Joint Corporations Minutes

committee Meeting Information

November 12 & 13, 2009

Room 302, Capitol Building

Cheyenne, Wyoming

committee Members Present

Chairman Cale Case

Chairman Pete Illoway

Senator Stan Cooper

Senator John Hastert

Senator Wayne Johnson (11/13)

Senator Charlie Scott

Representative Kermit Brown

Representative Ross Dierks (11/12)

Representative Mary Hales

Representative Terry Kimble

Representative Tom Lubnau (11/13)

Representative Tim Stubson

Representative Dan Zwonitzer

Committee Members Not Present

Senator Wayne Johnson (11/12)

Representative Ross Dierks (11/13)

Representative Tom Lubnau (11/12)

Representative David Miller

Legislative Service Office Staff

Lynda Cook, Staff Attorney

Lisa Jeremiah, Research Associate

Others Present at Meeting

Please refer to Appendix 1 to review the Committee Sign-in Sheet
for a list of other individuals who attended the meeting.

Executive Summary

The Joint Corporations, Elections and Political Subdivisions Interim Committee met in Cheyenne to consider issues and legislation related to special districts, elections, limited liability company laws, department of insurance and recommendations from the Management Audit Committee regarding the Department of Fire Prevention and Electrical Safety. The committee also received a report from One-call Wyoming and considered legislation related to ratemaking of public utilities.

Call To Order (November 12, 2009)

Co-Chairman Illoway called the meeting to order at 8:00 a.m. The following sections summarize the Committee proceedings by topic. Please refer to Appendix 2 to review the Committee Meeting Agenda.

Approval of Minutes

Minutes from the August Committee meeting were approved.

Secretary of State’s Office update on business friendly fraud friendly statutes.

Max Maxfield, Secretary of State, updated the committee on implementation of 2008 legislation designed to rein in fraud in business entities. Mr. Maxfield explained that they have created a division of compliance. He noted that there is still a federal push to nationalize statutes governing business entities.

Karen Wheeler, Director of the division of compliance, provided written testimony regarding the need for the 2008 statutory changes. (Appendix 3). She explained that previous laws left too much anonymity for people behind business entities. In 2008 the legislature strengthened the registered agent laws to require certain information be kept with the registered agent, that the agent have a physical presence in Wyoming and to limit the ability to create shell corporations. New statutes also allowed for administrative dissolution if a company does not file its annual report and provided for increased penalties.

Ms. Wheeler testified that since January 1, 2009, when the statutes went into effect, the company that was a problem registered agent left the state and has been the subject of a criminal subpoena in Florida.

Ms. Wheeler explained that owners of mail box businesses are working closely with the division to ensure that registered agents really exist in Wyoming. She noted that over 5700 companies had to choose between having a legitimate registered agent or dissolve. 76% of those chose to dissolve.

There was discussion about the administrative dissolution process and timelines. Senator Scott encouraged the department to send out annual report forms to entities regardless of whether they are required to do so. Mr. Maxfield noted that the change was part of the budget cutbacks.

10 LSO 0044.W2 – Limited liability companies.

Attorneys Scott Meier, Dale Cottam, Dale Higer, Walter Eggers, Bill Bagley, Tom Long and Ken Barbe (via phone) provided a summary of the articles. Mr. Higer is from the Uniform Laws Commission.

Article 1. Mr. Meier explained that the new laws get rid of the concept of flexible limited liability companies because now a single person may create an LLC. The committee voted to include a cross reference for the definition of person. Senator Scott suggested language in a noncodified section to clarify that reserved sections are there to show where the state statutes deviated from the uniform act. It was noted that the uniform act sanctions oral operating agreements. There was discussion about the practical effects of allowing oral operating agreements. Section 110 was discussed. The working group varied from the model act in that the recommended language does not limit the ability of a company to limit certain fiduciary responsibilities through the operating agreement. The working group recommended varying from the uniform act in order to take a more contractual approach to the operating agreement. Mr. Higer expressed concern about removal of the provisions. Mario Rampulla, attorney, testified that the committee could handle this under the close LLC supplement. Tom Long explained the "ultra contractarian" approach and why it is important to allow LLCs to waive fiduciary duties and reporting requirements through operating agreements. The working group recommended not adopting uniform language with respect to registered agents and that is reflected in the bill.

