Bill Text: IL HB1379 | 2013-2014 | 98th General Assembly | Enrolled

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Amends the Public Utilities Act. Provides an alternative procedure that a large public utility may choose in establishing the ratemaking rate base of a water or sewer utility that the large public utility is acquiring. Provides that the Commission's order that approves the large public utility's acquisition of the water or sewer utility shall include the Commission's decision establishing (1) the ratemaking rate base of the water or sewer utility and (2) the district or tariff group with which the water or sewer utility will be combined for ratemaking purposes. Sets forth provisions concerning definitions, appraisers and their duties, ratemaking rate base, and rate cases. Makes the provisions applicable until June 1, 2018. Makes other changes. Effective immediately.

Spectrum: Bipartisan Bill

Status: (Passed) 2013-08-09 - Public Act . . . . . . . . . 98-0213 [HB1379 Detail]

Download: Illinois-2013-HB1379-Enrolled.html

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AN ACT concerning regulation.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Public Utilities Act is amended by adding
Section 9-210.5 as follows:
(220 ILCS 5/9-210.5 new)
Sec. 9-210.5. Valuation of water and sewer utilities.
(a) In this Section:
"Disinterested" means that the person directly
involved (1) is not a director, officer, or an employee of
the large public utility or the water or sewer utility or
its direct affiliates or subsidiaries for at least 12
months before becoming engaged under this Section; (2)
shall not derive a material financial benefit from the sale
of the water or sewer utility other than fees for services
rendered, and (3) shall not have a member of the person's
immediate family, including a spouse, parents or spouse's
parents, children or spouses of children, or siblings and
their spouses or children, be a director, officer, or
employee of either the large public utility or water or
sewer utility or the water or sewer utility or its direct
affiliates or subsidiaries for at least 12 months before
becoming engaged under this Section or receive a material

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financial benefit from the sale of the water or sewer
utility other than fees for services rendered.
"District" means a service area of a large public
utility whose customers are subject to the same rate
tariff.
"Large public utility" means an investor-owned public
utility that:
(1) is subject to regulation by the Illinois
Commerce Commission under this Act;
(2) regularly provides water or sewer service to
more than 30,000 customer connections;
(3) provides safe and adequate service; and
(4) is not a water or sewer utility as defined in
this subsection (a).
"Next rate case" means a large public utility's first
general rate case after the date the large public utility
acquires the water or sewer utility where the acquired
water or sewer utility's cost of service is considered as
part of determining the large public utility's resulting
rates.
"Prior rate case" means a large public utility's
general rate case resulting in the rates in effect for the
large public utility at the time it acquires the water or
sewer utility.
"Utility service source" means the water or sewer
utility or large public utility from which the customer

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receives its utility service type.
"Utility service type" means water utility service or
sewer utility service or water and sewer utility service.
"Water or sewer utility" means any of the following:
(1) a public utility that regularly provides water
or sewer service to 6,000 or fewer customer
connections;
(2) a water district, including, but not limited
to, a public water district, water service district, or
surface water protection district, or a sewer district
of any kind established as a special district under the
laws of this State that regularly provides water or
sewer service to 7,500 or fewer customer connections;
(3) a waterworks system or sewerage system
established under the Township Code that regularly
provides water or sewer service to 7,500 or fewer
customer connections; or
(4) a water system or sewer system owned by a
municipality that regularly provides water or sewer
service to 7,500 or fewer customer connections; and
(5) any other entity that regularly provides water
or sewer service to 7,500 or fewer customer
connections.
(b) Notwithstanding any other provision of this Act, a
large public utility that acquires a water or sewer utility may
request that the Commission use, and, if so requested, the

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Commission shall use, the procedures set forth under this
Section to establish the ratemaking rate base of that water or
sewer utility at the time when it is acquired by the large
public utility.
(c) If a large public utility elects the procedures under
this Section to establish the rate base of a water or sewer
utility that it is acquiring, then 3 appraisals shall be
performed. The average of these 3 appraisals shall represent
the fair market value of the water or sewer utility that is
being acquired. The appraisals shall be performed by 3
appraisers selected by the Commission's water department
manager and engaged by either the water or sewer utility being
acquired or by the large public utility. The Commission's water
department manager shall select the appraisers within 30 days
after the water department manager is officially notified. Each
appraiser shall be engaged on reasonable terms approved by the
Commission. Each appraiser shall be a disinterested person
licensed as a State certified general real estate appraiser
under the Real Estate Appraiser Licensing Act of 2002.
Each appraiser shall:
(1) be sworn to determine the fair market value of the
water or sewer utility by establishing the amount for which
the water or sewer utility would be sold in a voluntary
transaction between a willing buyer and willing seller
under no obligation to buy or sell;
(2) determine fair market value in compliance with the

