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Public Act 102-0149 | ||||
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AN ACT concerning regulation.
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Be it enacted by the People of the State of Illinois,
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represented in the General Assembly:
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Section 5. The Public Utilities Act is amended by changing | ||||
Section 9-210.5 as follows: | ||||
(220 ILCS 5/9-210.5) | ||||
(Section scheduled to be repealed on June 1, 2028) | ||||
Sec. 9-210.5. Valuation of water and sewer utilities. | ||||
(a) In this Section: | ||||
"Disinterested" means that the person directly | ||||
involved (1) is not a director, officer, or an employee of | ||||
the large public utility or the water or sewer utility or | ||||
its direct affiliates or subsidiaries for at least 12 | ||||
months before becoming engaged under this Section; (2) | ||||
shall not derive a material financial benefit from the | ||||
sale of the water or sewer utility other than fees for | ||||
services rendered, and (3) shall not have a member of the | ||||
person's immediate family, including a spouse, parents or | ||||
spouse's parents, children or spouses of children, or | ||||
siblings and their spouses or children, be a director, | ||||
officer, or employee of either the large public utility or | ||||
water or sewer utility or the water or sewer utility or its | ||||
direct affiliates or subsidiaries for at least 12 months |
before becoming engaged under this Section or receive a | ||
material financial benefit from the sale of the water or | ||
sewer utility other than fees for services rendered. | ||
"District" means a service area of a large public | ||
utility whose customers are subject to the same rate | ||
tariff. | ||
"Large public utility" means an investor-owned public | ||
utility that: | ||
(1) is subject to regulation by the Illinois | ||
Commerce Commission under this Act; | ||
(2) regularly provides water or sewer service to | ||
more than 15,000 30,000 customer connections; | ||
(3) provides safe and adequate service; and | ||
(4) is not a water or sewer utility as defined in | ||
this subsection (a). | ||
"Next rate case" means a large public utility's first | ||
general rate case after the date the large public utility | ||
acquires the water or sewer utility where the acquired | ||
water or sewer utility's cost of service is considered as | ||
part of determining the large public utility's resulting | ||
rates. | ||
"Prior rate case" means a large public utility's | ||
general rate case resulting in the rates in effect for the | ||
large public utility at the time it acquires the water or | ||
sewer utility. | ||
"Utility service source" means the water or sewer |
utility or large public utility from which the customer | ||
receives its utility service type. | ||
"Utility service type" means water utility service or | ||
sewer utility service or water and sewer utility service. | ||
"Water or sewer utility" means any of the following: | ||
(1) a public utility that regularly provides water | ||
or sewer service to 6,000 or fewer customer | ||
connections; | ||
(2) a water district, including, but not limited | ||
to, a public water district, water service district, | ||
or surface water protection district, or a sewer | ||
district of any kind established as a special district | ||
under the laws of this State that regularly provides | ||
water or sewer service; | ||
(3) a waterworks system or sewerage system | ||
established under the Township Code that regularly | ||
provides water or sewer service; or | ||
(4) a water system or sewer system owned by a | ||
municipality that regularly provides water or sewer | ||
service; and | ||
(5) any other entity that is not a public utility | ||
that regularly provides water or sewer service. | ||
(b) Notwithstanding any other provision of this Act, a | ||
large public utility that acquires a water or sewer utility | ||
may request that the Commission use, and, if so requested, the | ||
Commission shall use, the procedures set forth under this |
Section to establish the ratemaking rate base of that water or | ||
sewer utility at the time when it is acquired by the large | ||
public utility. | ||
(c) If a large public utility elects the procedures under | ||
this Section to establish the rate base of a water or sewer | ||
utility that it is acquiring, then 3 appraisals shall be | ||
performed. The average of these 3 appraisals shall represent | ||
the fair market value of the water or sewer utility that is | ||
being acquired. The appraisals shall be performed by 3 | ||
appraisers approved by the Commission's Executive Director or | ||
designee and engaged by either the water or sewer utility | ||
being acquired or by the large public utility. Each appraiser | ||
shall be engaged on reasonable terms approved by the | ||
Commission. Each appraiser shall be a disinterested person | ||
licensed as a State certified general real estate appraiser | ||
under the Real Estate Appraiser Licensing Act of 2002. | ||
Each appraiser shall: | ||
(1) be sworn to determine the fair market value of the | ||
water or sewer utility by establishing the amount for | ||
which the water or sewer utility would be sold in a | ||
voluntary transaction between a willing buyer and willing | ||
seller under no obligation to buy or sell; | ||
(2) determine fair market value in compliance with the | ||
Uniform Standards of Professional Appraisal Practice; | ||
(3) engage one disinterested engineer who is licensed | ||
