S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   7502
 
                        2023-2024 Regular Sessions
 
                           I N  A S S E M B L Y
 
                               May 25, 2023
                                ___________
 
 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 requiring certain
   utilities to adopt the common equity ratio and rate of return on equi-
   ty authorized by the public service commission

   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  Legislative  intent.  The  legislature finds and declares
 that:
   1. The increasing burden of high utility rates leaves New  York  resi-
 dents  with  extreme  financial  difficulties. Soaring electricity rates
 leave one in five New York residents at risk of having their electricity
 cut off.  Meanwhile, the long-term trend of utilities  receiving  record
 profits threatens the livelihood of millions of New Yorkers who struggle
 to afford utility bills.
   2. The current process in which the public service commission (herein-
 after  the  "commission")  and regulated utilities set rates for utility
 bills to ratepayers has historically been inaccessible and  indeciphera-
 ble  to  the  public  and often runs contrary to the stated goals of the
 commission to ensure affordable,  safe,  secure,  and  reliable  utility
 service for New York residential and business consumers.
   3. Regulated utilities are entitled to earn a fair and reasonable rate
 of  return  on  their  capital  investments,  pursuant  to Supreme Court
 rulings in Federal Power Commission et  al.  v.  Hope  Natural  Gas  Co.
 (1944)  and  Bluefield Water Works and Improvement Co. v. Public Service
 Commission of West Virginia (1923). However, recent trends suggest  that
 the  "fair  and  reasonable"  legal  standard is not always reflected in
 actual utility rates for consumers.   Aligning the incentives  of  regu-
 lated  utilities and ratepayers is essential to protect the interests of
 all New York residents by establishing a more accurate  standard  for  a
 regulated utility's right to earn a fair and reasonable rate of return.
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD10360-05-3
              

