Full Text of SB2745 101st General Assembly
SB2745 101ST GENERAL ASSEMBLY |
| | 101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020 SB2745 Introduced 2/4/2020, by Sen. Andy Manar SYNOPSIS AS INTRODUCED: |
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Amends the Public Utilities Act. In provisions concerning procedures for a large public utility to acquire a water or sewer utility, provides that if the water or sewer utility being acquired is owned by the State or a political subdivision of the State, a referendum will be required to approve the acquisition of the water or sewer utility by the large public utility (rather than only requiring a public meeting and publication of the terms of acquisition in a newspaper of general circulation in the area that the water or sewer utility operates). Effective immediately.
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| | A BILL FOR |
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| 1 | | AN ACT concerning regulation.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Public Utilities Act is amended by changing | 5 | | Section 9-210.5 as follows: | 6 | | (220 ILCS 5/9-210.5) | 7 | | (Section scheduled to be repealed on June 1, 2028) | 8 | | Sec. 9-210.5. Valuation of water and sewer utilities. | 9 | | (a) In this Section: | 10 | | "Disinterested" means that the person directly | 11 | | involved (1) is not a director, officer, or an employee of | 12 | | the large public utility or the water or sewer utility or | 13 | | its direct affiliates or subsidiaries for at least 12 | 14 | | months before becoming engaged under this Section; (2) | 15 | | shall not derive a material financial benefit from the sale | 16 | | of the water or sewer utility other than fees for services | 17 | | rendered, and (3) shall not have a member of the person's | 18 | | immediate family, including a spouse, parents or spouse's | 19 | | parents, children or spouses of children, or siblings and | 20 | | their spouses or children, be a director, officer, or | 21 | | employee of either the large public utility or water or | 22 | | sewer utility or the water or sewer utility or its direct | 23 | | affiliates or subsidiaries for at least 12 months before |
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| 1 | | becoming engaged under this Section or receive a material | 2 | | financial benefit from the sale of the water or sewer | 3 | | utility other than fees for services rendered. | 4 | | "District" means a service area of a large public | 5 | | utility whose customers are subject to the same rate | 6 | | tariff. | 7 | | "Large public utility" means an investor-owned public | 8 | | utility that: | 9 | | (1) is subject to regulation by the Illinois | 10 | | Commerce Commission under this Act; | 11 | | (2) regularly provides water or sewer service to | 12 | | more than 30,000 customer connections; | 13 | | (3) provides safe and adequate service; and | 14 | | (4) is not a water or sewer utility as defined in | 15 | | this subsection (a). | 16 | | "Next rate case" means a large public utility's first | 17 | | general rate case after the date the large public utility | 18 | | acquires the water or sewer utility where the acquired | 19 | | water or sewer utility's cost of service is considered as | 20 | | part of determining the large public utility's resulting | 21 | | rates. | 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 | | "Utility service source" means the water or sewer |
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| 1 | | utility or large public utility from which the customer | 2 | | receives its utility service type. | 3 | | "Utility service type" means water utility service or | 4 | | sewer utility service or water and sewer utility service. | 5 | | "Water or sewer utility" means any of the following: | 6 | | (1) a public utility that regularly provides water | 7 | | or sewer service to 6,000 or fewer customer | 8 | | connections; | 9 | | (2) a water district, including, but not limited | 10 | | to, a public water district, water service district, or | 11 | | surface water protection district, or a sewer district | 12 | | of any kind established as a special district under the | 13 | | laws of this State that regularly provides water or | 14 | | sewer service; | 15 | | (3) a waterworks system or sewerage system | 16 | | established under the Township Code that regularly | 17 | | provides water or sewer service; or | 18 | | (4) a water system or sewer system owned by a | 19 | | municipality that regularly provides water or sewer | 20 | | service; and | 21 | | (5) any other entity that is not a public utility | 22 | | that regularly provides water or sewer service. | 23 | | (b) Notwithstanding any other provision of this Act, a | 24 | | large public utility that acquires a water or sewer utility may | 25 | | request that the Commission use, and, if so requested, the | 26 | | Commission shall use, the procedures set forth under this |
