Texas 2019 - 86th Regular

Texas Senate Bill SB1725 Compare Versions

Only one version of the bill is available at this time.

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1	1	86R13595 GRM-D
2	2	By: Lucio S.B. No. 1725
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the valuation of a retail public utility or its
8	8	facilities as part of a voluntary acquisition.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Subchapter H, Chapter 13, Water Code, is amended
11	11	by adding Section 13.305 to read as follows:
12	12	Sec. 13.305. VOLUNTARY VALUATION OF ACQUIRED UTILITY OR
13	13	FACILITIES. (a) In this section:
14	14	(1) "Acquiring utility" means a Class A utility that
15	15	is acquiring a selling utility, or facilities of a selling utility,
16	16	as the result of a voluntary arm's-length transaction.
17	17	(2) "Ratemaking rate base" means the dollar value of a
18	18	selling utility that is incorporated into the rate base of the
19	19	acquiring utility for postacquisition ratemaking purposes.
20	20	(3) "Selling utility" means a retail public utility
21	21	that is being purchased by an acquiring utility, or is selling
22	22	facilities to an acquiring utility, as the result of a voluntary
23	23	arm's-length transaction.
24	24	(b) The utility commission shall maintain a list of experts
25	25	qualified to conduct economic valuations of utilities for the
26	26	purposes of this section.
27	27	(c) An acquiring utility and a selling utility may agree to
28	28	determine by the following process the fair market value of the
29	29	selling utility or the facilities to be sold, as applicable:
30	30	(1) the acquiring utility and the selling utility
31	31	shall notify the utility commission of their intent to determine
32	32	the fair market value under this section;
33	33	(2) not later than the 30th day after the date the
34	34	utility commission receives notice under Subdivision (1), the
35	35	utility commission shall select three utility valuation experts
36	36	from the list maintained under Subsection (b);
37	37	(3) each utility valuation expert shall perform an
38	38	appraisal in compliance with Uniform Standards of Professional
39	39	Appraisal Practice, employing the cost, market, and income
40	40	approaches, to determine the fair market value; and
41	41	(4) the three utility valuation experts selected under
42	42	Subdivision (2) jointly shall retain a licensed engineer to conduct
43	43	an assessment of the tangible assets of the selling utility, or the
44	44	facilities to be sold, as applicable, and each utility valuation
45	45	expert shall:
46	46	(A) incorporate the assessment into the
47	47	appraisal under the cost approach required under Subdivision (3);
48	48	and
49	49	(B) provide the completed appraisal to the
50	50	acquiring utility and the selling utility in a reasonable and
51	51	timely manner.
52	52	(d) A utility valuation expert described by Subsection (b)
53	53	may not:
54	54	(1) derive any material financial benefit from the
55	55	sale other than fees for services rendered; or
56	56	(2) be or have been within the year preceding the date
57	57	the service contract is executed an immediate family member of a
58	58	director, officer, or employee of the acquiring utility or the
59	59	selling utility.
60	60	(e) A fee paid to a utility valuation expert may be included
61	61	in the transaction and closing costs associated with the
62	62	acquisition by the acquiring utility. A fee may not exceed the
63	63	lesser of:
64	64	(1) five percent of the fair market value; or
65	65	(2) a fee amount approved by the utility commission.
66	66	(f) For the purposes of the acquisition, the fair market
67	67	value is the average of the three utility valuation expert
68	68	appraisals conducted under Subsection (c).
69	69	(g) For an acquisition of a selling utility, the ratemaking
70	70	rate base of the selling utility is the lesser of the purchase price
71	71	negotiated by the acquiring utility and the selling utility or the
72	72	fair market value. The ratemaking rate base of the selling utility
73	73	shall be incorporated into the rate base of the acquiring utility
74	74	during the utility's next rate base case under Subchapter F.
75	75	(h) If the acquiring utility and the selling utility use the
76	76	process for establishing fair market value in Subsection (c), the
77	77	acquiring utility shall submit as attachments to an application
78	78	required under Section 13.301:
79	79	(1) copies of the three appraisals performed by the
80	80	utility valuation experts under Subsection (c);
81	81	(2) the purchase price agreed to by the acquiring
82	82	utility and the selling utility;
83	83	(3) if applicable, the ratemaking rate base determined
84	84	under Subsection (g);
85	85	(4) if applicable, the transaction and closing costs
86	86	incurred by the acquiring utility that will be included in the
87	87	utility's rate base; and
88	88	(5) if applicable, a tariff containing a rate equal to
89	89	the existing rates of the selling utility at the time of the
90	90	acquisition.
91	91	(i) If the utility commission approves the application for
92	92	acquisition under Section 13.301, the utility commission shall
93	93	issue an order that includes:
94	94	(1) the ratemaking rate base of the selling utility as
95	95	determined under Subsection (g); and
96	96	(2) any additional conditions for the acquisition the
97	97	utility commission requires.
98	98	(j) A tariff submitted under Subsection (h)(5) shall remain
99	99	in effect until the utility commission approves new rates as part of
100	100	a rate base case proceeding.
101	101	(k) The original sources of funding for any part of the
102	102	water or sewer assets of the selling utility are not relevant to
103	103	determine the value of the selling utility's assets. The selling
104	104	utility's cost of service shall be incorporated into the revenue
105	105	requirement of the acquiring utility's next rate base case
106	106	proceeding.
107	107	(l) In this subsection, "allowance of funds used during
108	108	construction" means an accounting practice that recognizes the
109	109	capital costs, including debt and equity funds, that are used to
110	110	finance the construction costs of an improvement to a selling
111	111	utility's assets by an acquiring utility. An acquiring utility's
112	112	postacquisition improvements shall accrue an allowance of funds
113	113	used during construction after the date the cost was incurred until
114	114	the earlier of:
115	115	(1) the fourth anniversary of the date the asset
116	116	entered into service; or
117	117	(2) the inclusion of the asset in the acquiring
118	118	utility's next rate base case.
119	119	(m) Depreciation on an acquiring utility's postacquisition
120	120	improvements shall be deferred for book and ratemaking purposes.
121	121	SECTION 2. This Act takes effect September 1, 2019.