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2008 SESSION
080024316Be it enacted by the General Assembly of Virginia:
1. That §§ 56-582, 56-585.1, 56-585.2, and 56-585.3 of the Code of Virginia are amended and reenacted as follows:
§ 56-582. Rate caps.
A. The Commission shall establish capped rates, effective January 1, 2001, for each service territory of every incumbent utility as follows:
1. Capped rates shall be established for customers purchasing bundled electric transmission, distribution and generation services from an incumbent electric utility.
2. Capped rates for electric generation services, only, shall also be established for the purpose of effecting customer choice for those retail customers authorized under this chapter to purchase generation services from a supplier other than the incumbent utility during this period.
3. The capped rates established under this section shall be the rates in effect for each incumbent utility as of the effective date of this chapter, or rates subsequently placed into effect pursuant to a rate application filed by an incumbent electric utility with the Commission prior to January 1, 2001, and subsequently approved by the Commission, and made by an incumbent electric utility that is not currently bound by a rate case settlement adopted by the Commission that extends in its application beyond January 1, 2002. If such rate application is filed, the rates proposed therein shall go into effect on January 1, 2001, but such rates shall be interim in nature and subject to refund until such time as the Commission has completed its investigation of such application. Any amount of the rates found excessive by the Commission shall be subject to refund with interest, as may be ordered by the Commission. The Commission shall act upon such applications prior to commencement of the period of transition to customer choice. Such rate application and the Commission's approval shall give due consideration, on a forward-looking basis, to the justness and reasonableness of rates to be effective for a period of time ending as late as July 1, 2007. The capped rates established under this section, which include rates, tariffs, electric service contracts, and rate programs (including experimental rates, regardless of whether they otherwise would expire), shall be such rates, tariffs, contracts, and programs of each incumbent electric utility, provided that experimental rates and rate programs may be closed to new customers upon application to the Commission. Such capped rates shall also include rates for new services where, subsequent to January 1, 2001, rate applications for any such rates are filed by incumbent electric utilities with the Commission and are thereafter approved by the Commission. In establishing such rates for new services, the Commission may use any rate method that promotes the public interest and that is fairly compensatory to any utilities requesting such rates.
B. The Commission may adjust such capped rates in connection
with the following: (i) utilities' recovery of fuel and purchased power costs
pursuant to § 56-249.6, and, if applicable, in accordance with the terms of any
Commission order approving the divestiture of generation assets pursuant to §
56-590, (ii) any changes in the taxation by the Commonwealth of incumbent
electric utility revenues, (iii) any financial distress of the utility beyond
its control, (iv) with respect to cooperatives that were not members of a power
supply cooperative on January 1, 1999, and as long as they do not become
members, their cost of purchased wholesale power and discounts from capped
rates to match the cost of providing distribution services, (v) with respect to
cooperatives that were members of a power supply cooperative on January 1,
1999, their recovery of fuel costs, through the wholesale power cost adjustment
clauses of their tariffs pursuant to § 56-231.33, and (vi) with respect to
incumbent electric utilities that were not, as of the effective date of this
chapter, bound by a rate case settlement adopted by the Commission that
extended in its application beyond January 1, 2002, the Commission shall adjust
such utilities' capped rates, not more than once in any 12-month period, for
the timely recovery of their incremental costs for transmission or distribution
system reliability and compliance with state or federal environmental laws or
regulations to the extent such costs are prudently incurred on and after between July 1, 2004, and July 1,
2008, and the Commission may adjust such utility's capped
rates for the timely recovery of such costs as are prudently
incurred between July 1, 2008, and the expiration of the capped rate period if
it finds that such an adjustment is consistent with the public interest.
Any adjustments pursuant to § 56-249.6 and clause (i) of this subsection by an
incumbent electric utility that transferred all of its generation assets to an
affiliate with the approval of the Commission pursuant to § 56-590 prior to
January 1, 2002, shall be effective only on and after July 1, 2007.
Notwithstanding the provisions of § 56-249.6, the Commission may authorize
tariffs that include incentives designed to encourage an incumbent electric
utility to reduce its fuel costs by permitting retention of a portion of cost
savings resulting from fuel cost reductions or by other methods determined by
the Commission to be fair and reasonable to the utility and its customers.
C. A utility may petition the Commission to terminate the capped rates to all customers any time after January 1, 2004, and such capped rates may be terminated upon the Commission finding of an effectively competitive market for generation services within the service territory of that utility. If its capped rates, as established and adjusted from time to time pursuant to subsections A and B, are continued after January 1, 2004, an incumbent electric utility that is not, as of the effective date of this chapter, bound by a rate case settlement adopted by the Commission that extends in its application beyond January 1, 2002, may petition the Commission, during the period January 1, 2004, through June 30, 2007, for approval of a one-time change in its rates, and if the capped rates are continued after July 1, 2007, such incumbent electric utility may at any time after July 1, 2007, petition the Commission for approval of a one-time change in its rates. Any change in rates pursuant to this subsection by an incumbent electric utility that divested its generation assets with approval of the Commission pursuant to § 56-590 prior to January 1, 2002, shall be in accordance with the terms of any Commission order approving such divestiture. Any petition for changes to capped rates filed pursuant to this subsection shall be governed by the provisions of Chapter 10 (§ 56-232 et seq.) of this title.
