10-Q 1 d26009d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark one)

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

For the quarterly period ended September 30, 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 September 30, 2015, the latest practicable date for determination, Dominion Resources, Inc. had 595,333,610 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      80   

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk      94   

Item 4.

   Controls and Procedures      96   
   PART II. Other Information   

Item 1.

   Legal Proceedings      97   

Item 1A.

   Risk Factors      97   

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      97   

Item 6.

   Exhibits      99   

 

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

Blue Racer   

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

BOD   

Board of Directors

BP   

BP Wind Energy North America Inc.

BREDL   

Blue Ridge Environmental Defense League

Bremo   

Bremo power station

Brunswick County   

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

CAA   

Clean Air Act

Caiman   

Caiman Energy II, LLC

CAIR   

Clean Air Interstate Rule

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

DCG   

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% noncontrolling partnership interest in Iroquois

Dominion Midstream   

The legal entity, Dominion Midstream Partners, LP, one or more of its consolidated subsidiaries, Cove Point Holdings, Iroquois GP Holding Company, LLC and DCG (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.

DSM   

Demand-side management

Dth   

Dekatherm

DTI   

Dominion Transmission, Inc.

DVP   

Dominion Virginia Power operating segment

East Ohio   

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

Enterprise   

Enterprise Product Partners, L.P.

EPA   

Environmental Protection Agency

EPC   

Engineering, procurement and construction

EPS   

Earnings per share

FERC   

Federal Energy Regulatory Commission

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

Granite Mountain   

Granite Mountain Holdings, LLC, a limited liability company owned by Dominion and Granite Mountain Renewables, LLC, a wholly-owned subsidiary of SunEdison

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

Hope   

Hope Gas, Inc., doing business as Dominion Hope

INPO   

Institute of Nuclear Power Operations

IRCA   

Intercompany revolving credit agreement

Iron Springs   

Iron Springs Holdings, LLC, a limited liability company owned by Dominion and Iron Springs Renewables, LLC, a wholly-owned subsidiary of SunEdison

Iroquois   

Iroquois Gas Transmission System L.P.

ISO   

Independent system operator

ISO-NE   

ISO New England

Kewaunee   

Kewaunee nuclear power station

Keys Energy Project   

Project to provide 107,000 Dths/day of firm transportation service from Cove Point’s interconnect with Transco in Fairfax County, Virginia to Keys Energy Center, LLC’s power generating facility in Prince George’s County, Maryland

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

Morgans Corner   

Morgans Corner Solar Energy, LLC

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 Wind Energy, Inc. in Grant County, West Virginia

NG   

Collectively, North East Transmission Co., Inc. and National Grid IGTS Corp.

NGLs   

Natural gas liquids

 

4


Table of Contents

Abbreviation or Acronym

  

Definition

NJNR   

NJNR Pipeline Company

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

NRC   

Nuclear Regulatory Commission

NSPS   

New Source Performance Standards

NYSE   

New York Stock Exchange

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

PREP   

Pipeline Replacement and Expansion Program, a program of replacing, upgrading and expanding natural gas utility infrastructure to be deployed by Hope

PSD   

Prevention of Significant Deterioration

PSMP   

Pipeline Safety and Management Program to be deployed by East Ohio to ensure the continued safe and reliable operation of East Ohio’s system and compliance with pipeline safety laws

REIT   

Real estate investment trust

Rider BW   

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

Rider US-1   

A rate adjustment clause associated with the recovery of costs related to Remington Solar Facility

Riders C1A and C2A   

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

ROE   

Return on equity

RTO   

Regional transmission organization

SEC   

Securities and Exchange Commission

SELC   

Southern Environmental Law Center

Shell   

Shell WindEnergy, Inc.

SO2   

Sulfur dioxide

St. Charles Transportation Project   

Project to provide 132,000 Dths/day of firm transportation service from Cove Point’s interconnect with Transco in Fairfax County, Virginia to Competitive Power Venture Maryland, LLC’s power generating facility in Charles County, Maryland

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, Granite Mountain Renewables, LLC and Iron Springs Renewables, LLC) or operating segments, or the entirety of SunEdison, Inc. and its consolidated subsidiaries

Three Cedars   

Granite Mountain and Iron Springs, collectively

U.S.   

United States of America

UAO   

Unilateral Administrative Order

VDEQ   

Virginia Department of Environmental Quality

VEBA   

Voluntary Employees’ Beneficiary Association

VIE   

Variable interest entity

Virginia 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

VOC   

Volatile organic compounds

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
September 30,
     Nine Months Ended
September 30,
 
     2015      2014      2015      2014  
(millions, except per share amounts)                            

Operating Revenue

   $ 2,971       $ 3,050       $ 9,127       $ 9,493   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Expenses

           

Electric fuel and other energy-related purchases

     636         743         2,180         2,710   

Purchased electric capacity

     75         86         259         261   

Purchased gas

     85         209         446         1,073   

Other operations and maintenance

     564         614         1,875         1,972   

Depreciation, depletion and amortization

     355         354         1,037         970   

Other taxes

     133         123         432         424   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     1,848         2,129         6,229         7,410   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations

     1,123         921         2,898         2,083   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other income

     11         69         127         166   

Interest and related charges

     230         231         674         695   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations including noncontrolling interests before income tax expense

     904         759         2,351         1,554   

Income tax expense

     305         228         794         477   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income Including Noncontrolling Interests

     599         531         1,557         1,077   

Noncontrolling Interests

     6         2         15         10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income Attributable to Dominion

   $ 593       $ 529       $ 1,542       $ 1,067   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings Per Common Share

           

Net income attributable to Dominion - Basic

   $ 1.00       $ 0.91       $ 2.61       $ 1.83   

Net income attributable to Dominion - Diluted

     1.00         0.90         2.60         1.83   

Dividends declared per common share

     0.6475         0.6000         1.9425         1.8000   
  

 

 

    

 

 

    

 

 

    

 

 

 

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
September 30,
    Nine Months Ended
September 30,
 
     2015     2014     2015     2014  
(millions)                         

Net income including noncontrolling interests

   $ 599      $ 531      $ 1,557      $ 1,077   

Other comprehensive income (loss), net of taxes:

        

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

     (7     (58     25        (267

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

     (59     2        (55     80   

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

     (9     —          (6     —     

Amounts reclassified to net income:

        

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

     (53     (31     (53     113   

Net realized gains on investment securities(5)

     (2     (21     (35     (39

Net pension and other postretirement benefit costs(6)

     14        8        39        25   

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

     1        —          —          (5
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive loss

     (115     (100     (85     (93
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income including noncontrolling interests

     484        431        1,472        984   

Comprehensive income attributable to noncontrolling interests

     6        2        15        10   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Dominion

