# Public Utilities (GPU)

## Title 6. Business Structure

### Subtitle 1. Financing

#### Section 6-101

(a)

  (1) This subsection:

    (i) applies only to corporations that operate in Maryland; and

    (ii) does not apply to a transaction in which the capital stock of a telephone company is acquired by another entity with a greater than 50% ownership in common with the telephone company.

  (2) Except as provided in paragraph (4) of this subsection, a public service company shall obtain authorization from the Commission before the public service company:

    (i) assumes or guarantees an obligation or liability with respect to stocks, bonds, securities, notes, or other evidence of indebtedness of any person that is payable wholly or partly more than 12 months after the date of the assumption or guarantee;

    (ii) issues stocks, bonds, securities, notes, or other evidence of indebtedness that is payable wholly or partly more than 12 months after the date issued; or

    (iii) lends money to an affiliate, as defined in Sec. 7-501 of this article, at rates or on terms that are significantly more favorable to the affiliate than the rates or terms that are otherwise commercially available to the affiliate.

  (3) An issuance under paragraph (2)(ii) of this subsection shall conform to Sec.Sec. 6-102 and 6-103 of this subtitle.

  (4) Prior authorization of the Commission is not required for an assumption or guarantee under paragraph (2)(i) of this subsection or an issuance under paragraph (2)(ii) of this subsection made by a gas company, electric company, or telephone company whose gross annual revenues, for the most recent calendar year for which data are available, are less than 3% of the total gross annual revenues of all public service companies in the State during the same calendar year, if the gas company, electric company, or telephone company:

    (i) provides prior written notice to the Commission of the transaction; and

    (ii) obtains approval of the transaction from the entity in another state that regulates the gas company, electric company, or telephone company.

(b)

  (1) Subject to the requirements of subsection (c) of this section, the Commission may authorize an act described under subsection (a)(2) of this section if the Commission finds that the act is consistent with the public convenience and necessity.

  (2) Authorization under this subsection does not:

    (i) revive a lapsed franchise, validate an invalid franchise, or add to the powers and privileges in a franchise; or

    (ii) waive a forfeiture.

(c)

  (1) This subsection does not apply to the formation of a holding company by a public service company in a corporate reorganization that involves an exchange of stock of the public service company for stock in the holding company.

  (2) In this subsection, a company controlling a public service company is deemed a public service company of the same class as the controlled public service company.

  (3) Without prior authorization of the Commission, a public service company may not take, hold, or acquire any part of the capital stock of a public service company that:

    (i) operates in Maryland; and

    (ii) is of the same class as the acquiring company.

  (4)

    (i) Except as provided in subparagraph (ii) of this paragraph, a stock corporation may not take, hold, or acquire more than 10% of the total capital stock of a public service company that operates in Maryland unless:

      (1) the stock is acquired as collateral security; and

      (2) the Commission approves the acquisition.

    (ii) The Commission may authorize a public service company of the same class to take, hold, or acquire more than 10% of the total capital stock of a public service company that operates in Maryland.

  (5) A public service company may not be a party to a violation of this subsection.

  (6) Notwithstanding paragraph (2) of this subsection, Sec. 6-105 of this subtitle shall apply, and the provisions of this subsection do not apply, to the acquisition, ownership, or disposition of any capital stock or voting securities of a company that controls, directly or indirectly, a gas and electric company.

  (7) Notwithstanding any other provision of this subsection, the Commission may authorize, in accordance with Sec. 6-105 of this subtitle, the taking, holding, or acquiring of all or any part of the capital stock of a gas and electric company that operates in the State by a stock corporation or a public service company that is not of the same class as the gas and electric company.

#### Section 6-102

(a) This section applies only to public service companies that operate in Maryland.

(b) The Commission shall authorize a public service company to issue stocks, bonds, securities, notes, or other evidence of indebtedness, payable wholly or partly more than 12 months after the date of issuance, if the Commission finds that the issuance is reasonably required for the public service company to:

  (1) acquire property;

  (2) construct, complete, extend, or improve its facilities;

  (3) discharge or lawfully refund its obligations;

  (4) maintain or improve service; or

  (5) reimburse money, not secured by or obtained from the issuance, that is expended for a purpose described in item (1), (2), or (3) of this subsection within 5 years before the filing of an application with the Commission for the reimbursement.

