                                 CODE OF VIRGINIA

BIENNIAL RATE REVIEWS (§ 56-585.8)

A. For the purposes of this section:
			&#8220;Phase I Utility&#8221; has the same meaning as provided in subdivision
A 1 of &#xA7; 56-585.1.
			&#8220;Utility&#8221; means a Phase I Utility.

B. With the first review commencing on March 31, 2024, and on May 31 biennially
thereafter, the Commission shall conduct rate reviews of the rates, terms, and
conditions for the provision of generation and distribution services by a Phase
I Utility that participated in triennial review proceedings in 2020 and 2023,
and such Phase I Utility shall no longer be subject to triennial review
proceedings pursuant to &#xA7; 56-585.1.

C. In each biennial review, the Commission shall conduct a proceeding to review
all rates, terms, and conditions for generation and distribution services with
such proceeding utilizing the two successive 12-month test periods ending
December 31 immediately preceding the year in which such proceeding is
conducted. Such biennial review shall be conducted in a single, combined
proceeding, except for review of the following costs, which the utility shall
continue to recover and the Commission shall continue to review separately,
pursuant to the applicable statutory provisions: costs that are recovered
pursuant to (i) &#xA7; 56-249.6, (ii) subdivisions A 4, 5, and 6 of &#xA7;
56-585.1, and (iii) &#xA7; 56-585.6.

D. Beginning in 2026, each biennial rate review proceeding shall commence on May
31 of the biennial review year with the filing of a petition by each Phase I
Utility subject to the provisions of this section. The Commission, after
providing notice and an opportunity for hearing, shall grant a final order on
such petition no later than January 15 of the subsequent year, with any
revisions in rates ordered by the Commission pursuant to the rate review taking
effect no earlier than March 1.

E. In each biennial review proceeding, the Commission shall set the fair rate of
return on common equity applicable to the generation and distribution services
of the utility for the two such services combined and for any rate adjustment
clauses approved under subdivision A 5 or 6 of &#xA7; 56-585.1. The Commission
may use any methodology it finds consistent with the public interest to
determine the Phase I Utility&#8217;s fair rate of return on common equity. The
Commission may increase or decrease the combined rate of return for generation
and distribution services by up to 50 basis points based on factors that may
include reliability, generating plant performance, customer service, and
operating efficiency of a utility. Any such adjustment to the combined rate of
return for generation and distribution services shall include consideration of
nationally recognized standards determined by the Commission to be appropriate
for such purposes.

F. In any biennial review for a Phase I Utility, if the Commission determines in
its sole discretion that the utility&#8217;s existing rates for generation and
distribution services will, on a going-forward basis, either produce (i)
revenues in excess of the utility&#8217;s authorized rate of return or (ii)
revenues below the utility&#8217;s authorized rate of return, then the
Commission shall order any reductions or increases, as applicable and necessary,
to such rates for generation and distribution services that it deems appropriate
to ensure the resulting rates for generation and distribution services (a) are
just and reasonable and (b) provide the utility an opportunity to recover its
costs of providing services over the rate period ending on December 31 of the
year of the utility&#8217;s succeeding review and earn a fair rate of return
authorized pursuant to this section. Such determination shall be limited to the
Phase I Utility&#8217;s rates for generation and distribution services and shall
not consider the costs or revenues recovered in any rate adjustment clause
authorized pursuant to this chapter.

G. In any biennial review of rates for generation and distribution services, if
the combined rate of return on common equity earned is no more than 100 basis
points above or below the fair combined rate of return, as determined by the
Commission, for the test period under review, then such combined return shall
not be considered either excessive or insufficient, respectively.

   1. If in any biennial review, the Commission finds that, during the test
   period under review, considered as a whole, the utility has earned more than
   100 basis points above the authorized fair combined rate of return on its
   generation or distribution services, the Commission shall direct that 100
   percent of the amount of such earnings that were more than 100 basis points
   above such fair combined rate of return for the test period under review,
   considered as a whole, be credited to customers&#8217; bills. Any such credits
   shall be applied to customers&#8217; bills, as determined at the discretion of
   the Commission, following the effective date of the Commission&#8217;s order,
   and shall be allocated among customer classes such that the relationship
   between the specific customer class rates of return to the overall target rate
   of return will have the same relationship as the last approved allocation of
   revenues used to design base rates; or

   2. The Commission shall authorize deferred recovery for reasonable (i) actual
   costs associated with severe weather events and (ii) actual costs associated
   with natural disasters, not currently in rates, and the Commission shall allow
   the utility to amortize and recover such deferred costs over future periods as
   determined by the Commission. The amount of any such deferral shall not exceed
   an amount that would, together with the utility&#8217;s other costs, revenues,
   and investments recovered through rates for generation and distribution
   services for the test period under review, cause the utility&#8217;s earned
   return on its generation and distribution services to exceed 100 basis points
   above the fair combined rate of return applicable to the test period under
   review. For the purposes of determining any amount of costs that are
   associated with severe weather events, the Commission shall consider
   nationally recognized standards such as those published by the Institute of
   Electrical and Electronics Engineers (IEEE).
   				Any amount of a utility&#8217;s earnings directed by the Commission to be
   credited to customers&#8217; bills pursuant to this subsection shall not be
   considered for the purpose of determining the utility&#8217;s earnings in any
   subsequent biennial review.

H. In any proceeding under this title, including each biennial review, to
determine the prior two years&#8217; excess or deficiency for the purposes of
subsection F, the Commission shall use an average rate base using the actual
starting and end-of-test period capital structure of the utility, excluding any
debt associated with any securitized bonds and without regard to the cost of
capital, capital structure, or investments of any other entities with which the
utility is affiliated. To determine a revenue requirement in any proceeding
under this title, the Commission shall use the 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 the utility is affiliated, including debt associated with any securitized
bonds, unless the Commission makes a finding, 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 a rate review for a Phase I Utility that is part of a publicly traded,
consolidated group, the Commission shall determine federal and state income tax
costs as follows: (i) the 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) the
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.

I. The Commission is authorized to determine during any biennial review the
reasonableness or prudence of any cost subject to the rate review incurred or
projected to be incurred by the utility, and a Phase I Utility shall recover
such costs that the Commission finds to be reasonable and prudent.

J. In any biennial review conducted pursuant to this section, a Phase I Utility
or any other party may propose changes to its terms and conditions and the
Commission may approve, reject, or amend any changes and may propose any special
rates, contracts, or incentives pursuant to &#xA7; 56-235.2.

K. Nothing in this section shall alter a Phase I Utility&#8217;s obligations
pursuant to &#xA7;&#xA7; 56-585.5 and 56-596.2.

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

HISTORY: 2023, cc. 749, 776; 2025, cc. 497, 597.