10-Q 1 d524933d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

 

 

 

Commission File

Number

  

Exact name of registrants as specified in their charters, address of

principal executive offices and registrants’ telephone number

  

I.R.S. Employer

Identification Number

001-08489

   DOMINION RESOURCES, INC.    54-1229715

001-02255

   VIRGINIA ELECTRIC AND POWER COMPANY    54-0418825
  

120 Tredegar Street

Richmond, Virginia 23219

(804) 819-2000

  

State or other jurisdiction of incorporation or organization of the registrants: Virginia

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Dominion Resources, Inc.    Yes  x    No  ¨             Virginia Electric and Power Company    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Dominion Resources, Inc.    Yes  x    No  ¨             Virginia Electric and Power Company    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Dominion Resources, Inc.

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Virginia Electric and Power Company

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   x  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Dominion Resources, Inc.    Yes  ¨    No  x             Virginia Electric and Power Company    Yes  ¨    No  x

At March 31, 2013, the latest practicable date for determination, Dominion Resources, Inc. had 577,676,451 shares of common stock outstanding and Virginia Electric and Power Company had 274,723 shares of common stock outstanding. Dominion Resources, Inc. is the sole holder of Virginia Electric and Power Company’s common stock.

This combined Form 10-Q represents separate filings by Dominion Resources, Inc. and Virginia Electric and Power Company. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Virginia Electric and Power Company makes no representations as to the information relating to Dominion Resources, Inc.’s other operations.

 

 

 


Table of Contents

COMBINED INDEX

 

         Page
Number
 
 

Glossary of Terms

     3   
  PART I. Financial Information   
Item 1.  

Financial Statements

     6   
Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     53   
Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

     66   
Item 4.  

Controls and Procedures

     68   
  PART II. Other Information   
Item 1.  

Legal Proceedings

     68   
Item 1A.  

Risk Factors

     68   
Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

     70   
Item 6.  

Exhibits

     71   

 

PAGE2


Table of Contents

GLOSSARY OF TERMS

The following abbreviations or acronyms used in this Form 10-Q are defined below:

 

Abbreviation or Acronym

  

Definition

2009 Base Rate Review

  

Order entered by the Virginia Commission in January 2009, pursuant to the Regulation Act, initiating reviews of the base rates and terms and conditions of all investor-owned utilities in Virginia

AFUDC

  

Allowance for funds used during construction

AOCI

  

Accumulated other comprehensive income (loss)

Appalachian Gateway Project

  

Dominion Energy project completed in September 2012 to provide approximately 484,000 Dth per day of firm transportation services for new Appalachian gas supplies in West Virginia and southwestern Pennsylvania to an interconnection with Texas Eastern Transmission, LP at Oakford, Pennsylvania.

AROs

  

Asset retirement obligations

ARP

  

Acid Rain Program, a market-based initiative for emissions allowance trading, established pursuant to Title IV of the CAA

bcf

  

Billion cubic feet

Bear Garden

  

Bear Garden power station, a 590 MW combined cycle, natural gas-fired power station in Buckingham County, Virginia

Blue Racer

  

Blue Racer Midstream, LLC, a joint venture with Caiman

BOD

  

Board of Directors

BP

  

BP Wind Energy North America Inc.

Brayton Point

  

Brayton Point power station, a 1,528 MW power station in Somerset, Massachusetts, with three coal-fired units and one unit fired by natural gas or oil

CAA

  

Clean Air Act

Caiman

  

Caiman Energy II, LLC

CAIR

  

Clean Air Interstate Rule

Carson-to-Suffolk line

  

Virginia Power 60-mile 500 kV transmission line in southeastern Virginia

CEO

  

Chief Executive Officer

CERCLA

  

Comprehensive Environmental Response, Compensation and Liability Act of 1980

CFO

  

Chief Financial Officer

CO2

  

Carbon dioxide

COL

  

Combined Construction Permit and Operating License

Companies

  

Dominion and Virginia Power, collectively

Cooling degree days

  

Units measuring the extent to which the average daily temperature is greater than 65 degrees Fahrenheit, calculated as the difference between 65 degrees and the average temperature for that day

Cove Point

  

Dominion Cove Point LNG, LP

CSAPR

  

Cross State Air Pollution Rule

CWA

  

Clean Water Act

DEI

  

Dominion Energy, Inc.

DOE

  

Department of Energy

Dominion

  

The legal entity, Dominion Resources, Inc., one or more of its consolidated subsidiaries (other than Virginia Power) or operating segments or the entirety of Dominion Resources, Inc. and its consolidated subsidiaries

DRS

  

Dominion Resources Services, Inc.

DSM

  

Demand-side management

DTI

  

Dominion Transmission, Inc.

Dth

  

Dekatherm

DVP

  

Dominion Virginia Power operating segment

East Ohio

  

The East Ohio Gas Company, doing business as Dominion East Ohio

Elwood

  

Elwood power station, a 1,424 MW power station outside Chicago, Illinois, with nine 158 MW natural gas-fired combustion turbines, in which Dominion owns a 50 percent interest (712 MW)

Energy Capital Partners

  

A private equity firm with offices in Short Hills, New Jersey and San Diego, California

EPA

  

Environmental Protection Agency

EPS

  

Earnings per share

ESBWR

  

General Electric-Hitachi’s Economic Simplified Boiling Water Reactor

Fairless

  

Fairless power station

 

PAGE3


Table of Contents

Abbreviation or Acronym

  

Definition

FERC   

Federal Energy Regulatory Commission

Fowler Ridge   

A wind-turbine facility joint venture between Dominion and BP in Benton County, Indiana

FTRs   

Financial transmission rights

GAAP   

U.S. generally accepted accounting principles

Gal   

Gallon

GHG   

Greenhouse gas

Heating degree days   

Units measuring the extent to which the average daily temperature is less than 65 degrees Fahrenheit, calculated as the difference between 65 degrees and the average temperature for that day

INPO   

Institute of Nuclear Power Operations

ISO   

Independent system operator

ISO-NE   

ISO New England

Kewaunee   

Kewaunee nuclear power station

Kincaid   

Kincaid power station, a 1,158 MW power station in Kincaid, Illinois, with two 579 MW coal-fired units

kV   

Kilovolt

kWh   

Kilowatt – hour

Line TL-404   

An approximately 26-mile, 24- and 30- inch interstate gas pipeline that extends from Wetzel County, West Virginia to Monroe County, Ohio

LNG   

Liquefied natural gas

Maryland Commission   

Maryland Public Service Commission

MD&A   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Meadow Brook-to-Loudoun line   

Virginia Power 65-mile 500 kV transmission line that begins in Warren County, Virginia and terminates in Loudoun County, Virginia

Millstone   

Millstone nuclear power station

MISO   

Midwest Independent Transmission System Operator, Inc.

Moody’s   

Moody’s Investors Service

MW   

Megawatt

MWh   

Megawatt hour

NCEMC   

North Carolina Electric Membership Corporation

NedPower   

A wind-turbine facility joint venture between Dominion and Shell in Grant County, West Virginia

NGLs   

Natural gas liquids

North Anna   

North Anna nuclear power station

North Carolina Commission   

North Carolina Utilities Commission

NOx   

Nitrogen oxide

NPDES   

National Pollutant Discharge Elimination System

NRC   

Nuclear Regulatory Commission

NSPS   

New Source Performance Standards

ODEC   

Old Dominion Electric Cooperative

Ohio Commission   

Public Utilities Commission of Ohio

PIPP   

Percentage of Income Payment Plan

PIR   

Pipeline Infrastructure Replacement program deployed by East Ohio

PJM   

PJM Interconnection, L.L.C.

ppb   

Parts-per-billion

Regulation Act   

Legislation effective July 1, 2007, that amended the Virginia Electric Utility Restructuring Act and fuel factor statute, which legislation is also known as the Virginia Electric Utility Regulation Act

RGGI   

Regional Greenhouse Gas Initiative

Rider B   

A rate adjustment clause associated with the recovery of costs related to the conversion of three of Virginia Power’s coal-fired power stations to biomass

Rider R   

A rate adjustment clause associated with the recovery of costs related to Bear Garden

Rider S   

A rate adjustment clause associated with the recovery of costs related to the Virginia City Hybrid Energy Center

Rider W   

A rate adjustment clause associated with the recovery of costs related to Warren County

Riders C1A and C2A   

Rate adjustment clauses associated with the recovery of costs related to certain DSM programs approved in the 2011 DSM case

 

PAGE4


Table of Contents

Abbreviation or Acronym

  

Definition

ROE   

Return on equity

RTO   

Regional transmission organization

Salem Harbor   

Salem Harbor power station

SEC   

Securities and Exchange Commission

Shell   

Shell WindEnergy, Inc.

