Investor-Owned Electric, Gas, and Gas and Electric Companies - Cost Recovery - Limitations

EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*sb0002*

SENATE BILL 2
C5 6lr0764
(PRE–FILED) CF HB 1
By: Senator Hester
Requested: September 3, 2025
Introduced and read first time: January 14, 2026
Assigned to: Education, Energy, and the Environment

A BILL ENTITLED

AN ACT concerning 1

Investor–Owned Electric, Gas, and Gas and Electric Companies – Cost Recovery 2
– Limitations 3

FOR the purpose of prohibiting certain public service companies from recovering through 4
rates any costs associated with paying certain employees a bonus except under 5
certain circumstances; prohibiting certain public service companies from recovering 6
through rates any costs associated with a supervisor’s annual compensation once the 7
compensation exceeds a certain amount; requiring the boards of directors of certain 8
public service companies to adopt certain policies to place reasonable cost limitations 9
on certain types of expenditures; and generally relating to cost recovery by public 10
service companies. 11

BY repealing and reenacting, with amendments, 12
Article – Public Utilities 13
Section 4–504 14
Annotated Code of Maryland 15
(2025 Replacement Volume and 2025 Supplement) 16

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 17
That the Laws of Maryland read as follows: 18

Article – Public Utilities 19

4–504. 20

(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 21
INDICATED. 22

2 SENATE BILL 2

(2) (I) “BONUS” MEANS A FORM OF DIRE CT OR INDIRECT 1
PAYMENT, CONSIDERATION, OR COMPENSATION THAT IS PAID OR CONVEYED TO AN 2
EMPLOYEE OF A PUBLIC SERVICE COMPANY IN ADDITION TO THE EMPLOYEE’S BASE 3
PAY. 4

(II) “BONUS” INCLUDES: 5

1. COMPENSATION THAT TH E PUBLIC SERVICE 6
COMPANY DOES NOT FORMALLY LABEL AS A BONUS PAYMENT; 7

2. ANY FORM OF INCENTIV E COMPENSATION THE FACT 8
AND AMOUNT OF WHICH IS UNDER THE DISCRET ION OF THE PUBLIC SE RVICE 9
COMPANY UNTIL A TIME CLOSE TO THE END OF THE PERIOD FOR WHICH THE 10
INCENTIVE PAYMENT IS PAID; AND 11

3. PAYMENTS GIVEN IN AD DITION TO BASE PAY T HAT 12
ARE CONTINGENT ON THE OCCURRENCE OF ONE OR MORE EVENTS OR CONDITIONS. 13

(3) (I) “COMPENSATION” MEANS A FORM OF PAYM ENT OR 14
CONSIDERATION CONVEY ED TO OR FOR THE BEN EFIT OF A SUPERVISOR IN 15
CONNECTION WITH THE SUPERVISOR’S WORK FOR A PUBLIC SERVICE COMPANY. 16

(II) “COMPENSATION” INCLUDES: 17

1. DIRECT AND INDIRECT METHODS OF CONFERRIN G 18
BENEFITS; 19

2. CASH AND NONCASH BENEFITS; 20

3. SALARY, BONUSES, PERIOD PAYMENTS , AND 21
SEVERANCE PAY; AND 22

4. THE VALUE OF A PERQU ISITE, COMPENSATORY OR 23
PAID LEAVE, OR OTHER BENEFIT NOT EXCLUDED UNDER SUBPARA GRAPH (III) OF 24
THIS PARAGRAPH. 25

(III) “COMPENSATION” DOES NOT INCLUDE ANY EXPENDITURE 26
OF A PUBLIC SERVICE COMPANY FOR HEALTH , MEDICAL, OR LIFE INSURANCE OR 27
DISABILITY PAY. 28

(4) “SUPERVISOR” MEANS AN INDIVIDUAL WHO: 29

(I) USING THE INDIVIDUAL’S INDEPENDENT JUDGMENT: 30
SENATE BILL 2 3

1. IS AUTHORIZED BY THE INDIVIDUAL’S EMPLOYER TO 1
HIRE, TRANSFER, SUSPEND, LAY OFF , RECALL, PROMOTE, DISCHARGE, ASSIGN, 2
REWARD, OR DISCIPLINE OTHER EMPLOYEES; 3

2. IS RESPONSIBLE FOR D IRECTING THE WORK 4
PERFORMANCE OF OTHER EMPLOYEES; AND 5

3. IS RESPONSIBLE FOR R ESPONDING TO EMPLOYE E 6
COMPLAINTS; OR 7

(II) IS EMPLOYED IN A BONA FIDE EXECUTIVE CAPACITY UNDER 8
THE FEDERAL FAIR LABOR STANDARDS ACT. 9

[(a)] (B) This section applies only to a public service compan y that is an 10
investor–owned electric company, gas company, or combination gas and electric company. 11

[(b)] (C) A public service company may not recover through rates any costs 12
associated with: 13

(1) membership, dues, sponsorships, or contributions to an industry trade 14
association, group, or related entity exempt from taxation under § 501(c)(6) of the Internal 15
Revenue Code; [or] 16

(2) the acquisition, use, or allocation of costs associated with a priv ate 17
plane that is owned or leased by the public service company or its holding company; 18

(3) EXCEPT AS PROVIDED I N SUBSECTION (D) OF THIS SECTION , 19
PAYING A BONUS TO AN EMPLOYEE OF A PUBLIC SERVICE COMPANY; OR 20

(4) COMPENSATION FOR A SUPERVISOR THAT EXCEEDS 110% OF THE 21
MAXIMUM ANNUAL SALARY PAYABLE TO A MEMBE R OF THE COMMISSION FOR THE 22
SAME CALENDAR YEAR. 23

(D) A PUBLIC SERVICE COMPA NY MAY RECOVER THE C OSTS ASSOCIATED 24
WITH PAYING AN EMPLOYEE A BONUS THROUGH RATES IF: 25

(1) THE EMPLOYEE HAS A W RITTEN EMPLOYMENT CONTRACT THA T 26
WAS EXECUTED ON OR BEFORE DECEMBER 31, 2025; OR 27

(2) THE EMPLOYEE IS COVE RED BY A VALID COLLE CTIVE 28
BARGAINING AGREEMENT. 29

4 SENATE BILL 2

(E) THE BOARD OF DIRECTORS OF EACH PUBLIC SERVICE COMPANY SHALL 1
ADOPT A COMPANY –WIDE POLICY PLACING REASONABLE COST LIMITATIONS O N 2
EXPENDITURES FOR: 3

(1) ENTERTAINMENT AND EVENTS; 4

(2) OFFICE AND FACILITY RENOVATIONS; 5

(3) TRANSPORTATION SERVICES, INCLUDING AVIATION; 6

(4) STAFF DEVELOPMENT ACTIVITIES OR EVENTS; 7

(5) PERFORMANCE INCENTIVES; AND 8

(6) OTHER ACTIVITIES OUT SIDE OF THE SCOPE OF THE NORMAL 9
COURSE OF BUSINESS OPERATIONS. 10

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 11
October 1, 2026. 12