UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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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 |
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Exact name of registrants as specified in their charters, address of principal executive offices and registrants’ telephone number |
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I.R.S. Employer Identification Number |
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DOMINION ENERGY GAS HOLDINGS, LLC
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State or other jurisdiction of incorporation or organization of the registrants:
Securities registered pursuant to Section 12(b) of the Act:
Registrant |
Trading Symbol |
Title of Each Class |
Name of Each Exchange on Which Registered |
DOMINION ENERGY, INC. |
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DOMINION ENERGY GAS HOLDINGS, LLC |
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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 Energy, Inc.
Dominion Energy Gas Holdings, LLC
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Dominion Energy, Inc.
Dominion Energy Gas Holdings, LLC
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an 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 Energy, Inc.
Large accelerated filer |
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Accelerated filer |
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Emerging growth company |
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Non-accelerated filer |
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Smaller reporting company |
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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 |
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Accelerated filer |
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Emerging growth company |
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Non-accelerated filer |
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Smaller reporting company |
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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 Energy Gas Holdings, LLC
Large accelerated filer |
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Accelerated filer |
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Emerging growth company |
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Non-accelerated filer |
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Smaller reporting company |
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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 Energy, Inc. Yes
Dominion Energy Gas Holdings, LLC Yes
At October 11, 2019, the latest practicable date for determination, Dominion Energy, Inc. had
This combined Form 10-Q represents separate filings by Dominion Energy, Inc., Virginia Electric and Power Company and Dominion Energy 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 Energy Gas Holdings, LLC make no representations as to the information relating to Dominion Energy, Inc.’s other operations.
VIRGINIA ELECTRIC AND POWER COMPANY AND DOMINION ENERGY 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.
COMBINED INDEX
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Page Number |
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3 |
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Item 1. |
8 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
106 |
Item 3. |
124 |
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Item 4. |
125 |
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Item 1. |
126 |
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Item 1A. |
126 |
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Item 2. |
126 |
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Item 6. |
127 |
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2
GLOSSARY OF TERMS
The following abbreviations or acronyms used in this Form 10-Q are defined below:
Abbreviation or Acronym |
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Definition |
2016 Equity Units |
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Dominion Energy’s 2016 Series A Equity Units issued in August 2016, initially in the form of 2016 Series A Corporate Units, consisting of a stock purchase contract and a 1/40 interest in RSNs issued by Dominion Energy |
2019 Equity Units |
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Dominion Energy’s 2019 Series A Equity Units issued in June 2019, initially in the form of 2019 Series A Corporate Units, consisting of a stock purchase contract and a 1/10 interest in a share of the Series A Preferred Stock |
2017 Tax Reform Act |
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An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (previously known as The Tax Cuts and Jobs Act) enacted on December 22, 2017 |
ACE Rule |
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Affordable Clean Energy Rule |
AFUDC |
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Allowance for funds used during construction |
Align RNG |
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Align RNG, LLC, a joint venture between Dominion Energy and Smithfield Foods, Inc. |
AMI |
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Advanced Metering Infrastructure |
AOCI |
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Accumulated other comprehensive income (loss) |
ARO |
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Asset retirement obligation |
Atlantic Coast Pipeline |
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Atlantic Coast Pipeline, LLC, a limited liability company owned by Dominion Energy, Duke and Southern Company Gas |
Atlantic Coast Pipeline Project |
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The approximately 600-mile natural gas pipeline running from West Virginia through Virginia to North Carolina which will be owned by Dominion Energy, Duke and Southern Company Gas and constructed and operated by DETI |
BACT |
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Best available control technology |
Bankruptcy Court |
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U.S. Bankruptcy Court for the Southern District of New York |
bcf |
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Billion cubic feet |
Blue Racer |
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Blue Racer Midstream, LLC, a joint venture between Caiman Energy II, LLC and FR BR Holdings, LLC effective December 2018 |
Brookfield |
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Brookfield Super-Core Infrastructure Partners, an infrastructure fund managed by Brookfield Asset Management Inc. |
Brunswick County |
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A 1,376 MW combined-cycle, natural gas-fired power station in Brunswick County, Virginia |
CAA |
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Clean Air Act |
CAISO |
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California Independent System Operator |
CCR |
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Coal combustion residual |
CEO |
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Chief Executive Officer |
CEP |
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Capital Expenditure Program, as established by House Bill 95, Ohio legislation enacted in 2011, deployed by East Ohio to recover certain costs associated with capital investment |
CERCLA |
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Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as Superfund |
CFO |
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Chief Financial Officer |
CO2 |
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Carbon dioxide |
Companies |
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Dominion Energy, Virginia Power and Dominion Energy Gas, collectively |
3
Abbreviation or Acronym |
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Definition |
Cooling degree days |
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Units measuring the extent to which the average daily temperature is greater than 65 degrees Fahrenheit, or 75 degrees Fahrenheit in DESC’s service territory, calculated as the difference between 65 or 75 degrees, as applicable, and the average temperature for that day |
Cove Point |
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Dominion Energy Cove Point LNG, LP |
CPCN |
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Certificate of Public Convenience and Necessity |
CWA |
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Clean Water Act |
DECG |
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Dominion Energy Carolina Gas Transmission, LLC |
DES |
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Dominion Energy Services, Inc. |
DESC |
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The legal entity, Dominion Energy South Carolina, Inc. (formerly known as South Carolina Electric & Gas Company), one or more of its consolidated subsidiaries or operating segments, or the entirety of Dominion Energy South Carolina, Inc. and its consolidated subsidiaries |
DETI |
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Dominion Energy Transmission, Inc. |
DGI |
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Dominion Generation, Inc. |
DOE |
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U.S. Department of Energy |
Dominion Energy |
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The legal entity, Dominion Energy, Inc., one or more of its consolidated subsidiaries (other than Virginia Power and Dominion Energy Gas) or operating segments, or the entirety of Dominion Energy, Inc. and its consolidated subsidiaries |
Dominion Energy Gas |
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The legal entity, Dominion Energy Gas Holdings, LLC, one or more of its consolidated subsidiaries or operating segment, or the entirety of Dominion Energy Gas Holdings, LLC and its consolidated subsidiaries |
Dominion Energy Midstream |
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The legal entity, Dominion Energy Midstream Partners, LP, one or more of its consolidated subsidiaries, Cove Point GP Holding Company, LLC, Iroquois GP Holding Company, LLC, DECG and Dominion Energy Questar Pipeline, or the entirety of Dominion Energy Midstream Partners, LP and its consolidated subsidiaries |
Dominion Energy Questar Pipeline |
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The legal entity, Dominion Energy Questar Pipeline, LLC, one or more of its consolidated subsidiaries, or the entirety of Dominion Energy Questar Pipeline, LLC and its consolidated subsidiaries |
DSM |
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Demand-side management |
Dth |
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Dekatherm |
Duke |
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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 |
East Ohio |
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The East Ohio Gas Company, doing business as Dominion Energy Ohio |
Eastern Market Access Project |
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Project to provide 150,000 Dths/day of transportation service to help meet demand for natural gas for Washington Gas Light Company, a local gas utility serving customers in D.C., Virginia and Maryland |
EPA |
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U.S. Environmental Protection Agency |
EPS |
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Earnings per share |
FASB |
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Financial Accounting Standards Board |
FERC |
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Federal Energy Regulatory Commission |
FILOT |
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Fee in lieu of taxes |
Four Brothers |
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Four Brothers Solar, LLC, a limited liability company owned by Dominion Energy and Four Brothers Holdings, LLC, a subsidiary of GIP effective August 2018 |
FTRs |
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Financial transmission rights |
GAAP |
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U.S. generally accepted accounting principles |
Gal |
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Gallon |
Gas Infrastructure |
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Gas Infrastructure Group operating segment |
GENCO |
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South Carolina Generating Company, Inc. |
GHG |
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Greenhouse gas |
4
Abbreviation or Acronym |
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Definition |
GIP |
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The legal entity, Global Infrastructure Partners, one or more of its consolidated subsidiaries (including, effective August 2018, Four Brothers Holdings, LLC, Granite Mountain Renewables, LLC, and Iron Springs Renewables, LLC) or operating segments, or the entirety of Global Infrastructure Partners and its consolidated subsidiaries |
Granite Mountain |
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Granite Mountain Holdings, LLC, a limited liability company owned by Dominion Energy and Granite Mountain Renewables, LLC, a subsidiary of GIP effective August 2018 |
GreenHat |
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GreenHat Energy, LLC |
GTSA |
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Virginia Grid Transformation and Security Act of 2018 |
Heating degree days |
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Units measuring the extent to which the average daily temperature is less than 65 degrees Fahrenheit, or 60 degrees Fahrenheit in DESC’s service territory, calculated as the difference between 65 or 60 degrees, as applicable, and the average temperature for that day |
Hope |
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Hope Gas, Inc., doing business as Dominion Energy West Virginia |
Iron Springs |
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Iron Springs Holdings, LLC, a limited liability company owned by Dominion Energy and Iron Springs Renewables, LLC, a subsidiary of GIP effective August 2018 |
Iroquois |
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Iroquois Gas Transmission System, L.P. |
ISO-NE |
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ISO New England, Inc. |
June 2006 hybrids |
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Dominion Energy’s 2006 Series A Enhanced Junior Subordinated Notes due 2066 |
Kewaunee |
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Kewaunee nuclear power station |
kV |
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Kilovolt |
Liquefaction Facility |
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A natural gas export/liquefaction facility at Cove Point |
LNG |
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Liquefied natural gas |
MATS |
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Utility Mercury and Air Toxics Standard Rule |
MD&A |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
MGD |
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Million gallons a day |
MW |
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Megawatt |
MWh |
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Megawatt hour |
NAV |
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Net asset value |
NGL |
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Natural gas liquid |
NND Project |
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V.C. Summer Units 2 and 3 new nuclear development project under which SCANA and Santee Cooper undertook to construct two Westinghouse AP1000 Advanced Passive Safety nuclear units in Jenkinsville, South Carolina |
North Carolina Commission |
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North Carolina Utilities Commission |
NRC |
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U.S. Nuclear Regulatory Commission |
NSPS |
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New Source Performance Standards |
NYSE |
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New York Stock Exchange |
ODEC |
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Old Dominion Electric Cooperative |
Ohio Commission |
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Public Utilities Commission of Ohio |
Order 1000 |
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Order issued by FERC adopting requirements for electric transmission planning, cost allocation and development |
PIPP |
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Percentage of Income Payment Plan deployed by East Ohio |
PIR |
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Pipeline Infrastructure Replacement program deployed by East Ohio |
PJM |
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PJM Interconnection, L.L.C. |
5
Abbreviation or Acronym |
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Definition |
Power Delivery |
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Power Delivery Group operating segment |
Power Generation |
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Power Generation Group operating segment |
PREP |
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Pipeline Replacement and Expansion Program, a program of replacing, upgrading and expanding natural gas utility infrastructure deployed by Hope |
PSD |
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Prevention of significant deterioration |
PSNC |
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Public Service Company of North Carolina, Incorporated, doing business as Dominion Energy North Carolina |
PURA |
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Connecticut’s Public Utility Regulatory Authority |
Questar Gas |
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Questar Gas Company, doing business as Dominion Energy Utah, Dominion Energy Wyoming and Dominion Energy Idaho |
RICO |
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Racketeer Influenced and Corrupt Organizations Act |
Rider BW |
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A rate adjustment clause associated with the recovery of costs related to Brunswick County |
Rider E |
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A rate adjustment clause associated with the recovery of costs related to certain capital projects at Virginia Power’s electric generating stations to comply with federal and state environmental laws and regulations |
Rider U |
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A rate adjustment clause associated with the recovery of costs of new underground distribution facilities |
Rider US-2 |
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A rate adjustment clause associated with the recovery of costs related to Woodland, Scott Solar and Whitehouse |
ROE |
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Return on equity |
RSN |
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Remarketable subordinated note |
Santee Cooper |
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South Carolina Public Service Authority |
SBL Holdco |
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SBL Holdco, LLC, a wholly-owned subsidiary of DGI |
SCANA |
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The legal entity, SCANA Corporation, one or more of its consolidated subsidiaries or the entirety of SCANA Corporation and its consolidated subsidiaries |
SCANA Combination |
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Dominion Energy’s acquisition of SCANA completed on January 1, 2019 pursuant to the terms of the agreement and plan of merger entered on January 2, 2018 between Dominion Energy and SCANA |
SCANA Merger Approval Order |
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Final order issued by the South Carolina Commission on December 21, 2018 setting forth its approval of the SCANA Combination |
SCDHEC |
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South Carolina Department of Health and Environmental Control |
SCDOR |
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South Carolina Department of Revenue |
Scott Solar |
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A 17 MW utility-scale solar power station in Powhatan County, Virginia |
SEC |
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U.S. Securities and Exchange Commission |
September 2006 hybrids |
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Dominion Energy’s 2006 Series B Enhanced Junior Subordinated Notes due 2066 |
Series A Preferred Stock |
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Dominion Energy’s 1.75% Series A Cumulative Perpetual Convertible Preferred Stock, without par value, with a liquidation preference of $1,000 per share |
South Carolina Commission |
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Public Service Commission of South Carolina |
Southeast Energy |
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Southeast Energy Group operating segment |
Standard & Poor’s |
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Standard & Poor’s Ratings Services, a division of S&P Global Inc. |
Terra Nova Renewable Partners |
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A partnership comprised primarily of institutional investors advised by J.P. Morgan Asset Management-Global Real Assets |
Three Cedars |
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Granite Mountain and Iron Springs, collectively |
6
Abbreviation or Acronym |
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Definition |
UEX Utah Commission |
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Uncollectible Expense Rider deployed by East Ohio Utah Public Service Commission |
VDEQ |
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Virginia Department of Environmental Quality |
VEBA |
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Voluntary Employees' Beneficiary Association |
VIE |
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Variable interest entity |
Virginia Commission |
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Virginia State Corporation Commission |
Virginia Power |
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The legal entity, Virginia Electric and Power Company, one or more of its consolidated subsidiaries or operating segments, or the entirety of Virginia Electric and Power Company and its consolidated subsidiaries |
VOC |
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Volatile organic compounds |
WECTEC |
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WECTEC Global Project Services, Inc. (formerly known as Stone & Webster, Inc.), a wholly-owned subsidiary of Westinghouse |
West Virginia Commission |
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Public Service Commission of West Virginia |
Westinghouse |
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Westinghouse Electric Company LLC |
Whitehouse |
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A 20 MW utility-scale solar power station in Louisa County, Virginia |
White River Hub |
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White River Hub, LLC |
Woodland |
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A 19 MW utility-scale solar power station in Isle of Wight County, Virginia |
Wrangler |
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Wrangler Retail Gas Holdings, LLC, a partnership between Dominion Energy and Interstate Gas Supply, Inc. |
Wyoming Commission |
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Wyoming Public Service Commission |
7
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOMINION ENERGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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(millions, except per share amounts) |
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Operating Revenue(1) |
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$ |
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$ |
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$ |
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$ |
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Operating Expenses |
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Electric fuel and other energy-related purchases |
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Purchased electric capacity |
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Purchased gas |
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Other operations and maintenance |
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Depreciation, depletion and amortization |
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Other taxes |
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Impairment of assets and other charges |
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Total operating expenses |
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Income from operations |
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Other income |
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Interest and related charges |
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Income from operations including noncontrolling interests before income tax expense |
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Income tax expense |
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Net Income Including Noncontrolling Interests |
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Noncontrolling Interests |
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Net Income Attributable to Dominion Energy |
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$ |
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$ |
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$ |
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$ |
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Earnings Per Common Share |
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Net income attributable to Dominion Energy - Basic |
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$ |
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$ |
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$ |
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$ |
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Net income attributable to Dominion Energy - Diluted |
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(1) |
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The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
8
DOMINION ENERGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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(millions) |
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Net income including noncontrolling interests |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss), net of taxes: |
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Net deferred gains (losses) on derivatives-hedging activities(1) |
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( |
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( |
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Changes in unrealized net gains (losses) on investment securities(2) |
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( |
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( |
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Changes in net unrecognized pension and other postretirement benefit costs(3) |
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( |
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— |
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— |
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Amounts reclassified to net income: |
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Net derivative (gains) losses-hedging activities(4) |
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Net realized (gains) losses on investment securities(5) |
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( |
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( |
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Net pension and other postretirement benefit costs(6) |
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Changes in other comprehensive income from equity method investees(7) |
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( |
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— |
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( |
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Total other comprehensive income (loss) |
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( |
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( |
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Comprehensive income including noncontrolling interests |
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Comprehensive income attributable to noncontrolling interests |
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Comprehensive income attributable to Dominion Energy |
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$ |
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$ |
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$ |
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$ |
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(1) |
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(2) |
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(3) |
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(4) |
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(5) |
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(6) |
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(7) |
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The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
9
DOMINION ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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September 30, 2019 |
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December 31, 2018(1) |
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(millions) |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Customer receivables (less allowance for doubtful accounts of $ |
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|
Other receivables (less allowance for doubtful accounts of $ |
|
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
|
|
Regulatory assets |
|
|
|
|
|
|
|
|
Derivative assets |
|
|
|
|
|
|
|
|
Prepayments |
|
|
|
|
|
|
|
|
Assets held for sale |
|
|
|
|
|
|
— |
|
Other |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
Nuclear decommissioning trust funds |
|
|
|
|
|
|
|
|
Investment in equity method affiliates |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Total investments |
|
|
|
|
|
|
|
|
Property, Plant and Equipment |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
|
|
|
Accumulated depreciation, depletion and amortization |
|
|
( |
) |
|
|
( |
) |
Total property, plant and equipment, net |
|
|
|
|
|
|
|
|
Deferred Charges and Other Assets |
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
Intangible assets, net |
|
|
|
|
|
|
|
|
Regulatory assets |
|
|
|
|
|
|
|
|
Operating lease assets |
|
|
|
|
|
|
— |
|
Pension and other postretirement benefit assets |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Total deferred charges and other assets |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
See Note 10 for amounts attributable to related parties. |
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
10
DOMINION ENERGY, INC.
CONSOLIDATED BALANCE SHEETS—(Continued)
(Unaudited)
|
|
September 30, 2019 |
|
|
December 31, 2018(1) |
|
||
(millions) |
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Securities due within one year |
|
$ |
|
|
|
$ |
|
|
Credit facility borrowings |
|
|
— |
|
|
|
|
|
Short-term debt |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
|
|
|
Accrued interest, payroll and taxes |
|
|
|
|
|
|
|
|
Regulatory liabilities |
|
|
|
|
|
|
|
|
Liabilities held for sale |
|
|
|
|
|
|
— |
|
Other(2) |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
|
Long-Term Debt |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
Junior subordinated notes |
|
|
|
|
|
|
|
|
Remarketable subordinated notes |
|
|
— |
|
|
|
|
|
Total long-term debt |
|
|
|
|
|
|
|
|
Deferred Credits and Other Liabilities |
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
|
|
|
|
|
|
|
Regulatory liabilities |
|
|
|
|
|
|
|
|
Asset retirement obligations |
|
|
|
|
|
|
|
|
Operating lease liabilities |
|
|
|
|
|
|
— |
|
Pension and other postretirement benefit liability |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Total deferred credits and other liabilities |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
Commitments and Contingencies (see Note 18) |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Preferred stock(3) |
|
|
|
|
|
|
— |
|
Common stock – no par(4) |
|
|
|
|
|
|
|
|
Retained earnings |
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Total shareholders' equity |
|
|
|
|
|
|
|
|
Noncontrolling interests |
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
|
|
|
$ |
|
|
(1) |
Dominion Energy’s Consolidated Balance Sheet at December 31, 2018 has been derived from the audited Consolidated Balance Sheet at that date. |
(2) |
See Note 10 for amounts attributable to related parties. |
(3) |
|
(4) |
|
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
11
DOMINION ENERGY, INC.
CONSOLIDATED STATEMENTS OF EQUITY - QUARTER-TO-DATE
(Unaudited)
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Dominion Energy Shareholders |
|
|
Total |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Retained Earnings |
|
|
AOCI |
|
|
Shareholders' Equity |
|
|
Noncontrolling Interests |
|
|
Total Equity |
|
|||||||||
(millions, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income including noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock awards (net of change in unearned compensation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends ($ and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income including noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock awards (net of change in unearned compensation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends ($ share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Common stock dividends ($ share) and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
September 30, 2019 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
12
DOMINION ENERGY, INC.
CONSOLIDATED STATEMENTS OF EQUITY - YEAR-TO-DATE
(Unaudited)
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Dominion Energy Shareholders |
|
|
Total |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Retained Earnings |
|
|
AOCI |
|
|
Shareholders' Equity |
|
|
Noncontrolling Interests |
|
|
Total Equity |
|
|||||||||
(millions, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Cumulative-effect of changes in accounting principles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
Net income including noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of Dominion Energy Midstream common units - net of offering costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Remeasurement of noncontrolling interest in Dominion Energy Midstream |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
Stock awards (net of change in unearned compensation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends ($ and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
September 30, 2018 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income including noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock purchase contract component of 2019 Equity Units(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Acquisition of SCANA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of public interest in Dominion Energy Midstream |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Stock awards (net of change in unearned compensation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends ($ share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Common stock dividends ($ share) and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
September 30, 2019 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
See Note 17 for further information. |
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
13
DOMINION ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, |
|
2019 |
|
|
2018 |
|
||
(millions) |
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
Net income including noncontrolling interests |
|
$ |
|
|
|
$ |
|
|
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization (including nuclear fuel) |
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
|
|
|
|
|
|
|
Provision for refunds and rate credits to electric utility customers |
|
|
|
|
|
|
|
|
Impairment of assets and other charges |
|
|
|
|
|
|
|
|
Charge related to a voluntary retirement program |
|
|
|
|
|
|
— |
|
Gains on sales of assets and equity method investments |
|
|
( |
) |
|
|
( |
) |
Net gains on nuclear decommissioning trust funds and other investments |
|
|
( |
) |
|
|
( |
) |
Charge associated with future ash pond and landfill closure costs |
|
|
— |
|
|
|
|
|
Revision to future ash pond and landfill closure costs |
|
|
( |
) |
|
|
— |
|
Other adjustments |
|
|
( |
) |
|
|
— |
|
Changes in: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
|
|
|
|
Inventories |
|
|
( |
) |
|
|
( |
) |
Deferred fuel and purchased gas costs, net |
|
|
|
|
|
|
( |
) |
Prepayments |
|
|
|
|
|
|
( |
) |
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Accrued interest, payroll and taxes |
|
|
( |
) |
|
|
( |
) |
Customer deposits |
|
|
( |
) |
|
|
|
|
Margin deposit assets and liabilities |
|
|
|
|
|
|
( |
) |
Net realized and unrealized changes related to derivative activities |
|
|
|
|
|
|
|
|
Pension and other postretirement benefits |
|
|
( |
) |
|
|
( |
) |
Other operating assets and liabilities |
|
|
( |
) |
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
Plant construction and other property additions (including nuclear fuel) |
|
|
( |
) |
|
|
( |
) |
Cash and restricted cash acquired in the SCANA Combination |
|
|
|
|
|
|
— |
|
Acquisition of solar development projects |
|
|
( |
) |
|
|
( |
) |
Proceeds from sales of securities |
|
|
|
|
|
|
|
|
Purchases of securities |
|
|
( |
) |
|
|
( |
) |
Proceeds from sales of assets and equity method investments |
|
|
|
|
|
|
|
|
Contributions to equity method affiliates |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
|
|
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing Activities |
|
|
|
|
|
|
|
|
Issuance (repayment) of short-term debt, net |
|
|
|
|
|
|
( |
) |
Issuance of short-term notes |
|
|
|
|
|
|
|
|
Repayment of short-term notes |
|
|
— |
|
|
|
( |
) |
Credit facility borrowings |
|
|
— |
|
|
|
|
|
Repayment of credit facility borrowings |
|
|
( |
) |
|
|
— |
|
Issuance of long-term debt |
|
|
|
|
|
|
|
|
Repayment of long-term debt, including redemption premiums |
|
|
( |
) |
|
|
( |
) |
Issuance of 2019 Equity Units |
|
|
|
|
|
|
— |
|
Issuance of common stock |
|
|
|
|
|
|
|
|
Common dividend payments |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Increase in cash, restricted cash and equivalents |
|
|
|
|
|
|
|
|
Cash, restricted cash and equivalents at beginning of period |
|
|
|
|
|
|
|
|
Cash, restricted cash and equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
Significant noncash investing and financing activities:(1)(2)(3) |
|
|
|
|
|
|
|
|
Accrued capital expenditures |
|
$ |
|
|
|
$ |
|
|
Leases(4) |
|
|
|
|
|
|
— |
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
14
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenue(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric fuel and other energy-related purchases(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased (excess) electric capacity |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other operations and maintenance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliated suppliers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of assets and other charges |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and related charges(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
15
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Other comprehensive income (loss), net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred gains (losses) on derivatives-hedging activities(1) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Changes in unrealized net gains (losses) on nuclear decommissioning trust funds(2) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
Amounts reclassified to net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative losses-hedging activities(3) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Net realized gains on nuclear decommissioning trust funds(4) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Total other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Comprehensive income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
16
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
September 30, 2019 |
|
|
December 31, 2018(1) |
|
||
(millions) |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
Customer receivables (less allowance for doubtful accounts of $ |
|
|
|
|
|
|
|
|
Other receivables (less allowance for doubtful accounts of $ |
|
|
|
|
|
|
|
|
Affiliated receivables |
|
|
|
|
|
|
|
|
Inventories (average cost method) |
|
|
|
|
|
|
|
|
Other(2) |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
Nuclear decommissioning trust funds |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Total investments |
|
|
|
|
|
|
|
|
Property, Plant and Equipment |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
|
|
|
Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Total property, plant and equipment, net |
|
|
|
|
|
|
|
|
Deferred Charges and Other Assets |
|
|
|
|
|
|
|
|
Regulatory assets |
|
|
|
|
|
|
|
|
Operating lease assets |
|
|
|
|
|
|
— |
|
Other(2) |
|
|
|
|
|
|
|
|
Total deferred charges and other assets |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
See Note 20 for amounts attributable to affiliates. |
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
17
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED BALANCE SHEETS—(Continued)
(Unaudited)
|
|
September 30, 2019 |
|
|
December 31, 2018(1) |
|
||
(millions) |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDER’S EQUITY |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Securities due within one year |
|
$ |
|
|
|
$ |
|
|
Short-term debt |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
|
|
|
Payables to affiliates |
|
|
|
|
|
|
|
|
Affiliated current borrowings |
|
|
|
|
|
|
|
|
Accrued interest, payroll and taxes |
|
|
|
|
|
|
|
|
Derivative liabilities(2) |
|
|
|
|
|
|
|
|
Regulatory liabilities |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
|
Long-Term Debt |
|
|
|
|
|
|
|
|
Deferred Credits and Other Liabilities |
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
|
|
|
|
|
|
|
Asset retirement obligations |
|
|
|
|
|
|
|
|
Regulatory liabilities |
|
|
|
|
|
|
|
|
Operating lease liabilities |
|
|
|
|
|
|
— |
|
Other(2) |
|
|
|
|
|
|
|
|
Total deferred credits and other liabilities |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
Commitments and Contingencies (see Note 18) |
|
|
|
|
|
|
|
|
Common Shareholder’s Equity |
|
|
|
|
|
|
|
|
Common stock – no par(3) |
|
|
|
|
|
|
|
|
Other paid-in capital |
|
|
|
|
|
|
|
|
Retained earnings |
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Total common shareholder’s equity |
|
|
|
|
|
|
|
|
Total liabilities and shareholder’s equity |
|
$ |
|
|
|
$ |
|
|
(1) |
Virginia Power’s Consolidated Balance Sheet at December 31, 2018 has been derived from the audited Consolidated Balance Sheet at that date. |
(2) |
See Note 20 for amounts attributable to affiliates. |
(3) |
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
18
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER’S EQUITY
(Unaudited)
QUARTER-TO-DATE
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Shares |
|
|
Amount |
|
|
Other Paid-In Capital |
|
|
Retained Earnings |
|
|
AOCI |
|
|
Total |
|
||||||
(millions, except for shares) |
|
(thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
September 30, 2019 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
YEAR-TO-DATE
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Shares |
|
|
Amount |
|
|
Other Paid-In Capital |
|
|
Retained Earnings |
|
|
AOCI |
|
|
Total |
|
||||||
(millions, except for shares) |
|
(thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Cumulative-effect of changes in accounting principles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
September 30, 2019 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
19
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, |
|
2019 |
|
|
|
|
2018 |
|
||
(millions) |
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
|
|
|
$ |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including nuclear fuel) |
|
|
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
|
( |
) |
|
|
|
|
|
|
Charge associated with future ash pond and landfill closure costs |
|
|
— |
|
|
|
|
|
|
|
Revision to future ash pond and landfill closure costs |
|
|
( |
) |
|
|
|
|
— |
|
Impairment of assets and other charges |
|
|
|
|
|
|
|
|
— |
|
Provision for rate credits to customers |
|
|
— |
|
|
|
|
|
|
|
Charge related to a voluntary retirement program |
|
|
|
|
|
|
|
|
— |
|
Other adjustments |
|
|
( |
) |
|
|
|
|
( |
) |
Changes in: |
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
( |
) |
|
|
|
|
( |
) |
Affiliated receivables and payables |
|
|
|
|
|
|
|
|
( |
) |
Inventories |
|
|
( |
) |
|
|
|
|
|
|
Prepayments |
|
|
( |
) |
|
|
|
|
( |
) |
Deferred fuel expenses, net |
|
|
|
|
|
|
|
|
( |
) |
Accounts payable |
|
|
( |
) |
|
|
|
|
( |
) |
Accrued interest, payroll and taxes |
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized changes related to derivative activities |
|
|
|
|
|
|
|
|
|
|
Asset retirement obligations |
|
|
|
|
|
|
|
|
( |
) |
Other operating assets and liabilities |
|
|
( |
) |
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
Plant construction and other property additions |
|
|
( |
) |
|
|
|
|
( |
) |
Purchases of nuclear fuel |
|
|
( |
) |
|
|
|
|
( |
) |
Acquisition of solar development projects |
|
|
( |
) |
|
|
|
|
( |
) |
Proceeds from sales of securities |
|
|
|
|
|
|
|
|
|
|
Purchases of securities |
|
|
( |
) |
|
|
|
|
( |
) |
Other |
|
|
( |
) |
|
|
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
|
|
( |
) |
Financing Activities |
|
|
|
|
|
|
|
|
|
|
Issuance of short-term debt, net |
|
|
|
|
|
|
|
|
|
|
Repayment of affiliated current borrowings, net |
|
|
( |
) |
|
|
|
|
( |
) |
Issuance of long-term debt |
|
|
|
|
|
|
|
|
|
|
Repayment of long-term debt |
|
|
( |
) |
|
|
|
|
( |
) |
Common dividend payments to parent |
|
|
( |
) |
|
|
|
|
( |
) |
Other |
|
|
( |
) |
|
|
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
|
|
( |
) |
Increase (decrease) in cash, restricted cash and equivalents |
|
|
( |
) |
|
|
|
|
|
|
Cash, restricted cash and equivalents at beginning of period |
|
|
|
|
|
|
|
|
|
|
Cash, restricted cash and equivalents at end of period |
|
$ |
|
|
|
|
|
$ |
|
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
|
|
Significant noncash investing activities:(1) |
|
|
|
|
|
|
|
|
|
|
Accrued capital expenditures |
|
$ |
|
|
|
|
|
$ |
|
|
Financing leases |
|
|
|
|
|
|
|
|
— |
|
(1) |
See Note 2 for noncash investing and financing activities related to the adoption of a new accounting standard for leasing arrangements. |
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
20
DOMINION ENERGY GAS HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenue(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased (excess) gas(1) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
Other energy-related purchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operations and maintenance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliated suppliers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of assets and other charges |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on sales of assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from equity method investee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and related charges(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.
