10-Q 1 d917911d10q.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark one)

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

For the quarterly period ended March 31, 2015

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

000-55337

   VIRGINIA ELECTRIC AND POWER COMPANY    54-0418825

000-55338

   DOMINION GAS HOLDINGS, LLC    46-3639580

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  ¨

Dominion Gas Holdings, LLC    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  ¨

Dominion Gas Holdings, LLC    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   ¨

Dominion Gas Holdings, LLC

 

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

Dominion Gas Holdings, LLC    Yes  ¨    No  x

  

At March 31, 2015, the latest practicable date for determination, Dominion Resources, Inc. had 589,330,633 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. Dominion Resources, Inc. holds all of the membership interests of Dominion Gas Holdings, LLC.

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

VIRGINIA ELECTRIC AND POWER COMPANY AND DOMINION GAS HOLDINGS, LLC MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND ARE FILING THIS FORM 10-Q UNDER THE REDUCED DISCLOSURE FORMAT.

 

 

 


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      70   

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk      80   

Item 4.

   Controls and Procedures      82   
   PART II. Other Information   

Item 1.

   Legal Proceedings      83   

Item 1A.

   Risk Factors      83   

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      83   

Item 6.

   Exhibits      84   

 

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Table of Contents

GLOSSARY OF TERMS

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

 

Abbreviation or Acronym

  

Definition

2013 Biennial Review Order

   Order issued by the Virginia Commission in November 2013 concluding the 2011-2012 biennial review of Virginia Power’s base rates, terms and conditions

2013 Equity Units

   Dominion’s 2013 Series A Equity Units and 2013 Series B Equity Units issued in June 2013

2014 Equity Units

   Dominion’s 2014 Series A Equity Units issued in July 2014

AFUDC

   Allowance for funds used during construction

AOCI

   Accumulated other comprehensive income (loss)

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

Atlantic Coast Pipeline

   Atlantic Coast Pipeline, LLC, a limited liability company owned by Dominion, Duke Energy Corporation, Piedmont Natural Gas Company, Inc. and AGL Resources Inc.

BACT

   Best available control technology

bcf

   Billion cubic feet

Bear Garden

   A 590 MW combined cycle, natural gas-fired power station in Buckingham County, Virginia

Blue Racer

   Blue Racer Midstream, LLC, a joint venture between Dominion and Caiman

BOD

   Board of Directors

BP

   BP Wind Energy North America Inc.

BREDL

   Blue Ridge Environmental Defense League

Bremo

   Bremo power station

Brunswick County

   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

CCR

   Coal combustion residual

CEO

   Chief Executive Officer

CERCLA

   Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as Superfund

CFO

   Chief Financial Officer

Chesapeake

   Chesapeake power station

CO2

   Carbon dioxide

COL

   Combined Construction Permit and Operating License

Companies

   Dominion, Virginia Power and Dominion Gas, 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

DCGT

   Dominion Carolina Gas Transmission, LLC (successor by statutory conversion to and formerly known as Carolina Gas Transmission Corporation)

DEI

   Dominion Energy, Inc.

Dominion

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

Dominion Gas

   The legal entity, Dominion Gas Holdings, LLC, one or more of its consolidated subsidiaries or operating segment, or the entirety of Dominion Gas Holdings, LLC and its consolidated subsidiaries

Dominion Iroquois

   Dominion Iroquois, Inc., which holds a 24.72% general partnership interest in Iroquois

 

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Table of Contents

Abbreviation or Acronym

  

Definition

Dominion Midstream

   The legal entity, Dominion Midstream Partners, LP, its consolidated subsidiary Cove Point Holdings, or the entirety of Dominion Midstream Partners, LP, and its consolidated subsidiary

Dominion NGL Pipelines, LLC

   The initial owner of the 58-mile G-150 pipeline project, which is designed to transport approximately 27,000 barrels per day of NGLs from Natrium to an interconnect with the ATEX line of Enterprise near Follansbee, West Virginia

DRS

   Dominion Resources Services, Inc.

DSM

   Demand-side management

Dth

   Dekatherm

DTI

   Dominion Transmission, Inc.

DVP

   Dominion Virginia Power operating segment

East Ohio

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

Enterprise

   Enterprise Product Partners, L.P.

EPA

   Environmental Protection Agency

EPC

   Engineering, procurement and construction

EPS

   Earnings per share

FERC

   Federal Energy Regulatory Commission

Fowler Ridge

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

FTRs

   Financial transmission rights

GAAP

   U.S. generally accepted accounting principles

Gal

   Gallon

GHG

   Greenhouse gas

Heating degree days

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

INPO

   Institute of Nuclear Power Operations

IRCA

   Intercompany revolving credit agreement

Iroquois

   Iroquois Gas Transmission System L.P.

ISO

   Independent system operator

ISO-NE

   ISO New England

Kewaunee

   Kewaunee nuclear power station

kV

   Kilovolt

Liquefaction Project

   A natural gas export/liquefaction facility currently under development by Cove Point

LNG

   Liquefied natural gas

Maryland Commission

   Public Service Commission of Maryland

MATS

   Utility Mercury and Air Toxics Standard Rule

MD&A

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

MGD

   Million gallons a day

Millstone

   Millstone nuclear power station

MISO

   Midcontinent Independent Transmission System Operator, Inc.

Moody’s

   Moody’s Investors Service

MW

   Megawatt

MWh

   Megawatt hour

Natrium

   A natural gas and fractionation facility located in Natrium, West Virginia, owned by Blue Racer

NCEMC

   North Carolina Electric Membership Corporation

NedPower

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

NGLs

   Natural gas liquids

North Anna

   North Anna nuclear power station

Northern System

   Collection of approximately 131 miles of various diameter natural gas pipelines in Ohio

NOx

   Nitrogen oxide

NPDES

   National Pollutant Discharge Elimination System

NRC

   Nuclear Regulatory Commission

NSPS

   New Source Performance Standards

NYSE

   New York Stock Exchange

 

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Table of Contents

Abbreviation or Acronym

  

Definition

ODEC

   Old Dominion Electric Cooperative

Ohio Commission

   Public Utilities Commission of Ohio

Order 1000

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

PIPP

   Percentage of Income Payment Plan deployed by East Ohio

PIR

   Pipeline Infrastructure Replacement Program deployed by East Ohio

PJM

   PJM Interconnection, L.L.C.

Possum Point

   Possum Point power station

ppb

   Parts-per-billion

PSD

   Prevention of Significant Deterioration

Rider B

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

Rider BW

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

Rider R

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

Rider S

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

Riders C1A and C2A

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

ROE

   Return on equity

RTO

   Regional transmission organization

SEC

   Securities and Exchange Commission

SELC

   Southern Environmental Law Center

Shell

   Shell WindEnergy, Inc.

SO2

   Sulfur dioxide

Standard & Poor’s

   Standard & Poor’s Ratings Services, a division of McGraw Hill Financial, Inc.

U.S.

   United States of America

UAO

   Unilateral Administrative Order

VDEQ

   Virginia Department of Environmental Quality

VEBA

   Voluntary Employees’ Beneficiary Association

VIE

   Variable interest entity

Virginia City Hybrid Energy Center

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

Virginia Commission

   Virginia State Corporation Commission

Virginia Power

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

WVDEP

   West Virginia Department of Environmental Protection

Yorktown

   Yorktown power station

 

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2015      2014  
(millions, except per share amounts)              

Operating Revenue

   $ 3,409       $ 3,630   
  

 

 

    

 

 

 

Operating Expenses

Electric fuel and other energy-related purchases

  953      1,334   

Purchased electric capacity

  94      88   

Purchased gas

  250      540   

Other operations and maintenance

  602      425   

Depreciation, depletion and amortization

  343      308   

Other taxes

  165      167   
  

 

 

    

 

 

 

Total operating expenses

  2,407      2,862   
  

 

 

    

 

 

 

Income from operations

  1,002      768   
  

 

 

    

 

 

 

Other income

  60      40   

Interest and related charges

  223      237   
  

 

 

    

 

 

 

Income from continuing operations including noncontrolling interests before income tax expense

  839      571   

Income tax expense

  299      186   
  

 

 

    

 

 

 

Net Income Including Noncontrolling Interests

  540      385   

Noncontrolling Interests

  4      6   
  

 

 

    

 

 

 

Net Income Attributable to Dominion

$ 536    $ 379   
  

 

 

    

 

 

 

Earnings Per Common Share - Basic and Diluted

Net income attributable to Dominion

$ 0.91    $ 0.65   
  

 

 

    

 

 

 

Dividends declared per common share

$ 0.6475    $ 0.6000   
  

 

 

    

 

 

 

 

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

 

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DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2015     2014  
(millions)             

Net income including noncontrolling interests

   $ 540      $ 385   

Other comprehensive income (loss), net of taxes:

    

Net deferred losses on derivatives-hedging activities(1)

     (58     (150

Changes in unrealized net gains on investment securities(2)

     15        29   

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

     —          (4

Amounts reclassified to net income:

    

Net derivative losses-hedging activities(4)

     59        160   

Net realized gains on investment securities(5)

     (21     (11

Net pension and other postretirement benefit costs(6)

     13        8   

Changes in other comprehensive loss from equity method investees

     (1     (7
  

 

 

   

 

 

 

Total other comprehensive income

  7      25   
  

 

 

   

 

 

 

Comprehensive income including noncontrolling interests

  547      410   

Comprehensive income attributable to noncontrolling interests

  4      6   
  

 

 

   

 

 

 

Comprehensive income attributable to Dominion

$ 543    $ 404   
  

 

 

   

 

 

 

 

(1) Net of $41 million and $80 million tax for the three months ended March 31, 2015 and 2014, respectively.
(2) Net of $(11) million and $(1) million tax for the three months ended March 31, 2015 and 2014, respectively.
(3) Net of $     million and $(4) million tax for the three months ended March 31, 2015 and 2014, respectively.
(4) Net of $(39) million and $(100) million tax for the three months ended March 31, 2015 and 2014, respectively.
(5) Net of $12 million and $7 million tax for the three months ended March 31, 2015 and 2014, respectively
(6) Net of $(9) million and $(6) million tax for the three months ended March 31, 2015 and 2014, respectively.

