102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
SB0515

 

Introduced 2/23/2021, by Sen. Michael E. Hastings

 

SYNOPSIS AS INTRODUCED:
 
220 ILCS 5/9-210.5

    Amends the Public Utilities Act. In provisions concerning valuation of water and sewer utilities, provides that to be included within the definition of "large public utility" an investor-owned public utility must regularly provide water or sewer service to more than 15,000 customer connections (rather than 30,000 customer connections).


LRB102 11137 SPS 16469 b

 

 

A BILL FOR

 

SB0515LRB102 11137 SPS 16469 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7    (Section scheduled to be repealed on June 1, 2028)
8    Sec. 9-210.5. Valuation of water and sewer utilities.
9    (a) In this Section:
10        "Disinterested" means that the person directly
11    involved (1) is not a director, officer, or an employee of
12    the large public utility or the water or sewer utility or
13    its direct affiliates or subsidiaries for at least 12
14    months before becoming engaged under this Section; (2)
15    shall not derive a material financial benefit from the
16    sale of the water or sewer utility other than fees for
17    services rendered, and (3) shall not have a member of the
18    person's immediate family, including a spouse, parents or
19    spouse's parents, children or spouses of children, or
20    siblings and their spouses or children, be a director,
21    officer, or employee of either the large public utility or
22    water or sewer utility or the water or sewer utility or its
23    direct affiliates or subsidiaries for at least 12 months

 

 

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1    before becoming engaged under this Section or receive a
2    material financial benefit from the sale of the water or
3    sewer utility other than fees for services rendered.
4        "District" means a service area of a large public
5    utility whose customers are subject to the same rate
6    tariff.
7        "Large public utility" means an investor-owned public
8    utility that:
9            (1) is subject to regulation by the Illinois
10        Commerce Commission under this Act;
11            (2) regularly provides water or sewer service to
12        more than 15,000 30,000 customer connections;
13            (3) provides safe and adequate service; and
14            (4) is not a water or sewer utility as defined in
15        this subsection (a).
16        "Next rate case" means a large public utility's first
17    general rate case after the date the large public utility
18    acquires the water or sewer utility where the acquired
19    water or sewer utility's cost of service is considered as
20    part of determining the large public utility's resulting
21    rates.
22        "Prior rate case" means a large public utility's
23    general rate case resulting in the rates in effect for the
24    large public utility at the time it acquires the water or
25    sewer utility.
26        "Utility service source" means the water or sewer

 

 

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1    utility or large public utility from which the customer
2    receives its utility service type.
3        "Utility service type" means water utility service or
4    sewer utility service or water and sewer utility service.
5        "Water or sewer utility" means any of the following:
6            (1) a public utility that regularly provides water
7        or sewer service to 6,000 or fewer customer
8        connections;
9            (2) a water district, including, but not limited
10        to, a public water district, water service district,
11        or surface water protection district, or a sewer
12        district of any kind established as a special district
13        under the laws of this State that regularly provides
14        water or sewer service;
15            (3) a waterworks system or sewerage system
16        established under the Township Code that regularly
17        provides water or sewer service; or
18            (4) a water system or sewer system owned by a
19        municipality that regularly provides water or sewer
20        service; and
21            (5) any other entity that is not a public utility
22        that regularly provides water or sewer service.
23    (b) Notwithstanding any other provision of this Act, a
24large public utility that acquires a water or sewer utility
25may request that the Commission use, and, if so requested, the
26Commission shall use, the procedures set forth under this

 

 

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1Section to establish the ratemaking rate base of that water or
2sewer utility at the time when it is acquired by the large
3public utility.
4    (c) If a large public utility elects the procedures under
5this Section to establish the rate base of a water or sewer
6utility that it is acquiring, then 3 appraisals shall be
7performed. The average of these 3 appraisals shall represent
8the fair market value of the water or sewer utility that is
9being acquired. The appraisals shall be performed by 3
10appraisers approved by the Commission's Executive Director or
11designee and engaged by either the water or sewer utility
12being acquired or by the large public utility. Each appraiser
13shall be engaged on reasonable terms approved by the
14Commission. Each appraiser shall be a disinterested person
15licensed as a State certified general real estate appraiser
16under the Real Estate Appraiser Licensing Act of 2002.
17    Each appraiser shall:
18        (1) be sworn to determine the fair market value of the
19    water or sewer utility by establishing the amount for
20    which the water or sewer utility would be sold in a
21    voluntary transaction between a willing buyer and willing
22    seller under no obligation to buy or sell;
23        (2) determine fair market value in compliance with the
24    Uniform Standards of Professional Appraisal Practice;
25        (3) engage one disinterested engineer who is licensed
26    in this State, and who may be the same engineer that is

