Bill Text: IA SF2328 | 2017-2018 | 87th General Assembly | Introduced
Bill Title: A bill for an act relating to the sale or acquisition of certain utilities. (Formerly SSB 3057.)
Spectrum: Committee Bill
Status: (Introduced - Dead) 2018-03-14 - Withdrawn. S.J. 686. [SF2328 Detail]
Download: Iowa-2017-SF2328-Introduced.html
Senate File 2328 - Introduced SENATE FILE BY COMMITTEE ON COMMERCE (SUCCESSOR TO SSB 3057) A BILL FOR 1 An Act relating to the sale or acquisition of certain 2 utilities. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 5223SV (2) 87 gh/rn PAG LIN 1 1 Section 1. NEW SECTION. 388.2A Procedure for disposal of 1 2 city utility by sale. 1 3 1. A proposal to discontinue a city utility and dispose of 1 4 such utility by sale, whether upon the council's own motion 1 5 or upon the receipt of a valid petition pursuant to section 1 6 388.2, subsection 1, paragraph "b", shall not be subject to the 1 7 approval of the voters of the city pursuant to section 388.2 1 8 at any election unless the governing body of the city utility 1 9 meets the requirements of this section. 1 10 2. a. (1) The governing body of the city utility shall 1 11 determine the fair market value of the utility system after 1 12 obtaining two appraisals of the system's fair market value. 1 13 One appraisal shall be obtained from an independent appraiser 1 14 selected by the governing body, and the other appraisal shall 1 15 be obtained from an independent appraiser approved by the 1 16 Iowa utilities board. Both appraisals shall be conducted 1 17 in conformance with the uniform standards of professional 1 18 appraisal practice or a substantially similar organization. 1 19 (2) Any appraisal obtained pursuant to this paragraph 1 20 shall consider the depreciated value of the capital assets 1 21 to be sold, the loss of future revenues to the city utility, 1 22 including the right to generate surpluses, and the cost of any 1 23 capital improvements reasonably necessary to provide adequate 1 24 service and facilities to the city utility's customers. 1 25 b. After considering the appraisals obtained pursuant to 1 26 paragraph "a", the governing body shall establish the city 1 27 utility's fair market value. The fair market value shall be 1 28 the greater of any of the following: 1 29 (1) The average of the two appraisals obtained pursuant to 1 30 paragraph "a". 1 31 (2) The depreciated value of the capital assets to be sold. 1 32 (3) The amount necessary to retire all of the city's 1 33 outstanding revenue and general obligations issued for purposes 1 34 of the city utility. 1 35 c. The governing body's determination of a city utility's 2 1 fair market value pursuant to this subsection shall not be 2 2 dispositive of the city utility's system price, which shall be 2 3 subject to negotiation by the governing body. 2 4 d. The governing body shall prepare an inventory of the 2 5 city utility's real and personal property, and a statement of 2 6 net position or balance sheet of the city utility, including 2 7 all assets, liabilities, outstanding revenue, and general 2 8 obligations used to finance the city utility system. 2 9 e. The governing body shall prepare a financial information 2 10 statement of the city utility that includes current and 2 11 projected rate schedules for the next five fiscal years, as 2 12 well as the five most recent fiscal year revenue statements, if 2 13 such statements exist, and a projection of the city utility's 2 14 revenue statements for the next five fiscal years. 2 15 f. The governing body shall consider alternatives to 2 16 disposing of the city utility system by sale, including 2 17 entering into an agreement pursuant to chapter 28E, or into a 2 18 finance agreement, purchase agreement, or lease agreement with 2 19 another entity described in section 476.1, subsection 5. 2 20 g. (1) The governing body shall make available on its 2 21 internet site, at least sixty days prior to submitting a 2 22 proposal for election pursuant to section 388.2, a copy of each 2 23 item listed in paragraphs "a" through "f" of this subsection. 2 24 (2) If, at the time of posting information pursuant to 2 25 subparagraph (1), the governing body has received any offers or 2 26 appraisals of fair market value from any prospective purchasers 2 27 of the city utility system in connection with a proposal to 2 28 discontinue the city utility and dispose of such utility by 2 29 sale, then the governing body shall make available on its 2 30 internet site each offer and appraisal then in existence. 2 31 Proprietary information of a rate=regulated public utility 2 32 under chapter 476 that is exempt from disclosure pursuant to 2 33 section 22.7 may be withheld from disclosure on the governing 2 34 body's internet site. The governing body may continue to 2 35 receive new or revised offers or appraisals thereafter. 3 1 (3) The governing body shall make a good=faith effort to 3 2 provide, by regular mail to each property owner of the city and 3 3 each ratepayer of the city utility, a notice of the proposal to 3 4 dispose of the city utility by sale, a summary of the proposal, 3 5 a summary of the information described in subparagraphs (1) and 3 6 (2), and instructions for locating the information described 3 7 in subparagraphs (1) and (2) on the governing body's internet 3 8 site. 3 9 3. Upon the governing body meeting the requirements 3 10 of subsection 2, a city council may submit a proposal to 3 11 discontinue and dispose of a city utility pursuant to section 3 12 388.2. 