 A. 7502                             2
 
   § 2. The public service law is amended by adding a new section 65-c to
 read as follows:
   § 65-C. SETTING A RATE OF RETURN ON EQUITY AND COMMON EQUITY RATIO. 1.
 DEFINITIONS. FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING TERMS SHALL
 HAVE THE FOLLOWING MEANINGS:
   (A)  "REGULATED  UTILITY" MEANS AN "ELECTRIC CORPORATION", "GAS CORPO-
 RATION", "STEAM CORPORATION", OR "WATER-WORKS CORPORATION" AS DEFINED IN
 SECTION TWO OF THIS CHAPTER.
   (B) "GENERIC FINANCING METHODOLOGY" MEANS A STANDARDIZED PROCEDURE FOR
 DETERMINING THE AUTHORIZED RATES OF RETURN ON EQUITY AND  COMMON  EQUITY
 RATIOS OF UTILITIES REGULATED BY THE COMMISSION.
   (C)  "AUTHORIZED  COMMON EQUITY RATIO" MEANS THE AUTHORIZED PERCENTAGE
 OF A UTILITY'S TOTAL CAPITALIZATION, SUCH AS  COMMON  EQUITY,  PREFERRED
 STOCK,  AND  LONG-TERM  DEBT,  THAT  CONSISTS OF COMMON EQUITY, RETAINED
 EARNINGS, AND CAPITAL SURPLUS.
   (D) "ACTUAL COMMON EQUITY RATIO" MEANS  THE  ACTUAL  PERCENTAGE  OF  A
 UTILITY'S  TOTAL CAPITALIZATION, SUCH AS COMMON EQUITY, PREFERRED STOCK,
 AND LONG-TERM DEBT, THAT CONSISTS OF COMMON EQUITY,  RETAINED  EARNINGS,
 AND CAPITAL SURPLUS.
   (E)  "AUTHORIZED  RATE  OF  RETURN  ON EQUITY" ALSO KNOWN AS RETURN ON
 EQUITY ("ROE") OR THE COST OF EQUITY CAPITAL, MEANS THE  RETURN  ON  THE
 EQUITY  PORTION OF THE RATE BASE THAT REGULATED UTILITIES ARE AUTHORIZED
 TO COLLECT IN RATES.
   (F) "ACTUAL RATE OF RETURN ON EQUITY" MEANS  A  MEASURE  OF  FINANCIAL
 PERFORMANCE CALCULATED BY DIVIDING NET INCOME BY SHAREHOLDERS' EQUITY.
   (G)  "RATE  PERIOD" MEANS THE TIME PERIOD IN WHICH A REGULATED UTILITY
 COLLECTS RATES THAT ARE AUTHORIZED AND APPROVED BY THE COMMISSION.
   (H) "PUBLICLY AVAILABLE DATA" MEANS  PUBLISHED  DATA  THAT  IS  OPENLY
 ACCESSIBLE  VIA  THE INTERNET, OR INDIRECTLY ACCESSIBLE THROUGH A PUBLIC
 LIBRARY OR SIMILAR INSTITUTION.
   2. SETTING THE GENERIC FINANCING  METHODOLOGY;  COMMON  EQUITY  RATIO;
 RATE  OF  RETURN ON EQUITY. (A) ON AN ANNUAL BASIS, THE COMMISSION SHALL
 PROMULGATE RULES AND REGULATIONS THAT:
   (I) UPDATE THE GENERIC FINANCING METHODOLOGY SUCH THAT, TO THE  GREAT-
 EST  EXTENT  POSSIBLE,  ALL  OF ITS CALCULATIONS ARE BASED UPON PUBLICLY
 AVAILABLE DATA;
   (II) SET A FAIR AND REASONABLE AUTHORIZED COMMON EQUITY RATIO FOR EACH
 REGULATED UTILITY AND A SINGLE AUTHORIZED RATE OF RETURN ON  EQUITY  FOR
 ALL REGULATED UTILITIES, BASED ON THE GENERIC FINANCING METHODOLOGY; AND
   (III)  RECONCILE  THE PRIOR RATE PERIOD'S AUTHORIZED RATE OF RETURN ON
 EQUITY TO A CALCULATION OF THE AVERAGE MONTHLY RATE OF RETURN ON  EQUITY
 PRODUCED BY THE GENERIC FINANCING METHODOLOGY FOR THAT RATE PERIOD, SUCH
 AS  A  "TRUE-UP MECHANISM". IN MAKING THIS DETERMINATION, THE COMMISSION
 SHALL REQUIRE THAT: (A) ANY REVENUES DERIVED FROM AN AUTHORIZED RATE  OF
 RETURN  ON EQUITY EXCEEDING THE AVERAGE MONTHLY RATE OF RETURN ON EQUITY
 BE RETURNED TO RATEPAYERS IN THE FORM OF A SURCREDIT TO THEIR BILLS  FOR
 THE  FOLLOWING  RATE  PERIOD;  AND (B) ANY REVENUES THAT WOULD HAVE BEEN
 DERIVED FROM AN AVERAGE MONTHLY RATE OF RETURN ON EQUITY  EXCEEDING  THE
 AUTHORIZED  RATE  OF RETURN ON EQUITY SHALL BE RECOVERED FROM RATEPAYERS
 IN THE FORM OF A SURCHARGE TO THEIR BILLS FOR THE FOLLOWING RATE PERIOD.
   (B) THE PROMULGATED GENERIC FINANCING METHODOLOGY,  AUTHORIZED  COMMON
 EQUITY  RATIO, AUTHORIZED RATE OF RETURN ON EQUITY, AND THE PRIOR YEAR'S
 AVERAGE MONTHLY RATE OF RETURN ON EQUITY SHALL CLEARLY STATE THE METHODS
 USED TO JUSTIFY AND EXPLAIN ITS PROPOSED GUIDANCE.
   (C) THE PROMULGATED GENERIC FINANCING METHODOLOGY,  AUTHORIZED  COMMON
 EQUITY  RATIO, AUTHORIZED RATE OF RETURN ON EQUITY, AND PRIOR RATE PERI-
 A. 7502                             3
 