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

 

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DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     March 31,
2015
    December 31,
2014(1)
 
(millions)             

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 275      $ 318   

Customer receivables (less allowance for doubtful accounts of $34 at both dates)

     1,589        1,514   

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

     113        119   

Inventories

     1,227        1,410   

Prepayments

     163        167   

Deferred income taxes

     673        800   

Other

     1,013        1,287   
  

 

 

   

 

 

 

Total current assets

  5,053      5,615   
  

 

 

   

 

 

 

Investments

Nuclear decommissioning trust funds

  4,244      4,196   

Investment in equity method affiliates

  1,085      1,081   

Other

  288      284   
  

 

 

   

 

 

 

Total investments

  5,617      5,561   
  

 

 

   

 

 

 

Property, Plant and Equipment

Property, plant and equipment

  52,720      51,406   

Accumulated depreciation, depletion and amortization

  (15,494   (15,136
  

 

 

   

 

 

 

Total property, plant and equipment, net

  37,226      36,270   
  

 

 

   

 

 

 

Deferred Charges and Other Assets

Goodwill

  3,294      3,044   

Pension and other postretirement benefit assets

  979      956   

Regulatory assets

  1,665      1,642   

Other

  1,322      1,239   
  

 

 

   

 

 

 

Total deferred charges and other assets

  7,260      6,881   
  

 

 

   

 

 

 

Total assets

$ 55,156    $ 54,327   
  

 

 

   

 

 

 

 

(1) Dominion’s Consolidated Balance Sheet at December 31, 2014 has been derived from the audited Consolidated Financial Statements at that date.

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

 

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Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

     March 31,
2015
    December 31,
2014(1)
 
(millions)             

LIABILITIES AND EQUITY

    

Current Liabilities

    

Securities due within one year

   $ 1,822      $ 1,375   

Short-term debt

     3,200        2,775   

Accounts payable

     945        952   

Derivative liabilities

     600        591   

Other

     1,454        1,505   
  

 

 

   

 

 

 

Total current liabilities

  8,021      7,198   
  

 

 

   

 

 

 

Long-Term Debt

Long-term debt

  17,896      18,348   

Junior subordinated notes

  1,373      1,374   

Remarketable subordinated notes

  2,084      2,083   
  

 

 

   

 

 

 

Total long-term debt

  21,353      21,805   
  

 

 

   

 

 

 

Deferred Credits and Other Liabilities

Deferred income taxes and investment tax credits

  7,577      7,444   

Asset retirement obligations

  1,645      1,633   

Regulatory liabilities

  2,119      1,991   

Other

  2,025      2,299   
  

 

 

   

 

 

 

Total deferred credits and other liabilities

  13,366      13,367   
  

 

 

   

 

 

 

Total liabilities

  42,740      42,370   
  

 

 

   

 

 

 

Commitments and Contingencies (see Note 15)

Equity

Common stock – no par(2)

  6,170      5,876   

Retained earnings

  6,250      6,095   

Accumulated other comprehensive loss

  (409   (416
  

 

 

   

 

 

 

Total common shareholders’ equity

  12,011      11,555   
  

 

 

   

 

 

 

Noncontrolling interests

  405      402   
  

 

 

   

 

 

 

Total equity

  12,416      11,957   
  

 

 

   

 

 

 

Total liabilities and equity

$ 55,156    $ 54,327   
  

 

 

   

 

 

 

 

(1) Dominion’s Consolidated Balance Sheet at December 31, 2014 has been derived from the audited Consolidated Financial Statements at that date.
(2) 1 billion shares authorized; 589 million shares and 585 million shares outstanding at March 31, 2015 and December 31, 2014, respectively.

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

 

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DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Three Months Ended March 31,

   2015     2014  
(millions)             

Operating Activities

    

Net income including noncontrolling interests

   $ 540      $ 385   

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

    

Depreciation, depletion and amortization (including nuclear fuel)

     414        378   

Deferred income taxes and investment tax credits

     277        232   

Gains on the sale of assets and businesses

     (70     (159

Other adjustments

     (40     (34

Changes in:

    

Accounts receivable

     (65     (183

Inventories

     148        163   

Deferred fuel and purchased gas costs, net

     (33     (304

Accounts payable

     (85     53   

Accrued interest, payroll and taxes

     (15     (55

Margin deposit assets and liabilities

     111        105   

Other operating assets and liabilities

     (51     172   
  

 

 

   

 

 

 

Net cash provided by operating activities

  1,131      753   
  

 

 

   

 

 

 

Investing Activities

Plant construction and other property additions (including nuclear fuel)

  (1,014   (1,120

Acquisition of solar development projects

  —        (47

Acquisition of DCGT

  (495   —     

Proceeds from sales of securities

  337      442   

Purchases of securities

  (304   (441

Proceeds from the sale of electric retail energy marketing business

  —        187   

Proceeds from the sale of assets to Blue Racer

  —        84   

Proceeds from assignments of Marcellus acreage

  27      —     

Other

  (50   (24
  

 

 

   

 

 

 

Net cash used in investing activities

  (1,499   (919
  

 

 

   

 

 

 

Financing Activities

Issuance of short-term debt, net

  425      45   

Issuance of long-term debt

  —        1,150   

Repayment and repurchase of long-term debt

  (3   (608

Subsidiary preferred stock redemption

  —        (125

Issuance of common stock

  295      —     

Common dividend payments

  (381   (349

Distributions to Dominion Midstream public unitholders

  (3   —     

Subsidiary preferred dividend payments

  —        (4

Other

  (8   (31
  

 

 

   

 

 

 

Net cash provided by financing activities

  325      78   
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

  (43   (88

Cash and cash equivalents at beginning of period

  318      316   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

$ 275    $ 228   
  

 

 

   

 

 

 

Supplemental Cash Flow Information

Significant noncash investing activities:

Accrued capital expenditures

$ 353    $ 261   
  

 

 

   

 

 

 

 

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

 

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Table of Contents

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2015      2014  
(millions)              

Operating Revenue(1)

   $ 2,137       $ 1,983   

Operating Expenses

     

Electric fuel and other energy-related purchases(1)

     810         650   

Purchased electric capacity

     94         88   

Other operations and maintenance:

     

Affiliated suppliers

     75         71   

Other

     321         270   

Depreciation and amortization

     238         218   

Other taxes

     74         73   
  

 

 

    

 

 

 

Total operating expenses

  1,612      1,370   
  

 

 

    

 

 

 

Income from operations

  525      613   
  

 

 

    

 

 

 

Other income

  15      15   

Interest and related charges

  108      107   
  

 

 

    

 

 

 

Income before income tax expense

  432      521   

Income tax expense

  163      197   
  

 

 

    

 

 

 

Net Income

  269      324   

Preferred dividends

  —        6   
  

 

 

    

 

 

 

Balance available for common stock

$ 269    $ 318   
  

 

 

    

 

 

 

 

(1) See Note 17 for amounts attributable to affiliates.

