10-Q 1 d377987d10q.htm 10-Q 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark one)

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

For the quarterly period ended March 31, 2017

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
001-37591   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  ☒    No  ☐            Virginia Electric and Power Company    Yes  ☒    No  ☐

Dominion Gas Holdings, LLC    Yes  ☒    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  ☒    No  ☐            Virginia Electric and Power Company    Yes  ☒    No  ☐

Dominion Gas Holdings, LLC    Yes  ☒    No  ☐

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

Dominion Resources, Inc.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☐  (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Virginia Electric and Power Company

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☒  (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Dominion Gas Holdings, LLC

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☒  (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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  ☒            Virginia Electric and Power Company    Yes  ☐    No  ☒

Dominion Gas Holdings, LLC    Yes  ☐    No  ☒

At April 14, 2017, the latest practicable date for determination, Dominion Resources, Inc. had 628,985,754 shares of common stock outstanding and Virginia Electric and Power Company had 274,723 shares of common stock outstanding. Dominion Resources, Inc. is the sole holder of Virginia Electric and Power Company’s common stock. Dominion Resources, Inc. holds all of the membership interests of Dominion Gas Holdings, LLC.

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

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

 

 

 


Table of Contents

COMBINED INDEX

 

         Page
Number
 
 

Glossary of Terms

     3  
PART I. Financial Information   

Item 1.

 

Financial Statements

     6  

Item 2.

 

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

     70  

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

     82  

Item 4.

 

Controls and Procedures

     83  
PART II. Other Information   

Item 1.

 

Legal Proceedings

     84  

Item 1A.

 

Risk Factors

     84  

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

     84  

Item 6.

 

Exhibits

     85  

 

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

2016 Equity Units

 

Dominion’s 2016 Series A Equity Units issued in August 2016

AFUDC

 

Allowance for funds used during construction

AMR

 

Automated meter reading program deployed by East Ohio

AOCI

 

Accumulated other comprehensive income (loss)

ARO

 

Asset retirement obligation

Atlantic Coast Pipeline

 

Atlantic Coast Pipeline, LLC, a limited liability company owned by Dominion, Duke and Southern Company Gas

BACT

 

Best available control technology

bcf

 

Billion cubic feet

bcfe

 

Billion cubic feet equivalent

Bear Garden

 

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

BREDL

 

Blue Ridge Environmental Defense League

Brunswick County

 

A 1,376 MW combined cycle, natural gas-fired power station in Brunswick County, Virginia

CAA

 

Clean Air Act

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

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

CWA

 

Clean Water Act

DCG

 

Dominion Carolina Gas Transmission, LLC

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 24.07% 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, DCG and Questar Pipeline (beginning December 1, 2016) or operating segment, or the entirety of Dominion Midstream Partners, LP, and its consolidated subsidiaries

Dominion Questar

 

The legal entity, Dominion Questar Corporation, one or more of its consolidated subsidiaries or operating segment, or the entirety of Dominion Questar Corporation and its consolidated subsidiaries

Dominion Questar Combination

 

Dominion’s acquisition of Dominion Questar completed on September 16, 2016 pursuant to the terms of the agreement and plan of merger entered on January 31, 2016

DRS

 

Dominion Resources Services, Inc.

DSM

 

Demand-side management

Dth

 

Dekatherm

DTI

 

Dominion Transmission, Inc.

Duke

 

The legal entity, Duke Energy Corporation, one or more of its consolidated subsidiaries or operating segments, or the entirety of Duke Energy Corporation and its consolidated subsidiaries

 

3


Table of Contents

Abbreviation or Acronym

 

Definition

DVP

 

Dominion Virginia Power operating segment

East Ohio

 

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

EPA

 

Environmental Protection Agency

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 NRG effective November 2016

Fowler Ridge

 

A wind-turbine facility joint venture between Dominion and BP Wind Energy North America Inc. in Benton County, Indiana

FTA

 

Free Trade Agreement

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 NRG effective November 2016

Greensville County

 

An approximately 1,588 MW natural gas-fired combined-cycle power station under construction in Greensville County, Virginia

Heating degree days

 

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

Hope

 

Hope Gas, Inc., doing business as Dominion Hope

Iron Springs

 

Iron Springs Holdings, LLC, a limited liability company owned by Dominion and Iron Springs Renewables, LLC, a wholly-owned subsidiary of NRG effective November 2016

Iroquois

 

Iroquois Gas Transmission System, L.P.

ISO-NE

 

Independent System Operator New England

kV

 

Kilovolt

Liquefaction Project

 

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

LNG

 

Liquefied natural gas

Local 69

 

Local 69, Utility Workers Union of America, United Gas Workers

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

MISO

 

Midcontinent Independent System Operator, Inc.

MW

 

Megawatt

MWh

 

Megawatt hour

NAV

 

Net asset value

NedPower

 

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

NGL

 

Natural gas liquid

NO×

 

Nitrogen oxide

NRC

 

Nuclear Regulatory Commission

NRG

 

The legal entity, NRG Energy, Inc., one or more of its consolidated subsidiaries (including, effective November 2016, Four Brothers Holdings, LLC, Granite Mountain Renewables, LLC and Iron Springs Renewables, LLC) or operating segments, or the entirety of NRG Energy, Inc. and its consolidated subsidiaries

NSPS

 

New Source Performance Standards

Order 1000

 

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

PIPP

 

Percentage of Income Payment Plan deployed by East Ohio

PIR

 

Pipeline Infrastructure Replacement program deployed by East Ohio

PJM

 

PJM Interconnection, L.L.C.

ppb

 

Parts-per-billion

PSD

 

Prevention of Significant Deterioration

Questar Gas

 

Questar Gas Company

 

4


Table of Contents

Abbreviation or Acronym

 

Definition

Questar Pipeline

 

Questar Pipeline, LLC, one or more of its consolidated subsidiaries, or the entirety of Questar Pipeline, LLC and its consolidated subsidiaries

Rider B

 

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

Rider BW

 

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

Rider GV

 

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

Rider R

 

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

Rider S

 

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

Rider US-2

 

A rate adjustment clause associated with the recovery of costs related to Woodland, Scott Solar and Whitehouse

Rider W

 

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

Riders C1A and C2A

 

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

ROE

 

Return on equity

SBL Holdco

 

SBL Holdco, LLC, a wholly-owned subsidiary of DEI

Scott Solar

 

A 17 MW utility-scale solar power station in Powhatan County, Virginia

SEC

 

Securities and Exchange Commission

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, through November 2016, 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

Terra Nova Renewable Partners

 

A partnership comprised primarily of institutional investors advised by J.P. Morgan Asset Management-Global Real Assets

Three Cedars

 

Granite Mountain and Iron Springs, collectively

VDEQ

 

Virginia Department of Environmental Quality

VEBA

 

Voluntary Employees’ Beneficiary Association

VIE

 

Variable interest entity

Virginia City Hybrid Energy Center

 

A 610 MW baseload carbon-capture compatible, clean coal powered electric generation facility in Wise County, Virginia

Virginia Commission

 

Virginia State Corporation Commission

Virginia Power

 

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

VOC

 

Volatile organic compounds

Warren County

 

A 1,342 MW combined-cycle, natural gas-fired power station in Warren County, Virginia

Whitehouse

 

A 20 MW utility-scale solar power station in Louisa County, Virginia

Woodland

 

A 19 MW utility-scale solar power station in Isle of Wight County, Virginia

 

5


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2017     2016  
(millions, except per share amounts)             

Operating Revenue

   $ 3,384     $ 2,921  
  

 

 

   

 

 

 

Operating Expenses

    

Electric fuel and other energy-related purchases

     575       634  

Purchased (excess) electric capacity

     (17     68  

Purchased gas

     305       119  

Other operations and maintenance

     738       703  

Depreciation, depletion and amortization

     469       351  

Other taxes

     189       164  
  

 

 

   

 

 

 

Total operating expenses

     2,259       2,039  
  

 

 

   

 

 

 

Income from operations

     1,125       882  
  

 

 

   

 

 

 

Other income

     116       54  

Interest and related charges

     292       226  
  

 

 

   

 

 

 

Income from operations including noncontrolling interests before income tax expense

     949       710  

Income tax expense

     275       179  
  

 

 

   

 

 

 

Net Income Including Noncontrolling Interests

     674       531  

Noncontrolling Interests

     42       7  
  

 

 

   

 

 

 

Net Income Attributable to Dominion

   $ 632     $ 524  
  

 

 

   

 

 

 

Earnings Per Common Share

    

Net income attributable to Dominion - Basic

   $ 1.01     $ 0.88  

Net income attributable to Dominion - Diluted

     1.01       0.88  
  

 

 

   

 

 

 

Dividends Declared Per Common Share

   $ 0.7550     $ 0.7000  
  

 

 

   

 

 

 

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

 

