10-Q 1 d619807d10q.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 September 30, 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 September 30, 2013, the latest practicable date for determination, Dominion Resources, Inc. had 580,435,589 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      64   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      78   

Item 4.

  Controls and Procedures      80   
  PART II. Other Information   

Item 1.

  Legal Proceedings      81   

Item 1A.

  Risk Factors      81   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      82   

Item 6.

  Exhibits      83   

 

PAGE 2


Table of Contents

GLOSSARY OF TERMS

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

 

Abbreviation or Acronym

  

Definition

AFUDC

  

Allowance for funds used during construction

AMR

  

Automated meter reading program deployed by East Ohio

AOCI

  

Accumulated other comprehensive income (loss)

Appalachian Gateway Project

  

DTI 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

ATEX line

  

Appalachia to Texas Express ethane line

bcf

  

Billion cubic feet

Blue Racer

  

Blue Racer Midstream, LLC, a joint venture with Caiman

BOD

  

Board of Directors

BOEM

  

Bureau of Ocean Energy Management

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

Brunswick County

  

Brunswick County power station, a 1,358 MW combined cycle, natural gas-fired power station under construction in Brunswick County, Virginia

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

CPCN

  

Certificate of Public Convenience and Necessity

CSAPR

  

Cross State Air Pollution Rule

CWA

  

Clean Water Act

D.C.

  

District of Columbia

DEI

  

Dominion Energy, Inc.

DGH

  

Dominion Gas Holdings, LLC

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 owned a 50 percent interest (712 MW)

 

PAGE 3


Table of Contents

Abbreviation or Acronym

  

Definition

Energy Capital Partners

  

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

Enterprise

  

Enterprise Product Partners, L.P.

EPA

  

Environmental Protection Agency

EPS

  

Earnings per share

ESBWR

  

General Electric-Hitachi’s Economic Simplified Boiling Water Reactor

Fairless

  

Fairless power station

FERC

  

Federal Energy Regulatory Commission

Fitch

  

Fitch Ratings Ltd.

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

IDA

  

Industrial Development Authority

Illinois Gas Contracts

  

A Dominion Retail natural gas book of business consisting of residential and commercial customers in Illinois

INPO

  

Institute of Nuclear Power Operations

IRS

  

Internal Revenue Service

ISO

  

Independent system operator

ISO-NE

  

ISO New England

Juniper

  

Juniper Capital L.P.

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 TPL-2A

  

An approximately 11-mile, 30-inch gathering line extending from Tuscarawas County, Ohio to Harrison County, Ohio

Line TL-388

  

A 37-mile, 24-inch gathering line extending from Texas Eastern, LP in Noble County, Ohio to its terminus at Dominion’s Gilmore Station in Tuscarawas County, Ohio

Line TL-404

  

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

LNG

  

Liquefied natural gas

MD&A

  

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

MDFA

  

Massachusetts Development Finance Agency

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

  

Midcontinent Independent Transmission System Operator, Inc.

MLP

  

Master limited partnership

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

NEIL

  

Nuclear Electric Insurance Limited

NERC

  

North American Electric Reliability Corporation

NGLs

  

Natural gas liquids

North Anna

  

North Anna nuclear power station

North Carolina Commission

  

North Carolina Utilities Commission

 

PAGE 4


Table of Contents

Abbreviation or Acronym

  

Definition

Northeast Expansion Project

  

DTI project completed in November 2012 to provide approximately 200,000 Dth per day of firm transportation services; this project moves supplies from various receipt points in central and southwestern Pennsylvania to a nexus of market pipelines and storage facilities in Leidy, Pennsylvania

NOx

  

Nitrogen oxide

NPDES

  

National Pollutant Discharge Elimination System

NRC

  

Nuclear Regulatory Commission

NSPS

  

New Source Performance Standards

ODEC

  

Old Dominion Electric Cooperative

Order 1000

  

Order issued by FERC adopting new requirements for transmission planning, cost allocation and development

PADEP

  

Pennsylvania Department of Environmental Protection

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 BW

  

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

ROE

  

Return on equity

RSN

  

Remarketable subordinated note

RTEP

  

Regional transmission expansion plan

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 McGraw Hill Financial, Inc.

State Line

  

State Line power station

Surry

  

Surry nuclear power station

U.S.

  

United States of America

UAO

  

Unilateral Administrative Order

VIE

  

Variable interest entity

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

West Virginia Commission

  

Public Service Commission of West Virginia

 

PAGE 5


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2013     2012(1)     2013     2012(1)  
(millions, except per share amounts)                         

Operating Revenue

   $ 3,432      $ 3,332      $ 9,935      $ 9,734   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Expenses

        

Electric fuel and other energy-related purchases

     1,107        1,009        2,933        2,816   

Purchased electric capacity

     91        86        267        297   

Purchased gas

     232        191        996        818   

Other operations and maintenance

     525        1,086        1,876        2,446   

Depreciation, depletion and amortization

     309        290        909        838   

Other taxes

     134        119        442        422   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     2,398        2,781        7,423        7,637   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     1,034        551        2,512        2,097   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income

     86        56        222        174   

Interest and related charges

     217        197        648        618   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations including noncontrolling interests before income tax expense

     903        410        2,086        1,653   

Income tax expense

     305        143        709        578   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations including noncontrolling interests

     598        267        1,377        1,075   

Loss from discontinued operations(2)

     (23     (52     (92     (94
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income Including Noncontrolling Interests

     575        215        1,285        981   

Noncontrolling Interests

     6        6        19        20   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income Attributable to Dominion

   $ 569      $ 209      $ 1,266      $ 961   
  

 

 

   

 

 

   

 

 

   

 

 

 

Amounts Attributable to Dominion:

        

Income from continuing operations, net of tax

   $ 592      $ 261      $ 1,358      $ 1,055   

Loss from discontinued operations, net of tax

     (23     (52     (92     (94
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Dominion

   $ 569      $ 209      $ 1,266      $ 961   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings Per Common Share-Basic

        

Income from continuing operations

   $ 1.02      $ 0.45      $ 2.35      $ 1.84   

Loss from discontinued operations

     (0.04     (0.09     (0.16     (0.16
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Dominion

   $ 0.98      $ 0.36      $ 2.19      $ 1.68   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings Per Common Share-Diluted

        

Income from continuing operations

   $ 1.02      $ 0.45      $ 2.35      $ 1.84   

Loss from discontinued operations

     (0.04     (0.09     (0.16     (0.16
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Dominion

   $ 0.98      $ 0.36      $ 2.19      $ 1.68   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per common share

   $ 0.5625      $ 0.5275      $ 1.6875      $ 1.5825   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Recast to reflect Brayton Point and Kincaid as discontinued operations, as discussed in Note 3.
(2) Includes income tax expense of $6 million for the three months ended September 30, 2013 and income tax benefit of $17 million, $43 million and $53 million for the three months ended September 30, 2012 and the nine months ended September 30, 2013 and 2012, respectively.

