PRIOR PRINTER'S NO. 977 PRINTER'S NO. 1049
No. 882 Session of 1995
INTRODUCED BY DURHAM, HERSHEY, LAWLESS, LEH, S. H. SMITH, SEMMEL, FICHTER, McCALL, LaGROTTA, LAUGHLIN, ROONEY, GODSHALL, GLADECK, CORNELL, L. I. COHEN, BUNT, RUBLEY AND KENNEY, FEBRUARY 27, 1995
AS REPORTED FROM COMMITTEE ON CONSUMER AFFAIRS, HOUSE OF REPRESENTATIVES, AS AMENDED, MARCH 1, 1995
AN ACT 1 Amending Title 66 (Public Utilities) of the Pennsylvania 2 Consolidated Statutes, further providing for the acquisition 3 of water and sewer utilities. 4 The General Assembly of the Commonwealth of Pennsylvania 5 hereby enacts as follows: 6 Section 1. Section 1327 of Title 66 of the Pennsylvania 7 Consolidated Statutes is amended to read: 8 § 1327. Acquisition of water and sewer utilities. 9 (a) Acquisition cost greater than depreciated original 10 cost.--If a public utility acquires property from another public 11 utility, a municipal corporation or a person at a cost which is 12 in excess of the original cost of the property when first 13 devoted to the public service less the applicable accrued 14 depreciation, IT SHALL BE A REBUTTABLE PRESUMPTION THAT THE <-- 15 EXCESS IS REASONABLE AND that excess[, or any portion thereof 16 found by the commission to be reasonable, may] shall be included 17 in the rate base of the acquiring public utility, provided that
1 the acquiring public utility proves that: 2 (1) the property is used and useful in providing water 3 or sewer service; 4 (2) the public utility acquired the property from 5 another public utility, a municipal corporation or a person 6 which had [1,200] 3,300 or fewer customer connections or 7 which was nonviable in the absence of the acquisition; 8 (3) the public utility, municipal corporation or person 9 from which the property was acquired was not, at the time of 10 acquisition, furnishing and maintaining adequate, efficient, 11 safe and reasonable service and facilities, evidence of which 12 shall include, but not be limited to, any one or more of the 13 following: 14 (i) violation of statutory or regulatory 15 requirements of the Department of Environmental Resources 16 or the commission concerning the safety, adequacy, 17 efficiency or reasonableness of service and facilities; 18 (ii) a finding by the commission of inadequate 19 financial, managerial or technical ability of the small 20 water or sewer utility; 21 (iii) a finding by the commission that there is a 22 present deficiency concerning the availability of water, 23 the palatability of water or the provision of water at 24 adequate volume and pressure; [or] 25 (iv) a finding by the commission that the small 26 water or sewer utility, because of necessary improvements 27 to its plant or distribution system, cannot reasonably be 28 expected to furnish and maintain adequate service to its 29 customers in the future at rates equal to or less than 30 those of the acquiring public utility; or 19950H0882B1049 - 2 -
1 (v) any other facts, as the commission may 2 determine, that evidence the inability of the small water 3 or sewer utility to furnish or maintain adequate, 4 efficient, safe and reasonable service and facilities; 5 (4) reasonable and prudent investments will be made to 6 assure that the customers served by the property will receive 7 adequate, efficient, safe and reasonable service; 8 (5) the public utility, municipal corporation or person 9 whose property is being acquired is in agreement with the 10 acquisition and the negotiations which led to the acquisition 11 were conducted at arm's length; 12 (6) the actual purchase price is reasonable; 13 (7) neither the acquiring nor the selling public 14 utility, municipal corporation or person is an affiliated 15 interest of the other; 16 (8) the rates charged by the acquiring public utility to 17 its preacquisition customers will not increase unreasonably 18 because of the acquisition; and 19 (9) the excess of the acquisition cost over the 20 depreciated original cost will be added to the rate base to 21 be amortized as an addition to expense over a reasonable 22 period of time with corresponding reductions in the rate 23 base. 24 (b) Procedure.--The commission, upon application by a public 25 utility, person or corporation which has agreed to acquire 26 property from another public utility, municipal corporation or 27 person, may approve an inclusion in rate base in accordance with 28 subsection (a) prior to the acquisition and prior to a 29 proceeding under this chapter to determine just and reasonable 30 rates if: 19950H0882B1049 - 3 -
1 (1) the applicant has provided notice of the proposed 2 acquisition and any proposed increase in rates to the 3 customers served by the property to be acquired, in such form 4 and manner as the commission, by regulation, shall require; 5 (2) the applicant has provided notice to its customers, 6 in such form and manner as the commission, by regulation, 7 shall require, if the proposed acquisition would increase 8 rates to the acquiring public utility's customers by an 9 amount in excess of 1% of the acquiring public utility's base 10 annual revenue; 11 (3) the applicant has provided notice of the application 12 to the Director of Trial Staff and the Consumer Advocate; and 13 (4) in addition to any other information required by the 14 commission, the application includes a full description of 15 the proposed acquisition and a plan for reasonable and 16 prudent investments to assure that the customers served by 17 the property to be acquired will receive adequate, efficient, 18 safe and reasonable service. 19 (c) Hearings.--The commission may hold such hearings on the 20 application as it deems necessary. 21 (d) Forfeiture.--Notwithstanding section 1309 (relating to 22 rates fixed on complaint; investigation of costs of production), 23 the commission, by regulation, shall provide for [a utility to <-- 24 remove the excess costs of acquisition from its rates] THE <-- 25 REMOVAL OF THE EXCESS COSTS OF ACQUISITION FROM ITS RATES, OR 26 ANY PORTION THEREOF, FOUND BY THE COMMISSION TO BE UNREASONABLE 27 and to refund any excess revenues collected as a result of this 28 section, plus interest, which shall be the average rate of 29 interest specified for residential mortgage lending by the 30 Secretary of Banking in accordance with the act of January 30, 19950H0882B1049 - 4 -
1 1974 (P.L.13, No.6), referred to as the Loan Interest and 2 Protection Law, during the period or periods for which the 3 commission orders refunds, if the commission, after notice and 4 hearings, determines that the reasonable and prudent investments 5 to be made in accordance with this section have not been 6 completed within a reasonable time. 7 (e) Acquisition cost lower than depreciated original cost.-- 8 If a public utility acquires property from another public 9 utility, a municipal corporation or a person at a cost which is 10 lower than the original cost of the property when first devoted 11 to the public service less the applicable accrued depreciation 12 and the property is used and useful in providing water or sewer 13 service, that difference shall, absent matters of a substantial 14 public interest, be amortized as an addition to income over a 15 reasonable period of time or be passed through to the ratepayers 16 by such other methodology as the commission may direct. Notice 17 of the proposed treatment of an acquisition cost lower than 18 depreciated original cost shall be given to the Director of 19 Trial Staff and the Consumer Advocate. 20 (f) Reports.--The commission shall annually transmit to the 21 Governor and to the General Assembly and shall make available to 22 the public a report on the acquisition activity under this 23 title. Such report shall include, but not be limited to, the 24 number of small water or sewer public utilities, municipal 25 corporations or persons acquired by public utilities, and the 26 amounts of any rate increases or decreases sought and granted 27 due to the acquisition. 28 [(g) Expiration.--This section shall expire in five years 29 unless extended by statute.] 30 Section 2. This act shall take effect in 60 days. B22L66JLW/19950H0882B1049 - 5 -