W. Va. Code R. § 110-1M-4

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 110-1M-4 - Valuation of Operating Public Utility Property (excluding interstate commercial motor vehicle property)

4.1. Unit method. -- The Tax Commissioner provides tentative assessments based on fair market value of operating property of public service corporations to be used as a guide by the Board of Public Works in establishing final assessed values for property tax purposes. In this regard the Tax Commissioner shall use the "Unit Rule" where applicable in furnishing tentative valuation estimates for the Board's consideration.

4.2. Generally accepted appraisal methods. -- In determining tentative assessments the Tax Commissioner shall consider, and use where applicable, three (3) generally accepted approaches to value:

(A) cost,

(B) income, and

(C) market data. Application of these approaches shall recognize the impact of regulation on the value of utility operating property where applicable.

4.2.1. Cost approach. B Recognizing that public service corporations are predominantly cost regulated, when the cost approach is used in the valuation process, original cost less applicable depreciation shall be employed. In applying the cost approach, the Tax Commissioner shall consider three (3) types of depreciation (a) physical deterioration, (b) functional obsolescence, and (c) economic obsolescence.

4.2.2. Income approach. -- In developing income approach valuations, the Tax Commissioner shall estimate capitalization rates considering the interrelationships of the income to be capitalized and the capitalization rate. In this regard, net operating income after taxes, but before interest on long-term debt shall be given primary consideration as the point on the income stream to be capitalized. The bands of investment technique shall be employed in estimating appropriate capitalization rates.

4.2.3. Market data approach. -- Recognizing that a sufficient number of sales of public service corporations do not occur to enable application of the market data technique, the Tax Commissioner shall consider the substitute stock and debt technique. The stock and debt technique shall be used in instances where a utility class possesses actively traded stocks and bonds that enable reasonable valuation estimates to be made.

4.2.4. Correlations. -- Once generated, the various estimates of value shall be correlated into a final value estimate. The income approach value shall generally be given primary consideration in the correlation process.

4.3. Classification of public utility and certain common carrier operating properties.

4.3.1. Electric utilities. -- Operating property for electric utilities shall primarily include properties that are considered by the Federal Energy Regulatory Commission (FERC) as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, the most recent FERC Uniform System of Accounts prescribed for Electric Utilities shall be used.

4.3.2. Gas utilities. -- Operating property for natural gas utilities shall primarily include properties that are considered by the Federal Energy Regulatory Commission (FERC) as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, the most recent FERC Uniform System of Accounts prescribed for Natural Gas Utilities shall be used.

4.3.3. Gas pipeline utilities. -- Operating property for natural gas utilities shall primarily include properties that are considered by the Federal Energy Regulatory Commission (FERC) as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, the most recent FERC Uniform System of Accounts prescribed for Gas Pipeline Utilities shall be used.

4.3.4. Telephone companies. -- Operating property for telephone carriers shall primarily include properties that are considered by the Federal Communications Commission (FCC) as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, the most recent FCC Uniform System of Accounts prescribed for Telephone Utilities shall be used.

4.3.5. Telegraph carriers. -- Operating property for telegraph carriers shall primarily include properties that are considered by the Federal Communications Commission (FCC) as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, the most recent FCC Uniform System of Accounts prescribed for Wire-Telegraph and Ocean-Cable Carriers shall be used.

4.3.6. Airline companies. -- Operating property for air carriers shall primarily include properties that are considered as operating property by the Department of Transportation. In determining which properties are properly included as operating property, the most recent Uniform System of Accounts and Reports for Certified Air Carriers shall be used.

4.3.7. Interstate railroads. -- Operating property for interstate railroads shall primarily include properties that are considered as operating property by the Surface Transportation Board. In determining which properties are properly included as operating property, the most recent Uniform System of Accounts for Railroad Companies shall be used.

4.3.8. Intrastate railroads. -- Operating property for intrastate railroads shall primarily include properties that are considered by the West Virginia Public Service Commission as operating property. In determining which properties are properly included as operating property, the most recent Uniform System of Accounts for Railroad Companies as prescribed by the Surface Transportation Board shall be used.

4.3.9. Water utilities. -- Operating property for water utilities shall primarily include properties that are considered by the Public Service Commission as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, water utilities shall use the most recent Uniform System of Accounts of the National Association of Regulatory Utility Commissioners for Class A and B, and Class C and D water utilities.

4.3.10. Sewer utilities. -- Operating property for sewer utilities shall primarily include properties that are considered by the Public Service Commission as part of the rate base for rate making purposes. In determining which properties are properly included as operating public utility property, sewer utilities shall use the most recent Uniform System of Accounts of the National Association of Regulatory Utility Commissioners for Class A and B, and Class C and D sewer utilities.

4.3.11. Carline companies. -- Operating property for carline companies shall include consideration of Rolling Stock used in transportation of freight or passengers.

4.3.12. Underground gas storage companies. B For public service corporations with underground gas storage and no other West Virginia property, operating property shall consist of only the gas stored underground.

4.3.13. Reorganization of regulatory bodies. -- In the event that there should be a reorganization of federal or state regulatory bodies, and any of the public service corporations described herein would be required to report to an agency other than that listed in the applicable subdivision or in the event that there should be any other utilities considered taxable by the Board of Public Works, operating property for the public service corporations shall include properties that would be considered as operating by the appropriate state or federal regulatory body in the prescribed Uniform System of Accounts.

4.3.14. Exceptions. -- Circumstances may arise where properties may be considered operating by the appropriate regulatory body but a portion of the property may be devoted to non-utility use. The Tax Commissioner may in these instances where deemed appropriate classify a portion of the property as non-operating and require that the non-operating portion so determined be assessed by the county assessor. In these instances adjustment to the public utility appraisal will be made to remove from the West Virginia unit values a proportionate value for such non-operating property.

W. Va. Code R. § 110-1M-4