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

 

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VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2015     2014  
(millions)             

Net income

   $ 269      $ 324   

Other comprehensive income (loss), net of taxes:

    

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

     (4     2   

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

     1        2   

Amounts reclassified to net income:

    

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

     1        (3

Net realized gains on nuclear decommissioning trust funds(4)

     (1     (2
  

 

 

   

 

 

 

Other comprehensive loss

  (3   (1
  

 

 

   

 

 

 

Comprehensive income

$ 266    $ 323   
  

 

 

   

 

 

 

 

(1) Net of $2 million and $(1) million tax for the three months ended March 31, 2015 and 2014, respectively.
(2) Net of $(1) million and $(2) million tax for the three months ended March 31, 2015 and 2014, respectively.
(3) Net of $     million and $2 million tax for the three months ended March 31, 2015 and 2014, respectively.
(4) Net of $     million and $1 million tax for the three months ended March 31, 2015 and 2014, 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)

 

     March 31,
2015
    December 31,
2014(1)
 
(millions)             

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 16      $ 15   

Customer receivables (less allowance for doubtful accounts of $25 at both dates)

     1,018        986   

Other receivables (less allowance for doubtful accounts of $1 at both dates)

     53        65   

Inventories (average cost method)

     768        853   

Prepayments

     38        252   

Regulatory assets

     339        298   

Other(2)

     32        82   
  

 

 

   

 

 

 

Total current assets

  2,264      2,551   
  

 

 

   

 

 

 

Investments

Nuclear decommissioning trust funds

  1,950      1,930   

Other

  4      4   
  

 

 

   

 

 

 

Total investments

  1,954      1,934   
  

 

 

   

 

 

 

Property, Plant and Equipment

Property, plant and equipment

  35,684      35,180   

Accumulated depreciation and amortization

  (11,255   (11,080
  

 

 

   

 

 

 

Total property, plant and equipment, net

  24,429      24,100   
  

 

 

   

 

 

 

Deferred Charges and Other Assets

Regulatory assets

  464      439   

Other(2)

  525      485   
  

 

 

   

 

 

 

Total deferred charges and other assets

  989      924   
  

 

 

   

 

 

 

Total assets

$ 29,636    $ 29,509   
  

 

 

   

 

 

 

 

(1) Virginia Power’s Consolidated Balance Sheet at December 31, 2014 has been derived from the audited Consolidated Financial Statements at that date.
(2) See Note 17 for amounts attributable to affiliates.

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

 

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     March 31,
2015
     December 31,
2014(1)
 
(millions)              

LIABILITIES AND SHAREHOLDER’S EQUITY

     

Current Liabilities

     

Securities due within one year

   $ 661       $ 211   

Short-term debt

     1,588         1,361   

Accounts payable

     456         458   

Payables to affiliates

     72         92   

Affiliated current borrowings

     10         427   

Accrued interest, payroll and taxes

     315         199   

Other

     505         528   
  

 

 

    

 

 

 

Total current liabilities

  3,607      3,276   
  

 

 

    

 

 

 

Long-Term Debt

  8,275      8,726   
  

 

 

    

 

 

 

Deferred Credits and Other Liabilities

Deferred income taxes and investment tax credits

  4,435      4,415   

Asset retirement obligations

  854      848   

Regulatory liabilities

  1,769      1,683   

Other(2)

  523      506   
  

 

 

    

 

 

 

Total deferred credits and other liabilities

  7,581      7,452   
  

 

 

    

 

 

 

Total liabilities

  19,463      19,454   
  

 

 

    

 

 

 

Commitments and Contingencies (see Note 15)

Common Shareholder’s Equity

Common stock – no par(3)

  5,738      5,738   

Other paid-in capital

  1,113      1,113   

Retained earnings

  3,275      3,154   

Accumulated other comprehensive income

  47      50   
  

 

 

    

 

 

 

Total common shareholder’s equity

  10,173      10,055   
  

 

 

    

 

 

 

Total liabilities and shareholder’s equity

$ 29,636    $ 29,509   
  

 

 

    

 

 

 

 

(1) Virginia Power’s Consolidated Balance Sheet at December 31, 2014 has been derived from the audited Consolidated Financial Statements at that date.
(2) See Note 17 for amounts attributable to affiliates.
(3) 500,000 shares authorized; 274,723 shares outstanding at March 31, 2015 and December 31, 2014.

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

 

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VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Three Months Ended March 31,

   2015     2014  
(millions)             

Operating Activities

    

Net income

   $ 269      $ 324   

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

    

Depreciation and amortization (including nuclear fuel)

     281        263   

Deferred income taxes and investment tax credits

     67        203   

Other adjustments

     (7     (12

Changes in:

    

Accounts receivable

     (20     (9

Inventories

     85        91   

Prepayments

     214        (15

Deferred fuel expenses, net (including write-off)

     (54     (328

Accounts payable

     3        34   

Accrued interest, payroll and taxes

     116        10   

Other operating assets and liabilities

     7        39   
  

 

 

   

 

 

 

Net cash provided by operating activities

  961      600   
  

 

 

   

 

 

 

Investing Activities

Plant construction and other property additions

  (583   (691

Purchases of nuclear fuel

  (23   (68

Purchases of securities

  (138   (215

Proceeds from sales of securities

  133      204   

Other

  (11   (6
  

 

 

   

 

 

 

Net cash used in investing activities

  (622   (776
  

 

 

   

 

 

 

Financing Activities

Issuance (repayment) of short-term debt, net

  227      (339

Issuance (repayment) of affiliated current borrowings, net

  (417   62   

Issuance of long-term debt

  —        750   

Preferred stock redemption

  —        (125

Common dividend payments

  (149   (149

Preferred dividend payments

       (4

Other

  1      (11
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

  (338   184   
  

 

 

   

 

 

 

Increase in cash and cash equivalents

  1      8   

Cash and cash equivalents at beginning of period

  15      16   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

$ 16    $ 24   
  

 

 

   

 

 

 

Supplemental Cash Flow Information

Significant noncash investing activities:

Accrued capital expenditures

$ 139    $ 203   
  

 

 

   

 

 

 

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

 

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DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2015      2014  
(millions)              

Operating Revenue(1)

   $ 531       $ 569   
  

 

 

    

 

 

 

Operating Expenses

Purchased gas(1)

  74      137   

Other energy-related purchases

  6      16   

Other operations and maintenance:

Affiliated suppliers

  21      21   

Other(2)

  53      32   

Depreciation and amortization

  51      47   

Other taxes

  55      51   
  

 

 

    

 

 

 

Total operating expenses

  260      304   
  

 

 

    

 

 

 

Income from operations

  271      265   
  

 

 

    

 

 

 

Other income

  9      8   

Interest and related charges

  17      6   
  

 

 

    

 

 

 

Income from operations before income taxes

  263      267   

Income tax expense

  102      103   
  

 

 

    

 

 

 

Net Income

$ 161    $ 164   
  

 

 

    

 

 

 

 

(1) See Note 17 for amounts attributable to related parties.
(2) Includes gains on the sales of assets to related parties of $59 million in 2014. See Note 10 for more information.

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

 

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DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2015     2014  
(millions)             

Net income

   $ 161      $ 164   

Other comprehensive income (loss), net of taxes:

    

Net deferred losses on derivatives-hedging activities(1)

     (4     (8

Amounts reclassified to net income:

    

Net derivative losses-hedging activities(2)

     —          5   

Net pension and other postretirement benefit costs(3)

     1        1   
  

 

 

   

 

 

 

Other comprehensive loss

  (3   (2
  

 

 

   

 

 

 

Comprehensive income

$ 158    $ 162   
  

 

 

   

 

 

 

 

(1) Net of $2 million and $5 million tax for the three months ended March 31, 2015 and 2014, respectively.
(2) Net of $     million and $(3) million tax for the three months ended March 31, 2015 and 2014, respectively.
(3) Net of $(1) million tax for both the three months ended March 31, 2015 and 2014.

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

 

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DOMINION GAS HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

         March 31,    
2015
    December 31,
2014(1)
 
(millions)             

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 19      $ 9   

Customer receivables (less allowance for doubtful accounts of $4 at both dates)(2)

     350        322   

Other receivables (less allowance for doubtful accounts of $1 at both dates)

     15        19   

Affiliated receivables

     5        12   

Inventories

     67        65   

Prepayments

     64        166   

Other(2)

     198        217   
  

 

 

   

 

 

 

Total current assets

  718      810   
  

 

 

   

 

 

 

Investments

  104      108   
  

 

 

   

 

 

 

Property, Plant and Equipment

Property, plant and equipment

  8,993      8,902   

Accumulated depreciation and amortization

  (2,568   (2,538
  

 

 

   

 

 

 

Total property, plant and equipment, net

  6,425      6,364   
  

 

 

   

 

 

 

Deferred Charges and Other Assets

Goodwill

  542      542   

Intangible assets, net

  83      79   

Regulatory assets

  390      379   

Pension and other postretirement benefit assets(2)

  1,516      1,486   

Other(2)

  81      80   
  

 

 

   

 

 

 

Total deferred charges and other assets

  2,612      2,566   
  

 

 

   

 

 

 

Total assets

$ 9,859    $ 9,848   
  

 

 

   

 

 

 

 

(1) Dominion Gas’ Consolidated Balance Sheet at December 31, 2014 has been derived from the audited Consolidated Financial Statements at that date.
(2) See Note 17 for amounts attributable to related parties.