SO2   

Sulfur dioxide

Standard & Poor’s   

Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc.

State Line

  

State Line power station

TGP

  

Tennessee Gas Pipeline Company

U.S.

  

United States of America

UAO

  

Unilateral Administrative Order

VIE

  

Variable interest entity

Virginia City Hybrid Energy Center

  

A 600 MW baseload carbon-capture compatible, clean coal powered electric generation facility in Wise County, Virginia

Virginia Commission

  

Virginia State Corporation Commission

Virginia Power

  

The legal entity, Virginia Electric and Power Company, one or more of its consolidated subsidiaries or operating segments or the entirety of Virginia Power and its consolidated subsidiaries

Virginia Settlement Approval Order

  

Order issued by the Virginia Commission in March 2010 concluding Virginia Power’s 2009 Base Rate Review

Warren County

  

Warren County power station, a 1,329 MW combined-cycle, natural gas-fired power station under construction in Warren County, Virginia

 

PAGE5


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2013      2012(1)  
(millions, except per share amounts)              

Operating Revenue

   $ 3,523       $ 3,397   
  

 

 

    

 

 

 

Operating Expenses

     

Electric fuel and other energy-related purchases

     951         912   

Purchased electric capacity

     88         113   

Purchased gas

     467         412   

Other operations and maintenance

     623         607   

Depreciation, depletion and amortization

     297         273   

Other taxes

     167         162   
  

 

 

    

 

 

 

Total operating expenses

     2,593         2,479   
  

 

 

    

 

 

 

Income from operations

     930         918   
  

 

 

    

 

 

 

Other income

     87         74   

Interest and related charges

     228         212   
  

 

 

    

 

 

 

Income from continuing operations including noncontrolling interests before income tax expense

     789         780   

Income tax expense

     288         269   
  

 

 

    

 

 

 

Income from continuing operations including noncontrolling interests

     501         511   

Income (loss) from discontinued operations(2)

     1         (10
  

 

 

    

 

 

 

Net Income Including Noncontrolling Interests

     502         501   

Noncontrolling Interests

     7         7   
  

 

 

    

 

 

 

Net Income Attributable to Dominion

   $ 495       $ 494   
  

 

 

    

 

 

 

Amounts Attributable to Dominion:

     

Income from continuing operations, net of tax

   $ 494       $ 504   

Income (loss) from discontinued operations, net of tax

     1         (10
  

 

 

    

 

 

 

Net income attributable to Dominion

   $ 495       $ 494   
  

 

 

    

 

 

 

Earnings Per Common Share-Basic

     

Income from continuing operations

   $ 0.86       $ 0.88   

Income (loss) from discontinued operations

     —           (0.02
  

 

 

    

 

 

 

Net income attributable to Dominion

   $ 0.86       $ 0.86   
  

 

 

    

 

 

 

Earnings Per Common Share-Diluted

     

Income from continuing operations

   $ 0.86       $ 0.88   

Income (loss) from discontinued operations

     —           (0.02
  

 

 

    

 

 

 

Net income attributable to Dominion

   $ 0.86       $ 0.86   
  

 

 

    

 

 

 

Dividends declared per common share

   $ 0.5625       $ 0.5275   
  

 

 

    

 

 

 

 

(1) Recast to reflect Brayton Point and Kincaid as discontinued operations, as discussed in Note 3.
(2) Includes income tax (expense) benefit of $(—) and $10 million for the three months ended March 31, 2013 and 2012, respectively.

The accompanying notes are an integral part of Dominion’s Consolidated Financial Statements.

 

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Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2013     2012  
(millions)             

Net income including noncontrolling interests

   $ 502      $ 501   

Other comprehensive income (loss), net of taxes:

    

Net deferred gains (losses) on derivatives-hedging activities(1)

     (90     128   

Changes in unrealized net gains on investment securities(2)

     78        85   

Amounts reclassified to net income:

    

Net derivative (gains) losses-hedging activities(3)

     76        (16

Net realized gains on investment securities(4)

     (27     (10

Net pension and other postretirement benefit costs(5)

     20        12   
  

 

 

   

 

 

 

Total other comprehensive income

     57        199   
  

 

 

   

 

 

 

Comprehensive income including noncontrolling interests

     559        700   

Comprehensive income attributable to noncontrolling interests

     7        7   
  

 

 

   

 

 

 

Comprehensive income attributable to Dominion

   $ 552      $ 693   
  

 

 

   

 

 

 

 

(1) Net of $54 million and $(80) million tax for the three months ended March 31, 2013 and 2012, respectively.
(2) Net of $(51) million and $(56) million tax for the three months ended March 31, 2013 and 2012, respectively.
(3) Net of $(48) million and $12 million tax for the three months ended March 31, 2013 and 2012, respectively.
(4) Net of $18 million and $6 million tax for the three months ended March 31, 2013 and 2012, respectively.
(5) Net of $(9) million tax for both the three months ended March 31, 2013 and 2012.

The accompanying notes are an integral part of Dominion’s Consolidated Financial Statements.

 

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Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     March 31,
2013
    December  31,
2012(1)
 
(millions)             

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 35      $ 248   

Customer receivables (less allowance for doubtful accounts of $29 and $28)

     1,758        1,621   

Other receivables (less allowance for doubtful accounts of $4 at both dates)

     73        96   

Inventories

     1,039        1,259   

Derivative assets

     527        518   

Assets held for sale

     313        —     

Other

     1,403        1,398   
  

 

 

   

 

 

 

Total current assets

     5,148        5,140   
  

 

 

   

 

 

 

Investments

    

Nuclear decommissioning trust funds

     3,547        3,330   

Investment in equity method affiliates

     559        558   

Other

     294        303   
  

 

 

   

 

 

 

Total investments

     4,400        4,191   
  

 

 

   

 

 

 

Property, Plant and Equipment

    

Property, plant and equipment

     43,705        43,364   

Property, plant and equipment, VIE

     957        957   

Accumulated depreciation, depletion and amortization

     (13,753     (13,548
  

 

 

   

 

 

 

Total property, plant and equipment, net

     30,909        30,773   
  

 

 

   

 

 

 

Deferred Charges and Other Assets

    

Goodwill

     3,128        3,130   

Regulatory assets

     1,696        1,717   

Other

     1,835        1,887   
  

 

 

   

 

 

 

Total deferred charges and other assets

     6,659        6,734   
  

 

 

   

 

 

 

Total assets

   $ 47,116      $ 46,838   
  

 

 

   

 

 

 

 

(1) Dominion’s Consolidated Balance Sheet at December 31, 2012 has been derived from the audited Consolidated Financial Statements at that date.

The accompanying notes are an integral part of Dominion’s Consolidated Financial Statements.

 

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Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

     March 31,
2013
    December  31,
2012(1)
 
(millions)             

LIABILITIES AND EQUITY

    

Current Liabilities

    

Securities due within one year

   $ 1,193      $ 1,363   

Securities due within one year, VIE

     852        860   

Short-term debt

     2,003        2,412   

Accounts payable

     950        1,137   

Derivative liabilities

     556        510   

Liabilities held for sale

     48        —     

Other

     1,370        1,481   
  

 

 

   

 

 

 

Total current liabilities

     6,972        7,763   
  

 

 

   

 

 

 

Long-Term Debt

    

Long-term debt

     15,904        15,478   

Junior subordinated notes

     1,373        1,373   
  

 

 

   

 

 

 

Total long-term debt

     17,277        16,851   
  

 

 

   

 

 

 

Deferred Credits and Other Liabilities

    

Deferred income taxes and investment tax credits

     6,070        5,800   

Asset retirement obligations

     1,611        1,641   

Pension and other postretirement benefit liabilities

     1,834        1,831   

Regulatory liabilities

     1,646        1,514   

Other

     521        556   
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     11,682        11,342   
  

 

 

   

 

 

 

Total liabilities

     35,931        35,956   
  

 

 

   

 

 

 

Commitments and Contingencies (see Note 15)

    

Subsidiary Preferred Stock Not Subject to Mandatory Redemption

     257        257   
  

 

 

   

 

 

 

Equity

    

Common stock – no par(2)

     5,571        5,493   

Other paid-in capital

     156        162   

Retained earnings

     5,961        5,790   

Accumulated other comprehensive loss

     (820     (877
  

 

 

   

 

 

 

Total common shareholders’ equity

     10,868        10,568   
  

 

 

   

 

 

 

Noncontrolling interest

     60        57   
  

 

 

   

 

 

 

Total equity

     10,928        10,625   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 47,116      $ 46,838   
  

 

 

   

 

 

 

 

(1) Dominion’s Consolidated Balance Sheet at December 31, 2012 has been derived from the audited Consolidated Financial Statements at that date.
(2) 1 billion shares authorized; 578 million shares and 576 million shares outstanding at March 31, 2013 and December 31, 2012, respectively.

