Title of Regulation: 20VAC5-317. Rates for Standby Service Furnished to Certain Renewable Cogeneration Facilities Pursuant to § 56-235.1:1 of the Code of Virginia (adding 20VAC5-317-10 through 20VAC5-317-50).

Statutory Authority: §§ 12.1-13 and 56-235.1:1 of the Code of Virginia.

Effective Date: January 1, 2010.

Agency Contact: Cody Walker, Assistant Director, Energy Division, State Corporation Commission, P.O. Box 1197, Richmond, VA 23218, telephone (804) 371-9611, FAX (804) 371-9350, or email cody.walker@scc.virginia.gov.

Summary:

As directed by Chapter 745 of the 2009 Acts of Assembly, codified as § 56-235.1:1 of the Code of Virginia, the regulation establishes a regulatory framework for electric utility standby service to customers that operate cogeneration facilities in the Commonwealth generating renewable energy, as defined in § 56-576 of the Code of Virginia. The legislation further states that such regulations must allow electric utilities to recover all of the costs that are identified by these utilities and determined by the commission to be related to the provision of standby service. Chapter 745 specifically states that these costs include, but are not limited to, the costs of transformers and other equipment required to provide standby service and the costs of capacity and generation, including, but not limited to, fuel costs. Chapter 745 also directs that within 90 days of the effective date of regulations adopted pursuant to this legislation, each public utility providing electric service in the Commonwealth must submit to the commission a plan setting forth how the utility will comply with the regulations if it does not already have standby provisions approved by the commission that comply with the regulations. The regulation (i) identifies costs that may be recovered by utilities under standby rates from utility customers operating cogeneration facilities generating renewable energy and (ii) establishes requirements for utilities' compliance plans to be submitted within 90 days of the regulation's effective date.

Changes to the proposed regulation are principally clarifying in nature and include establishing an April 1, 2010, deadline for utilities to submit their plans for compliance with § 56-235.1:1 of the Code of Virginia and this regulation.

AT RICHMOND, DECEMBER 2, 2009

COMMONWEALTH OF VIRGINIA

At the relation of the

STATE CORPORATION COMMISSION

CASE NO. PUE-2009-00080

Ex Parte: In the matter of establishing
rules of the State Corporation Commission
governing rates for stand-by service furnished
to certain renewable cogeneration facilities

ORDER PROMULGATING REGULATIONS

This Order promulgates State Corporation Commission ("Commission") rules required by HB 2152 as enacted by the 2009 Session of the Virginia General Assembly.¹ HB 2152 directs the Commission in § 56-235.1:1 of the Code of Virginia ("Code") (a new statutory provision enacted in HB 2152) to establish a regulatory framework for electric utility stand‑by service provided by electric utilities to "customers that operate a cogeneration facility in the Commonwealth that generates renewable energy, as defined in § 56-576." Section 56-235.1:1 of the Code further requires that such regulations must "allow the electric utility to recover all of the costs that are identified by the electric utility and determined by the Commission to be related to the provision of the stand-by service, including but not limited to the costs of transformers and other equipment required to provide stand-by service and the costs of capacity and generation, including but not limited to fuel costs."

Within 90 days of the effective date of the regulations promulgated under this Order, § 56-235.1:1 of the Code requires each public utility providing electric service in the Commonwealth to "submit a plan setting forth how the utility will comply with the regulations if it does not already have stand-by provisions approved by the Commission that comply with the regulations." Id. Thereafter, the Commission will, after notice and an opportunity for a hearing, "determine whether a utility's plan complies with the regulations." Id.

On August 19, 2009, the Commission issued an order establishing this docket ("August 19, 2009 Order"). Attached to that order were proposed rules prepared by the Commission's Staff ("Staff") implementing the rulemaking requirements of § 56-235.1:1 of the Code ("Proposed Rules"). The Proposed Rules, inter alia, set forth costs that may be recovered, under stand-by rates, by utilities from their customers operating cogeneration facilities generating renewable energy. The Proposed Rules also establish requirements for utilities' compliance plans to be submitted within 90 days of such rules' effective date.

