Virginia Law

NATURAL GAS PRIORITIES AND RULES

This plan sets forth the priorities which shall apply whenever any jurisdictional natural gas utility operating in Virginia has insufficient gas available to meet the end-use needs of its customers during a gas supply emergency. An "emergency," as contemplated within these rules, includes, but is not limited to, an unforeseen, or unplanned event resulting in a shortage of gas supplies or an inability to deliver gas such that human needs requirements are threatened. When it becomes necessary for any jurisdictional natural gas utility to curtail gas deliveries to its customers during such an emergency, the following priorities will apply beginning with the highest number and proceeding in reverse order to Priority 1. All customers within a priority class, or all customers within any subclass thereof, which is subject to curtailment shall be curtailed to the extent practicable on an equal basis. If a customer's end-use requirements come under two or more priorities, then such requirements must be treated separately when applying this schedule of priorities. Transportation customers will have equivalent end-use priorities as sales customers.

PRIORITIES FOR SERVICE

Priority 1 - Customer requirements for residential service, and requirements for human needs without alternate fuel capability (AFC).

Priority 2 - Customer requirements under 1500 Mcf per peak month without AFC.

Priority 3 - Customer requirements over 1500 Mcf per peak month without AFC.

Priority 4 - Electric generation requirements for essential electric human needs that do not have available supplies of alternate fuels or alternate sources of electricity.

Priority 5 - Customer requirements for human needs with AFC.

Priority 6 - Requirements of customers with AFC that do not come under any other priority.

Priority 7 - Requirements for boiler fuel.

RULES

A. Each jurisdictional natural gas utility shall develop a plan for curtailment of gas sales which complies with the schedule of priorities and rules adopted herein. To the extent necessary, such plan may provide for subclasses under each of the priority classes. Each curtailment plan shall be filed as a part of the jurisdictional natural gas utility's tariffs.

B. Each jurisdictional natural gas utility shall be responsible for the administration of its curtailment plan, including the determination of Alternate Fuel Capability (AFC).

C. Interruptible gas service may be furnished, in management's discretion, as available gas supplies permit. However, the Commission may terminate, or alter, the sale of gas to interruptible customers if it is determined that such sales unreasonably affect the reliability of supplies of gas for priority end- uses.

D. In the event of an unforeseen emergency of limited duration, each jurisdictional natural gas utility experiencing the emergency shall:

1. Encourage maximum conservation by all customers.

2. Use its own emergency facilities to the limit of their capability.

3. Consider establishing a temporary moratorium against the connection of new customers.

4. If the Commission finds that a jurisdictional natural gas utility cannot supply all of its customers natural gas because an emergency exists, the Commission may, by order, establish a temporary moratorium on the connection of new customers if such moratorium is necessary to minimize the adverse impact on the public health and safety and to facilitate restoration of normal service to all customers at the earliest time practicable.

E. 1. In the event of regional emergencies, natural gas may be temporarily redistributed among the jurisdictional natural gas utilities operating within the State to assure continued service for essential human needs.

2. Transfers of gas will be directed, if necessary, by the Commission pursuant to § 56-249.1 of the Code of Virginia which reads in pertinent part:

The Commission may require a public utility to transfer to another public utility of like business, gas, water or electricity, whenever the public health, welfare or safety shall be found to so require; provided, however, that the transferring public utility shall be compensated, at a rate fixed by the Commission, for all such deliveries by the receiving public utility.

3. The Commission may direct that customers in certain areas having usage under Priorities 5 and 6 use alternate fuel, even though there is gas available, when such gas is required for public health, welfare, and safety or for higher priority uses in other areas.

4. Each jurisdictional natural gas utility shall designate an individual to serve on a coordination committee to facilitate transfers of gas between companies operating within the Commonwealth. These individuals should be familiar with their respective company s sources of supply and have the authority to make commitments necessary to redistribute available gas supplies.

5. The Director of the Commission's Division of Energy Regulation, or his designee, shall be responsible for preparing and maintaining a list of the designated personnel described in subdivision D(4) and have the authority to call for meetings of the coordination committee to consider requests for assistance. The Director may also invite parties other than gas companies to join the coordination committee.

6. In responding to requests for a redistribution of natural gas, the coordination committee will seek to:

a. Ascertain the extent, nature and circumstance of the emergency.

b. Determine which companies operating within the Commonwealth might be able to assist by a temporary redistribution of some portion of their supplies.

c. Place natural gas utilities requesting assistance into direct communication with companies providing assistance to determine the most effective transfer procedure.

7. In the event that emergency assistance is requested of any jurisdictional natural gas utilities operating within the State of Virginia, it shall be the responsibility of the jurisdictional natural gas utility from whom assistance is required to consider carefully the request and use its aid as is warranted and possible under the circumstances without jeopardizing the integrity of its own service. As this plan is one of voluntary mutual aid without binding and legal commitment, adherence to this precept is essential to successful implementation.

8. The jurisdictional natural gas utility requesting emergency gas and the utility providing such aid shall obtain Commission approval of the price for the emergency gas furnished prior to the actual exchange thereof.

F. Each jurisdictional natural gas utility shall be authorized to request that transportation customers allow the use of their customer-owned gas to supply higher priority end-usages. Should transportation customers refuse to allow the use of their gas during emergencies and the ability of the gas utility to serve essential human needs is threatened, a jurisdictional natural gas utility shall delay delivery of customer-owned gas and utilize that gas to serve essential human needs when significant relief would be provided by the use of such gas, until such time as the supply threat to essential human needs has been resolved. The natural gas utility shall notify the Commission that it has delayed transportation gas deliveries under this section without the customer's agreement.

