Illinois General Assembly - Full Text of HB0737
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Full Text of HB0737  102nd General Assembly

HB0737 102ND GENERAL ASSEMBLY

  
  

 


 
102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB0737

 

Introduced 2/8/2021, by Rep. Thaddeus Jones

 

SYNOPSIS AS INTRODUCED:
 
220 ILCS 5/9-210.5

    Amends the Public Utilities Act. In provisions concerning procedures for a large public utility to acquire a water or sewer utility, provides that if the water or sewer utility being acquired is owned by the State or a political subdivision of the State, a referendum will be required to approve the acquisition of the water or sewer utility by the large public utility (rather than only requiring a public meeting and publication of the terms of acquisition in a newspaper of general circulation in the area that the water or sewer utility operates). Effective immediately.


LRB102 11725 SPS 17059 b

 

 

A BILL FOR

 

HB0737LRB102 11725 SPS 17059 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7    (Section scheduled to be repealed on June 1, 2028)
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
16    sale of the water or sewer utility other than fees for
17    services rendered, and (3) shall not have a member of the
18    person's immediate family, including a spouse, parents or
19    spouse's parents, children or spouses of children, or
20    siblings and their spouses or children, be a director,
21    officer, or employee of either the large public utility or
22    water or sewer utility or the water or sewer utility or its
23    direct affiliates or subsidiaries for at least 12 months

 

 

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1    before becoming engaged under this Section or receive a
2    material financial benefit from the sale of the water or
3    sewer 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

 

 

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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,
11        or surface water protection district, or a sewer
12        district of any kind established as a special district
13        under the laws of this State that regularly provides
14        water or sewer service;
15            (3) a waterworks system or sewerage system
16        established under the Township Code that regularly
17        provides water or sewer service; or
18            (4) a water system or sewer system owned by a
19        municipality that regularly provides water or sewer
20        service; and
21            (5) any other entity that is not a public utility
22        that regularly provides water or sewer service.
23    (b) Notwithstanding any other provision of this Act, a
24large public utility that acquires a water or sewer utility
25may request that the Commission use, and, if so requested, the
26Commission shall use, the procedures set forth under this

 

 

HB0737- 4 -LRB102 11725 SPS 17059 b

1Section to establish the ratemaking rate base of that water or
2sewer utility at the time when it is acquired by the large
3public utility.
4    (c) If a large public utility elects the procedures under
5this Section to establish the rate base of a water or sewer
6utility that it is acquiring, then 3 appraisals shall be
7performed. The average of these 3 appraisals shall represent
8the fair market value of the water or sewer utility that is
9being acquired. The appraisals shall be performed by 3
10appraisers approved by the Commission's Executive Director or
11designee and engaged by either the water or sewer utility
12being acquired or by the large public utility. Each appraiser
13shall be engaged on reasonable terms approved by the
14Commission. Each appraiser shall be a disinterested person
15licensed as a State certified general real estate appraiser
16under the Real Estate Appraiser Licensing Act of 2002.
17    Each appraiser shall:
18        (1) be sworn to determine the fair market value of the
19    water or sewer utility by establishing the amount for
20    which the water or sewer utility would be sold in a
21    voluntary transaction between a willing buyer and willing
22    seller under no obligation to buy or sell;
23        (2) determine fair market value in compliance with the
24    Uniform Standards of Professional Appraisal Practice;
25        (3) engage one disinterested engineer who is licensed
26    in this State, and who may be the same engineer that is

 

 

HB0737- 5 -LRB102 11725 SPS 17059 b

1    engaged by the other appraisers, to prepare an assessment
2    of the tangible assets of the water or sewer utility,
3    which is to be incorporated into the appraisal under the
4    cost approach;
5        (4) request from the manager of the Accounting
6    Department, if the water or sewer utility is a public
7    utility that is regulated by the Commission, a list of
8    investments made by the water or sewer utility that had
9    been disallowed previously and that shall be excluded from
10    the calculation of the large public utility's rate base in
11    its next rate case; and
12        (5) return their appraisal, in writing, to the water
13    or sewer utility and large public utility in a reasonable
14    and timely manner.
15    If the appraiser cannot engage an engineer, as described
16in paragraph (3) of this subsection (c), within 30 days after
17the appraiser is engaged, then the Commission's Executive
18Director or designee shall recommend the engineer the
19appraiser should engage. The Commission's Executive Director
20or designee shall provide his or her recommendation within 30
21days after he or she is officially notified of the appraiser's
22failure to engage an engineer and the appraiser shall promptly
23work to engage the recommended engineer. If the appraiser is
24unable to negotiate reasonable engagement terms with the
25recommended engineer within 15 days after the recommendation
26by the Commission's Executive Director or designee, then the

 

 

HB0737- 6 -LRB102 11725 SPS 17059 b

1appraiser shall notify the Commission's Executive Director or
2designee and the process shall be repeated until an engineer
3is successfully engaged.
4    (d) The lesser of (i) the purchase price or (ii) the fair
5market value determined under subsection (c) of this Section
6shall constitute the rate base associated with the water or
7sewer utility as acquired by and incorporated into the rate
8base of the district designated by the acquiring large public
9utility under this Section, subject to any adjustments that
10the Commission deems necessary to ensure such rate base
11reflects prudent and useful investments in the provision of
12public utility service. The reasonable transaction and closing
13costs incurred by the large public utility shall be treated
14consistent with the applicable accounting standards under this
15Act. The total amount of all of the appraisers' fees to be
16included in the transaction and closing costs shall not exceed
17the greater of $15,000 or 5% of the appraised value of the
18water or sewer utility being acquired. This rate base
19treatment shall not be deemed to violate this Act, including,
20but not limited to, any Sections in Articles VIII and IX of
21this Act that might be affected by this Section. Any
22acquisition 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

