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Public Act 102-0149


 

Public Act 0149 102ND GENERAL ASSEMBLY

  
  
  

 


 
Public Act 102-0149
 
SB0515 EnrolledLRB102 11137 SPS 16469 b

    AN ACT concerning regulation.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Public Utilities Act is amended by changing
Section 9-210.5 as follows:
 
    (220 ILCS 5/9-210.5)
    (Section scheduled to be repealed on June 1, 2028)
    Sec. 9-210.5. Valuation of water and sewer utilities.
    (a) In this Section:
        "Disinterested" means that the person directly
    involved (1) is not a director, officer, or an employee of
    the large public utility or the water or sewer utility or
    its direct affiliates or subsidiaries for at least 12
    months before becoming engaged under this Section; (2)
    shall not derive a material financial benefit from the
    sale of the water or sewer utility other than fees for
    services rendered, and (3) shall not have a member of the
    person's immediate family, including a spouse, parents or
    spouse's parents, children or spouses of children, or
    siblings and their spouses or children, be a director,
    officer, or employee of either the large public utility or
    water or sewer utility or the water or sewer utility or its
    direct affiliates or subsidiaries for at least 12 months
    before becoming engaged under this Section or receive a
    material financial benefit from the sale of the water or
    sewer utility other than fees for services rendered.
        "District" means a service area of a large public
    utility whose customers are subject to the same rate
    tariff.
        "Large public utility" means an investor-owned public
    utility that:
            (1) is subject to regulation by the Illinois
        Commerce Commission under this Act;
            (2) regularly provides water or sewer service to
        more than 15,000 30,000 customer connections;
            (3) provides safe and adequate service; and
            (4) is not a water or sewer utility as defined in
        this subsection (a).
        "Next rate case" means a large public utility's first
    general rate case after the date the large public utility
    acquires the water or sewer utility where the acquired
    water or sewer utility's cost of service is considered as
    part of determining the large public utility's resulting
    rates.
        "Prior rate case" means a large public utility's
    general rate case resulting in the rates in effect for the
    large public utility at the time it acquires the water or
    sewer utility.
        "Utility service source" means the water or sewer
    utility or large public utility from which the customer
    receives its utility service type.
        "Utility service type" means water utility service or
    sewer utility service or water and sewer utility service.
        "Water or sewer utility" means any of the following:
            (1) a public utility that regularly provides water
        or sewer service to 6,000 or fewer customer
        connections;
            (2) a water district, including, but not limited
        to, a public water district, water service district,
        or surface water protection district, or a sewer
        district of any kind established as a special district
        under the laws of this State that regularly provides
        water or sewer service;
            (3) a waterworks system or sewerage system
        established under the Township Code that regularly
        provides water or sewer service; or
            (4) a water system or sewer system owned by a
        municipality that regularly provides water or sewer
        service; and
            (5) any other entity that is not a public utility
        that regularly provides water or sewer service.
    (b) Notwithstanding any other provision of this Act, a
large public utility that acquires a water or sewer utility
may request that the Commission use, and, if so requested, the
Commission shall use, the procedures set forth under this
Section to establish the ratemaking rate base of that water or
sewer utility at the time when it is acquired by the large
public utility.
    (c) If a large public utility elects the procedures under
this Section to establish the rate base of a water or sewer
utility that it is acquiring, then 3 appraisals shall be
performed. The average of these 3 appraisals shall represent
the fair market value of the water or sewer utility that is
being acquired. The appraisals shall be performed by 3
appraisers approved by the Commission's Executive Director or
designee and engaged by either the water or sewer utility
being acquired or by the large public utility. Each appraiser
shall be engaged on reasonable terms approved by the
Commission. Each appraiser shall be a disinterested person
licensed as a State certified general real estate appraiser
under the Real Estate Appraiser Licensing Act of 2002.
    Each appraiser shall:
        (1) be sworn to determine the fair market value of the
    water or sewer utility by establishing the amount for
    which the water or sewer utility would be sold in a
    voluntary transaction between a willing buyer and willing
    seller under no obligation to buy or sell;
        (2) determine fair market value in compliance with the
    Uniform Standards of Professional Appraisal Practice;