6


Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2017     2016  
(millions)             

Net income including noncontrolling interests

   $ 674     $ 531  

Other comprehensive income (loss), net of taxes:

    

Net deferred gains on derivatives-hedging activities(1)

     43       53  

Changes in unrealized net gains on investment securities(2)

     58       15  

Amounts reclassified to net income:

    

Net derivative gains-hedging activities(3)

     (23     (63

Net realized gains on investment securities(4)

     (28     (2

Net pension and other postretirement benefit costs(5)

     13       8  

Changes in other comprehensive income from equity method investees(6)

     1       —    
  

 

 

   

 

 

 

Total other comprehensive income

     64       11  
  

 

 

   

 

 

 

Comprehensive income including noncontrolling interests

     738       542  

Comprehensive income attributable to noncontrolling interests

     42       7  
  

 

 

   

 

 

 

Comprehensive income attributable to Dominion

   $ 696     $ 535  
  

 

 

   

 

 

 

 

(1) Net of $(27) million and $(33) million tax for the three months ended March 31, 2017 and 2016, respectively.
(2) Net of $(35) million and $(10) million tax for the three months ended March 31, 2017 and 2016, respectively.
(3) Net of $14 million and $39 million tax for the three months ended March 31, 2017 and 2016, respectively.
(4) Net of $16 million and $1 million tax for the three months ended March 31, 2017 and 2016, respectively.
(5) Net of $(8) million and $(6) million tax for the three months ended March 31, 2017 and 2016, respectively.
(6) Net of $(1) million and $— million tax for the three months ended March 31, 2017 and 2016, respectively.

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

 

7


Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     March 31,
2017
    December 31,
2016(1)
 
(millions)             

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 486     $ 261  

Customer receivables (less allowance for doubtful accounts of $19 and $18)

     1,361       1,523  

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

     209       183  

Inventories

     1,453       1,524  

Other

     776       757  
  

 

 

   

 

 

 

Total current assets

     4,285       4,248  
  

 

 

   

 

 

 

Investments

    

Nuclear decommissioning trust funds

     4,655       4,484  

Investment in equity method affiliates

     1,713       1,561  

Other

     306       298  
  

 

 

   

 

 

 

Total investments

     6,674       6,343  
  

 

 

   

 

 

 

Property, Plant and Equipment

    

Property, plant and equipment

     70,728       69,556  

Accumulated depreciation, depletion and amortization

     (20,012     (19,592
  

 

 

   

 

 

 

Total property, plant and equipment, net

     50,716       49,964  
  

 

 

   

 

 

 

Deferred Charges and Other Assets

    

Goodwill

     6,399       6,399  

Regulatory assets

     2,439       2,473  

Other

     2,339       2,183  
  

 

 

   

 

 

 

Total deferred charges and other assets

     11,177       11,055  
  

 

 

   

 

 

 

Total assets

   $ 72,852     $ 71,610  
  

 

 

   

 

 

 

 

(1) Dominion’s Consolidated Balance Sheet at December 31, 2016 has been derived from the audited Consolidated Balance Sheet at that date.

 

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

 

8


Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

     March 31,
2017
    December 31,
2016(1)
 
(millions)             

LIABILITIES AND EQUITY

    

Current Liabilities

    

Securities due within one year

   $ 2,391     $ 1,709  

Short-term debt

     2,627       3,155  

Accounts payable

     724       1,000  

Accrued interest, payroll and taxes

     779       798  

Other

     1,321       1,453  
  

 

 

   

 

 

 

Total current liabilities

     7,842       8,115  
  

 

 

   

 

 

 

Long-Term Debt

    

Long-term debt

     25,742       24,878  

Junior subordinated notes

     2,980       2,980  

Remarketable subordinated notes

     2,374       2,373  
  

 

 

   

 

 

 

Total long-term debt

     31,096       30,231  
  

 

 

   

 

 

 

Deferred Credits and Other Liabilities

    

Deferred income taxes and investment tax credits

     8,897       8,602  

Regulatory liabilities

     2,745       2,622  

Other

     5,091       5,200  
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     16,733       16,424  
  

 

 

   

 

 

 

Total liabilities

     55,671       54,770  
  

 

 

   

 

 

 

Commitments and Contingencies (see Note 15)

    

Equity

    

Common stock – no par(2)

     8,629       8,550  

Retained earnings

     7,023       6,854  

Accumulated other comprehensive loss

     (735     (799
  

 

 

   

 

 

 

Total common shareholders’ equity

     14,917       14,605  
  

 

 

   

 

 

 

Noncontrolling interests

     2,264       2,235  
  

 

 

   

 

 

 

Total equity

     17,181       16,840  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 72,852     $ 71,610  
  

 

 

   

 

 

 

 

(1) Dominion’s Consolidated Balance Sheet at December 31, 2016 has been derived from the audited Consolidated Balance Sheet at that date.
(2) 1 billion shares authorized; 629 million shares and 628 million shares outstanding at March 31, 2017 and December 31, 2016, respectively.

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

 

9


Table of Contents

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

 

    Common Stock     Dominion Shareholders                    
    Shares     Amount     Retained
Earnings
    Accumulated
Other
Comprehensive
Loss
    Total
Common
Shareholders’
Equity
    Noncontrolling
Interests
    Total
Equity
 
(millions)                                          

December 31, 2015

    596     $ 6,680     $ 6,458     $ (474   $ 12,664     $ 938     $ 13,602  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income including noncontrolling interests

        524         524       7       531  

Contributions from SunEdison to Four Brothers and Three Cedars

            —         94       94  

Sale of interest in merchant solar projects

      22           22       117       139  

Purchase of Dominion Midstream common units

      (2         (2     (8     (10

Issuance of common stock

    1       75           75         75  

Dividends and distributions

        (417       (417     (10     (427

Other comprehensive income, net of tax

          11       11         11  

Other

      3           3       (3     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

March 31, 2016

    597     $ 6,778     $ 6,565     $ (463   $ 12,880     $ 1,135     $ 14,015  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2016

    628     $ 8,550     $ 6,854     $ (799   $ 14,605     $ 2,235     $ 16,840  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income including noncontrolling interests

        632         632       42       674  

Contributions from NRG to Four Brothers and Three Cedars

            —         6       6  

Issuance of common stock

    1       79           79         79  

Dividends and distributions

        (474       (474     (19     (493

Other comprehensive income, net of tax

          64       64         64  

Other

        11         11         11  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

March 31, 2017

    629     $ 8,629     $ 7,023     $ (735   $ 14,917     $ 2,264     $ 17,181  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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)

 

Three Months Ended March 31,

   2017     2016  
(millions)             

Operating Activities

    

Net income including noncontrolling interests

   $ 674     $ 531  

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

    

Depreciation, depletion and amortization (including nuclear fuel)

     548       424  

Deferred income taxes and investment tax credits

     250       131  

Proceeds from assignment of tower rental portfolio

     91       —    

Contribution to pension plan

     (75     —    

Other adjustments

     (84     (26

Changes in:

    

Accounts receivable

     136       40  

Inventories

     61       44  

Deferred fuel and purchased gas costs, net

     (37     35  

Prepayments

     18       41  

Accounts payable

     (140     (37

Accrued interest, payroll and taxes

     (19     68  

Margin deposit assets and liabilities

     8       (21

Other operating assets and liabilities

     (71     (38
  

 

 

   

 

 

 

Net cash provided by operating activities

     1,360       1,192  
  

 

 

   

 

 

 

Investing Activities

    

Plant construction and other property additions (including nuclear fuel)

     (1,435     (1,497

Acquisition of solar development projects

     (94     —    

Proceeds from sales of securities

     756       368  

Purchases of securities

     (786     (393

Contributions to equity method affiliates

     (146     (23

Other

     11       20  
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,694 )      (1,525
  

 

 

   

 

 

 

Financing Activities

    

Repayment of short-term debt, net

     (528     (481

Repayment of short-term notes

     —         (100

Issuance of long-term debt

     1,950       1,250  

Repayment and repurchase of long-term debt

     (401     (496

Proceeds from sale of interest in merchant solar projects

     —         117  

Contributions from NRG and SunEdison to Four Brothers and Three Cedars

     6       94  

Issuance of common stock

     79       75  

Common dividend payments

     (474     (417

Other

     (73     (98
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     559       (56
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     225       (389

Cash and cash equivalents at beginning of period

     261       607  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 486     $ 218  
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Significant noncash investing activities:

    

Accrued capital expenditures

   $ 230     $ 472  
  

 

 

   

 

 

 

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

 

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Table of Contents

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

    

Three Months Ended

March 31,

 
     2017     2016  
(millions)             

Operating Revenue(1)

   $ 1,831     $ 1,890  
  

 

 

   

 

 

 

Operating Expenses

    

Electric fuel and other energy-related purchases(1)

