                                 CODE OF VIRGINIA

UPSTREAM NATURAL GAS SUPPLY INFRASTRUCTURE PROJECTS (§ 56-609)

A. As used in this section, unless the context requires a different meaning:
			&#8220;Eligible natural gas supply infrastructure costs&#8221; includes the
investment in eligible natural gas supply infrastructure projects and the
following:

   1. Return on the investment. In calculating the return on investment, the
   Commission shall use the natural gas utility&#8217;s then in effect weighted
   average cost of capital, including the cost of debt and equity, based on its
   regulatory capital structure used in determining the natural gas
   utility&#8217;s base rates. The investment will be multiplied by the weighted
   average cost of capital to determine the return on investment;

   2. A revenue conversion factor. Such factor, including income taxes, shall be
   applied to the required operating income resulting from the eligible natural
   gas supply infrastructure costs;

   3. Operating and maintenance expense, which includes the amount of operating
   and maintenance expense utilized in production wells, processing the gas
   produced, and gathering, transmission, and distribution lines delivering the
   gas to a pipeline or distribution system;

   4. Depreciation. In calculating depreciation, the Commission shall use the
   natural gas utility&#8217;s current depreciation rates for investments in
   distribution infrastructure, as set out by appropriate asset class. The
   utility shall propose a basis for recovering for the depreciation or depletion
   of investments in other asset classes in the natural gas supply investment
   plan, including investments in natural gas reserves that will deplete based on
   their useful life or of associated facilities that may be retired upon
   depletion of natural gas reserves;

   5. Property tax, severance tax, and any other taxes or government fees
   associated with production and transmission of natural gas; and

   6. Carrying costs on the over-recovery or under-recovery of the eligible
   natural gas supply infrastructure costs. In calculating the carrying costs,
   the Commission shall use the natural gas utility&#8217;s regulatory capital
   structure as determined in subdivision 1 of this definition.
   				&#8220;Eligible natural gas supply infrastructure projects&#8221; means
   capital investments in natural gas reserves and upstream pipelines and
   facilities that, alone or in combination with other projects or strategies,
   offer reasonably anticipated benefits to customers and markets, which benefits
   mean (i) savings in the delivered cost of gas versus long-term forward market
   projections available to the natural gas utility at the time of the capital
   investment or other alternatives, (ii) a reduction in the utility&#8217;s
   overall portfolio price volatility, (iii) reduction in the utility&#8217;s
   overall supply risk, or (iv) any combination of the savings or reductions
   described in clauses (i), (ii), and (iii). Any such customer benefit
   benchmarks shall be outlined in the natural gas utility&#8217;s filings with
   the Commission pursuant to this section.
   				&#8220;Investment&#8221; means actual costs incurred on eligible natural
   gas supply infrastructure projects, including planning, development, and
   construction costs; actual costs of infrastructure associated therewith; and
   an allowance for funds used during construction. In calculating the allowance
   for funds used during construction, the Commission shall use the natural gas
   utility&#8217;s actual regulatory capital structure as determined in
   subdivision 1 of the definition of eligible natural gas supply infrastructure
   costs.
   				&#8220;Natural gas reserves and upstream pipelines and facilities&#8221;
   means investments in natural gas reserves, production facilities (including
   equipment required to prepare the natural gas for use), gathering,
   transmission, and, within the natural gas utility&#8217;s certificated service
   territory, any distribution pipelines necessary to deliver the reserves, and
   above-ground and below-ground storage used in the delivery of gas to existing
   natural gas transmission pipelines or distribution systems.
   				&#8220;Natural gas supply investment plan&#8221; means a plan filed by a
   natural gas utility that identifies proposed eligible natural gas supply
   infrastructure projects and its development of those projects with or without
   a third party.

