97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
SB3573

 

Introduced 2/10/2012, by Sen. William R. Haine

 

SYNOPSIS AS INTRODUCED:
 
220 ILCS 5/9-210  from Ch. 111 2/3, par. 9-210
220 ILCS 5/9-210.5 new

    Amends the Public Utilities Act. Provides an alternative procedure that a large public utility may choose in establishing the ratemaking rate base of a water or sewer utility that the large public utility is acquiring. Defines "large public utility" and "water or sewer utility". Provides that the Commission's order that approves the large public utility's acquisition of the water or sewer utility shall include the Commission's 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 will be combined for ratemaking purposes. Sets forth provisions concerning definitions, appraisers and their duties, ratemaking rate base, and rate cases. Makes other changes. Effective immediately.


LRB097 18541 CEL 63773 b

 

 

A BILL FOR

 

SB3573LRB097 18541 CEL 63773 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Public Utilities Act is amended by changing
5Section 9-210 and by adding Section 9-210.5 as follows:
 
6    (220 ILCS 5/9-210)  (from Ch. 111 2/3, par. 9-210)
7    Sec. 9-210. The Commission shall have power to ascertain
8the value of the property of every public utility in this State
9and every fact which in its judgment may or does have any
10bearing on such value. In all proceedings before the
11Commission, initiated by the Commission upon its own motion, or
12initiated by an application of such public utility, in which
13the value of the property of any public utility or utilities is
14an issue, the burden of establishing such value shall be upon
15such public utility or utilities. In making such valuation the
16Commission may avail itself of any information, books,
17documents, or records in the possession of any officer,
18department or board of the State or any subdivision thereof.
19The Commission shall have power to make revaluation from time
20to time and also to ascertain the value of all new
21construction, extensions, and additions to the property of
22every public utility.
23    For purposes of establishing the value of public utility

 

 

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1property, when determining rates or charges, or for any other
2reason, the Commission may base its determination on the
3original cost of such property.
4    This Section does not apply to valuations of water or sewer
5utilities under Section 9-210.5.
6(Source: P.A. 84-617.)
 
7    (220 ILCS 5/9-210.5 new)
8    Sec. 9-210.5. Valuation of water and sewer utilities.
9    (a) In this Section:
10        "Water or sewer utility" means any of the following:
11            (1) a public utility that regularly provides water
12        or sewer service to 6,000 or fewer customer
13        connections;
14            (2) a water district, including, but not limited
15        to, a public water district, water service district, or
16        surface water protection district, or a sewer district
17        of any kind established as a special district under the
18        laws of this State that regularly provides water or
19        sewer service to 30,000 or fewer customer connections;
20            (3) a waterworks system or sewerage system
21        established under the Township Code that regularly
22        provides water or sewer service to 30,000 or fewer
23        customer connections; or
24            (4) a water system or sewer system owned by a
25        municipality that regularly provides water or sewer

 

 

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1        service to 30,000 or fewer customer connections; and
2            (5) any other entity that regularly provides water
3        or sewer service to 30,000 or fewer customer
4        connections.
5        "Large public utility" means an investor-owned public
6    utility that:
7            (1) is subject to regulation by the Illinois
8        Commerce Commission under this Act;
9            (2) regularly provides water or sewer service to
10        more than 30,000 customer connections;
11            (3) provides safe and adequate service; and
12            (4) is not a water or sewer utility as defined in
13        this subsection (a).
14        "District" means a service area of a large public
15    utility whose customers are subject to the same rate
16    tariff.
17        "Utility service source" means the water or sewer
18    utility or large public utility from which the customer
19    receives its utility service type.
20        "Utility service type" means water utility service or
21    sewer utility service or water and sewer utility service.
22        "Prior rate case" means a large public utility's
23    general rate case resulting in the rates in effect for the
24    large public utility at the time it acquires the water or
25    sewer utility.
26        "Next rate case" means a large public utility's first

 

 

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1    general rate case after the date the large public utility
2    acquires the water or sewer utility where the acquired
3    water or sewer utility's cost of service is considered as
4    part of determining the large public utility's resulting
5    rates.
6        "Disinterested" means that the person directly
7    involved (1) is not a director, officer, or an employee of
8    the large public utility or the water or sewer utility; (2)
9    shall not derive a material financial benefit from the sale
10    of the water or sewer utility other than fees for services
11    rendered, and (3) no member of the person's immediate
12    family, including a spouse, parents or spouse's parents,
13    children or spouses of children, or siblings and their
14    spouses or children, is a director, officer, or employee of
15    either the large public utility or water or sewer utility,
16    or may receive a material financial benefit from the sale
17    of the water or sewer utility other than fees for services
18    rendered.
19    (b) Notwithstanding any other provision of this Act, a
20large public utility that acquires a water or sewer utility may
21request that the Commission use the procedures set forth under
22this Section to establish the ratemaking rate base of that
23water or sewer utility at the time when it is acquired by the
24large public utility.
25    (c) If a large public utility elects the procedures under
26this Section to establish the rate base of a water or sewer

