                                 CODE OF VIRGINIA

TRANSITIONAL RATE PERIOD: REVIEW OF RATES, TERMS AND CONDITIONS FOR UTILITY
GENERATION FACILITIES (§ 56-585.1:1)

A. No biennial reviews of the rates, terms, and conditions for any service of a
Phase I Utility, as defined in &#xA7; 56-585.1, shall be conducted at any time
by the Commission for the three successive 12-month test periods beginning
January 1, 2014, and ending December 31, 2016. No biennial reviews of the rates,
terms, and conditions for any service of a Phase II Utility, as defined in
&#xA7; 56-585.1, shall be conducted at any time by the Commission for the two
successive 12-month test periods beginning January 1, 2015, and ending December
31, 2016. Such test periods beginning January 1, 2014, and ending December 31,
2017, for a Phase I Utility, and beginning January 1, 2015, and ending December
31, 2016, for a Phase II Utility, are collectively referred to herein as the
&#8220;Transitional Rate Period.&#8221; Review of recovery of fuel and purchase
power costs shall continue during the Transitional Rate Period in accordance
with &#xA7; 56-249.6. Any biennial review of the rates, terms, and conditions
for any service of a Phase II Utility occurring in 2015 during the Transitional
Rate Period shall be solely a review of the utility&#8217;s earnings on its
rates for generation and distribution services for the two 12-month test periods
ending December 31, 2014, and a determination of whether any credits to
customers are due for such test periods pursuant to subdivision A 8 b of &#xA7;
56-585.1. After the conclusion of the Transitional Rate Period, reviews of the
utility&#8217;s rates for generation and distribution services shall resume for
a Phase I Utility in 2020, with the first such proceeding utilizing the three
successive 12-month test periods beginning January 1, 2017, and ending December
31, 2019. After the conclusion of the Transitional Rate Period, reviews of the
utility&#8217;s rates for generation and distribution services shall resume for
a Phase II Utility in 2021, with the first such proceeding utilizing the four
successive 12-month test periods beginning January 1, 2017, and ending December
31, 2020. Consistent with this provision, (i) no biennial review filings shall
be made by an investor-owned incumbent electric utility in the years 2016
through 2019, inclusive, and (ii) no adjustment to an investor-owned incumbent
electric utility&#8217;s existing tariff rates, including any rates adopted
pursuant to &#xA7; 56-235.2, shall be made between the beginning of the
Transitional Rate Period and the conclusion of the first review after the
conclusion of the Transitional Rate Period, except as may be provided pursuant
to &#xA7; 56-245 or 56-249.6 or subdivisions A 4, 5, or 6 of &#xA7; 56-585.1.

B. During the Transitional Rate Period, pursuant to &#xA7; 56-36, the Commission
shall have the right at all times to inspect the books, papers and documents of
any investor-owned incumbent electric utility and to require from such
companies, from time to time, special reports and statements, under oath,
concerning their business.

C. 1. Commencing in 2016 and concluding in 2018, the State Corporation
Commission, after notice and opportunity for a hearing, shall conduct a
proceeding every two years to determine the fair rate of return on common equity
to be used by a Phase I Utility as the general rate of return applicable to rate
adjustment clauses under subdivisions A 5 or A 6 of § 56-585.1. A Phase I
Utility&#8217;s filing in such proceedings shall be made on or before March 31
of 2016, and 2018.

   2. Commencing in 2017 and concluding in 2019, the State Corporation
   Commission, after notice and opportunity for a hearing, shall conduct a
   proceeding every two years to determine the fair rate of return on common
   equity to be used by a Phase II Utility as the general rate of return
   applicable to rate adjustment clauses under subdivisions A 5 or A 6 of &#xA7;
   56-585.1. A Phase II utility&#8217;s filing in such proceedings shall be made
   on or before March 31 of 2017 and 2019.

   3. Such fair rate of return shall be calculated pursuant to the methodology
   set forth in subdivisions A 2 a and b of &#xA7; 56-585.1 and shall utilize the
   utility&#8217;s actual end-of-test-period capital structure and cost of
   capital, as well as a 12-month test period ending December 31 immediately
   preceding the year in which the proceeding is conducted. The
   Commission&#8217;s final order in such a proceeding shall be entered no later
   than eight months after the date of filing, with any adjustment to the fair
   rate of return for applicable rate adjustment clauses under subdivisions A 5
   and 6 of &#xA7; 56-585.1 taking effect on the date of the Commission&#8217;s
   final order in the proceeding, utilizing rate adjustment clause true-up
   protocols as the Commission may in its discretion determine. Such proceeding
   shall concern only the issue of the determination of such fair rate of return
   to be used for rate adjustment clauses under subdivisions A 5 and 6 of &#xA7;
   56-585.1, and such determination shall have no effect on rates other than
   those applicable to such rate adjustment clauses; however, after the final
   such proceeding for a utility has been concluded, the fair combined rate of
   return on common equity so determined therein shall also be deemed equal to
   the fair combined rate of return on common equity to be used in such
   utility&#8217;s first review proceeding conducted after the end of the
   utility&#8217;s Transitional Rate Period to review such utility&#8217;s
   earnings on its rates for generation and distribution services for the
   historic test periods.

