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.

Public Hearing Information: A public hearing will be scheduled upon request.

Public Comment Deadline: October 2, 2009.

Agency Contact: Cody Walker, Assistant Director, Division of Public Utility Accounting, 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:

The State Corporation Commission has initiated a commission rulemaking required by the 2009 Session of the Virginia General Assembly. Chapter 745 of the 2009 Acts of Assembly, codified as § 56-235.1:1 of the Code of Virginia, directs the commission to establish 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. Thereafter, the commission will, after notice and an opportunity for a hearing, determine whether a utility's plan complies with the regulations. The commission's staff has prepared proposed rules implementing Chapter 745 rulemaking provisions. The proposed rules set forth costs that may be recovered by utilities under standby rates from utility customers operating cogeneration facilities generating renewable energy. The proposed rules also establish requirements for utilities' compliance plans to be submitted within 90 days of the regulations' effective date.

AT RICHMOND, AUGUST 19, 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 FOR NOTICE AND COMMENT

This Order initiates a rulemaking required by HB 2152 as enacted by the 2009 Session of the Virginia General Assembly.¹ HB 2152 directs the Commission to establish a regulatory framework for electric utility stand-by service to "customers that operate a cogeneration facility in the Commonwealth that generates renewable energy, as defined in § 56-576."² The legislation further states 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." Id.

Within 90 days of the effective date of regulations adopted pursuant to HB 2152, each public utility providing electric service in the Commonwealth is required 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.

The Commission's Staff ("Staff") has prepared proposed rules implementing HB 2152's rulemaking provisions ("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 the regulations' effective date. The Proposed Rules are appended hereto.

NOW THE COMMISSION, upon consideration of the foregoing, is of the opinion and finds that a rulemaking proceeding should be initiated for the purpose of establishing rules of the Commission governing rates for stand-by service furnished to certain renewable cogeneration facilities under § 56-235.1:1 of the Code of Virginia. Accordingly, we will direct that notice of the Proposed Rules be given to the public and that interested persons be provided an opportunity to file written comments on, propose modifications or supplements to, or request a hearing on these Proposed Rules.

Accordingly, IT IS ORDERED THAT:

(1) This matter is docketed and assigned Case No. PUE-2009-00080.

(2) The Commission's Division of Information Resources shall forward a copy of this Order to the Registrar of Regulation for publication in the Virginia Register.

(3) On or before September 11, 2009, the Commission's Division of Information Resources shall publish the following notice as classified advertising in newspapers of general circulation throughout the Commonwealth of Virginia.

NOTICE TO THE PUBLIC
OF A PROCEEDING TO ESTABLISH RULES
OF THE STATE CORPORATION COMMISSION
GOVERNING RATES FOR STAND-BY SERVICE
FURNISHED TO CERTAIN RENEWABLE COGENERATION FACILITIES UNDER § 56-235.1:1
OF THE CODE OF VIRGINIA
CASE NO. PUE-2009-00080

The State Corporation Commission ("Commission") has initiated a proceeding in which it proposes to establish Commission rules governing rates for stand-by service furnished to certain renewable cogeneration facilities all as directed by the Virginia General Assembly in HB 2152 enacted in its 2009 Session.

HB 2152 (codified as § 56-235.1:1 of the Code of Virginia) directs the Commission to establish a regulatory framework for electric utility stand-by 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 costs that are identified by electric utilities and determined by the Commission to be related to the provision of 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 regulations adopted by the Commission pursuant to HB 2152, each public utility providing electric service in the Commonwealth is required 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. Thereafter, the Commission will, after notice and opportunity for hearing, determine whether a utility's plan complies with the regulations.

The Commission's Staff has prepared proposed rules implementing the rulemaking directed by HB 2152 ("Proposed Rules"). The Proposed Rules 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 the regulations' effective date. The Commission has, by Order for Notice and Comment, directed that notice of the Proposed Rules (appended to that Order) be given to the public and that interested persons be provided an opportunity to file written comments on, propose modifications or supplements to, or request a hearing on these Proposed Rules.

Interested persons are encouraged to obtain copies of this Commission Order for Notice and Comment and the Proposed Rules. Copies are available for public inspection at the Commission's Document Control Center, Tyler Building, First Floor, 1300 East Main Street, Richmond, Virginia 23219, Monday through Friday, 8:15 a.m. to 5:00 p.m. Copies may also be downloaded from the Commission's website: http://www.scc.virginia.gov/case.

On or before October 2, 2009, any interested person may comment on, or propose modifications or supplements to, or request a hearing on the Proposed Rules by filing an original and fifteen (15) copies of such comments with the Clerk of the Commission, c/o Document Control Center, P.O. Box 2118, Richmond, Virginia 23218-2118, making reference in such comments to Case No. PUE-2009-00080. Any request for hearing shall state with specificity why the issues raised in the request for hearing cannot be adequately addressed in written comments. If a sufficient request for hearing is not received, the Commission may consider the matter and enter an order based upon the papers filed in this proceeding. Interested persons desiring to submit comments electronically may do so by following the instructions available at the Commission's website: http://www.scc.virginia.gov/case.

All filings in this proceeding shall be directed to the Clerk of the Commission, c/o Document Control Center, P.O. Box 2118, Richmond, Virginia 23218-2118, making reference in such comments to Case No. PUE-2009-00080.

STATE CORPORATION COMMISSION

(4) On or before October 2, 2009, any interested person may comment on, propose modifications or supplements to, or request a hearing on the Proposed Rules by filing an original and fifteen (15) copies of such comments with the Clerk of the Commission, c/o Document Control Center, P.O. Box 2118, Richmond, Virginia 23218-2118, making reference in such comments to Case No. PUE-2009-00080. Any request for hearing shall state with specificity why the issues raised in the request for hearing cannot be adequately addressed in written comments. If a sufficient request for hearing is not received, the Commission may consider the matter and enter an order based upon the papers filed herein. Interested persons desiring to submit comments electronically may do so by following the instructions available at the Commission's website: http://www.scc.virginia.gov/case.

(5) The Commission Staff may 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.

(6) This matter is continued for further Orders of the Commission.

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 Va. Code § 56-235.1:1.

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 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 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 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 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 utility fixed costs and nonfuel-related operating and maintenance expenses associated with investments in generating units and 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], 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.