(c)

  (1) The Commission may authorize a public service company to issue stocks, bonds, securities, notes, or other evidence of indebtedness, payable wholly or partly more than 12 months after the date of issuance, for the public service company to:

    (i) conform the aggregate capitalization of the public service company to the value of its property; or

    (ii) subject to paragraph (2) of this subsection, pay a dividend in shares of the public service company's own stock.

  (2) An order of the Commission authorizing an issuance under paragraph (1)(ii) of this subsection shall state that:

    (i) concurrently with the issuance, the public service company shall transfer from surplus to capital an amount that the Commission determines under paragraph (3) of this subsection; and

    (ii) a sum equal to the amount to be transferred has been expended from income or other money in the treasury of the public service company not secured by, obtained from, or reimbursed by the issuance of stocks, bonds, notes, or other evidence of indebtedness of the public service company for a purpose described in subsection (b)(1), (2), or (3) of this section.

  (3) The amount that the Commission determines under paragraph (2)(i) of this subsection may not be less than:

    (i) the aggregate par value of the stock whose issuance is to be authorized; or

    (ii) if the stock has no par value, the capital value of the stock.

(d)

  (1) An authorization by the Commission under subsection (b) or (c) of this section shall be by order.

  (2) The order shall specify:

    (i) the amount of the issuance authorized; and

    (ii) the purpose under subsection (b) or (c) of this section for which the issuance is reasonably required.

(e)

  (1) Notwithstanding subsections (b), (c), (d), and (g) of this section, the Commission may approve the issuance of stocks, bonds, securities, notes, or other evidence of indebtedness in connection with the organization of a new public service company by the purchaser of the franchise or property of a public service company sold under judicial proceedings, mortgage, or deed of trust.

  (2) An issuance that the Commission approves under this subsection shall be in the amount that the Commission considers necessary fully to protect the rights and equities of the holders of the securities of the predecessor company.

(f) A public service company's application for authorization under this section of long-term debt in excess of $1,000,000 shall include a copy of any restrictive covenant attached to the debt.

(g)

  (1) Except as provided in paragraph (2) of this subsection, this section does not prevent a public service company from issuing, without the prior consent of the Commission, notes that are:

    (i) for proper corporate purposes;

    (ii) not otherwise in violation of the law; and

    (iii) payable at periods totaling not more than 12 months after the date of issuance.

  (2) Except as authorized under subsection (b) or (c) of this section, notes issued under paragraph (1) of this subsection may not be refunded directly or indirectly, wholly or partly, by an evidence of indebtedness running for more than 12 months.

#### Section 6-103

(a) This section applies only to public service companies that operate in Maryland.

(b)

  (1) A public service company may not:

    (i) capitalize or issue bonds against or as lien on a contract for consolidation, merger, or lease; or

    (ii) except as provided in paragraph (2) of this subsection, capitalize a franchise or the right to own a franchise.

  (2) A public service company may capitalize a franchise or right to own a franchise in an amount not exceeding the amount, exclusive of any tax or annual charge, actually paid to the State or a political subdivision as consideration for the grant of the franchise or right.

(c) The stated capital, as determined under Title 2, Subtitle 3 of the Corporations and Associations Article, of a public service company formed by a merger or consolidation of corporations may not exceed, solely by virtue of the merger or consolidation, the stated capital of the corporations merged or consolidated plus any additional sum paid in cash.

(d)

  (1) This subsection does not apply to the capitalization of a franchise to be a public service company.

  (2) Notwithstanding any other provision of this article, the Commission may approve the capitalization of tangible and intangible property of:

    (i) a newly chartered public service company; or

    (ii) a public service company organized or reorganized by the purchaser of the franchise and property of its predecessor at a sale under judicial proceedings, mortgage, or deed of trust.

  (3) Capitalization under paragraph (2) of this subsection shall be in the amount and form that the Commission considers reasonably necessary to enable the public service company to obtain the capital necessary to establish itself as a going concern.

#### Section 6-104

Any contract, assignment, transfer, or agreement for transfer or purchase of stock in violation of the provisions of this article is void.

#### Section 6-105

(a) In this section, "affiliate" has the meaning stated in Sec. 7-501 of this article.

