Bill Text: NY A07953 | 2017-2018 | General Assembly | Amended
Bill Title: Relates to patronage capital contributions, allocations and retirements.
Spectrum: Slight Partisan Bill (Republican 6-3)
Status: (Passed) 2018-10-01 - signed chap.300 [A07953 Detail]
Download: New_York-2017-A07953-Amended.html
STATE OF NEW YORK ________________________________________________________________________ 7953--A 2017-2018 Regular Sessions IN ASSEMBLY May 23, 2017 ___________ Introduced by M. of A. BRINDISI, MAGEE, BUTLER, BLANKENBUSH, B. MILLER, PALMESANO, CROUCH -- read once and referred to the Committee on Energy -- recommitted to the Committee on Energy in accordance with Assembly Rule 3, sec. 2 -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the rural electric cooperative law, in relation to refunds of capital contributions, allocations and retirements The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Section 17 of the rural electric cooperative law is 2 amended by adding a new subdivision (f) to read as follows: 3 (f) Every cooperative shall keep, at the office of the cooperative, 4 correct and complete books and records of account and minutes of the 5 proceedings of its members, board and executive committees, if any, and 6 shall keep at such office a list or record containing the names and 7 addresses of all members, the class or classes of membership and amount 8 of patronage capital allocated and unretired to each member, as well as 9 the amount of any patronage capital allocated to nonmembers, and the 10 dates when they respectively were allocated such patronage capital. Any 11 of the foregoing books, minutes and records may be in written form or in 12 any other form capable of being converted into written form within a 13 reasonable time. 14 § 2. The rural electric cooperative law is amended by adding two new 15 sections 19-a and 19-b to read as follows: 16 § 19-a. Conflict of interest policy. (a) Except as provided in subdi- 17 vision (d) of this section, the board of every rural electric cooper- 18 ative shall adopt, and oversee the implementation of, and compliance 19 with, a conflict of interest policy to ensure that its directors, offi- 20 cers and employees act in the cooperative's best interest and comply 21 with applicable legal requirements. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD10932-10-8A. 7953--A 2 1 (b) The conflict of interest policy shall include, at a minimum, the 2 following provisions: 3 (1) a definition of the circumstances that constitute a conflict of 4 interest; 5 (2) procedures for disclosing a conflict of interest or possible 6 conflict of interest to the board or to a committee of the board, and 7 procedure for the board or committee to determine whether a conflict 8 exists; 9 (3) a requirement that the person with the conflict of interest not be 10 present at or participate in the board or committee deliberation or vote 11 on a matter giving rise to such conflict, provided that nothing in this 12 section shall prohibit the board or a committee from requesting that the 13 person with the conflict of interest present information as background 14 or answer questions at a committee or board meeting prior to the 15 commencement of deliberation or voting relating thereto; 16 (4) a prohibition against any attempt by the person with the conflict 17 to influence improperly the deliberation or voting on the matter giving 18 rise to such conflict; and 19 (5) a requirement that the existence and resolution of the conflict be 20 documented in the cooperative's records, including in the minutes of any 21 meeting at which the conflict was discussed or voted upon. 22 (c) The conflict of interest policy shall require that prior to the 23 initial election of any director, and annually thereafter, such director 24 shall complete, sign and submit to the secretary of the cooperative or a 25 designated compliance officer a written statement identifying, to the 26 best of the director's knowledge, any entity of which such director is 27 an officer, director, trustee, member, owner (either as a sole proprie- 28 tor or a partner), or employee and with which the cooperative has a 29 relationship, and any transaction in which the cooperative is a partic- 30 ipant and in which the director might have a conflicting interest. The 31 policy shall require that each director annually resubmit such written 32 statement. The secretary of the cooperative or the designated compliance 33 officer shall provide a copy of all the completed statements to the 34 president of the board. 35 (d) A rural electric cooperative that has adopted and possesses a 36 conflict of interest policy pursuant to federal, state or local laws 37 that is substantially consistent with the provisions of subdivision (b) 38 of this section shall be deemed in compliance with provisions of this 39 section. 