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

 

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DOMINION GAS HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

         March 31,    
2015
    December 31,
2014(1)
 
(millions)             

LIABILITIES AND EQUITY

    

Current Liabilities

    

Short-term debt

   $ 280      $ —     

Accounts payable

     209        247   

Payables to affiliates

     40        41   

Affiliated current borrowings

     39        384   

Accrued interest, payroll and taxes

     243        194   

Other(2)

     163        172   
  

 

 

   

 

 

 

Total current liabilities

  974      1,038   
  

 

 

   

 

 

 

Long-Term Debt

  2,594      2,594   
  

 

 

   

 

 

 

Deferred Credits and Other Liabilities

Deferred income taxes and investment tax credits

  2,197      2,158   

Other(2)

  465      492   
  

 

 

   

 

 

 

Total deferred credits and other liabilities

  2,662      2,650   
  

 

 

   

 

 

 

Total liabilities

  6,230      6,282   
  

 

 

   

 

 

 

Commitments and Contingencies (see Note 15)

Equity

Membership interests

  3,718      3,652   

Accumulated other comprehensive loss(2)

  (89   (86
  

 

 

   

 

 

 

Total equity

  3,629      3,566   
  

 

 

   

 

 

 

Total liabilities and equity

$ 9,859    $ 9,848   
  

 

 

   

 

 

 

 

(1) Dominion Gas’ Consolidated Balance Sheet at December 31, 2014 has been derived from the audited Consolidated Financial Statements at that date.
(2) See Note 17 for amounts attributable to related parties.

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

 

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DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Three Months Ended March 31,

   2015     2014  
(millions)             

Operating Activities

    

Net income

   $ 161      $ 164   

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

    

Gains on sales of assets

     (70     (59

Depreciation and amortization

     51        47   

Deferred income taxes and investment tax credits

     36        27   

Other adjustments

     3        (2

Changes in:

    

Accounts receivable

     (24     (154

Deferred purchased gas costs, net

     16        29   

Prepayments

     102        10   

Accounts payable

     (33     (16

Accrued interest, payroll and taxes

     49        73   

Other operating assets and liabilities

     (18     (6
  

 

 

   

 

 

 

Net cash provided by operating activities

  273      113   
  

 

 

   

 

 

 

Investing Activities

Plant construction and other property additions

  (128   (107

Proceeds from sale of assets to an affiliate

  —        30   

Proceeds from assignments of Marcellus acreage

  27      —     

Other

  (1   (2
  

 

 

   

 

 

 

Net cash used in investing activities

  (102   (79
  

 

 

   

 

 

 

Financing Activities

Issuance of short-term debt, net

  280      —     

Issuance (repayment) of affiliated current borrowings, net

  (345   51   

Distribution payments

  (95   (78

Other

  (1   (1
  

 

 

   

 

 

 

Net cash used in financing activities

  (161   (28
  

 

 

   

 

 

 

Increase in cash and cash equivalents

  10      6   

Cash and cash equivalents at beginning of period

  9      8   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

$ 19    $ 14   
  

 

 

   

 

 

 

Supplemental Cash Flow Information

Significant noncash investing and financing activities:

Accrued capital expenditures

$ 22    $ 24   

Proceeds from sale of assets to affiliate not yet received

  —        17   

Extinguishment of affiliated long-term debt in exchange for assets sold to affiliate

  —        67   
  

 

 

   

 

 

 

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

 

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Table of Contents

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 and Dominion Gas. Virginia Power is a regulated public utility that generates, transmits and distributes electricity for sale in Virginia and northeastern North Carolina. Dominion Gas is a holding company that conducts business activities through a regulated interstate natural gas transmission pipeline and underground storage system in the Northeast, mid-Atlantic and Midwest states, regulated gas transportation and distribution operations in Ohio, and gas gathering and processing activities primarily in West Virginia, Ohio and Pennsylvania. Dominion Gas’ wholly-owned subsidiaries are DTI, East Ohio and Dominion Iroquois.

Note 2. Significant Accounting Policies

As permitted by the rules and regulations of the SEC, the Companies’ 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 the Companies’ Annual Report on Form 10-K for the year ended December 31, 2014.

In the Companies’ opinion, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly their financial position as of March 31, 2015 and their results of operations and cash flows for the three months ended March 31, 2015 and 2014. 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.

The Companies’ accompanying unaudited Consolidated Financial Statements include, after eliminating intercompany transactions and balances, their accounts and those of their respective majority-owned subsidiaries. As of March 31, 2015, Dominion owns the general partner and 68.5% of the limited partner interests in Dominion Midstream, which owns a preferred equity interest and the general partner interest in Cove Point. The public’s ownership interest in Dominion Midstream is reflected as non-controlling interest in Dominion’s Consolidated Financial Statements.

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 the Companies’ 2014 Consolidated Financial Statements and Notes have been reclassified to conform to the 2015 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 and/or Dominion Gas, where applicable.

Note 3. Acquisitions and Dispositions

Dominion

Acquisition of Solar Projects

In March 2014, Dominion completed the acquisition of 100% of the equity interests of six solar development projects in California from Recurrent Energy Development Holdings, LLC for approximately $50 million in cash. The projects cost approximately $446 million to construct, including the initial acquisition cost. The facilities, which began commercial operations in the fourth quarter of 2014, generate approximately 139 MW.

The purchase price for this acquisition was allocated to Property, Plant and Equipment.

In April 2015, Dominion completed the acquisition of 100% of the equity interests of a solar project in California from EC&R NA Solar PV, LLC for approximately $66 million in cash. The project is expected to cost approximately $69 million once constructed, including the initial acquisition cost. Upon completion, the facility is expected to generate approximately 20 MW.

 

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In April 2015, Dominion also completed the acquisition of 100% of the equity interests of a solar project in California from EDF Renewable Development, Inc. for approximately $106 million in cash. The projects owned by the acquired company are expected to cost approximately $111 million once constructed, including the initial acquisition cost. Upon completion, the facilities are expected to generate approximately 24 MW.

The allocation of the purchase price to individual assets for these investments is under evaluation by management and has not been finalized.

Long-term power purchase, interconnection and operation and maintenance agreements have been executed for each of the projects. Dominion expects to claim federal investment tax credits on the projects.

Acquisition of DCGT

In January 2015, Dominion completed the acquisition of 100% of the equity interests of DCGT from SCANA Corporation for approximately $495 million in cash, subject to final working capital adjustments. DCGT owns and operates nearly 1,500 miles of FERC-regulated interstate natural gas pipeline in South Carolina and southeastern Georgia. This acquisition supports Dominion’s natural gas expansion into the Southeast. The allocation of the purchase price is currently being evaluated and has preliminarily resulted in approximately $277 million of net property, plant and equipment, $250 million of goodwill, of which approximately $225 million is expected to be deductible for income tax purposes, and approximately $38 million of regulatory liabilities. The goodwill reflects the value associated with enhancing Dominion’s regulated gas position, economic value attributable to future expansion projects as well as increased opportunities for synergies. The acquired assets of DCGT are included in the Dominion Energy operating segment.

On March 24, 2015, DCGT converted to a limited liability company under the laws of South Carolina and changed its name from Carolina Gas Transmission Corporation to DCGT. On April 1, 2015, Dominion contributed 100% of the issued and outstanding membership interests of DCGT to Dominion Midstream in exchange for total consideration of $495 million, subject to final working capital adjustments. Total consideration to Dominion consisted of the issuance of a two-year, approximately $295 million senior unsecured promissory note payable by Dominion Midstream at an annual interest rate of 0.6%, and 5,112,139 common units, valued at $200 million, representing limited partner interests in Dominion Midstream. The amount of the promissory note is subject to change to correspond with any working capital adjustments. The number of units was based on the volume weighted average trading price of Dominion Midstream’s common units for the ten trading days prior to April 1, 2015, or $39.12 per unit. Since Dominion consolidates Dominion Midstream for financial reporting purposes, this transaction was eliminated upon consolidation and did not impact Dominion’s financial position or cash flow.

Sale of Electric Retail Energy Marketing Business

In March 2014, Dominion completed the sale of its electric retail energy marketing business. The proceeds were approximately $187 million, net of transaction costs. The sale resulted in a gain, subject to post-closing adjustments, of approximately $100 million ($57 million after-tax) net of a $31 million write-off of goodwill, and is included in other operations and maintenance expense in Dominion’s Consolidated Statements of Income. The sale of the electric retail energy marketing business did not qualify for discontinued operations classification.

Dominion Gas

Assignments of Marcellus Acreage

In December 2013, DTI closed an agreement with a natural gas producer to convey over time approximately 79,000 acres of Marcellus Shale development rights underneath one of its natural gas storage fields. The agreement provided for payments to DTI, subject to customary adjustments, of up to approximately $200 million over a period of nine years, and an overriding royalty interest in gas produced from the acreage. In 2013, DTI received approximately $82 million in cash proceeds. During the twelve months ended December 31, 2014, DTI received $16 million in additional cash proceeds resulting from post-closing adjustments. At December 31, 2014, deferred revenue totaled approximately $85 million. In March 2015, DTI and the natural gas producer closed on an amendment to the agreement, which included the immediate conveyance of approximately 9,000 acres of Marcellus Shale development rights and a two year extension of the term of the original agreement. The conveyance of development rights resulted in the recognition of $43 million ($27 million after-tax) of previously deferred revenue to operations and maintenance expense in Dominion Gas’ Consolidated Statements of Income. At March 31, 2015, deferred revenue totaled approximately $40 million, which is expected to be recognized over the remaining term of the agreement.