D. Until the expiration or termination of capped rates as provided in this section, the incumbent electric utility, consistent with the functional separation plan implemented under § 56-590, shall make electric service available at capped rates established under this section to any customer in the incumbent electric utility's service territory, including any customer that, until the expiration or termination of capped rates, requests such service after a period of utilizing service from another supplier.
E. During the period when capped rates are in effect for an incumbent electric utility, such utility may file with the Commission a plan describing the method used by such utility to assure full funding of its nuclear decommissioning obligation and specifying the amount of the revenues collected under either the capped rates, as provided in this section, or the wires charges, as provided in former § 56-583, that are dedicated to funding such nuclear decommissioning obligation under the plan. The Commission shall approve the plan upon a finding that the plan is not contrary to the public interest.
F. The capped rates established pursuant to this section shall expire on December 31, 2008, unless sooner terminated by the Commission pursuant to the provisions of subsection C; however, rates after the expiration or termination of capped rates shall equal capped rates until such rates are changed pursuant to other provisions of this title.
§ 56-585.1. Generation, distribution, and transmission rates after capped rates terminate or expire.
A. During the first six months of 2009, the Commission shall, after notice and opportunity for hearing, initiate proceedings to review the rates, terms and conditions for the provision of generation, distribution and transmission services of each investor-owned incumbent electric utility. Such proceedings shall be governed by the provisions of Chapter 10 (§ 56-232 et seq.) of this title, except as modified herein. In such proceedings the Commission shall determine fair rates of return on common equity applicable to the generation and distribution services of the utility. In so doing, the Commission may use any methodology to determine such return it finds consistent with the public interest, but such return shall not be set lower than the average of the returns on common equity reported to the Securities and Exchange Commission for the three most recent annual periods for which such data are available by not less than a majority, selected by the Commission as specified in subdivision 2 b, of other investor-owned electric utilities in the peer group of the utility, nor shall the Commission set such return more than 300 basis points higher than such average. The peer group of the utility shall be determined in the manner prescribed in subdivision 2 b. The Commission may increase or decrease such combined rate of return by up to 100 basis points based on the generating plant performance, customer service, and operating efficiency of a utility, as compared to nationally recognized standards determined by the Commission to be appropriate for such purposes. In such a proceeding, the Commission shall determine the rates that the utility may charge until such rates are adjusted. If the Commission finds that the utility's combined rate of return on common equity is more than 50 basis points below the combined rate of return as so determined, it shall be authorized to order increases to the utility's rates necessary to provide the opportunity to fully recover the costs of providing the utility's services and to earn not less than such combined rate of return. If the Commission finds that the utility's combined rate of return on common equity is more than 50 basis points above the combined rate of return as so determined, it shall be authorized either (i) to order reductions to the utility's rates it finds appropriate, provided that the Commission may not order such rate reduction unless it finds that the resulting rates will provide the utility with the opportunity to fully recover its costs of providing its services and to earn not less than the fair rates of return on common equity applicable to the generation and distribution services; or (ii) direct that 60 percent of the amount of the utility's earnings that were more than 50 basis points above the fair combined rate of return for calendar year 2008 be credited to customers' bills, in which event such credits shall be amortized over a period of six to 12 months, as determined at the discretion of the Commission, following the effective date of the Commission's order and be allocated among customer classes such that the relationship between the specific customer class rates of return to the overall target rate of return will have the same relationship as the last approved allocation of revenues used to design base rates. Commencing in 2011, the Commission, after notice and opportunity for hearing, shall conduct biennial reviews of the rates, terms and conditions for the provision of generation, distribution and transmission services by each investor-owned incumbent electric utility, subject to the following provisions:
1. Rates, terms and conditions for each service shall be reviewed separately on an unbundled basis, and such reviews shall be conducted in a single, combined proceeding. The first such review shall utilize the two successive 12-month test periods ending December 31, 2010. However, the Commission may, in its discretion, elect to stagger its biennial reviews of utilities by utilizing the two successive 12-month test periods ending December 31, 2010, for a Phase I Utility, and utilizing the two successive 12-month test periods ending December 31, 2011, for a Phase II Utility, with subsequent proceedings utilizing the two successive 12-month test periods ending December 31 immediately preceding the year in which such proceeding is conducted. For purposes of this section, a Phase I Utility is an investor-owned incumbent electric utility that was, as of July 1, 1999, not bound by a rate case settlement adopted by the Commission that extended in its application beyond January 1, 2002, and a Phase II Utility is an investor-owned incumbent electric utility that was bound by such a settlement.
2. Subject to the provisions of subdivision 6, fair rates of return on common equity applicable separately to the generation and distribution services of such utility, and for the two such services combined, shall be determined by the Commission during each such biennial review, as follows:
a. The Commission may use any methodology to determine such return it finds consistent with the public interest, but such return shall not be set lower than the average of the returns on common equity reported to the Securities and Exchange Commission for the three most recent annual periods for which such data are available by not less than a majority, selected by the Commission as specified in subdivision 2 b, of other investor-owned electric utilities in the peer group of the utility subject to such biennial review, nor shall the Commission set such return more than 300 basis points higher than such average.
