101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB1849

 

Introduced 2/15/2019, by Sen. Sue Rezin

 

SYNOPSIS AS INTRODUCED:
 
220 ILCS 5/9-210.5

    Amends the Public Utilities Act. Modifies a Section concerning valuation of water and sewer utilities. Provides that the term "large public utility" means an investor-owned public utility that, among other specifications, regularly provides water or sewer service to customer connections (rather than regularly provides water or sewer service to more than 30,000 customer connections). Provides that in an acquiring large public utility's 2 rate cases after an acquisition, the large public utility shall (rather than may) file a rate tariff for an acquired water or sewer utility that establishes an annual rate of 2.5% or less, which shall apply to all customers of the utility going forward, regardless of the rates previously established by the district or tariff group into which the water or sewer utility is to be combined. Provides that any water or sewer utility system which may be purchased shall, before the purchase of the water or sewer utility system, require a vote by referendum of the voters of any affected unit of local government approving the purchase. Provides that a unit of local government that has approved the purchase of a water or sewer utility system may apply to the Illinois Commerce Commission for a docketed proceeding to negotiate the purchase of a buyback of a water or sewer utility system after 3 years after the purchase. Effective immediately.


LRB101 09045 JRG 54138 b

 

 

A BILL FOR

 

SB1849LRB101 09045 JRG 54138 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Public Utilities Act is amended by changing
5Section 9-210.5 as follows:
 
6    (220 ILCS 5/9-210.5)
7    (Text of Section before amendment by P.A. 100-1151)
8    Sec. 9-210.5. (Repealed).
9(Source: P.A. 100-751, eff. 8-10-18. Repealed internally, eff.
106-1-18. P.A. 100-751 contained an extension of the internal
11repealer, but did not take effect until 8-10-18.)
 
12    (Text of Section after amendment by P.A. 100-1151)
13    (Section scheduled to be repealed on June 1, 2028)
14    Sec. 9-210.5. Valuation of water and sewer utilities.
15    (a) In this Section:
16        "Disinterested" means that the person directly
17    involved (1) is not a director, officer, or an employee of
18    the large public utility or the water or sewer utility or
19    its direct affiliates or subsidiaries for at least 12
20    months before becoming engaged under this Section; (2)
21    shall not derive a material financial benefit from the sale
22    of the water or sewer utility other than fees for services

 

 

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1    rendered, and (3) shall not have a member of the person's
2    immediate family, including a spouse, parents or spouse's
3    parents, children or spouses of children, or siblings and
4    their spouses or children, be a director, officer, or
5    employee of either the large public utility or water or
6    sewer utility or the water or sewer utility or its direct
7    affiliates or subsidiaries for at least 12 months before
8    becoming engaged under this Section or receive a material
9    financial benefit from the sale of the water or sewer
10    utility other than fees for services rendered.
11        "District" means a service area of a large public
12    utility whose customers are subject to the same rate
13    tariff.
14        "Large public utility" means an investor-owned public
15    utility that:
16            (1) is subject to regulation by the Illinois
17        Commerce Commission under this Act;
18            (2) regularly provides water or sewer service to
19        more than 30,000 customer connections;
20            (3) provides safe and adequate service; and
21            (4) is not a water or sewer utility as defined in
22        this subsection (a).
23        "Next rate case" means a large public utility's first
24    general rate case after the date the large public utility
25    acquires the water or sewer utility where the acquired
26    water or sewer utility's cost of service is considered as

 

 

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1    part of determining the large public utility's resulting
2    rates.
3        "Prior rate case" means a large public utility's
4    general rate case resulting in the rates in effect for the
5    large public utility at the time it acquires the water or
6    sewer utility.
7        "Utility service source" means the water or sewer
8    utility or large public utility from which the customer
9    receives its utility service type.
10        "Utility service type" means water utility service or
11    sewer utility service or water and sewer utility service.
12        "Water or sewer utility" means any of the following:
13            (1) a public utility that regularly provides water
14        or sewer service to 6,000 or fewer customer
15        connections;
16            (2) a water district, including, but not limited
17        to, a public water district, water service district, or
18        surface water protection district, or a sewer district
19        of any kind established as a special district under the
20        laws of this State that regularly provides water or
21        sewer service;
22            (3) a waterworks system or sewerage system
23        established under the Township Code that regularly
24        provides water or sewer service; or
25            (4) a water system or sewer system owned by a
26        municipality that regularly provides water or sewer

