Court Opinion

ID: 2732507
Source: CourtListenerOpinion
Date Created: 2014-09-12 14:06:23.587143+00
Date Added: 2024-06-11T09:12:32.002628
License: Public Domain

PRESENT: Kinser, C.J., Lemons, Millette, Mims and McClanahan,
JJ., and Lacy and Koontz, S.JJ.

OFFICE OF THE ATTORNEY GENERAL,
DIVISION OF CONSUMER COUNSEL
                                            OPINION BY
v.   Record Nos. 131872, 131873  JUSTICE ELIZABETH A. McCLANAHAN
                                          September 12, 2014
STATE CORPORATION COMMISSION, ET AL.

               FROM THE STATE CORPORATION COMMISSION

     In these consolidated appeals, we consider whether the State

Corporation Commission (“the Commission”) properly interpreted

Code § 56-585.1(A)(6) (“Subsection (A)(6)”) to allow Virginia

Electric and Power Company, d/b/a Dominion Virginia Power

(“Dominion”), to recover an enhanced rate of return on common

equity for transmission infrastructure associated with the

Brunswick County Power Station and included in the Subsection

(A)(6) rate adjustment clause for that facility.

                     I.   Facts and Proceedings

     In 2012, Dominion filed an application with the Commission

for certificates of public convenience and necessity approving

construction of (1) the Brunswick County Power Station, an

approximately 1,358 megawatt natural gas-fired combined cycle

electric generating facility to be located in Brunswick County,

and (2) transmission interconnection facilities associated with

the Brunswick generation plant, including new transmission lines,

two new switching stations, and facilities necessary to “tap”

existing transmission lines in Brunswick and Greensville
Counties.   The estimated costs of the Brunswick project total

$1.27 billion, including approximately $89.1 million in

associated transmission infrastructure costs.

     Pursuant to Code § 56-585.1(A)(6), Dominion’s application

also sought approval of a rate adjustment clause (“RAC”),

designated as Rider BW, to recover the costs of the Brunswick

project and infrastructure associated therewith, “including the

transmission facilities necessary to interconnect the facility

with [Dominion’s] transmission system.” 1   At the time of its

      1
        At the time of Dominion’s application, Subsection
 (A)(6) read, in relevant part, as follows:

          To ensure a reliable and adequate supply of
          electricity, to meet the utility’s projected
          native load obligations and to promote
          economic development, a utility may at any
          time, after the expiration or termination of
          capped rates, petition the Commission for
          approval of a rate adjustment clause for
          recovery on a timely and current basis from
          customers of the costs of . . . one or more
          other generation facilities. . . .

          A utility that constructs any such facility
          shall have the right to recover the costs of
          the facility, as accrued against income,
          through its rates, including projected
          construction work in progress, and any
          associated allowance for funds used during
          construction, planning, development and
          construction costs, life-cycle costs, and
          costs of infrastructure associated therewith,
          plus, as an incentive to undertake such
          projects, an enhanced rate of return on common
          equity calculated as specified below.

                             2
application, Dominion’s general rate of return on common equity

(“ROE”) authorized by the Commission during Dominion’s 2011

biennial rate review was 10.4%.   As part of Rider BW, Dominion

sought a 100 basis point (1%) enhancement on its general ROE for

the projected construction work in progress period, the

associated allowance for funds used during the construction

period, and the first fifteen (15) years of the service life of

        The costs of the facility, other than return
        on projected construction work in progress and
        allowance for funds used during construction,
        shall not be recovered prior to the date the
        facility begins commercial operation.

        Such enhanced rate of return on common equity
        shall be applied to allowance for funds used
        during construction and to construction work
        in progress during the construction phase of
        the facility and shall thereafter be applied
        to the entire facility during the first
        portion of the service life of the facility .
        . . .

        Such enhanced rate of return on common equity
        shall be calculated by adding the basis points
        specified in the table below to the utility’s
        general rate of return, and such enhanced rate
        of return shall apply only to the facility
        that is subject of such rate adjustment clause
        . . . .