b. In selecting such majority of peer group investor-owned electric utilities, the Commission shall first remove from such group the two utilities within such group that have the lowest reported returns of the group, as well as the two utilities within such group that have the highest reported returns of the group, and the Commission shall then select a majority of the utilities remaining in such peer group. In its final order regarding such biennial review, the Commission shall identify the utilities in such peer group it selected for the calculation of such limitation. For purposes of this subdivision, an investor-owned electric utility shall be deemed part of such peer group if (i) its principal operations are conducted in the southeastern United States east of the Mississippi River in either the states of West Virginia or Kentucky or in those states south of Virginia, excluding the state of Tennessee, (ii) it is a vertically-integrated electric utility providing generation, transmission and distribution services whose facilities and operations are subject to state public utility regulation in the state where its principal operations are conducted, (iii) it had a long-term bond rating assigned by Moody's Investors Service of at least Baa at the end of the most recent test period subject to such biennial review, and (iv) it is not an affiliate of the utility subject to such biennial review.
c. The Commission may increase or decrease such combined rate of return by up to 100 basis points based on the generating plant performance, customer service, and operating efficiency of a utility, as compared to nationally recognized standards determined by the Commission to be appropriate for such purposes, such action being referred to in this section as a Performance Incentive. If the Commission adopts such Performance Incentive, it shall remain in effect without change until the next biennial review for such utility is concluded and shall not be modified pursuant to any provision of the remainder of this subsection.
d. In any Current Proceeding, the Commission shall determine whether the Current Return has increased, on a percentage basis, above the Initial Return by more than the increase, expressed as a percentage, in the United States Average Consumer Price Index for all items, all urban consumers (CPI-U), as published by the Bureau of Labor Statistics of the United States Department of Labor, since the date on which the Commission determined the Initial Return. If so, the Commission may conduct an additional analysis of whether it is in the public interest to utilize such Current Return for the Current Proceeding then pending. A finding of whether the Current Return justifies such additional analysis shall be made without regard to any Performance Incentive adopted by the Commission, or any enhanced rate of return on common equity awarded pursuant to the provisions of subdivision 6. Such additional analysis shall include, but not be limited to, a consideration of overall economic conditions, the level of interest rates and cost of capital with respect to business and industry, in general, as well as electric utilities, the current level of inflation and the utility's cost of goods and services, the effect on the utility's ability to provide adequate service and to attract capital if less than the Current Return were utilized for the Current Proceeding then pending, and such other factors as the Commission may deem relevant. If, as a result of such analysis, the Commission finds that use of the Current Return for the Current Proceeding then pending would not be in the public interest, then the lower limit imposed by subdivision 2 a on the return to be determined by the Commission for such utility shall be calculated, for that Current Proceeding only, by increasing the Initial Return by a percentage at least equal to the increase, expressed as a percentage, in the United States Average Consumer Price Index for all items, all urban consumers (CPI-U), as published by the Bureau of Labor Statistics of the United States Department of Labor, since the date on which the Commission determined the Initial Return. For purposes of this subdivision:
"Current Proceeding" means any proceeding conducted under any provisions of this subsection that require or authorize the Commission to determine a fair combined rate of return on common equity for a utility and that will be concluded after the date on which the Commission determined the Initial Return for such utility.
"Current Return" means the minimum fair combined rate of return on common equity required for any Current Proceeding by the limitation regarding a utility's peer group specified in subdivision 2 a.
"Initial Return" means the fair combined rate of return on common equity determined for such utility by the Commission on the first occasion after July 1, 2009, under any provision of this subsection pursuant to the provisions of subdivision 2 a.
e. In addition to other considerations, in setting the return on equity within the range allowed by this section, the Commission shall strive to maintain costs of retail electric energy that are cost competitive with costs of retail electric energy provided by the other peer group investor-owned electric utilities.
f. The determination of such returns, including the determination of whether to adopt a Performance Incentive and the amount thereof, shall be made by the Commission on a stand-alone basis, and specifically without regard to any return on common equity or other matters determined with regard to facilities described in subdivision 6.
g. If the combined rate of return on common equity earned by both the generation and distribution services is no more than 50 basis points above or below the return as so determined, such combined return shall not be considered either excessive or insufficient, respectively.
h. Any amount of a utility's earnings directed by the Commission to be credited to customers' bills pursuant to this section shall not be considered for the purpose of determining the utility's earnings in any subsequent biennial review.
3. Each such utility shall make a biennial filing by March 31
of every other year, beginning in 2011, consisting of the schedules contained
in the Commission's rules governing utility rate increase applications (20 VAC
5-200-30); however, if the Commission elects to stagger the dates of the
biennial reviews of utilities as provided in subdivision 1, then Phase I
utilities shall commence biennial filings in 2011 and Phase II utilities shall
commence biennial filings in 2012. Such filing shall encompass the two
successive 12-month test periods ending December 31 immediately preceding the
year in which such proceeding is conducted, and in every such case the filing
for each year shall be identified separately and shall be segregated from any
other year encompassed by the filing. If the Commission
determines that rates should be revised or credits be applied to customers'
bills pursuant to subdivision 8 or 9, any rate adjustment clauses
previously implemented pursuant to subdivision 4 or 5
or those related to facilities utilizing simple-cycle combustion turbines
described in subdivision 6, shall be combined with the utility's costs,
revenues and investments until the amounts that are the subject of such rate
adjustment clauses are fully recovered. The Commission shall combine such
clauses with the utility's costs, revenues and investments only after it makes
its initial determination with regard to necessary rate revisions or credits to
customers' bills, and the amounts thereof, but after such clauses are combined
as herein specified, they shall thereafter be considered part of the utility's
costs, revenues, and investments for the purposes of future biennial review
proceedings. By the same date, each such utility shall also file
its plan for its projected generation and transmission requirements to serve
its native load for the next 10 years, including how the utility will obtain
such resources, the capital requirements for providing such resources, and the
anticipated sources of funding for such resources.
