ratemaking.
1.This section applies to the acquisition of water, sanitary sewer, and storm water utilities
byrate-regulatedpublicutilities. Thissectiondoesnotapplytotheacquisitionofsuchutilities
by non-rate-regulated entities described in section 476.1, subsection 3.
2.
a.A public utility shall not acquire, in whole or in part, a water, sanitary sewer,
or storm water utility with a purchase price of three million dollars or more from a
non-rate-regulated entity described in section 476.1, subsection 3, unless the commission
first approves the acquisition. In addition, if the utility to be acquired is a city utility, then the
public utility shall not acquire the city utility until the city has first certified completion of
the requirements of sections 362.3, 364.2, 364.7, 384.84, 388.2, 38
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ratemaking.
1. This section applies to the acquisition of water, sanitary sewer, and storm water utilities
byrate-regulatedpublicutilities. Thissectiondoesnotapplytotheacquisitionofsuchutilities
by non-rate-regulated entities described in section 476.1, subsection 3.
2. a. A public utility shall not acquire, in whole or in part, a water, sanitary sewer,
or storm water utility with a purchase price of three million dollars or more from a
non-rate-regulated entity described in section 476.1, subsection 3, unless the commission
first approves the acquisition. In addition, if the utility to be acquired is a city utility, then the
public utility shall not acquire the city utility until the city has first certified completion of
the requirements of sections 362.3, 364.2, 364.7, 384.84, 388.2, 388.2A, and 388.6. A certified
completion submitted pursuant to this paragraph shall contain an affirmation that the city
that is the subject of the acquisition has timely and substantially complied in relation to
the acquisition with the applicable provisions of sections 362.3, 364.2, 364.7, 384.84, 388.2,
388.2A, and 388.6.
b. If a water, sanitary sewer, or storm water utility that is the subject of an acquisition
meets the requirements of paragraph “a”, then the acquiring public utility may apply to the
commission, prior to the completion of the acquisition, for advance approval of a proposed
initial tariff for providing service to customers of the acquired utility.
c. As part of its review of the proposed acquisition, the commission shall specify in
advance, by order issued after a contested case proceeding, the ratemaking principles that
will apply when the costs of the acquired utility are included in regulated rates. The lesser
of the sale price or the fair market value of the acquired utility as established pursuant
to section 388.2A, subsection 2, shall be used in determining the applicable ratemaking
principles. In determining the applicable ratemaking principles, the commission shall not
be limited to traditional ratemaking principles or traditional cost recovery mechanisms.
Among the principles and mechanisms the commission may consider, the commission has
the authority to approve ratemaking principles that provide for reasonable restrictions upon
the ability of the public utility to seek an increase in specified regulated rates for a period of
time after the acquisition takes place. The final order including the rate base and approving
the acquisition shall consider reasonable and customary closing costs, the cost of appraisals,
and regulatory and legal expenses incurred in connection with the acquisition.
d. In determining the applicable ratemaking principles, the commission shall find that
the proposed acquisition will result in just and reasonable rates to all customers of the public
utility, including but not limited to existing customers of the public utility. In making this
finding, the commission may consider any factor it reasonably concludes may affect future
rates, including but not limited to the price paid for the acquired utility and the projected
cost of reasonable and prudent investments in the acquired utility in order to provide safe
and reliable services and facilities to customers. The commission shall consider whether
there are ratemaking principles that will result in just and reasonable rates to all customers
in determining whether to approve or disapprove a proposed acquisition.
e. (1) In determining the applicable ratemaking principles, the commission shall require
the public utility to submit a purchase agreement for the acquisition and shall find that
the purchase agreement includes terms, conditions, requirements, and other provisions
applicable to the system to be acquired that are in substantial compliance with the
requirements in sections 362.3, 364.2, 364.7, 384.84, 388.2, 388.2A, and 388.6.
(2) The purchase agreement shall include a term allowing the parties thirty days, after
final approval of the ratemaking principles, to terminate the purchase agreement without
penalty.
f. If the acquisition involves a utility that is an at-risk system as defined in section
455B.199D, the commission shall issue a final order on an application for approval of the
acquisition within one hundred twenty days from the filing of the application. For all other
acquisitions, the commission shall issue an order within one hundred eighty days of the
filing date of the application.
g. Upontheapprovalofaproposalforacquisitionbycommissionorder,thepartiessubject
to the acquisition shall have the option of either proceeding with such acquisition or not,
subject to any termination provisions contained in the acquisition agreement.
h. Notwithstandinganyprovisionofthischaptertothecontrary,theratemakingprinciples
established by the commission pursuant to this section shall be binding with regard to the
acquired utility in any subsequent rate proceeding.