In March 2015, DTI closed an agreement with a natural gas producer to convey approximately 11,000 acres of Marcellus Shale development rights underneath one of its natural gas storage fields. The agreement provided for a payment to DTI, subject to customary adjustments, of approximately $27 million, and an overriding royalty interest in gas produced from the acreage. In March 2015, DTI received proceeds of $27 million associated with the conveyance of the acreage, resulting in a $27 million ($16 million after-tax) gain, included in other operations and maintenance expense in Dominion Gas’ Consolidated Statements of Income.

 

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Dominion and Dominion Gas

Blue Racer

See Note 10 for a discussion of transactions related to Blue Racer.

Note 4. Operating Revenue

The Companies’ operating revenue consists of the following:

 

     Three Months Ended
March 31,
 
     2015      2014  
(millions)              

Dominion

     

Electric sales:

     

Regulated

   $ 2,112       $ 1,951   

Nonregulated

     406         854   

Gas sales:

     

Regulated

     116         147   

Nonregulated

     208         117   

Gas transportation and storage

     471         444   

Other

     96         117   
  

 

 

    

 

 

 

Total operating revenue

$ 3,409    $ 3,630   
  

 

 

    

 

 

 

Virginia Power

Regulated electric sales

$ 2,112    $ 1,951   

Other

  25      32   
  

 

 

    

 

 

 

Total operating revenue

$ 2,137    $ 1,983   
  

 

 

    

 

 

 

Dominion Gas

Gas sales:

Regulated

$ 57    $ 83   

Nonregulated

  3      9   

Gas transportation and storage

  412      396   

NGL revenue

  29      57   

Other

  30      24   
  

 

 

    

 

 

 

Total operating revenue

$ 531    $ 569   
  

 

 

    

 

 

 

Note 5. Income Taxes

For continuing operations, including noncontrolling interests, the statutory U.S. federal income tax rate reconciles to the Companies’ effective income tax rate as follows:

 

     Dominion     Virginia Power     Dominion Gas  

Three Months Ended March 31,

   2015     2014     2015     2014     2015     2014  

U.S. statutory rate

     35.0     35.0     35.0     35.0     35.0     35.0

Increases (reductions) resulting from:

            

State taxes, net of federal benefit

     2.9        2.7        3.8        3.8        4.0        3.4   

Investment tax credits

     (0.8     (3.6     —          —          —          —     

Production tax credits

     (0.8     (0.6     (0.4     (0.8     —          —     

Other, net

     (0.6     (0.8     (0.7     (0.2     (0.1     0.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effective tax rate

  35.7   32.7   37.7   37.8   38.9   38.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of March 31, 2015, there have been no material changes in the Companies’ unrecognized tax benefits or possible changes that could reasonably be expected to occur during the next twelve months. See Note 5 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of these unrecognized tax benefits.

 

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Note 6. Earnings Per Share

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

 

     Three Months Ended
March 31,
 
     2015      2014  
(millions, except EPS)       

Net income attributable to Dominion

   $ 536       $ 379   
  

 

 

    

 

 

 

Average shares of common stock outstanding – Basic

  587.9      581.6   

Net effect of dilutive securities(1)

  2.0      1.3   
  

 

 

    

 

 

 

Average shares of common stock outstanding – Diluted

  589.9      582.9   
  

 

 

    

 

 

 

Earnings Per Common Share – Basic and Diluted

$ 0.91    $ 0.65   
  

 

 

    

 

 

 

 

(1) Dilutive securities consist primarily of the 2013 Equity Units for 2015 and contingently convertible senior notes and the 2013 Equity Units for 2014. See Note 14 in this report and Note 17 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2014 for more information.

The 2014 Equity Units are potentially dilutive securities but were excluded from the calculation of diluted EPS for the three months ended March 31, 2015, as the dilutive stock price threshold was not met. There were no potentially dilutive securities excluded from the calculation of diluted EPS for the three months ended March 31, 2014.

Note 7. Accumulated Other Comprehensive Income

Dominion

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
    Other
comprehensive
income (loss)
from equity
method investee
    Total  
(millions)                               

Three Months Ended March 31, 2015

          

Beginning balance

   $ (178   $ 548      $ (782   $ (4   $ (416

Other comprehensive income before reclassifications: gains (losses)

     (58     15        —          (1     (44

Amounts reclassified from AOCI(1): (gains) losses

     59        (21     13        —          51   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

  1      (6   13      (1   7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

$ (177 $ 542    $ (769 $ (5 $ (409
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Three Months Ended March 31, 2014

Beginning balance

$ (288 $ 474    $ (510 $ —      $ (324

Other comprehensive income before reclassifications: gains (losses)

  (150   29      (4   (7   (132

Amounts reclassified from AOCI(1): (gains) losses

  160      (11   8      —        157   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

  10      18      4      (7   25   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

$ (278 $ 492    $ (506 $ (7 $ (299
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 March 31, 2015

    

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

    

Commodity contracts

   $ 92      Operating revenue
     5      Purchased gas
     (1   Electric fuel and other energy-related purchases

Interest rate contracts

     2      Interest and related charges
  

 

 

   
  98   

Tax

  (39 Income tax expense
  

 

 

   
$ 59   
  

 

 

   

Unrealized (gains) and losses on investment securities:

Realized (gain) loss on sale of securities

$ (39 Other income

Impairment

  6    Other income
  

 

 

   
  (33

Tax

  12    Income tax expense
  

 

 

   
$ (21
  

 

 

   

Unrecognized pension and other postretirement benefit costs:

Prior service (credit) costs

$ (3 Other operations and maintenance

Actuarial (gains) losses

  25    Other operations and maintenance
  

 

 

   
  22   

Tax

  (9 Income tax expense
  

 

 

   
$ 13   
  

 

 

   

Three Months Ended March 31, 2014

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

Commodity contracts

$ 269    Operating revenue
  1    Purchased gas
  (13 Electric fuel and other energy-related purchases

Interest rate contracts

  3    Interest and related charges
  

 

 

   
  260   

Tax

  (100 Income tax expense
  

 

 

   
$ 160   
  

 

 

   

Unrealized (gains) and losses on investment securities:

Realized (gain) loss on sale of securities

$ (20 Other income

Impairment

  2    Other income
  

 

 

   
  (18

Tax

  7    Income tax expense
  

 

 

   
$ (11
  

 

 

   

Unrecognized pension and other postretirement benefit costs:

Prior service (credit) costs

$ (3 Other operations and maintenance

Actuarial (gains) losses

  17    Other operations and maintenance
  

 

 

   
  14   

Tax

  (6 Income tax expense
  

 

 

   
$ 8   
  

 

 

   

 

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Dominion Gas

The following table presents Dominion Gas’ changes in AOCI by component, net of tax:

 

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

Three Months Ended March 31, 2015

      

Beginning balance

   $ (20   $ (66   $ (86

Other comprehensive income before reclassifications: gains (losses)

     (4     —          (4

Amounts reclassified from AOCI(1): (gains) losses

     —          1        1   
  

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

  (4   1      (3
  

 

 

   

 

 

   

 

 

 

Ending balance

$ (24 $ (65 $ (89
  

 

 

   

 

 

   

 

 

 

Three Months Ended March 31, 2014

Beginning balance

$ 3    $ (61 $ (58

Other comprehensive income before reclassifications: gains (losses)

  (8   —        (8

Amounts reclassified from AOCI(1): (gains) losses

  5      1      6   
  

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

  (3   1      (2
  

 

 

   

 

 

   

 

 

 

Ending balance

$ —      $ (60 $ (60
  

 

 

   

 

 

   

 

 

 

 

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

The following table presents Dominion Gas’ 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 March 31, 2015

    

Unrecognized pension and other postretirement benefit costs:

    

Actuarial (gains) losses

   $             2      Other operations and maintenance
  

 

 

   
  2   

Tax

  (1 Income tax expense
  

 

 

   
$ 1   
  

 

 

   

Three Months Ended March 31, 2014

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

Commodity contracts

$ 6    Operating revenue
  2    Purchased gas
  

 

 

   
  8   

Tax

  (3 Income tax expense
  

 

 

   
$ 5   
  

 

 

   

Unrecognized pension and other postretirement benefit costs:

Actuarial (gains) losses

$ 2    Other operations and maintenance
  

 

 

   
  2   

Tax

  (1 Income tax expense
  

 

 

   
$ 1   
  

 

 

   

Note 8. Fair Value Measurements

The Companies’ fair value measurements are made in accordance with the policies discussed in Note 6 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2014. See Note 9 in this report for further information about the Companies’ derivatives and hedge accounting activities.

 

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The Companies enter into certain physical and financial forwards, futures, options and swaps, 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 and futures 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. 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, risk-free rate of return, the option expiration dates, the option strike prices, the original sales prices, and volumes. For Level 3 fair value measurements, forward market prices, credit spreads and implied price volatilities 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 quantitative information about Level 3 fair value measurements at March 31, 2015. The range and weighted average are presented in dollars for market price inputs and percentages for credit spreads and price volatility.

