1. No municipally owned electric utility may provide electric energy at retail to any structure located outside the municipality‘s corporate boundaries after July 11, 1991, unless:

(1) The structure was lawfully receiving permanent service from the municipally owned electric utility prior to July 11, 1991;

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(2) The service is provided pursuant to an approved territorial agreement under section 394.312; or

(3) The service is provided pursuant to lawful municipal annexation and subject to the provisions of this section; or

(4) The structure is located in an area which was previously served by an electrical corporation regulated under this chapter, and chapter 393, and the electrical corporation‘s authorized service territory was contiguous to or inclusive of the municipality’s previous corporate boundaries, and the electrical corporation‘s ownership or operating rights within the area were acquired in total by the municipally owned electrical system prior to July 11, 1991. In the event that a municipally owned electric utility in a city with a population of more than one hundred twenty-five thousand located in a county of the first class not having a charter form of government and not adjacent to any other county of the first class desires to serve customers beyond the authorized service territory in an area which was previously served by an electrical corporation regulated under the provisions of this chapter, and chapter 393, as provided in this subdivision, in the absence of an approved territorial agreement under section 394.312, the municipally owned utility shall apply to the public service commission for an order assigning nonexclusive service territories and concurrently shall provide written notice of the application to other electric service suppliers with electric facilities located in or within one mile outside of the boundaries of the proposed expanded service territory. The proposed service area shall be contiguous to the authorized service territory which was previously served by an electrical corporation regulated under the provisions of this chapter, and chapter 393, as a condition precedent to the granting of the application. The commission shall have one hundred twenty days from the date of application to grant or deny the requested order. The commission, after a hearing, may grant the order upon a finding that granting of the applicant’s request is not detrimental to the public interest. In granting the applicant’s request the commission shall give due regard to territories previously granted to or served by other electric service suppliers and the wasteful duplication of electric service facilities.

2. Any municipally owned electric utility may extend, pursuant to lawful annexation, its electric service territory to include areas where another electric supplier currently is not providing permanent service to a structure. If a rural electric cooperative has existing electric service facilities with adequate and necessary service capability located in or within one mile outside the boundaries of the area proposed to be annexed, a majority of the existing developers, landowners, or prospective electric customers in the area proposed to be annexed may, anytime within forty-five days prior to the effective date of the annexation, submit a written request to the governing body of the annexing municipality to invoke mandatory good faith negotiations under section 394.312 to determine which electric service supplier is best suited to serve all or portions of the newly annexed area. In such negotiations the following factors shall be considered, at a minimum:

(1) The preference of landowners and prospective electric customers;

(2) The rates, terms, and conditions of service of the electric service suppliers;

(3) The economic impact on the electric service suppliers;

(4) Each electric service supplier’s operational ability to serve all or portions of the annexed area within three years of the date the annexation becomes effective;

(5) Avoiding the wasteful duplication of electric facilities;

(6) Minimizing unnecessary encumbrances on the property and landscape within the area to be annexed; and

(7) Preventing the waste of materials and natural resources.

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If the municipally owned electric utility and rural electric cooperative are unable to negotiate a territorial agreement pursuant to section 394.312 within forty-five days, then they may submit proposals to those submitting the original written request, whose preference shall control, section 394.080 to the contrary notwithstanding, and the governing body of the annexing municipality shall not reject the petition requesting annexation based on such preference. This subsection shall not apply to municipally owned property in any newly annexed area.

3. In the event an electrical corporation rather than a municipally owned electric utility lawfully is providing electric service in the municipality, all the provisions of subsection 2 of this section shall apply equally as if the electrical corporation were a municipally owned electric utility, except that if the electrical corporation and the rural electric cooperative are unable to negotiate a territorial agreement pursuant to section 394.312 within forty-five days, then either electric service supplier may file an application with the commission for an order determining which electric service supplier should serve, in whole or in part, the area to be annexed. The application shall be made pursuant to the rules and regulations of the commission governing applications for certificates of public convenience and necessity. The commission after the opportunity for hearing shall make its determination after consideration of the factors set forth in subdivisions (1) to^* (7) of subsection 2 of this section, and section 394.080 to the contrary notwithstanding, may grant its order upon a finding that granting of the applicant’s request is not detrimental to the public interest. The commission shall issue its decision by report and order no later than one hundred twenty days from the date of the application unless otherwise ordered by the commission for good cause shown. Review of such commission decisions shall be governed by sections 386.500 to 386.550. If the applicant is a rural electric cooperative, the commission shall charge to the rural electric cooperative the appropriate fees as set forth in subsection 9 of this section.

4. When a municipally owned electric utility desires to extend its service territory to include any structure located within a newly annexed area which has received permanent service from another electric service supplier within ninety days prior to the effective date of the annexation, it shall:

(1) Notify by publication in a newspaper of general circulation the record owner of said structure, and notify in writing any affected electric service supplier and the public service commission, within sixty days after the effective date of the annexation its desire to extend its service territory to include said structure; and

(2) Within six months after the effective date of the annexation receive the approval of the municipality’s governing body to begin negotiations pursuant to section 394.312 with the affected electric service supplier.

