(a) In general

The Federal Power Act is amended by inserting after section 206 (16 U.S.C. 824e) the following:

206A. Requirements for and relating to transmission providers

(a) Return on Equity

(1) Range of reasonableness for return on equity

(A) Establishment

When establishing an authorized return on equity for a transmission provider for purposes of any change to be made by such transmission provider in any rate or charge, the Commission shall, subject to subparagraph (C), establish a range of reasonableness for the return on equity that is comprised of three data points, each of which represent a return on equity represented by a current average expected 10-year total or large-cap United States equity market return or equivalent measure determined in accordance with subparagraph (B).

(B) Data point determinations

(i) Data point 1

The Commission shall determine one data point to be included in a range of reasonableness established under subparagraph (A) by—

(I)

identifying the midpoint expected 10-year total or large-cap United States equity market return or equivalent measure as estimated by financial academics for each of the previous 5 years; and

(II)

using the average of such midpoints.

(ii) Data point 2

The Commission shall determine one data point to be included in a range of reasonableness established under subparagraph (A) by—

(I)

identifying the midpoint expected 10-year total or large-cap United States equity market return or equivalent measure as estimated by financial institutions for each of the previous 5 years; and

(II)

using the average of such midpoints.

(iii) Data point 3

The Commission shall determine one data point to be included in a range of reasonableness established under subparagraph (A) by—

(I)

identifying the midpoint expected 10-year total or large-cap United States equity market return or equivalent measure as estimated by Global Systemically Important Banks for each of the previous 5 years; and

(II)

using the average of such midpoints.

(C) Adjustment

The Commission shall adjust a range of reasonableness established under subparagraph (A) to account for the reduced risks of the applicable transmission provider due to, as applicable—

(i)

not participating in a regional planning process; and

(ii)

any applicable Federal action, including—

(I)

the approval of any regulatory assets of the transmission provider;

(II)

the use of a formula ratemaking process;

(III)

the provision to the transmission provider of any Federal loans or guarantees for assets in the rate base; or

(IV)

approval or allowance of any other measure that reduces the risks of the transmission provider that it will not recover prudently incurred capital investments.

(2) Authorized rate of return on equity

(A) In general

Except as provided in subparagraph (B), when establishing an authorized return on equity for a transmission provider for purposes of any change to be made by such transmission provider in any rate or charge, the Commission shall establish the authorized return on equity at the lowest return on equity in the applicable range of reasonableness established pursuant to paragraph (1).

(B) Exception

When establishing an authorized return on equity for a transmission provider for purposes of any change to be made by such transmission provider in any rate or charge, the Commission may establish an authorized return on equity that is in the applicable range of reasonableness established pursuant to paragraph (1) but is not the lowest return on equity in such range only if such transmission provider provides the Commission clear and convincing evidence that a higher return on equity is required to attract needed capital and to maintain the financial integrity of the transmission provider.

(b) Corrupt rate recovery ban

No transmission provider may recover through customer rates or charges any direct or indirect cost associated with—

(1)

membership dues or sponsorship fees paid, or contributions made, to an organization described in section 501(c)(6) of the Internal Revenue Code of 1986;

(2)

lobbying or legislative action, including—

(A)

any expense for the purpose of directly or indirectly influencing the possible—

(i)

adoption of Federal, State, or local regulations, legislation, or ordinances; or

(ii)

repeal or modification of existing Federal, State, or local regulations, legislation, or ordinances;

(B)

any expense for the purpose of directly or indirectly influencing elections or appointments of public officials or referenda;

(C)

any expense for the purpose of directly or indirectly influencing the approval, modification, or revocation of utility franchises;

(D)

any expense for the purpose of directly or indirectly influencing the public opinion with respect to Federal, State, or local—

(i)

regulations, legislation, or ordinances;

(ii)

elections;

(iii)

referenda; or

(iv)

utility rate setting; and

(E)

any expense for the purpose of directly or indirectly influencing the decisions of Federal, State, or local government officials;

(3)

advertising, marketing, or communications that seek to influence public opinion or any other related costs, unless such marketing, advertising, communications, or related costs are specifically approved or ordered by the Commission, the Secretary of Energy, or the Administrator of the Environmental Protection Agency;

(4)

travel, lodging, or food and beverage expenses for the board of directors or officers of—

(A)

such transmission provider; or

(B)

such transmission provider’s holding company or any associated company or affiliate;

(5)

entertainment or gifts;

(6)

any owned, leased, or chartered aircraft for the board of directors or officers of—

(A)

such transmission provider; or

(B)

such transmission provider’s holding company or any associated company or affiliate;

(7)

investor relations;

(8)

attendance in, participation in, preparation for, or appeal of any rate proceeding conducted before the Commission pursuant to section 205 or section 206, including costs for attorneys’ fees, fees to engage expert witnesses or consultants, the portion of employee salaries associated with such attendance, participation, preparation, or appeal of a rate proceeding and related costs identified by the Commission;

(9)

contributions made to an organization described in paragraph (3) or (4) of section 501(c) of the Internal Revenue Code of 1986;

(10)

contributions to political candidates, political parties, campaign committees, issue committees, or independent expenditure committees, or other political expenses;

(11)

products or services not regulated by the Commission, including marketing, administration, or customer service; or

(12)

penalties or fines, including tax penalties or fines, issued against the transmission provider.

