                                 CODE OF VIRGINIA

BIOGAS SUPPLY INFRASTRUCTURE PROJECTS (§ 56-625)

A. As used in this section:
			&#8220;Biogas&#8221; has the same meaning as set forth in § 56-248.1.
			&#8220;Biogas facilities&#8221; means biogas reserves; production facilities,
including equipment required to prepare the biogas for use; gathering of,
transmission of, and, within the natural gas utility&#8217;s certificated
service territory, any distribution pipelines necessary to deliver the reserves;
and aboveground and underground storage used in the delivery of gas to existing
natural gas transmission pipelines or distribution systems.
			&#8220;Biogas supply investment plan&#8221; or &#8220;plan&#8221; means a
plan filed by a natural gas utility that identifies proposed eligible biogas
supply infrastructure projects and its development of those projects with or
without a third party.
			&#8220;Eligible biogas supply infrastructure costs&#8221; includes the
investment in eligible biogas supply infrastructure projects and the following:

   1. Return on the investment. In calculating the return on the investment, the
   Commission shall use the natural gas utility&#8217;s regulatory capital
   structure in effect during the construction period of the eligible biogas
   supply infrastructure project. The regulatory capital structure shall be
   calculated utilizing the weighted average cost of capital, including the cost
   of debt and the cost of equity, plus an additional 100 basis points added to
   the cost of equity. If the natural gas utility&#8217;s cost of capital
   underlying the base rates in effect at the time its proposed eligible biogas
   supply infrastructure project is filed has not been changed by order of the
   Commission within the preceding five years, the Commission may require the
   natural gas utility to file an updated weighted average cost of capital, and
   the natural gas utility may propose an updated weighted average cost of
   capital. The natural gas utility may recover the external costs associated
   with establishing its updated weighted average cost of capital through a
   biogas supply rider. Such external costs shall include legal costs and
   consultant costs;

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

   3. Operating and maintenance expenses. These expenses include the amount of
   operating and maintenance expenses utilized in biogas collection; 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 the appropriate asset class. The
   natural gas utility shall propose a basis for recovering for the depreciation
   or depletion of investments in other asset classes in the biogas supply
   investment plan, including investments in biogas reserves that will deplete
   based on their useful life or of associated facilities that may be retired
   upon depletion of biogas reserves;

   5. Property tax and any other taxes or government fees associated with
   production and transmission of biogas; and

   6. Carrying costs on the over-recovery or under-recovery of the eligible
   biogas 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.
   				&#8220;Eligible biogas supply infrastructure projects&#8221; or
   &#8220;projects&#8221; means capital investments in biogas facilities that,
   alone or in combination with other projects or strategies, offer reasonably
   anticipated benefits to customers and markets, which benefits mean (i) a
   reduction in methane or carbon dioxide equivalent emissions from the biogas
   facility, (ii) an additional source of supply for the natural gas utility, and
   (iii) a beneficial use for the biogas, and which benefits do not result in the
   gas delivered to customers failing to meet the natural gas utility&#8217;s
   pipeline quality standards.
   				&#8220;Investment&#8221; means actual costs incurred on eligible biogas
   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 &#8220;eligible biogas supply
   infrastructure costs.&#8221;
   				&#8220;Natural gas utility&#8221; means an investor-owned public service
   company engaged in the business of furnishing natural gas service to the
   public.

B. A natural gas utility shall have the right to recover eligible biogas supply
infrastructure costs on an ongoing basis through the gas cost component of the
natural gas 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 biogas supply
infrastructure projects; provide for an estimated schedule for recovery of the
related eligible biogas supply infrastructure costs through the gas cost
component of the natural gas 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 biogas supply infrastructure costs; and
demonstrate that the plan is in the public interest with due consideration to
the reduction in methane or carbon dioxide equivalent emissions and the addition
of a supply source for the natural gas utility or a combination thereof. No
project shall provide an annual volume of biogas that exceeds three percent of
the natural gas utility&#8217;s annual firm sales demand, and no combination of
projects shall provide an annual volume of biogas that exceeds 15 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. The Commission shall approve such a plan upon a finding that it (i) is
in the public interest, (ii) will result in a decrease of methane or carbon
dioxide equivalent emissions, and (iii) will result in rates that are just and
reasonable, after notice and an opportunity for a 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 natural gas utility with an option to receive the
biogas or sell the biogas at market prices. A natural gas utility proposing this
option as part of its plan shall propose how any revenue gains from the sale of
the biogas 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 biogas supply investment 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 natural gas 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 a plan filed pursuant to the provisions of this section.

E. A natural gas utility with an approved biogas supply investment plan shall
annually file a report of the eligible biogas supply infrastructure investment
made, the eligible biogas supply infrastructure costs incurred and the amount of
such costs recovered, the volume of biogas delivered to customers or sold to
third parties during the 12-month reporting period, and an analysis of the price
of biogas 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
natural gas utility&#8217;s right to recover all eligible biogas 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 biogas
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: 2022, cc. 728, 759.