Virginia Law

A. Purpose and applicability.

1. The purpose of this section is to implement the distribution cost sharing program pursuant to the provisions of § 56-596.6 of the Code of Virginia for a generating facility with an alternating current nameplate capacity greater than 250 kilowatts and less than or equal to three megawatts that seeks to interconnect to a Phase I or Phase II Utility's distribution system and participate in net energy metering pursuant to § 56-594 of the Code of Virginia.

2. This section applies to Phase I and Phase II Utilities and to all triggering projects and sharing projects, as defined in 20VAC5-315-20, interconnecting pursuant to this section.

3. Each Phase I and Phase II Utility shall file on or before December 1, 2026, tariffs and forms, and a Distribution Cost Sharing Agreement consistent with this section, subject to commission approval. These documents should:

a. Conform to the parameters of this section.

b. Describe any utility-specific procedures and system configurations.

c. Include applicable administrative and processing fees as permitted by subsection G of this section.

B. Identification of qualifying upgrades and documentation.

1. When the utility determines through a facilities study that a qualifying upgrade is required to interconnect a triggering project, the utility shall:

a. Identify any specific upgrade, including location and function.

b. Determine an estimate of the cost of such qualifying upgrade, broken out by major cost categories (materials, internal labor, and other direct costs).

c. Determine and document the net increase in hosting capacity, expressed in kilowatts or megawatts, attributable to the qualifying upgrade.

2. The utility shall provide the applicant of the triggering project, and any subsequently queued applicants with projects on the affected circuit, with a study report that:

a. Identifies each qualifying upgrade and any non-qualifying upgrades.

b. Provides the estimated cost of each qualifying upgrade and the net increase in hosting capacity.

c. States the cost-sharing window opening date and estimated closing date, subject to subsection E of this section.

C. Determination of qualifying upgrade costs.

1. Costs of qualifying upgrades shall be determined by the utility using its Unit Cost Guide.

2. For each qualifying upgrade, the utility shall document:

a. The quantities of standard components and work items and the associated unit costs drawn from the Unit Cost Guide.

b. Any site-specific or non-standard cost elements and the basis for such costs.

c. The resulting total qualifying upgrade cost used for allocation under subsection D of this section.

3. The Unit Cost Guide shall be updated on an annual basis. Utilities shall not be required to seek project-specific commission approval of qualifying upgrade costs when such costs are calculated in accordance with the Unit Cost Guide, applicable standards, and good utility practice.

D. Cost allocation formula and thresholds.

1. Each utility shall apply a pro-rata cost allocation methodology under which the approved cost of qualifying upgrades is allocated among participating projects based on each project's alternating current nameplate capacity relative to the total alternating current nameplate capacity of all participating projects benefiting from the qualifying upgrade.

2. Unless otherwise approved by the commission, the allocation shall be calculated as follows:

A project's allocated share of qualifying upgrade cost is equal to the amount of the project alternating current nameplate in kilowatts divided by the sum of alternating current nameplate in kilowatts for all participating projects, then that amount multiplied by the approved qualifying upgrade cost.

3. The triggering project shall initially pay 100% of the estimated qualifying upgrade costs prior to construction, with subsequent sharing projects reimbursing the triggering project (and any prior sharing projects) for their proportional shares as payments are received.

4. The same cost allocation methodology shall apply to the reconciliation of estimated and actual qualifying upgrade costs at the conclusion of construction, with refunds or additional billings as provided in subsection F of this section.

5. The distribution cost sharing program shall apply only where

total estimated cost of a qualifying upgrade equals or exceeds $100,000.

E. Cost-sharing window and participation.

1. For each qualifying upgrade, the utility shall establish a cost-sharing window during which sharing projects may be allocated costs and triggering and sharing projects may receive refunds.

2. The default cost-sharing window shall be five years from the date the qualifying upgrade is placed in service.

3. Cost sharing shall terminate upon the earlier of:

a. The end of the cost-sharing window.

b. The point at which the net increase in hosting capacity created by the qualifying upgrade is fully utilized.

c. The point at which the remaining net cost of the qualifying upgrade to participating projects falls below the $100,000 threshold.

4. A triggering project may elect to opt out of the distribution cost sharing program by paying in full the approved cost of any associated qualifying upgrade, in which case such project shall not be treated as a sharing project and shall not be eligible to receive funds under this section.

F. Payments, reconciliation, and refunds.

1. Payment obligations.

a. Prior to the construction of qualifying upgrades, the triggering project shall pay the utility the estimated costs of all required interconnection upgrades, including qualifying and nonqualifying upgrades.

b. Each sharing project shall pay its allocated share of qualifying upgrade costs, plus its own nonqualifying upgrade costs, prior to construction of any upgrades necessary for its interconnection.

