Sec. 3. Requirements for investor owned utilities
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Title VI of the Public Utility Regulatory Policies Act of 1978 is amended by adding at the end the following: Except as provided in paragraph (2), when calculating a return on equity for a covered utility for purposes of any official business, including reports, financial disclosures, and rate applications, such covered utility shall, subject to subparagraph (C), establish a range of reasonableness for the return on equity that is comprised of three data points, each of which represent a return on equity represented by a current average expected 10-year total or large-cap United States equity market return or equivalent measure determined in accordance with subparagraph (B).
A covered utility shall determine one data point to be included in a range of reasonableness established under subparagraph
(A)by— identifying the midpoint expected 10-year total or large-cap United States equity market return or equivalent measure as estimated by financial academics for each of the previous 5 years; and using the average of such midpoints. A covered utility shall determine one data point to be included in a range of reasonableness established under subparagraph
(A)by— identifying the midpoint expected 10-year total or large-cap United States equity market return or equivalent measure as estimated by financial institutions for each of the previous 5 years; and using the average of such midpoints. A covered utility shall determine one data point to be included in a range of reasonableness established under subparagraph
(A)by— identifying the midpoint expected 10-year total or large-cap United States equity market return or equivalent measure as estimated by Global Systemically Important Banks for each of the previous 5 years; and using the average of such midpoints. A covered utility shall, in accordance with clause (ii), adjust a range of reasonableness established under subparagraph
(A)to account for the reduced risks of the covered utility due to, as applicable— operating as a regulated monopoly; and any applicable State action, including— the approval of any alternative to traditional cost of service ratemaking, including formula rates, performance-based regulation, or contemporaneous cost recovery mechanisms; the approval of any regulatory assets of the covered utility; the allowance of operating cost riders and nonbypassable fees; the allowance of recovery for any customer bad debt or under-collections; the approval of any securitization or bond revenue related to the provision of services by the covered utility; and approval or allowance of any other measure that reduces the risks of the covered utility relative to an entity operating in a competitive market. A covered utility shall adjust a range of reasonableness established under subparagraph
(A)down by 5 basis points for each of the factors in subclause (I), (II)(aa), (II)(bb), (II)(cc), (II)(dd), (II)(ee), and (II)(ff) of clause
(i)that apply. Except as otherwise provided in this paragraph, when using a return on equity for purposes of any official business, a covered utility shall use the lowest return on equity in the applicable range of reasonableness established pursuant to paragraph (1). Nothing in this section precludes an applicable State regulatory authority from requesting or requiring alternative rate schedules that rely on a return on equity that is not the return on equity required under subparagraph (A). If a covered utility uses a return on equity that is not the return on equity required under subparagraph
(A)for purposes of any alternative rate schedule described in subparagraph (B), such covered utility shall make publically available— a justification outlining why the higher return on equity is required to attract needed capital and to maintain the financial integrity of the covered utility; an explanation of the difference in the return on equity used in comparison to return on equity required under subparagraph (A); a quantification of the different impacts on the covered utility’s revenue requirement requested in its rate application using the return on equity used compared to the return on equity required under subparagraph (A); and a quantification of the different impacts of using the return on equity used compared to the return on equity required under subparagraph
(A)on the average residential monthly bill. No covered utility may recover through rates any direct or indirect cost associated with— membership dues or sponsorship fees paid, or contributions made, to an organization described in section 501(c)(6) of the Internal Revenue Code of 1986; lobbying or legislative action, including— any expense for the purpose of directly or indirectly influencing the possible— adoption of Federal, State, or local regulations, legislation, or ordinances; or repeal or modification of existing Federal, State, or local regulations, legislation, or ordinances; any expense for the purpose of directly or indirectly influencing elections or appointments of public officials or referenda; any expense for the purpose of directly or indirectly influencing the approval, modification, or revocation of utility franchises; any expense for the purpose of directly or indirectly influencing the public opinion with respect to Federal, State, or local— regulations, legislation, or ordinances; elections; referenda; or utility rate setting; and any expense for the purpose of directly or indirectly influencing the decisions of Federal, State, or local government officials; advertising, marketing, or communications that seek to influence public opinion or any other related costs identified by the Commission, unless such marketing, advertising, communications, or related costs are specifically approved or ordered by the relevant State regulatory authority, State energy office, or State environmental agency; travel, lodging, or food and beverage expenses for the board of directors or officers of— such covered utility; or such covered utility’s holding company or any associated company or affiliate; entertainment or gifts; any owned, leased, or chartered aircraft for the board of directors or officers of— such covered utility; or such covered utility’s holding company or any associated company or affiliate; investor relations; attendance in, participation in, preparation for, or appeal of any rate proceeding conducted before the applicable State regulatory authority or the Commission, including costs for attorneys’ fees, fees to engage expert witnesses or consultants, the portion of employee salaries associated with such attendance, participation, preparation, or appeal of a rate proceeding and related costs identified by the Commission; contributions made to an organization described in paragraph
(3)or
(4)of section 501(c) of the Internal Revenue Code of 1986; contributions to political candidates, political parties, campaign committees, issue committees, or independent expenditure committees, or other political expenses; products or services not regulated by the applicable State regulatory authority, including marketing, administration, or customer service; penalties or fines, including tax penalties or fines, issued against the covered utility; or payments to outside attorneys representing the covered utility in any Commission proceeding or experts testifying on behalf of, or otherwise supporting the participation by, utilities in any Commission proceeding. A violation of this section shall be treated as a violation of a provision of part II of the Federal Power Act and enforced in accordance with section 316A of such Act. Not later than 120 days after the date of enactment of this section, the Commission shall issue regulations to carry out this section. Nothing in this section shall be construed to preempt, diminish, or interfere with a collective bargaining agreement that is in place on the date of the enactment of this section. In this section: The terms affiliate , associate company , and holding company have the meaning given such terms in section 366.1 of title 18, Code of Federal Regulations (or any successor regulations). Subject to subparagraph (B), the term covered utility means an investor-owned utility enterprise engaged in the production or distribution of electricity or natural gas for use by the public. The term covered utility does not include— an electric cooperative; a gas cooperative; an electric utility that is owned or operated by a State or political subdivision thereof; or a gas utility that is owned or operated by a State or political subdivision thereof. The term financial academic means an accredited, full-time finance teaching program with over 50 years of teaching experience that regularly publishes United States equity market expected return data and that provides a curriculum in business administration or finance. The term financial institution means an entity that manages not less than $2,000,000,000,000 in combined assets and regularly publishes United States equity market expected return data. The term Global Systemically Important Bank means an entity classified as a Global Systemically Important Bank by the Financial Stability Board that regularly publishes United States equity market expected return data. . The table of contents in section 1(b) of the Public Utility Regulatory Policies Act of 1978 is amended by inserting after the item relating to section 608 the following: Sec. 609. Rural and remote communities electrification grants. Sec. 610. Requirements for investor owned utilities. .