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                                                       PRINTER'S NO. 137

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

No. 115 Session of 2007


        INTRODUCED BY D. EVANS, CALTAGIRONE, CAPPELLI, JOSEPHS, KENNEY,
           KULA, MANDERINO, MELIO AND NICKOL, JANUARY 30, 2007

        REFERRED TO COMMITTEE ON CONSUMER AFFAIRS, JANUARY 30, 2007

                                     AN ACT

     1  Amending Title 66 (Public Utilities) of the Pennsylvania
     2     Consolidated Statutes, providing for power of commission to
     3     order acquisition of city natural gas distribution
     4     operations.

     5     The General Assembly of the Commonwealth of Pennsylvania
     6  hereby enacts as follows:
     7     Section 1.  Title 66 of the Pennsylvania Consolidated
     8  Statutes is amended by adding a section to read:
     9  § 529.1.  Power of commission to order acquisition of city
    10             natural gas distribution operations.
    11     (a)  General rule.--The commission may order a capable public
    12  utility to acquire a city natural gas distribution operation if
    13  the commission, after notice and an opportunity to be heard,
    14  determines all of the following:
    15         (1)  That the city natural gas distribution operation
    16     cannot reasonably be expected to furnish and maintain
    17     adequate, efficient, safe and reasonable service and
    18     facilities in the future.


     1         (2)  That alternatives to acquisition have been
     2     considered in accordance with subsection (b) and have been
     3     determined by the commission to be impractical, ineffective
     4     or economically infeasible.
     5         (3)  That the acquiring capable public utility is
     6     financially, managerially and technically capable of
     7     acquiring and operating the city natural gas distribution
     8     operation in compliance with applicable statutory and
     9     regulatory standards.
    10         (4)  That the rates charged by the acquiring capable
    11     public utility to its preacquisition customers will not
    12     increase unreasonably because of the acquisition.
    13     (b)  Alternatives to acquisition.--Before the commission may
    14  order the acquisition of a city natural gas distribution
    15  operation in accordance with subsection (a), the commission
    16  shall discuss with the city natural gas distribution operation
    17  and its municipal government, and shall give the city natural
    18  gas distribution operation a reasonable opportunity to
    19  investigate alternatives to acquisition, including, but not
    20  limited to, all of the following:
    21         (1)  The reorganization of the city natural gas
    22     distribution operation under new management.
    23         (2)  The entering of a contract with another public
    24     utility or a management or service company to operate the
    25     city natural gas distribution operation.
    26         (3)  The appointment of a receiver to assure the
    27     provision of adequate, efficient, safe and reasonable service
    28     and facilities to the public.
    29         (4)  The expansion of the city natural gas distribution
    30     operation into territories outside its municipal boundaries.
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     1         (5)  The receipt of, or the verifiable commitment to
     2     receive, funds from Federal, State or local government, or
     3     from private or public entities, sufficient to place the city
     4     natural gas distribution operation on a sound financial
     5     footing for both operating and capital expenses enabling it
     6     to maintain adequate, efficient, safe and reasonable services
     7     and facilities.
     8         (6)  The entering of a contract with the Commonwealth or
     9     another entity to purchase and lease back assets of the city
    10     natural gas distribution operation.
    11     (c)  Factors to be considered.--In making a determination
    12  pursuant to subsection (a), the commission shall consider all of
    13  the following:
    14         (1)  The financial, managerial and technical ability of
    15     the city natural gas distribution operation.
    16         (2)  The financial, managerial and technical ability of
    17     public utilities providing the same type of service.
    18         (3)  The expenditures that may be necessary to make
    19     capital and other improvements to the city natural gas
    20     distribution operation to assure the adequacy, efficiency,
    21     safety, reasonableness or compliance with applicable
    22     statutory and regulatory standards of the utility service.
    23         (4)  Any other matters that the commission may determine
    24     to be relevant.
    25     (d)  Order of commission.--Subsequent to the determinations
    26  required by subsection (a), the commission shall issue an order
    27  for the acquisition of a city natural gas distribution operation
    28  by a capable public utility. Such order shall provide for the
    29  extension of the service area of the acquiring capable public
    30  utility to encompass the service area of the city natural gas
    20070H0115B0137                  - 3 -     