   $ 478      $ 429      $ 1,457      $ 974   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Net of $— million and $36 million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $(20) million and $163 million tax for the nine months ended September 30, 2015 and 2014, respectively.
(2) Net of $55 million and $(2) million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $50 million and $(30) million tax for the nine months ended September 30, 2015 and 2014, respectively.
(3) Net of $(9) million and $— million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $(6) million and $— million tax for the nine months ended September 30, 2015 and 2014, respectively.
(4) Net of $30 million and $22 million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $34 million and $(72) million tax for the nine months ended September 30, 2015 and 2014, respectively.
(5) Net of $— million and $13 million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $20 million and $24 million tax for the nine months ended September 30, 2015 and 2014, respectively.
(6) Net of $(7) million and $(6) million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $(25) million and $(18) million tax for the nine months ended September 30, 2015 and 2014, respectively.
(7) Net of $(1) million and $— million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $— million and $3 million tax for the nine months ended September 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)

 

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

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 238      $ 318   

Customer receivables (less allowance for doubtful accounts of $36 and $34)

     1,289        1,514   

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

     144        119   

Inventories

     1,310        1,410   

Prepayments

     142        167   

Derivative assets

     243        536   

Deferred income taxes

     288        800   

Other

     469        751   
  

 

 

   

 

 

 

Total current assets

     4,123        5,615   
  

 

 

   

 

 

 

Investments

    

Nuclear decommissioning trust funds

     4,033        4,196   

Investment in equity method affiliates

     1,322        1,081   

Other

     269        284   
  

 

 

   

 

 

 

Total investments

     5,624        5,561   
  

 

 

   

 

 

 

Property, Plant and Equipment

    

Property, plant and equipment

     55,848        51,406   

Accumulated depreciation, depletion and amortization

     (16,067     (15,136
  

 

 

   

 

 

 

Total property, plant and equipment, net

     39,781        36,270   
  

 

 

   

 

 

 

Deferred Charges and Other Assets

    

Goodwill

     3,294        3,044   

Pension and other postretirement benefit assets

     1,025        956   

Regulatory assets

     1,593        1,642   

Other

     1,159        1,239   
  

 

 

   

 

 

 

Total deferred charges and other assets

     7,071        6,881   
  

 

 

   

 

 

 

Total assets

   $ 56,599      $ 54,327   
  

 

 

   

 

 

 

 

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

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

 

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Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

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

LIABILITIES AND EQUITY

    

Current Liabilities

    

Securities due within one year

   $ 1,528      $ 1,375   

Short-term debt

     2,555        2,775   

Accounts payable

     705        952   

Accrued interest, payroll and taxes

     553        566   

Other(2)

     1,405        1,530   
  

 

 

   

 

 

 

Total current liabilities

     6,746        7,198   
  

 

 

   

 

 

 

Long-Term Debt

    

Long-term debt

     19,790        18,348   

Junior subordinated notes

     1,370        1,374   

Remarketable subordinated notes

     2,085        2,083   
  

 

 

   

 

 

 

Total long-term debt

     23,245        21,805   
  

 

 

   

 

 

 

Deferred Credits and Other Liabilities

    

Deferred income taxes and investment tax credits

     7,551        7,444   

Asset retirement obligations

     1,824        1,633   

Regulatory liabilities

     2,173        1,991   

Other

     1,784        2,299   
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     13,332        13,367   
  

 

 

   

 

 

 

Total liabilities

     43,323        42,370   
  

 

 

   

 

 

 

Commitments and Contingencies (see Note 16)

    

Equity

    

Common stock – no par(3)

     6,606        5,876   

Retained earnings

     6,487        6,095   

Accumulated other comprehensive loss

     (501     (416
  

 

 

   

 

 

 

Total common shareholders’ equity

     12,592        11,555   
  

 

 

   

 

 

 

Noncontrolling interests

     684        402   
  

 

 

   

 

 

 

Total equity

     13,276        11,957   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 56,599      $ 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; 595 million shares and 585 million shares outstanding at September 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)

 

Nine Months Ended September 30,

   2015     2014  
(millions)             

Operating Activities

    

Net income including noncontrolling interests

   $ 1,557      $ 1,077   

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

    

Depreciation, depletion and amortization (including nuclear fuel)

     1,250        1,171   

Deferred income taxes and investment tax credits

     703        444   

Gains on the sale of assets and businesses

     (123     (160

Charges associated with North Anna and offshore wind legislation

     —          330   

Other adjustments

     (1     (104

Changes in:

    

Accounts receivable

     229        300   

Inventories

     (3     (39

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

     70        (252

Prepayments

     45        14   

Accounts payable

     (222     (291

Accrued interest, payroll and taxes

     (13     (9

Margin deposit assets and liabilities

     205        55   

Other operating assets and liabilities

     (244     (126
  

 

 

   

 

 

 

Net cash provided by operating activities

     3,453        2,410   
  

 

 

   

 

 

 

Investing Activities

    

Plant construction and other property additions (including nuclear fuel)

     (3,632     (3,742

Acquisition of solar development projects

     (278     (66

Acquisition of DCG

     (497     —     

Proceeds from sales of securities

     937        1,524   

Purchases of securities

     (921     (1,562

Proceeds from the sale of electric retail energy marketing business

     —          187   

Proceeds from the sale of assets to Blue Racer

     —          86   

Proceeds from assignments of shale development rights

     80        —     

Other

     (39     40   
  

 

 

   

 

 

 

Net cash used in investing activities

     (4,350     (3,533
  

 

 

   

 

 

 

Financing Activities

    

Issuance (repayment) of short-term debt, net

     (220     702   

Issuance of long-term debt

     2,262        2,150   

Repayment and repurchase of long-term debt

     (675     (725

Subsidiary preferred stock redemption

     —          (125

Issuance of common stock

     717        138   

Common dividend payments

     (1,150     (1,048

Subsidiary preferred dividend payments

     —          (9

Other

     (117     (58
  

 

 

   

 

 

 

Net cash provided by financing activities

     817        1,025   
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (80     (98

Cash and cash equivalents at beginning of period

     318        316   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 238      $ 218   
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Significant noncash investing activities:(1)

    

Accrued capital expenditures

   $ 389      $ 309   

Dominion Midstream’s acquisition of a noncontrolling partnership interest in Iroquois in exchange for issuance of Dominion Midstream common units

     216        —     
  

 

 

   

 

 

 

 

(1) See Note 3 for noncash activities related to the acquisitions of Four Brothers and Three Cedars.

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
September 30,
     Nine Months Ended
September 30,
 
     2015      2014      2015      2014  
(millions)                            

Operating Revenue(1)

   $ 2,058       $ 2,053       $ 6,008       $ 5,765   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Expenses

           

Electric fuel and other energy-related purchases(1)

     554         649         1,861         1,817   

Purchased electric capacity

     75         86         259         261   

Other operations and maintenance:

           

Affiliated suppliers

     64         70         208         211   

Other

     311         331         1,008         1,164   

Depreciation and amortization

     244         260         713         695   

Other taxes

     69         63         212         205   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     1,317         1,459         4,261         4,353   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations

     741         594         1,747         1,412   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other income

     13         24         49         60   

Interest and related charges

     116         101         332         311   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income tax expense

     638         517         1,464         1,161   

Income tax expense

     253         203         564         454   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income

     385         314         900         707   

Preferred dividends

     —           2         —           10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance available for common stock

   $ 385       $ 312       $ 900       $ 697   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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
September 30,
    Nine Months Ended
September 30,
 
    2015     2014     2015     2014  
(millions)                        

Net income

  $ 385      $ 314      $ 900      $ 707   

Other comprehensive income (loss), net of taxes:

       

Net deferred losses on derivatives-hedging activities(1)

    (6     (1     (3     —     

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

    (11     2        (10     10   

Amounts reclassified to net income:

       

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

    —          1        1        (3

Net realized gains on nuclear decommissioning trust funds(4)

    (1     (3     (4     (5
 

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

    (18     (1     (16     2   
 

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

  $ 367      $ 313      $ 884      $ 709   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Net of $3 million and $— million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $1 million and $— million tax for the nine months ended September 30, 2015 and 2014, respectively.
(2) Net of $5 million and $(1) million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $5 million and $(6) million tax for the nine months ended September 30, 2015 and 2014, respectively.
(3) Net of $— million tax for both the three months ended September 30, 2015 and 2014, and net of $— million and $2 million tax for the nine months ended September 30, 2015 and 2014, respectively.
(4) Net of $2 million tax for both the three months ended September 30, 2015 and 2014, and net of $3 million tax for both the nine months ended September 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)

 

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

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 39      $ 15   

Customer receivables (less allowance for doubtful accounts of $27 and $25)

     955        986   

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

     96        65   

Inventories (average cost method)

     842        853   

Prepayments

     24        252   

Regulatory assets

     328        298   

Other(2)

     43        82   
  

 

 

   

 

 

 

Total current assets

     2,327        2,551   
  

 

 

   

 

 

 

Investments

    

Nuclear decommissioning trust funds

     1,875        1,930   

Other

     3        4   
  

 

 

   

 

 

 

Total investments

     1,878        1,934   
  

 

 

   

 

 

 

Property, Plant and Equipment

    

Property, plant and equipment

     37,016        35,180   

Accumulated depreciation and amortization

     (11,622     (11,080
  

 

 

   

 

 

 

Total property, plant and equipment, net

     25,394        24,100   
  

 

 

   

 

 

 

Deferred Charges and Other Assets

    

Regulatory assets

     422        439   

Other(2)

     538        485   
  

 

 

   

 

 

 

Total deferred charges and other assets

     960        924   
  

 

 

   

 

 

 

Total assets

   $ 30,559      $ 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)

 

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

LIABILITIES AND SHAREHOLDER’S EQUITY

     

Current Liabilities

     

Securities due within one year

   $ 677       $ 211   

Short-term debt

     1,362         1,361   

Accounts payable

     372         458   

Payables to affiliates

     59         92   

Affiliated current borrowings

     —           427   

Accrued interest, payroll and taxes

     336         199   

Other(2)

     666         528   
  

 

 

    

 

 

 

Total current liabilities

     3,472         3,276   
  

 

 

    

 

 

 

Long-Term Debt

     8,952         8,726   
  

 

 

    

 

 

 

Deferred Credits and Other Liabilities

     

Deferred income taxes and investment tax credits

     4,323         4,415   

Asset retirement obligations

     1,030         848   

Regulatory liabilities

     1,822         1,683   

Other(2)

     436         506   
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     7,611         7,452   
  

 

 

    

 

 

 

Total liabilities

     20,035         19,454   
  

 

 

    

 

 

 

Commitments and Contingencies (see Note 16)

     

Common Shareholder’s Equity

     

Common stock – no par(3)

     5,738         5,738   

Other paid-in capital

     1,113         1,113   

Retained earnings

     3,639         3,154   

Accumulated other comprehensive income

     34         50   
  

 

 

    

 

 

 

Total common shareholder’s equity

     10,524         10,055   
  

 

 

    

 

 

 

Total liabilities and shareholder’s equity

   $ 30,559       $ 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 September 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)

 

Nine Months Ended September 30,

   2015     2014  
(millions)             

Operating Activities

    

Net income

   $ 900      $ 707   

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

    

Depreciation and amortization (including nuclear fuel)

     844        824   

Deferred income taxes and investment tax credits

     9        235   

Charges associated with North Anna and offshore wind legislation

     —          330   

Other adjustments

     20        (28

Changes in:

    

Accounts receivable

     10        20   

Inventories

     11        (33

Prepayments

     228        11   

Deferred fuel expenses, net (including write-off)

     40        (284

Accounts payable

     (62     (24

Accrued interest, payroll and taxes

     137        60   

Other operating assets and liabilities

     37        (98
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,174        1,720   
  

 

 

   

 

 

 

Investing Activities

    

Plant construction and other property additions

     (1,840     (2,120

Purchases of nuclear fuel

     (100     (140

Proceeds from sales of securities

     407        415   

Purchases of securities

     (423     (421

Other

     (38     (18
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,994     (2,284
  

 

 

   

 

 

 

Financing Activities

    

Issuance of short-term debt, net

     1        562   

Repayment of affiliated current borrowings, net

     (427     (80

Issuance of long-term debt

     1,112        750   

Repayment of long-term debt

     (421     (52

Preferred stock redemption

     —          (125

Common dividend payments

     (416     (466

Preferred dividend payments

     —          (9

Other

     (5     (11
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (156     569   
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     24        5   

Cash and cash equivalents at beginning of period

     15        16   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 39      $ 21   
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Significant noncash investing activities:

    

Accrued capital expenditures

   $ 139      $ 176   
  

 

 

   

 

 

 

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
September 30,
     Nine Months Ended
September 30,
 
     2015      2014      2015      2014  
(millions)                            

Operating Revenue(1)

   $ 365       $ 391       $ 1,291       $ 1,388   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Expenses

           

Purchased gas(1)

     8         34         103         247   

Other energy-related purchases

     4         8         17         29   

Other operations and maintenance:

           

Affiliated suppliers

     12         12         50         49   

Other(2)

     51         79         211         204   

Depreciation and amortization

     53         50         157         146   

Other taxes

     35         31         127         117   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     163         214         665         792   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations

     202         177         626         596   
  

 

 

    

 

 

    

 

 

    

 

 

 

Other income

     4         5         17         18   

Interest and related charges

     18         7         53         19   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations before income taxes

     188         175         590         595   

Income tax expense

     77         68         233         231   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net Income

   $ 111       $ 107       $ 357       $ 364   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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 nine months ended September 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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Table of Contents

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2015     2014     2015     2014  
(millions)                         

Net income

   $ 111      $ 107      $ 357      $ 364   

Other comprehensive income (loss), net of taxes:

        

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

     3        (7     2        (33

Amounts reclassified to net income:

        

Net derivative (gains) losses-hedging activities(2)

     (2     4        (3     11   

Net pension and other postretirement benefit costs(3)

     1        1        3        3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     2        (2     2        (19
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 113      $ 105      $ 359      $ 345   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Net of $(1) million and $4 million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $— million and $22 million tax for the nine months ended September 30, 2015 and 2014, respectively.
(2) Net of $1 million million and $(2) million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $1 million and $(7) million tax for the nine months ended September 30, 2015 and 2014, respectively.
(3) Net of $(1) million tax for both the three months ended September 30, 2015 and 2014, and net of $(3) million and $(2) million tax for the nine months ended September 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)

 

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

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 18      $ 9   

Customer receivables (less allowance for doubtful accounts of $5 and $4)(2)

