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now that Fair Value now that Fair Value

now that Fair Value - PowerPoint Presentation

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now that Fair Value - PPT Presentation

Acquisitions Are Here Now what Danny Kermode CPA Assistant Director of Water amp Transportation Washington Utilities and Transportation Commission 2 DISCLAIMER The opinions expressed in this presentation are my personal opinions ID: 798156

000 customers pry vet customers 000 vet pry water company 480 acquisition cost muni system opinions stp price purchase

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Presentation Transcript

Slide1

now that Fair Value Acquisitions Are Here…

Now what?

Danny Kermode CPAAssistant Director of Water & Transportation Washington Utilities and Transportation Commission

Slide2

2

DISCLAIMERThe opinions expressed in this presentation are my personal opinions,

they do not necessarily reflect the opinions of the Washington Utilities and Transportation Commission, its commissioner or other staff.

Slide3

3

Pry Vet Water Company

Municipal Water Company

Target

26,000 Customers

480,000 Customers

Slide4

4

Pry Vet Water Company

26,000 Customers

480,000 Customers

Muni System – Pry Vet Co.

Slide5

5

Pry Vet Water Company

Muni System – Pry Vet Co.

26,000 Customers

480,000 Customers

Issue – Should the cost of the excess purchase price be borne by

all

customers or just those that receive benefits of the purchase?

Discussion:

Using STP - Socialize

(All

customers pay)

Cost

Causers/Benefit

Recipient

Standard Approach

-

Single

Tariff Pricing

(STP) aka Uniform Rates

Slide6

6

Pry Vet Water Company

Muni System – Pry Vet Co.

26,000 Customers

480,000 Customers

Slide7

7

Pry Vet Water Company

Muni System – Pry Vet Co.

26,000 Customers

480,000 Customers

Use of STP – Uniform rates

Economies of Scale

Private

vs Public target

Gain for ratepayers

Slide8

Recovery

Period of Acquisition Adjustment

Regulatory [legislative] Asset,Allocation of purchase price to assets – Not Allowed under USoA,

FASB – GAAP follows regulatory treatment

ASC 980-350-35-1

Suggestion - Match life of Water/Waste water plant in general (40+ years).

Slide9

Cost of Capital

The acquisition adjustment has a different risk profile than normal utility-plant-in-service, which should result in a lower equity return.

Slide10

Slide11

The logical solution [to getting the acquisition price right is to] Limit

the acquisition premium

…to the cost savings promised by the consolidation. - Scott

Hempling

2019

Thank you