                                 CODE OF VIRGINIA

ALL RATES, TOLLS, ETC., TO BE JUST AND REASONABLE TO JURISDICTIONAL CUSTOMERS;
FINDINGS AND CONCLUSIONS TO BE SET FORTH; ALTERNATIVE FORMS OF REGULATION FOR
ELECTRIC COMPANIES (§ 56-235.2)

A. Any rate, toll, charge or schedule of any public utility operating in this
Commonwealth shall be considered to be just and reasonable only if: (1) the
public utility has demonstrated that such rates, tolls, charges or schedules in
the aggregate provide revenues not in excess of the aggregate actual costs
incurred by the public utility in serving customers within the jurisdiction of
the Commission, including such normalization for nonrecurring costs and
annualized adjustments for future costs as the Commission finds reasonably can
be predicted to occur during the rate year, and a fair return on the public
utility&#8217;s rate base used to serve those jurisdictional customers, which
return shall be calculated in accordance with &#xA7; 56-585.1 for utilities
subject to such section; (1a) the investor-owned public electric utility has
demonstrated that no part of such rates, tolls, charges or schedules includes
costs for advertisement, except for advertisements either required by law or
rule or regulation, or for advertisements which solely promote the public
interest, conservation or more efficient use of energy; and (2) the public
utility has demonstrated that such rates, tolls, charges or schedules contain
reasonable classifications of customers. Notwithstanding &#xA7; 56-234, the
Commission may approve, either in the context of or apart from a rate proceeding
after notice to all affected parties and hearing, special rates, contracts or
incentives to individual customers or classes of customers where it finds such
measures are in the public interest. Such special charges shall not be limited
by the provisions of &#xA7; 56-235.4. In determining costs of service, the
Commission may use the test year method of estimating revenue needs. In any
Commission order establishing a fair and reasonable rate of return for an
investor-owned gas, telephone or electric public utility, the Commission shall
set forth the findings of fact and conclusions of law upon which such order is
based.
			For ratemaking purposes, the Commission shall determine the federal and state
income tax costs for investor-owned water, gas, or electric utility that is part
of a publicly-traded, consolidated group as follows: (i) such utility&#8217;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&#8217;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.
			In any ratemaking proceeding for an investor-owned utility authorized to
furnish water or water and sewer service initiated after January 1, 2022, the
Commission shall evaluate such utility on a stand-alone basis and, for purposes
of establishing any revenue requirement and rates, utilize such utility&#8217;s
actual end-of-test period capital structure and cost of capital without regard
to the cost of capital, capital structure, or investments of any other entities
with which such utility may be affiliated, unless the Commission finds based on
evidence in the record that the debt to equity ratio of the actual end-of-test
period capital structure of such utility is unreasonable, in which case the
Commission may utilize a debt to equity ratio that it finds to be reasonable. In
all proceedings initiated after January 1, 2022, in which the Commission reviews
the rates and associated earnings of an investor-owned utility authorized to
furnish water or water and sewer service, the Commission shall conduct such
review utilizing the same cost of capital and capital structure adopted in the
utility&#8217;s most recent rate case in which such rates were set, without
regard to any later changes in the cost of capital or capital structure.

B. The Commission shall, before approving special rates, contracts, incentives
or other alternative regulatory plans under subsection A, ensure that such
action (i) protects the public interest, (ii) will not unreasonably prejudice or
disadvantage any customer or class of customers, and (iii) will not jeopardize
the continuation of reliable electric service.

C. After notice and public hearing, the Commission shall issue guidelines for
special rates adopted pursuant to subsection A that will ensure that other
customers are not caused to bear increased rates as a result of such special
rates.

HISTORY: 1977, c. 336; 1984, c. 312; 1996, c. 156; 2007, cc. 537, 888, 933;
2022, cc. 581, 582.