H.R. 4603: Fair, Affordable and Inclusive Rates Act

The bill, titled the Fair, Affordable and Inclusive Rates Act, seeks to amend the Public Utility Regulatory Policies Act of 1978. Its main provisions focus on regulating how state authorities approve electricity rates charged by electric utilities. Here are the key elements of the bill:

Prohibition on Certain Practices by Electric Utilities

• Diversity, Equity, or Inclusion Practices: The bill prohibits state regulatory authorities from approving the rates of electric utilities that engage in practices related to diversity, equity, or inclusion (DEI). Specifically, utilities cannot:
  • Discriminate against or favor individuals based on race, color, ethnicity, religion, biological sex, or national origin.
  • Require employees to undergo training or education asserting that any demographic group is inherently superior or inferior.
• Environmental, Social, and Governance (ESG) Factors: The bill also prohibits state regulatory authorities from approving rates if the electric utility considers ESG factors in its rate-setting processes or operational decisions. This means:
  • Utilities cannot incorporate environmental, social, or governance criteria unless required by federal or state law.
  • If required to comply with federal or state laws regarding ESG factors, utilities can only do so within the strict confines of those laws and cannot use discretion to consider additional ESG factors.

Definition of ESG Factors

The bill defines ESG factors in detail, specifying that they include:

• Environmental Factors: Considerations like climate change policies and carbon emissions, but these must be directly tied to financial impacts or legal requirements.
• Social Factors: These include demographic quotas for corporate governance or workforce diversity unless mandated by law.
• Governance Factors: Policies aimed at achieving social or ideological objectives that do not relate to the utility's operational or financial performance.

Implications

This bill would significantly limit the discretion of state regulatory authorities when it comes to setting electric rates based on practices or considerations of diversity, equity, and environmental, social, or governance factors. If passed, the bill could change the landscape of how electric utilities operate and how they are regulated in various states.

Relevant Companies

• BE - Specific utilities focused on clean energy initiatives may be impacted by restrictions on taking ESG factors into account.
• NEE - An electric utility that is heavily involved in sustainability and renewable energy may need to reevaluate their rate-setting strategies under this bill.
• DUK - This utility may face challenges if their DEI initiatives are tied to their operational practices that could affect rate approvals.