The accompanying notes are an integral part of Dominion’s Consolidated Financial Statements.

 

PAGE9


Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

Three Months Ended March 31,

   2013     2012  
(millions)             

Operating Activities

    

Net income including noncontrolling interests

   $ 502      $ 501   

Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:

    

Depreciation, depletion and amortization (including nuclear fuel)

     366        353   

Deferred income taxes and investment tax credits

     266        269   

Rate refunds

     (5     (55

Other adjustments

     (52     (72

Changes in:

    

Accounts receivable

     (124     327   

Inventories

     133        99   

Deferred fuel and purchased gas costs, net

     16        162   

Prepayments

     (17     37   

Accounts payable

     (135     (275

Accrued interest, payroll and taxes

     (33     89   

Margin deposit assets and liabilities

     (65     97   

Other operating assets and liabilities

     200        91   
  

 

 

   

 

 

 

Net cash provided by operating activities

     1,052        1,623   
  

 

 

   

 

 

 

Investing Activities

    

Plant construction and other property additions (including nuclear fuel)

     (904     (981

Proceeds from sales of securities

     554        415   

Purchases of securities

     (574     (420

Other

     62        40   
  

 

 

   

 

 

 

Net cash used in investing activities

     (862     (946
  

 

 

   

 

 

 

Financing Activities

    

Repayment of short-term debt, net

     (409     (757

Issuance of long-term debt

     1,250        450   

Repayment of long-term debt

     (712     (104

Repayment of affiliated notes payable

     (258     —     

Issuance of common stock

     73        69   

Common dividend payments

     (324     (301

Subsidiary preferred dividend payments

     (4     (4

Other

     (19     1   
  

 

 

   

 

 

 

Net cash used in financing activities

     (403     (646
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (213     31   

Cash and cash equivalents at beginning of period

     248        102   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 35      $ 133   
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Significant noncash investing activities:

    

Accrued capital expenditures

   $ 200      $ 298   
  

 

 

   

 

 

 

The accompanying notes are an integral part of Dominion’s Consolidated Financial Statements.

 

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Table of Contents

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2013      2012  
(millions)              

Operating Revenue

   $ 1,781       $ 1,754   
  

 

 

    

 

 

 

Operating Expenses

     

Electric fuel and other energy-related purchases

     570         614   

Purchased electric capacity

     88         113   

Other operations and maintenance:

     

Affiliated suppliers

     74         83   

Other

     245         223   

Depreciation and amortization

     207         188   

Other taxes

     67         65   
  

 

 

    

 

 

 

Total operating expenses

     1,251         1,286   
  

 

 

    

 

 

 

Income from operations

     530         468   
  

 

 

    

 

 

 

Other income

     25         23   

Interest and related charges

     93         100   
  

 

 

    

 

 

 

Income before income tax expense

     462         391   

Income tax expense

     175         148   
  

 

 

    

 

 

 

Net Income

     287         243   

Preferred dividends

     4         4   
  

 

 

    

 

 

 

Balance available for common stock

   $ 283       $ 239   
  

 

 

    

 

 

 

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

 

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VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2013     2012  
(millions)             

Net income

   $ 287      $ 243   

Other comprehensive income (loss), net of taxes:

    

Net deferred gains (losses) on derivatives-hedging activities(1)

     2        (1

Changes in unrealized net gains on nuclear decommissioning trust funds(2)

     8        9   

Amounts reclassified to net income:

    

Net derivative losses-hedging activities(3)

     —          1   

Net realized gains on nuclear decommissioning trust funds(4)

     (1     (1
  

 

 

   

 

 

 

Other comprehensive income

     9        8   
  

 

 

   

 

 

 

Comprehensive income

   $ 296      $ 251   
  

 

 

   

 

 

 

 

(1) Net of $(1) million and $— million tax for the three months ended March 31, 2013 and 2012, respectively.
(2) Net of $(5) million tax for both the three months ended March 31, 2013 and 2012.
(3) Net of $— million and $(1) million tax for the three months ended March 31, 2013 and 2012, respectively.
(4) Net of $1 million tax for both the three months ended March 31, 2013 and 2012.

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

 

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VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     March 31,
2013
    December 31,
2012(1)
 
(millions)             

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 3      $ 28   

Customer receivables (less allowance for doubtful accounts of $10 at both dates)

     892        849   

Other receivables (less allowance for doubtful accounts of $3 at both dates)

     39        51   

Inventories (average cost method)

     721        789   

Prepayments

     37        23   

Other

     189        241   
  

 

 

   

 

 

 

Total current assets

     1,881        1,981   
  

 

 

   

 

 

 

Investments

    

Nuclear decommissioning trust funds

     1,608        1,515   

Other

     14        14   
  

 

 

   

 

 

 

Total investments

     1,622        1,529   
  

 

 

   

 

 

 

Property, Plant and Equipment

    

Property, plant and equipment

     31,085        30,631   

Accumulated depreciation and amortization

     (10,157     (10,014
  

 

 

   

 

 

 

Total property, plant and equipment, net

     20,928        20,617   
  

 

 

   

 

 

 

Deferred Charges and Other Assets

    

Intangible assets

     182        181   

Regulatory assets

     388        396   

Other

     117        107   
  

 

 

   

 

 

 

Total deferred charges and other assets

     687        684   
  

 

 

   

 

 

 

Total assets

   $ 25,118      $ 24,811   
  

 

 

   

 

 

 

 

(1) Virginia Power’s Consolidated Balance Sheet at December 31, 2012 has been derived from the audited Consolidated Financial Statements at that date.

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

 

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VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

     March 31,
2013
     December  31,
2012(1)
 
(millions)              

LIABILITIES AND SHAREHOLDER’S EQUITY

     

Current Liabilities

     

Securities due within one year

   $ 18       $ 418   

Short-term debt

     661         992   

Accounts payable

     347         430   

Payables to affiliates

     61         67   

Affiliated current borrowings

     57         435   

Accrued interest, payroll and taxes

     294         204   

Other

     319         461   
  

 

 

    

 

 

 

Total current liabilities

     1,757         3,007   
  

 

 

    

 

 

 

Long-Term Debt

     7,445         6,251   
  

 

 

    

 

 

 

Deferred Credits and Other Liabilities

     

Deferred income taxes and investment tax credits

     3,918         3,879   

Asset retirement obligations

     709         705   

Regulatory liabilities

     1,414         1,285   

Other

     241         194   
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     6,282         6,063   
  

 

 

    

 

 

 

Total liabilities

     15,484         15,321   
  

 

 

    

 

 

 

Commitments and Contingencies (see Note 15)

     

Preferred Stock Not Subject to Mandatory Redemption

     257         257   
  

 

 

    

 

 

 

Common Shareholder’s Equity

     

Common stock – no par(2)

     5,738         5,738   

Other paid-in capital

     1,113         1,113   

Retained earnings

     2,492         2,357   

Accumulated other comprehensive income

     34         25   
  

 

 

    

 

 

 

Total common shareholder’s equity

     9,377         9,233   
  

 

 

    

 

 

 

Total liabilities and shareholder’s equity

   $ 25,118       $ 24,811   
  

 

 

    

 

 

 

 

(1) Virginia Power’s Consolidated Balance Sheet at December 31, 2012 has been derived from the audited Consolidated Financial Statements at that date.
(2) 500,000 shares authorized; 274,723 shares outstanding at March 31, 2013 and December 31, 2012.

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

 

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VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Three Months Ended March 31,

   2013     2012  
(millions)             

Operating Activities

    

Net income

   $ 287      $ 243   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization (including nuclear fuel)

     250        222   

Deferred income taxes and investment tax credits

     112        85   

Rate refunds

     (5     (55

Other adjustments

     (17     (20

Changes in:

    

Accounts receivable

     (31     125   

Affiliated accounts receivable and payable

     (6     (15

Inventories

     68        20   

Deferred fuel expenses

     (19     156   

Accounts payable

     (65     (59

Accrued interest, payroll and taxes

     90        137   

Other operating assets and liabilities

     43        67   
  

 

 

   

 

 

 

Net cash provided by operating activities

     707        906   
  

 

 

   

 

 

 

Investing Activities

    

Plant construction and other property additions

     (592     (483

Purchases of nuclear fuel

     (47     (67

Purchases of securities

     (206     (193

Proceeds from sales of securities

     189        191   

Other

     1        (6
  

 

 

   

 

 

 

Net cash used in investing activities

     (655     (558
  

 

 

   

 

 

 

Financing Activities

    

Repayment of short-term debt, net

     (331     (639

Repayment of affiliated current borrowings, net

     (378       

Issuance of long-term debt

     1,250        450   

Repayment of long-term debt

     (451     (1

Common dividend payments

     (148     (149

Preferred dividend payments

     (4     (4

Other

     (15     (6
  

 

 

   

 

 

 

Net cash used in financing activities

     (77     (349
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (25     (1

Cash and cash equivalents at beginning of period

     28        29   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 3      $ 28   
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Significant noncash investing activities:

    

Accrued capital expenditures

   $ 117      $ 208   
  

 

 

   

 

 

 

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

 

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COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Nature of Operations

Dominion, headquartered in Richmond, Virginia, is one of the nation’s largest producers and transporters of energy. Dominion’s operations are conducted through various subsidiaries, including Virginia Power, a regulated public utility that generates, transmits and distributes electricity for sale in Virginia and northeastern North Carolina.