        The basis points to be added to the utility’s
        general rate of return to calculate the
        enhanced rate of return on common equity . . .
        shall vary by type of facility, as specified
        in the following table.

 Code § 56-585.1(A)(6) (as amended by 2012 Acts ch.
 435)(emphasis added).

                           3
the Brunswick facility. 2   Dominion proposed applying the resulting

11.4% enhanced ROE to the costs of the generation facility as

well as the costs of associated transmission and non-transmission

infrastructure.

     After receiving Dominion’s application, the Commission’s

staff filed a motion for ruling asking the Commission to rule

that the enhanced ROE authorized by Subsection (A)(6) “applies

only to the ‘facility,’ i.e., the generating plant, and not to

‘infrastructure associated therewith[.]’”    The Office of the

Attorney General’s Division of Consumer Counsel (“Consumer

Counsel”) and the Virginia Committee for Fair Utility Rates each

filed responses supporting the Staff’s interpretation of

Subsection (A)(6).

     Dominion filed a response opposing the Staff’s motion,

arguing that the Staff’s position is inconsistent with the plain

language of Subsection (A)(6), which establishes that costs of

associated infrastructure are “costs of the facility.”    Moreover,

Dominion argued that the Staff’s interpretation of Subsection

     2
       Subsection (A)(6) includes a table designating the number
of basis points to be added in calculating the enhanced ROE
recoverable by a utility based on the type of generation
facility constructed. At the time of Dominion’s application, a
100 basis point enhancement was available for natural gas
combined-cycle generation facilities. See 2012 Acts ch. 435.
     However, in 2013, the General Assembly amended Subsection
(A)(6). As a result, electric utilities may no longer receive
an enhanced ROE for new generation construction projects filed
for approval after January 1, 2013, except for nuclear and
offshore wind facilities. See 2013 Acts ch. 2.
                             4
(A)(6) is inconsistent with the General Assembly’s stated goal of

providing “an incentive to undertake such projects,” which

necessarily require transmission and other infrastructure to

function. 3

     The Commission held a public evidentiary hearing at which

Dominion presented evidence in support of its application.

Significantly, Dominion presented testimony that “but for”

construction of the Brunswick generating facility, the related

transmission lines and facilities would not be built.

     As relevant to this appeal, the Hearing Examiner found that

Subsection (A)(6) authorizes an enhanced ROE on all costs of a

qualifying generating facility, “including the costs of

infrastructure necessitated by the facility.”     Consequently, the

Hearing Examiner recommended that the Commission should accept

Dominion’s proposed rate design contained in Rider BW, including

the application of the enhanced ROE to the project’s transmission

infrastructure, if the project were approved. 4

     3
       Dominion also asserted that the Staff’s position
contradicted the Commission’s established precedent from 12
previous cases in which it had approved recovery of an enhanced
rate of return for transmission infrastructure.
     4
       The Hearing Examiner also concluded that Dominion should
receive the enhanced ROE for the first 10 years of the plant’s
service life, rather than the 15 years sought by Dominion. This
finding was adopted by the Commission in its final order and is
not at issue in this appeal.
                           5
     The Commission issued a final order approving construction

and operation of the Brunswick County Power Station and

associated transmission interconnection facilities. 5   The

Commission also approved Dominion’s proposed rate design for

Rider BW, including application of the enhanced ROE to “the

transmission infrastructure approved herein as part of the

[p]roject.”   Specifically, the Commission found that the plain

language of Subsection (A)(6) “expressly includes ‘costs of

infrastructure associated therewith’ as ‘costs of the facility.’”