     456       536  

Purchased (excess) electric capacity

     (17     68  

Other operations and maintenance:

    

Affiliated suppliers

     78       101  

Other

     296       349  

Depreciation and amortization

     286       248  

Other taxes

     79       74  
  

 

 

   

 

 

 

Total operating expenses

     1,178       1,376  
  

 

 

   

 

 

 

Income from operations

     653       514  
  

 

 

   

 

 

 

Other income

     31       16  

Interest and related charges(1)

     120       114  
  

 

 

   

 

 

 

Income before income tax expense

     564       416  

Income tax expense

     208       153  
  

 

 

   

 

 

 

Net Income

   $ 356     $ 263  
  

 

 

   

 

 

 

 

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

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

 

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Table of Contents

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2017     2016  
(millions)             

Net income

   $ 356     $ 263  

Other comprehensive income (loss), net of taxes:

    

Net deferred losses on derivatives-hedging activities(1)

     —         (9

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

     7       3  

Amounts reclassified to net income:

    

Net realized gains on nuclear decommissioning trust funds(3)

     (3 )      —    
  

 

 

   

 

 

 

Total other comprehensive income (loss)

     4       (6
  

 

 

   

 

 

 

Comprehensive income

   $ 360     $ 257  
  

 

 

   

 

 

 

 

(1) Net of $— million and $5 million tax for the three months ended March 31, 2017 and 2016, respectively.
(2) Net of $(4) million and $(1) million tax for the three months ended March 31, 2017 and 2016, respectively.
(3) Net of $2 million and $— million tax for the three months ended March 31, 2017 and 2016, respectively.

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

 

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Table of Contents

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     March 31,
2017
    December 31,
2016(1)
 
(millions)             

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 289     $ 11  

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

     790       892  

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

     125       99  

Affiliated receivables

     1       112  

Inventories (average cost method)

     842       853  

Other(2)

     305       281  
  

 

 

   

 

 

 

Total current assets

     2,352       2,248  
  

 

 

   

 

 

 

Investments

    

Nuclear decommissioning trust funds

     2,186       2,106  

Other

     3       3  
  

 

 

   

 

 

 

Total investments

     2,189       2,109  
  

 

 

   

 

 

 

Property, Plant and Equipment

    

Property, plant and equipment

     40,514       40,030  

Accumulated depreciation and amortization

     (12,699     (12,436
  

 

 

   

 

 

 

Total property, plant and equipment, net

     27,815       27,594  
  

 

 

   

 

 

 

Deferred Charges and Other Assets

    

Regulatory assets

     776       770  

Other(2)

     609       587  
  

 

 

   

 

 

 

Total deferred charges and other assets

     1,385       1,357  
  

 

 

   

 

 

 

Total assets

   $ 33,741     $ 33,308  
  

 

 

   

 

 

 

 

(1) Virginia Power’s Consolidated Balance Sheet at December 31, 2016 has been derived from the audited Consolidated Balance Sheet at that date.
(2) See Note 17 for amounts attributable to affiliates.

 

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

 

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VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

     March 31,
2017
     December 31,
2016(1)
 
(millions)              

LIABILITIES AND SHAREHOLDER’S EQUITY

     

Current Liabilities

     

Securities due within one year

   $ 928      $ 678  

Short-term debt

     40        65  

Accounts payable

     329        444  

Payables to affiliates

     139        109  

Affiliated current borrowings

     —          262  

Accrued interest, payroll and taxes

     248        239  

Other(2)

     634        725  
  

 

 

    

 

 

 

Total current liabilities

     2,318        2,522  
  

 

 

    

 

 

 

Long-Term Debt

     10,348        9,852  
  

 

 

    

 

 

 

Deferred Credits and Other Liabilities

     

Deferred income taxes and investment tax credits

     5,165        5,103  

Asset retirement obligations

     1,267        1,262  

Regulatory liabilities

     2,064        1,962  

Other(2)

     797        742  
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     9,293        9,069  
  

 

 

    

 

 

 

Total liabilities

     21,959        21,443  
  

 

 

    

 

 

 

Commitments and Contingencies (see Note 15)

     

Common Shareholder’s Equity

     

Common stock – no par(3)

     5,738        5,738  

Other paid-in capital

     1,113        1,113  

Retained earnings

     4,881        4,968  

Accumulated other comprehensive income

     50        46  
  

 

 

    

 

 

 

Total common shareholder’s equity

     11,782        11,865  
  

 

 

    

 

 

 

Total liabilities and shareholder’s equity

   $ 33,741      $ 33,308  
  

 

 

    

 

 

 

 

(1) Virginia Power’s Consolidated Balance Sheet at December 31, 2016 has been derived from the audited Consolidated Balance Sheet at that date.
(2) See Note 17 for amounts attributable to affiliates.
(3) 500,000 shares authorized; 274,723 shares outstanding at March 31, 2017 and December 31, 2016.

 

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

 

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Table of Contents

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Three Months Ended March 31,

   2017     2016  
(millions)             

Operating Activities

    

Net income

   $ 356     $ 263  

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

    

Depreciation and amortization (including nuclear fuel)

     336       294  

Deferred income taxes and investment tax credits

     56       99  

Proceeds from assignment of tower rental portfolio

     91       —    

Other adjustments

     (26     (8

Changes in:

    

Accounts receivable

     76       38  

Affiliated receivables and payables

     141       322  

Inventories

     11       40  

Prepayments

     (12     8  

Deferred fuel expenses, net

     (49     27  

Accounts payable

     (21     (3

Accrued interest, payroll and taxes

     9       87  

Other operating assets and liabilities

     —         4  
  

 

 

   

 

 

 

Net cash provided by operating activities

     968       1,171  
  

 

 

   

 

 

 

Investing Activities

    

Plant construction and other property additions

     (647     (604

Purchases of nuclear fuel

     (40     (22

Proceeds from sales of securities

     330       193  

Purchases of securities

     (342     (201

Other

     (3     (13
  

 

 

   

 

 

 

Net cash used in investing activities

     (702     (647
  

 

 

   

 

 

 

Financing Activities

    

Repayment of short-term debt, net

     (25     (380

Repayment of affiliated current borrowings, net

     (262     (376

Issuance of long-term debt

     750       750  

Repayment of long-term debt

     —         (452

Common dividend payments to parent

     (445     —    

Other

     (6     (6
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     12       (464
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     278       60  

Cash and cash equivalents at beginning of period

     11       18  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 289     $ 78  
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Significant noncash investing activities:

    

Accrued capital expenditures

   $ 124     $ 164  
  

 

 

   

 

 

 

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
March 31,
 
     2017      2016  
(millions)              

Operating Revenue(1)

   $ 490      $ 431  
  

 

 

    

 

 

 

Operating Expenses

     

Purchased gas(1)

     43        34  

Other energy-related purchases

     5        3  

Other operations and maintenance:

     

Affiliated suppliers

     25        27  

Other

     133        97  

Depreciation and amortization

     54        43  

Other taxes

     54        52  
  

 

 

    

 

 

 

Total operating expenses

     314        256  
  

 

 

    

 

 

 

Income from operations

     176        175  
  

 

 

    

 

 

 

Earnings from equity method investee

     7        6  

Other income

     5        —    

Interest and related charges(1)

     23        22  
  

 

 

    

 

 

 

Income from operations before income taxes

     165        159  

Income tax expense

     57        61  
  

 

 

    

 

 

 

Net Income

   $ 108      $ 98  
  

 

 

    

 

 

 

 

(1) See Note 17 for amounts attributable to related parties.

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

 

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Table of Contents

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
     2017     2016  
(millions)             

Net income

   $ 108     $ 98  

Other comprehensive income (loss), net of taxes:

    

Net deferred losses on derivatives-hedging activities(1)

     (9     (6

Amounts reclassified to net income:

    

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

     11       (2

Net pension and other postretirement benefit costs(3)

     —         —    
  

 

 

   

 

 

 

Total other comprehensive income (loss)

     2       (8
  

 

 

   

 

 

 

Comprehensive income

   $ 110     $ 90  
  

 

 

   

 

 

 

 

(1) Net of $7 million and $4 million tax for the three months ended March 31, 2017 and 2016, respectively.
(2) Net of $(7) million and $2 million tax for the three months ended March 31, 2017 and 2016, respectively.
(3) Net of $(1) million tax for both the three months ended March 31, 2017 and 2016.