The Commission's August 19, 2009 Order directed that on or before September 11, 2009, the Commission's Division of Information Resources should secure publication of notice concerning this proceeding in newspapers of general circulation throughout the Commonwealth of Virginia. The August 19, 2009 Order also permitted interested persons to comment on, propose modifications or supplements to, or request a hearing on the Proposed Rules on or before October 2, 2009. The Order further permitted the Staff to file a report with the Clerk of the Commission on or before October 28, 2009, concerning comments submitted to the Commission by interested persons addressing the Proposed Rules.

Comments concerning the Proposed Rules were received from Virginia Electric and Power Company d/b/a Dominion Virginia Power ("Dominion" or "Dominion Virginia Power"); Appalachian Power Company ("Appalachian"); and certain Virginia electric cooperatives² filing jointly with the Virginia, Maryland, and Delaware Association of Electric Cooperatives (collectively, "Virginia Cooperatives" or "Cooperatives"). No party requested a hearing, and the Staff did not file comments in this proceeding.

The comments received from Dominion Virginia Power,³ Appalachian, and the Virginia Cooperatives were principally supportive of the Proposed Rules, proposed only editorial changes for purposes of clarification, or described how these rules would or should be implemented.

Dominion's comments, for example, indicated that company's support for the Proposed Rules and offered no suggested changes or modifications thereto. Dominion did state, however, that stand-by service encompassed by this rulemaking can be accommodated under most, if not all, of Dominion's current rate schedules. Dominion Comments at 5. Thus, Dominion asserts that "[g]iven the Company's currently approved tariffs and those proposed in the 2009 Rate Case Filing [(Case No. PUE-2009-00019)], most customers will have alternative rate options for securing stand-by service and will have a choice of selecting the rate schedule that best fits their individual stand-by service requirements." Id. In this regard, Dominion states regarding 20 VAC 5-317-20 in the Proposed Rules that this rule "should not be interpreted as requiring a utility to provide rates specifically designed for stand-by service to customers that operate cogeneration facilities that generate renewable energy, where other tariffs properly apply to such customers." Id. at 6.

Appalachian states in its comments that it supports the Proposed Rules, but has offered changes it characterizes as minor to "ensure the clear applicability of the Rules." Appalachian Comments at 1. These suggested changes include substituting the term "customer charges" for "metering charges" in Subdivision 1 of 20 VAC 5-317-30 of the Proposed Rules (id.); modifying Subdivision 2 of 20 VAC 5-317-30 concerning its scope to specify that utilities' recoverable distribution service charges are those associated with "owning and operating" distribution facilities (id. at 2); and making minor clarifying edits in Subdivision 4 of 20 VAC 5-317-30 (id.).

The comments filed by the Virginia Cooperatives state that "[h]istorically, the Cooperatives have negotiated stand-by rates on an individual case basis to recover the costs of installing and maintaining the distribution facilities necessary to serve the customer and providing as-needed generation supply service. We believe that the Proposed Rules would continue to allow this approach." Cooperatives Comments at 4. These comments also provided illustrations of this approach as experienced by three Virginia cooperatives. Id. at 4-5. The Virginia Cooperatives further state that "[t]he Proposed Rules appear to endorse the notion that the generator to whom stand-by service is supplied is responsible for the increased costs associated with that service, and the Cooperatives support the Proposed Rules."⁴ Id. at 6.

NOW UPON CONSIDERATION of the comments filed herein, we find that we should adopt and promulgate the rules appended hereto as Attachment A, governing rates for stand-by service furnished to certain renewable cogeneration facilities, such rulemaking having been directed by § 56-235.1:1 of the Code enacted in Chapter 745 of the 2009 Acts of Assembly.

