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1996 SESSION

960638492
HOUSE BILL NO. 497
Offered January 18, 1996
A BILL to amend the Code of Virginia by adding a section numbered 56-235.6, relating to performance-based regulation of gas utilities.
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Patrons-- Woodrum, Barlow, Bennett, Callahan, Deeds, Heilig, Jones, J.C., Keating, Morgan and Watkins; Senators: Benedetti, Colgan, Edwards, Holland, Houck and Stosch
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Referred to Committee on Corporations, Insurance and Banking
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Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia is amended by adding a section numbered 56-235.6 as follows:

§ 56-235.6. Performance-based regulation of gas utilities.

A. Notwithstanding any provision of law to the contrary, the Commission may authorize any public utility engaged in the business of furnishing gas service (for the purposes of this section a "gas utility"), upon application by such gas utility at any time, and after such notice and opportunity for hearing as the Commission may prescribe, to implement an optional form of rate regulation under which the cost-of-service ratemaking methodology set forth in § 56-235.2 shall be replaced with a performance-based ratemaking methodology proposed by the gas utility.

B. The Commission shall approve such application if it finds that the performance-based program proposed by the gas utility: (i) preserves adequate service to all classes of customers; (ii) does not unreasonably prejudice or disadvantage any class of gas utility customers; (iii) provides incentives for improved performance by the gas utility in the conduct of its public duties; and (iv) is in the public interest. Performance-based forms of regulation may include, but not be limited to, the use of revenue indexing, price indexing, ranges of authorized return, gas cost indexing and innovative utilization of utility-related assets and activities (such as off-system sales of excess gas supplies, release of upstream pipeline capacity and performance of billing services for other gas suppliers) in ways that benefit both the gas utility and its customers and may include a mechanism for automatic annual adjustments to revenues or prices to reflect changes in any index adopted for the implementation of such performance-based form of regulation.

C. Each gas utility may apply for implementation of a performance-based form of regulation. If the Commission approves the application with modifications, the gas utility may, at its option, withdraw its application and continue to be regulated under the form of regulation that existed immediately prior to the filing of the application. Any gas utility authorized to implement a performance-based form of regulation under this section may at any time notify the Commission of its intent to discontinue the same and to apply for approval of new rates under the form of regulation that existed immediately prior to the filing of its application under this section. The Commission may, after notice and opportunity for hearing, alter, amend or revoke a performance-based form of regulation previously implemented under this section if it finds that the terms ordered by the Commission in connection with the approval of a gas utility's implementation of a performance-based form of regulation have been violated or that any of the Commission's findings made pursuant to clauses (i) through (v) of subsection B of this section no longer apply.

D. The Commission shall use the annual review process established in § 56-234.2 to monitor each performance-based form of regulation approved under this section and to make any annual prospective adjustments to revenues or prices necessary to reflect increases or decreases in any index adopted for the implementation of such performance-based form of regulation.