7. Sale to Public Water Provider

When grant-funded plant is sold to a municipal water provider, or other public entity providing water service to the public, the public interest integrity of the grant is preserved. A municipal provider would deploy the grant plant to provide water service to the public and there is not a concern with profit being realized by a private entity or its shareholders. While the Commission has no jurisdiction over how the public entity records the purchase or charges rates, the rules governing the transaction from the seller's position would still apply.

In some cases, it may be difficult or impossible to perform a valuation of the "fair market value" of a district or total utility without the grant-funded plant. If there is no way to perform the valuation any other way, the grant-funded plant must be deducted from the "fair market value" of the total utility that has been determined by the valuation. Since the value of the grant-funded plant in the valuation has most likely been inflated, the selling utility should inflate the depreciated book value of the grant-funded plant using the Handy Whitman index. This inflated value of grant-funded plant should be deducted from the "fair market value" of the utility. This "Adjusted Fair Market Value" would then be used to determine the reasonable purchase price of the utility.