10-Q 1 d159173d10q.htm 10-Q 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark one)

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

For the quarterly period ended June 30, 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 June 30, 2015, the latest practicable date for determination, Dominion Resources, Inc. had 594,321,909 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

     78   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

     90   

Item 4.

 

Controls and Procedures

     92   
  PART II. Other Information   

Item 1.

 

Legal Proceedings

     93   

Item 1A.

 

Risk Factors

     93   

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

     93   

Item 6.

 

Exhibits

     94   

 

2


Table of Contents

GLOSSARY OF TERMS

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

 

Abbreviation or Acronym

  

Definition

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
CAA    Clean Air Act
Caiman    Caiman Energy II, LLC
CAIR    Clean Air Interstate Rule
CAISO    California independent system operator
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.
DOE    Department of Energy
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
Dominion Midstream    The legal entity, Dominion Midstream Partners, LP, one or more of its consolidated subsidiaries, Cove Point Holdings and DCGT (beginning April 1, 2015), or the entirety of Dominion Midstream Partners, LP, and its consolidated subsidiaries

 

3


Table of Contents

Abbreviation or Acronym

  

Definition

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.
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
Four Brothers    Four Brothers Solar, LLC, a limited liability company owned by Dominion and Four Brothers Holdings, LLC, a wholly-owned subsidiary of SunEdison
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
Greensville County    An approximately 1,588 MW proposed natural gas-fired combined-cycle power station in Greensville County, Virginia
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
LNG    Liquefied natural gas
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
North Carolina Commission    North Carolina Utilities Commission
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

 

4


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
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 R    A rate adjustment clause associated with the recovery of costs related to Bear Garden
Rider S    A rate adjustment clause associated with the recovery of costs related to the Virginia City Hybrid Energy Center
Rider T1    A rate adjustment clause to recover the difference between revenues produced from transmission rates included in base rates, and the new total revenue requirement developed annually for the rate years effective September 1
Rider U    A rate adjustment clause associated with the recovery of costs of new underground distribution facilities
Rider W    A rate adjustment clause associated with the recovery of costs related to Warren County
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.
SunEdison    The legal entity, SunEdison, Inc., one or more of its consolidated subsidiaries (including Four Brothers Holdings, LLC) or operating segments, or the entirety of SunEdison, Inc. and its consolidated subsidiaries
U.S.    United States of America
UAO    Unilateral Administrative Order
UEX Rider    Uncollectible Expense Rider deployed by East Ohio
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
Warren County    A 1,342 MW combined-cycle, natural gas-fired power station in Warren County, Virginia
WVDEP    West Virginia Department of Environmental Protection
Yorktown    Yorktown power station

 

5


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2015      2014      2015      2014  
(millions, except per share amounts)                            

Operating Revenue

   $ 2,747       $ 2,813       $ 6,156       $ 6,443   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Expenses

           

Electric fuel and other energy-related purchases

     591         633         1,544         1,967   

Purchased electric capacity

     90         87         184         175   

Purchased gas

     111         324         361         864   

Other operations and maintenance

     709         933         1,311         1,358   

Depreciation, depletion and amortization

     339         308         682         616   

Other taxes

     134         134         299         301   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     1,974         2,419         4,381         5,281   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations

     773         394         1,775         1,162   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other income

     56         57         116         97   

Interest and related charges

     221         227         444         464   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations including noncontrolling interests before income tax expense

     608         224         1,447         795   

Income tax expense

     190         63         489         249   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income Including Noncontrolling Interests

     418         161         958         546   

Noncontrolling Interests

     5         2         9         8   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income Attributable to Dominion

   $ 413       $ 159       $ 949       $ 538   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings Per Common Share

           

Net income attributable to Dominion - Basic

   $ 0.70       $ 0.27       $ 1.61       $ 0.92   

Net income attributable to Dominion - Diluted

     0.70         0.27         1.60         0.92   
  

 

 

    

 

 

    

 

 

    

 

 

 

Dividends declared per common share

   $ 0.6475       $ 0.6000       $ 1.2950       $ 1.2000   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

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Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2015     2014     2015     2014  
(millions)                         

Net income including noncontrolling interests

   $ 418      $ 161      $ 958      $ 546   

Other comprehensive income (loss), net of taxes:

        

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

     92        (59     34        (209

Changes in unrealized net gains (losses) on investment securities(2)

     (11     49        4        78   

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

     3        4        3        —     

Amounts reclassified to net income:

        

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

     (61     (16     (2     144   

Net realized gains on investment securities(5)

     (12     (7     (33     (18

Net pension and other postretirement benefit costs(6)

     12        9        25        17   

Changes in other comprehensive income (loss) from equity method investees(7)

     —          2        (1     (5
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     23        (18     30        7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income including noncontrolling interests

     441        143        988        553   

Comprehensive income attributable to noncontrolling interests

     5        2        9        8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Dominion

   $ 436      $ 141      $ 979      $ 545   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Net of $(59) million and $47 million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $(19) million and $126 million for the six months ended June 30, 2015 and 2014, respectively.
(2) Net of $6 million and $(27) million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $(5) million and $(28) million for the six months ended June 30, 2015 and 2014, respectively.
(3) Net of $3 million and $4 million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $3 million and $— million for the six months ended June 30, 2015 and 2014, respectively.
(4) Net of $41 million and $6 million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $2 million and $(94) million for the six months ended June 30, 2015 and 2014, respectively.
(5) Net of $8 million and $4 million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $20 million and $11 million for the six months ended June 30, 2015 and 2014, respectively.
(6) Net of $(9) million and $(6) million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $(18) million and $(12) million for the six months ended June 30, 2015 and 2014, respectively.
(7) Net of $1 million and $3 million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $1 million and $3 million for the six months ended June 30, 2015 and 2014, respectively.

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

 

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Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     June 30,
2015
    December 31,
2014(1)
 
(millions)             

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 271      $ 318   

Customer receivables (less allowance for doubtful accounts of $37 and $34)

     1,334        1,514   

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

     106        119   

Inventories

     1,260        1,410   

Prepayments

     120        167   

Deferred income taxes

     517        800   

Other

     844        1,287   
  

 

 

   

 

 

 

Total current assets

     4,452        5,615   
  

 

 

   

 

 

 

Investments

    

Nuclear decommissioning trust funds

     4,208        4,196   

Investment in equity method affiliates

     1,103        1,081   

Other

     274        284   
  

 

 

   

 

 

 

Total investments

     5,585        5,561   
  

 

 

   

 

 

 

Property, Plant and Equipment

    

Property, plant and equipment

     54,448        51,406   

Accumulated depreciation, depletion and amortization

     (15,780     (15,136
  

 

 

   

 

 

 

Total property, plant and equipment, net

     38,668        36,270   
  

 

 

   

 

 

 

Deferred Charges and Other Assets

    

Goodwill

     3,294        3,044   

Pension and other postretirement benefit assets

     1,002        956   

Regulatory assets

     1,625        1,642   

Other

     1,316        1,239   
  

 

 

   

 

 

 

Total deferred charges and other assets

     7,237        6,881   
  

 

 

   

 

 

 

Total assets

   $ 55,942      $ 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.