Therefore, because Subsection (A)(6) requires that the enhanced

ROE be applied to the “entire facility,” the enhanced ROE must be

applied to costs of associated infrastructure approved as “costs

of the facility” that is the subject of the RAC. 6

     5
       The Commission’s approval of the project is not disputed
in this appeal.
     6
       The Commission further noted that it had recently approved
an enhanced ROE for the transmission infrastructure of three
other new generation facilities. Thus, it reasoned, “[a]ny other
result would be a clear departure from the Commission’s
consistent implementation of the plain language of [Subsection
(A)(6)].”
      Commissioner Dimitri concurred and joined in the final
 order on the approval of the project and agreed with the 100
 basis point enhancement to the ROE for the generation plant for
 10 years. However, he dissented from the majority’s extension
 of the Subsection (A)(6) ROE enhancement to the project’s
 transmission infrastructure, asserting that the enhancement is
 “focused specifically on generation facilities and not upon
 transmission or distribution,” which are treated differently
 under the statutory framework. Commissioner Dimitri further
 contended that, while the portion of Subsection (A)(6)
                            6
     Consumer Counsel filed a petition for reconsideration,

requesting that the Commission reconsider its final order and

enter an order finding that the enhanced ROE authorized by

Subsection (A)(6) applies only to the costs of the generation

facility, and not to costs of associated transmission

infrastructure.

     The Commission subsequently entered an order on

reconsideration and opinion, rejecting Consumer Counsel’s

interpretation of Subsection (A)(6) and denying the petition.    In

its order, the Commission reiterated its previous interpretation

of the plain meaning of Subsection (A)(6) that transmission

infrastructure was part of the “entire facility” subject to the

enhanced ROE and found, as a matter of fact, that both the

transmission and non-transmission infrastructure included in

Rider BW were associated with the Brunswick facility. 7   The

Commission further stated that its interpretation of Subsection

(A)(6) was both consistent with the General Assembly’s express

intent to encourage utilities to construct generation facilities

discussing the categories of costs a utility may recover through
a RAC includes both “costs of the facility” and “costs of
infrastructure associated therewith,” the discussion of the
enhanced ROE is addressed solely in terms of the “facility,” a
term that clearly means “generation facility” when read in the
context of the statute.
     7
       The Commission noted that these findings of fact were not
contested by Consumer Counsel.

                           7
to “ensure a reliable and adequate supply of electricity . . .

and to promote economic development” and with federal regulatory

treatment of interconnection infrastructure.     Finally, the

Commission noted that its decision was consistent with prior

Commission precedent applying the Subsection (A)(6) enhanced ROE

to “transmission – and all other – infrastructure costs

statutorily included as costs of the facility in the RAC.” 8

     Consumer Counsel appeals from both the Commission’s final

order (Record No. 131872) and its order on reconsideration and

opinion (Record No. 131873). 9

                      II.   Standard of Review

     We have long recognized that “[t]he Constitution of Virginia

and statutes enacted by the General Assembly thereunder give the

Commission broad, general and extensive powers in the control and

regulation of a public service corporation.”     Virginia Elec. &

Power Co. v. State Corp. Comm’n, 284 Va. 726, 735, 735 S.E.2d
684, 688 (2012) (quoting Northern Virginia Elec. Coop. v.

Virginia Elec. & Power Co., 265 Va. 363, 368, 576 S.E.2d 741,

743-44 (2003)).   Thus, “[i]n considering the appropriate standard

of review to be applied when reviewing a Commission decision, we

     8
       Commissioner Dimitri again dissented, restating his view
that the enhanced ROE in Subsection (A)(6) applies only to the
“generation facility” and nothing more.
     9
       The assignments of error asserted by Consumer Counsel are
identical for both cases. Consequently, we consolidated the
cases for our consideration.
                            8
begin by giving a decision in which the Commission has exercised

its expertise a presumption of correctness.”      Appalachian Power

Co. v. State Corp. Comm'n, 284 Va. 695, 703, 733 S.E.2d 250, 254

(2012).   However, we have also made clear that the standard of

review applied to a Commission decision “will depend on the

nature of the decision under review.”     Id.   Here, we are called

upon to review the Commission’s interpretation of Code § 56-

585.1(A)(6).    This Court reviews such questions of statutory

interpretation de novo.     See id.