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

 

PAGE 6


Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  
(millions)                         

Net income including noncontrolling interests

   $ 575      $ 215      $ 1,285      $ 981   

Other comprehensive income (loss), net of taxes:

        

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

     (77     (86     (45     40   

Changes in unrealized net gains on investment securities(2)

     38        49        119        110   

Changes in unrecognized pension and other postretirement benefit costs(3)

     (12     (6     216        (4

Amounts reclassified to net income:

        

Net derivative (gains) losses-hedging activities(4)

     (6     (20     53        (63

Net realized gains on investment securities(5)

     (10     (4     (46     (18

Net pension and other postretirement benefit costs(6)

     14        15        44        38   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     (53     (52     341        103   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income including noncontrolling interests

     522        163        1,626        1,084   

Comprehensive income attributable to noncontrolling interests

     6        6        19        20   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Dominion

   $ 516      $ 157      $ 1,607      $ 1,064   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Net of $43 million and $57 million tax for the three months ended September 30, 2013 and 2012, respectively, and net of $21 million and $(28) million tax for the nine months ended September 30, 2013 and 2012, respectively.
(2) Net of $(29) million and $(33) million tax for the three months ended September 30, 2013 and 2012, respectively, and net of $(80) million and $(73) million tax for the nine months ended September 30, 2013 and 2012, respectively.
(3) Net of $(12) million and $(7) million tax for the three months ended September 30, 2013 and 2012, respectively, and net of $(160) million and $(8) million tax for the nine months ended September 30, 2013 and 2012, respectively.
(4) Net of $4 million and $12 million tax for the three months ended September 30, 2013 and 2012, respectively, and net of $(35) million and $39 million tax for the nine months ended September 30, 2013 and 2012, respectively
(5) Net of $5 million and $3 million tax for the three months ended September 30, 2013 and 2012, respectively, and net of $28 million and $12 million tax for the nine months ended September 30, 2013 and 2012, respectively.
(6) Net of $(9) million and $(6) million tax for the three months ended September 30, 2013 and 2012, respectively, and net of $(29) million and $(23) million tax for the nine months ended September 30, 2013 and 2012, respectively.

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

 

PAGE 7


Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     September 30,
2013
    December 31,
2012(1)
 
(millions)             

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 287      $ 248   

Customer receivables (less allowance for doubtful accounts of $27 and $28)

     1,499        1,621   

Other receivables (less allowance for doubtful accounts of $3 and $4)

     103        96   

Inventories

     1,210        1,259   

Derivative assets

     689        518   

Other

     1,422        1,398   
  

 

 

   

 

 

 

Total current assets

     5,210        5,140   
  

 

 

   

 

 

 

Investments

    

Nuclear decommissioning trust funds

     3,673        3,330   

Investment in equity method affiliates

     926        558   

Other

     277        303   
  

 

 

   

 

 

 

Total investments

     4,876        4,191   
  

 

 

   

 

 

 

Property, Plant and Equipment

    

Property, plant and equipment

     46,102        43,364   

Property, plant and equipment, VIE

     —          957   

Accumulated depreciation, depletion and amortization

     (14,241     (13,548
  

 

 

   

 

 

 

Total property, plant and equipment, net

     31,861        30,773   
  

 

 

   

 

 

 

Deferred Charges and Other Assets

    

Goodwill

     3,087        3,130   

Regulatory assets

     1,478        1,717   

Other

     1,976        1,887   
  

 

 

   

 

 

 

Total deferred charges and other assets

     6,541        6,734   
  

 

 

   

 

 

 

Total assets

   $ 48,488      $ 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.

 

PAGE 8


Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

     September 30,
2013
    December 31,
2012(1)
 
(millions)             

LIABILITIES AND EQUITY

    

Current Liabilities

    

Securities due within one year

   $ 1,132      $ 1,363   

Securities due within one year, VIE

     —          860   

Short-term debt

     2,145        2,412   

Accounts payable

     980        1,137   

Derivative liabilities

     659        510   

Other

     1,537        1,481   
  

 

 

   

 

 

 

Total current liabilities

     6,453        7,763   
  

 

 

   

 

 

 

Long-Term Debt

    

Long-term debt

     16,096        15,478   

Junior subordinated notes

     1,373        1,373   

Remarketable subordinated notes

     1,079        —     
  

 

 

   

 

 

 

Total long-term debt

     18,548        16,851   
  

 

 

   

 

 

 

Deferred Credits and Other Liabilities

    

Deferred income taxes and investment tax credits

     6,735        5,800   

Asset retirement obligations

     1,625        1,641   

Pension and other postretirement benefit liabilities

     1,294        1,831   

Regulatory liabilities

     1,718        1,514   

Other

     616        556   
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     11,988        11,342   
  

 

 

   

 

 

 

Total liabilities

     36,989        35,956   
  

 

 

   

 

 

 

Commitments and Contingencies (see Note 15)

    
  

 

 

   

 

 

 

Subsidiary Preferred Stock Not Subject to Mandatory Redemption

     257        257   
  

 

 

   

 

 

 

Equity

    

Common stock - no par(2)

     5,699        5,493   

Other paid-in capital

     —          162   

Retained earnings

     6,079        5,790   

Accumulated other comprehensive loss

     (536     (877
  

 

 

   

 

 

 

Total common shareholders’ equity

     11,242        10,568   
  

 

 

   

 

 

 

Noncontrolling interest

     —          57   
  

 

 

   

 

 

 

Total equity

     11,242        10,625   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 48,488      $ 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; 580 million shares and 576 million shares outstanding at September 30, 2013 and December 31, 2012, respectively.

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

 

PAGE 9


Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

Nine Months Ended September 30,

   2013     2012  
(millions)             

Operating Activities

    

Net income including noncontrolling interests

   $ 1,285      $ 981   

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

    

Impairment of merchant generation assets

     48        444   

Gains on sales of assets

     (118     —     

Depreciation, depletion and amortization (including nuclear fuel)

     1,104        1,080   

Deferred income taxes and investment tax credits

     601        550   

Rate refunds

     (5     (132

Other adjustments

     (79     (91

Changes in:

    

Accounts receivable

     98        371   

Inventories

     (63     35   

Deferred fuel and purchased gas costs, net

     85        332   

Prepayments

     46        (72

Accounts payable

     (144     (216

Accrued interest, payroll and taxes

     (38     1   

Margin deposit assets and liabilities

     (27     126   

Other operating assets and liabilities

     157        53   
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,950        3,462   
  

 

 

   

 

 

 

Investing Activities

    

Plant construction and other property additions (including nuclear fuel)

     (2,978     (2,884

Proceeds from sales of assets

     595        —     

Proceeds from sales of securities

     1,260        1,040   

Purchases of securities

     (1,278     (1,047

Restricted cash equivalents

     23        92   

Other

     30        15   
  

 

 

   

 

 

 

Net cash used in investing activities

     (2,348     (2,784
  

 

 

   

 

 

 

Financing Activities

    