     180        322   

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

     11        19   

Affiliated receivables

     6        12   

Inventories

     80        65   

Prepayments

     42        166   

Other(2)

     141        217   
  

 

 

   

 

 

 

Total current assets

     478        810   
  

 

 

   

 

 

 

Investments

     100        108   
  

 

 

   

 

 

 

Property, Plant and Equipment

    

Property, plant and equipment

     9,429        8,902   

Accumulated depreciation and amortization

     (2,641     (2,538
  

 

 

   

 

 

 

Total property, plant and equipment, net

     6,788        6,364   
  

 

 

   

 

 

 

Deferred Charges and Other Assets

    

Goodwill

     542        542   

Pension and other postretirement benefit assets(2)

     1,577        1,486   

Other(2)

     540        538   
  

 

 

   

 

 

 

Total deferred charges and other assets

     2,659        2,566   
  

 

 

   

 

 

 

Total assets

   $ 10,025      $ 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)

 

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

LIABILITIES AND EQUITY

    

Current Liabilities

    

Short-term debt

   $ 382      $ —     

Accounts payable

     139        247   

Payables to affiliates

     13        41   

Affiliated current borrowings

     198        384   

Accrued interest, payroll and taxes

     149        194   

Other(2)

     160        172   
  

 

 

   

 

 

 

Total current liabilities

     1,041        1,038   
  

 

 

   

 

 

 

Long-Term Debt

     2,595        2,594   
  

 

 

   

 

 

 

Deferred Credits and Other Liabilities

    

Deferred income taxes and investment tax credits

     2,222        2,158   

Other(2)

     486        492   
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     2,708        2,650   
  

 

 

   

 

 

 

Total liabilities

     6,344        6,282   
  

 

 

   

 

 

 

Commitments and Contingencies (see Note 16)

    

Equity

    

Membership interests

     3,765        3,652   

Accumulated other comprehensive loss(2)

     (84     (86
  

 

 

   

 

 

 

Total equity

     3,681        3,566   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 10,025      $ 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)

 

Nine Months Ended September 30,

   2015     2014  
(millions)             

Operating Activities

    

Net income

   $ 357      $ 364   

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

    

Gains on sales of assets

     (123     (64

Depreciation and amortization

     157        146   

Deferred income taxes and investment tax credits

     75        80   

Other adjustments

     4        (12

Changes in:

    

Accounts receivable

     150        60   

Deferred purchased gas costs, net

     19        33   

Prepayments

     145        29   

Inventories

     (15     (28

Accounts payable

     (112     (113

Payables to affiliates

     (28     (8

Accrued interest, payroll and taxes

     (45     (56

Other operating assets and liabilities

     (88     (83
  

 

 

   

 

 

 

Net cash provided by operating activities

     496        348   
  

 

 

   

 

 

 

Investing Activities

    

Plant construction and other property additions

     (514     (467

Proceeds from sale of assets to an affiliate

     —          47   

Proceeds from assignments of shale development rights

     80        —     

Other

     (5     (1
  

 

 

   

 

 

 

Net cash used in investing activities

     (439     (421
  

 

 

   

 

 

 

Financing Activities

    

Issuance of short-term debt, net

     382        —     

Issuance (repayment) of affiliated current borrowings, net

     (186     288   

Distribution payments

     (244     (206

Other

     —          (1
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (48     81   
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     9        8   

Cash and cash equivalents at beginning of period

     9        8   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 18      $ 16   
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Significant noncash investing and financing activities:

    

Accrued capital expenditures

   $ 46      $ 63   

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’ principal 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 September 30, 2015, their results of operations for the three and nine months ended September 30, 2015 and 2014, and their cash flows for the nine months ended September 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 September 30, 2015, Dominion owns the general partner and 63.1% 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 September 30, 2015, Dominion owns 50% of the units in and consolidates Four Brothers and Three Cedars. SunEdison’s ownership interest in these projects 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 and Three Cedars.

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.

 

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Note 3. Acquisitions and Dispositions

Dominion

Wholly-Owned Merchant Solar Projects

Acquisitions

The following table presents significant completed acquisitions of wholly-owned merchant 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. These projects are included in the Dominion Generation operating segment.

 

Completed
Acquisition Date

  

Seller

   Number
of
Projects
   Project
Location
    

Project Name(s)

   Initial
Acquisition
Cost
(millions)(1)
     Project
Cost
(millions)(2)
    

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       $ 428       Fourth quarter 2014      139   

November 2014

   CSI Project Holdco, LLC    1      California       West Antelope      79         79       November 2014      20   

December 2014

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

April 2015

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

April 2015

   EDF Renewable Development, Inc.    3      California       City of Corcoran, Goose Lake, Marin Carport(3)      106         109       May 2015      24   

June 2015

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

July 2015

   SunPeak Solar, LLC    1      California       Imperial Valley 2      42         69       August 2015      20   

 

(1) The purchase price was primarily allocated to Property, Plant and Equipment.
(2) Includes acquisition cost.
(3) Marin Carport is expected to begin commercial operations in 2016.

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.

Expected Sale of Interest in Merchant Solar Projects

In September 2015, Dominion signed an agreement to sell a noncontrolling interest (consisting of 33% of the equity interests) in all of its currently wholly-owned merchant solar projects to SunEdison for approximately $300 million. The potential sale relates to a total of 24 solar projects totaling approximately 425 MW. The sales of these interests are expected to close by the end of the first quarter of 2016.

Non-Wholly-Owned Merchant Solar Projects

Acquisitions of Four Brothers and Three Cedars

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. As of September 30, 2015, a $56 million payable is included in other current liabilities in Dominion’s Consolidated Balance Sheets. 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. As of September 30, 2015, Dominion has contributed approximately $38 million. The facilities are expected to begin commercial operations in the third quarter of 2016, generating approximately 320 MW.

In September 2015, Dominion acquired 50% of the units in Three Cedars from SunEdison for approximately $43 million of consideration, consisting of $6 million in cash and a $37 million payable, which is included in other current liabilities in Dominion’s Consolidated Balance Sheets as of September 30, 2015. Three Cedars’ purpose is to develop and operate three solar projects located in Utah, which will produce and sell electricity and renewable energy credits. The projects are expected to cost approximately $425 million to construct. Dominion is obligated to contribute $276 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 210 MW.

 

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Long-term power purchase, interconnection and operation and maintenance agreements have been executed for both Four Brothers and Three Cedars. Dominion expects to claim 99% of the federal investment tax credits on the projects.

Dominion owns 50% of the voting interests in Four Brothers and Three Cedars and has a controlling financial interest over the entities through its rights to control operations. The allocation of the $64 million purchase price for Four Brothers resulted in approximately $89 million of property, plant and equipment and $25 million of noncontrolling interest. The allocation of the $43 million purchase price for Three Cedars resulted in approximately $65 million of property, plant and equipment and $22 million of noncontrolling interest. The noncontrolling interest for each entity 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. The acquired assets of Four Brothers and Three Cedars are included in the Dominion Generation operating segment.

Four Brothers and Three Cedars have entered into agreements with SunEdison to provide administrative and support services in connection with the construction of the projects, operation and maintenance of the facilities, and administrative and technical management services of the solar facilities. In addition, Dominion has entered into contracts with SunEdison to provide services related to construction project management and oversight. Costs related to services to be provided under these agreements were immaterial for the nine months ended September 30, 2015.

