HB 182 — Investor-owned water and water and sewer utilities; ratemaking proceedings, evaluation of utilities.

SESSION ENROLLED VIRGINIA ACTS OF ASSEMBLY ––-- 2022 SESSION CHAPTER E581 An Act to amend and reenact § 56-235.2 of the Code of Virginia, relating to investor-owned water and water and sewer utilities;

R O [H 182] Approved LApril L11, 2022 Be it enacted by the General Assembly of Virginia:

E § 56-235.2.

fDndingsfindings andA.and conclusions to be set forth;

alternative forms of regulation for electric companies.

A.

(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 CommissionCommissiong 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 accHrdanceaccordance with § 56-585.1 for utilities subject to such section;

(1a) the investor-owned public electric 1tilityutility 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;

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 whichricwhich such order is based.

(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 incInincome any ratemaking proceeding for an investor-owned utility authorized to furnish water or waterloss and sewer service initiated after January 1, 2022, the Commission shall evaluate such utility on a stand-alone basis and, for purposes of establishingits anyaffiliates. 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 allany proceedingsratemaking initiatedproceeding afterfor Januaryan 1,investor-owned utility authorized to furnish water or water and sewer service,service initiated after January 1, 2022, the Commission shall conductevaluate such reviewlityutility utilizingon thea samestand-alone costbasis and, for purposes of capitalestablishing any revenue requirement and rates, utilize such utility's actual end-of-test period capital structure adoptedand incost of capital without regard to the utility'scost mostof recentcapital, ratecapital casestructure, inor investments of any other entities with which such ratesutility weremay set,be withoutaffiliated, regardunless tothe anyCommission laterfinds changesbased on evidence in the costrecord that the debt to equity ratio of capitalthe oractual end-of-test period capital structure.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.

pursuantC. to subsection A that will ensure that other customers are not caused to bear increased rates as a result of such special rates.

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.