AN ACT RELATING TO PUBLIC UTILITIES AND CARRIERS -- PUBLIC UTILITIES COMMISSION (Directs the public utilities commission to establish a standardized framework for determining authorized common equity ratios and authorized rates of returns on equity for public utilities.)

S2202

2026 -- S 2202
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STATE OF RHODE ISLAND
IN GENERAL ASSEMBLY
JANUARY SESSION, A.D. 2026
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A N A C T
RELATING TO PUBLIC UTILITIES AND CARRIERS -- PUBLIC UTILITIES COMMISSION

Introduced By:
Senators Gu, DiMario, Ciccone, Zurier, and Euer

Date Introduced:
January 23, 2026

Referred To:
Senate Commerce
It is enacted by the General Assembly as follows:
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SECTION 1. Chapter 39-1 of the General Laws entitled "Public Utilities Commission" is
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hereby amended by adding thereto the following section:
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39-1-27.14. Setting authorized common equity ratios and rates of return on equity.

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(a) Definitions. For purposes of this section:
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(1) “Actual common equity ratio” means the actual percentage of a regulated utility’s total
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capitalization that consists of common equity during a given rate period.
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(2) “Actual rate of return on equity” means net income divided by shareholders’ equity
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during a rate period.
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(3) “Authorized common equity ratio” means the percentage of a regulated utility’s total
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capitalization that consists of common equity, including retained earnings and capital surplus, as
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approved by the commission.
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(4) “Authorized rate of return on equity” or “ROE” means the return on the equity portion
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of a regulated utility’s rate base authorized by the commission for recovery through rates.
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(5) “Generic financing methodology” means a standardized methodology adopted by the
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commission for determining authorized common equity ratios and authorized rates of return on
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equity for regulated utilities.
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(6) “Publicly available data” means data accessible to the public through published sources,
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internet resources, or public libraries.
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(7) “Rate period” means the period during which rates approved by the commission are in

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effect.
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(8) “Regulated utility” means any electric distribution company, gas company, water
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utility, or other public utility subject to the jurisdiction of the public utilities commission pursuant
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to this title.
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(b) Adoption of generic financing methodology. On an annual basis, the commission shall,
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through rulemaking:
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(1) Update and maintain a generic financing methodology that relies, to the greatest extent
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practicable, on publicly available data;
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(2) Establish a fair and reasonable authorized common equity ratio for each regulated utility
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and a single authorized rate of return on equity applicable to all regulated utilities, unless otherwise
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justified; and
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(3) Reconcile the authorized rate of return on equity from the prior rate period with the
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actual average monthly rate of return on equity produced by the generic financing methodology,
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including the use of a true-up mechanism.
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(c) Surcredits and surcharges.
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(1) If a regulated utility’s actual rate of return on equity exceeds the authorized rate of
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return on equity, revenues attributable to such excess shall be returned to ratepayers through a
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surcredit applied during the subsequent rate period.
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(2) If a regulated utility’s actual rate of return on equity is less than the authorized rate of
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return on equity, the commission may authorize recovery of the shortfall through a surcharge
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applied during the subsequent rate period.
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(d) Transparency and public participation. All methodologies, ratios, rates of return, and
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reconciliation calculations adopted pursuant to this section shall:
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(1) Clearly explain the data sources, assumptions, and analytical methods used;
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(2) Be subject to notice and comment in accordance with chapter 35 of title 42
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(“administrative procedures”); and
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(3) Include opportunities for participation by ratepayers, consumer advocates, public
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interest organizations, utilities, and other interested parties.
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In adopting final determinations under this section, the commission shall give preference
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to the best interests of ratepayers.
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(e) Rebuttal by regulated utilities.
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(1) A regulated utility may rebut the authorized common equity ratio or authorized rate of
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return on equity by petitioning the commission for a public hearing.
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(2) The burden of proof shall rest exclusively with the regulated utility to demonstrate, by

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a preponderance of the evidence, that the authorized values are insufficient to:
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(i) Maintain financial integrity;
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(ii) Attract capital on reasonable terms; or
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(iii) Provide a fair and reasonable return.
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(3) Upon a successful rebuttal, the commission and the regulated utility may engage in
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settlement negotiations pursuant to this title.
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(f) Annual reporting. The commission shall annually submit a report to the governor, the
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president of the senate and speaker of the house of representatives summarizing:
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(1) Authorized common equity ratios and authorized rates of return on equity;
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(2) Any surcredits or surcharges applied; and
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(3) Any deviations from the generic financing methodology and the justification therefor.
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Such report shall be published on the commission’s website.
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SECTION 2. This act shall take effect on July 1, 2027.
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EXPLANATION
BY THE LEGISLATIVE COUNCIL
OF
A N A C T
RELATING TO PUBLIC UTILITIES AND CARRIERS -- PUBLIC UTILITIES COMMISSION
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This act would direct the public utilities commission to establish a standardized framework
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for determining authorized common equity ratios and authorized rates of returns on equity for
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public utilities.
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This act would take effect on July 1, 2027.
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