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)

 

     March 31,
2017
    December 31,
2016(1)
 
(millions)             

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 11     $ 23  

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

     275       281  

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

     16       13  

Affiliated receivables

     16       17  

Inventories

     76       70  

Other(2)

     176       178  
  

 

 

   

 

 

 

Total current assets

     570       582  
  

 

 

   

 

 

 

Investments

     101       99  
  

 

 

   

 

 

 

Property, Plant and Equipment

    

Property, plant and equipment

     10,540       10,475  

Accumulated depreciation and amortization

     (2,897     (2,851
  

 

 

   

 

 

 

Total property, plant and equipment, net

     7,643       7,624  
  

 

 

   

 

 

 

Deferred Charges and Other Assets

    

Goodwill

     542       542  

Pension and other postretirement benefit assets(2)

     1,641       1,557  

Other(2)

     716       738  
  

 

 

   

 

 

 

Total deferred charges and other assets

     2,899       2,837  
  

 

 

   

 

 

 

Total assets

   $ 11,213     $ 11,142  
  

 

 

   

 

 

 

 

(1) Dominion Gas’ Consolidated Balance Sheet at December 31, 2016 has been derived from the audited Consolidated Balance Sheet at that date.
(2) See Note 17 for amounts attributable to related parties.

 

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

 

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Table of Contents

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

     March 31,
2017
    December 31,
2016(1)
 
(millions)             

LIABILITIES AND EQUITY

    

Current Liabilities

    

Short-term debt

   $ 399     $ 460  

Accounts payable

     152       221  

Payables to affiliates

     29       29  

Affiliated current borrowings

     174       118  

Accrued interest, payroll and taxes

     216       225  

Other(2)

     151       162  
  

 

 

   

 

 

 

Total current liabilities

     1,121       1,215  
  

 

 

   

 

 

 

Long-Term Debt

     3,533       3,528  
  

 

 

   

 

 

 

Deferred Credits and Other Liabilities

    

Deferred income taxes and investment tax credits

     2,500       2,438  

Other(2)

     419       425  
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     2,919       2,863  
  

 

 

   

 

 

 

Total liabilities

     7,573       7,606  
  

 

 

   

 

 

 

Commitments and Contingencies (see Note 15)

    

Equity

    

Membership interests

     3,761       3,659  

Accumulated other comprehensive loss

     (121     (123
  

 

 

   

 

 

 

Total equity

     3,640       3,536  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 11,213     $ 11,142  
  

 

 

   

 

 

 

 

(1) Dominion Gas’ Consolidated Balance Sheet at December 31, 2016 has been derived from the audited Consolidated Balance Sheet at that date.
(2) See Note 17 for amounts attributable to related parties.

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

 

20


Table of Contents

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Three Months Ended March 31,

   2017     2016  
(millions)             

Operating Activities

    

Net income

   $ 108     $ 98  

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

    

Depreciation and amortization

     54       43  

Deferred income taxes and investment tax credits

     59       58  

Other adjustments

     (4     (5

Changes in:

    

Accounts receivable

     3       (18

Affiliated receivables and payables

     1       99  

Deferred purchased gas costs, net

     11       11  

Prepayments

     12       16  

Inventories

     (6     (13

Accounts payable

     (53     (25

Accrued interest, payroll and taxes

     (9     1  

Pension and other postretirement benefits

     (31     (32

Other operating assets and liabilities

     (3     —    
  

 

 

   

 

 

 

Net cash provided by operating activities

     142       233  
  

 

 

   

 

 

 

Investing Activities

    

Plant construction and other property additions

     (134     (161

Other

     (8     3  
  

 

 

   

 

 

 

Net cash used in investing activities

     (142     (158
  

 

 

   

 

 

 

Financing Activities

    

Issuance (repayment) of short-term debt, net

     (61     12  

Issuance (repayment) of affiliated current borrowings, net

     56       (55

Distribution payments to parent

     (7     —    

Other

     —         (1
  

 

 

   

 

 

 

Net cash used in financing activities

     (12     (44
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (12     31  

Cash and cash equivalents at beginning of period

     23       13  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 11     $ 44  
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Significant noncash investing activities:

    

Accrued capital expenditures

   $ 31     $ 36  
  

 

 

   

 

 

 

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

 

21


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. See Note 3 for a description of operations acquired in the Dominion Questar Combination.

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, 2016.

In the Companies’ opinion, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly their financial position as of March 31, 2017, their results of operations for the three months ended March 31, 2017 and 2016, their cash flows for the three months ended March 31, 2017 and 2016 and Dominion’s changes in equity for the three months ended March 31, 2017. 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. At March 31, 2017, Dominion owns the general partner, 50.9% of the common and subordinated units and 37.5% of the convertible preferred interests in Dominion Midstream. The public’s ownership interest in Dominion Midstream is reflected as noncontrolling interest in Dominion’s Consolidated Financial Statements. Also, at March 31, 2017, Dominion owns 50% of the units in and consolidates Four Brothers and Three Cedars. NRG’s ownership interest in Four Brothers and Three Cedars, as well as Terra Nova Renewable Partners’ 33% interest in certain Dominion merchant solar projects, is reflected as noncontrolling interest in Dominion’s Consolidated Financial Statements.

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

Certain amounts in the Companies’ 2016 Consolidated Financial Statements and Notes have been reclassified to conform to the 2017 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.

With the exception of the items described below, there have been no significant changes from Note 2 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2016.

Property, Plant and Equipment

In the first quarter of 2017, Virginia Power revised the depreciation rates for its assets to reflect the results of a new depreciation study. This change resulted in an increase in depreciation expense of $10 million ($6 million after-tax) for the quarter ended March 31, 2017 and is expected to increase annual depreciation by approximately $40 million ($25 million after-tax). Additionally, Dominion revised the depreciable lives for its merchant generation assets, excluding Millstone, which resulted in a decrease in depreciation expense of $6 million ($4 million after-tax) for the quarter ended March 31, 2017 and is expected to decrease annual depreciation by approximately $26 million ($16 million after-tax).

 

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New Accounting Standards

In March 2017, the Financial Accounting Standards Board issued revised accounting guidance for the presentation of net periodic pension and other postretirement benefit costs. The update requires that the service cost component of net periodic pension and other postretirement benefit costs be classified in the same line item as other compensation costs arising from services rendered by employees, while all other components of net periodic pension and other postretirement benefit costs would be classified outside of income from operations. In addition, only the service cost component will be eligible for capitalization during construction. The standard also recognized that in the event that a regulator continues to require capitalization of all net periodic benefit costs prospectively, the difference would result in recognition of a regulatory asset or liability. The guidance is effective for the Companies’ interim and annual reporting periods beginning January 1, 2018, although it can be early adopted, with a retrospective approach for income statement presentation and a prospective approach for capitalization. The Companies are currently evaluating the impact the adoption of the standard will have on their consolidated financial statements and disclosures. The Companies are also evaluating industry issues that could potentially create a regulatory accounting difference in the event that FERC or any of our state commissions do not adopt the change in capitalization requirements for regulatory reporting.

Note 3. Acquisitions and Dispositions

Dominion

Acquisition of Dominion Questar

In September 2016, Dominion completed the Dominion Questar Combination and Dominion Questar became a wholly-owned

subsidiary of Dominion. Dominion Questar, a Rockies-based integrated natural gas company, included Questar Gas, Wexpro Company and Questar Pipeline at closing. Questar Gas has regulated gas distribution operations in Utah, southwestern Wyoming and southeastern Idaho. Wexpro Company develops and produces natural gas from reserves that are supplied to Questar Gas under a cost-of-service framework. Questar Pipeline provides FERC-regulated interstate natural gas transportation and storage services in Utah, Wyoming and western Colorado. The Dominion Questar Combination provides Dominion with pipeline infrastructure that provides a principal source of gas supply to Western states. Dominion Questar’s regulated businesses also provide further balance between Dominion’s electric and gas operations.

In accordance with the terms of the Dominion Questar Combination, at closing, each share of issued and outstanding Dominion Questar common stock was converted into the right to receive $25.00 per share in cash. The total consideration was $4.4 billion based on 175.5 million shares of Dominion Questar outstanding at closing.

Dominion financed the Dominion Questar Combination through the: (1) August 2016 issuance of $1.4 billion of 2016 Equity Units, (2) August 2016 issuance of $1.3 billion of senior notes, (3) September 2016 borrowing of $1.2 billion under a term loan agreement and (4) $500 million of the proceeds from the April 2016 issuance of common stock. See Notes 17 and 19 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2016 for more information.

See Note 3 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2016 for more information on the Dominion Questar Combination including purchase price allocation, regulatory matters, results of operations, and the contribution of Questar Pipeline to Dominion Midstream.

Pro Forma Information

The following unaudited pro forma financial information reflects the consolidated results of operations of Dominion assuming the Dominion Questar Combination had taken place on January 1, 2015. The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations that would have been achieved or the future consolidated results of operations of the combined company.

 

     Three Months
Ended
March 31, 2016(1)
 
(millions, except EPS)       

Operating Revenue

   $ 3,377  

Net income attributable to Dominion

     613  

Earnings Per Common Share – Basic

   $ 1.03  

Earnings Per Common Share – Diluted

   $ 1.03  

 

(1) Amounts include adjustments for non-recurring costs directly related to the Dominion Questar Combination.

