97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB1955

 

Introduced , by Rep. Thomas Holbrook

 

SYNOPSIS AS INTRODUCED:
 
220 ILCS 5/9-210  from Ch. 111 2/3, par. 9-210
220 ILCS 5/9-210.5 new

    Amends the Public Utilities Act. Provides an alternative procedure that a large public utility may choose in establishing the ratemaking rate base of a water or sewer utility that the large public utility is acquiring. Defines "large public utility" and "water or sewer utility". Provides that the Commission's order that approves the large public utility's acquisition of the water or sewer utility shall include the Commission's decision establishing (1) the ratemaking rate base of the water or sewer utility and (2) the district or tariff group with which the water or sewer utility will be combined for ratemaking purposes. Sets forth provisions concerning definitions, appraisers and their duties, ratemaking rate base, and rate cases. Makes other changes. Effective immediately.


LRB097 10530 ASK 50859 b

 

 

A BILL FOR

 

HB1955LRB097 10530 ASK 50859 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. The Commission shall have power to ascertain
8the value of the property of every public utility in this State
9and every fact which in its judgment may or does have any
10bearing 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    For purposes of establishing the value of public utility

 

 

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1property, when determining rates or charges, or for any other
2reason, the Commission may base its determination on the
3original cost of such property.
4    This Section does not apply to valuations of water or sewer
5utilities under Section 9-210.5.
6(Source: P.A. 84-617.)
 
7    (220 ILCS 5/9-210.5 new)
8    Sec. 9-210.5. Valuation of water and sewer utilities.
9    (a) In this Section:
10        "Water or sewer utility" means any of the following:
11            (1) a public utility that regularly provides water
12        or sewer service to 30,000 or fewer customer
13        connections;
14            (2) a water district, including, but not limited
15        to, a public water district, water service district, or
16        surface water protection district, or a sewer district
17        of any kind established as a special district under the
18        laws of this State that regularly provides water or
19        sewer service to 30,000 or fewer customer connections;
20            (3) a waterworks system or sewerage system
21        established under the Township Code that regularly
22        provides water or sewer service to 30,000 or fewer
23        customer connections; or
24            (4) a water system or sewer system owned by a
25        municipality that regularly provides water or sewer

 

 

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

 

 

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1        "Next rate case" means, a large public utility's
2    general rate case with a test-year end date as updated and
3    adjusted in accordance with Commission rules and
4    regulations, occurring immediately after the date of the
5    large public utility's acquisition of a water or sewer
6    utility.
7        "Actual pre-tax earnings" means the average daily sum
8    of the revenues and expenses, exclusive of income taxes, of
9    the water or sewer utility recorded in the large public
10    utility's accounting books over a time period beginning on
11    the date of the large public utility's acquisition of the
12    water or sewer utility and extending through the next rate
13    case's test-year end date as updated and adjusted
14    accordance with Commission rules and regulations,
15    multiplied by the number of days in the time period
16    beginning with the acquisition date and extending through
17    the statutory effective date of new rates in the next rate
18    case.
19        "Authorized pre-tax earnings" means the pre-tax
20    earnings calculated utilizing the following:
21            (1) the average of:
22                (A) the large public utility's rate base in the
23            water or sewer utility, as defined in subsection
24            (d) of this Section, recorded at the date of the
25            large public utility's acquisition of the water or
26            sewer utility; and

 

 

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1                (B) the large public utility's estimated rate
2            base in the water or sewer utility as of the
3            statutory effective date of new rates in the next
4            rate case. The estimated rate base shall include
5            adjustments for new investments, retirements,
6            depreciation, and deferred taxes;
7            (2) the large public utility's actual regulatory
8        capital structure;
9            (3) the large public utility's actual cost rates
10        for debt and preferred stock;
11            (4) the large public utility's cost of common
12        equity and effective income tax rate, as determined in
13        the prior rate case. In the event that either or both
14        the equity cost or effective income tax rate from the
15        prior rate case is not available, and either cannot
16        otherwise be agreed to by parties to the next rate
17        case, reference shall be made to the testimony
18        submitted during the prior rate case and an average
19        recommended cost of common equity or effective income
20        tax rate based upon the various recommendations
21        contained in such testimony shall be used in lieu
22        thereof;
23            (5) the actual property tax rate for the water or
24        sewer utility acquired by the large public utility; and
25            (6) the actual invested capital tax rate for the
26        water or sewer utility acquired by the large public

 

 

