                                 CODE OF VIRGINIA

DIVESTITURE, FUNCTIONAL SEPARATION AND OTHER CORPORATE RELATIONSHIPS (§ 56-590)

A. The Commission shall not require any incumbent electric utility to divest
itself of any generation, transmission or distribution assets pursuant to any
provision of this chapter.

B. 1. The Commission shall, however, direct the functional separation of
generation, retail transmission and distribution of all incumbent electric
utilities in connection with the provisions of this chapter to be completed by
January 1, 2002.

   2. By January 1, 2001, each incumbent electric utility shall submit to the
   Commission a plan for such functional separation which may be accomplished
   through the creation of affiliates, or through such other means as may be
   acceptable to the Commission.

   3. Consistent with this chapter, the Commission may impose conditions, as the
   public interest requires, upon its approval of any incumbent electric
   utility&#8217;s plan for functional separation, including requirements that
   (i) the incumbent electric utility&#8217;s generation assets or, at the
   election of the incumbent electric utility and if approved by the Commission
   pursuant to subdivision 4 of this subsection, their equivalent are made
   available for electric service during the capped rate period as provided in
   &#xA7; 56-582 and, if applicable, during any period the distributor serves as
   a default provider as provided for in &#xA7; 56-585; (ii) the incumbent
   electric utility receive Commission approval for the sale, transfer or other
   disposition of generation assets during the capped rate period and, if
   applicable, during any period the distributor serves as a default provider;
   and (iii) any such generation asset sold, transferred, or otherwise disposed
   of by the incumbent electric utility with Commission approval shall not be
   further sold, transferred, or otherwise disposed of during the capped rate
   period and, if applicable, during any period the distributor serves as default
   provider, without additional Commission approval.

   4. If an incumbent electric utility proposes that the equivalent to its
   generation assets be made available pursuant to subdivision 3 of this
   subsection, the Commission shall determine the adequacy of such proposal and
   shall approve or reject such proposal based on the public interest.

   5. In exercising its authority under the provisions of this section and under
   &#xA7; 56-90, the Commission shall have no authority to regulate, on a
   cost-of-service basis or other basis, the price at which generation assets or
   their equivalent are made available for default service purposes. Such
   restriction on the Commission&#8217;s authority to regulate, on a
   cost-of-service basis or other basis, prices for default service shall not
   affect the ability of a distributor to offer to provide, and of the Commission
   to approve if appropriate the provision of, such services on a cost plus basis
   or any other basis. The Commission&#8217;s authority to regulate the price of
   default service shall be consistent with the pricing provisions applicable to
   a distributor pursuant to &#xA7; 56-585. In addition, the Commission shall, in
   exercising its responsibilities under this section and under &#xA7; 56-90,
   consider, among other factors, the potential effects of any such transfer on:
   (i) rates and reliability of capped rate service under &#xA7; 56-582, and of
   default service under &#xA7; 56-585, and (ii) the development of a competitive
   market in the Commonwealth for retail generation services. However, the
   Commission may not deny approval of a transfer proposed by an incumbent
   electric utility, pursuant to subdivisions 2 and 4 of this subsection, due to
   an inability to determine, at the time of consideration of the transfer,
   default service prices under &#xA7; 56-585.

C. The Commission shall, to the extent necessary to promote effective
competition in the Commonwealth, promulgate rules and regulations to carry out
the provisions of this section, which rules and regulations shall include
provisions:

   1. Prohibiting cost-shifting or cross-subsidies between functionally separate
   units;

   2. Prohibiting functionally separate units from engaging in anticompetitive
   behavior or self-dealing;

   3. Prohibiting affiliated entities from engaging in discriminatory behavior
   towards nonaffiliated units; and

   4. Establishing codes of conduct detailing permissible relations between
   functionally separate units.

D. Neither a covered entity nor an affiliate thereof may be a party to a covered
transaction without the prior approval of the Commission. Any such person
proposing to be a party to such transaction shall file an application with the
Commission. The Commission shall approve or disapprove such transaction within
sixty days after the filing of a completed application; however, the sixty-day
period may be extended by Commission order for a period not to exceed an
additional 120 days. The application shall be deemed approved if the Commission
fails to act within such initial or extended period. The Commission shall
approve such application if it finds, after notice and opportunity for hearing,
that the transaction will comply with the requirements of subsection E, and may,
as a part of its approval, establish such conditions or limitations on such
transaction as it finds necessary to ensure compliance with subsection E.

E. A transaction described in subsection D shall not:

   1. Substantially lessen competition among the actual or prospective providers
   of noncompetitive electric service or of a service which is, or is likely to
   become, a competitive electric service; or

   2. Jeopardize or impair the safety or reliability of electric service in the
   Commonwealth, or the provision of any noncompetitive electric service at just
   and reasonable rates.

F. Except as provided in subdivision B 5, nothing in this chapter shall be
deemed to abrogate or modify the Commission&#8217;s authority under Chapter 3
(&#xA7; 56-55 et seq.), 4 (&#xA7; 56-76 et seq.) or 5 (&#xA7; 56-88 et seq.) of
this title. However, any person subject to the requirements of subsection D that
is also subject to the requirements of Chapter 5 of this title may be exempted
from compliance with the requirements of Chapter 5 of this title.

HISTORY: 1999, c. 411; 2000, c. 991; 2001, c. 748; 2007, cc. 888, 933.