New York S 10424: Enacts the "fair authorized investment returns act"

Bill Text

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S10424 Summary:

BILL NOS10424 

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SAME ASSAME AS A11197

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SPONSORMAYER

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COSPNSR

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MLTSPNSR

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Add Art 1-A §§28-a - 29-d, Pub Serv L

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Enacts the "fair authorized investment returns act"; sets a default authorized return on equity equal to the ten year US Treasury rate plus two hundred basis points; provides such default authorized return shall reset annually; establishes a competitive equity auction through which the cost of equity for a covered utility may be determined on a market basis, whether initiated by the utility or ordered by the commission.

Go to top S10424 Actions:

BILL NOS10424 

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05/15/2026REFERRED TO ENERGY AND TELECOMMUNICATIONS

Go to topS10424 Committee&nbspVotes:

Go to topS10424 Floor&nbspVotes:

There are no Assembly votes for this bill in this legislative session.

Go to topS10424 Text:

 STATE OF NEW YORK
 ________________________________________________________________________

 10424

 IN SENATE

 May 15, 2026
 ___________

 Introduced by Sen. MAYER -- read twice and ordered printed, and when
 printed to be committed to the Committee on Energy and Telecommuni-
 cations

 AN ACT to amend the public service law, in relation to enacting the
 "fair authorized investment returns act"

 The People of the State of New York, represented in Senate and Assem-
 bly, do enact as follows:

 1 Section 1. Short title. This act shall be known and may be cited as
 2 the "fair authorized investment returns act".
 3 § 2. Legislative findings. The legislature finds and declares all of
 4 the following:
 5 1. Investor-owned electric, gas, and water utilities are entitled to a
 6 reasonable opportunity to earn a fair return on their invested capital,
 7 but ratepayers should not bear costs that exceed the level necessary to
 8 attract capital under prevailing market conditions. A return on equity
 9 authorized above the minimum rate of return necessary to attract capital
 10 investment results in charges to ratepayers that are unjust and unrea-
 11 sonable.
 12 2. Authorized returns on equity over and above the minimum rate of
 13 return necessary to attract capital investment -- the cost of capital --
 14 harm ratepayers in multiple ways, including the direct cost of excess
 15 returns passed on to ratepayers, the incremental corporate income taxes
 16 owed on those excess returns, and the further costs that flow from the
 17 well-documented Averch-Johnson effect, by which too-high rates of return
 18 on equity create incentives for utilities to over invest in capital
 19 assets.
 20 3. The Capital Asset Pricing Model, applied to the low market beta of
 21 regulated utility equities relative to broad market indices, suggests
 22 that a premium to the 10-Year Treasury risk-free rate of less than two
 23 percent is warranted. Discounted cash flow analysis leads to a similar
 24 conclusion.
 25 4. The significant premium to book value at which the holding compa-
 26 nies of most utilities trade provides further evidence that authorized
 27 returns on equity are above utilities' cost of equity. As a matter of

 EXPLANATION--Matter in italics (underscored) is new; matter in brackets
 [ ] is old law to be omitted.
 LBD15643-02-6

 S. 10424 2

 1 financial principle, a utility earning a return on equity equal to its
 2 cost of equity should trade at approximately book value.
 3 5. That the return on equity awarded to regulated utilities in this
 4 state is broadly consistent with those awarded in other jurisdictions
 5 does not dispel these concerns. Rather, these consistently excessive
 6 returns reflect a rate-setting process in which regulators in each
 7 jurisdiction reference what other jurisdictions have awarded.
 8 6. More broadly, these excessive returns and premium valuations are a
 9 predictable consequence of the well-documented phenomenon of regulatory
 10 capture and capital bias, as explored in the foundational work of George
 11 Stigler (Nobel Prize, 1982) and Jean Tirole (Nobel Prize, 2014). The
 12 regulated entities subject to commission oversight can devote substan-
 13 tial resources to influencing regulatory outcomes that determine their
 14 profitability -- including the hiring of experts to advance favorable
 15 interpretations of otherwise straightforward financial models, the main-
 16 tenance o