English: Photo of the Virginia State Capitol b...

Photo of the Virginia State Capitol. (Photo credit: Wikipedia)

Virginia energy lawyers Eric Hurlocker and Blair Wortham have been keeping up with a multitude of legislative actions during the just completed 2015 Virginia General Assembly.  Here is a brief look at a few initiatives impacting renewable energy development in Virginia.

I. Solar Energy Legislation Passed and Taking Effect July 1, 2015

House Bill 1950/Senate Bill 1395:  Electric Utilities; Net Energy Metering Programs.

HB 1950 and SB 1395 increase, from 500 kilowatts to one megawatt, the maximum generating capacity of an electrical generating facility owned or operated by an electric utility’s nonresidential customer that may be eligible for participation in the utility’s net energy metering program.   In addition, the capacity of any generating facility installed under this legislation after July 1, 2015, is not to exceed the expected annual energy consumption based on the previous 12 months of billing history or an annualized calculation of billing history if 12 months of billing history is not available. The bill also (i) requires any eligible customer-generator seeking to participate in net energy metering to notify its supplier and receive approval to interconnect prior to installation of an electrical generating facility and (ii) clarifies requirements regarding the customer-generator’s obligation to bear the costs of equipment required for the interconnection to the supplier’s electric distribution system.

House Bill 2267/Senate Bill 1099:  Virginia Solar Energy Development Authority.

HB 2267 and SB 1099 create the Virginia Solar Energy Development Authority (“Authority”) which is established for the purposes of facilitating, coordinating and supporting development of the solar energy industry and solar-powered electric energy projects in Virginia.  As set forth in the legislation, the Authority is to achieve its purpose by developing programs that increase the availability of financing for solar energy projects, facilitate the increase of solar energy generation systems on public and private sector facilities in the Commonwealth, promote the growth of the Virginia solar industry, and provide a hub for collaboration between entities, both public and private, to partner on solar energy projects.  The bill provides that the Authority will be composed of 11 nonlegislative citizen members, including representatives of solar businesses, solar customers, renewable energy financiers, state and local government solar customers, and solar research academics.  Pursuant to the bill, the Authority is tasked with, among others, (i) identifying and taking steps to mitigate existing state and regulatory or administrative barriers to the development of the solar energy industry (including facilitating any permitting processes); (ii) collaborating with entities, including institutions of higher education, to increase the training and development of the workforce needed by the solar industry in the Commonwealth, including industry-recognized credentials and certifications; (iii) entering into interstate partnerships to develop the solar energy industry and solar energy projects; and (iv) conducting any other activities as may seem appropriate to increase solar energy generation in Virginia and the associated jobs and economic development and competitiveness benefits, including assisting investor-owned utilities in the planned deployment of at least 400 megawatts of solar energy projects in the Commonwealth by 2020 through entering into agreements in its discretion in any manner provided by law for the purpose of planning and providing for the financing or assisting in the financing of the construction or purchase of solar energy projects that are authorized pursuant to Section 56-585.1 of the Code.

House Bill 2237:  Electric Utility Ratemaking; Recovery of Costs of Solar Energy Facilities.

HB 2237 provides that an investor-owned electric utility that purchases a generation facility consisting of at least one megawatt of generating capacity using energy derived from sunlight and located in the Commonwealth and that utilizes goods or services sourced, in whole or in part, from one or more Virginia businesses, to recover the costs of acquiring the facility, with an enhanced rate of return on equity, through a rate adjustment clause. The legislation also states that a utility filing a petition for approval of such a project to construct or purchase a facility may propose a rate adjustment clause based on a market index in lieu of a cost of service model for such facility. In addition, the bill explains that the construction or purchase by a utility of one or more generation facilities with at least one megawatt of generating capacity, and with an aggregate rated capacity that does not exceed 500 megawatts, that use energy derived from sunlight and are located in Virginia, regardless of whether any of such facilities are located within or without the utility’s service territory, is in the public interest, and in determining whether to approve such facility, the State Corporation Commission (“SCC”) shall liberally construe the provisions of the legislation.  Furthermore, pursuant to the bill, a utility is authorized to enter into short-term or long-term power purchase contracts for the power derived from sunlight generated by such generation facility prior to purchasing the generation facility.