 OD'S AVERAGE MONTHLY RATE OF RETURN ON EQUITY SHALL BE SUBJECT TO TRADI-
 TIONAL NOTICE AND COMMENT PROCEDURES, AS OUTLINED IN THE STATE  ADMINIS-
 TRATIVE  PROCEDURE  ACT,  WHICH SHALL INCLUDE INPUT FROM PUBLIC INTEREST
 ORGANIZATIONS,  UTILITY  ACCOUNTING  EXPERTS, REPRESENTATIVES FROM REGU-
 LATED UTILITIES, AND OTHER ORGANIZATIONS AND INTERESTED PARTIES, INCLUD-
 ING RESIDENTS OF THIS STATE, AS NECESSARY.
   (D) THE FINAL GENERIC FINANCING METHODOLOGY, AUTHORIZED COMMON  EQUITY
 RATIO,  AUTHORIZED  RATE  OF  RETURN  ON EQUITY, AND PRIOR RATE PERIOD'S
 AVERAGE MONTHLY RATE OF RETURN ON  EQUITY  ADOPTED  BY  THE  COMMISSION,
 FOLLOWING  THE  NOTICE  AND COMMENT PERIOD, SHALL GIVE PREFERENCE TO THE
 BEST INTEREST OF THE RATEPAYERS.
   3. ADOPTING THE AUTHORIZED COMMON EQUITY  RATIO,  AUTHORIZED  RATE  OF
 RETURN  ON  EQUITY  AND/OR  PRIOR  RATE PERIOD'S AVERAGE MONTHLY RATE OF
 RETURN ON EQUITY.  EXCEPT  AS  PROVIDED  IN  SUBDIVISION  FOUR  OF  THIS
 SECTION, EVERY REGULATED UTILITY SHALL:
   (A)  ADOPT  THE  AUTHORIZED  COMMON  EQUITY RATIO BASED ON THE GENERIC
 FINANCING METHODOLOGY FOR THE FOLLOWING RATE PERIOD AS SET  SPECIFICALLY
 FOR EACH REGULATED UTILITY BY THE COMMISSION;
   (B) ADOPT THE AUTHORIZED RATE OF RETURN ON EQUITY BASED ON THE GENERIC
 FINANCING METHODOLOGY FOR THE FOLLOWING RATE PERIOD; AND
   (C)  ADOPT  THE  SURCREDIT/SURCHARGE  BASED ON THE PRIOR RATE PERIOD'S
 AVERAGE MONTHLY RATE OF RETURN ON EQUITY, AS OUTLINED IN SUBDIVISION TWO
 OF THIS SECTION, FOR THE FOLLOWING RATE PERIOD.
   4. REBUTTING THE AUTHORIZED COMMON EQUITY RATIO,  RATE  OF  RETURN  ON
 EQUITY,  AND PRIOR RATE PERIOD'S AVERAGE MONTHLY RATE OF RETURN ON EQUI-
 TY. (A) THE BURDEN OF REBUTTING  THE  AUTHORIZED  COMMON  EQUITY  RATIO,
 AUTHORIZED  RATE OF RETURN ON EQUITY, AND/OR PRIOR RATE PERIOD'S AVERAGE
 MONTHLY RATE OF RETURN ON EQUITY SHALL REST EXCLUSIVELY WITH  THE  REGU-