        (3) engage one disinterested engineer who is licensed
    in this State, and who may be the same engineer that is
    engaged by the other appraisers, to prepare an assessment
    of the tangible assets of the water or sewer utility,
    which is to be incorporated into the appraisal under the
    cost approach;
        (4) request from the manager of the Accounting
    Department, if the water or sewer utility is a public
    utility that is regulated by the Commission, a list of
    investments made by the water or sewer utility that had
    been disallowed previously and that shall be excluded from
    the calculation of the large public utility's rate base in
    its next rate case; and
        (5) return their appraisal, in writing, to the water
    or sewer utility and large public utility in a reasonable
    and timely manner.
    If the appraiser cannot engage an engineer, as described
in paragraph (3) of this subsection (c), within 30 days after
the appraiser is engaged, then the Commission's Executive
Director or designee shall recommend the engineer the
appraiser should engage. The Commission's Executive Director
or designee shall provide his or her recommendation within 30
days after he or she is officially notified of the appraiser's
failure to engage an engineer and the appraiser shall promptly
work to engage the recommended engineer. If the appraiser is
unable to negotiate reasonable engagement terms with the
recommended engineer within 15 days after the recommendation
by the Commission's Executive Director or designee, then the
appraiser shall notify the Commission's Executive Director or
designee and the process shall be repeated until an engineer
is successfully engaged.
    (d) The lesser of (i) the purchase price or (ii) the fair
market value determined under subsection (c) of this Section
shall constitute the rate base associated with the water or
sewer utility as acquired by and incorporated into the rate
base of the district designated by the acquiring large public
utility under this Section, subject to any adjustments that
the Commission deems necessary to ensure such rate base
reflects prudent and useful investments in the provision of
public utility service. The reasonable transaction and closing
costs incurred by the large public utility shall be treated
consistent with the applicable accounting standards under this
Act. The total amount of all of the appraisers' fees to be
included in the transaction and closing costs shall not exceed
the greater of $15,000 or 5% of the appraised value of the
water or sewer utility being acquired. This rate base
treatment shall not be deemed to violate this Act, including,
but not limited to, any Sections in Articles VIII and IX of
this Act that might be affected by this Section. Any
acquisition of a water or sewer utility that affects the
cumulative base rates of the large public utility's existing
ratepayers in the tariff group into which the water or sewer
utility is to be combined by less than (1) 2.5% at the time of
the acquisition for any single acquisition completed under
this Section or (2) 5% for all acquisitions completed under
this Section before the Commission's final order in the next
rate case shall not be deemed to violate Section 7-204 or any
other provision of this Act.
    In the Commission's order that approves the large public
utility's acquisition of the water or sewer utility, the
Commission shall issue its decision establishing (1) the
ratemaking rate base of the water or sewer utility; (2) the
district or tariff group with which the water or sewer utility
shall be combined for ratemaking purposes, if such combination
has been proposed by the large public utility; and (3) the
rates to be charged to customers in the water or sewer utility.
    (e) If the water or sewer utility being acquired is owned
by the State or any political subdivision thereof, then the
water or sewer utility must inform the public of the terms of
its acquisition by the large public utility by (1) holding a
public meeting prior to the acquisition and (2) causing to be
published, in a newspaper of general circulation in the area
that the water or sewer utility operates, a notice setting
forth the terms of its acquisition by the large public utility
and options that shall be available to assist customers to pay
their bills after the acquisition.
    (f) The large public utility may recommend the district or
tariff group of which the water or sewer utility shall, for
ratemaking purposes, become a part after the acquisition, or
may recommend a lesser rate for the water or sewer utility. If
the large public utility recommends a lesser rate, it shall
submit to the Commission its proposed rate schedule and the
proposed final tariff group for the acquired water or sewer
utility. The Commission's approved district or tariff group or
rates shall be consistent with the large public utility's
recommendation, unless such recommendation can be shown to be
contrary to the public interest.
    (g) From the date of acquisition until the date that new
rates are effective in the acquiring large public utility's
next rate case, the customers of the acquired water or sewer
utility shall pay the approved then-existing rates of the
district or tariff group as ordered by the Commission, or some
lesser rates as recommended by the large public utility and
approved by the Commission under subsection (f); provided,
