AB 554

This bill changes how the assets of out-of-state sewer and water affiliates are

treated under a current law that limits the extent to which a public utility holding

company (holding company) can invest in nonutility affiliates. The bill also makes

changes to the procedure that applies under current law for the sale or lease of a

water or sewer utility by a city, village, or town (municipality) to an investor-owned

public utility.

Holding companies.

Current law imposes certain requirements on a holding

company, which is a company that controls 5 percent or more of the outstanding

voting securities of a public utility that is not a telecommunications utility. A public

utility that is controlled by a holding company is called a public utility affiliate.

Other affiliates that the holding company controls are called nonutility affiliates.

Current law limits nonutility investments by prohibiting the sum of the assets

of each nonutility affiliate of the holding company from exceeding limits that are

based on specified percentages of the assets of the public utility affiliates. Current

law includes a test for determining whether an out-of-state affiliate is treated like

a public utility affiliate or nonutility affiliate for purposes of the limits on nonutility

investments. Under the test, if an out-of-state affiliate is incorporated in another

state and satisfies all of the following requirements, it is treated like a public utility

affiliate: 1) it provides heat, light, power, or natural gas for public use in another

state; 2) it is an "affiliated interest," as defined under current law, of a public utility

in this state; and 3) it is operated on an integrated system basis with that public

utility. If an out-of-state affiliate does not satisfy the foregoing requirements, it is

treated like a nonutility affiliate.

This bill allows an out-of-state affiliate that provides sewer service or water

for public use to satisfy the first requirement itemized above and exempts such an

affiliate from satisfying the third requirement. As a result, if an out-of-state sewer

or water affiliate is incorporated in another state and satisfies the test as affected by

the bill, its assets are treated like public utility affiliate assets for purposes of the

limits on nonutility investments.

Sales and leases.

Under current law, for any type of municipal utility, the

municipality must adopt an ordinance or resolution authorizing a proposed sale or

lease and submit the proposal to the Public Service Commission (PSC) for approval.

If the PSC determines that the interests of the municipality and its residents will be

best served by the sale or lease, the PSC must fix the price and other terms. If the

PSC does so, the proposal must then be approved by a majority of the municipality's

residents in a referendum. The notice for the referendum must include the price and

terms fixed by the PSC. If a majority of the municipality's residents approve the

proposal, the municipality may consummate the sale or lease with the proposed