Requires BPU to determine and consider lowest reasonable return on equity before approving electric, gas, and water public utility base rate cases.

2024-2025 Regular Session Introduced by Rosy Bagolie and 2 co-sponsors

Requires NJ BPU to use multiple models to identify the lowest reasonable ROE when evaluating base rate hikes for electric, gas, and water utilities, potentially lowering bills.

Assembly Floor Amendment Passed (Quijano)

#publicutil

Purpose

A5436 directs the New Jersey Board of Public Utilities (BPU) to determine and explicitly consider the "lowest reasonable" return on equity (ROE) when evaluating base rate increase petitions from electric, gas, and water public utilities. The bill requires the BPU to use one or more analytic models that reflect State, federal, and industry standards to identify that lowest reasonable ROE.

Key provisions

Definitions: clarifies terms used in the section (Board; electric, gas, and water public utilities; return on equity).

ROE requirement: when determining whether a proposed base rate increase is just and reasonable under R.S.48:2-21, R.S.48:2-21.1, or C.48:2-21.2, the BPU must determine and consider the lowest reasonable ROE as a factor.

Analytic models: the BPU shall develop or adopt and apply analytic model(s) — the reprint and floor amendment require more than one model — that, at a minimum, reflect State, federal, and industry standards for determining a fair and reasonable authorized ROE.

Rulemaking: the BPU must adopt implementing rules pursuant to the Administrative Procedure Act (P.L.1968, c.410).

Effective date: takes effect on the first day of the sixth month after enactment and applies to petitions filed on or after that effective date. The BPU may take anticipatory administrative action before the effective date.

Who would be affected

Electric, gas, and water public utilities operating in New Jersey: their authorized ROE determinations in base rate cases would be subject to the new analytic-model requirement and emphasis on the lowest reasonable ROE.

Ratepayers/customers: potential for lower authorized ROEs to reduce customer rates (depending on case outcomes).

BPU staff and processes: increased analytic and regulatory workload to develop/apply multiple models and to complete rulemaking.

Investors and utility financial stakeholders: potential impacts on utility revenue requirements and investor returns if authorized ROEs are set lower.

Procedural/timeline notes

Introduced Feb 14, 2025; referred to Governmental Operations and Telecommunications & Utilities committees; reported out and amended in May 2025.

Assembly Floor Amendment passed May 22, 2025 (changed to require multiple analytic models).

Subsequent entries (July 30, 2025) show amendment and recommit to Governmental Operations and printing as A5436A.

Fiscal impact: bill is not certified as requiring a fiscal note.

Potential effects (practical implications)

Could lead to lower authorized ROEs in some base rate cases, reducing revenue requirements and customer bills.

May increase litigation or contested proceedings as parties challenge model selection and methodology.

Requires BPU to adopt transparent modeling standards and complete APA rulemaking prior to full implementation.

Bill