IL
Illinois Senate Bill SB1477

Illinois 2023-2024 Regular Session

Illinois Senate Bill SB1477 Compare Versions

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11 103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 SB1477 Introduced 2/7/2023, by Sen. Ann Gillespie SYNOPSIS AS INTRODUCED: 220 ILCS 5/9-210.5 Amends the Public Utilities Act. Provides that in provisions concerning the valuation of water and sewer utilities, 20% of the lesser of (1) the purchase price or (2) the fair market value determined 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. Provides that the amount of 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. Provides that only 20% of the transaction and closing costs shall be included in rate base. Provides that any large public utility acquiring a water or sewer utility must inform (rather than 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. LRB103 26414 AMQ 52777 b A BILL FOR 103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 SB1477 Introduced 2/7/2023, by Sen. Ann Gillespie SYNOPSIS AS INTRODUCED: 220 ILCS 5/9-210.5 220 ILCS 5/9-210.5 Amends the Public Utilities Act. Provides that in provisions concerning the valuation of water and sewer utilities, 20% of the lesser of (1) the purchase price or (2) the fair market value determined 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. Provides that the amount of 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. Provides that only 20% of the transaction and closing costs shall be included in rate base. Provides that any large public utility acquiring a water or sewer utility must inform (rather than 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. LRB103 26414 AMQ 52777 b LRB103 26414 AMQ 52777 b A BILL FOR
22 103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 SB1477 Introduced 2/7/2023, by Sen. Ann Gillespie SYNOPSIS AS INTRODUCED:
33 220 ILCS 5/9-210.5 220 ILCS 5/9-210.5
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55 Amends the Public Utilities Act. Provides that in provisions concerning the valuation of water and sewer utilities, 20% of the lesser of (1) the purchase price or (2) the fair market value determined 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. Provides that the amount of 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. Provides that only 20% of the transaction and closing costs shall be included in rate base. Provides that any large public utility acquiring a water or sewer utility must inform (rather than 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.
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1111 1 AN ACT concerning regulation.
1212 2 Be it enacted by the People of the State of Illinois,
1313 3 represented in the General Assembly:
1414 4 Section 5. The Public Utilities Act is amended by changing
1515 5 Section 9-210.5 as follows:
1616 6 (220 ILCS 5/9-210.5)
1717 7 (Section scheduled to be repealed on June 1, 2028)
1818 8 Sec. 9-210.5. Valuation of water and sewer utilities.
1919 9 (a) In this Section:
2020 10 "Disinterested" means that the person directly
2121 11 involved (1) is not a director, officer, or an employee of
2222 12 the large public utility or the water or sewer utility or
2323 13 its direct affiliates or subsidiaries for at least 12
2424 14 months before becoming engaged under this Section; (2)
2525 15 shall not derive a material financial benefit from the
2626 16 sale of the water or sewer utility other than fees for
2727 17 services rendered, and (3) shall not have a member of the
2828 18 person's immediate family, including a spouse, parents or
2929 19 spouse's parents, children or spouses of children, or
3030 20 siblings and their spouses or children, be a director,
3131 21 officer, or employee of either the large public utility or
3232 22 water or sewer utility or the water or sewer utility or its
3333 23 direct affiliates or subsidiaries for at least 12 months
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3737 103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 SB1477 Introduced 2/7/2023, by Sen. Ann Gillespie SYNOPSIS AS INTRODUCED:
3838 220 ILCS 5/9-210.5 220 ILCS 5/9-210.5
3939 220 ILCS 5/9-210.5
4040 Amends the Public Utilities Act. Provides that in provisions concerning the valuation of water and sewer utilities, 20% of the lesser of (1) the purchase price or (2) the fair market value determined 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. Provides that the amount of 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. Provides that only 20% of the transaction and closing costs shall be included in rate base. Provides that any large public utility acquiring a water or sewer utility must inform (rather than 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.
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6868 1 before becoming engaged under this Section or receive a
6969 2 material financial benefit from the sale of the water or
7070 3 sewer utility other than fees for services rendered.
7171 4 "District" means a service area of a large public
7272 5 utility whose customers are subject to the same rate
7373 6 tariff.
7474 7 "Large public utility" means an investor-owned public
7575 8 utility that:
7676 9 (1) is subject to regulation by the Illinois
7777 10 Commerce Commission under this Act;
7878 11 (2) regularly provides water or sewer service to
7979 12 more than 15,000 customer connections;
8080 13 (3) provides safe and adequate service; and
8181 14 (4) is not a water or sewer utility as defined in
8282 15 this subsection (a).
