STATE CORPORATION COMMISSION

AT RICHMOND, MARCH 5, 2012

COMMONWEALTH OF VIRGINIA, ex rel.

STATE CORPORATION COMMISSION

CASE NO. PUE-2012-00021

Ex Parte: In re: In the matter of adopting
rules and regulations for consideration of the
Performance Incentive authorized by
§ 56-585.1 A 2 c of the Code of Virginia

ORDER INITIATING RULEMAKING PROCEEDING

Section 56-585.1 A 2 c of the Code of Virginia ("Code") establishes a Performance Incentive for investor-owned incumbent electric utilities which authorizes the State Corporation Commission ("Commission") to increase or decrease a utility's authorized return on equity for superior or inferior performance when providing regulated electric service in the Commonwealth. Specifically, under the statute:

The Commission may increase or decrease [an investor-owned incumbent electric utility's] combined rate of return by up to 100 basis points based on the generating plant performance, customer service, and operating efficiency of a utility, as compared to nationally recognized standards determined by the Commission to be appropriate for such purposes, such action being referred to in this section as a Performance Incentive. If the Commission adopts such Performance Incentive, it shall remain in effect without change until the next biennial review for such utility is concluded and shall not be modified pursuant to any provision of the remainder of this subsection.

Accordingly, the Commission has the discretion under § 56-585.1 A 2 c of the Code:

(1) to apply or not apply a Performance Incentive; and (2) to increase or decrease an investor-owned incumbent electric utility's authorized return on common equity based on generating plant performance, customer service, and operating efficiency.

Since the enactment of this statute by the Virginia General Assembly in 2007,¹ Virginia Electric and Power Company ("DVP") and Appalachian Power Company ("APCo") have filed applications with the Commission requesting an increase in their authorized return on common equity in recognition of their generating plant performance, customer service, and operating efficiency pursuant to the Performance Incentive authorized by § 56-585.1 A 2 c of the Code.² However, since the statute is silent on what specific performance metrics or nationally recognized standards should apply when determining whether a positive or negative Performance Incentive should be awarded, the parties participating in DVP's and APCo's recent rate proceedings have expressed widely divergent views on what specific performance metrics or nationally recognized standards should apply when determining whether an investor-owned incumbent electric utility's authorized return on equity should be increased or decreased under the statute. For example, in the Final Order in DVP's recent biennial review proceeding, Case No. PUE-2011-00027, we noted there was a lack of consensus among the parties on what specific performance metrics or nationally recognized standards should apply when determining whether to issue a positive or negative Performance Incentive for generating plant performance, customer service, and operating efficiency. Therein we stated that:

the Company did not propose any specific metrics for evaluating operating efficiency, and that the participants in this case expressed divergent views on some of the nationally recognized standards that should be applied to generating plant performance, customer service, and operating efficiency under [§ 56-585.1 A 2 c of the Code]. In this regard, we will forthwith initiate a rulemaking proceeding for further development of workable criteria for the implementation of this statute in future biennial review proceedings.³

NOW THE COMMISSION, having considered the Performance Incentive authorized by § 56-585.1 A 2 c of the Code and our Final Order in Case No. PUE-2011-00027, is of the opinion and finds that a rulemaking proceeding should be initiated to develop the specific performance metrics and nationally recognized standards the Commission should consider when determining whether a positive or negative Performance Incentive should be applied, as authorized by § 56-585.1 A 2 c of the Code. In this regard, we will direct our Staff to solicit comments from stakeholders and schedule a meeting or meetings with stakeholders, if necessary, having an interest in the Performance Incentive authorized by § 56-585.1 A 2 c of the Code. Initially, we will deem those parties participating in DVP's and APCo's recent base rate proceedings to be stakeholders in this rulemaking proceeding. However, this proceeding also shall be open to any other interested persons who desire to file comments or otherwise participate in this case. We expect our Staff to develop, with appropriate input from stakeholders and other interested persons, the specific performance metrics and nationally recognized standards that should be filed when an investor-owned incumbent electric utility requests, or when a party supports, an increase or decrease in such utility's authorized return on equity under § 56-585.1 A 2 c of the Code.  We further direct our Staff to draft proposed rules and regulations relative to Performance Incentive filing requirements and submit the same to the Commission for further consideration after consultation with stakeholders and other interested persons.

