Committee advances bill directing BPU to consider lowest reasonable return on equity in rate cases

The Appropriations Committee amended and reported Assembly Bill 5,436 on May 15, 2025, legislation that would require the Board of Public Utilities to determine and consider the lowest reasonable return on equity prior to approving electric, gas and water base‑rate increases.

Rate Counsel testified in support, saying the bill would promote a transparent, regulatory methodology and require the board to adopt an ROE methodology by regulation. "The legislation provides guidance with sufficient flexibility to be workable by all the parties," Rate Counsel’s Brian Lippman told the committee. He described the standard methods (discounted cash flow, capital asset pricing model) and said the bill asks the board to choose the lowest figure that is still reasonable for a regulated monopoly.

Utilities and business groups opposed the bill, saying it would make capital acquisition more difficult and risk undercutting long‑term investment in reliability and modernization. Christina Farrell of the New Jersey Utilities Association said existing BPU processes already provide rigorous, quasi‑judicial review of rate requests and that limiting ROE could threaten reliability and discourage investment.

Committee members heard both views and ultimately reported the bill. Proponents said the bill preserves reasonableness standards while making methodology transparent and regulable; opponents warned it could create disincentives for utility investment if applied too aggressively.