One significant impact of SB1477 is changing how acquisition costs for water and sewer utilities are calculated and assessed. By limiting the rate base to only 20% of the purchase price or market value, the bill seeks to protect consumers from substantial rate increases that could result from large service provider acquisitions. This regulatory approach means that existing customers of the acquiring utility might not face immediate large rate hikes; rather, the burden of higher acquisition costs will largely fall on shareholders. Additionally, the bill mandates public disclosures by utilities about acquisition terms, enhancing transparency.
SB1477 amends the Public Utilities Act in Illinois to alter the valuation methodology for water and sewer utilities when acquired by large public utilities. Specifically, the bill states that 20% of the lesser of a utility's purchase price or fair market value will constitute the rate base for the incorporated utility. Furthermore, the bill requires that the difference between the rate base and the actual purchase price or fair market value be borne by the shareholders of the acquiring public utility. This provision is intended to prevent excessive costs from being passed onto consumers.
Points of contention surrounding SB1477 primarily revolve around the balance between protecting consumers and ensuring fair returns for utility investors. Supporters argue that the bill promotes consumer safety from inflated utility rates following acquisitions, thus fostering a more equitable market. Detractors, however, raise concerns about the financial implications for large public utilities, suggesting that this could deter acquisitions that would otherwise enhance service efficiency and infrastructure investments. Stakeholders worry that limiting rate bases may hinder utilities' ability to support necessary capital improvements and operational costs, ultimately affecting service quality.