 

 

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1    engaged by the other appraisers, to prepare an assessment
2    of the tangible assets of the water or sewer utility,
3    which is to be incorporated into the appraisal under the
4    cost approach;
5        (4) request from the manager of the Accounting
6    Department, if the water or sewer utility is a public
7    utility that is regulated by the Commission, a list of
8    investments made by the water or sewer utility that had
9    been disallowed previously and that shall be excluded from
10    the calculation of the large public utility's rate base in
11    its next rate case; and
12        (5) return their appraisal, in writing, to the water
13    or sewer utility and large public utility in a reasonable
14    and timely manner.
15    If the appraiser cannot engage an engineer, as described
16in paragraph (3) of this subsection (c), within 30 days after
17the appraiser is engaged, then the Commission's Executive
18Director or designee shall recommend the engineer the
19appraiser should engage. The Commission's Executive Director
20or designee shall provide his or her recommendation within 30
21days after he or she is officially notified of the appraiser's
22failure to engage an engineer and the appraiser shall promptly
23work to engage the recommended engineer. If the appraiser is
24unable to negotiate reasonable engagement terms with the
25recommended engineer within 15 days after the recommendation
26by the Commission's Executive Director or designee, then the

 

 

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1appraiser shall notify the Commission's Executive Director or
2designee and the process shall be repeated until an engineer
3is successfully engaged.
4    (d) The lesser of (i) the purchase price or (ii) the fair
5market value determined under subsection (c) of this Section
6shall constitute the rate base associated with the water or
7sewer utility as acquired by and incorporated into the rate
8base of the district designated by the acquiring large public
9utility under this Section, subject to any adjustments that
10the Commission deems necessary to ensure such rate base
11reflects prudent and useful investments in the provision of
12public utility service. The reasonable transaction and closing
13costs incurred by the large public utility shall be treated
14consistent with the applicable accounting standards under this
15Act. The total amount of all of the appraisers' fees to be
16included in the transaction and closing costs shall not exceed
17the greater of $15,000 or 5% of the appraised value of the
18water or sewer utility being acquired. This rate base
19treatment shall not be deemed to violate this Act, including,
20but not limited to, any Sections in Articles VIII and IX of
21this Act that might be affected by this Section. Any
22acquisition of a water or sewer utility that affects the
23cumulative base rates of the large public utility's existing
24ratepayers in the tariff group into which the water or sewer
25utility is to be combined by less than (1) 2.5% at the time of
26the acquisition for any single acquisition completed under

 

 

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

 

 

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1the large public utility recommends a lesser rate, it shall
2submit to the Commission its proposed rate schedule and the
3proposed final tariff group for the acquired water or sewer
4utility. The Commission's approved district or tariff group or
5rates shall be consistent with the large public utility's
6recommendation, unless such recommendation can be shown to be
7contrary to the public interest.
8    (g) From the date of acquisition until the date that new
9rates are effective in the acquiring large public utility's
10next rate case, the customers of the acquired water or sewer
11utility shall pay the approved then-existing rates of the
12district or tariff group as ordered by the Commission, or some
13lesser rates as recommended by the large public utility and
14approved by the Commission under subsection (f); provided,
15that, if the application of such rates of the large public
16utility to customers of the acquired water or sewer utility
17using 54,000 gallons annually results in an increase to the
18total annual bill of customers of the acquired water or sewer
19utility, exclusive of fire service or related charges, then
20the large public utility's rates charged to the customers of
21the acquired water or sewer utility shall be uniformly
22reduced, if any reduction is required, by the percent that
23results in the total annual bill, exclusive of fire services
24or related charges, for the customers of the acquired water or
25sewer utility using 54,000 gallons being equal to 1.5% of the
26latest median household income as reported by the United