Note 2. Significant Accounting Policies

As permitted by the rules and regulations of the SEC, Dominion’s and Virginia Power’s accompanying unaudited Consolidated Financial Statements contain certain condensed financial information and exclude certain footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with GAAP. These unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes in Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2012.

In Dominion’s and Virginia Power’s opinion, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly their financial position as of March 31, 2013, and their results of operations and cash flows for the three months ended March 31, 2013 and 2012. Such adjustments are normal and recurring in nature unless otherwise noted.

The Companies make certain estimates and assumptions in preparing their Consolidated Financial Statements in accordance with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. Actual results may differ from those estimates.

Dominion’s and Virginia Power’s accompanying unaudited Consolidated Financial Statements include, after eliminating intercompany transactions and balances, their accounts and those of their respective majority-owned subsidiaries and those VIEs where Dominion has been determined to be the primary beneficiary.

The results of operations for interim periods are not necessarily indicative of the results expected for the full year. Information for quarterly periods is affected by seasonal variations in sales, rate changes, electric fuel and other energy-related purchases, purchased gas expenses and other factors.

Certain amounts in Dominion’s and Virginia Power’s 2012 Consolidated Financial Statements and Notes have been reclassified to conform to the 2013 presentation for comparative purposes. The reclassifications did not affect the Companies’ net income, total assets, liabilities, equity or cash flows.

Amounts disclosed for Dominion are inclusive of Virginia Power, where applicable.

Note 3. Dispositions

Sale of Brayton Point, Kincaid and Equity Method Investment in Elwood

In March 2013, Dominion entered into an agreement with Energy Capital Partners to sell Brayton Point, Kincaid, and its 50% interest in Elwood, which is an equity method investment.

 

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The transaction is expected to close in the second quarter of 2013, subject to FERC approval. The sales price is approximately $472 million, subject to customary closing adjustments. In the first quarter of 2013, Brayton Point’s and Kincaid’s assets and liabilities to be disposed of were classified as held for sale and adjusted to their estimated fair value less cost to sell, resulting in a pre-tax impairment charge of $37 million ($22 million after-tax), which is included in discontinued operations in Dominion’s Consolidated Statement of Income. Dominion used the market approach to estimate the fair value of Brayton Point’s and Kincaid’s long-lived assets. This was considered a Level 2 fair value measurement given it was based on the agreed-upon sales price. The carrying amounts of the major classes of assets and liabilities classified as held for sale in Dominion’s Consolidated Balance Sheet are as follows:

 

At March 31,

   2013  
(millions)       

Assets

  

Current assets

   $ 109   

Property, plant and equipment, net

     187   

Other assets

     17   
  

 

 

 

Total assets

   $ 313   

Liabilities

  

Current liabilities

   $ 28   

Asset retirement obligations

     19   

Other liabilities

     1   
  

 

 

 

Total liabilities

   $ 48   
  

 

 

 

The following table presents selected information regarding the results of operations of Brayton Point and Kincaid, which are reported as discontinued operations in Dominion’s Consolidated Statements of Income:

 

     Three Months Ended
March 31,
 
     2013      2012  
(millions)              

Operating revenue

   $ 154       $ 65   

Income (loss) before income taxes

     1         (22

Dominion’s 50% interest in Elwood is an equity method investment and therefore, in accordance with applicable accounting guidance, the carrying amount of this investment is not classified as held for sale nor are the equity earnings from this investment reported as discontinued operations.

Sale of Salem Harbor and State Line

In August 2012, Dominion completed the sale of Salem Harbor. During the second quarter of 2012, Dominion completed the sale of State Line, which ceased operations in March 2012.

The following table presents selected information regarding the results of operations of Salem Harbor and State Line, which are classified in discontinued operations in Dominion’s Consolidated Statement of Income:

 

Three months ended March 31,

   2012  
(millions)       

Operating revenue

   $ 30   

Income before income taxes

     2   

 

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Note 4. Operating Revenue

The Companies’ operating revenue consists of the following:

 

     Three Months Ended
March 31,
 
     2013      2012  
(millions)              

Dominion

     

Electric sales:

     

Regulated

   $ 1,761       $ 1,724   

Nonregulated

     658         643   

Gas sales:

     

Regulated

     132         99   

Nonregulated

     345         398   

Gas transportation and storage

     467         405   

Other

     160         128   
  

 

 

    

 

 

 

Total operating revenue

   $ 3,523       $ 3,397   
  

 

 

    

 

 

 

Virginia Power

     

Regulated electric sales

   $ 1,761       $ 1,724   

Other

     20         30   
  

 

 

    

 

 

 

Total operating revenue

   $ 1,781       $ 1,754   
  

 

 

    

 

 

 

Note 5. Income Taxes

For continuing operations, including noncontrolling interests, the statutory U.S. federal income tax rate reconciles to Dominion’s and Virginia Power’s effective income tax rate as follows:

 

     Dominion     Virginia Power  

Three Months Ended March 31,

   2013     2012     2013     2012  

U.S. statutory rate

     35.0     35.0     35.0     35.0

Increases (reductions) resulting from:

        

State taxes, net of federal benefit

     4.0        4.0        3.9        3.9   

Investment and production tax credits

     (1.5     (0.5     —          —     

Valuation allowances

     0.1        (2.6     —          —     

AFUDC – equity

     (0.7     (0.7     (1.3     (0.9

Other, net

     (0.4     (0.7     0.2        (0.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Effective tax rate

     36.5     34.5     37.8     37.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Dominion’s effective tax rate in 2012 reflects a $20 million reduction of valuation allowance related to state operating loss carryforwards attributable to Fairless. After considering the results of Fairless’ operations in recent years and a forecast of future operating results reflecting Dominion’s planned purchase of the facility, Dominion concluded that it was more likely than not that the tax benefit of the operating losses would be realized. Significant assumptions included future commodity prices, in particular, those for electric energy produced by Fairless and those for natural gas, as compared to other fuels used for the generation of electricity, which would significantly influence the extent to which Fairless is dispatched by PJM.

As of March 31, 2013, there have been no material changes in Dominion’s and Virginia Power’s unrecognized tax benefits or possible changes that could reasonably be expected to occur during the next twelve months. See Note 5 to the Consolidated Financial Statements in Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2012 for a discussion of these unrecognized tax benefits.

 

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Note 6. Earnings Per Share

The following table presents the calculation of Dominion’s basic and diluted EPS:

 

     Three Months Ended
March 31,
 
     2013      2012  
(millions, except EPS)              

Net income attributable to Dominion

   $ 495       $ 494   
  

 

 

    

 

 

 

Average shares of common stock outstanding – Basic

     576.6         570.5   

Net effect of potentially dilutive securities(1)

     0.9         1.4   
  

 

 

    

 

 

 

Average shares of common stock outstanding – Diluted

     577.5         571.9   
  

 

 

    

 

 

 

Earnings Per Common Share – Basic

   $ 0.86       $ 0.86   

Earnings Per Common Share – Diluted

   $ 0.86       $ 0.86   
  

 

 

    

 

 

 

 

(1) Potentially dilutive securities consist primarily of goal-based stock and contingently convertible senior notes.

There were no potentially dilutive securities excluded from the calculation of diluted EPS for the three months ended March 31, 2013 and 2012.

 

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Note 7. Accumulated Other Comprehensive Income

The following table presents Dominion’s changes in AOCI by component, net of tax for the three months ended March 31, 2013:

 

     Deferred gains
and losses on
derivatives-
hedging
activities
    Unrealized
gains and losses
on investment
securities
    Unrecognized
pension and
other
postretirement
benefit costs
    Total  
(millions)                         

Beginning balance

   $ (122   $ 326      $ (1,081   $ (877

Other comprehensive income (loss) before reclassifications: gains (losses)

     (90     78        —          (12

Amounts reclassified from accumulated other comprehensive income (loss)(1): (gains) losses

     76        (27     20        69   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     (14     51        20        57   
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (136   $ 377      $ (1,061   $ (820
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) See table below for details about these reclassifications.

