SB 3573 — UTILITIES - VALUATION

*LRB09718541CEL63773b* SB3573 97THEngrossed GENERALLRB097 ASSEMBLY18541 StateCEL of63773 Illinoisb andAN 2012ACT SB3573concerning Introducedregulation. 2/10/2012, by Sen.

William R.

Haine SYNOPSIS AS INTRODUCED:

ILCS 5/9-210 from Ch.

111 2/3, par.

9-210 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 18541 CEL 63773 b A BILL FOR SB3573 LRB097 18541 CEL 63773 b AN ACT concerning regulation.

(a) The Commission shall have power to ascertain the value of the property of every public utility in this State and every fact which in its judgment may or does have any bearing on such value.

(b) For purposes of establishing the value of public utility SB3573 Engrossed - 2 - LRB097 18541 CEL 63773 b utility property, when determining rates or charges, or for any other reason, the Commission may base its determination on the original cost of such property.

(c) This Section does not apply to valuations of water or sewer utilities under Section 9-210.5.

This subsection (c) is inoperative on and after June 1, 2017.

(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 to 30,0007,500 or fewer customer connections;

(3) a waterworks system or sewerage system established under the Township Code that regularly provides water or sewer service to 30,0007,500 or fewer customer connections;

or (4) a water system or sewer system owned by a municipality that regularly provides water or sewer SB3573 Engrossed - 3 - LRB097 18541 CEL 63773 b municipality that regularly provides water or sewer service to 30,0007,500 or fewer customer connections;

and (5) any other entity that regularly provides water or sewer service to 30,0007,500 or fewer customer connections.

"Next rate case" means a large public utility's first SB3573 Engrossed - 4 - LRB097 18541 CEL 63773 b "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.

"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;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) noshall 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, isbe a director, officer, or employee of either the large public utility or water or sewer utility,utility or maythe 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.

(b) Notwithstanding any other provision of this Act, a large public utility that acquires a water or sewer utility may request that the Commission useuse, and, if so requested, the SB3573 Engrossed - 5 - LRB097 18541 CEL 63773 b 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 SB3573 - 5 - LRB097 18541 CEL 63773 b utility that it is acquiring, then an appraisal shall be performed.

If the appraiser or appraisers are unable to negotiate reasonable engagement terms with the recommended SB3573 Engrossed - 6 - LRB097 18541 CEL 63773 b third appraiser within 15 days after the recommendation by the manager of the Water Department, then the appraisers shall notify the manager of the Water Department and the process shall be repeated until a third appraiser is successfully engaged.

Each appraiser shall be a disinterested person licensed as a State certified general real estate appraiser SB3573 - 6 - LRB097 18541 CEL 63773 b under the Real Estate Appraiser Licensing Act of 2002.

SB3573 Engrossed - 7 - LRB097 18541 CEL 63773 b (5) return their appraisal, in writing, to the water or sewer utility and large public utility in a reasonable and timely manner;

and (6) if the appraisers cannot agree on the engineer, as described in paragraph (3) of this subsection (c), within 30 days after the appraisers are appointed, then the SB3573 - 7 - LRB097 18541 CEL 63773 b Commission's manager of the Water Department shall recommend the engineer which the appraiser or appraisers should engage;

the manager of the Water Department shall provide his or her recommendation within 30 days fromafter when he or she is officially notified of the appraiser or appraisers failure to engage an engineer and the appraiser or appraisers shall promptly work to engage the recommended engineer;

In this event, the third appraisal shall be submitted to the Commission with the filing for approval of the SB3573 Engrossed - 8 - LRB097 18541 CEL 63773 b transaction.

(d) The lesser of the purchase price andor the appraised value,value together with reasonable transaction and closing costs incurred by the large public utility, shall constitute the rate SB3573 - 8 - LRB097 18541 CEL 63773 b 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.

Without otherwise limiting the application of Section 7-204 or any other Article of this Act, 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 5%(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 any other Article of this Act.

SB3573 Engrossed - 9 - LRB097 18541 CEL 63773 b 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 and (2) the district or tariff group with which the water or sewer utility shall be combined for ratemaking purposes.

(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 holdinform 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 informbe thepublished, publicin a newspaper of general circulation in the termsarea ofthat itsthe SB3573water -or 9sewer -utility LRB097operates, 18541a CELnotice 63773setting bforth the terms of its acquisition by the large public utility.utility and options that shall be available to assist customers to pay their bills after the acquisition.

(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 SB3573 Engrossed - 10 - LRB097 18541 CEL 63773 b utility shall pay the then-existing rates of the district or tariff group ordered by the Commission.Commission;

Forprovided, eachthat, customerif the application of such then-existing rates of the large public utility to customers of the acquired water or sewer utility withusing potable54,000 gallons annually results in an increase to the total annual bill of customers of the acquired water usageor valuessewer thatutility, cannotexclusive beof reasonablyfire obtained,service aor valuerelated charges, then the large public utility's rates charged to the customers of 5,000the gallonsacquired perwater monthor sewer utility shall be assigned.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.