Article 2 provides for formation and articles of organization and filing with the secretary of state. There was discussion about why filings are not accepted and filed on the date they are delivered. Ms. Sawyer noted that the annual fee and report provisions of Section 209 are grafted from the corporations act rather than the uniform act.

Article 3 deals with the relations of member and managers to persons outside the company. Ken Barbe explained that the working group recommended the uniform act language for this section as there are few current Wyoming statutes directly related to the topic. Section 304 does have a corresponding Wyoming statute, but the uniform language is a good improvement. There was some discussion about when a company’s veil can be pierced. Senator Scott suggested practitioners might bring an amendment to strengthen the protections against piercing the liability veil.

Article 4 deals with relations between members and managers among themselves and with the company. There was discussion about arbitration being a voluntary matter. There was discussion about section 403. The working group did not recommend adopting the uniform provision that gives third parties rights to enforce future contribution promises between members. Section 404 is a significant change from current law. Unless members agree otherwise, they are sharing profits on per capita basis rather than on a contribution basis as is current law. The working group recommended leaving the contribution basis in the close LLC supplement and providing a four year phase in for companies to opt out of this provision through their operating agreements. Under the recommended language, a dissociated member has no right to get their money out until winding up. Section 409 now sets standards and duties for members and managers which were not spelled out in Wyoming statutes before. The committee discussed how these provisions may be contracted around in the operating agreement and whether they are appropriate for small companies that may not have legal guidance in creating an operating agreement.

Article 5. Tom Long explained that article 5 deals with transferable interests and rights of creditors. Transferable interests are the economic rights of members which can be transferred. The transfer of an interest is not an event which automatically causes dissolution as it does under current law. Tax regulations have changed making the uniform act approach better. The working group more narrowly defined the remedies of a creditor provided in the uniform act under Section 503. The group took language from South Dakota and Alaska clarifying that the charging order is the sole remedy for creditors. Mr. Higer testified that the uniform laws committee has concerns about the home cooking of the working group. He suggested that the working group misinterpreted the language in the uniform act to create greater rights than it does. Carol Gonnella, appearing by phone, suggested that the uniform act erodes the protections available to the members and the company itself.

Article 6 provides for dissociation of members. Bill Bagley explained that article 6 entirely follows the uniform act, makes provisions for situations that haven’t been problems in Wyoming and likely does no harm to the current state of the law. Mr. Bagley suggested that the committee should deviate from the uniform act somewhat in order to value a dissociated member’s interest at dissociation.

Article 7. Dale Cottam explained that the article deals with dissolution and winding up. The article gives details and processes for how the dissolution and winding up will occur.

Article 8 of the uniform act was not adopted as the working group agreed that current foreign limited liability companies are adequately provided for in the corporate act statutes. The committee asked that a noncodified section be created that clarifies which statutes deal with foreign limited liability companies.

Article 9 deals with actions by members. Scott Meier explained that this section gives rights for derivative actions. They are substantially similar to the provisions of the corporate act.

Article 10 provides for merger, continuance, transfer, domestication and conversion. The committee noted that these provisions are different than the uniform act.

Article 11 provides transitional provisions. Section 1103 provides a four year grace period before management provisions, division of profits provisions and stated term provisions go into effect for companies currently in existence. It gives the company four years to address the issues in their operational agreements. Mr. Higer suggested that section 1102 of the uniform act dealing with electronic signatures should be adopted as it preempts some federal law that no one knows what it does. He also suggested that the effective date should be January 1, 2011.

The committee passed the bill unanimously as amended. (Appendix 4).

Special Districts

10 LSO 0075.W2 – Special districts-public records.

The bill was moved and seconded. The bill was presented at the last committee meeting and provides for filing of special district documents. Jim Angel, Wyoming Press Association testified in support of the bill. Jason Begger, representing the Wyoming Mining Association, testified in support of the bill because it gives more transparency and access to public information.

Dan Purdue, Wyoming Hospital Association, testified in opposition to the onerous requirements of the bill on special hospital districts. He suggested that as long as the records are accessible at the place of business and do not have to be filed somewhere it is not so bad.

Bobbi Frank, Wyoming conservation districts, questioned whether the problem is really a lack of training versus a lack of requirements.

Larry Wolfe, Holland & Hart, expressed concerns about the bill. First, he noted that July is a very busy month for districts and September would be a better deadline for filing. He proffered amendments which would require districts to maintain the records rather than file them. If they have a regular business office open to the public they have to make the documents available. If they have a website, they can post them there. If they have neither, they have to file with the county clerk. He also suggested that the documents covered should only apply to public records as defined in the public records act.