 

 

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1        service; and
2            (5) any other entity that is not a public utility
3        that regularly provides water or sewer service.
4    (b) Notwithstanding any other provision of this Act, a
5large public utility that acquires a water or sewer utility may
6request that the Commission use, and, if so requested, the
7Commission shall use, the procedures set forth under this
8Section to establish the ratemaking rate base of that water or
9sewer utility at the time when it is acquired by the large
10public utility.
11    (c) If a large public utility elects the procedures under
12this Section to establish the rate base of a water or sewer
13utility that it is acquiring, then 3 appraisals shall be
14performed. The average of these 3 appraisals shall represent
15the fair market value of the water or sewer utility that is
16being acquired. The appraisals shall be performed by 3
17appraisers approved by the Commission's Executive Director or
18designee and engaged by either the water or sewer utility being
19acquired or by the large public utility. Each appraiser shall
20be engaged on reasonable terms approved by the Commission. Each
21appraiser shall be a disinterested person licensed as a State
22certified general real estate appraiser under the Real Estate
23Appraiser Licensing Act of 2002.
24    Each appraiser shall:
25        (1) be sworn to determine the fair market value of the
26    water or sewer utility by establishing the amount for which

 

 

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1    the water or sewer utility would be sold in a voluntary
2    transaction between a willing buyer and willing seller
3    under no obligation to buy or sell;
4        (2) determine fair market value in compliance with the
5    Uniform Standards of Professional Appraisal Practice;
6        (3) engage one disinterested engineer who is licensed
7    in this State, and who may be the same engineer that is
8    engaged by the other appraisers, to prepare an assessment
9    of the tangible assets of the water or sewer utility, which
10    is to be incorporated into the appraisal under the cost
11    approach;
12        (4) request from the manager of the Accounting
13    Department, if the water or sewer utility is a public
14    utility that is regulated by the Commission, a list of
15    investments made by the water or sewer utility that had
16    been disallowed previously and that shall be excluded from
17    the calculation of the large public utility's rate base in
18    its next rate case; and
19        (5) return their appraisal, in writing, to the water or
20    sewer utility and large public utility in a reasonable and
21    timely manner.
22    If the appraiser cannot engage an engineer, as described in
23paragraph (3) of this subsection (c), within 30 days after the
24appraiser is engaged, then the Commission's Executive Director
25or designee shall recommend the engineer the appraiser should
26engage. The Commission's Executive Director or designee shall

 

 

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1provide his or her recommendation within 30 days after he or
2she is officially notified of the appraiser's failure to engage
3an engineer and the appraiser shall promptly work to engage the
4recommended engineer. If the appraiser is unable to negotiate
5reasonable engagement terms with the recommended engineer
6within 15 days after the recommendation by the Commission's
7Executive Director or designee, then the appraiser shall notify
8the Commission's Executive Director or designee and the process
9shall be repeated until an engineer is successfully engaged.
10    (d) The lesser of (i) the purchase price or (ii) the fair
11market value determined under subsection (c) of this Section
12shall constitute the rate base associated with the water or
13sewer utility as acquired by and incorporated into the rate
14base of the district designated by the acquiring large public
15utility under this Section, subject to any adjustments that the
16Commission deems necessary to ensure such rate base reflects
17prudent and useful investments in the provision of public
18utility service. The reasonable transaction and closing costs
19incurred by the large public utility shall be treated
20consistent with the applicable accounting standards under this
21Act. The total amount of all of the appraisers' fees to be
22included in the transaction and closing costs shall not exceed
23the greater of $15,000 or 5% of the appraised value of the
24water or sewer utility being acquired. This rate base treatment
25shall not be deemed to violate this Act, including, but not
26limited to, any Sections in Articles VIII and IX of this Act