5. Upon receiving approval from the municipality’s governing body pursuant to subsection 4 of this section, the municipally owned electric utility and the affected electric service supplier shall meet and negotiate in good faith the terms of the territorial agreement and any transfers or acquisitions, including, as an alternative, granting the affected electric service supplier a franchise or authority to continue providing service in the annexed area. In the event that the affected electric service supplier does not provide wholesale electric power to the municipality, if the affected electric service supplier so desires, the parties may also negotiate, consistent with applicable law, regulations and existing power supply agreements, for power contracts which would provide for the purchase of power by the municipality from the affected electric service supplier for an amount of power equivalent to the loss of any sales to customers receiving permanent service at structures within the annexed areas which are being sought by the municipally owned electric utility. The parties shall have no more than one hundred eighty days from the date of receiving approval from the municipality’s governing body within which to conclude their negotiations and file their territorial agreement with the commission for approval under the provisions of section 394.312. The time period for negotiations allowed under this subsection may be extended for a period not to exceed one hundred eighty days by a mutual agreement of the parties and a written request with the public service commission.

6. For purposes of this section, the term “fair and reasonable compensation” shall mean the following:

(1) The present-day reproduction cost, new, of the properties and facilities serving the annexed areas, less depreciation computed on a straight-line basis; and

(2) An amount equal to the reasonable and prudent cost of detaching the facilities in the annexed areas and the reasonable and prudent cost of constructing any necessary facilities to reintegrate the system of the affected electric service supplier outside the annexed area after detaching the portion to be transferred to the municipally owned electric utility; and

(3) Two hundred percent of gross revenues less gross receipts taxes received by the affected electric service supplier from the twelve-month period preceding the approval of the municipality’s governing body under the provisions of subdivision (2) of subsection 4 of this section, normalized to produce a representative usage from customers at the subject structures in the annexed area; and

(4) Any federal, state and local taxes which may be incurred as a result of the transaction, including the recapture of any deduction or credit; and

(5) Any other costs reasonably incurred by the affected electric supplier in connection with the transaction.

7. In the event the parties are unable to reach an agreement under subsection 5 of this section, within sixty days after the expiration of the time specified for negotiations, the municipally owned electric utility or the affected electric service supplier may apply to the commission for an order assigning exclusive service territories within the annexed area and a determination of the fair and reasonable compensation amount to be paid to the affected electric service supplier under subsection 6 of this section. Applications shall be made and notice of such filing shall be given to all affected parties pursuant to the rules and regulations of the commission governing applications for certificates of public convenience and necessity. Unless otherwise ordered by the commission for good cause shown, the commission shall rule on such applications not later than one hundred twenty days after the application is properly filed with the secretary of the commission. The commission shall hold evidentiary hearings to assign service territory between the affected electric service suppliers inside the annexed area and to determine the amount of compensation due any affected electric service supplier for the transfer of plant, facilities or associated lost revenues between electric service suppliers in the annexed area. The commission shall make such determinations based on findings of what best serves the public interest and shall issue its decision by report and order. Review of such commission decisions shall be governed by sections 386.500 to 386.550. The payment of compensation and transfer of title and operation of the facilities shall occur within ninety days after the order and any appeal therefrom becomes final unless the order provides otherwise.

8. In reaching its decision under subsection 7 of this section, the commission shall consider the following factors:

(1) Whether the acquisition or transfers sought by the municipally owned electric utility within the annexed area from the affected electric service supplier are, in total, in the public interest, including the preference of the owner of any affected structure, consideration of rate disparities between the competing electric service suppliers, and issues of unjust rate discrimination among customers of a single electric service supplier if the rates to be charged in the annexed areas are lower than those charged to other system customers; and

(2) The fair and reasonable compensation to be paid by the municipally owned electric utility, to the affected electric service supplier with existing system operations within the annexed area, for any proposed acquisitions or transfers; and

(3) Any effect on system operation, including, but not limited to, loss of load and loss of revenue; and

(4) Any other issues upon which the municipally owned electric utility and the affected electric service supplier might otherwise agree, including, but not limited to, the valuation formulas and factors contained in subsections 5, 6, and 7, of this section, even if the parties could not voluntarily reach an agreement thereon under those subsections.

9. The commission is hereby given all necessary jurisdiction over municipally owned electric utilities and rural electric cooperatives to carry out the purposes of this section consistent with other applicable law; provided, however, the commission shall not have jurisdiction to compel the transfer of customers or structures with a connected load greater than one thousand kilowatts. The commission shall by rule set appropriate fees to be charged on a case-by-case basis to municipally owned electric utilities and rural electric cooperatives to cover all necessary costs incurred by the commission in carrying out its duties under this section. Nothing in this section shall be construed as otherwise conferring upon the public service commission jurisdiction over the service, rates, financing, accounting, or management of any rural electric cooperative or municipally owned electric utility, except as provided in this section.

10. Notwithstanding sections 394.020 and 394.080 to the contrary, a rural electric cooperative may provide electric service within the corporate boundaries of a municipality if such service is provided:

(1) Pursuant to subsections 2 to^* 9 of this section; and

(2) Such service is conditioned upon the execution of the appropriate territorial and municipal franchise agreements, which may include a nondiscriminatory requirement, consistent with other applicable law, that the rural electric cooperative collect and remit a sales tax based on the amount of electricity sold by the rural electric cooperative within the municipality.