21
DOMINION ENERGY GAS HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Other comprehensive income (loss), net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred gains (losses) on derivatives-hedging activities(1) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Changes in unrecognized pension and other postretirement benefit costs(2) |
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
— |
|
Amounts reclassified to net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative losses-hedging activities(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension and other postretirement benefit costs(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Comprehensive income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.
22
DOMINION ENERGY GAS HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
September 30, 2019 |
|
|
December 31, 2018(1) |
|
||
(millions) |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
Customer receivables (less allowance for doubtful accounts of less than $ |
|
|
|
|
|
|
|
|
Other receivables (less allowance for doubtful accounts of $ |
|
|
|
|
|
|
|
|
Affiliated receivables |
|
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
|
|
Regulatory assets |
|
|
|
|
|
|
|
|
Gas imbalances(2) |
|
|
|
|
|
|
|
|
Other(2) |
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
Property, Plant and Equipment |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
|
|
|
Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Total property, plant and equipment, net |
|
|
|
|
|
|
|
|
Deferred Charges and Other Assets |
|
|
|
|
|
|
|
|
Pension and other postretirement benefit assets(2) |
|
|
|
|
|
|
|
|
Operating lease assets |
|
|
|
|
|
|
— |
|
Other(2) |
|
|
|
|
|
|
|
|
Total deferred charges and other assets |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
See Note 20 for amounts attributable to related parties. |
The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.
23
DOMINION ENERGY GAS HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS—(Continued)
(Unaudited)
|
|
September 30, 2019 |
|
|
December 31, 2018(1) |
|
||
(millions) |
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Securities due within one year |
|
$ |
|
|
|
$ |
|
|
Short-term debt |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
|
|
|
Payables to affiliates |
|
|
|
|
|
|
|
|
Affiliated current borrowings |
|
|
|
|
|
|
|
|
Other(2) |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
|
Long-Term Debt |
|
|
|
|
|
|
|
|
Deferred Credits and Other Liabilities |
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
|
|
|
|
|
|
|
Regulatory liabilities |
|
|
|
|
|
|
|
|
Operating lease liabilities |
|
|
|
|
|
|
— |
|
Other |
|
|
|
|
|
|
|
|
Total deferred credits and other liabilities |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
Commitments and Contingencies (see Note 18) |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Membership interests |
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Total equity |
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
|
|
|
$ |
|
|
(1) |
Dominion Energy Gas’ Consolidated Balance Sheet at December 31, 2018 has been derived from the audited Consolidated Balance Sheet at that date. |
(2) |
See Note 20 for amounts attributable to related parties. |
The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.
24
DOMINION ENERGY GAS HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
QUARTER-TO-DATE
|
|
Membership Interests |
|
|
AOCI |
|
|
Total |
|
|||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net of tax |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
September 30, 2019 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
YEAR-TO-DATE
|
|
Membership Interests |
|
|
AOCI |
|
|
Total |
|
|||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Cumulative-effect of changes in accounting principles |
|
|
|
|
|
|
( |
) |
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net of tax |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
September 30, 2019 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.
25
DOMINION ENERGY GAS HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, |
|
2019 |
|
|
2018 |
|
||
(millions) |
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
|
$ |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
|
|
|
|
|
|
|
Charge related to a voluntary retirement program |
|
|
|
|
|
|
— |
|
Impairment of assets and other charges |
|
|
|
|
|
|
|
|
Gains on sales of assets |
|
|
( |
) |
|
|
( |
) |
Other adjustments |
|
|
|
|
|
|
|
|
Changes in: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
|
|
|
|
Affiliated receivables and payables |
|
|
( |
) |
|
|
( |
) |
Inventories |
|
|
( |
) |
|
|
( |
) |
Deferred purchased gas costs, net |
|
|
|
|
|
|
|
|
Prepayments |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Accrued interest, payroll and taxes |
|
|
( |
) |
|
|
( |
) |
Pension and other postretirement benefits |
|
|
( |
) |
|
|
( |
) |
Other operating assets and liabilities |
|
|
( |
) |
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
Plant construction and other property additions |
|
|
( |
) |
|
|
( |
) |
Proceeds from assignments of shale development rights |
|
|
— |
|
|
|
|
|
Other |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing Activities |
|
|
|
|
|
|
|
|
Issuance (repayment) of short-term debt, net |
|
|
|
|
|
|
( |
) |
Issuance of long-term debt |
|
|
— |
|
|
|
|
|
Issuance (repayment) of affiliated current borrowings, net |
|
|
( |
) |
|
|
|
|
Distribution payments to parent |
|
|
— |
|
|
|
( |
) |
Other |
|
|
— |
|
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
( |
) |
Decrease in cash, restricted cash and equivalents |
|
|
( |
) |
|
|
( |
) |
Cash, restricted cash and equivalents at beginning of period |
|
|
|
|
|
|
|
|
Cash, restricted cash and equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
Significant noncash investing activities:(1) |
|
|
|
|
|
|
|
|
Accrued capital expenditures |
|
$ |
|
|
|
$ |
|
|
Financing leases |
|
|
|
|
|
|
— |
|
(1) |
See Note 2 for noncash investing and financing activities related to the adoption of a new accounting standard for leasing arrangements. |
The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.
26
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Nature of Operations
Dominion Energy, headquartered in Richmond, Virginia, is one of the nation’s largest producers and transporters of energy. Dominion Energy’s operations are conducted through various subsidiaries, including Virginia Power and Dominion Energy Gas. Virginia Power is a regulated public utility that generates, transmits and distributes electricity for sale in Virginia and northeastern North Carolina. Dominion Energy 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. In addition, other Dominion Energy subsidiaries provide merchant generation, LNG terminalling services, natural gas transmission and distribution services primarily in the eastern and Rocky Mountain regions of the U.S. The SCANA Combination was completed in January 2019. See Note 3 for a description of operations acquired in the SCANA 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, 2018.
In the Companies’ opinion, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly their financial position at September 30, 2019, their results of operations and changes in equity for the three and nine months ended September 30, 2019 and 2018 and their cash flows for the nine months ended September 30, 2019 and 2018. 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 December 31, 2018, Dominion Energy owned the general partner,
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’ 2018 Consolidated Financial Statements and Notes have been reclassified to conform to the 2019 presentation for comparative purposes; however, such reclassifications did not affect the Companies’ net income, total assets, liabilities, equity or cash flows.
Amounts disclosed for Dominion Energy are inclusive of Virginia Power and/or Dominion Energy Gas, where applicable. 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, 2018, with the exception of the items described below.
27
Cash, Restricted Cash and Equivalents
|
|
Cash, Restricted Cash and Equivalents at End of Period |
|
|
Cash, Restricted Cash and Equivalents at Beginning of Period |
|
||||||||||
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
December 31, 2018 |
|
|
December 31, 2017 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Restricted cash and equivalents(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, restricted cash and equivalents shown in the Consolidated Statements of Cash Flows |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Virginia Power |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Restricted cash and equivalents(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, restricted cash and equivalents shown in the Consolidated Statements of Cash Flows |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Dominion Energy Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Restricted cash and equivalents (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, restricted cash and equivalents shown in the Consolidated Statements of Cash Flows |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
Property, Plant and Equipment
In January 2019, Virginia Power committed to a plan to retire certain automated meter reading infrastructure associated with its electric operations before the end of its useful life and replace such equipment with more current AMI technology. As a result, Virginia Power recorded a charge of $
In March 2019, Virginia Power committed to retire certain electric generating units before the end of their useful lives and completed the retirement of certain units at
In May 2019, Virginia Power abandoned a coal rail project at its Mt. Storm generating facility. As a result, Virginia Power recorded a charge of $
In September 2019, Dominion Energy and Virginia Power abandoned certain property, plant and equipment before the end of its useful life. As a result, Dominion Energy recorded a charge of $
28
Leases
The Companies lease certain assets including vehicles, real estate, office equipment and other operational assets under both operating and finance leases. For the Companies’ operating leases, rent expense is recognized on a straight-line basis over the term of the lease agreement, subject to regulatory framework. Rent expense associated with operating leases, short-term leases and variable leases is primarily recorded in other operations and maintenance expense in the Companies’ Consolidated Statements of Income. Rent expense associated with finance leases results in the separate presentation of interest expense on the lease liability and amortization expense of the related right-of-use asset in the Companies’ Consolidated Statements of Income.
The determination of the discount rate utilized has a significant impact on the calculation of the present value of the lease liability included in the Companies’ Consolidated Balance Sheets. For the Companies’ fleet of leased vehicles, the discount rate is equal to the prevailing borrowing rate earned by the lessor. For the Companies’ remaining leased assets, the discount rate implicit in the lease is generally unable to be determined from a lessee perspective. As such, the Companies use internally-developed incremental borrowing rates as a discount rate in the calculation of the present value of the lease liability. The incremental borrowing rates are determined based on an analysis of the Companies’ publicly available unsecured borrowing rates, adjusted for a collateral discount, over various lengths of time that most closely correspond to the Companies’ lease maturities.
In addition, Dominion Energy acts as lessor under certain power purchase agreements in which the counterparty or counterparties purchase substantially all of the output of certain solar facilities. These leases are considered operating in nature. For such leasing arrangements, rental revenue and an associated accounts receivable are recorded when the monthly output of the solar facility is determined. Depreciation on these solar facilities is computed on a straight-line basis over an estimated useful life of
New Accounting Standards
Leases
In February 2016, the FASB issued revised accounting guidance for the recognition, measurement, presentation and disclosure of leasing arrangements. The update requires that a liability and corresponding right-of-use asset are recorded on the balance sheet for all leases, including those leases classified as operating leases, while also refining the definition of a lease. In addition, lessees are required to disclose key information about the amount, timing and uncertainty of cash flows arising from leasing arrangements. Lessor accounting remains largely unchanged.
The guidance became effective for the Companies’ interim and annual reporting periods beginning January 1, 2019. The Companies adopted this revised accounting guidance using a modified retrospective approach, which requires lessees and lessors to recognize and measure leases at the date of adoption. Under this approach, the Companies utilized the transition practical expedient to maintain historical presentation for periods before January 1, 2019. The Companies also applied the other practical expedients, which required no reassessment of whether existing contracts are or contain leases, no reassessment of lease classification for existing leases and no reassessment of existing or expired land easements that were not previously accounted for as leases. In connection with the adoption of this revised accounting guidance, Dominion Energy, Virginia Power and Dominion Energy Gas recorded $
Note 3. Acquisitions and Dispositions
Acquisition of SCANA
In January 2019, Dominion Energy issued
29
See Note 3 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018 and Notes 13, 17 and 18 for more information on the SCANA Combination, including information on assets and liabilities acquired, significant financing transactions, regulatory matters and proceedings, legal proceedings and commitments and contingencies.
Merger Approval and Conditions
Merger Approval
The SCANA Combination required approval of SCANA’s shareholders, FERC, the North Carolina Commission, the South Carolina Commission, the Georgia Public Service Commission and the NRC and clearance from the Federal Trade Commission under the Hart-Scott-Rodino Act. All such approvals were received prior to closing of the SCANA Combination.
Various parties filed petitions for rehearing or reconsideration of the SCANA Merger Approval Order. In January 2019, the South Carolina Commission issued an order (1) granting the request of various parties and finding that DESC was imprudent in its actions by not disclosing material information to the South Carolina Office of Regulatory Staff and the South Carolina Commission with regard to costs incurred subsequent to March 2015 and (2) denying the petitions for rehearing or consideration as to other issues raised in the various petitions. The deadline to appeal the SCANA Merger Approval Order and the order on rehearing expired in April 2019, and no party has sought appeal.
Refunds to Customers
As a condition to the SCANA Merger Approval Order, DESC will provide refunds and restitution of $
In September and October 2017, DESC received proceeds totaling $
Additionally, in the first quarter of 2019, DESC recorded a reduction in operating revenue and a corresponding regulatory liability of $
NND Project
As a condition to the SCANA Merger Approval Order, DESC committed to excluding from rate recovery $
The remaining regulatory asset associated with the NND Project of $
Other Terms and Conditions
|
• |
DESC will not file an application for a general rate case with the South Carolina Commission with a requested effective date earlier than January 2021; |
|
• |
PSNC will not file an application for a general rate case with the North Carolina Commission with a requested effective date earlier than April 2021; |
|
• |
Dominion Energy has committed to increasing SCANA’s historical level of corporate contributions to charities by $ |
30
|
• |
Dominion Energy will maintain DESC and PSNC’s headquarters in Cayce, South Carolina and Gastonia, North Carolina, respectively; and |
|
• |
Dominion Energy will seek to minimize reductions in local employment by allowing some DES employees supporting shared and common services functions and activities to be located in Cayce, South Carolina where it makes economic and practical sense to do so. |
Purchase Price Allocation
SCANA’s assets acquired and liabilities assumed have been measured at estimated fair value at closing and are included in the Southeast Energy operating segment, which was established following the closing of the SCANA Combination. The majority of the operations acquired are subject to the rate setting authority of FERC and the North and South Carolina Commissions and are therefore accounted for pursuant to ASC 980, Regulated Operations. The fair values of SCANA’s assets and liabilities subject to rate-setting and cost recovery provisions provide revenues derived from costs, including a return on investment of assets and liabilities included in rate base. As such, the fair values of these assets and liabilities equal their carrying values. Accordingly, neither the assets and liabilities acquired, nor the unaudited pro forma financial information, reflect any adjustments related to these amounts.
The fair value of SCANA’s assets acquired and liabilities assumed that are not subject to the rate-setting provisions discussed above and the fair values of SCANA’s investments accounted for under the equity method have been determined using the income approach and the market approach. The valuation of SCANA’s long-term debt is considered a Level 2 fair value measurement. All other valuations are considered Level 3 fair value measurements due to the use of significant judgmental and unobservable inputs, including projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future market prices.
The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed is reflected as goodwill. The goodwill reflects the value associated with enhancing Dominion Energy’s portfolio of regulated operations in the growing southeast region of the U.S. The goodwill recognized is not deductible for income tax purposes, and as such, no deferred taxes have been recorded related to goodwill.
The table below shows the preliminary allocation of the purchase price to the assets acquired and liabilities assumed at closing, including adjustments related to income taxes identified during 2019 as discussed in Note 5. The allocation is subject to change during the measurement period as additional information is obtained about the facts and circumstances that existed at closing. Any material adjustments to provisional amounts identified during the measurement period will be recognized and disclosed in the reporting period in which the adjustment amounts are determined. Certain tax-related amounts in the allocation of the purchase price below are preliminary and may change as Dominion Energy completes its analysis and review of applicable tax matters.
|
Amount |
|
||
(millions) |
|
|
|
|
Total current assets(1) |
|
$ |
|
|
Investments |
|
|
|
|
Property, plant and equipment(2) |
|
|
|
|
Goodwill |
|
|
|
|
Regulatory assets(3) |
|
|
|
|
Other deferred charges and other assets, including intangible assets |
|
|
|
|
Total Assets |
|
|
|
|
Total current liabilities |
|
|
|
|
Long-term debt |
|
|
|
|
Deferred income taxes |
|
|
|
|
Regulatory liabilities |
|
|
|
|
Other deferred credits and other liabilities(4) |
|
|
|
|
Total Liabilities |
|
|
|
|
Total purchase price(5) |
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
(5) |
|
31
See Note 3 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018 for a description of assets acquired and liabilities assumed in connection with the SCANA Combination.
Results of Operations and Unaudited Pro Forma Information
The impact of the SCANA Combination on Dominion Energy’s operating revenue and net income attributable to Dominion Energy in the Consolidated Statements of Income was an increase of $
Dominion Energy incurred merger and integration-related costs of $
The following unaudited pro forma financial information reflects the consolidated results of operations of Dominion Energy assuming the SCANA Combination had taken place on January 1, 2018. The unaudited pro forma financial information has been presented for illustrative purposes only and may change as Dominion Energy finalizes its valuation of certain assets acquired and liabilities assumed at the acquisition date. The unaudited pro forma financial information 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 September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019(1) |
|
|
2018(1) |
|
|
2019(1) |
|
|
2018(1) |
|
||||
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income attributable to Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Common Share – Basic |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Earnings Per Common Share – Diluted |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
Expected Sale of Interest in Cove Point
In October 2019, Dominion Energy signed an agreement to sell a noncontrolling interest (consisting of
32
Note 4. Operating Revenue
The Companies’ operating revenue consists of the following:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated electric sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and other retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonregulated electric sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated gas sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonregulated gas sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated gas transportation and storage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERC-regulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State-regulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonregulated gas transportation and storage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other regulated revenues(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other nonregulated revenues(1)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenue from contracts with customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Virginia Power |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated electric sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and other retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other regulated revenues(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other nonregulated revenues(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenue from contracts with customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues(2)(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Dominion Energy Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated gas sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Other |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Nonregulated gas sales(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated gas transportation and storage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERC-regulated(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State-regulated(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGL revenue(1)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management service revenue(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other regulated revenues(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other nonregulated revenues(1)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenue from contracts with customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Total operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
33
(2) |
|
(3) |
|
The table below discloses the aggregate amount of the transaction price allocated to fixed-price performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period and when the Companies expect to recognize this revenue. These revenues relate to contracts containing fixed prices where the Companies will earn the associated revenue over time as they stand ready to perform services provided. This disclosure does not include revenue related to performance obligations that are part of a contract with original durations of one year or less. In addition, this disclosure does not include expected consideration related to performance obligations for which the Companies elect to recognize revenue in the amount they have a right to invoice.
Revenue expected to be recognized on multi-year contracts in place at September 30, 2019 |
|
2019 |
|
|
2020 |
|
|
2021 |
|
|
2022 |
|
|
2023 |
|
|
Thereafter |
|
|
Total |
|
|||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Virginia Power |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract assets represent an entity’s right to consideration in exchange for goods and services that the entity has transferred to a customer. At September 30, 2019 and December 31, 2018, Dominion Energy’s contract asset balances were $
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 Energy |
|
|
Virginia Power |
|
|
Dominion Energy Gas |
|
|||||||||||||||
Nine Months Ended September 30, |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||||
U.S. statutory rate |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
Increases (reductions) resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State taxes, net of federal benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment tax credits |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Production tax credits |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Reversal of excess deferred income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Federal legislative change |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
State legislative change |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Write-off of regulatory assets |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
AFUDC - equity |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Effective tax rate |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
For the Companies’ rate-regulated entities, deferred taxes will reverse at the weighted average rate used to originate the deferred tax liability, which in some cases will be
34
In connection with the SCANA Combination, Dominion Energy committed to forgo, or limit, the recovery of certain income tax-related regulatory assets associated with the NND Project. Dominion Energy’s effective tax rate reflects deferred income tax expense of $
As part of the SCANA Combination, Dominion Energy acquired SCANA’s unrecognized tax benefits of $
As of September 30, 2019, there have been no other 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, 2018, for a discussion of these unrecognized tax benefits.
The 2017 Tax Reform Act limits the deductibility of interest expense to
The following table presents the calculation of Dominion Energy’s basic and diluted EPS:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Dominion Energy |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Series A Preferred Stock dividends |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Net income attributable to Dominion Energy - Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of Series A Preferred Stock |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Net income attributable to Dominion Energy - Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares of common stock outstanding – Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of dilutive securities |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares of common stock outstanding – Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Common Share – Basic |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Earnings Per Common Share – Diluted |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The 2019 Equity Units are potentially dilutive securities. The forward stock purchase contracts included within the 2019 Equity Units were excluded from the calculation of diluted EPS for the three and nine months ended September 30, 2019, as the dilutive stock price threshold was not met. The Series A Preferred Stock included within the 2019 Equity Units is excluded from the effect of dilutive securities within diluted EPS, but a fair value adjustment is reflected within net income attributable to Dominion Energy for the calculation of diluted EPS for the three and nine months ended September 30, 2019 based upon the expectation that the conversion will be settled in cash rather than through issuance of Dominion Energy common stock. The 2016 Equity Units were potentially dilutive securities, but were excluded from the calculation of diluted EPS for the three and nine months ended September 30, 2019 and 2018, as the dilutive stock price threshold was not met. The forward sales agreements, effective April 2018, were potentially dilutive securities but had no effect on the calculation of diluted EPS for the three and nine months ended September 30, 2018. The Dominion Energy Midstream convertible preferred units were potentially dilutive securities but had no effect on the calculation of diluted EPS for the three and nine months ended September 30, 2018. In calculating diluted EPS in connection with the Dominion Energy Midstream convertible preferred units, Dominion Energy applied the if-converted method.
35
Note 7. Accumulated Other Comprehensive Income
Dominion Energy
The following table presents Dominion Energy’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 loss from equity method investees |
|
|
Total |
|
|||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before reclassifications: gains (losses) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
— |
|
|
|
|
|
Net current period other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before reclassifications: gains (losses) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Net current period other comprehensive income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
— |
|
|
|
|
|
Ending balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before reclassifications: gains (losses) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
— |
|
|
|
( |
) |
Net current period other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before reclassifications: gains (losses) |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
Amounts reclassified from AOCI: (gains) losses(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Net current period other comprehensive income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative-effect of changes in accounting principle |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Less other comprehensive income attributable to noncontrolling interest |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Ending balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(1) |
|
36
The following table presents Dominion Energy’s reclassifications out of AOCI by component:
Details about AOCI components |
|
Amounts reclassified from AOCI |
|
|
Affected line item in the Consolidated Statements of Income |
|
(millions) |
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
|
Commodity contracts |
|
$ |
( |
) |
|
Operating revenue |
|
|
|
|
|
|
Purchased gas |
Interest rate contracts |
|
|
|
|
|
Interest and related charges |
Foreign currency contracts |
|
|
|
|
|
Other income |
Total |
|
|
( |
) |
|
|
Tax |
|
|
|
|
|
Income tax expense |
Total, net of tax |
|
$ |
( |
) |
|
|
Unrealized (gains) and losses on investment securities: |
|
|
|
|
|
|
Realized (gain) loss on sale of securities |
|
$ |
( |
) |
|
Other income |
Total |
|
|
( |
) |
|
|
Tax |
|
|
|
|
|
Income tax expense |
Total, net of tax |
|
$ |
( |
) |
|
|
Unrecognized pension and other postretirement benefit costs: |
|
|
|
|
|
|
Amortization of prior-service costs (credits) |
|
$ |
( |
) |
|
Other income |
Amortization of actuarial losses |
|
|
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
( |
) |
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
|
Commodity contracts |
|
$ |
|
|
|
Operating revenue |
Interest rate contracts |
|
|
|
|
|
Interest and related charges |
Foreign currency contracts |
|
|
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
( |
) |
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
Unrealized (gains) and losses on investment securities: |
|
|
|
|
|
|
Realized (gain) loss on sale of securities |
|
$ |
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
— |
|
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
Unrecognized pension and other postretirement benefit costs: |
|
|
|
|
|
|
Amortization of prior-service costs (credits) |
|
$ |
( |
) |
|
Other income |
Amortization of actuarial losses |
|
|
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
( |
) |
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
37
Details about AOCI components |
|
Amounts reclassified from AOCI |
|
|
Affected line item in the Consolidated Statements of Income |
|
(millions) |
|
|
|
|
|
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
|
Commodity contracts |
|
$ |
( |
) |
|
Operating revenue |
|
|
|
( |
) |
|
Purchased gas |
Interest rate contracts |
|
|
|
|
|
Interest and related charges |
Foreign currency contracts |
|
|
|
|
|
Other income |
Total |
|
|
( |
) |
|
|
Tax |
|
|
|
|
|
Income tax expense |
Total, net of tax |
|
$ |
( |
) |
|
|
Unrealized (gains) and losses on investment securities: |
|
|
|
|
|
|
Realized (gain) loss on sale of securities |
|
$ |
( |
) |
|
Other income |
Total |
|
|
( |
) |
|
|
Tax |
|
|
|
|
|
Income tax expense |
Total, net of tax |
|
$ |
( |
) |
|
|
Unrecognized pension and other postretirement benefit costs: |
|
|
|
|
|
|
Amortization of prior-service costs (credits) |
|
$ |
( |
) |
|
Other income |
Amortization of actuarial losses |
|
|
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
( |
) |
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
|
Commodity contracts |
|
$ |
|
|
|
Operating revenue |
|
|
|
|
|
|
Purchased gas |
|
|
|
( |
) |
|
Electric fuel and other energy-related purchases |
Interest rate contracts |
|
|
|
|
|
Interest and related charges |
Foreign currency contracts |
|
|
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
( |
) |
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
Unrealized (gains) and losses on investment securities: |
|
|
|
|
|
|
Realized (gain) loss on sale of securities |
|
$ |
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
( |
) |
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
Unrecognized pension and other postretirement benefit costs: |
|
|
|
|
|
|
Amortization of prior-service costs (credits) |
|
$ |
( |
) |
|
Other income |
Amortization of actuarial losses |
|
|
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
( |
) |
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
38
Virginia Power
The following table presents Virginia Power’s changes in AOCI by component, net of tax:
|
|
Deferred gains and losses on derivatives- hedging activities |
|
|
Unrealized gains and losses on investment securities |
|
|
Total |
|
|||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Other comprehensive income before reclassifications: gains (losses) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net current period other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Ending balance |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before reclassifications: gains (losses) |
|
|
|
|
|
|
— |
|
|
|
|
|
Amounts reclassified from AOCI: (gains) losses(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net current period other comprehensive income (loss) |
|
|
|
|
|
|
— |
|
|
|
|
|
Ending balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Other comprehensive income before reclassifications: gains (losses) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
|
|
|
|
|
( |
) |
|
|
— |
|
Net current period other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Ending balance |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
Other comprehensive income before reclassifications: gains (losses) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Amounts reclassified from AOCI: (gains) losses(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net current period other comprehensive income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Cumulative-effect of changes in accounting principle |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(1) |
|
39
Dominion Energy Gas
The following table presents Dominion Energy Gas’ changes in AOCI by component, net of tax:
|
|
Deferred gains and losses on derivatives- hedging activities |
|
|
Unrecognized pension costs |
|
|
Total |
|
|||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before reclassifications: gains (losses) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Ending balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before reclassifications: gains (losses) |
|
|
|
|
|
|
— |
|
|
|
|
|
Amounts reclassified from AOCI: (gains) losses(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before reclassifications: gains (losses) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Ending balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income before reclassifications: gains (losses) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative-effect of changes in accounting principle |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(1) |
See table below for details about these reclassifications. |
40
The following table presents Dominion Energy Gas’ reclassifications out of AOCI by component:
Details about AOCI components |
|
Amounts reclassified from AOCI |
|
|
Affected line item in the Consolidated Statements of Income |
|
(millions) |
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
|
Commodity contracts |
|
$ |
( |
) |
|
Operating revenue |
Interest rate contracts |
|
|
|
|
|
Interest and related charges |
Foreign currency contracts |
|
|
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
( |
) |
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
Unrecognized pension costs: |
|
|
|
|
|
|
Actuarial losses |
|
$ |
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
— |
|
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
|
Commodity contracts |
|
$ |
|
|
|
Operating revenue |
Interest rate contracts |
|
|
|
|
|
Interest and related charges |
Foreign currency contracts |
|
|
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
( |
) |
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
Unrecognized pension costs: |
|
|
|
|
|
|
Actuarial losses |
|
$ |
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
— |
|
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
|
Commodity contracts |
|
$ |
( |
) |
|
Operating revenue |
Interest rate contracts |
|
|
|
|
|
Interest and related charges |
Foreign currency contracts |
|
|
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
( |
) |
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
Unrecognized pension costs: |
|
|
|
|
|
|
Actuarial losses |
|
$ |
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
( |
) |
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
|
Commodity contracts |
|
$ |
|
|
|
Operating revenue |
Interest rate contracts |
|
|
|
|
|
Interest and related charges |
Foreign currency contracts |
|
|
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
( |
) |
|
Income tax expense |
Total, net of tax |
|
$ |
|
|
|
|
Unrecognized pension costs: |
|
|
|
|
|
|
Actuarial losses |
|
$ |
|
|
|
Other income |
Total |
|
|
|
|
|
|
Tax |
|
|
( |
) |
|
Income tax expense |
41
Total, net of tax |
|
$ |
|
|
|
|
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, 2018. See Note 9 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 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, certain forward market prices and implied price volatilities are considered unobservable.
