HB4508 EngrossedLRB100 15518 RJF 30563 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 9-210.5 as follows:
 
6    (220 ILCS 5/9-210.5)
7    (Section scheduled to be repealed on June 1, 2018)
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

 

 

HB4508 Engrossed- 2 -LRB100 15518 RJF 30563 b

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

 

 

HB4508 Engrossed- 3 -LRB100 15518 RJF 30563 b

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 to 7,500 or fewer customer connections;
15            (3) a waterworks system or sewerage system
16        established under the Township Code that regularly
17        provides water or sewer service to 7,500 or fewer
18        customer connections; or
19            (4) a water system or sewer system owned by a
20        municipality that regularly provides water or sewer
21        service to 7,500 or fewer customer connections; and
22            (5) any other entity that is not a public utility
23        that regularly provides water or sewer service to 7,500
24        or fewer customer connections.
25    (b) Notwithstanding any other provision of this Act, a
26large public utility that acquires a water or sewer utility may

 

 

HB4508 Engrossed- 4 -LRB100 15518 RJF 30563 b

1request that the Commission use, and, if so requested, the
2Commission shall use, the procedures set forth under this
3Section to establish the ratemaking rate base of that water or
4sewer utility at the time when it is acquired by the large
5public utility.
6    (c) If a large public utility elects the procedures under
7this Section to establish the rate base of a water or sewer
8utility that it is acquiring, then 3 appraisals shall be
9performed. The average of these 3 appraisals shall represent
10the fair market value of the water or sewer utility that is
11being acquired. The appraisals shall be performed by 3
12appraisers approved selected by the Commission's Executive
13Director or designee water department manager and engaged by
14either the water or sewer utility being acquired or by the
15large public utility. The Commission's water department
16manager shall select the appraisers within 30 days after the
17water department manager is officially notified. Each
18appraiser shall be engaged on reasonable terms approved by the
19Commission. Each appraiser shall be a disinterested person
20licensed as a State certified general real estate appraiser
21under the Real Estate Appraiser Licensing Act of 2002.
22    Each appraiser shall:
23        (1) be sworn to determine the fair market value of the
24    water or sewer utility by establishing the amount for which
25    the water or sewer utility would be sold in a voluntary
26    transaction between a willing buyer and willing seller

 

 

HB4508 Engrossed- 5 -LRB100 15518 RJF 30563 b

1    under no obligation to buy or sell;
2        (2) determine fair market value in compliance with the
3    Uniform Standards of Professional Appraisal Practice;
4        (3) engage one disinterested engineer who is licensed
5    in this State, and who may be the same engineer that is
6    engaged by the other appraisers, to prepare an assessment
7    of the tangible assets of the water or sewer utility, which
8    is to be incorporated into the appraisal under the cost
9    approach;
10        (4) if the water or sewer utility is a public utility
11    that is regulated by the Commission, request from the
12    manager of the Accounting Department, if the water or sewer
13    utility is a public utility that is regulated by the
14    Commission, a list of investments made by the water or
15    sewer utility that had been disallowed previously and that
16    shall be excluded from the calculation of the large public
17    utility's rate base in its next rate case; and
18        (5) return their appraisal, in writing, to the water or
19    sewer utility and large public utility in a reasonable and
20    timely manner.
21    If the appraiser cannot engage an engineer, as described in
22paragraph (3) of this subsection (c), within 30 days after the
23appraiser is engaged, then the Commission's Executive Director
24or designee water department manager shall recommend the
25engineer the appraiser should engage. The Commission's
26Executive Director or designee water department manager shall

 

 

HB4508 Engrossed- 6 -LRB100 15518 RJF 30563 b

1provide his or her recommendation within 30 days after he or
2she is officially notified of the appraiser's failure to engage
3an engineer and the appraiser shall promptly work to engage the
4recommended engineer. If the appraiser is unable to negotiate
5reasonable engagement terms with the recommended engineer
6within 15 days after the recommendation by the Commission's
7Executive Director or designee water department manager, then
8the appraiser shall notify the Commission's Executive Director
9or designee water department manager and the process shall be
10repeated until an engineer is successfully engaged.
11    (d) The lesser of (i) the purchase price or (ii) the fair
12market value determined under subsection (c) of this Section
13shall constitute the rate base associated with the water or
14sewer utility as acquired by and incorporated into the rate
15base of the district designated by the acquiring large public
16utility under this Section, subject to any adjustments that the
17Commission deems necessary to ensure such rate base reflects
18prudent and useful investments in the provision of public
19utility service. The reasonable transaction and closing costs
20incurred by the large public utility shall be treated
21consistent with the applicable accounting standards under this
22Act. The total amount of all of the appraisers' appraiser's
23fees to be included in the transaction and closing costs shall
24not exceed the greater of $15,000 or 5% of the appraised value
25of the water or sewer utility being acquired. This rate base
26treatment shall not be deemed to violate this Act, including,

 

 