Repayment of short-term debt, net

     (267     (433

Issuance of long-term debt

     2,935        1,500   

Repayment of long-term debt, including redemption premiums

     (1,214     (1,037

Repayment of junior subordinated notes

     (258     —     

Acquisition of Juniper noncontrolling interest in Fairless

     (923     —     

Issuance of common stock

     206        197   

Common dividend payments

     (976     (906

Subsidiary preferred dividend payments

     (12     (12

Other

     (54     (8
  

 

 

   

 

 

 

Net cash used in financing activities

     (563     (699
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     39        (21

Cash and cash equivalents at beginning of period

     248        102   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 287      $ 81   
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Significant noncash investing activities:

    

Accrued capital expenditures

   $ 271      $ 328   

Contribution of assets in exchange for additional ownership interest in Blue Racer

     473        —     
  

 

 

   

 

 

 

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

 

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VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2013      2012      2013      2012  
(millions)                            

Operating Revenue

   $ 2,059       $ 2,086       $ 5,550       $ 5,596   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Expenses

           

Electric fuel and other energy-related purchases

     651         634         1,749         1,850   

Purchased electric capacity

     91         86         267         296   

Other operations and maintenance:

           

Affiliated suppliers

     83         91         238         256   

Other

     273         278         792         861   

Depreciation and amortization

     218         203         636         579   

Other taxes

     64         48         196         179   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     1,380         1,340         3,878         4,021   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations

     679         746         1,672         1,575   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other income

     19         25         71         65   

Interest and related charges

     93         97         270         297   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income tax expense

     605         674         1,473         1,343   

Income tax expense

     218         259         534         513   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income

     387         415         939         830   

Preferred dividends

     4         4         12         12   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance available for common stock

   $ 383       $ 411       $ 927       $ 818   
  

 

 

    

 

 

    

 

 

    

 

 

 

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
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  
(millions)                         

Net income

   $ 387      $ 415      $ 939      $ 830   

Other comprehensive income (loss), net of taxes:

        

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

     1        (2     4        (5

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

     4        4        12        11   

Amounts reclassified to net income:

        

Net derivative losses-hedging activities(3)

     1        1        —          2   

Net realized gains on nuclear decommissioning trust funds(4)

     (2     —          (2     (1
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

     4        3        14        7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 391      $ 418      $ 953      $ 837   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Net of $(1) million and $1 million tax for the three months ended September 30, 2013 and 2012, respectively, and net of $(3) million and $3 million tax for the nine months ended September 30, 2013 and 2012, respectively.
(2) Net of $(2) million and $(4) million tax for the three months ended September 30, 2013 and 2012, respectively, and net of $(7) million and $(7) million tax for the nine months ended September 30, 2013 and 2012, respectively.
(3) Net of $— million and $— million tax for the three months ended September 30, 2013 and 2012, respectively, and net of $— million and $(2) million tax for the nine months ended September 30, 2013 and 2012, respectively.
(4) Net of $— million and $— million tax for the three months ended September 30, 2013 and 2012, respectively, and net of $1 million and $1 million tax for the nine months ended September 30, 2013 and 2012, respectively.

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)

 

     September 30,
2013
    December 31,
2012(1)
 
(millions)             

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 51      $ 28   

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

     906        849   

Other receivables (less allowance for doubtful accounts of $2 and $3)

     59        51   

Inventories (average cost method)

     804        789   

Prepayments

     28        23   

Other

     271        241   
  

 

 

   

 

 

 

Total current assets

     2,119        1,981   
  

 

 

   

 

 

 

Investments

    

Nuclear decommissioning trust funds

     1,668        1,515   

Other

     14        14   
  

 

 

   

 

 

 

Total investments

     1,682        1,529   
  

 

 

   

 

 

 

Property, Plant and Equipment

    

Property, plant and equipment

     32,249        30,631   

Accumulated depreciation and amortization

     (10,481     (10,014
  

 

 

   

 

 

 

Total property, plant and equipment, net

     21,768        20,617   
  

 

 

   

 

 

 

Deferred Charges and Other Assets

    

Intangible assets, net

     187        181   

Regulatory assets

     420        396   

Other

     134        107   
  

 

 

   

 

 

 

Total deferred charges and other assets

     741        684   
  

 

 

   

 

 

 

Total assets

   $ 26,310      $ 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)

 

     September 30,
2013
     December 31,
2012(1)
 
(millions)              

LIABILITIES AND SHAREHOLDER’S EQUITY

     

Current Liabilities

     

Securities due within one year

   $ 58       $ 418   

Short-term debt

     485         992   

Accounts payable

     392         430   

Payables to affiliates

     87         67   

Affiliated current borrowings

     —           435   

Accrued interest, payroll and taxes

     354         204   

Other

     413         461   
  

 

 

    

 

 

 

Total current liabilities

     1,789         3,007   
  

 

 

    

 

 

 

Long-Term Debt

     7,981         6,251   
  

 

 

    

 

 

 

Deferred Credits and Other Liabilities

     

Deferred income taxes and investment tax credits

     4,112         3,879   

Asset retirement obligations

     727         705   

Regulatory liabilities

     1,471         1,285   

Other

     263         194   
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     6,573         6,063   
  

 

 

    

 

 

 

Total liabilities

     16,343         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

     2,820         2,357   

Accumulated other comprehensive income

     39         25   
  

 

 

    

 

 

 

Total common shareholder’s equity

     9,710         9,233   
  

 

 

    

 

 

 

Total liabilities and shareholder’s equity

   $ 26,310       $ 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 September 30, 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)

 

Nine Months Ended September 30,

   2013     2012  
(millions)             

Operating Activities

    

Net income

   $ 939      $ 830   

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

    

Depreciation and amortization (including nuclear fuel)

     758        687   

Deferred income taxes and investment tax credits

     243        331   

Rate refunds

     (5     (132

Other adjustments

     (49     (47

Changes in:

    

Accounts receivable

     (65     (2

Affiliated accounts payable

     20        40   

Inventories

     (15     40   

Deferred fuel expenses

     47        321   

Accounts payable

     (10     28   

Accrued interest, payroll and taxes

     150        70   

Other operating assets and liabilities

     23        121   
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,036        2,287   
  

 

 

   

 

 

 

Investing Activities

    

Plant construction and other property additions

     (1,794     (1,402

Purchases of nuclear fuel

     (108     (142

Purchases of securities

     (501     (491

Proceeds from sales of securities

     464        481   

Restricted cash equivalents

            21   

Other

     (9     (18
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,948     (1,551
  

 

 

   

 

 

 

Financing Activities

    

Repayment of short-term debt, net

     (507     (789

Repayment of affiliated current borrowings, net

     (435     —     

Issuance of long-term debt

     1,835        450   

Repayment of long-term debt

     (462     (10

Common dividend payments

     (463     (379

Preferred dividend payments

     (12     (12

Other

     (21     (4
  

 

 

   

 

 

 

Net cash used in financing activities

     (65     (744
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     23        (8

Cash and cash equivalents at beginning of period

     28        29   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 51      $ 21   
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Significant noncash investing activities:

    

Accrued capital expenditures

   $ 137      $ 136   
  

 

 

   

 

 

 

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 and their Quarterly Reports on Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013.

