In an order issued by the WV PSC Tomlinson Public Service District was given approval to acquire Newell Company. The order in its entirety follows
PUBLIC SERVICE COMMISSION
OF WEST VIRGINIA
CHARLESTON
At a session of the PUBLIC SERVICE COMMISSION OF WEST VIRGINIA in the City of Charleston on the 25th day of July 2024.
TOMLINSON PUBLIC SERVICE DISTRICT and
THE NEWELL COMPANY
Joint petition for consent and approval of
an asset purchase agreement
COMMISSION ORDER
The Commission grants its consent and approval for Tomlinson Public Service District (Tomlinson) to purchase The Newell Company’s (Newell) (Collectively Applicants) water utility assets pursuant to the November 14, 2023 Asset Purchase Agreement (Agreement).
BACKGROUND
On November 27, 2023, the Applicants filed a Joint Petition for the Commission’s consent and approval for Tomlinson to acquire Newell’s water utility assets pursuant to the Agreement.[1]
On February 26, 2024, Staff filed a Final Joint Staff Memorandum and recommended that the Commission grant its consent and approval of the Agreement between Newell and Tomlinson and the Water User Agreement (Water Agreement) with Fiesta Tableware Company (Fiesta), without approving the specific terms and conditions of the transaction, along with the recommendations of Financial Staff. Staff provided recommended accounting treatment for the transaction.[2]
Newell and Tomlinson filed responses in agreement with Staff’s final recommendation on March 5, 2024, and March 6, 2024, respectively.
On April 10, 2024, the Commission denied the Applicants’ request to waive notice and hearing requirements and directed the Applicants to publish a notice to give customers notice of the filing of the Joint Petition and potential rate impacts of the Agreement between Tomlinson and Newell. The Commission advised that it may conduct public comment and/or evidentiary hearings if it received substantial protests and/or petitions to intervene. The Commission gave a thirty-day deadline for protests and petitions to intervene after the date of publication.
On April 12, 2024, the Commission issued an Order directing the Applicants to publish a revised notice of filing. The revised notice stated that Fiesta would pay Tomlinson a rate that has yet to be established for non-potable water for production purposes.
On April 30, 2024, the Applicants filed an Affidavit of Publication evidencing publication of the Notice of Filing and Proposed Change in Rates as a Class I legal advertisement in the Weirton Daily Times on April 25, 2024.
As of the date of this Order, the Commission has not received any protests, comments, or petitions to intervene in this matter.
DISCUSSION
Staff Financial Recommendations
In its February 23, 2023 Order in Case No. 20-1033-WS-DU, the Commission determined a purchase price of $1,638,921 for Newell’s water utility assets. Pursuant to the Agreement, Tomlinson agreed to pay Newell $1,638,921 upon closing on the transaction.[3] With respect to the accounting treatment for the transaction, Staff recommended as follows:
the Newell Company be required to account for the proceeds of $1,638,921 between land and depreciable property with $1,638,594 allocated for land and $327 for depreciable property. As a result, there would be a debit to Cash of $1,638,921, a debit to Accumulated Depreciation of $1,120,649 ($2,759,243 net book value-$1,638,594), a debit to Gains (Losses) on Disposition of Property of $189 ($516 book value-$327), a credit to Plant-In Service of $2,759,759. Related to the accounting treatment for Tomlinson Public Service District, the Utilities Division recommends that Tomlinson Public Service District be required to account for the difference of net book value and the acquisition price be credited to Utility Plant Acquisition Adjustments. As a result, there would be a debit to Plant in Service of $2,759,759 (book value), a credit to Accumulated Depreciation of $1,959,362, a credit to Cash of $1,638,921, and a credit to Utility Plant Acquisition Adjustments of $838,524 (acquisition price plus accumulated depreciation less book value).[4]
The Commission will require Newell and Tomlinson to follow Staff’s recommended accounting directives.
Water User Agreement
In the Agreement, the Applicants included a Water User Agreement (Water Agreement) to address Fiesta’s purchase of non-potable water for production purposes. The Water Agreement states that Fiesta may require 8,333,333.33 gallons of water per month and 100,000,000 gallons of water per year. According to the Water Agreement, Fiesta agrees to pay for raw water at a “rate per thousand gallons of water delivered . . . as determined by the [Commission], which rate may be changed from time to time.” Fiesta also agreed to pay for all potable water based on Tomlinson’s current tariff. The Water Agreement will be effective upon the first month Tomlinson sells water to Fiesta and will continue as long as Fiesta is operational.
