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SENATE BILL NO. 691
AMENDMENT IN THE NATURE OF A SUBSTITUTE
(Proposed by the Senate Committee on Commerce and Labor
on ________________)
(Patron Prior to Substitute--Senator Suetterlein)
A BILL to direct the State Corporation Commission to consider certain requirements in the biennial rate review for a Phase I Utility.
Be it enacted by the General Assembly of Virginia:
1.
§ 1.
A.
That
in conducting its
2026
review of the rates
,
terms
,
and conditions
for the provision of generation and distribution
service
s
by
a Phase I Utility
(the utility)
, as that term is defined in subdivision A 1 of §
56-585.1
of the Code of Virginia,
pursuant to §
56-585.8
of the Code of Virginia
the State Corporation Commission (the Commission) shall
consider
the requirements described in
t
his
act
.
B
.
To avoid unnecessary costs for customers, i
n determining a fair rate of return on common equity pursuant to subsection E of §
56-585.8
of the Code of Virginia, the Commission
may adopt the lowest rate of return on
common
equity within a cost of equity
range that the Commission finds to be fair and reasonable. The Commission may disallow recovery from ratepayers of costs associated with the cost of capital expert testimony or consulting services that rely on methodologies or assumptions that the Commission has previously found
to be
unrea
sonable.
The
Commission
shall
conduct
quantitative
analys
e
s evaluating alternative combinations of return on equity and capital structure and the resulting effects on customer rates and
shall identify the combination that produces the lowest costs for customers
.
C.
In
determining a fair rate of return on common equity
, the Commission shall
also
consider the affordability of the utility's existing rates for service, the relative levels of regulatory risk faced by the utility, and the most recent rates of return approved for the utility's operations by other regulatory agencies with jurisdiction over the utility's operations outside of the Commonwealth.
In
assessing the affordability of the utility
'
s existing rates, the Commission shall consider, among other factors, (i) the number of residential customer service disconnections for nonpayment during the last five years and (ii) the percentage
of
change in the utility
'
s total residential customer per-kilowatt-hour rates during the utility
'
s prior two rate review periods as compared to the percentage
of
change in the Consumer Price Index, as published by the Bureau of Labor Statistics
of the
U.S.
Department of Labor
, during
such
period
s
.
In
assessing the relative level of regulatory risk faced by the utility, the Commission shall consider, among other factors,
the securitization of costs and
the proportion of the utility
'
s total annual revenues that are projected to be recovered through riders or rate adjustment clauses during the
upcoming
biennial review period.
D
. The Commission
staff
shall review the
decision of the utility or its parent company to satisfy its capacity obligations with the regional transmission entity through
a fixed resource requirement alternative
.
The utility shall file a report exp
laining the basis for such decision and comparing the historical costs of the fixed resource requirement alternative with comparable capacity market prices of the regional transmission entity.
E
.
There shall be a rebuttable presumption that the following costs are unreasonable and imprudent: (i) costs associated with the self-scheduling of an electric generation facility
if the marginal operating costs of such facility are higher than the energy market clearing price set by the regional transmission entity for the same hour
and (ii)
the cost of
electricity, including
capacity and energy
,
that the utility has purchased
pursuant to an intercompany power agreement
at a price
that the Commission
staff
determines to be above the market price for comparable
electricit
y
available within the regional transmission entity
.
F
. The Commission may direct the utility to file any supplemental information that the Commission determines is necessary to comply with this act
as part of its rate review proceeding
.
§ 2.
A.
T
o ensure the lowest reasonable costs for customers
and identify opportunities for cost savings
, t
he Commission shall conduct a review of the terms of service and rates for electric transmission by
the utility
. Such rev
iew shall (i) identify the primary drivers of transmission costs in the utility's service territory
;
(ii) determine whether the utility and i
ts parent company maintain systemic and robust evaluation processes of grid-enhancing technologies and other reasonable alternatives to reduce or defer the costs of local and regional transmission projects, including competitive procurement processes; (iii) examine the current cost
allocation
methodologies
for transmission costs used by the utility and the regional transmission entity of whi
ch the utility is a member, including an examination of concerns raised by regulatory bodies and consumer protection agencies regarding such methodologies and an evaluation of the impacts of such
methodologies on costs to customers; and (iv) a description of the Commission's ability to oversee, approve, or deny transmission projects based on criteria includ
ing cost and need, and its coordination with the planning and authority of the regional transmission entity of which the utility is a member.
The Commission shall provide opportunity for public comment as part of such review.
By December 1,
2026, the Commission shall provide a report to the Governor and the Commission on Electric Utility Regulation summarizing its review and providing any recommendations for action
s that may lower the costs of transmission paid by the utility's customers.
B.
To ensure the lowest reasonable costs for customers
and identify opportunities for cost savings
, the Commission shall conduct a review of the utility's efforts to improve system efficiency, resilience, and reliability to address rising costs of severe
weather events. Such review shall (i)
evaluate
the increased risk of severe weather events; (ii) identify best practices employed by electric utilities operating in geographically similar regions; (iii)
identify options for the expansion of energy efficiency programs administered by the utility to enhance system resilience;
and (iv) determine whether additional resources from the Commonwealth are necessary to offset reductions in federal funding, financing, or tax incentives for electric grid
resilience investments.
The Commission shall provide opportunity for public comment as part of such review
. By September 1, 2027, the
Commission shall provide a report to the Governor and the Commission on Electric Utility Regulation summarizing its review and providing any recommendations for actions by the utility, the Commission, and the General Assembly to reduce the costs of severe weather events.
C. The Commission may provide the reports required by this act as part of an annual report prepared by the Commission pursuant to §
56-596
of the Code of Virginia.
2. That the State Corporation Commission (the Commission) staff shall recommend three independent experts with demonstrated experience in utility finance and regulatory economics as candidates to conduct a study on behalf of the Office of the Attorney General (the Office) reviewing the methods used to determine the cost of equity capital for investor-owned utilities. The Office may select one independent expert recommended by the Commission to conduct such study. Such study shall evaluate recent methods, assumptions, and analytical practices employed by expert witnesses retained by such utilities and witnesses in proceedings before the Commission and shall include a review of relevant academic, practitioner, and regulatory literature. The Office shall develop specific recommendations for the Commission and the General Assembly to improve regulatory practices governing the determination of such utilities' cost of equity capital with the objectives of protecting customer affordability and ensuring compliance with all applicable legal requirements. The Office shall provide opportunity for public comment and conduct at least one public workshop as part of such study. The Office shall submit a written report presenting its findings and recommendations to the Commission and the Commission on Electric Utility Regulation by November 1, 2026.