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 September 30, 2013, their results of operations for the three and nine months ended September 30, 2013 and 2012 and their cash flows for the nine months ended September 30, 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 Illinois Gas Contracts

In June 2013, Dominion completed the sale of Illinois Gas Contracts. The sales price was approximately $32 million, subject to post-closing adjustments. The sale resulted in a gain of approximately $29 million ($18 million after-tax) net of a $3 million write-off of goodwill, and is included in other operations and maintenance expense in Dominion’s Consolidated Statement of Income. The sale of Illinois Gas Contracts did not qualify for discontinued operations classification as it is not considered a component under applicable accounting guidance.

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 equity method investment in Elwood.

In the first and second quarters 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 impairment charges totaling $48 million ($28 million after-tax), which are included in discontinued operations in Dominion’s Consolidated Statements of Income. In both periods, Dominion used the market approach to estimate the fair value of Brayton Point’s and Kincaid’s long-lived assets. These were considered Level 2 fair value measurements given that they were based on the agreed-upon sales price.

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

 

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Table of Contents

In August 2013, Dominion completed the sale and received proceeds of approximately $465 million, net of transaction costs. The sale resulted in a $35 million ($25 million after-tax) gain attributable to its equity method investment in Elwood, which is included in other income in Dominion’s Consolidated Statement of Income, which was partially offset by a $17 million ($18 million after-tax) loss attributable to Brayton Point and Kincaid, which includes a $16 million write-off of goodwill and is reflected in loss from discontinued operations in Dominion’s Consolidated Statement of Income.

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
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  
(millions)                         

Operating revenue

   $ 87      $ 77      $ 304      $ 191   

Loss before income taxes

     (17     (50     (135 )(1)      (98

 

(1) Includes $64 million of charges related to the early redemption of Brayton Point and Kincaid debt. See Note 14 in this report for more information.

Sale of Salem Harbor and State Line

In the third quarter of 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 Statements of Income:

 

     Three Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2012
 
(millions)             

Operating revenue

   $ 5      $ 57   

Loss before income taxes

     (19     (49

 

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Note 4. Operating Revenue

The Companies’ operating revenue consists of the following:

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2013      2012      2013      2012  
(millions)                            

Dominion

           

Electric sales:

           

Regulated

   $ 2,023       $ 2,046       $ 5,471       $ 5,495   

Nonregulated

     704         661         1,907         1,930   

Gas sales:

           

Regulated

     32         34         213         166   

Nonregulated

     159         177         712         740   

Gas transportation and storage

     329         297         1,156         1,007   

Other

     185         117         476         396   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenue

   $ 3,432       $ 3,332       $ 9,935       $ 9,734   
  

 

 

    

 

 

    

 

 

    

 

 

 

Virginia Power

           

Regulated electric sales

   $ 2,023       $ 2,046       $ 5,471       $ 5,495   

Other

     36         40         79         101   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenue

   $ 2,059       $ 2,086       $ 5,550       $ 5,596   
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 5. Income Taxes

In December 2011, the IRS issued temporary regulations that provide guidance to taxpayers on the treatment of amounts paid to acquire, produce or improve tangible property and of dispositions of such property, including whether expenditures should be deducted as repairs or capitalized and depreciated on tax returns. Upon issuance, the temporary regulations were generally to be effective for expenditures made on or after January 1, 2012. However, in December 2012, in response to public comments received, the IRS amended the temporary regulations to postpone the effective date until January 1, 2014.

In September 2013, the IRS withdrew the December 2011 temporary regulations and issued final regulations. The final regulations include a number of safe harbor tax accounting methods which a taxpayer may choose to elect and, if adopted, will not be challenged by the IRS. In addition, the IRS reissued certain temporary regulations that were also issued concurrently as proposed regulations regarding property dispositions. The final regulations are effective for tax years beginning on or after January 1, 2014. Although changes in tax accounting methods would be effective prospectively, implementation of certain changes will require a calculation of the cumulative effect of the change on prior years. Beginning with the year of the change, this cumulative effect is includible in taxable income over a period assumed to be four years, pending the issuance of IRS procedural guidance.

Dominion and Virginia Power have evaluated tax accounting method changes that may be elected or required by the final regulations. At September 30, 2013, $13 million of deferred tax liabilities have been classified as current in the Companies’ Consolidated Balance Sheets, representing cumulative adjustment amounts expected to be reflected in income for tax purposes during the nine months ending September 30, 2014. Tax accounting method changes in 2014 are not expected to materially affect the Companies’ cash flows, results of operations or financial condition.

 

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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  

Nine Months Ended September 30,

   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

     2.4        4.4        2.8        3.9   

Investment and production tax credits

     (1.8     (0.6     (0.2     —     

Valuation allowances

     —          (0.9     —          —     

AFUDC - equity

     (0.7     (0.9     (1.1     (0.8

Other, net

     (0.9     (2.1     (0.3     0.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Effective tax rate

     34.0     34.9     36.2     38.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Dominion’s and Virginia Power’s 2013 state income tax expense reflects changes in the amount of income apportioned among states.

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. In August 2013, Dominion purchased Fairless from Juniper per the terms of the lease agreement. See Note 13 in this report for more information.

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 the Companies’ unrecognized tax benefits. During the nine months ended September 30, 2013, Dominion’s and Virginia Power’s unrecognized tax benefits changed as follows:

 

     Dominion     Virginia Power  
(millions)             

Balance at January 1, 2013

   $ 293      $ 57   

Increases - prior period positions

     14        12   

Decreases - prior period positions

     (91     (42

Current period positions

     21        7   

Settlements

     (2     (2

Expiration of statutes of limitations

     (4     —     
  

 

 

   

 

 

 

Balance at September 30, 2013

   $ 231      $ 32   
  

 

 

   

 

 

 

Discontinued Operations

Dominion’s effective tax rate for 2013 reflects the impact of goodwill written off in the sale of Kincaid and Brayton Point that is not deductible for tax purposes.

Note 6. Earnings Per Share

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

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2013      2012      2013      2012  
(millions, except EPS)       

Net income attributable to Dominion

   $ 569       $ 209       $ 1,266       $ 961   
  

 

 

    

 

 

    

 

 

    

 

 

 

Average shares of common stock outstanding - Basic

     579.4         573.8         578.1         572.1   

Net effect of dilutive securities(1)

     0.7         0.9         0.7         1.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Average shares of common stock outstanding - Diluted

     580.1         574.7         578.8         573.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings Per Common Share - Basic

   $ 0.98       $ 0.36       $ 2.19       $ 1.68   

Earnings Per Common Share - Diluted

   $ 0.98       $ 0.36       $ 2.19       $ 1.68   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Dilutive securities consist primarily of contingently convertible senior notes. See Note 14 in this report for more information.

