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HB 5073

UTILITIES-WATER ACQUISITION

104th Regular Session Introduced by Dee Avelar and 3 co-sponsors

The bill creates a structured framework for large utilities to acquire water or sewer systems, including independent appraisals, a post-acquisition referendum, rate protections for

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Bill Summary · HB 5073

Bill overview

HB5073 (104th General Assembly, Illinois) amends the Public Utilities Act to reform how a large public utility acquires a water or sewer utility and how rate base, ratemaking, and customer impacts are handled. The bill introduces a new framework for valuing acquired water/sewer utilities, requires a post-acquisition referendum in the service area, and tightens provisions around rate base, costs, and protections for ratepayers. It also contains a sunset provision (the section is repealed on June 1, 2028).

Main purpose and intent

  • Provide a structured process for the valuation and acquisition of water or sewer utilities by large public utilities.
  • Protect ratepayers by requiring a referendum within the service area and limiting rate base impacts.
  • Ensure transparency and prudence in determining the value and costs associated with acquisitions.
  • Create specific procedural rules for appraisals, cost accounting, and transition rates after acquisition.
  • Limit applicability to water/sewer utilities (not electric or gas).

Key provisions and changes

  • Rate base treatment after acquisition:

    • 20% of the lesser of purchase price or fair market value (as determined under a new appraisal process) shall be included in the rate base of the acquiring large public utility, subject to adjustments by the Illinois Commerce Commission (ICC) to reflect prudent and useful investments.
    • The difference between the rate base and the purchase price/fair market value is borne by the acquiring utility’s shareholders.
    • Transaction and closing costs included in rate base are capped at the greater of $15,000 or 5% of the appraised value.
    • Only 20% of transaction/closing costs are included in the rate base.
    • Post-acquisition improvements accrue financing costs for up to 4 years (or until rates are implemented in the next rate case) and are not depreciated during that period for ratemaking purposes.

  • Valuation and appraisal process (Section 9-210.5):

    • If the acquiring utility elects the valuation track, three independent appraisals determine fair market value (average of the three).
    • Appraisers must be state-licensed, disinterested, and follow Uniform Standards of Professional Appraisal Practice.
    • An engineer must be engaged to assess tangible assets (may be the same engineer used by other appraisers).
    • Appraisers must obtain and consider disallowed investments for rate base calculations, and deliver their appraisals within a set timeline, with ICC oversight to resolve engagement issues if necessary.
    • The appraisal process includes procedural protections to ensure independence and timely completion.

  • Referendum requirement (on acquisitions involving public utility districts):

    • After a public meeting and notice, a referendum is placed on the ballot for all electors within the water/sewer utility’s service area.
    • A majority “Yes” vote allows the acquisition to continue; a majority “No” vote prevents ICC approval of the acquisition.
    • The referendum form explicitly asks whether the acquiring large utility may proceed under terms published in a designated newspaper.

  • Rate design and district/tariff grouping (post-acquisition):

    • The acquiring utility may propose the district or tariff group for the acquired utility; ICC approval aligns with the utility’s recommendation unless a public interest objection is shown.
    • In the interim period, customers pay the approved rates of the district/tariff or lesser rates approved by the ICC, with a final adjustment rule based on household income and usage (see below).

  • Interim rate protections for customers:

    • If the post-acquisition rate application increases a typical bill (based on 54,000 gallons/year) beyond a threshold, rates must be uniformly reduced by the proportion needed to keep the increase to 1.5% of the latest median household income (as per U.S. Census data) for the applicable community or county.
    • For customers where precise usage data is unavailable, a standard 4,500 gallons/month is used for billing adjustments.
    • These adjustments are designed to mitigate abrupt rate shocks during transition.

  • Combined rate case and future rate treatment (Section 9-210.5 and 9-220.2):

    • In the acquiring utility’s next rate case, the acquired utility and the designated district/tariff group may be combined into a single rate tariff, based on the cost of service allocation.
    • The rate design must avoid discrimination by service source/type.
    • In the first two rate cases after acquisition, the utility may file a rate tariff with lower rates than the designated district/tariff group if the Commission finds it consistent with public interest and within specified cumulative impact limits.
    • Post-acquisition, certain costs can be treated with standard rate base concepts in the first subsequent rate cases.

  • Procurement and labor requirements:

    • Contractors for acquired utilities must be responsible bidders per the Illinois Procurement Code.
    • New water/sewer facilities built as part of the acquisition must involve project labor agreements.
    • The acquiring utility must offer positions to qualified employees of the acquired utility.

  • Sunset and applicability:

    • The key acquisition section (9-210.5) is repealed on June 1, 2028.
    • The act applies exclusively to large public utilities acquiring water or sewer utilities and not to electric or natural gas utilities.

Who is affected

  • Large public utilities (investor-owned) seeking to acquire water or sewer utilities.
  • Water or sewer utilities being acquired (including municipal or district-operated systems) and their customers.
  • Ratepayers within the service areas of acquired utilities.
  • Contractors and subcontractors working on acquired utilities (subject to responsible bidder and project labor agreement requirements).
  • State regulatory processes (ICC) and staff involved in appraisal, rate base determination, and ratemaking.

Procedural and timeline aspects

  • Valuation process: three independent appraisals plus engineering assessment; timelines and engagement rules outlined; ICC oversight for engineer engagement if delays occur.
  • Referendum timeline: after a public meeting and notice, a referendum is placed at the next election within the service area.
  • Rate case timing: acquisition-related ratemaking decisions to be incorporated into the acquiring utility’s next rate case; interim rate protections apply until rates are set.
  • Sunset: the specific section enabling this acquisition framework is set to repeal on June 1, 2028, limiting the window for these provisions.
  • Discretion and oversight: ICC retains the authority to adjust rate base adjustments to reflect prudence and usefulness; final tariff group and rates require ICC approval.

If you’d like, I can tailor this summary to a specific audience (e.g., policymakers, ratepayers, or utility professionals) or add a quick comparison to the prior framework.

Compiled from official sources — confirm details with the bill’s official record.

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