UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20192020
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number |
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GAS HOLDINGS, LLC |
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| 120 Tredegar Street Richmond, Virginia 23219 (804) 819-2000 |
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State or other jurisdiction of incorporation or organization of the registrants: Virginia
Securities registered pursuant to Section 12(b) of the Act:
Registrant | Trading Symbol | Title of Each Class | Name of Each Exchange on Which Registered | |
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HOLDINGS, LLC |
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| 2014 Series C 4.6% Senior Notes | New York Stock Exchange
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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. Yes ☒ No ☐ Virginia Electric and Power Company Yes ☒ No ☐
Dominion Energy Gas Holdings, LLC Yes ☒ No ☐
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. Yes ☒ No ☐ Virginia Electric and Power Company Yes ☒ No ☐
Dominion Energy Gas Holdings, LLC Yes ☒ No ☐
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,” “non-accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Dominion Energy, Inc.
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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 | ☐ |
| Accelerated filer | ☐ | Emerging growth company | ☐ |
Non-accelerated filer | ☒ |
| 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
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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 ☐ No ☒ Virginia Electric and Power Company Yes ☐ No ☒
Dominion Energy Gas Holdings, LLC Yes ☐ No ☒
At October 11, 2019, the latest practicable date for determination, Dominion Energy, Inc. had 823,093,381 shares of common stock outstanding and Virginia Electric and Power Company had 274,723 shares of common stock outstanding. Dominion Energy, Inc. is the sole holder of Virginia Electric and Power Company’s common stock. Dominion Energy, Inc. holds allAll of the membership interests of Dominion Energy Gas Holdings, LLC.
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 DominionEastern Energy Gas Holdings, LLC make no representationsis held by its indirect parent company, Berkshire Hathaway Energy Company, as to the information relating to Dominion Energy, Inc.’s other operations.of November 12, 2020.
VIRGINIA ELECTRIC AND POWER COMPANY AND DOMINION
EASTERN ENERGY GAS HOLDINGS, LLC MEETMEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND AREIS FILING THIS FORM 10-Q UNDER THE REDUCED DISCLOSURE FORMAT.
COMBINED INDEX
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Item 1. |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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| 35 | |
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Item 1. |
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Item 1A. |
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Item 6. |
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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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2017 Tax Reform Act |
| 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 |
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AFUDC |
| Allowance for funds used during construction |
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AOCI |
| Accumulated other comprehensive income (loss) |
ARO |
| Asset retirement obligation |
Atlantic Coast Pipeline |
| Atlantic Coast Pipeline, LLC, a limited liability company owned by Dominion Energy and Duke |
Atlantic Coast Pipeline Project |
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Brookfield |
| Brookfield Super-Core Infrastructure Partners, an infrastructure fund managed by Brookfield Asset Management Inc. |
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CAA |
| Clean Air Act |
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CERCLA |
| Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as Superfund |
CFO |
| Chief Financial Officer |
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Cove Point |
| Cove Point LNG, LP (formerly known as Dominion Energy Cove Point LNG, |
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CWA |
| Clean Water Act |
DCP | The legal entity, CPMLP Holdings Company, LLC (formerly known as Dominion Cove Point, LLC), one or more of its consolidated subsidiaries, or the entirety of CPMLP Holdings Company, LLC and its consolidated subsidiaries | |
DECG | Carolina Gas Transmission, LLC (formerly known as Dominion Energy Carolina Gas Transmission, LLC) | |
DECGS | Carolina Gas Services, Inc. (formerly known as Dominion Energy Carolina Gas Services, Inc.) | |
DEQPS |
| Dominion Energy |
DES |
| Dominion Energy Services, Inc. |
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DETI |
| Eastern Gas Transmission and Storage, Inc. (formerly known as Dominion Energy Transmission, Inc.) |
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| Eastern Gathering and Processing, Inc. (formerly known as Dominion |
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Dominion Energy |
| The legal entity, Dominion Energy, Inc., one or more of its consolidated subsidiaries (other than |
Dominion Energy Gas Restructuring |
| The |
Dominion Energy Midstream |
| The legal entity, Northeast Midstream Partners, LP (formerly known as Dominion Energy Midstream Partners, |
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Dominion Energy Questar | The legal entity, Dominion Energy Questar | |
Dominion Energy Questar Pipeline |
| 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 |
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East Ohio |
| The East Ohio Gas Company, doing business as Dominion Energy Ohio |
Eastern |
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EPA |
| U.S. Environmental Protection Agency |
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FERC |
| Federal Energy Regulatory Commission |
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GAAP |
| U.S. generally accepted accounting principles |
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GHG |
| Greenhouse gas |
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Iroquois |
| Iroquois Gas Transmission System, L.P. |
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Liquefaction Facility |
| A natural gas export/liquefaction facility at the Cove Point LNG Facility |
LNG |
| Liquefied natural gas |
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MD&A |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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NSPS |
| New Source Performance Standards |
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SEC |
| U.S. Securities and Exchange Commission |
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VEBA |
| Voluntary |
VIE |
| Variable interest entity |
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VOC |
| Volatile organic compounds |
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White River Hub |
| White River Hub, LLC |
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4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOMINION
EASTERN ENERGY INC.GAS HOLDINGS, LLC
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) |
| $ | 4,269 |
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| $ | 3,451 |
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| $ | 12,097 |
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| $ | 10,005 |
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Operating Expenses |
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Electric fuel and other energy-related purchases |
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| 774 |
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| 761 |
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| 2,283 |
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| 2,128 |
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Purchased electric capacity |
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| 11 |
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| 50 |
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| 74 |
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| 87 |
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Purchased gas |
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| 153 |
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| 5 |
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| 1,110 |
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| 409 |
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Other operations and maintenance |
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| 1,010 |
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| 770 |
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| 3,295 |
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| 2,438 |
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Depreciation, depletion and amortization |
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| 679 |
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| 526 |
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| 1,991 |
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| 1,487 |
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Other taxes |
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| 243 |
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| 177 |
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| 819 |
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| 542 |