(b)

  (1) The General Assembly finds that:

    (i) existing legislation requires the approval by the Commission of the acquisition by one public service company of another public service company's stocks and obligations, but does not require the Commission's approval of these acquisitions by persons not engaged in the public utility business in the State; and

    (ii) an attempt by a person not engaged in the public utility business in the State to acquire the power to exercise any substantial influence over the policies and actions of a public service company that provides electricity or gas in the State could result in harm to the customers of the public service company, including the degradation of utility services, higher rates, weakened financial structure, and diminution of utility assets.

  (2) The General Assembly declares that it is the policy of the State to regulate acquisitions by persons that are not engaged in the public utility business in the State of the power to exercise any substantial influence over the policies and actions of a public service company that provides electricity or gas in the State in order to prevent unnecessary and unwarranted harm to the customers of the public service company.

(c) This section applies to the acquisition of an electric company, gas and electric company, or a gas company that operates in Maryland.

(d)

  (1) A gas and electric company, at the same time as a filing by the company or within 10 days after receipt by the company, shall provide the Commission with a copy of any document regarding the acquisition of voting securities of the gas and electric company or any company that owns or controls the gas and electric company, filed or received by the company, that is filed with:

    (i) the Securities and Exchange Commission;

    (ii) the Federal Energy Regulatory Commission;

    (iii) the Nuclear Regulatory Commission;

    (iv) the Department of Justice;

    (v) the Federal Trade Commission; or

    (vi) any successor agency.

  (2) The Commission shall provide the gas and electric company with the same confidentiality and other protections provided by the federal agency with which the filing was made.

(e)

  (1) Without prior authorization from the Commission, a person may not acquire, directly or indirectly, the power to exercise any substantial influence over the policies and actions of an electric company, gas and electric company, or gas company, if the person would become an affiliate of the electric company, gas and electric company, or gas company as a result of the acquisition.

  (2) For the purposes of this subsection, a person may not be considered to have acquired, directly or indirectly, the power to exercise any substantial influence over the policies and actions of a gas and electric company if the person:

    (i) after any acquisition of voting interests of a company that owns or controls a gas and electric company, directly or indirectly, owns, controls, or has the right to vote, or direct the voting of, not more than 20% of the outstanding voting interests of a company that owns or controls a gas and electric company; and

    (ii) does not have the right to designate more than 20% of the board of directors or other governing body of a company that owns or controls a gas and electric company.

  (3) Paragraph (2) of this subsection may not be construed to apply to the acquisition of any voting interests of a gas and electric company.

  (4) If a person that acquires voting securities of a company that owns or controls a gas and electric company after the acquisition actually exercises substantial influence over the policies and actions of a gas and electric company, the Commission may order compliance with, and take any actions authorized by, other provisions of this article with respect to the gas and electric company.

(f) An application for authorization under subsection (e) of this section must include detailed information regarding:

  (1) the applicant's identity and financial ability;

  (2) the background of the key personnel associated with the applicant;

  (3) the source and amounts of funds or other consideration to be used in the acquisition;

  (4) the applicant's compliance with federal law in carrying out the acquisition;

  (5) whether the applicant or the key personnel associated with the applicant have violated any State or federal statutes regulating the activities of public service companies;

  (6) all documents relating to the transaction giving rise to the application;

  (7) the applicant's experience in operating public service companies providing electricity;

  (8) the applicant's plan for operating the public service company;

  (9) how the acquisition will serve the customers of the public service company in the public interest, convenience, and necessity; and

  (10) any other information that the Commission may specify by regulation or order.

(g)

  (1) The Commission promptly shall:

    (i) examine and investigate each application received under this section; and

    (ii) undertake any proceedings necessary or convenient to review the application in accordance with Title 3 of this article and issue an order concerning the acquisition.

  (2) The Commission shall consider the following factors in considering an acquisition under this section:

    (i) the potential impact of the acquisition on rates and charges paid by customers and on the services and conditions of operation of the public service company;

    (ii) the potential impact of the acquisition on continuing investment needs for the maintenance of utility services, plant, and related infrastructure;

    (iii) the proposed capital structure that will result from the acquisition, including allocation of earnings from the public service company;

    (iv) the potential effects on employment by the public service company;

    (v) the projected allocation of any savings that are expected to the public service company between stockholders and rate payers;

    (vi) issues of reliability, quality of service, and quality of customer service;

    (vii) the potential impact of the acquisition on community investment;

    (viii) affiliate and cross-subsidization issues;

    (ix) the use or pledge of utility assets for the benefit of an affiliate;

    (x) jurisdictional and choice-of-law issues;

    (xi) whether it is necessary to revise the Commission's ring fencing and code of conduct regulations in light of the acquisition; and

    (xii) any other issues the Commission considers relevant to the assessment of acquisition in relation to the public interest, convenience, and necessity.