40 (e) Nothing in this section shall be interpreted to require a rural 41 electric cooperative to adopt any specific conflict of interest policy 42 not otherwise required by this section or any other law or rule, or to 43 supersede or limit any requirement or duty governing conflicts of inter- 44 est required by any other law or rule. 45 § 19-b. Whistleblower policy. (a) Except as provided in subdivision 46 (c) of this section, the board of every rural electric cooperative shall 47 adopt, and oversee the implementation of, and compliance with, a whist- 48 leblower policy to protect from retaliation persons who report suspected 49 improper conduct. Such policy shall provide that no director, officer or 50 employee of a rural electric cooperative who in good faith reports any 51 action or suspected action taken by or within the cooperative that is 52 illegal, fraudulent or in violation of any adopted policy or bylaw of 53 the cooperative shall suffer intimidation, harassment, discrimination or 54 other retaliation or, in the case of employees, adverse employment 55 consequence. 56 (b) The whistleblower policy shall include the following provisions:A. 7953--A 3 1 (1) procedures for the reporting of violations or suspected violations 2 of laws or cooperative policies or bylaws, including procedures for 3 preserving the confidentiality of reported information; 4 (2) a requirement that an employee, officer or director of the cooper- 5 ative be designated to administer the whistleblower policy and to report 6 to the board or an authorized committee thereof; 7 (3) a requirement that the person who is the subject of a whistleblow- 8 er complaint not be present at or participate in board deliberations or 9 vote on the matter relating to such complaint, provided that nothing in 10 this paragraph shall prohibit the board from requesting that the person 11 who is subject to the complaint present information as background or 12 answer questions at a board meeting prior to the commencement of delib- 13 erations or voting relating thereto; and 14 (4) a requirement that a copy of the policy be distributed to all 15 directors, officers and employees. For purposes of this subdivision, 16 posting the policy on the cooperative's website or at the cooperative's 17 offices in a conspicuous location accessible to employees are among the 18 methods a cooperative may use to satisfy the distribution requirement. 19 (c) A rural electric cooperative that has adopted and possesses a 20 whistleblower policy pursuant to federal, state or local laws that is 21 substantially consistent with the provisions of subdivision (b) of this 22 section shall be deemed in compliance with provisions of this section. 23 (d) Nothing in this section shall be interpreted to relieve any rural 24 electric cooperative from any additional requirements in relation to 25 internal compliance, retaliation, or document retention required by any 26 other law or rule. 27 § 3. Section 60 of the rural electric cooperative law is amended to 28 read as follows: 29 § 60. [Refunds to members. Revenues of a cooperative for any fiscal30year in excess of the amount thereof necessary:31(a) To defray the expenses of the operation and maintenance of the32facilities of the cooperative during such fiscal year;33(b) To pay interest and principal obligations of the cooperative34coming due in such fiscal year;35(c) To finance, or to provide a reserve for the financing of, the36construction or acquisition by the cooperative of additional facilities37to the extent determined by the board of directors;38(d) To provide a reasonable reserve for working capital as determined39by the board of directors;40(e) To provide a reserve for the payment of indebtedness of the coop-41erative in an amount not less than the total of the interest and princi-42pal payment in respect thereof required to be made during the next43following fiscal year; and44(f) To provide a fund for education in cooperation and for the dissem-45ination of information concerning the effective use of electric energy46and other services made available by the cooperative, shall, unless47otherwise determined by a vote of the members, be distributed by the48cooperative to its members and to other persons to whom the cooperative49supplies electric energy or other services, as patronage refunds50prorated in accordance with the patronage of the cooperative by the51respective members and such other persons, paid for during such fiscal52year; provided, however, that such distribution shall not be made to any53such other person until he has become a member of the cooperative. If54such other person does not become a member of the cooperative within