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House File 473 - 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 three 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
9to be acquired is a city utility, then the public utility
10shall not acquire the city utility until the city has first
11met certified completion of the requirements of section 388.2A
12 sections 362.3, 364.2, 364.7, 384.84, 388.2, 388.2A, and 388.6.
13A certified completion submitted pursuant to this paragraph
14shall contain an affirmation that the city that is the subject
15of the acquisition has timely and substantially complied in
16relation to the acquisition with the applicable provisions of
17sections 362.3, 364.2, 364.7, 384.84, 388.2, 388.2A, and 388.6.
18b. If a water, sanitary sewer, or storm water utility that
19is the subject of an acquisition meets the requirements of
20paragraph “a”, then the acquiring public utility may apply to
21the board, prior to the completion of the acquisition, for
22advance approval of a proposed initial tariff for providing
23service to customers of the acquired utility.
24c. As part of its review of the proposed acquisition,
25the board shall specify in advance, by order issued after a
26contested case proceeding, the ratemaking principles that will
27apply when the costs of the acquired utility are included in
28regulated rates. The lesser of the sale price or the fair
29market value of the acquired utility as established pursuant
30to section 388.2A, subsection 2, shall be used in determining
31the applicable ratemaking principles. In determining the
32applicable ratemaking principles, the board shall not be
33limited to traditional ratemaking principles or traditional
34cost recovery mechanisms. Among the principles and mechanisms
35the board may consider, the board has the authority to approve
-1-1ratemaking principles that provide for reasonable restrictions
2upon the ability of the public utility to seek an increase
3in specified regulated rates for a period of time after the
4acquisition takes place. The final order including the rate
5base and approving the acquisition shall consider reasonable
6and customary closing costs, the cost of appraisals, and
7regulatory and legal expenses incurred in connection with the
8acquisition.
9d. In determining the applicable ratemaking principles,
10the board shall find that the proposed acquisition will result
11in just and reasonable rates to all customers of the public
12utility, including but not limited to existing customers of
13the public utility. In making this finding, the board may
14consider any factor it reasonably concludes may affect future
15rates, including but not limited to the price paid for the
16acquired utility and the projected cost of reasonable and
17prudent changes to investments in the acquired utility in order
18to provide adequate safe and reliable services and facilities
19to customers. The board shall consider whether there are
20ratemaking principles that will result in just and reasonable
21rates to all customers in determining whether to approve or
22disapprove a proposed acquisition.
23e. (1) In determining the applicable ratemaking principles,
24the board shall require the public utility to submit a purchase
25agreement for the acquisition and shall find that the purchase
26agreement includes terms, conditions, requirements, and other
27provisions applicable to the system to be acquired that are in
28substantial compliance with the requirements in sections 362.3,
29364.2, 364.7, 384.84, 388.2, 388.2A, and 388.6.
30(2) The purchase agreement shall include a term allowing
31the parties thirty days, after final approval of the ratemaking
32principles, to terminate the purchase agreement without
33penalty.
34e. f. If the acquisition involves a utility that is an
35at-risk system as defined in section 455B.199D, the board shall
-2-1issue a final order on an application for approval of the
2acquisition within one hundred twenty days from the filing of
3the application. For all other acquisitions, the board shall
4issue an order within one hundred eighty days of the filing
5date of the application.
6f. g. Upon the approval of a proposal for acquisition
7by board order, the parties subject to the acquisition shall
8have the option of either proceeding with such acquisition or
9not, subject to any termination provisions contained in the
10acquisition agreement.
11g. h. Notwithstanding any provision of this chapter to the
12contrary, the ratemaking principles established by the board
13pursuant to this section shall be binding with regard to the
14acquired utility in any subsequent rate proceeding.
15EXPLANATION
16The inclusion of this explanation does not constitute agreement with
17the explanation’s substance by the members of the general assembly.
18This bill relates to the acquisition of water, sanitary
19sewer, and storm water utilities by rate-regulated public
20utilities.
21The bill increases the threshold amount requiring utilities
22board (board) approval from $500,000 to $3 million when a
23public utility is acquiring a water, sanitary sewer, or storm
24water utility. The bill modifies city utility acquisition to
25include that the city must first certify completion of the
26requirements of Code sections 362.3 (regarding publication of
27notices), 364.2 (regarding vesting power of franchises), 364.7
28(regarding disposal of property), 384.84 (regarding rate and
29charges, billing, and contracts), 388.2 (regarding submission
30to voters), 388.2A (regarding the procedure for disposal of a
31city utility by sale), and 388.6 (regarding discrimination in
32rates). Current law requires that the city meet requirements
33of Code section 388.2A, but not certify compliance.
34The bill provides that the rate base in the final order
35approving an acquisition shall include reasonable and customary
-3-1closing costs, the cost of appraisals, and regulatory and legal
2expenses incurred in connection with the acquisition.
3The bill provides that the board shall require a public
4utility to submit a purchase agreement for the acquisition and
5shall find the purchase agreement includes terms, conditions,
6requirements, and other provisions applicable to the system
7sought to be acquired and the public utility shall be in
8compliance with specified provisions in determining applicable
9ratemaking principles. The purchase agreement shall include
10a term allowing the parties 30 days after final approval of
11the ratemaking principles to terminate the purchase agreement
12without penalty.
13The bill provides that the board shall issue a final order
14within 120 days of the filing of an application for the
15acquisition of an at-risk utility system, or an order within
16180 days for all other acquisitions. Current law provides that
17the board shall issue a final order within 120 days of filing
18the application for a utility that is an at-risk system.
