§ 14-206-109 - Denial -- Purchase price, terms, and conditions of sale. - Arkansas Statutes

14-206-109. Denial -- Purchase price, terms, and conditions of sale.

(a) In the event that the commission determines, on the basis of the evidence, that either the gas or electric public utility or its customers will be adversely affected by the proposed acquisition or purchases, it shall deny the application for approval.

(b) (1) In the event the commission determines, on the basis of the evidence, that the requested approval should be granted, it shall fix the purchase price to be paid by the municipality to the gas or electric public utility for any properties to be purchased from the gas or electric utility as well as all other terms and conditions of the purchase and sale.

(2) The amount to be paid shall include, but shall not be limited to, the total of the following elements:

(A) The present-day reproduction cost, new, of the facilities being acquired, adjusted for remaining life expectancy;

(B) An amount equal to the cost of constructing any necessary facilities to reintegrate the system of the gas or electric utility outside the area to be acquired after detaching the portion to be sold;

(C) An amount sufficient to reimburse the gas or electric utility for reasonable expenses it incurs preparing the aforementioned reproduction cost, new, adjusted for remaining life expectancy, including the appraisal, and all other expenses including, but not limited to, employee salaries, overheads, consultants' fees and attorneys' fees incurred in connection with the acquisition of the facilities;

(D) (i) An amount equal to any severance damages which will be incurred by the gas or electric utility. Severance damages shall be measured by the present value of the estimated revenue requirements associated with any investment in plant, gas supply, expenses incurred, or other costs which would have been allocated to or paid by the gas or electric public utility's customers in that portion of the gas or electric public utility's service area to be acquired or served by the municipality and which could be shifted to or allocated to other customers of the gas or electric public utility as a result of the acquisition of the properties by the municipality.

(ii) The estimated present value of any such revenue requirements shall include, but shall not be limited to, the estimated revenue requirements associated with:

(a) The investment in, or other costs incurred with respect to, existing substations, compressor stations, and other distribution, transmission, or generating facilities;

(b) Expenses incurred under purchased power contracts or gas supply contracts except to the extent the expenses arise from a plant which is not then in commercial operation;

(c) Real property owned or leased by the gas or electric public utility; or

(d) Other costs which would have been allocated to the customers in that portion of the gas or electric utility's service area to be acquired or served by the municipality;

(iii) The estimated revenue requirements shall be estimated for such reasonable period of time in the future as may be justified by the applicable facts and circumstances, but in no event shall that period of time be less than a period of ten (10) years after the date the purchase is projected to be consummated;

(E) An amount sufficient to reimburse the gas or electric utility for any federal or state income tax effect, if any, requiring payment of either federal or state income tax because of the involuntary transfer, which taxes are related to recapture of tax benefits from:

(i) Investment tax credit or investment tax credit carry-forwards or other accelerated income tax benefits;

(ii) Other income tax benefits, which have been flowed through to ratepayers through the setting of rates by a regulatory commission, that reflect either the amortization of investment tax credits or other accelerated income tax benefits; and

(iii) An amount sufficient to reimburse the gas or electric utility for any federal or state income tax effects that result from the use of a net of tax allowance for funds used during construction rate by the gas or electric utility in either the accounting for construction costs on its books or the calculation of the depreciated replacement cost.