     Furthermore, “although questions of law are reviewed de

novo, the practical construction given by the Commission to a

statute it is charged with enforcing is entitled to great weight

by the courts and in doubtful cases will be regarded as

decisive.”     Piedmont Envtl. Council v. Virginia Elec. & Power

Co., 278 Va. 553, 563, 684 S.E.2d 805, 819 (2009)(internal

quotation marks and citations omitted).    For these reasons, “we

will not disturb the Commission’s analysis when it is based upon

the application of correct principles of law.”      Virginia Elec. &

Power, 284 Va. at 736, 735 S.E.2d at 688 (internal quotation

marks and citations omitted). 10

     10
       We have also recognized that legislative acquiescence to
the Commission’s interpretation is presumed, and the
Commission’s interpretation will be considered decisive, when
the interpretation is a long-standing one. Appalachian Power,
284 Va. at 704, 733 S.E.2d at 255. Although the Commission has
implicitly interpreted Subsection (A)(6) to include an enhanced
                              9
                          III.   Discussion

A. Under the Plain Language of Subsection (A)(6), “Costs of the
Facility” Include “Costs of Infrastructure Associated Therewith.”

     This appeal requires us to discern the categories of costs

encompassed within the term “facility,” as it is used in

Subsection (A)(6).   In this inquiry, we are guided by familiar

principles of statutory construction:

         When construing a statute, [this Court’s]
    primary objective “is to ascertain and give effect
    to legislative intent,” as expressed by the
    language used in the statute. “When the language
    of a statute is unambiguous, [this Court] is bound
    by the plain meaning of that language.” And if
    the language of a statute “is subject to more than
    one interpretation, [this Court] must apply the
    interpretation that will carry out the legislative
    intent behind the statute.” . . . “[C]onsideration
    of the entire statute . . . to place its terms in
    context to ascertain their plain meaning does not
    offend the rule because it is [this Court’s] duty
    to interpret the several parts of a statute as a
    consistent and harmonious whole so as to
    effectuate the legislative goal.”

Cuccinelli v. Rector & Visitors of the Univ. of Va., 283 Va. 420,

425-26, 722 S.E.2d 626, 629-30 (2012) (internal quotation marks

ROE for transmission infrastructure since the adoption of the
statute by the General Assembly in 2007, we have only applied
this rule of construction in instances where we have found that
the statutory language is ambiguous. See Commonwealth v.
Appalachian Electric Power Co., 193 Va. 37,45-46, 68 S.E.2d 122,
127 (1951) (noting that the presumption of legislative
acquiescence is a rule of construction that applies only when a
statute is ambiguous).
     Because we hold, infra, that the language of Subsection
(A)(6) is plain and unambiguous, we do not presume here that the
General Assembly has acquiesced to the Commission’s
interpretation.
                           10
and citations omitted).   Furthermore, we will not single out “a

particular term or phrase, but . . . construe the words and terms

at issue in the context of the other language used in the

statute.”   Buonocore v. Chesapeake & Potomac Tel. Co., 254 Va.
469, 472, 492 S.E.2d 439, 441 (1997).    Finally, “[r]ules of

statutory construction prohibit adding language to or deleting

language from a statute.”   Appalachian Power, 284 Va. at 706, 733

S.E.2d at 256.

     Subsection (A)(6) was enacted by the General Assembly in

2007 to create “a new proceeding allowing a utility to petition

the Commission for approval of a [RAC] for the ‘timely and

current’ recovery from customers for costs incurred in certain

identified programs.”   Id. at 700-01, 733 S.E.2d at 253.

Specifically, Subsection (A)(6) states that:

       A utility that constructs [one or more other
       generation facilities] shall have the right to
       recover the costs of the facility . . .through
       its rates, including projected construction
       work in progress, and any associated allowance
       for funds used during construction, planning,
       development and construction costs, life-cycle
       costs . . . and costs of infrastructure
       associated therewith.