When developing the proposed rules and regulations, we find that a mechanical, formulaic approach which limits the Commission's discretion when considering a positive or negative Performance Incentive should not be included in the proposed rules. In other words, when the specific performance metrics and nationally recognized standards are proposed, a utility's ability to meet or fail to meet a specific performance metric or nationally recognized standard should not automatically result in a specific basis point increase or decrease in an investor-owned incumbent electric utility's authorized return on equity. Rather, we expect the proposed rules and regulations to preserve the Commission's discretion to award a positive or negative Performance Incentive depending on the evidence presented in each case. Finally, we will set a date of September 5, 2012, for the filing of the Staff's proposed rules and regulations relating to the Performance Incentive.

Accordingly, IT IS ORDERED THAT:

(1) This matter is docketed and assigned Case No. PUE-2012-00021.

(2) The Commission's Divisions of Energy Regulation and Utility Accounting and Finance shall prepare and file proposed rules and regulations for consideration of the Performance Incentive authorized by § 56-585.1 A 2 c of the Code, with appropriate input from stakeholders and other interested persons as described herein.

(3) This matter is continued generally pending further order of the Commission.

AN ATTESTED COPY hereof shall be sent to the Clerk of the Commission to all persons on the official service lists in Case Nos. PUE-2009-00019, PUE-2009-00030, PUE-2011-00027, and PUE-2011-00037. The Service Lists are available from the Clerk of the Commission, c/o Document Control Center, 1300 East Main Street, First Floor, Tyler Building, Richmond, Virginia 23219. A copy shall also be sent to the Commission's Office of General Counsel and Divisions of Energy Regulation and Utility Accounting and Finance.

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¹ Virginia Acts of Assembly, 2007 Reconvened Session, identical Chapters 888 and 933 (approved April 4, 2007; effective July 1, 2007).

² See Application of Virginia Electric and Power Company, For a 2009 statutory review of the rates, terms and conditions for the provision of generation, distribution and transmission services pursuant to § 56-585.1 A of the Code of Virginia, Case No. PUE-2009-00019, Application (Mar. 31, 2009) (requesting a 100 basis point Performance Incentive increase under § 56-585.1 A 2 c of the Code); Application of Appalachian Power Company, For a 2009 statutory review of the rates, terms and conditions for the provision of generation, distribution and transmission services pursuant to § 56-585.1 A of the Code of Virginia, Case No. PUE-2009-00030, Application (July 15, 2009) (requesting an 85 basis point Performance Incentive increase under § 56-585.1 A 2 c of the Code); Application of Virginia Electric and Power Company, For a 2011 biennial review of the rates, terms and conditions for the provision of generation, distribution and transmission services pursuant to § 56-585.1 A of the Code, Case No. PUE-2011-00027, Application (Mar. 31, 2011) (requesting a 100 basis point Performance Incentive increase under § 56-585.1 A 2 c of the Code). 

³ Application of Virginia Electric and Power Company, For a 2011 biennial review of the rates, terms and conditions for the provision of generation, distribution, and transmission services pursuant to § 56-585.1 A of the Code of Virginia, Case No. PUE-2011-00027, Doc. Cont. Cen. No. 111160062, Final Order at 23 (Nov. 30, 2011).

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March 28, 2012

Administrative Letter 2012-03

To: All Insurers Licensed in Virginia and Other Interested Parties

Re: Implementation of Search Options for Rate and Form Submissions and Establishment of Additional Filing Requirements

In accordance with our ongoing efforts to educate and inform Virginia's insurance consumers, we will soon launch a new website function for viewing information about rate and form submissions on file with the Bureau of Insurance (the Bureau). The purpose of this administrative letter is to apprise all carriers and interested parties of the availability of this new function, and to notify carriers of additional filing requirements that will be necessary in order to display clear and succinct information through this new website application. We anticipate this new functionality, which will consist of two separate search options described below, to be available on or around May 1, 2012. Additional filing requirements described further in this letter are effective immediately.