one55year after the amount of his distributive share or accumulated distribu-56tive shares equals the membership fee required by the by-laws of theA. 7953--A 4 1cooperative, or, if no membership fee is required, within two years2after the declaration of any such patronage refund, he shall cease to be3entitled to such share or shares, which shall, in such case, be paid4into the fund provided for in this subdivision. The cooperative shall5make such additional provision, in the by-laws or otherwise, relative to6the disposition of the revenues of the cooperative, as may be necessary7and appropriate to establish and maintain the non-profit character of8the cooperative. Nothing herein contained shall be construed to prohibit9the payment by a cooperative of all or any part of its indebtedness10prior to the date when the same shall become due.] Patronage capital 11 contributions, allocations, and retirements. (a) Each cooperative's 12 by-laws shall, unless otherwise determined by agreement of the members, 13 provide for patronage capital allocations and retirements in the manner 14 provided by this section. Agreement by the members for purposes of this 15 section shall mean member approval of by-law provisions or by a majority 16 vote of the members voting at a duly called meeting. Any matter set 17 forth in this section which is subject to determination of the board of 18 directors shall be determined in the exercise of such board of direc- 19 tor's business judgment. 20 (b) Patronage capital shall be determined by a cooperative on an annu- 21 al basis and shall be the excess, if any, of amounts received or receiv- 22 able by such cooperative from furnishing electricity over such cooper- 23 ative's operating costs and expenses properly chargeable against 24 furnishing electricity, as determined using such accounting method or 25 methods as agreed upon by the members. Costs and expenses chargeable 26 against furnishing electricity shall include: 27 (1) expenses of the operation and maintenance of its facilities during 28 such fiscal year; 29 (2) interest obligations of the cooperative coming due in such fiscal 30 year; 31 (3) depreciation and other expenses to finance or to provide a reserve 32 for the financing of the construction or acquisition by the cooperative 33 of additional facilities to the extent determined by the board of direc- 34 tors; 35 (4) expenses to provide a reasonable reserve for working capital as 36 determined by the board of directors; 37 (5) expenses to provide a reserve for the payment of indebtedness of 38 the cooperative maturing more than one year after the date of the incur- 39 rence of such indebtedness in an amount not less than the total of the 40 interest and principal payments in respect thereof required to be made 41 during the next following fiscal year; 42 (6) expenses to provide a fund for education in cooperation and for 43 the dissemination of information concerning the effective use of elec- 44 tric energy and other services made available by the cooperative; and 45 (7) all other costs and expenses from and directly related to the 46 furnishing of electric energy to the patrons. 47 (c) "Patron", as referred to in subdivisions (b) through (h) of this 48 section, shall be defined as (1) a member and (2) a nonmember to whom 49 the cooperative furnishes electric energy or other services on a patro- 50 nage basis pursuant to bylaws or as agreed upon by the members. 51 (d) On an annual basis, patronage capital determined under subdivision 52 (b) of this section shall be allocated on the books of the cooperative 53 to each patron having furnished such capital and shall be based upon and 54 in proportion to: 55 (1) the revenue from each patron or group of similar patrons to the 56 cooperative's total revenue;A. 7953--A 5 1 (2) the contribution of each patron or group of similar patrons to the 2 cooperative's overall patronage capital; 3 (3) the kilowatt-hour usage of each patron or group of similar patrons 4 to the total kilowatt-hour usage of all patrons; 5 (4) any other method which is agreed upon by the members; or 6 (5) any combination of paragraphs one, two, three and/or four of this 7 subdivision as agreed upon by the members. 