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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