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| 1 | | Section to establish the ratemaking rate base of that water or | 2 | | sewer utility at the time when it is acquired by the large | 3 | | public utility. | 4 | | (c) If a large public utility elects the procedures under | 5 | | this Section to establish the rate base of a water or sewer | 6 | | utility that it is acquiring, then 3 appraisals shall be | 7 | | performed. The average of these 3 appraisals shall represent | 8 | | the fair market value of the water or sewer utility that is | 9 | | being acquired. The appraisals shall be performed by 3 | 10 | | appraisers approved by the Commission's Executive Director or | 11 | | designee and engaged by either the water or sewer utility being | 12 | | acquired or by the large public utility. Each appraiser shall | 13 | | be engaged on reasonable terms approved by the Commission. Each | 14 | | appraiser shall be a disinterested person licensed as a State | 15 | | certified general real estate appraiser under the Real Estate | 16 | | Appraiser Licensing Act of 2002. | 17 | | Each appraiser shall: | 18 | | (1) be sworn to determine the fair market value of the | 19 | | water or sewer utility by establishing the amount for which | 20 | | the water or sewer utility would be sold in a voluntary | 21 | | transaction between a willing buyer and willing seller | 22 | | under no obligation to buy or sell; | 23 | | (2) determine fair market value in compliance with the | 24 | | Uniform Standards of Professional Appraisal Practice; | 25 | | (3) engage one disinterested engineer who is licensed | 26 | | in this State, and who may be the same engineer that is |
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| 1 | | engaged by the other appraisers, to prepare an assessment | 2 | | of the tangible assets of the water or sewer utility, which | 3 | | is to be incorporated into the appraisal under the cost | 4 | | approach; | 5 | | (4) request from the manager of the Accounting | 6 | | Department, if the water or sewer utility is a public | 7 | | utility that is regulated by the Commission, a list of | 8 | | investments made by the water or sewer utility that had | 9 | | been disallowed previously and that shall be excluded from | 10 | | the calculation of the large public utility's rate base in | 11 | | its next rate case; and | 12 | | (5) return their appraisal, in writing, to the water or | 13 | | sewer utility and large public utility in a reasonable and | 14 | | timely manner. | 15 | | If the appraiser cannot engage an engineer, as described in | 16 | | paragraph (3) of this subsection (c), within 30 days after the | 17 | | appraiser is engaged, then the Commission's Executive Director | 18 | | or designee shall recommend the engineer the appraiser should | 19 | | engage. The Commission's Executive Director or designee shall | 20 | | provide his or her recommendation within 30 days after he or | 21 | | she is officially notified of the appraiser's failure to engage | 22 | | an engineer and the appraiser shall promptly work to engage the | 23 | | recommended engineer. If the appraiser is unable to negotiate | 24 | | reasonable engagement terms with the recommended engineer | 25 | | within 15 days after the recommendation by the Commission's | 26 | | Executive Director or designee, then the appraiser shall notify |
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| 1 | | the Commission's Executive Director or designee and the process | 2 | | shall be repeated until an engineer is successfully engaged. | 3 | | (d) The lesser of (i) the purchase price or (ii) the fair | 4 | | market value determined under subsection (c) of this Section | 5 | | shall constitute the rate base associated with the water or | 6 | | sewer utility as acquired by and incorporated into the rate | 7 | | base of the district designated by the acquiring large public | 8 | | utility under this Section, subject to any adjustments that the | 9 | | Commission deems necessary to ensure such rate base reflects | 10 | | prudent and useful investments in the provision of public | 11 | | utility service. The reasonable transaction and closing costs | 12 | | incurred by the large public utility shall be treated | 13 | | consistent with the applicable accounting standards under this | 14 | | Act. The total amount of all of the appraisers' fees to be | 15 | | included in the transaction and closing costs shall not exceed | 16 | | the greater of $15,000 or 5% of the appraised value of the | 17 | | water or sewer utility being acquired. This rate base treatment | 18 | | shall not be deemed to violate this Act, including, but not | 19 | | limited to, any Sections in Articles VIII and IX of this Act | 20 | | that might be affected by this Section. Any acquisition of a | 21 | | water or sewer utility that affects the cumulative base rates | 22 | | of the large public utility's existing ratepayers in the tariff | 23 | | group into which the water or sewer utility is to be combined | 24 | | by less than (1) 2.5% at the time of the acquisition for any | 25 | | single acquisition completed under this Section or (2) 5% for | 26 | | all acquisitions completed under this Section before the |
