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SENATE BILL NO. 761
AMENDMENT IN THE NATURE OF A SUBSTITUTE
(Proposed by the Senate Committee on Commerce and Labor
on ________________)
(Patron Prior to Substitute--Senator Jones)
A BILL to amend and reenact §
56-235.2
of the Code of Virginia and to amend the Code of Virginia by adding a section numbered
56-235.2:1
, relating to electric and gas utilities; rates and charges for service; political influence activity; promotional advertising; annual report.
Be it enacted by the General Assembly of Virginia:
1. That §
56-235.2
of the Code of Virginia is amended and reenacted and that the Code of Virginia is amended by adding a section numbered
56-235.2:1
as follows:
§
56-235.2
. All rates, tolls, etc., to be just and reasonable to jurisdictional customers; findings and conclusions to be set forth; alternative forms of regulation for electric companies.
A. Any rate, toll, charge or schedule of any public utility operating in this Commonwealth shall be considered to be just and reasonable only if: (1) the public utility has demonstrated that such rates, tolls, charges or schedules in the aggregate provide revenues not in excess of the aggregate actual costs incurred by the public utility in serving customers within the jurisdiction of the Commission, including such normalization for nonrecurring costs and annualized adjustments for future costs as the Commission finds reasonably can be predicted to occur during the rate year, and a fair return on the public utility's rate base used to serve those jurisdictional customers, which return shall be calculated in accordance with §
56-585.1
for utilities subject to such section;
(1a)
(2)
the investor-owned public electric utility has demonstrated that no part of such rates, tolls, charges or schedules includes costs for
advertisement, except for advertisements either required by law or rule or regulation, or for advertisements which solely promote the public interest, conservation or more efficient use of energy
prom
otional adverti
sing
or political influence activities, as
those terms are
defined in § 56-
235.2:1
; and
(2)
(3)
the public utility has demonstrated that such rates, tolls, charges or schedules contain reasonable classifications of customers. Notwithstanding §
56-234
, the Commission may approve, either in the context of or apart from a rate proceeding after notice to all affected parties and hearing, special rates, contracts or incentives to individual customers or classes of customers where it finds such measures are in the public interest. Such special charges shall not be limited by the provisions of §
56-235.4
. In determining costs of service, the Commission may use the test year method of estimating revenue needs. In any Commission order establishing a fair and reasonable rate of return for an investor-owned gas, telephone or electric public utility, the Commission shall set forth the findings of fact and conclusions of law upon which such order is based.
For ratemaking purposes, the Commission shall determine the federal and state income tax costs for investor-owned water, gas, or electric utility that is part of a publicly-traded, consolidated group as follows: (i) such utility's apportioned state income tax costs shall be calculated according to the applicable statutory rate, as if the utility had not filed a consolidated return with its affiliates, and (ii) such utility's federal income tax costs shall be calculated according to the applicable federal income tax rate and shall exclude any consolidated tax liability or benefit adjustments originating from any taxable income or loss of its affiliates.
In any ratemaking proceeding for an investor-owned utility authorized to furnish water or water and sewer service initiated after January 1, 2022, the Commission shall evaluate such utility on a stand-alone basis and, for purposes of establishing any revenue requirement and rates, utilize such utility's actual end-of-test period capital structure and cost of capital without regard to the cost of capital, capital structure, or investments of any other entities with which such utility may be affiliated, unless the Commission finds based on evidence in the record that the debt to equity ratio of the actual end-of-test period capital structure of such utility is unreasonable, in which case the Commission may utilize a debt to equity ratio that it finds to be reasonable. In all proceedings initiated after January 1, 2022, in which the Commission reviews the rates and associated earnings of an investor-owned utility authorized to furnish water or water and sewer service, the Commission shall conduct such review utilizing the same cost of capital and capital structure adopted in the utility's most recent rate case in which such rates were set, without regard to any later changes in the cost of capital or capital structure.
B. The Commission shall, before approving special rates, contracts, incentives or other alternative regulatory plans under subsection A, ensure that such action (i) protects the public interest, (ii) will not unreasonably prejudice or disadvantage any customer or class of customers, and (iii) will not jeopardize the continuation of reliable electric service.
