HB 3068 Electric utility service; advances scheduled expiration of capped rate period.
Clarke N. Hogan | all patrons    ...    notes
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Summary as enacted with Governor's Recommendation: (all summaries)
Electric utility regulation. Advances the scheduled expiration of the capped rate period from December 31, 2010, to December 31, 2008, establishes a new mechanism for regulating the rates of investor-owned electric utilities, and limits the ability of most consumers to purchase electric generation service from competing suppliers. The ratemaking procedure requires the State Corporation Commission (SCC) to conduct a rate case for investor-owned utilities in 2009; thereafter, the SCC will review each utility's rates, terms, and conditions using two 12-month test periods ending December 31, 2010, though the SCC is given discretion to stagger the years in which it conducts such reviews.  In these biennial reviews the SCC will determine fair rates of return on common equity for the utility's generation and distribution services, using any methodology it finds consistent with the public interest.  However, the return shall not be set: (i) lower than the average of the returns on common equity reported to the Securities and Exchange Commission for the three most recent annual periods by a peer group of a majority of the other vertically-integrated investor-owned electric utilities in the southeastern United States with a Moody's bond rating of at least Baa or (ii) higher than 300 basis points above that average.  Increases in the rate of return are capped based on the rate of increases in the Consumer Price Index (CPI). The SCC may increase or decrease the rate of return by a Performance Incentive of up to 100 basis points based on the generating plant performance, customer service, operations and efficiency of a utility. In setting the return on equity, the SCC is required to strive to maintain costs of retail electric energy that are cost competitive with costs of retail electric energy provided by the other peer group investor-owned electric utilities. If the combined rate of return on common equity earned is no more than one half of one percent above or below this rate of return, the return shall not be considered either excessive or insufficient. Each utility may seek rate adjustment clauses to recover (i) costs for transmission services provided by PJM Interconnection under applicable rates, terms and conditions approved by the Federal Energy Regulatory Commission (FERC) and costs of FERC-approved demand response programs; (ii) deferred environmental and reliability costs authorized under prior capped rate rules; (iii) costs of providing incentives for the utility to design and operate fair and effective demand-management, conservation, energy efficiency, and load management programs; (iv) costs of participation in the new renewable energy portfolio standard program; and (v) costs of projects that the SCC finds to be necessary to comply with state or federal environmental laws or regulations applicable to generation facilities used to serve the utility’s native load obligations, which costs may include the enhanced rate of return for new base load generation if the project would reduce the need for construction of new generation facilities by enabling the continued operation of existing generation facilities. A utility may also apply a rate adjustment clause for recovery from customers of the costs of (i) a coal-fired generation facility that utilizes Virginia coal and is located in the coalfield region of the Commonwealth, (ii) one or more other generation facilities, or (iii) one or more major unit modifications of generation facilities, to meet the utility’s projected native load obligations. The utility may recover an enhanced rate of return on common equity associated with the type of project, which may include projects utilizing nuclear power, renewable technologies, carbon capture facilities, combined cycle combustion turbines, and conventional coal facilities. The period over which the enhanced rate of return may be collected depends on the type of facility, as determined by the SCC within specified ranges. The SCC’s final order on any petition filed for any of the rate adjustment clauses shall be entered within a specified period after the filing of the petition, and any rate increase required by the clause shall go into effect within 60 days or upon the end of capped rates, whichever is later. The SCC is required to consider petitions for rate adjustment clauses on a stand-alone basis, without regard to the other costs or revenues of the utility. The enhanced returns are subject to revocation if permits are not applied for or construction is not commenced by specified dates. If the SCC determines in a biennial review that a utility underearned by at least 50 basis points on its generation and distribution services, excluding provisions for new generation facilities, the SCC is required to increase the utility’s rates to a level necessary to provide the opportunity to fully recover the costs of providing the utility’s services and to earn such fair rate of return. If the SCC determines in a biennial review that a utility earned more than 50 basis points above a fair combined rate of return on its generation and distribution services, excluding provisions for new generation facilities, the SCC is required to direct that 60 percent of such overearnings be credited to customers' bills over a period of between 6 and 12 months, to be determined by the SCC. In addition, if the SCC determines that the utility's earnings exceed this limit for two consecutive biennial review periods, it shall also order reductions to the utility’s rates, provided that rates may not be reduced to levels below what would provide the utility with the opportunity to fully recover its costs and to earn a fair