The following table presents Dominion Energy’s quantitative information about Level 3 fair value measurements at September 30, 2019. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility.
|
|
Fair Value (millions) |
|
|
Valuation Techniques |
|
Unobservable Input |
|
|
Range |
|
Weighted Average(1) |
|
||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical and financial forwards and futures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas(2) |
|
$ |
|
|
|
Discounted cash flow |
|
Market price (per Dth) |
(3) |
|
(1) - 6 |
|
|
|
|
FTRs |
|
|
|
|
|
Discounted cash flow |
|
Market price (per MWh) |
(3) |
|
(2) - 8 |
|
|
|
|
Physical options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
|
|
|
|
Option model |
|
Market price (per Dth) |
(3) |
|
1 - 6 |
|
|
|
|
|
|
|
|
|
|
|
|
Price volatility |
(4) |
|
1% - 70% |
|
|
|
% |
Total assets |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical and financial forwards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas(2) |
|
$ |
|
|
|
Discounted Cash Flow |
|
Market price (per Dth) |
(3) |
|
(2) - 7 |
|
|
( |
) |
FTRs |
|
|
|
|
|
Discounted cash flow |
|
Market price (per MWh) |
(3) |
|
(5) - 3 |
|
|
|
|
Physical options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
|
|
|
|
Option model |
|
Market price (per Dth) |
(3) |
|
1 - 6 |
|
|
|
|
|
|
|
|
|
|
|
|
Price volatility |
(4) |
|
1% - 71% |
|
|
|
% |
Total liabilities |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
(2) |
Includes basis. |
(3) |
|
(4) |
|
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) |
42
Recurring Fair Value Measurements
Dominion Energy
The following table presents Dominion Energy’s assets and liabilities that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Foreign currency |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Investments(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Cash equivalents and other |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Foreign currency |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Total liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
At December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Foreign currency |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Investments(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Cash equivalents and other |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Foreign currency |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Total liabilities |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
43
The following table presents the net change in Dominion Energy's assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
Purchased gas |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Electric fuel and other energy-related purchases |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Included in other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Included in regulatory assets/liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Settlements |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Purchases |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Transfers out of Level 3 |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
Ending balance |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets/liabilities still held at the reporting date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
Purchased gas |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
Virginia Power
The following table presents Virginia Power’s quantitative information about Level 3 fair value measurements at September 30, 2019. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility.
|
|
Fair Value (millions) |
|
|
Valuation Techniques |
|
Unobservable Input |
|
|
Range |
|
Weighted Average(1) |
|
||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical and financial forwards and futures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas(2) |
|
$ |
|
|
|
Discounted cash flow |
|
Market price (per Dth) |
(3) |
|
(1) - 3 |
|
|
|
|
FTRs |
|
|
|
|
|
Discounted cash flow |
|
Market price (per MWh) |
(3) |
|
(2) - 8 |
|
|
|
|
Total assets |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical and financial forwards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas(2) |
|
$ |
|
|
|
Discounted cash flow |
|
Market price (per Dth) |
(3) |
|
(2) - 6 |
|
|
( |
) |
FTRs |
|
|
|
|
|
Discounted cash flow |
|
Market price (per MWh) |
(3) |
|
(5) - 3 |
|
|
|
|
Physical options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
|
|
|
|
Option model |
|
Market price (per Dth) |
(3) |
|
1 - 6 |
|
|
|
|
|
|
|
|
|
|
|
|
Price volatility |
(4) |
|
24% - 52% |
|
|
|
% |
Total liabilities |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Averages weighted by volume. |
(2) |
|
(3) |
Represents market prices beyond defined terms for Levels 1 and 2. |
(4) |
Represents volatilities unrepresented in published markets. |
44
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) |
The following table presents Virginia Power’s assets and liabilities that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Investments(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Cash equivalents and other |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Total liabilities |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
At December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Investments(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Total liabilities |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
45
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 |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total realized and unrealized losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric fuel and other energy-related purchases |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Included in regulatory assets/liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Settlements |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
There were
Dominion Energy Gas
The following table presents Dominion Energy Gas’ assets and liabilities for derivatives that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions.
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Foreign currency |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Total assets |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Foreign currency |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Total liabilities |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
At December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Foreign currency |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Total assets |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Foreign currency |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Total liabilities |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
The following table presents the net change in Dominion Energy Gas’ assets and liabilities for derivatives measured at fair value on a recurring basis and included in the Level 3 fair value category. There were
|
|
Nine Months Ended |
|
|
|
|
September 30, |
|
|
|
|
2018 |
|
|
(millions) |
|
|
|
|
Beginning balance |
|
$ |
( |
) |
Total realized and unrealized gains: |
|
|
|
|
Included in other comprehensive income |
|
|
|
|
Transfers out of Level 3 |
|
|
|
|
Ending balance |
|
$ |
|
|
46
There were no gains or losses included in earnings in the Level 3 fair value category for the nine months ended September 30, 2018. There were
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 and equivalents, 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.
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||||||||||
|
|
Carrying Amount |
|
|
Estimated Fair Value(1) |
|
|
Carrying Amount |
|
|
Estimated Fair Value(1) |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, including securities due within one year(2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Credit facility borrowings |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Junior subordinated notes(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remarketable subordinated notes(3) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Virginia Power |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, including securities due within one year(3) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Dominion Energy Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, including securities due within one year(4) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
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, 2018. See Note 8 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 Energy’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 and Dominion Energy Gas’ derivative contracts include over-the-counter transactions. Over-the-counter contracts are bilateral contracts that are transacted directly with a third party. Exchange contracts utilize a financial intermediary, exchange, or clearinghouse to enter, execute, or clear the transactions. Certain over-the-counter and exchange contracts contain contractual rights of setoff through master netting arrangements, derivative clearing agreements, and contract default provisions. In addition, the contracts are subject to conditional rights of setoff through counterparty nonperformance, insolvency, or other conditions.
In general, most over-the-counter transactions and all exchange contracts are subject to collateral requirements. Types of collateral for over-the-counter and exchange contracts include cash, letters of credit, and in some cases other forms of security, none of which are subject to restrictions. Cash collateral is used in the table below to offset derivative assets and liabilities. Certain accounts receivable and accounts payable recognized on 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. See Note 19 for further information regarding credit-related contingent features for the Companies’ derivative instruments.
47
Dominion Energy
Balance Sheet Presentation
The tables below present Dominion Energy’s derivative asset and liability balances by type of financial instrument, if the gross amounts recognized in its Consolidated Balance Sheets were netted with derivative instruments and cash collateral received or paid:
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
December 31, 2018 |
|
|
|
||||||||||||||||
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
|||||||||||
|
|
Gross Assets Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Received |
|
|
Net Amounts |
|
|
Gross Assets Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Received |
|
|
Net Amounts |
|
||||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives, subject to a master netting or similar arrangement |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
|
|
|
|||||||||||
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
|||||||||||
|
|
Gross Liabilities Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Paid |
|
|
Net Amounts |
|
|
Gross Liabilities Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Paid |
|
|
Net Amounts |
|
||||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Foreign currency contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
Total derivatives, subject to a master netting or similar arrangement |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
48
Volumes
The following table presents the volume of Dominion Energy’s derivative activity at September 30, 2019. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of its long and short positions.
|
|
Current |
|
|
Noncurrent |
|
||
Natural Gas (bcf): |
|
|
|
|
|
|
|
|
Fixed price(1) |
|
|
|
|
|
|
|
|
Basis |
|
|
|
|
|
|
|
|
Electricity (MWh): |
|
|
|
|
|
|
|
|
Fixed price |
|
|
|
|
|
|
|
|
FTRs |
|
|
|
|
|
|
|
|
NGLs (Gal) |
|
|
|
|
|
|
|
|
Interest rate(2) |
|
$ |
|
|
|
$ |
|
|
Foreign currency(2)(3) |
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
AOCI
The following table presents selected information related to gains (losses) on cash flow hedges included in AOCI in Dominion Energy’s Consolidated Balance Sheet at September 30, 2019:
|
|
AOCI After-Tax |
|
|
Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax |
|
|
Maximum Term |
||
(millions) |
|
|
|
|
|
|
|
|
|
|
Commodities: |
|
|
|
|
|
|
|
|
|
|
Gas |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Electricity |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
( |
) |
|
|
( |
) |
|
|
Foreign currency |
|
|
|
|
|
|
( |
) |
|
|
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
The amounts that will be reclassified from AOCI to earnings will generally be offset by the recognition of the hedged transactions (e.g., anticipated sales) in earnings, thereby achieving the realization of prices contemplated by the underlying risk management strategies and will vary from the expected amounts presented above as a result of changes in market prices, interest rates and foreign currency exchange rates.
49
Fair Value Hedges
For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings and presented in the same line item. Gains and losses on derivatives in fair value hedge relationships were immaterial for the three and nine months ended September 30, 2019 and 2018.
The following table presents the amounts recorded on the balance sheet related to cumulative basis adjustments for fair value hedges:
|
|
Carrying Amount of the Hedged Asset (Liability)(1) |
|
|
Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Assets (Liabilities)(2) |
|
||||||||||
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
(1) |
|
(2) |
|
50
Fair Value and Gains and Losses on Derivative Instruments
The following table presents the fair values of Dominion Energy’s derivatives and where they are presented in its Consolidated Balance Sheets:
|
|
Fair Value – Derivatives under Hedge Accounting |
|
|
Fair Value – Derivatives not under Hedge Accounting |
|
|
Total Fair Value |
|
|||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
Total current derivative assets(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
Foreign currency |
|
|
|
|
|
|
— |
|
|
|
|
|
Total noncurrent derivative assets(2) |
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency |
|
|
|
|
|
|
— |
|
|
|
|
|
Total current derivative liabilities(3) |
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent derivative liabilities(4) |
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
Total current derivative assets(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
Foreign currency |
|
|
|
|
|
|
— |
|
|
|
|
|
Total noncurrent derivative assets(2) |
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
Foreign currency |
|
|
|
|
|
|
— |
|
|
|
|
|
Total current derivative liabilities(3) |
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
Total noncurrent derivative liabilities(4) |
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
|
51
(3) |
|
(4) |
|
The following tables present the gains and losses on Dominion Energy’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(1) |
|
|
Amount of Gain (Loss) Reclassified From AOCI to Income |
|
|
Increase (Decrease) in Derivatives Subject to Regulatory Treatment(2) |
|
|||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
|
$ |
|
|
|
|
|
|
Purchased gas |
|
|
|
|
|
|
( |
) |
|
|
|
|
Total commodity |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
— |
|
Interest rate(3) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign currency(4) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Total |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
|
$ |
( |
) |
|
|
|
|
Total commodity |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
— |
|
Interest rate(3) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Foreign currency(4) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
|
$ |
|
|
|
|
|
|
Purchased gas |
|
|
|
|
|
|
|
|
|
|
|
|
Total commodity |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
Interest rate(3) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign currency(4) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Total |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
|
$ |
( |
) |
|
|
|
|
Purchased gas |
|
|
|
|
|
|
( |
) |
|
|
|
|
Electric fuel and other energy-related purchases |
|
|
|
|
|
|
|
|
|
|
|
|
Total commodity |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
— |
|
Interest rate(3) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Foreign currency(4) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
52
Derivatives not designated as hedging instruments |
|
Amount of Gain (Loss) Recognized in Income on Derivatives(1) |
|
|
||||||||||||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
|||||||||||||
|
|
2019 |
|
|
|
|
2018 |
|
|
2019 |
|
|
|
2018 |
|
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
$ |
( |
) |
|
Purchased gas |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
Electric fuel and other energy-related purchases |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
|
Total |
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
$ |
( |
) |
|
(1) |
|
Virginia Power
Balance Sheet Presentation
The tables below present Virginia Power’s derivative asset and liability balances by type of financial instrument, if the gross amounts recognized in its Consolidated Balance Sheets were netted with derivative instruments and cash collateral received or paid:
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
||||||||||
|
|
Gross Assets Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Received |
|
|
Net Amounts |
|
|
Gross Assets Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Received |
|
|
Net Amounts |
|
||||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Total derivatives, subject to a master netting or similar arrangement |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
53
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
|
||||||||||||||
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
||||||||||
|
|
Gross Liabilities Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Paid |
|
|
Net Amounts |
|
|
Gross Liabilities Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Paid |
|
|
Net Amounts |
|
||||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Total derivatives, subject to a master netting or similar arrangement |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
(1) |
|
Volumes
The following table presents the volume of Virginia Power’s derivative activity at September 30, 2019. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of its long and short positions.
|
|
Current |
|
|
Noncurrent |
|
||
Natural Gas (bcf): |
|
|
|
|
|
|
|
|
Fixed price(1) |
|
|
|
|
|
|
|
|
Basis |
|
|
|
|
|
|
|
|
Electricity (MWh): |
|
|
|
|
|
|
|
|
FTRs |
|
|
|
|
|
|
|
|
Interest rate(2) |
|
$ |
|
|
|
$ |
|
|
(1) |
Includes options. |
(2) |
Maturity is determined based on final settlement period. |
AOCI
The following table presents selected information related to losses on cash flow hedges included in AOCI in Virginia Power’s Consolidated Balance Sheet at September 30, 2019:
|
|
AOCI After-Tax |
|
|
Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax |
|
|
Maximum Term |
||
(millions) |
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
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 interest rates contemplated by the underlying risk management strategies and will vary from the expected amounts presented above as a result of changes in interest rates.
54
Fair Value and Gains and Losses on Derivative Instruments
The following table presents the fair values of Virginia Power’s derivatives and where they are presented in its Consolidated Balance Sheets:
|
|
Fair Value – Derivatives under Hedge Accounting |
|
|
Fair Value – Derivatives not under Hedge Accounting |
|
|
Total Fair Value |
|
|||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
Total current derivative assets(1) |
|
|
— |
|
|
|
|
|
|
|
|
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
— |
|
|
|
|
|
|
|
|
|
Total noncurrent derivative assets(2) |
|
|
— |
|
|
|
|
|
|
|
|
|
Total derivative assets |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
Total current derivative liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
— |
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
Total noncurrent derivatives liabilities(3) |
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
Total current derivative assets(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
— |
|
|
|
|
|
|
|
|
|
Total noncurrent derivative assets(2) |
|
|
— |
|
|
|
|
|
|
|
|
|
Total derivative assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
Total current derivative liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
Total noncurrent derivatives liabilities(3) |
|
|
|
|
|
|
— |
|
|
|
|
|
Total derivative liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
55
The following tables present the gains and losses on Virginia Power’s derivatives, as well as where the associated activity is presented in its Consolidated Balance Sheets and Statements of Income:
Derivatives in cash flow hedging relationships |
|
Amount of Gain (Loss) Recognized in AOCI on Derivatives(1) |
|
|
Amount of Gain (Loss) Reclassified From AOCI to Income |
|
|
Increase (Decrease) in Derivatives Subject to Regulatory Treatment(2) |
|
|||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate(3) |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
Total |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate(3) |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Total |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate(3) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate(3) |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Total |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
Derivatives not designated as hedging instruments |
|
Amount of Gain (Loss) Recognized in Income on Derivatives(1) |
|
|
|||||||||||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
||||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
||||||||||||
|
|
2019 |
|
|
|
2018 |
|
|
2019 |
|
|
|
2018 |
|
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity(2) |
|
$ |
( |
) |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
$ |
( |
) |
|
Total |
|
$ |
( |
) |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
$ |
( |
) |
|
(1) |
|
(2) |
|
56
Dominion Energy Gas
Balance Sheet Presentation
The tables below present Dominion Energy Gas’ derivative asset and liability balances by type of financial instrument, if the gross amounts recognized in its Consolidated Balance Sheets were netted with derivative instruments and cash collateral received or paid:
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
|
|
|
|||||||||||
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
|||||||||||
|
|
Gross Assets Presented in the Consolidated Balance Sheet |
|
|
Financial Instruments |
|
|
Cash Collateral Received |
|
|
Net Amounts |
|
|
Gross Assets Presented in the Consolidated Balance Sheet |
|
|
Financial Instruments |
|
|
Cash Collateral Received |
|
|
Net Amounts |
|
||||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
Foreign currency contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives, subject to a master netting or similar arrangement |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
|
||||||||||||||
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
||||||||||
|
|
Gross Liabilities Presented in the Consolidated Balance Sheet |
|
|
Financial Instruments |
|
|
Cash Collateral Paid |
|
|
Net Amounts |
|
|
Gross Liabilities Presented in the Consolidated Balance Sheet |
|
|
Financial Instruments |
|
|
Cash Collateral Paid |
|
|
Net Amounts |
|
||||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
Foreign currency contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
Total derivatives, subject to a master netting or similar arrangement |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Volumes
The following table presents the volume of Dominion Energy Gas’ derivative activity at September 30, 2019. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of its long and short positions.
|
|
Current |
|
|
Noncurrent |
|
||
NGLs (Gal) |
|
|
|
|
|
|
|
|
Interest rate(1) |
|
$ |
|
|
|
$ |
|
|
Foreign currency(1)(2) |
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
Euro equivalent volumes are € |
57
AOCI
The following table presents selected information related to gains (losses) on cash flow hedges included in AOCI in Dominion Energy Gas’ Consolidated Balance Sheet at September 30, 2019:
|
|
AOCI After-Tax |
|
|
Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax |
|
|
Maximum Term |
||
(millions) |
|
|
|
|
|
|
|
|
|
|
Commodities: |
|
|
|
|
|
|
|
|
|
|
NGLs |
|
$ |
|
|
|
$ |
|
|
|
|
Interest rate |
|
|
( |
) |
|
|
( |
) |
|
|
Foreign currency |
|
|
|
|
|
|
( |
) |
|
|
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
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.
58
Fair Value and Gains and Losses on Derivative Instruments
The following tables present the fair values of Dominion Energy Gas’ derivatives and where they are presented in its Consolidated Balance Sheets:
|
|
Fair Value- Derivatives Under Hedge Accounting |
|
|
Fair Value- Derivatives Not Under Hedge Accounting |
|
|
Total Fair Value |
|
|||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Total current derivative assets(1) |
|
|
|
|
|
|
— |
|
|
|
|
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency |
|
|
|
|
|
|
— |
|
|
|
|
|
Total noncurrent derivative assets(2) |
|
|
|
|
|
|
— |
|
|
|
|
|
Total derivative assets |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Foreign currency |
|
|
|
|
|
|
— |
|
|
|
|
|
Total current derivative liabilities(3) |
|
|
|
|
|
|
— |
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
Total noncurrent derivative liabilities(4) |
|
|
|
|
|
|
— |
|
|
|
|
|
Total derivative liabilities |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Total current derivative assets(1) |
|
|
|
|
|
|
— |
|
|
|
|
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency |
|
|
|
|
|
|
— |
|
|
|
|
|
Total noncurrent derivative assets(2) |
|
|
|
|
|
|
— |
|
|
|
|
|
Total derivative assets |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Foreign currency |
|
|
|
|
|
|
— |
|
|
|
|
|
Total current derivative liabilities(3) |
|
|
|
|
|
|
— |
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
Total noncurrent derivative liabilities(4) |
|
|
|
|
|
|
— |
|
|
|
|
|
Total derivative liabilities |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
59
The following table presents the gains and losses on Dominion Energy Gas’ 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(1) |
|
|
Amount of Gain (Loss) Reclassified From AOCI to Income |
|
||
(millions) |
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
Derivative Type and Location of Gains (Losses): |
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
|
$ |
|
|
Total commodity |
|
$ |
|
|
|
$ |
|
|
Interest rate(2) |
|
|
( |
) |
|
|
( |
) |
Foreign currency(3) |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
( |
) |
|
$ |
( |
) |
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
Derivative Type and Location of Gains (Losses): |
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
|
$ |
( |
) |
Total commodity |
|
$ |
( |
) |
|
$ |
( |
) |
Interest rate(2) |
|
|
|
|
|
|
( |
) |
Foreign currency(3) |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
|
$ |
( |
) |
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
Derivative Type and Location of Gains (Losses): |
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
|
$ |
|
|
Total commodity |
|
$ |
|
|
|
$ |
|
|
Interest rate(2) |
|
|
( |
) |
|
|
( |
) |
Foreign currency(3) |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
( |
) |
|
$ |
( |
) |
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
Derivative Type and Location of Gains (Losses): |
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
|
$ |
( |
) |
Total commodity |
|
$ |
( |
) |
|
$ |
( |
) |
Interest rate(2) |
|
|
|
|
|
|
( |
) |
Foreign currency(3) |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
( |
) |
|
$ |
( |
) |
(1) |
|
(2) |
|
(3) |
|
Note 10. Investments
Dominion Energy
Equity and Debt Securities
Rabbi Trust Securities
Equity and fixed income securities and cash equivalents in Dominion Energy’s rabbi trusts and classified as trading totaled $
60
Decommissioning Trust Securities
Dominion Energy holds equity and fixed income securities, insurance contracts and cash equivalents in nuclear decommissioning trust funds to fund future decommissioning costs for its nuclear plants.
|
|
Amortized Cost |
|
|
Total Unrealized Gains |
|
|
Total Unrealized Losses |
|
|
|
Fair Value |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
|
$ |
|
|
Fixed income securities:(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Common/collective trust funds |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Insurance contracts |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Cash equivalents and other(3) |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
(4) |
|
$ |
|
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
|
$ |
|
|
Fixed income securities:(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Common/collective trust funds |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Cash equivalents and other |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
(4) |
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
The portion of unrealized gains and losses that relates to equity securities held within Dominion Energy’s nuclear decommissioning trusts is summarized below:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains recognized during the period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Less: Net gains recognized during the period on securities sold during the period |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Unrealized gains recognized during the period on securities still held at September 30, 2019 and 2018(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
61
The fair value of Dominion Energy’s fixed income securities with readily determinable fair values held in nuclear decommissioning trust funds at September 30, 2019 by contractual maturity is as follows:
|
|
Amount |
|
|
(millions) |
|
|
|
|
Due in one year or less |
|
$ |
|
|
Due after one year through five years |
|
|
|
|
Due after five years through ten years |
|
|
|
|
Due after ten years |
|
|
|
|
Total |
|
$ |
|
|
Presented below is selected information regarding Dominion Energy’s equity and fixed income securities with readily determinable fair values held in nuclear decommissioning trust funds.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Realized gains(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized losses(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Dominion Energy recorded other-than-temporary impairment losses on investments held in nuclear decommissioning trust funds as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other-than-temporary impairment losses |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Losses recognized in other comprehensive income (before taxes) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net impairment losses recognized in earnings |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
62
Virginia Power
Virginia Power holds equity and fixed income securities and cash equivalents in nuclear decommissioning trust funds to fund future decommissioning costs for its nuclear plants.
|
|
Amortized Cost |
|
|
Total Unrealized Gains |
|
|
Total Unrealized Losses |
|
|
|
Fair Value |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
|
$ |
|
|
Fixed income securities:(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Common/collective trust funds |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Cash equivalents and other(3) |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
(4) |
|
$ |
|
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
|
$ |
|
|
Fixed income securities:(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Common/collective trust funds |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Cash equivalents and other(3) |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
(4) |
|
$ |
|
|
(1) |
Unrealized gains and losses on equity securities are included in other income and the nuclear decommissioning trust regulatory liability. |
(2) |
Unrealized gains and losses on fixed income securities are included in AOCI and the nuclear decommissioning trust regulatory liability. |
(3) |
|
(4) |
|
The portion of unrealized gains and losses that relates to equity securities held within Virginia Power’s nuclear decommissioning trusts is summarized below:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains recognized during the period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Less: Net gains recognized during the period on securities sold during the period |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Unrealized gains recognized during the period on securities still held at September 30, 2019 and 2018(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
Included in other income and the nuclear decommissioning trust regulatory liability. |
The fair value of Virginia Power’s fixed income securities with readily determinable fair values held in nuclear decommissioning trust funds at September 30, 2019 by contractual maturity is as follows:
|
|
Amount |
|
|
(millions) |
|
|
|
|
Due in one year or less |
|
$ |
|
|
Due after one year through five years |
|
|
|
|
Due after five years through ten years |
|
|
|
|
Due after ten years |
|
|
|
|
Total |
|
$ |
|
|
63
Presented below is selected information regarding Virginia Power’s equity and fixed income securities with readily determinable fair values held in nuclear decommissioning trust funds.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Realized gains(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized losses(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes realized gains and losses recorded to the nuclear decommissioning trust regulatory liability. |
Other-than-temporary impairment losses on investments held in nuclear decommissioning trust funds recognized in earnings for Virginia Power were immaterial for the three and nine months ended September 30, 2019 and 2018.
64
Equity Method Investments
Dominion Energy
Atlantic Coast Pipeline
In September 2014, Dominion Energy, along with Duke and Southern Company Gas, announced the formation of Atlantic Coast Pipeline. The Atlantic Coast Pipeline partnership agreement includes provisions to allow Dominion Energy an option to purchase additional ownership interest in Atlantic Coast Pipeline to maintain a leading ownership percentage. As of September 30, 2019, the members hold the following membership interests: Dominion Energy,
Atlantic Coast Pipeline is focused on constructing an approximately
Dominion Energy recorded contributions of $
DETI provides services to Atlantic Coast Pipeline which totaled $
In October 2017, Dominion Energy entered into a guarantee agreement to support a portion of Atlantic Coast Pipeline’s obligation under its credit facility. See Note 18 for more information.
Atlantic Coast Pipeline is the subject of challenges in state and federal courts and agencies, including, among others, challenges of the Atlantic Coast Pipeline Project’s biological opinion and incidental take statement, permits providing right of way crossings of certain federal lands, the U.S. Army Corps of Engineers 404 permit, the air permit for a compressor station at Buckingham, Virginia, the FERC Environmental Impact Statement order and the FERC order approving the CPCN. Each of these challenges alleges non-compliance on the part of federal and state permitting authorities and adverse ecological consequences if the Atlantic Coast Pipeline Project is permitted to proceed. Since December 2018, notable developments in these challenges include a stay in December 2018 issued by the U.S. Court of Appeals for the Fourth Circuit and the same court's July 2019 vacatur of the biological opinion and incidental take statement (which stay and subsequent vacatur halted most project construction activity), a U.S. Court of Appeals for the Fourth Circuit decision vacating the permits to cross certain federal forests, the U.S. Court of Appeals for the Fourth Circuit's remand to U.S. Army Corps of Engineers of Atlantic Coast Pipeline’s Huntington District 404 verification and the U.S. Court of Appeals for the Fourth Circuit’s remand to the National Park Service of Atlantic Coast Pipeline’s Blue Ridge Parkway right-of-way. Atlantic Coast Pipeline is vigorously defending these challenges and coordinating with the federal and state authorities which are the direct parties to the challenges. In June 2019, the Solicitor General of the U.S. and Atlantic Coast Pipeline filed petitions requesting that the Supreme Court of the U.S. hear the case regarding the Appalachian Trail crossing. In October 2019, the Supreme Court of the U.S. agreed to hear the case. A ruling is expected no later than June 2020. Atlantic Coast Pipeline is also evaluating possible legislative remedies to this issue.
In anticipation of the U.S. Court of Appeals for the Fourth Circuit's vacatur of the biological opinion and incidental take statement, Atlantic Coast Pipeline and the U.S. Fish and Wildlife Service commenced work in mid-May of 2019 to set the basis for a reissued biological opinion and incidental take statement. Atlantic Coast Pipeline continues coordinating and working with U.S. Fish and Wildlife Service and other parties in preparation for a reissuance of the biological opinion and incidental take statement.
Given the legal challenges described above and ongoing discussions with customers, project construction is expected to be completed by the end of 2021, with full in-service in early 2022.
The delays resulting from the legal challenges described above have impacted the cost and schedule for the Atlantic Coast Pipeline Project. Project cost estimates are $
65
pressure. Project construction activities, schedules and costs are also subject to uncertainty due to permitting and/or work delays (including due to judicial or regulatory action), abnormal weather and other conditions that could result in cost or schedule modifications in the future, a suspension of AFUDC for Atlantic Coast Pipeline and/or impairment charges potentially material to Dominion Energy’s cash flows, financial position and/or results of operations.
Blue Racer
In the first quarter of 2019, Dominion Energy received $
Other – Catalyst Old River Hydroelectric Limited Partnership
In September 2018, Dominion Energy completed the sale of its
Wrangler
In September 2019, Dominion Energy entered into an agreement to form Wrangler, a partnership with Interstate Gas Supply, Inc. Wrangler will operate a nonregulated natural gas retail energy marketing business with Dominion Energy contributing its nonregulated retail energy marketing operations and Interstate Gas Supply, Inc. contributing cash.
Dominion Energy expects the initial contribution, consisting of SCANA Energy Marketing, Inc., to close in the fourth quarter of 2019, subject to approval from the Georgia Public Service Commission and clearance from the Federal Trade Commission under the Hart-Scott-Rodino Act. Dominion Energy will receive approximately $
Dominion Energy will have a
In the third quarter of 2019, SCANA Energy Marketing, Inc.’s assets and liabilities to be contributed were classified as held for sale on the Consolidated Balance Sheet. SCANA Energy Marketing, Inc. is included in Dominion Energy’s Southeast Energy segment and is primarily comprised of intangible assets related to acquired customer lists in the SCANA Combination, trade accounts receivable, gas inventory and trade accounts payable.
Over the next three years, Dominion Energy expects to contribute its remaining nonregulated retail energy marketing operations to Wrangler under the terms of the September 2019 agreement. As a result, Dominion Energy will receive additional cash consideration which will be based upon future financial performance. When these future contributions occur, Dominion Energy expects to retain a 20% noncontrolling ownership interest in Wrangler.
Dominion Energy Gas
Iroquois
Dominion Energy Gas’ equity earnings totaled $
66
Note 11. Property, Plant and Equipment
Dominion Energy and Virginia Power
Acquisitions of Solar Projects
The following table presents acquisitions by Virginia Power of solar projects. Virginia Power expects to claim federal investment tax credits on the projects.
Date Agreement Entered |
|
Date Agreement Closed |
|
Project Location |
|
Project Name |
|
Project Cost (millions)(1) |
|
|
Date of Commercial Operations |
|
MW Capacity |
|
||
|
|
|
|
North Carolina |
|
Gutenberg |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Virginia |
|
Gloucester |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia |
|
Grasshopper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Carolina |
|
Chestnut |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia |
|
Ft. Powhatan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia |
|
Belcher |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia |
|
Bedford |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia |
|
Maplewood |
|
|
|
|
|
|
|
|
|
|
(1) |
Includes acquisition cost. |
Dominion Energy
Acquisitions of Solar Projects
The following table presents acquisitions by Dominion Energy of solar projects. Dominion Energy expects to claim federal investment tax credits on the projects.