  (3)

    (i) If the Commission finds that the acquisition is consistent with the public interest, convenience, and necessity, including benefits and no harm to consumers, the Commission shall issue an order granting the application.

    (ii) The Commission may condition an order authorizing the acquisition on the applicant's satisfactory performance or adherence to specific requirements.

  (4) If the Commission does not find that the acquisition is consistent with the public interest, convenience, and necessity, including benefits and no harm to consumers, the Commission shall issue an order denying the application.

  (5) The applicant bears the burden of showing that granting the acquisition is consistent with the public interest, convenience, and necessity, including benefits and no harm to consumers.

  (6)

    (i) Except as provided in subparagraph (ii) of this paragraph, the Commission shall issue an order with respect to the application no later than 180 days after the filing of the application for authorization.

    (ii) Unless the Commission finds, based on good cause, that the 180-day period should be extended for an additional 45 days, failure of the Commission to issue an order within the 180-day period shall be considered to be an approval of the acquisition by the Commission.

(h) Nothing in this section prohibits dissemination by any party of information concerning the acquisition if the dissemination does not otherwise conflict with federal or State law.

#### Section 6-106

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Affiliate" has the meaning stated in Sec. 7-501 of this article.

  (3) "Investor-owned electric company" means an electric company that is not a municipal electric utility or an electric cooperative.

(b) For purposes of this section, a person is considered to have acquired, directly or indirectly, the power to exercise substantial influence over the policies or actions of an investor-owned electric company if the person:

  (1) after any acquisition of voting interests, directly or indirectly owns, controls, or has the right to vote, or direct the voting of, at least 20% of the voting interests of the investor-owned electric company or an entity that owns or controls the investor-owned electric company;

  (2) has the right to designate at least 20% of the board of directors or other governing body of the investor-owned electric company or an entity that owns or controls the investor-owned electric company; or

  (3) is found by the Commission, directly or indirectly, or through one or more intermediaries, to have substantial influence over the policies or actions of an investor-owned electric company.

(c) A person may not acquire, directly or indirectly, the power to exercise substantial influence over the policies or actions of an investor-owned electric company if the person would become an affiliate of each investor-owned electric company in the State as a result of the acquisition.

(d) The Commission may adopt regulations to implement this section.

### Subtitle 2. Reporting Requirements

#### Section 6-201

(a) In this subtitle the following words have the meanings indicated.

(b) "Control" means the possession, direct or indirect, of the power to direct or cause the direction of the management or policies of a person.

(c) "Financing lease" means a lease that, during the noncancelable lease period:

  (1) covers at least 75% of the economic life of the property; or

  (2) has terms that assure the lessor of a full recovery of the fair market value that would normally be represented by the lessor's investment of the property at the start of the lease and a reasonable return on the use of the assets invested, subject only to limited risk in the realization of the residual interest in the property and the credit risks generally associated with secured loans.

(d) "Joint venture" means a joint business arrangement between a public service company and another person for mutual benefit, with the understanding that each will share in the profits and losses and have a voice in management.

(e) "Long-term debt" means a debt due at least 1 year after the date of indebtedness.

(f) "Parent" means:

  (1) every firm, holding company, or other person that ultimately controls a public service company; or

  (2) any intermediary entity that controls a public service company.

(g) "Person" includes an individual, corporation, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity.

(h) "Short-term debt" means a debt due within 1 year after the date of indebtedness.

(i) "SIC code and short title" means a 4-digit industry Standard Industrial Classification code and short title listed in the most recent Standard Industrial Classification manual published by the Office of Management and Budget of the Executive Office of the President.

#### Section 6-202

(a) The Commission may classify the public service companies under its jurisdiction.

(b) Two public service companies are of the same class, if they are both:

  (1) common carrier companies;

  (2) electric companies;

  (3) gas companies;

  (4) gas and electric companies;

  (5) sewage disposal companies;

  (6) telegraph companies;

  (7) telephone companies; or

  (8) water companies.

