Section 10.9B Valuation

• Jurisdiction: Arizona

Valuation of an operating utility is a complex matter, distinct from other valuation issues in eminent domain because the compensation must include the value of the on-going business along with the plant and property of the utility being condemned. Adequate market data is typically lacking in utility cases, hence, alternate valuation theories are used, such as original cost less depreciation, reproduction-cost-new-less-depreciation, and the capitalization-of-income. Combining these different approaches to value can be confusing and could result in an improper double counting of certain valuation elements. For an excellent discussion of the different valuation theories and how they relate to determining the fair market value of a utility, see South Bay Irrigation Dist. v. California-American Water Co., 61 Cal. App. 3d 944, 133 Cal. Rptr. 166 (Cal. Ct. App. 1976), cert.dismissed, 434 U.S. 801, 98 S. Ct. 28, 54 L. Ed. 2d 59 (1977).

In the condemnation of a utility, just compensation must address the value of the plant and property, and the value of...