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The Virginia Supreme Court has ruled that the city of Richmond cannot tax Dominion Virginia Power for natural gas it uses to generate electricity.

The power company, which operates a gas-fired electric generation station in Richmond, challenged utility tax assessments from the city for gas it used from 2001 to 2008. According to the Supreme Court opinion, in total the city sought $7.3 million in taxes and late fees for Dominion Virginia Power’s gas consumption from 2001 to 2013.

The utility’s challenges were denied by the city, and the city’s denials were later affirmed by the state tax commissioner. Dominion Virginia Power appealed to Richmond Circuit Judge Margaret P. Spencer, who sided with the power company.

The city cited a state law that permits the taxation of gas provided by pipeline distribution companies and used by consumers to furnish heat and light. The power company said it used the gas to generate electricity, not to furnish heat or light and so was not subject to the tax.

The city argued that when Dominion Virginia Power burns the gas it produces heat, subjecting the company to the tax. Spencer, however, held that any heat or light created when the power company consumed gas at the station was merely incidental.