8 (e) "Retirement" in reference to patronage capital shall mean the 9 redemption and payment in cash or other property, as provided by subdi- 10 vision (f) of this section, of patronage capital to the cooperative 11 patrons or former patrons to whom it has previously been allocated. The 12 allocation of patronage capital to a patron's patronage capital account 13 shall in no event create a vested right to the retirement of the amount 14 so allocated. The board of directors of a cooperative may, in its 15 discretion, retire patronage capital allocated on the books of the coop- 16 erative when it determines such retirement is consistent with sound 17 business and management practices and the long-term financial stability 18 of the cooperative. Patronage capital shall be retired according to the 19 method chosen by the members and at the time the board of directors 20 shall determine as a matter of its discretion. However, patronage capi- 21 tal may be retired in advance of the date when it would otherwise be 22 retired under the previous sentence in such circumstances and upon such 23 conditions as are agreed upon by the members, including, but not limited 24 to, upon a patron's or former patron's death, the termination of a 25 patron or former patron's electric service, or a patron or former 26 patron's filing for bankruptcy. In the event of such early retirement of 27 patronage capital, the amount of patronage capital allocated to the 28 patron or former patron on the cooperative's books may be discounted for 29 purposes of its retirement in accordance with such method as is agreed 30 upon by the members. The difference between the discounted amount and 31 the patron's or former patron's patronage capital may be retained by the 32 cooperative as part of its net savings in a manner determined by the 33 board of directors. 34 (f) When the board of directors of the cooperative has determined, 35 pursuant to subdivision (e) of this section, that patronage capital 36 shall be retired, the retirement may be accomplished by a bill credit, 37 by the mailing of payment or notice of payment to the patron's or former 38 patron's last known address of record on file with the cooperative, or 39 by such other method as the board of directors shall determine to be 40 appropriate. No interest shall be paid or payable by the cooperative on 41 any patronage capital. The amount of patronage capital being retired may 42 be reduced by any amount owed to the cooperative by the patron or former 43 patron. 44 (g) A cooperative may adopt such procedures for the assignment and 45 contribution of unclaimed patronage capital to the cooperative as are 46 agreed upon by its members. Such procedures may include providing that 47 patronage capital which has not been claimed by a patron or former 48 patron, after reasonable efforts to locate said patron or former patron, 49 shall be added to the net savings of the cooperative. Mailing of a check 50 or notice of the availability of a check to the last known address of a 51 patron or former patron by first class mail and publication of the list 52 of patrons or former patrons having unclaimed patronage capital on the 53 website and/or newsletter of the cooperative for a period of three years 54 shall be deemed reasonable effort to locate said patron or former 55 patron.A. 7953--A 6 1 (h) In the event that the cooperative should engage in the business of 2 furnishing goods and services other than electric energy, all amounts 3 received and receivable therefrom which are in excess of costs and 4 expenses properly chargeable against the furnishing of such goods or 5 services shall, insofar as permitted by law, bylaws, or by approval of 6 the members, be prorated annually on a patronage basis and allocated to 7 each member and shall be retired to said member according to the method 8 chosen by the members and at the time that the board of directors shall 9 determine as a matter of its discretion. Nothing in this section, 10 however, prevents a cooperative from furnishing goods and services other 11 than electric energy on a non-patronage basis to non-members; the net 12 earnings of which may be retained as part of its net savings. 13 (i) With respect to any cooperative formed under this chapter that is 14 exempt from federal income taxation under paragraph twelve of subsection 15 (c) of section five hundred one of the internal revenue code of nineteen 16 eighty-six, as amended, or any corresponding provision of future federal 17 tax law, or any cooperative which would otherwise qualify for said 18 exemption but for having less than eighty-five percent (or whatever 19 threshold may be specified in the future for said purpose by the inter- 20 nal revenue code) of income from members, this section shall in all 21 events be limited to and interpreted in a manner which is compliant with 22 the requirements of exemption under such internal revenue code section, 23 and any agreement by the members or determination by the board of direc- 24 tors under this section with respect to the subject matter hereof shall 25 also be limited to and interpreted in a manner which is compliant with 26 such internal revenue code section. 27 § 4. This act shall take effect on the first of January next succeed- 28 ing the date on which it shall have become a law.