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Impairment of assets and other charges |
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| 85 |
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| 12 |
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| 1,232 |
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| 147 |
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Total operating expenses |
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| 2,955 |
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| 2,301 |
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| 10,804 |
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| 7,238 |
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Income from operations |
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| 1,314 |
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| 1,150 |
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| 1,293 |
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| 2,767 |
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Other income |
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| 173 |
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| 373 |
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| 653 |
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| 658 |
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Interest and related charges |
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| 451 |
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| 378 |
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| 1,372 |
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| 1,053 |
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Income from operations including noncontrolling interests before income tax expense |
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| 1,036 |
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| 1,145 |
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| 574 |
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| 2,372 |
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Income tax expense |
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| 51 |
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| 262 |
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| 208 |
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| 485 |
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Net Income Including Noncontrolling Interests |
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| 985 |
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| 883 |
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| 366 |
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| 1,887 |
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Noncontrolling Interests |
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| 10 |
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| 29 |
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| 17 |
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| 81 |
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Net Income Attributable to Dominion Energy |
| $ | 975 |
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| $ | 854 |
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| $ | 349 |
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| $ | 1,806 |
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Earnings Per Common Share |
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Net income attributable to Dominion Energy - Basic |
| $ | 1.19 |
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| $ | 1.31 |
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| $ | 0.42 |
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| $ | 2.77 |
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Net income attributable to Dominion Energy - Diluted |
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| 1.17 |
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| 1.30 |
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| 0.39 |
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| 2.77 |
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| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
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| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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(millions) |
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Operating Revenue(1) |
| $ | 531 |
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| $ | 502 |
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| $ | 1,597 |
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| $ | 1,598 |
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Operating Expenses |
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Purchased gas(1) |
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| 14 |
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| 3 |
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| 22 |
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| 12 |
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Other energy-related purchases |
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| — |
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| 1 |
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| 1 |
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| 2 |
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Other operations and maintenance: |
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Affiliated suppliers |
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| 31 |
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| 32 |
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| 110 |
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| 125 |
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Other |
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| 105 |
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| 134 |
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| 341 |
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| 427 |
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Depreciation and amortization |
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| 95 |
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| 92 |
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| 282 |
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| 274 |
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Other taxes |
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| 40 |
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| 40 |
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| 117 |
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| 118 |
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Impairment of assets and other charges (benefits) |
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| (19 | ) |
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| — |
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| 463 |
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| 13 |
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Gains on sales of assets |
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| — |
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| (2 | ) |
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| — |
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| (2 | ) |
Total operating expenses |
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| 266 |
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| 300 |
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| 1,336 |
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| 969 |
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Income from continuing operations |
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| 265 |
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| 202 |
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| 261 |
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| 629 |
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Earnings from equity method investees |
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| 7 |
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| 8 |
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| 30 |
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| 30 |
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Other income(1) |
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| 22 |
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| 46 |
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| 117 |
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| 131 |
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Interest and related charges(1) |
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| 186 |
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| 88 |
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| 294 |
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| 261 |
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Income from continuing operations before income tax expense |
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| 108 |
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| 168 |
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| 114 |
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| 529 |
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Income tax expense (benefit) |
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| (10 | ) |
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| 38 |
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| (40 | ) |