G. Transportation customers shall be compensated for the use of transportation gas voluntarily supplied or otherwise used in an emergency to assist a jurisdictional natural gas utility. The level of compensation should be determined through negotiation. Compensation should be limited to reasonable costs associated with alternate fuels or the price difference associated with resupplying gas to the customer. Compensation is not intended to reflect damages that may result from the use of customer-owned gas. Transportation customers or jurisdictional natural gas utilities may request that the State Corporation Commission waive the foregoing compensation limit for the purpose of negotiating contingency emergency supply agreements. Any such agreement must be approved by the Commission. Jurisdictional natural gas utilities may specify the terms of compensation in tariffs, approved pursuant to § 56-237 et seq. of the Code of Virginia.

H. Transportation customers receiving gas supplies from a jurisdictional natural gas utility pursuant to the enactment of curtailment priorities shall be charged a rate equivalent to the gas utility's incremental cost of gas, adjusted for unaccounted for losses and gross receipts taxes plus the gas utility's normal transportation rate.

I. Each jurisdictional natural gas utility shall be authorized to grant exemptions to the priorities and rules adopted herein, and the filed tariffs conforming therewith, for a period not to exceed 10 days. Such exemptions shall be granted, in management's discretion, to avoid undue hardship.

A written report of all requests for an exemption and each exemption granted by a jurisdictional natural gas utility shall be filed with the Director or a designated member of the Commission's Division of Energy Regulation.

J. A gas customer, or a jurisdictional natural gas utility on behalf of a gas customer, may request of the State Corporation Commission an exception to this section, for a period of time greater than 10 days based on hardship or other justifiable circumstances.

K. If gas supplies become inadequate to meet the requirements of customers in Priorities 1 and 2, an Essential Human Needs Emergency may be declared and limitations may be imposed restricting gas usage to Essential Human Needs.

L. Definitions as used in this section:

"Alternate fuel capability (AFC)" means that gas usage for which the customer has the installed facilities to use an alternate fuel, and shall mean that gas usage of 10,000 Mcf or more, per peak month for which it would be reasonable to install facilities to use an alternate fuel. A customer may be deemed not to have AFC if alternate fuel supplies are unavailable or their use restricted, for reasons beyond the control of the customer, during a gas supply emergency. Any exceptions to the definition of AFC must be approved by the Commission.

"Boiler fuel" means that usage of gas of 1500 Mcf, or more, per peak month for the generation of electricity, production of steam, or heating of water. The only exception shall be for Washington Gas Light Company (including Shenandoah Gas Company). Washington Gas Light Company may define boiler fuel as that industrial usage of gas of 100,000 therms, or more, per peak month for the generation of electricity, production of steam, or heating of water.

"Commercial services" means service to customers engaged primarily in the sale of goods or services, to educational institutions, to correctional institutions, and to local, state and federal government agencies for uses other than those involving manufacturing or electric power generation.

"Essential human needs emergency" means a situation in which gas supply, for whatever reason, is inadequate to meet requirements of customers in Priorities 1 and 2.

"Essential human needs" means that gas usage necessary to maintain service to all residential customers and customers qualifying for human needs requirements without AFC, subject to the following restrictions: (i) thermostats in residences, apartments, sanatoriums, rest homes, hospitals, hotels, motels, prisons, and anywhere else that people reside shall be set to 65°F in the day and 55°F at night, unless such setting causes health hazards; and (ii) thermostats in office buildings, retail stores, schools, and other commercial, government and industrial facilities shall be set to the minimum level required to prevent injury to life or property.

"Human needs requirement" means requirements for residences, critical child care and medical facilities, sanatoriums, rest homes, hotels, certain schools, essential agricultural users and food process needs, commercial cooking, prisons, plant protection, water and sewage treatment and electric generating unit start-up and flame stabilization.

"Interruptible service" means that service provided under interruptible rate schedules or under special interruptible contracts.

"Plant protection" means that minimum use of gas necessary to prevent physical damage to plant facilities, danger to plant personnel, and to protect material in production. It shall not include gas to maintain ongoing production of materials.

"Residential usage" means that gas used for normal purposes in maintaining permanent single and multi-family dwellings.

"Peak month" shall remain as presently defined in individual tariffs or past practices of jurisdictional natural gas public utilities; however, for purposes of priority classifications, when a customer's usage is increased, or reduced, on a permanent basis then the customer shall be moved to the priority consistent with the change in usage.

"Electric generating start-up requirements" means that usage of gas associated with the start-up of base load generating units including requirements for flame stabilization where alternate start-up fuels are unavailable. It shall not include gas used for co-firing.

"Essential electric human needs" means that electric usage necessary to maintain service to all residential customers and customers qualifying for human needs requirements, subject to the following restrictions: (i) thermostats in residences, apartments, sanatoriums, rest homes, hospitals, hotels, motels, prisons, and anywhere else that people reside shall be set to 65°F in the day and 55°F at night, unless such setting causes health hazards; and (ii) thermostats in office buildings, retail stores, schools, and other commercial, government and industrial facilities shall be set to the minimum level required to prevent injury to life or property. Electric generation will be deemed to be required for essential electric human needs if the electric utility has implemented emergency load reduction procedures at least to the point of shedding non-critical curtailable load.

ADMINISTRATION

The Director or a designated member of the Commission's Division of Energy Regulation shall be responsible for administering the Schedule of Priorities and Rules adopted herein, subject to review by the Commission as provided by the Commission's Rules of Practice and Procedure in (5VAC5-20).

All written correspondence concerning the foregoing shall be addressed to Natural Gas Priorities and Rules, Attn: Director, Division of Energy Regulation, State Corporation Commission, P.O. Box 1197, Richmond, Virginia 23218.