 LATED  UTILITY DURING A PUBLIC HEARING FACILITATED BY THE COMMISSION. IN
 ORDER TO REBUT THE AUTHORIZED COMMON EQUITY RATIO AND/OR AUTHORIZED RATE
 OF RETURN ON EQUITY,  THE  REGULATED  UTILITY  SHALL  FIRST  INITIATE  A
 REQUEST  FOR  PUBLIC  HEARING THROUGH PROCEDURES OUTLINED BY THE COMMIS-
 SION. SHOULD THE COMMISSION FIND A  SUBSTANTIAL  BASIS  FOR  THE  CLAIMS
 OUTLINED BY THE REGULATED UTILITY IN ITS REQUEST, IT SHALL PUBLISH A SET
 OF DATES FROM WHICH A PUBLIC HEARING SHALL TAKE PLACE.
   (B) DURING THE PUBLIC HEARING THE REGULATED UTILITY SHALL:
   (I)  PRESENT DOCUMENTARY EVIDENCE, INCLUDING BUT NOT LIMITED TO EXHIB-
 ITS, WRITTEN AND ORAL TESTIMONY, AND DATA, DESCRIBING WHY THE AUTHORIZED
 COMMON EQUITY RATIO, AUTHORIZED RATE OF RETURN ON EQUITY, OR PRIOR  RATE
 PERIOD'S  AVERAGE  MONTHLY  RATE  OF RETURN ON EQUITY IS INSUFFICIENT TO
 MEET ITS CURRENT OR FUTURE OPERATING AND CAPITAL NEEDS;
   (II) PRESENT DOCUMENTARY EVIDENCE, INCLUDING BUT NOT LIMITED TO EXHIB-
 ITS, WRITTEN AND ORAL TESTIMONY, AND DATA, DESCRIBING WHY THE AUTHORIZED
 COMMON EQUITY RATIO, AUTHORIZED RATE OF RETURN ON EQUITY, OR PRIOR  RATE
 PERIOD'S  AVERAGE  MONTHLY  RATE  OF RETURN ON EQUITY DOES NOT PROVIDE A
 FAIR AND REASONABLE RETURN;
   (III) DESCRIBE WITH SUFFICIENT DETAIL WHY THE AUTHORIZED COMMON EQUITY
 RATIO, AUTHORIZED RATE OF RETURN ON EQUITY OR PRIOR RATE PERIOD'S  AVER-
 AGE MONTHLY RATE OF RETURN ON EQUITY ADOPTED BY THE COMMISSION IS INSUF-
 FICIENT  FOR  THE  REGULATED  UTILITY  TO  ATTRACT CAPITAL AT REASONABLE
 TERMS; AND
   (IV) DESCRIBE WITH SUFFICIENT DETAIL WHY THE AUTHORIZED COMMON  EQUITY
 RATIO, AUTHORIZED RATE OF RETURN ON EQUITY, OR PRIOR RATE PERIOD'S AVER-
 AGE  MONTHLY  RATE OF RETURN ON EQUITY IS INSUFFICIENT FOR THE REGULATED
 UTILITY TO MAINTAIN ITS FINANCIAL INTEGRITY DURING THE RATE YEAR.
 A. 7502                             4
 