 

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Table of Contents

Dominion’s 2013 Series A Equity Units and 2013 Series B Equity Units issued in June 2013 are potentially dilutive securities but were excluded from the calculation of diluted EPS for the three and nine months ended September 30, 2013. See Note 14 in this report for more information. There were no potentially dilutive securities excluded from the calculation of diluted EPS for the three and nine months ended September 30, 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:

 

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

Three Months Ended September 30, 2013

        

Beginning balance

   $ (31   $ 371      $ (823   $ (483

Other comprehensive income before reclassifications: gains (losses)

     (77     38        (12     (51

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

     (6     (10     14        (2
  

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     (83     28        2        (53
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (114   $ 399      $ (821   $ (536
  

 

 

   

 

 

   

 

 

   

 

 

 

Nine Months Ended September 30, 2013

        

Beginning balance

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

Other comprehensive income before reclassifications: gains (losses)

     (45     119        216        290   

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

     53        (46     44        51   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     8        73        260        341   
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (114   $ 399      $ (821   $ (536
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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

 

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Table of Contents

The following table presents Dominion’s reclassifications out of AOCI by component:

 

Details about AOCI components

  Amounts
reclassified from
AOCI
    Affected line item in the Consolidated
Statements of Income
(millions)          

Three Months Ended September 30, 2013

   

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

   

Commodity contracts

  $ (24   Operating revenue
    5      Purchased gas
    3      Electric fuel and other energy-related purchases

Interest rate contracts

    6      Interest and related charges
 

 

 

   
    (10  

Tax

    4      Income tax expense
 

 

 

   
  $ (6  
 

 

 

   

Unrealized (gains) and losses on investment securities:

   

Realized (gain) loss on sale of securities

  $ (16   Other income

Impairment

    1      Other income
 

 

 

   
    (15  

Tax

    5      Income tax expense
 

 

 

   
  $ (10  
 

 

 

   

Unrecognized pension and other postretirement benefit costs:

   

Actuarial losses

  $ 23      Other operations and maintenance
 

 

 

   
    23     

Tax

    (9   Income tax expense
 

 

 

   
  $ 14     
 

 

 

   

Nine Months Ended September 30, 2013

   

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

   

Commodity contracts

  $ 31      Operating revenue
    39      Purchased gas
    6      Electric fuel and other energy-related purchases

Interest rate contracts

    12      Interest and related charges
 

 

 

   
    88     

Tax

    (35   Income tax expense
 

 

 

   
  $ 53     
 

 

 

   

Unrealized (gains) and losses on investment securities:

   

Realized (gain) loss on sale of securities

  $ (80   Other income

Impairment

    6      Other income
 

 

 

   
    (74  

Tax

    28      Income tax expense
 

 

 

   
  $ (46  
 

 

 

   

Unrecognized pension and other postretirement benefit costs:

   

Prior service costs

  $ (6   Other operations and maintenance

Actuarial losses

    79      Other operations and maintenance
 

 

 

   
    73     

Tax

    (29   Income tax expense
 

 

 

   
  $ 44     
 

 

 

   

 

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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, forward market prices, 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.

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

 

     Fair Value
(millions)
     Valuation Techniques    Unobservable Input     Range    Weighted
Average(1)
 

At September 30, 2013

             

Assets:

             

Physical and Financial Forwards and Futures:

             

Natural Gas(2)

   $ 10       Discounted Cash Flow      Market Price (per Dth) (4)    (1) - 5      2   

Electricity

     9       Discounted Cash Flow      Market Price (per MWh) (4)    31 - 77      44   

FTRs(3)

     1       Discounted Cash Flow      Market Price (per MWh) (4)    (1) - 6      0   

Liquids

     12       Discounted Cash Flow      Market Price (per Gal) (4)    0 - 3      1   

Physical and Financial Options:

             

Natural Gas

     7       Option Model      Market Price (per Dth) (4)    3 - 5      4   
           Price Volatility (5)    19% - 30%      24
           Price Correlation (6)    (9)% - 100%      36
           Mean Reversion (7)    0 - 58      4   

Full Requirements Contracts:

             

Electricity

     13       Discounted Cash Flow      Market Price (per MWh) (4)    10 - 403(10)      34   
           Load Shaping (8)    0% - 10%      7
           Usage Factor (9)    11% - 15%      14
  

 

 

         

 

  

 

 

 

Total assets

   $ 52              
  

 

 

         

 

  

 

 

 

Liabilities:

             

Physical and Financial Forwards and Futures:

             

Natural Gas(2)

   $ 16       Discounted Cash Flow      Market Price (per Dth) (4)    (1) - 5      1   

Electricity

     6       Discounted Cash Flow      Market Price (per MWh) (4)    23 - 86      50   

FTRs(3)

     16       Discounted Cash Flow      Market Price (per MWh) (4)    (4) - 6      1   

Liquids

     8       Discounted Cash Flow      Market Price (per Gal) (4)    1 - 3      2   

Physical and Financial Options:

             

Natural Gas

     10       Option Model      Market Price (per Dth) (4)    3 - 10      5   
           Price Volatility (5)    19% - 30%      23
           Price Correlation (6)    (9)% - 100%      36
           Mean Reversion (7)    0 - 58      4   
  

 

 

         

 

  

 

 

 

Total liabilities

   $ 56              
  

 

 

         

 

  

 

 

 

 

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

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

In June 2013, Dominion purchased certain natural gas infrastructure facilities that were previously leased from third parties. The purchase price was based on terms in the lease, which exceeded current market pricing. As a result of the purchase price and expected losses, Dominion recorded an impairment charge of $49 million ($29 million after-tax) in other operations and maintenance expense in its Consolidated Statements of Income, to write down the long-lived assets to their estimated fair values of less than $1 million. As management was not aware of any recent market transactions for comparable assets with sufficient transparency to develop a market approach to fair value, Dominion used the income approach (discounted cash flows) to estimate the fair value of the assets in this impairment test. This was considered a Level 3 fair value measurement due to the use of significant unobservable inputs, including estimates of future production and other commodity prices.

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

 

PAGE 24


Table of Contents

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 September 30, 2013

           

Assets:

           

Derivatives:

           

Commodity

   $ 6       $ 713       $ 52       $ 771   

Interest rate

     —           114         —           114   

Investments(1):

           

Equity securities:

           

U.S.:

           

Large cap

     2,211         —           —           2,211   

Other

     74         —           —           74   

Non-U.S.:

           

Large cap

     11         —           —           11   

Fixed income:

           

Corporate debt instruments

     —           352         —           352   

U.S. Treasury securities and agency debentures

     414         168         —           582   

State and municipal

     —           342         —           342   

Other

     —           4         —           4   

Cash equivalents and other

     9         80         —           89   

Restricted cash equivalents

     —           10         —           10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 2,725       $ 1,783       $ 52       $ 4,560   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivatives:

           

Commodity

   $ 5       $ 721       $ 56       $ 782   

Interest rate

     —           11         —           11   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 5       $ 732       $ 56       $ 793   
  

 

 

    

 

 

    

 

 

    

 

 

 

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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Table of Contents

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
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  
(millions)                         

Beginning balance

   $ 2      $ 155      $ 25      $ (71

Total realized and unrealized gains (losses):

        

Included in earnings

     (1     (8     1        (31

Included in other comprehensive income (loss)

