H 7888Finance

Public Utilities and Carriers - Public Utilities Commission

This bill limits the annual profit margin (return on equity) for large electric and gas utility companies to 4% starting in 2026.

Held for study

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Introduced Feb 27, 2026Committee House Corporations

Plain-English Summary

This legislation amends the laws governing public utilities in Rhode Island, specifically targeting large electric and gas distribution companies with over 100,000 customers. The primary change introduced by this bill is a cap on the profit margin for these utility companies. Effective July 1, 2026, these companies are prohibited from exceeding a profit margin—defined specifically as the return on equity—of four percent (4%) in any calendar year. The Public Utilities Commission is directed to update its regulations to enforce this new financial limit.

For younger readers

This bill changes the rules for the big companies that bring electricity and gas to our houses. Right now, these companies are businesses that try to make money. This new law says that starting in the summer of 2026, there is a limit on how much extra money, or profit, they are allowed to keep. They will not be allowed to make a profit higher than 4% in a year. The government group that watches over these companies will have to make sure they follow this new rule.

Who & Where It Applies

Impacted groups

Electric distribution companiesGas distribution companiesUtility ratepayersUtility shareholdersPublic Utilities Commission

Impacted communities

All

Constitutional & Fiscal Check

High risk

There is a high risk this legislation is unconstitutional. Under the Takings Clause of the Fifth Amendment, the Supreme Court (e.g., *FPC v. Hope Natural Gas*) has ruled that regulated utilities are entitled to a "just and reasonable" return that allows them to maintain financial integrity and attract capital. If a 4% cap is significantly below the market cost of capital, courts would likely rule it confiscatory and a violation of due process.

Estimated cost

None

Estimated revenue

None

Bill Analysis

Both viewpoints

For Progressives

Limits corporate profiteering on essential life-sustaining services like electricity and heat, ensuring that public needs are prioritized over shareholder returns.
May result in lower utility bills for working-class families and disadvantaged communities by preventing the extraction of excessive profits from ratepayers.
Asserts stronger public control and accountability over state-sanctioned monopolies, shifting power away from corporate executives and toward the community.
Could drastically reduce the capital available for the utility to invest in necessary green energy infrastructure and grid modernization required to fight climate change.
Might incentivize the utility company to cut labor costs, potentially leading to job losses or reduced wages for unionized utility workers to maintain profitability.
Risk of reduced service reliability and slower response times to power outages in low-income areas if the company cuts operational spending to stay under the cap.

For Conservatives

Checks the power of a state-sanctioned monopoly, preventing them from exploiting their exclusive market position to overcharge businesses and residents.
Could lower operating costs for businesses and manufacturers in the state by potentially reducing energy overhead expenses.
Forces the utility company to focus on operational austerity and efficiency rather than relying on guaranteed high rates of return.
Represents extreme government interference in the free market by arbitrarily dictating the profit margins of private businesses.
Violates property rights and sets a dangerous precedent for government seizure of corporate earnings, likely leading to costly litigation against the state.
Will likely drive capital investment out of the state, as investors will refuse to fund infrastructure projects with artificially suppressed returns.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 9 additions

SECTION 1. Section 39-1-27.7.1 of the General Laws in Chapter 39-1 entitled "Public Utilities Commission" is hereby amended to read as follows: 39-1-27.7.1. Revenue decoupling.

(a) The general assembly finds and declares that electricity and gas revenues shall be fully decoupled from sales pursuant to the provisions of this chapter and further finds and declares that any decoupling proposal submitted by an electric distribution company as defined in § 39-1- 2(a)(12) or gas distribution company included as a public utility in § 39-1-2(a)(20) that has greater than one hundred thousand (100,000) customers, shall be for the following purposes:

(1) Increasing efficiency in the operations and management of the electric and gas distribution system;

(2) Achieving the goals established in the electric distribution company’s plan for system reliability and energy efficiency and conservation procurement as required pursuant to § 39-1- 27.7(d);

(3) Increasing investment in least-cost resources that will reduce long-term electricity demand;

(4) Reducing risks for both customers and the distribution company including, but not limited to, societal risks, weather risks, and economic risks;

(5) Increasing investment in end-use energy efficiency;

(6) Eliminating disincentives to support energy-efficiency programs;

(7) Facilitating and encouraging investment in utility infrastructure, safety, and reliability; and

(8) Considering the reduction of fixed, recurring customer charges and transition to increased unit charges that more accurately reflect the long-term costs of energy production and delivery. (b)(1) Each electric distribution company as defined by § 39-1-2(a)(12) and gas distribution company included as a public utility in § 39-1-2(a)(20) having greater than one hundred thousand (100,000) customers shall file proposals at the commission to implement the policy set forth in subsection (a) of this section. The commission shall approve these proposals, provided they contain the features and components set forth in subsection (c) of this section, and that they are consistent with the intent and objectives contained in subsection (a) of this section. Actions taken by the commission in the exercise of its ratemaking authority for electric and gas rate cases shall be within the norm of industry standards and recognize the need to maintain the financial health of the distribution company as a stand-alone entity in Rhode Island.