8383 16 "Next rate case" means a large public utility's first
8484 17 general rate case after the date the large public utility
8585 18 acquires the water or sewer utility where the acquired
8686 19 water or sewer utility's cost of service is considered as
8787 20 part of determining the large public utility's resulting
8888 21 rates.
8989 22 "Prior rate case" means a large public utility's
9090 23 general rate case resulting in the rates in effect for the
9191 24 large public utility at the time it acquires the water or
9292 25 sewer utility.
9393 26 "Utility service source" means the water or sewer
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104104 1 utility or large public utility from which the customer
105105 2 receives its utility service type.
106106 3 "Utility service type" means water utility service or
107107 4 sewer utility service or water and sewer utility service.
108108 5 "Water or sewer utility" means any of the following:
109109 6 (1) a public utility that regularly provides water
110110 7 or sewer service to 6,000 or fewer customer
111111 8 connections;
112112 9 (2) a water district, including, but not limited
113113 10 to, a public water district, water service district,
114114 11 or surface water protection district, or a sewer
115115 12 district of any kind established as a special district
116116 13 under the laws of this State that regularly provides
117117 14 water or sewer service;
118118 15 (3) a waterworks system or sewerage system
119119 16 established under the Township Code that regularly
120120 17 provides water or sewer service; or
121121 18 (4) a water system or sewer system owned by a
122122 19 municipality that regularly provides water or sewer
123123 20 service; and
124124 21 (5) any other entity that is not a public utility
125125 22 that regularly provides water or sewer service.
126126 23 (b) Notwithstanding any other provision of this Act, a
127127 24 large public utility that acquires a water or sewer utility
128128 25 may request that the Commission use, and, if so requested, the
129129 26 Commission shall use, the procedures set forth under this
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140140 1 Section to establish the ratemaking rate base of that water or
141141 2 sewer utility at the time when it is acquired by the large
142142 3 public utility.
143143 4 (c) If a large public utility elects the procedures under
144144 5 this Section to establish the rate base of a water or sewer
145145 6 utility that it is acquiring, then 3 appraisals shall be
146146 7 performed. The average of these 3 appraisals shall represent
147147 8 the fair market value of the water or sewer utility that is
148148 9 being acquired. The appraisals shall be performed by 3
149149 10 appraisers approved by the Commission's Executive Director or
150150 11 designee and engaged by either the water or sewer utility
151151 12 being acquired or by the large public utility. Each appraiser
152152 13 shall be engaged on reasonable terms approved by the
153153 14 Commission. Each appraiser shall be a disinterested person
154154 15 licensed as a State certified general real estate appraiser
155155 16 under the Real Estate Appraiser Licensing Act of 2002.
156156 17 Each appraiser shall:
157157 18 (1) be sworn to determine the fair market value of the
158158 19 water or sewer utility by establishing the amount for
159159 20 which the water or sewer utility would be sold in a
160160 21 voluntary transaction between a willing buyer and willing
161161 22 seller under no obligation to buy or sell;
162162 23 (2) determine fair market value in compliance with the
163163 24 Uniform Standards of Professional Appraisal Practice;
164164 25 (3) engage one disinterested engineer who is licensed
165165 26 in this State, and who may be the same engineer that is
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176176 1 engaged by the other appraisers, to prepare an assessment
177177 2 of the tangible assets of the water or sewer utility,
178178 3 which is to be incorporated into the appraisal under the
179179 4 cost approach;
180180 5 (4) request from the manager of the Accounting
181181 6 Department, if the water or sewer utility is a public
182182 7 utility that is regulated by the Commission, a list of
183183 8 investments made by the water or sewer utility that had
184184 9 been disallowed previously and that shall be excluded from
185185 10 the calculation of the large public utility's rate base in
186186 11 its next rate case; and
187187 12 (5) return their appraisal, in writing, to the water
188188 13 or sewer utility and large public utility in a reasonable
189189 14 and timely manner.
190190 15 If the appraiser cannot engage an engineer, as described
191191 16 in paragraph (3) of this subsection (c), within 30 days after
192192 17 the appraiser is engaged, then the Commission's Executive
193193 18 Director or designee shall recommend the engineer the
194194 19 appraiser should engage. The Commission's Executive Director
195195 20 or designee shall provide his or her recommendation within 30
196196 21 days after he or she is officially notified of the appraiser's
197197 22 failure to engage an engineer and the appraiser shall promptly
198198 23 work to engage the recommended engineer. If the appraiser is
199199 24 unable to negotiate reasonable engagement terms with the
200200 25 recommended engineer within 15 days after the recommendation
201201 26 by the Commission's Executive Director or designee, then the
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212212 1 appraiser shall notify the Commission's Executive Director or
213213 2 designee and the process shall be repeated until an engineer
214214 3 is successfully engaged.
