HB 2196 -- Water and Sewer Systems

Sponsor:  Schad

This bill establishes procedures for the sale of water or sewer
systems of a small utility to a large public utility.  In its
main provisions, the bill:

(1)  Requires a small utility whenever it decides to sell its
water or sewer system to a large public utility to authorize an
appraisal of the system and set a date that the appraisal is due
by ordinance, resolution, or board action;

(2)  Requires the appraisal to be performed by three
disinterested Missouri residents appointed to serve as
appraisers.  One will be appointed by the small utility, one by
the large public utility, and one by the two appraisers appointed
by the utilities.  One appraiser must be a licensed engineer and
one a licensed appraiser.  The third appraiser must be either a
licensed engineer or a licensed appraiser;

(3)  Requires the appraisers to be sworn to determine the fair
market value of the system and return the appraisal, in writing,
to the small and large public utilities by the established due
date.  If all three appraisers cannot agree on the appraised
value, an appraisal signed by two of them will be a valid
appraisal;

(4)  Allows either utility, after receiving the appraisal, to
decline to proceed with the sale.  If the small utility is a
municipality required to submit the proposed sale to a public
vote, the vote must be conducted as required by law;

(5)  Specifies that the purchase price or the appraised value of
the system, whichever is less, and the transaction, closing, and
transition costs incurred by the large public utility will be the
ratemaking rate base for the small utility as incorporated into
the ratemaking rate base of the district designated by the large
public utility;

(6)  Requires the small utility's customers to pay the existing
rate of the designated district from the date of the acquisition
to the date new rates are effective.  For customers with potable
water usage values that cannot be obtained, 5,000 gallons per
month will be assigned; and

(7)  Requires, at the large utility's next rate case, the small
utility and the designated district to be combined under the same
rate tariff based on the allocation of the utilities' combined
costs of service and rate design.  The difference between the
actual pretax earnings and authorized pretax earnings will be
recorded as a regulatory asset or liability in the rate base of
the large utility and amortized for up to three years.

Missouri House of Representatives
95th General Assembly, 2nd Regular Session
Last Updated September 14, 2010 at 3:13 pm