(2) Provided, effective July 1, 2026, the profit margin of any public utility company that is an electric distribution company or gas distribution company as further defined in § 39-1-2, shall not have a profit margin greater than or exceeding four percent (4%), in any given calendar year. The public utilities commission shall amend its rules and regulations as needed, consistent with the provisions of this chapter. As used herein, a “profit margin” means and shall refer to the return on equity, which shall be the return on the equity portion of the base rate, that is allowed by the commission.

(1) A revenue decoupling reconciliation mechanism that reconciles annually the revenue requirement allowed in the company’s base distribution-rate case to revenues actually received for the applicable twelve-month (12) period. Any revenues over-recovered or under-recovered shall be credited to, or recovered from, customers, as applicable; and

(2) An annual infrastructure, safety, and reliability spending plan for each fiscal year and an annual rate-reconciliation mechanism that includes a reconcilable allowance for the anticipated capital investments and other spending pursuant to the annual pre-approved budget as developed in accordance with subsection (d) of this section.

(d) Prior to the beginning of each fiscal year, gas and electric distribution companies shall consult with the division of public utilities and carriers regarding their infrastructure, safety, and reliability spending plan for the following fiscal year, addressing the following categories:

(1) Capital spending on utility infrastructure;

(2) For electric distribution companies, operation and maintenance expenses on vegetation management;

(3) For electric distribution companies, operation and maintenance expenses on system inspection, including expenses from expected resulting repairs; and

(4) Any other costs relating to maintaining safety and reliability that are mutually agreed upon by the division and the company. The distribution company shall submit a plan to the division and the division shall cooperate in good faith to reach an agreement on a proposed plan for these categories of costs for the prospective fiscal year within sixty (60) days. To the extent that the company and the division mutually agree on a plan, such plan shall be filed with the commission for review and approval within ninety (90) days. If the company and the division cannot agree on a plan, the company shall file a proposed plan with the commission and the commission shall review and, if the investments and spending are found to be reasonably needed to maintain safe and reliable distribution service over the short and long term, approve the plan within ninety (90) days.

(e) The commission shall have the following duties and powers, in addition to its existing authorities established in this title:

(1) To maintain reasonable and adequate service-quality standards, after decoupling, that are in effect at the time of the proposal and were established pursuant to § 39-3-7.

(2) The commission may exclude the low-income rate class from the revenue decoupling reconciliation-rate mechanism for either electric or gas distribution. The commission also may exclude customers in the large commercial and industrial rate class from the gas-distribution mechanism.

(3) The commission may adopt performance incentives for the electric distribution company that provide a shared-savings mechanism whereby the company would receive a percentage of savings realized as a result of achieving the purposes of this section while the remaining savings are credited to customers.

(4) The commission shall review and approve, with any necessary amendments, performance-based, energy-savings targets developed and submitted by the Rhode Island energy efficiency and resources management council. The performance-based targets shall also be used as a consideration in any shared-savings mechanism established by the commission pursuant to subsection (e)(3) of this section.

(f) The Rhode Island energy efficiency and resources management council shall propose performance-based, energy-savings targets to the commission no later than September 1, 2010. The targets shall include, but not be limited to, specific energy kilowatt-hour savings overall and peak- demand savings for both summer and winter peak periods expressed in total megawatts as well as appropriate targets recommended in the opportunities report filed with the commission pursuant to § 39-1-27.7(d)(3). The council shall revise, as necessary, these targets on an annual basis prior to the reconciliation process established pursuant to subsection (c) of this section and submit its revisions to the commission for approval.

(g) Reporting. Every electric distribution company, as defined in subsection (a) of this section, shall report to the governor, general assembly, division of public utilities and carriers, and public utilities commission on or before September 1, 2012. The report shall include, but not be limited to, the following elements:

(1) A comparison of revenues from traditional rate regulation and how the revenues have differed as part of an approved decoupling structure;

(2) A summary of how the company is achieving the performance-based targets that may have been adopted pursuant to subsection (e)(4) of this section;

(3) A summary of any shared savings the company may have received pursuant to the performance incentives authorized in subsection (e)(3) of this section;

(4) A summary of how the company is achieving the service-quality standards required in subsection (e)(1) of this section;

(5) An overview of how decoupling is impacting revenue stabilization goals that have resulted from decoupling; and

(6) A summary of any customer education programs provided.

SECTION 2. This act shall take effect upon passage.