There was discussion about whether posting to a web site would be adequate for persons who want a hard copy of the documents.

The committee discussed how minutes and records should be limited to the governing boards and committees & subcommittees of the governing bodies.

Mitch Edwards, attorney, testified in opposition to the amendments suggested by Mr. Wolfe. He suggested that the purpose of the bill was to create a central repository where documents can be searched.

Aaron Beaver suggested that the rules may already be covered by rules promulgated by the secretary of state’s office. The committee asked the LSO to work with the secretary of state’s office to ensure that the bill is not in conflict with those rules.

The bill passed as amended (Dierks, Hales opposed). (Appendix 5).

10 LSO 0083.W1 – Special districts elections.

Julie Freese, Fremont County Clerk, testified that the bill was considered by the county clerks association. They offered an amendment to clarify that "oversee" means training, advice and assistance but does not include responsibility for conducting the election.

The bill passed as amended (Dierks, Zwonitzer opposed). (Appendix 6).

10 LSO 0143.W1 – special districts-election conformity. (Appendix 7).

The committee decided to lay the bill back until next year.

Elections

10 LSO 0167.W1 - Election code revisions.

Julie Freese and Debbie Lathrop presented the bill and provided written testimony (Appendix 8).

The committee voted to pull out sections not dealing with elections and put them in separate bills.

The three bills passed unanimously. (Appendix 9).

Canvass of military ballots.

Peggy Nighswonger, Secretary of State's Office, informed the committee of a federal bill that relates to uniformed and overseas citizens voting act. The military and overseas voter enhancement act passed. The secretary of state's office doesn’t know exactly what will be required of states, but they know some statutory amendments will be required. They plan to handle the changes with directives from the secretary of state this year. Some provisions in the new act include a requirement that ballots be available to send to these citizens 45 days prior to an election. The department of defense is providing a waiver process for states with late primaries. The act requires states to send ballots electronically if requested. Our statutes do not handle this right now.

The committee adjourned for the day at 6:00 p.m.

The committee reconvened at 8:00 am.

State Fire Marshall’s Office

Lanny Applegate, State Fire Marshall, Kevin Booker, Chief Electrical Inspector and Mick Finn, Assistant. Attorney General testified.

Mr. Booker provided a handout showing recommended training hours for specific types of low voltage licenses. (Appendix 10). He described the various types of low voltage installations and the hours necessary to ensure proper training for each type. The department will recommend varying hours for certification in their rules. Mr. Booker noted that these reduced hours will mean that the state will now be less than some states and those licenses will lose reciprocity with those states. Chairman Case asked for a list of states that we will lose reciprocity with.

Clay Rouse, former Chief Electrical Inspector, testified in support of changing the low voltage training requirements. He suggested that general license requirements be 4000 hours, alarm at 3000, control at 2000 and the rest should be 1000. He suggested that the levels should be statutory. He also noted that reciprocity would only be a concern in one or two states.

Liz Zerga, Range Telephone Companies, testified reminding the committee about the history of the low voltage licensing. There was an exemption for cable installers. Telecommunications operators would like to see similar treatment for similar installers. She testified in support of the bill. She also noted that the department has worked well with companies to get self certified.

Rep. Brown questioned whether there is a level playing field for all similar installers.

Walter Eggers, representing Bresnan, testified that the legislature had good policy reasons for exempting cable. The primary concern with cable is the penetration of fire walls. He suggested that the staggered and reduced licensing requirements in the rules is an acceptable solution.

Steven Hall, McKee Hall Electrical Systems, testified in support generally of the bill. He noted that he went through five years of training. He also noted that troubleshooting a life safety system is very difficult and involves life and death situations.

Dave Picard, Dish Network, testified that they have worked with the board on self certification. He testified that they are in support of the bill. He also noted that reciprocity is not a big concern because there are very few states that even license low voltage installers.

Shane Sheid testified that the function of licensing is to increase wages in an industry by suppressing competition. He noted that criminal recidivism is a problem because convicts can’t get licensed. He also noted that a display of competency rather than an arbitrary hours requirement would be preferable.

10 LSO 0043.W2 – Electrical safety-low voltage licensing.

The bill repeals the cable exemption for low voltage licensing, provides an exemption for lawn sprinkler installations and gives specific authority for the board to set work experience requirements for licensure by rule.

