Virginia Law

A. The following practices are prohibited:

1. Cost shifting or cross subsidies between functionally separate units;

2. Anticompetitive behavior or self-dealing between functionally separate units; and

3. Discriminatory behavior by affiliated entities toward nonaffiliated units.

B. The following provisions apply to (i) the relationships between a local distribution company and any affiliated generation company following the commission's approval of their functional separation and (ii) the commission's oversight of such affiliated companies:

1. The local distribution company shall not give undue preference to an affiliated generation company over the interests of any other generation company. For purposes of this subdivision, "undue preference" means a preference that is reasonably likely to affect adversely the development of effective competition within the Commonwealth.

2. To the extent local distribution companies administer or otherwise furnish fuel supply services, such companies shall provide information related to fuel or fuel supply resources to an affiliated generation company only if it makes such information simultaneously available, through an electronic bulletin board or similar means of public dissemination, to all other generation companies conducting business in Virginia. Nothing in this subdivision shall require any local distribution company to disseminate to all generation companies information requested and deemed competitively sensitive by a generation company and supplied by the local distribution company. This subdivision is not applicable to daily operational data provided by the local distribution company to any generation company in the ordinary course of conducting business.

3. Affiliated local distribution and generation companies shall maintain separate records and accounts for functionally separate units and separate books of account for separate legal entities.

4. Each local distribution company shall operate independently of any affiliated generation company and shall observe the following requirements:

a. Each local distribution company shall establish and implement internal controls to ensure that such company and its employees who are engaged in (i) merchant operations, transmission, or reliability functions of electric generation or natural gas supply systems, or (ii) customer service, sales, marketing, accounting or billing functions do not provide information to an affiliated generation company or to entities that provide similar functions for or on behalf of such an affiliated general company that would give any such affiliated generation company an undue advantage over nonaffiliated generation companies. For purposes of this subdivision, "undue advantage" means an advantage that is reasonably likely to affect adversely the development of effective competition within the Commonwealth.

b. Each local distribution company shall file with the commission, a listing and description of all internal controls implemented pursuant to this section or within 10 days subsequent to any modification of such controls.

5. Local distribution companies shall be subject to the following requirements concerning affiliate transactions:

a. Local distribution companies shall be compensated at the greater of fully distributed cost or market price for all nontariffed services, facilities, and products provided to an affiliated generation company. An affiliated generation company shall be compensated at the lower of fully distributed cost or market price for all nontariffed services, facilities, and products provided to the local distribution company. If market price data are unavailable for purposes of such calculations, nontariffed services, facilities and products shall be compensated at fully distributed costs. In such event, the local distribution company shall document its efforts to determine market price data and its basis for concluding that such price data are unavailable. Notification of a determination of the unavailability of market price data shall be included with the report required in subdivision 5 b of this subsection.

b. Local distribution companies shall file annually with the commission, a report that shall, at a minimum, include: (i) the amount and description of each type of nontariffed service provided to or by an affiliated generation company; (ii) accounts debited or credited; and (iii) the compensation basis used (i.e., market price or fully distributed cost). The local distribution company shall make available to the commission's staff, upon request, the following documentation for each agreement and arrangement where services are provided to or by an affiliated generation company: (i) component costs (i.e., direct or indirect labor, fringe benefits, travel or housing, materials, supplies, indirect miscellaneous expenses, equipment or facilities charges, and overhead); (ii) profit component; and (iii) comparable market values and documentation.

6. Affiliated generation and local distribution companies shall document each occasion that (i) an employee of one becomes an employee of the other or of any transmission provider that services either, or (ii) an employee of any transmission provider that services any such affiliated distribution company or generation company becomes any employee of either. Upon request of the commission's staff, such information shall be filed with the commission identifying each such employment described in this subdivision. This information shall include a listing of each employee transferred and a brief description of each associated position and responsibility.

7. The commission may inspect the books, papers, records and documents of, and require special reports and statements from, every generation company affiliated with a local distribution company regarding) transactions with its local distribution company affiliate. Upon complaint or on its own initiative, the commission may also (i) investigate alleged violations of this chapter, and (ii) seek to resolve any complaints filed with the commission against any such affiliated generation company.