Income Taxes

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

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
Three Months Ended March 31,	2024			2023			2024			2023
U.S. statutory rate		21.0	%		21.0	%		21.0	%		21.0	%
Increases (reductions) resulting from:
State taxes, net of federal benefit		3.4			3.8			4.4			4.6
Investment tax credits		(1.3	)		(1.1	)		(0.7	)		(0.8	)
Production tax credits		(1.0	)		(0.4	)		(0.9	)		(0.7	)
Reversal of excess deferred income taxes		(2.1	)		(2.0	)		(1.7	)		(2.7	)
AFUDC - equity		(0.7	)		(0.1	)		(0.7	)		0.2
Other, net		0.1			(1.1	)		0.2			(0.2	)
Effective tax rate		19.4	%		20.1	%		21.6	%		21.4	%

The IRA created a nuclear production tax credit for electricity produced and sold starting in 2024. The Companies did not record these potential tax benefits for the three months ended March 31, 2024 given computational uncertainty (in part from the absence of U.S. Treasury guidance) and market pricing volatility. Depending on future developments, 2024 nuclear production tax credits could have a material benefit to the Companies’ results of operations and/or cash flows.

As of March 31, 2024, there have been no material changes in the Companies’ unrecognized tax benefits or possible changes that could reasonably be expected to occur during the next twelve months. See Note 5 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2023, for a discussion of these unrecognized tax benefits.

Discontinued operations

Income tax expense reflected in discontinued operations is $51 million and $56 million for the three months ended March 31, 2024 and 2023, respectively. Dominion Energy entered into agreements for the East Ohio, PSNC and Questar Gas Transactions in September 2023, each of which was or will be treated as a stock sale for income tax purposes. During 2023 in connection with the pending sales, Dominion Energy recorded a charge of $825 million to establish deferred tax liabilities to reflect the excess of financial reporting basis over tax basis in stock of the entities to be sold. See Note 3 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2023, for a discussion of these transactions.

Dominion Energy recorded tax expense of $6 million in the first quarter of 2024, including the reversal of $29 million of these previously established deferred tax liabilities associated with East Ohio through income tax expense. Following the internal reorganization discussed in Note 3 and upon closing of the East Ohio Transaction, Dominion Energy recorded a tax benefit of $5 million, including the reversal of $462 million of these previously established deferred tax liabilities associated with Questar Gas, Wexpro and related affiliates through income tax expense.

In addition, Dominion Energy recorded a tax benefit of $22 million to establish a deferred tax asset reflecting the excess of tax basis over financial reporting basis for Questar Gas, Wexpro and related affiliates. These deferred taxes will reverse upon closing of the Questar Gas Transaction, which is expected to occur in the second quarter of 2024.