SECTIONS 2718-2720 - California Statutes

PUBLIC UTILITIES CODE

SECTION 2718-2720

2718. This chapter shall be known and may be cited as the Public
Water System Investment and Consolidation Act of 1997.

2719. The Legislature finds and declares all of the following:
(a) Public water systems are faced with the need to replace or
upgrade the public water system infrastructure to meet increasingly
stringent state and federal safe drinking water laws and regulations
governing fire flow standards for public fire protection.
(b) Increasing amounts of capital are required to finance the
necessary investment in public water system infrastructure.
(c) Scale economies are achievable in the operation of public
water systems.
(d) Providing water corporations with an incentive to achieve
these scale economies will provide benefits to ratepayers.

2720. (a) The commission shall use the standard of fair market
value when establishing the rate base value for the distribution
system of a public water system acquired by a water corporation. This
standard shall be used for ratesetting.
(1) For purposes of this section, "public water system" shall have
the same meaning as set forth in Section 116275 of the Health and
Safety Code.
(2) For purposes of this section, "fair market value" shall have
the same meaning as set forth in Section 1263.320 of the Code of
Civil Procedure.
(b) If the fair market value exceeds reproduction cost, as
determined in accordance with Section 820 of the Evidence Code, the
commission may include the difference in the rate base for
ratesetting purposes if it finds that the additional amounts are fair
and reasonable. In determining whether the additional amounts are
fair and reasonable the commission shall consider whether the
acquisition of the public water system will improve water system
reliability, whether the ability of the water system to comply with
health and safety regulations is improved, whether the water
corporation by acquiring the public water system can achieve
efficiencies and economies of scale that would not otherwise be
available, and whether the effect on existing customers of the water
corporation and the acquired public water system is fair and
reasonable.
(c) The provisions of subdivisions (a) and (b) shall also be
applicable to the acquisition of a sewer system by any sewer system
corporation or water corporation.
(d) Consistent with the provisions of this section, the commission
shall retain all powers and responsibilities granted pursuant to
Sections 851 and 852.