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Water Rate Setting Study

water tower

Municipal water departments and water utilities operate under Illinois law and establish their own rate structures. The Public Water District Act, for example, states that “it shall be the duty of such board to establish rates and charges for water and water service, which shall be sufficient at all times to pay the cost of maintenance and operation, depreciation, and principal of and interest on all bonds issued and other obligations incurred under the provisions of Sections 1 through 23 of this Act.” Boards and elected city officials are required to set the rates to cover the costs of water and sewer provision. Yet, little is known about how such rates are actually set.

 

In 2021, the Illinois General Assembly awarded the GFRC a state appropriation in the amount of $769,000 as part of the American Rescue Plan Act (ARPA) Coronavirus State Fiscal Recovery (CSFR) Fund. The funding will support a three-year “Water Rate Setting Study” that will culminate in two reports addressing seven critical purposes, as outlined in Public Act 101-562 (approved in 2019) and amended by Public Act 102-507 (approved by Governor Pritzker on August 20, 2021). To that end, the GFRC will research:

  • The components of water bills
  • How municipalities and water districts establish rates
  • What factors influence rate adjustments as well as the extent to which State or local policies drive cost increases or variations in rate-settings
  • The definition of affordability throughout the State and any variances to that definition
  • Whether equity and affordability are integrated into the rate-setting process
  • How rate-setting varies between economically disadvantaged and economically advantaged communities
  • How such variation impacts the accessibility of drinking water for community residents
  • Challenges within economically disadvantaged communities in setting water rates
  • Evidence of rate-setting that utilizes inappropriate practices
  • Opportunities for increased intergovernmental coordination for setting equitable water rates and increasing access to drinking water for residents of economically disadvantaged communities

Findings from this project will be released periodically, and can be found on this page.

Project Deliverables Heading link

As a preparatory step, the GFRC assembled a primer that provides a preliminary review of water bills, rate structures, drivers of costs, and rate setting processes. Read the GFRC’s Primer about water rate setting and water bills in Illinois.

map of northeast Illinois

In addition to periodic releases of findings, this project will culminate in two separate reports: one focused on Northeastern Illinois and the other focused on the remainder of the state.

Northeastern Illinois  (including the City of Chicago, Cook County, and surrounding counties) is home to a high density of water systems. Additionally, water utilities have access to a unique resource – Lake Michigan water. The dynamics of a high concentration of municipal water utilities and a shared water source are integral to the rate setting practices of Northeastern Illinois. You can explore these dynamics in our newly released data portal.

Illinois Water Rate Setting Study Data Portal

map of water systems

This data portal will be updated periodically to reflect research progress. Currently, included in this portal are the following interactive maps and key findings:

  1. Provision and Production of Drinking Water in Northeastern Illinois begins to tell the story of production (pumping and treating water) and wholesale agreements (purchases between water utilities) which play an integral role in the region. Key observations of the 284 municipalities within Northeastern Illinois include:
  • Only 12 municipalities directly pump water from the lake, while 144 municipalities purchase Lake Michigan water
  • 7 out of 12 of municipalities that directly pump Lake Michigan water also sell water wholesale to other communities
  • 16 municipalities that purchase Lake Michigan water also resell Lake Michigan water to other communities
  • The majority of communities on groundwater (67 out of 71) self-produce and do not engage in wholesale with neighbors