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PRINTER'S NO. 1016
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
866
Session of
2023
INTRODUCED BY KANE, FONTANA, DILLON, SCHWANK, MUTH, COMITTA AND
SAVAL, JULY 17, 2023
REFERRED TO CONSUMER PROTECTION AND PROFESSIONAL LICENSURE,
JULY 17, 2023
AN ACT
Amending Title 66 (Public Utilities) of the Pennsylvania
Consolidated Statutes, in rates and distribution systems,
repealing provisions relating to valuation of acquired water
and wastewater systems.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 1329 of Title 66 of the Pennsylvania
Consolidated Statutes is repealed:
[ยง 1329. Valuation of acquired water and wastewater systems.
(a) Process to establish fair market value of selling
utility.--Upon agreement by both the acquiring public utility or
entity and the selling utility, the following procedure shall be
used to determine the fair market value of the selling utility:
(1) The commission will maintain a list of utility
valuation experts from which the acquiring public utility or
entity and selling utility will choose.
(2) Two utility valuation experts shall perform two
separate appraisals of the selling utility for the purpose of
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establishing its fair market value.
(3) Each utility valuation expert shall determine fair
market value in compliance with the Uniform Standards of
Professional Appraisal Practice, employing the cost, market
and income approaches.
(4) The acquiring public utility or entity and selling
utility shall engage the services of the same licensed
engineer to conduct an assessment of the tangible assets of
the selling utility. The assessment shall be incorporated
into the appraisal under the cost approach required under
paragraph (3).
(5) Each utility valuation expert shall provide the
completed appraisal to the acquiring public utility or entity
and selling utility within 90 days of execution of the
service contract.
(b) Utility valuation experts.--
(1) The utility valuation experts required under
subsection (a) shall be selected as follows:
(i) one shall be selected by the acquiring public
utility or entity; and
(ii) one shall be selected by the selling utility.
(2) The utility valuation experts shall not:
(i) derive any material financial benefit from the
sale of the selling utility other than fees for services
rendered; or
(ii) be an immediate family member of a director,
officer or employee of either the acquiring public
utility, entity or selling utility within a 12-month
period of the date of hire to perform an appraisal.
(3) Fees paid to utility valuation experts may be
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included in the transaction and closing costs associated with
acquisition by the acquiring utility or entity. Fees eligible
for inclusion may be of an amount not exceeding 5% of the
fair market value of the selling utility or a fee approved by
the commission.
(c) Ratemaking rate base.--The following apply:
(1) The ratemaking rate base of the selling utility
shall be incorporated into the rate base of:
(i) the acquiring public utility during the
acquiring public utility's next base rate case; or
(ii) the entity in its initial tariff filing.
(2) The ratemaking rate base of the selling utility
shall be the lesser of the purchase price negotiated by the
acquiring public utility or entity and selling utility or the
fair market value of the selling utility.
(d) Acquisitions by public utility.--The following apply:
(1) If the acquiring public utility and selling utility
agree to use the process outlined in subsection (a), the
acquiring public utility shall include the following as an
attachment to its application for commission approval of the
acquisition filed pursuant to section 1102 (relating to
enumeration of acts requiring certificate):
(i) Copies of the two appraisals performed by the
utility valuation experts under subsection (a).
(ii) The purchase price of the selling utility as
agreed to by the acquiring public utility and selling
utility.
(iii) The ratemaking rate base determined pursuant
to subsection (c)(2).
(iv) The transaction and closing costs incurred by
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the acquiring public utility that will be included in its
rate base.
(v) A tariff containing a rate equal to the existing
rates of the selling utility at the time of the
acquisition and a rate stabilization plan, if applicable
to the acquisition.
(2) The commission shall issue a final order on an
application submitted under this section within six months of
the filing date of an application meeting the requirements of
subsection (d)(1).
(3) If the commission issues an order approving the
application for acquisition, the order shall include:
(i) The ratemaking rate base of the selling utility,
as determined under subsection (c)(2).
(ii) Additional conditions of approval as may be
required by the commission.
(4) The tariff submitted pursuant to subsection (d)(1)
(v) shall remain in effect until such time as new rates are
approved for the acquiring public utility as the result of a
base rate case proceeding before the commission. The
acquiring public utility may collect a distribution system
improvement charge during this time, as approved by the
commission under this chapter.
(5) The selling utility's cost of service shall be
incorporated into the revenue requirement of the acquiring
public utility as part of the acquiring utility's next base
rate case proceeding. The original source of funding for any
part of the water or sewer assets of the selling utility
shall not be relevant to determine the value of said assets.
(e) Acquisitions by entity.--An entity shall provide all the
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information required by subsection (d)(1) to the commission as
an attachment to its application for a certificate of public
convenience filed pursuant to section 1102.
(f) Postacquisition projects.--The following apply:
(1) An acquiring public utility's postacquisition
improvements that are not included in a distribution
improvement charge shall accrue allowance for funds used
during construction after the date the cost was incurred
until the asset has been in service for a period of four
years or until the asset is included in the acquiring public
utility's next base rate case, whichever is earlier.
(2) Depreciation on an acquiring public utility's
postacquisition improvements that have not been included in
the calculation of a distribution system improvement charge
shall be deferred for book and ratemaking purposes.
(g) Definitions.--As used in this section, the following
words and phrases shall have the meanings given to them in this
subsection unless the context clearly indicates otherwise:
"Acquiring public utility." A water or wastewater public
utility subject to regulation under this title that is acquiring
a selling utility as the result of a voluntary arm's-length
transaction between the buyer and seller.
"Allowance of funds used during construction." An accounting
practice that recognizes the capital costs, including debt and
equity funds that are used to finance the construction costs of
an improvement to a selling utility's assets by an acquiring
public utility.
"Entity." A person, partnership or corporation that is
acquiring a selling utility and has filed or whose affiliate has
filed an application with the commission seeking public utility
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status pursuant to section 1102.
"Fair market value." The average of the two utility
valuation expert appraisals conducted under subsection (a)(2).
"Ratemaking rate base." The dollar value of a selling
utility which, for postacquisition ratemaking purposes, is
incorporated into the rate base of the acquiring public utility
or entity.
"Rate stabilization plan." A plan that will hold rates
constant or phase rates in over a period of time after the next
base rate case.
"Selling utility." A water or wastewater company located in
this Commonwealth, owned by a municipal corporation or authority
that is being purchased by an acquiring public utility or entity
as the result of a voluntary arm's-length transaction between
the buyer and seller.
"Utility valuation expert." A person hired by an acquiring
public utility and selling utility for the purpose of conducting
an economic valuation of the selling utility to determine its
fair market value.]
Section 2. This act shall take effect in 60 days.
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