Dominion Midstream Acquisition of Interest in Iroquois

In September 2015, Dominion Midstream acquired from NG and NJNR a 25.93% noncontrolling partnership interest in Iroquois, which owns and operates a 416-mile, FERC-regulated natural gas transmission pipeline in New York and Connecticut. In exchange for this partnership interest, Dominion Midstream issued approximately 8.6 million common units representing limited partnership interests in Dominion Midstream (approximately 6.8 million common units to NG for its 20.4% interest and approximately 1.8 million common units to NJNR for its 5.53% interest). The investment was recorded at approximately $216 million based on the value of Dominion Midstream’s common units at closing. These common units are reflected as noncontrolling interest in Dominion’s Consolidated Financial Statements. Dominion Midstream’s noncontrolling partnership interest is reflected in the Dominion Energy operating segment. In addition to this acquisition, Dominion Gas currently holds a 24.72% partnership interest in Iroquois. Dominion Midstream and Dominion Gas each account for their interest in Iroquois as an equity method investment. See Notes 10 and 14 for more information regarding Iroquois.

Acquisition of DCG

In January 2015, Dominion completed the acquisition of 100% of the equity interests of DCG from SCANA Corporation for approximately $497 million in cash, as adjusted for working capital. DCG 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 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 DCG are included in the Dominion Energy operating segment.

On March 24, 2015, DCG converted to a limited liability company under the laws of South Carolina and changed its name from Carolina Gas Transmission Corporation to DCG. On April 1, 2015, Dominion contributed 100% of the issued and outstanding membership interests of DCG 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.

 

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Virginia Power

Acquisition of Solar Project

In September 2015, Virginia Power entered into an agreement to acquire 100% of a solar development project in North Carolina from Morgans Corner for approximately $47 million. The acquisition is expected to close in the fourth quarter of 2015. The project is expected to be placed into service by the end of the first quarter of 2016 and cost approximately $50 million once constructed, including the initial acquisition cost. Upon completion, the facility is expected to generate approximately 20 MW. The output generated by Morgans Corner will be used to meet a ten year non-jurisdictional supply agreement with the U.S. Navy, which has the unilateral option to extend for an additional ten years. In October 2015, the North Carolina Commission granted the transfer of the existing CPCN from Morgans Corner to Virginia Power. The acquired assets will be included in the Virginia Power Generation operating segment.

Dominion Gas

Assignments of Shale Development Rights

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 September 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.

In September 2015, DTI closed on an agreement with a natural gas producer to convey approximately 16,000 acres of Utica and Point Pleasant Shale development rights underneath one of its natural gas storage fields. The agreement provided for a payment to DTI, subject to customary adjustments, of approximately $52 million and an overriding royalty interest in gas produced from the acreage. In September 2015, DTI received proceeds of $52 million associated with the conveyance of the acreage, resulting in a $52 million ($29 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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Note 4. Operating Revenue

The Companies’ operating revenue consists of the following:

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2015      2014      2015      2014  
(millions)                            

Dominion

           

Electric sales:

           

Regulated

   $ 2,020       $ 2,026       $ 5,911       $ 5,674   

Nonregulated

     388         353         1,145         1,527   

Gas sales:

           

Regulated

     21         25         168         242   

Nonregulated

     66         187         361         532   

Gas transportation and storage

     365         343         1,221         1,138   

Other

     111         116         321         380   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenue

   $ 2,971       $ 3,050       $ 9,127       $ 9,493   
  

 

 

    

 

 

    

 

 

    

 

 

 

Virginia Power

           

Regulated electric sales

   $ 2,020       $ 2,026       $ 5,911       $ 5,674   

Other

     38         27         97         91   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenue

   $ 2,058       $ 2,053       $ 6,008       $ 5,765   
  

 

 

    

 

 

    

 

 

    

 

 

 

Dominion Gas

           

Gas sales:

           

Regulated

   $ 9       $ 15       $ 87       $ 152   

Nonregulated

     1         3         5         16   

Gas transportation and storage

     302         296         1,035         996   

NGL revenue

     20         54         71         155   

Other

     33         23         93         69   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenue

   $ 365       $ 391       $ 1,291       $ 1,388   
  

 

 

    

 

 

    

 

 

    

 

 

 

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  

Nine Months Ended September 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

     4.0        2.7        4.2        3.9        4.1        3.7   

Investment tax credits

     (3.5     (6.0     —          —          —          —     

Production tax credits

     (0.8     (1.1     (0.5     (0.6     —          —     

Other, net

     (0.9     0.1        (0.2     0.8        0.4        0.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effective tax rate

     33.8     30.7     38.5     39.1     39.5     38.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of September 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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Note 6. Earnings Per Share

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

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2015      2014      2015      2014  
(millions, except EPS)       

Net income attributable to Dominion

   $ 593       $ 529       $ 1,542       $ 1,067   
  

 

 

    

 

 

    

 

 

    

 

 

 

Average shares of common stock outstanding – Basic

     594.6         583.1         591.3         582.2   

Net effect of dilutive securities(1)

     0.9         1.5         1.4         1.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Average shares of common stock outstanding – Diluted

     595.5         584.6         592.7         583.8   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings Per Common Share – Basic

   $ 1.00       $ 0.91       $ 2.61       $ 1.83   

Earnings Per Common Share – Diluted

   $ 1.00       $ 0.90       $ 2.60       $ 1.83   

 

(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 nine months ended September 30, 2015 and 2014, as the dilutive stock price threshold was not met.

 

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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 September 30, 2015

          

Beginning balance

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

Other comprehensive income before reclassifications: gains (losses)

     (7     (59     (9     1        (74

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

     (53     (2     14        —          (41
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     (60     (61     5        1        (115
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (206   $ 458      $ (749   $ (4   $ (501
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Three Months Ended September 30, 2014

          

Beginning balance

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

Other comprehensive income before reclassifications: gains (losses)

     (58     2        —          —          (56

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

     (31     (21     8        —          (44
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     (89     (19     8        —          (100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (442   $ 515      $ (485   $ (5   $ (417
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nine Months Ended September 30, 2015

          

Beginning balance

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

Other comprehensive income before reclassifications: gains (losses)

     25        (55     (6     —          (36

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

     (53     (35     39        —          (49
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     (28     (90     33        —          (85
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (206   $ 458      $ (749   $ (4   $ (501
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nine Months Ended September 30, 2014

          

Beginning balance

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

Other comprehensive income before reclassifications: gains (losses)

     (267     80        —          (5     (192

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

     113        (39     25        —          99   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     (154     41        25        (5     (93
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (442   $ 515      $ (485   $ (5   $ (417
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

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

 

Details about AOCI components

   Amounts reclassified
from AOCI
    

Affected line item in the Consolidated Statements of
Income

(millions)            

Three Months Ended September 30, 2015

     

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

     

Commodity contracts

   $ (87    Operating revenue
     2       Purchased gas

Interest rate contracts

     2       Interest and related charges
  

 

 

    
     (83   

Tax

     30       Income tax expense
  

 

 

    
   $ (53   
  

 