2. Reconciliation of estimated and actual costs.

a. Upon completion of the qualifying upgrade, the utility shall determine actual costs and recalculate each project's share under subsection D of this section.

b. The utility shall issue a final bill or refund to each participating project reflecting the difference between the amounts previously paid and the project's final allocated share, net of any applicable administrative or processing fees approved under subsection G of this section.

3. Refunds during cost-sharing window.

a. Refunds based on new sharing projects.

(1) When a new sharing project enters the program within the cost-sharing window and pays its allocated share of qualifying upgrade costs, the utility shall recalculate cost responsibility for all participating projects using the methodology in subsection D of this section.

(2) The utility shall then issue refunds or additional bills, as applicable, so that each participating project's net payments reflect its updated allocated share, net of applicable administrative and processing fees.

(3) These refunds and additional bills shall be administered automatically by the utility and shall not require a petition to the commission.

b. Final billing process.

(1) After all participating projects associated with a qualifying upgrade have been approved for operation, and actual qualifying upgrade costs are known, the utility shall perform a final reconciliation of costs and allocations under subsection E of this section.

(2) The utility shall issue any final refunds or additional bills so that each participating project's total payments equal its final allocated share of the actual qualifying upgrade costs, net of applicable administrative and processing fees.

c. Refunds during the cost-sharing window shall occur in the two circumstances described in subdivisions 3 a and 3 b of this subsection.

d. Process and timing.

(1) For refunds and additional bills issued under subdivisions 3 a and 3 b of this subsection, the utility shall perform the recalculation and issue any resulting refund or additional bill within 90 days of (i) receipt of payment from the new sharing project in the case of subdivision 3 a of this subsection or (ii) completion of the final reconciliation after all participating projects have been approved for operation in the case of subdivision 3 b of this subsection.

(2) Refunds may be issued either as direct payments or as bill credits applied to future interconnection-related charges under this program, at the election of the project owner, as provided in the utility's tariff.

(3) A nonoperational refund is not required if the upgrades have been completed and the project fails to become operational due to customer driven changes, equipment issues, or delays in meeting interconnection timelines.

G. Administrative and processing fees.

1. Each utility shall include in its compliance filing reasonable administrative and processing fees to recover incremental costs of designing, implementing, and operating systems necessary to track qualifying upgrades, cost allocations, payments, and refunds and to avoid cost shifting to nonparticipating customers.

2. Administrative and processing fees may include:

a. A one-time application or program enrollment fee for projects electing to participate in the distribution cost sharing program.

b. A processing fee assessed on participating projects each time the utility reallocates costs of a qualifying upgrade due to the addition of a new sharing project or final reconciliation and administers any resulting refund or additional bill, including refunds issued

as part of a cost-sharing recalculation or nonoperational refund.

3. Administrative and processing fees shall be subject to commission review and approval.

H. Jurisdictional and nonjurisdictional cost allocation.

1. The costs attributed to jurisdictional triggering projects shall be recovered only from jurisdictional sharing projects, and costs attributed to nonjurisdictional triggering projects shall be recovered only from nonjurisdictional sharing projects, consistent with § 56-596.6 of the Code of Virginia.

2. Each utility shall identify and document within the Distribution Cost Sharing Agreement whether a project is jurisdictional or nonjurisdictional and shall maintain records sufficient to demonstrate compliance with this subsection.

I. Dispute resolution.

1. In the event of a dispute arising out of the program, either party (project owners or utility) shall provide the other parties with a written notice of dispute. The notice shall describe in detail the nature of the dispute, which may include: (i) the designation of or cost of a qualifying upgrade, (ii) the calculation of net hosting capacity, (iii) cost allocations under subsection D of this section, and (iv) eligibility for or amount of a refund under subsection F of this section. The parties shall make a good faith effort to resolve the dispute informally within 10 business days.

2. If the dispute has not been resolved within 10 business days after receipt of the notice, either party may seek resolution assistance from the Division of Public Utility Regulation where the matter will be handled as an informal complaint.

Alternately, the parties may, upon mutual agreement, seek resolution through the assistance of a dispute resolution service. The dispute resolution service will assist the parties in either resolving the dispute or selecting an appropriate dispute resolution venue (e.g., mediation, settlement judge, early neutral evaluation, or technical expert) to assist the parties in resolving the dispute. Each party shall conduct all negotiations in good faith and shall share equally in any costs paid to neutral third parties.

3. If the dispute remains unresolved, either party may petition the commission to handle the dispute as a formal complaint or may exercise whatever rights and remedies the party may have in equity or law.

J. Reporting and transparency. Each utility shall submit to the Division of Public Utility Regulation, on an annual basis, a report listing all executed Distribution Cost Sharing Agreements and associated qualifying upgrades during the reporting period, including:

1. Circuit or node identifier.

2. Description of all qualifying upgrades.

3. Initial estimated and actual costs.

4. Net increase in hosting capacity.

5. Identity and alternating current nameplate capacity of triggering and sharing projects.

6. Cost allocations.

7. Payments received.

8. Refunds issued.

9. Administrative and processing fees collected.