B. A natural gas utility shall have the right to recover eligible natural gas
supply infrastructure costs on an ongoing basis through the gas cost component
of the utility&#8217;s rate structure or other recovery mechanism approved by
the Commission, provided that any such mechanism shall properly allocate costs.
Natural gas utilities using the cost of service methodology set forth in &#xA7;
56-235.2 or a performance-based regulation plan authorized by &#xA7; 56-235.6
shall be eligible to file a plan. The plan shall include a timeline for the
investment and completion of the proposed eligible natural gas supply
infrastructure projects; provide for an estimated schedule for recovery of the
related eligible natural gas supply infrastructure costs through the gas cost
component of the utility&#8217;s rate structure or other mechanism, including
proposed depreciation rates for investments in non-distribution asset classes
and how any revenue gains from the use of the pipelines by third parties will be
used to offset eligible natural gas supply infrastructure costs; and demonstrate
that the plan is in the public interest with due consideration to providing a
portion of the utility&#8217;s delivered supply at prices at or below the
long-term projections as available and defined in the natural gas
utility&#8217;s filing, or reduction in the utility&#8217;s overall supply risk,
or reduction in the utility&#8217;s overall portfolio price volatility, or a
combination thereof. No project may provide an annual volume of natural gas that
exceeds 12.5 percent of the natural gas utility&#8217;s annual firm sales
demand, and no combination of projects may provide an annual volume of natural
gas that exceeds 25 percent of the natural gas utility&#8217;s annual firm sales
demand. The natural gas utility&#8217;s weather-normalized firm sales demand for
the calendar year preceding the application shall be deemed to establish the
annual firm sales demand for the purposes of calculating the volume and
volumetric limits of projects. In no case shall any investment in reserves
exceed 20 years. The Commission shall approve such a plan upon a finding that it
is in the public interest after notice and an opportunity for hearing in
accordance with the provisions of this chapter.

C. In addition to the items included in the plan as specified in subsection B,
the plan may provide the utility with an option to receive the gas or sell the
gas at market prices. A utility proposing this option as part of its plan shall
propose how any revenue gains from the sale of the gas will be used to reduce
the cost of gas to its customers. The Commission shall approve or deny, within
180 days, a natural gas utility&#8217;s initial application for a natural gas
supply infrastructure plan. A plan filed pursuant to this section shall not
require the filing of rate case schedules. The Commission shall approve or deny,
within 120 days, a natural gas utility&#8217;s application to amend a previously
approved plan. If the Commission denies such a plan or amendment, it shall set
forth with specificity the reasons for such denial, and the utility shall have
the right to refile, without prejudice, an amended plan or amendment within 60
days, and the Commission shall thereafter have 60 days to approve or deny the
amended plan or amendment. If the plan is filed as part of a general rate case
using the cost of service methodology set forth in &#xA7; 56-235.2 or a
performance-based regulation plan authorized by &#xA7; 56-235.6, then the
Commission shall approve or deny the plan concurrent with or as part of the
general rate case decision.

D. No other revenue requirement or ratemaking issues shall be examined in
consideration of the initial plan filed pursuant to the provisions of this
section.

E. A gas utility with an approved natural gas supply infrastructure plan shall
annually file a report of the eligible natural gas supply infrastructure
investment made, the eligible natural gas supply infrastructure costs incurred
and the amount of such costs recovered, the volume of gas delivered to customers
or sold to third parties during the 12-month reporting period, and an analysis
of the price of gas delivered to the natural gas utility customers and the
market cost of gas during the 12-month period. However, such analysis shall not
affect a gas utility&#8217;s right to recover all eligible natural gas supply
infrastructure costs as set forth in subsection B. The report shall also
identify the balance of over-recovery or under-recovery of the eligible natural
gas supply infrastructure costs at the end of the reporting period and the
projected investment to be made, the projected infrastructure costs to be
incurred, and the projected costs to be recovered during the next 12-month
reporting period.

F. Costs recovered pursuant to this section shall be in addition to all other
costs that the natural gas utility is permitted to recover and shall not be
considered an offset to other Commission-approved costs of service or revenue
requirements.

HISTORY: 2014, cc. 467, 507.