 

    

 

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Unrealized (gains) and losses on investment securities:

     

Realized (gain) loss on sale of securities

   $ (18    Other income

Impairment

     16       Other income
  

 

 

    
     (2   

Tax

           Income tax expense
  

 

 

    
   $ (2   
  

 

 

    

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

     (7    Income tax expense
  

 

 

    
   $ 14      
  

 

 

    

Three Months Ended September 30, 2014

     

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

     

Commodity contracts

   $ (66    Operating revenue
     3       Purchased gas
     5       Electric fuel and other energy-related purchases

Interest rate contracts

     5       Interest and related charges
  

 

 

    
     (53   

Tax

     22       Income tax expense
  

 

 

    
   $ (31   
  

 

 

    

Unrealized (gains) and losses on investment securities:

     

Realized (gain) loss on sale of securities

   $ (38    Other income

Impairment

     4       Other income
  

 

 

    
     (34   

Tax

     13       Income tax expense
  

 

 

    
   $ (21   
  

 

 

    

Unrecognized pension and other postretirement benefit costs:

     

Prior service (credit) costs

   $ (4    Other operations and maintenance

Actuarial (gains) losses

     18       Other operations and maintenance
  

 

 

    
     14      

Tax

     (6    Income tax expense
  

 

 

    
   $ 8      
  

 

 

    

Nine Months Ended September 30, 2015

     

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

     

Commodity contracts

   $ (103    Operating revenue
     9       Purchased gas

Interest rate contracts

     7       Interest and related charges
  

 

 

    
     (87   

Tax

     34       Income tax expense
  

 

 

    
   $ (53   
  

 

 

    

Unrealized (gains) and losses on investment securities:

     

Realized (gain) loss on sale of securities

   $ (82    Other income

 

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Impairment

     27       Other income
  

 

 

    
     (55   

Tax

     20       Income tax expense
  

 

 

    
   $ (35   
  

 

 

    

Unrecognized pension and other postretirement benefit costs:

     

Prior service (credit) costs

   $ (9    Other operations and maintenance

Actuarial (gains) losses

     73       Other operations and maintenance
  

 

 

    
     64      

Tax

     (25    Income tax expense
  

 

 

    
   $ 39      
  

 

 

    

Nine Months Ended September 30, 2014

     

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

     

Commodity contracts

   $ 175       Operating revenue
     7       Purchased gas
     (8    Electric fuel and other energy-related purchases

Interest rate contracts

     11       Interest and related charges
  

 

 

    
     185      

Tax

     (72    Income tax expense
  

 

 

    
   $ 113      
  

 

 

    

Unrealized (gains) and losses on investment securities:

     

Realized (gain) loss on sale of securities

   $ (71    Other income

Impairment

     8       Other income
  

 

 

    
     (63   

Tax

     24       Income tax expense
  

 

 

    
   $ (39   
  

 

 

    

Unrecognized pension and other postretirement benefit costs:

     

Prior service (credit) costs

   $ (9    Other operations and maintenance

Actuarial (gains) losses

     52       Other operations and maintenance
  

 

 

    
     43      

Tax

     (18    Income tax expense
  

 

 

    
   $ 25      
  

 

 

    

 

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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 September 30, 2015

        

Beginning balance

   $ (22    $ (64    $ (86

Other comprehensive income before reclassifications: gains (losses)

     3         —           3   

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

     (2      1         (1
  

 

 

    

 

 

    

 

 

 

Net current-period other comprehensive income

     1         1         2   
  

 

 

    

 

 

    

 

 

 

Ending balance

   $ (21    $ (63    $ (84
  

 

 

    

 

 

    

 

 

 

Three Months Ended September 30, 2014

        

Beginning balance

   $ (16    $ (59    $ (75

Other comprehensive income before reclassifications: gains (losses)

     (7      —           (7

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

     4         1         5   
  

 

 

    

 

 

    

 

 

 

Net current-period other comprehensive income (loss)

     (3      1         (2
  

 

 

    

 

 

    

 

 

 

Ending balance

   $ (19    $ (58    $ (77
  

 

 

    

 

 

    

 

 

 

Nine Months Ended September 30, 2015

        

Beginning balance

   $ (20    $ (66    $ (86

Other comprehensive income before reclassifications: gains (losses)

     2         —           2   

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

     (3      3         —     
  

 

 

    

 

 

    

 

 

 

Net current-period other comprehensive income (loss)

     (1      3         2   
  

 

 

    

 

 

    

 

 

 

Ending balance

   $ (21    $ (63    $ (84
  

 

 

    

 

 

    

 

 

 

Nine Months Ended September 30, 2014

        

Beginning balance

   $ 3       $ (61    $ (58

Other comprehensive income before reclassifications: gains (losses)

     (33      —           (33

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

     11         3         14   
  

 

 

    

 

 

    

 

 

 

Net current-period other comprehensive income (loss)

     (22      3         (19
  

 

 

    

 

 

    

 

 

 

Ending balance

   $ (19    $ (58    $ (77
  

 

 

    

 

 

    

 

 

 

 

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

 

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Table of Contents

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 September 30, 2015

   

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

   

Commodity contracts

  $ (3   Operating revenue
 

 

 

   
    (3  

Tax

    1      Income tax expense
 

 

 

   
  $ (2  
 

 

 

   

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 September 30, 2014

   

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

   

Commodity contracts

  $ 1      Operating revenue
    5      Purchased gas
 

 

 

   
    6     

Tax

    (2   Income tax expense
 

 

 

   
  $ 4     
 

 

 

   

Unrecognized pension and other postretirement benefit costs:

   

Actuarial (gains) losses

  $ 2      Other operations and maintenance
 

 

 

   
    2     

Tax

    (1   Income tax expense
 

 

 

   
  $ 1     
 

 

 

   

Nine Months Ended September 30, 2015

   

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

   

Commodity contracts

  $ (4   Operating revenue
 

 

 

   
    (4  

Tax

    1      Income tax expense
 

 

 

   
  $ (3  
 

 

 

   

Unrecognized pension and other postretirement benefit costs:

   

Actuarial (gains) losses

  $ 6      Other operations and maintenance
 

 

 

   
    6     

Tax

    (3   Income tax expense
 

 

 

   
  $ 3     
 

 

 

   

Nine Months Ended September 30, 2014

   

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

   

Commodity contracts

  $ 8      Operating revenue
    10      Purchased gas
 

 

 

   
    18     

Tax

    (7   Income tax expense
 

 

 

   
  $ 11     
 

 

 

   

Unrecognized pension and other postretirement benefit costs:

   

Actuarial (gains) losses

  $ 5      Other operations and maintenance
 

 

 

   
    5     

Tax

    (2   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 September 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)

   $ 99       Discounted Cash Flow      Market Price (per Dth)  (4)      (2) - 4        (1
           Credit spread  (5)      1% - 6     3

Liquids(3)

     5       Discounted Cash Flow      Market Price (per Gal)  (4)      0 - 2        1   

Electric

     4       Discounted Cash Flow      Market Price (per MWh)  (4)      26 - 47        45   

FTRs

     23       Discounted Cash Flow      Market Price (per MWh)  (4)      (3) - 12        2   

Physical and Financial Options:

            

Natural Gas

     6       Option Model      Market Price (per Dth)  (4)      2 - 6        4   
           Price Volatility  (6)      23% - 75     44
  

 

 

           

Total assets

   $ 137             
  

 

 

           

Liabilities:

            

Physical and Financial Forwards and Futures:

            

Natural Gas(2)

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

FTRs

     2       Discounted Cash Flow      Market Price (per MWh)  (4)      (12) - 12        1   

Physical and Financial Options:

            

Natural Gas

     2       Option Model      Market Price (per Dth)  (4)      2 - 4        3   
           Price Volatility  (6)      23% - 50     34
  

 

 

           

Total liabilities

   $ 14             
  

 

 

           

 

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

 

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Table of Contents

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

 

Significant Unobservable Inputs

  

Position

  

Change to Input

  

Impact on Fair
Value Measurement

Market Price    Buy    Increase (decrease)    Gain (loss)
Market Price    Sell    Increase (decrease)    Loss (gain)
Price Volatility    Buy    Increase (decrease)    Gain (loss)
Price Volatility    Sell    Increase (decrease)    Loss (gain)
Credit spread    Asset    Increase (decrease)    Loss (gain)

 

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Table of Contents

Recurring Fair Value Measurements

Dominion

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

 

     Level 1      Level 2      Level 3      Total  
(millions)                            

At September 30, 2015

           

Assets:

           

Derivatives:

           

Commodity

   $ 1       $ 237       $ 137       $ 375   

Interest rate

     —           31         —           31   

Investments(1):

           

Equity securities:

           

U.S.:

           

Large cap

     2,401         —           —           2,401   

Other

     5         —           —           5   

REIT

     59         —           —           59   

Non-U.S.:

           

Large cap

     10         —           —           10   

Fixed income:

           

Corporate debt instruments

     —           463         —           463   

U.S. Treasury securities and agency debentures

     431         184         —           615   

State and municipal

     —           395         —           395   

Other

     —           97         —           97   

Cash equivalents and other

     6         1         —           7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 2,913       $ 1,408       $ 137       $ 4,458   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivatives:

           

Commodity

   $ 1       $ 117       $ 14       $ 132   

Interest rate

     —           214         —           214   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 1       $ 331       $ 14       $ 346   
  

 

 

    

 

 

    

 

 

    

 

 

 

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
September 30,
     Nine Months Ended
September 30,
 
     2015      2014      2015      2014  
(millions)                            

Beginning balance

   $ 71       $ 3       $ 107       $ (16

Total realized and unrealized gains (losses):

           

Included in earnings

     (9      (2      1         98   

Included in other comprehensive income (loss)

     5         4         (7      7   

Included in regulatory assets/liabilities

     47         39         18         53   

Settlements

     10         5         1         (94

Transfers out of Level 3(1)

     (1      (2      3         (1
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   $ 123       $ 47       $ 123       $ 47   
  

 

 

    

 

 

    

 

 

    

 

 

 

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       $ 1       $ 2   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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 nine months ended September 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 September 30, 2015

           

Total gains (losses) included in earnings

   $ —         $ —         $ (9    $ (9

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   
  

 

 

    

 

 

    

 

 

    

 

 

 

Three Months Ended September 30, 2014

           

Total gains (losses) included in earnings

   $ 3       $ (3    $ (2    $ (2

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

     3         (2      —           1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Nine Months Ended September 30, 2015

           

Total gains (losses) included in earnings

   $ 2       $ —         $ (1    $ 1   

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

     1         —           —           1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Nine Months Ended September 30, 2014

           

Total gains (losses) included in earnings

   $ (7    $ (4    $ 109       $ 98   

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

     4         (2      —           2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Virginia Power

The following table presents Virginia Power’s quantitative information about Level 3 fair value measurements at September 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:

            

FTRs

   $ 23         Discounted Cash Flow         Market Price (per MWh)  (3)      (3) - 12        2   

Natural Gas(2)

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

Electric

     4         Discounted Cash Flow         Market Price (per MWh)  (3)      44 - 47        45   

Physical and Financial Options:

            

Natural Gas

     2         Discounted Cash Flow         Market Price (per Dth)  (3)      2 - 6        5   
           Price Volatility  (5)      50% - 75     66
  

 

 

           

Total assets

   $ 122             
  

 

 

           

Liabilities:

            

Physical and Financial Forwards and Futures:

            

FTRs

   $ 2         Discounted Cash Flow         Market Price (per MWh)  (3)      (12) - 12        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.
(5) Represents volatilities unrepresented in published markets.

 

36


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)
Price Volatility    Buy    Increase (decrease)    Gain (loss)
Price Volatility    Sell    Increase (decrease)    Loss (gain)

 

37


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 September 30, 2015

           

Assets:

           

Derivatives:

           

Commodity

   $ —         $ 20       $ 122       $ 142   

Interest rate

     —           8         —           8   

Investments(1):

           

Equity securities:

           

U.S. large cap

     1,037         —           —           1,037   

REIT

     59         —              59   

Fixed income:

           

Corporate debt instruments

     —           252         —           252   

U.S. Treasury securities and agency debentures

     164         61         —           225   

State and municipal

     —           199         —           199   

Other

     —           30         —           30   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 1,260       $ 570       $ 122       $ 1,952   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivatives:

           

Commodity

   $ —         $ 4       $ 2       $ 6   

Interest rate

     —           67         —           67   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —         $ 71       $ 2       $ 73   
  

 

 

    

 

 

    

 

 

    

 

 

 

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.

 

38


Table of Contents

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

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2015      2014      2015      2014  
(millions)                            

Beginning balance

   $ 73       $ 7       $ 102       $ (7

Total realized and unrealized gains (losses):

           

Included in earnings

     (10      (2      (1      109   

Included in regulatory assets/liabilities

     47         39         18         53   

Settlements

     10         2         1         (109
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   $ 120       $ 46       $ 120       $ 46   
  

 

 

    

 

 

    

 

 

    

 

 

 

The gains and losses included in earnings in the Level 3 fair value category were classified in electric fuel and other energy-related purchases in Virginia Power’s Consolidated Statements of Income for the three and nine months ended September 30, 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 nine months ended September 30, 2015 and 2014.

Dominion Gas

The following table presents Dominion Gas’ quantitative information about Level 3 fair value measurements at September 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:

             

NGLs

   $ 4       Discounted Cash Flow      Market Price (per Gal)  (2)      0 - 2         1   
  

 

 

            

Total assets

   $ 4              
  

 

 

            

 

(1) Averages weighted by volume.
(2) Represents market prices beyond defined terms for Levels 1 and 2.

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)

 

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Table of Contents

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 September 30, 2015

           

Assets:

           

Commodity

   $ —         $ 5       $ 4       $ 9   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

   $ —         $ 5       $ 4       $ 9   

Liabilities:

           

Commodity

   $ —         $ 1       $ —         $ 1   

Interest rate

     —           17         —           17   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —         $ 18       $ —         $ 18   
  

 

 

    

 

 

    

 

 

    

 

 

 

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
September 30,
     Nine Months Ended
September 30,
 
     2015      2014      2015      2014  
(millions)                            

Beginning balance

   $ (1    $ (3    $ 2       $ (6

Total realized and unrealized gains (losses):

           

Included in earnings

     —           (1      1         (8

Included in other comprehensive income (loss)

     5         5         (7      8   

Settlements

     —           —           (1      7   

Transfers out of Level 3(1)

     —           —           9         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   $ 4       $ 1       $ 4       $ 1   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) In March 2015, Dominion Gas 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 nine months ended September 30, 2015 are $— million and $9 million, respectively.

