Consumer advocacy groups oppose Illinois American Water $142.4M rate hike and potential major acquisition

Consumer advocates want Illinois American Water to cut its proposed $142.4 million rate hike by 38%, saying the company is seeking exorbitant profits.

Those advocates are seeking a $54 million cut to the proposal, according to filings to the Illinois Commerce Commission from the Illinois Attorney General’s office and groups including the Citizens Utility Board. The Illinois Commerce Commission is set to rule on the company’s request later this year.

Illinois American’s proposal, filed earlier this year, was submitted after the Illinois Commerce Commission approved a separate $110 million rate increase for the company for 2025. Illinois American’s proposal could bump water bills by an average of $168 per year for residential water customers and $336 per year for wastewater customers, according to CUB estimates.

The groups argue that Illinois American’s request for an increased payout for its investors — 10.75%, the same figure the ICC reduced by nearly a full percentage point in its last rate case — is driving the rising costs, saying it’s overinflated by $30.8 million when IAW’s parent company has seen more than $1 billion dollars in profit each of the last two years.

Meanwhile, as of April, nearly 47,000 households are already behind on their bills to Illinois American Water, totaling more than $8 million, according to ICC data.

“The fact that [the current return on investment] is not enough for them already is troubling,” said Eric DuBellis, general counsel for CUB.

In a statement to the Sun-Times, the company attributed the request for a rate increase to the cost of “replacing aging pipes, upgrading treatment facilities, improving storage and pumping systems, and meeting evolving regulatory requirements.”

But in addition to $4.7 million in executive bonuses factored into the request, CUB said the company also is basing its revenue estimates on a sharp drop in water use, akin to the start of the COVID-19 pandemic, when people stopped leaving their homes.

“It’s an absurd thing to forecast — that was an unforeseeable circumstance in an otherwise normal year,” DuBellis said.

Illinois American serves 148 communities across the state, including some in suburban Chicago. It operates the water delivery systems in those communities, along with 18 water treatment plants and 17 wastewater treatment facilities around the state.

Even beyond the rate hike, Illinois American and Aqua Illinois, two of the largest water utility providers in the state, proposed an acquisition that would put the two under the same roof last October; the Illinois Commerce Commission still has yet to rule on it.

Over the last several years, the two companies have aggressively bought up depreciated municipal water and wastewater systems, which CUB says has added $411 million to Illinois water bills since 2013.

Illinois American has also purchased Prairie Path Water Company, which has about 35,000 customers in northern and central Illinois. If the proposed acquisition is approved, it would leave just about 800 private residential water customers outside Illinois American’s jurisdiction statewide — an effective monopoly for water utility and a complete monopoly for wastewater, according to CUB.

The “level of market consolidation raises obvious concerns,” representatives for CUB wrote in ICC filings.

“It would make one large private utility in the state,” Bryan McDaniel, CUB’s director of governmental affairs. “They’re buying all these systems, there’ll be no competition, just one big monopoly.”

The consumer advocate also argues the consolidation of utilities has led to worse outcomes for customers.

Data from Aqua Illinois in ICC filings show a 77% increase in “unplanned disruptions” — such as main breaks — from 2022 to 2025, as well as a 39% increase in “unplanned advisories,” which include boil orders, between 2024 and 2025. CUB said data for advisories in 2022 and 2023 weren’t provided when requested by the Attorney General’s office as part of the case for the rate hike.

“Customers pay the full price of the system, plus they replace it all,” McDaniel said. “We think shareholders ought to pay for that.”

State Sen. Laura Murphy had legislation up for consideration to force utility companies’ shareholders to shoulder 80% of merger and acquisition costs.

Between July 2024 and 2025, IAW customers in Des Plaines saw bills an average of 142% higher than those getting water from the municipal system, according to a study conducted by the city of Des Plaines.

The legislation was amended after push back, opting instead to give towns and cities a chance to buy back their systems every few years, but still didn’t pass by the end of the session. The problem persists, Murphy said, as she still constantly hears of complaints out of Des Plaines, the town which originally inspired the bill.

“I remember when it was rare when a utility went to the ICC [for a rate hike], people’s salaries can’t keep up, ” Murphy said. “You have to learn how to manage the same way the government does. You don’t have to have profits to increase upper management salaries.”

Looking ahead to the fall session, Murphy said her colleagues have been looking into reforming the current rate hike system and bolstering the ICC’s ability to regulate utilities.

Illinois American’s request comes at the same time Peoples Gas’ put in for a $202 million rate hike and Nicor for a $220 million rate hike; both also will be up for a vote before the ICC later this year.

“Our system structure puts the ICC as that watchdog and they’re going to have to step up like they never have before,” Murphy said.