 

8


Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

     June 30,
2015
    December 31,
2014(1)
 
(millions)             

LIABILITIES AND EQUITY

    

Current Liabilities

    

Securities due within one year

   $ 1,310      $ 1,375   

Short-term debt

     2,622        2,775   

Accounts payable

     842        952   

Accrued interest, payroll and taxes

     527        566   

Other(2)

     1,435        1,530   
  

 

 

   

 

 

 

Total current liabilities

     6,736        7,198   
  

 

 

   

 

 

 

Long-Term Debt

    

Long-term debt

     19,597        18,348   

Junior subordinated notes

     1,373        1,374   

Remarketable subordinated notes

     2,084        2,083   
  

 

 

   

 

 

 

Total long-term debt

     23,054        21,805   
  

 

 

   

 

 

 

Deferred Credits and Other Liabilities

    

Deferred income taxes and investment tax credits

     7,573        7,444   

Asset retirement obligations

     1,812        1,633   

Regulatory liabilities

     2,130        1,991   

Other

     1,782        2,299   
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     13,297        13,367   
  

 

 

   

 

 

 

Total liabilities

     43,087        42,370   
  

 

 

   

 

 

 

Commitments and Contingencies (see Note 16)

    

Equity

    

Common stock – no par(3)

     6,530        5,876   

Retained earnings

     6,278        6,095   

Accumulated other comprehensive loss

     (386     (416
  

 

 

   

 

 

 

Total common shareholders’ equity

     12,422        11,555   
  

 

 

   

 

 

 

Noncontrolling interests

     433        402   
  

 

 

   

 

 

 

Total equity

     12,855        11,957   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 55,942      $ 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) See Note 3 for amounts attributable to related parties.
(3) 1 billion shares authorized; 594 million shares and 585 million shares outstanding at June 30, 2015 and December 31, 2014, respectively.

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

 

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Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Six Months Ended June 30,

   2015     2014  
(millions)             

Operating Activities

    

Net income including noncontrolling interests

   $ 958      $ 546   

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

    

Depreciation, depletion and amortization (including nuclear fuel)

     822        748   

Deferred income taxes and investment tax credits

     399        301   

Gains on the sale of assets and businesses

     (71     (159

Charge associated with North Anna and offshore wind legislation

     —          287   

Other adjustments

     (18     (55

Changes in:

    

Accounts receivable

     214        153   

Inventories

     47        2   

Deferred fuel and purchased gas costs, net (including write-off)

     28        (322

Prepayments

     47        (34

Accounts payable

     (173     (258

Accrued interest, payroll and taxes

     (41     (50

Margin deposit assets and liabilities

     186        204   

Other operating assets and liabilities

     (238     84   
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,160        1,447   
  

 

 

   

 

 

 

Investing Activities

    

Plant construction and other property additions (including nuclear fuel)

     (2,370     (2,389

Acquisition of solar development projects

     (230     (58

Acquisition of DCGT

     (497     —     

Proceeds from sales of securities

     580        686   

Purchases of securities

     (553     (703

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

     28        —     

Other

     (42     7   
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,084     (2,186
  

 

 

   

 

 

 

Financing Activities

    

Issuance (repayment) of short-term debt, net

     (153     1,152   

Issuance of long-term debt

     1,200        1,150   

Repayment and repurchase of long-term debt

     (8     (660

Subsidiary preferred stock redemption

     —          (125

Issuance of common stock

     647        71   

Common dividend payments

     (765     (698

Subsidiary preferred dividend payments

     —          (6

Other

     (44     (42
  

 

 

   

 

 

 

Net cash provided by financing activities

     877        842   
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (47     103   

Cash and cash equivalents at beginning of period

     318        316   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 271      $ 419   
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Significant noncash investing activities:

    

Accrued capital expenditures

   $ 319      $ 309   
  

 

 

   

 

 

 

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
June 30,
     Six Months Ended
June 30,
 
     2015      2014      2015      2014  
  

 

 

    

 

 

    

 

 

    

 

 

 
(millions)                            

Operating Revenue(1)

   $ 1,813       $ 1,729       $ 3,950       $ 3,712   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Expenses

           

Electric fuel and other energy-related purchases(1)

     497         518         1,307         1,168   

Purchased electric capacity

     90         87         184         175   

Other operations and maintenance:

           

Affiliated suppliers

     69         70         144         141   

Other

     376         563         697         833   

Depreciation and amortization

     231         217         469         435   

Other taxes

     69         69         143         142   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     1,332         1,524         2,944         2,894   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations

     481         205         1,006         818   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other income

     21         21         36         36   

Interest and related charges

     108         103         216         210   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income tax expense

     394         123         826         644   

Income tax expense

     148         54         311         251   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income

     246         69         515         393   

Preferred dividends

     —           2         —           8   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance available for common stock

   $ 246       $ 67       $ 515       $ 385   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) See Note 18 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
June 30,
    Six Months Ended
June 30,
 
     2015     2014     2015     2014  
  

 

 

   

 

 

   

 

 

   

 

 

 
(millions)                         

Net income

   $ 246      $ 69      $ 515      $ 393   

Other comprehensive income (loss), net of taxes:

        

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

     7        (1     3        1   

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

     —          6        1        8   

Amounts reclassified to net income:

        

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

     —          (1     1        (4

Net realized gains on nuclear decommissioning trust funds(4)

     (2     —          (3     (2
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

     5        4        2        3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 251      $ 73      $ 517      $ 396   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Net of $(4) million and $— million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $(2) million and $— million for the six months ended June 30, 2015 and 2014, respectively.
(2) Net of $1 million and $(3) million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $— million and $(5) million for the six months ended June 30, 2015 and 2014, respectively.
(3) Net of $— million tax for both the three months ended June 30, 2015 and 2014, and net of $— million and $2 million for the six months ended June 30, 2015 and 2014, respectively.
(4) Net of $1 million and $— million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $1 million for both the six months ended June 30, 2015 and 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 BALANCE SHEETS

(Unaudited)

 

     June 30,
2015
    December 31,
2014(1)
 
(millions)             

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 82      $ 15   

Customer receivables (less allowance for doubtful accounts of $28 and $25)

     967        986   

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

     44        65   

Inventories (average cost method)

     828        853   

Prepayments

     23        252   

Regulatory assets

     317        298   

Other(2)

     33        82   
  

 

 

   

 

 

 

Total current assets

     2,294        2,551   
  

 

 

   

 

 

 

Investments

    

Nuclear decommissioning trust funds

     1,948        1,930   

Other

     4        4   
  

 

 

   

 

 

 

Total investments

     1,952        1,934   
  

 

 

   

 

 

 

Property, Plant and Equipment

    

Property, plant and equipment

     36,480        35,180   

Accumulated depreciation and amortization

     (11,431     (11,080
  

 

