Illinois American Water will increase water rates

[December 06, 2024]  By Andrew Adams

CHICAGO — The state’s largest private water utility, Illinois American Water, will increase customer bills in the new year.

The move comes after state regulators at the Illinois Commerce Commission approved the requested increase on Thursday. The five-member board approved a $110 million increase for the company, a 30% reduction from the company’s original request early this year.

Illinois American Water serves more than 1 million Illinoisans in roughly 150 communities around the state, ranging from South Beloit to Cairo, with major operations in the Chicago suburbs, Champaign, Peoria and the Metro East.

Illinois American Water said in a statement it is reviewing the final order and indicated it will communicate directly with customers about the impact to their bills. While they did not provide an estimate, the increase will be lower than the company’s originally requested rate hike. That would have corresponded to a roughly $24 per month increase in water service bills and a $5 increase in wastewater service costs for the average residential customer.

The ICC also reduced the company’s proposed return on equity — a share of the company’s revenue that’s paid out to investors – from its requested 10.75% to 9.84%.

New water rates will go into effect in early 2025.

The company said in a statement Thursday the “main driver” of the increase was to cover the cost of future investments in water systems.

That includes things like lead pipe replacement and upgrading pump stations that move water throughout its system. The increase also covers the costs associated with Illinois American Water purchasing several water systems from local governments.

The legal order approving the rate increase Thursday also included an expansion of Illinois American Water’s low-income discount program. The expansion will provide between a 10% and 80% reduction to customers’ bills if they have an income below three times the federal poverty level. In 2024, that was about $93,600 per year for a family of four.

Affordability was a major issue for some customers who spoke out against the proposed rate increase at public hearings held around the state this summer. At one particularly fiery hearing in Bolingbrook, customers urged the ICC to reject the increase, pointing out the already high cost of bills.

Others at that hearing pointed to the fact that bill increases disproportionately affect those on fixed incomes and the elderly. This was a major theme for AARP Illinois, a group that advocates for the interests of those 50 and older.

Last month, AARP Illinois delivered petitions with what they said were over 10,000 signatures to the ICC opposing the proposed rate increase as well as a similar proposal from Aqua Illinois, the state’s second largest private water utility.

AARP Illinois State Director Philipe Largent said in a statement the 30% reduction was a “step in the right direction” and commended the ICC for hosting public hearings on the rate case earlier in the year.

An Illinois American Water tower pictured in Bolingbrook. Regulators approved an increase to the company's water rates starting in 2025. (Capitol News Illinois photo by Andrew Adams)

Water system acquisitions were a major part of the controversy surrounding Illinois American Water’s rate case and others this year. Throughout the past year, consumer advocates criticized a state law that allows water utilities to purchase water systems and recover 100% of the associated costs of those purchases from customers.

That policy — outlined in the Illinois Water Systems Viability Act, or SVA — has led to lawmakers of both parties calling for reform to the system, backing a proposal from the Citizens Utility Board, a consumer advocacy group.

CUB Executive Director Sarah Moskowitz said she and others at CUB were “disappointed” that the water utility received a significant rate increase.

“The ICC’s ruling today gives new urgency to CUB’s push to reform a water privatization law that Illinois American Water successfully lobbied for, and now uses to plunder its customers,” Moskowitz said in a statement. “Illinois American Water has now received $195 million in rate hikes in just two years, and they’ve indicated on earnings calls that they expect the rate hikes to continue.”

But some say that privatization is a way for smaller water systems to get infrastructure upgrades they otherwise wouldn’t have. Illinois American Water President Rebecca Losi noted at a public hearing earlier this year that the acquisitions make up “less than 4%” of the company’s originally proposed increase.

ICC Commissioner Stacey Paradis called out the role of acquisitions in a comment at Thursday’s meeting.

“Generally, we’ve seen communities choose to sell because they cannot afford to invest in system upgrades to antiquated infrastructure required to meet federal and state regulations or they can’t maintain existing systems,” Paradis said. “It seems clear based on recent cases and evidence across the country that water systems haven’t received much investment in decades, leading to aging systems that are inefficient and aren’t able to meet health and safety standards.”

ICC Chair Doug Scott also noted Thursday the state’s limited ability to interfere with municipal water systems

“If an investor-owned utility seeks to acquire a system and the acquisition is compliant with the SVA, the commission must grant the acquisition order,” Scott said. “The commission does not have the authority to direct public and municipal system investments in the system that were referred to by Commissioner Paradis.”

Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.