The committee amended the bill to allow specific authority to set work experience requirements for all classes of electrical licensing.

Marion Schultz testified that the requirement to give some credit should be mandatory.

The bill passed as amended (Case, Scott opposed). (Appendix 11).

Public Service Commission

10 LSO 0079.W2 – Utility rates-allowable expenses. (Appendix 12).

Al Minier, Darrell Zlomke and Marci Norby from the Public Service Commission, testified. Mr. Minier explained how rates are set for utilities. Because they are a monopoly the PSC allows them to make a rate of return on their assets. The PSC tries to tie the rate of recovery to the class of service customers. In cases they are asking for the class cost of service. They tie it as closely as is possible to what it costs to serve that class. He described the agreement between the several states on how to allocate costs for various projects by PacifiCorp among the states. The judgment was that the states by working together could get a better deal than if they worked separately. This is different than being in a regional transmission authority. Characterizations of the assets is very complex. With respect to wind, the assets are considered system assets and therefore Wyoming customers will pay a portion of the costs (currently 15%).

If the system is upset, i.e. if some state backs out, the balance will be broken and could increase utility overhead because the utility is dealing with one entity instead of six. PacifiCorp considers wind the least cost, least risk utility. They know how to get wind, there is no fuel costs and they know the costs of the system.

With respect to the bills before the committee – Mr. Minier noted that the PSC is already doing what the bills are asking them to do. He also expressed concern about unintended consequences. He suggested that new legislation often leads to new litigation. He stated that he warns legislators to avoid making changes to the system unless something is really broken.

There was discussion about whether an IRP in one state is part of the calculations in the least cost, least risk analysis. Rep. Lubnau suggested that political risk factors into the equation and asked if that has an affect on the rates in Wyoming. Mr. Minier suggested he doesn’t know how you quantify political risk.

There was discussion about Wyoming’s benefits in receiving low cost hydroelectric energy and whether that could be jeopardized by passage of these bills. Mr. Minier suggested that the ongoing committee structure addresses the complaints within each state that come up.

Matt Grant, PacifiCorp, provided written testimony regarding the bills. (Appendix 13). He suggested that the company does not use wind to meet other state renewable energy portfolio standards. He testified that they are increasing wind because it is the least cost, least risk resource at this time. He expressed concern that the bill creates unnecessary risk on Wyoming customers because of retaliation of other states. If other states do this, Wyoming ratepayers would be stuck with the increased costs coming from taxes on coal and natural gas.

Dave Moser, Rocky Mountain Power, testified that the bills are not necessary. First the PSC currently has authority to disallow costs that are imprudent. He noted that the PSC is doing a good job of scrutinizing Rocky Mountain Power along with many other non-governmental organizations very involved in those rate making cases. Second, they dislike the bills because the bills presume that there is something wrong. Finally, they are concerned about reciprocation from other states.

Mr. Moser suggested that a person who moves into a larger house causes load growth. He suggested that Wyoming is the fastest growing state in their grid and they cannot tie that down to any one type of customer, although he stated that commercial growth is up over 4% while residential is up 1.8%. He stated that rate differentials already take into account the differences in load growth. Mr. Moser testified that RMP's last rate case resulted in an increase of 7% in rates for industrial customers with a decrease in rates for residential customers. He also noted that they have for decades offered on-peak and off-peak rates to customers, but they do so with PSC approval.

There was discussion about the different classes of customers. Within each class there are subclasses and each utility has different definitions of classes based on the size of the customer.

There was discussion of different methodologies for allocating costs, incremental costs allocation and sharing of costs.

Bob Tarrantola, testified on behalf of Black Hills Corporation that the PSC is already doing what is requested in the bills. He testified that the PSC does a very thorough job of looking at rates and protecting consumers.

Charlene Murdoch, representing Montana Dakota Utilities expressed concern about unintended consequences.

Bryce Freeman, OCA, agreed with the previous testimony.

Shawn Taylor, Wyo. Rural Electric Association, agreed with the previous testimony.

Senator Case presented the bill. He explained that the bill restricts when a rate may include costs for complying with requirements imposed by other jurisdiction.

Senator Scott spoke on and for the bill. He stated that he does not believe it will have any immediate effect but he is concerned that it will be needed in the future. He suggested that it could discourage other states from passing mandates that could effect utility generation decisions.

The bill failed (Case, Scott and Dierks approved).