 

   

 

 

 

Total property, plant and equipment, net

     25,049        24,100   
  

 

 

   

 

 

 

Deferred Charges and Other Assets

    

Regulatory assets

     447        439   

Other(2)

     551        485   
  

 

 

   

 

 

 

Total deferred charges and other assets

     998        924   
  

 

 

   

 

 

 

Total assets

   $ 30,293      $ 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 18 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 BALANCE SHEETS—(Continued)

(Unaudited)

 

     June 30,
2015
     December 31,
2014(1)
 
(millions)              

LIABILITIES AND SHAREHOLDER’S EQUITY

     

Current Liabilities

     

Securities due within one year

   $ 660       $ 211   

Short-term debt

     1,441         1,361   

Accounts payable

     409         458   

Payables to affiliates

     93         92   

Affiliated current borrowings

     —           427   

Accrued interest, payroll and taxes

     241         199   

Other

     620         528   
  

 

 

    

 

 

 

Total current liabilities

     3,464         3,276   
  

 

 

    

 

 

 

Long-Term Debt

     8,970         8,726   
  

 

 

    

 

 

 

Deferred Credits and Other Liabilities

     

Deferred income taxes and investment tax credits

     4,385         4,415   

Asset retirement obligations

     1,018         848   

Regulatory liabilities

     1,774         1,683   

Other(2)

     380         506   
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     7,557         7,452   
  

 

 

    

 

 

 

Total liabilities

     19,991         19,454   
  

 

 

    

 

 

 

Commitments and Contingencies (see Note 16)

     

Common Shareholder’s Equity

     

Common stock – no par(3)

     5,737         5,738   

Other paid-in capital

     1,113         1,113   

Retained earnings

     3,400         3,154   

Accumulated other comprehensive income

     52         50   
  

 

 

    

 

 

 

Total common shareholder’s equity

     10,302         10,055   
  

 

 

    

 

 

 

Total liabilities and shareholder’s equity

   $ 30,293       $ 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 18 for amounts attributable to affiliates.
(3) 500,000 shares authorized; 274,723 shares outstanding at June 30, 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)

 

Six Months Ended June 30,

   2015     2014  
(millions)             

Operating Activities

    

Net income

   $ 515      $ 393   

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

    

Depreciation and amortization (including nuclear fuel)

     555        521   

Deferred income taxes and investment tax credits

     13        246   

Charge associated with North Anna and offshore wind legislation

     —          287   

Other adjustments

     32        (17

Changes in:

    

Accounts receivable

     40        26   

Inventories

     25        (31

Prepayments

     229        (138

Deferred fuel expenses, net (including write-off)

     (9     (359

Accounts payable

     (8     18   

Other operating assets and liabilities

     2        (37
  

 

 

   

 

 

 

Net cash provided by operating activities

     1,394        909   
  

 

 

   

 

 

 

Investing Activities

    

Plant construction and other property additions

     (1,292     (1,385

Purchases of nuclear fuel

     (67     (131

Purchases of securities

     (222     (311

Proceeds from sales of securities

     209        299   

Other

     (27     (11
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,399     (1,539
  

 

 

   

 

 

 

Financing Activities

    

Issuance of short-term debt, net

     80        481   

Repayment of affiliated current borrowings, net

     (427     (97

Issuance of long-term debt

     700        750   

Repayment of long-term debt

     (6     (50

Preferred stock redemption

     —          (125

Common dividend payments

     (270     (270

Preferred dividend payments

     —          (6

Other

     (5     (11
  

 

 

   

 

 

 

Net cash provided by financing activities

     72        672   
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     67        42   

Cash and cash equivalents at beginning of period

     15        16   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 82      $ 58   
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Significant noncash investing activities:

    

Accrued capital expenditures

   $ 117      $ 236   
  

 

 

   

 

 

 

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

 

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Table of Contents

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2015      2014      2015      2014  
(millions)                            

Operating Revenue(1)

   $ 395       $ 428       $ 926       $ 997   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Expenses

           

Purchased gas(1)

     21         76         95         213   

Other energy-related purchases

     7         5         13         21   

Other operations and maintenance:

           

Affiliated suppliers

     17         16         38         37   

Other(2)

     107         93         160         125   

Depreciation and amortization

     53         49         104         96   

Other taxes

     37         35         92         86   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     242         274         502         578   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations

     153         154         424         419   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other income

     4         5         13         13   

Interest and related charges

     18         6         35         12   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations before income taxes

     139         153         402         420   

Income tax expense

     54         60         156         163   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income

   $ 85       $ 93       $ 246       $ 257   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) See Note 18 for amounts attributable to related parties.
(2) Includes gains on the sales of assets to related parties of $59 million for the six months ended June 30, 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
June 30,
    Six Months Ended
June 30,
 
     2015     2014     2015     2014  
(millions)                         

Net income

   $ 85      $ 93      $ 246      $ 257   

Other comprehensive income (loss), net of taxes:

        

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

     3        (19     (1     (27

Changes in net unrecognized pension and other postretirement benefit costs(2)

     —          —          —          (1

Amounts reclassified to net income:

        

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

     (1     3        (1     8   

Net pension and other postretirement benefit costs(4)

     1        1        2        3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     3        (15     —          (17
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 88      $ 78      $ 246      $ 240   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Net of $(1) million and $12 million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $1 million and $17 million tax for the six months ended June 30, 2015 and 2014, respectively.
(2) Net of $— million tax for both the three months ended June 30, 2015 and 2014, and net of $— million and $(1) million tax for the six months ended June 30, 2015 and 2014, respectively.
(3) Net of $— million and $(2) million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $— million and $(4) million tax for the six months ended June 30, 2015 and 2014, respectively.
(4) Net of $(1) million and $— million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $(2) million and $(1) million tax for the six months ended June 30, 2015 and 2014, respectively.

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

 

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Table of Contents

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     June 30,
2015
    December 31,
2014(1)
 
(millions)             

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 11      $ 9   

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

     222        322   

Other receivables (less allowance for doubtful accounts of $1 at both dates)(2)

     13        19   

Affiliated receivables

     7        12   

Inventories

     79        65   

Prepayments

     55        166   

Other(2)

     168        217   
  

 

 

   

 

 

 

Total current assets

     555        810   
  

 

 

   

 

 

 

Investments

     108        108   
  

 

 

   

 

 

 

Property, Plant and Equipment

    

Property, plant and equipment

     9,195        8,902   

Accumulated depreciation and amortization

     (2,609     (2,538
  

 

 

   

 

 

 

Total property, plant and equipment, net

     6,586        6,364   
  

 

 

   

 

 

 

Deferred Charges and Other Assets

    

Goodwill

     542        542   

Intangible assets, net

     85        79   

Regulatory assets

     381        379   

Pension and other postretirement benefit assets(2)

     1,546        1,486   

Other(2)

     85        80   
  

 

 

   

 

 

 

Total deferred charges and other assets

     2,639        2,566   
  

 

 

   

 

 

 

Total assets

   $ 9,888      $ 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 18 for amounts attributable to related parties.

