Net book value is what a utility paid for its capital assets, less the depreciation recorded against them since. It appears on the statement of net position in the audited financial statements, and it is usually the first number anyone reaches for when asked what a system is worth.
Why it is the wrong number for a valuation
Depreciation schedules are an accounting convention, not a measurement of remaining service life. A cast iron main installed in 1955 on a fifty-year schedule is fully depreciated and carries a book value of zero. It is also still delivering water and would cost several hundred dollars a foot to replace.
The consequence is systematic and one-directional: the older the system, the further net book value sits below what the assets are worth or what replacing them would cost. A city that treats book value as a floor in a sale negotiation is negotiating against its own accounting policy.
What it is good for
It is the right number for the balance sheet, for computing depreciation expense, and as one input among several in a valuation. It is also a useful diagnostic: a net book value that is a small fraction of original cost tells you the system is largely depreciated, which is a statement about its age and about the renewal programme it is going to need.
Sources
Governmental Accounting Standards Board, Statement No. 34, on capital asset reporting and depreciation in proprietary funds. American Water Works Association, Manual M1, 7th ed. (2017), on valuation approaches and the limits of book value.