D. In furtherance of rate stability during the Transitional Rate Period, any
Phase II Utility carrying a prior period deferred fuel expense recovery balance
on its books and records as of December 31, 2014, shall not recover from
customers 50 percent of any such balance outstanding as of December 31, 2014,
and the State Corporation Commission shall implement as soon as practicable
reductions in the fuel factor rate of any such Phase II Utility to reflect the
nonrecovery of any such fuel expense as well as any reduction in the fuel factor
associated with the Phase II Utility&#8217;s current period forecasted fuel
expense over recovery for the 2014-2015 fuel year and projected fuel expense for
the 2015-2016 fuel year.

E. Except for early retirement plans identified by the utility in an integrated
resource plan filed with the State Corporation Commission by September 1, 2014,
for utility generation plants, an investor-owned incumbent electric utility
shall not permanently retire an electric power generation facility from service
during the Transitional Rate Period without first obtaining the approval of the
State Corporation Commission, upon petition from such investor-owned incumbent
electric utility, and a finding by the State Corporation Commission that the
retirement determination is reasonable and prudent. During the Transitional Rate
Period, an investor-owned incumbent electric utility shall recover the following
costs, as recorded per books by the utility for financial reporting purposes and
accrued against income, only through its existing tariff rates for generation or
distribution services, except such costs as may be recovered pursuant to &#xA7;
56-245, &#xA7; 56-249.6 or subdivisions A 4, A 5, or A 6 of &#xA7; 56-585.1: (i)
costs associated with asset impairments related to early retirement
determinations for utility generation facilities resulting from the
implementation of carbon emission guidelines for existing electric power
generation facilities that the U.S. Environmental Protection Agency has issued
pursuant to &#xA7; 111(d) of the Clean Air Act; (ii) costs associated with
severe weather events; and (iii) costs associated with natural disasters.

F. During the Transitional Rate Period:

   1. The State Corporation Commission shall submit a report and make
   recommendations to the Governor and the General Assembly annually on or before
   December 1 of each year assessing the updated integrated resource plan of any
   investor-owned incumbent electric utility. The report shall include an
   analysis of, among other matters, the amount, reliability, and type of
   generation facilities needed to serve Virginia native load compared to what is
   then available to serve such load and what may be available to serve such load
   in the future in view of market conditions and current and pending state and
   federal environmental regulations. As a part of such report, the State
   Corporation Commission shall update its estimate of the impact upon electric
   rates in Virginia of the implementation of carbon emission guidelines for
   existing electric power generation facilities that the U.S. Environmental
   Protection Agency has issued pursuant to &#xA7; 111(d) of the federal Clean
   Air Act. The State Corporation Commission shall submit copies of such annual
   reports to the Chairman of the House Committee on Labor and Commerce, the
   Chairman of the Senate Committee on Commerce and Labor and the Chairman of the
   Commission on Electric Utility Regulation; and

   2. The Department of Environmental Quality shall submit a report and make
   recommendations to the Governor and the General Assembly annually on or before
   December 1 of each year concerning the implementation of carbon emission
   guidelines for existing electric power generation facilities that the U.S.
   Environmental Protection Agency has issued pursuant to &#xA7; 111(d) of the
   federal Clean Air Act. The report shall include an analysis of, among other
   matters, the impact of such federal regulations on the operation of any
   investor-owned incumbent electric utility&#8217;s electric power generation
   facilities and any changes, interdiction, or suspension of such regulations.
   The Department of Environmental Quality shall submit copies of such annual
   reports to the Chairman of the House Committee on Labor and Commerce, the
   Chairman of the Senate Committee on Commerce and Labor and the Chairman of the
   Commission on Electric Utility Regulation.

G. The construction or purchase by an investor-owned incumbent utility of one or
more generation facilities with at least one megawatt of generating capacity,
and with an aggregate rated capacity that does not exceed 5,000 megawatts,
including rooftop solar installations with a capacity of not less than 50
kilowatts, and with an aggregate capacity of 50 megawatts, that use energy
derived from sunlight or from wind and are located in the Commonwealth or off
the Commonwealth&#8217;s Atlantic shoreline, regardless of whether any of such
facilities are located within or without such utility&#8217;s service territory,
is in the public interest, and in determining whether to approve such facility,
the Commission shall liberally construe the provisions of this section. Such
utility shall utilize goods or services sourced, in whole or in part, from one
or more Virginia businesses. The utility may propose a rate adjustment clause
based on a market index in lieu of a cost of service model for such facility. An
investor-owned incumbent utility may enter into short-term or long-term power
purchase contracts for the power derived from sunlight generated by such
generation facility prior to purchasing the generation facility.

H. To the extent that the provisions of this section are inconsistent with the
provisions of &#xA7;&#xA7; 56-249.6 and 56-585.1, the provisions of this section
shall control.

HISTORY: 2015, c. 6; 2018, c. 296.