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Uniform Standards of Professional Appraisal Practice;
(3) engage one disinterested engineer who is licensed
in this State to prepare an assessment of the tangible
assets of the water or sewer utility, which is to be
incorporated into the appraisal under the cost approach;
(4) if the water or sewer utility is a public utility
that is regulated by the Commission, request from the
manager of the Accounting Department a list of investments
made by the water or sewer utility that had been disallowed
previously and that shall be excluded from the calculation
of the large public utility's rate base in its next rate
case; and
(5) return their appraisal, in writing, to the water or
sewer utility and large public utility in a reasonable and
timely manner.
If the appraiser cannot engage an engineer, as described in
paragraph (3) of this subsection (c), within 30 days after the
appraiser is engaged, then the Commission's water department
manager shall recommend the engineer the appraiser should
engage. The Commission's water department manager shall
provide his or her recommendation within 30 days after he or
she is officially notified of the appraiser's failure to engage
an engineer and the appraiser shall promptly work to engage the
recommended engineer. If the appraiser is unable to negotiate
reasonable engagement terms with the recommended engineer
within 15 days after the recommendation by the Commission's

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

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acquisitions completed under this Section before the
Commission's final order in the next rate case shall not be
deemed to violate Section 7-204 or any other provision of this
Act.
In the Commission's order that approves the large public
utility's acquisition of the water or sewer utility, the
Commission shall issue its decision establishing (1) the
ratemaking rate base of the water or sewer utility and (2) the
district or tariff group with which the water or sewer utility
shall be combined for ratemaking purposes.
(e) If the water or sewer utility being acquired is owned
by the State or any political subdivision thereof, then the
water or sewer utility must inform the public of the terms of
its acquisition by the large public utility by (1) holding a
public meeting prior to the acquisition and (2) causing to be
published, in a newspaper of general circulation in the area
that the water or sewer utility operates, a notice setting
forth the terms of its acquisition by the large public utility
and options that shall be available to assist customers to pay
their bills after the acquisition.
(f) The large public utility shall recommend the district
or tariff group of which the water or sewer utility shall, for
ratemaking purposes, become a part after the acquisition. The
Commission's recommended district or tariff group shall be
consistent with the large public utility's recommendation,
unless such recommendation can be shown to be contrary to the

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public interest.
(g) From the date of acquisition until the date that new
rates are effective in the acquiring large public utility's
next rate case, the customers of the acquired water or sewer
utility shall pay the then-existing rates of the district or
tariff group ordered by the Commission; provided, that, if the
application of such then-existing rates of the large public
utility to customers of the acquired water or sewer utility
using 54,000 gallons annually results in an increase to the
total annual bill of customers of the acquired water or sewer
utility, exclusive of fire service or related charges, then the
large public utility's rates charged to the customers of the
acquired water or sewer utility shall be uniformly reduced, if
any reduction is required, by the percent that results in the
total annual bill, exclusive of fire services or related
charges, for the customers of the acquired water or sewer
utility using 54,000 gallons being equal to 1.5% of the latest
median household income as reported by the United States Census
Bureau for the most applicable community or county. For each
customer of the water or sewer utility with potable water usage
values that cannot be reasonably obtained, a value of 4,500
gallons per month shall be assigned. These rates shall not be
deemed to violate this Act including, but not limited to,
Section 9-101 and any other applicable Sections in Articles
VIII and IX of this Act. The Commission shall issue its
decision establishing the rates effective for the water or

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sewer utility immediately following an acquisition in its order
approving the acquisition.
(h) In the acquiring large public utility's next rate case,
the water or sewer utility and the district or tariff group
ordered by the Commission and their costs of service shall be
combined under the same rate tariff. This rate tariff shall be
based on allocation of costs of service of the acquired water
or sewer utility and the large public utility's district or
tariff group ordered by the Commission and utilizing a rate
design that does not distinguish among customers on the basis
of utility service source or type. This rate tariff shall not
be deemed to violate this Act including, but not limited to,
Section 9-101 of this Act.
(i) Any post-acquisition improvements made by the large
public utility in the water or sewer utility shall accrue a
cost for financing set at the large public utility's determined
rate for allowance for funds used during construction,
inclusive of the debt, equity, and income tax gross up
components, after the date on which the expenditure was
incurred by the large public utility until the investment has
been in service for a 4-year period or, if sooner, until the
time the rates are implemented in the large public utility's
next rate case.
Any post-acquisition improvements made by the large public
utility in the water or sewer utility shall not be depreciated
for ratemaking purposes from the date on which the expenditure

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

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Section 30-22 of the Illinois Procurement Code. The contractor
or subcontractor shall submit evidence of meeting the
requirements to be a responsible bidder as described in Section
30-22 to the water or sewer utility. Any new water or sewer
facility built as a result of the acquisition shall require the
contractor to enter into a project labor agreement. The large
public utility acquiring the water or sewer utility shall offer
employee positions to qualified employees of the acquired water
or sewer utility.
(n) This Section is repealed on June 1, 2018.