25-30.0371. Acquisition Adjustments  


Effective on Monday, November 22, 2010
  • 1(1) Definition. For the purpose of this rule, an acquisition adjustment is defined as the difference between the purchase price of utility system assets to an acquiring utility and the net book value of the utility assets. A positive acquisition adjustment exists when the purchase price is greater than the net book value. A negative acquisition adjustment exists when the purchase price is less than the net book value.

    70(2) Positive Acquisition Adjustments. A positive acquisition adjustment shall not be included in rate base absent proof of extraordinary circumstances. Any entity that believes a full or partial positive acquisition adjustment should be made has the burden to prove the existence of extraordinary circumstances. In determining whether extraordinary circumstances have been demonstrated, the Commission shall consider evidence provided to the Commission such as anticipated improvements in quality of service, anticipated improvements in compliance with regulatory mandates, anticipated rate reductions or rate stability over a long-term period, anticipated cost efficiencies, and whether the purchase was made as part of an arms-length transaction. Amortization of a positive acquisition adjustment shall be pursuant to paragraph (4)(a) below.

    184(3) Negative Acquisition Adjustments. 188If the purchase price is greater than 80 percent of net book value, a negative acquisition adjustment will not be included in rate base. When the purchase price is equal to or less than 80 percent of net book value, a 229negative acquisition adjustment shall be included in rate base and will be equal to 80 percent of net book value less the purchase price. Amortization of a negative acquisition adjustment shall be pursuant to subparagraph (4)(b)1. or (4)(b)2. below.

    268(4) Amortization Period.

    271(a) In setting the amortization period for a Commission approved positive acquisition adjustment pursuant to subsection (2) above, the Commission shall consider evidence such as the composite remaining life of the assets purchased and the condition of the assets purchased. Amortization of the acquisition adjustment shall begin on the date of issuance of the order approving the transfer of assets.

    331(b) The appropriate period over which to amortize a Commission approved negative acquisition adjustment pursuant to subsection (3) above, shall be determined as follows:

    3551. If the purchase price is greater than 50 percent of net book value, the negative acquisition adjustment shall be amortized over a 7-year period from the date of issuance of the order approving the transfer of assets. In this case, the negative acquisition adjustment shall not be recorded on the books for ratemaking purposes or used for any earnings review unless the purchaser files for a rate increase pursuant to Section 427367.081(2), 428367.0814, 429367.0817 430or 431367.0822, F.S., 433that will be effective during the amortization period.

    4412. If the purchase price is 50 percent of net book value or less, the negative acquisition adjustment shall be amortized from the date of issuance of the order approving the transfer of assets as follows:

    477a. 50 percent of the negative acquisition adjustment shall be amortized over a 7-year period; and

    493b. 50 percent of the negative acquisition adjustment shall be amortized over the remaining life of the assets.

    511(5) Subsequent Modification. Any full or partial positive acquisition adjustment, once made by the Commission pursuant to subsection (2) above, may be subsequently modified if the extraordinary circumstances do not materialize or subsequently are eliminated or changed within 5 years of the date of issuance of the order approving the transfer of assets.

    564Rulemaking Authority 566350.127(2), 567367.121(1)(f) FS. 569Law Implemented 571367.071(5), 572367.081(2)(a), 573367.121(1)(a), 574(b) FS. History–New 8-4-02, Amended 11-22-10.

     

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