House Bill 1360/Senate Bill 763:  Securities Act; Crowdfunding Exemption.

HB 1360 and SB 763, known as crowdfunding bills, create an exemption from some of the requirements in the Securities Act for Virginia businesses raising money from investors in the Commonwealth.  This bill provides Virginia businesses with the opportunity to access low-cost capital, as well as creating investment opportunities for investors to invest in local projects in Virginia.  Specifically, this legislation creates an exemption from the securities, broker-dealer, and agent registration requirements of the Securities Act for any security issued by an entity formed, organized or existing under the laws of Virginia, provided certain conditions are satisfied.

House Bill 1297:  Machinery and Tools Tax; Production of Renewable Energy.

HB 1297 authorizes a governing body of any county, city or town to impose a tax rate on machinery and tools, including repair and replacement parts, owned by a business and used directly in producing or generating renewable energy that is different from such tax rate imposed on other machinery and tools.  However, the bill prohibits the tax rate on machinery and tools used directly in producing or generating renewable energy from exceeding the tax rate applicable to the general class of machinery and tools.  In other words, this legislation gives localities the freedom to either maintain or lower the tax rate for machinery and tools used in renewable energy projects from such rate applicable to the general class of machinery and tools.

II. Solar Energy Legislation Continued this Session

House Bill 881:  Electric Utility Regulation; Renewable Energy Portfolio Standard Program, Etc.

HB 881 was introduced in an effort to require the SCC to establish and maintain a market-based renewable energy registration and tracking system to facilitate the creation and transfer of renewable energy certificates.  This system is to be, to the extent practicable, consistent with, and operate in conjunction with, the trading system developed by PJM Interconnection LLC, known as PJM-GATS.  The bill requires the system established by the SCC to include a registry of pertinent information regarding all renewable energy certificates and renewable energy certificate transactions.  The idea is that this system would provide current information to electric suppliers and the public (via Internet access) on the status of renewable energy certificates created, sold or transferred in the Commonwealth.  The legislation also establishes limits on the duration of a renewable energy certificate.  In addition, the bill provides that the SCC is to establish requirements for documentation and verification of renewable energy certificates by licensed electric suppliers and other renewable energy generators.  Notably, the bill also would eliminate provisions for double or triple credit toward meeting the renewable energy portfolio standard for energy derived from specific renewable energy sources, such as sunlight or offshore wind.

The legislation was left in the Commerce and Labor Committee in December 2014.  We will continue to monitor any activities relating to this bill in the coming sessions.

III. Other Energy Legislation Passed and Taking Effect July 1, 2015

Senate Bill 1349:  Electric Utility Regulation; Suspension of Regulatory Review of Utility Earnings.

SB 1349 prohibits the SCC from conducting a biennial review of the rates, terms, and conditions for any service of (i) Dominion Virginia Power for the five successive 12-month test periods beginning January 1, 2015, and ending December 31, 2019, and (ii) Appalachian Power for the four successive 12-month test periods beginning January 1, 2014, and ending December 31, 2017 (collectively, the “Transitional Rate Period”).  The legislation further provides that no biennial review filings must be made by an investor-owned incumbent electric utility in 2016 through 2019 and an investor-owned incumbent electric utility’s existing tariff rates shall not be adjusted between the beginning of the Transitional Rate Period and the conclusion of the first biennial review after the conclusion of the Transitional Rate Period, except as permitted for fuel factor and purchased power cost adjustments, rate adjustment clauses, and emergency temporary rate increases.  In addition, the bill authorizes the SCC to, during the Transitional Rate Period, inspect the books, papers, and documents of any investor-owned incumbent electric utility and to require it to provide special reports and statements, under oath, concerning its business. Furthermore, during the Transitional Rate Period, the SCC is required to conduct a proceeding every two years to determine the fair rate of return on common equity to be used by the utility as the general rate of return applicable to the rate adjustment clauses.  Pursuant to the legislation, in furtherance of rate stability during the Transitional Rate Period, Dominion Virginia Power is prohibited from recovering from customers 50 percent of certain deferred fuel expenses, and the SCC is instructed to implement, as soon as practicable, reductions in the fuel factor rate.