The following table presents Dominion’s reclassifications out of AOCI by component for the three months ended March 31, 2013:

 

Details about AOCI components

   Amounts
reclassified from
AOCI
   

Affected line item in the Consolidated
Statements of Income

(millions)           

Deferred (gains) and losses on derivatives-hedging activities:

    

Commodity contracts

   $ 84     

Operating revenue

     34     

Purchased gas

     3     

Electric fuel and other energy-related purchases

Interest rate contracts

     3     

Interest and related charges

  

 

 

   
     124     

Tax

     (48  

Income tax expense

  

 

 

   
   $ 76     
  

 

 

   

Unrealized (gains) and losses on investment securities:

    

Realized (gain) loss on sale of securities

   $ (47  

Other income

Impairment

     2     

Other income

  

 

 

   
     (45  

Tax

     18     

Income tax expense

  

 

 

   
   $ (27  
  

 

 

   

Unrecognized pension and other postretirement benefit costs:

    

Actuarial (gains) losses

   $ 29     

Other operations and maintenance

  

 

 

   
     29     

Tax

     (9  

Income tax expense

  

 

 

   
   $ 20     
  

 

 

   

 

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Note 8. Fair Value Measurements

Dominion’s and Virginia Power’s fair value measurements are made in accordance with the policies discussed in Note 6 to the Consolidated Financial Statements in their Annual Report on Form 10-K for the year ended December 31, 2012. See Note 9 in this report for further information about their derivatives and hedge accounting activities.

Dominion and Virginia Power enter into certain physical and financial forwards and futures, options, and full requirements contracts, which are considered Level 3 as they have one or more inputs that are not observable and are significant to the valuation. The discounted cash flow method is used to value Level 3 physical and financial forwards, futures, and full requirements contracts. An option model is used to value Level 3 physical and financial options. The discounted cash flow model for forwards and futures calculates mark-to-market valuations based on forward market prices, original transaction prices, volumes, risk-free rate of return, and credit spreads. Full requirements contracts add load shaping and usage factors in addition to the discounted cash flow model inputs. The option model calculates mark-to-market valuations using variations of the Black-Scholes option model. The inputs into the models are the forward market prices, implied price volatilities, mean reversions, risk-free rate of return, the option expiration dates, the option strike prices, price correlations, the original sales prices, and volumes. For Level 3 fair value measurements, the forward market prices, the implied price volatilities, price correlations, load shaping, and usage factors are considered unobservable. The unobservable inputs are developed and substantiated using historical information, available market data, third-party data, and statistical analysis. Periodically, inputs to valuation models are reviewed and revised as needed, based on historical information, updated market data, market liquidity and relationships, and changes in third-party pricing sources.

 

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The following table presents Dominion’s quantitative information about Level 3 fair value measurements. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility, price correlations, load shaping, and usage factors.

 

     Fair Value
(millions)
    

Valuation Techniques

   Unobservable Input     Range    Weighted
Average(1)
 

At March 31, 2013

             

Assets:

             

Physical and Financial Forwards and Futures:

             

Natural Gas(2)

   $ 11      

Discounted Cash Flow

     Market Price (per  Dth) (3)    (1) - 6      3   

Electricity

     7      

Discounted Cash Flow

     Market Price (per  MWh) (3)    34 - 76      49   

FTRs

     2      

Discounted Cash Flow

     Market Price (per  MWh) (3)    (3) - 5      0   

Liquids

     18      

Discounted Cash Flow

     Market Price (per Gal) (3)    0 - 3      1   

Physical and Financial Options:

             

Natural Gas

     4      

Option Model

     Market Price (per Dth) (3)    3 - 11      4   
           Price Volatility (4)    8% -  546%(9)      42
           Price Correlation (5)    37% - 100%      57
           Mean Reversion (6)    0 - 58      11   

Full Requirements Contracts:

             

Electricity

     9      

Discounted Cash Flow

     Market Price (per  MWh) (3)    11 -  480(10)      47   
           Load Shaping (7)    1% - 8%      4
           Usage Factor (8)    1% - 7%      5
  

 

 

            

Total assets

   $ 51              
  

 

 

            

Liabilities:

             

Physical and Financial Forwards and Futures:

             

Natural Gas(2)

   $ 18       Discounted Cash Flow      Market Price (per Dth) (3)    (1) - 6      2   

Electricity

     1       Discounted Cash Flow      Market Price (per  MWh) (3)    23 - 43      33   

FTRs

     5       Discounted Cash Flow      Market Price (per  MWh) (3)    (1) - 18      1   

Liquids

     12      

Discounted Cash Flow

     Market Price (per Gal) (3)    1 - 3      2   

Physical and Financial Options:

             

Natural Gas

     6       Option Model      Market Price (per Dth) (3)    3 - 11      5   
           Price Volatility (4)    8% -  546%(9)      27
           Price Correlation (5)    37% - 100%      57
           Mean Reversion (6)    0 - 58      11   
  

 

 

            

Total liabilities

   $ 42              
  

 

 

            

 

(1) Averages weighted by volume.
(2) Includes basis.
(3) Represents market prices beyond defined terms for Levels 1 & 2.
(4) Represents volatilities unrepresented in published markets.
(5) Represents intra-price correlations for which markets do not exist.
(6) Represents mean-reverting property in price simulation modeling.
(7) Converts block monthly loads to 24-hour load shapes.
(8) Represents expected increase (decrease) in sales volumes compared to historical usage.
(9) The range in volatilities is the result of large variability in natural gas basis prices.
(10) The range in market prices is the result of large variability in hourly power prices during peak and off-peak hours.

 

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Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:

 

Significant Unobservable Inputs

 

Position

    

Change to Input

    

Impact on
Fair Value
Measurement

Market Price   Buy      Increase (decrease)      Gain (loss)
Market Price   Sell      Increase (decrease)      Loss (gain)
Price Volatility   Buy      Increase (decrease)      Gain (loss)
Price Volatility   Sell      Increase (decrease)      Loss (gain)
Price Correlation   Buy      Increase (decrease)      Loss (gain)
Price Correlation   Sell      Increase (decrease)      Gain (loss)
Mean Reversion   Buy      Increase (decrease)      Loss (gain)
Mean Reversion   Sell      Increase (decrease)      Gain (loss)
Load Shaping   Sell(1)      Increase (decrease)      Loss (gain)
Usage Factor   Sell(2)      Increase (decrease)      Gain (loss)

 

(1) Assumes the contract is in a gain position and load increases during peak hours.
(2) Assumes the contract is in a gain position.

Non-recurring Fair Value Measurements

See Note 3 for a non-recurring fair value measurement related to Brayton Point and Kincaid.

 

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Recurring Fair Value Measurements

Dominion

The following table presents Dominion’s assets and liabilities that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions:

 

     Level 1      Level 2      Level 3      Total  
(millions)                            

At March 31, 2013

           

Assets:

           

Derivatives:

           

Commodity

   $ 12       $ 610       $ 51       $ 673   

Interest rate

     —           78         —           78   

Investments(1):

           

Equity securities:

           

U.S.:

           

Large cap

     2,065         —           —           2,065   

Other

     68         —           —           68   

Non-U.S.:

           

Large cap

     12         —           —           12   

Fixed income:

           

Corporate debt instruments

     —           364         —           364   

U.S. Treasury securities and agency debentures

     454         195         —           649   

State and municipal

     —           299         —           299   

Other

     —           8         —           8   

Cash equivalents and other

     1         80         —           81   

Restricted cash equivalents

     —           20         —           20   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 2,612       $ 1,654       $ 51       $ 4,317   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivatives:

           

Commodity

   $ 13       $ 556       $ 42       $ 611   

Interest rate

     —           33         —           33   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 13       $ 589       $ 42       $ 644   
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2012

           

Assets:

           

Derivatives:

           

Commodity

   $ 12       $ 639       $ 84       $ 735   

Interest rate

     —           93         —           93   

Investments(1):

           

Equity securities:

           

U.S.:

           

Large cap

     1,973         —           —           1,973   

Other

     59         —           —           59   

Non-U.S.:

           

Large cap

     12         —           —           12   

Fixed income:

           

Corporate debt instruments

     —           325         —           325   

U.S. Treasury securities and agency debentures

     391         152         —           543   

State and municipal

     —           315         —           315   

Other

     —           7         —           7   

Cash equivalents and other

     13         67         —           80   

Restricted cash equivalents

     —           33         —           33   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 2,460       $ 1,631       $ 84       $ 4,175   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivatives:

           

Commodity

   $ 8       $ 528       $ 59       $ 595   

Interest rate

     —           66         —           66   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 8       $ 594       $ 59       $ 661   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Includes investments held in the nuclear decommissioning and rabbi trusts.