4. The following costs incurred by the utility shall be deemed recoverable in any
biennial rate
review if and to the extent they are determined to be reasonable and prudent: (i) costs for
transmission services provided to the utility by the regional transmission
entity of which the utility is a member, as determined under applicable rates,
terms and conditions approved by the Federal Energy Regulatory Commission and
(ii) costs charged to the utility that are associated with demand response
programs approved by the Federal Energy Regulatory Commission and administered
by the regional transmission entity of which the utility is a member. Upon
petition of a utility at any time after the expiration or termination of capped
rates, but not more than once in any 12-month period, the Commission shall
approve a rate adjustment clause under which such costs, including, without
limitation, costs for transmission service, charges for new and existing
transmission facilities, administrative charges, and ancillary service charges
designed to recover transmission costs, shall be recovered on a timely and
current basis from customers. Retail rates to recover these costs shall be designed
using the appropriate billing determinants in the retail rate schedules.
5. A utility may at any time, after
the expiration or termination of capped rates, but not more than once in any
12-month period, petition the Commission for seek to recover approval
of one or more rate adjustment clauses for the timely and current recovery from
customers of the following costs in any
biennial rate
review:
a. Incremental costs described in clause (vi) of subsection B
of § 56-582 incurred between July 1, 2004, and the expiration or termination of
capped rates, if such utility is, as of July 1, 2007, deferring such costs
consistent with an order of the Commission entered under clause (vi) of
subsection B of § 56-582. The Commission shall approve such a petition allowing
the recovery of such costs that comply with the requirements of clause (vi) of
subsection B of § 56-582;
b. Projected and actual costs of providing incentives for the
utility to design and operate fair and effective demand-management, conservation,
energy efficiency, and load management programs. The that
are found by the Commission shall approve such a
petition if it finds that the program is to be in
the public interest and that if the utility has demonstrated
the need for the incentives is demonstrated with reasonable
certainty; provided that the Commission shall allow the
recovery of such costs as it finds are reasonable;
c. Projected and actual costs of participation in a renewable
energy portfolio standard program pursuant to § 56-585.2 that are not
recoverable under subdivision 6. The Commission shall
approve such a petition allowing the recovery of such costs as are provided for
in a program approved pursuant to § 56-585.2; and
d. Projected and actual costs of projects that the Commission finds
to be necessary to comply with state or federal environmental laws or
regulations applicable to generation facilities used to serve the utility's
native load obligations. The Commission shall approve such a petition if it
finds that such costs are necessary to comply with such environmental laws or
regulations. If the Commission determines it would be just,
reasonable, and in the public interest, the Commission may include the enhanced
rate of return on common equity prescribed in subdivision 6 in a rate
adjustment clause approved hereunder for a
project whose purpose is to reduce the need for construction of new generation
facilities by enabling the continued operation of existing generation
facilities. In the event the Commission includes such enhanced
return in such rate adjustment clause, the project that is the subject of such
clause shall be treated as a facility described in subdivision 6 for the
purposes of this section.
The Commission shall have the authority to
determine the duration or amortization period for any adjustment clause
approved under this subdivision.
6. To ensure a reliable and adequate supply of electricity, to
meet the utility's projected native load obligations and to promote economic
development, a utility may at any time, after the expiration or termination of
capped rates, petition the Commission for approval of a rate adjustment clause for recovery seek to recover, in any biennial rate
review, on a timely and current basis from
customers of the costs of (i) a coal-fueled generation facility that utilizes
Virginia coal and is located in the coalfield region of the Commonwealth, as
described in § 15.2-6002, regardless of whether such facility is located within
or without the utility's service territory, (ii) one or more other generation
facilities, or (iii) one or more major unit modifications of generation
facilities; however, such a petition concerning facilities
described in clause (ii) that utilize nuclear power, facilities described in
clause (ii) that are coal-fueled and will be built by a Phase I utility, or
facilities described in clause (i) may also be filed before the expiration or
termination of capped rates. A If
found by the Commission to be reasonable, prudent, and in the public interest,
a utility that constructs any such facility shall have the right
to may recover the costs of the
facility, as accrued against income, through its rates,
including projected construction work in progress, and any associated allowance
for funds used during construction, planning, development and construction
costs, life-cycle costs, and costs of infrastructure associated therewith,
plus, as an incentive to undertake such projects, an enhanced rate of return on
common equity calculated as specified below if
the Commission finds the enhanced rate of return to be reasonable, prudent, and
in the public interest. The costs of the facility, other than
return on projected construction work in progress and allowance for funds used
during construction, shall not be recovered prior to the date the facility
begins commercial operation. Such Any
enhanced rate of return on common equity shall may
be applied to allowance for funds used during construction and to construction
work in progress during the construction phase of the facility and shall may thereafter be applied to the
entire facility during the first portion of the service life of the
facility. The first portion of the service life shall be as specified in the
table below; however, the Commission shall determine the duration of the first
portion of the service life of any facility, within the range specified in the
table below, which determination shall be such period as the
Commission finds is consistent with the public interest and
