Virginia HB 1075: State Corporation Commission; Phase I Utility biennial rate review, reports.

Bill Text

2027 SESSION

INTRODUCED

26104884D

HOUSE BILL NO. 1075

Offered January 14, 2026

A BILL to direct the State Corporation Commission to adhere to certain requirements in the biennial rate review for a Phase I Utility.

—————

Patrons—Rasoul, Clark, Carr, Cole, N.T., Cornett, Franklin, L.V., Griffin, Guzman, Hope, Martinez, McAuliff, McNamara, Morefield, Schmidt, Tran and Willett

—————

Referred to Committee on Labor and Commerce

—————

Be it enacted by the General Assembly of Virginia:

1. § 1. A. That in conducting its 2026 review of the rates, terms, and conditions for the provision of generation and distribution services by a Phase I Utility (the utility), as that term is defined in subdivision A 1 of § 56-585.1 of the Code of Virginia, pursuant to § 56-585.8 of the Code of Virginia the State Corporation Commission (the Commission) shall adhere to the requirements described in this act. To the extent that the provisions of this act conflict with any other provision of law, the provisions of this act shall control.

B. In determining a fair rate of return on common equity pursuant to subsection E of § 56-585.8 of the Code of Virginia, the Commission shall ensure that no increase in such rate of return above the rate of return approved by the Commission in the utility's immediately preceding biennial review proceeding occurs unless the utility demonstrates that such increase is the approach to maintaining reasonable access to capital that results in the lowest cost to customers. The Commission's determinations regarding the utility's cost of capital, including the determination of such rate of return, shall be based on methods widely and customarily used in competitive finance markets to value equity investments. No method that is materially different from such methods, primarily developed for regulatory proceedings, or not demonstrably relied upon for the purpose of investments, including the Utility Risk Premium method and Expected Earnings method, shall be used as a basis for such determinations. No methodology based on biased assumptions or practices shall be used to calculate the utility's cost of capital, including (i) the use of forecasted or projected risk-free interest rates in place of observable current market yields; (ii) the manipulation of beta estimates without empirical justification grounded in utility sector data, or the selection of beta values that systemically exceed long-term, sector-wide market evidence; and (iii) the use of long-term growth assumptions that are economically unfeasible, including long-term growth rates that exceed aggregated economic growth without rigorous justification. The utility shall demonstrate, and the Commission shall consider through quantitative analysis, whether the proposed rate of return on common equity and capital structure is reasonably consistent with achieving a least-cost outcome while maintaining access to capital on reasonable terms, preserving credit quality comparable to companies with comparable risk to the utility, and avoiding unnecessary costs to customers. The utility shall file a quantitative scenario and sensitivity analysis evaluating alternative combinations of return on equity and capital structure and the resulting effects on customer rates and relevant credit quality metrics. The Commission shall make findings of fact regarding compliance with this act and may evaluate the credibility, relevance, and weight offered in support of a proposed method.

C. In determining a fair rate of return on common equity, the Commission shall also consider the affordability of the utility's existing rates for service, the relative levels of regulatory risk faced by the utility, and the most recent rates of return approved for the utility's operations by other regulatory agencies with jurisdiction over the utility's operations outside of the Commonwealth. In assessing the affordability of the utility's existing rates, the Commission shall consider, among other factors, (i) the number of residential customer service disconnections for nonpayment during the last five years and (ii) the percentage of change in the utility's total residential customer per-kilowatt-hour rates during the utility's prior two rate review periods as compared to the percentage of change in the Consumer Price Index, as published by the Bureau of Labor Statistics of the U.S. Department of Labor, during such periods. In assessing the relative level of regulatory risk faced by the utility, the Commission shall consider, among other factors, the securitization of costs and the proportion of the utility's total annual revenues that are projected to be recovered through riders or rate adjustment clauses during the upcoming biennial review period. 

D. The Commission shall review the utility's decision to procure capacity through a fixed resource requirement alternative instead of through a capacity market operated by a regional transmission entity. The Commission shall direct the