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| 104 |
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Net income from continuing operations |
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| 118 |
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| 130 |
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| 154 |
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| 425 |
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Net income from discontinued operations |
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| 0 |
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| 45 |
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| 0 |
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| 125 |
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Net income including noncontrolling interests |
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| 118 |
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| 175 |
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| 154 |
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| 550 |
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Noncontrolling interests |
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| 32 |
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| 24 |
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| 97 |
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| 90 |
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Net Income Attributable to Eastern Energy |
| $ | 86 |
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| $ | 151 |
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| $ | 57 |
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| $ | 460 |
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(1) | See Note |
The accompanying notes are an integral part of DominionEastern Energy’s Consolidated Financial Statements.
5
DOMINIONEASTERN ENERGY INC.GAS HOLDINGS, LLC
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 |
| $ | 985 |
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| $ | 883 |
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| $ | 366 |
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| $ | 1,887 |
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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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| (107 | ) |
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| (27 | ) |
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| (209 | ) |
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| 51 |
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Changes in unrealized net gains (losses) on investment securities(2) |
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| 8 |
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| (6 | ) |
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| 37 |
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| (24 | ) |
Changes in net unrecognized pension and other postretirement benefit costs(3) |
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| (4 | ) |
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| — |
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| 109 |
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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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| (6 | ) |
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| 30 |
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| (58 | ) |
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| 71 |
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Net realized (gains) losses on investment securities(5) |
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| (4 | ) |
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| 3 |
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| (5 | ) |
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| 4 |
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Net pension and other postretirement benefit costs(6) |
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| 20 |
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| 18 |
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| 50 |
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| 60 |
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Changes in other comprehensive income from equity method investees(7) |
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| (1 | ) |
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| — |
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| (1 | ) |
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| 1 |
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Total other comprehensive income (loss) |
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| (94 | ) |
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| 18 |
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| (77 | ) |
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| 163 |
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Comprehensive income including noncontrolling interests |
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| 891 |
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| 901 |
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| 289 |
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| 2,050 |
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Comprehensive income attributable to noncontrolling interests |
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| 10 |
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| 29 |
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| 17 |
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| 82 |
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Comprehensive income attributable to Dominion Energy |
| $ | 881 |
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| $ | 872 |
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| $ | 272 |
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| $ | 1,968 |
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| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
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| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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(millions) |
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Net income including noncontrolling interests |
| $ | 118 |
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| $ | 175 |
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| $ | 154 |
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| $ | 550 |
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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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| 12 |
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| (36 | ) |
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| (79 | ) |
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| (87 | ) |
Changes in unrecognized pension and other postretirement benefits(2) |
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| (4 | ) |
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| (1 | ) |
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| (4 | ) |
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| 28 |
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Amounts reclassified to net income (loss): |
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Net derivative (gains) losses-hedging activities(3) |
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| 99 |
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| 9 |
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| 103 |
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| 10 |
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Net pension and other postretirement benefit costs(4) |
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| 0 |
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| 1 |
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| 3 |
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| 4 |
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Total other comprehensive income (loss) |
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| 107 |
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| (27 | ) |
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| 23 |
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| (45 | ) |
Comprehensive income including noncontrolling interests |
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| 225 |
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| 148 |
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| 177 |
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| 505 |
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Comprehensive income attributable to noncontrolling interests |
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| 32 |
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| 24 |
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| 97 |
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| 89 |
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Comprehensive income attributable to Eastern Energy |
| $ | 193 |
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| $ | 124 |
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| $ | 80 |
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| $ | 416 |
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(1) | Net of |
(2) | Net of |
(3) | Net of |
(4) | Net of |
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The accompanying notes are an integral part of DominionEastern Energy’s Consolidated Financial Statements.