     1  distribution operation.
     2     (e)  Acquisition price.--The price for the acquisition of a
     3  city natural gas distribution operation shall be determined by
     4  agreement between the municipality of the city natural gas
     5  distribution operation and the acquiring capable public utility,
     6  subject to a determination by the commission that the price is
     7  reasonable. If the municipality that owns the city natural gas
     8  distribution operation and the acquiring capable public utility
     9  are unable to agree on the acquisition price or the commission
    10  disapproves the acquisition price on which the utilities have
    11  agreed, the commission shall issue an order directing the
    12  acquiring capable public utility to acquire the city natural gas
    13  distribution operation by following the procedure prescribed for
    14  determining fair market value pursuant to 26 Pa.C.S. Ch. 7
    15  (relating to just compensation and measure of damages).
    16     (f)  Separate tariffs.--The commission may, in its discretion
    17  and for a reasonable period of time after the date of
    18  acquisition, allow the acquiring capable public utility to
    19  charge and collect rates from the customers of the acquired city
    20  natural gas distribution operation pursuant to a separate
    21  tariff.
    22     (g)  Appointment of receiver.--The commission may, in its
    23  discretion, appoint a receiver to protect the interests of the
    24  customers of the city natural gas distribution operation. Any
    25  such appointment shall be by order of the commission, which
    26  order shall specify the duties and responsibilities of the
    27  receiver.
    28     (h)  Notice.--The notice required under subsection (a) or any
    29  other provision of this section shall be served upon the city
    30  natural gas distribution operation affected, the municipality
    20070H0115B0137                  - 4 -     

     1  thereof, the Office of Consumer Advocate, the Office of Small
     2  Business Advocate, the Office of Trial Staff and all public
     3  utilities providing the same type of service as the city natural
     4  gas distribution operation. The commission shall order the
     5  affected city natural gas distribution operation to provide
     6  notice to its customers of the initiation of proceedings under
     7  this section in the same manner in which the utility is required
     8  to notify its customers of proposed general rate increases.
     9     (i)  Burden of proof.--The Law Bureau shall have the burden
    10  of establishing a prima facie case that the acquisition of the
    11  city natural gas distribution operation would be in the public
    12  interest and in compliance with the provisions of this section.
    13  Once the commission determines that a prima facie case has been
    14  established:
    15         (1)  the city natural gas distribution operation shall
    16     have the burden of proving its ability to render adequate,
    17     efficient, safe and reasonable service at just and reasonable
    18     rates; and
    19         (2)  a public utility providing the same type of service
    20     as the city natural gas distribution operation shall have the
    21     opportunity and burden of proving its financial, managerial
    22     or technical inability to acquire and operate the city
    23     natural gas distribution operation.
    24     (j)  Plan for improvements.--Any capable public utility
    25  ordered by the commission to acquire a city natural gas
    26  distribution operation shall, prior to acquisition, submit to
    27  the commission for approval a plan, including a timetable, for
    28  capital improvements, financial stability and for maintaining or
    29  bringing the city natural gas distribution operation into
    30  compliance with applicable statutory and regulatory standards.
    20070H0115B0137                  - 5 -     

     1     (k)  Definitions.--As used in this section, the following
     2  words and phrases shall have the meanings given to them in this
     3  subsection:
     4     "Capable public utility."  A public utility that regularly
     5  provides the same type of service as a city natural gas
     6  distribution operation and is determined by the commission to
     7  have sufficient assets and revenue to undertake an acquisition
     8  of another utility.
     9     Section 2.  This act shall take effect in 30 days.














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