Sen. William R. Haine

Filed: 3/26/2012

 

 


 

 


 
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1
AMENDMENT TO SENATE BILL 3573

2    AMENDMENT NO. ______. Amend Senate Bill 3573 by replacing
3everything after the enacting clause with the following:
 
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,

 

 

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1documents, or records in the possession of any officer,
2department or board of the State or any subdivision thereof.
3The Commission shall have power to make revaluation from time
4to time and also to ascertain the value of all new
5construction, extensions, and additions to the property of
6every public utility.
7    (b) For purposes of establishing the value of public
8utility property, when determining rates or charges, or for any
9other reason, the Commission may base its determination on the
10original cost of such property.
11    (c) This Section does not apply to valuations of water or
12sewer utilities under Section 9-210.5. This subsection (c) is
13inoperative on and after June 1, 2017.
14(Source: P.A. 84-617.)
 
15    (220 ILCS 5/9-210.5 new)
16    Sec. 9-210.5. Valuation of water and sewer utilities.
17    (a) In this Section:
18        "Water or sewer utility" means any of the following:
19            (1) a public utility that regularly provides water
20        or sewer service to 6,000 or fewer customer
21        connections;
22            (2) a water district, including, but not limited
23        to, a public water district, water service district, or
24        surface water protection district, or a sewer district
25        of any kind established as a special district under the

 

 

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1        laws of this State that regularly provides water or
2        sewer service to 7,500 or fewer customer connections;
3            (3) a waterworks system or sewerage system
4        established under the Township Code that regularly
5        provides water or sewer service to 7,500 or fewer
6        customer connections; or
7            (4) a water system or sewer system owned by a
8        municipality that regularly provides water or sewer
9        service to 7,500 or fewer customer connections; and
10            (5) any other entity that regularly provides water
11        or sewer service to 7,500 or fewer customer
12        connections.
13        "Large public utility" means an investor-owned public
14    utility that:
15            (1) is subject to regulation by the Illinois
16        Commerce Commission under this Act;
17            (2) regularly provides water or sewer service to
18        more than 30,000 customer connections;
19            (3) provides safe and adequate service; and
20            (4) is not a water or sewer utility as defined in
21        this subsection (a).
22        "District" means a service area of a large public
23    utility whose customers are subject to the same rate
24    tariff.
25        "Utility service source" means the water or sewer
26    utility or large public utility from which the customer

 

 

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

 

 

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1    affiliates or subsidiaries for at least 12 months before
2    becoming engaged under this Section or receive a material
3    financial benefit from the sale of the water or sewer
4    utility other than fees for services rendered.
5    (b) Notwithstanding any other provision of this Act, a
6large public utility that acquires a water or sewer utility may
7request that the Commission use, and, if so requested, the
8Commission shall use, the procedures set forth under this
9Section to establish the ratemaking rate base of that water or
10sewer utility at the time when it is acquired by the large
11public utility.
12    (c) If a large public utility elects the procedures under
13this Section to establish the rate base of a water or sewer
14utility that it is acquiring, then an appraisal shall be
15performed. If the water or sewer utility being acquired and the
16large public utility agree on one appraiser, then the appraisal
17shall be performed by that jointly selected appraiser. If the
18water or sewer utility being acquired and the large public
19utility cannot agree on one appraiser, then the appraisal shall
20be performed by 3 appraisers with the water or sewer utility
21being acquired and the large public utility each appointing one
22appraiser individually and those resulting 2 appraisers shall
23together appoint an agreed-upon third appraiser. If the third
24appraiser is not appointed within 30 days after the first 2
25appraisers are appointed, then the manager of the Commission's
26Water Department shall recommend the third appraiser to be

 

 

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1appointed. The manager of the Water Department shall provide
2his or her recommendation for an appraiser within 30 days after
3when he or she is officially notified of the failure of the 2
4appraisers to agree upon a third appraiser, and the 2
5appraisers shall promptly work to engage the recommended third
6appraiser. If the appraiser or appraisers are unable to
7negotiate reasonable engagement terms with the recommended
8third appraiser within 15 days after the recommendation by the
9manager of the Water Department, then the appraisers shall
10notify the manager of the Water Department and the process
11shall be repeated until a third appraiser is successfully
12engaged. Each appraiser shall be a disinterested person
13licensed as a State certified appraiser under the Real Estate
14Appraiser Licensing Act of 2002.
15    The appraisers shall:
16        (1) be sworn to determine the fair market value of the
17    water or sewer utility by establishing the amount for which
18    the water or sewer utility would be sold in a voluntary
19    transaction between a willing buyer and willing seller
20    under no obligation to buy or sell;
21        (2) determine fair market value in compliance with the
22    Uniform Standards of Professional Appraisal Practice;
23        (3) engage one disinterested engineer who is licensed
24    in this State to prepare an assessment of the tangible
25    assets of the water or sewer utility, which is to be
26    incorporated into the appraisal under the cost approach;

 

 

