SB3573 EngrossedLRB097 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. (a) The Commission shall have power to
8ascertain the value of the property of every public utility in
9this State and every fact which in its judgment may or does
10have any bearing 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    (b) For purposes of establishing the value of public

 

 

SB3573 Engrossed- 2 -LRB097 18541 CEL 63773 b

1utility property, when determining rates or charges, or for any
2other reason, the Commission may base its determination on the
3original cost of such property.
4    (c) This Section does not apply to valuations of water or
5sewer utilities under Section 9-210.5. This subsection (c) is
6inoperative on and after June 1, 2017.
7(Source: P.A. 84-617.)
 
8    (220 ILCS 5/9-210.5 new)
9    Sec. 9-210.5. Valuation of water and sewer utilities.
10    (a) In this Section:
11        "Water or sewer utility" means any of the following:
12            (1) a public utility that regularly provides water
13        or sewer service to 6,000 or fewer customer
14        connections;
15            (2) a water district, including, but not limited
16        to, a public water district, water service district, or
17        surface water protection district, or a sewer district
18        of any kind established as a special district under the
19        laws of this State that regularly provides water or
20        sewer service to 7,500 or fewer customer connections;
21            (3) a waterworks system or sewerage system
22        established under the Township Code that regularly
23        provides water or sewer service to 7,500 or fewer
24        customer connections; or
25            (4) a water system or sewer system owned by a

 

 

SB3573 Engrossed- 3 -LRB097 18541 CEL 63773 b

1        municipality that regularly provides water or sewer
2        service to 7,500 or fewer customer connections; and
3            (5) any other entity that regularly provides water
4        or sewer service to 7,500 or fewer customer
5        connections.
6        "Large public utility" means an investor-owned public
7    utility that:
8            (1) is subject to regulation by the Illinois
9        Commerce Commission under this Act;
10            (2) regularly provides water or sewer service to
11        more than 30,000 customer connections;
12            (3) provides safe and adequate service; and
13            (4) is not a water or sewer utility as defined in
14        this subsection (a).
15        "District" means a service area of a large public
16    utility whose customers are subject to the same rate
17    tariff.
18        "Utility service source" means the water or sewer
19    utility or large public utility from which the customer
20    receives its utility service type.
21        "Utility service type" means water utility service or
22    sewer utility service or water and sewer utility service.
23        "Prior rate case" means a large public utility's
24    general rate case resulting in the rates in effect for the
25    large public utility at the time it acquires the water or
26    sewer utility.

 

 

SB3573 Engrossed- 4 -LRB097 18541 CEL 63773 b

1        "Next rate case" means a large public utility's first
2    general rate case after the date the large public utility
3    acquires the water or sewer utility where the acquired
4    water or sewer utility's cost of service is considered as
5    part of determining the large public utility's resulting
6    rates.
7        "Disinterested" means that the person directly
8    involved (1) is not a director, officer, or an employee of
9    the large public utility or the water or sewer utility or
10    its direct affiliates or subsidiaries for at least 12
11    months before becoming engaged under this Section; (2)
12    shall not derive a material financial benefit from the sale
13    of the water or sewer utility other than fees for services
14    rendered, and (3) shall not have a member of the person's
15    immediate family, including a spouse, parents or spouse's
16    parents, children or spouses of children, or siblings and
17    their spouses or children, be a director, officer, or
18    employee of either the large public utility or water or
19    sewer utility or the water or sewer utility or its direct
20    affiliates or subsidiaries for at least 12 months before
21    becoming engaged under this Section or receive a material
22    financial benefit from the sale of the water or sewer
23    utility other than fees for services rendered.
24    (b) Notwithstanding any other provision of this Act, a
25large public utility that acquires a water or sewer utility may
26request that the Commission use, and, if so requested, the

 

 