shall, which finding may reflect the
Commission's determinations regarding how critical the facility may be in
meeting the energy needs of the citizens of the Commonwealth and the risks
involved in the development of the facility. After the first
portion of the service life of the facility is concluded, the utility's general
rate of return shall be applied to such facility for the remainder of its
service life. As used herein, the service life of the facility shall be deemed
to begin on the date the facility begins commercial operation, and such service
life shall be deemed equal in years to the life of that facility as used to
calculate the utility's depreciation expense. Such enhanced rate of return on
common equity shall be calculated by adding the basis points specified in the
table below to the utility's general rate of return, and such enhanced rate of
return shall apply only to the facility that is the subject of such rate
adjustment clause. No change shall be made to any Performance Incentive
previously adopted by the Commission in implementing any rate of return under
this subdivision. Allowance for funds used during construction shall may be calculated for any such
facility utilizing the utility's actual capital structure and overall cost of
capital, including an enhanced rate of return on common equity as determined
pursuant to this subdivision, until such construction work in progress is
included in rates. The construction of any facility described in clause (i) is
in the public interest, and in determining whether to approve such facility,
the Commission shall liberally construe the provisions of this title. The
basis points to be added to the utility's general rate of return to calculate
the enhanced rate of return on common equity, and the first portion of that
facility's service life to which such enhanced rate of return shall be applied,
shall vary by type of facility, as specified in the following table:
Type of Generation Facility Basis Points First Portion of
Service Life
Nuclear-powered 200 Between 12 and 25 years
Carbon capture compatible,
clean-coal powered 200 Between 10 and 20 years
Renewable powered 200 Between 5 and 15 years
Conventional coal or combined-
cycle combustion turbine 100 Between 10 and 20 years
Generation facilities described in clause (ii) that
utilize simple-cycle combustion turbines shall not receive an enhanced rate of
return on common equity as described herein, but instead shall receive the
utility's general rate of return during the construction phase of the facility
and, thereafter, for the entire service life of the facility.
For purposes of this subdivision, "general rate of return" means the fair combined rate of return on common equity as it is determined by the Commission from time to time for such utility pursuant to subdivision 2. In any proceeding under this subdivision conducted prior to the conclusion of the first biennial review for such utility, the Commission shall determine a general rate of return for such utility in the same manner as it would in a biennial review proceeding.
Notwithstanding any other provision of this subdivision, if the Commission finds during the biennial review conducted for a Phase II utility in 2018 that such utility has not filed applications for all necessary federal and state regulatory approvals to construct one or more nuclear-powered or coal-fueled generation facilities that would add a total capacity of at least 1500 megawatts to the amount of the utility's generating resources as such resources existed on July 1, 2007, or that, if all such approvals have been received, that the utility has not made reasonable and good faith efforts to construct one or more such facilities that will provide such additional total capacity within a reasonable time after obtaining such approvals, then the Commission, if it finds it in the public interest, may reduce on a prospective basis any enhanced rate of return on common equity previously applied to any such facility to no less than the general rate of return for such utility and may apply no less than the utility's general rate of return to any such facility for which the utility seeks approval in the future under this subdivision.
7. Any petition filed pursuant to subdivision 4, 5 or 6 shall not be
considered by the Commission on a stand-alone basis without regard to,
but shall be considered in conjunction with a review of the other
costs, revenues, investments, or earnings of the utility. Any costs incurred by
a utility prior to the filing of such petition, or during the consideration
thereof by the Commission, that are proposed for recovery in such petition and
that are related to clause (a) of subdivision 5, or that are related to
facilities and projects described in clause (i) of subdivision 6, shall may, in the Commission's discretion,
be deferred on the books and records of the utility until the Commission's
final order in the matter, or until the implementation of any applicable
approved rate adjustment clauses, whichever is later. Any costs prudently incurred
on or after July 1, 2007, by a utility prior to the filing of such petition, or
during the consideration thereof by the Commission, that are proposed for
recovery in such petition a biennial review
and that are related to facilities and projects described in clause (ii) of
subdivision 6 that utilize nuclear power, or coal-fueled facilities and
projects described in clause (ii) of subdivision 6 if such coal-fueled
facilities will be built by a Phase I Utility, shall be deferred on the books
and records of the utility until the Commission's final order in the matter, or
until the implementation of any applicable approved rate adjustment clauses,
whichever is later. Any costs prudently
incurred after the expiration or termination of capped rates related to other
matters described in subdivisions 4, 5 or 6 shall be deferred beginning only
upon the expiration or termination of capped rates, provided, however, that no No
provision of this act shall affect the rights of any parties with respect to
the rulings of the Federal Energy Regulatory Commission in PJM Interconnection
LLC and Virginia Electric and Power Company, 109 F.E.R.C. P 61,012 (2004). The
Commission's final order regarding any petition filed pursuant to subdivision
4, 5 or 6 shall be entered not more than three months, eight months, and nine
months, respectively, after the date of filing of such petition. If such
petition is approved, the order shall direct that the applicable rate
adjustment clause be applied to customers' bills not more than 60 days after
the date of the order, or upon the expiration or termination of capped rates,
whichever is later.