 

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The following table presents the net change in Dominion’s assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category:

 

     Three Months Ended
March 31,
 
     2013     2012  
(millions)             

Beginning balance

   $ 25      $ (71

Total realized and unrealized gains (losses):

    

Included in earnings

     14        (35

Included in other comprehensive income (loss)

     9        5   

Included in regulatory assets/liabilities

     (5     11   

Settlements

     (26     30   

Transfers out of Level 3

     (8     (1
  

 

 

   

 

 

 

Ending balance

   $ 9      $ (61
  

 

 

   

 

 

 

The amount of gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets/liabilities still held at the reporting date

   $ (5   $ 1   
  

 

 

   

 

 

 

The following table presents Dominion’s classification of gains and losses included in earnings in the Level 3 fair value category:

 

     Operating
revenue
    Electric fuel
and other
energy-related
purchases
    Total  
(millions)                   

Three Months Ended March 31, 2013

      

Total gains (losses) included in earnings

   $ 12      $ 2      $ 14   

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets/liabilities still held at the reporting date

     (5     —          (5

Three Months Ended March 31, 2012

      

Total gains (losses) included in earnings

   $ (9   $ (26   $ (35

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets/liabilities still held at the reporting date

     1        —          1   

 

PAGE25


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Virginia Power

The following table presents Virginia Power’s assets and liabilities that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions:

 

     Level 1      Level 2      Level 3      Total  
(millions)                            

At March 31, 2013

           

Assets:

           

Derivatives:

           

Commodity

   $ —         $ 6       $ 2       $ 8   

Interest rate

     —           3         —           3   

Investments(1):

           

Equity securities:

           

U.S.:

           

Large cap

     864         —           —           864   

Other

     30         —           —           30   

Fixed income:

           

Corporate debt instruments

     —           214         —           214   

U.S. Treasury securities and agency debentures

     177         75         —           252   

State and municipal

     —           104         —           104   

Other

     —           1         —           1   

Cash equivalents and other

     —           29         —           29   

Restricted cash equivalents

     —           10         —           10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 1,071       $ 442       $ 2       $ 1,515   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivatives:

           

Commodity

   $ —         $ 2       $ 5       $ 7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —         $ 2       $ 5       $ 7   
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2012

           

Assets:

           

Derivatives:

           

Commodity

   $ —         $ 1       $ 5       $ 6   

Investments(1):

           

Equity securities:

           

U.S.:

           

Large cap

     779         —           —           779   

Other

     27         —           —           27   

Fixed income:

           

Corporate debt instruments

     —           196         —           196   

U.S. Treasury securities and agency debentures

     168         66         —           234   

State and municipal

     —           118         —           118   

Other

     —           1         —           1   

Cash equivalents and other

     7         31         —           38   

Restricted cash equivalents

     —           10         —           10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 981       $ 423       $ 5       $ 1,409   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivatives:

           

Commodity

   $ —         $ 6       $ 3       $ 9   

Interest rate

     —           25         —           25   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —         $ 31       $ 3       $ 34   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Includes investments held in the nuclear decommissioning and rabbi trusts.

 

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The following table presents the net change in Virginia Power’s assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category:

 

     Three Months Ended
March 31,
 
     2013     2012  
(millions)             

Beginning balance

   $ 2      $ (28

Total realized and unrealized gains (losses):

    

Included in earnings

     2        (27

Included in regulatory assets/liabilities

     (5     11   

Settlements

     (2     27   
  

 

 

   

 

 

 

Ending balance

   $ (3   $ (17
  

 

 

   

 

 

 

The gains and losses included in earnings in the Level 3 fair value category were classified in electric fuel and other energy-related purchases in Virginia Power’s Consolidated Statements of Income for the three months ended March 31, 2013 and 2012. There were no unrealized gains or losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the three months ended March 31, 2013 and 2012.

Fair Value of Financial Instruments

Substantially all of Dominion’s and Virginia Power’s financial instruments are recorded at fair value, with the exception of the instruments described below that are reported at historical cost. Estimated fair values have been determined using available market information and valuation methodologies considered appropriate by management. The carrying amount of cash and cash equivalents, customer and other receivables, short-term debt and accounts payable are representative of fair value because of the short-term nature of these instruments. For Dominion’s and Virginia Power’s financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:

 

    March 31, 2013     December 31, 2012  
    Carrying
Amount
    Estimated  Fair
Value(1)
    Carrying
Amount
    Estimated  Fair
Value(1)
 
(millions)                        

Dominion

       

Long-term debt, including securities due within one year(2)

  $ 17,097      $ 19,874      $ 16,841      $ 19,898   

Securities due within one year, VIE(3)

    852        855        860        864   

Junior subordinated notes

    1,373        1,435        1,373        1,430   

Subsidiary preferred stock(4)

    257        260        257        255   

Virginia Power

       

Long-term debt, including securities due within one year(2)

  $ 7,463      $ 8,929      $ 6,669      $ 8,270   

Preferred stock(4)

    257        260        257        255   

 

(1) Fair value is estimated using market prices, where available, and interest rates currently available for issuance of debt with similar terms and remaining maturities. All fair value measurements are classified as Level 2. The carrying amount of debt issues with short-term maturities and variable rates refinanced at current market rates is a reasonable estimate of their fair value.
(2) Includes amounts which represent the unamortized discount and premium. At March 31, 2013 and December 31, 2012, includes the valuation of certain fair value hedges associated with Dominion’s fixed rate debt of approximately $72 million and $93 million, respectively.
(3) Includes amounts which represent the unamortized premium.
(4) Includes deferred issuance expenses of $2 million at March 31, 2013 and December 31, 2012.

Note 9. Derivatives and Hedge Accounting Activities

Dominion’s and Virginia Power’s accounting policies and objectives and strategies for using derivative instruments are discussed in Note 2 to the Consolidated Financial Statements in their Annual Report on Form 10-K for the year ended December 31, 2012. See Note 8 in this report for further information about fair value measurements and associated valuation methods for derivatives.

Derivative assets and liabilities are presented gross on Dominion’s and Virginia Power’s Consolidated Balance Sheets. Dominion’s and Virginia Power’s derivative contracts include both over-the-counter transactions and those that are executed on

 

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an exchange or other trading platform (exchange contracts) and centrally cleared. Over-the-counter contracts are bilateral contracts that are transacted directly with a third party. Exchange contracts utilize a financial intermediary, exchange, or clearinghouse to enter, execute, or clear the transactions. Certain over-the-counter and exchange contracts contain contractual rights of setoff through master netting arrangements, derivative clearing agreements, and contract default provisions. In addition, the contracts are subject to conditional rights of setoff through counterparty nonperformance, insolvency, or other conditions.

In general, most over-the-counter transactions and all exchange contracts are subject to collateral requirements. Types of collateral for over-the-counter and exchange contracts include cash, letters of credit, and in some cases other forms of security, none of which are subject to restrictions. Cash collateral is used in the table below to offset derivative assets and liabilities. Certain accounts receivable and accounts payable recognized on Dominion’s and Virginia Power’s Consolidated Balance Sheets, as well as letters of credit and other forms of security, all of which are not included in the tables below, are subject to offset under master netting agreements or similar agreements and would reduce the net exposure.

Dominion

The tables below present Dominion’s derivative asset and liability balances by type of financial instrument, before and after the effects of offsetting, as of March 31, 2013:

 

     Gross
Amounts of
Recognized
Assets
     Gross
Amounts
Offset in the
Consolidated
Balance
Sheet
     Net Amounts of
Assets Presented
in the Consolidated
Balance Sheet
 
(millions)                     

Interest rate contracts:

        

Over-the-counter

   $ 78       $ —         $ 78   

Commodity contracts:

        

Over-the-counter

     245         —           245   

Exchange

     418         —           418   
  

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting arrangement or similar arrangement

     741         —           741   

Total derivatives, not subject to a master netting arrangement or similar arrangement

     10         —           10   
  

 

 

    

 

 

    

 

 

 

Total(1)

   $ 751       $ —         $ 751   
  

 

 

    

 

 

    

 

 

 

 

(1) The total derivative asset balance contains $534 million of current assets, $527 million and $7 million of which is presented in current derivative assets and assets held for sale, respectively, in Dominion’s Consolidated Balance Sheet, and $217 million of noncurrent derivative assets, which is presented in other deferred charges and other assets in Dominion’s Consolidated Balance Sheet.