combined rate of return on its generation and distribution services, excluding provisions for new generation facilities. If the Commission determines that and the utility's total aggregate regulated rates would exceed the annual increases in CPI, when compared to the utility's rates as determined in the biennial review for a base period (either the utility's first test period or the most recent test period for which credits are applied to customers' bills), the Commission shall direct, unless such action would not be in the public interest, that any or all of such overearnings be credited to customers' bills. An electric utility that demonstrates that it has a reasonable expectation of achieving 12 percent of its base year electric energy sales from certain renewable energy sources during calendar year 2022 may participate in a renewable energy portfolio standard program. Under the program, a participating utility that meets specified percentage goals for sales of eligible renewable energy is eligible for a Performance Incentive that increases the fair combined rate of return on common equity for the utility by a 50 basis points through the third succeeding biennial review if it continues to meet the RPS Goals. It is also entitled to an enhanced rate of return on the costs associated with the construction of renewable energy generation facilities used to provide the renewable energy. Participating utilities may recover their incremental costs of meeting the RPS Goals from customers other than large industrial customers purchasing electricity at large general service rates and at primary or transmission voltage. Double credits will be provided for energy from solar or wind sources. Specific provisions address the use of certain wood products for projects qualifying to meet the renewable energy goals. With regard to the ability of customers to purchase generation services from competing providers, the measure provides that after the capped rate period ends, only customers whose annual demand exceeds five megawatts will be permitted to shop.  However, two or more individual nonresidential retail customers may aggregate their demand for the purpose of meeting the five megawatt threshold if the Commission finds that neither their incumbent electric utility nor its retail customers will be adversely affected and that the demand of the customers who are allowed to buy power from competitors will not exceed one percent of the utility’s peak annual load.  Aggregating customers may petition the SCC to aggregate their supply, even if their aggregated load exceeds 1% of the utility’s demand, if the aggregation would not harm other utility customers or the utility. The ability of large customers to purchase electric power from a licensed competitive supplier is subject to the condition that they cannot thereafter purchase electricity from their incumbent utility without giving 5 years’ notice, with certain exceptions; however, the 5-year notice requirement does not apply if the SCC finds that waiving it would not harm other utility customers or the utility. Municipalities are allowed to aggregate the electric energy load of their governmental operations for the purpose of negotiating rates and terms, and conditions of service from the electric utility certificated by the Commission to serve the territory in which such operations are located. Other provisions (i) require the deferral over the period 2008-2010 of a portion of Dominion's 2007 fuel factor increase; (ii) authorize electric utilities to seek approval of optional performance-based regulation methodologies to the same extent as gas utilities; (iii) require that 75 percent of the margins from off-system sales be applied to the utility's fuel expenses unless the SCC finds by clear and convincing evidence that a smaller percentage is in the public interest; (iv) require rates of distribution electric cooperatives to be regulated pursuant to the provisions of Chapters 9.1 and 10 of Title 56, subject to the ability to increase rates without SCC approval by not more than five percent over three years and to make certain other changes to terms and conditions of service; (v) provide that the measure does not modify or impair the terms, unless otherwise modified by an order of the SCC, of any SCC order approving the divestiture of generation assets; (vi) direct the SCC to complete by December 15, 2007, a proceeding to develop a plan to identify and implement demand side management, conservation, energy efficiency, load management, real-time pricing, and consumer education programs in order to achieve by 2022 a stated goal of reducing the consumption of electric energy by retail customers by ten percent of the amount consumed by such customers in 2006; (vii) direct the Office of the Attorney General to identify issues of the act that impede its implementation; (viii) direct the Department of Taxation is directed to conduct an analysis of the potential implications of the provisions of this measure on the system of taxation; (ix) ensure that utilities use competitive bidding in purchasing and construction practices; (x) increase the cap on power that a utility may be required to purchase from eligible customer-generators under the net energy metering program from 0.1% to one percent of the utility's adjusted peal load; and (xi) allow competitive service providers to offer 100% renewable power to retail customers in any area of the Commonwealth where the customer's incumbent utility does not offer such a tariff. Provisions of the Electric Utility Restructuring Act that exempt the generation of electric energy from regulation, prohibit public service corporations from exercising the power of eminent domain to acquire property for generation facilities, authorize the collection of wires charges, and authorize competition for metering and billing services are repealed. This bill is identical to SB 1416.

