2010 Pennsylvania Code
Title 66 - PUBLIC UTILITIES
Chapter 13 - Rates and Rate Making
1327 - Acquisition of water and sewer utilities.

     § 1327.  Acquisition of water and sewer utilities.
        (a)  Acquisition cost greater than depreciated original
     cost.--If a public utility acquires property from another public
     utility, a municipal corporation or a person at a cost which is
     in excess of the original cost of the property when first
     devoted to the public service less the applicable accrued
     depreciation, it shall be a rebuttable presumption that the
     excess is reasonable and that excess shall be included in the
     rate base of the acquiring public utility, provided that the
     acquiring public utility proves that:
            (1)  the property is used and useful in providing water
        or sewer service;
            (2)  the public utility acquired the property from
        another public utility, a municipal corporation or a person
        which had 3,300 or fewer customer connections or which was
        nonviable in the absence of the acquisition;
            (3)  the public utility, municipal corporation or person
        from which the property was acquired was not, at the time of
        acquisition, furnishing and maintaining adequate, efficient,
        safe and reasonable service and facilities, evidence of which
        shall include, but not be limited to, any one or more of the
        following:
                (i)  violation of statutory or regulatory
            requirements of the Department of Environmental Resources
            or the commission concerning the safety, adequacy,
            efficiency or reasonableness of service and facilities;
                (ii)  a finding by the commission of inadequate
            financial, managerial or technical ability of the small
            water or sewer utility;
                (iii)  a finding by the commission that there is a
            present deficiency concerning the availability of water,
            the palatability of water or the provision of water at
            adequate volume and pressure;
                (iv)  a finding by the commission that the small
            water or sewer utility, because of necessary improvements
            to its plant or distribution system, cannot reasonably be
            expected to furnish and maintain adequate service to its
            customers in the future at rates equal to or less than
            those of the acquiring public utility; or
                (v)  any other facts, as the commission may
            determine, that evidence the inability of the small water
            or sewer utility to furnish or maintain adequate,
            efficient, safe and reasonable service and facilities;
            (4)  reasonable and prudent investments will be made to
        assure that the customers served by the property will receive
        adequate, efficient, safe and reasonable service;
            (5)  the public utility, municipal corporation or person
        whose property is being acquired is in agreement with the
        acquisition and the negotiations which led to the acquisition
        were conducted at arm's length;
            (6)  the actual purchase price is reasonable;
            (7)  neither the acquiring nor the selling public
        utility, municipal corporation or person is an affiliated
        interest of the other;
            (8)  the rates charged by the acquiring public utility to
        its preacquisition customers will not increase unreasonably
        because of the acquisition; and
            (9)  the excess of the acquisition cost over the
        depreciated original cost will be added to the rate base to
        be amortized as an addition to expense over a reasonable
        period of time with corresponding reductions in the rate
        base.
        (b)  Procedure.--The commission, upon application by a public
     utility, person or corporation which has agreed to acquire
     property from another public utility, municipal corporation or
     person, may approve an inclusion in rate base in accordance with
     subsection (a) prior to the acquisition and prior to a
     proceeding under this chapter to determine just and reasonable
     rates if:
            (1)  the applicant has provided notice of the proposed
        acquisition and any proposed increase in rates to the
        customers served by the property to be acquired, in such form
        and manner as the commission, by regulation, shall require;
            (2)  the applicant has provided notice to its customers,
        in such form and manner as the commission, by regulation,
        shall require, if the proposed acquisition would increase
        rates to the acquiring public utility's customers by an
        amount in excess of 1% of the acquiring public utility's base
        annual revenue;
            (3)  the applicant has provided notice of the application
        to the Director of Trial Staff and the Consumer Advocate; and
            (4)  in addition to any other information required by the
        commission, the application includes a full description of
        the proposed acquisition and a plan for reasonable and
        prudent investments to assure that the customers served by
        the property to be acquired will receive adequate, efficient,
        safe and reasonable service.
        (c)  Hearings.--The commission may hold such hearings on the
     application as it deems necessary.
        (d)  Forfeiture.--Notwithstanding section 1309 (relating to
     rates fixed on complaint; investigation of costs of production),
     the commission, by regulation, shall provide for the removal of
     the excess costs of acquisition from its rates, or any portion
     thereof, found by the commission to be unreasonable and to
     refund any excess revenues collected as a result of this
     section, plus interest, which shall be the average rate of
     interest specified for residential mortgage lending by the
     Secretary of Banking in accordance with the act of January 30,
     1974 (P.L.13, No.6), referred to as the Loan Interest and
     Protection Law, during the period or periods for which the
     commission orders refunds, if the commission, after notice and
     hearings, determines that the reasonable and prudent investments
     to be made in accordance with this section have not been
     completed within a reasonable time.
        (e)  Acquisition cost lower than depreciated original cost.--
     If a public utility acquires property from another public
     utility, a municipal corporation or a person at a cost which is
     lower than the original cost of the property when first devoted
     to the public service less the applicable accrued depreciation
     and the property is used and useful in providing water or sewer
     service, that difference shall, absent matters of a substantial
     public interest, be amortized as an addition to income over a
     reasonable period of time or be passed through to the ratepayers
     by such other methodology as the commission may direct. Notice
     of the proposed treatment of an acquisition cost lower than
     depreciated original cost shall be given to the Director of
     Trial Staff and the Consumer Advocate.
        (f)  Reports.--The commission shall annually transmit to the
     Governor and to the General Assembly and shall make available to
     the public a report on the acquisition activity under this
     title. Such report shall include, but not be limited to, the
     number of small water or sewer public utilities, municipal
     corporations or persons acquired by public utilities, and the
     amounts of any rate increases or decreases sought and granted
     due to the acquisition.
     (Apr. 4, 1990, P.L.107, No.24, eff. 60 days; June 1, 1995,
     P.L.49, No.7, eff. 60 days)

        References in Text.  The Department of Environmental
     Resources, referred to in subsec. (a), was abolished by Act 18
     of 1995. Its functions were transferred to the Department of
     Conservation and Natural Resources and the Department of
     Environmental Protection.