 

            Gross Amounts Not Offset
in the Consolidated
Balance Sheet
        
     Net Amounts  of
Assets
Presented in the
Consolidated
Balance Sheet
     Financial
Instruments
     Cash
Collateral
Received
     Net
Amounts
 
(millions)                            

Interest rate contracts:

           

Over-the-counter

   $ 78       $ 15       $ —         $ 63   

Commodity contracts:

           

Over-the-counter

     245         74         —           171   

Exchange

     418         405         1         12   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 741       $ 494       $ 1       $ 246   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

PAGE28


Table of Contents
     Gross
Amounts of
Recognized
Liabilities
     Gross
Amounts
Offset in the
Consolidated
Balance Sheet
     Net Amounts of
Liabilities Presented
in the

Consolidated
Balance Sheet
 
(millions)                     

Interest rate contracts:

        

Over-the-counter

   $ 33       $ —         $ 33   

Commodity contracts:

        

Over-the-counter

     145         —           145   

Exchange

     462         —           462   
  

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting arrangement or similar arrangement

     640         —           640   

Total derivatives, not subject to a master netting arrangement or similar arrangement

     4         —           4   
  

 

 

    

 

 

    

 

 

 

Total(1)

   $ 644       $ —         $ 644   
  

 

 

    

 

 

    

 

 

 

 

(1) The total derivative liability balance contains $556 million of current liabilities, which is presented in current derivative liabilities in Dominion’s Consolidated Balance Sheet, and $88 million of noncurrent derivative liabilities, which is presented in the other deferred credits and other liabilities in Dominion’s Consolidated Balance Sheet.

 

            Gross Amounts Not Offset
in the Consolidated
Balance Sheet
        
     Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
     Financial
Instruments
     Cash
Collateral
Paid
     Net
Amounts
 
(millions)                            

Interest rate contracts:

           

Over-the-counter

   $ 33       $ 15       $ —         $ 18   

Commodity contracts:

           

Over-the-counter

     145         74         13         58   

Exchange

     462         405         57         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 640       $ 494       $ 70       $ 76   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

PAGE29


Table of Contents

The tables below present Dominion’s derivative asset and liability balances by type of financial instrument, before and after the effects of offsetting, as of December 31, 2012:

 

     Gross
Amounts of
Recognized
Assets
     Gross
Amounts
Offset in the
Consolidated
Balance Sheet
     Net Amounts of
Assets Presented
in the

Consolidated
Balance Sheet
 
(millions)                     

Interest rate contracts:

        

Over-the-counter

   $ 93       $ —         $ 93   

Commodity contracts:

        

Over-the-counter

     290         —           290   

Exchange

     416         —           416   
  

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting arrangement or similar arrangement

     799         —           799   

Total derivatives, not subject to a master netting arrangement or similar arrangement

     29         —           29   
  

 

 

    

 

 

    

 

 

 

Total(1)

   $ 828       $ —         $ 828   
  

 

 

    

 

 

    

 

 

 

 

(1) The total derivative asset balance contains $518 million of current assets, which is presented in current derivative assets in Dominion’s Consolidated Balance Sheet and $310 million of noncurrent derivative assets, which is presented in other deferred charges and other assets in Dominion’s Consolidated Balance Sheet.

 

            Gross Amounts Not
Offset in the Consolidated
Balance Sheet
        
     Net Amounts
of Assets
Presented in the
Consolidated
Balance Sheet
     Financial
Instruments
     Cash
Collateral
Received
     Net
Amounts
 
(millions)                            

Interest rate contracts:

           

Over-the-counter

   $ 93       $ 19       $ —         $ 74   

Commodity contracts:

              —     

Over-the-counter

     290         97         —           193   

Exchange

     416         350         4         62   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 799       $ 466       $ 4       $ 329   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

PAGE30


Table of Contents
     Gross
Amounts of
Recognized
Liabilities
     Gross
Amounts
Offset in the
Consolidated
Balance Sheet
     Net Amounts of
Liabilities Presented
in the

Consolidated
Balance Sheet
 
(millions)                     

Interest rate contracts:

        

Over-the-counter

   $ 66       $ —         $ 66   

Commodity contracts:

        

Over-the-counter

     191         —           191   

Exchange

     393         —           393   
  

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting arrangement or similar arrangement

     650         —           650   

Total derivatives, not subject to a master netting arrangement or similar arrangement

     11         —           11   
  

 

 

    

 

 

    

 

 

 

Total(1)

   $ 661       $ —         $ 661   
  

 

 

    

 

 

    

 

 

 

 

(1) The total derivative liability balance contains $510 million of current liabilities, which is presented in current derivative liabilities in Dominion’s Consolidated Balance Sheet and $151 million of noncurrent derivative liabilities, which is presented in other deferred credits and other liabilities in Dominion’s Consolidated Balance Sheet.

 

            Gross Amounts Not
Offset in the Consolidated
Balance Sheet
        
     Net Amounts
of Liabilities
Presented in the
Consolidated
Balance Sheet
     Financial
Instruments
     Cash
Collateral
Paid
     Net
Amounts
 
(millions)                            

Interest rate contracts:

           

Over-the-counter

   $ 66       $ 19       $ —         $ 47   

Commodity contracts:

              —     

Over-the-counter

     191         97         20         74   

Exchange

     393         350         43         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 650       $ 466       $ 63       $ 121   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the volume of Dominion’s derivative activity as of March 31, 2013. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of their long and short positions.

 

     Current      Noncurrent  

Natural Gas (bcf):

     

Fixed price(1)

     292         47   

Basis

     875         482   

Electricity (MWh):

     

Fixed price(1)

     19,932,885         15,662,175   

FTRs

     19,950,674         —     

Capacity (MW)

     200,525         90,744   

Liquids (Gal)(2)

     161,322,000         109,284,000   

Interest rate

   $ 1,350,000,000       $ 1,650,000,000   

 

(1) Includes options.
(2) Includes NGLs and oil.

 

PAGE31


Table of Contents

For the three months ended March 31, 2013 and 2012, gains or losses on hedging instruments determined to be ineffective and amounts excluded from the assessment of effectiveness were not material. Amounts excluded from the assessment of effectiveness include gains or losses attributable to changes in the time value of options and changes in the differences between spot prices and forward prices.

The following table presents selected information related to gains (losses) on cash flow hedges included in AOCI in Dominion’s Consolidated Balance Sheet at March 31, 2013:

 

     AOCI
After-Tax
    Amounts
Expected to be
Reclassified to
Earnings
during the
next 12
Months
After-Tax
    Maximum
Term
 
(millions)                   

Commodities:

      

Gas

   $ (20   $ (14     31 months   

Electricity

     31        (12     33 months   

Other

     8        4        38 months   

Interest rate

     (155     (27     358 months   
  

 

 

   

 

 

   

Total

   $ (136   $ (49  
  

 

 

   

 

 

   

The amounts that will be reclassified from AOCI to earnings will generally be offset by the recognition of the hedged transactions (e.g., anticipated sales) in earnings, thereby achieving the realization of prices contemplated by the underlying risk management strategies and will vary from the expected amounts presented above as a result of changes in market prices and interest rates.

 

PAGE32


Table of Contents

Fair Value and Gains and Losses on Derivative Instruments

The following table presents the fair values of Dominion’s derivatives and where they are presented in its Consolidated Balance Sheets:

 

     Fair
Value –
Derivatives
under
Hedge
Accounting
     Fair
Value –
Derivatives
not under
Hedge
Accounting
     Total
Fair Value
 
(millions)                     

March 31, 2013

        

ASSETS

        

Current Assets

        

Commodity

   $ 94       $ 406       $ 500   

Interest rate

     34         —           34   
  

 

 

    

 

 

    

 

 

 

Total current derivative assets(1)

     128         406         534   
  

 

 

    

 

 

    

 

 

 

Noncurrent Assets

        

Commodity

     106         67         173   

Interest rate

     44         —           44   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative assets(2)

     150         67         217   
  

 

 

    

 

 

    

 

 

 

Total derivative assets

   $ 278       $ 473       $ 751   
  

 

 

    

 

 

    

 

 

 

LIABILITIES

        

Current Liabilities

        

Commodity

   $ 123       $ 400       $ 523   

Interest rate

     33         —           33   
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities

     156         400         556   
  

 

 

    

 

 

    

 

 

 

Noncurrent Liabilities

        

Commodity

     46         42         88   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative liabilities(3)

     46         42         88   
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

   $ 202       $ 442       $ 644   
  

 

 

    

 

 

    

 

 

 

December 31, 2012

        

ASSETS

        

Current Assets

        

Commodity

   $ 103       $ 379       $ 482   

Interest rate

     36         —           36   
  

 

 

    

 

 

    

 

 

 

Total current derivative assets

     139         379         518   
  

 

 

    

 

 

    

 

 

 

Noncurrent Assets

        

Commodity

     130         123         253   

Interest rate

     57         —           57   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative assets(2)

     187         123         310   
  

 

 

    

 

 

    

 

 

 

Total derivative assets

   $ 326       $ 502       $ 828   
  

 

 

    

 

 

    

 

 

 

LIABILITIES

        

Current Liabilities

        

Commodity

   $ 103       $ 341       $ 444   

Interest rate

     66         —           66   
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities

     169         341         510   
  

 

 

    

 

 

    

 

 

 

Noncurrent Liabilities

        

Commodity

     58         93         151   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative liabilities(3)

     58         93         151   
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

   $ 227       $ 434       $ 661   
  

 

 

    

 

 

    

 

 

 

 

(1) $7 million of current derivative assets are classified as assets held for sale in Dominion’s Consolidated Balance Sheet. See Note 3 for further information.

