98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB1379

 

Introduced , by Rep. Brandon W. Phelps

 

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. 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. 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 the provisions applicable until June 1, 2018. Makes other changes. Effective immediately.


LRB098 05850 AMC 35889 b

 

 

A BILL FOR

 

HB1379LRB098 05850 AMC 35889 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. (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,
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    (b) For purposes of establishing the value of public

 

 

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1utility property, when determining rates or charges, or for any
2other reason, the Commission may base its determination on the
3original cost of such property.
4    (c) This Section does not apply to valuations of water or
5sewer utilities under Section 9-210.5. This subsection (c) is
6inoperative on and after June 1, 2018.
7(Source: P.A. 84-617.)
 
8    (220 ILCS 5/9-210.5 new)
9    Sec. 9-210.5. Valuation of water and sewer utilities.
10    (a) In this Section:
11        "Disinterested" means that the person directly
12    involved (1) is not a director, officer, or an employee of
13    the large public utility or the water or sewer utility or
14    its direct affiliates or subsidiaries for at least 12
15    months before becoming engaged under this Section; (2)
16    shall not derive a material financial benefit from the sale
17    of the water or sewer utility other than fees for services
18    rendered, and (3) shall not have a member of the person's
19    immediate family, including a spouse, parents or spouse's
20    parents, children or spouses of children, or siblings and
21    their spouses or children, be a director, officer, or
22    employee of either the large public utility or water or
23    sewer utility or the water or sewer utility or its direct
24    affiliates or subsidiaries for at least 12 months before
25    becoming engaged under this Section or receive a material

 

 

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1    financial benefit from the sale of the water or sewer
2    utility other than fees for services rendered.
3        "District" means a service area of a large public
4    utility whose customers are subject to the same rate
5    tariff.
6        "Large public utility" means an investor-owned public
7    utility that:
8            (1) is subject to regulation by the Illinois
9        Commerce Commission under this Act;
10            (2) regularly provides water or sewer service to
11        more than 30,000 customer connections;
12            (3) provides safe and adequate service; and
13            (4) is not a water or sewer utility as defined in
14        this subsection (a).
15        "Next rate case" means a large public utility's first
16    general rate case after the date the large public utility
17    acquires the water or sewer utility where the acquired
18    water or sewer utility's cost of service is considered as
19    part of determining the large public utility's resulting
20    rates.
21        "Prior rate case" means a large public utility's
22    general rate case resulting in the rates in effect for the
23    large public utility at the time it acquires the water or
24    sewer utility.
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        "Water or sewer utility" means any of the following:
5            (1) a public utility that regularly provides water
6        or sewer service to 6,000 or fewer customer
7        connections;
8            (2) a water district, including, but not limited
9        to, a public water district, water service district, or
10        surface water protection district, or a sewer district
11        of any kind established as a special district under the
12        laws of this State that regularly provides water or
13        sewer service to 7,500 or fewer customer connections;
14            (3) a waterworks system or sewerage system
15        established under the Township Code that regularly
16        provides water or sewer service to 7,500 or fewer
17        customer connections; or
18            (4) a water system or sewer system owned by a
19        municipality that regularly provides water or sewer
20        service to 7,500 or fewer customer connections; and
21            (5) any other entity that regularly provides water
22        or sewer service to 7,500 or fewer customer
23        connections.
24    (b) Notwithstanding any other provision of this Act, a
25large public utility that acquires a water or sewer utility may
26request that the Commission use, and, if so requested, the

 

 