10 LSO 0159.W1- Utility rates-customer groups.

Senator Scott presented the bill. It does three different things. It tries to deal with the concern that residential customers are being stuck with rate increases because of the rate of growth of large industrial users. He noted that it simply codifies what the PSC already does. The bill does what 10 LSO 0079 does in subsection (c). Subsection (d) is a departure from current practice. He understands that utilities built system capacity to meet peak load requirements. The bill encourages spreading load across off peak hours and encourages utilities to plan for the future and use more entrepreneurial methods for setting rates.

The bill was amended to remove subsection (c).

The bill failed (Case and Scott approved). (Appendix 14)

10 LSO 0078.W2 – PSC authority-consumer advocate.

The bill requires notice by the office of consumer advocate in proceedings in which the office acts as a party. The bill was brought forward in response to a case where the PSC was forced to develop late evidence when the OCA dropped out at the last minute. Al Minier testified that a further problem arose when a stipulated agreement was brought to the PSC without any other evidence presented. Mr. Minier testified that the both concerns are being dealt with by allowing the commission to get more aggressively involved earlier in cases. Mr. Miner testified that they believe they can work out their differences with OCA without legislation.

Senator Case testified that he had concerns that the OCA was acting as a gatekeeper to information to be provided to the PSC. He is now encouraged by the PSC’s efforts to commit more resources to these cases.

Bryce Freeman, OCA, testified about the bill. He referred the committee to his testimony at the August meeting. He stated that he is working with the PSC to come to some resolution to the perceived problem. They have committed not to withdraw from a case after a date certain.

The bill failed (Case, Hastert, Scott, Dierks, Kimble and Zwonitzer approved). (Appendix 15)

Department of Insurance

10 LSO 0156.C1-Insurance-risk based capital revisions.

Ken Vines, Insurance Commissioner, presented the bill and provided written testimony (Appendix 16). Mr. Vines explained that risk based capital is designed to determine the risk attributable to an insurance company and the capitalization necessary to reduce the risks. The bill sets the level of risk based capital for property and casualty insurers which would trigger a trend test.

The bill passed unanimously as amended. (Appendix 17).

One Call Wyoming

Charlene Murdoch provided the committee with a presentation about the one-call program encouraging people to call before they dig. She expressed concerns about damages to lines and if the law had strong enough penalties. Ms. Murdoch worked with industry groups and decided they needed broader consensus before taking it further. She asked the committee to look at this as an interim topic.

Meeting Adjournment

There being no further business, Co-Chairman Cale Case adjourned the meeting at 3:00 p.m..

Respectfully submitted,

Pete Illoway, Co-Chairman Cale Case, Co-Chairman

Appendix	Appendix Topic	Appendix Description	Appendix Provider
1	Committee Sign-In Sheet	Lists meeting attendees	Legislative Service Office
2	Committee Meeting Agenda	Provides an outline of the topics the Committee planned to address at meeting	Legislative Service Office
3	Secretary of State	Business Friendly vs. Fraud Friendly	Secretary of State's Office
4	Limited Liability Companies	10 LSO 0044.W2 – Limited liability companies-revisions.	Legislative Service Office
5	Special Districts	10 LSO 0075.W2 – Special districts-public records	Legislative Service Office
6	Special Districts	10 LSO 0083.W1 - Special districts-elections.	Legislative Service Office
7	Special Districts	10 LSO 0143.W1 – Special districts-election conformity.	Legislative Service Office
8	Elections	Written testimony	Julie Freese
9	Elections	10 LSO 0167.W1 – Election code revisions.	Legislative Service Office
10	Fire Prevention and Electrical Safety	Recommended low voltage licensing changes.	Dept. of Fire Prevention & Electrical Safety
11	Fire Prevention and Electrical Safety	10 LSO 0043.W2 – Electrical safety – low voltage licensing.	Legislative Service Office
12	Public Service Commission	10 LSO 0079.W2 – Utility rates-allowable expenses.	Legislative Service Office
13	Public Service Commission	Written Testimony	Rocky Mountain Power
14	Public Service Commission	10 LSO 0159.W1 – Utility rates-customer groups.	Legislative Service Office
15	Public Service Commission	10 LSO 0078.W2 – Public service commission authority-consumer advocate.	Legislative Service Office
16	Insurance	Written testimony	Ken Vines
17	Insurance	10 LSO 0156.C1 – Insurance-risk based capital revisions.	Legislative Service Office