Florida Senate - 2020 SB 658 By Senator Albritton 26-00784-20 2020658__ 1 A bill to be entitled 2 An act relating to acquisition of water and wastewater 3 systems; creating s. 367.0712, F.S.; authorizing 4 certain water and wastewater utilities to establish a 5 rate base value by using the fair market value when 6 acquiring a utility system; establishing a procedure 7 to determine the fair market value; requiring the rate 8 base value to be reflected in the acquiring utility’s 9 next rate case for ratemaking purposes; specifying the 10 contents required for an application to the Public 11 Service Commission for approval of the rate base value 12 of the utility system; specifying duties of the 13 commission regarding applications; specifying the 14 commission’s retained authority; providing 15 applicability; requiring the commission to adopt 16 rules; providing an effective date. 17 18 Be It Enacted by the Legislature of the State of Florida: 19 20 Section 1. Section 367.0712, Florida Statutes, is created 21 to read: 22 367.0712 Determination of value.— 23 (1) When a utility acquires an existing utility system, the 24 utility may establish a rate base value of the acquired utility 25 system by using the fair market value of the utility system 26 instead of the system’s original cost. 27 (2)(a) The fair market value of a utility system to be 28 acquired must be based on appraisals conducted by two licensed 29 appraisers chosen from a list established by the commission. 30 1. One appraiser shall represent and be paid by the 31 acquiring utility and one appraiser shall represent and be paid 32 by the utility system being acquired. 33 2. Each appraiser shall determine the fair market value 34 using the Uniform Standards of Professional Appraisal Practice, 35 employing cost, market, and income approaches in assessing the 36 value. 37 3. For ratemaking purposes, the fair market value is the 38 average of the two appraisals. 39 4. The original source of funding for the utility system 40 being acquired is not relevant to an evaluation of fair market 41 value. 42 (b) The acquiring utility and utility system being acquired 43 shall jointly retain a licensed engineer to conduct an 44 assessment of the tangible assets of the utility system and the 45 assessment shall be used by the two appraisers in determining 46 the fair market value of the system. 47 (c) The acquiring utility may include in the cost of the 48 acquired utility system: 49 1. Reasonable fees paid to the appraisers, if approved by 50 the commission. 51 2. Reasonable transaction and closing costs incurred by the 52 acquiring utility. 53 (d) The rate base value of the acquired utility system, 54 which must be reflected in the acquiring utility’s next general 55 rate case for ratemaking purposes, is equal to the lesser of the 56 purchase price negotiated between the parties to the sale or the 57 fair market value, and the fees and costs authorized in 58 paragraph (c). 59 (3) An application to the commission for approval of the 60 rate base value of the utility system to be acquired must 61 contain the following: 62 (a) Copies of the appraisals performed by the appraisers 63 pursuant to paragraph (2)(a). 64 (b) Each deficiency identified by the engineering 65 assessment conducted pursuant to paragraph (2)(b) and a 3-year 66 plan for prudent and necessary infrastructure improvements. 67 (c) The projected rate impact for the selling utility’s 68 customers for the next 5 years. 69 (d) The average of the appraisals, which shall constitute 70 the fair market value of the system. 71 (e) The assessment of tangible assets pursuant to (2)(b). 72 (f) The contract of sale. 73 (g) The estimated value of fees and transaction and closing 74 costs to be incurred by the acquiring utility. 75 (h) A tariff, including rates equal to the rates of the 76 selling utility. 77 (4) If the application complies with the requirements of 78 subsection (3), the commission shall issue a final order 79 approving or denying the application within 8 months after the 80 date on which the application was filed. An order approving an 81 application shall determine the rate base value of the acquired 82 utility system for ratemaking purposes in a manner consistent 83 with this section. 84 (5) Notwithstanding any provision in this section, the 85 commission retains its authority under this chapter to set rates 86 for the acquired utility system in future rate cases and may 87 classify the acquired utility system as a separate entity for 88 ratemaking purposes, consistent with the public interest. 89 (6) This section applies to acquiring utilities that 90 provide water and wastewater services to more than 10,000 91 customers and are engaged in a voluntary and mutually agreeable 92 acquisition of a water and wastewater system. 93 (7) The commission shall adopt rules to implement this 94 section. 95 Section 2. This act shall take effect July 1, 2020.