VALUATION OF WATER UTILITIES

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104TH GENERAL ASSEMBLY
State of Illinois
2025 and 2026
SB3889

Introduced 2/6/2026, by Sen. Rachel Ventura

SYNOPSIS AS INTRODUCED:

65 ILCS 5/11-117-13.5 new
220 ILCS 5/9-210.5

Amends the Illinois Municipal Code. Provides that, before the sale of
a water system or sewer system owned by a municipality to a private entity,
a referendum shall be submitted to the electors of the municipality.
Provides that a majority vote authorizing the sale of the water system or
sewer system shall be required from the electors of the municipality
before the sale or purchase can occur. Amends the Public Utilities Act. In
provisions concerning valuation of water and sewer utilities, provides
that "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 the State that regularly provides water
or sewer service to 6,000 or fewer customer connections; (3) a waterworks
system or sewerage system established under the Township Code that
regularly provides water or sewer service to 6,000 or fewer customer
connections; (4) a water system or sewer system owned by a municipality
that regularly provides water or sewer service to 6,000 or fewer customer
connections; or (5) any other entity that is not a public utility that
regularly provides water or sewer service to 6,000 or fewer customer
connections. Provides that the provisions are repealed on June 1, 2026
(rather than June 1, 2028). Effective immediately.
LRB104 19411 AAS 32859 b

A BILL FOR

SB3889
LRB104 19411 AAS 32859 b
1

AN ACT concerning regulation.

2

Be it enacted by the People of the State of Illinois,
3
represented in the General Assembly:

4

Section 5.
The Illinois Municipal Code is amended by
5
adding Section 11-117-13.5 as follows:

6

(65 ILCS 5/11-117-13.5 new)
7

Sec. 11-117-13.5.
Referendum to approve sale of municipal
8
water or sewer system.
Except as provided in Section
9
11-117-14, before the sale of a water system or sewer system
10
owned by a municipality to a private entity, a referendum
11
shall be submitted to the electors of the municipality. A
12
majority vote authorizing the sale of the water system or
13
sewer system shall be required from the electors of the
14
municipality before the sale or purchase can occur. This
15
Section applies to a water system or sewer system owned by a
16
municipality that provides service to more than 1,000 customer
17
connections.

18

Section 10.
The Public Utilities Act is amended by
19
changing Section 9-210.5 as follows:

20

(220 ILCS 5/9-210.5)
21

(Section scheduled to be repealed on June 1, 2028)

SB3889
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LRB104 19411 AAS 32859 b
1

Sec. 9-210.5.
Valuation of water and sewer utilities.
2

(a) In this Section:
3

"Disinterested" means that the person directly
4

involved (1) is not a director, officer, or an employee of
5

the large public utility or the water or sewer utility or
6

its direct affiliates or subsidiaries for at least 12
7

months before becoming engaged under this Section; (2)
8

shall not derive a material financial benefit from the
9

sale of the water or sewer utility other than fees for
10

services rendered, and (3) shall not have a member of the
11

person's immediate family, including a spouse, parents or
12

spouse's parents, children or spouses of children, or
13

siblings and their spouses or children, be a director,
14

officer, or employee of either the large public utility or
15

water or sewer utility or the water or sewer utility or its
16

direct affiliates or subsidiaries for at least 12 months
17

before becoming engaged under this Section or receive a
18

material financial benefit from the sale of the water or
19

sewer utility other than fees for services rendered.
20

"District" means a service area of a large public
21

utility whose customers are subject to the same rate
22

tariff.
23

"Large public utility" means an investor-owned public
24

utility that:
25

(1) is subject to regulation by the Illinois
26

Commerce Commission under this Act;