The Commission notes, first of all, that the Proposed Rules were broadly supported by the parties filing comments in this docket: Dominion Virginia Power, Appalachian, and the Virginia Cooperatives. Second, we will adopt—either verbatim or in substance—nearly all of the suggested editorial changes to the Proposed Rules by Appalachian. They clarify the final rules we approve in this docket. However, we will not adopt the amendment proposed by Appalachian to Subdivision 2 of 20 VAC 5-317-30 (concerning its scope to specify that utilities' recoverable distribution service charges are those associated with "owning and operating" distribution facilities); the language in that subdivision is sufficiently clear without those modifiers, and it is that language we adopt in our final rules.

We will also address Dominion's concerns, described above, that 20 VAC 5-317-20 in the Proposed Rules should not be interpreted as requiring a utility "to provide rates specifically designed for stand-by service to customers that operate cogeneration facilities that generate renewable energy, where other tariffs properly apply to such customers." Specifically, Dominion states that its existing tariffs or those proposed in its pending rate case (PUE-2009-00019) are or will be sufficient to the task. The Commission would observe that Dominion will be required to submit a compliance plan under these rules (20 VAC 5-317-40) within 90 days of their promulgation in which Dominion may seek this Commission's ruling, inter alia, that such tariffs are sufficient to satisfy the requirements of § 56-235.1:1 of the Code and the Commission's rules implementing this new statute that we adopt herein. Similarly, the Virginia Cooperatives may submit for Commission review under 20 VAC 5-317-40, their current practice of negotiating stand-by rates "on an individual case basis" to recover their costs associated with providing that service—if that is their proposed compliance plan under these rules.

Put simply, the rules we adopt in this order (implementing § 56-235.1:1 of the Code) require that within 90 days of the effective date of these rules, electric utilities subject to their provisions must submit compliance plans to the Commission for review and approval, subject to notice and an opportunity for hearing. It is at that time that the Commission will "determine whether a utility's plan complies with the regulations." Section 56-235.1:1 B of the Code. Consequently, we do not reach in this order whether Dominion's or the Cooperative's intended compliance strategies—evidently previewed in their comments filed in this docket—satisfy the requirements of § 56-235.1:1 of the Code and the regulations we adopt herein. That determination must await their filings required by 20 VAC 5-317-40 of these regulations.

Accordingly, IT IS ORDERED THAT:

(1) We hereby adopt and promulgate the Commission's rules governing Rates for Stand-by Service Furnished to Certain Renewable Cogeneration Facilities, pursuant to § 56-235.1:1 of the Code of Virginia to be set forth in a new Chapter 317 (20 VAC 5-317-10 et seq.) in Title 20 of the Virginia Administrative Code, appended hereto as Attachment A, all to become effective on January 1, 2010.

(2) A copy of this Order and the rules adopted herein shall be promptly forwarded for publication in the Virginia Register of Regulations.

(3) This case is dismissed and the papers filed herein shall be placed in the file for end causes.

AN ATTESTED COPY hereof shall be sent by the Clerk of the Commission to: Pamela A. Walker, Deputy General Counsel, Dominion Virginia Power, Law Department PH‑1, P.O. Box 26532, Richmond, Virginia 23261-6532; Barry L. Thomas, Director, Regulatory Affairs, Appalachian Power Company, 1051 East Cary Street, Suite 702, Richmond, Virginia 23219; Kendrick R. Riggs, Esquire, Stoll Keenon Ogden, 2000 PNC Plaza, 500 West Jefferson Street, Louisville, Kentucky 40202; Jeffery P. Trout, Esquire, Allegheny Power, 800 Cabin Hill Road, Greensburg, Pennsylvania 15601; C. Meade Browder, Jr., Senior Assistant Attorney General, Division of Consumer Counsel, Office of Attorney General, 900 East Main Street, 2nd Floor, Richmond, Virginia 23219; all Virginia electric cooperatives as listed in Appendix A attached hereto; and a copy shall be delivered to the Commission's Office of General Counsel and Division of Energy Regulation.

¹ Chapter 745 of the 2009 Acts of Assembly.