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| 1 | | Commission's final order in the next rate case shall not be | 2 | | deemed to violate Section 7-204 or any other provision of this | 3 | | Act. | 4 | | In the Commission's order that approves the large public | 5 | | utility's acquisition of the water or sewer utility, the | 6 | | Commission shall issue its decision establishing (1) the | 7 | | ratemaking rate base of the water or sewer utility; (2) the | 8 | | district or tariff group with which the water or sewer utility | 9 | | shall be combined for ratemaking purposes, if such combination | 10 | | has been proposed by the large public utility; and (3) the | 11 | | rates to be charged to customers in the water or sewer utility. | 12 | | (e) If the water or sewer utility being acquired is owned | 13 | | by the State or any political subdivision thereof, then the | 14 | | water or sewer utility must inform the public of the terms of | 15 | | its acquisition by the large public utility by (1) holding a | 16 | | public meeting prior to the acquisition and (2) causing to be | 17 | | published, in a newspaper of general circulation in the area | 18 | | that the water or sewer utility operates, a notice setting | 19 | | forth the terms of its acquisition by the large public utility | 20 | | and options that shall be available to assist customers to pay | 21 | | their bills after the acquisition. | 22 | | At the election next following the public meeting and | 23 | | notice required under this subsection, a referendum, subject to | 24 | | the requirements of Section 16-7 of the Election Code, shall be | 25 | | placed on the ballot for all electors within the area where the | 26 | | water or sewer utility operates in substantially the following |
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| 1 | | form: | 2 | | May the (name of large public utility) acquire the | 3 | | (name of water or sewer utility) under the terms of | 4 | | acquisition as published in (name of newspaper) on (date)? | 5 | | The votes shall be recorded as "Yes" or "No". | 6 | | If a majority of the electors voting on the referendum | 7 | | within the service area of the water or sewer utility vote in | 8 | | favor of the referendum, then the acquisition may continue as | 9 | | provided in this Section. If less than a majority of the | 10 | | electors voting on the referendum within the service area of | 11 | | the water or sewer utility vote against the referendum, the | 12 | | Commission shall deny the large public utility's acquisition of | 13 | | the water or sewer utility. | 14 | | (f) The large public utility may recommend the district or | 15 | | tariff group of which the water or sewer utility shall, for | 16 | | ratemaking purposes, become a part after the acquisition, or | 17 | | may recommend a lesser rate for the water or sewer utility. If | 18 | | the large public utility recommends a lesser rate, it shall | 19 | | submit to the Commission its proposed rate schedule and the | 20 | | proposed final tariff group for the acquired water or sewer | 21 | | utility. The Commission's approved district or tariff group or | 22 | | rates shall be consistent with the large public utility's | 23 | | recommendation, unless such recommendation can be shown to be | 24 | | contrary to the public interest. | 25 | | (g) From the date of acquisition until the date that new | 26 | | rates are effective in the acquiring large public utility's |
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| 1 | | next rate case, the customers of the acquired water or sewer | 2 | | utility shall pay the approved then-existing rates of the | 3 | | district or tariff group as ordered by the Commission, or some | 4 | | lesser rates as recommended by the large public utility and | 5 | | approved by the Commission under subsection (f); provided, | 6 | | that, if the application of such rates of the large public | 7 | | utility to customers of the acquired water or sewer utility | 8 | | using 54,000 gallons annually results in an increase to the | 9 | | total annual bill of customers of the acquired water or sewer | 10 | | utility, exclusive of fire service or related charges, then the | 11 | | large public utility's rates charged to the customers of the | 12 | | acquired water or sewer utility shall be uniformly reduced, if | 13 | | any reduction is required, by the percent that results in the | 14 | | total annual bill, exclusive of fire services or related | 15 | | charges, for the customers of the acquired water or sewer | 16 | | utility using 54,000 gallons being equal to 1.5% of the latest | 17 | | median household income as reported by the United States Census | 18 | | Bureau for the most applicable community or county. For each | 19 | | customer of the water or sewer utility with potable water usage | 20 | | values that cannot be reasonably obtained, a value of 4,500 | 21 | | gallons per month shall be assigned. These rates shall not be | 22 | | deemed to violate this Act including, but not limited to, | 23 | | Section 9-101 and any other applicable Sections in Articles | 24 | | VIII and IX of this Act. The Commission shall issue its | 25 | | decision establishing the rates effective for the water or | 26 | | sewer utility immediately following an acquisition in its order |