8. If the Commission determines as a result of such biennial review that:
(i) The utility has, during the test period or periods under review, considered as a whole, earned more than 50 basis points below a fair combined rate of return on both its generation and distribution services, as determined in subdivision 2, without regard to any return on common equity or other matters determined with respect to facilities described in subdivision 6, the Commission shall order increases to the utility's rates necessary to provide the opportunity to fully recover the costs of providing the utility's services and to earn not less than such fair combined rate of return, using the most recently ended 12-month test period as the basis for determining the amount of the rate increase necessary. However, the Commission may not order such rate increase unless it finds that the resulting rates will provide the utility with the opportunity to fully recover its costs of providing its services and to earn not less than a fair combined rate of return on both its generation and distribution services, as determined in subdivision 2, without regard to any return on common equity or other matters determined with respect to facilities described in subdivision 6, using the most recently ended 12-month test period as the basis for determining the permissibility of any rate increase under the standards of this sentence, and the amount thereof;
(ii) The utility has, during the test period or test periods under review, considered as a whole, earned more than 50 basis points above a fair combined rate of return on both its generation and distribution services, as determined in subdivision 2, without regard to any return on common equity or other matters determined with respect to facilities described in subdivision 6, the Commission shall, subject to the provisions of subdivision 9, direct that 60 percent of the amount of such earnings that were more than 50 basis points above such fair combined rate of return for the test period or periods under review, considered as a whole, shall be credited to customers' bills. Any such credits shall be amortized over a period of six to 12 months, as determined at the discretion of the Commission, following the effective date of the Commission's order, and shall be allocated among customer classes such that the relationship between the specific customer class rates of return to the overall target rate of return will have the same relationship as the last approved allocation of revenues used to design base rates; or
(iii) Such biennial review is the second consecutive biennial review in which the utility has, during the test period or test periods under review, considered as a whole, earned more than 50 basis points above a fair combined rate of return on both its generation and distribution services, as determined in subdivision 2, without regard to any return on common equity or other matter determined with respect to facilities described in subdivision 6, the Commission shall, subject to the provisions of subdivision 9 and in addition to the actions authorized in clause (ii) of this subdivision, also order reductions to the utility's rates it finds appropriate. However, the Commission may not order such rate reduction unless it finds that the resulting rates will provide the utility with the opportunity to fully recover its costs of providing its services and to earn not less than a fair combined rate of return on both its generation and distribution services, as determined in subdivision 2, without regard to any return on common equity or other matters determined with respect to facilities described in subdivision 6, using the most recently ended 12-month test period as the basis for determining the permissibility of any rate reduction under the standards of this sentence, and the amount thereof.
The Commission's final order regarding such biennial review shall be entered not more than nine months after the end of the test period, and any revisions in rates or credits so ordered shall take effect not more than 60 days after the date of the order.
9. If, as a result of a biennial review required under this subsection and conducted with respect to any test period or periods under review ending later than December 31, 2010 (or, if the Commission has elected to stagger its biennial reviews of utilities as provided in subdivision 1, under review ending later than December 31, 2010, for a Phase I Utility, or December 31, 2011, for a Phase II Utility), the Commission finds, with respect to such test period or periods considered as a whole, that (i) any utility has, during the test period or periods under review, considered as a whole, earned more than 50 basis points above a fair combined rate of return on both its generation and distribution services, as determined in subdivision 2, without regard to any return on common equity or other matters determined with respect to facilities described in subdivision 6, and (ii) the total aggregate regulated rates of such utility at the end of the most recently-ended 12-month test period exceeded the annual increases in the United States Average Consumer Price Index for all items, all urban consumers (CPI-U), as published by the Bureau of Labor Statistics of the United States Department of Labor, compounded annually, when compared to the total aggregate regulated rates of such utility as determined pursuant to the biennial review conducted for the base period, the Commission shall, unless it finds that such action is not in the public interest or that the provisions of clauses (ii) and (iii) of subdivision 8 are more consistent with the public interest, direct that any or all earnings for such test period or periods under review, considered as a whole that were more than 50 basis points above such fair combined rate of return shall be credited to customers' bills, in lieu of the provisions of clauses (ii) and (iii) of subdivision 8. Any such credits shall be amortized and allocated among customer classes in the manner provided by clause (ii) of subdivision 8. For purposes of this subdivision:
"Base period" means (i) the test period ending December 31, 2010 (or, if the Commission has elected to stagger its biennial reviews of utilities as provided in subdivision 1, the test period ending December 31, 2010, for a Phase I Utility, or December 31, 2011, for a Phase II Utility), or (ii) the most recent test period with respect to which credits have been applied to customers' bills under the provisions of this subdivision, whichever is later.
"Total aggregate regulated rates" shall include: (i)
fuel tariffs approved pursuant to § 56-249.6, except for any increases in fuel
tariffs deferred by the Commission for recovery in periods after December 31,
2010, pursuant to the provisions of clause (ii) of subsection C of § 56-249.6;
(ii) rate adjustment clauses implemented pursuant to
subdivision 4 or 5; (iii) revisions to the utility's rates
pursuant to clause (i) of subdivision 8; (iv iii)
revisions to the utility's rates pursuant to the Commission's rules governing
utility rate increase applications (20 VAC 5-200-30), as permitted by
subsection B, occurring after July 1, 2009; and (v iv)
base rates in effect as of July 1, 2009.
10. For purposes of this section, the Commission shall regulate the rates, terms and conditions of any utility subject to this section on a stand-alone basis utilizing the actual end-of-test period capital structure and cost of capital of such utility, unless the Commission finds that the debt to equity ratio of such capital structure is unreasonable for such utility, in which case the Commission may utilize a debt to equity ratio that it finds to be reasonable for such utility in determining any rate adjustment pursuant to clauses (i) and (iii) of subdivision 8, and without regard to the cost of capital, capital structure, revenues, expenses or investments of any other entity with which such utility may be affiliated. In particular, and without limitation, the Commission shall determine the federal and state income tax costs for any such utility that is part of a publicly traded, consolidated group as follows: (i) such utility's apportioned state income tax costs shall be calculated according to the applicable statutory rate, as if the utility had not filed a consolidated return with its affiliates, and (ii) such utility's federal income tax costs shall be calculated according to the applicable federal income tax rate and shall exclude any consolidated tax liability or benefit adjustments originating from any taxable income or loss of its affiliates.
