CODE OF VIRGINIA

CONSERVATION AND RATEMAKING EFFICIENCY PLANS (§ 56-602)

A. Notwithstanding any provision of law to the contrary, each natural gas
utility shall have the option to file a conservation and ratemaking efficiency
plan as provided in this chapter. Such a plan may include one or more
residential, small commercial, or small general service classes, but shall not
apply to large commercial or large industrial classes of customers. Such plan
shall include: (i) a normalization component that removes the effect of weather
from the determination of conservation and energy efficiency results; (ii) a
decoupling mechanism; (iii) one or more cost-effective conservation and energy
efficiency programs; (iv) provisions to address the needs of low-income or
low-usage residential customers; and (v) provisions to ensure that the rates and
service to non-participating classes of customers are not adversely impacted.
Such plan may also include provisions for phased or targeted implementation of
rate or tariff design changes, if any, or conservation and energy efficiency
programs. The Commission may approve such a plan after such notice and
opportunity for hearing as the Commission may prescribe, subject to the
provisions of this chapter. Nothing in this subsection shall prevent a natural
gas utility from amending a conservation and ratemaking efficiency plan by
amending, altering, supplementing, or deleting one or more conservation or
energy efficiency programs.

B. The Commission shall approve or deny, within 180 days, a natural gas
utility’s initial application for any revenue-neutral conservation and
ratemaking efficiency plan that allocates annual per-customer fixed costs on an
intra-class basis in reliance upon a revenue study or class cost of service
study supporting the rates in effect at the time the plan is filed. A plan filed
pursuant to this subsection shall not require the filing of rate case schedules.
The Commission shall approve or deny, within 120 days, a natural gas
utility’s application to amend a previously approved plan. The Commission
shall approve such a plan or amendment if it finds that the plan’s or
amendment’s proposed decoupling mechanism is revenue-neutral and is
otherwise consistent with this chapter. 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. The time period for Commission
review provided for in this subsection shall not apply if the conservation and
ratemaking efficiency plan is filed in conjunction with 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.

C. The Commission shall approve or deny, within 270 days, a natural gas
utility’s initial application for any revenue-neutral conservation and
ratemaking efficiency plan that allocates per-customer fixed costs on an
intra-class basis according to a class cost of service study filed with the
plan, when such plan is filed in conjunction with 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. The Commission shall approve or deny, within 120
days, a natural gas utility’s application to amend a plan previously
approved pursuant to this subsection. The Commission shall approve such a plan
or amendment if it finds that the plan’s or amendment’s proposed
decoupling mechanism is revenue-neutral, is consistent with this chapter, and is
otherwise in the public interest, including any findings required by § 56-235.2
or 56-235.6. If the Commission denies such a plan or amendment, it shall set
forth with specificity the reasons for its denial and the utility shall have the
right to refile, without prejudice, an amended plan or amendment within 60 days;
the Commission shall thereafter have 60 days to approve or deny the amended plan
or amendment.

D. The Commission shall allow any natural gas utility that implements a
conservation and ratemaking efficiency plan under this chapter to recover, on a
timely basis and through its regulated rates charged to its classes of customers
participating in the plan, its entire incremental costs associated with
cost-effective conservation and energy efficiency programs that are designed to
encourage the reduction of annualized, weather-normalized natural gas
consumption per customer. Ratemaking treatment may include placing appropriate
capital expenditures for technology and program costs in the respective
utility’s rate base, deferral of such interim incremental costs (which
costs would not be subject to an earnings test), or recovering the
utility’s technology and program costs through another ratemaking
methodology approved by the Commission, such as a tracking mechanism. Such
conservation and energy efficiency programs may also be jointly conducted or
co-sponsored with other utilities, federal, state or local government agencies,
nonprofit organizations, trade associations, homebuilders, and other for-profit
vendors. Incremental costs recovered pursuant to this subsection shall be in
addition to all other costs that the utility is permitted to recover, shall not
be considered an offset to other Commission-approved costs of service or revenue
requirements, and shall not be included in any computation relative to a
performance-based regulation plan revenue sharing mechanism.

E. The Commission shall require every natural gas utility operating under a
conservation and ratemaking efficiency plan approved pursuant to this chapter to
file annual reports showing the year over year weather-normalized use of natural
gas on an average customer basis, by customer class, as well as the incremental,
independently verified net economic benefits created by the utility’s
cost-effective conservation and energy-efficiency programs during the previous
year.

F. The Commission shall grant recovery, on an annual basis, of a
performance-based incentive for delivering conservation and energy efficiency
benefits, which shall be included in the utility’s respective purchased
gas adjustment mechanism. The incentive shall be calculated as a reasonable
share of the verified net economic benefits created by the utility’s
cost-effective conservation and energy efficiency programs, and may be recovered
over a period of years equal to the payback period or discounted to net present
value and recovered in the first year. In structuring this incentive, the
Commission shall create a reasonable opportunity for a utility to earn up to a
15 percent share of such independently verified net economic benefits upon
meeting target levels of such benefits set forth in a plan approved by the
Commission. The level of net economic benefits to be used as the basis for such
calculation shall be the sum of customer savings less utility costs recovered
through subsection D, measured over the number of years of the payback period,
rounded up to the next highest year. The incentives authorized by this
subsection shall be in addition to any other revenue requirements or rates
established pursuant to § 56-235.2 or 56-235.6 and independent of any
computation of shared revenues under an approved performance-based regulation
plan.

G. Unless the context clearly indicates otherwise, nothing in this chapter shall
impair the Commission’s authority under § 56-234.2, 56-235.2, or
56-235.6; provided, however, that notwithstanding any other provision of law,
the Commission shall not reduce an authorized return on common equity or other
measure of utility profit as a result of the implementation of a natural gas
conservation and ratemaking efficiency plan pursuant to this chapter.

HISTORY: 2008, c. 639.