     (25     (48     11        124   

Included in regulatory assets/liabilities

     10        2        (17     30   

Settlements

     3        3        (23     54   

Transfers out of Level 3

     7        (1     (1     (3
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (4   $ 103      $ (4   $ 103   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 2      $ (15   $ —        $ 25   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

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 September 30, 2013

      

Total gains (losses) included in earnings

   $ 5      $ (6   $ (1

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

     2        —          2   
  

 

 

   

 

 

   

 

 

 

Three Months Ended September 30, 2012

      

Total gains (losses) included in earnings

   $ (10   $ 2      $ (8

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

     (15     —          (15
  

 

 

   

 

 

   

 

 

 

Nine Months Ended September 30, 2013

      

Total gains (losses) included in earnings

   $ 12      $ (11   $ 1   

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

     —          —          —     
  

 

 

   

 

 

   

 

 

 

Nine Months Ended September 30, 2012

      

Total gains (losses) included in earnings

   $ 13      $ (44   $ (31

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

     25        —          25   
  

 

 

   

 

 

   

 

 

 

 

PAGE 27


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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 September 30, 2013

           

Assets:

           

Derivatives:

           

Commodity

   $ —         $ 1       $ 1       $ 2   

Interest rate

     —           33         —           33   

Investments(1):

           

Equity securities:

           

U.S.:

           

Large cap

     939         —           —           939   

Other

     33         —           —           33   

Fixed income:

           

Corporate debt instruments

     —           197         —           197   

U.S. Treasury securities and agency debentures

     146         63         —           209   

State and municipal

     —           160         —           160   

Cash equivalents and other

     —           24         —           24   

Restricted cash equivalents

     —           10         —           10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 1,118       $ 488       $ 1       $ 1,607   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivatives:

           

Commodity

   $ —         $ 4       $ 16       $ 20   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —         $ 4       $ 16       $ 20   
  

 

 

    

 

 

    

 

 

    

 

 

 

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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Table of Contents

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
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  
(millions)                         

Beginning balance

   $ (25   $ 1      $ 2      $ (28

Total realized and unrealized gains (losses):

        

Included in earnings

     (4     2        (9     (44

Included in regulatory assets/liabilities

     10        2        (17     31   

Settlements

     4        (2     9        44   
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (15   $ 3      $ (15   $ 3   
  

 

 

   

 

 

   

 

 

   

 

 

 

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 and nine months ended September 30, 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 and nine months ended September 30, 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, which 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:

 

    September 30, 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)

  $ 17,228      $ 18,899      $ 16,841      $ 19,898   

Securities due within one year, VIE(3)

    —          —          860        864   

Junior subordinated notes(3)

    1,373        1,397        1,373        1,430   

Remarketable subordinated notes(3)

    1,079        1,175        —          —     

Subsidiary preferred stock(4)

    257        258        257        255   
 

 

 

   

 

 

   

 

 

   

 

 

 

Virginia Power

       

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

  $ 8,039      $ 8,975      $ 6,669      $ 8,270   

Preferred stock(4)

    257        258        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) Carrying amount includes amounts which represent the unamortized discount and premium. At September 30, 2013 and December 31, 2012, includes the valuation of certain fair value hedges associated with Dominion’s fixed rate debt of approximately $56 million and $93 million, respectively.
(3) Carrying amount includes amounts which represent the unamortized discount or premium.
(4) Carrying amount includes deferred issuance expenses of $2 million at September 30, 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.

 

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Table of Contents

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 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 or similar arrangements 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:

 

     September 30, 2013      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
     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

   $ 114       $ —         $ 114       $ 93       $ —         $ 93   

Commodity contracts:

                 

Over-the-counter

     190         —           190         290         —           290   

Exchange

     568         —           568         416         —           416   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting or similar arrangement

     872         —           872         799         —           799   

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

     13         —           13         29         —           29   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total(1)

   $ 885       $ —         $ 885       $ 828       $ —         $ 828   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) At September 30, 2013, the total derivative asset balance contains $689 million of current assets, which is presented in current derivative assets, in Dominion’s Consolidated Balance Sheet, and $196 million of noncurrent assets, which is presented in other deferred charges and other assets in Dominion’s Consolidated Balance Sheet. At December 31, 2012, 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 assets, which is presented in other deferred charges and other assets in Dominion’s Consolidated Balance Sheet.

 

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Table of Contents
            September 30, 2013                    December 31, 2012         
            Gross Amounts Not Offset in
the 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
     Net Amounts of
Assets
Presented in the
Consolidated
Balance Sheet
     Financial
Instruments
     Cash
Collateral
Received
     Net
Amounts
 
(millions)                                                        

Interest rate contracts:

                       

Over-the-counter

   $ 114       $ 11       $ —         $ 103       $ 93       $ 19       $ —         $ 74   

Commodity contracts:

                       

Over-the-counter

     190         78         —           112         290         97         —           193   

Exchange

     568         563         3         2         416         350         4         62   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 872       $ 652       $ 3       $ 217       $ 799       $ 466       $ 4       $ 329   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     September 30, 2013      December 31, 2012  
     Gross
Amounts of
Recognized
Liabilities
     Gross Amounts
Offset in the
Consolidated
Balance Sheet
     Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
     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

   $ 11       $ —         $ 11       $ 66       $ —         $ 66   

Commodity contracts:

                 

Over-the-counter

     162         —           162         191         —           191   

Exchange

     617         —           617         393         —           393   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting or similar arrangement

     790         —           790         650         —           650   

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

     3         —           3         11         —           11   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total(1)

   $ 793       $ —         $ 793       $ 661       $ —         $ 661   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) At September 30, 2013, the total derivative liability balance contains $659 million of current liabilities, which is presented in current derivative liabilities in Dominion’s Consolidated Balance Sheet, and $134 million of noncurrent liabilities, which is presented in the other deferred credits and other liabilities in Dominion’s Consolidated Balance Sheet. At December 31, 2012, 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 liabilities, which is presented in other deferred credits and other liabilities in Dominion’s Consolidated Balance Sheet.

 

PAGE 31


Table of Contents
            September 30, 2013                    December 31, 2012         
            Gross Amounts Not Offset in
the 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
     Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
     Financial
Instruments
     Cash
Collateral
Paid
     Net
Amounts
 
(millions)                                                        

Interest rate contracts:

                       

Over-the-counter

   $ 11       $ 11       $ —         $ —         $ 66       $ 19       $ —         $ 47   

Commodity contracts:

                       

Over-the-counter

     162         78         17         67         191         97         20         74   

Exchange

     617         563         54         —           393         350         43         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 790       $ 652       $ 71       $ 67       $ 650       $ 466       $ 63       $ 121   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the volume of Dominion’s derivative activity as of September 30, 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)

     149         27   

Basis

     529         379   

Electricity (MWh):

     

Fixed price(1)

     17,059,889         15,411,998   

FTRs

     64,859,720         689,289   

Capacity (MW)

     133,650         18,300   

Liquids (Gal)(2)

     152,418,000         35,700,000   

Interest rate

   $ 2,400,000,000       $ 1,150,000,000   

 

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

For the three and nine months ended September 30, 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 September 30, 2013:

 

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

Commodities:

      

Gas

   $ (7   $ (6     31 months   

Electricity

     6        (9     39 months   

Other

     4        2        32 months   

Interest rate

     (117     (21     367 months   
  

 

 

   

 

 

   

 

 

 

Total

   $ (114   $ (34  
  

 

 

   

 

 

   

 

 

 

 

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Table of Contents

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.

