H.R. 4603 — FAIR Act

This section adds two new ratemaking standards to subsection (d) of Section 111 of the Public Utility Regulatory Policies Act of 1978 (PURPA), which requires state regulatory authorities (for regulated electric utilities) and nonregulated electric utilities to consider each listed standard after public notice and hearing and determine whether it is appropriate to implement. (1) Standard (22) prohibits approval of an electric utility's rates if the utility engages in or employs consultants to promote diversity, equity, or inclusion (DEI) practices, including discrimination based on race, color, ethnicity, religion, biological sex, or national origin, or requirements for employees to undergo specified trainings or assent to statements asserting inherent superiority/inferiority by such characteristics. (2) Standard (23) prohibits rate approval if the utility considers environmental, social, or governance (ESG) factors (as defined to include environmental considerations like climate policies unless tied to pecuniary impacts; social quotas or preferences by protected characteristics unless required by law; and governance policies for non-pecuniary ideological objectives) in establishing rates or operational decisions affecting rates, except to fulfill direct obligations of federal or certain state laws without discretionary ESG consideration. (Thus, state regulators must evaluate these prohibitions through PURPA's process and may decline to implement them with written reasons, consistent with otherwise applicable state law.)