 

 

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1utility that it is acquiring, then an appraisal shall be
2performed. If the water or sewer utility being acquired and the
3large public utility agree on one appraiser, then the appraisal
4shall be performed by that jointly selected appraiser. If the
5water or sewer utility being acquired and the large public
6utility cannot agree on one appraiser, then the appraisal shall
7be performed by 3 appraisers with the water or sewer utility
8being acquired and the large public utility each appointing one
9appraiser individually and those resulting 2 appraisers shall
10together appoint an agreed-upon third appraiser. If the third
11appraiser is not appointed within 30 days after the first 2
12appraisers are appointed, then the manager of the Commission's
13Water Department shall recommend the third appraiser to be
14appointed. The manager of the Water Department shall provide
15his or her recommendation for an appraiser within 30 days after
16when he or she is officially notified of the failure of the 2
17appraisers to agree upon a third appraiser, and the 2
18appraisers shall promptly work to engage the recommended third
19appraiser. If the appraiser or appraisers are unable to
20negotiate reasonable engagement terms with the recommended
21third appraiser within 15 days after the recommendation by the
22manager of the Water Department, then the appraisers shall
23notify the manager of the Water Department and the process
24shall be repeated until a third appraiser is successfully
25engaged. Each appraiser shall be a disinterested person
26licensed as a State certified general real estate appraiser

 

 

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1under the Real Estate Appraiser Licensing Act of 2002.
2    The appraisers shall:
3        (1) be sworn to determine the fair market value of the
4    water or sewer utility by establishing the amount for which
5    the water or sewer utility would be sold in a voluntary
6    transaction between a willing buyer and willing seller
7    under no obligation to buy or sell;
8        (2) determine fair market value in compliance with the
9    Uniform Standards of Professional Appraisal Practice;
10        (3) engage one disinterested engineer who is licensed
11    in this State to prepare an assessment of the tangible
12    assets of the water or sewer utility, which is to be
13    incorporated into the appraisal under the cost approach;
14        (4) if the water or sewer utility is a public utility
15    that is regulated by the Commission, request from the
16    manager of the Accounting Department a list of investments
17    made by the water or sewer utility that had been disallowed
18    previously and that shall be excluded from the calculation
19    of the large public utility's rate base in its next rate
20    case;
21        (5) return their appraisal, in writing, to the water or
22    sewer utility and large public utility in a reasonable and
23    timely manner; and
24        (6) if the appraisers cannot agree on the engineer, as
25    described in paragraph (3) of this subsection (c), within
26    30 days after the appraisers are appointed, then the

 

 

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1    Commission's manager of the Water Department shall
2    recommend the engineer which the appraiser or appraisers
3    should engage; the manager of the Water Department shall
4    provide his or her recommendation within 30 days from when
5    he or she is officially notified of the appraiser or
6    appraisers failure to engage an engineer and the appraiser
7    or appraisers shall promptly work to engage the recommended
8    engineer; if the appraiser or appraisers are unable to
9    negotiate reasonable engagement terms with the recommended
10    engineer within 15 days after the recommendation by the
11    manager of the Water Department, then the appraisers shall
12    notify the manager of the Water Department and the process
13    shall be repeated until an engineer is successfully
14    engaged.
15    When 3 appraisers are required and in the event all 3
16appointed appraisers cannot agree as to the appraised value of
17the water or sewer utility, then an appraisal signed by 2 of
18the appointed appraisers shall constitute a good and valid
19appraisal. In this event, the third appraisal shall be
20submitted to the Commission with the filing for approval of the
21transaction. The Commission shall consider the third appraisal
22in its determination of the rate base of the water or sewer
23utility.
24    (d) The lesser of the purchase price and the appraised
25value, together with reasonable transaction and closing costs
26incurred by the large public utility, shall constitute the rate

 

 