C. After notice and public hearing, the Commission shall issue guidelines for special rates adopted pursuant to subsection A that will ensure that other customers are not caused to bear increased rates as a result of such special rates.
§
56-235.2
:1.
Promotional advertising and political influence activity; annual reporting requir
ed.
A. As used in this section:
"Political influence activity" means
:
1. An activity for the purpose of directly or indirectly influencing any of the following: (
i
)
lobbying, as that term is defined in
§
2.2-419
;
(
ii
) the election, recall, appointment, or removal of a public official or the adoption of initiatives or referenda; (
iii
) public opinion with respect to legislation, regu
lations, ordinances, elections, referenda, or rate setting mechanisms of an electric or gas utility; or (
i
v
) decisions of federal, state, regional, or local public officials; or
2. Research, prepar
ation, or any other activity undertaken for the purpose of supporting any activities specified in subdivision 1.
"Political influence activity" does not include:
1. An activity that is directly and necessarily related to appearances
before
regulatory or other governmental bodies in connection with the utility's existing or proposed operations of the utility's regulated system
;
2
. An activity that is directly related to a Commission-approved energy efficiency program or other Commission-approved public purpose program
in w
hich the
utility participates;
3
. An activity
that responds to a request by a legislative committee, the Commission, or a government agency for technical information from the utility; or
4. An activity required by applicable federal or state statute, or by order of regulatory authority, and undertaken for the purpose of satisfying that statutory or regulatory requirement.
"Promotional advertising" means
written, online, video, or audio communications that primarily build the public image of a utility and that is not required by the Commission, including communications about actions that a utility may take in the future. "Promotional advertising" does not include
(i) public messages that the utility is directed to publish by law or regulations; (ii) public messages that provide information on safety measures, emergency conditions, the conservation of
energy, rates, utility programs and services approved by the Commission, or service interruptions, and that do not primarily build the public image of the utility; or (iii) public messages providing necessary information to customers about specific actions the customers can take for their safety.
B.
No
investor-owned
electric or gas utility under the jurisdiction of the Commission for the approval of rates and charges shall recover through its retail rates and charges for service any
direct or indirect costs associated with the following
, except as otherwise permitted by law
:
1.
Membership dues, sponsorship fees, or monetary contributions paid to a business
or
industry trade group or association if such business,
trade
group
,
or association engages in political influence activities or promotional advertising on behalf of its utility members;
2. Charitable contributions;
3. Political influence activities;
4. Promotional advertising;
5.
Entertainment or gifts;
6
.
Compensation paid to an employee
for
any portion of the employee's time in a given year
that
was
spent on lobbying, legislative action, or other political influence activities;
7
. Any expenses related to products, services, or programs not regulated
by the Commission, including any marketing, administrative, or customer service
-
related expenses;
or
8
. Penalties or fines issued against the utility
, except as otherwise permitted by law.
C. No later than
April
1, 202
7
, an
d
annually thereaft
er, each electric and gas utility subject to the requirements of this section shall file with the Commission, in a form and manner prescribed by the Commission, an annual report that includes the following information concerning each activity or expense described in sub
section B:
1. The total costs to the utility, separately delineated for each expense or activity described in subsection B;
2. An itemized list of the amounts billed or allocated to the utility by third
-
party vendors for any expenses or activities described in subsection B, including billing dates, payees, and explanations of each expenditure's purpose;
3
. The job title and salary of any employee of the utility who performed work associated with political influence activities,
along with the number of hours attributable to such work by the employee
; and
4. A list of all divisions, departments, or other organizational groups within the utility that performed political influence activities.
D.
The Commission may impose a fine on a utility subject to the requirements of this section in
an
amount
equivalent to
the amount of costs
the utility attempts
to
recover improperly in
violation of subsection B. Any such fines collected by the Commission shall be directed toward low-income payment assistance programs for such utility.
E.
The Commission shall make the annual reports provided by utilities under subse
ction
C
publicly available online, provided that the Commission may redact or exclude any information as necessary to comply with relevant law or protect
the physical
security
of the grid or the personal safety of utility employees
.