B. Nothing in this section shall preclude an investor-owned incumbent electric utility from applying for an increase in rates pursuant to § 56-245 or the Commission's rules governing utility rate increase applications (20 VAC 5-200-30); however, in any such filing, a fair rate of return on common equity shall be determined pursuant to subdivision 2. Nothing in this section shall preclude such utility's recovery of fuel and purchased power costs as provided in § 56-249.6.
C. Except as otherwise provided in this section, the Commission shall exercise authority over the rates, terms and conditions of investor-owned incumbent electric utilities for the provision of generation, transmission and distribution services to retail customers in the Commonwealth pursuant to the provisions of Chapter 10 (§ 56-232 et seq.) of this title, including specifically § 56-235.2.
D. Nothing in this section shall preclude the Commission from determining, during any proceeding authorized or required by this section, the reasonableness or prudence of any cost incurred or projected to be incurred, by a utility in connection with the subject of the proceeding. A determination of the Commission regarding the reasonableness or prudence of any such cost shall be consistent with the Commission's authority to determine the reasonableness or prudence of costs in proceedings pursuant to the provisions of Chapter 10 (§ 56-232 et seq.) of this title.
E. The Commission shall promulgate such rules and regulations as may be necessary to implement the provisions of this section.
§ 56-585.2. Sale of electricity from renewable sources through a renewable energy portfolio standard program.
A. As used in this section:
"Renewable energy" shall have the same meaning ascribed to it in § 56-576, provided such renewable energy is (i) generated or purchased in the Commonwealth or in the interconnection region of the regional transmission entity of which the participating utility is a member, as it may change from time to time; (ii) generated by a public utility providing electric service in the Commonwealth from a facility in which the public utility owns at least a 49 percent interest and that is located in a control area adjacent to such interconnection region; or (iii) represented by certificates issued by an affiliate of such regional transmission entity, or any successor to such affiliate, and held or acquired by such utility, which validate the generation of renewable energy by eligible sources in such region. "Renewable energy" shall not include electricity generated from pumped storage, but shall include run-of-river generation from a combined pumped-storage and run-of-river facility.
"Total electric energy sold in the base year" means total electric energy sold to Virginia jurisdictional retail customers by a participating utility in calendar year 2007, excluding an amount equivalent to the average of the annual percentages of the electric energy that was supplied to such customers from nuclear generating plants for the calendar years 2004 through 2006.
B. Any investor-owned incumbent electric utility may apply to the Commission for approval to participate in a renewable energy portfolio standard program, as defined in this section. The Commission shall approve such application if the applicant demonstrates that it has a reasonable expectation of achieving 12 percent of its base year electric energy sales from renewable energy sources during calendar year 2022, as provided in subsection D.
C. It is in the public interest for utilities to achieve the
goals set forth in subsection D, such goals being referred to herein as
"RPS Goals". Accordingly, the Commission, in addition to providing
recovery of incremental RPS program costs pursuant to subsection E, shall may increase the fair combined rate
of return on common equity for each utility participating in such program by a
single Performance Incentive, as defined in subdivision A 2 of § 56-585.1, of up
to 50 basis points whenever the utility attains an RPS Goal
established in subsection D. Such Performance Incentive shall first be used in
the calculation of a fair combined rate of return for the purposes of the
immediately succeeding biennial review conducted pursuant to § 56-585.1 after
any such RPS Goal is attained, and shall remain in effect if the utility
continues to meet the RPS Goals established in this section through and
including the third succeeding biennial review conducted thereafter. Any such
Performance Incentive, if implemented, shall may
be in lieu of any other Performance Incentive reducing or increasing such
utility's fair combined rate of return on common equity for the same time
periods. However, if the utility receives any other Performance Incentive increasing
its fair combined rate of return on common equity by more than 50 basis points,
the utility shall be entitled to may
receive such other Performance Incentive in lieu of this
Performance Incentive during the term of such other Performance Incentive. A
utility shall receive double credit toward meeting the renewable energy
portfolio standard for energy derived from sunlight or from wind.
D. To qualify for the Performance Incentive established in subsection C, the total electric energy sold by a utility to meet the RPS Goals shall be composed of the following amounts of electric energy from renewable energy sources, as adjusted for any sales volumes lost through operation of the customer choice provisions of subdivision A 3 or A 4 of § 56-577:
RPS Goal I: In calendar year 2010, 4 percent of total electric energy sold in the base year.
RPS Goal II: For calendar years 2011 through 2015, inclusive, an average of 4 percent of total electric energy sold in the base year, and in calendar year 2016, 7 percent of total electric energy sold in the base year.
RPS Goal III: For calendar years 2017 through 2021, inclusive, an average of 7 percent of total electric energy sold in the base year, and in calendar year 2022, 12 percent of total electric energy sold in the base year.
A utility may apply renewable energy sales achieved or renewable energy certificates acquired during the periods covered by any such RPS Goal that are in excess of the sales requirement for that RPS Goal to the sales requirements for any future RPS Goal.