HB4508 Engrossed- 7 -LRB100 15518 RJF 30563 b

1but not limited to, any Sections in Articles VIII and IX of
2this Act that might be affected by this Section. Any
3acquisition of a water or sewer utility that affects the
4cumulative base rates of the large public utility's existing
5ratepayers in the tariff group into which the water or sewer
6utility is to be combined by less than (1) 2.5% at the time of
7the acquisition for any single acquisition completed under this
8Section or (2) 5% for all acquisitions completed under this
9Section before the Commission's final order in the next rate
10case shall not be deemed to violate Section 7-204 or any other
11provision of this Act.
12    In the Commission's order that approves the large public
13utility's acquisition of the water or sewer utility, the
14Commission shall issue its decision establishing (1) the
15ratemaking rate base of the water or sewer utility; and (2) the
16district or tariff group with which the water or sewer utility
17shall be combined for ratemaking purposes, if such combination
18has been proposed by the large public utility; and (3) the
19rates to be charged to customers in the water or sewer utility.
20    (e) If the water or sewer utility being acquired is owned
21by the State or any political subdivision thereof, then the
22water or sewer utility must inform the public of the terms of
23its acquisition by the large public utility by (1) holding a
24public meeting prior to the acquisition and (2) causing to be
25published, in a newspaper of general circulation in the area
26that the water or sewer utility operates, a notice setting

 

 

HB4508 Engrossed- 8 -LRB100 15518 RJF 30563 b

1forth the terms of its acquisition by the large public utility
2and options that shall be available to assist customers to pay
3their bills after the acquisition.
4    (f) The large public utility may shall recommend the
5district or tariff group of which the water or sewer utility
6shall, for ratemaking purposes, become a part after the
7acquisition, or may recommend a lesser rate for the water or
8sewer utility. If the large public utility recommends a lesser
9rate, it shall submit to the Commission its proposed rate
10schedule and the proposed final tariff group for the acquired
11water or sewer utility. The Commission's approved recommended
12district or tariff group or rates shall be consistent with the
13large public utility's recommendation, unless such
14recommendation can be shown to be contrary to the public
15interest.
16    (g) From the date of acquisition until the date that new
17rates are effective in the acquiring large public utility's
18next rate case, the customers of the acquired water or sewer
19utility shall pay the approved then-existing rates of the
20district or tariff group as ordered by the Commission, or some
21lesser rates as recommended by the large public utility and
22approved by the Commission under subsection (f); provided,
23that, if the application of such then-existing rates of the
24large public utility to customers of the acquired water or
25sewer utility using 54,000 gallons annually results in an
26increase to the total annual bill of customers of the acquired

 

 

HB4508 Engrossed- 9 -LRB100 15518 RJF 30563 b

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

 

 

HB4508 Engrossed- 10 -LRB100 15518 RJF 30563 b

1of utility service source or type. This rate tariff shall not
2be deemed to violate this Act including, but not limited to,
3Section 9-101 of this Act. In the acquiring large public
4utility's 2 rate cases after an acquisition, but in no
5subsequent rate case, the large public utility may file a rate
6tariff for a water or sewer utility acquired under this Section
7that establishes lesser rates than the district or tariff group
8into which the water or sewer utility is to be combined. Those
9lesser rates shall not be deemed to violate Section 7-204 or
10any other provision of this Act if they affect the cumulative
11base rates of the large public utility's existing rate payers
12in the district or tariff by less than 2.5%.
13    (i) Any post-acquisition improvements made by the large
14public utility in the water or sewer utility shall accrue a
15cost for financing set at the large public utility's determined
16rate for allowance for funds used during construction,
17inclusive of the debt, equity, and income tax gross up
18components, after the date on which the expenditure was
19incurred by the large public utility until the investment has
20been in service for a 4-year period or, if sooner, until the
21time the rates are implemented in the large public utility's
22next rate case.
23    Any post-acquisition improvements made by the large public
24utility in the water or sewer utility shall not be depreciated
25for ratemaking purposes from the date on which the expenditure
26was incurred by the large public utility until the investment

 

 

HB4508 Engrossed- 11 -LRB100 15518 RJF 30563 b

1has been in service for a 4-year period or, if sooner, until
2the time the rates are implemented in the large public
3utility's next rate case.
4    (j) This Section shall be exclusively applied to large
5public utilities in the voluntary and mutually agreeable
6acquisition of water or sewer utilities. Any petitions filed
7with the Commission related to the acquisitions described in
8this Section, including petitions seeking approvals or
9certificates required by this Act, shall be deemed approved
10unless the Commission issues its final order within 11 months
11after the date the large public utility filed its initial
12petition. This Section shall only apply to utilities providing
13water or sewer service and shall not be construed in any manner
14to apply to electric corporations, natural gas corporations, or
15any other utility subject to this Act.
16    (k) Nothing in this Section shall prohibit a party from
17declining to proceed with an acquisition or be deemed as
18establishing the final purchase price of an acquisition.
19    (l) In the Commission's order that approves the large
20utility's acquisition of the water or sewer utility, the
21Commission shall address each aspect of the acquisition
22transaction for which approval is required under the Act.
23    (m) 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

 

 

HB4508 Engrossed- 12 -LRB100 15518 RJF 30563 b

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    (n) This Section is repealed on June 1, 2028 2018.
10(Source: P.A. 98-213, eff. 8-9-13.)
 
11    Section 99. Effective date. This Act takes effect upon
12becoming law.