SSB 3060 (LSB 5599XC (1) 91)

SENATE FILE _____ 

BY  (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON BOUSSELOT)

A BILL FOR

An Act relating to the acquisition of water, sanitary sewer, and storm water utilities, including required findings by the Iowa utilities commission, the timeline for issuing ratemaking principles, and the determination of applicable ratemaking principles.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 476.84, subsection 2, paragraphs a and c, Code 2026, are amended to read as follows:
   a.  A public utility shall not acquire, in whole or in part, a water, sanitary sewer, or storm water utility with a purchase price of three million dollars or more from a non-rate-regulated entity described in section 476.1, subsection 3, unless the commission first approves the acquisition and finds that the acquisition will not detrimentally affect ratepayers of either the utility to be acquired or the acquiring utility. In addition, if the utility to be acquired is a city utility, then the public utility shall not acquire the city utility until the city has first certified completion of the requirements of sections 362.3, 364.2, 364.7, 384.84, 388.2, 388.2A, and 388.6. A certified completion submitted pursuant to this paragraph shall contain an affirmation that the city that is the subject of the acquisition has timely and substantially complied in relation to the acquisition with the applicable provisions of sections 362.3, 364.2, 364.7, 384.84, 388.2, 388.2A, and 388.6.
   c.  As part of its review of the proposed acquisition, the commission shall specify in advance, by order issued after a contested case proceeding, the ratemaking principles that will apply when the costs of the acquired utility are included in regulated rates, and the commission shall not defer the ratemaking principles to a later contested case proceeding. The lesser of the sale price or the fair market value of the acquired utility as established pursuant to section 388.2A, subsection 2, or the net book value of the acquired utility, as established in the contested case proceeding, shall be used in determining the applicable ratemaking principles. In determining the applicable ratemaking principles, the commission shall not be limited to traditional ratemaking principles or traditional cost recovery mechanisms. Among the principles and mechanisms the commission may consider, the commission has the authority to approve ratemaking principles that provide for reasonable restrictions upon the ability of the public utility to seek an increase in specified regulated rates for a period of time after the acquisition takes place. 

If the acquisition would increase the average rate base per customer for existing customers of the acquiring utility, the commission shall not consolidate the rates for the two utilities for a period of at least ten years following the contested case proceeding. The final order including the rate base and approving the acquisition shall consider reasonable and customary closing costs, the cost of appraisals, and regulatory and legal expenses incurred in connection with the acquisition. 
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to the acquisition of water, sanitary sewer, and storm water utilities, including required findings by the Iowa utilities commission (commission), the timeline to issue ratemaking principles, and the determination of applicable ratemaking principles.
   Under current law, a public utility is not allowed to acquire a water, sanitary sewer, or storm water utility with a purchase price of $3 million or more without commission approval. The bill removes the $3 million qualifier and requires the commission to find, in addition to current requirements, that the acquisition will not detrimentally affect ratepayers of either the utility to be acquired or the acquiring utility.
   Under current law, the commission provides ratemaking principles after a contested case proceeding. This could include a general rate case in a later contested case proceeding. The bill requires the commission to provide ratemaking principles before the acquisition is approved and prohibits the commission from deferring the ratemaking principles to a later contested case proceeding.
   Under current law, the lesser of the sale price or the established fair market value of the acquired utility is used in determining the applicable ratemaking principles. The bill replaces the established fair market value option with the net book value, which is established in the contested case proceeding.
   If the acquisition would increase the average rate base per customer for existing customers of the acquiring utility, the bill directs the commission to prohibit the consolidation of rates for the two utilities for a period of at least 10 years following the contested case proceeding.