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.
   18  Be It Enacted by the Legislature of the State of Florida:
   20         Section 1. Section 367.0712, Florida Statutes, is created
   21  to read:
   22         367.0712Determination 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.