that, if the application of such rates of the large public
utility to customers of the acquired water or sewer utility
using 54,000 gallons annually results in an increase to the
total annual bill of customers of the acquired water or sewer
utility, exclusive of fire service or related charges, then
the large public utility's rates charged to the customers of
the acquired water or sewer utility shall be uniformly
reduced, if any reduction is required, by the percent that
results in the total annual bill, exclusive of fire services
or related charges, for the customers of the acquired water or
sewer utility using 54,000 gallons being equal to 1.5% of the
latest median household income as reported by the United
States Census Bureau for the most applicable community or
county. For each customer of the water or sewer utility with
potable water usage values that cannot be reasonably obtained,
a value of 4,500 gallons per month shall be assigned. These
rates shall not be deemed to violate this Act including, but
not limited to, Section 9-101 and any other applicable
Sections in Articles VIII and IX of this Act. The Commission
shall issue its decision establishing the rates effective for
the water or sewer utility immediately following an
acquisition in its order approving the acquisition.
    (h) In the acquiring large public utility's next rate
case, the water or sewer utility and the district or tariff
group ordered by the Commission and their costs of service may
be combined under the same rate tariff. This rate tariff shall
be based on allocation of costs of service of the acquired
water or sewer utility and the large public utility's district
or tariff group ordered by the Commission and utilizing a rate
design that does not distinguish among customers on the basis
of utility service source or type. This rate tariff shall not
be deemed to violate this Act including, but not limited to,
Section 9-101 of this Act. In the acquiring large public
utility's 2 rate cases after an acquisition, but in no
subsequent rate case, the large public utility may file a rate
tariff for a water or sewer utility acquired under this
Section that establishes lesser rates than the district or
tariff group into which the water or sewer utility is to be
combined. Those lesser rates shall not be deemed to violate
Section 7-204 or any other provision of this Act if they affect
the cumulative base rates of the large public utility's
existing rate payers in the district or tariff by less than
2.5%.
    (i) Any post-acquisition improvements made by the large
public utility in the water or sewer utility shall accrue a
cost for financing set at the large public utility's
determined rate for allowance for funds used during
construction, inclusive of the debt, equity, and income tax
gross up components, after the date on which the expenditure
was incurred by the large public utility until the investment
has been in service for a 4-year period or, if sooner, until
the time the rates are implemented in the large public
utility's next rate case.
    Any post-acquisition improvements made by the large public
utility in the water or sewer utility shall not be depreciated
for ratemaking purposes from the date on which the expenditure
was incurred by the large public utility until the investment
has been in service for a 4-year period or, if sooner, until
the time the rates are implemented in the large public
utility's next rate case.
    (j) This Section shall be exclusively applied to large
public utilities in the voluntary and mutually agreeable
acquisition of water or sewer utilities. Any petitions filed
with the Commission related to the acquisitions described in
this Section, including petitions seeking approvals or
certificates required by this Act, shall be deemed approved
unless the Commission issues its final order within 11 months
after the date the large public utility filed its initial
petition. This Section shall only apply to utilities providing
water or sewer service and shall not be construed in any manner
to apply to electric corporations, natural gas corporations,
or any other utility subject to this Act.
    (k) Nothing in this Section shall prohibit a party from
declining to proceed with an acquisition or be deemed as
establishing the final purchase price of an acquisition.
    (l) In the Commission's order that approves the large
utility's acquisition of the water or sewer utility, the
Commission shall address each aspect of the acquisition
transaction for which approval is required under the Act.
    (m) Any contractor or subcontractor that performs work on
a water or sewer utility acquired by a large public utility
under this Section shall be a responsible bidder as described
in Section 30-22 of the Illinois Procurement Code. The
contractor or subcontractor shall submit evidence of meeting
the requirements to be a responsible bidder as described in
Section 30-22 to the water or sewer utility. Any new water or
sewer facility built as a result of the acquisition shall
require the contractor to enter into a project labor
agreement. The large public utility acquiring the water or
sewer utility shall offer employee positions to qualified
employees of the acquired water or sewer utility.
    (n) This Section is repealed on June 1, 2028.
(Source: P.A. 100-751, eff. 8-10-18; 100-1151, eff. 6-1-19.)

Effective Date: 1/1/2022