HB 945 — An Act amending Title 66 (Public Utilities) of the Pennsylvania Consolidated Statutes, in rates and distribution systems, repealing provisions relating to valuation of acquired water and wastewater systems.

PRINTER'S NO.    1012

                     THE GENERAL ASSEMBLY OF PENNSYLVANIA



                         HOUSE BILL
                         No. 945
                                                Session of
                                                  2025

     INTRODUCED BY LAWRENCE, CIRESI, GILLEN, KUZMA, SHUSTERMAN AND
        ZIMMERMAN, MARCH 17, 2025

     REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, MARCH 17, 2025


                                     AN ACT
 1   Amending Title 66 (Public Utilities) of the Pennsylvania
 2      Consolidated Statutes, in rates and distribution systems,
 3      repealing provisions relating to valuation of acquired water
 4      and wastewater systems.
 5      The General Assembly of the Commonwealth of Pennsylvania
 6   hereby enacts as follows:
 7      Section 1.    Section 1329 of Title 66 of the Pennsylvania
 8   Consolidated Statutes is repealed:
 9   [§ 1329.    Valuation of acquired water and wastewater systems.
10      (a)     Process to establish fair market value of selling
11   utility.--Upon agreement by both the acquiring public utility or
12   entity and the selling utility, the following procedure shall be
13   used to determine the fair market value of the selling utility:
14            (1)   The commission will maintain a list of utility
15      valuation experts from which the acquiring public utility or
16      entity and selling utility will choose.
17            (2)   Two utility valuation experts shall perform two
18      separate appraisals of the selling utility for the purpose of
19      establishing its fair market value.
 1          (3)   Each utility valuation expert shall determine fair
 2    market value in compliance with the Uniform Standards of
 3    Professional Appraisal Practice, employing the cost, market
 4    and income approaches.
 5          (4)   The acquiring public utility or entity and selling
 6    utility shall engage the services of the same licensed
 7    engineer to conduct an assessment of the tangible assets of
 8    the selling utility. The assessment shall be incorporated
 9    into the appraisal under the cost approach required under
10    paragraph (3).
11          (5)   Each utility valuation expert shall provide the
12    completed appraisal to the acquiring public utility or entity
13    and selling utility within 90 days of execution of the
14    service contract.
15    (b)   Utility valuation experts.--
16          (1)   The utility valuation experts required under
17    subsection (a) shall be selected as follows:
18                (i)    one shall be selected by the acquiring public
19          utility or entity; and
20                (ii)    one shall be selected by the selling utility.
21          (2)   The utility valuation experts shall not:
22                (i)    derive any material financial benefit from the
23          sale of the selling utility other than fees for services
24          rendered; or
25                (ii)    be an immediate family member of a director,
26          officer or employee of either the acquiring public
27          utility, entity or selling utility within a 12-month
28          period of the date of hire to perform an appraisal.
29          (3)   Fees paid to utility valuation experts may be
30    included in the transaction and closing costs associated with

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 1    acquisition by the acquiring utility or entity. Fees eligible
 2    for inclusion may be of an amount not exceeding 5% of the
 3    fair market value of the selling utility or a fee approved by
 4    the commission.
 5    (c)   Ratemaking rate base.--The following apply:
 6          (1)   The ratemaking rate base of the selling utility
 7    shall be incorporated into the rate base of:
 8                (i)    the acquiring public utility during the
 9          acquiring public utility's next base rate case; or
10                (ii)    the entity in its initial tariff filing.
11          (2)   The ratemaking rate base of the selling utility
12    shall be the lesser of the purchase price negotiated by the
13    acquiring public utility or entity and selling utility or the
14    fair market value of the selling utility.
15    (d)   Acquisitions by public utility.--The following apply:
16          (1)   If the acquiring public utility and selling utility
17    agree to use the process outlined in subsection (a), the
18    acquiring public utility shall include the following as an
19    attachment to its application for commission approval of the
20    acquisition filed pursuant to section 1102 (relating to
21    enumeration of acts requiring certificate):
22                (i)    Copies of the two appraisals performed by the
23          utility valuation experts under subsection (a).
24                (ii)    The purchase price of the selling utility as
25          agreed to by the acquiring public utility and selling
26          utility.
27                (iii)    The ratemaking rate base determined pursuant
28          to subsection (c)(2).
29                (iv)    The transaction and closing costs incurred by
30          the acquiring public utility that will be included in its

