HB 2266: Electric utilities; distribution cost sharing program established, etc. - Virginia

Governor Substitute → Chaptered · 5 edits

MODERATE

This bill transitions from a Governor's substitute proposal to an enacted law (Chapter 658), establishing a distribution cost sharing program for Virginia electric utilities. The core policy changes include creating a new state statute requiring utilities to share infrastructure upgrade costs with distributed energy resource projects, adding income tax deductions for qualifying upgrade costs, and setting specific implementation timelines for regulatory compliance and reporting.

Scope change

The bill's scope remains focused on electric utilities and distributed energy resources, but the enactment status changes it from a proposed amendment to an active law with binding regulatory requirements.

REQUIREMENT

New distribution cost sharing program requiring utilities to allocate infrastructure upgrade costs among sharing projects based on capacity ratings

DEFINITION

New definitions for hosting capacity, qualifying upgrade, sharing project, and triggering project to clarify program mechanics

TAXATION

New income tax deduction for costs of qualifying upgrades required to interconnect triggering projects, effective for taxable years beginning on or after January 1, 2026

TIMELINE

State Corporation Commission must finalize regulations by July 1, 2026 and submit implementation report by November 1, 2028

ENFORCEMENT

Added provisions allowing utilities to exempt projects from cost sharing if owners elect to pay upgrade costs in full

Commerce and Labor Substitute → Governor Substitute · 4 edits

MODERATE

The bill was amended from a Senate Substitute to a Governor Substitute, shifting the legislative origin and adding new statutory references to the Code of Virginia. The core policy regarding the distribution cost sharing program for solar projects remains largely intact, but the language was refined to clarify definitions and add a new income tax deduction provision for Virginia taxpayers.

Scope change

The bill now explicitly references amendments to specific Code of Virginia sections (58.1-322.03 and 58.1-402) and adds a new section (56-596.5), while also introducing an income tax deduction provision not present in the Senate version.

DEFINITION

The term 'participating project' was changed to 'sharing project' to better reflect projects that share costs for distribution upgrades.

FISCAL

A new income tax deduction provision was added to the bill, allowing taxpayers to deduct certain federal itemized deductions from their Virginia taxable income.

REQUIREMENT

The Commission's authority to establish cost recovery limits was added, giving it more flexibility in managing how costs are recovered from ratepayers.

TECHNICAL

The bill header was updated from 'Senate Substitute' to 'Governor Substitute' with a new amendment number and date.

Labor and Commerce Substitute → Commerce and Labor Substitute · 6 edits

MODERATE

The bill was amended from a House version to a Senate version, introducing significant changes to eligibility criteria, cost allocation methods, and reporting requirements. The Senate version expands the scope of participating solar projects, modifies how costs are distributed among projects, and adds a refund mechanism for non-operational projects.

Scope change

The bill's scope expanded to include a broader range of solar projects and added a requirement for the State Corporation Commission to submit a report on program implementation.

ELIGIBILITY

Participating project definition changed from 50 kW to 250 kW minimum and from 2 MW to 3 MW maximum, and now requires participation in net energy metering.

FISCAL

Cost allocation method changed from spreading costs based on kilowatt-hour output to spreading based on AC nameplate capacity rating.

Added an exemption allowing project developers to pay full cost upfront to avoid program participation.

Added a refund system for projects that are not operational during cost recovery periods.

REQUIREMENT

Added a requirement for the State Corporation Commission to submit a report to both House and Senate committee chairs by November 1, 2028.

Added authority for the Commission to determine the appropriate time period for cost recovery under the program.

Reenrolled → Labor and Commerce Substitute · 7 edits

MODERATE

This bill was amended to change how distribution cost sharing for electric utilities works. The main changes involve modifying the definition of projects that can participate in the program, changing how costs are allocated among projects, and adjusting the timeline for program implementation and reporting.

Scope change

The bill's scope expanded to clarify that the distribution cost sharing program applies to solar generating facilities with specific capacity thresholds, and the cost allocation method was changed from AC nameplate capacity rating to kilowatt-hour output.

DEFINITION

Changed the definition of 'sharing project' from distributed energy resources with AC nameplate capacity of 250 kW to 3 MW to solar generating facilities with AC nameplate rating of 50 kW to 2 MW.

Added new definition for 'Participating project' to clarify it refers specifically to solar generating facilities within the defined capacity range.

REQUIREMENT

Changed cost allocation method from AC nameplate capacity rating to kilowatt-hour output of each participating project.

Changed cost recovery from being recovered from sharing projects to being recovered from customers (jurisdictional and nonjurisdictional).

TIMELINE

Modified the timeline for State Corporation Commission to establish regulations by July 1, 2026, and file necessary tariffs by December 1, 2026.

Modified the report submission deadline from November 1, 2028 to no later than November 1, 2028.

ELIGIBILITY

Removed the exemption provision that allowed project owners to opt out by paying upgrade costs in full.

Enrolled → Reenrolled · 4 edits · Apr 2, 2025

MODERATE

The bill was reenrolled with minor formatting changes and a new income tax deduction provision added to the Code of Virginia. The core distribution cost sharing program for solar projects remains substantively unchanged, though terminology was slightly adjusted (e.g., 'participating project' became 'sharing project'). The reenrolled version also includes a significant tax deduction provision for Virginia taxpayers related to federal itemized deductions and personal exemptions.

Scope change

The bill's scope expanded to include income tax deductions in addition to the distribution cost sharing program, and terminology was updated to clarify project classifications.

FISCAL

Added a new income tax deduction provision (§ 58.1-322.03) allowing Virginia taxpayers to deduct federal itemized deductions and personal exemptions from Virginia taxable income.

DEFINITION

Changed terminology from 'participating project' to 'sharing project' in the distribution cost sharing program to clarify which projects share upgrade costs.

Added a new definition for 'Program' to explicitly define the distribution cost sharing program established under the section.

TECHNICAL

Minor formatting and layout changes occurred during the reenrollment process, including session header updates and spacing adjustments.

Introduced → Enrolled · 8 edits · Apr 2, 2025

MODERATE

The bill was amended to expand its scope from all incumbent electric utilities to only Phase I and Phase II Utilities, narrow the definition of participating projects to solar facilities between 250 kW and 3 MW, add exemptions for projects that pay upgrades upfront, and require a Commission report to legislative committees by November 2028.

Scope change

The bill now applies only to Phase I and Phase II Utilities rather than all incumbent electric utilities, and restricts participating projects to solar facilities with specific capacity thresholds.

SCOPE

Changed from all incumbent electric utilities to only Phase I and Phase II Utilities as defined in Virginia Code § 56-585.1.

ELIGIBILITY

Narrowed participating projects from any small generating facility 50 kW to 2 MW to only solar facilities 250 kW to 3 MW seeking net energy metering.

REQUIREMENT

Added requirement that qualifying upgrade costs must be approved by the Commission as reasonable and prudent.

Added requirement that costs be recovered from jurisdictional and nonjurisdictional customers separately.

Added provision for refunding projects during non-operational periods upon owner petition.

FISCAL

Added exemption allowing projects to opt out of cost sharing if they pay the full upgrade cost upfront.

ENFORCEMENT

Added requirement for State Corporation Commission to submit implementation report to legislative committees by November 1, 2028.

DEFINITION

Changed participating project definition to specify solar facilities and net energy metering participation requirements.

Electric utilities; distribution cost sharing program established, etc.

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