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1        (4) if the water or sewer utility is a public utility
2    that is regulated by the Commission, request from the
3    manager of the Accounting Department a list of investments
4    made by the water or sewer utility that had been disallowed
5    previously and that shall be excluded from the calculation
6    of the large public utility's rate base in its next rate
7    case;
8        (5) return their appraisal, in writing, to the water or
9    sewer utility and large public utility in a reasonable and
10    timely manner; and
11        (6) if the appraisers cannot agree on the engineer, as
12    described in paragraph (3) of this subsection (c), within
13    30 days after the appraisers are appointed, then the
14    Commission's manager of the Water Department shall
15    recommend the engineer which the appraiser or appraisers
16    should engage; the manager of the Water Department shall
17    provide his or her recommendation within 30 days after he
18    or she is officially notified of the appraiser or
19    appraisers failure to engage an engineer and the appraiser
20    or appraisers shall promptly work to engage the recommended
21    engineer; if the appraiser or appraisers are unable to
22    negotiate reasonable engagement terms with the recommended
23    engineer within 15 days after the recommendation by the
24    manager of the Water Department, then the appraisers shall
25    notify the manager of the Water Department and the process
26    shall be repeated until an engineer is successfully

 

 

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1    engaged.
2    When 3 appraisers are required and in the event all 3
3appointed appraisers cannot agree as to the appraised value of
4the water or sewer utility, then an appraisal signed by 2 of
5the appointed appraisers shall constitute a good and valid
6appraisal. In this event, the third appraisal shall be
7submitted to the Commission with the filing for approval of the
8transaction. The Commission shall consider the third appraisal
9in its determination of the rate base of the water or sewer
10utility.
11    (d) The lesser of the purchase price or the appraised value
12shall constitute the rate base associated with the water or
13sewer utility as acquired by and incorporated into the rate
14base of the district designated by the acquiring large public
15utility under this Section, subject to any adjustments that the
16Commission deems necessary to ensure such rate base reflects
17prudent and useful investments in the provision of public
18utility service. The reasonable transaction and closing costs
19incurred by the large public utility shall be treated
20consistent with the applicable accounting standards under this
21Act. This rate base treatment shall not be deemed to violate
22this Act, including, but not limited to, any Sections in
23Articles VIII and IX of this Act that might be affected by this
24Section. Without otherwise limiting the application of Section
257-204 or any other Article of this Act, any acquisition of a
26water or sewer utility that affects the cumulative base rates

 

 

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1of the large public utility's existing ratepayers in the tariff
2group into which the water or sewer utility is to be combined
3by less than (1) 2.5% at the time of the acquisition for any
4single acquisition completed under this Section or (2) 5% for
5all acquisitions completed under this Section before the
6Commission's final order in the next rate case shall not be
7deemed to violate any other Article of this Act.
8    In the Commission's order that approves the large public
9utility's acquisition of the water or sewer utility, the
10Commission shall issue its decision establishing (1) the
11ratemaking rate base of the water or sewer utility and (2) the
12district or tariff group with which the water or sewer utility
13shall be combined for ratemaking purposes.
14    (e) If the water or sewer utility being acquired is owned
15by the State or any political subdivision thereof, then the
16water or sewer utility must inform the public of the terms of
17its acquisition by the large public utility by (1) holding a
18public meeting prior to the acquisition and (2) causing to be
19published, in a newspaper of general circulation in the area
20that the water or sewer utility operates, a notice setting
21forth the terms of its acquisition by the large public utility
22and options that shall be available to assist customers to pay
23their bills after the acquisition.
24    (f) The large public utility shall recommend the district
25or tariff group of which the water or sewer utility shall, for
26ratemaking purposes, become a part after the acquisition. The

 

 

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

 

 

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

 

 

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1    Any post-acquisition improvements, made by the large
2public utility in the water or sewer utility shall not be
3depreciated for ratemaking purposes from the date on which the
4expenditure was incurred by the large public utility until the
5investment has been in service for a 4-year period or, if
6sooner, until the time the rates are implemented in the large
7public utility's next rate case.
8    (j) This Section shall be exclusively applied to large
9public utilities in the voluntary and mutually agreeable
10acquisition of water or sewer utilities. Any petitions filed
11with the Commission related to the acquisitions described in
12this Section, including petitions seeking approvals or
13certificates required by this Act, shall be deemed approved
14unless the Commission issues its final order within 11 months
15after the date the large public utility filed its initial
16petition. This Section shall only apply to utilities providing
17water or sewer service and shall not be construed in any manner
18to apply to electric corporations, natural gas corporations, or
19any other utility subject to this Act.
20    (k) Nothing in this Section shall prohibit a party from
21declining to proceed with an acquisition or be deemed as
22establishing the final purchase price of an acquisition.
23    (l) Any contractor or subcontractor that performs work on a
24water or sewer utility acquired by a large public utility under
25this Section shall be a responsible bidder as described in
26Section 30-22 of the Illinois Procurement Code. The contractor

 

 

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1or subcontractor shall submit evidence of meeting the
2requirements to be a responsible bidder as described in Section
330-22 to the water or sewer utility. Any new water or sewer
4facility built as a result of the acquisition shall require the
5contractor to enter into a project labor agreement. The large
6public utility acquiring the water or sewer utility shall offer
7employee positions to qualified employees of the acquired water
8or sewer utility.
9    (m) This Section is repealed on June 1, 2017.
 
10    Section 99. Effective date. This Act takes effect upon
11becoming law.".