Code § 56-585.1(A)(6)(emphasis added).   The plain meaning of this

language dictates that the “costs of the facility,” recoverable

by a utility which petitions the Commission for approval of a

RAC, include the “costs of infrastructure associated therewith.”

                            11
     It is clear from the language used by the General Assembly

that the phrase “associated therewith” relates to the term

“facility.”   Thus, read as a whole, Subsection (A)(6) establishes

that the “costs of the facility” recoverable through a RAC

include “costs of infrastructure” associated with the facility.

In other words, Subsection (A)(6) dictates that costs of

associated infrastructure are a cost of the facility.   This

interpretation of Subsection (A)(6) does not render the phrase

“associated therewith” “unnecessary and redundant.”   Rather, it

clearly establishes that costs of infrastructure associated with

the facility, and only those infrastructure costs, are considered

“costs of the facility” that may be recovered under a RAC.

B. The Subsection (A)(6) Enhanced ROE Applies to the “Entire
Facility,” Including the “Costs of Infrastructure Associated
Therewith.”

     In addition to providing for recovery of the “costs of the

facility,” Subsection (A)(6) states that “as an incentive to

undertake such projects” a utility will receive “an enhanced

[ROE] calculated as specified below.”   The statute then

establishes that “[s]uch enhanced [ROE] shall be applied to

allowance for funds used during construction and to construction

work in progress during the construction phase of the facility

and shall thereafter be applied to the entire facility during the

first portion of the service life of the facility.”

                           12
     Consumer Counsel contends that the term “facility,” as it is

used throughout Subsection (A)(6), means “generation facility.”

Additionally, Consumer Counsel asserts that we should construe

the term “entire facility” to mean “completed facility.”   Thus,

Consumer Counsel argues, the “entire facility” to which the

Subsection (A)(6) enhanced ROE applies after the facility’s

construction phrase is the completed generation plant itself and

nothing more.

     This interpretation of Subsection (A)(6) misconstrues the

plain language of the statute.    To have us reach its desired

result, Consumer Counsel suggests that the portion of Subsection

(A)(6) that defines the “costs of the facility” merely

“enumerates the types of costs that a utility shall have the

right to recover through a [Subsection (A)(6)] RAC” and does not

apply to the portion of the statute discussing the application of

the enhanced ROE.   We decline, however, to read the various

portions of the statute in isolation.   See Cuccinelli, 283 Va. at

425-26, 722 S.E.2d at 629-30 (holding that portions of a statute

must be interpreted “as a consistent and harmonious whole.”).    We

likewise decline to substitute the word “completed” for the word

“entire” when interpreting the meaning of the phrase “entire

facility” in Subsection (A)(6).    See Appalachian Power, 284 Va.

at 706, 733 S.E.2d at 256 (“Rules of statutory construction

                           13
prohibit adding language to or deleting language from a

statute.”).

     “Entire” means: “with no element or part excepted;” or

“complete in degree.”    Webster’s Third New International

Dictionary 758 (1993).    Therefore, because “costs of

infrastructure” associated with the facility are recoverable as

“costs of the facility” under a RAC, the plain meaning of “entire

facility” in the portion of the statute discussing the enhanced

ROE encompasses all costs of the facility expressly delineated in

the statute, including associated infrastructure costs.      Even

assuming that the word “facility” must mean “generation

facility,” Subsection (A)(6) establishes that “costs of

infrastructure associated therewith” are “costs of the

[generation] facility.”

     Moreover, in its order on reconsideration and opinion, the

Commission found that both associated transmission and non-

transmission infrastructure, “such as certain water and sewer

lines, roads, administrative and security buildings, and other

power lines that are included in the RAC under Subsection

(A)(6),” should receive the enhanced ROE under the statute.

