AN ACT Relating to the water systems of municipalities; and adding a new chapter to Title 35 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that a significant potential exists for the development of the electric generation capabilities of water systems operated by municipalities. The legislature also finds that developing such electric generation capabilities will be beneficial in meeting the present and future energy needs of the citizens of the state of Washington, will conserve, recycle, and utilize valuable resources located within the state, will further a state purpose and policy, and will be in the public interest.

It is the intent of the legislature to provide municipalities with additional authority to benefit from these electric generation capabilities in connection with municipally operated water utility systems. It is further the intent of the legislature that the sale of electricity authorized by this chapter shall be subordinate to the water supply functions of municipalities authorized by other statutes and to permit the revenue to be derived from such sales to be used by the water utilities of the municipalities that own such facilities. Nothing in this chapter authorizes municipalities to engage in the business of distributing electricity or to sell electric power or energy to persons or entities not authorized by law to engage in the distribution or transmission of electric power or energy.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Hydroelectric generating facilities" means any and all permits, licenses, property rights, water rights, and any and all works, plants, dams, powerhouses, property, and facilities of any kind and character which may be used or useful in the generation and transmission of electric power and energy produced by water power made available by present and future water utility system facilities, but shall not include facilities for the distribution of electric power and energy to an end user other than the municipality owning the facility.

(2) "Municipality" means any city, town, water district, sewer district, combined water and sewer district, or public utility district.

(3) "Water utility system" means a system for the supply, collection, management, storage, transmission, and delivery of water for domestic, commercial, industrial, or municipal purposes together with all additions and betterments to and improvements of that system and which may be combined with a sewer utility system.

NEW SECTION. Sec. 3. Each municipality that owns and operates a water utility system is authorized:

(1) To acquire, construct, develop, own, dispose of, operate, renew, replace, and maintain hydroelectric generating facilities or an interest therein located within or outside its boundaries as additions or betterments to or improvements of its water utility system, notwithstanding the requirements for power of its water utility system, and to utilize the revenues derived from the use or disposal of such facilities in the same manner as revenues of its water utility system;

(2) To provide the electric power and energy from hydroelectric generating facilities for any use by the municipality but not for resale by the municipality;

(3) To enter into contracts for the public or private sale of the electric power, energy and capacity produced by such hydroelectric generating facilities to: (a) Any municipality that is authorized by law to distribute electricity; (b) any cooperative that is authorized by law to distribute electricity; (c) any electrical company which distributes electric power and energy subject to the jurisdiction of the utilities and transportation commission or a similar regulatory agency in another state; or (d) the Bonneville Power Administration. Such contracts for the sale of such electric power, energy or capacity may include such terms and provisions as are deemed by the municipality to be in its best interest;

(4) To finance hydroelectric generating facilities, or the acquisition of an interest therein, in the same manner and with the same authority that the municipality may finance other additions and betterments to and improvements of its water utility system and to sell all or a portion of its ownership interest in hydroelectric generating facilities or other water utility system facilities pursuant to contracts authorized in subsection (5) of this section, notwithstanding its financing of all or a part of such facilities;

(5) To enter into contracts to carry out the authorities granted in this chapter with: (a) One or more other municipalities exercising the authority granted in this chapter or authorized by law to distribute electricity; (b) one or more cooperatives authorized by law to distribute electricity; (c) one or more electric companies which distribute electric power and energy subject to the jurisdiction of the utilities and transportation commission; (d) the Bonneville power administration; which contracts may prescribe among other things: (i) The rights and property interests which the parties shall have in the hydroelectric generating facilities or other water utility system facilities and the parties' rights to dispose of those facilities; (ii) the rights of the parties in the ownership and disposition of the revenues generated by the sale of the electric power, energy or capacity of the hydroelectric generating facilities and in the water or revenue from the sale of water made available by the other water utility system facilities; (iii) the method of financing the hydroelectric generating facilities or other water utility system facilities. The method may include, in addition to any other method permitted by law, the designation of one municipality to issue all of the obligations necessary to finance such facilities; (iv) the obligations of the parties to pay the costs of acquiring, constructing, developing, owning, disposing, operating, renewing, replacing and maintaining hydroelectric generating facilities or other water utility system facilities. These obligations may include the duty to pay a defaulting party's share of unpaid costs unless otherwise prohibited by law; and

(6) To acquire, either by purchase or condemnation, or other legal means, all lands, waters, water rights, and other property located within or outside the boundaries of the municipality necessary for the construction, use, supply, maintenance, repair, or improvement of hydroelectric generating facilities. However, nothing in this section may be construed to authorize a municipality through the exercise of the authority granted in this section, to condemn: (a) Electric generating facilities of municipalities, cooperatives authorized by law to distribute electricity, or companies which distribute electric power and energy subject to the jurisdiction of the utilities and transportation commission, or otherwise to acquire such facilities without the consent of the owner; or (b) more land than is reasonably necessary to construct and operate hydroelectric generating facilities.

NEW SECTION. Sec. 4. (1) Prior to a final determination by a municipality to construct hydroelectric generating facilities under the authority of this chapter, or to acquire an ownership interest therein, the municipality shall hold at least one public hearing. This hearing may be held in conjunction with other public hearings of the municipality or another municipality. The hearing shall afford all interested parties a reasonable opportunity to submit data, views, or arguments relevant to the hydroelectric generating facilities. Notice of such public hearing shall be published in a newspaper of general circulation within the municipality a minimum of fourteen days before the date of the public hearing. The notice shall include the time when, the place where, and the manner in which interested persons may present their views.

(2) Prior to a final determination by a municipality to issue bonds to construct a hydroelectric generating facility with a generating capacity exceeding twenty megawatts, or to acquire at least a twenty-five percent ownership interest therein, the municipality shall hold an advisory ballot to inform the members of the governing body of such municipality regarding voter opinion on the construction or acquisition of such facilities. Prior to such election, the municipality shall contract with an independent engineer or certified public accountant to conduct an independent study of the cost-effectiveness of such facilities. The study shall be available for public review at least thirty days prior to the public hearing required in subsection (1) of this section. Following the public hearing, the municipality shall prepare a final draft of the study which shall include public comment, if any. The election shall be held no sooner than fourteen days after the final study is made available for public review. Municipalities required by this chapter to hold such advisory ballots are hereby authorized to conduct such ballot at a general election or at a special election called for that purpose by the governing body in accordance with RCW 29.13.020 and such municipalities may expend public funds to explain the ballot proposition.

NEW SECTION. Sec. 5. This chapter supplements the authority of municipalities authorized by law to operate a water or combined water and sewer system and does not restrict nor impose limits on any authority municipalities may otherwise have under any laws of this state nor may the authority of municipalities under other laws of this state be construed more narrowly on account of this statute. Nothing in this chapter authorizes a municipality to engage in the business of distributing electricity. Nothing in this chapter may be construed as requiring an electric utility to purchase electric energy from a municipality at a cost greater than the utility would pay to generate the same amount of additional electric energy or to purchase it from another source. Nothing in this chapter limits any obligation of a municipality to compensate landowners for restrictions on the use of their property or other diminutions in the value of their property attributable to projects authorized by this chapter. Municipalities acting under the authority of this chapter shall not be subject to regulation by the utilities and transportation commission. The construction or acquisition of hydroelectric generating facilities by a public utility district pursuant to this chapter shall not be construed to relieve such district of the requirement of RCW 54.08.070 if electric facilities other than those authorized by this chapter have not been constructed or acquired during the time periods specified therein.

NEW SECTION. Sec. 6. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 7. Sections 1 through 5 of this act shall constitute a new chapter in Title 35 RCW.