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

 

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Table of Contents

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

     June 30,
2015
    December 31,
2014(1)
 
(millions)             

LIABILITIES AND EQUITY

    

Current Liabilities

    

Short-term debt

   $ 360      $ —     

Accounts payable

     118        247   

Payables to affiliates

     21        41   

Affiliated current borrowings

     168        384   

Accrued interest, payroll and taxes

     140        194   

Other(2)

     162        172   
  

 

 

   

 

 

 

Total current liabilities

     969        1,038   
  

 

 

   

 

 

 

Long-Term Debt

     2,594        2,594   
  

 

 

   

 

 

 

Deferred Credits and Other Liabilities

    

Deferred income taxes and investment tax credits

     2,211        2,158   

Other(2)

     465        492   
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     2,676        2,650   
  

 

 

   

 

 

 

Total liabilities

     6,239        6,282   
  

 

 

   

 

 

 

Commitments and Contingencies (see Note 16)

    

Equity

    

Membership interests

     3,735        3,652   

Accumulated other comprehensive loss(2)

     (86     (86
  

 

 

   

 

 

 

Total equity

     3,649        3,566   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 9,888      $ 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 18 for amounts attributable to related parties.

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

 

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Table of Contents

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Six Months Ended June 30,

   2015     2014  
(millions)             

Operating Activities

    

Net income

   $ 246      $ 257   

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

    

Gains on sales of assets

     (71     (59

Depreciation and amortization

     104        96   

Deferred income taxes and investment tax credits

     55        48   

Other adjustments

     —          (7

Changes in:

    

Accounts receivable

     106        12   

Deferred purchased gas costs, net

     28        40   

Prepayments

     111        21   

Inventories

     (14     (18

Accounts payable

     (132     (152

Payables to affiliates

     (20     (32

Accrued interest, payroll and taxes

     (54     (22

Other operating assets and liabilities

     (66     (23
  

 

 

   

 

 

 

Net cash provided by operating activities

     293        161   
  

 

 

   

 

 

 

Investing Activities

    

Plant construction and other property additions

     (292     (249

Proceeds from sale of assets to an affiliate

     —          47   

Proceeds from assignments of Marcellus acreage

     28        —     

Other

     (6     (6
  

 

 

   

 

 

 

Net cash used in investing activities

     (270     (208
  

 

 

   

 

 

 

Financing Activities

    

Issuance of short-term debt, net

     360        —     

Issuance (repayment) of affiliated current borrowings, net

     (216     196   

Distribution payments

     (164     (145

Other

     (1     (2
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (21     49   
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     2        2   

Cash and cash equivalents at beginning of period

     9        8   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 11      $ 10   
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Significant noncash investing and financing activities:

    

Accrued capital expenditures

   $ 37      $ 40   

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 June 30, 2015, their results of operations for the three and six months ended June 30, 2015 and 2014, and their cash flows for the six months ended June 30, 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, those of their respective majority-owned subsidiaries and non-wholly owned entities in which they have a controlling financial interest. For certain partnership structures, income is allocated based on the liquidation value of the underlying contractual arrangements. As of June 30, 2015, Dominion owns the general partner and 70.9% of the limited partner interests in Dominion Midstream. The public’s ownership interest in Dominion Midstream is reflected as noncontrolling interest in Dominion’s Consolidated Financial Statements. Also, as of June 30, 2015, Dominion owns 50% of the units in and consolidates Four Brothers. SunEdison’s ownership interest in Four Brothers is reflected as noncontrolling interest in Dominion’s Consolidated Financial Statements. See Note 3 for more details regarding the nature and purpose of Four Brothers.

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 Four Brothers

In June 2015, Dominion acquired 50% of the units in Four Brothers from SunEdison for approximately $64 million of consideration, consisting of $2 million in cash and a $62 million payable, which is included in other current liabilities in Dominion’s Consolidated Balance Sheets as of June 30, 2015. Four Brothers’ purpose is to develop and operate four solar projects located in Utah, which will produce and sell electricity and renewable energy credits. The projects are expected to cost approximately $730 million to construct, including the initial acquisition cost. Dominion is obligated to contribute $445 million of capital to fund the construction of the projects. The facilities are expected to begin commercial operations in the third quarter of 2016, generating approximately 320 MW. Long-term power purchase, interconnection and operation and maintenance agreements have been executed for each of the projects. Dominion expects to claim 99% of the federal investment tax credits on the projects.

 

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Dominion owns 50% of the voting interests in Four Brothers and has a controlling financial interest over the entity through its rights to control operations.

The allocation of the purchase price resulted in approximately $89 million of property, plant and equipment, $25 million of noncontrolling interest and $64 million of acquired equity. The noncontrolling interest was measured at fair value using the discounted cash flow method, with the primary components of the valuation being future cash flows (both incoming and outgoing) and the discount rate. Dominion determined its discount rate based on the cost of capital a utility-scale investor would expect, as well as the cost of capital an individual project developer could achieve via a combination of non-recourse project financing and outside equity partners.

Four Brothers has entered into agreements with SunEdison to provide administrative and support services in connection with the construction of the project, operation and maintenance of the facilities, and administrative and technical management services of the solar facilities. In addition, Dominion has entered into a contract with SunEdison to provide services related to construction project management and oversight. There have been no costs related to services to be provided under these agreements for the six months ended June 30, 2015.

Acquisitions of Solar Projects

The following table presents other significant acquisitions of solar projects by Dominion in 2014 and 2015. Long-term power purchase, interconnection and operation and maintenance agreements have been executed for all of the projects. Dominion has claimed and/or expects to claim federal investment tax credits on the projects.

 

Completed Acquisition Date

  Seller   Number
of
Projects
  Project
Location
  Project Name(s)   Initial
Acquisition
Cost
(millions)
    Project
Cost
(millions)(1)
    Date of
Commercial
Operations
  MW
Capacity
 

March 2014

  Recurrent Energy
Development
Holdings, LLC
  6   California   Camelot, Kansas,
Kent South, Old
River One,
Adams East,
Columbia 2
  $ 50 (2)    $ 446      Fourth quarter
2014
    139   

November 2014

  CSI Project
Holdco, LLC
  1   California   West Antelope     79 (2)      80      November 2014     20   

December 2014

  EDF Renewable
Development,
Inc.
  1   California   CID     71 (2)      71      January 2015     20   

April 2015

  EC&R NA Solar
PV, LLC
  1   California   Alamo     66 (2)      66      May 2015     20   

April 2015

  EDF Renewable
Development,
Inc.
  3   California   City of Corcoran,
Goose Lake,
Marin Carport(3)
    106 (2)      108      May 2015     24   

June 2015

  EDF Renewable
Development,
Inc.
  1   California   Catalina 2     68 (4)      68      July 2015     18   

July 2015

  SunPeak Solar,
LLC
  1   California   Imperial Valley 2     42 (4)      70      Third quarter
2015
    20   

 

(1) Includes acquisition cost.
(2) The purchase price was primarily allocated to Property, Plant and Equipment.
(3) Marin Carport is expected to begin commercial operations in late 2015 or early 2016.
(4) The allocation of the purchase price to individual assets is under evaluation by management and has not been finalized.

