Senate Bill 416

- SB 416 is an effort to expedite and streamline the process at the IURC for service territory boundary line changes when a municipality annexes an area.

- The bill provides that a municipality that annexes an area beyond the assigned service area boundaries of its municipal electric utility may petition the IURC to change the service territory to include the annexed area. Such a petition must be filed within 60 days after the annexation becomes effective and attached to it must be a certified copy of the annexation ordinance.

- The IURC is then required to enter an order changing the service territory of the affected electricity suppliers promptly, which should help to avoid long litigation before the IURC and make the change essentially automatic.

- Under the provisions of SB 416, the municipal utility is required to calculate and pay to each incumbent supplier the value of all property which was devoted to furnishing retail electric service within the annexed area at its reproduction cost new depreciated value.

- The municipal electric utility also must pay severance damages based on the value of the distribution and substation facilities located in the area of 2 ½ times the gross revenues from electricity sales in that area during the 12 months preceding the effective date of the annexation ordinances, whichever is greater.

- SB 416 also sets in place a mechanism by which the municipal utility would pay additional severance damages to the incumbent supplier in the event that new customers locate in the annexed area within five years of the effective date of annexation. If new customers would come in within that 5 year period, then severance damages of one mil (.001) per kilowatt hour of electricity sold, up to a maximum of 170,000 kwh per month per customer, would kick in for a five year period from the point that the service is established.

- Finally, and very importantly, this legislation would set in place a certainty that the IURC would approve the service boundary line changes unless it was determined that such a change would result in a duplication of facilities, waste of resources, or inefficient, uneconomic or inadequate service to the public.

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