 

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Wholly-Owned Merchant Solar Projects

In January 2017, Dominion entered into an agreement to acquire 100% of the equity interests of a solar project in North Carolina from Cypress Creek Renewables, LLC for $154 million in cash. The acquisition is expected to close during the second quarter of 2017, prior to the project commencing commercial operations, which is expected by the end of the third quarter of 2017. The project is expected to cost $160 million once constructed, including the initial acquisition cost, and to generate approximately 79 MW.

In September 2016, Dominion entered into an agreement to acquire 100% of the equity interests of a solar project in Virginia from Community Energy Solar, LLC. In February 2017, Dominion closed on the acquisition for $29 million, all of which was allocated to property, plant and equipment. The project is expected to cost approximately $205 million once constructed, including the initial acquisition cost. The facility is expected to begin commercial operations during the fourth quarter of 2017 and to generate approximately 100 MW.

In August 2016, Dominion entered into an agreement to acquire 100% of the equity interests of two solar projects in California from Solar Frontier Americas Holding LLC. In March 2017, Dominion closed on the acquisition of one of the solar projects for $77 million, all of which was allocated to property, plant and equipment. The project is expected to cost approximately $80 million once constructed, including the initial acquisition cost. The facility is expected to begin commercial operations during the second quarter of 2017 and to generate approximately 30 MW. In April 2017, Dominion discontinued efforts on the acquisition of the additional 20 MW solar project from Solar Frontier Americas Holding LLC.

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 then currently wholly-owned merchant solar projects, 24 solar projects totaling approximately 425 MW, to SunEdison. In December 2015, the sale of interest in 15 of the solar projects closed for $184 million with the sale of interest in the remaining projects completed in January 2016 for $117 million. Upon closing, SunEdison sold its interest in these projects to Terra Nova Renewable Partners. Terra Nova Renewable Partners has a future option to buy all or a portion of Dominion’s remaining 67% ownership in the projects upon the occurrence of certain events, none of which had occurred as of March 31, 2017 nor are expected to occur in the remainder of 2017.

Virginia Power

Assignment of Tower Rental Portfolio

Virginia Power rents space on certain of its electric transmission towers to various wireless carriers for communications antennas and other equipment. In March 2017, Virginia Power sold its rental portfolio to Vertical Bridge Towers II, LLC for $91 million in cash. The proceeds are subject to Virginia Power’s FERC-regulated tariff, under which it is required to return half of the proceeds to customers. Virginia Power recognized $7 million in other income in March 2017 with the remaining $39 million to be recognized ratably through 2023.

Dominion Gas

Assignment of Shale Development Rights

In November 2014, Dominion Gas closed on an agreement with a natural gas producer to convey over time approximately 24,000 acres of Marcellus Shale development rights underneath one of its natural gas storage fields. In connection with that agreement, in January 2016, Dominion Gas conveyed approximately 2,000 acres of Marcellus Shale development rights and received proceeds of $5 million and an overriding royalty interest in gas produced from the acreage. This transaction resulted in a $5 million ($3 million after-tax) gain, included in other operations and maintenance expense in Dominion Gas’ Consolidated Statements of Income.

 

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Note 4. Operating Revenue

The Companies’ operating revenue consists of the following:

 

     Three Months Ended
March 31,
 
     2017      2016  
(millions)              

Dominion

     

Electric sales:

     

Regulated

   $ 1,766      $ 1,842  

Nonregulated

     427        389  

Gas sales:

     

Regulated

     448        65  

Nonregulated

     144        118  

Gas transportation and storage

     492        415  

Other

     107        92  
  

 

 

    

 

 

 

Total operating revenue

   $ 3,384      $ 2,921  
  

 

 

    

 

 

 

Virginia Power

     

Regulated electric sales

   $ 1,766      $ 1,842  

Other

     65        48  
  

 

 

    

 

 

 

Total operating revenue

   $ 1,831      $ 1,890  
  

 

 

    

 

 

 

Dominion Gas

     

Gas sales:

     

Regulated

   $ 32      $ 29  

Nonregulated

     2        1  

Gas transportation and storage

     396        351  

Other

     60        50  
  

 

 

    

 

 

 

Total operating revenue

   $ 490      $ 431  
  

 

 

    

 

 

 

Note 5. Income Taxes

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

 

     Dominion     Virginia Power     Dominion Gas  

Three Months Ended March 31,

   2017     2016     2017     2016     2017     2016  

U.S. statutory rate

     35.0     35.0     35.0     35.0     35.0     35.0

Increases (reductions) resulting from:

            

State taxes, net of federal benefit

     2.8       4.3       3.8       4.2       0.3       3.9  

Investment tax credits

     (4.2     (10.9     (0.8     (1.3     —         —    

Production tax credits

     (0.8     (0.8     (0.6     (0.6     —         —    

Other, net

     (3.8     (2.4     (0.6     (0.6     (0.6     (0.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effective tax rate

     29.0     25.2     36.8     36.7     34.7     38.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The effective tax rate in 2017 for Dominion and Dominion Gas reflects the completion of audits by state tax authorities that resulted in the recognition of previously unrecognized tax benefits. Otherwise, as of March 31, 2017, 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, 2016 for a discussion of these unrecognized tax benefits.

 

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Note 6. Earnings Per Share

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

 

    

Three Months Ended

March 31,

 
     2017      2016  
(millions, except EPS)              

Net income attributable to Dominion

   $ 632      $ 524  
  

 

 

    

 

 

 

Average shares of common stock outstanding – Basic

     628.1        596.6  

Net effect of dilutive securities(1)

     —          1.6  
  

 

 

    

 

 

 

Average shares of common stock outstanding – Diluted

     628.1        598.2  
  

 

 

    

 

 

 

Earnings Per Common Share – Basic

   $ 1.01      $ 0.88  

Earnings Per Common Share – Diluted

   $ 1.01      $ 0.88  

 

(1) Dilutive securities consist primarily of the 2013 Equity Units for the three months ended March 31, 2016. See Note 17 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2016 for more information.

The 2014 Equity Units are potentially dilutive securities but were excluded from the calculation of diluted EPS for the three months ended March 31, 2017 and 2016, as the dilutive stock price threshold was not met. The 2016 Equity Units are potentially dilutive securities but were excluded from the calculation of diluted EPS for the three months ended March 31, 2017, as the dilutive stock price threshold was not met. The Dominion Midstream convertible preferred units are potentially dilutive securities but had no effect on the calculation of diluted EPS for the three months ended March 31, 2017.

Note 7. Accumulated Other Comprehensive Income

Dominion

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

 

     Deferred Gains
and Losses on
Derivatives-
Hedging
Activities
    Unrealized
Gains and
Losses on
Investment
Securities
    Unrecognized
Pension and
Other
Postretirement
Benefit Costs
    Other
Comprehensive
Income (Loss)
From Equity
Method
Investee
    Total  
(millions)                               

Three Months Ended March 31, 2017

          

Beginning balance

   $ (280   $ 569     $ (1,082   $ (6   $ (799

Other comprehensive income before reclassifications: gains

     43       58       —         1       102  

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

     (23     (28     13       —         (38
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income

     20       30       13       1       64  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (260   $ 599     $ (1,069   $ (5   $ (735
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Three Months Ended March 31, 2016

          

Beginning balance

   $ (176   $ 504     $ (797   $ (5   $ (474

Other comprehensive income before reclassifications: gains

     53       15       —         —         68  

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

     (63     (2     8       —         (57
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive income (loss)

     (10     13       8       —         11  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ (186   $ 517     $ (789   $ (5   $ (463
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

 

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

 

Details About AOCI Components

  Amounts Reclassified
From AOCI
    Affected Line Item in the Consolidated Statements of
Income
 
(millions)            

Three Months Ended March 31, 2017

   

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

   

Commodity contracts

  $ (62     Operating revenue  
    (1     Purchased gas  
    1       Electric fuel and other energy-related purchases  

Interest rate contracts

    11       Interest and related charges  

Foreign currency contracts

    14       Other income  
 

 

 

   
    (37  

Tax

    14       Income tax expense  
 

 

 

   
  $ (23  
 

 

 

   

Unrealized (gains) and losses on investment securities:

   

Realized (gain) loss on sale of securities

  $ (53     Other income  

Impairment

    9       Other income  
 

 

 

   
    (44  

Tax

    16       Income tax expense  
 

 

 

   
  $ (28  
 

 

 

   

Unrecognized pension and other postretirement benefit costs:

   

Prior service (credit) costs

  $ (4     Other operations and maintenance  

Actuarial (gains) losses

    25       Other operations and maintenance  
 

 

 

   
    21    

Tax

    (8     Income tax expense  
 

 

 

   
  $ 13    
 

 

 

   

Three Months Ended March 31, 2016

   

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

   