Date Agreement Entered |
|
Date Agreement Closed |
|
Project Location |
|
Project Name |
|
Project Cost (millions)(1) |
|
|
Date of Commercial Operations |
|
MW Capacity |
|
||
|
|
|
|
Virginia |
|
Greensville |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Virginia |
|
Myrtle |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South Carolina |
|
Seabrook |
|
|
|
|
|
|
|
|
|
|
(1) |
Includes acquisition cost. |
Dominion Energy Gas
Assignment of Shale Development Rights
In December 2013, Dominion Energy closed on agreements with natural gas producers to convey over time approximately
In November 2014, Dominion Energy Gas closed an agreement with a natural gas producer to convey over time approximately
67
In March 2018, Dominion Energy Gas closed an agreement with a natural gas producer to convey approximately
In June 2018, Dominion Energy Gas closed an amendment to an agreement with a natural gas producer for the elimination of Dominion Energy Gas’ overriding royalty interest in gas produced from approximately
68
Note 12. Regulatory Assets and Liabilities
Regulatory assets and liabilities include the following:
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
(millions) |
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
Regulatory assets: |
|
|
|
|
|
|
|
|
Deferred cost of fuel used in electric generation(1) |
|
$ |
|
|
|
$ |
|
|
Deferred project costs and DSM programs for gas utilities(2) |
|
|
|
|
|
|
|
|
Unrecovered gas costs(3) |
|
|
|
|
|
|
|
|
Deferred rate adjustment clause costs for Virginia electric utility(4)(5) |
|
|
|
|
|
|
|
|
Deferred nuclear refueling outage costs(6) |
|
|
|
|
|
|
|
|
NND Project costs(7) |
|
|
|
|
|
|
— |
|
PJM transmission rates(8) |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Regulatory assets-current |
|
|
|
|
|
|
|
|
Deferred cost of fuel used in electric generation(1) |
|
|
— |
|
|
|
|
|
Unrecognized pension and other postretirement benefit costs(9) |
|
|
|
|
|
|
|
|
Deferred rate adjustment clause costs for Virginia electric utility(4)(5)(10) |
|
|
|
|
|
|
|
|
Deferred project costs for gas utilities(2) |
|
|
|
|
|
|
|
|
PJM transmission rates(8) |
|
|
|
|
|
|
|
|
Interest rate hedges(11) |
|
|
|
|
|
|
|
|
AROs and related funding(12) |
|
|
|
|
|
|
— |
|
Cost of reacquired debt(13)(14) |
|
|
|
|
|
|
|
|
NND Project costs(7) |
|
|
|
|
|
|
— |
|
Ash pond and landfill closure costs(15) |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Regulatory assets-noncurrent |
|
|
|
|
|
|
|
|
Total regulatory assets |
|
$ |
|
|
|
$ |
|
|
Regulatory liabilities: |
|
|
|
|
|
|
|
|
Provision for future cost of removal and AROs(16) |
|
$ |
|
|
|
$ |
|
|
Reserve for refunds and rate credits to electric utility customers(17) |
|
|
|
|
|
|
|
|
Cost-of-service impact of 2017 Tax Reform Act(18) |
|
|
|
|
|
|
|
|
Income taxes refundable through future rates(19) |
|
|
|
|
|
|
— |
|
Monetization of guarantee settlement(20) |
|
|
|
|
|
|
— |
|
Other |
|
|
|
|
|
|
|
|
Regulatory liabilities-current |
|
|
|
|
|
|
|
|
Income taxes refundable through future rates(19) |
|
|
|
|
|
|
|
|
Provision for future cost of removal and AROs(16) |
|
|
|
|
|
|
|
|
Nuclear decommissioning trust(21) |
|
|
|
|
|
|
|
|
Monetization of guarantee settlement(20) |
|
|
|
|
|
|
— |
|
Reserve for refunds and rate credits to electric utility customers(17) |
|
|
|
|
|
|
— |
|
Overrecovered other postretirement benefit costs(22) |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Regulatory liabilities-noncurrent |
|
|
|
|
|
|
|
|
Total regulatory liabilities |
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
69
(5) |
|
(6) |
|
(7) |
|
(8) |
|
(9) |
|
(10) |
|
(11) |
|
(12) |
|
(13) |
|
(14) |
|
(15) |
|
(16) |
|
(17) |
|
(18) |
|
(19) |
|
(20) |
|
(21) |
|
(22) |
|
70
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
(millions) |
|
|
|
|
|
|
|
|
Virginia Power |
|
|
|
|
|
|
|
|
Regulatory assets: |
|
|
|
|
|
|
|
|
Deferred cost of fuel used in electric generation(1) |
|
$ |
|
|
|
$ |
|
|
Deferred rate adjustment clause costs(2)(3) |
|
|
|
|
|
|
|
|
Deferred nuclear refueling outage costs(4) |
|
|
|
|
|
|
|
|
PJM transmission rates(5) |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Regulatory assets-current(6) |
|
|
|
|
|
|
|
|
Deferred rate adjustment clause costs(2)(3)(7) |
|
|
|
|
|
|
|
|
PJM transmission rates(5) |
|
|
|
|
|
|
|
|
Interest rate hedges(8) |
|
|
|
|
|
|
|
|
Deferred cost of fuel used in electric generation(1) |
|
|
— |
|
|
|
|
|
Ash pond and landfill closure costs(9) |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Regulatory assets-noncurrent |
|
|
|
|
|
|
|
|
Total regulatory assets |
|
$ |
|
|
|
$ |
|
|
Regulatory liabilities: |
|
|
|
|
|
|
|
|
Provision for future cost of removal(10) |
|
$ |
|
|
|
$ |
|
|
Cost-of-service impact of 2017 Tax Reform Act(11) |
|
|
|
|
|
|
|
|
Reserve for rate credits to electric utility customers(12) |
|
|
— |
|
|
|
|
|
Income taxes refundable through future rates(13) |
|
|
|
|
|
|
— |
|
Other |
|
|
|
|
|
|
|
|
Regulatory liabilities-current |
|
|
|
|
|
|
|
|
Income taxes refundable through future rates(13) |
|
|
|
|
|
|
|
|
Nuclear decommissioning trust(14) |
|
|
|
|
|
|
|
|
Provision for future cost of removal(10) |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Regulatory liabilities-noncurrent |
|
|
|
|
|
|
|
|
Total regulatory liabilities |
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
As a result of actions from the Virginia Commission in the first quarter of 2019 regarding the ratemaking treatment of excess deferred taxes from the adoption of the 2017 Tax Reform Act for all existing rate adjustment clauses, Virginia Power recorded a $ |
(4) |
Legislation enacted in Virginia in April 2014 requires Virginia Power to defer operation and maintenance costs incurred in connection with the refueling of any nuclear-powered generating plant. These deferred costs will be amortized over the refueling cycle, not to exceed |
(5) |
Reflects amounts to be recovered through retail rates in Virginia for payments Virginia Power will make to PJM over a ten-year period ending 2028 under the terms of a FERC settlement agreement in May 2018 resolving a PJM cost allocation matter. |
(6) |
|
(7) |
During the first quarter of 2019, Virginia Power recorded a charge of $ |
(8) |
|
(9) |
|
(10) |
|
(11) |
|
(12) |
|
71
(13) |
Amounts recorded to pass the effect of reduced income taxes from the 2017 Tax Reform Act to customers in future periods, which will reverse at the weighted average tax rate that was used to build the reserves over the remaining book life of the property, net of amounts to be recovered through future rates to pay income taxes that become payable when rate revenue is provided to recover AFUDC equity. |
(14) |
|
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
(millions) |
|
|
|
|
|
|
|
|
Dominion Energy Gas |
|
|
|
|
|
|
|
|
Regulatory assets: |
|
|
|
|
|
|
|
|
Deferred project costs(1) |
|
$ |
|
|
|
$ |
|
|
PIPP(2) |
|
|
|
|
|
|
— |
|
Unrecovered gas costs(3) |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Regulatory assets-current |
|
|
|
|
|
|
|
|
Unrecognized pension and other postretirement benefit costs(4) |
|
|
|
|
|
|
|
|
Deferred project costs(1) |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Regulatory assets-noncurrent(5) |
|
|
|
|
|
|
|
|
Total regulatory assets |
|
$ |
|
|
|
$ |
|
|
Regulatory liabilities: |
|
|
|
|
|
|
|
|
Provision for future cost of removal and AROs(6) |
|
$ |
|
|
|
$ |
|
|
PIPP(2) |
|
|
— |
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Regulatory liabilities-current(7) |
|
|
|
|
|
|
|
|
Income taxes refundable through future rates(8) |
|
|
|
|
|
|
|
|
Provision for future cost of removal and AROs(6) |
|
|
|
|
|
|
|
|
Overrecovered other postretirement benefit costs(9) |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Regulatory liabilities-noncurrent |
|
|
|
|
|
|
|
|
Total regulatory liabilities |
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
Reflects unrecovered or overrecovered gas costs at regulated gas operations, which are recovered or refunded through filings with the applicable regulatory authority. |
(4) |
|
(5) |
|
(6) |
|
(7) |
|
(8) |
Amounts recorded to pass the effect of reduced income taxes from the 2017 Tax Reform Act to customers in future periods, which will reverse at the weighted average tax rate that was used to build the reserves over the remaining book life of the property, net of amounts to be recovered through future rates to pay income taxes that become payable when rate revenue is provided to recover AFUDC equity. |
(9) |
|
At September 30, 2019, Dominion Energy, Virginia Power and Dominion Energy Gas’ regulatory assets include $
72
Note 13. Regulatory Matters
Regulatory Matters Involving Potential Loss Contingencies
As a result of issues generated in the ordinary course of business, the Companies are involved in various regulatory matters. Certain regulatory matters may ultimately result in a loss; however, as such matters are in an initial procedural phase, involve uncertainty as to the outcome of pending reviews or orders, and/or involve significant factual issues that need to be resolved, it is not possible for the Companies to estimate a range of possible loss. For regulatory matters that the Companies cannot estimate, a statement to this effect is made in the description of the matter. Other matters may have progressed sufficiently through the regulatory process such that the Companies are able to estimate a range of possible loss. For regulatory matters that the Companies are able to reasonably estimate a range of possible losses, an estimated range of possible loss is provided, in excess of the accrued liability (if any) for such matters. Any estimated range is based on currently available information, involves elements of judgment and significant uncertainties and may not represent the Companies’ maximum possible loss exposure. The circumstances of such regulatory matters will change from time to time and actual results may vary significantly from the current estimate. For current matters not specifically reported below, management does not anticipate that the outcome from such matters would have a material effect on the Companies’ financial position, liquidity or results of operations.
FERC - Electric
Under the Federal Power Act, FERC regulates wholesale sales and transmission of electricity in interstate commerce by public utilities. Virginia Power purchases and, under its market based rate authority, sells electricity in the PJM wholesale market and to wholesale purchasers in Virginia and North Carolina. DESC sells electricity to wholesale purchasers in its balancing authority area under its electric cost based tariff and to wholesale purchasers outside of its balancing authority area under its market based rate authority. Dominion Energy’s merchant generators sell electricity in the PJM, CAISO and ISO-NE wholesale markets, and to wholesale purchasers in the states of Virginia, North Carolina, Indiana, Connecticut, Tennessee, Georgia, California, South Carolina and Utah, under Dominion Energy’s market-based sales tariffs authorized by FERC or pursuant to FERC authority to sell as a qualified facility. In addition, Virginia Power has FERC approval of a tariff to sell wholesale power at capped rates based on its embedded cost of generation. This cost-based sales tariff could be used to sell to loads within or outside Virginia Power’s service territory. Any such sales would be voluntary.
Rates
In April 2008, FERC granted an application for Virginia Power’s electric transmission operations to establish a forward-looking formula rate mechanism that updates transmission rates on an annual basis and approved an ROE effective as of January 1, 2008. The formula rate is designed to recover the expected revenue requirement for each calendar year and is updated based on actual costs. The FERC-approved formula method, which is based on projected costs, allows Virginia Power to earn a current return on its investment in electric transmission infrastructure.
In March 2010, ODEC and North Carolina Electric Membership Corporation filed a complaint with FERC against Virginia Power claiming, among other issues, that the incremental costs of undergrounding certain transmission line projects were unjust, unreasonable and unduly discriminatory or preferential and should be excluded from Virginia Power’s transmission formula rate. A settlement of the other issues raised in the complaint was approved by FERC in May 2012.
In March 2014, FERC issued an order excluding from Virginia Power’s transmission rates for wholesale transmission customers located outside Virginia the incremental costs of undergrounding certain transmission line projects. FERC found it is not just and reasonable for non-Virginia wholesale transmission customers to be allocated the incremental costs of undergrounding the facilities because the projects are a direct result of Virginia legislation and Virginia Commission pilot programs intended to benefit the citizens of Virginia. The order is retroactively effective as of March 2010 and will cause the reallocation of the costs charged to wholesale transmission customers with loads outside Virginia to wholesale transmission customers with loads in Virginia. FERC determined that there was not sufficient evidence on the record to determine the magnitude of the underground increment and held a hearing to determine the appropriate amount of undergrounding cost to be allocated to each wholesale transmission customer in Virginia.
In October 2017, FERC issued an order determining the calculation of the incremental costs of undergrounding the transmission projects and affirming that the costs are to be recovered from the wholesale transmission customers with loads located in Virginia. FERC directed Virginia Power to rebill all wholesale transmission customers retroactively to March 2010 within 30 days of when the proceeding becomes final and no longer subject to rehearing. In November 2017, Virginia Power, North Carolina Electric Membership Corporation and the wholesale transmission customers filed petitions for rehearing. In July 2018, FERC denied the rehearing requests related to the October 2017 order determining the calculation of the undergrounding costs. Several parties have appealed FERC’s decision to the U.S. Court of Appeals for the D.C. Circuit. This matter is pending. While Virginia Power cannot predict the outcome of the matter, it is not expected to have a material effect on results of operations.
73
In January 2019, FERC issued an order denying PJM’s request to waive certain provisions of the PJM Tariff regarding the liquidation of a portfolio of FTRs owned by GreenHat who had defaulted on its financial obligations. As a result of FERC’s order, PJM is required to use the existing tariff provisions to liquidate GreenHat’s FTR portfolio and allocate the resulting costs to PJM members. In February 2019, PJM filed a request for clarification and rehearing with FERC. Also in February 2019, Virginia Power and certain other PJM members filed a request for rehearing with FERC. In June 2019, FERC established a hearing and settlement proceedings to address the issues raised in PJM’s request for clarification and rehearing. In October 2019, PJM submitted a settlement offer to FERC which is pending approval. Based on the terms of the proposed settlement, the impact to Virginia Power is expected to be immaterial.
FERC – Gas
DETI
In July 2017, FERC audit staff communicated to DETI that it had substantially completed an audit of DETI’s compliance with the accounting and reporting requirements of FERC’s Uniform System of Accounts and provided a description of matters and preliminary recommendations. In November 2017, the FERC audit staff issued its audit report which could have the potential to result in adjustments which could be material to Dominion Energy and Dominion Energy Gas’ results of operations. In December 2017, DETI provided its response to the audit report. DETI recognized a charge of $
2017 Tax Reform Act
Other than the items discussed below, which are pending or have been resolved during the period, there have been no changes to the 2017 Tax Reform Act matters discussed in Notes 3 and 13 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018.
In January 2019, Virginia Power filed updated testimony in response to the Virginia Commission’s September 2018 order with a proposed annual revenue reduction of approximately $
In October 2018, the North Carolina Commission issued an order requesting companies file to reduce base rates expeditiously. Virginia Power made its compliance filing in October 2018 and submitted an annual base rate revenue decrease of approximately $
In March 2019, Questar Gas filed with the Utah and Wyoming Commissions as to the impact of excess deferred income taxes resulting from the 2017 Tax Reform Act. Questar Gas proposed to return the 2018 amortization of excess deferred income taxes to customers and to incorporate the remaining excess deferred income tax impact in its next general rate cases in each jurisdiction. In May 2019, the Utah Commission issued an order approving Questar Gas’ proposal to refund the 2018 amortization of excess deferred income taxes over twelve months beginning in June 2019. The matter with the Wyoming Commission is pending.
In October 2018, the Ohio Commission issued an order requiring rate-regulated utilities to file an application reflecting the impact of the 2017 Tax Reform Act on current rates by January 1, 2019. In December 2018, East Ohio filed its application proposing an approach to establishing rates and charges by and through which to return tax reform benefits to its customers. This case is pending.
In March 2018, FERC announced actions to address the income tax allowance component of regulated entities’ cost-of-service rates as a result of the 2017 Tax Reform Act. FERC required all interstate natural gas pipelines to make a one-time informational filing with FERC on Form 501-G to provide financial information to allow FERC and other interested parties to analyze the impacts of the changes in tax law. The actions also included the reversal of FERC’s policy allowing master limited partnerships to recover an income tax allowance in cost-of-service rates and requiring other pass-through entities to justify the inclusion of an income tax allowance.
74
During 2018, Dominion Energy’s FERC-regulated pipelines, including those accounted for as equity method investments, filed the Form 501-G with FERC. Dominion Energy Overthrust Pipeline, LLC, White River Hub, Dominion Energy Questar Pipeline, DETI, DECG, Cove Point and Iroquois have reached resolution through a FERC waiver or FERC terminating the 501-G proceeding, or through settlement, which did not result in a material impact to results of operations, financial condition and/or cash flows of Dominion Energy or Dominion Energy Gas.
Other Regulatory Matters
Other than the following matters, there have been no significant developments regarding the pending regulatory matters disclosed in Notes 3 and 13 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018 or Note 13 to the Consolidated Financial Statements in the Companies’ Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019.
Virginia Regulation
Grid Transformation and Security Act of 2018
In July 2018, Virginia Power filed a petition with the Virginia Commission for approval of the first three years of its ten-year plan for electric distribution grid transformation projects as authorized by the GTSA. During the first three years of the plan, Virginia Power proposed to focus on the following seven foundational components of the overall grid transformation plan: (i) smart meters; (ii) customer information platform; (iii) reliability and resilience; (iv) telecommunications infrastructure; (v) cyber and physical security; (vi) predictive analytics; and (vii) emerging technology. The total estimated capital investment during 2019-2021 was $
In September 2019, Virginia Power filed a revised plan which includes six components: (i) smart meters; (ii) customer information platform; (iii) grid improvement projects; (iv) telecommunications infrastructure; (v) cyber security; and (vi) a smart charging electric vehicle infrastructure pilot program (Phase IB). For Phase IB, the total proposed capital investment during 2019 – 2021 is $
Virginia Fuel Expenses
In May 2019, Virginia Power filed its annual fuel factor with the Virginia Commission to recover an estimated $
Battery Storage Pilot
In August 2019, Virginia Power filed an application with the Virginia Commission to participate in a pilot program for electric power storage batteries, which includes three projects for deployment of battery energy storage systems. Virginia Power also requested an amended CPCN to construct and operate a battery energy storage system at Scott Solar. The projects are estimated to cost approximately $
Rate Adjustment Clauses
In December 2018, Virginia Power filed a petition requesting approval of Rider E and proposed a $
75
The Virginia Commission previously approved Rider U in conjunction with cost recovery to move certain electric distribution facilities underground as authorized by Virginia legislation. In October 2019, The Virginia Commission approved Virginia Power’s proposed fourth phase of conversions totaling $
Additional significant riders associated with various Virginia Power projects are as follows:
Rider Name |
|
Application Date |
|
Approval Date |
|
Rate Year Beginning |
|
Total Revenue Requirement (millions) |
|
|
Increase (Decrease) Over Previous Year (millions) |
|
||
Rider BW |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Rider US-2 |
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
Electric Transmission Projects
In November 2013, the Virginia Commission issued an order granting Virginia Power a CPCN to construct approximately
Virginia Power electric transmission projects approved or applied for are as follows:
Description and Location of Project |
|
Application Date |
|
Approval Date |
|
Type of Line |
|
Miles of Lines |
|
Cost Estimate (millions) |
|
|
Rebuild and operate the Glebe substation and relocate and operate in Arlington County, Virginia and the City of Alexandria, Virginia existing overhead line underground |
|
|
|
|
|
|
|
<1 |
|
$ |
|
|
Rebuild and operate five segments between the Loudoun and Ox substations |
|
|
|
|
|
|
|
|
|
|
|
|
North Carolina Regulation
North Carolina Base Rate Case
In March 2019, Virginia Power filed its base rate case and schedules with the North Carolina Commission. Virginia Power proposed a non-fuel, base rate increase of $
North Carolina Fuel Filing
In August 2019, Virginia Power submitted its annual filing to the North Carolina Commission to adjust the fuel component of its electric rates. Virginia Power proposed a total $
South Carolina Regulation
In June 2019, DESC filed with the South Carolina Commission its monitoring report for the 12-month period ended March 31, 2019 with a total revenue requirement of $
76
of the Natural Gas Rate Stabilization Act effective for the rate year beginning November 2019. In October 2019, the South Carolina Commission approved a total revenue requirement of $
Ohio Regulation
UEX Rider
East Ohio has approval for a UEX rider through which it recovers the bad debt expense of most customers not participating in the PIPP Plus Program. The UEX rider is adjusted annually to achieve dollar for dollar recovery of East Ohio’s actual write-offs of uncollectible amounts. In July 2019, the Ohio Commission approved East Ohio’s application requesting approval of its UEX rider to reflect recovery of under-recovered accumulated bad debt expense of approximately $
West Virginia Regulation
PREP
In May 2019, Hope filed a PREP application with the West Virginia Commission requesting approval to recover PREP costs related to $
Utah Regulation
In April 2019, Questar Gas filed a request with the Utah Commission for pre-approval to construct an LNG storage facility with a liquefaction rate of
FERC – Gas
Cove Point
In June 2015, Cove Point executed
In connection with the Eastern Market Access Project, in August 2019, Cove Point filed to update its annual electric power cost adjustment requesting FERC approval to recover $
DETI
In September 2019, DETI submitted its annual transportation cost rate adjustment to FERC requesting approval to recover $
In January 2018, DETI filed an application to request FERC authorization to construct and operate certain facilities located in Ohio and Pennsylvania for the Sweden Valley project. In June 2019, DETI withdrew its application for the project due to certain regulatory delays. As a result of the project abandonment, during the second quarter of 2019, DETI recorded a charge of $
77
Note 14. Asset Retirement Obligations
AROs represent obligations that result from laws, statutes, contracts and regulations related to the eventual retirement of certain of the Companies’ long-lived assets. Dominion Energy and Virginia Power’s AROs are primarily associated with the decommissioning of their nuclear generation facilities and ash pond and landfill closures. Dominion Energy Gas’ AROs primarily include plugging and abandonment of gas and oil wells and the interim retirement of natural gas gathering, transmission, distribution and storage pipeline components.
The Companies have also identified, but not recognized, AROs related to the retirement of Dominion Energy’s LNG facility, Dominion Energy and Dominion Energy Gas’ storage wells in their underground natural gas storage network, certain Virginia Power electric transmission and distribution assets located on property with easements, rights of way, franchises and lease agreements, Virginia Power’s hydroelectric generation facilities and the abatement of certain asbestos not expected to be disturbed in Dominion Energy and Virginia Power’s generation facilities. The Companies currently do not have sufficient information to estimate a reasonable range of expected retirement dates for any of these assets since the economic lives of these assets can be extended indefinitely through regular repair and maintenance and they currently have no plans to retire or dispose of any of these assets. As a result, a settlement date is not determinable for these assets and AROs for these assets will not be reflected in the Consolidated Financial Statements until sufficient information becomes available to determine a reasonable estimate of the fair value of the activities to be performed. The Companies continue to monitor operational and strategic developments to identify if sufficient information exists to reasonably estimate a retirement date for these assets.
|
Amount |
|
||
(millions) |
|
|
|
|
Dominion Energy |
|
|
|
|
AROs at December 31, 2018(1) |
$ |
|
|
|
Obligations incurred during the period(2) |
|
|
|
|
Obligations settled during the period |
|
|
( |
) |
AROs acquired in the SCANA Combination |
|
|
|
|
Revisions in estimated cash flows(2) |
|
|
( |
) |
Accretion |
|
|
|
|
AROs at September 30, 2019(1) |
$ |
|
|
|
Virginia Power |
|
|
|
|
AROs at December 31, 2018(3) |
$ |
|
|
|
Obligations incurred during the period(2) |
|
|
|
|
Obligations settled during the period |
|
|
( |
) |
Revisions in estimated cash flows(2) |
|
|
( |
) |
Accretion |
|
|
|
|
AROs at September 30, 2019(3) |
$ |
|
|
|
Dominion Energy Gas |
|
|
|
|
AROs at December 31, 2018(4) |
$ |
|
|
|
Obligations settled during the period |
|
|
( |
) |
Revisions in estimated cash flows |
|
|
( |
) |
Accretion |
|
|
|
|
AROs at September 30, 2019(4) |
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
Dominion Energy and Virginia Power have established trusts dedicated to funding the future decommissioning of their nuclear plants. At September 30, 2019 and December 31, 2018, the aggregate fair value of Dominion Energy’s trusts, consisting primarily of equity and debt securities, totaled $
78
Note 15. Leases
At September 30, 2019, the Companies had the following lease assets and liabilities recorded in the Consolidated Balance Sheets:
|
|
September 30, 2019 |
|
|
(millions) |
|
|
|
|
Dominion Energy |
|
|
|
|
Lease assets: |
|
|
|
|
Operating lease assets |
|
$ |
|
|
Finance lease assets(1) |
|
|
|
|
Total lease assets |
|
$ |
|
|
Lease liabilities: |
|
|
|
|
Operating lease liabilities(2) |
|
$ |
|
|
Finance lease liabilities(3) |
|
|
|
|
Total lease liabilities - current |
|
|
|
|
Operating lease liabilities |
|
|
|
|
Finance lease liabilities(4) |
|
|
|
|
Total lease liabilities - noncurrent |
|
|
|
|
Total lease liabilities |
|
$ |
|
|
Virginia Power |
|
|
|
|
Operating lease assets |
|
$ |
|
|
Finance lease assets(1) |
|
|
|
|
Total lease assets |
|
$ |
|
|
Lease liabilities: |
|
|
|
|
Operating lease liabilities(2) |
|
$ |
|
|
Finance lease liabilities(3) |
|
|
|
|
Total lease liabilities - current |
|
|
|
|
Operating lease liabilities |
|
|
|
|
Finance lease liabilities(4) |
|
|
|
|
Total lease liabilities - noncurrent |
|
|
|
|
Total lease liabilities |
|
$ |
|
|
Dominion Energy Gas |
|
|
|
|
Operating lease assets |
|
$ |
|
|
Finance lease assets(1) |
|
|
|
|
Total lease assets |
|
$ |
|
|
Lease liabilities: |
|
|
|
|
Operating lease liabilities(2) |
|
$ |
|
|
Finance lease liabilities(3) |
|
|
|
|
Total lease liabilities - current |
|
|
|
|
Operating lease liabilities |
|
|
|
|
Finance lease liabilities(4) |
|
|
|
|
Total lease liabilities - noncurrent |
|
|
|
|
Total lease liabilities |
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
In addition to the amounts disclosed above, Dominion Energy’s Consolidated Balance Sheet at September 30, 2019 includes property, plant and equipment and accumulated depreciation of $
79
|
|
Three Months Ended September 30, 2019 |
|
|
Nine Months Ended September 30, 2019 |
|
||
(millions) |
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
Finance lease cost: |
|
|
|
|
|
|
|
|
Amortization |
|
$ |
|
|
|
$ |
|
|
Interest |
|
|
|
|
|
|
|
|
Operating lease cost |
|
|
|
|
|
|
|
|
Short-term lease cost |
|
|
|
|
|
|
|
|
Variable lease cost |
|
|
|
|
|
|
|
|
Total lease cost |
|
$ |
|
|
|
$ |
|
|
Virginia Power |
|
|
|
|
|
|
|
|
Operating lease cost |
|
$ |
|
|
|
$ |
|
|
Short-term lease cost |
|
|
|
|
|
|
|
|
Variable lease cost |
|
|
|
|
|
|
|
|
Total lease cost |
|
$ |
|
|
|
$ |
|
|
Dominion Energy Gas |
|
|
|
|
|
|
|
|
Operating lease cost |
|
$ |
|
|
|
$ |
|
|
Short-term lease cost |
|
|
|
|
|
|
|
|
Total lease cost |
|
$ |
|
|
|
$ |
|
|
For the nine months ended September 30, 2019, cash paid for amounts included in the measurement of lease liabilities consisted of the following amounts, included in the Companies’ Consolidated Statements of Cash Flows:
|
|
Nine Months Ended September 30, 2019 |
|
|
(millions) |
|
|
|
|
Dominion Energy |
|
|
|
|
Operating cash flows for finance leases |
|
$ |
|
|
Operating cash flows for operating leases |
|
|
|
|
Financing cash flows for finance leases |
|
|
|
|
Virginia Power |
|
|
|
|
Operating cash flows for operating leases |
|
|
|
|
Dominion Energy Gas |
|
|
|
|
Operating cash flows for operating leases |
|
|
|
|
80
In addition to the amounts disclosed above, Dominion Energy’s Consolidated Statement of Income for the three and nine months ended September 30, 2019 includes $
At September 30, 2019, the weighted average remaining lease term and weighted discount rate for the Companies’ finance and operating leases were as follows:
|
|
September 30, 2019 |
Dominion Energy |
|
|
Weighted average remaining lease term - finance leases |
|
|
Weighted average remaining lease term - operating leases |
|
|
Weighted average discount rate - finance leases |
|
|
Weighted average discount rate - operating leases |
|
|
Virginia Power |
|
|
Weighted average remaining lease term - finance leases |
|
|
Weighted average remaining lease term - operating leases |
|
|
Weighted average discount rate - finance leases |
|
|
Weighted average discount rate - operating leases |
|
|
Dominion Energy Gas |
|
|
Weighted average remaining lease term - finance leases |
|
|
Weighted average remaining lease term - operating leases |
|
|
Weighted average discount rate - finance leases |
|
|
Weighted average discount rate - operating leases |
|
|
The Companies’ lease liabilities have the following scheduled maturities:
Maturity of Lease Liabilities |
|
Dominion Energy |
|
|
Virginia Power |
|
|
Dominion Energy Gas |
|
|||||||||||||||
(millions) |
|
Operating |
|
|
Finance |
|
|
Operating |
|
|
Finance |
|
|
Operating |
|
|
Finance |
|
||||||
2019 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
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After 2023 |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total undiscounted lease payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value adjustment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Present value of lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Corporate Office Leasing Arrangement
In July 2016, Dominion Energy signed an agreement with a lessor to construct and lease a new corporate office property in Richmond, Virginia. The lessor provided equity and obtained financing commitments from debt investors, totaling $
Upon commencement, the lease for the facility was classified as a finance lease. At the end of the initial lease term, Dominion Energy can (i) extend the term of the lease for an additional
81
Note 16. Variable Interest Entities
There have been no significant changes regarding the entities the Companies consider VIEs as described in Note 15 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018.
