SECTION 1: Chapter 164 of the General Laws is hereby amended by inserting after section 94I the following sections:-

Section 94J. (a) In any base rate proceeding conducted by the department under section 94 for electric companies or gas companies, the department may not approve an allowed return on equity higher than the average allowed return on equity approved in neighboring states over the preceding 4 years. Such requirement may be waived only upon a specific showing that the constitutional rights of the electric or gas company would otherwise be violated.

(b) The determination of allowed return on equity under this section shall not include compensation related to programs under section 21 of chapter 25 or any performance incentives designed to promote the efficient, clean, and reliable operation of the electric or gas system.

Section 94K. In any base rate proceeding conducted by the department under section 94 for electric companies or gas companies, the department may not approve a performance-based ratemaking mechanism with a negative productivity factor, negative productivity offset, or negative X factor, or any other mechanism that automatically results in annual revenue increases at a rate higher than inflation.

SECTION 2: Section 94K of chapter 164 of the General Laws, as inserted by this act, shall apply to any performance-based ratemaking mechanism approved more than 30 days after the effective date of this act. For any performance-based ratemaking mechanism approved prior to 30 days after the effective date of this act, the department shall exclude the negative productivity factor from any future filings for an annual performance-based ratemaking adjustment.