                                 CODE OF VIRGINIA

COST ALLOCATION AND RATE DESIGN (§ 56-264.3)

A. The provisions of this section shall apply in any proceeding in which the
Commission is required to determine, pursuant to &#xA7; 56-234, if (i) rates
charged by water and sewerage companies with fewer than 10,000 customer
accounts, inclusive of their subsidiaries, are reasonable and just and (ii)
customers using water and sewerage services under like conditions are being
charged uniformly for such services.

B. Any rate application or proposal submitted to the Commission that would
allocate the revenue requirement of a water or sewerage company with fewer than
10,000 customer accounts, inclusive of their subsidiaries, among more than one
class of customers shall be supported by a class cost-of-service study that is
designed to allocate revenues on the basis of cost causation and to assign
credit for contributions in aid of construction, not previously addressed in a
utility acquisition transaction or the most recent approved rate case
application, to the customer class that made the contributions.

C. In setting rates, the Commission shall not find that any allocation of the
revenue requirement to a particular class of customers that is greater than the
portion of the revenue requirement that can be attributed to that class on the
basis of a cost-of-service study of the type described in subsection B is just
and reasonable unless the allocation is otherwise supported by substantial
evidence.

D. In any proceeding pursuant to &#xA7; 56-234 regarding the rates charged by
water and sewerage companies, the revenues to be produced by rates as designed
for any particular class of customers shall not provide an anticipated return on
equity more than 25 percent greater or less than the return on equity used to
set rates for the company as a whole, unless otherwise supported by clear and
convincing evidence. The effect of this provision on class rate design shall not
be considered in establishing the return on equity used to set rates for the
company as a whole.

HISTORY: 2019, c. 715.