| (a) Applicability. This section applies to a person
who files an application with the commission under Texas Water Code
(TWC) §13.301(a) and a request for authorized acquisition rates
under TWC §13.3011. For purposes of this section, the term "transaction"
is used to align with its usage in the procedural provisions of §24.239
of this title (relating to Sale, Transfer, Merger, Consolidation,
Acquisition, Lease, or Rental).
(b) Definitions. In this section, the following definitions
apply unless the context indicates otherwise.
(1) Authorized acquisition rates--Initial rates that
are in force and shown in a tariff filed with a regulatory authority
for the transferee for another water or sewer system owned by the
transferee on the date an application is filed for the acquisition
of a water or sewer system under §24.239 of this title.
(2) Existing rates--Rates a transferor charged its
customers under a tariff filed with a regulatory authority prior to
the water system or sewer system being acquired.
(3) Initial rates--Rates charged by a transferee to
the customers of an acquired water or sewer system upon approval of
the transaction by the commission. An initial rate may be an existing
rate, an authorized acquisition rate, or a rate authorized by other
applicable law.
(c) Initial Rates.
(1) A transferee must use existing rates as initial
rates unless the commission authorizes, under this section or other
applicable law, the use of different initial rates.
(2) A transferee may request commission approval to
charge authorized acquisition rates to the customers of the water
or sewer system for which the transferee seeks approval to acquire
as part of an application filed in accordance with §24.239 of
this title.
(3) If the transferee has in-force tariffs filed with
multiple regulatory authorities, there is a rebuttable presumption
that authorized acquisition rates should be based upon an in-force
tariff that was approved by the same regulatory authority that has
original jurisdiction over the rates charged to the acquired customers.
(4) Phased-in rates. If the in-force tariff contains
rates that are phased in over time, the provisions of this paragraph
apply.
(A) Unless determined otherwise by the commission,
the schedule in the tariff for the effective period of each phase
will be applied to the customers of the acquired water or sewer system.
To moderate the effects of a rate increase on customers, the commission
may approve authorized acquisition rates that start customers of the
acquired water or sewer system on an earlier phase than is in place
for the customers to which the tariff already applies or establish
a different schedule for the effective period of each phase.
(B) The transferee's application must include financial
projections, rate schedules, and billing comparisons, consistent with
the requirements of subsection (d) of this section, for each phase
in the in-force tariff.
(C) The commission's review of whether the authorized
acquisition rates are just and reasonable under subsection (f) of
this section will include an evaluation of whether the final phase
of the requested rates are just and reasonable.
(5) Public interest determination. In determining whether
to approve an acquisition under §24.239 of this title, the commission
will consider whether approving the transferee's request to charge
authorized acquisition rates under this section would change whether
the proposed transaction would serve the public interest under §24.239(h)(5)
of this title.
(d) Application. In addition to other applicable requirements,
a request for authorized acquisition rates in a §24.239 proceeding
must include the following:
(1) a rate schedule showing the existing rates and
the requested authorized acquisition rates;
(2) financial projections including a comparison of
expected revenues under the acquired water or sewer system's existing
rates and the requested authorized acquisition rates;
(3) a billing comparison for usage of 5,000 and 10,000
gallons at existing rates and the requested authorized acquisition
rates;
(4) documentation from the most recent base rate case
in which the rates that the transferee is requesting to use as authorized
acquisition rates were approved; this documentation must be sufficient
to allow the commission to evaluate what was included in the revenue
requirement for the requested rates and, if available online, may
consist solely of a web address where the documentation can be located
and the applicable docket number or any other information required
to locate the documentation;
(5) a disclosure of whether the transferor and transferee
are or have been affiliates in the five-year period before the proposed
acquisition, and the nature of each applicable affiliate relationship;
(6) additional explanation, including any applicable
documentation, supporting the request to charge authorized acquisition
rates, including:
(A) that the requested authorized acquisition rates
would be just and reasonable rates for the customers of the acquired
system and for the transferee;
(B) how approving the requested rates would change
how the commission should evaluate whether the proposed transaction
would serve the public interest, according to any applicable criteria
listed in §24.239(h)(5) of this title;
(C) if the transferee has multiple eligible in-force
tariffs or rate schedules, a list of eligible tariffs or rate schedules
and an explanation for the tariff or rate schedules the transferee
proposes to use for authorized acquisition rates;
(D) if the transferor and transferee are affiliates
or have been affiliates in the five-year period before the proposed
acquisition, the application must also include an explanation for
why the transferee is requesting to charge authorized acquisition
rates instead of using other available ratemaking proceedings.
(e) Notice requirements. Unless the commission waives
notice in accordance with other applicable law, a transferee requesting
approval to charge authorized acquisition rates under this section
must, as part of the notice provided under §24.239 of this title,
also provide notice of the information outlined in this subsection.
Commission staff must incorporate this information into the notice
provided to the transferee for distribution after the application
is determined to be administratively complete.
(1) How intervention differs from protesting a rate
increase.
(2) A rate schedule showing the existing rates and
the authorized acquisition rates.
(3) A billing comparison for usage of 5,000 and 10,000
gallons at existing rates and authorized acquisition rates.
(f) Commission review. The commission will, with or
without a public hearing, investigate the request for authorized acquisition
rates to determine whether the requested rates are just and reasonable
for the acquired customers and the transferee. That a regulatory authority
has determined that the requested rates are just and reasonable for
a water or sewer system to which the rates already apply is not, in
itself, sufficient to conclude that the requested rates are just and
reasonable for the acquired water or sewer system.
(1) Public hearing. As part of its determination on
whether to require a public hearing on the proposed transaction under §24.239(h)
of this title, the commission will also consider whether a hearing
is required to determine if the requested authorized acquisition rates
are just and reasonable.
(A) If the commission requires a public hearing under
this section or §24.239(h) of this title, the request to charge
authorized acquisition rates will not be approved unless the commission
determines that the requested rates are just and reasonable.
(B) If the commission does not require a public hearing
under this section or §24.239(h) of this title, and the transferee
has complied with the notice provisions of this section, the request
to charge authorized acquisition rates will be approved in the commission's
order approving the transaction. This subparagraph does not apply
if the commission does not approve the transaction.
(2) Scope of rate review. The commission will determine
whether the requested rates are just and reasonable based on the relevant
facts and circumstances, subject to the limitations of subparagraph
(A) of this paragraph.
(A) The transferee is not required to support its request
for authorized acquisition rates by initiating a rate proceeding,
establishing the cost of service for the acquired water or sewer system,
or establishing substantial similarity between the acquired water
or sewer system and the water or sewer system to which the requested
rates already apply. The transferee is also not required to defend
the reasonableness of the requested rates, or any individual component
of those rates, with respect to any water or sewer system to which
the rates already apply.
(B) The commission may consider whether any charges
or significant components of the requested authorized acquisition
rates (e.g., local or system-specific charges, pass throughs, etc.)
would be unjust or unreasonable if applied to the acquired water or
sewer system. The commission may also consider evidence of whether
the customers of the acquired water or sewer system are currently
receiving continuous and adequate service. The commission may also
consider evidence of whether the requested rates are generally consistent
with the rates charged to similar water or sewer systems. The commission's
review is not limited to the factors enumerated in this subparagraph.
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