Rep. Brandon W. Phelps

Filed: 2/22/2013

 

 


 

 


 
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1
AMENDMENT TO HOUSE BILL 1379

2    AMENDMENT NO. ______. Amend House Bill 1379 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Public Utilities Act is amended by adding
5Section 9-210.5 as follows:
 
6    (220 ILCS 5/9-210.5 new)
7    Sec. 9-210.5. Valuation of water and sewer utilities.
8    (a) In this Section:
9        "Disinterested" means that the person directly
10    involved (1) is not a director, officer, or an employee of
11    the large public utility or the water or sewer utility or
12    its direct affiliates or subsidiaries for at least 12
13    months before becoming engaged under this Section; (2)
14    shall not derive a material financial benefit from the sale
15    of the water or sewer utility other than fees for services
16    rendered, and (3) shall not have a member of the person's

 

 

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1    immediate family, including a spouse, parents or spouse's
2    parents, children or spouses of children, or siblings and
3    their spouses or children, be a director, officer, or
4    employee of either the large public utility or water or
5    sewer utility or the water or sewer utility or its direct
6    affiliates or subsidiaries for at least 12 months before
7    becoming engaged under this Section or receive a material
8    financial benefit from the sale of the water or sewer
9    utility other than fees for services rendered.
10        "District" means a service area of a large public
11    utility whose customers are subject to the same rate
12    tariff.
13        "Large public utility" means an investor-owned public
14    utility that:
15            (1) is subject to regulation by the Illinois
16        Commerce Commission under this Act;
17            (2) regularly provides water or sewer service to
18        more than 30,000 customer connections;
19            (3) provides safe and adequate service; and
20            (4) is not a water or sewer utility as defined in
21        this subsection (a).
22        "Next rate case" means a large public utility's first
23    general rate case after the date the large public utility
24    acquires the water or sewer utility where the acquired
25    water or sewer utility's cost of service is considered as
26    part of determining the large public utility's resulting

 

 

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1    rates.
2        "Prior rate case" means a large public utility's
3    general rate case resulting in the rates in effect for the
4    large public utility at the time it acquires the water or
5    sewer utility.
6        "Utility service source" means the water or sewer
7    utility or large public utility from which the customer
8    receives its utility service type.
9        "Utility service type" means water utility service or
10    sewer utility service or water and sewer utility service.
11        "Water or sewer utility" means any of the following:
12            (1) a public utility that regularly provides water
13        or sewer service to 6,000 or fewer customer
14        connections;
15            (2) a water district, including, but not limited
16        to, a public water district, water service district, or
17        surface water protection district, or a sewer district
18        of any kind established as a special district under the
19        laws of this State that regularly provides water or
20        sewer service to 7,500 or fewer customer connections;
21            (3) a waterworks system or sewerage system
22        established under the Township Code that regularly
23        provides water or sewer service to 7,500 or fewer
24        customer connections; or
25            (4) a water system or sewer system owned by a
26        municipality that regularly provides water or sewer

 

 

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1        service to 7,500 or fewer customer connections; and
2            (5) any other entity that regularly provides water
3        or sewer service to 7,500 or fewer customer
4        connections.
5    (b) Notwithstanding any other provision of this Act, a
6large public utility that acquires a water or sewer utility may
7request that the Commission use, and, if so requested, the
8Commission shall use, the procedures set forth under this
9Section to establish the ratemaking rate base of that water or
10sewer utility at the time when it is acquired by the large
11public utility.
12    (c) If a large public utility elects the procedures under
13this Section to establish the rate base of a water or sewer
14utility that it is acquiring, then an appraisal shall be
15performed. The appraisal shall be performed by an appraiser
16selected by the Commission's water department manager and
17engaged by either the water or sewer utility being acquired or
18by the large public utility. The Commission's water department
19manager shall select an appraiser within 30 days after when he
20or she is officially notified. The appraiser shall be engaged
21on reasonable terms approved by the Commission. The appraiser
22shall be a disinterested person licensed as a State certified
23appraiser under the Real Estate Appraiser Licensing Act of
242002.
25    The appraiser shall:
26        (1) be sworn to determine the fair market value of the

 

 

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1    water or sewer utility by establishing the amount for which
2    the water or sewer utility would be sold in a voluntary
3    transaction between a willing buyer and willing seller
4    under no obligation to buy or sell;
5        (2) determine fair market value in compliance with the
6    Uniform Standards of Professional Appraisal Practice;
7        (3) engage one disinterested engineer who is licensed
8    in this State to prepare an assessment of the tangible
9    assets of the water or sewer utility, which is to be
10    incorporated into the appraisal under the cost approach;
11        (4) if the water or sewer utility is a public utility
12    that is regulated by the Commission, request from the
13    manager of the Accounting Department a list of investments
14    made by the water or sewer utility that had been disallowed
15    previously and that shall be excluded from the calculation
16    of the large public utility's rate base in its next rate
17    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 water department
24manager shall recommend the engineer the appraiser should
25engage. The Commission's water department manager shall
26provide his or her recommendation within 30 days after he or

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1transaction for which approval is required under the Act.
2    (m) Any contractor or subcontractor that performs work on a
3water or sewer utility acquired by a large public utility under
4this Section shall be a responsible bidder as described in
5Section 30-22 of the Illinois Procurement Code. The contractor
6or subcontractor shall submit evidence of meeting the
7requirements to be a responsible bidder as described in Section
830-22 to the water or sewer utility. Any new water or sewer
9facility built as a result of the acquisition shall require the
10contractor to enter into a project labor agreement. The large
11public utility acquiring the water or sewer utility shall offer
12employee positions to qualified employees of the acquired water
13or sewer utility.
14    (n) This Section is repealed on June 1, 2018.
 
15    Section 99. Effective date. This Act takes effect upon
16becoming law.".