Buried inside a much larger utility rate order is a single percentage that shapes what every Rhode Island Energy customer pays for years to come: 9.275 percent. That’s the annual return regulators say Rhode Island Energy is allowed to earn on the equity portion of its investment in the state’s electric and gas delivery system, and on August 21, 2026, the Rhode Island Public Utilities Commission refused to raise it, despite the company asking for nearly a percentage and a half more. The decision, and a quieter one beside it, will help determine what shows up on Rhode Island electric and gas bills long after this year’s rate case is forgotten.
The Number Utilities Rarely Explain
A return on equity, or ROE, is the profit rate a regulator allows a utility to earn on the portion of its infrastructure investment funded by shareholders rather than debt. It isn’t a hidden fee; it’s built into the base distribution rates every customer pays, the charge that funds wires, meters, substations and gas mains, separate from the cost of the electricity or gas itself. Because Rhode Island Energy has a legal monopoly on delivering power to homes in its territory, customers can’t shop around if they think the allowed profit is too generous, which is exactly why a commission, not a market, sets the number, and why that number gets fought over harder than almost anything else in a rate case. Set it too high, and every customer effectively overpays for delivery service for years; set it too low, and the company argues it can’t attract the capital needed to keep the system reliable.
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What Rhode Island Energy Asked For, and What It Got
Rhode Island Energy asked the commission to raise its allowed return on equity from 9.275 percent to 10.75 percent, its first request for a change since 2018. The commission’s August 21 order denied the increase outright and left the rate at 9.275 percent. Attorney General Peter Neronha’s office, which intervened in the case and participated in 17 days of evidentiary hearings, had argued for aligning the rate more closely with the company’s actual cost of capital, below 8.25 percent by its own expert’s estimate, and pointed out that a 10-year Treasury bond was yielding about 4.63 percent at the time, a comparison meant to show how generous a return above 10 percent would be for a business whose delivery revenue is effectively guaranteed. The commission’s 9.275 percent decision landed well below what the company wanted and above what the Attorney General’s office proposed, closer to the company’s existing rate than to either side’s opening position.
The Quieter Vote: Capital Structure
A second vote in the same order may matter just as much as the headline percentage. Rhode Island Energy proposed treating 57 percent of its capital as equity, with the rest as lower-cost debt; the commission instead approved a structure of 52 percent equity and 48 percent debt. Return on equity only applies to the equity slice of a company’s investment, so shrinking that slice shrinks the dollar amount the allowed return actually produces, even though the percentage itself didn’t move. Commission Chairman Ronald Gerwatowski said during the proceeding that the capital-structure change would have a significant effect on the company’s overall return, arguably more than the ROE denial by itself, since it reduces the base against which 9.275 percent gets applied every single year until the next rate case.
Why a Fraction of a Percent Adds Up
None of this is abstract math confined to a filing cabinet in Providence. The allowed return on equity, multiplied against the equity share of the company’s rate base, is a specific dollar figure baked into the revenue the commission lets Rhode Island Energy collect from customers every year, the same pool of money that funds the base distribution charge on every bill. Rhode Island Energy had originally requested rate increases that grew to roughly $77.3 million for electric and $130.3 million for gas by the close of hearings, with a second year of automatic increases on top of that. The commission’s order, built around the lower profit rate and leaner capital structure, approved one year of increases at $44.1 million for electric and $93.7 million for gas, and rejected the second year entirely, a gap of roughly $70 million between what the company asked for and what regulators allowed in year one alone.
This Number Doesn’t Change Again Soon
Because this was Rhode Island Energy’s first base distribution rate case since 2018, in part due to a three-year moratorium the Attorney General’s office attached to the 2022 sale of Narragansett Electric, the 9.275 percent figure is likely to stand for some time before the company can ask the commission to revisit it again. Every year that passes without a new rate case is a year the two 2026 votes, on the percentage and on the capital structure behind it, keep setting what shareholders earn and what customers pay for delivery service, long after the headline of this particular rate case has faded from the news.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
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