 

 

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1that might be affected by this Section. Any acquisition of a
2water or sewer utility that affects the cumulative base rates
3of the large public utility's existing ratepayers in the tariff
4group into which the water or sewer utility is to be combined
5by less than (1) 2.5% at the time of the acquisition for any
6single acquisition completed under this Section or (2) 5% for
7all acquisitions completed under this Section before the
8Commission's final order in the next rate case shall not be
9deemed to violate Section 7-204 or any other provision of this
10Act.
11    In the Commission's order that approves the large public
12utility's acquisition of the water or sewer utility, the
13Commission shall issue its decision establishing (1) the
14ratemaking rate base of the water or sewer utility; (2) the
15district or tariff group with which the water or sewer utility
16shall be combined for ratemaking purposes, if such combination
17has been proposed by the large public utility; and (3) the
18rates to be charged to customers in the water or sewer utility.
19    (e) If the water or sewer utility being acquired is owned
20by the State or any political subdivision thereof, then the
21water or sewer utility must inform the public of the terms of
22its acquisition by the large public utility by (1) holding a
23public meeting prior to the acquisition and (2) causing to be
24published, in a newspaper of general circulation in the area
25that the water or sewer utility operates, a notice setting
26forth the terms of its acquisition by the large public utility

 

 

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1and options that shall be available to assist customers to pay
2their bills after the acquisition.
3    (f) The large public utility may recommend the district or
4tariff group of which the water or sewer utility shall, for
5ratemaking purposes, become a part after the acquisition, or
6may recommend a lesser rate for the water or sewer utility. If
7the large public utility recommends a lesser rate, it shall
8submit to the Commission its proposed rate schedule and the
9proposed final tariff group for the acquired water or sewer
10utility. The Commission's approved district or tariff group or
11rates shall be consistent with the large public utility's
12recommendation, unless such recommendation can be shown to be
13contrary to the public interest.
14    (g) From the date of acquisition until the date that new
15rates are effective in the acquiring large public utility's
16next rate case, the customers of the acquired water or sewer
17utility shall pay the approved then-existing rates of the
18district or tariff group as ordered by the Commission, or some
19lesser rates as recommended by the large public utility and
20approved by the Commission under subsection (f); provided,
21that, if the application of such rates of the large public
22utility to customers of the acquired water or sewer utility
23using 54,000 gallons annually results in an increase to the
24total annual bill of customers of the acquired water or sewer
25utility, exclusive of fire service or related charges, then the
26large public utility's rates charged to the customers of the

 

 

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1acquired water or sewer utility shall be uniformly reduced, if
2any reduction is required, by the percent that results in the
3total annual bill, exclusive of fire services or related
4charges, for the customers of the acquired water or sewer
5utility using 54,000 gallons being equal to 1.5% of the latest
6median household income as reported by the United States Census
7Bureau for the most applicable community or county. For each
8customer of the water or sewer utility with potable water usage
9values that cannot be reasonably obtained, a value of 4,500
10gallons per month shall be assigned. These rates shall not be
11deemed to violate this Act including, but not limited to,
12Section 9-101 and any other applicable Sections in Articles
13VIII and IX of this Act. The Commission shall issue its
14decision establishing the rates effective for the water or
15sewer utility immediately following an acquisition in its order
16approving the acquisition.
17    (h) In the acquiring large public utility's next rate case,
18the water or sewer utility and the district or tariff group
19ordered by the Commission and their costs of service may be
20combined under the same rate tariff. This rate tariff shall be
21based on allocation of costs of service of the acquired water
22or sewer utility and the large public utility's district or
23tariff group ordered by the Commission and utilizing a rate
24design that does not distinguish among customers on the basis
25of utility service source or type. This rate tariff shall not
26be deemed to violate this Act including, but not limited to,