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1base associated with the water or sewer utility as acquired by
2and incorporated into the rate base of the district designated
3by the acquiring large public utility under this Section,
4subject to any adjustments that the Commission deems necessary
5to ensure such rate base reflects prudent and useful
6investments in the provision of public utility service. This
7rate base treatment shall not be deemed to violate this Act,
8including, but not limited to, any Sections in Articles VIII
9and IX of this Act that might be affected by this Section.
10Without otherwise limiting the application of Section 7-204 or
11any other Article of this Act, any acquisition of a water or
12sewer utility that affects the cumulative base rates of the
13large public utility's existing ratepayers in the tariff group
14into which the water or sewer utility is to be combined by less
15than 5% at the time of the acquisition shall not be deemed to
16violate any other Article of this Act.
17    In the Commission's order that approves the large public
18utility's acquisition of the water or sewer utility, the
19Commission shall issue its decision establishing (1) the
20ratemaking rate base of the water or sewer utility and (2) the
21district or tariff group with which the water or sewer utility
22shall be combined for ratemaking purposes.
23    (e) If the water or sewer utility being acquired is owned
24by the State or any political subdivision thereof, then the
25water or sewer utility must hold a public meeting prior to the
26acquisition to inform the public of the terms of its

 

 

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1acquisition by the large public utility.
2    (f) The large public utility shall recommend the district
3or tariff group of which the water or sewer utility shall, for
4ratemaking purposes, become a part after the acquisition. The
5Commission's recommended district or tariff group shall be
6consistent with the large public utility's recommendation,
7unless such recommendation can be shown to be contrary to the
8public interest.
9    (g) From the date of acquisition until the date that new
10rates are effective in the acquiring large public utility's
11next rate case, the customers of the acquired water or sewer
12utility shall pay the then-existing rates of the district or
13tariff group ordered by the Commission. For each customer of
14the water or sewer utility with potable water usage values that
15cannot be reasonably obtained, a value of 5,000 gallons per
16month shall be assigned. These rates shall not be deemed to
17violate this Act including, but not limited to, Section 9-101
18and any other applicable Sections in Articles VIII and IX of
19this Act. The Commission shall issue its decision establishing
20the rates effective for the water or sewer utility immediately
21following an acquisition in its order approving the
22acquisition.
23    (h) In the acquiring large public utility's next rate case,
24the water or sewer utility and the district or tariff group
25ordered by the Commission and their costs of service shall be
26combined under the same rate tariff. This rate tariff shall be

 

 

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1based on allocation of costs of service of the acquired water
2or sewer utility and the large public utility's district or
3tariff group ordered by the Commission and utilizing a rate
4design that does not distinguish among customers on the basis
5of utility service source or type. This rate tariff shall not
6be deemed to violate this Act including, but not limited to,
7Section 9-101 of this Act.
8    (i) Any post-acquisition improvements made by the large
9public utility in the water or sewer utility shall accrue a
10cost for financing set at the large public utility's determined
11rate for allowance for funds used during construction,
12inclusive of the debt, equity, and income tax gross up
13components, after the date on which the expenditure was
14incurred by the large public utility until the investment has
15been in service for a 4-year period or, if sooner, until the
16time the rates are implemented in the large public utility's
17next rate case.
18    Any post-acquisition improvements, made by the large
19public utility in the water or sewer utility shall not be
20depreciated for ratemaking purposes from the date on which the
21expenditure was incurred by the large public utility until the
22investment has been in service for a 4-year period or, if
23sooner, until the time the rates are implemented in the large
24public utility's next rate case.
25    (j) This Section shall be exclusively applied to large
26public utilities in the voluntary and mutually agreeable

 

 

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1acquisition of water or sewer utilities. Any petitions filed
2with the Commission related to the acquisitions described in
3this Section, including petitions seeking approvals or
4certificates required by this Act, shall be deemed approved
5unless the Commission issues its final order within 11 months
6after the date the large public utility filed its initial
7petition. This Section shall only apply to utilities providing
8water or sewer service and shall not be construed in any manner
9to apply to electric corporations, natural gas corporations, or
10any other utility subject to this Act.
11    (k) Nothing in this Section shall prohibit a party from
12declining to proceed with an acquisition or be deemed as
13establishing the final purchase price of an acquisition.
14    (l) Any contractor or subcontractor that performs work on a
15water or sewer utility acquired by a large public utility under
16this Section shall be a responsible bidder as described in
17Section 30-22 of the Illinois Procurement Code. The contractor
18or subcontractor shall submit evidence of meeting the
19requirements to be a responsible bidder as described in Section
2030-22 to the water or sewer utility. Any new water or sewer
21facility built as a result of the acquisition shall require the
22contractor to enter into a project labor agreement. The large
23public utility acquiring the water or sewer utility shall offer
24employee positions to qualified employees of the acquired water
25or sewer utility.
 
26    Section 99. Effective date. This Act takes effect upon

 

 

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1becoming law.