3 13 4. If a proposal to discontinue and dispose of a city 3 14 utility is to be submitted to voters following the receipt 3 15 of a valid petition pursuant to section 388.2, subsection 1, 3 16 paragraph "b", the council shall submit the proposal at the next 3 17 general election, regular city election, or a special election 3 18 called for that purpose, within one hundred twenty days after 3 19 the governing body of the city utility meets the requirements 3 20 of subsection 2. 3 21 5. A proposal to discontinue and dispose of a city utility 3 22 by sale that is approved by the voters pursuant to section 3 23 388.2, subsection 2, paragraph "a", shall not require the 3 24 governing body or any purchasing entity to finalize a sale of 3 25 the city utility. 3 26 6. No action may be brought which questions the legality of 3 27 the election or the city and governing body's compliance with 3 28 this section, except as provided in section 57.1, within twenty 3 29 days of the canvass of votes for the election by the county 3 30 board of supervisors. 3 31 Sec. 2. Section 476.72, subsection 4, Code 2018, is amended 3 32 to read as follows: 3 33 4. "Public utility" means agas or electricrate=regulated 3 34 public utility providing electric, gas, water, sanitary sewage, 3 35 or storm water drainage service, or any combination thereof. 4 1 Sec. 3. NEW SECTION. 476.84 Water, sanitary sewer, and 4 2 storm water utilities ==== acquisitions ==== advance ratemaking. 4 3 1. This section applies to the acquisition of water, 4 4 sanitary sewer, and storm water utilities by rate=regulated 4 5 public utilities. This section does not apply to the 4 6 acquisition of such utilities by non=rate=regulated entities 4 7 described in section 476.1, subsection 5. 4 8 2. a. A public utility shall not acquire, in whole or in 4 9 part, a water, sanitary sewer, or storm water utility with a 4 10 fair market value of five hundred thousand dollars or more 4 11 from a non=rate=regulated entity described in section 476.1, 4 12 subsection 5, unless the board first approves the acquisition. 4 13 In addition, if the utility to be acquired is a city utility, 4 14 then the public utility shall not acquire the city utility 4 15 until the city has first met the requirements of section 4 16 388.2A. 4 17 b. If a water, sanitary sewer, or storm water utility that 4 18 is the subject of an acquisition meets the requirements of 4 19 paragraph "a", then the acquiring public utility may apply to 4 20 the board, prior to the completion of the acquisition, for 4 21 advance approval of a proposed initial tariff for providing 4 22 service to customers of the acquired utility. 4 23 c. As part of its review of the proposed acquisition, 4 24 the board shall specify in advance, by order issued after a 4 25 contested case proceeding, the ratemaking principles that will 4 26 apply when the costs of the acquired utility are included in 4 27 regulated rates. The lesser of the sale price or the fair 4 28 market value of the acquired utility as established pursuant 4 29 to section 388.2A, subsection 2, shall be used in determining 4 30 the applicable ratemaking principles. In determining the 4 31 applicable ratemaking principles, the board shall not be 4 32 limited to traditional ratemaking principles or traditional 4 33 cost recovery mechanisms. Among the principles and mechanisms 4 34 the board may consider, the board has the authority to approve 4 35 ratemaking principles that provide for reasonable restrictions 5 1 upon the ability of the public utility to seek an increase 5 2 in specified regulated rates for a period of time after the 5 3 acquisition takes place. 5 4 d. In determining the applicable ratemaking principles, 5 5 the board shall find that the proposed acquisition will result 5 6 in just and reasonable rates to all customers of the public 5 7 utility, including but not limited to existing customers of the 5 8 public utility. In making this finding, the board may consider 5 9 any factor it reasonably concludes may affect future rates, 5 10 including but not limited to the price paid for the acquired 5 11 utility and the projected cost of reasonable and prudent 5 12 changes to the acquired utility in order to provide adequate 5 13 services and facilities to customers. The board shall consider 5 14 whether there are ratemaking principles that will result in 5 15 just and reasonable rates to all customers in determining 5 16 whether to approve or disapprove a proposed acquisition. 5 17 e. Upon the approval of a proposal for acquisition by 5 18 board order, the parties subject to the acquisition shall 5 19 have the option of either proceeding with such acquisition or 5 20 not, subject to any termination provisions contained in the 5 21 acquisition agreement. 5 22 f. Notwithstanding any provision of this chapter to the 5 23 contrary, the ratemaking principles established by the board 5 24 pursuant to this section shall be binding with regard to the 5 25 acquired utility in any subsequent rate proceeding. 5 26 EXPLANATION 5 27 The inclusion of this explanation does not constitute agreement with 5 28 the explanation's substance by the members of the general assembly. 5 29 This bill relates to the sale or acquisition of certain 5 30 utilities. 