GeneralUNOFFICIAL AssemblyCOPY Proposed19 BillRS No.BR 1164 AN ACT relating to the acquisition of water or sewer utilities.

222Be Januaryit Session,enacted 2019by LCOthe No.General Assembly of the Commonwealth of Kentucky:

3230SECTION Referred1. to Committee on ENERGY AND TECHNOLOGY Introduced by:

SEN.A NEW SECTION OF KRS 278.010 TO 278.450 IS CREATED TO READ AS FOLLOWS:

FORMICA,(1) 20thAs Dist.used in this section:

AN(a) ACT"Acquisition" CONCERNINGmeans THEa SALEvoluntary OFsale MUNICIPALto WATERan SUPPLYacquiring ANDutility WASTEWATERof SYSTEMthe ASSETS.assets of an existing utility between a willing buyer and a willing seller;

Be(b) it"Acquisition enactedagreement" bymeans the Senatedocument andreflecting Housethe ofterms Representativesand inprovisions Generalof Assemblyan convened:acquisition;

Thatand the(c) general"Debt" statutesmeans be amended to establish a processsum forcertain, awhich municipality'sis saledue ofand itsowing. water supply system or municipal wastewater system to a water company that requires:

(1)(2) AIf municipalityan thatinvestor-owned ownswater suchor asewer systemutility acquires an existing water or sewer utility or its assets, including but not limited to negotiatecity-owned withassets athat provide water companyor forsewer services, the saleacquiring utility’s next base rate application may seek to include in the rate base the entire value of suchall systemassets andacquired determineas ameasured saleby price;the fair market value as of the date of the acquisition or by the purchase price paid by the acquiring utility, whichever is less.

(2)(3) SuchIn municipalityreviewing andthe wateracquiring companyutility’s request to determineinclude the system'svalue fairof marketthe valueacquired utilizingassets ain licensedthe engineerrate andbase, athe utilitycommission valuationshall expertconsider, among other factors, whether operational economies were achieved through the acquisition and submitwhether aninclusion applicationof forthe approvalvalue toof the Publicacquired Utilitiesassets Regulatoryin Authority;the rate base will result in utility rates that are fair, just, and reasonable as required by KRS 278.030.

and(4) (3)The Iffair themarket authorityvalue approvesof thean application,acquisition theunder authoritythis tosection determineshall be established by the ratemakingaverage rateof basethree as(3) appraisals, the lessercosts of thewhich negotiatedshall salebe pricepaid orby the system'sacquiring averageutility. fair market value.

LCOAppraisers No.shall be chosen as follows:

3230(a) 1One of(1) 2appraiser Proposedshall Billbe No.chosen by the utility that is to be acquired.

222The Statementchoice shall be made within thirty (30) days of Purpose:receiving a written request to do so from the acquiring utility;

ToPage establish1 aof process2 forXXXX theJacketed saleUNOFFICIAL ofCOPY a19 municipalRS waterBR supply1164 system(b) orOne municipal(1) wastewaterappraiser system.shall be chosen by the acquiring utility;

LCOand No.(c) The appraisers chosen in paragraphs (a) and (b) of this subsection shall choose a third appraiser by mutual agreement.

3230(5) 2The entities choosing appraisers under subsection (4) of 2this section shall only choose appraisers that:

(a) Have the expertise, technical knowledge, and qualifications to make a fair and proper appraisal and valuation of the type of property involved in the acquisition;

(b) Have no financial or other interest in the acquisition;

and (c) Are neither residents nor taxpayers of the service area of the utility being acquired.

(6) Each appraiser chosen under subsection (4) of this section shall separately determine the fair market value of the utility or the assets in the acquisition in compliance with the latest version of the Uniform Standards of Professional Appraisal Practice.

The determination of the current value for all assets shall not be limited to or by the original purchase price or the original value of the assets.

(7) The acquisition agreement shall provide for the repayment to any person or government entity of any debt owed on the assets being acquired.

(8) Nothing in this section shall affect the commission’s jurisdiction as set forth in KRS 278.040.

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