H.F. 473 Section 1. Section 476.84, subsection 2, Code 2023, is 1 amended to read as follows: 2 2. a. A public utility shall not acquire, in whole or in 3 part, a water, sanitary sewer, or storm water utility with 4 a fair market value purchase price of five hundred thousand 5 three million dollars or more from a non-rate-regulated entity 6 described in section 476.1, subsection 4 , unless the board 7 first approves the acquisition. In addition, if the utility 8 to be acquired is a city utility, then the public utility 9 shall not acquire the city utility until the city has first 10 met certified completion of the requirements of section 388.2A 11 sections 362.3, 364.2, 364.7, 384.84, 388.2, 388.2A, and 388.6 . 12 A certified completion submitted pursuant to this paragraph 13 shall contain an affirmation that the city that is the subject 14 of the acquisition has timely and substantially complied in 15 relation to the acquisition with the applicable provisions of 16 sections 362.3, 364.2, 364.7, 384.84, 388.2, 388.2A, and 388.6. 17 b. If a water, sanitary sewer, or storm water utility that 18 is the subject of an acquisition meets the requirements of 19 paragraph “a” , then the acquiring public utility may apply to 20 the board, prior to the completion of the acquisition, for 21 advance approval of a proposed initial tariff for providing 22 service to customers of the acquired utility. 23 c. As part of its review of the proposed acquisition, 24 the board shall specify in advance, by order issued after a 25 contested case proceeding, the ratemaking principles that will 26 apply when the costs of the acquired utility are included in 27 regulated rates. The lesser of the sale price or the fair 28 market value of the acquired utility as established pursuant 29 to section 388.2A, subsection 2 , shall be used in determining 30 the applicable ratemaking principles. In determining the 31 applicable ratemaking principles, the board shall not be 32 limited to traditional ratemaking principles or traditional 33 cost recovery mechanisms. Among the principles and mechanisms 34 the board may consider, the board has the authority to approve 35 -1- LSB 1317HV (3) 90 es/rn 1/ 4

H.F. 473 ratemaking principles that provide for reasonable restrictions 1 upon the ability of the public utility to seek an increase 2 in specified regulated rates for a period of time after the 3 acquisition takes place. The final order including the rate 4 base and approving the acquisition shall consider reasonable 5 and customary closing costs, the cost of appraisals, and 6 regulatory and legal expenses incurred in connection with the 7 acquisition. 8 d. In determining the applicable ratemaking principles, 9 the board shall find that the proposed acquisition will result 10 in just and reasonable rates to all customers of the public 11 utility, including but not limited to existing customers of 12 the public utility. In making this finding, the board may 13 consider any factor it reasonably concludes may affect future 14 rates, including but not limited to the price paid for the 15 acquired utility and the projected cost of reasonable and 16 prudent changes to investments in the acquired utility in order 17 to provide adequate safe and reliable services and facilities 18 to customers. The board shall consider whether there are 19 ratemaking principles that will result in just and reasonable 20 rates to all customers in determining whether to approve or 21 disapprove a proposed acquisition. 22 e. (1) In determining the applicable ratemaking principles, 23 the board shall require the public utility to submit a purchase 24 agreement for the acquisition and shall find that the purchase 25 agreement includes terms, conditions, requirements, and other 26 provisions applicable to the system to be acquired that are in 27 substantial compliance with the requirements in sections 362.3, 28 364.2, 364.7, 384.84, 388.2, 388.2A, and 388.6. 29 (2) The purchase agreement shall include a term allowing 30 the parties thirty days, after final approval of the ratemaking 31 principles, to terminate the purchase agreement without 32 penalty. 33 e. f. If the acquisition involves a utility that is an 34 at-risk system as defined in section 455B.199D , the board shall 35 -2- LSB 1317HV (3) 90 es/rn 2/ 4

H.F. 473 issue a final order on an application for approval of the 1 acquisition within one hundred twenty days from the filing of 2 the application. For all other acquisitions, the board shall 3 issue an order within one hundred eighty days of the filing 4 date of the application. 5 f. g. Upon the approval of a proposal for acquisition 6 by board order, the parties subject to the acquisition shall 7 have the option of either proceeding with such acquisition or 8 not, subject to any termination provisions contained in the 9 acquisition agreement. 10 g. h. Notwithstanding any provision of this chapter to the 11 contrary, the ratemaking principles established by the board 12 pursuant to this section shall be binding with regard to the 13 acquired utility in any subsequent rate proceeding. 14 EXPLANATION 15 The inclusion of this explanation does not constitute agreement with 16 the explanation’s substance by the members of the general assembly. 17 This bill relates to the acquisition of water, sanitary 18 sewer, and storm water utilities by rate-regulated public 19 utilities. 20 The bill increases the threshold amount requiring utilities 21 board (board) approval from $500,000 to $3 million when a 22 public utility is acquiring a water, sanitary sewer, or storm 23 water utility. The bill modifies city utility acquisition to 24 include that the city must first certify completion of the 25 requirements of Code sections 362.3 (regarding publication of 26 notices), 364.2 (regarding vesting power of franchises), 364.7 27 (regarding disposal of property), 384.84 (regarding rate and 28 charges, billing, and contracts), 388.2 (regarding submission 29 to voters), 388.2A (regarding the procedure for disposal of a 30 city utility by sale), and 388.6 (regarding discrimination in 31 rates). Current law requires that the city meet requirements 32 of Code section 388.2A, but not certify compliance. 33 The bill provides that the rate base in the final order 34 approving an acquisition shall include reasonable and customary 35 -3- LSB 1317HV (3) 90 es/rn 3/ 4

H.F. 473 closing costs, the cost of appraisals, and regulatory and legal 1 expenses incurred in connection with the acquisition. 2 The bill provides that the board shall require a public 3 utility to submit a purchase agreement for the acquisition and 4 shall find the purchase agreement includes terms, conditions, 5 requirements, and other provisions applicable to the system 6 sought to be acquired and the public utility shall be in 7 compliance with specified provisions in determining applicable 8 ratemaking principles. The purchase agreement shall include 9 a term allowing the parties 30 days after final approval of 10 the ratemaking principles to terminate the purchase agreement 11 without penalty. 12 The bill provides that the board shall issue a final order 13 within 120 days of the filing of an application for the 14 acquisition of an at-risk utility system, or an order within 15 180 days for all other acquisitions. Current law provides that 16 the board shall issue a final order within 120 days of filing 17 the application for a utility that is an at-risk system. 18 -4- LSB 1317HV (3) 90 es/rn 4/ 4