Consumer Counsel does not, however, challenge the Commission’s

findings with regard to the non-transmission infrastructure, and

we can find nothing in the plain language of Subsection (A)(6)

that supports carving out only transmission infrastructure for

                            14
purposes of applying the enhanced ROE.    Consumer Counsel asserts

that Subsection (A)(6) “clearly deals with generation plants, not

transmission lines.”    However, it is undisputed that the type of

transmission interconnection infrastructure at issue here is

properly included in a Subsection (A)(6) RAC. 11

     Consumer Counsel further argues that the portion of

Subsection (A)(6) which states that “such enhanced rate of return

shall apply only to the facility that is the subject of such

[RAC]” limits the applicability of the enhanced ROE to the

generation plant itself.    Again, we disagree.    The plain meaning

of this provision establishes that the enhanced ROE applies only

to the facility covered under the Subsection (A)(6) RAC, and not

     11
       Although a separate provision, Code § 56-585.1(A)(4)
(“Subsection (A)(4)”), allows a utility to seek approval of a
RAC for recovery of transmission costs, a Subsection A4 RAC is
limited to recovery of:

          (i) costs for transmission services provided
          to the utility by the regional transmission
          entity of which the utility is a member, as
          determined under applicable rates, terms and
          conditions approved by the Federal Energy
          Regulatory Commission [“FERC”], and (ii) costs
          charged to the utility that are associated
          with demand response programs approved by
          [FERC] and administered by the regional
          transmission entity of which the utility is a
          member.

     The interconnection facilities included in Dominion’s Rider
BW are not regulated by FERC. Therefore, they fall outside of
the ambit of Subsection (A)(4).
                             15
to other facilities that are included in other RACs or in base

rates.

C. The Commission’s Interpretation of Subsection (A)(6) Furthers
the General Assembly’s Expressly Stated Intention

     The General Assembly was clear about its intentions in

enacting Subsection (A)(6), stating in the text of the statute

that a utility may petition the Commission for a RAC seeking

recovery of the costs of a generation facility “[t]o ensure a

reliable and adequate supply of electricity, to meet the

utility’s projected native load obligations and to promote

economic development.”   Furthermore, the General Assembly

expressly stated in Subsection (A)(6) that a utility “shall have

the right to recover . . . as an incentive to undertake such

projects, an enhanced [ROE].”   (Emphasis added).

     Here, the Commission found that the transmission

interconnection facilities included in Dominion’s Rider BW “are

associated with the Brunswick generation facility and must be

constructed in order for the Brunswick facility to function and

serve its statutory purpose.”   We agree with the Commission.   The

expressly stated intention of the General Assembly in enacting

Subsection (A)(6) and providing for the recovery of an enhanced

ROE is to incentivize the construction of generation plants

capable of “ensur[ing] a reliable and adequate supply of

electricity” to citizens of the Commonwealth.   The application of

                           16
the enhanced ROE to the “entire facility,” including the costs of

necessary transmission interconnection infrastructure associated

with the facility, clearly and unambiguously furthers this

statutory purpose.

                            IV.   Conclusion

     For the reasons stated herein, we hold that a utility has

the right to recover an enhanced rate of return on common equity

for the costs of associated transmission infrastructure included

in a Code § 56-585.1(A)(6) rate adjustment clause.      The

Commission’s decision will be affirmed.

                                                                Affirmed.

JUSTICE MIMS, dissenting.

     The disposition of this case turns on the interpretation of

the plain language of Code § 56-585.1.     The parties ably

presented their arguments, and this is a close question on which

reasonable minds can respectfully differ.      The majority’s

conclusion is articulated in a well-reasoned and well-written

opinion.   Nevertheless, I dissent for the reasons stated by

Commissioner Dimitri in his opinions concurring in part and

dissenting in part from the Commission’s final order and order

on reconsideration.   I found his views persuasive and I have

nothing new to add.   Mindful that the question is one of

statutory interpretation, I am content to rely on the General

                             17
Assembly’s power to amend Code § 56-585.1 if the Court has

misapprehended its intent.

                             18