6
DOMINIONEASTERN ENERGY INC.GAS HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
| September 30, 2019 |
|
| December 31, 2018(1) |
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| September 30, 2020 |
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| December 31, 2019(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 |
| $ | 378 |
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| $ | 268 |
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| $ | 40 |
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| $ | 27 |
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Customer receivables (less allowance for doubtful accounts of $19 and $14) |
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| 1,972 |
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|
| 1,749 |
| ||||||||
Other receivables (less allowance for doubtful accounts of $3 and $4)(2) |
|
| 363 |
|
|
| 331 |
| ||||||||
Customer receivables (less allowance for doubtful accounts of $7 and $2) |
|
| 155 |
|
|
| 173 |
| ||||||||
Other receivables(2) |
|
| 3 |
|
|
| 26 |
| ||||||||
Affiliated receivables |
|
| 152 |
|
|
| 362 |
| ||||||||
Affiliated notes receivable |
|
| 240 |
|
|
| 0 |
| ||||||||
Inventories |
|
| 1,800 |
|
|
| 1,418 |
|
|
| 128 |
|
|
| 122 |
|
Regulatory assets |
|
| 966 |
|
|
| 496 |
| ||||||||
Derivative assets |
|
| 55 |
|
|
| 223 |
| ||||||||
Prepayments |
|
| 338 |
|
|
| 265 |
|
|
| 90 |
|
|
| 73 |
|
Assets held for sale |
|
| 228 |
|
|
| — |
| ||||||||
Gas imbalances(2) |
|
| 22 |
|
|
| 52 |
| ||||||||
Other |
|
| 169 |
|
|
| 411 |
|
|
| 26 |
|
|
| 23 |
|
Total current assets |
|
| 6,269 |
|
|
| 5,161 |
|
|
| 856 |
|
|
| 858 |
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuclear decommissioning trust funds |
|
| 5,860 |
|
|
| 4,938 |
| ||||||||
Affiliated notes receivable |
|
| 0 |
|
|
| 3,437 |
| ||||||||
Investment in equity method affiliates |
|
| 1,528 |
|
|
| 1,278 |
|
|
| 279 |
|
|
| 312 |
|
Other |
|
| 369 |
|
|
| 344 |
| ||||||||
Total investments |
|
| 7,757 |
|
|
| 6,560 |
|
|
| 279 |
|
|
| 3,749 |
|
Property, Plant and Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
| 96,122 |
|
|
| 76,578 |
|
|
| 14,999 |
|
|
| 15,166 |
|
Accumulated depreciation, depletion and amortization |
|
| (28,144 | ) |
|
| (22,018 | ) | ||||||||
Accumulated depreciation and amortization |
|
| (3,773 | ) |
|
| (3,538 | ) | ||||||||
Total property, plant and equipment, net |
|
| 67,978 |
|
|
| 54,560 |
|
|
| 11,226 |
|
|
| 11,628 |
|
Deferred Charges and Other Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
| 8,986 |
|
|
| 6,410 |
|
|
| 1,471 |
|
|
| 1,471 |
|
Intangible assets, net |
|
| 773 |
|
|
| 670 |
| ||||||||
Regulatory assets |
|
| 7,669 |
|
|
| 2,676 |
| ||||||||
Operating lease assets |
|
| 455 |
|
|
| — |
| ||||||||
Pension and other postretirement benefit assets |
|
| 1,610 |
|
|
| 1,279 |
| ||||||||
Other |
|
| 862 |
|
|
| 598 |
| ||||||||
Other(2) |
|
| 1,115 |
|
|
| 1,078 |
| ||||||||
Total deferred charges and other assets |
|
| 20,355 |
|
|
| 11,633 |
|
|
| 2,586 |
|
|
| 2,549 |
|
Total assets |
| $ | 102,359 |
|
| $ | 77,914 |
|
| $ | 14,947 |
|
| $ | 18,784 |
|
(1) |
|
(2) | See Note |
The accompanying notes are an integral part of DominionEastern Energy’s Consolidated Financial Statements.