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LRB104 19411 AAS 32859 b
1

(2) regularly provides water or sewer service to
2

more than 15,000 customer connections;
3

(3) provides safe and adequate service; and
4

(4) is not a water or sewer utility as defined in
5

this subsection (a).
6

"Next rate case" means a large public utility's first
7

general rate case after the date the large public utility
8

acquires the water or sewer utility where the acquired
9

water or sewer utility's cost of service is considered as
10

part of determining the large public utility's resulting
11

rates.
12

"Prior rate case" means a large public utility's
13

general rate case resulting in the rates in effect for the
14

large public utility at the time it acquires the water or
15

sewer utility.
16

"Utility service source" means the water or sewer
17

utility or large public utility from which the customer
18

receives its utility service type.
19

"Utility service type" means water utility service or
20

sewer utility service or water and sewer utility service.
21

"Water or sewer utility" means any of the following:
22

(1) a public utility that regularly provides water
23

or sewer service to 6,000 or fewer customer
24

connections;
25

(2) a water district, including, but not limited
26

to, a public water district, water service district,

SB3889
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LRB104 19411 AAS 32859 b
1

or surface water protection district, or a sewer
2

district of any kind established as a special district
3

under the laws of this State that regularly provides
4

water or sewer service
to 6,000 or fewer customer
5

connections
;
6

(3) a waterworks system or sewerage system
7

established under the Township Code that regularly
8

provides water or sewer service
to 6,000 or fewer
9

customer connections
;
or
10

(4) a water system or sewer system owned by a
11

municipality that regularly provides water or sewer
12

service
to 6,000 or fewer customer connections
;
or

and
13

(5) any other entity that is not a public utility
14

that regularly provides water or sewer service
to
15

6,000 or fewer customer connections
.
16

(b) Notwithstanding any other provision of this Act, a
17
large public utility that acquires a water or sewer utility
18
may request that the Commission use, and, if so requested, the
19
Commission shall use, the procedures set forth under this
20
Section to establish the ratemaking rate base of that water or
21
sewer utility at the time when it is acquired by the large
22
public utility.
23

(c) If a large public utility elects the procedures under
24
this Section to establish the rate base of a water or sewer
25
utility that it is acquiring, then 3 appraisals shall be
26
performed. The average of these 3 appraisals shall represent

SB3889
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LRB104 19411 AAS 32859 b
1
the fair market value of the water or sewer utility that is
2
being acquired. The appraisals shall be performed by 3
3
appraisers approved by the Commission's Executive Director or
4
designee and engaged by either the water or sewer utility
5
being acquired or by the large public utility. Each appraiser
6
shall be engaged on reasonable terms approved by the
7
Commission. Each appraiser shall be a disinterested person
8
licensed as a State certified general real estate appraiser
9
under the Real Estate Appraiser Licensing Act of 2002.
10

Each appraiser shall:
11

(1) be sworn to determine the fair market value of the
12

water or sewer utility by establishing the amount for
13

which the water or sewer utility would be sold in a
14

voluntary transaction between a willing buyer and willing
15

seller under no obligation to buy or sell;
16

(2) determine fair market value in compliance with the
17

Uniform Standards of Professional Appraisal Practice;
18

(3) engage one disinterested engineer who is licensed
19

in this State, and who may be the same engineer that is
20

engaged by the other appraisers, to prepare an assessment
21

of the tangible assets of the water or sewer utility,
22

which is to be incorporated into the appraisal under the
23

cost approach;
24

(4) request from the manager of the Accounting
25

Department, if the water or sewer utility is a public
26

utility that is regulated by the Commission, a list of

SB3889
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LRB104 19411 AAS 32859 b
1

investments made by the water or sewer utility that had
2

been disallowed previously and that shall be excluded from
3

the calculation of the large public utility's rate base in
4

its next rate case; and
5

(5) return their appraisal, in writing, to the water
6

or sewer utility and large public utility in a reasonable
7

and timely manner.
8

If the appraiser cannot engage an engineer, as described
9
in paragraph (3) of this subsection (c), within 30 days after
10
the appraiser is engaged, then the Commission's Executive
11
Director or designee shall recommend the engineer the
12
appraiser should engage. The Commission's Executive Director
13
or designee shall provide his or her recommendation within 30
14
days after he or she is officially notified of the appraiser's
15
failure to engage an engineer and the appraiser shall promptly
16
work to engage the recommended engineer. If the appraiser is
17
unable to negotiate reasonable engagement terms with the
18
recommended engineer within 15 days after the recommendation
19
by the Commission's Executive Director or designee, then the
20
appraiser shall notify the Commission's Executive Director or
21
designee and the process shall be repeated until an engineer
22
is successfully engaged.
23

