Administrative Code

Virginia Administrative Code
Title 20. Public Utilities and Telecommunications
Agency 5. State Corporation Commission
1/21/2020

Chapter 202. Regulations Governing the Functional Separation of Incumbent Electric Utilities under the Virginia Electric Utility Restructuring Act

20VAC5-202-10. Applicability and scope.

These regulations are promulgated pursuant to the provisions of the Virginia Electric Utility Regulation Act (§ 56-576 et seq. of the Code of Virginia), and they apply only to incumbent electric utilities subject to the provisions thereof. Section 56-590 of the Act declares that all incumbent electric utilities shall functionally separate their generation, transmission and distribution services by January 1, 2002, and that such functional separation may be accomplished through the creation of affiliates or through such other means as may be acceptable to the commission. The utilities were required to submit proposed functional separation plans to the Virginia State Corporation Commission by January 1, 2001.

Section 56-590 B 3 of the Act authorizes the commission to impose conditions, as the public interest requires, upon its approval of incumbent electric utilities' plan for functional separation, including requirements that (i) incumbent electric utilities' generation assets or their equivalent remain available for electric service during the capped rate period as provided in § 56-582 and, if applicable, during any period incumbent electric utilities serve as default providers pursuant to § 56-585, and (ii) incumbent electric utilities receive commission approval for the sale, transfer or other disposition of generation assets during the capped rate period and, if applicable, during any period incumbent electric utilities serve as default providers.

Pursuant to § 56-590 C, the commission is also directed, to the extent necessary to promote effective competition in the Commonwealth, to promulgate regulations:

1. Prohibiting cost-shifting or cross-subsidies between functionally separate units;

2. Prohibiting functionally separate units from engaging in anticompetitive behavior or self-dealing;

3. Prohibiting affiliated entities from engaging in discriminatory behavior toward nonaffiliated units; and

4. Establishing codes of conduct detailing permissible relations between functionally separate units.

Additionally, § 56-590 F provides, in pertinent part, that nothing in the Virginia Electric Utility Regulation Act shall be deemed to abrogate or modify the commission's authority under Chapters 3 (§ 56-55 et seq.), 4 (§ 56-76 et seq.) or 5 (§ 56-88 et seq.) of Title 56 of the Code of Virginia.

This chapter, therefore, implements the statutory provisions of the Virginia Electric Utility Regulation Act described above. Such regulations shall not, however, be deemed to modify or supersede any regulations adopted by the commission concerning the relationships between local distribution companies and any company licensed by the commission to provide competitive energy services, which regulations shall include the commission's Interim Rules Governing Electric and Natural Gas Retail Access Pilot Programs, 20VAC5-311-10 et seq., and any successor regulations thereto.

Statutory Authority

§ 12.1-13 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 17, Issue 5, eff. October 20, 2000; amended, Virginia Register Volume 29, Issue 23, eff. July 1, 2013.

20VAC5-202-20. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Act" means the Virginia Electric Utility Regulation Act.

"Affiliated generation company" means a generation company that controls, is controlled by, or is under common control with a local distribution company. For purposes of this chapter, any unit or division created by a local distribution company for the purpose of acting as a generation company shall be treated as an affiliated generation company and shall be subject to the same provisions and regulations.

"Commission" or "SCC" means the Virginia State Corporation Commission.

"FERC" means the Federal Energy Regulatory Commission.

"Generation company" means a person owning, controlling, or operating a facility that produces electric energy for sale to wholesale customers.

"Incumbent electric utility" shall have the same meaning as set forth in § 56-576 of the Code of Virginia.

"Local distribution company" means an entity regulated by the Virginia State Corporation Commission that owns or controls the distribution facilities required for delivery of electricity to the end user.

"Market price" or "market value" means the value of comparable goods or services determined through such methods as competitive bidding, appraisals, catalog listings, sales to third parties and asset replacement cost determinations.

"Person" shall have the same meaning as set forth in § 56-576 of the Code of Virginia.

"Transmission provider" means an entity regulated by the Federal Energy Regulatory Commission (FERC) that owns or operates, or both, transmission facilities.

Statutory Authority

§ 12.1-13 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 17, Issue 5, eff. October 20, 2000; amended, Virginia Register Volume 29, Issue 23, eff. July 1, 2013.

20VAC5-202-30. Relations between affiliated functionally separated entities; SCC oversight.

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.

Statutory Authority

§ 12.1-13 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 17, Issue 5, eff. October 20, 2000; amended, Virginia Register Volume 29, Issue 23, eff. July 1, 2013.

20VAC5-202-40. (Repealed.)

Historical Notes

Derived from Virginia Register Volume 17, Issue 5, eff. October 20, 2000; repealed, Virginia Register Volume 29, Issue 23, eff. July 1, 2013.

20VAC5-202-50. Waiver or exemption requests; confidential information; other filings.

A. Any request for a waiver of any provision in this chapter shall be considered by the commission on a case-by-case basis and may be granted upon such terms and conditions as the commission may impose.

B. Where a filing made pursuant to this chapter contains information that the applicant claims to be confidential, the filing may be made under seal provided it is accompanied by both a motion for protective order or other confidential treatment and an additional five copies of a redacted version of the filing to be available for public disclosure. Unredacted filings containing the confidential information shall be maintained under seal unless and until the commission rules otherwise, except that such filings shall be immediately available to the commission staff for internal use at the commission.

Filings containing confidential (or redacted) information shall be so stated on the cover of the filing, and the precise portions of the filing containing such confidential (or redacted) information, including supporting material, shall be clearly marked within the filing.

Statutory Authority

§ 12.1-13 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 17, Issue 5, eff. October 20, 2000; amended, Virginia Register Volume 29, Issue 23, eff. July 1, 2013.



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