7
DOMINIONEASTERN ENERGY INC.GAS HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS—(Continued)
(Unaudited)
|
| September 30, 2019 |
|
| December 31, 2018(1) |
|
| September 30, 2020 |
|
| December 31, 2019(1) |
| ||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities due within one year |
| $ | 4,824 |
|
| $ | 3,624 |
|
| $ | 1,199 |
|
| $ | 700 |
|
Credit facility borrowings |
|
| — |
|
|
| 73 |
| ||||||||
Short-term debt |
|
| 2,420 |
|
|
| 334 |
|
|
| 0 |
|
|
| 62 |
|
Accounts payable |
|
| 791 |
|
|
| 914 |
|
|
| 81 |
|
|
| 59 |
|
Payables to affiliates |
|
| 97 |
|
|
| 82 |
| ||||||||
Affiliated current borrowings |
|
| 7 |
|
|
| 260 |
| ||||||||
Accrued interest, payroll and taxes |
|
| 1,263 |
|
|
| 836 |
|
|
| 160 |
|
|
| 128 |
|
Regulatory liabilities |
|
| 547 |
|
|
| 356 |
| ||||||||
Liabilities held for sale |
|
| 85 |
|
|
| — |
| ||||||||
Derivative liabilities |
|
| 186 |
|
|
| 33 |
| ||||||||
Other(2) |
|
| 2,261 |
|
|
| 1,510 |
|
|
| 159 |
|
|
| 128 |
|
Total current liabilities |
|
| 12,191 |
|
|
| 7,647 |
|
|
| 1,889 |
|
|
| 1,452 |
|
Long-Term Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
| 29,838 |
|
|
| 26,328 |
|
|
| 4,337 |
|
|
| 4,821 |
|
Junior subordinated notes |
|
| 3,797 |
|
|
| 3,430 |
| ||||||||
Remarketable subordinated notes |
|
| — |
|
|
| 1,386 |
| ||||||||
Finance leases |
|
| 4 |
|
|
| 5 |
| ||||||||
Total long-term debt |
|
| 33,635 |
|
|
| 31,144 |
|
|
| 4,341 |
|
|
| 4,826 |
|
Deferred Credits and Other Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
| 6,198 |
|
|
| 5,116 |
| ||||||||
Regulatory liabilities |
|
| 10,926 |
|
|
| 6,840 |
| ||||||||
Asset retirement obligations |
|
| 5,020 |
|
|
| 2,250 |
| ||||||||
Operating lease liabilities |
|
| 394 |
|
|
| — |
| ||||||||
Pension and other postretirement benefit liability |
|
| 2,571 |
|
|
| 2,328 |
| ||||||||
Deferred income taxes |
|
| 1,189 |
|
|
| 1,288 |
| ||||||||
Other |
|
| 1,467 |
|
|
| 541 |
|
|
| 978 |
|
|
| 989 |
|
Total deferred credits and other liabilities |
|
| 26,576 |
|
|
| 17,075 |
|
|
| 2,167 |
|
|
| 2,277 |
|
Total liabilities |
|
| 72,402 |
|
|
| 55,866 |
|
|
| 8,397 |
|
|
| 8,555 |
|
Commitments and Contingencies (see Note 18) |
|
|
|
|
|
|
|
| ||||||||
Commitments and Contingencies (see Note 14) |
|
|
|
|
|
|
|
| ||||||||
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock(3) |
|
| 1,596 |
|
|
| — |
| ||||||||
Common stock – no par(4) |
|
| 22,131 |
|
|
| 12,588 |
| ||||||||
Retained earnings |
|
