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| Public Act 098-0213
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| HB1379 Enrolled | LRB098 05850 AMC 35889 b |
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AN ACT concerning regulation.
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Be it enacted by the People of the State of Illinois,
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represented in the General Assembly:
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Section 5. The Public Utilities Act is amended by adding |
Section 9-210.5 as follows:
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(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.
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