In June 2015, Dominion entered into an agreement to acquire 100% of the equity interests in the Maricopa West solar project in California from EC&R NA Solar PV, LLC for approximately $65 million in cash. The project is expected to close in the fourth quarter of 2015 and cost approximately $66 million once constructed, including the initial acquisition cost. Upon completion, the facility is expected to generate approximately 20 MW.

The acquired assets of Four Brothers and the other solar projects are included in the Dominion Generation operating segment.

 

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Table of Contents

Acquisition of DCGT

In January 2015, Dominion completed the acquisition of 100% of the equity interests of DCGT from SCANA Corporation for approximately $497 million in cash, as adjusted for working capital. 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 $501 million, as adjusted for working capital. Total consideration to Dominion consisted of the issuance of a two-year, approximately $301 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 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 flows.

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 and 2014, DTI received approximately $98 million in cash proceeds. 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 June 30, 2015, deferred revenue totaled approximately $38 million, which is expected to be recognized over the remaining term of the agreement.

In March 2015, DTI conveyed to a natural gas producer approximately 11,000 acres of Marcellus Shale development rights underneath one of its natural gas storage fields and received proceeds of approximately $27 million and an overriding royalty interest in gas produced from the acreage. This transaction resulted in a $27 million ($16 million after-tax) gain, included in other operations and maintenance expense in Dominion Gas’ Consolidated Statements of Income.

Dominion and Dominion Gas

Blue Racer

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

 

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Table of Contents

Note 4. Operating Revenue

The Companies’ operating revenue consists of the following:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2015      2014      2015      2014  
(millions)                            

Dominion

           

Electric sales:

           

Regulated

   $ 1,779       $ 1,697       $ 3,891       $ 3,648   

Nonregulated

     351         320         757         1,174   

Gas sales:

           

Regulated

     31         70         147         217   

Nonregulated

     87         228         295         345   

Gas transportation and storage

     385         351         856         795   

Other

     114         147         210         264   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenue

   $ 2,747       $ 2,813       $ 6,156       $ 6,443   
  

 

 

    

 

 

    

 

 

    

 

 

 

Virginia Power

           

Regulated electric sales

   $ 1,779       $ 1,697       $ 3,891       $ 3,648   

Other

     34         32         59         64   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenue

   $ 1,813       $ 1,729       $ 3,950       $ 3,712   
  

 

 

    

 

 

    

 

 

    

 

 

 

Dominion Gas

           

Gas sales:

           

Regulated

   $ 21       $ 54       $ 78       $ 137   

Nonregulated

     1         4         4         13   

Gas transportation and storage

     321         304         733         700   

NGL revenue

     22         44         51         101   

Other

     30         22         60         46   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenue

   $ 395       $ 428       $ 926       $ 997   
  

 

 

    

 

 

    

 

 

    

 

 

 

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  

Six Months Ended June 30,

   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

     3.3        1.5        3.8        3.8        3.9        3.7   

Investment tax credits

     (2.7     (4.9     —          —          —          —     

Production tax credits

     (0.8     (1.0     (0.5     (0.6     —          —     

Valuation allowances

     —          1.1        —          —          —          —     

Other, net

     (1.0     (0.4     (0.7     0.6        —          0.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effective tax rate

     33.8     31.3     37.6     38.8     38.9     38.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of June 30, 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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Table of Contents

Note 6. Earnings Per Share

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

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2015      2014      2015      2014  
(millions, except EPS)                            

Net income attributable to Dominion

   $ 413       $ 159       $ 949       $ 538   
  

 

 

    

 

 

    

 

 

    

 

 

 

Average shares of common stock outstanding – Basic

     591.5         581.9         589.7         581.7   

Net effect of dilutive securities(1)

     1.0         2.0         1.5         1.7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Average shares of common stock outstanding – Diluted

     592.5         583.9         591.2         583.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings Per Common Share – Basic

   $ 0.70       $ 0.27       $ 1.61       $ 0.92   

Earnings Per Common Share – Diluted

   $ 0.70       $ 0.27       $ 1.60       $ 0.92   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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 15 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 and six months ended June 30, 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 and six months ended June 30, 2014.

 

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Table of Contents

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 June 30, 2015

          

Beginning balance

   $ (177   $ 542      $ (769   $ (5   $ (409

Other comprehensive income before reclassifications: gains (losses)

     92        (11     3        —          84   

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

     (61     (12     12        —          (61
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     31        (23     15        —          23   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (146   $ 519      $ (754   $ (5   $ (386
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Three Months Ended June 30, 2014

          

Beginning balance

   $ (278   $ 492      $ (506   $ (7   $ (299

Other comprehensive income before reclassifications: gains (losses)

     (59     49        4        2        (4

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

     (16     (7     9        —          (14
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     (75     42        13        2        (18
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (353   $ 534      $ (493   $ (5   $ (317
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Six Months Ended June 30, 2015

          

Beginning balance

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

Other comprehensive income before reclassifications: gains (losses)

     34        4        3        (1     40   

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

     (2     (33     25        —          (10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     32        (29     28        (1     30   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (146   $ 519      $ (754   $ (5   $ (386
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Six Months Ended June 30, 2014

          

Beginning balance

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

Other comprehensive income before reclassifications: gains (losses)

     (209     78        —          (5     (136

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

     144        (18     17        —          143   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     (65     60        17        (5     7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (353   $ 534      $ (493   $ (5   $ (317
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 June 30, 2015

     

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

     

Commodity contracts

   $ (107   

Operating revenue

     2      

Purchased gas

  

 

 

    

Interest rate contracts

     3      

Interest and related charges

     (102   

Tax

     41      

Income tax expense

  

 

 

    
   $ (61   
  

 

 

    

Unrealized (gains) and losses on investment securities:

     

Realized (gain) loss on sale of securities

   $ (25   

Other income

Impairment

     5      

Other income

  

 

 

    
     (20   

Tax

     8      

Income tax expense

  

 

 

    
   $ (12   
  

 

 

    

Unrecognized pension and other postretirement benefit costs:

     

Prior service (credit) costs

   $ (3   

Other operations and maintenance

Actuarial (gains) losses

     24      

Other operations and maintenance

  

 

 

    
     21      

Tax

     (9   

Income tax expense

  

 

 

    
   $ 12      
  

 

 

    

Three Months Ended June 30, 2014

     

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

     

Commodity contracts

   $ (28   

Operating revenue

     3      

Purchased gas

Interest rate contracts

     3      

Interest and related charges

  

 

 

    
     (22   

Tax

     6      

Income tax expense

  

 

 

    
   $ (16   
  

 

 

    