#### Section 6-203

The Commission may:

(1) establish a uniform system of records for each class of public service company; and

(2) prescribe the manner and form in which a public service company shall keep records and enter particular items.

#### Section 6-204

The Commission shall prescribe a system, a form of records, and a form of annual report for public service companies that conform as nearly as possible to the system and forms that any corresponding federal regulatory unit requires for public service companies of the same class in interstate commerce.

#### Section 6-205

(a)

  (1) This subsection does not apply to railroads.

  (2) Except as provided in subsection (b) of this section, each public service company shall file with the Commission an annual report containing information on its corporate structure, affiliations of its officers and directors, and debt holdings.

  (3)

    (i) Notwithstanding any specific reporting requirements in this subtitle, the Commission may prescribe the contents of the annual report to be filed by a public service company whose gross annual revenues for the most recent calendar year for which data are available are less than 0.003% of the total gross annual revenues of all public service companies in the State during the same calendar year.

    (ii) A small rural electric cooperative described in Sec. 7-502(a) of this article may satisfy the reporting requirement by submitting to the Commission a copy of a report including the required information that the small rural electric cooperative submits to the rural utilities service.

(b) Unless otherwise directed by the Commission, a public service company is not required to comply with subsection (a) of this section if the public service company is:

  (1) a common carrier; or

  (2) a telephone company whose rates are not regulated by the Commission under Title 4 of this article.

(c) The president, treasurer, or general manager of a public service company shall verify the company's annual report under oath.

(d) The Commission may:

  (1) require a public service company to submit reports and information that the Commission reasonably desires;

  (2) prescribe the form, contents, and deadlines for the reports and information; and

  (3) require amendments or corrections to the reports within a set period.

#### Section 6-206

(a) A public service company shall file its annual report with the Commission within the time the Commission sets after the end of the year that the report covers.

(b)

  (1) The Commission shall provide each public service company with a blank form of an annual report in time to allow the public service company to comply with subsection (a) of this section.

  (2) Unless the Commission notifies a public service company of a proposed change at least 6 months before the start of the year for which an annual report is due, the Commission may not change the form of the annual report in a way that requires the public service company to change the manner or form of its record keeping.

#### Section 6-207

In addition to any other information that the Commission requires, the annual report of a public service company shall state:

(1) the amount and kind of:

  (i) authorized capital stock;

  (ii) capital stock issued and outstanding;

  (iii) authorized bonded indebtedness; and

  (iv) bonds and other evidence of indebtedness issued and outstanding;

(2) receipts and expenditures for the year reported;

(3) the amount paid as dividends and interest on bonds or other evidence of indebtedness;

(4) the amount of salary paid to each officer, by name, and the amount paid as wages to employees;

(5) the location of the public service company's plants with a full description of each plant and franchise, stating in detail how each franchise was acquired; and

(6) when applicable:

  (i) a monthly compilation of expenditures that were the basis for any fuel rate adjustment; and

  (ii) an annual recapitulation of the information required under item (i) of this item.

#### Section 6-208

(a) A public service company shall list in its annual report the name and address, basis of control, and principal business activities of:

  (1) the public service company; and

  (2) each:

    (i) parent;

    (ii) subsidiary of the public service company;

    (iii) organization the public service company controls; and

    (iv) joint venture in excess of $1,000,000 in which the public service company is involved.

(b)

  (1) For each principal business activity described in subsection (a) of this section, a public service company shall list and describe by SIC code and short title each industry in which the public service company's activities generated, during the reporting year, at least 10% of gross revenues or $5,000,000.

  (2) The public service company shall compile the list described under paragraph (1) of this subsection in order of significance relative to the total activities of the public service company, based on the percentage of gross revenues generated within each industry.

(c) For each corporation, partnership, or other business organization in which a public service company owns more than 5% of the outstanding voting securities or other ownership interests, the public service company shall, in its annual report:

  (1) list the corporation, partnership, or other business organization; and

  (2) indicate the percentage that the public service company owns.

#### Section 6-209

(a)

  (1) A public service company shall list in its annual report the name and address of:

    (i) each principal officer, director, trustee, or partner of the public service company and its parent; and

    (ii) each individual exercising functions similar to that of a director, trustee, or partner on behalf of the public service company and its parent.

