Connecticut Seal

General Assembly

 

Raised Bill No. 5346

February Session, 2018

 

LCO No. 1958

 

*01958_______ET_*

Referred to Committee on ENERGY AND TECHNOLOGY

 

Introduced by:

 

(ET)

 

AN ACT CONCERNING THE SALE OF MUNICIPAL WATER SUPPLY AND WASTEWATER UTILITY ASSETS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective October 1, 2018) (a) For purposes of this section:

(1) "Municipal" or "municipality" means any unit of government, including a town, city, borough, consolidated town and city, consolidated town and borough, district taxing district, public agency or authority established by the general statutes, a special act or a local law, ordinance or charter, or any other subdivision of government;

(2) "Municipal water supply system" means a water system owned by a municipality, including a municipal waterworks system established by the general statutes, a special act or a local law, ordinance or charter, or any other subdivision of government;

(3) "Municipal wastewater system" means a sewage or wastewater system owned by a municipality or otherwise established by the general statutes, a special act or a local law, ordinance or charter, or any other subdivision of government;

(4) "Average fair market value" means the numerical average of the fair market values of two utility valuation expert appraisals conducted pursuant to subsection (c) of this section;

(5) "Ratemaking rate base" means the dollar value of the municipal water supply system or municipal wastewater system;

(6) "Water company" has the same meaning as provided in section 16-1 of the general statutes; and

(7) "Utility valuation expert" means an experienced appraiser.

(b) A municipality may negotiate with a water company for the sale of a municipal water supply system or municipal wastewater system to such water company. The municipality and the water company shall negotiate a sale price. After such sale price is negotiated and agreed upon, such municipality and water company shall determine the average fair market value of such municipal water supply system or municipal wastewater system pursuant to subsection (c) of this section.

(c) To determine the average fair market value of a municipal water supply system or municipal wastewater system, after a municipality and a water company have negotiated and agreed upon a sale price pursuant to subsection (b) of this section, (1) the municipality and the water company shall jointly engage the services of a licensed engineer to conduct an assessment of the tangible assets of such municipal water supply system or municipal wastewater system, (2) the municipality and the water company shall each engage a utility valuation expert, (3) each utility valuation expert, using the assessment conducted pursuant to subdivision (1) of this subsection, shall perform an appraisal of such municipal water supply system or municipal wastewater system, which shall include a determination of the fair market value of such municipal water supply system or municipal wastewater system pursuant to the Uniform Standards of Professional Appraisal Practice, and (4) each utility valuation expert shall provide such utility valuation expert's appraisal to the municipality and the water company within ninety days of engagement pursuant to subdivision (2) of this subsection.

(d) After the completion of the appraisals pursuant to subsection (c) of this section, the municipality and the water company shall jointly submit an application for approval for the sale of such municipal water supply system or municipal wastewater system to the Public Utilities Regulatory Authority. The authority may approve such application, provided the authority shall approve or deny such application not later than six months after the date on which the application was filed.

(e) If the authority approves such application, the authority shall (1) determine the ratemaking rate base as the lesser of (A) the sale price negotiated by the municipality and the water company pursuant to subsection (b) of this section, and (B) the average fair market value of such municipal water supply system or municipal wastewater system as determined by subsection (c) of this section, (2) approve rates and any applicable surcharges for customers of such municipal water supply system or municipal wastewater system, (3) permit such water company to include the ratemaking rate base in such water company's rate base for ratemaking purposes in its next general rate case, and (4) permit such water company to include in its rate base the costs associated with the acquisition of such municipal water supply system or municipal wastewater system, including (A) transaction and closing costs, and (B) fees paid to the engineer conducting the assessment of the assets and the utility valuation experts, provided appraisal fees that do not exceed five per cent of the fair market value of the municipal water supply system or municipal wastewater system shall be presumed to be reasonable.

(f) Nothing in this section shall be construed to supersede any provisions of the general statutes or municipal charters regarding the sale or disposition of municipal assets or any provisions of the general statutes regarding the acquisition of a water company.

This act shall take effect as follows and shall amend the following sections:

Section 1

October 1, 2018

New section

Statement of Purpose:

To create a process for determining the sale price of municipal water supply and wastewater utility assets.

[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]