Bill Text: IL HB5157 | 2023-2024 | 103rd General Assembly | Introduced

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Bill Title: Amends the Public Utilities Act. Provides that 20% of the lesser of (rather than the lesser of): (i) the purchase price or (ii) the fair market value 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, subject to any adjustments that the Illinois Commerce Commission deems necessary to ensure such rate base reflects prudent and useful investments in the provision of public utility service. Provides that the difference between the rate base and the purchase price or fair market value shall be borne by the shareholders of the acquiring large public utility. In provisions concerning the acquisition of a water or sewer utility, provides that, at the next election following the public meeting and notice requirements, a referendum shall be placed on the ballot for all electors within the area the water or sewer utility operates. Provides that, if a majority of the electors voting on the referendum within the service area of the water or sewer utility vote in favor of the referendum, then the acquisition may continue. Provides that, if less than a majority of the electors voting on the referendum within the service area of the water or sewer utility vote in favor of the referendum, the Commission shall not approve the large public utility's acquisition of the water or sewer utility. Removes a provision that provides that the Commission may authorize a water or sewer utility to file a surcharge which adjusts rates and charges to provide for recovery of costs associated with an investment in qualifying infrastructure plant, independent of any other matters related to the utility's revenue requirement. Makes other changes.

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Introduced) 2024-04-05 - House Committee Amendment No. 1 Rule 19(c) / Re-referred to Rules Committee [HB5157 Detail]

Download: Illinois-2023-HB5157-Introduced.html

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103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 HB5157 Introduced , by Rep. Nabeela Syed SYNOPSIS AS INTRODUCED:
220 ILCS 5/9-210.5
220 ILCS 5/9-220.2
Amends the Public Utilities Act. Provides that 20% of the lesser of (rather than the lesser of): (i) the purchase price or (ii) the fair market value 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, subject to any adjustments that the Illinois Commerce Commission deems necessary to ensure such rate base reflects prudent and useful investments in the provision of public utility service. Provides that the difference between the rate base and the purchase price or fair market value shall be borne by the shareholders of the acquiring large public utility. In provisions concerning the acquisition of a water or sewer utility, provides that, at the next election following the public meeting and notice requirements, a referendum shall be placed on the ballot for all electors within the area the water or sewer utility operates. Provides that, if a majority of the electors voting on the referendum within the service area of the water or sewer utility vote in favor of the referendum, then the acquisition may continue. Provides that, if less than a majority of the electors voting on the referendum within the service area of the water or sewer utility vote in favor of the referendum, the Commission shall not approve the large public utility's acquisition of the water or sewer utility. Removes a provision that provides that the Commission may authorize a water or sewer utility to file a surcharge which adjusts rates and charges to provide for recovery of costs associated with an investment in qualifying infrastructure plant, independent of any other matters related to the utility's revenue requirement. Makes other changes.
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A BILL FOR
HB5157 LRB103 35475 SPS 65544 b
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 changing
Sections 9-210.5 and 9-220.2 as follows:
(220 ILCS 5/9-210.5)
(Section scheduled to be repealed on June 1, 2028)
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

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before becoming engaged under this Section or receive a
material 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 15,000 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

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utility or large public utility from which the customer
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;
(3) a waterworks system or sewerage system
established under the Township Code that regularly
provides water or sewer service; or
(4) a water system or sewer system owned by a
municipality that regularly provides water or sewer
service; and
(5) any other entity that is not a public utility
that regularly provides water or sewer service.
(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
Commission shall use, the procedures set forth under this

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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 approved by the Commission's Executive Director or
designee and engaged by either the water or sewer utility
being acquired or by the large public utility. 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
Uniform Standards of Professional Appraisal Practice;
(3) engage one disinterested engineer who is licensed
in this State, and who may be the same engineer that is

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engaged by the other appraisers, 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) request from the manager of the Accounting
Department, if the water or sewer utility is a public
utility that is regulated by the Commission, 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 Executive
Director or designee shall recommend the engineer the
appraiser should engage. The Commission's Executive Director
or designee 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 Executive Director or designee, then the