215215 4 (d) Twenty percent of the The lesser of (i) the purchase
216216 5 price or (ii) the fair market value determined under
217217 6 subsection (c) of this Section shall constitute the rate base
218218 7 associated with the water or sewer utility as acquired by and
219219 8 incorporated into the rate base of the district designated by
220220 9 the acquiring large public utility under this Section, subject
221221 10 to any adjustments that the Commission deems necessary to
222222 11 ensure such rate base reflects prudent and useful investments
223223 12 in the provision of public utility service. The amount of the
224224 13 difference between the rate base and the purchase price or
225225 14 fair market value shall be borne by the shareholders of the
226226 15 acquiring large public utility. The reasonable transaction and
227227 16 closing costs incurred by the large public utility shall be
228228 17 treated consistent with the applicable accounting standards
229229 18 under this Act. The total amount of all of the appraisers' fees
230230 19 to be included in the transaction and closing costs shall not
231231 20 exceed the greater of $15,000 or 5% of the appraised value of
232232 21 the water or sewer utility being acquired. This rate base
233233 22 treatment shall not be deemed to violate this Act, including,
234234 23 but not limited to, any Sections in Articles VIII and IX of
235235 24 this Act that might be affected by this Section. Only 20% of
236236 25 the transaction and closing costs shall be included in the
237237 26 rate base. Any acquisition of a water or sewer utility that
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248248 1 affects the cumulative base rates of the large public
249249 2 utility's existing ratepayers in the tariff group into which
250250 3 the water or sewer utility is to be combined by less than (1)
251251 4 2.5% at the time of the acquisition for any single acquisition
252252 5 completed under this Section or (2) 5% for all acquisitions
253253 6 completed under this Section before the Commission's final
254254 7 order in the next rate case shall not be deemed to violate
255255 8 Section 7-204 or any other provision of this Act.
256256 9 In the Commission's order that approves the large public
257257 10 utility's acquisition of the water or sewer utility, the
258258 11 Commission shall issue its decision establishing (1) the
259259 12 ratemaking rate base of the water or sewer utility; (2) the
260260 13 district or tariff group with which the water or sewer utility
261261 14 shall be combined for ratemaking purposes, if such combination
262262 15 has been proposed by the large public utility; and (3) the
263263 16 rates to be charged to customers in the water or sewer utility.
264264 17 (e) Any large public utility acquiring a If the water or
265265 18 sewer utility being acquired is owned by the State or any
266266 19 political subdivision thereof, then the water or sewer utility
267267 20 must inform the public of the terms of the its acquisition by
268268 21 the large public utility by (1) holding a public meeting prior
269269 22 to the acquisition and (2) causing to be published, in a
270270 23 newspaper of general circulation in the area that the water or
271271 24 sewer utility operates, a notice setting forth the terms of
272272 25 the its acquisition by the large public utility, the property
273273 26 tax impact of the acquisition, and options that shall be
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284284 1 available to assist customers to pay their bills after the
285285 2 acquisition.
286286 3 (f) The large public utility may recommend the district or
287287 4 tariff group of which the water or sewer utility shall, for
288288 5 ratemaking purposes, become a part after the acquisition, or
289289 6 may recommend a lesser rate for the water or sewer utility. If
290290 7 the large public utility recommends a lesser rate, it shall
291291 8 submit to the Commission its proposed rate schedule and the
292292 9 proposed final tariff group for the acquired water or sewer
293293 10 utility. The Commission's approved district or tariff group or
294294 11 rates shall be consistent with the large public utility's
295295 12 recommendation, unless such recommendation can be shown to be
296296 13 contrary to the public interest.
297297 14 (g) From the date of acquisition until the date that new
298298 15 rates are effective in the acquiring large public utility's
299299 16 next rate case, the customers of the acquired water or sewer
300300 17 utility shall pay the approved then-existing rates of the
301301 18 district or tariff group as ordered by the Commission, or some
302302 19 lesser rates as recommended by the large public utility and
303303 20 approved by the Commission under subsection (f); provided,
304304 21 that, if the application of such rates of the large public
305305 22 utility to customers of the acquired water or sewer utility
306306 23 using 54,000 gallons annually results in an increase to the
307307 24 total annual bill of customers of the acquired water or sewer
308308 25 utility, exclusive of fire service or related charges, then
309309 26 the large public utility's rates charged to the customers of
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320320 1 the acquired water or sewer utility shall be uniformly
321321 2 reduced, if any reduction is required, by the percent that
322322 3 results in the total annual bill, exclusive of fire services
323323 4 or related charges, for the customers of the acquired water or
324324 5 sewer utility using 54,000 gallons being equal to 1.5% of the
325325 6 latest median household income as reported by the United
326326 7 States Census Bureau for the most applicable community or
327327 8 county. For each customer of the water or sewer utility with
328328 9 potable water usage values that cannot be reasonably obtained,
329329 10 a value of 4,500 gallons per month shall be assigned. These
330330 11 rates shall not be deemed to violate this Act including, but
331331 12 not limited to, Section 9-101 and any other applicable
332332 13 Sections in Articles VIII and IX of this Act. The Commission
333333 14 shall issue its decision establishing the rates effective for
334334 15 the water or sewer utility immediately following an
335335 16 acquisition in its order approving the acquisition.