Unrealized (gains) and losses on investment securities:

     

Realized (gain) loss on sale of securities

   $ (13   

Other income

Impairment

     2      

Other income

  

 

 

    
     (11   

Tax

     4      

Income tax expense

  

 

 

    
   $ (7   
  

 

 

    

Unrecognized pension and other postretirement benefit costs:

     

Prior service (credit) costs

   $ (2   

Other operations and maintenance

Actuarial (gains) losses

     17      

Other operations and maintenance

  

 

 

    
     15      

Tax

     (6   

Income tax expense

  

 

 

    
   $ 9      
  

 

 

    

 

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Table of Contents

Six Months Ended June 30, 2015

     

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

     

Commodity contracts

   $ (15   

Operating revenue

     7      

Purchased gas

     (1   

Electric fuel and other energy-related purchases

Interest rate contracts

     5      

Interest and related charges

  

 

 

    
     (4   

Tax

     2      

Income tax expense

  

 

 

    
   $ (2   
  

 

 

    

Unrealized (gains) and losses on investment securities:

     

Realized (gain) loss on sale of securities

   $ (64   

Other income

Impairment

     11      

Other income

  

 

 

    
     (53   

Tax

     20      

Income tax expense

  

 

 

    
   $ (33   
  

 

 

    

Unrecognized pension and other postretirement benefit costs:

     

Prior service (credit) costs

   $ (6   

Other operations and maintenance

Actuarial (gains) losses

     49      

Other operations and maintenance

  

 

 

    
     43      

Tax

     (18   

Income tax expense

  

 

 

    
   $ 25      
  

 

 

    

Six Months Ended June 30, 2014

     

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

     

Commodity contracts

   $ 241      

Operating revenue

     4      

Purchased gas

     (13   

Electric fuel and other energy-related purchases

Interest rate contracts

     6      

Interest and related charges

  

 

 

    
     238      

Tax

     (94   

Income tax expense

  

 

 

    
   $ 144      
  

 

 

    

Unrealized (gains) and losses on investment securities:

     

Realized (gain) loss on sale of securities

   $ (33   

Other income

Impairment

     4      

Other income

  

 

 

    
     (29   

Tax

     11      

Income tax expense

  

 

 

    
   $ (18   
  

 

 

    

Unrecognized pension and other postretirement benefit costs:

     

Prior service (credit) costs

   $ (5   

Other operations and maintenance

Actuarial (gains) losses

     34      

Other operations and maintenance

  

 

 

    
     29      

Tax

     (12   

Income tax expense

  

 

 

    
   $ 17      
  

 

 

    

 

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Table of Contents

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 June 30, 2015

        

Beginning balance

   $ (24    $ (65    $ (89

Other comprehensive income before reclassifications: gains (losses)

     3         —           3   

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

     (1      1         —     
  

 

 

    

 

 

    

 

 

 

Net current-period other comprehensive income

     2         1         3   
  

 

 

    

 

 

    

 

 

 

Ending balance

   $ (22    $ (64    $ (86
  

 

 

    

 

 

    

 

 

 

Three Months Ended June 30, 2014

        

Beginning balance

   $ —         $ (60    $ (60

Other comprehensive income before reclassifications: gains (losses)

     (19      —           (19

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

     3         1         4   
  

 

 

    

 

 

    

 

 

 

Net current-period other comprehensive income (loss)

     (16      1         (15
  

 

 

    

 

 

    

 

 

 

Ending balance

   $ (16    $ (59    $ (75
  

 

 

    

 

 

    

 

 

 

Six Months Ended June 30, 2015

        

Beginning balance

   $ (20    $ (66    $ (86

Other comprehensive income before reclassifications: gains (losses)

     (1      —           (1

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

     (1      2         1   
  

 

 

    

 

 

    

 

 

 

Net current-period other comprehensive income (loss)

     (2      2         —     
  

 

 

    

 

 

    

 

 

 

Ending balance

   $ (22    $ (64    $ (86
  

 

 

    

 

 

    

 

 

 

Six Months Ended June 30, 2014

        

Beginning balance

   $ 3       $ (61    $ (58

Other comprehensive income before reclassifications: gains (losses)

     (27      (1      (28

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

     8         3         11   
  

 

 

    

 

 

    

 

 

 

Net current-period other comprehensive income (loss)

     (19      2         (17
  

 

 

    

 

 

    

 

 

 

Ending balance

   $ (16    $ (59    $ (75
  

 

 

    

 

 

    

 

 

 

 

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

 

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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 June 30, 2015

     

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

     

Commodity contracts

   $ (1    Operating revenue
  

 

 

    
     (1   

Tax

     —         Income tax expense
  

 

 

    
   $ (1   
  

 

 

    

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 June 30, 2014

     

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

     

Commodity contracts

   $ 2       Operating revenue
     3       Purchased gas
  

 

 

    
     5      

Tax

     (2    Income tax expense
  

 

 

    
   $ 3      
  

 

 

    

Unrecognized pension and other postretirement benefit costs:

     

Actuarial (gains) losses

   $ 1       Other operations and maintenance
  

 

 

    
     1      

Tax

     —         Income tax expense
  

 

 

    
   $ 1      
  

 

 

    

Six Months Ended June 30, 2015

     

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

     

Commodity contracts

   $ (1    Operating revenue
  

 

 

    
     (1   

Tax

     —         Income tax expense
  

 

 

    
   $ (1   
  

 

 

    

Unrecognized pension and other postretirement benefit costs:

     

Actuarial (gains) losses

   $ 4       Other operations and maintenance
  

 

 

    
     4      

Tax

     (2    Income tax expense
  

 

 

    
   $ 2      
  

 

 

    

Six Months Ended June 30, 2014

     

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

     

Commodity contracts

   $ 7       Operating revenue
     5       Purchased gas
  

 

 

    
     12      

Tax

     (4    Income tax expense
  

 

 

    
   $ 8      
  

 

 

    

Unrecognized pension and other postretirement benefit costs:

     

Actuarial (gains) losses

   $ 4       Other operations and maintenance 
  

 

 

    
     4      

Tax

     (1    Income tax expense
  

 

 

    
   $ 3      
  

 

 

    

 

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Table of Contents

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.

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 June 30, 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)

   $ 57       Discounted Cash Flow      Market Price (per Dth) (3)    (2) - 4      (1
           Credit spread (4)    1% - 5%      3

FTRs

     25       Discounted Cash Flow      Market Price (per MWh) (3)    (2) - 10      2   

Physical and Financial Options:

             

Natural Gas

     4       Option Model      Market Price (per Dth) (3)    2 - 4      3   
           Price Volatility (5)    22% - 69%      33
  

 

 

            

Total assets

   $ 86              
  

 

 

            

Liabilities:

             

Physical and Financial Forwards and Futures:

             

Natural Gas(2)

   $ 10       Discounted Cash Flow      Market Price (per Dth) (3)    (2) - 4      2   

NGLs(6)

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

FTRs

     2       Discounted Cash Flow      Market Price (per MWh) (3)    (10) - 10      1   

Physical and Financial Options:

             

Natural Gas

     2       Option Model      Market Price (per Dth) (3)    2 - 4      3   
           Price Volatility (5)    22% - 69%      33
  

 

 

            

Total liabilities

   $ 15              
  

 

 

            

 

(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.
(6) Information represents Dominion Gas’ quantitative information about Level 3 fair value measurement.

