| (a) Applicability. This section applies to a voluntary
arm's length transaction between an acquiring utility and a retail
public utility under TWC §13.305 for which approval is required
under TWC §13.301. This section does not apply to a transaction
between a utility and its affiliate.
(b) Definitions. In this section, the following words
and terms have the following meanings, unless the context indicates
otherwise.
(1) Acquiring utility -- A Class A or Class B utility
that is acquiring a selling utility, or the facilities of a selling
utility.
(2) Allowance for funds used during construction (AFUDC)
-- An accounting practice that recognizes the capital costs, including
debt and equity funds, that are used to finance a transferee's construction
costs of an improvement to a purchased asset.
(3) Fair market value -- The average of the three appraisals
conducted under subsection (f) of this section.
(4) Ratemaking rate base -- The dollar value of the
selling utility or the sold facilities of a selling utility that is
incorporated into the rate base of the acquiring utility for post-acquisition
purposes. The ratemaking rate base is the lesser of the purchase price
negotiated by an acquiring utility and a selling utility or the fair
market value. The ratemaking rate base does not include transaction
and closing costs.
(5) Selling utility -- A retail public utility that
is being purchased by an acquiring utility or is selling facilities
to an acquiring utility.
(c) List of qualified utility valuation experts. The
commission will maintain a list of qualified utility valuation experts
to perform appraisals to determine a fair market value of a selling
utility or facilities of a selling utility.
(1) A utility valuation expert may request to be included
on the commission's list by submitting, under the control number designated
for that purpose, the required information.
(2) The request filed by the utility valuation expert
must include:
(A) The expert's name, mailing address, telephone number,
and email address;
(B) The name of the company with which the expert is
employed or associated, or the name under which the expert conducts
business;
(C) The names of the principal officers of the company
with which the expert is employed or associated, if applicable;
(D) The name and mailing addresses of any affiliates
of the company with which the expert is employed or associated, if
applicable; and
(E) A detailed description of the utility valuation
expert's qualifications, such as professional licensing, certifications,
training or past experience conducting economic evaluations of water
and sewer utilities.
(3) The utility valuation expert must update the information
in its request on file with the commission within ten business days
of a material change to the information.
(4) A utility valuation expert who wishes to be removed
from the list maintained by the commission under this subsection must
file a letter with the commission requesting to be removed from the
list. This letter must be filed under the control number designated
for that purpose. The commission will acknowledge the removal request
in writing.
(d) Notice of intent to determine fair market value.
(1) A selling utility and an acquiring utility that
agree to use the fair market valuation process described in subsection
(f) of this section must file a notice of intent to determine fair
market value in the control number designated for that purpose.
(2) The notice of intent must include the following:
(A) The name and certificate of convenience and necessity
(CCN) number of the acquiring utility. If the acquiring utility holds
multiple CCN numbers, the acquiring utility must provide all the CCN
numbers.
(B) The name and contact information of the acquiring
utility's representative.
(C) The number of connections served by the acquiring
utility.
(D) The name and CCN number of the selling utility.
(E) The name and contact information of the selling
utility's representative.
(F) The number of connections served by the selling
utility.
(G) The estimated closing date of the planned acquisition.
(H) A list of the utility valuation experts on the
commission's list of qualified experts who, as of the date of the
notice of intent, are precluded under subsection (e)(2)(B) of this
section from performing an appraisal of the transaction.
(3) The notice of intent must not include the purchase
price agreed upon by the acquiring utility and the selling utility.
(e) Selection of utility valuation experts.
(1) The commission's executive director or the executive
director's designee will select three utility valuation experts from
the list maintained under subsection (c) of this section no later
than 30 days after the filing of a notice of intent to determine fair
market value that meets the requirements of subsection (d) of this
section.
(2) The utility valuation experts selected under paragraph
(1) of this subsection may not:
(A) derive material or financial benefit from the sale
other than fees for services rendered;
(B) be or have been within the year preceding the date
the service contract is executed a director, officer, or employee
of the acquiring utility or the selling utility or an immediate family
member of a director, officer, or employee of the acquiring utility
or the selling utility; or
(C) have received compensation under a contract for
consulting or other services with the acquiring or selling utility,
or executed a contract for consulting or other services with the acquiring
or selling utility, within the year preceding the date the utility
valuation expert is selected.
(3) The commission's executive director or the executive
director's designee will base the selection of utility valuation experts
on the following:
(A) Qualifications of the utility valuation expert.
(B) Availability of the utility valuation expert during
the required time frame.
(C) Absence of conflicts of interest described in paragraph
(2) of this subsection.
(D) Other factors relevant to a utility valuation expert's
ability to perform an appraisal under this section.
(4) The acquiring utility must contract directly with
the selected utility valuation experts and the commission will not
be a party to the contract. Subsection (k)(2) of this section, which
limits the amount of transaction and closing costs that may be recovered
in rates, does not apply to the fees for service agreed to in the
contract. If the acquiring utility and any of the utility valuation
experts selected under subsection (e)(1) of this subsection are unable
to reach agreement on the terms and conditions for performing the
appraisal, including the amount of the service fee, the acquiring
utility or utility valuation expert may submit a request for selection
of a different utility valuation expert under the control number designated
for that purpose. If the commission's executive director or the executive
director's designee selects a different utility valuation expert,
the time period for all utility valuation expert to submit a report
under subsection (f)(5) of this section begins when the different
utility valuation expert is selected.
(f) Determination of fair market value.
(1) The three utility valuation experts selected under
subsection (e) of this section jointly must retain a licensed engineer
to conduct an assessment of the tangible assets of the selling utility
or the facilities to be sold to the acquiring utility.
(A) The engineer may not be or have been within one
year preceding the date the service contract is executed a director,
officer, or employee of the acquiring utility or the selling utility
or an immediate family member of a director, officer, or employee
of the acquiring utility or the selling utility.
(B) The engineer must provide the following information
to the valuation experts:
(i) Qualifications that demonstrate the engineer's
ability to provide the requested assessment;
(ii) The engineer's fees for other similar assessments;
and
(iii) Other relevant information requested by the utility
valuation experts.
(C) The engineer's assessment must include a separate
assessment for each type of facility based on the applicable National
Association of Regulatory Utility Commissioners (NARUC) account for
the facility.
Cont'd... |