 

     Fair Value
(millions)
     Valuation
Techniques
  

Unobservable Input

   Range      Weighted
Average(1)
 

Assets:

              

Physical and Financial Forwards and Futures:

              

Natural Gas(2)

   $ 85       Discounted
Cash Flow
   Market Price (per Dth)(3)      (2) - 6         (1
         Credit spread(4)      1% - 5%         2

FTRs

     4       Discounted
Cash Flow
   Market Price (per MWh)(3)      (5) - 7         1   

Physical and Financial Options:

              

Natural Gas

     5       Option
Model
   Market Price (per Dth)(3)      2 - 4         3   
         Price Volatility(5)      21% - 76%         32
  

 

 

             

Total assets

$ 94   
  

 

 

             

Liabilities:

Physical and Financial Forwards and Futures:

Natural Gas(2)

$ 12    Discounted
Cash Flow
Market Price (per Dth)(3)   (2) - 4      2   

FTRs

  4    Discounted
Cash Flow
Market Price (per MWh)(3)   (2) - 5      1   

Physical and Financial Options:

Natural Gas

  2    Option
Model
Market Price (per Dth)(3)   2 - 4      3   
Price Volatility(5)   21% - 76%      32
  

 

 

             

Total liabilities

$ 18   
  

 

 

             

 

(1) Averages weighted by volume.
(2) Includes basis.
(3) Represents market prices beyond defined terms for Levels 1 and 2.
(4) Represents credit spreads unrepresented in published markets.
(5) Represents volatilities unrepresented in published markets.

 

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Table of Contents

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)

Credit spread

   Asset    Increase (decrease)    Loss (gain)

 

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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 March 31, 2015

           

Assets:

           

Derivatives:

           

Commodity

   $ 3       $ 564       $ 94       $ 661   

Interest rate

     —           18         —           18   

Investments(1):

           

Equity securities:

           

U.S.:

           

Large cap

     2,647         —           —           2,647   

Other

     7         —           —           7   

Non-U.S.:

           

Large cap

     12         —           —           12   

Fixed income:

           

Corporate debt instruments

     —           462         —           462   

U.S. Treasury securities and agency debentures

     407         187         —           594   

State and municipal

     —           423         —           423   

Other

     —           130         —           130   

Cash equivalents and other

     1         4         —           5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

$ 3,077    $ 1,788    $ 94    $ 4,959   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

Derivatives:

Commodity

$ 3    $ 437    $ 18    $ 458   

Interest rate

  —        307      —        307   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

$ 3    $ 744    $ 18    $ 765   
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2014

Assets:

Derivatives:

Commodity

$ 3    $ 567    $ 125    $ 695   

Interest rate

  —        24      —        24   

Investments(1):

Equity securities:

U.S.:

Large cap

  2,669      —        —        2,669   

Other

  6      —        —        6   

Non-U.S.:

Large cap

  12      —        —        12   

Fixed income:

Corporate debt instruments

  —        441      —        441   

U.S. Treasury securities and agency debentures

  419      190      —        609   

State and municipal

  —        395      —        395   

Other

  —        74      —        74   

Cash equivalents and other

  3      10      —        13   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

$ 3,112    $ 1,701    $ 125    $ 4,938   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

Derivatives:

Commodity

$ 3    $ 571    $ 18    $ 592   

Interest rate

  —        202      —        202   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

$ 3    $ 773    $ 18    $ 794   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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
March 31,
 
     2015     2014  
(millions)             

Beginning balance

   $ 107      $ (16

Total realized and unrealized gains (losses):

    

Included in earnings

     15        110   

Included in other comprehensive income (loss)

     (11     4   

Included in regulatory assets/liabilities

     (24     17   

Settlements

     (14     (108

Transfers out of Level 3(1)

     3        1   
  

 

 

   

 

 

 

Ending balance

$ 76    $ 8   
  

 

 

   

 

 

 

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

$ —      $ 1   

 

(1) In March 2015, Dominion changed the classification of NGL derivatives from Level 3 to Level 2 due to an increase in liquidity in financial forward markets. At March 31, 2015, $9 million of the transfers out of Level 3 relate to NGLs.

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

 

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

Three Months Ended March 31, 2015

        

Total gains (losses) included in earnings

   $ 2       $ 13       $ 15   

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

     —           —           —     
  

 

 

    

 

 

    

 

 

 

Three Months Ended March 31, 2014

Total gains (losses) included in earnings

$ (10 $ 120    $ 110   

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

  1      —        1   

Virginia Power

The following table presents Virginia Power’s quantitative information about Level 3 fair value measurements at March 31, 2015. The range and weighted average are presented in dollars for market price inputs and percentages for credit spreads.

 

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Table of Contents
     Fair Value
(millions)
     Valuation Techniques   

Unobservable Input

   Range     Weighted
Average(1)
 

Assets:

             

Physical and Financial Forwards and Futures:

             

FTRs

   $ 4       Discounted Cash Flow    Market Price (per MWh)(3)      (5) - 7        1   

Natural Gas(2)

     78       Discounted Cash Flow    Market Price (per Dth)(3)      (2) - 3        (1
         Credit spread(4)      1% - 5     2
  

 

 

            

Total assets

$ 82   
  

 

 

            

Liabilities:

Physical and Financial Forwards and Futures:

FTRs

$ 4    Discounted Cash Flow Market Price (per MWh)(3)   (2) - 5      1   
  

 

 

            

Total liabilities

$ 4   
  

 

 

            

 

(1) Averages weighted by volume.
(2) Includes basis.
(3) Represents market prices beyond defined terms for Levels 1 and 2.
(4) Represents credit spreads unrepresented in published markets.

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)

Credit spread

   Asset    Increase (decrease)    Loss (gain)

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:

 

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Table of Contents
     Level 1      Level 2      Level 3      Total  
(millions)                            

At March 31, 2015

           

Assets:

           

Derivatives:

           

Commodity

   $ —         $ 24       $ 82       $ 106   

Investments(1):

           

Equity securities:

           

U.S. large cap

     1,166         —           —           1,166   

Fixed income:

           

Corporate debt instruments

     —           258         —           258   

U.S. Treasury securities and agency debentures

     129         63         —           192   

State and municipal

     —           224         —           224   

Other

     —           31         —           31   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

$ 1,295    $ 600    $ 82    $ 1,977   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

Derivatives:

Commodity

$ —      $ 7    $ 4    $ 11   

Interest rate

  —        128      —        128   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

$ —      $ 135    $ 4    $ 139   
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2014

Assets:

Derivatives:

Commodity

$ —      $ 7    $ 106    $ 113   

Investments(1):

Equity securities:

U.S. large cap

  1,157      —        —        1,157   

Fixed income:

Corporate debt instruments

  —        250      —        250   

U.S. Treasury securities and agency debentures

  137      61      —        198   

State and municipal

  —        211      —        211   

Other

  —        23      —        23   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

$ 1,294    $ 552    $ 106    $ 1,952   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

Derivatives:

Commodity

$ —      $ 11    $ 4    $ 15   

Interest rate

  —        72      —        72   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

$ —      $ 83    $ 4    $ 87   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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

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:

 

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Table of Contents
     Three Months Ended
March 31,
 
     2015      2014  
(millions)              

Beginning balance

   $ 102       $ (7

Total realized and unrealized gains (losses):

     

Included in earnings

     14         120   

Included in regulatory assets/liabilities

     (24      17   

Settlements

     (14      (120
  

 

 

    

 

 

 

Ending balance

$ 78    $ 10   
  

 

 

    

 

 

 

The gains and losses included in earnings in the Level 3 fair value category were classified in electric fuel and other energy-related purchases in Virginia Power’s Consolidated Statements of Income for the three months ended March 31, 2015 and 2014. There were no unrealized gains or losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the three months ended March 31, 2015 and 2014.

Dominion Gas

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

 

     Level 1      Level 2      Level 3      Total  
(millions)                            

At March 31, 2015

           

Assets:

           

Commodity

   $ —         $ 3       $ —         $ 3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

$ —      $ 3    $ —      $ 3   

Liabilities:

Commodity

$ —      $ 3    $ —      $ 3   

Interest rate

  —        13      —        13   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

$ —      $ 16    $ —      $ 16   
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2014

Assets:

Commodity

$ —      $ —      $ 2    $ 2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

$ —      $ —      $ 2    $ 2   

Liabilities:

Interest rate

$ —      $ 9    $ —      $ 9   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

$ —      $ 9    $ —      $ 9   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

     Three Months Ended
March 31,
 
     2015      2014  
(millions)              

Beginning balance

   $ 2       $ (6

Total realized and unrealized gains (losses):

     

Included in earnings

     1         (5

Included in other comprehensive income (loss)

     (11      4   

Settlements

     (1      5   

Transfers out of Level 3(1)

     9         —     
  

 

 

    

 

 

 

Ending balance

$ —      $ (2
  

 

 

    

 

 

 

 

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(1) In March 2015, Dominion changed the classification of NGL derivatives from Level 3 to Level 2 due to an increase in liquidity in financial forward markets. At March 31, 2015, $9 million of the transfers out of Level 3 relate to NGLs.

The gains and losses included in earnings in the Level 3 fair value category were classified in operating revenue in Dominion Gas’ Consolidated Statements of Income for the three months ended March 31, 2015 and 2014. There were no unrealized gains or losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the three months ended March 31, 2015 and 2014.