  (2) For each individual described in paragraph (1) of this subsection, the public service company shall list:

    (i) the title and position with the public service company and any parent;

    (ii) the title and position with any subsidiary of the public service company and any other company, firm, or organization that the public service company controls;

    (iii) the principal occupation or business affiliation, if different than that provided in item (i) or (ii) of this paragraph; and

    (iv) each affiliation with any other business or financial organization, firm, or partnership doing business with the public service company.

(b) In its annual report, a public service company shall:

  (1) list each contract, agreement, or other business arrangement exceeding an aggregate value of $1,000,000 between the public service company and any business or financial organization, firm, or partnership listed under subsection (a)(2)(iii) and (iv) of this section;

  (2) except for compensation related to a position with the public service company, list each contract, agreement, or other business arrangement with a value exceeding $2,500 entered into during the reporting year between the public service company and each officer and director listed in subsection (a) of this section;

  (3) for each contract, agreement, or other business arrangement described in paragraph (1) or (2) of this subsection, identify the parties, amounts, dates, and product or service involved; and

  (4) list the professional services performed for the public service company by each firm, partnership, or organization with which an officer or director of the public service company is affiliated.

#### Section 6-210

(a)

  (1) Except as provided in paragraph (2) of this subsection, a public service company shall describe in its annual report each long-term debt of the public service company exceeding $1,000,000, including:

    (i) the name and address of the creditor;

    (ii) the character of the debt;

    (iii) the nature of any security;

    (iv) the date of origin of the debt;

    (v) the date of maturity of the debt;

    (vi) the total amount of the debt;

    (vii) the rate of interest; and

    (viii) the total amount of interest to be paid.

  (2) If the long-term debt is in the form of bonds, debentures, or other widely held debt, the public service company shall list the name and address of the trustee, if available, in place of the name and address of the creditor.

(b) In its annual report, a public service company shall:

  (1) except for the accounts payable of the public service company, describe each short-term debt, including:

    (i) the name and address of the creditor;

    (ii) the character of the debt;

    (iii) the period of the debt;

    (iv) the rate of interest;

    (v) the total amount of the debt;

    (vi) the nature of any security; and

    (vii) the date the debt was paid or shall be paid;

  (2) describe, if involving aggregate payments exceeding $1,000,000, each financing lease, equipment trust, conditional sales contract, or major liability related to the capital assets of the public service company; and

  (3) provide a copy of any restrictive covenant attached to the debt described in item (1) or (2) of this subsection.

(c) In its annual report, a public service company shall, if available:

  (1) list the name and address of each holder of more than 5% of each issue reported under this section; and

  (2) identify the holder as a bank, broker, holding company, individual, or other person.

### Subtitle 3. Acquisition of Water Companies and Sewage Disposal Companies

#### Section 6-301

(a) In this subtitle the following words have the meanings indicated.

(b) "Acquiring entity" means:

  (1) a water company or a sewage company that is acquiring a selling utility as the result of a voluntary arm's length transaction between the buyer and seller; or

  (2) another person that:

    (i) is acquiring a selling utility as the result of a voluntary arm's length transaction between the buyer and seller; and

    (ii) has applied to the Commission, directly or through an affiliate, for authority to operate as a public service company in the State.

(c) "Affiliate" has the meaning stated in Sec. 7-501 of this article.

(d) "Construction allowance" means an accounting practice that recognizes the capital costs, including debt and equity funds that are used to finance the construction costs of an improvement to a selling utility's assets by an acquiring entity.

(e) "Fair market value" means the average of the two utility valuation expert appraisals conducted under Sec. 6-304 of this subtitle.

(f) "Selling utility" means a water company or a sewage disposal company or any other water service or sewage disposal service provider in the State, including any State, county, or municipal water service provider or sewage disposal service provider that is being purchased by an acquiring entity as the result of a voluntary arm's length transaction between the buyer and seller.

(g) "Utility valuation expert" or "expert" means a person hired by an acquiring public utility and selling utility for the purpose of conducting an economic valuation of the selling utility to determine its fair market value.

#### Section 6-302

This subtitle applies to the sale and acquisition, including all tangible assets, of public and private water service providers and sewage disposal service providers with fewer than 400,000 customers.

