Title 6. Business Structure — Subtitle 3. Acquisition of Water Companies and Sewage Disposal Companies

In this subtitle the following words have the meanings indicated.

“Acquiring entity” means:

“Affiliate” has the meaning stated in § 7–501 of this article.

“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.

“Fair market value” means the average of the two utility valuation expert appraisals conducted under § 6–304 of this subtitle.

“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.

“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.

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.

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.

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.

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.

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

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

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.

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:

If an acquiring entity and the selling utility agree to use the process outlined in § 6–304 of this subtitle, the acquiring entity shall include in its application for Commission approval of the acquisition:

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

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.

An appraisal conducted under this subtitle is presumed to be valid unless substantial evidence demonstrates a failure to adhere to the requirements of § 6–304 or § 6–305 of this subtitle.

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:

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