 

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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)                     

September 30, 2013

        

ASSETS

        

Current Assets

        

Commodity

   $ 53       $ 546       $ 599   

Interest rate

     90         —           90   
  

 

 

    

 

 

    

 

 

 

Total current derivative assets

     143         546         689   
  

 

 

    

 

 

    

 

 

 

Noncurrent Assets

        

Commodity

     70         102         172   

Interest rate

     24         —           24   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative assets(1)

     94         102         196   
  

 

 

    

 

 

    

 

 

 

Total derivative assets

   $ 237       $ 648       $ 885   
  

 

 

    

 

 

    

 

 

 

LIABILITIES

        

Current Liabilities

        

Commodity

   $ 64       $ 584       $ 648   

Interest rate

     11         —           11   
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities

     75         584         659   
  

 

 

    

 

 

    

 

 

 

Noncurrent Liabilities

        

Commodity

     47         87         134   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative liabilities(2)

     47         87         134   
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

   $ 122       $ 671       $ 793   
  

 

 

    

 

 

    

 

 

 

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(1)

     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(2)

     58         93         151   
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

   $ 227       $ 434       $ 661   
  

 

 

    

 

 

    

 

 

 

 

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

 

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Table of Contents

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 September 30, 2013

      

Derivative Type and Location of Gains (Losses)

      

Commodity:

      

Operating revenue

     $ 24     

Purchased Gas

       (5  

Electric fuel and other energy-related purchases

       (3  
  

 

 

   

 

 

   

 

 

 

Total commodity

   $ (110   $ 16      $ 4   
  

 

 

   

 

 

   

 

 

 

Interest rate(3)

     (10     (6     14   
  

 

 

   

 

 

   

 

 

 

Total

   $ (120   $ 10      $ 18   
  

 

 

   

 

 

   

 

 

 

Three Months Ended September 30, 2012

      

Derivative Type and Location of Gains (Losses)

      

Commodity:

      

Operating revenue

     $ 44     

Purchased gas

       (9  

Electric fuel and other energy-related purchases

       (4  
  

 

 

   

 

 

   

 

 

 

Total commodity

   $ (128   $ 31      $ 7   
  

 

 

   

 

 

   

 

 

 

Interest rate(3)

     (15     1        (4
  

 

 

   

 

 

   

 

 

 

Total

   $ (143   $ 32      $ 3   
  

 

 

   

 

 

   

 

 

 

Nine Months Ended September 30, 2013

      

Derivative Type and Location of Gains (Losses)

      

Commodity:

      

Operating revenue

     $ (31  

Purchased gas

       (39  

Electric fuel and other energy-related purchases

       (6  
  

 

 

   

 

 

   

 

 

 

Total commodity

   $ (137   $ (76   $ 3   
  

 

 

   

 

 

   

 

 

 

Interest rate(3)

     71        (12     66   
  

 

 

   

 

 

   

 

 

 

Total

   $ (66   $ (88   $ 69   
  

 

 

   

 

 

   

 

 

 

Nine Months Ended September 30, 2012

      

Derivative Type and Location of Gains (Losses)

      

Commodity:

      

Operating revenue

     $ 171     

Purchased gas

       (55  

Electric fuel and other energy-related purchases

       (16  
  

 

 

   

 

 

   

 

 

 

Total commodity

   $ 159      $ 100      $ 14   
  

 

 

   

 

 

   

 

 

 

Interest rate(3)

     (91     2        (44
  

 

 

   

 

 

   

 

 

 

Total

   $ 68      $ 102      $ (30
  

 

 

   

 

 

   

 

 

 

 

(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.

 

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Table of Contents
     Amount of Gain (Loss) Recognized in Income on  Derivatives(1)  
     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 

Derivatives not designated as hedging instruments

   2013     2012      2013     2012  
(millions)                          

Derivative Type and Location of Gains (Losses)

         

Commodity

         

Operating revenue

   $ 3      $ 5       $ —        $ 108   

Purchased gas

     (3     3         (11     (2

Electric fuel and other energy-related purchases

     (12     3         (20     (33

Interest rate(2)

     —          10         —          17   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $ (12   $ 21       $ (31   $ 90   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

(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.

Virginia Power

The tables below present Virginia Power’s derivative asset and liability balances by type of financial instrument, before and after the effects of offsetting:

 

     September 30, 2013      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
     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

   $ 33       $ —         $ 33       $ —         $ —         $ —     

Commodity contracts:

              

Over-the-counter

     2         —           2         6         —           6   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting or similar arrangement

     35         —           35         6         —           6   

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

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total(1)

   $ 35       $ —         $ 35       $ 6       $ —         $ 6   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) At September 30, 2013, the total derivative asset balance contains $35 million of current assets, which is presented in other current assets in Virginia Power’s Consolidated Balance Sheet. At December 31, 2012, the total derivative asset balance contains $6 million of current assets, which is presented in other current assets in Virginia Power’s Consolidated Balance Sheet.

 

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Table of Contents
          September 30, 2013                 December 31, 2012        
          Gross Amounts Not Offset in
the 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
    Net Amounts of
Assets
Presented in the
Consolidated
Balance Sheet
    Financial
Instruments
    Cash
Collateral
Received
    Net
Amounts
 
(millions)                        

Interest rate contracts:

       

Over-the-counter

  $ 33      $ —        $ —        $ 33      $ —        $ —        $ —        $ —     

Commodity contracts:

             

Over-the-counter

    2        2        —          —          6        3        —          3   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 35      $ 2      $ —        $ 33      $ 6      $ 3      $ —        $ 3   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     September 30, 2013      December 31, 2012  
     Gross
Amounts of
Recognized
Liabilities
     Gross Amounts
Offset in the
Consolidated
Balance Sheet
     Net Amounts of
Liabilities
Presented in the

Consolidated
Balance Sheet
     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

   $ —         $ —         $ —         $ 25       $ —         $ 25   

Commodity contracts:

              

Over-the-counter

     19         —           19         7         —           7   

Exchange

     1         —           1         2         —           2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting or similar arrangement

     20         —           20         34         —           34   

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

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total(1)

   $ 20       $ —         $ 20       $ 34       $ —         $ 34   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) At September 30, 2013, the total derivative liability balance contains $20 million of current liabilities, which is presented in other current liabilities in Virginia Power’s Consolidated Balance Sheet. At December 31, 2012, the total derivative liability balance contains $33 million of current liabilities, which is presented in other current liabilities in Virginia Power’s Consolidated Balance Sheet and $1 million of noncurrent derivative liabilities, which is presented in other deferred credits and other liabilities in Virginia Power’s Consolidated Balance Sheet.