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 nine months ended September 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 nine months ended September 30, 2015 and 2014.

 

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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:

 

     September 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)

   $ 21,318       $ 22,923       $ 19,723       $ 21,881   

Junior subordinated notes(3)

     1,370         1,290         1,374         1,396   

Remarketable subordinated notes(3)

     2,085         2,214         2,083         2,362   
  

 

 

    

 

 

    

 

 

    

 

 

 

Virginia Power

           

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

   $ 9,629       $ 10,764       $ 8,937       $ 10,293   
  

 

 

    

 

 

    

 

 

    

 

 

 

Dominion Gas

           

Long-term debt(3)

   $ 2,595       $ 2,618       $ 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 both September 30, 2015 and December 31, 2014, includes the valuation of certain fair value hedges associated with fixed rate debt of approximately $19 million.
(3) Carrying amount includes amounts which represent the unamortized discount and/or premium.

Note 9. Derivatives and Hedge Accounting Activities

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

Derivative assets and liabilities are presented gross on the Companies’ Consolidated Balance Sheets. Dominion’s derivative contracts include both over-the-counter transactions and those that are executed on an exchange or other trading platform (exchange contracts) and centrally cleared. Dominion Gas’ and Virginia Power’s derivative contracts consist of over-the-counter transactions. Over-the-counter contracts are bilateral contracts that are transacted directly with a counterparty. Exchange contracts utilize a financial intermediary, exchange, or clearinghouse to enter, execute, or clear the transactions. Certain over-the-counter and exchange contracts contain contractual rights of setoff through master netting arrangements, derivative clearing agreements, and contract default provisions. In addition, the contracts are subject to conditional rights of setoff through counterparty nonperformance, insolvency, or other conditions.

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

 

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Table of Contents

Dominion

Balance Sheet Presentation

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

 

     September 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

   $ 31       $ —         $ 31       $ 24       $ —         $ 24   

Commodity contracts:

                 

Over-the-counter

     270         —           270         382         —           382   

Exchange

     95         —           95         298         —           298   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting or similar arrangement

     396         —           396         704         —           704   

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

     10         —           10         15         —           15   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 406       $ —         $ 406       $ 719       $ —         $ 719   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

            September 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

   $ 31       $ 29       $ —         $ 2       $ 24       $ 16       $ —         $ 8   

Commodity contracts:

                       

Over-the-counter

     270         16         23         231         382         34         34         314   

Exchange

     95         74         —           21         298         298         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 396       $ 119       $ 23       $ 254       $ 704       $ 348       $ 34       $ 322   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     September 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

   $ 214       $ —         $ 214       $ 202       $ —         $ 202   

Commodity contracts:

                 

Over-the-counter

     39         —           39         87         —           87   

Exchange

     84         —           84         493         —           493   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting or similar arrangement

     337         —           337         782         —           782   

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

     9         —           9         12         —           12   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 346       $ —         $ 346       $ 794       $ —         $ 794   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
            September 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

   $ 214       $ 29       $ —         $ 185       $ 202       $ 16       $ —         $ 186   

Commodity contracts:

                       

Over-the-counter

     39         16         —           23         87         34         1         52   

Exchange

     84         74         10         —           493         298         195         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 337       $ 119       $ 10       $ 208       $ 782       $ 348       $ 196       $ 238   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Volumes

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

     57         14   

Basis

     267         605   

Electricity (MWh):

     

Fixed price

     13,869,299         3,399,889   

FTRs

     49,967,941         —     

Capacity (MW)

     12,200         —     

Liquids (Gal)(2)

     65,772,000         18,774,000   

Interest rate

   $ 2,250,000,000       $ 3,000,000,000   

 

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

Ineffectiveness and AOCI

For the three and nine months ended September 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 September 30, 2015:

 

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

Commodities:

        

Gas

   $ (8    $ (7      25 months   

Electricity

     67         50         15 months   

Other

     5         4         18 months   

Interest rate

     (270      (9      387 months   
  

 

 

    

 

 

    

Total

   $ (206    $ 38      
  

 

 

    

 

 

    

 

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Table of Contents

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

 

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Table of Contents

Fair Value and Gains and Losses on Derivative Instruments

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

 

     Fair Value –
Derivatives under
Hedge
Accounting
     Fair Value –
Derivatives not under
Hedge

Accounting
     Total Fair Value  
(millions)                     

At September 30, 2015

        

ASSETS

        

Current Assets

        

Commodity

   $ 63       $ 169       $ 232   

Interest rate

     11         —           11   
  

 

 

    

 

 

    

 

 

 

Total current derivative assets

     74         169         243   
  

 

 

    

 

 

    

 

 

 

Noncurrent Assets

        

Commodity

     10         133         143   

Interest rate

     20         —           20   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative assets(1)

     30         133         163   
  

 

 

    

 

 

    

 

 

 

Total derivative assets

   $ 104       $ 302       $ 406   
  

 

 

    

 

 

    

 

 

 

LIABILITIES

        

Current Liabilities

        

Commodity

   $ 20       $ 90       $ 110   

Interest rate

     144         —           144   
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities(2)

     164         90         254   
  

 

 

    

 

 

    

 

 

 

Noncurrent Liabilities

        

Commodity

     6         16         22   

Interest Rate

     70         —           70   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative liabilities(3)

     76         16         92   
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

   $ 240       $ 106       $ 346   
  

 

 

    

 

 

    

 

 

 

At December 31, 2014

        

ASSETS

        

Current Assets

        

Commodity

   $ 281       $ 242       $ 523   

Interest rate

     13         —           13   
  

 

 

    

 

 

    

 

 

 

Total current derivative assets

     294         242         536   
  

 

 

    

 

 

    

 

 

 

Noncurrent Assets

        

Commodity

     71         101         172   

Interest rate

     11         —           11   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative assets(1)

     82         101         183   
  

 

 

    

 

 

    

 

 

 

Total derivative assets

   $ 376       $ 343       $ 719   
  

 

 

    

 

 

    

 

 

 

LIABILITIES

        

Current Liabilities

        

Commodity

   $ 224       $ 267       $ 491   

Interest rate

     100         —           100   
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities(2)

     324         267         591   
  

 

 

    

 

 

    

 

 

 

Noncurrent Liabilities

        

Commodity

     55         46         101   

Interest rate

     102         —           102   
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative liabilities(3)

     157         46         203   
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

   $ 481       $ 313       $ 794   
  

 

 

    

 

 

    

 

 

 

 

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

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

 

Derivatives in cash flow hedging relationships

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

Three Months Ended September 30, 2015

        

Derivative Type and Location of Gains (Losses)

        

Commodity:

        

Operating revenue

      $ 87      

Purchased gas

        (2