in this State, and who may be the same engineer that is |
engaged by the other appraisers, to prepare an assessment | ||
of the tangible assets of the water or sewer utility, | ||
which is to be incorporated into the appraisal under the | ||
cost approach; | ||
(4) request from the manager of the Accounting | ||
Department, if the water or sewer utility is a public | ||
utility that is regulated by the Commission, a list of | ||
investments made by the water or sewer utility that had | ||
been disallowed previously and that shall be excluded from | ||
the calculation of the large public utility's rate base in | ||
its next rate case; and | ||
(5) return their appraisal, in writing, to the water | ||
or sewer utility and large public utility in a reasonable | ||
and timely manner. | ||
If the appraiser cannot engage an engineer, as described | ||
in paragraph (3) of this subsection (c), within 30 days after | ||
the appraiser is engaged, then the Commission's Executive | ||
Director or designee shall recommend the engineer the | ||
appraiser should engage. The Commission's Executive Director | ||
or designee shall provide his or her recommendation within 30 | ||
days after he or she is officially notified of the appraiser's | ||
failure to engage an engineer and the appraiser shall promptly | ||
work to engage the recommended engineer. If the appraiser is | ||
unable to negotiate reasonable engagement terms with the | ||
recommended engineer within 15 days after the recommendation | ||
by the Commission's Executive Director or designee, then the |
appraiser shall notify the Commission's Executive Director or | ||
designee and the process shall be repeated until an engineer | ||
is successfully engaged. | ||
(d) The lesser of (i) the purchase price or (ii) the fair | ||
market value determined under subsection (c) of this Section | ||
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 under this Section, subject to any adjustments that | ||
the Commission deems necessary to ensure such rate base | ||
reflects prudent and useful investments in the provision of | ||
public utility service. The reasonable transaction and closing | ||
costs incurred by the large public utility shall be treated | ||
consistent with the applicable accounting standards under this | ||
Act. The total amount of all of the appraisers' fees to be | ||
included in the transaction and closing costs shall not exceed | ||
the greater of $15,000 or 5% of the appraised value of the | ||
water or sewer utility being acquired. This rate base | ||
treatment shall not be deemed to violate this Act, including, | ||
but not limited to, any Sections in Articles VIII and IX of | ||
this Act that might be affected by this Section. Any | ||
acquisition of a water or sewer utility that affects the | ||
cumulative base rates of the large public utility's existing | ||
ratepayers in the tariff group into which the water or sewer | ||
utility is to be combined by less than (1) 2.5% at the time of | ||
the acquisition for any single acquisition completed under |
this Section or (2) 5% for all acquisitions completed under | ||
this Section before the Commission's final order in the next | ||
rate case shall not be deemed to violate Section 7-204 or any | ||
other provision of this Act. | ||
In the Commission's order that approves the large public | ||
utility's acquisition of the water or sewer utility, the | ||
Commission shall issue its decision establishing (1) the | ||
ratemaking rate base of the water or sewer utility; (2) the | ||
district or tariff group with which the water or sewer utility | ||
shall be combined for ratemaking purposes, if such combination | ||
has been proposed by the large public utility; and (3) the | ||
rates to be charged to customers in the water or sewer utility. | ||
(e) 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 by the large public utility by (1) holding a | ||
public meeting prior to the acquisition and (2) causing to be | ||
published, in a newspaper of general circulation in the area | ||
that the water or sewer utility operates, a notice setting | ||
forth the terms of its acquisition by the large public utility | ||
and options that shall be available to assist customers to pay | ||
their bills after the acquisition. | ||
(f) The large public utility may recommend the district or | ||
tariff group of which the water or sewer utility shall, for | ||
ratemaking purposes, become a part after the acquisition, or | ||
may recommend a lesser rate for the water or sewer utility. If |
the large public utility recommends a lesser rate, it shall | ||
submit to the Commission its proposed rate schedule and the | ||
proposed final tariff group for the acquired water or sewer | ||
utility. The Commission's approved district or tariff group or | ||
rates shall be consistent with the large public utility's | ||
recommendation, unless such recommendation can be shown to be | ||
contrary to the public interest. | ||
(g) From the date of acquisition until the date that new | ||
rates are effective in the acquiring large public utility's | ||
next rate case, the customers of the acquired water or sewer | ||
utility shall pay the approved then-existing rates of the | ||
district or tariff group as ordered by the Commission, or some | ||
lesser rates as recommended by the large public utility and | ||
approved by the Commission under subsection (f); provided, | ||
that, if the application of such rates of the large public | ||
utility to customers of the acquired water or sewer utility | ||
using 54,000 gallons annually results in an increase to the | ||