 

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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 June 30, 2015

           

Assets:

           

Derivatives:

           

Commodity

   $ 1       $ 452       $ 86       $ 539   

Interest rate

     —           58         —           58   

Investments(1):

           

Equity securities:

           

U.S.:

           

Large cap

     2,640         —           —           2,640   

Other

     7         —           —           7   

Non-U.S.:

           

Large cap

     13         —           —           13   

Fixed income:

           

Corporate debt instruments

     —           464         —           464   

U.S. Treasury securities and agency debentures

     399         179         —           578   

State and municipal

     —           412         —           412   

Other

     —           109         —           109   

Cash equivalents and other

     1         6         —           7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 3,061       $ 1,680       $ 86       $ 4,827   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivatives:

           

Commodity

   $ 1       $ 329       $ 15       $ 345   

Interest rate

     —           108         —           108   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 1       $ 437       $ 15       $ 453   
  

 

 

    

 

 

    

 

 

    

 

 

 

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
June 30,
     Six Months Ended
June 30,
 
     2015      2014      2015      2014  
(millions)                            

Beginning balance

   $ 76       $ 8       $ 107       $ (16

Total realized and unrealized gains (losses):

           

Included in earnings

     (5      (10      10         100   

Included in other comprehensive income (loss)

     (1      (1      (12      3   

Included in regulatory assets/liabilities

     (5      (3      (29      14   

Settlements

     6         9         (8      (99

Transfers out of Level 3(1)

     —           —           3         1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   $ 71       $ 3       $ 71       $ 3   
  

 

 

    

 

 

    

 

 

    

 

 

 

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 certain short term NGL derivatives from Level 3 to Level 2 due to an increase in liquidity in financial forward markets. The transfers out of Level 3 that relate to NGLs for the three and six months ended June 30, 2015 are $— million and $9 million, respectively.

 

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Table of Contents

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

 

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

Three Months Ended June 30, 2015

           

Total gains (losses) included in earnings

   $ —         $ —         $ (5    $ (5

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 June 30, 2014

           

Total gains (losses) included in earnings

   $ (1    $ (1    $ (8    $ (10

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      —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Six Months Ended June 30, 2015

           

Total gains (losses) included in earnings

   $ 2       $ —         $ 8       $ 10   

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      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Six Months Ended June 30, 2014

           

Total gains (losses) included in earnings

   $ (11    $ (1    $ 112       $ 100   

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

     2         (1      —           1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Virginia Power

The following table presents Virginia Power’s quantitative information about Level 3 fair value measurements at June 30, 2015. The range and weighted average are presented in dollars for market price inputs and percentages for credit spreads.

 

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

Assets:

             

Physical and Financial Forwards and Futures:

             

FTRs

   $ 25       Discounted Cash Flow      Market Price (per MWh) (3)    (2) - 10      2   

Natural Gas(2)

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

 

 

            

Total assets

   $ 75              
  

 

 

            

Liabilities:

             

Physical and Financial Forwards and Futures:

             

FTRs

   $ 2       Discounted Cash Flow      Market Price (per MWh) (3)    (10) - 10      1   
  

 

 

            

Total liabilities

   $ 2              
  

 

 

            

 

(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.

 

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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)

Credit spread

   Asset    Increase (decrease)    Loss (gain)
        

 

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Table of Contents

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

 

     Level 1      Level 2      Level 3      Total  
(millions)                            

At June 30, 2015

           

Assets:

           

Derivatives:

           

Commodity

   $ —         $ 5       $ 75       $ 80   

Interest rate

     —           37         —           37   

Investments(1):

           

Equity securities:

           

U.S. large cap

     1,170         —           —           1,170   

Fixed income:

           

Corporate debt instruments

     —           255         —           255   

U.S. Treasury securities and agency debentures

     140         60         —           200   

State and municipal

     —           217         —           217   

Other

     —           28         —           28   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 1,310       $ 602       $ 75       $ 1,987   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivatives:

           

Commodity

   $ —         $ 3       $ 2       $ 5   

Interest rate

     —           16         —           16   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —         $ 19       $ 2       $ 21   
  

 

 

    

 

 

    

 

 

    

 

 

 

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.

 

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Table of Contents

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

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2015      2014      2015      2014  
(millions)                            

Beginning balance

   $ 78       $ 10       $ 102       $ (7

Total realized and unrealized gains (losses):

           

Included in earnings

     (5      (9      8         111   

Included in regulatory assets/liabilities

     (5      (3      (29      14   

Settlements

     5         9         (8      (111
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   $ 73       $ 7       $ 73       $ 7   
  

 

 

    

 

 

    

 

 

    

 

 

 

The gains and losses included in earnings in the Level 3 fair value category were classified in electric fuel and other energy-related purchases in Virginia Power’s Consolidated Statements of Income for the three and six months ended June 30, 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 and six months ended June 30, 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 June 30, 2015

  

Assets:

  

Commodity

   $ —         $ 6       $ —         $ 6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

   $ —         $ 6       $ —         $ 6   

Liabilities:

  

Commodity

   $ —         $ 5       $ 1       $ 6   

Interest rate

     —           9         —           9   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —         $ 14       $ 1       $ 15   
  

 

 

    

 

 

    

 

 

    

 

 

 

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
June 30,
     Six Months Ended
June 30,
 
     2015      2014      2015      2014  
(millions)                            

Beginning balance

   $ —         $ (2    $ 2       $ (6

Total realized and unrealized gains (losses):

           

Included in earnings

     (1      (2      1         (7

Included in other comprehensive income (loss)

     —           (1      (12      3   

Settlements

     —           2         (1      7   

Transfers out of Level 3(1)

     —           —           9         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   $ (1    $ (3    $ (1    $ (3
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) In March 2015, Dominion changed the classification of certain short term NGL derivatives from Level 3 to Level 2 due to an increase in liquidity in financial forward markets. The transfers out of Level 3 that relate to NGLs for the three and six months ended June 30, 2015 are $— million and $9 million, respectively.