Full text:
01/16/07  House: Presented and ordered printed 070106324  pdf | impact statement
02/02/07  House: Committee substitute printed 070274324-H1  pdf | impact statement
02/05/07  House: Floor substitute printed 070279428-H2 (Morgan)  pdf
02/19/07  Senate: Committee substitute printed 070299324-S1  pdf | impact statement
03/12/07  House: Bill text as passed House and Senate (HB3068ER)  pdf | impact statement
03/27/07  House: Governor's substitute printed 070308129-H3  pdf
04/04/07  House: Reenrolled bill text (HB3068ER2)  pdf
04/11/07  Governor: Acts of Assembly Chapter text (CHAP0888)  pdf

Governor's recommendation

01/16/07  House: Presented and ordered printed 070106324
01/16/07  House: Referred to Committee on Commerce and Labor
02/01/07  House: Reported from Commerce and Labor with substitute (18-Y 1-N)
02/02/07  House: Committee substitute printed 070274324-H1
02/03/07  House: Read first time
02/05/07  House: Read second time
02/05/07  House: Floor substitute printed 070279428-H2 (Morgan)
02/05/07  House: Substitute by Delegate Morgan rejected 070279428-H2
02/05/07  House: Committee substitute agreed to 070274324-H1
02/05/07  House: Motion to pass by amendments by Delegate Marshall, R.G. agreed to
02/05/07  House: Pending question ordered
02/05/07  House: Engrossed by House - committee substitute HB3068H1
02/06/07  House: Read third time
02/06/07  House: Pending question ordered
02/06/07  House: Passed House (85-Y 13-N)
02/06/07  House: VOTE: PASSAGE (85-Y 13-N)
02/06/07  House: Communicated to Senate
02/07/07  Senate: Constitutional reading dispensed
02/07/07  Senate: Referred to Committee on Commerce and Labor
02/19/07  Senate: Committee substitute printed 070299324-S1
02/19/07  Senate: Reported from Commerce and Labor with substitute (15-Y 0-N)
02/20/07  Senate: Constitutional reading dispensed (40-Y 0-N)
02/20/07  Senate: VOTE: (40-Y 0-N)
02/21/07  Senate: Read third time
02/21/07  Senate: Reading of substitute waived
02/21/07  Senate: Committee substitute agreed to 070299324-S1
02/21/07  Senate: Committee substitute reconsidered 070299324-S1 (38-Y 1-N 1-A)
02/21/07  Senate: VOTE: (38-Y 1-N 1-A)
02/21/07  Senate: Passed by for the day
02/22/07  Senate: Read third time
02/22/07  Senate: Passed by temporarily
02/22/07  Senate: Reading of substitute waived
02/22/07  Senate: Committee substitute agreed to 070299324-S1
02/22/07  Senate: Engrossed by Senate - committee substitute HB3068S1
02/22/07  Senate: Passed Senate with substitute (35-Y 3-N 1-A)
02/22/07  Senate: VOTE: (35-Y 3-N 1-A)
02/22/07  House: Placed on Calendar
02/22/07  House: Senate substitute agreed to by House (77-Y 13-N)
02/22/07  House: VOTE: ADOPTION (77-Y 13-N)
03/12/07  House: Enrolled
03/12/07  House: Bill text as passed House and Senate (HB3068ER)
03/12/07  Senate: Signed by President
03/13/07  House: Signed by Speaker
03/26/07  House: Governor's recommendation received by House
03/27/07  House: Governor's substitute printed 070308129-H3
04/03/07  House: Placed on Calendar
04/04/07  House: House concurred in Governor's recommendation (82-Y 16-N)
04/04/07  House: VOTE: ADOPTION (82-Y 16-N)
04/04/07  House: Reconsideration of Governor's recommendation agreed to
04/04/07  House: House concurred in Governor's recommendation (84-Y 16-N)
04/04/07  House: VOTE: ADOPTION #2 (84-Y 16-N)
04/04/07  Senate: Senate concurred in Governor's recommendation (36-Y 2-N 1-A)
04/04/07  Governor: Governor's recommendation adopted
04/04/07  House: Reenrolled
04/04/07  House: Reenrolled bill text (HB3068ER2)
04/04/07  House: Signed by Speaker as reenrolled
04/04/07  Senate: Signed by President as reenrolled
04/04/07  House: Enacted, Chapter 888 (effective 7/1/07)
04/11/07  Governor: Acts of Assembly Chapter text (CHAP0888)