total annual bill of customers of the acquired water or sewer | ||
utility, exclusive of fire service or related charges, then | ||
the large public utility's rates charged to the customers of | ||
the acquired water or sewer utility shall be uniformly | ||
reduced, if any reduction is required, by the percent that | ||
results in the total annual bill, exclusive of fire services | ||
or related charges, for the customers of the acquired water or | ||
sewer utility using 54,000 gallons being equal to 1.5% of the | ||
latest median household income as reported by the United |
States Census Bureau for the most applicable community or | ||
county. For each customer of the water or sewer utility with | ||
potable water usage values that cannot be reasonably obtained, | ||
a value of 4,500 gallons per month shall be assigned. These | ||
rates shall not be deemed to violate this Act including, but | ||
not limited to, Section 9-101 and any other applicable | ||
Sections in Articles VIII and IX of this Act. The Commission | ||
shall issue its decision establishing the rates effective for | ||
the water or sewer utility immediately following an | ||
acquisition in its order approving the acquisition. | ||
(h) In the acquiring large public utility's next rate | ||
case, the water or sewer utility and the district or tariff | ||
group ordered by the Commission and their costs of service may | ||
be combined under the same rate tariff. This rate tariff shall | ||
be based on allocation of costs of service of the acquired | ||
water or sewer utility and the large public utility's district | ||
or tariff group ordered by the Commission and utilizing a rate | ||
design that does not distinguish among customers on the basis | ||
of utility service source or type. This rate tariff shall not | ||
be deemed to violate this Act including, but not limited to, | ||
Section 9-101 of this Act. In the acquiring large public | ||
utility's 2 rate cases after an acquisition, but in no | ||
subsequent rate case, the large public utility may file a rate | ||
tariff for a water or sewer utility acquired under this | ||
Section that establishes lesser rates than the district or | ||
tariff group into which the water or sewer utility is to be |
combined. Those lesser rates shall not be deemed to violate | ||
Section 7-204 or any other provision of this Act if they affect | ||
the cumulative base rates of the large public utility's | ||
existing rate payers in the district or tariff by less than | ||
2.5%. | ||
(i) Any post-acquisition improvements made by the large | ||
public utility in the water or sewer utility shall accrue a | ||
cost for financing set at the large public utility's | ||
determined rate for allowance for funds used during | ||
construction, inclusive of the debt, equity, and income tax | ||
gross up components, after the date on which the expenditure | ||
was incurred by the large public utility until the investment | ||
has been in service for a 4-year period or, if sooner, until | ||
the time the rates are implemented in the large public | ||
utility's next rate case. | ||
Any post-acquisition improvements made by the large public | ||
utility in the water or sewer utility shall not be depreciated | ||
for ratemaking purposes from the date on which the expenditure | ||
was incurred by the large public utility until the investment | ||
has been in service for a 4-year period or, if sooner, until | ||
the time the rates are implemented in the large public | ||
utility's next rate case. | ||
(j) This Section shall be exclusively applied to large | ||
public utilities in the voluntary and mutually agreeable | ||
acquisition of water or sewer utilities. Any petitions filed | ||
with the Commission related to the acquisitions described in |
this Section, including petitions seeking approvals or | ||
certificates required by this Act, shall be deemed approved | ||
unless the Commission issues its final order within 11 months | ||
after the date the large public utility filed its initial | ||
petition. This Section shall only apply to utilities providing | ||
water or sewer service and shall not be construed in any manner | ||
to apply to electric corporations, natural gas corporations, | ||
or any other utility subject to this Act. | ||
(k) Nothing in this Section shall prohibit a party from | ||
declining to proceed with an acquisition or be deemed as | ||
establishing the final purchase price of an acquisition. | ||
(l) In the Commission's order that approves the large | ||
utility's acquisition of the water or sewer utility, the | ||
Commission shall address each aspect of the acquisition | ||
transaction for which approval is required under the Act. | ||
(m) Any contractor or subcontractor that performs work on | ||
a water or sewer utility acquired by a large public utility | ||
under this Section shall be a responsible bidder as described | ||
in Section 30-22 of the Illinois Procurement Code. The | ||
contractor or subcontractor shall submit evidence of meeting | ||
the requirements to be a responsible bidder as described in | ||
Section 30-22 to the water or sewer utility. Any new water or | ||
sewer facility built as a result of the acquisition shall | ||
require the contractor to enter into a project labor | ||
agreement. The large public utility acquiring the water or | ||
sewer utility shall offer employee positions to qualified |
employees of the acquired water or sewer utility. | ||
(n) This Section is repealed on June 1, 2028.
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(Source: P.A. 100-751, eff. 8-10-18; 100-1151, eff. 6-1-19 .)
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