   (C) IF THE COMMISSION DETERMINES, BY A PREPONDERANCE OF THE  EVIDENCE,
 AFTER  THE  CONCLUSION OF THE PUBLIC HEARING, THAT THE REGULATED UTILITY
 HAS SUFFICIENTLY DEMONSTRATED THAT THE AUTHORIZED COMMON  EQUITY  RATIO,
 AUTHORIZED  RATE  OF  RETURN  ON  EQUITY, OR PRIOR RATE PERIOD'S AVERAGE
 MONTHLY  RATE  OF RETURN ON EQUITY IS INSUFFICIENT TO MEET THE REGULATED
 UTILITIES' OPERATING NEEDS, CAPITAL NEEDS, OR BOTH, THEN THE  COMMISSION
 AND  THE REGULATED UTILITY SHALL THEN ENTER INTO SETTLEMENT NEGOTIATIONS
 THROUGH ADJUDICATION PURSUANT TO THE PROCEDURES SET OUT UNDER THIS ARTI-
 CLE.
   5. SETTLEMENT NEGOTIATIONS FOLLOWING SUCCESSFUL REBUTTAL. ALL  SETTLE-
 MENT  NEGOTIATIONS  SHALL  TAKE INTO CONSIDERATION THE FOLLOWING FACTORS
 PRIOR TO REACHING A FINAL AUTHORIZED  COMMON  EQUITY  RATIO,  AUTHORIZED
 RATE OF RETURN ON EQUITY, OR PRIOR RATE PERIOD'S AVERAGE MONTHLY RATE OF
 RETURN ON EQUITY:
   (A)  TESTIMONIES  AND  EXHIBITS FROM EXPERT WITNESSES, INCLUDING THOSE
 FROM OUTSIDE PUBLIC INTEREST ORGANIZATIONS;
   (B) HOW THE NEGOTIATED SETTLEMENT REDUCES DELIVERY RATES  FOR  CONSUM-
 ERS;
   (C)  HOW  THE  NEGOTIATED  SETTLEMENT  IMPROVES  EQUITY FOR, MINIMIZES
 IMPACTS ON, AND PRIORITIZES BENEFITS TO UTILITY RATES FOR  DISADVANTAGED
 COMMUNITIES AS DEFINED IN SECTION 75-0101 OF THE ENVIRONMENTAL CONSERVA-
 TION LAW;
   (D)  WHETHER  THE  TESTIMONY  AND  EXHIBITS  OF  THE REGULATED UTILITY
 REFLECT POSITIONS THAT ARE IN  THE  BEST  INTEREST  OF  THE  PUBLIC  AND
 PROMOTE PRINCIPLES OF EQUITY FOR DISADVANTAGED COMMUNITIES;
   (E) WHETHER THE PROPOSALS OF THE REGULATED UTILITY WOULD RESULT IN THE
 LOWEST POSSIBLE DELIVERY COST TO THE BENEFIT OF THE RATE PAYER; AND
   (F)  WHETHER  THE NEW SETTLEMENT AGREEMENT PROVIDES A JUST AND REASON-
 ABLE RETURN FOR THE REGULATED UTILITY.
   6. REPORTS AND LEGISLATIVE HEARING ON FINDINGS BETWEEN THE  COMMISSION
 AND  REGULATED UTILITIES.   (A) ANNUALLY, THE COMMISSION SHALL SUBMIT TO
 THE GOVERNOR AND THE LEGISLATURE, A REPORT OUTLINING  THE  FINDINGS  AND
 DETERMINATIONS  OF  THE FINAL AUTHORIZED COMMON EQUITY RATIO, AUTHORIZED
 RATE OF RETURN ON EQUITY AND/OR PRIOR RATE PERIOD'S AVERAGE MONTHLY RATE
 OF RETURN ON EQUITY, WHETHER SET  THROUGH  THE  PROCEDURES  OUTLINED  IN
 SUBDIVISIONS  THREE  AND  FOUR  OF  THIS  SECTION  OR THROUGH NEGOTIATED
 SETTLEMENTS OUTLINED IN SUBDIVISION FIVE  OF  THIS  SECTION,  BETWEEN  A
 REGULATED UTILITY AND THE COMMISSION DURING THE PREVIOUS YEAR.
   (B)  SUCH  REPORT  SHALL  ANALYZE  AND  DESCRIBE  IN CLEAR, ACCESSIBLE
 LANGUAGE HOW THE FINAL AUTHORIZED COMMON EQUITY RATIO,  AUTHORIZED  RATE
 OF  RETURN ON EQUITY, AND/OR PRIOR RATE PERIOD'S AVERAGE MONTHLY RATE OF
 RETURN ON EQUITY HAS CHANGED, REFLECTS NEW  CIRCUMSTANCES,  OR  REMAINED
 THE SAME DURING THE PREVIOUS YEAR.
   (C)  SUCH  REPORT  SHALL  INCLUDE  ALL  MONTHLY  DATA USED FOR GENERIC
 FINANCING METHODOLOGY CALCULATIONS THAT IS NOT PUBLICLY AVAILABLE  DATA,
 TOGETHER  WITH  AN  EXPLANATION OF WHY IT WAS NECESSARY TO USE SUCH NON-
 PUBLIC DATA INSTEAD OF A PUBLICLY AVAILABLE DATA SOURCE.
   (D) THE ANNUAL REPORT SHALL BE PUBLISHED ONLINE  ON  THE  COMMISSION'S
 WEBSITE AND BE MADE PUBLICLY AVAILABLE.
   §  3. This act shall take effect one year after it shall have become a
 law.