Commodity contracts

  $ (114     Operating revenue  
    6       Purchased gas  
    3       Electric fuel and other energy-related purchases  

Interest rate contracts

    3       Interest and related charges  
 

 

 

   
    (102  

Tax

    39       Income tax expense  
 

 

 

   
  $ (63  
 

 

 

   

Unrealized (gains) and losses on investment securities:

   

Realized (gain) loss on sale of securities

  $ (10     Other income  

Impairment

    7       Other income  
 

 

 

   
    (3  

Tax

    1       Income tax expense  
 

 

 

   
  $ (2  
 

 

 

   

Unrecognized pension and other postretirement benefit costs:

   

Prior service (credit) costs

  $ (3     Other operations and maintenance  

Actuarial (gains) losses

    17       Other operations and maintenance  
 

 

 

   
    14    

Tax

    (6     Income tax expense  
 

 

 

   
  $ 8    
 

 

 

   
   

 

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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 March 31, 2017

        

Beginning balance

   $ (24    $ (99    $ (123

Other comprehensive income before reclassifications: losses

     (9      —          (9

Amounts reclassified from AOCI(1): losses

     11        —          11  
  

 

 

    

 

 

    

 

 

 

Net current-period other comprehensive income

     2        —          2  
  

 

 

    

 

 

    

 

 

 

Ending balance

   $ (22    $ (99    $ (121
  

 

 

    

 

 

    

 

 

 

Three Months Ended March 31, 2016

        

Beginning balance

   $ (17    $ (82    $ (99

Other comprehensive income before reclassifications: losses

     (6      —          (6

Amounts reclassified from AOCI(1): gains

     (2      —          (2
  

 

 

    

 

 

    

 

 

 

Net current-period other comprehensive loss

     (8      —          (8
  

 

 

    

 

 

    

 

 

 

Ending balance

   $ (25    $ (82    $ (107
  

 

 

    

 

 

    

 

 

 

 

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

 

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

 

Details About AOCI Components

   Amounts Reclassified
From AOCI
     Affected Line Item in the Consolidated
Statements of Income
 
(millions)              

Three Months Ended March 31, 2017

     

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

     

Commodity contracts

   $ 3        Operating revenue  

Interest rate contracts

     1        Interest and related charges  

Foreign currency contracts

     14        Other income  
  

 

 

    
     18     

Tax

     (7      Income tax expense  
  

 

 

    
   $ 11     
  

 

 

    

Unrecognized pension and other postretirement benefit costs:

     

Actuarial (gains) losses

   $ 1        Other operations and maintenance  
  

 

 

    
     1     

Tax

     (1      Income tax expense  
  

 

 

    
   $ —       
  

 

 

    

Three Months Ended March 31, 2016

     

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

     

Commodity contracts

   $ (4      Operating revenue  
  

 

 

    
     (4   

Tax

     2        Income tax expense  
  

 

 

    
   $ (2   
  

 

 

    

Unrecognized pension and other postretirement benefit costs:

     

Actuarial (gains) losses

   $ 1        Other operations and maintenance  
  

 

 

    
     1     

Tax

     (1      Income tax expense  
  

 

 

    
   $ —       
  

 

 

    

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, 2016. 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, futures, and swaps contracts. An option model is used to value Level 3 physical and financial options. The discounted cash flow model for forwards, futures, and swaps calculates mark-to-market valuations based on forward market prices, original transaction prices, volumes, risk-free rate of return, and credit spreads. The option model calculates mark-to-market valuations using variations of the Black-Scholes option model. The inputs into the models are the forward market prices, implied price volatilities, risk-free rate of return, the option expiration dates, the option strike prices, the original sales prices, and volumes. For Level 3 fair value measurements, forward market prices, credit spreads and implied price volatilities are considered unobservable. The unobservable inputs are developed and substantiated using historical information, available market data, third-party data, and statistical analysis. Periodically, inputs to valuation models are reviewed and revised as needed, based on historical information, updated market data, market liquidity and relationships, and changes in third-party pricing sources.

The following table presents Dominion’s quantitative information about Level 3 fair value measurements at March 31, 2017. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility and credit spreads.

 

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Table of Contents
    Fair Value
(millions)
   

Valuation Techniques

 

Unobservable Input

  Range     Weighted
Average(1)
 

Assets

         

Physical and financial forwards and futures:

         

Natural gas(2)

  $ 78     Discounted cash flow   Market price (per Dth) (3)     (2) - 7     —    
      Credit Spreads (4)     0% - 4 %     2

FTRs

    1     Discounted cash flow   Market price (per MWh) (3)     (3) - 3       —    

Physical and financial options:

         

Natural gas

    2     Option model   Market price (per Dth) (3)     2 - 7       3  
      Price volatility (5)     18% - 48     25

Electricity

    60     Option model   Market Price (per MWh) (3)     21 - 54       33  
      Price volatility (5)    
14% - 68

    31
 

 

 

         

Total assets

  $ 141          
 

 

 

         

Liabilities

         

Physical and financial forwards and futures:

         

Natural gas(2)

  $ 2     Discounted cash flow   Market price (per Dth) (3)     (1) - 4       3  

FTRs

    8     Discounted cash flow   Market price (per MWh) (3)     (3) - 2       —    

Physical and financial options:

         

Natural gas

    1     Option model   Market price (per Dth) (3)     2 - 3     3  
      Price volatility (5)     34% - 48     39
 

 

 

         

Total liabilities

  $ 11          
 

 

 

         

 

(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.

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

 

Significant Unobservable Inputs

  

Position

  

Change to Input

  

Impact on Fair

Value Measurement

Market price

   Buy    Increase (decrease)    Gain (loss)

Market price

   Sell    Increase (decrease)    Loss (gain)

Price volatility

   Buy    Increase (decrease)    Gain (loss)

Price volatility

   Sell    Increase (decrease)    Loss (gain)

Credit spread

   Asset    Increase (decrease)    Loss (gain)

 

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Table of Contents

Recurring Fair Value Measurements

Dominion

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

 

     Level 1      Level 2      Level 3      Total  
(millions)                            

At March 31, 2017

           

Assets

           

Derivatives:

           

Commodity

   $ —        $ 113      $ 141      $ 254  

Interest rate

     —          20        —          20  

Investments(1):

           

Equity securities:

           

U.S.

     3,084        —          —          3,084  

Fixed income:

           

Corporate debt instruments

     —          498        —          498  

Government securities

     423        615        —          1,038  

Cash equivalents and other

     6        —          —          6  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 3,513      $ 1,246      $ 141      $ 4,900  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Derivatives:

           

Commodity

   $ —        $ 74      $ 11      $ 85  

Interest rate

     —          59        —          59  

Foreign currency

     —          6        —          6  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —        $ 139      $ 11      $ 150  
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2016

           

Assets

           

Derivatives:

           

Commodity

   $ —        $ 115      $ 147      $ 262  

Interest rate

     —          17        —          17  

Investments(1):

           

Equity securities:

           

U.S.

     2,913        —          —          2,913  

Fixed income:

           

Corporate debt instruments

     —          487        —          487  

Government securities

     424        614        —          1,038  

Cash equivalents and other

     5        —          —          5  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 3,342      $ 1,233      $ 147      $ 4,722  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Derivatives:

           

Commodity

   $ —        $ 88      $ 8      $ 96  

Interest rate

     —          53        —          53  

Foreign currency

     —          6        —          6  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —        $ 147      $ 8      $ 155  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Includes investments held in the nuclear decommissioning and rabbi trusts. Excludes $88 million and $89 million of assets at March 31, 2017 and December 31, 2016, respectively, measured at fair value using NAV (or its equivalent) as a practical expedient which are not required to be categorized in the fair value hierarchy.

 

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

 

    

Three Months Ended

March 31,

 
     2017      2016  
(millions)              

Beginning balance

   $ 139      $ 95  

Total realized and unrealized gains (losses):

     

Included in earnings

     (15      (7

Included in other comprehensive income

     —          3  

Included in regulatory assets/liabilities

     (9      17  

Settlements

     12        8  

Transfers out of Level 3

     3        (7
  

 

 

    

 

 

 

Ending balance

   $ 130      $ 109  
  

 

 

    

 

 

 

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 Dominion’s Consolidated Statements of Income for the three months ended March 31, 2017 and 2016. There were no unrealized gains or losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the three months ended March 31, 2017 and 2016.

Virginia Power

The following table presents Virginia Power’s quantitative information about Level 3 fair value measurements at March 31, 2017. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility and credit spreads.