The following two search options, which will be accessed through the link also shown below, will be provided to users of this new website function: www.scc.virginia.gov/boi/SERFFInquiry/

Search Option 1 - Public Access to General Information about Rate and Form Submissions:

General information about submissions filed with the Bureau will be available through this search option, but direct access to the rates or forms will not be included.  It will still be necessary to contact the Bureau for copies of publicly available rates and forms. 

Search Option 2 - Public Access to PPACA Forms and Rates and Associated Supporting Documentation:

Rates and forms associated with accident and sickness insurance products that are subject to the requirements of the federal Patient Protection Affordable Care Act (PPACA), along with related supporting documentation, will be available for viewing through this option.

Additional Filing Requirements

In order to ensure that there is meaningful information available to the public, additional filing requirements have been established for the Filing Description section in SERFF. Any SERFF submission that does not include a properly completed Filing Description will be rejected. Filings submitted via mail must also contain this information or the submission will be rejected.  The required information is listed below:

• All submissions filed with the Life and Health Division or the Property and Casualty Division must provide a brief summary of the filing, including a statement describing whether the materials in the filing are new, revisions of existing materials or are additional materials that will be used with previously filed or approved rates or forms in Virginia.

• All rate submissions filed with the Life and Health Division involving a rate change must include (i) a statement regarding whether the change is an increase, decrease, or revision of former rates, (ii) the percentage amount(s) of the change(s), (iii) the number of affected policyholders, and (iv) the reason for the proposed change(s).

• All form submissions filed with the Life and Health Division must include (i) a description of each form (i.e., form name, title, and edition date) and the intended use of the form, (ii) identification of any change in benefits and premiums which occurs while the form is in force with a reference to the contract provisions which describe the benefit change, (iii) to the extent practicable, the SERFF or State Tracking number of the approved form that the new form revises or replaces, or the SERFF or State Tracking number of the approved form(s) with which the new forms will be used, and (iv) a statement as to whether any other regulatory body has withdrawn approval of the form because the form contains one or more provisions that were deemed to be misleading, deceptive or contrary to public policy.

Questions regarding this letter and the filing requirements for submissions to the Life and Health Division may be directed to: Bob Grissom, Chief Insurance Market Examiner, Life and Health Division, (804) 371-9152, bob.grissom@scc.virginia.gov.

Questions regarding this letter and the filing requirements for submissions to the Property and Casualty Division may be directed to: Rebecca Nichols, CPCU, CIC, CIE, AIC, CCP, ALMI, Principal Insurance Market Examiner, Property and Casualty Division, (804) 371-9331, rebecca.nichols@scc.virginia.gov.

Questions regarding the functionality of the search options may be directed to: Trish Todd, CPCU, AIE, AIC, Senior Insurance Market Examiner, Automated Systems, (804) 371-9195, trish.todd@scc.virginia.gov.

/s/ Jacqueline K. Cunningham
Commissioner of Insurance

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April 2, 2012

Administrative Letter 2012-04

To: All Insurance Institutions Licensed in Virginia and All Interested Parties

Re: Revised Gramm-Leach Bliley Act Privacy Notices; Withdrawal of Administrative Letter 2011-06

NOTE: EACH INSURANCE INSTITUTION RECEIVING THIS ADMINISTRATIVE LETTER IS INSTRUCTED TO MAKE ALL OF ITS CURRENTLY APPOINTED AGENTS AND ALL NEWLY APPOINTED AGENTS AWARE OF THIS ADMINISTRATIVE LETTER.

The purpose of this administrative letter is to advise Virginia agents and insurance institutions, as defined in § 38.2-602 of the Code of Virginia, that changes have been made in the Federal Model Privacy Forms (Model Privacy Forms) that were attached to Administrative Letter 2011-06. The attached revised Model Privacy Forms remove the requirement to insert Virginia specific information in the Other Important Information box. Removing this requirement allows insurance institutions and agents who do business in multiple states to use a uniform notice and still meet the requirements described in §§ 38.2-604.1, 38.2-612.1, 38.2-613, and 38.2-613.2 of the Code of Virginia (Virginia Privacy Notice). Although the Model Privacy Forms are not required to be used, insurance institutions and agents who elect to use the attached forms in accordance with this administrative letter will meet the requirements for compliance with the Gramm-Leach-Bliley Act (GLBA) set forth in the Virginia Privacy Notice. Due to the changes in the attached Model Privacy Forms, Administrative Letter 2011-06 is hereby withdrawn.

