                                 CODE OF VIRGINIA

RECOVERY OF FUEL AND PURCHASED POWER COSTS (§ 56-249.6)

A. 1. Each electric utility that purchases fuel for the generation of
electricity or purchases power and that was not, as of July 1, 1999, bound by a
rate case settlement adopted by the Commission that extended in its application
beyond January 1, 2002, shall submit to the Commission its estimate of fuel
costs, including the cost of purchased power, for the 12-month period beginning
on the date prescribed by the Commission. Upon investigation of such estimates
and hearings in accordance with law, the Commission shall direct each company to
place in effect tariff provisions designed to recover the fuel costs determined
by the Commission to be appropriate for that period, adjusted for any
over-recovery or under-recovery of fuel costs previously incurred.

   2. The Commission shall continuously review fuel costs and if it finds that
   any utility described in subdivision A 1 is in an over-recovery position by
   more than five percent, or likely to be so, it may reduce the fuel cost
   tariffs to correct the over-recovery.

   3. Beginning July 1, 2009, for all utilities described in subdivision A 1 and
   subsection B, if the Commission approves any increase in fuel factor charges
   pursuant to this section that would increase the total rates of the
   residential class of customers of any such utility by more than 20 percent,
   the Commission, within six months following the effective date of such
   increase, shall review fuel costs, and if the Commission finds that the
   utility is, or is likely to be, in an over-recovery position with respect to
   fuel costs for the 12-month period for which the increase in fuel factor
   charges was approved by more than five percent, it may reduce the
   utility&#8217;s fuel cost tariffs to correct the over-recovery.

B. All fuel costs recovery tariff provisions in effect on January 1, 2004, for
any electric utility that purchases fuel for the generation of electricity and
that was, as of July 1, 1999, bound by a rate case settlement adopted by the
Commission that extended in its application beyond January 1, 2002, shall remain
in effect until the later of (i) July 1, 2007 or (ii) the establishment of
tariff provisions under subsection C. Any such utility shall continue to report
to the Commission annually its actual fuel costs, including the cost of
purchased power.

C. Each electric utility described in subsection B shall submit annually to the
Commission its estimate of fuel costs, including the cost of purchased power,
for successive 12-month periods beginning on July 1, 2007, and each July 1
thereafter. Upon investigation of such estimates and hearings in accordance with
law, the Commission shall direct each such utility to place in effect tariff
provisions designed to recover the fuel costs determined by the Commission to be
appropriate for such periods, adjusted for any over-recovery or under-recovery
of fuel costs previously incurred; however, (i) no such adjustment for any
over-recovery or under-recovery of fuel costs previously incurred shall be made
for any period prior to July 1, 2007, and (ii) the Commission shall order that
the deferral portion, if any, of the total increase in fuel tariffs for all
classes as determined by the Commission to be appropriate for the 12-month
period beginning July 1, 2007, above the fuel tariffs previously existing, shall
be deferred without interest and recovered from all classes of customers as
follows: (i) in the 12-month period beginning July 1, 2008, that part of the
deferral portion of the increase in fuel tariffs that the Commission determines
would increase the total rates of the residential class of customers of the
utility by four percent over the level of such total rates in existence on June
30, 2008, shall be recovered; (ii) in the 12-month period beginning July 1,
2009, that part of the balance of the deferral portion of the increase in fuel
tariffs, if any, that the Commission determines would increase the total rates
of the residential class of customers of the utility by four percent over the
level of such total rates in existence on June 30, 2009, shall be recovered; and
(iii) in the 12-month period beginning July 1, 2010, the entire balance of the
deferral portion of the increase in fuel tariffs, if any, shall be recovered.
The &#8220;deferral portion of the increase in fuel tariffs&#8221; means the
portion of such increase in fuel tariffs that exceeds the amount of such
increase in fuel tariffs that the Commission determines would increase the total
rates of the residential class of customers of the utility by more than four
percent over the level of such total rates in existence on June 30, 2007.

D. In proceedings under subsections A and C:

   1. Energy revenues associated with off-system sales of power shall be credited
   against fuel factor expenses in an amount equal to the total incremental fuel
   factor costs incurred in the production and delivery of such sales. In
   addition, 75 percent of the total annual margins from off-system sales shall
   be credited against fuel factor expenses; however, the Commission, upon
   application and after notice and opportunity for hearing, may require that a
   smaller percentage of such margins be so credited if it finds by clear and
   convincing evidence that such requirement is in the public interest. The
   remaining margins from off-system sales shall not be considered in the
   biennial reviews of electric utilities conducted pursuant to &#xA7; 56-585.1.
   In the event such margins result in a net loss to the electric utility, (i) no
   charges shall be applied to fuel factor expenses and (ii) any such net losses
   shall not be considered in the biennial reviews of electric utilities
   conducted pursuant to &#xA7; 56-585.1. For purposes of this subsection,
   &#8220;margins from off-system sales&#8221; shall mean the total revenues
   received from off-system sales transactions less the total incremental costs
   incurred; and

   2. The Commission shall disallow recovery of any fuel costs that it finds
   without just cause to be the result of failure of the utility to make every
   reasonable effort to minimize fuel costs or any decision of the utility
   resulting in unreasonable fuel costs, giving due regard to reliability of
   service and the need to maintain reliable sources of supply, economical
   generation mix, generating experience of comparable facilities, and
   minimization of the total cost of providing service.
   				In any proceeding for the recovery of fuel costs under this subdivision in
   which the costs a utility seeks to recover include costs incurred under a
   natural gas capacity contract for a term of more than 10 years that procures
   more than 250,000 dekatherms per day that has not previously been subject to a
   review under this subdivision, the Commission shall require the utility to
   prove by a preponderance of the evidence that the utility has (i) determined
   that the utility cannot meet its service obligations, giving due regard, in
   the Commission&#8217;s sole discretion, to reliability of service and the need
   to maintain reliable sources of supply, without an additional fuel resource;
   (ii) reasonably identified and determined the date and amount of the new fuel
   resource it needs; (iii) objectively studied available alternative fuel
   resource options, as verified by the Commission, including options other than
   a new natural gas capacity contract or contracts to meet the identified and
   determined need; and (iv) determined that the natural gas capacity contract or
   contracts are the lowest-cost available option, taking into consideration
   fixed and variable costs and a reasonable projection of utilization. Absent
   the Commission&#8217;s finding that the utility has proven by a preponderance
   of the evidence that the utility had complied with the requirements of clauses
   (i), (ii), (iii), and (iv), the Commission shall deny the utility&#8217;s
   recovery of such costs. Nothing in this subdivision shall limit the
   Commission&#8217;s discretion to review and make a determination as to the
   reasonableness of the recovery by a utility of costs, including costs incurred
   under a natural gas capacity contract, that were previously subject to a
   review under this subdivision.

E. The Commission is authorized to promulgate, in accordance with the provisions
of this section, all rules and regulations necessary to allow the recovery by
electric utilities of all of their prudently incurred fuel costs under
subsections A and C, including the cost of purchased power, as precisely and
promptly as possible, with no over-recovery or under-recovery, except as
provided in subsection C, in a manner that will tend to assure public confidence
and minimize abrupt changes in charges to consumers.

HISTORY: 1978, c. 636; 1979, c. 492; 1980, c. 384; 1982, c. 584; 1984, cc. 716,
725; 1989, c. 666; 2004, c. 827; 2006, c. 939; 2007, cc. 888, 933; 2009, c. 244;
2020, c. 661.