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House File 56 - IntroducedA Bill ForAn Act 1relating to the acquisition of water, sanitary sewer,
2and storm water utilities by rate-regulated public
3utilities.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 476.84, subsection 2, Code 2023, is
2amended to read as follows:
32. a. A public utility shall not acquire, in whole or in
4part, a water, sanitary sewer, or storm water utility with
5a fair market value purchase price of five hundred thousand
6 million dollars or more from a non-rate-regulated entity
7described in section 476.1, subsection 4, unless the board
8first approves the acquisition. In addition, if the utility to
9be acquired is a city utility, then the public utility shall
10not acquire the city utility until the city has first met
11 certified completion of the requirements of section 388.2A.
12b. If a water, sanitary sewer, or storm water utility that
13is the subject of an acquisition meets the requirements of
14paragraph “a”, then the acquiring public utility may apply to
15the board, prior to the completion of the acquisition, for
16advance approval of a proposed initial tariff for providing
17service to customers of the acquired utility.
18c. As part of its review of the proposed acquisition,
19the board shall specify in advance, by order issued after a
20contested case proceeding, the ratemaking principles that will
21apply when the costs of the acquired utility are included in
22regulated rates. The lesser of the sale price or the fair
23market value of the acquired utility as established pursuant
24to section 388.2A, subsection 2, shall be used in determining
25the applicable ratemaking principles. In determining the
26applicable ratemaking principles, the board shall not be
27limited to traditional ratemaking principles or traditional
28cost recovery mechanisms. Among the principles and mechanisms
29the board may consider, the board has the authority to approve
30ratemaking principles that provide for reasonable restrictions
31upon the ability of the public utility to seek an increase
32in specified regulated rates for a period of time after the
33acquisition takes place. The final order including the rate
34base and approving the acquisition shall consider reasonable
35and customary closing costs, the cost of appraisals, and
-1-1regulatory and legal expenses incurred in connection with the
2acquisition.
3d. In determining the applicable ratemaking principles,
4the board shall find that the proposed acquisition will result
5in just and reasonable rates to all customers of the public
6utility, including but not limited to existing customers of
7the public utility. In making this finding, the board may
8consider any factor it reasonably concludes may affect future
9rates, including but not limited to the price paid for the
10acquired utility and the projected cost of reasonable and
11prudent changes to investments in the acquired utility in order
12to provide adequate safe and reliable services and facilities
13to customers. The board shall consider whether there are
14ratemaking principles that will result in just and reasonable
15rates to all customers in determining whether to approve or
16disapprove a proposed acquisition.
17e. If the acquisition involves a utility that is an at-risk
18system as defined in section 455B.199D, the board shall
19issue a final order on an application for approval of the
20acquisition within one hundred twenty days from the filing of
21the application. For all other acquisitions, the board shall
22issue an order within one hundred eighty days of the filing
23date of the application.
24f. Upon the approval of a proposal for acquisition by
25board order, the parties subject to the acquisition shall
26have the option of either proceeding with such acquisition or
27not, subject to any termination provisions contained in the
28acquisition agreement.
29g. Notwithstanding any provision of this chapter to the
30contrary, the ratemaking principles established by the board
31pursuant to this section shall be binding with regard to the
32acquired utility in any subsequent rate proceeding.
33EXPLANATION
34The inclusion of this explanation does not constitute agreement with
35the explanation’s substance by the members of the general assembly.
-2- 1This bill relates to the acquisition of water, sanitary
2sewer, and storm water utilities by rate-regulated public
3utilities.
4The bill increases the threshold amount requiring utilities
5board (board) approval from $500,000 to $5 million when a
6public utility is acquiring a water, sanitary sewer, or storm
7water utility. The bill modifies city utility acquisition to
8include that the city must first certify completion of the
9requirements of Code section 388.2A, including an appraisal
10for the fair market value of the utility system, discussion
11of alternatives of the sale of the utility system, and a city
12council proposal for the sale. Current law requires that the
13city meets the requirements, but not certifies compliance.
14The bill provides that the rate base in the final order
15approving an acquisition shall include reasonable and customary
16closing costs, the cost of appraisals, and regulatory and legal
17expenses incurred in connection with the acquisition.
18The bill provides that the board shall issue a final order
19within 120 days of the filing of an application for the
20acquisition of an at-risk utility system, or an order within
21180 days for all other acquisitions. Current law provides that
22the board shall issue a final order within 120 days of filing
23the application for a utility that is an at-risk system.