 

 

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1Section 9-101 of this Act. In the acquiring large public
2utility's 2 rate cases after an acquisition, but in no
3subsequent rate case, the large public utility shall may file a
4rate tariff for a water or sewer utility acquired under this
5Section that establishes an annual rate of 2.5% or less, which
6shall apply to all customers of the utility going forward,
7regardless of the rates previously established by lesser rates
8than the district or tariff group into which the water or sewer
9utility is to be combined. Those lesser rates shall not be
10deemed to violate Section 7-204 or any other provision of this
11Act if they affect the cumulative base rates of the large
12public utility's existing rate payers in the district or tariff
13by less than 2.5%.
14    (i) Any post-acquisition improvements made by the large
15public utility in the water or sewer utility shall accrue a
16cost for financing set at the large public utility's determined
17rate for allowance for funds used during construction,
18inclusive of the debt, equity, and income tax gross up
19components, after the date on which the expenditure was
20incurred by the large public utility until the investment has
21been in service for a 4-year period or, if sooner, until the
22time the rates are implemented in the large public utility's
23next rate case.
24    Any post-acquisition improvements made by the large public
25utility in the water or sewer utility shall not be depreciated
26for ratemaking purposes from the date on which the expenditure

 

 

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1was incurred by the large public utility until the investment
2has been in service for a 4-year period or, if sooner, until
3the time the rates are implemented in the large public
4utility's next rate case.
5    (j) This Section shall be exclusively applied to large
6public utilities in the voluntary and mutually agreeable
7acquisition of water or sewer utilities. Any petitions filed
8with the Commission related to the acquisitions described in
9this Section, including petitions seeking approvals or
10certificates required by this Act, shall be deemed approved
11unless the Commission issues its final order within 11 months
12after the date the large public utility filed its initial
13petition. This Section shall only apply to utilities providing
14water or sewer service and shall not be construed in any manner
15to apply to electric corporations, natural gas corporations, or
16any other utility subject to this Act.
17    (k) Nothing in this Section shall prohibit a party from
18declining to proceed with an acquisition or be deemed as
19establishing the final purchase price of an acquisition.
20    (l) In the Commission's order that approves the large
21utility's acquisition of the water or sewer utility, the
22Commission shall address each aspect of the acquisition
23transaction for which approval is required under the Act.
24    (m) Any contractor or subcontractor that performs work on a
25water or sewer utility acquired by a large public utility under
26this Section shall be a responsible bidder as described in

 

 

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1Section 30-22 of the Illinois Procurement Code. The contractor
2or subcontractor shall submit evidence of meeting the
3requirements to be a responsible bidder as described in Section
430-22 to the water or sewer utility. Any new water or sewer
5facility built as a result of the acquisition shall require the
6contractor to enter into a project labor agreement. The large
7public utility acquiring the water or sewer utility shall offer
8employee positions to qualified employees of the acquired water
9or sewer utility.
10    (m-5) Any water or sewer utility system which may be
11purchased shall, before the purchase of the water or sewer
12utility system, require a vote by referendum of the voters of
13any affected unit of local government approving the purchase. A
14unit of local government that has approved the purchase of a
15water or sewer utility system may apply to the Illinois
16Commerce Commission for a docketed proceeding to negotiate the
17purchase of a buyback of a water or sewer utility system after
183 years after the purchase.
19    (n) This Section is repealed on June 1, 2028.
20(Source: P.A. 100-751, eff. 8-10-18; 100-1151, eff. 6-1-19.)
 
21    Section 95. No acceleration or delay. Where this Act makes
22changes in a statute that is represented in this Act by text
23that is not yet or no longer in effect (for example, a Section
24represented by multiple versions), the use of that text does
25not accelerate or delay the taking effect of (i) the changes

 

 

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1made by this Act or (ii) provisions derived from any other
2Public Act.
 
3    Section 99. Effective date. This Act takes effect upon
4becoming law.