||The appraisal of utilities (telecommunication,
electric, water, pipelines, railroads) is a complex and challenging task, often
requiring the appraiser to consider all the basic approaches to value (Cost,
Market, and Income) and then correlate the indicated values by each approach to
derive the most appropriate and defendable opinion of fair market value.
Utility valuations are usually performed for the subject company as a whole (a
"unit approach"), and then total value is allocated to specific assets and
locations. Of all the categories of property we appraise, utility
appraisals are typically the largest in terms of market value because the scope
of a utility company’s operations can encompass a large geographic area and
customer base, even across state lines.
Most utility companies are regulated in some fashion by either state or federal
agencies, and most of them are investor-owned. These two aspects give the
utility appraiser a good place to start with data research. Regulating
agencies and investors alike require the utility companies to provide annual
reports of all operations, and therefore the appraiser can obtain financial
details that are useful in determining the utility’s anticipated profitability
and thus market value as of the lien date each tax year.
Each utility company is unique in that it serves an area or customer base that
often has little or practically no competition. P&A utility appraisers must
then apply fee-appraisal techniques where additional details specific to each
utility company are analyzed and judged in relation to other utility companies
serving different areas. Therefore, experience in appraising many
different kinds of utilities with diverse market considerations becomes a
valuable commodity when multi-billion dollar valuations, and hundreds of
millions of tax dollars, are at stake.
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