 

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Table of Contents
          September 30, 2013                 December 31, 2012        
          Gross Amounts Not Offset in
the 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
    Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
    Financial
Instruments
    Cash
Collateral
Paid
    Net
Amounts
 
(millions)                                                

Interest rate contracts:

               

Over-the-counter

  $ —        $ —        $ —        $ —        $ 25      $ —        $ —        $ 25   

Commodity contracts:

               

Over-the-counter

    19        2        14        3        7        3        —          4   

Exchange

    1        —          1        —          2        —          2        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 20      $ 2      $ 15      $ 3      $ 34      $ 3      $ 2      $ 29   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table presents the volume of Virginia Power’s derivative activity as of September 30, 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

     9         —     

Basis

     5         —     

Electricity (MWh):

     

Fixed price

     511,200         —     

FTRs

     63,408,139         —     

Capacity (MW)

     121,500         18,300   

Interest rate

   $ 600,000,000       $ —     

 

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Table of Contents

Fair Value and Gains and Losses on Derivative Instruments

The following table presents the fair values of Virginia Power’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)                     

September 30, 2013

        

ASSETS

        

Current Assets

        

Commodity

   $ 1       $ 1       $ 2   

Interest rate

     33         —           33   
  

 

 

    

 

 

    

 

 

 

Total current derivative assets(1)

     34         1         35   
  

 

 

    

 

 

    

 

 

 

Total derivative assets

   $ 34       $ 1       $ 35   
  

 

 

    

 

 

    

 

 

 

LIABILITIES

        

Current Liabilities

        

Commodity

   $ 3       $ 17       $ 20   
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities(2)

     3         17         20   
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

   $ 3       $ 17       $ 20   
  

 

 

    

 

 

    

 

 

 

December 31, 2012

        

ASSETS

        

Current Assets

        

Commodity

   $ 1       $ 5       $ 6   
  

 

 

    

 

 

    

 

 

 

Total current derivative assets(1)

     1         5         6   
  

 

 

    

 

 

    

 

 

 

Total derivative assets

   $ 1       $ 5       $ 6   
  

 

 

    

 

 

    

 

 

 

LIABILITIES

        

Current Liabilities

        

Commodity

   $ 5       $ 3       $ 8   

Interest rate

     25         —           25   
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities(2)

     30         3         33   
  

 

 

    

 

 

    

 

 

 

Noncurrent Liabilities

        

Commodity

     1         —           1   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative liabilities(3)

     1         —           1   
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

   $ 31       $ 3       $ 34   
  

 

 

    

 

 

    

 

 

 

 

(1) Current derivative assets are presented in other current assets in Virginia Power’s Consolidated Balance Sheets.
(2) Current derivative liabilities are presented in other current liabilities in Virginia Power’s Consolidated Balance Sheets.
(3) Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in Virginia Power’s Consolidated Balance Sheets.

 

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Table of Contents

The following tables present the gains and losses on Virginia Power’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 September 30, 2013

      

Derivative Type and Location of Gains (Losses)

      

Commodity:

      

Electric fuel and other energy-related purchases

     $ (1  
  

 

 

   

 

 

   

 

 

 

Total commodity

   $ 1      $ (1   $ 4   
  

 

 

   

 

 

   

 

 

 

Interest rate(3)

     1        —          14   
  

 

 

   

 

 

   

 

 

 

Total

   $ 2      $ (1   $ 18   
  

 

 

   

 

 

   

 

 

 

Three Months Ended September 30, 2012

      

Derivative Type and Location of Gains (Losses)

      

Commodity:

      

Electric fuel and other energy-related purchases

     $ (1  
  

 

 

   

 

 

   

 

 

 

Total commodity

   $ —        $ (1   $ 7   
  

 

 

   

 

 

   

 

 

 

Interest rate(3)

     (3     —          (4
  

 

 

   

 

 

   

 

 

 

Total

   $ (3   $ (1   $ 3   
  

 

 

   

 

 

   

 

 

 

Nine Months Ended September 30, 2013

      

Derivative Type and Location of Gains (Losses)

      

Commodity:

      

Electric fuel and other energy-related purchases

     $ —       
  

 

 

   

 

 

   

 

 

 

Total commodity

   $ —        $ —        $ 3   
  

 

 

   

 

 

   

 

 

 

Interest rate(3)

     7        —          66   
  

 

 

   

 

 

   

 

 

 

Total

   $ 7      $ —        $ 69   
  

 

 

   

 

 

   

 

 

 

Nine Months Ended September 30, 2012

      

Derivative Type and Location of Gains (Losses)

      

Commodity:

      

Electric fuel and other energy-related purchases

     $ (4  
  

 

 

   

 

 

   

 

 

 

Total commodity

   $ (1   $ (4   $ 14   
  

 

 

   

 

 

   

 

 

 

Interest rate(3)

     (7     —          (44
  

 

 

   

 

 

   

 

 

 

Total

   $ (8   $ (4   $ (30
  

 

 

   

 

 

   

 

 

 

 

(1) Amounts deferred into AOCI have no associated effect in Virginia Power’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 Virginia Power’s Consolidated Statements of Income.
(3) Amounts recorded in Virginia Power’s Consolidated Statements of Income are classified in interest and related charges.

 

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Table of Contents
     Amount of Gain (Loss) Recognized in Income on  Derivatives(1)  
     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 

Derivatives not designated as hedging instruments

   2013     2012      2013     2012  
(millions)                          

Derivative Type and Location of Gains (Losses)

         

Commodity(2)

   $ (4   $ 3       $ (8   $ (43

Interest rate(3)

     —          1         —          —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $ (4   $ 4       $ (8   $ (43
  

 

 

   

 

 

    

 

 

   

 

 

 

 

(1) Includes derivative activity amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in Virginia Power’s Consolidated Statements of Income.
(2) Amounts recorded in Virginia Power’s Consolidated Statements of Income are classified in electric fuel and other energy-related purchases.
(3) Amounts recorded in Virginia Power’s Consolidated Statements of Income are classified in interest and related charges.

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 $100 million and $95 million at September 30, 2013 and December 31, 2012, respectively. Cost method investments held in Dominion’s rabbi trusts totaled $10 million and $14 million at September 30, 2013 and December 31, 2012, respectively.

 

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Table of Contents

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)                           

September 30, 2013

          

Marketable equity securities:

          

U.S.:

          

Large Cap

   $ 1,176       $ 999       $ —        $ 2,175   

Other

     48         20         —          68   

Marketable debt securities:

          

Corporate bonds

     339         17         (4     352   

U.S. Treasury securities and agency debentures

     571         10         (7     574   

State and municipal

     299         13         (4     308   

Other

     4         —           —          4   

Cost method investments

     103         —           —          103   

Cash equivalents and other(2)

     89         —           —          89   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 2,629       $ 1,059       $ (15 )(3)    $ 3,673   
  

 

 

    

 

 

    

 

 

   

 

 

 

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