Dominion Energy
At September 30, 2019 and December 31, 2018, Dominion Energy’s securities due within one year includes $
Virginia Power
Virginia Power had a long-term power and capacity contract with
Virginia Power and Dominion Energy Gas
Virginia Power and Dominion Energy Gas purchased shared services from DES, an affiliated VIE, of $
Note 17. Significant Financing Transactions
Credit Facilities and Short-term Debt
The Companies use short-term debt to fund working capital requirements and as a bridge to long-term debt financings. The levels of borrowing may vary significantly during the course of the year, depending upon the timing and amount of cash requirements not satisfied by cash from operations. In addition, Dominion Energy utilizes cash and letters of credit to fund collateral requirements. Collateral requirements are impacted by commodity prices, hedging levels, Dominion Energy’s credit ratings and the credit quality of its counterparties.
Dominion Energy
At September 30, 2019, Dominion Energy’s commercial paper and letters of credit outstanding, as well as its capacity available under the credit facility, were as follows:
|
|
Facility Limit |
|
|
Outstanding Commercial Paper |
|
|
Outstanding Letters of Credit |
|
|
Facility Capacity Available |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint revolving credit facility(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
In addition to the credit facility mentioned above, Dominion Energy also has a credit facility with a maturity date in June 2020 which allows Dominion Energy to issue up to approximately $
82
In March 2019, DESC’s existing $
South Carolina Fuel Company, Inc.’s existing credit facility was terminated in February 2019. SCANA and PSNC’s existing credit facilities were terminated in March 2019. Liquidity needs for these entities may be satisfied through short-term intercompany borrowings from Dominion Energy.
In addition to the credit facilities mentioned above, SBL Holdco has $
In February 2019, Dominion Energy Midstream terminated its $
In September 2019, Dominion Energy Questar Corporation borrowed $
Virginia Power
Virginia Power’s short-term financing is supported through its access as co-borrower to the joint revolving credit facility. This credit facility can be used for working capital, as support for the combined commercial paper programs of the borrowers under the credit facility and for other general corporate purposes.
At September 30, 2019, Virginia Power’s share of commercial paper and letters of credit outstanding under its joint credit facility with Dominion Energy, Dominion Energy Gas, Questar Gas and DESC was as follows:
|
|
Facility Limit(1) |
|
|
Outstanding Commercial Paper |
|
|
Outstanding Letters of Credit |
|
|||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Joint revolving credit facility(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
Dominion Energy Gas
Dominion Energy Gas’ short-term financing is supported through its access as co-borrower to the joint revolving credit facility. This credit facility can be used for working capital, as support for the combined commercial paper programs of the borrowers under the credit facility and for other general corporate purposes.
83
At September 30, 2019, Dominion Energy Gas' share of commercial paper and letters of credit outstanding under its joint credit facility with Dominion Energy, Virginia Power, Questar Gas and DESC was as follows:
|
|
Facility Limit(1) |
|
|
Outstanding Commercial Paper |
|
|
Outstanding Letters of Credit |
|
|||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Joint revolving credit facility(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1) |
|
Long-term Debt
Unless otherwise noted, the proceeds of long-term debt issuances were used for general corporate purposes and/or to repay short-term debt.
In February 2019, Dominion Energy Midstream repaid its $
In February and March 2019, DESC purchased certain of its first mortgage bonds having an aggregate purchase price of $
In March 2019, Dominion Energy issued $
In March 2019, Dominion Energy issued an additional $
In May 2019, Virginia Power redeemed its $
In May 2019, GENCO redeemed its
In May 2019, Virginia Power remarketed
In June 2019, Dominion Energy purchased and cancelled $
In July 2019, Virginia Power issued $
In August 2019, Dominion Energy issued $
In September 2019, DESC purchased certain of its first mortgage bonds with an outstanding principal balance of $
In October 2019, Dominion Energy Terminal Company remarketed its $
In October 2019, Dominion Energy Gas provided notice to holders to redeem its $
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Remarketable Subordinated Notes
In June 2019, Dominion Energy successfully remarketed its $
Noncontrolling Interest in Dominion Energy Midstream
In June 2018, Dominion Energy, as general partner, exercised an incentive distribution right reset as defined in Dominion Energy Midstream’s partnership agreement and received
In January 2019, Dominion Energy and Dominion Energy Midstream closed on an agreement and plan of merger pursuant to which Dominion Energy acquired each outstanding common unit representing limited partner interests in Dominion Energy Midstream not already owned by Dominion Energy through the issuance of
2019 Corporate Units
In June 2019, Dominion Energy issued $
Each 2019 Series A Corporate Unit consists of a stock purchase contract and a 1/10, or
The stock purchase contracts obligate the holders to purchase shares of Dominion Energy common stock in June 2022. The purchase price to be paid under the stock purchase contracts is $
Dominion Energy pays cumulative dividends on the Series A Preferred Stock and quarterly contract adjustment payments on the stock purchase contracts, at the rates described below. Dominion Energy may elect to pay such dividends and/or payments in cash, shares of Dominion Energy common stock or a combination of cash and shares of Dominion Energy common stock. Dominion Energy may defer the contract adjustment payments for one or more consecutive periods but generally not beyond the purchase contract settlement date. If payments are deferred, Dominion Energy may not make any distributions related to its capital stock, including dividends, redemptions, repurchases or liquidation payments. Also, during the deferral period, Dominion Energy may not make any payments on or redeem, repay or repurchase any debt securities that are equal in right of payment with, or subordinated to, the contract adjustment
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payments or make any payment on any guarantee of a security of a subsidiary if the guarantee ranks equal or junior to the contract adjustment payments. Unless all accumulated and unpaid dividends on the Series A Preferred Stock have been declared and paid, Dominion Energy may not make any distributions on any of its capital stock ranking equal or junior to the Series A Preferred Stock as to dividends or upon liquidation, as applicable, including dividends, redemptions, repurchases or liquidation payments. In such circumstances, Dominion Energy also may not make any contract adjustment payments or other similar types of payments, subject to certain exceptions.
Dominion Energy has recorded the present value of the stock purchase contract payments as a liability offset to common stock. Stock purchase contract payments are recorded against this liability. Accretion of the stock purchase contract liability is recorded as imputed interest expense. In calculating diluted EPS, Dominion Energy applies the treasury stock method to the stock purchase contracts and the if-converted method to the Series A Preferred Stock. Under the terms of the stock purchase contracts, assuming no anti-dilution or other adjustments, the maximum number of shares of common stock Dominion Energy will issue in June 2022 is
Selected information about Dominion Energy’s 2019 Equity Units is presented below:
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6/14/2019 |
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$ |
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Issuance of Common Stock
See Note 3 for information on the issuance of Dominion Energy common stock in January 2019 in connection with the SCANA Combination. Also, in January 2019, Dominion Energy acquired all outstanding partnership interests of Dominion Energy Midstream not owned by Dominion Energy through the issuance of common stock as noted above.
In August 2019, Dominion Energy issued
At-the-Market Program
Dominion Energy has an at-the-market program pursuant to which it may offer common stock as discussed in Note 19 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018. In the first quarter of 2019, Dominion Energy issued
Forward Sales Agreements
Dominion Energy entered in March 2018, and closed in April 2018, separate forward sale agreements with Goldman Sachs & Co. LLC and Credit Suisse Capital LLC, as forward purchasers, and an underwriting agreement with Credit Suisse Securities (USA) LLC and Goldman Sachs & Co. LLC, as representatives of the several underwriters named therein, relating to an aggregate of
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Note 18. Commitments and Contingencies
As a result of issues generated in the ordinary course of business, the Companies are involved in legal proceedings before various courts and are periodically subject to governmental examinations (including by regulatory authorities), inquiries and investigations. Certain legal proceedings and governmental examinations involve demands for unspecified amounts of damages, are in an initial procedural phase, involve uncertainty as to the outcome of pending appeals or motions, or involve significant factual issues that need to be resolved, such that it is not possible for the Companies to estimate a range of possible loss. For such matters that the Companies cannot estimate, a statement to this effect is made in the description of the matter. Other matters may have progressed sufficiently through the litigation or investigative processes such that the Companies are able to estimate a range of possible loss. For legal proceedings and governmental examinations that the Companies are able to reasonably estimate a range of possible losses, an estimated range of possible loss is provided, in excess of the accrued liability (if any) for such matters. Any accrued liability is recorded on a gross basis with a receivable also recorded for any probable insurance recoveries. Estimated ranges of loss are inclusive of legal fees and net of any anticipated insurance recoveries. Any estimated range is based on currently available information and involves elements of judgment and significant uncertainties. Any estimated range of possible loss may not represent the Companies’ maximum possible loss exposure. The circumstances of such legal proceedings and governmental examinations will change from time to time and actual results may vary significantly from the current estimate. For current proceedings not specifically reported below, management does not anticipate that the liabilities, if any, arising from such proceedings would have a material effect on the Companies’ financial position, liquidity or results of operations.
Environmental Matters
The Companies are subject to costs resulting from a number of federal, state and local laws and regulations designed to protect human health and the environment. These laws and regulations affect future planning and existing operations. They can result in increased capital, operating and other costs as a result of compliance, remediation, containment and monitoring obligations.
Air
CAA
The CAA, as amended, is a comprehensive program utilizing a broad range of regulatory tools to protect and preserve the nation's air quality. At a minimum, states are required to establish regulatory programs to address all requirements of the CAA. However, states may choose to develop regulatory programs that are more restrictive. Many of the Companies’ facilities are subject to the CAA’s permitting and other requirements.
MATS
In February 2019, the EPA published a proposed rule to reverse its previous finding that it is appropriate and necessary to regulate toxic emissions from power plants. However, the emissions standards and other requirements of the MATS rule would remain in place as the EPA is not proposing to remove coal and oil fired power plants from the list of sources that are regulated under MATS. Although litigation of the MATS rule and the outcome of the EPA’s rulemaking are still pending, the regulation remains in effect and Dominion Energy and Virginia Power are complying with the applicable requirements of the rule and do not expect any adverse impacts to their operations at this time.
Ozone Standards
The EPA published final non-attainment designations for the October 2015 ozone standard in June 2018. States have until August 2021 to develop plans to address the new standard. Until the states have developed implementation plans for the standard, the Companies are unable to predict whether or to what extent the new rules will ultimately require additional controls. The expenditures required to implement additional controls could have a material impact on the Companies’ results of operations and cash flows.
Oil and Gas NSPS
In August 2012, the EPA issued an NSPS impacting new and modified facilities in the natural gas production and gathering sectors and made revisions to the NSPS for natural gas processing and transmission facilities. These rules establish equipment performance specifications and emissions standards for control of VOC emissions for natural gas production wells, tanks, pneumatic controllers, and compressors in the upstream sector. In June 2016, the EPA issued another NSPS regulation, for the oil and natural gas sector, to regulate methane and VOC emissions from new and modified facilities in transmission and storage, gathering and boosting, production and processing facilities. All projects which commenced construction after September 2015 are required to comply with this regulation. In October 2018, the EPA published a proposed rule reconsidering and amending portions of the 2016 rule, including but not limited to, the fugitive emissions requirements at well sites and compressor stations. The amended portions of the 2016 rule were effective immediately upon publication. Until the proposed rule regarding reconsideration is final, Dominion Energy and
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Dominion Energy Gas are implementing the 2016 regulation. Dominion Energy and Dominion Energy Gas are still evaluating whether potential impacts on results of operations, financial condition and/or cash flows related to this matter will be material.
ACE Rule
In July 2019, the EPA published the ACE Rule, which repeals and replaces the Clean Power Plan. The ACE Rule became effective in September 2019. The final ACE Rule applies to coal-fired steam electric generating units greater than or equal to 25 MW. The rule includes unit-specific performance standards based on the degree of emission reduction levels achievable from unit efficiency improvements to be determined by the permitting agency. The ACE Rule requires states to develop plans by July 2022 to implement these performance standards, which plans must be approved by the EPA by January 2024. While the impacts of this rule could be material to Dominion Energy and Virginia Power’s results of operations, financial condition and/or cash flows, the existing regulatory frameworks in South Carolina and Virginia provide rate recovery mechanisms that could substantially mitigate any such impacts for the regulated electric utilities.
GHG Regulation
Carbon Regulations
In August 2016, the EPA issued a draft rule proposing to reaffirm that a source’s obligation to obtain a PSD or Title V permit for GHGs is triggered only if such permitting requirements are first triggered by non-GHG, or conventional, pollutants that are regulated by the New Source Review program, and to set a significant emissions rate at
In addition, the EPA continues to evaluate its policy regarding the consideration of CO2 emissions from biomass projects when determining whether a stationary source meets the PSD and Title V applicability thresholds, including those for the application of BACT. It is unclear how the final policy will affect Virginia Power’s Altavista, Hopewell and Southampton power stations which were converted from coal to biomass under the prior biomass deferral policy; however, the expenditures to comply with any new requirements could be material to Dominion Energy and Virginia Power’s results of operations, financial condition and/or cash flows.
State Regulations
In May 2019, VDEQ issued a final rule establishing a state carbon regulation program with a
Water
The CWA, as amended, is a comprehensive program requiring a broad range of regulatory tools including a permit program to authorize and regulate discharges to surface waters with strong enforcement mechanisms. The Companies must comply with applicable aspects of the CWA programs at their operating facilities.
In October 2014, the final regulations under Section 316(b) of the CWA that govern existing facilities and new units at existing facilities that employ a cooling water intake structure and that have flow levels exceeding a minimum threshold became effective. The rule establishes a national standard for impingement based on seven compliance options, but forgoes the creation of a single technology standard for entrainment. Instead, the EPA has delegated entrainment technology decisions to state regulators. State regulators are to make case-by-case entrainment technology determinations after an examination of
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In September 2015, the EPA released a final rule to revise the Effluent Limitations Guidelines for the Steam Electric Power Generating Category. The final rule establishes updated standards for wastewater discharges that apply primarily at coal and oil steam generating stations. Affected facilities are required to convert from wet to dry or closed cycle coal ash management, improve existing wastewater treatment systems and/or install new wastewater treatment technologies in order to meet the new discharge limits. In April 2017, the EPA granted
Waste Management and Remediation
The CERCLA, as amended, provides for immediate response and removal actions coordinated by the EPA in the event of threatened releases of hazardous substances into the environment and authorizes the U.S. government either to clean up sites at which hazardous substances have created actual or potential environmental hazards or to order persons responsible for the situation to do so. Under the CERCLA, as amended, generators and transporters of hazardous substances, as well as past and present owners and operators of contaminated sites, can be jointly, severally and strictly liable for the cost of cleanup. These potentially responsible parties can be ordered to perform a cleanup, be sued for costs associated with an EPA-directed cleanup, voluntarily settle with the U.S. government concerning their liability for cleanup costs, or voluntarily begin a site investigation and site remediation under state oversight.
From time to time, Dominion Energy, Virginia Power or Dominion Energy Gas may be identified as a potentially responsible party to a Superfund site. The EPA (or a state) can either allow such a party to conduct and pay for a remedial investigation, feasibility study and remedial action or conduct the remedial investigation and action itself and then seek reimbursement from the potentially responsible parties. These parties can also bring contribution actions against each other and seek reimbursement from their insurance companies. As a result, Dominion Energy, Virginia Power or Dominion Energy Gas may be responsible for the costs of remedial investigation and actions under the Superfund law or other laws or regulations regarding the remediation of waste. The Companies do not believe these matters will have a material effect on results of operations, financial condition and/or cash flows.
Dominion Energy has determined that it is associated with
See below for discussion on ash pond and landfill closure costs.
Other Legal Matters
The Companies are defendants in a number of lawsuits and claims involving unrelated incidents of property damage and personal injury. Due to the uncertainty surrounding these matters, the Companies are unable to make an estimate of the potential financial statement impacts; however, they could have a material impact on results of operations, financial condition and/or cash flows.
SCANA Legal Proceedings
The following describes certain legal proceedings involving Dominion Energy, SCANA or DESC relating to events occurring before closing of the SCANA Combination. Dominion Energy intends to vigorously contest the lawsuits, claims and assessments which have been filed or initiated against SCANA and DESC. No reference to, or disclosure of, any proceeding, item or matter described below
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shall be construed as an admission or indication that such proceeding, item or matter is material. For certain of these matters, and unless otherwise noted therein, Dominion Energy is unable to estimate a reasonable range of possible loss and the related financial statement impacts, but for any such matter there could be a material impact to its results of operations, financial condition and/or cash flows. For the matters for which Dominion Energy is able to reasonably estimate a probable loss, Dominion Energy’s Consolidated Balance Sheets include reserves of $
Ratepayer Class Actions
In May 2018, a consolidated complaint against DESC, SCANA and the State of South Carolina was filed in the State Court of Common Pleas in Hampton County, South Carolina (the DESC Ratepayer Case). In September 2018, the court certified this case as a class action. The plaintiffs allege, among other things, that DESC was negligent and unjustly enriched, breached alleged fiduciary and contractual duties and committed fraud and misrepresentation in failing to properly manage the NND Project, and that DESC committed unfair trade practices and violated state anti-trust laws. The plaintiffs sought a declaratory judgment that DESC may not charge its customers for any past or continuing costs of the NND Project, sought to have SCANA and DESC’s assets frozen and all monies recovered from Toshiba Corporation and other sources be placed in a constructive trust for the benefit of ratepayers and sought specific performance of the alleged implied contract to construct the NND Project.
In December 2018, the State Court of Common Pleas in Hampton County entered an order granting preliminary approval of a class action settlement and a stay of pre-trial proceedings in the DESC Ratepayer Case. The settlement agreement, contingent upon the closing of the SCANA Combination, provided that SCANA and DESC would establish an escrow account and proceeds from the escrow account would be distributed to the class members, after payment of certain taxes, attorneys' fees and other expenses and administrative costs. The escrow account would include (1) up to $
In September 2017, a purported class action was filed by Santee Cooper ratepayers against Santee Cooper, DESC, Palmetto Electric Cooperative, Inc. and Central Electric Power Cooperative, Inc. in the State Court of Common Pleas in Hampton County, South Carolina (the Santee Cooper Ratepayer Case). The allegations are substantially similar to those in the DESC Ratepayer Case. The plaintiffs seek a declaratory judgment that the defendants may not charge the purported class for reimbursement for past or future costs of the NND Project. In March 2018, the plaintiffs filed an amended complaint including as additional named defendants, including certain then current and former directors of Santee Cooper and SCANA. In June 2018, Santee Cooper filed a Notice of Petition for Original Jurisdiction with the Supreme Court of South Carolina which was denied. In December 2018, Santee Cooper filed its answer to the plaintiffs' fourth amended complaint and filed cross claims against DESC. In October 2019, Santee Cooper voluntarily consented to stay its cross claims against DESC pending the outcome of the trial of the underlying case. This case is pending.
In July 2019, a similar purported class action was filed by certain Santee Cooper ratepayers against DESC, SCANA, Dominion Energy and former directors and officers of SCANA in the State Court of Common Pleas in Orangeburg, South Carolina. In August 2019, DESC, SCANA and Dominion Energy were voluntarily dismissed from the case. The claims are similar to the Santee Cooper Ratepayer Case. This case is pending.
RICO Class Action
In January 2018, a purported class action was filed, and subsequently amended, against SCANA, DESC and certain former executive officers in the U.S. District Court for the District of South Carolina. The plaintiff alleges, among other things, that SCANA, DESC and the individual defendants participated in an unlawful racketeering enterprise in violation of RICO and conspired to violate RICO by fraudulently inflating utility bills to generate unlawful proceeds. The DESC Ratepayer Class Action settlement described previously contemplates dismissal of claims by DESC ratepayers in this case against DESC, SCANA and their officers. In August 2019, the individual defendants filed motions to dismiss. This case is pending.
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SCANA Shareholder Litigation
In September 2017, a purported class action was filed against SCANA and certain former executive officers and directors in the U.S. District Court for the District of South Carolina. Subsequent additional purported class actions were separately filed against all or nearly all of these defendants. In January 2018, the U.S. District Court for the District of South Carolina consolidated these suits, and the plaintiffs filed a consolidated amended complaint in March 2018. The plaintiffs allege, among other things, that the defendants violated §10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, and that the individually named defendants are liable under §20(a) of the same act. In June 2018, the defendants filed motions to dismiss. In March 2019, the U.S. District Court for the District of South Carolina granted in part and denied in part the defendants’ motions to dismiss. In October 2019, the parties reached a settlement in principle pursuant to which SCANA will pay $
In September 2017, a shareholder derivative action was filed against certain former executive officers and directors of SCANA in the State Court of Common Pleas in Richland County, South Carolina. In September 2018, this action was consolidated with another action in the Business Court Pilot Program in Richland County. The plaintiffs allege, among other things, that the defendants breached their fiduciary duties to shareholders by their gross mismanagement of the NND Project, and that the defendants were unjustly enriched by bonuses they were paid in connection with the project. The defendants have filed a motion to dismiss the consolidated action. In February 2019, one action was voluntarily dismissed. This case is pending.
In November 2017, a shareholder derivative action was filed against SCANA and certain former executive officers and directors in the U.S. District Court of the District of South Carolina. Another purported shareholder derivative action was filed in the same court against nearly all of these defendants. In January 2018, the U.S. District Court for the District of South Carolina consolidated these suits, and the plaintiffs filed a consolidated amended complaint. The plaintiffs allege, among other things, that the defendants violated their fiduciary duties to shareholders by disseminating false and misleading information about the NND Project, failing to maintain proper internal controls, failing to properly oversee and manage SCANA and that the individual defendants were unjustly enriched in their compensation. In June 2018, the court denied the defendants’ motions to dismiss and in October 2018, the court denied SCANA’s motion to stay all proceedings pending investigation by a Special Litigation Committee, with leave to refile after the SCANA Merger Approval Order was issued. The plaintiffs have agreed to a stay of this action on the condition that defendants file a motion for judgment on the pleadings, which was filed in January 2019. In September 2019, the court granted the defendants’ motion for judgment and the complaint was dismissed.
In January 2018, a purported class action was filed against SCANA, Dominion Energy and certain former executive officers and directors of SCANA in the State Court of Common Pleas in Lexington County, South Carolina (the City of Warren Lawsuit). The plaintiff alleges, among other things, that defendants violated their fiduciary duties to shareholders by executing a merger agreement that would unfairly deprive plaintiffs of the true value of their SCANA stock, and that Dominion Energy aided and abetted these actions. Among other remedies, the plaintiff seeks to enjoin and/or rescind the merger. In February 2018, Dominion Energy removed the case to the U.S. District Court for the District of South Carolina, and filed a Motion to Dismiss in March 2018. In June 2018, the case was remanded back to the State Court of Common Pleas in Lexington County. Dominion Energy appealed the decision to remand to the U.S. Court of Appeals for the Fourth Circuit, where the appeal was consolidated with a similar appeal in the Metzler Lawsuit discussed below. In June 2019, the U.S. Court of Appeals for the Fourth Circuit reversed the order remanding the case to state court. The case is pending in the U.S. District Court for the District of South Carolina.
In February 2018, a purported class action was filed against Dominion Energy and certain former directors of SCANA and DESC in the State Court of Common Pleas in Richland County, South Carolina (the Metzler Lawsuit). The allegations made and the relief sought by the plaintiffs are substantially similar to that described for the City of Warren Lawsuit. In February 2018, Dominion Energy removed the case to the U.S. District Court for the District of South Carolina, and filed a Motion to Dismiss in March 2018. In August 2018, the case was remanded back to the State Court of Common Pleas in Richland County. Dominion Energy appealed the decision to remand to the U.S. Court of Appeals for the Fourth Circuit, where the appeal was consolidated with the City of Warren Lawsuit. In June 2019, the U.S. Court of Appeals for the Fourth Circuit reversed the order remanding the case to state court. The case is pending in the U.S. District Court for the District of South Carolina.
In September 2019, the U.S. District Court for the District of South Carolina granted the plaintiffs’ motion to consolidate the City of Warren Lawsuit and the Metzler Lawsuit. In October 2019, the plaintiffs filed an amended complaint against certain former directors and executive officers of SCANA and DESC, which stated substantially similar allegations to those in the City of Warren Lawsuit and the Metzler Lawsuit.
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In May 2019, a case was filed against certain former executive officers and directors of SCANA in the State Court of Common Pleas in Richland County, South Carolina. The plaintiffs allege, among other things, that the defendants breached their fiduciary duties to shareholders by their gross mismanagement of the NND Project, were unjustly enriched by the bonuses they were paid in connection with the project and breached their fiduciary duties to secure and obtain the best price for the sale of SCANA. Also in May 2019, the case was removed to the U.S. District Court of South Carolina by the non-South Carolina defendants. In June 2019, the plaintiffs filed a motion to remand the case to state court. This case is pending.
Employment Class Actions and Indemnification
In August 2017, a case was filed in the U.S. District Court for the District of South Carolina on behalf of persons who were formerly employed at the NND Project. In July 2018, the court certified this case as a class action. In February 2019, certain of these plaintiffs filed an additional case, which case has been dismissed and the plaintiffs have joined the case filed August 2017. The plaintiffs allege, among other things, that SCANA, DESC, Fluor Corporation and Fluor Enterprises, Inc. violated the Worker Adjustment and Retraining Notification Act in connection with the decision to stop construction at the NND Project. The plaintiffs allege that the defendants failed to provide adequate advance written notice of their terminations of employment and are seeking damages, which could be as much as $
In September 2018, a case was filed in the State Court of Common Pleas in Fairfield County, South Carolina by Fluor Enterprises, Inc. and Fluor Daniel Maintenance Services, Inc. against DESC and Santee Cooper. The plaintiffs make claims for indemnification, breach of contract and promissory estoppel arising from, among other things, the defendants' alleged failure and refusal to defend and indemnify the Fluor defendants in the aforementioned case. These cases are pending.
FILOT Litigation and Related Matters
In November 2017, Fairfield County filed a complaint and a motion for temporary injunction against DESC in the State Court of Common Pleas in Fairfield County, South Carolina, making allegations of breach of contract, fraud, negligent misrepresentation, breach of fiduciary duty, breach of implied duty of good faith and fair dealing and unfair trade practices related to DESC’s termination of the FILOT agreement between DESC and Fairfield County related to the NND Project. The plaintiff sought a temporary and permanent injunction to prevent DESC from terminating the FILOT agreement. The plaintiff withdrew the motion for temporary injunction in December 2017. This case is pending.
Governmental Proceedings and Investigations
In June 2018, DESC received a notice of proposed assessment of approximately $
In September and October 2017, SCANA was served with subpoenas issued by the U.S. Attorney’s Office for the District of South Carolina and the Staff of the SEC’s Division of Enforcement seeking documents related to the NND Project. In addition, the South Carolina Law Enforcement Division is conducting a criminal investigation into the handling of the NND Project by SCANA and DESC. These matters are pending. SCANA and DESC are cooperating fully with the investigations, including responding to additional subpoenas and document requests.
Other Litigation
In December 2018, arbitration proceedings commenced between DESC and Cameco Corporation related to a supply agreement signed in May 2008. This agreement provides the terms and conditions under which DESC agreed to purchase uranium hexafluoride from Cameco Corporation over a period from 2010 to 2020. Cameco Corporation alleges that DESC violated this agreement by failing to purchase the stated quantities of uranium hexafluoride for the 2017 and 2018 delivery years. DESC denies that it is in breach of the agreement and believes that it has reduced its purchase quantity within the terms of the agreement. This matter is pending.
Abandoned NND Project
DESC, for itself and as agent for Santee Cooper, entered into an engineering, construction and procurement contract with Westinghouse and WECTEC in 2008 for the design and construction of the NND Project, of which DESC’s ownership share is
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regulatory, legal, training and construction processes associated with securing approvals, permits and licenses and necessary amendments to them within projected time frames, the availability of labor and materials at estimated costs and the efficiency of project labor. There were also contractor and supplier performance issues, difficulties in timely meeting critical regulatory requirements, contract disputes, and changes in key contractors or subcontractors. These matters preceded the filing for bankruptcy protection by Westinghouse and WECTEC in March 2017, and were the subject of comprehensive analyses performed by SCANA and Santee Cooper.
Based on the results of SCANA’s analysis, and in light of Santee Cooper's decision to suspend construction on the NND Project, in July 2017, SCANA determined to stop the construction of the units and to pursue recovery of costs incurred in connection with the construction under the abandonment provisions of the Base Load Review Act or through other means. This decision by SCANA became the focus of numerous legislative, regulatory and legal proceedings. Some of these proceedings remain unresolved and are described above.
In September 2017, DESC, for itself and as agent for Santee Cooper, filed with the Bankruptcy Court Proofs of Claim for unliquidated damages against each of Westinghouse and WECTEC. These Proofs of Claim were based upon the anticipatory repudiation and material breach by Westinghouse and WECTEC of the contract, and assert against Westinghouse and WECTEC any and all claims that are based thereon or that may be related thereto. DESC and Santee Cooper remain responsible for any claims that may be made by Westinghouse and WECTEC against them relating to the contract.
Westinghouse’s reorganization plan was confirmed by the Bankruptcy Court and became effective in August 2018. In connection with the effectiveness of the reorganization plan, the contract associated with the NND Project was deemed rejected. DESC is contesting approximately $
Westinghouse has indicated that some unsecured creditors have sought or may seek amounts beyond what Westinghouse allocated when it submitted its reorganization plan to the Bankruptcy Court. If any unsecured creditor is successful in its attempt to include its claim as part of the class of general unsecured creditors beyond the amounts in the bankruptcy reorganization plan allocated by Westinghouse, it is possible that the reorganization plan will not provide for payment in full or nearly in full to its pre-petition trade creditors. The shortfall could be significant.
DESC and Santee Cooper are responsible for amounts owed to Westinghouse for valid work performed by Westinghouse subcontractors on the NND Project after the Westinghouse bankruptcy filing until termination of the interim assessment agreement. DESC does not believe that the claims asserted related to the interim assessment agreement period will exceed the amounts previously funded, whether relating to claims already paid or those remaining to be paid. DESC intends to oppose any previously unasserted claim that is asserted against it, whether directly or indirectly by a claim through the interim assessment agreement.