 

 

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1this Section or (2) 5% for all acquisitions completed under
2this Section before the Commission's final order in the next
3rate case shall not be deemed to violate Section 7-204 or any
4other provision of this Act.
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; (2) the
9district or tariff group with which the water or sewer utility
10shall be combined for ratemaking purposes, if such combination
11has been proposed by the large public utility; and (3) the
12rates to be charged to customers in the water or sewer utility.
13    (e) If the water or sewer utility being acquired is owned
14by the State or any political subdivision thereof, then the
15water or sewer utility must inform the public of the terms of
16its acquisition by the large public utility by (1) holding a
17public meeting prior to the acquisition and (2) causing to be
18published, in a newspaper of general circulation in the area
19that the water or sewer utility operates, a notice setting
20forth the terms of its acquisition by the large public utility
21and options that shall be available to assist customers to pay
22their bills after the acquisition.
23    At the election next following the public meeting and
24notice required under this subsection, a referendum, subject
25to the requirements of Section 16-7 of the Election Code,
26shall be placed on the ballot for all electors within the area

 

 

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1where the water or sewer utility operates in substantially the
2following form:
3        May the (name of large public utility) acquire the
4    (name of water or sewer utility) under the terms of
5    acquisition as published in (name of newspaper) on (date)?
6    The votes shall be recorded as "Yes" or "No".
7    If a majority of the electors voting on the referendum
8within the service area of the water or sewer utility vote in
9favor of the referendum, then the acquisition may continue as
10provided in this Section. If less than a majority of the
11electors voting on the referendum within the service area of
12the water or sewer utility vote against the referendum, the
13Commission shall deny the large public utility's acquisition
14of the water or sewer utility.
15    (f) The large public utility may recommend the district or
16tariff group of which the water or sewer utility shall, for
17ratemaking purposes, become a part after the acquisition, or
18may recommend a lesser rate for the water or sewer utility. If
19the large public utility recommends a lesser rate, it shall
20submit to the Commission its proposed rate schedule and the
21proposed final tariff group for the acquired water or sewer
22utility. The Commission's approved district or tariff group or
23rates shall be consistent with the large public utility's
24recommendation, unless such recommendation can be shown to be
25contrary to the public interest.
26    (g) From the date of acquisition until the date that new

 

 

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

 

 

HB0737- 10 -LRB102 11725 SPS 17059 b

1the water or sewer utility immediately following an
2acquisition in its order approving the acquisition.
3    (h) In the acquiring large public utility's next rate
4case, the water or sewer utility and the district or tariff
5group ordered by the Commission and their costs of service may
6be combined under the same rate tariff. This rate tariff shall
7be based on allocation of costs of service of the acquired
8water or sewer utility and the large public utility's district
9or tariff 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. In the acquiring large public
14utility's 2 rate cases after an acquisition, but in no
15subsequent rate case, the large public utility may file a rate
16tariff for a water or sewer utility acquired under this
17Section that establishes lesser rates than the district or
18tariff group into which the water or sewer utility is to be
19combined. Those lesser rates shall not be deemed to violate
20Section 7-204 or any other provision of this Act if they affect
21the cumulative base rates of the large public utility's
22existing rate payers in the district or tariff by less than
232.5%.
24    (i) Any post-acquisition improvements made by the large
25public utility in the water or sewer utility shall accrue a
26cost for financing set at the large public utility's

 

 

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1determined rate for allowance for funds used during
2construction, inclusive of the debt, equity, and income tax
3gross up components, after the date on which the expenditure
4was incurred by the large public utility until the investment
5has been in service for a 4-year period or, if sooner, until
6the time the rates are implemented in the large public
7utility's next rate case.
8    Any post-acquisition improvements made by the large public
9utility in the water or sewer utility shall not be depreciated
10for ratemaking purposes from the date on which the expenditure
11was incurred by the large public utility until the investment
12has been in service for a 4-year period or, if sooner, until
13the time the rates are implemented in the large public
14utility's next rate case.
15    (j) This Section shall be exclusively applied to large
16public utilities in the voluntary and mutually agreeable
17acquisition of water or sewer utilities. Any petitions filed
18with the Commission related to the acquisitions described in
19this Section, including petitions seeking approvals or
20certificates required by this Act, shall be deemed approved
21unless the Commission issues its final order within 11 months
22after the date the large public utility filed its initial
23petition. This Section shall only apply to utilities providing
24water or sewer service and shall not be construed in any manner
25to apply to electric corporations, natural gas corporations,
26or any other utility subject to this Act.

 

 

HB0737- 12 -LRB102 11725 SPS 17059 b

1    (k) Nothing in this Section shall prohibit a party from
2declining to proceed with an acquisition or be deemed as
3establishing the final purchase price of an acquisition.
4    (l) In the Commission's order that approves the large
5utility's acquisition of the water or sewer utility, the
6Commission shall address each aspect of the acquisition
7transaction for which approval is required under the Act.
8    (m) Any contractor or subcontractor that performs work on
9a water or sewer utility acquired by a large public utility
10under this Section shall be a responsible bidder as described
11in Section 30-22 of the Illinois Procurement Code. The
12contractor or subcontractor shall submit evidence of meeting
13the requirements to be a responsible bidder as described in
14Section 30-22 to the water or sewer utility. Any new water or
15sewer facility built as a result of the acquisition shall
16require the contractor to enter into a project labor
17agreement. The large public utility acquiring the water or
18sewer utility shall offer employee positions to qualified
19employees of the acquired water or sewer utility.
20    (n) This Section is repealed on June 1, 2028.
21(Source: P.A. 100-751, eff. 8-10-18; 100-1151, eff. 6-1-19.)
 
22    Section 99. Effective date. This Act takes effect upon
23becoming law.