1. (1) The Board may approve a grant request made by one or more utility systems when:

   1. (a) The utility systems have merged in accordance with T.C.A. § 7-82-704; or
   2. (b) The utility systems are pursuing a voluntary merger.

2. (2) When Payments May Be Made:

   1. (a) Grant payments may be made to any entity involved in a merger, or to the merged entity.
   2. (b) In the case of a merger ordered by the Board pursuant to T.C.A. § 7-82-704, payments may only be made after the merger is final.
   3. (c) Payments may be made to an entity involved in a voluntary merger when the parties are legally obligated to merge or have merged. Payments may only be made to entities involved in a voluntary merger if the merger is in the best interest of at least one (1) utility system's service population, does not harm another service population, and the grant is necessary to achieve the merger.
   4. (d) Grant payments are subject to the claw back provision in 1715-06-.03(4).

3. (3) Grant payments may be used to offset, in whole or in part, the following costs and obligations:

   1. (a) Amounts to offset increased administrative costs relating to the merger, to the extent those costs cannot reasonably be recovered from customer revenues or other assets of the utility system;
   2. (b) Amounts that may be necessary to cure a default on indebtedness of the utility system to the extent the defaults can, in the opinion of the Board, reasonably be cured;
   3. (c) Amounts that may be necessary to renovate and repair the facilities of the utility system to the level necessary to enable the merged utility to provide continued service to the public being served by an ailing utility system;
   4. (d) Amounts necessary to standardize equipment, infrastructure, or software between the merging utilities; and,
   5. (e) Other payments that may be necessary in the opinion of the Board to accomplish the merger and mitigate the financial impact of the merger.
4. (4) The Board will not favor any grand division, county, municipality, or service population over any other when determining whether a grant should be approved.
5. (5) A grant will only be approved pursuant to a completed grant request for such payments, which request must be made in a manner approved by the Board and timely submitted to Board staff.
6. (6) The Board has sole discretion to approve a grant.

7. (7) The Board has sole discretion to determine the amount of a grant. The Board shall consider the following:

   1. (a) Available funds in the URF;
   2. (b) The findings of a study performed pursuant to T.C.A. § 7-82-704;
   3. (c) Evidence provided by a qualified professional as part of a feasibility or rate study; or,
   4. (d) Any other source or authority determined by the Board to be reliable.
8. (8) A request for a grant may be approved prior to a merger of the utility systems but grant payments will only be made as described in the order approving the grant.

Authority: T.C.A. §§ 4-5-201, et seq., 7-82-702, 7-82-704, and 7-82-708. Administrative History: New rules filed May 5, 2025; effective August 3, 2025.