#### Section 6-303

(a) Without prior authorization of the Commission, a person may not acquire a controlling interest in any State, county, municipal, or similar not-for-profit water service or sewage disposal service provider, for the purpose of converting the provider into a water company or sewage disposal company.

(b) The Commission may authorize an acquisition under subsection (a) of this section if the Commission finds that the acquisition is consistent with the public convenience and necessity.

#### Section 6-304

(a) On agreement by both the acquiring entity and the selling utility, the fair market value of the selling utility shall be determined in accordance with this section.

(b) The acquiring entity and the selling utility shall each be responsible for hiring a utility valuation expert to conduct an appraisal of the selling utility to determine the fair market value of the selling utility.

(c) Each utility valuation appraisal shall be completed in accordance with the Uniform Standards of Professional Appraisal Practice.

(d)

  (1) The acquiring entity and the selling utility shall engage the services of the same licensed engineer to conduct an assessment of the tangible assets of the selling utility.

  (2) The assessment shall be incorporated into the appraisals under subsection (c) of this section.

#### Section 6-305

A utility valuation expert may not:

(1) derive any material financial benefit from the sale of the selling utility other than fees for services rendered; or

(2) be an immediate family member of a director, an officer, or an employee of either the acquiring entity or the selling utility within 12 months before the date of hiring to perform an appraisal under this subtitle.

#### Section 6-306

(a)

  (1) Reasonable transaction and closing costs incurred by the acquiring entity shall be included in the rate making rate base of the acquiring entity.

  (2) Fees paid to utility valuation experts may be included in the transaction and closing costs associated with acquisition by the acquiring entity.

  (3) Unless the Commission finds just cause to authorize additional fees, fees eligible for inclusion may not exceed 5% of the fair market value of the selling utility or $50,000 if the actual fees paid exceed 5% of the fair market value.

(b) As of the closing date of the acquisition, the rate making rate base of the selling utility, including additions under subsection (a) of this section, shall be the lesser of:

  (1) the purchase price negotiated by the acquiring entity and selling utility; or

  (2) the fair market value of the selling utility.

#### Section 6-307

(a) If an acquiring entity and the selling utility agree to use the process outlined in Sec. 6-304 of this subtitle, the acquiring entity shall include in its application for Commission approval of the acquisition:

  (1) copies of the two appraisals performed by the utility valuation experts under Sec. 6-304 of this subtitle;

  (2) the purchase price of the selling utility as agreed to by the acquiring entity and the selling utility;

  (3) the rate making rate base of the selling utility determined in accordance with this subtitle;

  (4) the transaction and closing costs incurred by the acquiring entity that will be included in its rate base; and

  (5) a tariff containing a schedule of rates, service charges, and any additional fees to be incurred by the customers of the selling utility at or immediately after the closing date of acquisition.

(b)

  (1) Subject to paragraph (2) of this subsection, the Commission shall issue a final order on an application submitted under this subtitle within 180 days after the filing date of a complete application under subsection (a) of this section.

  (2) The Commission may extend a proceeding under this subtitle for an additional 30 days if the Commission finds that the proceedings cannot be completed within the initial suspension period.

  (3) After the expiration of 180 days under paragraph (1) of this subsection and any extension under paragraph (2) of this subsection, if the Commission has not entered a final order, the application shall be deemed approved.

(c) If the Commission issues an order approving the application for acquisition, the order shall include:

  (1) the rate making rate base of the selling utility, as determined under this subtitle; and

  (2) any conditions of approval that the Commission requires.

(d) The tariff submitted under subsection (a)(5) of this section shall remain in effect until new rates are approved for the acquiring entity in a base rate case proceeding.

(e) An appraisal conducted under this subtitle is presumed to be valid unless substantial evidence demonstrates a failure to adhere to the requirements of Sec. 6-304 or Sec. 6-305 of this subtitle.

#### Section 6-308

(a) The cost of an improvement that an acquiring entity places in service after the acquisition shall accrue a construction allowance after the date the cost was incurred until the earlier of:

  (1) 3 years after the improvement is placed in service; or

  (2) the date the improvement is included in the acquiring entity's next base rate case.

(b) Depreciation on an acquiring entity's improvements after the acquisition shall be deferred for book and rate making purposes.

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Md. Code Ann., Pub. Util. (as displayed at mgaleg.maryland.gov, October 16, 2026)