RI utility profit cap bill would limit profits for electric and gas utilities

PROVIDENCE, R.I. — A utility profit cap bill introduced at the Rhode Island State House aims to limit how much electric and gas utilities can earn from Rhode Island customers.

The legislation was introduced by Senator Victoria Gu and Representative Megan Cotter. The proposal is intended to address rising utility bills by reducing what they describe as excessive profits earned by utility companies.

Lawmakers target utility profit margins

Under the current system, utilities are not allowed to profit from the electricity or natural gas they purchase. Instead, they earn a return based on the infrastructure used to deliver that energy to customers.

Rhode Island Energy, which supplies most of the state’s electricity and natural gas, is currently allowed a 9.275 percent return on equity for energy distribution. That rate was established in 2018 when the company was still owned by National Grid before being sold to PPL Corporation in 2022.

Supporters of the bill argue that return is too high and contributes to higher monthly bills for Rhode Islanders.

Two proposals to limit profits

The legislation proposes two different approaches to limiting utility profits.

The first bill would require the Rhode Island Public Utilities Commission to set an annual authorized return on equity that matches a company’s cost of capital. If the commission determines utilities earned more than that amount in a given year, ratepayers would receive credits on their bills.

Utilities could challenge the authorized rate through a public hearing, but the burden would be on the company to show the rate is too low to maintain financial stability or attract investment.

A second bill would go further by placing a hard cap of 4 percent on a utility’s return on equity.

Debate over utility profits and rising bills

Supporters say the measures are necessary as many Rhode Islanders struggle with high energy costs.

Lawmakers behind the proposal argue that utilities operate as regulated monopolies and should be limited to profits that are considered fair and reasonable.

Research cited by the sponsors suggests investor owned utilities across the country have earned returns significantly above what federal precedent considers appropriate.

The RI utility profit cap bills will now be considered by committees in the Rhode Island General Assembly.