Running a public utility isn't a license to steal

Megan Cotter bill would cap electric and gas utilities’ profits 

Public utilities are guaranteed a profit.
The question is how much.

Rep. Megan L. Cotter has introduced legislation to put a limit in state law on the profit that can be reaped by utilities distributing electricity and natural gas in Rhode Island.

The legislation is intended to prevent utilities from making hefty profits at the expense of everyday Rhode Islanders who struggle under rapidly rising utility bills.

“As the middle class erodes, we need to look at the ways we enable big businesses to wring large profits out of the public. Corporate greed has no place in public utilities in particular, because people don’t have any other option but to use their services. They shouldn’t have to pay higher rates for basic, vital needs like heat and electricity for the sake of the company’s profit,” said Representative Cotter (D-Dist. 39, Exeter, Richmond, Hopkinton).

The bill (2025-H 5018), which Representative Cotter introduced Jan. 9, would limit the return on equity (the industry term for profit margin) of public electric or gas distribution utilities in Rhode Island to 4% in any year.

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. A settlement made at the time of the sale bound RIE to that agreement for three years, which means it can file for a change later this year.

According to information provided by the Division of Public Utilities and Carriers, the company reported its electric profits in the last two years were lower than the 9.275% allowed in the 2018 rate case. In 2019, 2020 and 2021, they were above (9.62%, 10.74% and 10.02% respectively).

The gas profits have remained below that threshold since 2019. In 2023, the most recent full year for which data is available, its filings with the DPUC showed a profit margin of 4.02% on electricity and 5.33% for natural gas.

However, PPL’s CEO Vincent Sorgi received a 31% raise that year, taking home $11.97 million. Meanwhile, Rhode Island Energy customers faced a 47% electric rate hike in October 2022.

“Energy utilities are publicly regulated because they are allowed to be monopolies. As such, government needs to keep them on a short leash when it comes to profit,” said Representative Cotter. “They are not struggling if they can pay their CEO $12 million a year. That money comes from utility customers, a great many of whom really are struggling to pay their electric and gas bills.” 

She added that writing the profit cap into state law, as opposed to allowing it to be fluid and determined by the PUC, would make the limit stable and nonnegotiable, thereby better protecting Rhode Islanders.

While electric companies often claim they must recoup the costs of transitioning from fossil fuels to renewable sources of energy from customers, Representative Cotter argued that ratepayers alone should not have to shoulder the costs, particularly if companies are allowed to earn large profits and will continue to do so when the transition is complete.

Representative Cotter is considering additional legislation to increase transparency in energy utilities’ finances, profit-making and billing. She said not only high utility costs, but also the difficulties in determining what they’re being charged for on their utility bills, is a top concern constituents have raised in conversations with her.

The legislation has been assigned to the House Corporations Committee and is cosponsored by Rep. David Morales (D-Dist. 7, Providence), Rep. Jennifer A. Stewart (D-Dist. 59, Pawtucket), Rep. Cheri L. Cruz (D-Dist. 58, Pawtucket), Rep. Teresa A. Tanzi (D-Dist. 34, South Kingstown, Narragansett), House Majority Whip Katherine S. Kazarian (D-Dist. 63, East Providence, Pawtucket), Sen. Kathleen A. Fogarty (D-Dist. 35, South Kingstown), Rep. Lauren H. Carson (D-Dist. 75, Newport), Rep. Rebecca Kislak (D-Dist. 4, Providence) and Deputy Speaker Raymond A. Hull (D-Dist. 6, Providence, North Providence).