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Status: (Introduced - Dead) 2018-03-14 - Withdrawn.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 a gas or electric rate=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
feedback