BILL NUMBER: S7693

SPONSOR: MAYER
 
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 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:

Section one amends subdivision 20 of section 66 of the public service to
prohibit the PSC from approving any rate plan which allows a gas, elec-
tric, or combination gas and electric corporation from retaining reven-
ues 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 DPS on excess
rates.

Section two provides the effective date.

 
JUSTIFICATION:

Over the last several years, the Public Service Commission has approved
significant rate increases for public utilities, stretching many rate-
payers to the limit. For example, in 2023, the PSC approved a $457.5M
electric rate increase over three years and $187.2 million gas rate
increase for ConEd. In January, 2025, ConEd filed another rate increase
request with the PSC, seeking $1.6B more in revenue for electric service
and $440 million more in gas. The PSC is currently reviewing this rate
case, 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.1 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 996 ROE; but in actuality may earn 9.59s 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.

 
PRIOR LEGISLATIVE HISTORY:

New bill.

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect 180 days after it is signed into law,
provided that it will not apply to any rate plan approved prior to the
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/PovertyTracker- Energy-
Insecuntv-Report-Robin-Hood-2024.07.18-FINAL.pdf