Pennsylvania Code › Title 52 - PUBLIC UTILITIES › Part I - Public Utility Commission › Subpart C - Fixed Service Utilities › Chapter 69 - GENERAL ORDERS, POLICY STATEMENTS AND GUIDELINES ON FIXED UTILITIES › ACQUISITIONS OF VIABLE WATER AND WASTEWATER SYSTEM-STATEMENT OF POLICY › Section 69.721 - Water and wastewater system acquisitions

Current through Register Vol. 54, No. 28, July 13, 2024
(a)
General
. The Commission
					 believes that further consolidation of water and wastewater systems within this
					 Commonwealth may, with appropriate management, result in greater environmental
					 and economic benefits to customers. The regionalization of water and wastewater
					 systems through mergers and acquisitions will allow the water industry to
					 institute better management practices and achieve greater economies of scale.
					 To further this goal, the Commission sets forth the guidance in this section
					 regarding the acquisition of water and wastewater systems. Guidance
					 specifically applicable to the acquisition of nonviable systems is set forth in
					 §
											69.711 (relating to acquisition
					 incentives).
(b)
Inclusion
					 of acquisition assets in rate base
. After the approval of an
					 acquisition, as evidenced by the receipt of a certificate of public
					 convenience, an acquiring utility may request the inclusion of the value of the
					 used and useful assets of the acquired system in its rate base. A request will
					 be considered during the acquiring utility's next filed rate case proceeding.
					 See
					 66 Pa.C.S. §
												1311(a) (relating to
					 valuation of and return on the property of a public utility).
(c)
Method of valuation of
					 acquisition assets
. The assets of the acquired system should be booked
					 at the original cost of the acquired system when first devoted to the public
					 service less the applicable accrued depreciation and related contributions. See
					 66 Pa.C.S. §
												1311(b).
(d)
Determining original cost of
					 acquisition assets
. An acquiring utility may use various methods to
					 support its valuation of the original cost of the used and useful assets of the
					 acquired water or wastewater system. For example, an acquiring utility may
					 elect to rely in whole or in part upon the original cost records of the seller
					 or the Commission in determining the original cost of the used and useful
					 assets of the acquired system that are to be included in its rate
					 base.
(e)
Preparation of an
					 original cost of plant-in-service valuation
. The Commission will not
					 require an acquiring utility to submit a full original cost plant-in-service
					 study in order to determine the value of the assets of the acquired system. An
					 acquiring utility, upon its own election, may file an original cost study with
					 the Commission to support its valuation of the assets of the acquired water and
					 wastewater system proposed to be included in its rate base. A full original
					 cost plant-in-service study is one method of determining the valuation costs of
					 the property of a public utility. It requires the acquiring utility to develop
					 realistic plant balances and accumulates the records and accounting details
					 that support those balances. Disputes regarding the acquiring utility's
					 original cost valuation of the acquired assets will be resolved in the context
					 of a rate proceeding in which all interested parties will have an opportunity
					 to be heard.
(1)
Contents of an
					 original cost plant-in-service study
. The acquiring utility is
					 obligated to exercise due diligence and make reasonable attempts to obtain,
					 from the seller, documents related to original cost. In particular, as part of
					 its due diligence, the acquiring utility should request from the seller, for
					 purposes of determining the original cost plant-in-service valuation, the
					 original cost of the assets being acquired and records relating to
					 contributions in aid of construction (CIAC), such as the following:
(i) Accounting records and other related
					 documentation and agreements of donations or contributions, services, or
					 property from states, municipalities or other government agencies, individuals,
					 and others for construction purposes.
(ii) Records of unrefunded balances in
					 customer advances for construction (CAC).
(iii) Records of customer tap-in fees and
					 hook-up fees.
(iv) Prior original
					 cost studies.
(v) Records of local,
					 State and Federal grants used for construction of utility plant.
(vi) Relevant PennVEST or Department of
					 Environmental Protection records.
(vii) Any Commission records.
(viii) Summary of the depreciation schedules
					 from all filed Federal tax returns.
(ix) Other accounting records supporting
					 plant-in-service.