E. A utility participating in such program shall have the right
to may recover all incremental costs
incurred for the purpose of such participation in such program, as accrued
against income, through rate adjustment clauses as provided in
subdivisions A 5 and A 6 of the biennial rate
review procedure prescribed in § 56-585.1, including, but not
limited to, administrative costs, ancillary costs, capacity costs, costs of
energy represented by certificates described in subsection A, and, in. In
the case of construction of renewable energy generation facilities, the
utility may also receive an allowance for funds used during
construction until such time as an enhanced rate of return, as determined
pursuant to subdivision A 6 of § 56-585.1, on construction work in
progress is included in rates, projected construction work
in progress, planning, development and construction costs, life-cycle costs,
and costs of infrastructure associated therewith, plus an enhanced rate of
return, as determined pursuant to subdivision A 6 of § 56-585.1.
All incremental costs of the RPS program shall be allocated to and recovered
from the utility's customer classes based on the demand created by the class
and within the class based on energy used by the individual customer in the
class, except that the incremental costs of the RPS program shall not be
allocated to or recovered from customers that are served within the large
industrial rate classes of the participating utilities and that are served at
primary or transmission voltage.
F. A utility participating in such program shall apply towards meeting its RPS Goals any renewable energy from existing renewable energy sources owned by the participating utility or purchased as allowed by contract at no additional cost to customers to the extent feasible. A utility participating in such program shall not apply towards meeting its RPS Goals renewable energy certificates attributable to any renewable energy generated at a renewable energy generation source in operation as of July 1, 2007, that is operated by a person that is served within a utility's large industrial rate class and that is served at primary or transmission voltage. A participating utility shall be required to fulfill any remaining deficit needed to fulfill its RPS Goals from new renewable energy supplies at reasonable cost and in a prudent manner to be determined by the Commission at the time of approval of any application made pursuant to subsection B. Utilities participating in such program shall collectively, either through the installation of new generating facilities, through retrofit of existing facilities or through purchases of electricity from new facilities located in Virginia, use or cause to be used no more than a total of 1.5 million tons per year of green wood chips, bark, sawdust, a tree or any portion of a tree which is used or can be used for lumber and pulp manufacturing by facilities located in Virginia, towards meeting RPS goals, excluding such fuel used at electric generating facilities using wood as fuel prior to January 1, 2007. A utility with an approved application shall be allocated a portion of the 1.5 million tons per year in proportion to its share of the total electric energy sold in the base year, as defined in subsection A, for all utilities participating in the RPS program. A utility may use in meeting RPS goals, without limitation, the following sustainable biomass and biomass based waste to energy resources: mill residue, except wood chips, sawdust and bark; pre-commercial soft wood thinning; slash; logging and construction debris; brush; yard waste; shipping crates; dunnage; non-merchantable waste paper; landscape or right-of-way tree trimmings; agricultural and vineyard materials; grain; legumes; sugar; and gas produced from the anaerobic decomposition of animal waste.
G. The Commission shall promulgate such rules and regulations as may be necessary to implement the provisions of this section including a requirement that participants verify whether the RPS goals are met in accordance with this section.
§ 56-585.3. Regulation of cooperative rates after rate caps.
After the expiration or termination of capped rates, the rates, terms and conditions of distribution electric cooperatives subject to Article 1 (§ 56-231.15 et seq.) of Chapter 9.1 of this title shall be regulated in accordance with the provisions of Chapters 9.1 (§ 56-231.15 et seq.) and 10 (§ 56-232 et seq.) of this title, as modified by the following provisions:
1. Except for energy related cost (fuel cost), the Commission shall not require any cooperative to adjust, modify, or revise its rates, by means of riders or otherwise, to reflect changes in wholesale power cost which occurred during the capped rate period, other than in a general rate proceeding.
2. Each cooperative may, without Commission approval or the requirement of any filing other than as provided in this subdivision, upon an affirmative resolution of its board of directors, increase or decrease all classes of its rates for distribution services at any time, provided, however, that such adjustments will not effect a cumulative net increase or decrease in excess of 5 percent in such rates in any three year period. Such adjustments will not affect or be limited by any existing fuel or wholesale power cost adjustment provisions. The cooperative will promptly file any such revised rates with the Commission for informational purposes.
3. Each cooperative may, without Commission approval, upon an affirmative resolution of its board of directors, make any adjustment to its terms and conditions that does not affect the cooperative's revenues from the distribution or supply of electric energy. In addition, a cooperative may make such adjustments to any pass-through of third-party service charges and fees, and to any fees, charges and deposits set out in Schedule F of such cooperative's Terms and Conditions filed as of January 1, 2007. The cooperative will promptly file any such amended terms and conditions with the Commission for informational purposes.
4. A cooperative may, at any time after the expiration or
termination of capped rates, petition the Commission for approval of one or
more rate adjustment clauses for the timely and current recovery from customers
of a review of its rates, terms and conditions of
service, in which the cooperative may seek recovery of the costs
described in subdivisions A 5 b and d of § 56-585.1.
5. None of the adjustments described in subdivisions 2 through 4 will apply to the rates paid by any customer that takes service by means of dedicated distribution facilities and had noncoincident peak demand in excess of 90 megawatts in calendar year 2006.
Nothing in this section shall be deemed to grant to a cooperative any authority to amend or adjust any terms and conditions of service or agreements regarding pole attachments or the use of the cooperative's poles or conduits.