Provides that gas, electric, or combination gas and electric corporations shall not be permitted to retain revenues derived from their actual return on equity in excess of authorized rates of return on equity.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A8150
SPONSOR: Barrett TITLE OF BILL:
An act to amend the public service law, in relation to the retention of
revenues derived from their actual return on equity in excess of author-
ized rates of return by gas, electric, or combination gas and electric
corporations
PURPOSE OF THE BILL:
To require gas and electric utilities to return all revenues earned in
excess of their authorized rate of return on equity to ratepayers,
SUMMARY OF SPECIFIC PROVISIONS:
§ 1: Amends subdivision 20 of Section 66 of the Public Service Law to
prohibit the Public Service Commission (PSC) from approving any rate
plan which allows a gas, electric, or combination gas and electric
corporation from retaining revenues in excess of their authorized rate
of return on equity. Utilities must return excess revenues annually to
ratepayers in the form of a surcredit on their bills and must report
annually to the Department of Public Service (DPS) on excess revenues.
§ Effective date.
JUSTIFICATION:
Over the last several years, the Public Service Commission (PSC) has
approved significant rate increases for public utilities, stretching
many ratepayers to the limit. There has been a pattern of electric, gas,
and combination gas and electric utilities filing for double digit rate
increases. For example, this year Con Edison filed a rate increase
request with the PSC for $1.6B more in revenue for electric service and
$440 million more in gas and National Grid Upstate filed a rate increase
request with the PSC for $525 million more in revenue for electric
service and $148 million more in gas revenues. The PSC is currently
reviewing these rate cases, but it is likely to result in further
increases for electric and gas customers.
For New Yorkers across the economic spectrum, these rate increases are
untenable. According to the Robin Hood Foundation, 1.5M New York City
residents live in households where their utilities have been shut off at
some time in the past 5 years.' But even for families that haven't expe-
rienced shut offs, utility costs represent a growing burden.
Under the public service law, the PSC is tasked with reviewing and ulti-
mately approving all major rate increases for utilities. The process is
long and multifaceted, but one of the determining factors in the rates
approved by the commission is the rate of return on equity, The rate of
return on equity dictates how much a utility is authorized to earn in
return on the equity portion of their capitalization. It is functionally
their approved profit.
The process for determining a utility's approved ROE is flawed and in
need of reform, but the authorized ROE is not actually the ceiling for
how much utilities can earn at the expense of ratepayers. When utilities
earn in excess of their authorized ROE, they are typically allowed to
keep a significant portion of that excess profit.
Multi-year rate settlements typically provide for earnings sharing above
the approved ROE. That is if a utility exceeds their authorized ROE, or
profit, they must share a portion of excess earnings with ratepayers in
the form of a discount on future bills. However, these earnings sharing
mechanisms typically do not apply to a "dead-band" above the approved
ROE. In other words, utilities are usually allowed to earn some amount
in excess of their approved ROE before they begin having to share their
earnings with ratepayers. For example, a utility may be authorized to
earn a 9% ROE; but in actuality may earn 9.5% before they have to begin
returning a portion of excess earnings to ratepayers. As a result, a
utility's authorized ROE in practice is usually half a percentage point
or more higher than what is actually approved.
This obvious inequity results in utilities being allowed to keep the
vast majority of excess earnings. According to analysis by the Public
Utility Law Project, while the most recent major electric and gas rate
cases have been in effect, ratepayers have only received, on average,
14% of utilities' excess earnings.
This legislation would address these two sources of inequity by prohib-
iting the PSC from approving any rate plan that provides a deadband or
earning sharing mechanism. Instead, utilities would be required to
return all earnings in excess of their approved ROE to ratepayers.
Utilities are entitled to earn just and reasonable rates under federal
law. They should not be entitled to earn a profit above what is approved
by the PSC, at the expense of ratepayers.
LEGISLATIVE HISTORY:
New bill.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
shall have become a law; provided, however, it shall not apply to any
rate plan in effect prior to such effective date.
1 Wilkinson, N., et al. "The Prevalence and Persistence of Energy Inse-
curity in New York City." Robin Hood Foundation. July 2024. Access on
January 28, 2025,
https://robinhood.ordwp-content/uploads/2024/07/Poverty-Tracker-Energy-I
nsecurityReport-Robin-Hood-2024.07.18-FINAL.pdf
STATE OF NEW YORK
________________________________________________________________________
8150
2025-2026 Regular Sessions
IN ASSEMBLY
May 2, 2025
___________
Introduced by M. of A. BARRETT -- read once and referred to the Commit-
tee on Energy
AN ACT to amend the public service law, in relation to the retention of
revenues derived from their actual return on equity in excess of
authorized rates of return by gas, electric, or combination gas and
electric corporations
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivision 20 of section 66 of the public service law, as
2 added by chapter 394 of the laws of 1978, is amended to read as follows:
3 20. (a) Notwithstanding any general or special law, rule or regulation
4 to the contrary, the commission shall have the power to provide for the
5 refund of any revenues received by any gas or electric corporation which
6 cause the corporation to have revenues in the aggregate in excess of its
7 authorized rate of return for a period of twelve months.
8 (b) Such corporations shall be required to return all revenues derived
9 from their actual return on equity in excess of their authorized rate of
10 return on equity to ratepayers in the form of a surcredit to their
11 bills. Such surcredit shall be provided to ratepayers no later than
12 thirty days following the end of each year of a rate period and shall be
13 clearly labeled on the ratepayer's bill. The commission [may] shall
14 initiate a proceeding with respect to such a refund after the conclusion
15 of any such twelve month period.
16 (c) The commission shall not approve any rate plan which allows any
17 gas, electric, or combination gas and electric corporation to retain
18 revenues derived from their actual return on equity in excess of their
19 authorized rate of return on equity.
20 (d) Such corporations shall be required to report annually to the
21 department any excess revenues and the amount returned to ratepayers.
22 (e) For purposes of this subdivision, "authorized rate of return on
23 equity" shall mean the return on the equity portion of the rate base
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD11616-04-5
A. 8150 2
1 that regulated utilities are authorized to collect in rates and "rate
2 period" shall mean the time period in which a regulated utility collects
3 rates that are authorized and approved by the commission.
4 § 2. This act shall take effect on the one hundred eightieth day after
5 it shall have become a law; provided, however, it shall not apply to any
6 rate plan in effect prior to such effective date.
