Income Taxes

9 Months Ended

Sep. 30, 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
Nine Months Ended September 30,	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		3.3			3.9			4.4			4.6
Investment tax credits		(1.2	)		(1.5	)		(0.8	)		(0.7	)
Production tax credits		(2.8	)		(0.6	)		(3.0	)		(0.9	)
Reversal of excess deferred income taxes		(2.4	)		(2.6	)		(1.8	)		(2.6	)
Changes in state deferred taxes associated    with assets held for sale		—			1.3			—			—
AFUDC - equity		(0.6	)		(0.1	)		(0.6	)		—
Other, net		(0.4	)		(0.8	)		0.3			(0.3	)
Effective tax rate		16.9	%		20.6	%		19.5	%		21.1	%

The IRA created a nuclear production tax credit for electricity produced and sold beginning in 2024. The amount of the credit to be realized, if any, is a function of annual qualified production levels and gross receipts determined for each of the Companies’ nuclear units that cannot be fully determined until the completion of the calendar year. For the nine months ended September 30, 2024, Virginia Power recorded a $53 million tax benefit which represents a prorated portion of the estimated net realizable value of the nuclear production tax credit. The ultimate nuclear production tax credit realized by the Companies could vary significantly based on actual market prices, qualifying production and/or final computational U.S. Treasury guidance.

Dominion Energy’s effective tax rate for the nine months ended September 30, 2023, includes a net income tax expense of $29 million associated with the remeasurement of consolidated state deferred taxes as a result of the East Ohio, PSNC and Questar Gas Transactions and the sale of Dominion Energy's 50% noncontrolling partnership interest in Cove Point. See Notes 3 and 10 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.

As of September 30, 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 $22 million and $1.3 billion for the nine months ended September 30, 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 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 a tax benefit of $52 million for the nine months ended September 30, 2024, including the reversal of $841 million of the deferred tax liabilities associated with the East Ohio, Questar Gas and PSNC Transactions previously established during 2023 and 2024. See Note 3 for additional information.