(c) Prioritizing Cost Saving Investments

The Commission shall consider a capital expenditure by a transmission provider for a transmission project prudent only if—

(1)

the transmission provider provides to the Commission substantial evidence that the transmission provider prioritized grid enhancing technologies and other lower cost alternatives in its planning process for the transmission project; and

(2)

the transmission project was subject to a regional planning process that is determined by the Commission to be in compliance with applicable orders of the Commission.

(d) Regulations

Not later than 120 days after the date of enactment of this section, the Commission shall issue regulations to carry out this section.

(e) Definitions

In this section:

(1) Affiliate; associate company; holding company

The terms affiliate, associate company, and holding company have the meaning given such terms in section 366.1 of title 18, Code of Federal Regulations (or any successor regulations).

(2) Financial academic

The term financial academic means an accredited, full-time finance teaching program with over 50 years of teaching experience that regularly publishes United States equity market expected return data and that provides a curriculum in business administration or finance.

(3) Financial institution

The term financial institution means an entity that manages not less than $2,000,000,000,000 in combined assets and regularly publishes United States equity market expected return data.

(4) Global Systemically Important Bank

The term Global Systemically Important Bank means an entity classified as a Global Systemically Important Bank by the Financial Stability Board that regularly publishes United States equity market expected return data.

(5) Transmission provider

The term transmission provider means any public utility that owns, operates, or controls facilities used for the transmission of electric energy in interstate commerce.

(b) Eliminating FERC Candy

(a) In general

Title VI of the Public Utility Regulatory Policies Act of 1978 is amended by adding at the end the following:

610. Requirements for investor owned utilities

(a) Calculation of Return on Equity

(1) Range of reasonableness for return on equity

(A) Establishment

Except as provided in paragraph (2), when calculating a return on equity for a covered utility for purposes of any official business, including reports, financial disclosures, and rate applications, such covered utility shall, subject to subparagraph (C), establish a range of reasonableness for the return on equity that is comprised of three data points, each of which represent a return on equity represented by a current average expected 10-year total or large-cap United States equity market return or equivalent measure determined in accordance with subparagraph (B).

(B) Data point determinations

(i) Data point 1

A covered utility shall determine one data point to be included in a range of reasonableness established under subparagraph (A) by—

(I)

identifying the midpoint expected 10-year total or large-cap United States equity market return or equivalent measure as estimated by financial academics for each of the previous 5 years; and

(II)

using the average of such midpoints.

(ii) Data point 2

A covered utility shall determine one data point to be included in a range of reasonableness established under subparagraph (A) by—

(I)

identifying the midpoint expected 10-year total or large-cap United States equity market return or equivalent measure as estimated by financial institutions for each of the previous 5 years; and

(II)

using the average of such midpoints.

(iii) Data point 3

A covered utility shall determine one data point to be included in a range of reasonableness established under subparagraph (A) by—

(I)

identifying the midpoint expected 10-year total or large-cap United States equity market return or equivalent measure as estimated by Global Systemically Important Banks for each of the previous 5 years; and

(II)

using the average of such midpoints.

(C) Adjustment

(i) In general

A covered utility shall, in accordance with clause (ii), adjust a range of reasonableness established under subparagraph (A) to account for the reduced risks of the covered utility due to, as applicable—

(I)

operating as a regulated monopoly; and

(II)

any applicable State action, including—

(aa)

the approval of any alternative to traditional cost of service ratemaking, including formula rates, performance-based regulation, or contemporaneous cost recovery mechanisms;

(bb)

the approval of any regulatory assets of the covered utility;

(cc)

the allowance of operating cost riders and nonbypassable fees;

(dd)

the allowance of recovery for any customer bad debt or under-collections;

(ee)

the approval of any securitization or bond revenue related to the provision of services by the covered utility; and

(ff)

approval or allowance of any other measure that reduces the risks of the covered utility relative to an entity operating in a competitive market.

(ii) Specific adjustment

A covered utility shall adjust a range of reasonableness established under subparagraph (A) down by 5 basis points for each of the factors in subclause (I), (II)(aa), (II)(bb), (II)(cc), (II)(dd), (II)(ee), and (II)(ff) of clause (i) that apply.

(2) Use

(A) In general

Except as otherwise provided in this paragraph, when using a return on equity for purposes of any official business, a covered utility shall use the lowest return on equity in the applicable range of reasonableness established pursuant to paragraph (1).

(B) State requirement or request

Nothing in this section precludes an applicable State regulatory authority from requesting or requiring alternative rate schedules that rely on a return on equity that is not the return on equity required under subparagraph (A).