Fair Value of Financial Instruments

Substantially all of the Companies’ 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, restricted cash (which is recorded in other current assets) customer and other receivables, short-term debt, affiliated current borrowings, payables to affiliates and accounts payable are representative of fair value because of the short-term nature of these instruments. For the Companies’ financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:

 

     March 31, 2015      December 31, 2014  
     Carrying
Amount
     Estimated
Fair
Value(1)
     Carrying
Amount
     Estimated
Fair
Value(1)
 
(millions)                            

Dominion

           

Long-term debt, including securities due within one year(2)(3)

   $ 19,718       $ 22,197       $ 19,723       $ 21,881   

Junior subordinated notes(3)

     1,373         1,405         1,374         1,396   

Remarketable subordinated notes(3)

     2,084         2,206         2,083         2,362   
  

 

 

    

 

 

    

 

 

    

 

 

 

Virginia Power

Long-term debt, including securities due within one year(3)

$ 8,936    $ 10,441    $ 8,937    $ 10,293   
  

 

 

    

 

 

    

 

 

    

 

 

 

Dominion Gas

Long-term debt(3)

$ 2,594    $ 2,720    $ 2,594    $ 2,672   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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) At March 31, 2015 and December 31, 2014, includes the valuation of certain fair value hedges associated with fixed rate debt of approximately $15 million and $19 million, respectively.
(3) Carrying amount includes amounts which represent the unamortized discount and/or premium.

Note 9. Derivatives and Hedge Accounting Activities

The Companies’ accounting policies and objectives and strategies for using derivative instruments are discussed in Note 2 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2014. See Note 8 in this report for further information about fair value measurements and associated valuation methods for derivatives.

Derivative assets and liabilities are presented gross on the Companies’ Consolidated Balance Sheets. Dominion’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. Dominion Gas’ and Virginia Power’s derivative contracts consist of over-the-counter transactions. Over-the-counter contracts are bilateral contracts that are transacted directly with a counterparty. 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 the Companies’ 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.

 

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Table of Contents

Dominion

Balance Sheet Presentation

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

 

     March 31, 2015      December 31, 2014  
     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

   $ 18       $ —         $ 18       $ 24       $ —         $ 24   

Commodity contracts:

                 

Over-the-counter

     323         —           323         382         —           382   

Exchange

     326         —           326         298         —           298   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting or similar arrangement

  667      —        667      704      —        704   

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

  12      —        12      15      —        15   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 679    $ —      $ 679    $ 719    $ —      $ 719   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Net Amounts of
Assets Presented
in the
Consolidated
Balance Sheet
     March 31, 2015      Net Amounts of
Assets Presented
in the
Consolidated
Balance Sheet
     December 31, 2014  
      Gross Amounts Not Offset
in the Consolidated
Balance Sheet
        Gross Amounts Not Offset
in the Consolidated Balance
Sheet
 
      Financial
Instruments
     Cash
Collateral
Received
     Net
Amounts
        Financial
Instruments
     Cash
Collateral
Received
     Net
Amounts
 
(millions)                                                        

Interest rate contracts:

                       

Over-the-counter

   $ 18       $ 18       $ —         $ —         $ 24       $ 16       $ —         $ 8   

Commodity contracts:

                       

Over-the-counter

     323         45         —           278         382         34         34         314   

Exchange

     326         326         —           —           298         298         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 667    $ 389    $ —      $ 278    $ 704    $ 348    $ 34    $ 322   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     March 31, 2015      December 31, 2014  
     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

   $ 307       $ —         $ 307       $ 202       $ —         $ 202   

Commodity contracts:

                 

Over-the-counter

     83         —           83         87         —           87   

Exchange

     364         —           364         493         —           493   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting or similar arrangement

  754      —        754      782      —        782   

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

  11      —        11      12      —        12   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 765    $ —      $ 765    $ 794    $ —      $ 794   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
     March 31, 2015      Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
     December 31, 2014  
      Gross Amounts Not Offset
in the Consolidated
Balance Sheet
        Gross Amounts Not Offset
in the Consolidated Balance
Sheet
 
      Financial
Instruments
     Cash
Collateral
Paid
     Net
Amounts
        Financial
Instruments
     Cash
Collateral
Paid
     Net
Amounts
 
(millions)                                                        

Interest rate contracts:

                       

Over-the-counter

   $ 307       $ 18       $ —         $ 289       $ 202       $ 16       $ —         $ 186   

Commodity contracts:

                       

Over-the-counter

     83         45         —           38         87         34         1         52   

Exchange

     364         326         38         —           493         298         195         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 754    $ 389    $ 38    $ 327    $ 782    $ 348    $ 196    $ 238   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Volumes

The following table presents the volume of Dominion’s derivative activity as of March 31, 2015. 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)

     55         10   

Basis

     224         558   

Electricity (MWh):

     

Fixed price

     13,610,507         7,505,325   

FTRs

     14,994,541         —     

Capacity (MW)

     15,250         3,050   

Liquids (Gal)(2)

     77,280,000         2,016,000   

Interest rate

   $ 2,550,000,000       $ 4,000,000,000   

 

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

 

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Table of Contents

Ineffectiveness and AOCI

For the three months ended March 31, 2015 and 2014, gains or losses on hedging instruments determined to be ineffective and amounts excluded from the assessment of effectiveness were not material. Amounts excluded from the assessment of effectiveness include gains or losses attributable to changes in the time value of options and changes in the differences between spot prices and forward prices.

The following table presents selected information related to gains (losses) on cash flow hedges included in AOCI in Dominion’s Consolidated Balance Sheet at March 31, 2015:

 

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

Commodities:

      

Gas

   $ (5   $ (5     25 months   

Electricity

     89        32        21 months   

Other

            (1     14 months   

Interest rate

     (261     (6     393 months   
  

 

 

   

 

 

   

Total

$ (177 $ 20   
  

 

 

   

 

 

   

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)                     

At March 31, 2015

        

ASSETS

        

Current Assets

        

Commodity

   $ 298       $ 109       $ 407   

Interest rate

     13         —           13   
  

 

 

    

 

 

    

 

 

 

Total current derivative assets(1)

  311      109      420   
  

 

 

    

 

 

    

 

 

 

Noncurrent Assets

Commodity

  140      114      254   

Interest rate

  5      —        5   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative assets(2)

  145      114      259   
  

 

 

    

 

 

    

 

 

 

Total derivative assets

$ 456    $ 223    $ 679   
  

 

 

    

 

 

    

 

 

 

LIABILITIES

Current Liabilities

Commodity

$ 253    $ 118    $ 371   

Interest rate

  229      —        229   
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities

  482      118      600   
  

 

 

    

 

 

    

 

 

 

Noncurrent Liabilities

Commodity

  48      39      87   

Interest Rate

  78      —        78   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative liabilities(3)

  126      39      165   
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

$ 608    $ 157    $ 765   
  

 

 

    

 

 

    

 

 

 

At December 31, 2014

ASSETS

Current Assets

Commodity

$ 281    $ 242    $ 523   

Interest rate

  13      —        13   
  

 

 

    

 

 

    

 

 

 

Total current derivative assets(1)

  294      242      536   
  

 

 

    

 

 

    

 

 

 

Noncurrent Assets

Commodity

  71      101      172   

Interest rate

  11      —        11   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative assets(2)

  82      101      183   
  

 

 

    

 

 

    

 

 

 

Total derivative assets

$ 376    $ 343    $ 719   
  

 

 

    

 

 

    

 

 

 

LIABILITIES

Current Liabilities

Commodity

$ 224    $ 267    $ 491   

Interest rate

  100      —        100   
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities

  324      267      591   
  

 

 

    

 

 

    

 

 

 

Noncurrent Liabilities

Commodity

  55      46      101   

Interest rate

  102      —        102   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative liabilities(3)

  157      46      203   
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

$ 481    $ 313    $ 794   
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents
(1) Current derivative assets are presented in other current assets in Dominion’s Consolidated Balance Sheets.
(2) Noncurrent derivative assets are presented in other deferred charges and other assets in Dominion’s Consolidated Balance Sheets.
(3) Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in Dominion’s Consolidated Balance Sheets.

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

 

Derivatives in cash flow hedging relationships

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

Three Months Ended March 31, 2015

        

Derivative Type and Location of Gains (Losses)

        

Commodity:

        

Operating revenue

      $ (92   

Purchased gas

        (5   

Electric fuel and other energy-related purchases

        1      
  

 

 

    

 

 

    

 

 

 

Total commodity

$ (41 $ (96 $ 3   
  

 

 

    

 

 

    

 

 

 

Interest rate(3)

  (58   (2   (49
  

 

 

    

 

 

    

 

 

 

Total

$ (99 $ (98 $ (46
  

 

 

    

 

 

    

 

 

 

Three Months Ended March 31, 2014

Derivative Type and Location of Gains (Losses)

Commodity:

Operating revenue

$ (269

Purchased gas

  (1

Electric fuel and other energy-related purchases

  13   
  

 

 

    

 

 

    

 

 

 

Total commodity

$ (183 $ (257 $ 2   
  

 

 

    

 

 

    

 

 

 

Interest rate(3)

  (47   (3   (23
  

 

 

    

 

 

    

 

 

 

Total

$ (230 $ (260 $ (21
  

 

 

    

 

 

    

 

 

 

 

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

 

    Amount of Gain (Loss) Recognized
in Income on  Derivatives(1)
 
   

Three Months Ended

March 31,

 

Derivatives not designated as hedging instruments

  2015     2014  
(millions)            

Derivative Type and Location of Gains (Losses)

   

Commodity

   

Operating revenue

  $ 3      $ (361

Purchased gas

    (2     7   

Electric fuel and other energy-related purchases

    6        133   
 

 

 

   

 

 

 

Total

$ 7    $ (221
 

 

 

   

 

 

 

 

(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.