336336 17 (h) In the acquiring large public utility's next rate
337337 18 case, the water or sewer utility and the district or tariff
338338 19 group ordered by the Commission and their costs of service may
339339 20 be combined under the same rate tariff. This rate tariff shall
340340 21 be based on allocation of costs of service of the acquired
341341 22 water or sewer utility and the large public utility's district
342342 23 or tariff group ordered by the Commission and utilizing a rate
343343 24 design that does not distinguish among customers on the basis
344344 25 of utility service source or type. This rate tariff shall not
345345 26 be deemed to violate this Act including, but not limited to,
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356356 1 Section 9-101 of this Act. In the acquiring large public
357357 2 utility's 2 rate cases after an acquisition, but in no
358358 3 subsequent rate case, the large public utility may file a rate
359359 4 tariff for a water or sewer utility acquired under this
360360 5 Section that establishes lesser rates than the district or
361361 6 tariff group into which the water or sewer utility is to be
362362 7 combined. Those lesser rates shall not be deemed to violate
363363 8 Section 7-204 or any other provision of this Act if they affect
364364 9 the cumulative base rates of the large public utility's
365365 10 existing rate payers in the district or tariff by less than
366366 11 2.5%.
367367 12 (i) Any post-acquisition improvements made by the large
368368 13 public utility in the water or sewer utility shall accrue a
369369 14 cost for financing set at the large public utility's
370370 15 determined rate for allowance for funds used during
371371 16 construction, inclusive of the debt, equity, and income tax
372372 17 gross up components, after the date on which the expenditure
373373 18 was incurred by the large public utility until the investment
374374 19 has been in service for a 4-year period or, if sooner, until
375375 20 the time the rates are implemented in the large public
376376 21 utility's next rate case.
377377 22 Any post-acquisition improvements made by the large public
378378 23 utility in the water or sewer utility shall not be depreciated
379379 24 for ratemaking purposes from the date on which the expenditure
380380 25 was incurred by the large public utility until the investment
381381 26 has been in service for a 4-year period or, if sooner, until
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392392 1 the time the rates are implemented in the large public
393393 2 utility's next rate case.
394394 3 (j) This Section shall be exclusively applied to large
395395 4 public utilities in the voluntary and mutually agreeable
396396 5 acquisition of water or sewer utilities. Any petitions filed
397397 6 with the Commission related to the acquisitions described in
398398 7 this Section, including petitions seeking approvals or
399399 8 certificates required by this Act, shall be deemed approved
400400 9 unless the Commission issues its final order within 11 months
401401 10 after the date the large public utility filed its initial
402402 11 petition. This Section shall only apply to utilities providing
403403 12 water or sewer service and shall not be construed in any manner
404404 13 to apply to electric corporations, natural gas corporations,
405405 14 or any other utility subject to this Act.
406406 15 (k) Nothing in this Section shall prohibit a party from
407407 16 declining to proceed with an acquisition or be deemed as
408408 17 establishing the final purchase price of an acquisition.
409409 18 (l) In the Commission's order that approves the large
410410 19 utility's acquisition of the water or sewer utility, the
411411 20 Commission shall address each aspect of the acquisition
412412 21 transaction for which approval is required under the Act.
413413 22 (m) Any contractor or subcontractor that performs work on
414414 23 a water or sewer utility acquired by a large public utility
415415 24 under this Section shall be a responsible bidder as described
416416 25 in Section 30-22 of the Illinois Procurement Code. The
417417 26 contractor or subcontractor shall submit evidence of meeting
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428428 1 the requirements to be a responsible bidder as described in
429429 2 Section 30-22 to the water or sewer utility. Any new water or
430430 3 sewer facility built as a result of the acquisition shall
431431 4 require the contractor to enter into a project labor
432432 5 agreement. The large public utility acquiring the water or
433433 6 sewer utility shall offer employee positions to qualified
434434 7 employees of the acquired water or sewer utility.
435435 8 (n) This Section is repealed on June 1, 2028.
436436 9 (Source: P.A. 102-149, eff. 1-1-22.)
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