As required by the Financial Services Regulatory Relief Act of 2006, eight federal agencies¹ adopted the simplified Model Privacy Forms. Insurance institutions and agents that do business in the Commonwealth may use the new Model Privacy Forms or continue to use other types of privacy notices that differ from the Model Privacy Forms to meet the notice content requirements of the Virginia Privacy Notice. The full and accurate completion of the Model Privacy Forms in accordance with the Virginia Instructions and this administrative letter constitutes compliance with the notice content requirements of the Virginia Privacy Notice. This safe harbor is limited to the content and format of the Model Privacy Forms. The requirements of § 38.2-604.1 as to when the Virginia Privacy Notice must be given to an applicant or insured are not changed by this administrative letter.

Use of Model Privacy Form

Insurance institutions and agents may use the attached Model Privacy Forms, consistent with the Virginia instructions and the instructions set forth in this administrative letter, as a safe harbor of compliance with the requirements of the Virginia Privacy Notice. The Model Privacy Forms may be used at the option of an insurance institution, including a group of insurance institutions, agents, or financial companies that use a common privacy notice to meet the content requirements of the Virginia Privacy Notice. GLBA and the Virginia Privacy Notice requirements apply to life insurance, accident and sickness insurance, and property and casualty insurance primarily for personal, family, or household purposes.

The Model Privacy Forms are standardized forms, including page layout, content, format, style, pagination, and shading.  Insurance institutions and agents seeking to obtain the safe harbor through use of the Model Privacy Forms may modify them only as described in the Virginia Instructions, as well as those in this administrative letter. Furthermore, the safe harbor only applies to the use of the Model Privacy Forms if the insurance institution or agent accurately completes the form and otherwise meets the requirements of the Virginia instructions and those set forth in this administrative letter.

Under § 38.2-604.1 of the Code of Virginia, if an insurance institution or agent only discloses nonpublic personal information to affiliated and non-affiliated third parties as authorized under § 38.2-613 of the Code of Virginia, the insurance institution or agent is not required to list those exceptions in the initial or annual Virginia Privacy Notice. When describing the categories of parties to whom these disclosures are made in the Model Privacy Forms, it is sufficient for the insurance institution or agent to state that it makes disclosures to other affiliated and non-affiliated third parties for their everyday business purposes.

Use of Other Types of Privacy Notices

Use of the attached Model Privacy Forms is not required.  Insurance institutions and agents may continue to use their existing privacy notices that meet the requirements of the Virginia Privacy Notice.

Safe Harbor Not Applicable to the Notice Required by § 38.2-604

Insurance institutions and agents should be aware that while the accurate use of the Model Privacy Forms will provide the insurance institution or agent with a safe harbor of compliance with the Virginia Privacy Notice, the Model Privacy Forms will not provide a safe harbor for the notice required by § 38.2-604 of the Code of Virginia, the Notice of Information Collection and Disclosure Practices. Consequently, insurance institutions and agents are reminded that they are still required to provide the notice set forth in § 38.2-604 of the Code of Virginia.

Questions regarding this letter may be directed to: Property & Casualty Division, Katie Johnson, CIC, AIE, Principal Insurance Market Examiner, (804) 371-9688, katie.johnson@scc.virginia.gov, Life & Health Division, Ann Colley, Principal Insurance Analyst, (804) 371-9813, ann.colley@scc.virginia.gov.

______________________________

¹ Office of the Comptroller of the Currency; Treasury (OCC); Board of Governors of the Federal Reserve System (Board); Federal Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, Treasury (OTS); National Credit Union Administration (NCUA); Federal Trade Commission (FTC); Commodity Futures Trading Commission (CFTC); and Securities and Exchange Commission (SEC).

/s/ Jacqueline K. Cunningham
Commissioner of Insurance

Attachment - Model Privacy Form

There are four versions of the Model Privacy Form on the following pages:

•  Version 1:  Model Form with No Opt-out.

• Version 2:  Model Form with Opt-out by Telephone and/or Online.

•  Version 3:  Model with Mail-in Opt-out Form.

•  Version 4:  Optional Mail-in Form.