66-1,209. Retail natural gas supplier; termination of service rights; compensation for termination of service rights.
66-1,209
66-1,209. Retail natural gas supplier; terminationof service rights; compensation for termination of service rights.(a) When the service rights of a retail natural gas supplierare terminated by a city during the period in which a valid franchise is ineffect and the service rights are assumed by the terminating city, or an entityacting on behalf of or as an agent for the city, the governing body of thecity shall acquire from the terminated supplier the parts of the local naturalgas distribution system necessary to serve all customers within the previouslyfranchised area and the terminated supplier shall sell the system to thegoverning body of such city for which it shall be fairly compensated. Suchcompensation shall be an amount mutually agreed upon by the affected parties oran amount determined by the following formula:
(1) The depreciated replacement cost for the gas utility facilities in theterritory in which the service rights have been terminated. As used in thisparagraph, "depreciated replacement cost" means the original installed cost ofthe facilities, adjusted to present value by utilizing a nationally recognizedindex of utility construction costs, less accumulated depreciation based on thebook depreciation rates of the selling utility, as filed with and approved bythe state corporation commission, which are in effect at the time ofacquisition;
(2) the depreciated replacement costs of the remaining proportion of any takeor pay contracts or participation agreements;
(3) the depreciated replacement cost for the gas utility facilities outsidethe affected territory used in providing service to the formerly franchisedarea. Such facilities shall include all compression, regulating or transmissionfacilities throughout the terminated utility's integrated system, the value ofwhich shall be determined by the depreciated replacement cost formula inparagraph (1) multiplied by the percentage of the terminated utility's totalretail sales to customers in the affected area during the 12 months nextpreceding the effective date of the sale;
(4) all reasonable and prudent costs of detaching the gas system facilitiesto be sold, including the reasonable costs of studies and inventories made todetermine the facility's value and all reasonable and prudent costs ofreintegrating the remaining gas system facilities of the retail gas supplierwhose service rights are terminated;
(5) an amount equal to the net revenues received during the 12 months nextpreceding the date of termination of the service rights from the customerswithin the affected area of the retail gas supplier whose service rights areterminated. As used in this paragraph, "net revenues" means the totalrevenues received by the terminated utility for gas service within the affectedarea less franchise and sales taxes collected and the cost of gas recovered intherevenues. This numbershall be multiplied by the number of years remaining in any franchisecontract; and
(6) an amount equal to the state and federal tax liability created by thetaxable income pursuant to the provisions of this paragraph and paragraphs (1),(2), (3), (4) and (5) by the retail gas supplier whose service rights areterminated, calculated, without regard to any tax deductions or benefits notrelated to the sale of assets covered herein.
(b) If the parties are unable to agree upon the amount of compensation to bepaid pursuant to this act after 60 days following the date of termination ofservice rights, either party may apply to the district court havingjurisdiction where any portion of the facilities are located for determinationofcompensation. Such determination shall be made by the court sitting without ajury.
History: L. 2002, ch. 31, § 1; July 1.