SB3573 Engrossed- 5 -LRB097 18541 CEL 63773 b

1Commission shall use, the procedures set forth under this
2Section to establish the ratemaking rate base of that water or
3sewer utility at the time when it is acquired by the large
4public utility.
5    (c) If a large public utility elects the procedures under
6this Section to establish the rate base of a water or sewer
7utility that it is acquiring, then an appraisal shall be
8performed. If the water or sewer utility being acquired and the
9large public utility agree on one appraiser, then the appraisal
10shall be performed by that jointly selected appraiser. If the
11water or sewer utility being acquired and the large public
12utility cannot agree on one appraiser, then the appraisal shall
13be performed by 3 appraisers with the water or sewer utility
14being acquired and the large public utility each appointing one
15appraiser individually and those resulting 2 appraisers shall
16together appoint an agreed-upon third appraiser. If the third
17appraiser is not appointed within 30 days after the first 2
18appraisers are appointed, then the manager of the Commission's
19Water Department shall recommend the third appraiser to be
20appointed. The manager of the Water Department shall provide
21his or her recommendation for an appraiser within 30 days after
22when he or she is officially notified of the failure of the 2
23appraisers to agree upon a third appraiser, and the 2
24appraisers shall promptly work to engage the recommended third
25appraiser. If the appraiser or appraisers are unable to
26negotiate reasonable engagement terms with the recommended

 

 

SB3573 Engrossed- 6 -LRB097 18541 CEL 63773 b

1third appraiser within 15 days after the recommendation by the
2manager of the Water Department, then the appraisers shall
3notify the manager of the Water Department and the process
4shall be repeated until a third appraiser is successfully
5engaged. Each appraiser shall be a disinterested person
6licensed as a State certified appraiser under the Real Estate
7Appraiser Licensing Act of 2002.
8    The appraisers shall:
9        (1) be sworn to determine the fair market value of the
10    water or sewer utility by establishing the amount for which
11    the water or sewer utility would be sold in a voluntary
12    transaction between a willing buyer and willing seller
13    under no obligation to buy or sell;
14        (2) determine fair market value in compliance with the
15    Uniform Standards of Professional Appraisal Practice;
16        (3) engage one disinterested engineer who is licensed
17    in this State to prepare an assessment of the tangible
18    assets of the water or sewer utility, which is to be
19    incorporated into the appraisal under the cost approach;
20        (4) if the water or sewer utility is a public utility
21    that is regulated by the Commission, request from the
22    manager of the Accounting Department a list of investments
23    made by the water or sewer utility that had been disallowed
24    previously and that shall be excluded from the calculation
25    of the large public utility's rate base in its next rate
26    case;

 

 

SB3573 Engrossed- 7 -LRB097 18541 CEL 63773 b

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

 

 

SB3573 Engrossed- 8 -LRB097 18541 CEL 63773 b

1transaction. The Commission shall consider the third appraisal
2in its determination of the rate base of the water or sewer
3utility.
4    (d) The lesser of the purchase price or the appraised value
5shall constitute the rate base associated with the water or
6sewer utility as acquired by and incorporated into the rate
7base of the district designated by the acquiring large public
8utility under this Section, subject to any adjustments that the
9Commission deems necessary to ensure such rate base reflects
10prudent and useful investments in the provision of public
11utility service. The reasonable transaction and closing costs
12incurred by the large public utility shall be treated
13consistent with the applicable accounting standards under this
14Act. This rate base treatment shall not be deemed to violate
15this Act, including, but not limited to, any Sections in
16Articles VIII and IX of this Act that might be affected by this
17Section. Without otherwise limiting the application of Section
187-204 or any other Article of this Act, any acquisition of a
19water or sewer utility that affects the cumulative base rates
20of the large public utility's existing ratepayers in the tariff
21group into which the water or sewer utility is to be combined
22by less than (1) 2.5% at the time of the acquisition for any
23single acquisition completed under this Section or (2) 5% for
24all acquisitions completed under this Section before the
25Commission's final order in the next rate case shall not be
26deemed to violate any other Article of this Act.

