State’s largest privately owned water utilities seek rate increase amid lawmaker scrutiny

[July 20, 2024]  By ANDREW ADAMS
Capitol News Illinois
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The two largest privately owned water utilities in Illinois are seeking to raise rates for a combined 1.5 million customers around the state.

Illinois American Water, which serves 1.3 million people, is seeking a $152.4 million rate increase. That corresponds to a $24 per month increase in water service bills and $5 per month increase in wastewater service for the average residential customer.

Aqua Illinois, which serves 273,000 people, is seeking a $19.2 million increase. That would bring with it $29.91 in bill increases, according to the Citizens Utility Board, a consumer advocacy group.

The requests must be reviewed by the Illinois Commerce Commission before the utilities are allowed to modify their rates. The ICC will then likely modify the requests to comply with state law, and it will respond to arguments presented by entities such as the Illinois attorney general, local municipalities and advocacy organization.

Decisions in the cases are expected by the end of the year, with water rates going into effect around the start of 2025.

To collect public input in the two cases, the ICC set up a series of five hearings around the state. While the first in Jerseyville was held on June 26, the rest are scheduled over the next two weeks.
 

Two hearings in the Illinois American Water case are scheduled for July 22 at the Levy Center in Bolingbrook and for July 23 at the Champaign Public Library in Champaign.

Two hearings on the Aqua Illinois case are scheduled for July 29 at McHenry County College in Crystal Lake and for Aug. 1 at Olivet Nazarene University in Bourbonnais.

All four hearings begin at 7 p.m. and run for either 2 or 2 ½ hours.

AARP Illinois, which advocates for Illinoisans age 55 and older, requested the hearings to give customers a chance to have “face-to-face” time with the administrative judge who is overseeing the case, according to Jeff Scott, an associate state director at AARP.

While his organization is not planning on formally testifying in the cases, it has been circulating petitions and conducting an education campaign with the goal of lowering the requested increases to fixed charges.

AARP said Illinois American’s request would increase the fixed monthly meter charges, which customers must pay no matter how much water they use, from $17.98 to $26.12. Aqua’s request would increase fixed charges for most customers from $19.47 to $21.95.

Scott said recent decisions to dramatically reduce requested rate increases from natural gas and electric utilities suggests the agency could do the same for water companies.

“We're absolutely optimistic that we have an ICC whose members are thinking about the customers who have to pay these bills,” Scott told Capitol News Illinois.

Profit rates, executive bonuses

Much like they were during the ICC proceedings for natural gas and electricity utilities last year, consumer advocates have been critical of the water utilities’ requested profit rates.

CUB, a nonprofit set up by the General Assembly to advocate for utility customers, is intervening alongside the village of Bolingbrook in the Illinois American case and with the village of University Park in the Aqua case.

Both towns have a history of issues with their respective water utilities. Bolingbrook was among a group of nearby municipalities that sued Illinois American as part of a yearslong battle over control of the pipeline that brings water from Lake Michigan to that area of the suburbs.

University Park faced years of dangerously high lead in its water, leading the Illinois attorney general to sue the company. That case was settled in October 2023.

CUB objects to both companies’ proposed “return on equity,” or profit rate. Currently Illinois American operates with a 9.78 percent profit rate and Aqua operates with a 9.6 percent profit rate. They’ve requested to raise that to 10.75 and 10.8 percent, respectively.

CUB also argues that customers should not have to pay for certain bonuses to employees based on meeting financial goals that primarily benefit shareholders.

Sen. Sue Rezin, R-Morris, speaks at a news conference in Bolingbrook earlier this month to call on fellow lawmakers to pass legislation to make water rate hikes more difficult. (Capitol News Illinois photo by Andrew Adams)

“Consumers just want clean and affordable water – they shouldn’t have to cover bonuses for Illinois American executives and exorbitant profit rates for corporate shareholders,” CUB Executive Director Sarah Moskowitz said in a statement when the group filed its testimony in the Illinois American case.

When asked about CUB’s criticism of its requested profit rates and executive bonus structure, a representative of Illinois American did not offer any argument to its defense.

“Intervention by customers, communities and third parties like CUB, and the expression of their opinion, is a standard and expected part of the rate-making process,” the company said in a statement to Capitol News Illinois.

The statement also noted the request “reinforces the company’s ongoing commitment” to upgrading infrastructure as it ages and providing reliable water service.

In testimony filed June 20, Illinois American’s vice president of operations, Brian Eisenloeffel, defended its pay structure as “a reasonable and prudently incurred expense” and argued that the company can more easily retain employees and incentivize high-performance work under its current structure.

Aqua faces similar criticisms for its profit rate and executive pay structure. In a statement, the company defended its request by saying the money is necessary to provide safe service.

“Aqua purchased systems across Illinois, some of which required significant investment due to failing or obsolete infrastructure during the past six and a half years and has spent millions of dollars to improve the communities we serve through infrastructure enhancements,” the statement read. “Our customers have not seen an increase in rates during that time, but Aqua cannot sustain these continued investments in Illinois water infrastructure alone.”

Lawmakers critique companies, face long odds

In coordination with CUB, several lawmakers spoke out against the companies earlier this month and called on their colleagues in the General Assembly to pass laws restricting how the companies can increase rates and making it harder for them to purchase publicly owned systems.

Rep. Dagmara Avelar, D-Romeoville, sponsored legislation that would prohibit water companies from increasing rates without prior approval to pay for certain infrastructure projects. Lawmakers let a nearly identical program for natural gas companies lapse at the end of last year.

“The rising cost of living due to inflation has made everyday costs burdensome for families, especially low- and fixed-income households,” Avelar said at a news conference earlier this month. “This utility increase makes it difficult for families to survive.”

Sen. Sue Rezin, R-Morris, also sponsored legislation that was backed by CUB. Her bill would have required municipalities to hold a referendum before selling their water systems to a private utility. She said it would curb “predatory practices” that result in higher prices.

Private water utilities can charge customers to make up the costs related to acquiring water systems from municipalities, contributing to increased costs for private water customers when compared to public water customers.

Neither of these bills was close to passage in the General Assembly’s spring session, having failed to garner a committee hearing, something CUB’s in-house lobbyist, Bryan McDaniel, was quick to downplay.

“There’s 1.5 million customers covered by (Illinois) American Water and Aqua. Because there’s over 13 million in Illinois, they don’t touch every district,” McDaniel said. “It’s a tall task to educate legislators and that’s what we’re doing.”

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of print and broadcast outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.