-4-es/rn
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 three 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
9to be acquired is a city utility, then the public utility
10shall not acquire the city utility until the city has first
11met certified completion of the requirements of section 388.2A
12 sections 362.3, 364.2, 364.7, 384.84, 388.2, 388.2A, and 388.6.
13A certified completion submitted pursuant to this paragraph
14shall contain an affirmation that the city that is the subject
15of the acquisition has timely and substantially complied in
16relation to the acquisition with the applicable provisions of
17sections 362.3, 364.2, 364.7, 384.84, 388.2, 388.2A, and 388.6.
18b. If a water, sanitary sewer, or storm water utility that
19is the subject of an acquisition meets the requirements of
20paragraph “a”, then the acquiring public utility may apply to
21the board, prior to the completion of the acquisition, for
22advance approval of a proposed initial tariff for providing
23service to customers of the acquired utility.
24c. As part of its review of the proposed acquisition,
25the board shall specify in advance, by order issued after a
26contested case proceeding, the ratemaking principles that will
27apply when the costs of the acquired utility are included in
28regulated rates. The lesser of the sale price or the fair
29market value of the acquired utility as established pursuant
30to section 388.2A, subsection 2, shall be used in determining
31the applicable ratemaking principles. In determining the
32applicable ratemaking principles, the board shall not be
33limited to traditional ratemaking principles or traditional
34cost recovery mechanisms. Among the principles and mechanisms
35the board may consider, the board has the authority to approve
-1-1ratemaking principles that provide for reasonable restrictions
2upon the ability of the public utility to seek an increase
3in specified regulated rates for a period of time after the
4acquisition takes place. The final order including the rate
5base and approving the acquisition shall consider reasonable
6and customary closing costs, the cost of appraisals, and
7regulatory and legal expenses incurred in connection with the
8acquisition.
9d. In determining the applicable ratemaking principles,
10the board shall find that the proposed acquisition will result
11in just and reasonable rates to all customers of the public
12utility, including but not limited to existing customers of
13the public utility. In making this finding, the board may
14consider any factor it reasonably concludes may affect future
15rates, including but not limited to the price paid for the
16acquired utility and the projected cost of reasonable and
17prudent changes to investments in the acquired utility in order
18to provide adequate safe and reliable services and facilities
19to customers. The board shall consider whether there are
20ratemaking principles that will result in just and reasonable
21rates to all customers in determining whether to approve or
22disapprove a proposed acquisition.
23e. (1) In determining the applicable ratemaking principles,
24the board shall require the public utility to submit a purchase
25agreement for the acquisition and shall find that the purchase
26agreement includes terms, conditions, requirements, and other
27provisions applicable to the system to be acquired that are in
28substantial compliance with the requirements in sections 362.3,
29364.2, 364.7, 384.84, 388.2, 388.2A, and 388.6.
30(2) The purchase agreement shall include a term allowing
31the parties thirty days, after final approval of the ratemaking
32principles, to terminate the purchase agreement without
33penalty.
34e. f. If the acquisition involves a utility that is an
35at-risk system as defined in section 455B.199D, the board shall
-2-1issue a final order on an application for approval of the
2acquisition within one hundred twenty days from the filing of
3the application. For all other acquisitions, the board shall
4issue an order within one hundred eighty days of the filing
5date of the application.
6f. g. Upon the approval of a proposal for acquisition
7by board order, the parties subject to the acquisition shall
8have the option of either proceeding with such acquisition or
9not, subject to any termination provisions contained in the
10acquisition agreement.
11g. h. Notwithstanding any provision of this chapter to the
12contrary, the ratemaking principles established by the board
13pursuant to this section shall be binding with regard to the
14acquired utility in any subsequent rate proceeding.
15EXPLANATION
16The inclusion of this explanation does not constitute agreement with
17the explanation’s substance by the members of the general assembly.
18This bill relates to the acquisition of water, sanitary
19sewer, and storm water utilities by rate-regulated public
20utilities.
21The bill increases the threshold amount requiring utilities
22board (board) approval from $500,000 to $3 million when a
23public utility is acquiring a water, sanitary sewer, or storm
24water utility. The bill modifies city utility acquisition to
25include that the city must first certify completion of the
26requirements of Code sections 362.3 (regarding publication of
27notices), 364.2 (regarding vesting power of franchises), 364.7
28(regarding disposal of property), 384.84 (regarding rate and
29charges, billing, and contracts), 388.2 (regarding submission
30to voters), 388.2A (regarding the procedure for disposal of a
31city utility by sale), and 388.6 (regarding discrimination in
32rates). Current law requires that the city meet requirements
33of Code section 388.2A, but not certify compliance.
34The bill provides that the rate base in the final order
35approving an acquisition shall include reasonable and customary
-3-1closing costs, the cost of appraisals, and regulatory and legal
2expenses incurred in connection with the acquisition.
3The bill provides that the board shall require a public
4utility to submit a purchase agreement for the acquisition and
5shall find the purchase agreement includes terms, conditions,
6requirements, and other provisions applicable to the system
7sought to be acquired and the public utility shall be in
8compliance with specified provisions in determining applicable
9ratemaking principles. The purchase agreement shall include
10a term allowing the parties 30 days after final approval of
11the ratemaking principles to terminate the purchase agreement
12without penalty.
13The bill provides that the board shall issue a final order
14within 120 days of the filing of an application for the
15acquisition of an at-risk utility system, or an order within
16180 days for all other acquisitions. Current law provides that
17the board shall issue a final order within 120 days of filing
18the application for a utility that is an at-risk system.
-4-es/rn