(d) The lesser of (i) the purchase price or (ii) the fair
24
market value determined under subsection (c) of this Section
25
shall constitute the rate base associated with the water or
26
sewer utility as acquired by and incorporated into the rate

SB3889
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LRB104 19411 AAS 32859 b
1
base of the district designated by the acquiring large public
2
utility under this Section, subject to any adjustments that
3
the Commission deems necessary to ensure such rate base
4
reflects prudent and useful investments in the provision of
5
public utility service. The reasonable transaction and closing
6
costs incurred by the large public utility shall be treated
7
consistent with the applicable accounting standards under this
8
Act. The total amount of all of the appraisers' fees to be
9
included in the transaction and closing costs shall not exceed
10
the greater of $15,000 or 5% of the appraised value of the
11
water or sewer utility being acquired. This rate base
12
treatment shall not be deemed to violate this Act, including,
13
but not limited to, any Sections in Articles VIII and IX of
14
this Act that might be affected by this Section. Any
15
acquisition of a water or sewer utility that affects the
16
cumulative base rates of the large public utility's existing
17
ratepayers in the tariff group into which the water or sewer
18
utility is to be combined by less than (1) 2.5% at the time of
19
the acquisition for any single acquisition completed under
20
this Section or (2) 5% for all acquisitions completed under
21
this Section before the Commission's final order in the next
22
rate case shall not be deemed to violate Section 7-204 or any
23
other provision of this Act.
24

In the Commission's order that approves the large public
25
utility's acquisition of the water or sewer utility, the
26
Commission shall issue its decision establishing (1) the

SB3889
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LRB104 19411 AAS 32859 b
1
ratemaking rate base of the water or sewer utility; (2) the
2
district or tariff group with which the water or sewer utility
3
shall be combined for ratemaking purposes, if such combination
4
has been proposed by the large public utility; and (3) the
5
rates to be charged to customers in the water or sewer utility.
6

(e) If the water or sewer utility being acquired is owned
7
by the State or any political subdivision thereof, then the
8
water or sewer utility must inform the public of the terms of
9
its acquisition by the large public utility by (1) holding a
10
public meeting prior to the acquisition and (2) causing to be
11
published, in a newspaper of general circulation in the area
12
that the water or sewer utility operates, a notice setting
13
forth the terms of its acquisition by the large public utility
14
and options that shall be available to assist customers to pay
15
their bills after the acquisition.
16

(f) The large public utility may recommend the district or
17
tariff group of which the water or sewer utility shall, for
18
ratemaking purposes, become a part after the acquisition, or
19
may recommend a lesser rate for the water or sewer utility. If
20
the large public utility recommends a lesser rate, it shall
21
submit to the Commission its proposed rate schedule and the
22
proposed final tariff group for the acquired water or sewer
23
utility. The Commission's approved district or tariff group or
24
rates shall be consistent with the large public utility's
25
recommendation, unless such recommendation can be shown to be
26
contrary to the public interest.

SB3889
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LRB104 19411 AAS 32859 b
1

(g) From the date of acquisition until the date that new
2
rates are effective in the acquiring large public utility's
3
next rate case, the customers of the acquired water or sewer
4
utility shall pay the approved then-existing rates of the
5
district or tariff group as ordered by the Commission, or some
6
lesser rates as recommended by the large public utility and
7
approved by the Commission under subsection (f); provided,
8
that, if the application of such rates of the large public
9
utility to customers of the acquired water or sewer utility
10
using 54,000 gallons annually results in an increase to the
11
total annual bill of customers of the acquired water or sewer
12
utility, exclusive of fire service or related charges, then
13
the large public utility's rates charged to the customers of
14
the acquired water or sewer utility shall be uniformly
15
reduced, if any reduction is required, by the percent that
16
results in the total annual bill, exclusive of fire services
17
or related charges, for the customers of the acquired water or
18
sewer utility using 54,000 gallons being equal to 1.5% of the
19
latest median household income as reported by the United
20
States Census Bureau for the most applicable community or
21
county. For each customer of the water or sewer utility with
22
potable water usage values that cannot be reasonably obtained,
23
a value of 4,500 gallons per month shall be assigned. These
24
rates shall not be deemed to violate this Act including, but
25
not limited to, Section 9-101 and any other applicable
26
Sections in Articles VIII and IX of this Act. The Commission