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 1            rate base.
 2                  (v)    A tariff containing a rate equal to the existing
 3            rates of the selling utility at the time of the
 4            acquisition and a rate stabilization plan, if applicable
 5            to the acquisition.
 6            (2)   The commission shall issue a final order on an
 7      application submitted under this section within six months of
 8      the filing date of an application meeting the requirements of
 9      subsection (d)(1).
10            (3)   If the commission issues an order approving the
11      application for acquisition, the order shall include:
12                  (i)    The ratemaking rate base of the selling utility,
13            as determined under subsection (c)(2).
14                  (ii)   Additional conditions of approval as may be
15            required by the commission.
16            (4)   The tariff submitted pursuant to subsection (d)(1)
17      (v) shall remain in effect until such time as new rates are
18      approved for the acquiring public utility as the result of a
19      base rate case proceeding before the commission. The
20      acquiring public utility may collect a distribution system
21      improvement charge during this time, as approved by the
22      commission under this chapter.
23            (5)   The selling utility's cost of service shall be
24      incorporated into the revenue requirement of the acquiring
25      public utility as part of the acquiring utility's next base
26      rate case proceeding. The original source of funding for any
27      part of the water or sewer assets of the selling utility
28      shall not be relevant to determine the value of said assets.
29      (e)   Acquisitions by entity.--An entity shall provide all the
30   information required by subsection (d)(1) to the commission as

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 1   an attachment to its application for a certificate of public
 2   convenience filed pursuant to section 1102.
 3      (f)   Postacquisition projects.--The following apply:
 4            (1)   An acquiring public utility's postacquisition
 5      improvements that are not included in a distribution
 6      improvement charge shall accrue allowance for funds used
 7      during construction after the date the cost was incurred
 8      until the asset has been in service for a period of four
 9      years or until the asset is included in the acquiring public
10      utility's next base rate case, whichever is earlier.
11            (2)   Depreciation on an acquiring public utility's
12      postacquisition improvements that have not been included in
13      the calculation of a distribution system improvement charge
14      shall be deferred for book and ratemaking purposes.
15      (g)   Definitions.--The following words and phrases when used
16   in this section shall have the meanings given to them in this
17   section unless the context clearly indicates otherwise:
18      "Acquiring public utility."     A water or wastewater public
19   utility subject to regulation under this title that is acquiring
20   a selling utility as the result of a voluntary arm's-length
21   transaction between the buyer and seller.
22      "Allowance of funds used during construction."     An accounting
23   practice that recognizes the capital costs, including debt and
24   equity funds that are used to finance the construction costs of
25   an improvement to a selling utility's assets by an acquiring
26   public utility.
27      "Entity."    A person, partnership or corporation that is
28   acquiring a selling utility and has filed or whose affiliate has
29   filed an application with the commission seeking public utility
30   status pursuant to section 1102.

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 1      "Fair market value."     The average of the two utility
 2   valuation expert appraisals conducted under subsection (a)(2).
 3      "Ratemaking rate base."     The dollar value of a selling
 4   utility which, for postacquisition ratemaking purposes, is
 5   incorporated into the rate base of the acquiring public utility
 6   or entity.
 7      "Rate stabilization plan."     A plan that will hold rates
 8   constant or phase rates in over a period of time after the next
 9   base rate case.
10      "Selling utility."     A water or wastewater company located in
11   this Commonwealth, owned by a municipal corporation or authority
12   that is being purchased by an acquiring public utility or entity
13   as the result of a voluntary arm's-length transaction between
14   the buyer and seller.
15      "Utility valuation expert."     A person hired by an acquiring
16   public utility and selling utility for the purpose of conducting
17   an economic valuation of the selling utility to determine its
18   fair market value.]
19      Section 2.     This act shall take effect in 60 days.




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