Sen. Gu, Rep. Cotter introduce bills to cap electric and gas utilities’ profits

Protecting consumers from price-gouging utilities

If only this was real

Sen. Victoria Gu and Rep. Megan Cotter have introduced legislation to limit the profits of utilities distributing electricity and natural gas to “just and reasonable” rates.

“One very important reason our utility bills are so high is that in Rhode Island, as in many places across the country, utilities are making unreasonable profits that exceed a reasonable rate of return, reflected locally in the nearly $12 million Rhode Island Energy’s parent company CEO made in 2023, ” said Senator Gu (D-Dist. 38, Westerly, Charlestown, South Kingstown). 

“Utilities are regulated monopolies, and they don’t operate like a normal business. If they spend $100 million on a project, they get 9.275% back from ratepayers. If they spend $200 million on the same project, they still get 9.275% back and they double their profits. There’s no incentive to control costs.”

Said Representative Cotter (D-Dist. 39, Exeter, Richmond, Hopkinton), “While billion-dollar utility companies post record profits, families and seniors in our community are sitting at their kitchen tables trying to figure out how to pay their electric bills. That’s just not right. Our profit cap bills are about protecting working families who are choosing between heat and groceries and making sure seniors on fixed incomes don’t have to live in the cold. Utilities are a necessity, not a luxury, and we have a responsibility to make sure they are fair, affordable and accountable to the people they serve.”

In Rhode Island, utility companies are not allowed to make profit on procuring energy to supply ratepayers. They instead earn a rate of return on the delivery of the energy, based on the infrastructure they build in Rhode Island. Rhode Island Energy, which distributes both electricity and natural gas to most of Rhode Island, is allowed a return on equity of 9.275% on its distribution of gas and electric under the rate agreement that took effect in September 2018, before the company was sold by National Grid to PPL in 2022.

Senator Gu and Representative Cotter assert that the 9.275% profit margin is excessive: According to a report from the American Economic Liberties Project, across the country investor-owned utilities have been awarded average returns on investment over the last 15 years that are twice what is considered “just and reasonable” under a 1944 Supreme Court precedent.

“Just and reasonable” rates are those that allow the utilities to cover their cost of capital, which is the investor return necessary to attract equity financing in the capital markets. Rates above the cost of capital benefit the utility at the expense of ratepayers, whose utility bills increase to fund excessive investor profits.

Senator Gu and Representative Cotter are proposing two legislative solutions to inflated investor profits and utility bills. The first bill (2026-S 2202, 2026-H 7887) would direct the Rhode Island Public Utilities Commission to set an authorized rate of return on equity for utilities operating in Rhode Island so that these companies meet—but do not exceed—their cost of capital.

This authorized rate would be adjusted on a yearly basis, with ratepayers receiving credits if the rates they were charged in the previous year exceeded the actual cost of capital, as determined by the PUC.

Utilities could challenge an authorized rate of return by petitioning the commission in a public hearing. The burden of proof would rest on the utility to show that the authorized rate is too low to maintain financial integrity, attract capital investment or provide a fair and reasonable return.

Senator Gu and Representative Cotter’s second solution (2026-S 2777, 2026-H 7888) would place a hard limit on utilities’ return on equity to 4 percent in any year.

“Whether through the regulatory process of the PUC or through a simple legislative cap, it’s time to put people before profits,” said Representative Cotter. “I look forward to working with my colleagues to pass the right solution but make no mistake: the status quo is unacceptable.”

Said Representative Gu, “Of the many factors that contribute to our high utility bills, the excessive returns earned by utility investors are the lowest-hanging fruit. Utilities should serve the public interest, and it is our job in the General Assembly to make sure they are regulated to do so.”