² A & N Electric Cooperative, BARC Electric Cooperative, Central Virginia Electric Cooperative; Community Electric Cooperative, Craig-Botetourt Electric Cooperative, Mecklenburg Electric Cooperative, Northern Neck Electric Cooperative, Northern Virginia Electric Cooperative, Prince George Electric Cooperative, Rappahannock Electric Cooperative, Shenandoah Valley Electric Cooperative, and Southside Electric Cooperative.

³ Dominion requested the opportunity to file reply comments in order to respond to the comments of other parties and to those of the Staff. However, in light of the comments filed by the other parties supporting the Proposed Rules, and the Staff's election to not file comments in this proceeding, we find that reply comments are not necessary.

⁴ The Cooperatives elaborate on generator responsibility by stating that "[o]ftentimes, a cooperative's interest in protecting its other customers results in (i) the stand-by service customer being required to make a CIAC payment, and (ii) necessarily high monthly rates to ensure cost recovery on both the distribution and supply sides of the utility's operations." Cooperatives' Comments at 6.

CHAPTER 317
RATES FOR STANDBY SERVICE FURNISHED TO CERTAIN RENEWABLE COGENERATION FACILITIES PURSUANT TO § 56-235.1:1 OF THE CODE OF VIRGINIA

20VAC5-317-10. Applicability and scope.

This chapter is promulgated pursuant to the provisions of § 56-235.1:1 of the Code of Virginia. It is applicable to (i) Virginia's electric utilities ("utilities" or "utility") subject to the provisions of § 56-235.1:1 [ , ] and (ii) utilities' customers that operate cogeneration facilities that generate renewable energy, as that term is defined in § 56-576 of the Code of Virginia, and desire to obtain standby service from utilities.

20VAC5-317-20. Duty to provide rate for [ stand-by standby ] service.

Every utility subject to the provisions of § 56-235.1:1 of the Code of Virginia shall provide a rate for standby service to customers in its certificated territory that operate a cogeneration facility in the Commonwealth that generates renewable energy as defined in § 56-576 of the Code of Virginia.

20VAC5-317-30. Costs to be recovered in [ stand-by standby ] rates.

Costs to be recovered in utility rates for standby service provided to cogeneration facilities generating renewable energy shall include, but are not limited to, the following:

1. [ Metering Customer ] charges [ , including, but not limited to, metering charges ] to recover utility costs associated with metering facilities, meter reading (where appropriate), processing, communication equipment (where appropriate), and administration.

2. Distribution service charges to recover utility costs associated with distribution facilities including [ , but not limited to, ] the costs of transformers and other distribution equipment necessary to provide standby service.

3. Transmission service charges to recover utility costs (i) for transmission services provided to the utility by the regional transmission entity of which the utility is a member, as determined under applicable rates, terms, and conditions approved by the Federal Energy Regulatory Commission [ , ] and (ii) charged to the utility that are associated with demand response programs approved by the Federal Energy Regulatory Commission and administered by the regional transmission entity of which the utility is a member.

4. Electricity supply service charges to recover [ (i) ] utility fixed costs and nonfuel-related operating and maintenance expenses associated with investments in generating units and [ (ii) ] capacity payments associated with power purchases including, but not limited to, a return on the undepreciated generating unit investments, associated income taxes, depreciation expenses, operations and maintenance expenses, and property taxes.

5. Fuel charges to recover utility fuel costs including purchased power costs.

20VAC5-317-40. Initial implementation of standby rates.

On or before [ within 90 days of the effective date of these regulations April 1, 2010 ] , each utility shall submit to the State Corporation Commission (commission) a plan setting forth the utility's plan for compliance with this chapter. A utility may submit its existing standby provisions as its proposed plan for compliance with this chapter. Thereafter, following notice and an opportunity for hearing, the commission will determine whether a utility's plan complies with this chapter.

20VAC5-317-50. Waiver.

The commission may waive any or all parts of this chapter for good cause shown.