Further, some Westinghouse subcontractors who have made claims against Westinghouse in the bankruptcy proceeding also filed against DESC and Santee Cooper in South Carolina state court for damages. Many of these claimants have also asserted construction liens against the NND Project site. DESC also intends to oppose these claims and liens. With respect to claims of Westinghouse subcontractors, DESC believes there were sufficient amounts previously funded during the interim assessment agreement period to pay such validly asserted claims. With respect to the Westinghouse subcontractor claims which relate to other periods, DESC understands that such claims will be paid pursuant to Westinghouse’s confirmed bankruptcy reorganization plan. DESC further understands that the amounts paid under the plan may satisfy such claims in full. Therefore, DESC believes that the Westinghouse subcontractors may be paid substantially (and potentially in full) by Westinghouse. While Dominion Energy cannot be assured that it will not have any exposure on account of unpaid Westinghouse subcontractor claims, which DESC is presently disputing, Dominion Energy believes it is unlikely that it will be required to make payments on account of such claims.
Ash Pond and Landfill Closure Costs
In April 2015, the EPA enacted a final rule regulating CCR landfills, existing ash ponds that still receive and manage CCRs, and inactive ash ponds that do not receive, but still store, CCRs. Dominion Energy currently operates inactive ash ponds, existing ash ponds and CCR landfills subject to the final rule at
In December 2016, legislation was enacted that creates a framework for EPA- approved state CCR permit programs. In August 2017, the EPA issued interim guidance outlining the framework for state CCR program approval. The EPA has enforcement authority until state programs are approved. The EPA and states with approved programs both will have authority to enforce CCR requirements under their respective rules and programs. In September 2017, the EPA agreed to reconsider portions of the CCR rule in response to
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petitions for reconsideration. In March 2018, the EPA proposed certain changes to the CCR rule related to issues remanded as part of the pending litigation and other issues the EPA is reconsidering. Several of the proposed changes would allow states with approved CCR permit programs additional flexibilities in implementing their programs. In July 2018, the EPA promulgated the first phase of changes to the CCR rule. Until all phases of the CCR rule are promulgated, Dominion Energy and Virginia Power cannot forecast potential incremental impacts or costs related to existing coal ash sites in connection with future implementation of the 2016 CCR legislation and reconsideration of the CCR rule. In August 2018, the U.S. Court of Appeals for the D.C. Circuit issued its decision in the pending challenges of the CCR rule, vacating and remanding to the EPA three provisions of the rule. Dominion Energy and Virginia Power do not expect the scope of the U.S. Court of Appeals for the D.C. Circuit’s decision to impact their closure plans, but cannot forecast incremental impacts associated with any future changes to the CCR rule in connection with the court’s remand.
In April 2017, the Governor of Virginia signed legislation into law that placed a moratorium on the VDEQ issuing solid waste permits for closure of ash ponds at Virginia Power’s Bremo, Chesapeake, Chesterfield and Possum Point power stations until May 2018. The law also required Virginia Power to conduct an assessment of closure alternatives for the ash ponds at these
In March 2019, the Governor of Virginia signed into law legislation which requires any CCR unit located at Virginia Power’s Bremo, Chesapeake, Chesterfield or Possum Point power stations that stop accepting CCR prior to July 2019 be closed by removing the CCR to an approved landfill or through recycling for beneficial reuse. The legislation further requires that at least
Nuclear Matters
In March 2011, a magnitude 9.0 earthquake and subsequent tsunami caused significant damage at the Fukushima Daiichi nuclear power station in northeast Japan. These events have resulted in significant nuclear safety reviews required by the NRC and industry groups such as the Institute of Nuclear Power Operations. Like other U.S. nuclear operators, Dominion Energy has been gathering supporting data and participating in industry initiatives focused on the ability to respond to and mitigate the consequences of design-basis and beyond-design-basis events at its stations.
In July 2011, an NRC task force provided initial recommendations based on its review of the Fukushima Daiichi accident and in October 2011 the NRC staff prioritized these recommendations into Tiers 1, 2 and 3, with the Tier 1 recommendations consisting of actions which the staff determined should be started without unnecessary delay. In December 2011, the NRC Commissioners approved the agency staff's prioritization and recommendations, and that same month an appropriations act directed the NRC to require reevaluation of external hazards (not limited to seismic and flooding hazards) as soon as possible.
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Based on the prioritized recommendations, in March 2012, the NRC issued orders and information requests requiring specific reviews and actions to all operating reactors, construction permit holders and combined license holders based on the lessons learned from the Fukushima Daiichi event. The orders applicable to Dominion Energy requiring implementation of safety enhancements related to mitigation strategies to respond to extreme natural events resulting in the loss of power at plants, and enhancing spent fuel pool instrumentation have been implemented. The information requests issued by the NRC request each reactor to reevaluate the seismic and external flooding hazards at their site using present-day methods and information, conduct walkdowns of their facilities to ensure protection against the hazards in their current design basis, and to reevaluate their emergency communications systems and staffing levels. The walkdowns of each unit have been completed, audited by the NRC and found to be adequate. Reevaluation of the emergency communications systems and staffing levels was completed as part of the effort to comply with the orders. Reevaluation of the seismic hazards was completed or in review with the NRC in 2018. Reevaluation of the external flooding hazards is expected to continue through 2019. Dominion Energy and Virginia Power do not currently expect that compliance with the NRC's information requests will materially impact their financial position, results of operations or cash flows during the implementation period. The NRC staff is evaluating the implementation of the longer term Tier 2 and Tier 3 recommendations. Dominion Energy and Virginia Power do not expect material financial impacts related to compliance with Tier 2 and Tier 3 recommendations.
Nuclear Operations
Nuclear Insurance
During the second quarter of 2019, the total liability protection per nuclear incident available to all participants in the Secondary Financial Protection Program decreased from $
Spent Nuclear Fuel
As discussed in Notes 3 and 22 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018, Dominion Energy, Virginia Power and DESC entered into contracts with the DOE for the disposal of spent nuclear fuel under provisions of the Nuclear Waste Policy Act of 1982.
In June 2018, a lawsuit for Kewaunee was filed in the U.S. Court of Federal Claims for recovery of spent nuclear fuel storage costs incurred for the period January 1, 2014 through December 31, 2017. In March 2019, Dominion Energy amended its filing for recovery of spent nuclear fuel storage to include costs incurred for the year ended December 31, 2018. This matter is pending.
Guarantees, Surety Bonds and Letters of Credit
Dominion Energy entered into a guarantee agreement to support a portion of Atlantic Coast Pipeline’s obligation under a $
In addition, at September 30, 2019, Dominion Energy had issued an additional $
Dominion Energy also enters into guarantee arrangements on behalf of its consolidated subsidiaries, primarily to facilitate their commercial transactions with third parties. If any of these subsidiaries fail to perform or pay under the contracts and the counterparties seek performance or payment, Dominion Energy would be obligated to satisfy such obligation. To the extent that a liability subject to a guarantee has been incurred by one of Dominion Energy’s consolidated subsidiaries, that liability is included in the Consolidated Financial Statements. Dominion Energy is not required to recognize liabilities for guarantees issued on behalf of its subsidiaries unless it becomes probable that it will have to perform under the guarantees. Terms of the guarantees typically end once obligations have been paid. Dominion Energy currently believes it is unlikely that it would be required to perform or otherwise incur any losses associated with guarantees of its subsidiaries’ obligations.
95
At September 30, 2019, Dominion Energy had issued the following subsidiary guarantees:
|
|
Maximum Exposure |
|
|
(millions) |
|
|
|
|
Commodity transactions(1) |
|
$ |
|
|
Nuclear obligations(2) |
|
|
|
|
Cove Point(3) |
|
|
|
|
Solar(4) |
|
|
|
|
Other(5) |
|
|
|
|
Total(6) |
|
$ |
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
(5) |
|
(6) |
|
Additionally, at September 30, 2019, Dominion Energy had purchased $
Note 19. Credit Risk
The Companies’ accounting policies for credit risk are discussed in Note 23 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018.
At September 30, 2019, Dominion Energy’s gross credit exposure related to energy marketing and price risk management activities totaled $
Credit-Related Contingent Provisions
The majority of Dominion Energy’s derivative instruments contain credit-related contingent provisions. These provisions require Dominion Energy to provide collateral upon the occurrence of specific events, primarily a credit rating downgrade. If the credit-related contingent features underlying these instruments that are in a liability position and not fully collateralized with cash were fully triggered as of September 30, 2019 and December 31, 2018, Dominion Energy would have been required to post $
96
Note 20. Related-Party Transactions
Virginia Power and Dominion Energy Gas engage in related-party transactions primarily with other Dominion Energy subsidiaries (affiliates). Virginia Power's and Dominion Energy Gas’ receivable and payable balances with affiliates are settled based on contractual terms or on a monthly basis, depending on the nature of the underlying transactions. Virginia Power and Dominion Energy Gas are included in Dominion Energy's consolidated federal income tax return and, where applicable, combined income tax returns for Dominion Energy are filed in various states. Dominion Energy’s transactions with equity method investments are described in Note 10. A discussion of significant related-party transactions follows.
Virginia Power
Transactions with Affiliates
Virginia Power transacts with affiliates for certain quantities of natural gas and other commodities in the ordinary course of business. Virginia Power also enters into certain commodity derivative contracts with affiliates. Virginia Power uses these contracts, which are principally comprised of forward commodity purchases, to manage commodity price risks associated with purchases of natural gas. At September 30, 2019, Virginia Power’s derivative assets and liabilities with affiliates were $
Virginia Power participates in certain Dominion Energy benefit plans described in Note 21 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018. At September 30, 2019 and December 31, 2018, amounts due to Dominion Energy associated with the Dominion Energy Pension Plan and included in other deferred credits and other liabilities in the Consolidated Balance Sheets were $
DES and other affiliates provide accounting, legal, finance and certain administrative and technical services to Virginia Power. In addition, Virginia Power provides certain services to affiliates, including charges for facilities and equipment usage.
The financial statements for all years presented include costs for certain general, administrative and corporate expenses assigned by DES to Virginia Power on the basis of direct and allocated methods in accordance with Virginia Power’s services agreements with DES. Where costs incurred cannot be determined by specific identification, the costs are allocated based on the proportional level of effort devoted by DES resources that is attributable to the entity, determined by reference to number of employees, salaries and wages and other similar measures for the relevant DES service. Management believes the assumptions and methodologies underlying the allocation of general corporate overhead expenses are reasonable.
Presented below are Virginia Power’s significant transactions with DES and other affiliates:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity purchases from affiliates |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Services provided by affiliates(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services provided to affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Virginia Power has borrowed funds from Dominion Energy under short-term borrowing arrangements. There were $
There were
97
Dominion Energy Gas
Transactions with Related Parties
Dominion Energy Gas transacts with affiliates for certain quantities of natural gas and other commodities at market prices in the ordinary course of business. Additionally, Dominion Energy Gas provides transportation and storage services to affiliates. Dominion Energy Gas also enters into certain other contracts with affiliates and related parties, including construction services, which are presented separately from contracts involving commodities or services. As of September 30, 2019 and December 31, 2018, all of Dominion Energy Gas' commodity derivatives were with affiliates. See Notes 7 and 9 for more information. See Note 10 for information regarding transactions with Atlantic Coast Pipeline.
Dominion Energy Gas participates in certain Dominion Energy benefit plans as described in Note 21 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018. At September 30, 2019 and December 31, 2018, amounts due from Dominion Energy associated with the Dominion Energy Pension Plan included in noncurrent pension and other postretirement benefit assets in the Consolidated Balance Sheets were $
DES and other affiliates provide accounting, legal, finance and certain administrative and technical services to Dominion Energy Gas. Dominion Energy Gas provides certain services to related parties, including technical services.
The financial statements for all years presented include costs for certain general, administrative and corporate expenses assigned by DES to Dominion Energy Gas on the basis of direct and allocated methods in accordance with Dominion Energy Gas’ services agreements with DES. Where costs incurred cannot be determined by specific identification, the costs are allocated based on the proportional level of effort devoted by DES resources that is attributable to the entity, determined by reference to number of employees, salaries and wages and other similar measures for the relevant DES service. Management believes the assumptions and methodologies underlying the allocation of general corporate overhead expenses are reasonable.
Presented below are Dominion Energy Gas’ significant transactions with DES and other affiliates and related parties:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of natural gas and transportation and storage services to affiliates |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Purchases of natural gas from affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services provided by related parties(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services provided to related parties(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
(2) |
|
The following table presents affiliated and related party balances reflected in Dominion Energy Gas’ Consolidated Balance Sheets:
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||
(millions) |
|
|
|
|
|
|
|
|
Other receivables(1) |
|
$ |
|
|
|
$ |
|
|
Customer receivables from related parties |
|
|
— |
|
|
|
|
|
Imbalances receivable from affiliates |
|
|
— |
|
|
|
|
|
Imbalances payable to affiliates(2) |
|
|
|
|
|
|
|
|
Affiliated notes receivable(3) |
|
|
|
|
|
|
|
|
(1) |
|
(2) |
|
(3) |
|
98
Dominion Energy Gas’ borrowings under the intercompany revolving credit agreement with Dominion Energy were $
Note 21. Employee Benefit Plans
Dominion Energy
The components of Dominion Energy’s provision for net periodic benefit cost (credit) were as follows:
|
|
Pension Benefits |
|
|
Other Postretirement Benefits |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of prior service credit |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Amortization of net actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements(1) |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net periodic benefit cost (credit) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of prior service cost (credit) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Amortization of net actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements and curtailment(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (credit) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
(1) |
|
Voluntary Retirement Program
In March 2019, the Companies announced a voluntary retirement program to employees that meet certain age and service requirements. The voluntary retirement program will not compromise safety or the Companies’ ability to comply with applicable laws and regulations. In the second quarter of 2019, upon the determinations made concerning the number of employees that elected to participate in the program, Dominion Energy recorded a charge of $
In the second quarter of 2019, Dominion Energy and Dominion Energy Gas remeasured their pension and other postretirement benefit plans as a result of the voluntary retirement program. The remeasurement resulted in an increase in the pension benefit obligation of $
99
In the third quarter of 2019, Dominion Energy remeasured a pension plan as a result of a settlement from the voluntary retirement program at SCANA. The settlement and related remeasurement resulted in an increase in the pension benefit obligation of $
Employer Contributions
During the nine months ended September 30, 2019, Dominion Energy made
Dominion Energy Gas
Dominion Energy Gas participates in certain Dominion Energy benefit plans as described in Note 21 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018. See Note 20 for more information.
The components of Dominion Energy Gas’ provision for net periodic benefit cost (credit) for employees represented by collective bargaining units were as follows:
|
|
Pension Benefits |
|
|
Other Postretirement Benefits |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of prior service credit |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Amortization of net actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit credit |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of prior service credit |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Amortization of net actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailment(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit credit |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(1) |
|
Employer Contributions
During the nine months ended September 30, 2019, Dominion Energy Gas made
100
Note 22. Operating Segments
The Companies are organized primarily on the basis of products and services sold in the U.S.
Primary Operating Segment |
|
Description of Operations |
|
Dominion Energy |
|
Virginia Power |
|
Dominion Energy Gas |
Power Delivery |
|
Regulated electric distribution |
|
X |
|
X |
|
|
|
|
Regulated electric transmission |
|
X |
|
X |
|
|
Power Generation |
|
Regulated electric generation fleet |
|
X |
|
X |
|
|
|
|
Merchant electric generation fleet |
|
X |
|
|
|
|
Gas Infrastructure |
|
Gas transmission and storage |
|
X |
|
|
|
X |
|
|
Gas distribution and storage |
|
X |
|
|
|
X |
|
|
Gas gathering and processing |
|
X |
|
|
|
X |
|
|
LNG terminalling and storage |
|
X |
|
|
|
|
|
|
Nonregulated retail energy marketing |
|
X |
|
|
|
|
Southeast Energy |
|
Regulated electric distribution |
|
X |
|
|
|
|
|
|
Regulated electric transmission |
|
X |
|
|
|
|
|
|
Regulated electric generation fleet |
|
X |
|
|
|
|
|
|
Gas distribution and storage |
|
X |
|
|
|
|
|
|
Nonregulated retail energy marketing |
|
X |
|
|
|
|
In addition to the operating segments above, the Companies also report a Corporate and Other segment.
Dominion Energy
The Corporate and Other Segment of Dominion Energy includes its corporate, service company and other functions (including unallocated debt). In addition, Corporate and Other includes specific items attributable to Dominion Energy’s operating segments that are not included in profit measures evaluated by executive management in assessing the segments’ performance or in allocating resources.
In the nine months ended September 30, 2019, Dominion Energy reported after-tax net expenses of $
The net expense for specific items attributable to Dominion Energy’s operating segments in 2019 primarily related to the impact of the following items:
• |
A $ |
• |
$ |
|
• |
Power Delivery ($ |
|
• |
Power Generation ($ |
|
• |
Gas Infrastructure ($ |
|
• |
Southeast Energy ($ |
• |
A $ |
• |
$ |
• |
A $ |
101
• |
A $ |
• |
A $ |
• |
A $ |
• |
A $ |
• |
A $ |
The net expense for specific items attributable to Dominion Energy’s operating segments in 2018 primarily related to the impact of the following items:
• |
A $ |
|
• |
Power Generation ($ |
|
• |
Power Delivery ($ |
• |
A $ |
• |
A $ |
• |
An $ |
102
The following table presents segment information pertaining to Dominion Energy’s operations:
|
|
Power Delivery |
|
|
Power Generation |
|
|
Gas Infrastructure |
|
|
Southeast Energy |
|
|
Corporate and Other |
|
|
Adjustments/ Eliminations |
|
|
Consolidated Total |
|
|||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from external customers |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
4,269 |
|
Intersegment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
Total operating revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Net income (loss) attributable to Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from external customers |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
3,451 |
|
Intersegment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
Total operating revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Net income attributable to Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from external customers |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
12,097 |
|
Intersegment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
Total operating revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net income (loss) attributable to Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from external customers |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
10,005 |
|
Intersegment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
Total operating revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Net income (loss) attributable to Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
Intersegment sales and transfers for Dominion Energy are based on contractual arrangements and may result in intersegment profit or loss that is eliminated in consolidation.
Virginia Power
The Corporate and Other Segment of Virginia Power primarily includes specific items attributable to its operating segments that are not included in profit measures evaluated by executive management in assessing the segments' performance or in allocating resources.
In the nine months ended September 30, 2019, Virginia Power reported after-tax net expenses of $
The net expense for specific items attributable to Virginia Power’s operating segments in 2019 primarily related to the impact of the following items:
• |
A $ |
• |
A $ |
|
• |
Power Delivery ($ |
|
• |
Power Generation ($ |
• |
A $ |
• |
A $ |
103
• |
A $ |
• |
A $ |
The net expense for specific items attributable to Virginia Power’s operating segments in 2018 primarily related to the impact of the following items:
• |
A $ |
|
• |
Power Generation ($ |
|
• |
Power Delivery ($ |
• |
An $ |
The following table presents segment information pertaining to Virginia Power’s operations:
|
|
Power Delivery |
|
|
Power Generation |
|
|
Corporate and Other |
|
|
Consolidated Total |
|
||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Dominion Energy Gas
The Corporate and Other Segment of Dominion Energy Gas primarily includes specific items attributable to Dominion Energy Gas’ operating segment that are not included in profit measures evaluated by executive management in assessing the segment’s performance or in allocating resources and the effect of certain items recorded at Dominion Energy Gas as a result of Dominion Energy’s basis in the net assets contributed.
In the nine months ended September 30, 2019, Dominion Energy Gas reported after-tax net expenses of $
The net expense for specific items attributable to Dominion Energy Gas’ operating segment in 2019 primarily related to a $
The net expense for specific items attributable to Dominion Energy Gas’ operating segment in 2018 primarily related to a $
104
The following table presents segment information pertaining to Dominion Energy Gas’ operations:
|
|
Gas Infrastructure |
|
|
Corporate and Other |
|
|
Consolidated Total |
|
|||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Net income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
105
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MD&A discusses Dominion Energy’s results of operations and general financial condition and Virginia Power’s and Dominion Energy Gas’ results of operations. MD&A should be read in conjunction with the Companies’ Consolidated Financial Statements. Virginia Power and Dominion Energy Gas meet the conditions to file under the reduced disclosure format, and therefore have omitted certain sections of MD&A.
Contents of MD&A
MD&A consists of the following information:
• |
Forward-Looking Statements |
• |
Accounting Matters – Dominion Energy |
• |
Dominion Energy |
|
• |
Results of Operations |
|
• |
Segment Results of Operations |
• |
Virginia Power |
|
• |
Results of Operations |
• |
Dominion Energy Gas |
|
• |
Results of Operations |
• |
Liquidity and Capital Resources – Dominion Energy |
• |
Future Issues and Other Matters – Dominion Energy |
Forward-Looking Statements
This report contains statements concerning the Companies’ expectations, plans, objectives, future financial performance and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In most cases, the reader can identify these forward-looking statements by such words as “anticipate,” “estimate,” “forecast,” “expect,” “believe,” “should,” “could,” “plan,” “may,” “continue,” “target” or other similar words.
The Companies make forward-looking statements with full knowledge that risks and uncertainties exist that may cause actual results to differ materially from predicted results. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Additionally, other factors may cause actual results to differ materially from those indicated in any forward-looking statement. These factors include but are not limited to:
• |
Unusual weather conditions and their effect on energy sales to customers and energy commodity prices; |
• |
Extreme weather events and other natural disasters, including, but not limited to, hurricanes, high winds, severe storms, earthquakes, flooding and changes in water temperatures and availability that can cause outages and property damage to facilities; |
• |
Federal, state and local legislative and regulatory developments, including changes in federal and state tax laws and regulations; |
• |
Risks of operating businesses in regulated industries that are subject to changing regulatory structures; |
• |
Changes to regulated electric rates collected by Dominion Energy and Virginia Power and regulated gas distribution, transportation and storage rates, including LNG storage, collected by Dominion Energy and Dominion Energy Gas; |
• |
Changes in rules for regional transmission organizations and independent system operators in which Dominion Energy and Virginia Power participate, including changes in rate designs, changes in FERC’s interpretation of market rules and new and evolving capacity models; |
• |
Risks associated with Virginia Power’s membership and participation in PJM, including risks related to obligations created by the default of other participants; |
106
• |
Timing and receipt of regulatory approvals necessary for planned construction or growth projects and compliance with conditions associated with such regulatory approvals; |
• |
The inability to complete planned construction, conversion or growth projects at all, or with the outcomes or within the terms and time frames initially anticipated, including as a result of increased public involvement, intervention or litigation in such projects; |
• |
Changes to federal, state and local environmental laws and regulations, including those related to climate change, the tightening of emission or discharge limits for GHGs and other substances, more extensive permitting requirements and the regulation of additional substances; |
• |
Cost of environmental compliance, including those costs related to climate change; |
• |
Changes in implementation and enforcement practices of regulators relating to environmental standards and litigation exposure for remedial activities; |
• |
Difficulty in anticipating mitigation requirements associated with environmental and other regulatory approvals or related appeals; |
• |
Unplanned outages at facilities in which the Companies have an ownership interest; |
• |
The impact of operational hazards, including adverse developments with respect to pipeline and plant safety or integrity, equipment loss, malfunction or failure, operator error, and other catastrophic events; |
• |
Risks associated with the operation of nuclear facilities, including costs associated with the disposal of spent nuclear fuel, decommissioning, plant maintenance and changes in existing regulations governing such facilities; |
• |
Changes in operating, maintenance and construction costs; |
• |
Domestic terrorism and other threats to the Companies’ physical and intangible assets, as well as threats to cybersecurity; |
• |
Additional competition in industries in which the Companies operate, including in electric markets in which Dominion Energy’s merchant generation facilities operate and potential competition from the development and deployment of alternative energy sources, such as self-generation and distributed generation technologies, and availability of market alternatives to large commercial and industrial customers; |
• |
Competition in the development, construction and ownership of certain electric transmission facilities in Dominion Energy and Virginia Power’s service territory in connection with Order 1000; |
• |
Changes in technology, particularly with respect to new, developing or alternative sources of generation and smart grid technologies; |
• |
Changes in demand for the Companies’ services, including industrial, commercial and residential growth or decline in the Companies’ service areas, changes in supplies of natural gas delivered to Dominion Energy and Dominion Energy Gas’ pipeline and processing systems, failure to maintain or replace customer contracts on favorable terms, changes in customer growth or usage patterns, including as a result of energy conservation programs, the availability of energy efficient devices and the use of distributed generation methods; |
• |
Receipt of approvals for, and timing of, closing dates for acquisitions and divestitures; |
• |
Impacts of acquisitions, including the recently completed SCANA Combination, divestitures, transfers of assets to joint ventures and retirements of assets based on asset portfolio reviews; |
• |
Adverse outcomes in litigation matters or regulatory proceedings, including matters acquired in the SCANA Combination; |
• |
Counterparty credit and performance risk; |
• |
Fluctuations in the value of investments held in nuclear decommissioning trusts by Dominion Energy and Virginia Power and in benefit plan trusts by Dominion Energy and Dominion Energy Gas; |
• |
Fluctuations in energy-related commodity prices and the effect these could have on Dominion Energy’s and Dominion Energy Gas’ earnings and the Companies’ liquidity position and the underlying value of their assets; |
• |
Fluctuations in interest rates or foreign currency exchange rates; |
• |
Changes in rating agency requirements or credit ratings and their effect on availability and cost of capital; |
• |
Global capital market conditions, including the availability of credit and the ability to obtain financing on reasonable terms; |
107
• |
Political and economic conditions, including inflation and deflation; |
• |
Employee workforce factors including collective bargaining agreements and labor negotiations with union employees; and |
• |
Changes in financial or regulatory accounting principles or policies imposed by governing bodies. |
Additionally, other risks that could cause actual results to differ from predicted results are set forth in Item 1A. Risk Factors in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018.
The Companies’ forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. The Companies caution the reader not to place undue reliance on their forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. The Companies undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.
Accounting Matters
Critical Accounting Policies and Estimates
As of September 30, 2019, there have been no significant changes with regard to the critical accounting policies and estimates disclosed in MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018. The policies disclosed included the accounting for regulated operations, AROs, income taxes, derivative contracts and financial instruments at fair value, impairment testing of goodwill, long-lived assets and equity method investments and employee benefit plans.
Dominion Energy
Results of Operations
Presented below is a summary of Dominion Energy’s consolidated results:
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|||
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Dominion Energy |
|
$ |
975 |
|
|
$ |
854 |
|
|
$ |
121 |
|
Diluted EPS |
|
|
1.17 |
|
|
|
1.30 |
|
|
|
(0.13 |
) |
Year-To-Date |
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Dominion Energy |
|
$ |
349 |
|
|
$ |
1,806 |
|
|
$ |
(1,457 |
) |
Diluted EPS |
|
|
0.39 |
|
|
|
2.77 |
|
|
|
(2.38 |
) |
Overview
Third Quarter 2019 vs. 2018
Net income attributable to Dominion Energy increased 14%, primarily due to operations acquired in the SCANA Combination, higher renewable energy investment tax credits, decreased Virginia Power electric capacity expense and an increase in cooling degree days in Virginia Power’s service territory. These increases were partially offset by a decrease in net investment earnings on nuclear decommissioning trust funds, the absence of a gain on sale of an equity method investment and the absence of gains related to agreements to convey shale development rights under natural gas storage fields.
Year-To-Date 2019 vs. 2018
Net income attributable to Dominion Energy decreased $1.5 billion, primarily due to charges for refunds of amounts previously collected from retail electric customers of DESC for the NND Project, a voluntary retirement program, the planned early retirement of certain Virginia Power electric generation facilities and automated meter reading infrastructure, regulatory assets and property, plant and equipment acquired in the SCANA Combination for which Dominion Energy committed to forgo recovery, litigation acquired in the SCANA Combination, Virginia Power’s contract termination with a non-utility generator and the absence of gains related to agreements to convey shale development rights under natural gas storage fields. These decreases were partially offset by an increase in net investment earnings on nuclear decommissioning trust funds, the operations acquired in the SCANA Combination, the revision of future ash pond and landfill closure costs as a result of Virginia legislation enacted in March 2019, the absence of charges associated with Virginia legislation enacted in March 2018 and April 2018 and the absence of disallowance of FERC-regulated plant.
108
Analysis of Consolidated Operations
Presented below are selected amounts related to Dominion Energy’s results of operations:
|
|
Third Quarter |
|
|
Year-To-Date |
|
||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
4,269 |
|
|
$ |
3,451 |
|
|
$ |
818 |
|
|
$ |
12,097 |
|
|
$ |
10,005 |
|
|
$ |
2,092 |
|
Electric fuel and other energy-related purchases |
|
|
774 |
|
|
|
761 |
|
|
|
13 |
|
|
|
2,283 |
|
|
|
2,128 |
|
|
|
155 |
|
Purchased electric capacity |
|
|
11 |
|
|
|
50 |
|
|
|
(39 |
) |
|
|
74 |
|
|
|
87 |
|
|
|
(13 |
) |
Purchased gas |
|
|
153 |
|
|
|
5 |
|
|
|
148 |
|
|
|
1,110 |
|
|
|
409 |
|
|
|
701 |
|
Net revenue |
|
|
3,331 |
|
|
|
2,635 |
|
|
|
696 |
|
|
|
8,630 |
|
|
|
7,381 |
|
|
|
1,249 |
|
Other operations and maintenance |
|
|
1,010 |
|
|
|
770 |
|
|
|
240 |
|
|
|
3,295 |
|
|
|
2,438 |
|
|
|
857 |
|
Depreciation, depletion and amortization |
|
|
679 |
|
|
|
526 |
|
|
|
153 |
|
|
|
1,991 |
|
|
|
1,487 |
|
|
|
504 |
|
Other taxes |
|
|
243 |
|
|
|
177 |
|
|
|
66 |
|
|
|
819 |
|
|
|
542 |
|
|
|
277 |
|
Impairment of assets and other charges |
|
|
85 |
|
|
|
12 |
|
|
|
73 |
|
|
|
1,232 |
|
|
|
147 |
|
|
|
1,085 |
|
Other income |
|
|
173 |
|
|
|
373 |
|
|
|
(200 |
) |
|
|
653 |
|
|
|
658 |
|
|
|
(5 |
) |
Interest and related charges |
|
|
451 |
|
|
|
378 |
|
|
|
73 |
|
|
|
1,372 |
|
|
|
1,053 |
|
|
|
319 |
|
Income tax expense |
|
|
51 |
|
|
|
262 |
|
|
|
(211 |
) |
|
|
208 |
|
|
|
485 |
|
|
|
(277 |
) |
Noncontrolling interests |
|
|
10 |
|
|
|
29 |
|
|
|
(19 |
) |
|
|
17 |
|
|
|
81 |
|
|
|
(64 |
) |
An analysis of Dominion Energy’s results of operations follows:
Third Quarter 2019 vs. 2018
Net revenue increased 26%, primarily due to:
• |
A $607 million increase from operations acquired in the SCANA Combination; |
• |
A $96 million increase from Virginia Power rate adjustment clauses; |
• |
A $40 million decrease in Virginia Power electric capacity expense related to the annual PJM capacity performance market effective June 2019 ($27 million) and a contract termination with a non-utility generator ($13 million); and |
• |
A $31 million increase in sales to Virginia Power retail customers, primarily due to an increase in cooling degree days during the cooling season. |
These increases were partially offset by:
• |
A $67 million decrease from the absence of certain merchant generation facilities sold in 2018; and |
• |
A $26 million decrease in services performed for Atlantic Coast Pipeline. |
Other operations and maintenance increased 31%, primarily reflecting:
• |
A $165 million increase from operations acquired in the SCANA Combination; |
• |
The absence of gains related to agreements to convey shale development rights under natural gas storage fields ($65 million); |
• |
A $47 million increase in certain Virginia Power transmission-related expenditures. These expenses are primarily recovered through state and FERC rates and do not impact net income; and |
• |
An increase in merger and integration-related costs associated with the SCANA Combination ($26 million); partially offset by |
• |
A $26 million decrease in services performed for Atlantic Coast Pipeline. These expenses are billed to Atlantic Coast Pipeline and do not significantly impact net income. |
Depreciation, depletion and amortization increased 29%, primarily due to property, plant and equipment acquired in the SCANA Combination, including amortization of NND Project costs.