 

39


Table of Contents

Virginia Power

Balance Sheet Presentation

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

 

     March 31, 2015      December 31, 2014  
     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)                                          

Commodity contracts:

                 

Over-the-counter

   $ 82       $  —         $ 82       $ 106       $  —         $ 106   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting or similar arrangement

  82      —        82      106      —        106   

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

  24      —        24      7      —        7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 106    $ —      $ 106    $ 113    $ —      $ 113   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     March 31, 2015      December 31, 2014  
            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)                                                        

Commodity contracts:

                       

Over-the-counter

   $ 82       $  4       $  —         $ 78       $ 106       $  4       $  —         $ 102   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 82    $ 4    $ —      $ 78    $ 106    $ 4    $ —      $ 102   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     March 31, 2015      December 31, 2014  
     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

   $ 128       $ —         $ 128       $ 72       $  —         $ 72   

Commodity contracts:

                 

Over-the-counter

     5         —           5         8         —           8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting or similar arrangement

  133      —        133      80      —        80   

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

  6      —        6      7      —        7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 139    $  —      $ 139    $ 87    $ —      $ 87   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

40


Table of Contents
            March 31, 2015
Gross Amounts Not Offset
in the Consolidated
Balance Sheet
                   December 31, 2014
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

   $ 128       $ —         $ —         $ 128       $ 72       $ —         $ —         $ 72   

Commodity contracts:

                       

Over-the-counter

     5         4         —           1         8         4         —           4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 133    $ 4    $ —      $ 129    $ 80    $ 4    $ —      $ 76   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Volumes

The following table presents the volume of Virginia Power’s derivative activity as of March 31, 2015. 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)

     12         —     

Basis

     84         493   

Electricity (MWh):

     

FTRs

     13,486,569         —     

Capacity (MW)

     15,250         3,050   

Interest rate

   $ 1,000,000,000       $ 750,000,000   

 

(1) Includes options.

Ineffectiveness

For the three months ended March 31, 2015 and 2014, gains or losses on hedging instruments determined to be ineffective were not material.

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:

 

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

At March 31, 2015

        

ASSETS

        

Current Assets

        

Commodity

   $ —         $ 28       $ 28   
  

 

 

    

 

 

    

 

 

 

Total current derivative assets(1)

  —        28      28   
  

 

 

    

 

 

    

 

 

 

Noncurrent Assets

Commodity

  —        78      78   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative assets(2)

  —        78      78   
  

 

 

    

 

 

    

 

 

 

Total derivative assets

$ —      $ 106    $ 106   
  

 

 

    

 

 

    

 

 

 

LIABILITIES

Current Liabilities

Commodity

$ 1    $ 10    $ 11   

Interest rate

  96      —        96   
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities(3)

  97      10      107   
  

 

 

    

 

 

    

 

 

 

Noncurrent Liabilities

Interest rate

  32      —        32   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivatives liabilities(4)

  32      —        32   
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

$ 129    $ 10    $ 139   
  

 

 

    

 

 

    

 

 

 

December 31, 2014

ASSETS

Current Assets

Commodity

$ —      $ 51    $ 51   
  

 

 

    

 

 

    

 

 

 

Total current derivative assets(1)

  —        51      51   
  

 

 

    

 

 

    

 

 

 

Noncurrent Assets

Commodity

  —        62      62   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative assets(2)

  —        62      62   
  

 

 

    

 

 

    

 

 

 

Total derivative assets

$ —      $ 113    $ 113   
  

 

 

    

 

 

    

 

 

 

LIABILITIES

Current Liabilities

Commodity

$ 3    $ 12    $ 15   

Interest rate

  45      —        45   
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities(3)

  48      12      60   
  

 

 

    

 

 

    

 

 

 

Noncurrent Liabilities

Interest rate

  27      —        27   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative liabilities(4)

  27      —        27   
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

$ 75    $ 12    $ 87   
  

 

 

    

 

 

    

 

 

 

 

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

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:

 

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Table of Contents

Derivatives in cash flow hedging relationships

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

Three Months Ended March 31, 2015

        

Derivative Type and Location of Gains (Losses)

        

Commodity:

        

Electric fuel and other energy-related purchases

      $ (1   
     

 

 

    

Total commodity

$ —      $ (1 $ 3   
  

 

 

    

 

 

    

 

 

 

Interest rate(3)

  (6   —        (49
  

 

 

    

 

 

    

 

 

 

Total

$ (6 $ (1 $ (46
  

 

 

    

 

 

    

 

 

 

Three Months Ended March 31, 2014

Derivative Type and Location of Gains (Losses)

Commodity:

Electric fuel and other energy-related purchases

$ 5   
  

 

 

    

 

 

    

 

 

 

Total commodity

$ 6    $ 5    $ 2   
  

 

 

    

 

 

    

 

 

 

Interest rate(3)

  (3   —        (23
  

 

 

    

 

 

    

 

 

 

Total

$ 3    $ 5    $ (21
  

 

 

    

 

 

    

 

 

 

 

(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.

 

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

Derivatives not designated as hedging instruments

   2015      2014  
(millions)              

Derivative Type and Location of Gains (Losses)

     

Commodity(2)

   $ 7       $ 119   
  

 

 

    

 

 

 

Total

$ 7    $ 119   
  

 

 

    

 

 

 

 

(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.

Dominion Gas

Balance Sheet Presentation

The tables below present Dominion Gas’ derivative asset and liability balances by type of financial instrument, before and after the effects of offsetting.

 

     March 31, 2015      December 31, 2014  
     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)                                          

Commodity contracts:

                 

Over-the-counter

   $ 3       $ —         $ 3       $ 2       $ —         $ 2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting or similar arrangement

$ 3    $ —      $ 3    $ 2    $ —      $ 2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
            March 31, 2015                    December 31, 2014         
            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)                                                        

Commodity contracts:

                       

Over-the-counter

   $ 3       $ 3       $  —         $  —         $ 2       $  —         $  —         $ 2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 3    $ 3    $ —      $ —      $ 2    $ —      $ —      $ 2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     March 31, 2015      December 31, 2014  
     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

   $ 13       $  —         $ 13       $ 9       $  —         $ 9   

Commodity contracts:

                 

Over-the-counter

     3         —           3         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting or similar arrangement

$ 16    $ —      $ 16    $ 9    $ —      $ 9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

            March 31, 2015                    December 31, 2014         
            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

   $ 13       $  —         $  —         $ 13       $ 9       $  —         $  —         $ 9   

Commodity contracts:

                       

Over-the-counter

     3         3         —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 16    $ 3    $ —      $ 13    $ 9    $ —      $ —      $ 9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Volumes

The following table presents the volume of Dominion Gas’ derivative activity as of March 31, 2015. 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.

 

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Table of Contents
     Current      Noncurrent  

Natural Gas (bcf):

     

Fixed price

     7         —     

Basis

     8         —     

NGLs (Gal)

     72,912,000         —     

Interest rate

   $ —         $ 250,000,000   

Ineffectiveness and AOCI

For the three months ended March 31, 2015 and 2014, gains or losses on hedging instruments determined to be ineffective were not material.

The following table presents selected information related to losses on cash flow hedges included in AOCI in Dominion Gas’ Consolidated Balance Sheet at March 31, 2015:

 

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

Commodities:

        

NGLs

   $ (1    $  —           12 months   

Interest rate

     (23      —           357 months   
  

 

 

    

 

 

    

Total

$ (24 $ —     
  

 

 

    

 

 

    

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.

Fair Value and Gains and Losses on Derivative Instruments

The following tables present the fair values of Dominion Gas’ commodity and interest rate derivatives and where they are presented in its Consolidated Balance Sheets:

 

45


Table of Contents
     Fair Value -
Derivatives
under
Hedge
Accounting
     Fair Value -
Derivatives
not under
Hedge
Accounting
     Total
Fair
Value
 
(millions)                     

At March 31, 2015

        

ASSETS

        

Current Assets

        

Commodity

   $ 2       $ 1       $ 3   
  

 

 

    

 

 

    

 

 

 

Total current derivative assets(1)

  2      1      3   
  

 

 

    

 

 

    

 

 

 

Total derivative assets

$ 2    $ 1    $ 3   
  

 

 

    

 

 

    

 

 

 

LIABILITIES

Current Liabilities

Commodity

$ 3    $ —      $ 3   
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities(2)

  3      —        3