 

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Table of Contents

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 and six months ended June 30, 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 and six months ended June 30, 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:

 

     June 30, 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)

   $ 20,907       $ 22,251       $ 19,723       $ 21,881   

Junior subordinated notes(3)

     1,373         1,348         1,374         1,396   

Remarketable subordinated notes(3)

     2,084         2,116         2,083         2,362   
  

 

 

    

 

 

    

 

 

    

 

 

 

Virginia Power

           

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

   $ 9,630       $ 10,541       $ 8,937       $ 10,293   
  

 

 

    

 

 

    

 

 

    

 

 

 

Dominion Gas

           

Long-term debt(3)

   $ 2,594       $ 2,614       $ 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 June 30, 2015 and December 31, 2014, includes the valuation of certain fair value hedges associated with fixed rate debt of approximately $8 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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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:

 

    June 30, 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

  $ 58      $ —        $ 58      $ 24      $ —        $ 24   

Commodity contracts:

         

Over-the-counter

    276        —          276        382        —          382   

Exchange

    253        —          253        298        —          298   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives, subject to a master netting or similar arrangement

    587        —          587        704        —          704   

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

    10        —          10        15        —          15   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 597      $ —        $ 597      $ 719      $ —        $ 719   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

          June 30, 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)                                                

Interest rate contracts:

               

Over-the-counter

  $ 58      $ 25      $ —        $ 33      $ 24      $ 16      $ —        $ 8   

Commodity contracts:

               

Over-the-counter

    276        30        17        229        382        34        34        314   

Exchange

    253        247        —          6        298        298        —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 587      $ 302      $ 17      $ 268      $ 704      $ 348      $ 34      $ 322   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents
    June 30, 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

  $ 108      $ —        $ 108      $ 202      $ —        $ 202   

Commodity contracts:

         

Over-the-counter

    65        —          65        87        —          87   

Exchange

    272        —          272        493        —          493   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives, subject to a master netting or similar arrangement

    445        —          445        782        —          782   

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

    8        —          8        12        —          12   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 453      $ —        $ 453      $ 794      $ —        $ 794   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

          June 30, 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

  $ 108      $ 25      $ —        $ 83      $ 202      $ 16      $ —        $ 186   

Commodity contracts:

               

Over-the-counter

    65        30        —          35        87        34        1        52   

Exchange

    272        247        25        —          493        298        195        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 445      $ 302      $ 25      $ 118      $ 782      $ 348      $ 196      $ 238   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Volumes

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

     50         13   

Basis

     217         570   

Electricity (MWh):

     

Fixed price

     12,920,765         5,146,901   

FTRs

     69,152,521         —     

Capacity (MW)

     16,800         —     

Liquids (Gal)(2)

     77,616,000         14,616,000   

Interest rate

   $ 2,050,000,000       $ 3,450,000,000   

 

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

 

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Table of Contents

Ineffectiveness and AOCI

For the three and six months ended June 30, 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 June 30, 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      28 months   

Electricity

     84         39         18 months   

Other

     (1      —           21 months   

Interest rate

     (224      (7      390 months   
  

 

 

    

 

 

    

Total

   $ (146    $ 27      
  

 

 

    

 

 

    

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 June 30, 2015

     

ASSETS

     

Current Assets

     

Commodity

  $ 245      $ 112      $ 357   

Interest rate

    —          1        1   
 

 

 

   

 

 

   

 

 

 

Total current derivative assets(1)

    245        113        358   
 

 

 

   

 

 

   

 

 

 

Noncurrent Assets

     

Commodity

    107        75        182   

Interest rate

    57        —          57   
 

 

 

   

 

 

   

 

 

 

Total noncurrent derivative assets(2)

    164        75        239   
 

 

 

   

 

 

   

 

 

 

Total derivative assets

  $ 409      $ 188      $ 597   
 

 

 

   

 

 

   

 

 

 

LIABILITIES

     

Current Liabilities

     

Commodity

  $ 191      $ 94      $ 285   

Interest rate

    90        —          90   
 

 

 

   

 

 

   

 

 

 

Total current derivative liabilities(3)

    281        94        375   
 

 

 

   

 

 

   

 

 

 

Noncurrent Liabilities

     

Commodity

    37        23        60   

Interest Rate

    18        —          18   
 

 

 

   

 

 

   

 

 

 

Total noncurrent derivative liabilities(4)

    55        23        78   
 

 

 

   

 

 

   

 

 

 

Total derivative liabilities

  $ 336      $ 117      $ 453   
 

 

 

   

 

 

   

 

 

 

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(3)

    324        267        591   
 

 

 

   

 

 

   

 

 

 

Noncurrent Liabilities

     

Commodity

    55        46        101   

Interest rate

    102        —          102   
 

 

 

   

 

 

   

 

 

 

Total noncurrent derivative liabilities(4)

    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) Current derivative liabilities are presented in other current liabilities in Dominion’s Consolidated Balance Sheets.
(4) 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 June 30, 2015

     

Derivative Type and Location of Gains (Losses)

     

Commodity:

     

Operating revenue

    $ 107     

Purchased gas

      (2  
 

 

 

   

 

 

   

 

 

 

Total commodity

  $ 94      $ 105      $ —     
 

 

 

   

 

 

   

 

 

 

Interest rate(3)

    57        (3     91   
 

 

 

   

 

 

   

 

 

 

Total

  $ 151      $ 102      $ 91   
 

 

 

   

 

 

   

 

 

 

Three Months Ended June 30, 2014

     

Derivative Type and Location of Gains (Losses)

     

Commodity:

     

Operating revenue

    $ 28     

Purchased gas

      (3  
 

 

 

   

 

 

   

 

 

 

Total commodity

  $ (33   $ 25      $ (4
 

 

 

   

 

 

   

 

 

 

Interest rate(3)

    (73     (3     (8
 

 

 

   

 

 

   

 

 

 

Total

  $ (106   $ 22      $ (12
 

 

 

   

 

 

   

 

 

 

Six Months Ended June 30, 2015

     

Derivative Type and Location of Gains (Losses)

     

Commodity:

     

Operating revenue

    $ 15     

Purchased gas

      (7  

Electric fuel and other energy-related purchases

      1     
 

 

 

   

 

 

   

 

 

 

Total commodity

  $ 54      $ 9      $ 3   
 

 

 

   

 

 

   

 

 

 

Interest rate(3)

    (1     (5     42   
 

 

 

   

 

 

   

 

 

 

Total

  $ 53      $ 4      $ 45   
 

 

 

   

 

 

   

 

 

 

Six Months Ended June 30, 2014

     

Derivative Type and Location of Gains (Losses)

     

Commodity:

     

Operating revenue

    $ (241  

Purchased gas

      (4  

Electric fuel and other energy-related purchases

      13     
 

 

 

   

 

 

   

 

 

 

Total commodity

  $ (216   $ (232   $ (2
 

 

 

   

 

 

   

 

 

 

Interest rate(3)

    (119     (6     (31
 

 

 

   

 

 

   

 

 

 

Total

  $ (335   $ (238   $ (33
 

 

 

   

 

 

   

 

 

 

 

(1) Amounts deferred into AOCI have no associated effect in Dominion’s Consolidated Statements of Income.

 

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Table of Contents
(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

June 30,

   

Six Months Ended

June 30,

 

Derivatives not designated as hedging instruments

  2015     2014     2015     2014  
(millions)                        

Derivative Type and Location of Gains (Losses)

       

Commodity

       

Operating revenue

  $ 15      $ (1   $