5 31 The bill establishes a procedure for the disposal of city 5 32 utilities by sale. The bill provides that a proposal to 5 33 discontinue a city utility and dispose of such utility by sale 5 34 shall not be submitted to the voters of the city pursuant to 5 35 Code section 388.2 unless the governing body of the city meets 6 1 the requirements of the bill. 6 2 The bill requires the governing body of the city utility 6 3 to determine the fair market value of the utility system, as 6 4 specified in the bill. The governing body's determination of 6 5 the city utility's fair market value shall not be dispositive 6 6 of the city utility's system price, which shall be subject to 6 7 negotiation by the governing body. 6 8 The bill provides that the governing body shall prepare an 6 9 inventory of the city utility's real and personal property, 6 10 and a statement of net position or balance sheet, including 6 11 all assets, liabilities, and outstanding revenue and general 6 12 obligations used to finance the city utility system. The 6 13 bill also requires the governing body to prepare a financial 6 14 information statement of the city utility, as specified in the 6 15 bill. 6 16 The bill requires the governing body to consider 6 17 alternatives to disposing of the city utility by sale, 6 18 including entering into an agreement pursuant to Code chapter 6 19 28E, or into a finance agreement, purchase agreement, or lease 6 20 agreement with certain entities. 6 21 The bill requires the governing body to make certain 6 22 information available on its internet site, as specified in 6 23 the bill. The bill also requires the governing body to make 6 24 a good=faith effort to provide certain information by regular 6 25 mail to each property owner of the city and each ratepayer of 6 26 the city utility, as specified in the bill. 6 27 The bill provides that upon a governing body meeting the 6 28 requirements specified in the bill, a city council may submit a 6 29 proposal to discontinue and dispose of a city utility pursuant 6 30 to Code section 388.2. If such a proposal is to be submitted 6 31 to voters, the council shall submit the proposal at the next 6 32 general election, regular city election, or a special election 6 33 called for that purpose, within 120 days after the governing 6 34 body meets the requirements of the bill. Any such proposal 6 35 approved by the voters shall not require the governing body or 7 1 any purchasing entity to finalize a sale of the city utility. 7 2 No action may be brought which questions the legality of an 7 3 election or the city and governing body's compliance with the 7 4 bill, except as provided in Code section 57.1, within 20 days 7 5 of the canvass of votes by the county board of supervisors. 7 6 The bill also establishes a procedure for the acquisition 7 7 of water, sanitary sewer, and storm water utilities by 7 8 rate=regulated public utilities, as defined in the bill. 7 9 The bill provides that a public utility shall not acquire, 7 10 in whole or in part, a water, sanitary sewer, or storm water 7 11 utility with a fair market value of $500,000 or more from 7 12 certain non=rate=regulated entities, unless the Iowa utilities 7 13 board first approves the acquisition. If the utility to be 7 14 required is a city utility, then the city must first meet the 7 15 requirements for the disposal of city utilities by sale, as 7 16 specified in the bill, before such acquisition. 7 17 The bill allows an acquiring public utility to apply to the 7 18 board, prior to the completion of an acquisition of a water, 7 19 sanitary sewer, or storm water utility, for advance approval of 7 20 a proposed initial tariff for providing service to customers 7 21 of the acquired utility. 7 22 The bill provides that as part of its review of the proposed 7 23 acquisition, the board shall specify in advance, by order 7 24 issued after a contested case proceeding, the ratemaking 7 25 principles that will apply when the costs of the acquired 7 26 utility are included in regulated rates. The lesser of the 7 27 sale price or the fair market value of the acquired utility 7 28 shall be used in determining the applicable ratemaking 7 29 principles. In determining such ratemaking principles, the 7 30 board shall not be limited to traditional ratemaking principles 7 31 or cost recovery mechanisms, and may approve ratemaking 7 32 principles that provide for reasonable restrictions upon the 7 33 ability of the public utility to seek an increase in specified 7 34 regulated rates for a period of time. 7 35 The bill provides that in determining the applicable 8 1 ratemaking principles, the board shall find that the proposed 8 2 acquisition will result in just and reasonable rates to all 8 3 customers, including but not limited to existing customers. 8 4 In making this finding, the board may consider any factor it 8 5 reasonable includes may affect future rates, as specified 8 6 in the bill. The board shall consider whether there are 8 7 ratemaking principles that will result in just and reasonable 8 8 rates to all customers in determining whether to approve or 8 9 disapprove a proposed acquisition. 8 10 The bill provides that upon the approval of a proposal 8 11 for acquisition by board order, the parties subject to the 8 12 acquisition shall have the option of either proceeding with 8 13 the acquisition or not, subject to any applicable termination 8 14 provisions contained in the acquisition agreement. 8 15 The bill provides that notwithstanding any provisions of 8 16 Code chapter 476 to the contrary, the ratemaking principles 8 17 established by the board pursuant to the bill shall be binding 8 18 with regard to the acquired utility in any subsequent rate 8 19 proceeding. LSB 5223SV (2) 87 gh/rn
