Localities in Virginia cannot tax natural gas used to generate electricity, according to a recent ruling by the Supreme Court of Virginia.

Late last month, the state’s Supreme Court upheld a lower court’s opinion that the City of Richmond lacked jurisdiction to assess taxes on natural gas used at a Virginia Electric Power Co. (VEPCO) power plant located in the city.

The city had attempted to assess more than $7.29 million in taxes and late fees for gas used at the plant from 2001 through 2013, according to the Supreme Court’s opinion, published June 30.

VEPCO had originally appealed the taxes to the city and later to the Virginia Department of Taxation, which sided with the city in determining that the gas used at the power plant was subject to tax. VEPCO then took its appeal to circuit court, where the judge ruled in the company’s favor.

Arguments in the case hinged on statutory language defining pipeline distribution companies as transmitting gas to generate “heat or light.”

VEPCO argued that the gas used at its plant was for electricity, not heat or light, and thus not subject to the tax, while the city had argued that it was creating heat by combusting the gas to generate electricity, according to a summary of the arguments provided in the Supreme Court’s opinion.

The Supreme Court, siding with the lower court, said that state code uses the phrase “heat, light and power” to define “commission” but omits the word “power” from its definition of a pipeline distribution company.

The high court agreed with the lower court that this “reflected legislative intent that the term ”pipeline distribution companies’ exclude companies transmitting gas consumed solely to produce electricity.”

Dan Genest, a spokesman for VEPCO parent company Dominion, told NGI via email that the company is “pleased with the court’s ruling, and we are glad to have this issue behind us.”

Dominion has been expanding its gas-fired generating capacity in Virginia recently. Its 1,358 MW Brunswick Power Station in Brunswick County, VA, began operations in April (see Daily GPI, April 27). Dominion is also developing a 1,588 MW gas-fired plant nearby in Greensville County, VA (see Daily GPI, March 30).