NC H351

Water and wastewater public utilities may elect to use fair value instead of original cost to establish rate base when acquiring systems owned by municipalities, counties, or Chapter 162A authorities or districts.

Fair value shall be determined by averaging three independent appraisals conducted by accredited valuation experts representing the acquiring utility, selling utility, and the Public Staff, using cost, market, and income approaches.

The acquiring utility and selling utility must jointly retain a licensed engineer to assess tangible assets; appraisers shall use this assessment in determining fair value.

Rate base value shall be the lesser of the negotiated purchase price or fair value plus reasonable appraisal fees and transaction costs; normal depreciation rules apply after purchase.

The Public Utilities Commission must approve applications within six months and retains authority to adjust fair value if needed in the public interest; the Commission shall adopt implementing rules.