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1        utility.
2    (b) Notwithstanding any other provision of this Act, a
3large public utility that acquires a water or sewer utility may
4request that the Commission use the procedures set forth under
5this Section to establish the ratemaking rate base of that
6water or sewer utility at the time when it is acquired by the
7large public utility.
8    (c) If a large public utility elects the procedures under
9this Section to establish the ratemaking rate base of a water
10or sewer utility that it is acquiring, then an appraisal shall
11be performed by 3 appraisers. The water or sewer utility being
12acquired and the large public utility shall each appoint one
13appraiser individually and shall together appoint an
14agreed-upon third appraiser. Each appraiser shall be a
15disinterested person licensed as a State certified general real
16estate appraiser under the Real Estate Appraiser Licensing Act
17of 2002.
18    The appraisers shall:
19        (1) be sworn to determine the fair market value of the
20    water or sewer utility, by establishing the amount for
21    which the water or sewer utility would be sold in a
22    voluntary transaction between a willing buyer and willing
23    seller under no obligation to buy or sell;
24        (2) determine fair market value in compliance with the
25    Uniform Standards of Professional Appraisal Practice;
26        (3) engage one disinterested engineer who is licensed

 

 

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1    in this State to prepare a reproduction cost new less
2    deprecation assessment of the tangible assets of the water
3    or sewer utility, which is to be incorporated into the
4    appraisal under the cost approach;
5        (4) return their appraisal, in writing, to the water or
6    sewer utility and large public utility in a reasonable and
7    timely manner; and
8        (5) if the appraisers cannot agree on the engineer, as
9    described in paragraph (3) of this subsection (c), within
10    30 days after the appraisers are appointed, then the large
11    public utility shall select the engineer.
12    If all 3 appointed appraisers cannot agree as to the
13appraised value of the water or sewer utility, then an
14appraisal signed by 2 of the appointed appraisers shall
15constitute a good and valid appraisal.
16    (d) The lesser of the purchase price and the appraised
17value, together with the transaction, closing, and transition
18costs incurred by the large public utility, shall constitute
19the ratemaking rate base associated with the water or sewer
20utility as acquired by and incorporated into the ratemaking
21rate base of the district designated by the acquiring large
22public utility under this Section. This rate base treatment
23shall not be deemed to violate this Act, including, but not
24limited to, any Sections in Articles VIII and IX of this Act.
25    In the Commission's order that approves the large public
26utility's acquisition of the water or sewer utility, the

 

 

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1Commission shall issue its decision establishing (1) the
2ratemaking rate base of the water or sewer utility and (2) the
3district or tariff group with which the water or sewer utility
4will be combined for ratemaking purposes.
5    (e) If the water or sewer utility being acquired is owned
6by the State or any political subdivision thereof, then the
7water or sewer utility must hold a public meeting prior to the
8acquisition to inform the public of the terms of its
9acquisition by the large public utility.
10    (f) Upon the date of acquisition, the water or sewer
11utility shall, for ratemaking purposes, become part of the
12district or tariff group designated by the acquiring large
13public utility.
14    (g) From the date of acquisition until the date that new
15rates are effective in the acquiring large public utility's
16next rate case, the customers of the acquired water or sewer
17utility shall pay the then-existing rates of the district or
18tariff group designated by the acquiring large public utility.
19For each customer of the water or sewer utility with potable
20water usage values that cannot be reasonably obtained, a value
21of 5,000 gallons per month shall be assigned. These rates shall
22not be deemed to violate this Act including, but not limited
23to, Section 9-101 and any other applicable Sections in Articles
24VIII and IX of this Act. The Commission shall issue its
25decision establishing the rates effective for the water or
26sewer utility immediately following an acquisition in its order

 

 

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1approving the acquisition.
2    (h) In the acquiring large public utility's next rate case,
3the water or sewer utility and the district or tariff group
4designated by the acquiring large public utility and their
5costs of service shall be combined under the same rate tariff.
6This rate tariff shall be based on allocation of the large
7public utility's and water or sewer utility's combined costs of
8service and rate design without distinction among customers on
9the basis of utility service source or type. This rate tariff
10shall not be deemed to violate this Act including, but not
11limited to, Section 9-101 of this Act.
12    (i) The actual pre-tax earnings and authorized pre-tax
13earnings difference shall be recorded as a regulatory asset or
14liability, included in the rate base of the large public
15utility, and amortized over a period not to exceed 3 years.
16    (j) This Section shall be exclusively applied to large
17public utilities providing water or sewer service in the
18voluntary and mutually agreeable acquisition of water or sewer
19utilities providing water or sewer service. Any petitions filed
20with the Commission related to the acquisitions described in
21this Section, including petitions seeking approvals or
22certificates required by this Act, will be deemed approved
23unless the Commission issues its final order within 6 months
24after the date the large public utility filed its initial
25petition. This Section shall not be construed in any manner to
26apply to electric corporations, natural gas corporations, or

 

 

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1any other utility subject to this Act.
2    (k) Nothing in this Section shall prohibit a party from
3declining to proceed with an acquisition or be deemed as
4establishing the final purchase price of an acquisition.
 
5    Section 99. Effective date. This Act takes effect upon
6becoming law.