Other taxes increased 37%, primarily due to the SCANA Combination.
109
Impairment of assets and other charges increased $73 million, primarily due to a charge associated with litigation acquired in the SCANA Combination ($38 million), the abandonment of certain property, plant and equipment ($26 million) and a $21 million charge for disallowance of Virginia Power state-regulated plant.
Other income decreased 54%, primarily due to a decrease in net investment earnings on nuclear decommissioning trust funds ($124 million) and the absence of a gain on the sale of Dominion Energy’s 25% limited partnership interest in Catalyst Old River Hydroelectric Limited Partnership ($87 million).
Interest and related charges increased 19%, primarily due to debt acquired in the SCANA Combination net of debt redeemed in the first and third quarters of 2019.
Income tax expense decreased 81%, primarily due to lower pre-tax income ($146 million), higher renewable energy investment tax credits ($38 million) and the absence of impacts from the 2017 Tax Reform Act ($31 million).
Noncontrolling interests decreased 66%, primarily due to the acquisition of the public interest in Dominion Energy Midstream in January 2019.
Year-To-Date 2019 vs. 2018
Net revenue increased 17%, primarily reflecting:
• |
A $741 million increase from the SCANA Combination, due to operations acquired ($1.8 billion), partially offset by a $1.0 billion charge for refunds of amounts previously collected from retail electric customers of DESC for the NND Project; |
• |
A $236 million increase from the Liquefaction Facility, including terminalling services provided to the export customers ($190 million), a decrease in credits associated with the start-up phase ($25 million) and regulated gas transportation contracts to serve the export customers ($23 million); |
• |
The absence of a $215 million charge associated with Virginia legislation enacted in March 2018 that required one-time rate credits of certain amounts to utility customers; |
• |
A $198 million increase from Virginia Power rate adjustment clauses; |
• |
A $48 million increase due to favorable pricing at merchant generation facilities; and |
• |
A $34 million decrease in Virginia Power electric capacity expense related to the annual PJM capacity performance market effective June 2019 ($35 million) and a contract termination with a non-utility generator ($25 million), partially offset by the annual PJM capacity performance market effective June 2018 ($26 million). |
These increases were partially offset by:
• |
A $166 million decrease from the absence of certain merchant generation facilities sold in 2018; |
• |
A $75 million decrease in services performed for Atlantic Coast Pipeline; |
• |
A $33 million decrease in sales to Virginia Power retail customers from lower heating degree days during the heating season, partially offset by a $25 million increase from higher cooling degree days during the cooling season; and |
• |
A $30 million decrease due to an increase in planned outage days at certain merchant generation facilities. |
Other operations and maintenance increased 35%, primarily reflecting:
• |
A $539 million increase from operations acquired in the SCANA Combination; |
• |
An increase in merger and integration-related costs associated with the SCANA Combination ($435 million), including a charge related to a voluntary retirement program ($291 million); |
• |
The absence of gains related to agreements to convey shale development rights under natural gas storage fields ($115 million); |
• |
A $45 million increase from additional planned outage days at certain generation facilities; |
• |
A $44 million increase in certain Virginia Power transmission-related expenditures. These expenses are primarily recovered through state and FERC rates and do not impact net income; and |
110
• |
A $25 million increase in operating expenses from the commercial operations of the Liquefaction Project and costs associated with regulated gas transportation contracts to serve the export customers. |
These increases were partially offset by:
• |
A $113 million benefit from the revision of future ash pond and landfill closure costs as a result of Virginia legislation enacted in March 2019; |
• |
The absence of an $81 million charge associated primarily with future ash pond and landfill closure costs in connection with the enactment of Virginia legislation in April 2018; |
• |
A $74 million decrease in services performed for Atlantic Coast Pipeline. These expenses are billed to Atlantic Coast Pipeline and do not significantly impact net income; and |
• |
A $33 million decrease from the absence of certain merchant generation facilities sold in 2018. |
Depreciation, depletion and amortization increased 34%, primarily due to property, plant and equipment acquired in the SCANA Combination ($421 million), including amortization of NND Project costs ($92 million), an increase from various growth projects being placed into service ($112 million), including the Liquefaction Facility ($28 million), and the absence of a benefit for the retroactive application of depreciation rates for regulated nuclear plants to comply with Virginia Commission requirements ($31 million).
Other taxes increased 51%, primarily due to the SCANA Combination ($215 million) and a charge related to a voluntary retirement program ($24 million).
Impairment of assets and other charges increased $1.1 billion, primarily due to:
• |
A $368 million charge related to the early retirement of certain Virginia Power electric generation facilities; |
• |
Charges associated with litigation acquired in the SCANA Combination ($316 million); |
• |
A $160 million charge related to Virginia Power’s planned early retirement of certain automated meter reading infrastructure; |
• |
A $135 million charge related to Virginia Power’s contract termination with a non-utility generator; |
• |
A $105 million charge for property, plant and equipment acquired in the SCANA Combination for which Dominion Energy committed to forgo recovery; |
• |
A $62 million charge related to the abandonment of a project at a Virginia Power electric generating facility; and |
• |
The abandonment of certain property, plant and equipment ($39 million); partially offset by |
• |
The absence of a $135 million charge for disallowance of FERC-regulated plant. |
Other income remained substantially unchanged, primarily reflecting a charge related to a voluntary retirement program ($112 million), the absence of a gain on the sale of Dominion Energy’s 25% limited partnership interest in Catalyst Old River Hydroelectric Limited Partnership ($87 million) and the absence of equity earnings due to the sale of Blue Racer in December 2018 ($40 million). These decreases were substantially offset by an increase in net investment earnings on nuclear decommissioning trust funds ($210 million) and an increase in equity earnings from Atlantic Coast Pipeline ($42 million).
Interest and related charges increased 30%, primarily due to debt acquired in the SCANA Combination net of debt redeemed in the first and third quarters of 2019 ($245 million), the absence of capitalization of interest expense associated with the Liquefaction Facility upon completion of construction ($46 million) and higher long-term debt interest expense resulting from net debt issuances in 2018 ($32 million).
Income tax expense decreased 57%, primarily due to lower pre-tax income ($452 million) and the absence of impacts from the 2017 Tax Reform Act ($31 million), partially offset by a charge for certain income tax-related regulatory assets acquired in the SCANA Combination for which Dominion Energy committed to forgo recovery ($198 million) and the absence of a state legislative change ($20 million).
Noncontrolling interests decreased 79%, primarily due to the acquisition of the public interest in Dominion Energy Midstream in January 2019.
111
Segment Results of Operations
Segment results include the impact of intersegment revenues and expenses, which may result in intersegment profit and loss. Presented below is a summary of contributions by Dominion Energy’s operating segments to net income attributable to Dominion Energy:
|
|
Net Income (Loss) Attributable to Dominion Energy |
|
|
Diluted EPS |
|
||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
||||||
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power Delivery |
|
$ |
185 |
|
|
$ |
163 |
|
|
$ |
22 |
|
|
$ |
0.23 |
|
|
$ |
0.25 |
|
|
$ |
(0.02 |
) |
Power Generation |
|
|
490 |
|
|
|
414 |
|
|
|
76 |
|
|
|
0.60 |
|
|
|
0.63 |
|
|
|
(0.03 |
) |
Gas Infrastructure |
|
|
232 |
|
|
|
264 |
|
|
|
(32 |
) |
|
|
0.29 |
|
|
|
0.40 |
|
|
|
(0.11 |
) |
Southeast Energy |
|
|
147 |
|
|
|
— |
|
|
|
147 |
|
|
|
0.18 |
|
|
|
— |
|
|
|
0.18 |
|
Primary operating segments |
|
|
1,054 |
|
|
|
841 |
|
|
|
213 |
|
|
|
1.30 |
|
|
|
1.28 |
|
|
|
0.02 |
|
Corporate and Other |
|
|
(79 |
) |
|
|
13 |
|
|
|
(92 |
) |
|
|
(0.13 |
) |
|
|
0.02 |
|
|
|
(0.15 |
) |
Consolidated |
|
$ |
975 |
|
|
$ |
854 |
|
|
$ |
121 |
|
|
$ |
1.17 |
|
|
$ |
1.30 |
|
|
$ |
(0.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-To-Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power Delivery |
|
$ |
496 |
|
|
$ |
464 |
|
|
$ |
32 |
|
|
$ |
0.62 |
|
|
$ |
0.71 |
|
|
$ |
(0.09 |
) |
Power Generation |
|
|
1,048 |
|
|
|
1,038 |
|
|
|
10 |
|
|
|
1.30 |
|
|
|
1.59 |
|
|
|
(0.29 |
) |
Gas Infrastructure |
|
|
838 |
|
|
|
840 |
|
|
|
(2 |
) |
|
|
1.04 |
|
|
|
1.29 |
|
|
|
(0.25 |
) |
Southeast Energy |
|
|
361 |
|
|
|
— |
|
|
|
361 |
|
|
|
0.45 |
|
|
|
— |
|
|
|
0.45 |
|
Primary operating segments |
|
|
2,743 |
|
|
|
2,342 |
|
|
|
401 |
|
|
|
3.41 |
|
|
|
3.59 |
|
|
|
(0.18 |
) |
Corporate and Other |
|
|
(2,394 |
) |
|
|
(536 |
) |
|
|
(1,858 |
) |
|
|
(3.02 |
) |
|
|
(0.82 |
) |
|
|
(2.20 |
) |
Consolidated |
|
$ |
349 |
|
|
$ |
1,806 |
|
|
$ |
(1,457 |
) |
|
$ |
0.39 |
|
|
$ |
2.77 |
|
|
$ |
(2.38 |
) |
Power Delivery
Presented below are selected operating statistics related to Power Delivery’s operations:
|
|
Third Quarter |
|
|
Year-To-Date |
|
||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
Electricity delivered (million MWh) |
|
|
24.4 |
|
|
|
24.0 |
|
|
|
2 |
% |
|
|
66.8 |
|
|
|
67.0 |
|
|
—% |
|
|
Degree days (electric distribution service area): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooling |
|
|
1,299 |
|
|
|
1,271 |
|
|
|
2 |
|
|
|
1,948 |
|
|
|
1,890 |
|
|
|
3 |
|
Heating |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,042 |
|
|
|
2,306 |
|
|
|
(11 |
) |
Average electric distribution customer accounts (thousands)(1) |
|
|
2,629 |
|
|
|
2,603 |
|
|
|
1 |
|
|
|
2,623 |
|
|
|
2,597 |
|
|
|
1 |
|
(1) |
Period average. |
Presented below, on an after-tax basis, are the key factors impacting Power Delivery’s net income contribution:
|
|
Third Quarter 2019 vs. 2018 Increase (Decrease) |
|
|
Year-To-Date 2019 vs. 2018 Increase (Decrease) |
|
||||||||||
|
|
Amount |
|
|
EPS |
|
|
Amount |
|
|
EPS |
|
||||
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated electric sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weather |
|
$ |
7 |
|
|
$ |
0.01 |
|
|
$ |
(2 |
) |
|
$ |
— |
|
Other |
|
|
2 |
|
|
|
— |
|
|
|
7 |
|
|
|
0.01 |
|
Rate adjustment clause equity return |
|
|
17 |
|
|
|
0.02 |
|
|
|
40 |
|
|
|
0.06 |
|
Storm damage and service restoration |
|
|
5 |
|
|
|
0.01 |
|
|
|
(5 |
) |
|
|
(0.01 |
) |
Other |
|
|
(9 |
) |
|
|
(0.01 |
) |
|
|
(8 |
) |
|
|
(0.01 |
) |
Share dilution |
|
|
— |
|
|
|
(0.05 |
) |
|
|
— |
|
|
|
(0.14 |
) |
Change in net income contribution |
|
$ |
22 |
|
|
$ |
(0.02 |
) |
|
$ |
32 |
|
|
$ |
(0.09 |
) |
112
Power Generation
Presented below are selected operating statistics related to Power Generation’s operations:
|
|
Third Quarter |
|
|
Year-To-Date |
|
||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
Electricity supplied (million MWh): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility |
|
|
24.5 |
|
|
|
24.0 |
|
|
|
2 |
% |
|
|
67.3 |
|
|
|
67.1 |
|
|
—% |
|
|
Merchant |
|
|
5.6 |
|
|
|
8.1 |
|
|
|
(31 |
) |
|
|
15.2 |
|
|
|
23.1 |
|
|
|
(34 |
) |
Degree days (electric utility service area): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooling |
|
|
1,299 |
|
|
|
1,271 |
|
|
|
2 |
|
|
|
1,948 |
|
|
|
1,890 |
|
|
|
3 |
|
Heating |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,042 |
|
|
|
2,306 |
|
|
|
(11 |
) |
Presented below, on an after-tax basis, are the key factors impacting Power Generation’s net income contribution:
|
|
Third Quarter 2019 vs. 2018 Increase (Decrease) |
|
|
Year-To-Date 2019 vs. 2018 Increase (Decrease) |
|
||||||||||
|
|
Amount |
|
|
EPS |
|
|
Amount |
|
|
EPS |
|
||||
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated electric sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weather |
|
$ |
16 |
|
|
$ |
0.02 |
|
|
$ |
(3 |
) |
|
$ |
— |
|
Other |
|
|
(3 |
) |
|
|
— |
|
|
|
(9 |
) |
|
|
(0.01 |
) |
Planned outage costs |
|
|
3 |
|
|
|
— |
|
|
|
(32 |
) |
|
|
(0.05 |
) |
Electric capacity |
|
|
30 |
|
|
|
0.05 |
|
|
|
27 |
|
|
|
0.04 |
|
Sale of certain merchant generation facilities |
|
|
(36 |
) |
|
|
(0.05 |
) |
|
|
(69 |
) |
|
|
(0.11 |
) |
Expiration of energy supply contract |
|
|
13 |
|
|
|
0.02 |
|
|
|
22 |
|
|
|
0.03 |
|
Renewable energy investment tax credits |
|
|
22 |
|
|
|
0.03 |
|
|
|
30 |
|
|
|
0.04 |
|
Interest expense |
|
|
6 |
|
|
|
0.01 |
|
|
|
19 |
|
|
|
0.03 |
|
Other |
|
|
25 |
|
|
|
0.04 |
|
|
|
25 |
|
|
|
0.04 |
|
Share dilution |
|
|
— |
|
|
|
(0.15 |
) |
|
|
— |
|
|
|
(0.30 |
) |
Change in net income contribution |
|
$ |
76 |
|
|
$ |
(0.03 |
) |
|
$ |
10 |
|
|
$ |
(0.29 |
) |
Gas Infrastructure
Presented below are selected operating statistics related to Gas Infrastructure’s operations:
|
|
Third Quarter |
|
|
Year-To-Date |
|
||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
||||||
Gas distribution throughput (bcf): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
9 |
|
|
|
9 |
|
|
—% |
|
|
|
92 |
|
|
|
85 |
|
|
|
8 |
% |
|
Transportation |
|
|
168 |
|
|
|
153 |
|
|
|
10 |
|
|
|
538 |
|
|
|
525 |
|
|
|
2 |
|
Heating degree days (gas distribution service area): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern region |
|
|
5 |
|
|
|
48 |
|
|
|
(90 |
) |
|
|
3,446 |
|
|
|
3,633 |
|
|
|
(5 |
) |
Western region |
|
|
86 |
|
|
|
18 |
|
|
|
378 |
|
|
|
3,290 |
|
|
|
2,518 |
|
|
|
31 |
|
Average gas distribution customer accounts (thousands)(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
1,273 |
|
|
|
1,253 |
|
|
|
2 |
|
|
|
1,271 |
|
|
|
1,254 |
|
|
|
1 |
|
Transportation |
|
|
1,104 |
|
|
|
1,092 |
|
|
|
1 |
|
|
|
1,110 |
|
|
|
1,097 |
|
|
|
1 |
|
Average retail energy marketing customer accounts (thousands)(1) |
|
|
379 |
|
|
|
867 |
|
|
|
(56 |
) |
|
|
375 |
|
|
|
864 |
|
|
|
(57 |
) |
(1) |
Period average. |
113
Presented below, on an after-tax basis, are the key factors impacting Gas Infrastructure’s net income contribution:
|
|
Third Quarter 2019 vs. 2018 Increase (Decrease) |
|
|
Year-To-Date 2019 vs. 2018 Increase (Decrease) |
|
||||||||||
|
|
Amount |
|
|
EPS |
|
|
Amount |
|
|
EPS |
|
||||
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cove Point export contracts |
|
$ |
10 |
|
|
$ |
0.01 |
|
|
$ |
158 |
|
|
$ |
0.24 |
|
Noncontrolling interest(1) |
|
|
15 |
|
|
|
0.03 |
|
|
|
45 |
|
|
|
0.07 |
|
Interest expense, net |
|
|
(8 |
) |
|
|
(0.01 |
) |
|
|
(72 |
) |
|
|
(0.11 |
) |
Assignment of shale development rights |
|
|
(47 |
) |
|
|
(0.07 |
) |
|
|
(83 |
) |
|
|
(0.13 |
) |
State legislative change |
|
|
— |
|
|
|
— |
|
|
|
(18 |
) |
|
|
(0.03 |
) |
Other |
|
|
(2 |
) |
|
|
— |
|
|
|
(32 |
) |
|
|
(0.05 |
) |
Share dilution |
|
|
— |
|
|
|
(0.07 |
) |
|
|
— |
|
|
|
(0.24 |
) |
Change in net income contribution |
|
$ |
(32 |
) |
|
$ |
(0.11 |
) |
|
$ |
(2 |
) |
|
$ |
(0.25 |
) |
(1) |
Reflects the acquisition of the public interest in Dominion Energy Midstream in January 2019. |
Southeast Energy
Presented below are selected operating statistics related to Southeast Energy’s operations:
|
|
Third Quarter |
|
|
Year-To-Date |
|
||
|
|
2019 |
|
|
2019 |
|
||
Electricity delivered (million MWh) |
|
|
6.8 |
|
|
|
17.7 |
|
Electricity supplied (million MWh) |
|
|
7.2 |
|
|
|
18.6 |
|
Degree days (electric distribution service area): |
|
|
|
|
|
|
|
|
Cooling |
|
|
645 |
|
|
|
913 |
|
Heating |
|
|
— |
|
|
|
698 |
|
Average electric distribution customer accounts (thousands)(1) |
|
|
742 |
|
|
|
738 |
|
Gas distribution throughput (bcf): |
|
|
|
|
|
|
|
|
Sales |
|
|
18 |
|
|
|
80 |
|
Transportation |
|
|
17 |
|
|
|
48 |
|
Heating degree days (gas distribution service area) |
|
|
— |
|
|
|
808 |
|
Average gas distribution customer accounts (thousands)(1) |
|
|
964 |
|
|
|
963 |
|
Average retail energy marketing customer accounts (thousands)(1) |
|
|
406 |
|
|
|
415 |
|
(1) |
Period average. |
Presented below, on an after-tax basis, are the key factors impacting Southeast Energy’s net income contribution:
|
|
Third Quarter 2019 vs. 2018 Increase (Decrease) |
|
|
Year-To-Date 2019 vs. 2018 Increase (Decrease) |
|
||||||||||
|
|
Amount |
|
|
EPS |
|
|
Amount |
|
|
EPS |
|
||||
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SCANA Combination |
|
$ |
147 |
|
|
$ |
0.18 |
|
|
$ |
361 |
|
|
$ |
0.45 |
|
Change in net income contribution |
|
$ |
147 |
|
|
$ |
0.18 |
|
|
$ |
361 |
|
|
$ |
0.45 |
|
114
Corporate and Other
Presented below are the Corporate and Other segment’s after-tax results:
|
|
Third Quarter |
|
|
Year-To-Date |
|
||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
||||||
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specific items attributable to operating segments |
|
$ |
(80 |
) |
|
$ |
122 |
|
|
$ |
(202 |
) |
|
$ |
(1,955 |
) |
|
$ |
(188 |
) |
|
$ |
(1,767 |
) |
Specific items attributable to Corporate and Other segment |
|
|
88 |
|
|
|
(26 |
) |
|
|
114 |
|
|
|
(155 |
) |
|
|
(65 |
) |
|
|
(90 |
) |
Total specific items |
|
|
8 |
|
|
|
96 |
|
|
|
(88 |
) |
|
|
(2,110 |
) |
|
|
(253 |
) |
|
|
(1,857 |
) |
Other corporate operations(1) |
|
|
(87 |
) |
|
|
(83 |
) |
|
|
(4 |
) |
|
|
(284 |
) |
|
|
(283 |
) |
|
|
(1 |
) |
Total net income (expense) |
|
$ |
(79 |
) |
|
$ |
13 |
|
|
$ |
(92 |
) |
|
$ |
(2,394 |
) |
|
$ |
(536 |
) |
|
$ |
(1,858 |
) |
EPS impact |
|
$ |
(0.13 |
) |
|
$ |
0.02 |
|
|
$ |
(0.15 |
) |
|
$ |
(3.02 |
) |
|
$ |
(0.82 |
) |
|
$ |
(2.20 |
) |
(1) |
Primarily consists of net interest expense. |
Total Specific Items
Corporate and Other includes specific items attributable to Dominion Energy’s primary operating segments that are not included in profit measures evaluated by executive management in assessing those segments' performance or in allocating resources. See Note 22 to the Consolidated Financial Statements in this report for discussion of these items in more detail. Corporate and Other also includes items attributable to the Corporate and Other segment.
Virginia Power
Results of Operations
Presented below is a summary of Virginia Power’s consolidated results:
|
|
Third Quarter |
|
|
Year-To-Date |
|
||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
602 |
|
|
$ |
520 |
|
|
$ |
82 |
|
|
$ |
722 |
|
|
$ |
1,043 |
|
|
$ |
(321 |
) |
Overview
Third Quarter 2019 vs. 2018
Net income increased 16%, primarily due to an increase in cooling degree days in the service territory, a decrease in net electric capacity expense and higher renewable energy investment tax credits. These increases were partially offset by increases in charges related to the abandonment and disallowance of certain property, plant and equipment.
Year-To-Date 2019 vs. 2018
Net income decreased 31%, primarily due to charges associated with the planned early retirement of certain electric generation facilities and certain automated meter reading infrastructure, a voluntary retirement program and a contract termination with a non-utility generator. These decreases were partially offset by increases related to the revision of future ash pond and landfill closure costs as a result of Virginia legislation enacted in March 2019 and the absence of charges associated with Virginia legislation enacted in March 2018 and April 2018.
115
Analysis of Consolidated Operations
Presented below are selected amounts related to Virginia Power’s results of operations:
|
|
Third Quarter |
|
|
Year-To-Date |
|
||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
2,264 |
|
|
$ |
2,232 |
|
|
$ |
32 |
|
|
$ |
6,167 |
|
|
$ |
5,809 |
|
|
$ |
358 |
|
Electric fuel and other energy-related purchases |
|
|
559 |
|
|
|
648 |
|
|
|
(89 |
) |
|
|
1,691 |
|
|
|
1,747 |
|
|
|
(56 |
) |
Purchased (excess) electric capacity |
|
|
(1 |
) |
|
|
50 |
|
|
|
(51 |
) |
|
|
45 |
|
|
|
87 |
|
|
|
(42 |
) |
Net revenue |
|
|
1,706 |
|
|
|
1,534 |
|
|
|
172 |
|
|
|
4,431 |
|
|
|
3,975 |
|
|
|
456 |
|
Other operations and maintenance |
|
|
453 |
|
|
|
404 |
|
|
|
49 |
|
|
|
1,297 |
|
|
|
1,242 |
|
|
|
55 |
|
Depreciation and amortization |
|
|
313 |
|
|
|
295 |
|
|
|
18 |
|
|
|
916 |
|
|
|
839 |
|
|
|
77 |
|
Other taxes |
|
|
82 |
|
|
|
79 |
|
|
|
3 |
|
|
|
257 |
|
|
|
241 |
|
|
|
16 |
|
Impairment of assets and other charges |
|
|
38 |
|
|
|
— |
|
|
|
38 |
|
|
|
781 |
|
|
|
— |
|
|
|
781 |
|
Other income |
|
|
15 |
|
|
|
25 |
|
|
|
(10 |
) |
|
|
68 |
|
|
|
49 |
|
|
|
19 |
|
Interest and related charges |
|
|
138 |
|
|
|
130 |
|
|
|
8 |
|
|
|
408 |
|
|
|
388 |
|
|
|
20 |
|
Income tax expense |
|
|
95 |
|
|
|
131 |
|
|
|
(36 |
) |
|
|
118 |
|
|
|
271 |
|
|
|
(153 |
) |
An analysis of Virginia Power’s results of operations follows:
Third Quarter 2019 vs. 2018
Net revenue increased 11%, primarily reflecting:
• |
A $96 million increase from rate adjustment clauses; |
• |
A $40 million decrease in electric capacity expense related to the annual PJM capacity performance market effective June 2019 ($27 million) and a contract termination with a non-utility generator ($13 million); and |
• |
A $31 million increase in sales to retail customers, primarily due to an increase in cooling degree days during the cooling season. |
Other operations and maintenance increased 12%, primarily reflecting an increase in certain transmission-related expenses. These expenses were primarily recovered through state and FERC rates and did not impact net income.
Depreciation and amortization increased 6%, primarily due to various projects being placed into service ($22 million), partially offset by the absence of depreciation from certain electric generation facilities and automated meter reading infrastructure that were retired early ($11 million).
Impairment of assets and other charges increased $38 million, reflecting charges related to a $21 million charge for disallowance of state-regulated plant and the abandonment of certain property, plant and equipment ($17 million).
Other income decreased 40%, primarily reflecting a decrease in net investment earnings on nuclear decommissioning trust funds.
Income tax expense decreased 27%, primarily due to higher renewable energy investment tax credits.
Year-To-Date 2019 vs. 2018
Net revenue increased 11%, primarily reflecting:
• |
The absence of a $215 million charge associated with Virginia legislation enacted in March 2018 that required one-time rate credits of certain amounts to utility customers; |
• |
A $198 million increase from rate adjustment clauses; and |
• |
A $34 million decrease in electric capacity expense related to the annual PJM capacity performance market effective June 2019 ($35 million) and a contract termination with a non-utility generator ($25 million), partially offset by the annual PJM capacity performance market effective June 2018 ($26 million); partially offset by |
• |
A $33 million decrease in sales to retail customers from lower heating degree days during the heating season partially offset by a $25 million increase from higher cooling degree days during the cooling season. |
116
Other operations and maintenance increased 4%, primarily reflecting:
• |
A $190 million charge related to a voluntary retirement program; and |
• |
A $44 million increase in certain transmission-related expenses. These expenses were primarily recovered through state and FERC rates and did not impact net income; partially offset by |
• |
A $113 million benefit from the revision of future ash pond and landfill closure costs as a result of Virginia legislation enacted in March 2019; and |
• |
The absence of an $81 million charge associated primarily with future ash pond and landfill closure costs in connection with the enactment of Virginia legislation in April 2018. |
Depreciation and amortization increased 9%, due to various projects being placed into service ($71 million) and the absence of a benefit for the retroactive application of depreciation rates for regulated nuclear plants to comply with Virginia Commission requirements ($31 million), partially offset by the absence of depreciation from certain electric generation facilities and automated meter reading infrastructure that were retired early ($29 million).
Impairment of assets and other charges increased $781 million, primarily reflecting:
• |
A $368 million charge related to the early retirement of certain electric generation facilities; |
• |
A $160 million charge related to the planned early retirement of certain automated meter reading infrastructure; |
• |
A $135 million charge related to contract termination with a non-utility generator; |
• |
A $62 million charge related to the abandonment of a project at an electric generating facility; |
• |
A $21 million charge for disallowance of state-regulated plant; and |
• |
A $17 million charge related to the abandonment of certain property, plant and equipment. |
Other income increased 39%, primarily reflecting an increase in net investment earnings on nuclear decommissioning trust funds.
Income tax expense decreased 56%, primarily due to lower pre-tax income ($122 million) and higher renewable energy investment tax credits ($26 million).
Dominion Energy Gas
Results of Operations
Presented below is a summary of Dominion Energy Gas’ consolidated results:
|
|
Third Quarter |
|
|
Year-To-Date |
|
||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
92 |
|
|
$ |
136 |
|
|
$ |
(44 |
) |
|
$ |
255 |
|
|
$ |
317 |
|
|
$ |
(62 |
) |
Overview
Third Quarter 2019 vs. 2018
Net income decreased 32%, primarily due to the absence of gains related to agreements to convey shale development rights under natural gas storage fields.
