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
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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:
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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,
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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.
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