 

     Fair Value
(millions)
    

Valuation Techniques

  

Unobservable Input

   Range     Weighted
Average(1)
 

Assets

             

Physical and financial forwards and futures:

             

Natural gas(2)

   $ 77      Discounted cash flow    Market price (per Dth) (3)      (2) - 7       —    
         Credit Spreads (4)      0% - 4     2

FTRs

     1      Discounted cash flow    Market price (per MWh) (3)      (3) - 2       —    

Physical and financial options:

             

Natural gas

     2      Option model    Market price (per Dth) (3)      2 - 7       3  
         Price Volatility (5)      18% - 40     25

Electricity

     60      Option model    Market price (per MWh) (3)      21 - 54       33  
         Price Volatility (5)      14% - 68     31
  

 

 

            

Total assets

   $ 140             
  

 

 

            

Liabilities

             

Physical and financial forwards and futures:

             

FTRs

   $ 8      Discounted cash flow    Market price (per MWh) (3)      (3) - 2       —    
  

 

 

            

Total liabilities

   $ 8             
  

 

 

            

 

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

 

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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)

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

 

     Level 1      Level 2      Level 3      Total  
(millions)                            

At March 31, 2017

           

Assets

           

Derivatives:

           

Commodity

   $ —        $ 30      $ 140      $ 170  

Interest rate

     —          8        —          8  

Investments(1):

           

Equity securities:

           

U.S.

     1,376        —          —          1,376  

Fixed income:

           

Corporate debt instruments

     —          282        —          282  

Government securities

     133        294        —          427  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 1,509      $ 614      $ 140      $ 2,263  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Derivatives:

           

Commodity

   $ —        $ 3      $ 8      $ 11  

Interest rate

     —          22        —          22  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —        $ 25      $ 8      $ 33  
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2016

           

Assets

           

Derivatives:

           

Commodity

   $ —        $ 43      $ 145      $ 188  

Interest rate

     —          6        —          6  

Investments(1):

           

Equity securities:

           

U.S.

     1,302        —          —          1,302  

Fixed income:

           

Corporate debt instruments

     —          277        —          277  

Government securities

     136        291        —          427  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 1,438      $ 617      $ 145      $ 2,200  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Derivatives:

           

Commodity

   $ —        $ 8      $ 2      $ 10  

Interest rate

     —          21        —          21  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —        $ 29      $ 2      $ 31  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Includes investments held in the nuclear decommissioning trusts. Excludes $30 million and $26 million of assets at March 31, 2017 and December 31, 2016, respectively, measured at fair value using NAV (or its equivalent) as a practical expedient which are not required to be categorized in the fair value hierarchy.

 

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

 

    

Three Months Ended

March 31,

 
     2017      2016  
(millions)              

Beginning balance

   $ 143      $ 93  

Total realized and unrealized gains (losses):

     

Included in earnings

     (15      (8

Included in regulatory assets/liabilities

     (8      17  

Settlements

     12        8  
  

 

 

    

 

 

 

Ending balance

   $ 132      $ 110  
  

 

 

    

 

 

 

The gains and losses included in earnings in the Level 3 fair value category were classified in electric fuel and other energy-related purchases in Virginia Power’s Consolidated Statements of Income for the three months ended March 31, 2017 and 2016. There were no unrealized gains or losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the three months ended March 31, 2017 and 2016.

Dominion Gas

The following table presents Dominion Gas’ liabilities for derivatives that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions. Derivative assets at March 31, 2017 and December 31, 2016 were not material.

 

     Level 1      Level 2      Level 3      Total  
(millions)                            

At March 31, 2017

           

Liabilities

           

Commodity

   $ —        $ 1      $ —        $ 1  

Foreign currency

     —          6        —          6  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —        $ 7      $ —        $ 7  
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2016

           

Liabilities

           

Commodity

   $ —        $ 3      $ 2      $ 5  

Foreign currency

     —          6        —          6  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —        $ 9      $ 2      $ 11  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

    

Three Months Ended

March 31,

 
     2017      2016  
(millions)              

Beginning balance

   $ (2    $ 6  

Total realized and unrealized gains (losses):

     

Included in other comprehensive income (loss)

     (1      2  

Transfers out of Level 3

     3        (8
  

 

 

    

 

 

 

Ending balance

   $ —        $ —    
  

 

 

    

 

 

 

 

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Table of Contents

There were no gains or losses included in earnings in the level 3 fair value category for the three months ended March 31, 2017 and 2016. There were no unrealized gains or losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the three months ended March 31, 2017 and 2016.

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, affiliated receivables, short-term debt, affiliated current borrowings, payables to affiliates and accounts payable are representative of fair value because of the short-term nature of these instruments. For the Companies’ financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:

 

     March 31, 2017      December 31, 2016  
     Carrying
Amount
     Estimated
Fair
Value(1)
     Carrying
Amount
     Estimated
Fair
Value(1)
 
(millions)                            

Dominion

           

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

   $ 28,133      $ 29,918      $ 26,587      $ 28,273  

Junior subordinated notes(3)

     2,980        2,981        2,980        2,893  

Remarketable subordinated notes(3)

     2,374        2,431        2,373        2,418  
  

 

 

    

 

 

    

 

 

    

 

 

 

Virginia Power

           

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

   $ 11,276      $ 12,371      $ 10,530      $ 11,584  
  

 

 

    

 

 

    

 

 

    

 

 

 

Dominion Gas

           

Long-term debt, including securities due within one year(4)

   $ 3,533      $ 3,614      $ 3,528      $ 3,603  

 

(1) Fair value is estimated using market prices, where available, and interest rates currently available for issuance of debt with similar terms and remaining maturities. All fair value measurements are classified as Level 2. The carrying amount of debt issues with short-term maturities and variable rates refinanced at current market rates is a reasonable estimate of their fair value.
(2) Carrying amount includes amounts which represent the unamortized debt issuance costs, discount or premium, and foreign currency remeasurement adjustments. At March 31, 2017 and December 31, 2016, includes the valuation of certain fair value hedges associated with fixed rate debt of $(4) million and $(1) million, respectively.
(3) Carrying amount includes amounts which represent the unamortized debt issuance costs, discount or premium.
(4) Carrying amount includes amounts which represent the unamortized debt issuance costs, discount or premium, and foreign currency remeasurement adjustments.

Note 9. Derivatives and Hedge Accounting Activities

The Companies’ accounting policies, 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, 2016. 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. Virginia Power’s and Dominion Gas’ derivative contracts consist of over-the-counter transactions. Over-the-counter contracts are bilateral contracts that are transacted directly with a counterparty. Exchange contracts utilize a financial intermediary, exchange, or clearinghouse to enter, execute, or clear the transactions. Certain over-the-counter and exchange contracts contain contractual rights of setoff through master netting arrangements, derivative clearing agreements, and contract default provisions. In addition, the contracts are subject to conditional rights of setoff through counterparty nonperformance, insolvency, or other conditions.

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

 

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Table of Contents

Dominion

Balance Sheet Presentation

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

 

     March 31, 2017      December 31, 2016  
     Gross
Amounts of
Recognized
Assets
     Gross
Amounts
Offset in the
Consolidated
Balance Sheet
     Net Amounts of
Assets
Presented in the
Consolidated
Balance Sheet
     Gross
Amounts of
Recognized
Assets
     Gross
Amounts
Offset in the
Consolidated
Balance Sheet
     Net Amounts of
Assets Presented
in the
Consolidated
Balance Sheet
 
(millions)                                          

Commodity contracts:

                 

Over-the-counter

   $ 206      $ —        $ 206      $ 211      $ —        $ 211  

Exchange

     42        —          42        44        —          44  

Interest rate contracts:

                 

Over-the-counter

     20        —          20        17        —          17  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total derivatives, subject to a master netting or similar arrangement

     268        —          268        272        —          272  

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

     6        —          6        7        —          7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 274      $ —        $ 274      $ 279      $ —        $ 279  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

            March 31, 2017                    December 31, 2016         
            Gross Amounts Not Offset
in the Consolidated
Balance Sheet
                   Gross Amounts Not Offset
in the Consolidated Balance
Sheet
        
     Net Amounts of
Assets Presented
in the
Consolidated
Balance Sheet
     Financial
Instruments
     Cash
Collateral
Received
     Net
Amounts
     Net Amounts of
Assets Presented
in the
Consolidated
Balance Sheet
     Financial
Instruments
     Cash
Collateral
Received
     Net
Amounts
 
(millions)                                                        

Commodity contracts:

                       

Over-the-counter

   $ 206      $ 6      $ —        $ 200      $ 211      $ 14      $ —        $ 197  

Exchange

     42        42        —          —          44        44        —          —    

Interest rate contracts:

                       

Over-the-counter

     20        11        —          9        17        9        —          8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 268      $ 59      $ —        $ 209      $ 272      $ 67      $ —        $ 205  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
    March 31, 2017     December 31, 2016  
    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)                                    

Commodity contracts:

           

Over-the-counter

  $ 21     $ —       $ 21     $ 23     $ —       $ 23  

Exchange

    61       —         61       71       —         71  

Interest rate contracts:

           

Over-the-counter

    59       —         59       53       —         53  

Foreign currency contracts:

           

Over-the-counter

    6       —         6       6       —         6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives, subject to a master netting or similar arrangement

    147       —         147       153       —         153  

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

    3       —         3       2       —         2  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 150     $ —       $ 150     $ 155     $ —       $ 155  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

          March 31, 2017                 December 31, 2016        
          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)                                                

Commodity contracts:

               

Over-the-counter

  $ 21     $ 6     $ 2     $ 13     $ 23     $ 14     $ —       $ 9  

Exchange

    61       42       19       —         71       44       27       —    

Interest rate contracts:

               

Over-the-counter

    59       11       —         48       53       9       —         44  

Foreign currency contracts:

               

Over-the-counter

    6       —         —         6       6       —         —         6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 147     $ 59     $ 21     $ 67     $ 153     $ 67     $ 27     $ 59  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Volumes

The following table presents the volume of Dominion’s derivative activity at March 31, 2017. These volumes are based on open derivative positions and represent the combined absolute value of its long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of its long and short positions.

