This bill amends Chapter 39-1 of the General Laws concerning the Public Utilities Commission by introducing a new section, 39-1-27.14, which establishes a framework for setting authorized common equity ratios and rates of return on equity for regulated utilities. The bill defines key terms such as "actual common equity ratio," "actual rate of return on equity," "authorized common equity ratio," "authorized rate of return on equity," "generic financing methodology," "publicly available data," "rate period," and "regulated utility."

The commission is mandated to adopt a generic financing methodology on an annual basis, which will rely on publicly available data to establish a fair and reasonable authorized common equity ratio for each regulated utility and a single authorized rate of return on equity applicable to all regulated utilities, unless otherwise justified. The commission is also required to reconcile the authorized rate of return on equity from the prior rate period with the actual average monthly rate of return on equity produced by the generic financing methodology, including the use of a true-up mechanism.

The bill includes provisions for surcredits and surcharges, stating that if a regulated utility's actual rate of return on equity exceeds the authorized rate, the excess revenues shall be returned to ratepayers through a surcredit in the subsequent rate period. Conversely, if the actual rate of return is less than the authorized rate, the commission may authorize recovery of the shortfall through a surcharge.

Transparency and public participation are emphasized, requiring that all methodologies, ratios, rates of return, and reconciliation calculations be clearly explained, subject to notice and comment, and include opportunities for participation by various stakeholders. The commission is instructed to prioritize the best interests of ratepayers in its final determinations.

Regulated utilities may challenge the authorized common equity ratio or authorized rate of return on equity by petitioning the commission for a public hearing, with the burden of proof resting on the utility to demonstrate that the authorized values are insufficient to maintain financial integrity, attract capital on reasonable terms, or provide a fair return. Upon a successful rebuttal, the commission and the regulated utility may engage in settlement negotiations.

Finally, the commission is required to submit an annual report to the governor, the president of the senate, and the speaker of the house of representatives summarizing the authorized common equity ratios, authorized rates of return on equity, any surcredits or surcharges applied, and any deviations from the generic financing methodology along with justifications. This report must be published on the commission's website. This act is set to take effect on July 1, 2027.