SB3889
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LRB104 19411 AAS 32859 b
1
shall issue its decision establishing the rates effective for
2
the water or sewer utility immediately following an
3
acquisition in its order approving the acquisition.
4

(h) In the acquiring large public utility's next rate
5
case, the water or sewer utility and the district or tariff
6
group ordered by the Commission and their costs of service may
7
be combined under the same rate tariff. This rate tariff shall
8
be based on allocation of costs of service of the acquired
9
water or sewer utility and the large public utility's district
10
or tariff group ordered by the Commission and utilizing a rate
11
design that does not distinguish among customers on the basis
12
of utility service source or type. This rate tariff shall not
13
be deemed to violate this Act including, but not limited to,
14
Section 9-101 of this Act. In the acquiring large public
15
utility's 2 rate cases after an acquisition, but in no
16
subsequent rate case, the large public utility may file a rate
17
tariff for a water or sewer utility acquired under this
18
Section that establishes lesser rates than the district or
19
tariff group into which the water or sewer utility is to be
20
combined. Those lesser rates shall not be deemed to violate
21
Section 7-204 or any other provision of this Act if they affect
22
the cumulative base rates of the large public utility's
23
existing rate payers in the district or tariff by less than
24
2.5%.
25

(i) Any post-acquisition improvements made by the large
26
public utility in the water or sewer utility shall accrue a

SB3889
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LRB104 19411 AAS 32859 b
1
cost for financing set at the large public utility's
2
determined rate for allowance for funds used during
3
construction, inclusive of the debt, equity, and income tax
4
gross up components, after the date on which the expenditure
5
was incurred by the large public utility until the investment
6
has been in service for a 4-year period or, if sooner, until
7
the time the rates are implemented in the large public
8
utility's next rate case.
9

Any post-acquisition improvements made by the large public
10
utility in the water or sewer utility shall not be depreciated
11
for ratemaking purposes from the date on which the expenditure
12
was incurred by the large public utility until the investment
13
has been in service for a 4-year period or, if sooner, until
14
the time the rates are implemented in the large public
15
utility's next rate case.
16

(j) This Section shall be exclusively applied to large
17
public utilities in the voluntary and mutually agreeable
18
acquisition of water or sewer utilities. Any petitions filed
19
with the Commission related to the acquisitions described in
20
this Section, including petitions seeking approvals or
21
certificates required by this Act, shall be deemed approved
22
unless the Commission issues its final order within 11 months
23
after the date the large public utility filed its initial
24
petition. This Section shall only apply to utilities providing
25
water or sewer service and shall not be construed in any manner
26
to apply to electric corporations, natural gas corporations,

SB3889
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LRB104 19411 AAS 32859 b
1
or any other utility subject to this Act.
2

(k) Nothing in this Section shall prohibit a party from
3
declining to proceed with an acquisition or be deemed as
4
establishing the final purchase price of an acquisition.
5

(l) In the Commission's order that approves the large
6
utility's acquisition of the water or sewer utility, the
7
Commission shall address each aspect of the acquisition
8
transaction for which approval is required under the Act.
9

(m) Any contractor or subcontractor that performs work on
10
a water or sewer utility acquired by a large public utility
11
under this Section shall be a responsible bidder as described
12
in Section 30-22 of the Illinois Procurement Code. The
13
contractor or subcontractor shall submit evidence of meeting
14
the requirements to be a responsible bidder as described in
15
Section 30-22 to the water or sewer utility. Any new water or
16
sewer facility built as a result of the acquisition shall
17
require the contractor to enter into a project labor
18
agreement. The large public utility acquiring the water or
19
sewer utility shall offer employee positions to qualified
20
employees of the acquired water or sewer utility.
21

(n) This Section is repealed on
June 1, 2026

June 1, 2028
.
22
(Source: P.A. 102-149, eff. 1-1-22
.)

23

Section 99.
Effective date.
This Act takes effect upon
24
becoming law.

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