 

 

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1States Census Bureau for the most applicable community or
2county. For each customer of the water or sewer utility with
3potable water usage values that cannot be reasonably obtained,
4a value of 4,500 gallons per month shall be assigned. These
5rates shall not be deemed to violate this Act including, but
6not limited to, Section 9-101 and any other applicable
7Sections in Articles VIII and IX of this Act. The Commission
8shall issue its decision establishing the rates effective for
9the water or sewer utility immediately following an
10acquisition in its order approving the acquisition.
11    (h) In the acquiring large public utility's next rate
12case, the water or sewer utility and the district or tariff
13group ordered by the Commission and their costs of service may
14be combined under the same rate tariff. This rate tariff shall
15be based on allocation of costs of service of the acquired
16water or sewer utility and the large public utility's district
17or tariff group ordered by the Commission and utilizing a rate
18design that does not distinguish among customers on the basis
19of utility service source or type. This rate tariff shall not
20be deemed to violate this Act including, but not limited to,
21Section 9-101 of this Act. In the acquiring large public
22utility's 2 rate cases after an acquisition, but in no
23subsequent rate case, the large public utility may file a rate
24tariff for a water or sewer utility acquired under this
25Section that establishes lesser rates than the district or
26tariff group into which the water or sewer utility is to be

 

 

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1combined. Those lesser rates shall not be deemed to violate
2Section 7-204 or any other provision of this Act if they affect
3the cumulative base rates of the large public utility's
4existing rate payers in the district or tariff by less than
52.5%.
6    (i) Any post-acquisition improvements made by the large
7public utility in the water or sewer utility shall accrue a
8cost for financing set at the large public utility's
9determined rate for allowance for funds used during
10construction, inclusive of the debt, equity, and income tax
11gross up components, after the date on which the expenditure
12was incurred by the large public utility until the investment
13has been in service for a 4-year period or, if sooner, until
14the time the rates are implemented in the large public
15utility's next rate case.
16    Any post-acquisition improvements made by the large public
17utility in the water or sewer utility shall not be depreciated
18for ratemaking purposes from the date on which the expenditure
19was incurred by the large public utility until the investment
20has been in service for a 4-year period or, if sooner, until
21the time the rates are implemented in the large public
22utility's next rate case.
23    (j) This Section shall be exclusively applied to large
24public utilities in the voluntary and mutually agreeable
25acquisition of water or sewer utilities. Any petitions filed
26with the Commission related to the acquisitions described in

 

 

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1this Section, including petitions seeking approvals or
2certificates required by this Act, shall be deemed approved
3unless the Commission issues its final order within 11 months
4after the date the large public utility filed its initial
5petition. This Section shall only apply to utilities providing
6water or sewer service and shall not be construed in any manner
7to apply to electric corporations, natural gas corporations,
8or any other utility subject to this Act.
9    (k) Nothing in this Section shall prohibit a party from
10declining to proceed with an acquisition or be deemed as
11establishing the final purchase price of an acquisition.
12    (l) In the Commission's order that approves the large
13utility's acquisition of the water or sewer utility, the
14Commission shall address each aspect of the acquisition
15transaction for which approval is required under the Act.
16    (m) Any contractor or subcontractor that performs work on
17a water or sewer utility acquired by a large public utility
18under this Section shall be a responsible bidder as described
19in Section 30-22 of the Illinois Procurement Code. The
20contractor or subcontractor shall submit evidence of meeting
21the requirements to be a responsible bidder as described in
22Section 30-22 to the water or sewer utility. Any new water or
23sewer facility built as a result of the acquisition shall
24require the contractor to enter into a project labor
25agreement. The large public utility acquiring the water or
26sewer utility shall offer employee positions to qualified

 

 

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1employees of the acquired water or sewer utility.
2    (n) This Section is repealed on June 1, 2028.
3(Source: P.A. 100-751, eff. 8-10-18; 100-1151, eff. 6-1-19.)