During the Transitional Rate Period, an investor-owned incumbent electric utility shall recover the following costs, only through its existing tariff rates for generation or distribution services: (i) costs associated with asset impairments related to early retirement determinations for utility generation facilities resulting from the implementation of carbon emission guidelines for existing electric power generation facilities that the U.S. Environmental Protection Agency has issued pursuant to § 111 (d) of the Clean Air Act; (ii) costs associated with severe weather events; and (iii) costs associated with natural disasters.

The legislation requires that, during the Transitional Rate Period, the SCC and the Department of Environmental Quality provide reports and make recommendations to the Governor and the General Assembly annually concerning the implementation of carbon emission guidelines for existing electric power generation facilities that the U.S. Environmental Protection Agency has issued pursuant to Section 111(d) of the federal Clean Air Act.  In addition, the utilities must conduct and fund, a pilot program for energy assistance and weatherization for low income, elderly and disabled individuals in their respective service territories in Virginia.

House Bill 1475/Senate Bill 1163:  Natural Gas Utilities; Recovery and Deferral of System Expansion Infrastructure Costs.

HB 1475 and Senate Bill 1163 establish a procedure under which a natural gas utility may seek SCC approval of a system expansion plan.  This plan is to include, among other things, a business rationale explaining that the expansion plan is in the public interest and of benefit to the affected customers and the estimated eligible system expansion infrastructure costs and a maximum level of investment to be included in the program.  The legislation requires that any system expansion plan that is submitted to and approved by the SCC allocate and charge costs in accordance with the appropriate cost causation principles in order to avoid any undue cross-subsidization between rate classes.  The SCC is instructed to approve a natural gas utility’s system expansion plan if the SCC finds that the plan (i) includes the components as set forth in the bill, (ii) provides for the recovery of eligible system expansion infrastructure costs in accordance with the bill, and (iii) is prudent and reasonable.  However, in its review of an application, the SCC may not examine other revenue requirement or ratemaking issues.  Costs recovered pursuant to the legislation are in addition to all other costs that the natural gas utility is permitted to recover, are not be considered an offset to other SCC-approved costs of service or revenue requirements, and are not to be included in any computation relative to a performance-based regulation plan revenue-sharing mechanism. The bill does not apply to interstate pipeline companies regulated by the Federal Energy Regulatory Commission.  This legislation should allow more Virginia consumers to have the opportunity to benefit from increased natural gas availability in Virginia and the related benefit of lower energy costs.

Senate Bill 1331:  Natural Gas Conservation and Ratemaking Efficiency Act; Cost-Effective Programs.

SB 1331 requires the SCC, in its evaluation of whether a natural gas conservation or energy efficiency program is cost-effective, to make its determination with (i) the assignment of administrative costs associated with the conservation and ratemaking efficiency plan to the portfolio as a whole and (ii) the assignment of education and outreach costs associated with each program in a portfolio of programs to such program and not to individual measures within a program, when such administrative, education, or outreach costs are not otherwise directly assignable.  In addition, the legislation provides that a cost-effective conservation and energy efficiency program shall not include a program designed to convert propane customers to natural gas.

If you have questions about any Virginia laws and how they might impact your business, please contact the Virginia energy lawyers at GreeneHurlocker for more information.


Eric Hurlocker