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appraiser shall notify the Commission's Executive Director or
designee and the process shall be repeated until an engineer
is successfully engaged.
(d) Twenty percent of the 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 difference
between the rate base and the purchase price or fair market
value shall be borne by the shareholders of the acquiring
large public utility. 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 total amount of all of the appraisers' 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, provided that
only 20% of the transaction and closing costs are included in
the rate base. Any acquisition of a water or sewer utility that

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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 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; (2) the
district or tariff group with which the water or sewer utility
shall be combined for ratemaking purposes, if such combination
has been proposed by the large public utility; and (3) the
rates to be charged to customers in the water or sewer utility.
(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.

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At the next election following the public meeting and
notice required by this subsection, a referendum, subject to
the requirements of Section 16-7 of the Election Code, shall
be placed on the ballot for all electors within the area the
water or sewer utility operates in substantially the following
form:
May the (name of large public utility) acquire the
(name of water or sewer utility) under the terms of
acquisition published in (name of newspaper) on (date)?
The votes shall be recorded as "Yes" or "No".
If a majority of the electors voting on the referendum
within the service area of the water or sewer utility vote in
favor of the referendum, then the acquisition may continue as
provided in this Section. If less than a majority of the
electors voting on the referendum within the service area of
the water or sewer utility vote in favor of the referendum, the
Commission shall not approve the large public utility's
acquisition of the water or sewer utility.
(f) The large public utility may recommend the district or
tariff group of which the water or sewer utility shall, for
ratemaking purposes, become a part after the acquisition, or
may recommend a lesser rate for the water or sewer utility. If
the large public utility recommends a lesser rate, it shall
submit to the Commission its proposed rate schedule and the
proposed final tariff group for the acquired water or sewer
utility. The Commission's approved district or tariff group or

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rates shall be consistent with the large public utility's
recommendation, unless such recommendation can be shown to be
contrary to the 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 approved then-existing rates of the
district or tariff group as ordered by the Commission, or some
lesser rates as recommended by the large public utility and
approved by the Commission under subsection (f); provided,
that, if the application of such 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

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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 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 may
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. In the acquiring large public
utility's 2 rate cases after an acquisition, but in no
subsequent rate case, the large public utility may file a rate
tariff for a water or sewer utility acquired under this
Section that establishes lesser rates than the district or
tariff group into which the water or sewer utility is to be
combined. Those lesser rates shall not be deemed to violate
Section 7-204 or any other provision of this Act if they affect
the cumulative base rates of the large public utility's
existing rate payers in the district or tariff by less than

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2.5%.
(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
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

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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 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, 2028.
(Source: P.A. 102-149, eff. 1-1-22.)

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(220 ILCS 5/9-220.2)
Sec. 9-220.2. Water and sewer surcharges authorized.
(a) The Commission may authorize a water or sewer utility
to file a surcharge which adjusts rates and charges to provide
for recovery of (i) the cost of purchased water, (ii) the cost
of purchased sewage treatment service, or (iii) other costs
which fluctuate for reasons beyond the utility's control or
are difficult to predict, or (iv) costs associated with an
investment in qualifying infrastructure plant, independent of
any other matters related to the utility's revenue
requirement. A surcharge approved under this Section can
operate on an historical or a prospective basis.
(b) (Blank). For purposes of this Section, "costs
associated with an investment in qualifying infrastructure
plant" include a return on the investment in and depreciation
expense related to plant items or facilities (including, but
not limited to, replacement mains, meters, services, and
hydrants) which (i) are not reflected in the rate base used to
establish the utility's base rates and (ii) are non-revenue
producing. For purposes of this Section, a "non-revenue
producing facility" is one that is not constructed or
installed for the purpose of serving a new customer.
(c) On a periodic basis, the Commission shall initiate
hearings to reconcile amounts collected under each surcharge
authorized pursuant to this Section with the actual prudently
incurred costs recoverable for each annual period during which

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