Year-To-Date 2019 vs. 2018
Net income decreased 20%, primarily due the absence of gains related to agreements to convey shale development rights under natural gas storage fields and a charge related to a voluntary retirement program, partially offset by the absence of a charge for disallowance of FERC-regulated plant.
117
Analysis of Consolidated Operations
Presented below are selected amounts related to Dominion Energy Gas’ results of operations:
|
|
Third Quarter |
|
|
Year-To-Date |
|
||||||||||||||||||
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
|
2019 |
|
|
2018 |
|
|
$ Change |
|
||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
392 |
|
|
$ |
423 |
|
|
$ |
(31 |
) |
|
$ |
1,303 |
|
|
$ |
1,408 |
|
|
$ |
(105 |
) |
Purchased (excess) gas |
|
|
5 |
|
|
|
(7 |
) |
|
|
12 |
|
|
|
49 |
|
|
|
22 |
|
|
|
27 |
|
Other energy-related purchases |
|
|
17 |
|
|
|
26 |
|
|
|
(9 |
) |
|
|
62 |
|
|
|
88 |
|
|
|
(26 |
) |
Net revenue |
|
|
370 |
|
|
|
404 |
|
|
|
(34 |
) |
|
|
1,192 |
|
|
|
1,298 |
|
|
|
(106 |
) |
Other operations and maintenance |
|
|
159 |
|
|
|
180 |
|
|
|
(21 |
) |
|
|
547 |
|
|
|
572 |
|
|
|
(25 |
) |
Depreciation and amortization |
|
|
64 |
|
|
|
61 |
|
|
|
3 |
|
|
|
188 |
|
|
|
173 |
|
|
|
15 |
|
Other taxes |
|
|
47 |
|
|
|
45 |
|
|
|
2 |
|
|
|
162 |
|
|
|
152 |
|
|
|
10 |
|
Impairment of assets and other charges |
|
|
— |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
13 |
|
|
|
127 |
|
|
|
(114 |
) |
Gains on sales of assets |
|
|
(7 |
) |
|
|
(65 |
) |
|
|
58 |
|
|
|
(7 |
) |
|
|
(116 |
) |
|
|
109 |
|
Earnings from equity method investee |
|
|
3 |
|
|
|
4 |
|
|
|
(1 |
) |
|
|
13 |
|
|
|
18 |
|
|
|
(5 |
) |
Other income |
|
|
35 |
|
|
|
34 |
|
|
|
1 |
|
|
|
103 |
|
|
|
99 |
|
|
|
4 |
|
Interest and related charges |
|
|
26 |
|
|
|
28 |
|
|
|
(2 |
) |
|
|
77 |
|
|
|
79 |
|
|
|
(2 |
) |
Income tax expense |
|
|
27 |
|
|
|
56 |
|
|
|
(29 |
) |
|
|
73 |
|
|
|
111 |
|
|
|
(38 |
) |
An analysis of Dominion Energy Gas’ results of operations follows:
Third Quarter 2019 vs. 2018
Net revenue decreased 8%, primarily reflecting:
• |
A $26 million decrease in services performed for Atlantic Coast Pipeline; |
• |
A $9 million increase in net fuel costs; and |
• |
A $6 million decrease in NGL activities; partially offset by |
• |
A $7 million increase in PIR program revenues. |
Other operations and maintenance decreased 12%, primarily due to a $26 million decrease in services performed for Atlantic Coast Pipeline. These expenses are billed to Atlantic Coast Pipeline and do not significantly impact net income.
Gains on sales of assets decreased 89%, primarily due to the absence of gains related to agreements to convey shale development rights under natural gas storage fields.
Income tax expense decreased 52%, primarily due to lower pre-tax income ($24 million) and the absence of impacts from the 2017 Tax Reform Act ($8 million).
Year-To-Date 2019 vs. 2018
Net revenue decreased 8%, primarily reflecting:
• |
A $75 million decrease in services performed for Atlantic Coast Pipeline; |
• |
A $25 million increase in net fuel costs; and |
• |
A $16 million decrease in NGL activities; partially offset by |
• |
A $19 million increase in PIR program revenues. |
118
Other operations and maintenance decreased 4% primarily reflecting:
• |
A $74 million decrease in services performed for Atlantic Coast Pipeline. These expenses are billed to Atlantic Coast Pipeline and do not significantly impact net income; and |
• |
A $24 million benefit associated with a revision of certain AROs; substantially offset by |
• |
A $59 million charge related to a voluntary retirement program; and |
• |
A $7 million increase in salaries, wages and benefits. |
Impairment of assets and other charges decreased 90%, due to the absence of a charge for disallowance of FERC-regulated plant ($127 million), partially offset by the abandonment of the Sweden Valley project ($13 million).
Gains on sales of assets decreased 94%, primarily due to the absence of gains related to agreements to convey shale development rights under natural gas storage fields.
Earnings from equity method investee decreased 28%, primarily due to lower earnings from unsubscribed capacity as a result of a decrease in heating degree days at Iroquois.
Income tax expense decreased 34%, primarily due to lower pre-tax income ($33 million) and the absence of impacts from the 2017 Tax Reform Act ($8 million).
Liquidity and Capital Resources
Dominion Energy depends on both internal and external sources of liquidity to provide working capital and as a bridge to long-term debt financings. Short-term cash requirements not met by cash provided by operations are generally satisfied with proceeds from short-term borrowings. Long-term cash needs are met through issuances of debt and/or equity securities.
At September 30, 2019, Dominion Energy had $3.5 billion of unused capacity under its credit facility. See Note 17 to the Consolidated Financial Statements for more information.
A summary of Dominion Energy’s cash flows is presented below:
|
|
2019 |
|
|
2018 |
|
||
(millions) |
|
|
|
|
|
|
|
|
Cash, restricted cash and equivalents at January 1 |
|
$ |
391 |
|
|
$ |
185 |
|
Cash flows provided by (used in): |
|
|
|
|
|
|
|
|
Operating activities |
|
|
3,709 |
|
|
|
3,711 |
|
Investing activities |
|
|
(3,160 |
) |
|
|
(3,369 |
) |
Financing activities |
|
|
(500 |
) |
|
|
(140 |
) |
Net increase in cash, restricted cash and equivalents |
|
|
49 |
|
|
|
202 |
|
Cash, restricted cash and equivalents at September 30 |
|
$ |
440 |
|
|
$ |
387 |
|
Operating Cash Flows
Net cash provided by Dominion Energy’s operating activities was substantially consistent as increases in property tax payments, decreased customer deposits, increased interest payments, higher customer refunds, a contract termination payment to a non-utility generator and an increase in merger and integration-related costs associated with the SCANA Combination were substantially offset by higher deferred fuel cost recoveries at Virginia Power, the commencement of commercial operations of the Liquefaction Facility and operations acquired from the SCANA Combination.
Dominion Energy believes that its operations provide a stable source of cash flow to contribute to planned levels of capital expenditures and maintain or grow the dividend on common shares.
Dominion Energy’s operations are subject to risks and uncertainties that may negatively impact the timing or amounts of operating cash flows, which are discussed in Item 1A. Risk Factors in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018.
119
Credit Risk
Dominion Energy’s exposure to potential concentrations of credit risk results primarily from its energy marketing and price risk management activities. Presented below is a summary of Dominion Energy’s credit exposure as of September 30, 2019 for these activities. Gross credit exposure for each counterparty is calculated prior to the application of collateral and represents outstanding receivables plus any unrealized on- or off-balance sheet exposure, taking into account contractual netting rights.
|
|
Gross Credit Exposure |
|
|
Credit Collateral |
|
|
Net Credit Exposure |
|
|||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade(1) |
|
$ |
88 |
|
|
$ |
— |
|
|
$ |
88 |
|
Non-investment grade(2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
No external ratings: |
|
|
|
|
|
|
|
|
|
|
|
|
Internally rated—investment grade(3) |
|
|
48 |
|
|
|
— |
|
|
|
48 |
|
Internally rated—non-investment grade(4) |
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
Total(5) |
|
$ |
149 |
|
|
$ |
— |
|
|
$ |
149 |
|
(1) |
Designations as investment grade are based upon minimum credit ratings assigned by Moody’s Investors Service and Standard & Poor’s. The five largest counterparty exposures, combined, for this category represented approximately 36% of the total net credit exposure. |
(2) |
The five largest counterparty exposures, combined, for this category represented less than 1% of the total net credit exposure. |
(3) |
The five largest counterparty exposures, combined, for this category represented approximately 32% of the total net credit exposure. |
(4) |
The five largest counterparty exposures, combined, for this category represented approximately 6% of the total net credit exposure. |
(5) |
Excludes agreements approved by PURA, which commenced in October 2019, with Eversource Energy and The United Illuminating Company for Millstone to provide an estimated nine million MWh per year of electricity for ten years. |
Investing Cash Flows
Net cash used in Dominion Energy’s investing activities decreased $209 million, primarily due to cash and restricted cash acquired in the SCANA Combination and proceeds from the sale of Blue Racer, partially offset by an increase in plant construction and other property additions.
Financing Cash Flows and Liquidity
Dominion Energy relies on capital markets as significant sources of funding for capital requirements not satisfied by cash provided by its operations. As discussed further in Credit Ratings and Debt Covenants in MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018, the ability to borrow funds or issue securities and the return demanded by investors are affected by credit ratings. In addition, the raising of external capital is subject to certain regulatory requirements, including registration with the SEC for certain issuances.
Dominion Energy currently meets the definition of a well-known seasoned issuer under SEC rules governing the registration, communications and offering processes under the Securities Act of 1933, as amended. The rules provide for a streamlined shelf registration process to provide registrants with timely access to capital. This allows Dominion Energy to use automatic shelf registration statements to register any offering of securities, other than those for exchange offers or business combination transactions.
Net cash used by Dominion Energy's financing activities increased $360 million, primarily due to net debt repayments in 2019, compared to net debt issuances in 2018 and higher common dividend payments, partially offset by higher issuance of common stock and the issuance of the 2019 Equity Units.
In November 2017, Dominion Energy filed an SEC shelf registration statement for the sale of up to $3.0 billion of variable denomination floating rate demand notes, called Dominion Energy Reliability InvestmentSM. The registration limits the principal amount that may be outstanding at any one time to $1.0 billion. The notes are offered on a continuous basis and bear interest at a floating rate per annum determined by the Dominion Energy Reliability Investment Committee, or its designee, on a weekly basis. The notes have no stated maturity date, are non-transferable and may be redeemed in whole or in part by Dominion Energy or at the investor’s option at any time. The balance as of September 30, 2019 was $26 million. The notes are short-term debt obligations on Dominion Energy’s Consolidated Balance Sheets. The proceeds will be used for general corporate purposes and to repay debt.
120
In January 2019, Dominion Energy acquired all outstanding partnership interests of Dominion Energy Midstream not owned by Dominion Energy through the issuance of 22.5 million common shares.
In January 2019, in connection with the SCANA Combination, Dominion Energy issued 95.6 million shares of Dominion Energy common stock, valued at $6.8 billion, representing 0.6690 of a share of Dominion Energy common stock for each share of SCANA common stock outstanding at closing. SCANA’s outstanding debt totaled $6.9 billion at closing.
In June 2019, Dominion Energy issued $1.6 billion of 2019 Equity Units, initially in the form of 2019 Series A Corporate Units. The Corporate Units are listed on the NYSE under the symbol DCUE.
In August 2019, Dominion Energy issued 18.5 million shares to settle the stock purchase contracts entered into as part of the 2016 Equity Units and received proceeds of $1.4 billion.
See Note 17 to the Consolidated Financial Statements in this report for further information regarding Dominion Energy’s credit facilities, liquidity and significant financing transactions.
Credit Ratings
Credit ratings are intended to provide banks and capital market participants with a framework for comparing the credit quality of securities and are not a recommendation to buy, sell or hold securities. In the Credit Ratings section of MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018, there is a discussion on the use of capital markets by Dominion Energy as well as the impact of credit ratings on the accessibility and costs of using these markets. As of September 30, 2019, there have been no changes in Dominion Energy’s credit ratings.
Debt Covenants
In the Debt Covenants section of MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018, there is a discussion on the various covenants present in the enabling agreements underlying Dominion Energy’s debt. As of September 30, 2019, there have been no material changes to debt covenants, nor any events of default under Dominion Energy’s debt covenants.
Future Cash Payments for Contractual Obligations and Planned Capital Expenditures
As of September 30, 2019, there have been no material changes outside the ordinary course of business to Dominion Energy’s contractual obligations nor any material changes to planned capital expenditures as disclosed in MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018.
Use of Off-Balance Sheet Arrangements
In August 2019, construction of the new corporate office property was substantially complete and the facility was able to be occupied resulting in the commencement of the five-year lease term. See Note 15 to the Consolidated Financial Statements in this report for additional information. As of September 30, 2019, there have been no other material changes in the off-balance sheet arrangements disclosed in MD&A in the Companies' Annual Report on Form 10-K for the year ended December 31, 2018.
Future Issues and Other Matters
The following discussion of future issues and other information includes current developments of previously disclosed matters and new issues arising during the period covered by, and subsequent to, the dates of Dominion Energy’s Consolidated Financial Statements that may impact future results of operations, financial condition and/or cash flows. This section should be read in conjunction with Item 1. Business and Future Issues and Other Matters in MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018, Future Issues and Other Matters in MD&A in the Companies’ Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019 and Note 18 to the Consolidated Financial Statements in this report.
Environmental Matters
Dominion Energy is subject to costs resulting from a number of federal, state and local laws and regulations designed to protect human health and the environment. These laws and regulations affect future planning and existing operations. They can result in increased capital, operating and other costs as a result of compliance, remediation, containment and monitoring obligations. See Note
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22 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018, Note 17 to the Consolidated Financial Statements in the Companies’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, Note 18 to the Consolidated Financial Statements in the Companies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 and Note 18 in this report for additional information on various environmental matters.
Legal Matters
See Notes 3, 13 and 22 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018, Notes 13 and 17 to the Consolidated Financial Statements and Item 1. Legal Proceedings in the Companies’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, Notes 13 and 18 to the Consolidated Financial Statements and Item 1. Legal Proceedings in the Companies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 and Notes 13 and 18 to the Consolidated Financial Statements in this report for additional information on various legal matters.
Regulatory Matters
See Notes 3 and 13 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018, Note 13 to the Consolidated Financial Statements in the Companies’ Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019 and Note 13 to the Consolidated Financial Statements in this report for additional information on various regulatory matters.
Atlantic Coast Pipeline
In September 2014, Dominion Energy, along with Duke and Southern Company Gas, announced the formation of Atlantic Coast Pipeline. Atlantic Coast Pipeline is focused on constructing an approximately 600-mile natural gas pipeline running from West Virginia through Virginia to North Carolina. Atlantic Coast Pipeline has continued to experience delays in obtaining permits necessary for construction along with construction delays due to judicial actions. In October 2019, the Supreme Court of the U.S. agreed to hear Atlantic Coast Pipeline’s request to hear the case regarding the Appalachian Trail crossing. The Supreme Court of the U.S. is expected to issue a ruling by June 2020. Atlantic Coast Pipeline is also evaluating possible legislative remedies to this issue. Given the legal challenges and ongoing discussions with customers, project construction is expected to be completed by the end of 2021, with full in-service in early 2022. Project cost estimates are $7.3 billion to $7.8 billion, excluding financing costs. Project construction activities, schedules and costs are subject to uncertainty due to permitting and/or work delays (including due to judicial or regulatory action), abnormal weather and other conditions that could result in cost or schedule modifications in the future, a suspension of AFUDC for Atlantic Coast Pipeline and/or impairment charges potentially material to Dominion Energy’s cash flows, financial position and/or results of operations. See Note 10 to the Consolidated Financial Statements in this report for more information.
Supply Header Project
In December 2014, DETI entered into a precedent agreement with Atlantic Coast Pipeline for the Supply Header project, a project to provide approximately 1,500,000 Dths per day of firm transportation service to various customers. Atlantic Coast Pipeline has continued to experience delays in obtaining permits necessary for construction and delays in construction due to judicial actions. As a result, project cost estimates are $725 million to $775 million, excluding financing costs. Project construction is expected to be completed by the end of 2021 with full in-service in early 2022.
Millstone Agreement
In November 2017, Connecticut adopted the Act Concerning Zero Carbon Solicitation and Procurement, which allows nuclear generating facilities to compete for power purchase agreements in a state sponsored procurement for electricity. In February 2018, Connecticut regulators recommended pursuing the procurement. In May 2018, Millstone petitioned to be considered an “existing resource confirmed at risk” and subsequently participated in the state sponsored procurement for electricity. Being considered “at risk” allows the Department of Energy and Environmental Protection to consider factors other than price, such as environmental and economic benefits, when evaluating Dominion Energy’s bids. In December 2018, PURA confirmed that Millstone should be considered an “existing resource confirmed at risk” in the state’s Department of Energy and Environmental Protection zero carbon procurement. An agreement was reached in March 2019 between Dominion Energy, Eversource Energy and The United Illuminating Company for Millstone to provide nine million MWh per year of electricity for ten years. In September 2019, PURA approved the agreement, which commenced in October 2019.
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Coastal Virginia Offshore Wind Project
In November 2018, Virginia Power received approval from the Virginia Commission to develop two 6 MW wind turbines off the coast of Virginia for the Coastal Virginia Offshore Wind project, expected to cost approximately $300 million and to be in service in late 2020. In September 2019, Virginia Power filed an application with PJM to interconnect 2,640 MW of wind energy between 2024 and 2026 off the coast of Virginia as an expansion of the Coastal Virginia Offshore Wind project, expected to increase the total cost by up to approximately $8 billion.
Align RNG
In November 2018, Dominion Energy announced the formation of Align RNG, an equal partnership with Smithfield Foods, Inc. As announced in October 2019, Align RNG expects to invest $500 million to develop assets to capture methane from hog farms across Virginia, North Carolina, Utah, Arizona and California and convert it into pipeline quality natural gas.
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ITEM 3.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The matters discussed in this Item may contain “forward-looking statements” as described in the introductory paragraphs under Part I, Item 2. MD&A in this report. The reader’s attention is directed to those paragraphs for discussion of various risks and uncertainties that may impact the Companies.
Market Risk Sensitive Instruments and Risk Management
The Companies’ financial instruments, commodity contracts and related financial derivative instruments are exposed to potential losses due to adverse changes in commodity prices, interest rates and equity security prices as described below. Commodity price risk is present in Dominion Energy and Virginia Power’s electric operations and Dominion Energy and Dominion Energy Gas’ natural gas procurement and marketing operations due to the exposure to market shifts in prices received and paid for electricity, natural gas and other commodities. The Companies use commodity derivative contracts to manage price risk exposures for these operations. Interest rate risk is generally related to their outstanding debt and future issuances of debt. In addition, the Companies are exposed to investment price risk through various portfolios of equity and debt securities.
The following sensitivity analysis estimates the potential loss of future earnings or fair value from market risk sensitive instruments over a selected time period due to a 10% change in commodity prices or interest rates.
Commodity Price Risk
To manage price risk, Dominion Energy and Virginia Power hold commodity-based derivative instruments held for non-trading purposes associated with purchases and sales of electricity, natural gas and other energy-related products and Dominion Energy Gas holds commodity-based financial derivative instruments held for non-trading purposes associated with sales of NGLs.
The derivatives used to manage commodity price risk are executed within established policies and procedures and may include instruments such as futures, forwards, swaps, options and FTRs that are sensitive to changes in the related commodity prices. For sensitivity analysis purposes, the hypothetical change in market prices of commodity-based derivative instruments is determined based on models that consider the market prices of commodities in future periods, the volatility of the market prices in each period, as well as the time value factors of the derivative instruments. Prices and volatility are principally determined based on observable market prices.
A hypothetical 10% decrease in commodity prices would have resulted in a decrease in fair value of $59 million and $6 million of Dominion Energy’s commodity-based derivative instruments as of September 30, 2019 and December 31, 2018, respectively. The increase in sensitivity is largely due to decreased short positions and lower commodity prices on those short positions.
A hypothetical 10% decrease in commodity prices would have resulted in a decrease in fair value of $61 million and $51 million of Virginia Power’s commodity-based derivative instruments as of September 30, 2019 and December 31, 2018, respectively.
A hypothetical 10% increase in commodity prices would not have resulted in a material change of Dominion Energy Gas’ commodity-based derivative instruments as of both September 30, 2019 and December 31, 2018.
The impact of a change in energy commodity prices on the Companies' commodity-based derivative instruments at a point in time is not necessarily representative of the results that will be realized when the contracts are ultimately settled. Net losses from commodity-based financial derivative instruments used for hedging purposes, to the extent realized, will generally be offset by recognition of the hedged transaction, such as revenue from physical sales of the commodity.
Interest Rate Risk
The Companies manage their interest rate risk exposure predominantly by maintaining a balance of fixed and variable rate debt. They also enter into interest rate sensitive derivatives, including interest rate swaps and interest rate lock agreements. For variable rate debt outstanding for Dominion Energy, a hypothetical 10% increase in market interest rates would result in a $22 million and $24 million decrease in earnings at September 30, 2019 and December 31, 2018, respectively. For variable rate debt outstanding for Virginia Power and Dominion Energy Gas, a hypothetical 10% increase in market interest rates would not have resulted in a material change in earnings at September 30, 2019 or December 31, 2018.
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The Companies also use interest rate derivatives, including forward-starting swaps, as cash flow hedges of forecasted interest payments. As of September 30, 2019, Dominion Energy, Virginia Power and Dominion Energy Gas had $5.5 billion, $1.8 billion and $1.3 billion, respectively, in aggregate notional amounts of these interest rate derivatives outstanding. A hypothetical 10% decrease in market interest rates would have resulted in a decrease of $120 million, $77 million and $14 million, respectively, in the fair value of Dominion Energy, Virginia Power and Dominion Energy Gas’ interest rate derivatives at September 30, 2019. As of December 31, 2018, Dominion Energy, Virginia Power and Dominion Energy Gas had $5.9 billion, $1.9 billion and $1.1 billion, respectively, in aggregate notional amounts of these interest rate derivatives outstanding. A hypothetical 10% decrease in market interest rates would have resulted in a decrease of $147 million, $94 million and $17 million, respectively, in the fair value of Dominion Energy, Virginia Power and Dominion Energy Gas’ interest rate derivatives at December 31, 2018.
Dominion Energy Gas holds foreign currency swaps for the purpose of hedging the foreign currency exchange risk associated with Euro denominated debt. As of September 30, 2019 and December 31, 2018, Dominion Energy and Dominion Energy Gas had $280 million (€250 million) in aggregate notional amounts of these foreign currency swaps outstanding. A hypothetical 10% decrease in market interest rates would not have resulted in a material decrease in the fair value of Dominion Energy Gas’ foreign currency swaps at September 30, 2019 and would have resulted in a decrease of $8 million in the fair value of Dominion Energy Gas' foreign currency swaps at December 31, 2018.
The impact of a change in interest rates on the Companies’ interest rate-based financial derivative instruments at a point in time is not necessarily representative of the results that will be realized when the contracts are ultimately settled. Net gains and/or losses from interest rate derivative instruments used for hedging purposes, to the extent realized, will generally be offset by recognition of the hedged transaction.
Investment Price Risk
Dominion Energy and Virginia Power are subject to investment price risk due to securities held as investments in nuclear decommissioning and rabbi trust funds that are managed by third-party investment managers. These trust funds primarily hold marketable securities that are reported in Dominion Energy and Virginia Power’s Consolidated Balance Sheets at fair value.
Dominion Energy recognized net investment gains on nuclear decommissioning and rabbi trust investments of $691 million and $350 million for the nine months ended September 30, 2019 and 2018, respectively, and net investment losses (including investment income) on nuclear decommissioning and rabbi trust investments of $135 million for the year ended December 31, 2018. Net realized gains and losses include gains and losses from the sale of investments as well as any other-than-temporary declines in fair value. Dominion Energy recorded in AOCI and regulatory liabilities, a net increase in unrealized gains on debt investments of $73 million for the nine months ended September 30, 2019 and recorded a net decrease in unrealized gains on debt investments of $36 million and an additional unrealized loss of $10 million for the nine months ended September 30, 2018 and $36 million for the year ended December 31, 2018.
Virginia Power recognized net investment gains on nuclear decommissioning trust investments of $335 million and $163 million for the nine months ended September 30, 2019 and 2018, respectively, and net investment losses (including investment income) on nuclear decommissioning and rabbi trust investments of $44 million for the year ended December 31, 2018. Net realized gains and losses include gains and losses from the sale of investments as well as any other-than-temporary declines in fair value. Virginia Power recorded in AOCI and regulatory liabilities, a net increase in unrealized gains on debt investments of $35 million for the nine months ended September 30, 2019 and recorded a net decrease in unrealized gains on debt investments of $19 million with an additional unrealized loss of $5 million for the nine months ended September 30, 2018 and $21 million for the year ended December 31, 2018.
Dominion Energy sponsors pension and other postretirement employee benefit plans that hold investments in trusts to fund employee benefit payments. Virginia Power and Dominion Energy Gas employees participate in these plans. Differences between actual and expected returns on plan assets are accumulated and amortized during future periods. As such, any investment-related declines in these trusts will result in future increases in the net periodic cost recognized for employee benefit plans and will be included in the determination of the amount of cash to be contributed to the employee benefit plans.
ITEM 4. CONTROLS AND PROCEDURES
Senior management of each of Dominion Energy, Virginia Power and Dominion Energy Gas, including Dominion Energy, Virginia Power and Dominion Energy Gas’ CEO and CFO, evaluated the effectiveness of each of their respective company’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation process, each of Dominion Energy, Virginia Power and Dominion Energy Gas’ CEO and CFO have concluded that each of their respective company’s disclosure controls and procedures are effective.
There were no changes that occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect Dominion Energy, Virginia Power or Dominion Energy Gas’ internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Companies are alleged to be in violation or in default under orders, statutes, rules or regulations relating to the environment, compliance plans imposed upon or agreed to by the Companies, or permits issued by various local, state and/or federal agencies for the construction or operation of facilities. Administrative proceedings may also be pending on these matters. In addition, in the ordinary course of business, the Companies and their subsidiaries are involved in various legal proceedings.
See the following for discussions on various legal, environmental and other regulatory proceedings to which the Companies are a party, which information is incorporated herein by reference:
• |
Notes 3, 13 and 22 to the Consolidated Financial Statements and Future Issues and Other Matters in MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018. |
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Notes 13 and 17 to the Consolidated Financial Statements in the Companies’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. |
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Notes 13 and 18 to the Consolidated Financial Statements in the Companies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2019. |
• |
Notes 13 and 18 to the Consolidated Financial Statements in this report. |
ITEM 1A. RISK FACTORS
The Companies’ businesses are influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond the Companies’ control. A number of these risk factors have been identified in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018, which should be taken into consideration when reviewing the information contained in this report. There have been no material changes with regard to the risk factors previously disclosed in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement or projection contained in this report, see Forward-Looking Statements in MD&A in this report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Dominion Energy
ISSUER PURCHASES OF EQUITY SECURITIES
Period |
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Total Number of Shares (or Units) Purchased(1) |
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Average Price Paid per Share (or Unit)(2) |
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Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |
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Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased under the Plans or Programs(3) |
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7/1/19-7/31/19 |
|
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2,002 |
|
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$ |
77.47 |
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|
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— |
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19,629,059 shares/ $1.18 billion |
8/1/19-8/31/19 |
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146 |
|
|
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77.05 |
|
|
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— |
|
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19,629,059 shares/ $1.18 billion |
9/1/19-9/30/19 |
|
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5,613 |
|
|
|
78.49 |
|
|
|
— |
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19,629,059 shares/ $1.18 billion |
Total |
|
|
7,761 |
|
|
$ |
78.20 |
|
|
|
— |
|
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19,629,059 shares/ $1.18 billion |
(1) |
In July, August and September 2019, 2,002 shares, 146 shares and 5,613 shares, respectively, were tendered by employees to satisfy tax withholding obligations on vested restricted stock. |
(2) |
Represents the weighted-average price paid per share. |
(3) |
The remaining repurchase authorization is pursuant to repurchase authority granted by the Dominion Energy Board of Directors in February 2005, as modified in June 2007. The aggregate authorization granted by the Dominion Energy Board of Directors was 86 million shares (as adjusted to reflect a two-for-one stock split distributed in November 2007) not to exceed $4 billion. |
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ITEM 6. EXHIBITS
Exhibit Number |
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Description |
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Dominion Energy |
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Virginia Power |
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Dominion Energy Gas |
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3.1.a |
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X |
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3.1.b |
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3.1.c |
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X |
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3.1.d |
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X |
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3.2.a |
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X |
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3.2.b |
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X |
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3.2.c |
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4.1 |
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Dominion Energy, Inc., Virginia Electric and Power Company and Dominion Energy Gas Holdings, LLC agree to furnish to the Securities and Exchange Commission upon request any other instrument with respect to long-term debt as to which the total amount of securities authorized does not exceed 10% of any of their total consolidated assets. |
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X |
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X |
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X |
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128
Exhibit Number |
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Description |
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Dominion Energy |
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Virginia Power |
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Dominion Energy Gas |
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31.e |
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X |
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31.f |
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X |
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32.a |
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X |
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32.b |
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X |
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32.c |
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X |
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99 |
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Condensed consolidated earnings statements (filed herewith). |
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X |
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X |
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X |
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101 |
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The following financial statements from Dominion Energy, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, filed on November 1, 2019, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements. The following financial statements from Virginia Electric and Power Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, filed on November 1, 2019, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Common Shareholder’s Equity (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements. The following financial statements from Dominion Energy Gas Holdings, LLC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, filed on November 1, 2019, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements. |
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X |
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X |
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X |
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104 |
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Cover Page Interactive Data File formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101. |
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X |
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X |
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X |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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DOMINION ENERGY, INC. Registrant |
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November 1, 2019 |
/s/ Michele L. Cardiff |
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Michele L. Cardiff Vice President, Controller and Chief Accounting Officer |
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VIRGINIA ELECTRIC AND POWER COMPANY Registrant |
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November 1, 2019 |
/s/ Michele L. Cardiff |
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Michele L. Cardiff Vice President, Controller and Chief Accounting Officer |
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DOMINION ENERGY GAS HOLDINGS, LLC Registrant |
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November 1, 2019 |
/s/ Michele L. Cardiff |
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Michele L. Cardiff Vice President, Controller and Chief Accounting Officer |
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