Bill Text: IL HB4508 | 2017-2018 | 100th General Assembly | Engrossed

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

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Bill Title: Amends the Public Utilities Act. Modifies the definition of "water or sewer utility" to remove language specifying water or sewer service provided to 7,500 or fewer customer connections as provided by certain entities. Provides that appraisals of the fair market value of the water or sewer utility that is being acquired shall be performed by 3 appraisers approved (rather than selected) by the Illinois Commerce Commission's Executive Director or designee (rather than the water department manager) and engaged by either the water or sewer utility being acquired or by the large public utility. Allows appraisers to engage one disinterested engineer who is licensed in this State who may be the same engineer that is engaged by other appraisers. Provides that 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, among other requirements, the rates to be charged to customers in the water or sewer utility. Provides that a large public utility may (rather than shall) recommend the district or tariff group of which the water or sewer utility shall become a part of after the acquisition, or may recommend a lesser rate for the water or sewer utility. Provides that from the date of acquisition until the date that new rates are effective in an 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. Provides that in an acquiring large public utility's 2 rate cases following an acquisition, the public utility may file a rate tariff for an acquired water or sewer utility that establishes lesser rates than the district or tariff group into which the water or sewer utility is combined. Extends the repeal date of the valuation of water and sewer utilities Section from June 1, 2018 to June 1, 2028. Makes conforming changes. Effective immediately.

Spectrum: Bipartisan Bill

Status: (Passed) 2018-11-28 - Removed Co-Sponsor Rep. Jerry Lee Long [HB4508 Detail]

Download: Illinois-2017-HB4508-Engrossed.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 changing
Section 9-210.5 as follows:
(220 ILCS 5/9-210.5)
(Section scheduled to be repealed on June 1, 2018)
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

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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 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

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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 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 is not a public utility
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

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request that the Commission use, and, if so requested, the
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 approved selected by the Commission's Executive
Director or designee 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

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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
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) if the water or sewer utility is a public utility
that is regulated by the Commission, 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 water department manager shall recommend the
engineer the appraiser should engage. The Commission's
Executive Director or designee water department manager shall

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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 water department manager, then
the appraiser shall notify the Commission's Executive Director
or designee 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 total amount of all of the appraisers' 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,

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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 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, 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

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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 may shall 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 recommended
district or tariff group or 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 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

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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
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 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

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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 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

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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
Section 30-22 of the Illinois Procurement Code. The contractor

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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 2018.
(Source: P.A. 98-213, eff. 8-9-13.)
Section 99. Effective date. This Act takes effect upon
becoming law.