CODE OF VIRGINIA

RECOVERY OF ELIGIBLE SAFETY ACTIVITY COSTS; ADMINISTRATION; PROCEDURE (§
56-235.10)

A. As used in this section:”Eligible safety activity costs” means a
natural gas utility’s operation and maintenance expenditures that are
related to (i) the development, implementation, or execution of the natural gas
utility’s integrity management program developed in conformance with 49
CFR Part 192, Subpart P — Gas Distribution Pipeline Integrity Management
or (ii) programs or measures implemented to comply with regulations issued by
the Commission or a federal regulatory body with jurisdiction over pipeline
safety.”Natural gas utility” means any investor-owned public service
company engaged in the business of furnishing natural gas service to the public.

B. In order to enhance pipeline safety in the Commonwealth, when the
requirements of this section have been satisfied, a natural gas utility shall be
permitted to recover eligible safety activity costs incurred on and after
January 1, 2013, in future rates as provided in this section. The natural gas
utility shall maintain the burden of demonstrating that the eligible safety
activity costs have been reasonably and prudently incurred and that the criteria
of this section have been satisfied.

C. A natural gas utility may account for eligible safety activity costs to be
recovered pursuant to this section as deferred costs. The accumulated
unrecovered balance of eligible safety activity costs deferred pursuant to this
section shall not exceed four percent of the natural gas utility’s net
plant investment that was utilized in establishing or confirming base rates in
the natural gas utility’s most recent rate case using the cost of service
methodology set forth in § 56-235.2 or performance-based regulation plan
authorized by § 56-235.6. The eligible safety activity costs deferred hereunder
shall be included in new base rates and charges instituted pursuant to a
Commission order establishing or confirming customer rates in a rate case using
the cost of service methodology set forth in § 56-235.2 or a performance-based
regulation plan authorized by § 56-235.6. Such deferred costs shall not be
subject to write-off or write-down by the Commission in an earnings test filing
made pursuant to Commission rules governing utility rate increases and annual
informational filings except as provided in this subsection. The natural gas
utility shall be deemed to have recovered eligible safety activity costs to the
extent that the return on equity earned by the natural gas utility in an
earnings test filing for a given year, after consideration of the treatment of
regulatory assets, is in excess of the mid-point of the rate of return on equity
range specified or confirmed in the natural gas utility’s most recent rate
case or performance-based regulation plan. Notwithstanding the foregoing, in the
event that a utility’s base rates include eligible safety activity costs,
the utility shall only be permitted to defer the level of eligible safety
activity costs that are in excess of the level reflected in base rates.

D. Any natural gas utility that has on its books eligible safety activity costs
deferred pursuant to this section shall include an earnings test filing as part
of any application for an annual informational filing or rate proceeding.

HISTORY: 2013, cc. 281, 406.