A.__A large district serving an area with a population over 100,000 people;

B.__A medium-sized district serving an area with a population over 10,000 people but under 100,000 people; and

C.__A small district serving an area with a population under 10,000 people.

At least one of the participating districts must be a municipal water district.

3.__Election by participating water utility.__To qualify for selection by the commission under subsection 1, the governing body of the consumer-owned water utility must affirmatively vote to participate in the pilot project.__The election must be certified by the secretary or clerk of the utility.__Prior to taking the vote, the utility shall hold a public hearing at which the Public Advocate and any customers of the utility may testify and may question the utility's officials regarding participation in the pilot project. Public notice of the time, date, location and purpose of the hearing must be made no less than 14 days in advance of the hearing in a newspaper of general circulation in the area encompassed by the utility.__ In addition, the utility shall provide one notice to each of its customers containing the same information in the public notice, which notice must be distributed by mail or other similar means no less than 14 days prior to the hearing.__A copy of the notice must be provided concurrently to the commission and the Public Advocate.

4.__Municipal approval.__If the governing body of the consumer-owned water utility votes to participate in the pilot project pursuant to subsection 3, then the municipal officers of a municipality within the consumer-owned water utility's service area shall vote on whether to approve the utility's election.__For utilities serving more than one municipality, the approval of municipalities representing a majority of the population within the utility's service area is required.__ Prior to requesting a vote by any municipality under this subsection, the utility shall provide to the clerk of the municipality a copy of the utility's certified vote pursuant to subsection 2.

5.__Term of pilot project.__Once designated by the commission as a local governed water district, a utility is a locally governed water district until June 1, 2007.__At the expiration of the pilot project, a locally governed water