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| 1 | | approving the acquisition. | 2 | | (h) In the acquiring large public utility's next rate case, | 3 | | the water or sewer utility and the district or tariff group | 4 | | ordered by the Commission and their costs of service may be | 5 | | combined under the same rate tariff. This rate tariff shall be | 6 | | based on allocation of costs of service of the acquired water | 7 | | or sewer utility and the large public utility's district or | 8 | | tariff group ordered by the Commission and utilizing a rate | 9 | | design that does not distinguish among customers on the basis | 10 | | of utility service source or type. This rate tariff shall not | 11 | | be deemed to violate this Act including, but not limited to, | 12 | | Section 9-101 of this Act. In the acquiring large public | 13 | | utility's 2 rate cases after an acquisition, but in no | 14 | | subsequent rate case, the large public utility may file a rate | 15 | | tariff for a water or sewer utility acquired under this Section | 16 | | that establishes lesser rates than the district or tariff group | 17 | | into which the water or sewer utility is to be combined. Those | 18 | | lesser rates shall not be deemed to violate Section 7-204 or | 19 | | any other provision of this Act if they affect the cumulative | 20 | | base rates of the large public utility's existing rate payers | 21 | | in the district or tariff by less than 2.5%. | 22 | | (i) Any post-acquisition improvements made by the large | 23 | | public utility in the water or sewer utility shall accrue a | 24 | | cost for financing set at the large public utility's determined | 25 | | rate for allowance for funds used during construction, | 26 | | inclusive of the debt, equity, and income tax gross up |
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| 1 | | components, after the date on which the expenditure was | 2 | | incurred by the large public utility until the investment has | 3 | | been in service for a 4-year period or, if sooner, until the | 4 | | time the rates are implemented in the large public utility's | 5 | | next rate case. | 6 | | Any post-acquisition improvements made by the large public | 7 | | utility in the water or sewer utility shall not be depreciated | 8 | | for ratemaking purposes from the date on which the expenditure | 9 | | was incurred by the large public utility until the investment | 10 | | has been in service for a 4-year period or, if sooner, until | 11 | | the time the rates are implemented in the large public | 12 | | utility's next rate case. | 13 | | (j) This Section shall be exclusively applied to large | 14 | | public utilities in the voluntary and mutually agreeable | 15 | | acquisition of water or sewer utilities. Any petitions filed | 16 | | with the Commission related to the acquisitions described in | 17 | | this Section, including petitions seeking approvals or | 18 | | certificates required by this Act, shall be deemed approved | 19 | | unless the Commission issues its final order within 11 months | 20 | | after the date the large public utility filed its initial | 21 | | petition. This Section shall only apply to utilities providing | 22 | | water or sewer service and shall not be construed in any manner | 23 | | to apply to electric corporations, natural gas corporations, or | 24 | | any other utility subject to this Act. | 25 | | (k) Nothing in this Section shall prohibit a party from | 26 | | declining to proceed with an acquisition or be deemed as |
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| 1 | | establishing the final purchase price of an acquisition. | 2 | | (l) In the Commission's order that approves the large | 3 | | utility's acquisition of the water or sewer utility, the | 4 | | Commission shall address each aspect of the acquisition | 5 | | transaction for which approval is required under the Act. | 6 | | (m) Any contractor or subcontractor that performs work on a | 7 | | water or sewer utility acquired by a large public utility under | 8 | | this Section shall be a responsible bidder as described in | 9 | | Section 30-22 of the Illinois Procurement Code. The contractor | 10 | | or subcontractor shall submit evidence of meeting the | 11 | | requirements to be a responsible bidder as described in Section | 12 | | 30-22 to the water or sewer utility. Any new water or sewer | 13 | | facility built as a result of the acquisition shall require the | 14 | | contractor to enter into a project labor agreement. The large | 15 | | public utility acquiring the water or sewer utility shall offer | 16 | | employee positions to qualified employees of the acquired water | 17 | | or sewer utility. | 18 | | (n) This Section is repealed on June 1, 2028.
| 19 | | (Source: P.A. 100-751, eff. 8-10-18; 100-1151, eff. 6-1-19 .)
| 20 | | Section 99. Effective date. This Act takes effect upon | 21 | | becoming law.
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