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1Commission shall use, the procedures set forth under this
2Section to establish the ratemaking rate base of that water or
3sewer utility at the time when it is acquired by the large
4public utility.
5    (c) If a large public utility elects the procedures under
6this Section to establish the rate base of a water or sewer
7utility that it is acquiring, then an appraisal shall be
8performed. The appraisal shall be performed by an appraiser
9selected by the Commission's water department manager and
10engaged by either the water or sewer utility being acquired or
11by the large public utility. The Commission's water department
12manager shall select an appraiser within 30 days after when he
13or she is officially notified. The appraiser shall be engaged
14on reasonable terms approved by the Commission. The appraiser
15shall be a disinterested person licensed as a State certified
16appraiser under the Real Estate Appraiser Licensing Act of
172002.
18    The appraiser shall:
19        (1) be sworn to determine the fair market value of the
20    water or sewer utility by establishing the amount for which
21    the water or sewer utility would be sold in a voluntary
22    transaction between a willing buyer and willing seller
23    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 an assessment of the tangible
2    assets of the water or sewer utility, which is to be
3    incorporated into the appraisal under the cost approach;
4        (4) if the water or sewer utility is a public utility
5    that is regulated by the Commission, request from the
6    manager of the Accounting Department a list of investments
7    made by the water or sewer utility that had been disallowed
8    previously and that shall be excluded from the calculation
9    of the large public utility's rate base in its next rate
10    case;
11        (5) return their appraisal, in writing, to the water or
12    sewer utility and large public utility in a reasonable and
13    timely manner; and
14        (6) if the appraiser cannot engage an engineer, as
15    described in paragraph (3) of this subsection (c), within
16    30 days after the appraiser is engaged, then the
17    Commission's manager of the Water Department shall
18    recommend the engineer which the appraiser should engage;
19    the manager of the Water Department shall provide his or
20    her recommendation within 30 days after he or she is
21    officially notified of the appraiser's failure to engage an
22    engineer and the appraiser shall promptly work to engage
23    the recommended engineer; if the appraiser are unable to
24    negotiate reasonable engagement terms with the recommended
25    engineer within 15 days after the recommendation by the
26    manager of the Water Department, then the appraiser shall

 

 

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1    notify the manager of the Water Department and the process
2    shall be repeated until an engineer is successfully
3    engaged.
4    (d) The lesser of the purchase price or the appraised value
5shall constitute the rate base associated with the water or
6sewer utility as acquired by and incorporated into the rate
7base of the district designated by the acquiring large public
8utility under this Section, subject to any adjustments that the
9Commission deems necessary to ensure such rate base reflects
10prudent and useful investments in the provision of public
11utility service. The reasonable transaction and closing costs
12incurred by the large public utility shall be treated
13consistent with the applicable accounting standards under this
14Act. The amount of the appraiser's fees to be included in the
15transaction and closing costs shall not exceed the greater of
16$15,000 or 5% of the appraised value of the water or sewer
17utility being acquired. This rate base treatment shall not be
18deemed to violate this Act, including, but not limited to, any
19Sections in Articles VIII and IX of this Act that might be
20affected by this Section. Without otherwise limiting the
21application of Section 7-204 or any other Article of this Act,
22any acquisition of a water or sewer utility that affects the
23cumulative base rates of the large public utility's existing
24ratepayers in the tariff group into which the water or sewer
25utility is to be combined by less than (1) 2.5% at the time of
26the acquisition for any single acquisition completed under this

 

 

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

 

 

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1public interest.
2    (g) From the date of acquisition until the date that new
3rates are effective in the acquiring large public utility's
4next rate case, the customers of the acquired water or sewer
5utility shall pay the then-existing rates of the district or
6tariff group ordered by the Commission; provided, that, if the
7application of such then-existing rates of the large public
8utility to customers of the acquired water or sewer utility
9using 54,000 gallons annually results in an increase to the
10total annual bill of customers of the acquired water or sewer
11utility, exclusive of fire service or related charges, then the
12large public utility's rates charged to the customers of the
13acquired water or sewer utility shall be uniformly reduced, if
14any reduction is required, by the percent that results in the
15total annual bill, exclusive of fire services or related
16charges, for the customers of the acquired water or sewer
17utility using 54,000 gallons being equal to 1.5% of the latest
18median household income as reported by the United States Census
19Bureau for the most applicable community or county. For each
20customer of the water or sewer utility with potable water usage
21values that cannot be reasonably obtained, a value of 4,500
22gallons per month shall be assigned. These rates shall not be
23deemed to violate this Act including, but not limited to,
24Section 9-101 and any other applicable Sections in Articles
25VIII and IX of this Act. The Commission shall issue its
26decision establishing the rates effective for the water or

 

 

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

 

 

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

 

 

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1Section 30-22 of the Illinois Procurement Code. The contractor
2or subcontractor shall submit evidence of meeting the
3requirements to be a responsible bidder as described in Section
430-22 to the water or sewer utility. Any new water or sewer
5facility built as a result of the acquisition shall require the
6contractor to enter into a project labor agreement. The large
7public utility acquiring the water or sewer utility shall offer
8employee positions to qualified employees of the acquired water
9or sewer utility.
10    (n) This Section is repealed on June 1, 2018.
 
11    Section 99. Effective date. This Act takes effect upon
12becoming law.