Florida Senate - 2020                              CS for SB 658
       By the Committee on Innovation, Industry, and Technology; and
       Senator Albritton
       580-03760-20                                           2020658c1
    1                        A bill to be entitled                      
    2         An act relating to water and wastewater systems;
    3         amending s. 180.191, F.S.; requiring a municipality to
    4         charge customers receiving its utility services
    5         outside the municipal boundaries the same rates, fees,
    6         and charges as it charges customers within the
    7         municipality under certain circumstances; creating s.
    8         367.0712, F.S.; authorizing certain water and
    9         wastewater utilities to establish a rate base value by
   10         using the fair market value when acquiring a utility
   11         system; establishing a procedure to determine the fair
   12         market value; requiring the rate base value to be
   13         reflected in the acquiring utility’s next rate case
   14         for ratemaking purposes; specifying the contents
   15         required for an application to the Public Service
   16         Commission for approval of the rate base value of the
   17         utility system; specifying duties of the commission
   18         regarding applications; specifying the commission’s
   19         retained authority; providing applicability; requiring
   20         the commission to adopt rules; providing an effective
   21         date.
   23  Be It Enacted by the Legislature of the State of Florida:
   25         Section 1. Present subsections (2), (3), and (4) of section
   26  180.191, Florida Statutes, are redesignated as subsections (3),
   27  (4), and (5), respectively, a new subsection (2) is added to
   28  that section, and subsection (1) of that section is amended, to
   29  read:
   30         180.191 Limitation on rates charged consumer outside city
   31  limits.—
   32         (1) Except as provided in subsection (2), any municipality
   33  within the state operating a water or sewer utility outside of
   34  the boundaries of such municipality shall charge consumers
   35  outside the boundaries rates, fees, and charges determined in
   36  one of the following manners:
   37         (a) It may charge the same rates, fees, and charges as
   38  consumers inside the municipal boundaries. However, in addition
   39  thereto, the municipality may add a surcharge of not more than
   40  25 percent of such rates, fees, and charges to consumers outside
   41  the boundaries. Fixing of such rates, fees, and charges in this
   42  manner does shall not require a public hearing except as may be
   43  provided for service to consumers inside the municipality.
   44         (b) It may charge rates, fees, and charges that are just
   45  and equitable and that which are based on the same factors used
   46  in fixing the rates, fees, and charges for consumers inside the
   47  municipal boundaries. In addition thereto, the municipality may
   48  add a surcharge not to exceed 25 percent of such rates, fees,
   49  and charges for said services to consumers outside the
   50  boundaries. However, the total of all such rates, fees, and
   51  charges for the services to consumers outside the boundaries may
   52  shall not be more than 50 percent in excess of the total amount
   53  the municipality charges consumers served within the
   54  municipality for corresponding service. No Such rates, fees, and
   55  charges may not shall be fixed until after a public hearing at
   56  which all of the users of the water or sewer systems; owners,
   57  tenants, or occupants of property served or to be served
   58  thereby; and all others interested shall have an opportunity to
   59  be heard concerning the proposed rates, fees, and charges. Any
   60  change or revision of such rates, fees, or charges may be made
   61  in the same manner as such rates, fees, or charges were
   62  originally established, but if such change or revision is to be
   63  made substantially pro rata as to all classes of service, both
   64  inside and outside the municipality, no hearing or notice shall
   65  be required.
   66         (2) Any municipality within the state operating a water or
   67  sewer utility providing service to customers in another
   68  recipient municipality from infrastructure located in the
   69  recipient municipality shall charge the customers in the
   70  recipient municipality the same rates, fees, and charges as it
   71  does the customers inside its own municipal boundaries.
   72         Section 2. Section 367.0712, Florida Statutes, is created
   73  to read:
   74         367.0712Determination of value.—
   75         (1)When a utility acquires an existing utility system, the
   76  utility may establish a rate base value of the acquired utility
   77  system by using the fair market value of the utility system
   78  instead of the system’s original cost.
   79         (2)(a)The fair market value of a utility system to be
   80  acquired must be based on appraisals conducted by two licensed
   81  appraisers chosen from a list established by the commission.
   82         1.One appraiser shall represent and be paid by the
   83  acquiring utility and one appraiser shall represent and be paid
   84  by the utility system being acquired.
   85         2.Each appraiser shall determine the fair market value
   86  using the Uniform Standards of Professional Appraisal Practice,
   87  employing cost, market, and income approaches in assessing the
   88  value.
   89         3.For ratemaking purposes, the fair market value is the
   90  average of the two appraisals.
   91         4.The original source of funding for the utility system
   92  being acquired is not relevant to an evaluation of fair market
   93  value.
   94         (b)The acquiring utility and utility system being acquired
   95  shall jointly retain a licensed engineer to conduct an
   96  assessment of the tangible assets of the utility system and the
   97  assessment shall be used by the two appraisers in determining
   98  the fair market value of the system.
   99         (c)The acquiring utility may include in the cost of the
  100  acquired utility system:
  101         1.Reasonable fees paid to the appraisers, if approved by
  102  the commission.
  103         2.Reasonable transaction and closing costs incurred by the
  104  acquiring utility.
  105         (d)The rate base value of the acquired utility system,
  106  which must be reflected in the acquiring utility’s next general
  107  rate case for ratemaking purposes, is equal to the lesser of the
  108  purchase price negotiated between the parties to the sale or the
  109  fair market value, and the fees and costs authorized in
  110  paragraph (c).
  111         (3)An application to the commission for approval of the
  112  rate base value of the utility system to be acquired must
  113  contain the following:
  114         (a)Copies of the appraisals performed by the appraisers
  115  pursuant to paragraph (2)(a).
  116         (b)Each deficiency identified by the engineering
  117  assessment conducted pursuant to paragraph (2)(b) and a 3-year
  118  plan for prudent and necessary infrastructure improvements.
  119         (c)The projected rate impact for the selling utility’s
  120  customers for the next 5 years.
  121         (d)The average of the appraisals, which shall constitute
  122  the fair market value of the system.
  123         (e)The assessment of tangible assets pursuant to (2)(b).
  124         (f)The contract of sale.
  125         (g)The estimated value of fees and transaction and closing
  126  costs to be incurred by the acquiring utility.
  127         (h)A tariff, including rates equal to the rates of the
  128  selling utility.
  129         (4)If the application complies with the requirements of
  130  subsection (3), the commission shall issue a final order
  131  approving or denying the application within 8 months after the
  132  date on which the application was filed. An order approving an
  133  application shall determine the rate base value of the acquired
  134  utility system for ratemaking purposes in a manner consistent
  135  with this section.
  136         (5)Notwithstanding any provision in this section, the
  137  commission retains its authority under this chapter to set rates
  138  for the acquired utility system in future rate cases and may
  139  classify the acquired utility system as a separate entity for
  140  ratemaking purposes, consistent with the public interest.
  141         (6)This section applies to acquiring utilities that
  142  provide water and wastewater services to more than 10,000
  143  customers and are engaged in a voluntary and mutually agreeable
  144  acquisition of a water and wastewater system.
  145         (7)The commission shall adopt rules to implement this
  146  section.
  147         Section 3. This act shall take effect July 1, 2020.