The Commission will direct the Applicants to file a revised Water Agreement that contains the rate that Fiesta agrees to pay Tomlinson for non-potable water.
Commission Decision
W. Va. Code § 24-2-12 requires Tomlinson to obtain Commission consent and approval before acquiring the property of any other utility, and Newell is required to obtain Commission consent and approval before transferring or selling its utility assets. Under the statute, the Commission is authorized to consent to a proposed transaction, without approving its terms and conditions, if the transaction is reasonable, neither party is given undue advantage, and it does not adversely affect the public in this State. The Commission is further authorized to determine if a hearing is necessary.
The Commission finds that the terms and conditions of the Agreement for Tomlinson to acquire Newell’s water utility assets are reasonable, do not adversely affect the public, and neither party was given an undue advantage over the other. The Commission will grant Tomlinson’s request to acquire Newell’s water utility assets.
FINDINGS OF FACT
1. The Applicants requested the Commission’s prior consent and approval for Tomlinson to acquire Newell’s water utility assets pursuant to the Agreement dated November 14, 2023.[5]
2. The Applicants filed an Affidavit of Publication evidencing the publication of the Notice of Filing and Proposed Change in Rates.[6]
3. The Commission did not receive any protests, comments, or petitions to intervene in this matter.
CONCLUSIONS OF LAW
1. The Commission should approve the Agreement without approving the underlying terms and conditions thereof, and grant its consent and approval for Tomlinson to purchase Newell’s water utility assets because the terms and conditions of the Agreement are reasonable and do not adversely affect the public in this State, and no party to those arrangements is given an undue advantage over the other.[7]
2. Newell should follow Staff’s recommendations to account for the $1,638,921 in proceeds from the sale of its water utility assets to Tomlinson Public Service District and Tomlinson should follow Staff’s recommendations to account for the difference of net book value and the acquisition price.[8]
3. The Applicants should file a revised Water Agreement that contains the rate that Fiesta agrees to pay Tomlinson for non-potable water.
ORDER
IT IS THEREFORE ORDERED that pursuant to W. Va. Code § 24-2-12, without approving the underlying terms and conditions, the Commission grants its prior consent and approval for Tomlinson Public Service District to purchase the Newell Company’s water utility assets.
IT IS FURTHER ORDERED that the Newell Company shall account for the $1,638,921 in proceeds from the sale of its water utility assets to Tomlinson Public Service District as recommended by Staff.
IT IS FURTHER ORDERED that Tomlinson Public Service District shall account for the difference of net book value and the acquisition price as recommended by Staff.
IT IS FURTHER ORDERED that Tomlinson Public Service District and the Newell Company shall file a revised Water User Agreement that contains the rate that Fiesta will pay to Tomlinson Public Service District for non-potable water as a closed entry filing.
IT IS FURTHER ORDERED that Tomlinson Public Service District file revised tariff sheets within ten days after closing to reflect the closing of the transaction.
IT IS FURTHER ORDERED that upon entry of this Order this case shall be removed from the Commission’s docket of open cases.
IT IS FURTHER ORDERED that the Executive Secretary of the Commission serve a copy of this Order by electronic service on all parties of record who have filed an e-service agreement, and by United States First Class Mail on all parties of record who have not filed an e-service agreement, and on Commission Staff by hand delivery.
A True Copy, Teste,
Karen Buckley, Executive Secretary
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[1] By Order issued May 23, 2022, in Case No. 20-1033-WS-DU the Commission found that Newell is a failing utility and concluded that Tomlinson and Hancock Public Service District (Hancock PSD) were capable proximate utilities. The Commission ordered Tomlinson and Hancock PSD to file petitions for Commission consent and approval for the acquisition of Newell’s water and wastewater systems, respectively, pursuant to W. Va. Code § 24-2-12.
[2] Final Joint Staff Memorandum at p. 2.
[3] Agreement at Bates 5.
[4] Final Joint Staff Memorandum at p. 2.
[5] See Agreement.
[6] See April 30, 2024 Affidavit of Publication.
[7] W. Va. Code § 24-2-12.
[8] Final Joint Staff Memorandum at p. 2.