 

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(2) Noncurrent derivative assets are presented in other deferred charges and other assets in Dominion’s Consolidated Balance Sheets.
(3) Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in Dominion’s Consolidated Balance Sheets.

The following tables present the gains and losses on Dominion’s derivatives, as well as where the associated activity is presented in its Consolidated Balance Sheets and Statements of Income:

 

Derivatives in cash flow hedging relationships

   Amount of
Gain (Loss)
Recognized
in AOCI on
Derivatives
(Effective
Portion)(1)
    Amount of
Gain (Loss)
Reclassified
from AOCI
to Income
    Increase
(Decrease) in
Derivatives
Subject to
Regulatory
Treatment(2)
 
(millions)                   

Three Months Ended March 31, 2013

      

Derivative Type and Location of Gains (Losses)

      

Commodity:

      

Operating revenue

     $ (84  

Purchased gas

       (34  

Electric fuel and other energy-related purchases

       (3  
  

 

 

   

 

 

   

 

 

 

Total commodity

   $ (157     (121   $ 7   
  

 

 

   

 

 

   

 

 

 

Interest rate(3)

     13        (3     16   
  

 

 

   

 

 

   

 

 

 

Total

   $ (144   $ (124   $ 23   
  

 

 

   

 

 

   

 

 

 

Three Months Ended March 31, 2012

      

Derivative Type and Location of Gains (Losses)

      

Commodity:

      

Operating revenue

     $ 64     

Purchased gas

       (30  

Electric fuel and other energy-related purchases

       (7  
  

 

 

   

 

 

   

 

 

 

Total commodity

   $ 176        27      $ (1
  

 

 

   

 

 

   

 

 

 

Interest rate(3)

     32        1        27   
  

 

 

   

 

 

   

 

 

 

Total

   $ 208      $ 28      $ 26   
  

 

 

   

 

 

   

 

 

 

 

(1) Amounts deferred into AOCI have no associated effect in Dominion’s Consolidated Statements of Income.
(2) Represents net derivative activity deferred into and amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in Dominion’s Consolidated Statements of Income.
(3) Amounts recorded in Dominion’s Consolidated Statements of Income are classified in interest and related charges.

 

     Amount of Gain (Loss)
Recognized in Income on
Derivatives(1)
 
     Three Months Ended
March 31,
 

Derivatives not designated as hedging instruments

   2013      2012  
(millions)              

Derivative Type and Location of Gains (Losses)

     

Commodity

     

Operating revenue

   $ 3       $ 69   

Purchased gas

     18         (10

Electric fuel and other energy-related purchases

     3         (27

Interest rate(2)

             (2
  

 

 

    

 

 

 

Total

   $ 24       $ 30   
  

 

 

    

 

 

 

 

(1) Includes derivative activity amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in Dominion’s Consolidated Statements of Income.
(2) Amounts recorded in Dominion’s Consolidated Statements of Income are classified in interest and related charges.

 

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Virginia Power

The following table presents the volume of Virginia Power’s derivative activity as of March 31, 2013. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of their long and short positions.

 

     Current      Noncurrent  

Natural Gas (bcf):

     

Fixed price

     16         —     

Basis

     8         —     

Electricity (MWh):

     

Fixed price

     644,000         —     

FTRs

     17,168,056         —     

Capacity (MW)

     152,000         48,800   

Interest rate

   $ —         $ 250,000,000   

Note 10. Investments

Dominion

Equity and Debt Securities

Rabbi Trust Securities

Marketable equity and debt securities and cash equivalents held in Dominion’s rabbi trusts and classified as trading totaled $98 million and $95 million at March 31, 2013 and December 31, 2012, respectively. Cost method investments held in Dominion’s rabbi trusts totaled $13 million and $14 million at March 31, 2013 and December 31, 2012, respectively.

 

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Decommissioning Trust Securities

Dominion holds marketable equity and debt securities (classified as available-for-sale), cash equivalents and cost method investments in nuclear decommissioning trust funds to fund future decommissioning costs for its nuclear plants. Dominion’s decommissioning trust funds are summarized below:

 

     Amortized
Cost
     Total
Unrealized
Gains(1)
     Total
Unrealized

Losses (1)
    Fair Value  
(millions)                           

March 31, 2013

          

Marketable equity securities:

          

U.S.:

          

Large Cap

   $ 1,153       $ 879       $ —        $ 2,032   

Other

     44         18         —          62   

Marketable debt securities:

          

Corporate bonds

     336         28         —          364   

U.S. Treasury securities and agency debentures

     628         19         (1     646   

State and municipal

     236         23         —          259   

Other

     8         —           —          8   

Cost method investments

     113         —           —          113   

Cash equivalents and other(2)

     63         —           —          63   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 2,581       $ 967       $ (1 )(3)    $ 3,547   
  

 

 

    

 

 

    

 

 

   

 

 

 

December 31, 2012

          

Marketable equity securities:

          

U.S.:

          

Large Cap

   $ 1,210       $ 732       $ —        $ 1,942   

Other

     40         13         —          53   

Marketable debt securities:

          

Corporate bonds

     295         30         —          325   

U.S. Treasury securities and agency debentures

     523         19         (2     540   

State and municipal

     248         26         —          274   

Other

     6         1         —          7   

Cost method investments

     117         —           —          117   

Cash equivalents and other(2)

     72         —           —          72   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 2,511       $ 821       $ (2 )(3)    $ 3,330   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) Included in AOCI and the decommissioning trust regulatory liability.
(2) Includes pending purchases of securities of $14 million and $6 million at March 31, 2013 and December 31, 2012, respectively.
(3) The fair value of securities in an unrealized loss position was $208 million and $195 million at March 31, 2013 and December 31, 2012, respectively.

 

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The fair value of Dominion’s marketable debt securities held in nuclear decommissioning trust funds at March 31, 2013 by contractual maturity is as follows:

 

     Amount  
(millions)       

Due in one year or less

   $ 162   

Due after one year through five years

     333   

Due after five years through ten years

     367   

Due after ten years

     415   
  

 

 

 

Total

   $ 1,277   
  

 

 

 

Presented below is selected information regarding Dominion’s marketable equity and debt securities held in nuclear decommissioning trust funds.

 

     Three Months Ended
March 31,
 
     2013      2012  
(millions)              

Proceeds from sales

   $ 554       $ 415   

Realized gains(1)

     63         28   

Realized losses(1)

     6         4   

 

(1) Includes realized gains and losses recorded to the decommissioning trust regulatory liability.

Other-than-temporary impairment losses on investments held in nuclear decommissioning trust funds for Dominion were not material for the three months ended March 31, 2013 and 2012.

Blue Racer

In December 2012, Dominion formed Blue Racer to provide midstream services to natural gas producers operating in the Utica Shale region in Ohio and portions of Pennsylvania. Blue Racer is an equal partnership between Dominion and Caiman, with Dominion contributing midstream assets and Caiman contributing private equity capital. In March 2013, DTI contributed Line TL-404 to Blue Racer and received approximately $47 million in cash proceeds resulting in an approximately $25 million ($14 million after-tax) gain. The Natrium natural gas processing and fractionation facility is expected to be completed in the second quarter of 2013, and is expected to be contributed to Blue Racer upon completion.

 

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Virginia Power

Virginia Power holds marketable equity and debt securities (classified as available-for-sale), cash equivalents and cost method investments in nuclear decommissioning trust funds to fund future decommissioning costs for its nuclear plants. Virginia Power’s decommissioning trust funds are summarized below:

 

     Amortized
Cost
     Total
Unrealized
Gains(1)
     Total
Unrealized
Losses(1)
    Fair Value  
(millions)                           

March 31, 2013

          

Marketable equity securities:

          

U.S.:

          

Large Cap

   $ 490       $ 373       $ —        $ 863   

Other

     21         9         —          30   

Marketable debt securities:

          

Corporate bonds

     198         16         —          214   

U.S. Treasury securities and agency debentures

     248         5         (1     <