                                 CODE OF VIRGINIA

RATE CAPS (§ 56-582)

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 January 1, 2002. Such
   rate application and the Commission&#8217;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&#8217; recovery of fuel and purchased power costs pursuant to
&#xA7; 56-249.6, and, if applicable, in accordance with the terms of any
Commission order approving the divestiture of generation assets pursuant to
&#xA7; 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 &#xA7; 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&#8217; 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 July 1,
2004. Any adjustments pursuant to &#xA7; 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 &#xA7; 56-590 prior to January 1, 2002, shall be effective only on and after
July 1, 2007. Notwithstanding the provisions of &#xA7; 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 &#xA7; 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 (&#xA7; 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 &#xA7; 56-590, shall make electric service
available at capped rates established under this section to any customer in the
incumbent electric utility&#8217;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 &#xA7; 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.

HISTORY: 1999, c. 411; 2000, cc. 942, 991; 2001, c. 748; 2004, c. 827; 2007, cc.
888, 933; 2008, c. 883.