SB 512 — 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.   568

                     THE GENERAL ASSEMBLY OF PENNSYLVANIA



                        SENATE BILL
                        No. 512
                                                Session of
                                                  2025

     INTRODUCED BY KANE, FONTANA, SCHWANK, KEARNEY, COMITTA, COSTA,
        HAYWOOD, MUTH, L. WILLIAMS, SAVAL, KIM AND PISCIOTTANO,
        APRIL 4, 2025

     REFERRED TO CONSUMER PROTECTION AND PROFESSIONAL LICENSURE,
        APRIL 4, 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 8   Consolidated Statutes is repealed: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
 1    establishing its fair market value.
 2          (3)   Each utility valuation expert shall determine fair
 3    market value in compliance with the Uniform Standards of
 4    Professional Appraisal Practice, employing the cost, market
 5    and income approaches.
 6          (4)   The acquiring public utility or entity and selling
 7    utility shall engage the services of the same licensed
 8    engineer to conduct an assessment of the tangible assets of
 9    the selling utility. The assessment shall be incorporated
10    into the appraisal under the cost approach required under
11    paragraph (3).
12          (5)   Each utility valuation expert shall provide the
13    completed appraisal to the acquiring public utility or entity
14    and selling utility within 90 days of execution of the
15    service contract.
16    (b)   Utility valuation experts.--
17          (1)   The utility valuation experts required under
18    subsection (a) shall be selected as follows:
19                (i)    one shall be selected by the acquiring public
20          utility or entity; and
21                (ii)    one shall be selected by the selling utility.
22          (2)   The utility valuation experts shall not:
23                (i)    derive any material financial benefit from the
24          sale of the selling utility other than fees for services
25          rendered; or
26                (ii)    be an immediate family member of a director,
27          officer or employee of either the acquiring public
28          utility, entity or selling utility within a 12-month
29          period of the date of hire to perform an appraisal.
30          (3)   Fees paid to utility valuation experts may be

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

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

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

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 1   status pursuant to section 1102.
 2      "Fair market value."     The average of the two utility
 3   valuation expert appraisals conducted under subsection (a)(2).
 4      "Ratemaking rate base."     The dollar value of a selling
 5   utility which, for postacquisition ratemaking purposes, is
 6   incorporated into the rate base of the acquiring public utility
 7   or entity.
 8      "Rate stabilization plan."     A plan that will hold rates
 9   constant or phase rates in over a period of time after the next
10   base rate case.
11      "Selling utility."     A water or wastewater company located in
12   this Commonwealth, owned by a municipal corporation or authority
13   that is being purchased by an acquiring public utility or entity
14   as the result of a voluntary arm's-length transaction between
15   the buyer and seller.
16      "Utility valuation expert."     A person hired by an acquiring
17   public utility and selling utility for the purpose of conducting
18   an economic valuation of the selling utility to determine its
19   fair market value.]
20      Section 2.     This act shall take effect in 60 days.




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