 

 

SB3573 Engrossed- 9 -LRB097 18541 CEL 63773 b

1    In the Commission's order that approves the large public
2utility's acquisition of the water or sewer utility, the
3Commission shall issue its decision establishing (1) the
4ratemaking rate base of the water or sewer utility and (2) the
5district or tariff group with which the water or sewer utility
6shall be combined for ratemaking purposes.
7    (e) If the water or sewer utility being acquired is owned
8by the State or any political subdivision thereof, then the
9water or sewer utility must inform the public of the terms of
10its acquisition by the large public utility by (1) holding a
11public meeting prior to the acquisition and (2) causing to be
12published, in a newspaper of general circulation in the area
13that the water or sewer utility operates, a notice setting
14forth the terms of its acquisition by the large public utility
15and options that shall be available to assist customers to pay
16their bills after the acquisition.
17    (f) The large public utility shall recommend the district
18or tariff group of which the water or sewer utility shall, for
19ratemaking purposes, become a part after the acquisition. The
20Commission's recommended district or tariff group shall be
21consistent with the large public utility's recommendation,
22unless such recommendation can be shown to be contrary to the
23public interest.
24    (g) From the date of acquisition until the date that new
25rates are effective in the acquiring large public utility's
26next rate case, the customers of the acquired water or sewer

 

 

SB3573 Engrossed- 10 -LRB097 18541 CEL 63773 b

1utility shall pay the then-existing rates of the district or
2tariff group ordered by the Commission; provided, that, if the
3application of such then-existing rates of the large public
4utility to customers of the acquired water or sewer utility
5using 54,000 gallons annually results in an increase to the
6total annual bill of customers of the acquired water or sewer
7utility, exclusive of fire service or related charges, then the
8large public utility's rates charged to the customers of the
9acquired water or sewer utility shall be uniformly reduced, if
10any reduction is required, by the percent that results in the
11total annual bill, exclusive of fire services or related
12charges, for the customers of the acquired water or sewer
13utility using 54,000 gallons being equal to 1.5% of the latest
14median household income as reported by the United States Census
15Bureau for the most applicable community or county. For each
16customer of the water or sewer utility with potable water usage
17values that cannot be reasonably obtained, a value of 4,500
18gallons per month shall be assigned. These rates shall not be
19deemed to violate this Act including, but not limited to,
20Section 9-101 and any other applicable Sections in Articles
21VIII and IX of this Act. The Commission shall issue its
22decision establishing the rates effective for the water or
23sewer utility immediately following an acquisition in its order
24approving the acquisition.
25    (h) In the acquiring large public utility's next rate case,
26the water or sewer utility and the district or tariff group

 

 

SB3573 Engrossed- 11 -LRB097 18541 CEL 63773 b

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

 

 

SB3573 Engrossed- 12 -LRB097 18541 CEL 63773 b

1    (j) This Section shall be exclusively applied to large
2public utilities in the voluntary and mutually agreeable
3acquisition of water or sewer utilities. Any petitions filed
4with the Commission related to the acquisitions described in
5this Section, including petitions seeking approvals or
6certificates required by this Act, shall be deemed approved
7unless the Commission issues its final order within 11 months
8after the date the large public utility filed its initial
9petition. This Section shall only apply to utilities providing
10water or sewer service and shall not be construed in any manner
11to apply to electric corporations, natural gas corporations, or
12any other utility subject to this Act.
13    (k) Nothing in this Section shall prohibit a party from
14declining to proceed with an acquisition or be deemed as
15establishing the final purchase price of an acquisition.
16    (l) Any contractor or subcontractor that performs work on a
17water or sewer utility acquired by a large public utility under
18this Section shall be a responsible bidder as described in
19Section 30-22 of the Illinois Procurement Code. The contractor
20or subcontractor shall submit evidence of meeting the
21requirements to be a responsible bidder as described in Section
2230-22 to the water or sewer utility. Any new water or sewer
23facility built as a result of the acquisition shall require the
24contractor to enter into a project labor agreement. The large
25public utility acquiring the water or sewer utility shall offer
26employee positions to qualified employees of the acquired water

 

 

SB3573 Engrossed- 13 -LRB097 18541 CEL 63773 b

1or sewer utility.
2    (m) This Section is repealed on June 1, 2017.
 
3    Section 99. Effective date. This Act takes effect upon
4becoming law.