 

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Table of Contents
     Current      Noncurrent  

Natural Gas (bcf):

     

Fixed price(1)

     92        11  

Basis

     194        607  

Electricity (MWh):

     

Fixed price

     13,457,158        1,537,046  

FTRs

     19,361,385        —    

Liquids (Gal)(2)

     60,968,672        —    

Interest rate(3)

   $ 2,050,000,000      $ 4,953,640,679  

Foreign currency(3)(4)

   $ —        $ 280,000,000  
  

 

 

    

 

 

 

 

(1) Includes options.
(2) Includes NGLs and oil.
(3) Maturity is determined based on final settlement period.
(4) Euro equivalent volumes are €250,000,000.

Ineffectiveness and AOCI

For the three months ended March 31, 2017 and 2016, gains or losses on hedging instruments determined to be ineffective and amounts excluded from the assessment of effectiveness were not material. Amounts excluded from the assessment of effectiveness include gains or losses attributable to changes in the time value of options and changes in the differences between spot prices and forward prices.

The following table presents selected information related to gains (losses) on cash flow hedges included in AOCI in Dominion’s Consolidated Balance Sheet at March 31, 2017:

 

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

Commodities:

        

Gas

   $ 7      $ 7        33 months  

Electricity

     (4      (4      9 months  

Interest rate

     (267      (6      393 months  

Foreign currency

     4        (1      111 months  
  

 

 

    

 

 

    

 

 

 

Total

   $ (260    $ (4   
  

 

 

    

 

 

    

 

 

 

The amounts that will be reclassified from AOCI to earnings will generally be offset by the recognition of the hedged transactions (e.g., interest payments) 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, interest rates and foreign currency exchange rates.

Fair Value and Gains and Losses on Derivative Instruments

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

 

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

At March 31, 2017

        

ASSETS

        

Current Assets

        

Commodity

   $ 33      $ 107      $ 140  

Interest rate

     19        —          19  
  

 

 

    

 

 

    

 

 

 

Total current derivative assets(1)

     52        107        159  
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents
                                                                         

Noncurrent Assets

        

Commodity

     —          114        114  

Interest rate

     1        —          1  
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative assets(2)

     1        114        115  
  

 

 

    

 

 

    

 

 

 

Total derivative assets

   $ 53      $ 221      $ 274  
  

 

 

    

 

 

    

 

 

 

LIABILITIES

        

Current Liabilities

        

Commodity

   $ 29      $ 53      $ 82  

Interest rate

     35        —          35  

Foreign currency

     1        —          1  
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities(3)

     65        53        118  
  

 

 

    

 

 

    

 

 

 

Noncurrent Liabilities

        

Commodity

     —          3        3  

Interest rate

     24        —          24  

Foreign currency

     5        —          5  
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative liabilities(4)

     29        3        32  
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

   $ 94      $ 56      $ 150  
  

 

 

    

 

 

    

 

 

 

At December 31, 2016

        

ASSETS

        

Current Assets

        

Commodity

   $ 29      $ 101      $ 130  

Interest rate

     10        —          10  
  

 

 

    

 

 

    

 

 

 

Total current derivative assets(1)

     39        101        140  
  

 

 

    

 

 

    

 

 

 

Noncurrent Assets

        

Commodity

     —          132        132  

Interest rate

     7        —          7  
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative assets(2)

     7        132        139  
  

 

 

    

 

 

    

 

 

 

Total derivative assets

   $ 46      $ 233      $ 279  
  

 

 

    

 

 

    

 

 

 

LIABILITIES

        

Current Liabilities

        

Commodity

   $ 51      $ 41      $ 92  

Interest rate

     33        —          33  

Foreign currency

     3        —          3  
  

 

 

    

 

 

    

 

 

 

Total current derivative liabilities(3)

     87        41        128  
  

 

 

    

 

 

    

 

 

 

Noncurrent Liabilities

        

Commodity

     1        3        4  

Interest rate

     20        —          20  

Foreign currency

     3        —          3  
  

 

 

    

 

 

    

 

 

 

Total noncurrent derivative liabilities(4)

     24        3        27  
  

 

 

    

 

 

    

 

 

 

Total derivative liabilities

   $ 111      $ 44      $ 155  
  

 

 

    

 

 

    

 

 

 

 

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

 

39


Table of Contents

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

 

Derivatives in Cash Flow Hedging Relationships

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

Three Months Ended March 31, 2017

     

Derivative type and location of gains (losses):

     

Commodity:

     

Operating revenue

    $ 62    

Purchased gas

      1    

Electric fuel and other energy-related purchases

      (1  
 

 

 

   

 

 

   

 

 

 

Total commodity

  $ 87     $ 62     $ —    
 

 

 

   

 

 

   

 

 

 

Interest rate(3)

    1       (11     8  

Foreign currency(4)

    (18     (14     —    
 

 

 

   

 

 

   

 

 

 

Total

  $ 70     $ 37     $ 8  
 

 

 

   

 

 

   

 

 

 

Three Months Ended March 31, 2016

     

Derivative type and location of gains (losses):

     

Commodity:

     

Operating revenue

    $ 114    

Purchased gas

      (6  

Electric fuel and other energy-related purchases

      (3  
 

 

 

   

 

 

   

 

 

 

Total commodity

  $ 173     $ 105     $ —    
 

 

 

   

 

 

   

 

 

 

Interest rate(3)

    (87     (3     (133
 

 

 

   

 

 

   

 

 

 

Total

  $ 86     $ 102     $ (133
 

 

 

   

 

 

   

 

 

 

 

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

 

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

Three Months Ended

March 31,

 

Derivatives Not Designated as Hedging Instruments

   2017      2016  
(millions)              

Derivative type and location of gains (losses):

     

Commodity:

     

Operating revenue

   $ 4      $ 2  

Purchased gas

     16        —    

Electric fuel and other energy-related purchases

     (23      (23

Other operations and maintenance

     (1      —    
  

 

 

    

 

 

 

Total

   $ (4    $ (21
  

 

 

    

 

 

 

 

(1) Includes derivative activity amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in Dominion’s Consolidated Statements of Income.

 

40


Table of Contents

Virginia Power

Balance Sheet Presentation

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

 

    March 31, 2017     December 31, 2016  
    Gross
Amounts of
Recognized
Assets
    Gross
Amounts
Offset in the
Consolidated
Balance Sheet
    Net Amounts of
Assets
Presented in the
Consolidated
Balance Sheet
    Gross
Amounts of
Recognized
Assets
    Gross
Amounts
Offset in the
Consolidated
Balance Sheet
    Net Amounts of
Assets Presented
in the
Consolidated
Balance Sheet
 
(millions)                                    

Commodity contracts:

           

Over-the-counter

  $ 143     $ —       $ 143     $ 147     $ —       $ 147  

Interest rate contracts:

           

Over-the-counter

    8       —         8       6       —         6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives, subject to a master netting or similar arrangement

    151       —         151       153       —         153  

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

    27       —         27       41       —         41  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 178     $ —       $ 178     $ 194     $ —       $ 194  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

          March 31, 2017                 December 31, 2016        
          Gross Amounts Not Offset
in the Consolidated
Balance Sheet
                Gross Amounts Not Offset
in the Consolidated Balance
Sheet
       
    Net Amounts of
Assets Presented
in the
Consolidated
Balance Sheet
    Financial
Instruments
    Cash
Collateral
Received
    Net
Amounts
    Net Amounts of
Assets Presented
in the
Consolidated
Balance Sheet
    Financial
Instruments
    Cash
Collateral
Received
    Net
Amounts
 
(millions)                                                

Commodity contracts:

               

Over-the-counter

  $ 143     $ 1     $ —       $ 142     $ 147     $ 2     $ —       $ 145  

Interest rate contracts:

               

Over-the-counter

    8       —         —         8       6       —         —         6