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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
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An act relating to utility system rate base values; 2
creating s. 367.0811, F.S.; providing legislative 3
findings; defining the term "rate stabilization plan"; 4
establishing an alternative procedure by which the 5
Florida Public Service Commission may establish a rate 6
base value for certain acquired utility systems; 7
requiring that the approved rate base value be 8
reflected in the acquiring utility's next general rate 9
case for ratemaking purposes; establishing a procedure 10
for appraisal of the acquired utility system; 11
providing the contents required for a petition to the 12
commission for approval of the rate base value of the 13
acquired utility system; providing duties of t he 14
commission regarding petitions; authorizing the 15
commission to set rates for and classify certain 16
acquired utility systems; providing applicability; 17
requiring the commission to take certain factors into 18
consideration for certain rate base value petitions ; 19
requiring the commission to adopt rules; providing an 20
effective date. 21
22
Be It Enacted by the Legislature of the State of Florida: 23
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Section 1. Section 367.0811, Florida Statutes, is created 25
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
to read: 26
367.0811 Rates; alternative procedure for estab lishing 27
rate base value of acquired utility system. — 28
(1) The Legislature finds that it is in the public 29
interest to promote consolidation efforts with water and 30
wastewater utility systems in order to encourage economies of 31
scale, better access to lower m aterial and supply costs, better 32
access to capital, improvement in utility infrastructure, and 33
improvement in the quality of service overall. 34
(2) As used in this section, the term "rate stabilization 35
plan" means an acquiring utility's plan to implement rate 36
changes incrementally over a period of time to mitigate rate 37
increases and to predictably achieve consolidated pricing over 38
time. 39
(3)(a) If a utility acquires an existing utility system, 40
including a system described in s. 367.022(2), the utility ma y 41
petition the commission to establish a rate base value for the 42
utility system being acquired using the valuation process in 43
this section instead of the cost method pursuant to s. 367.081. 44
(b) The rate base value established by the commission 45
under this section shall be used for ratemaking purposes in the 46
acquiring utility's next general rate case. The rate base value 47
may not exceed the lesser of the purchase price negotiated 48
between the parties to the acquisition transaction or the 49
average of the three appraisals conducted under subsection (4) 50
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and may not be adjusted for contribution -in-aid-of-construction 51
or used and useful in serving the public. However, the rate base 52
value may include reasonable transaction and closing costs 53
incurred by the acquiring utility and reasonable fees paid to 54
the appraisers. 55
(4)(a) For purposes of this section, the utility system 56
being acquired shall be appraised by three licensed appraisers 57
chosen from a list established by the commission. Appraisals 58
shall be paid for by t he buyer. Each appraiser shall provide an 59
appraisal of the value of the utility system being acquired that 60
is consistent with the Uniform Standards of Professional 61
Appraisal Practice. 62
(b) The acquiring utility and the utility system being 63
acquired shall jointly retain a licensed engineer to conduct an 64
assessment of the tangible assets of the utility system being 65
acquired, and the assessment shall be provided to the three 66
appraisers for use in determining the value of the utility 67
system being acquired. 68
(5) A petition filed under this section to establish the 69
rate base value for a utility system being acquired must contain 70
all of the following: 71
(a) The requested rate base value for the utility system 72
being acquired. 73
(b) Copies of the appraisals require d by this section, 74
including the average of the valuations produced by each 75
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appraisal. 76
(c) A copy of the assessment of tangible assets required 77
by this section. 78
(d) A 3-year plan to address each deficiency identified by 79
the assessment of tangible asset s required by this section. The 80
plan must address impact on quality of service and any planned 81
improvements to water quality. 82
(e) The 5-year projected rate impact on the customers of 83
the utility system being acquired, including, but not limited 84
to, the rate impact of all of the following: 85
1. Any cost efficiencies expected to result from the 86
acquisition transaction. 87
2. Use of this section, instead of the cost method 88
pursuant to s. 367.081, to establish the rate base value. 89
(f) The contract of sale. 90
(g) The estimated value of fees and transaction and 91
closing costs to be incurred by the acquiring utility. 92
(h) A tariff, including rates equal to the rates of the 93
utility system being acquired, and a rate stabilization plan, if 94
applicable to the acquis ition. A rate stabilization plan must be 95
filed if the acquisition would result in a significant 96
individual increase in rates during the period identified in 97
paragraph (e). 98
(6)(a) If the petition meets the filing requirements of 99
subsection (5), the commis sion, no later than 8 months after the 100
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date the complete petition is filed, shall issue a final order 101
on the petition. 102
(b) The commission may, in the public interest, grant the 103
petition, in whole or in part, or with modifications or may deny 104
the petition. 105
(c) The commission may not approve a rate base value 106
higher than that requested in the petition. 107
(7) Notwithstanding any provision in this section, the 108
commission may, pursuant to this chapter, set rates for the 109
acquired utility system in future rate cases and may classify 110
the acquired utility system as a separate entity for ratemaking 111
purposes if it is deemed to be in the public interest. 112
(8) This section applies to acquiring utilities that are 113
engaged in an arms-length acquisition of a water or wa stewater 114
system, or both, and: 115
(a) Provide water or wastewater service, or both, to more 116
than 10,000 customers; or 117
(b) Are permitted to produce at least 3 million gallons 118
per day of drinking water. 119
(9) At minimum, in considering a rate base value pet ition 120
pursuant to this section, the commission must consider all of 121
the following in serving the public interest and pursuant to the 122
goals of this section: 123
(a) Improvements in quality of service. 124
(b) Improvements in compliance with regulatory 125
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requirements. 126
(c) Rate reductions or rate stability over a long -term 127
period. 128
(d) Cost efficiencies. 129
(e) A demonstration that the purchase is being made as 130
part of an arms-length transaction. 131
(f) Economies of scale to be generated by the transaction. 132
(g) A comparison of the acquiring utility's net book 133
value, to the extent available, and the proposed rate base value 134
of the utility being acquired. 135
(h) A demonstration that the acquiring utility has greater 136
access to capital than the utility being acquired. 137
(10) The commission may set reasonable performance goals 138
based on the standards specified in subsection (9) and review 139
utility performance regarding these standards in a rate 140
proceeding. 141
(11) The commission shall adopt rules to implement this 142
section. 143
Section 2. This act shall take effect July 1, 2023. 144