GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 2017 H 21 HOUSE BILL 351 Committee Substitute Favorable 4/25/17 Short Title:

Representatives Watford and Collins (Primary Sponsors).

For a complete list of sponsors, refer to the North Carolina General Assembly web site.

Energy and Public Utilities, if favorable, State and Local Government II March 15, 2017 A BILL TO BE ENTITLED AN ACT AUTHORIZING WATER AND WASTEWATER PUBLIC UTILITIES TO ELECT TO USE A FAIR VALUE DETERMINATION FOR RATE-MAKING PURPOSES WHEN ACQUIRING UTILITIES OWNED BY COUNTIES, MUNICIPALITIES, OR OTHER GOVERNMENTAL ENTITIES.

*H351-v-2**H351-v-1* General Assembly Of North Carolina Session 2017 "§ 62-133.1A.

62-3(23)a.2., may elect to establish rate base by using the fair value of the utility property instead of original cost when acquiring an existing water or wastewater system (system) owned by a municipality or county or an authority or district established under Chapter 162A of the General Statutes.

One appraiser shall represent the public utility acquiring the system and another appraiser shall represent the utility selling the system.

(4) The rate base value of the acquired system,system which shall be reflected in the acquiring public utility's next general rate case for rate-making purposes,purposes shall be the lesser of the purchase price negotiated between the parties to the sale or the fair value plus the fees and costs authorized in subdivision (3) of this subsection.

(2) AnyThe deficienciesaveraging identifiedof by the engineeringappraisers' assessmentvaluations, conductedwhich pursuantshall toconstitute subdivisionfair (2)value offor subsectionpurposes (b) of this sectionsection. and a five-year plan for prudent and necessary infrastructure improvements by the acquiring entity.

(3) ProjectedThe rateassessment impactof fortangible theassets sellingperformed entity'sby customersa forlicensed theprofessional nextengineer, fiveas years.provided in subdivision (2) of subsection (b) of this section.

(4) The averagingcontract of thesale. appraisers' valuations, which shall constitute fair value for purposes of this section.

(5) The assessmentestimated ofvaluation tangiblefees assetsand performedtransaction byand aclosing licensedcosts professionalincurred engineer,by asthe providedacquiring inpublic subdivisionutility. (2) of subsection (b) of this section.

Page(6) 2A Housetariff, Billincluding 351-Secondrates Editionequal Generalto Assemblythe Ofrates Northof Carolinathe Sessionselling 2017utility. (6) The contract of sale.

(7) The estimatedselling valuationutility's feesrates andshall transactionbe andthe closingrates costscharged incurredto bythe customers of the acquiring Page 2 House Bill 351-First Edition General Assembly Of North Carolina Session 2017 public utility.utility until the acquiring public utility's next general rate case, unless otherwise ordered by the Commission for good cause shown.

(8) A tariff, including rates equal to the rates of the selling utility.

The selling utility's rates shall be the rates charged to the customers of the acquiring public utility until the acquiring public utility's next general rate case, unless otherwise ordered by the Commission for good cause shown.

– The Commission shall retain its authority under Chapter 62 of the General Statutes to set rates for the acquired system in future rate cases, and shall have the discretion to classify the acquired system as a separate entity for ratemaking purposes, consistent with the public interest." SECTION 3.

House Bill 351-Second351-First Edition Page 3