(C) Information to make publicly available

If a covered utility uses a return on equity that is not the return on equity required under subparagraph (A) for purposes of any alternative rate schedule described in subparagraph (B), such covered utility shall make publically available—

(i)

a justification outlining why the higher return on equity is required to attract needed capital and to maintain the financial integrity of the covered utility;

(ii)

an explanation of the difference in the return on equity used in comparison to return on equity required under subparagraph (A);

(iii)

a quantification of the different impacts on the covered utility’s revenue requirement requested in its rate application using the return on equity used compared to the return on equity required under subparagraph (A); and

(iv)

a quantification of the different impacts of using the return on equity used compared to the return on equity required under subparagraph (A) on the average residential monthly bill.

(b) Corrupt rate recovery ban

No covered utility may recover through rates any direct or indirect cost associated with—

(1)

membership dues or sponsorship fees paid, or contributions made, to an organization described in section 501(c)(6) of the Internal Revenue Code of 1986;

(2)

lobbying or legislative action, including—

(A)

any expense for the purpose of directly or indirectly influencing the possible—

(i)

adoption of Federal, State, or local regulations, legislation, or ordinances; or

(ii)

repeal or modification of existing Federal, State, or local regulations, legislation, or ordinances;

(B)

any expense for the purpose of directly or indirectly influencing elections or appointments of public officials or referenda;

(C)

any expense for the purpose of directly or indirectly influencing the approval, modification, or revocation of utility franchises;

(D)

any expense for the purpose of directly or indirectly influencing the public opinion with respect to Federal, State, or local—

(i)

regulations, legislation, or ordinances;

(ii)

elections;

(iii)

referenda; or

(iv)

utility rate setting; and

(E)

any expense for the purpose of directly or indirectly influencing the decisions of Federal, State, or local government officials;

(3)

advertising, marketing, or communications that seek to influence public opinion or any other related costs identified by the Commission, unless such marketing, advertising, communications, or related costs are specifically approved or ordered by the relevant State regulatory authority, State energy office, or State environmental agency;

(4)

travel, lodging, or food and beverage expenses for the board of directors or officers of—

(A)

such covered utility; or

(B)

such covered utility’s holding company or any associated company or affiliate;

(5)

entertainment or gifts;

(6)

any owned, leased, or chartered aircraft for the board of directors or officers of—

(A)

such covered utility; or

(B)

such covered utility’s holding company or any associated company or affiliate;

(7)

investor relations;

(8)

attendance in, participation in, preparation for, or appeal of any rate proceeding conducted before the applicable State regulatory authority or the Commission, including costs for attorneys’ fees, fees to engage expert witnesses or consultants, the portion of employee salaries associated with such attendance, participation, preparation, or appeal of a rate proceeding and related costs identified by the Commission;

(9)

contributions made to an organization described in paragraph (3) or (4) of section 501(c) of the Internal Revenue Code of 1986;

(10)

contributions to political candidates, political parties, campaign committees, issue committees, or independent expenditure committees, or other political expenses;

(11)

products or services not regulated by the applicable State regulatory authority, including marketing, administration, or customer service;

(12)

penalties or fines, including tax penalties or fines, issued against the covered utility; or

(13)

payments to outside attorneys representing the covered utility in any Commission proceeding or experts testifying on behalf of, or otherwise supporting the participation by, utilities in any Commission proceeding.

(c) Enforcement

A violation of this section shall be treated as a violation of a provision of part II of the Federal Power Act and enforced in accordance with section 316A of such Act.

(d) Regulations

Not later than 120 days after the date of enactment of this section, the Commission shall issue regulations to carry out this section.

(e) Rule of construction

Nothing in this section shall be construed to preempt, diminish, or interfere with a collective bargaining agreement that is in place on the date of the enactment of this section.

(e) Definitions

In this section:

(1) Affiliate; associate company; holding company

The terms affiliate, associate company, and holding company have the meaning given such terms in section 366.1 of title 18, Code of Federal Regulations (or any successor regulations).

(2) Covered utility

(A) In general

Subject to subparagraph (B), the term covered utility means an investor-owned utility enterprise engaged in the production or distribution of electricity or natural gas for use by the public.

(B) Exclusions

The term covered utility does not include—

(i)

an electric cooperative;

(ii)

a gas cooperative;

(iii)

an electric utility that is owned or operated by a State or political subdivision thereof; or

(iv)

a gas utility that is owned or operated by a State or political subdivision thereof.

(3) Financial academic

The term financial academic means an accredited, full-time finance teaching program with over 50 years of teaching experience that regularly publishes United States equity market expected return data and that provides a curriculum in business administration or finance.

(4) Financial institution

The term financial institution means an entity that manages not less than $2,000,000,000,000 in combined assets and regularly publishes United States equity market expected return data.

(5) Global Systemically Important Bank

The term Global Systemically Important Bank means an entity classified as a Global Systemically Important Bank by the Financial Stability Board that regularly publishes United States equity market expected return data.

(b) Table of contents

The table of contents in section 1(b) of the Public Utility Regulatory Policies Act of 1978 is amended by inserting after the item relating to section 608 the following: