"An Act clarifying the powers of electric or telephone cooperatives to become members of or own stock in other entities. "

As it currently exists, the Alaska Electric and Telephone Cooperative Act (AS 10.25) grants electric and telephone cooperatives broad powers to conduct various activities. Those powers include the ability to become a member of other cooperatives or corporations or own stock in them and to do and perform any other act and thing, and have and exercise any other power which may be necessary, convenient, or appropriate to accomplish the purpose for which the cooperative is organized.

These powers allow the formation of subsidiary corporations or cooperatives in which a cooperative can own all or a portion of another legal entity that conducts activities separate from the cooperative's utility operations. For example, some cooperatives provide internet or cable television services.

Recent court decisions in Georgia, Mississippi and Texas have called into question a cooperative's ability to own subsidiary corporations. While the statutes in those states are different from those here in Alaska, there is a concern that those cases could be used in the future to help interpret Alaska's laws.

HB 157 proposes to clarify AS 10.25.010(a)(9) to make clear that an electric cooperative utility may own an interest in another entity that does not provide electric or telephone utility services. This amendment simply preserves and clarifies the current statutes which allow cooperatives to provide added benefits to their members.

For example, in some rural areas, cost-effective and environmentally sound bulk fuel storage, facilities maintenance and delivery are lacking. This is an activity in which rural electric utilities have useful expertise. Through membership or ownership in interests in subsidiary entities, electric cooperatives may be able to provide those types of services more safely and at a lower cost than would otherwise occur.

The second change made in HB 157 is the addition of "limited liability company" to the list of entities a cooperative may become a member of or own stock in. Limited liability companies (LLCs) are a relatively new type of member-owned legal entity. They were first recognized in Alaska in 1994 and did not exist when AS 10.25.010(a)(9) was enacted. LLCs are increasingly becoming preferred over corporations and cooperatives for many non-profit and for-profit organizations, including subsidiaries. Although LLCs are not specifically prohibited in the statutes, the addition made by HB 157 clarifies this by expressly including LLCs as an acceptable legal entity a cooperative may become a member or own stock in.

This bill is necessary and important to preserve the intent of existing statutes. I urge your support for this legislation.

24-LS0562-F

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