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2and storm water utilities by rate-regulated public
3utilities.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 476.84, subsection 2, Code 2023, is
2amended to read as follows:
32. a. A public utility shall not acquire, in whole or in
4part, a water, sanitary sewer, or storm water utility with
5a fair market value purchase price of five hundred thousand
6 million dollars or more from a non-rate-regulated entity
7described in section 476.1, subsection 4, unless the board
8first approves the acquisition. In addition, if the utility to
9be acquired is a city utility, then the public utility shall
10not acquire the city utility until the city has first met
11 certified completion of the requirements of section 388.2A.
12b. If a water, sanitary sewer, or storm water utility that
13is the subject of an acquisition meets the requirements of
14paragraph “a”, then the acquiring public utility may apply to
15the board, prior to the completion of the acquisition, for
16advance approval of a proposed initial tariff for providing
17service to customers of the acquired utility.
18c. As part of its review of the proposed acquisition,
19the board shall specify in advance, by order issued after a
20contested case proceeding, the ratemaking principles that will
21apply when the costs of the acquired utility are included in
22regulated rates. The lesser of the sale price or the fair
23market value of the acquired utility as established pursuant
24to section 388.2A, subsection 2, shall be used in determining
25the applicable ratemaking principles. In determining the
26applicable ratemaking principles, the board shall not be
27limited to traditional ratemaking principles or traditional
28cost recovery mechanisms. Among the principles and mechanisms
29the board may consider, the board has the authority to approve
30ratemaking principles that provide for reasonable restrictions
31upon the ability of the public utility to seek an increase
32in specified regulated rates for a period of time after the
33acquisition takes place. The final order including the rate
34base and approving the acquisition shall consider reasonable
35and customary closing costs, the cost of appraisals, and
-1-1regulatory and legal expenses incurred in connection with the
2acquisition.
3d. In determining the applicable ratemaking principles,
4the board shall find that the proposed acquisition will result
5in just and reasonable rates to all customers of the public
6utility, including but not limited to existing customers of
7the public utility. In making this finding, the board may
8consider any factor it reasonably concludes may affect future
9rates, including but not limited to the price paid for the
10acquired utility and the projected cost of reasonable and
11prudent changes to investments in the acquired utility in order
12to provide adequate safe and reliable services and facilities
13to customers. The board shall consider whether there are
14ratemaking principles that will result in just and reasonable
15rates to all customers in determining whether to approve or
16disapprove a proposed acquisition.
17e. If the acquisition involves a utility that is an at-risk
18system as defined in section 455B.199D, the board shall
19issue a final order on an application for approval of the
20acquisition within one hundred twenty days from the filing of
21the application. For all other acquisitions, the board shall
22issue an order within one hundred eighty days of the filing
23date of the application.
24f. Upon the approval of a proposal for acquisition by
25board order, the parties subject to the acquisition shall
26have the option of either proceeding with such acquisition or
27not, subject to any termination provisions contained in the
28acquisition agreement.
29g. Notwithstanding any provision of this chapter to the
30contrary, the ratemaking principles established by the board
31pursuant to this section shall be binding with regard to the
32acquired utility in any subsequent rate proceeding.
33EXPLANATION
34The inclusion of this explanation does not constitute agreement with
35the explanation’s substance by the members of the general assembly.
-2- 1This bill relates to the acquisition of water, sanitary
2sewer, and storm water utilities by rate-regulated public
3utilities.
4The bill increases the threshold amount requiring utilities
5board (board) approval from $500,000 to $5 million when a
6public utility is acquiring a water, sanitary sewer, or storm
7water utility. The bill modifies city utility acquisition to
8include that the city must first certify completion of the
9requirements of Code section 388.2A, including an appraisal
10for the fair market value of the utility system, discussion
11of alternatives of the sale of the utility system, and a city
12council proposal for the sale. Current law requires that the
13city meets the requirements, but not certifies compliance.
14The bill provides that the rate base in the final order
15approving an acquisition shall include reasonable and customary
16closing costs, the cost of appraisals, and regulatory and legal
17expenses incurred in connection with the acquisition.
18The bill provides that the board shall issue a final order
19within 120 days of the filing of an application for the
20acquisition of an at-risk utility system, or an order within
21180 days for all other acquisitions. Current law provides that
22the board shall issue a final order within 120 days of filing
23the application for a utility that is an at-risk system.
-3-es/rn