| 7,336 |
|
|
| 9,219 |
| ||||||||
Membership interests |
|
| 5,343 |
|
|
| 9,031 |
| ||||||||
Accumulated other comprehensive loss |
|
| (1,777 | ) |
|
| (1,700 | ) |
|
| (164 | ) |
|
| (187 | ) |
Total shareholders' equity |
|
| 29,286 |
|
|
| 20,107 |
| ||||||||
Total members' equity |
|
| 5,179 |
|
|
| 8,844 |
| ||||||||
Noncontrolling interests |
|
| 671 |
|
|
| 1,941 |
|
|
| 1,371 |
|
|
| 1,385 |
|
Total equity |
|
| 29,957 |
|
|
| 22,048 |
|
|
| 6,550 |
|
|
| 10,229 |
|
Total liabilities and equity |
| $ | 102,359 |
|
| $ | 77,914 |
|
| $ | 14,947 |
|
| $ | 18,784 |
|
(1) |
|
(2) | See Note |
|
|
|
|
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
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 |
|
| — |
|
| $ | — |
|
|
| 654 |
|
| $ | 10,782 |
|
| $ | 8,820 |
|
| $ | (1,538 | ) |
| $ | 18,064 |
|
| $ | 1,972 |
|
| $ | 20,036 |
|
Net income including noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 854 |
|
|
|
|
|
|
| 854 |
|
|
| 29 |
|
|
| 883 |
|
Issuance of stock |
|
|
|
|
|
|
|
|
|
| 1 |
|
|
| 75 |
|
|
|
|
|
|
|
|
|
|
| 75 |
|
|
|
|
|
|
| 75 |
|
Stock awards (net of change in unearned compensation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5 |
|
|
|
|
|
|
|
|
|
|
| 5 |
|
|
|
|
|
|
| 5 |
|
Dividends ($0.8350 per common share) and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (546 | ) |
|
|
|
|
|
| (546 | ) |
|
| (45 | ) |
|
| (591 | ) |
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18 |
|
|
| 18 |
|
|
|
|
|
|
| 18 |
|
September 30, 2018 |
|
| — |
|
| $ | — |
|
|
| 655 |
|
| $ | 10,862 |
|
| $ | 9,128 |
|
| $ | (1,520 | ) |
| $ | 18,470 |
|
| $ | 1,956 |
|
| $ | 20,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019 |
|
| 2 |
|
| $ | 1,596 |
|
|
| 803 |
|
| $ | 20,660 |
|
| $ | 7,124 |
|
| $ | (1,683 | ) |
| $ | 27,697 |
|
| $ | 684 |
|
| $ | 28,381 |
|
Net income including noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 975 |
|
|
|
|
|
|
| 975 |
|
|
| 10 |
|
|
| 985 |
|
Issuance of stock |
|
|
|
|
|
|
|
|
|
| 20 |
|
|
| 1,477 |
|
|
|
|
|
|
|
|
|
|
| 1,477 |
|
|
|
|
|
|
| 1,477 |
|
Stock awards (net of change in unearned compensation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7 |
|
|
|
|
|
|
|
|
|
|
| 7 |
|
|
|
|
|
|
| 7 |
|
Preferred stock dividends ($4.375 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7 | ) |
|
|
|
|
|
| (7 | ) |
|
|
|
|
|
| (7 | ) |
Common stock dividends ($0.9175 per share) and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (755 | ) |
|
|
|
|
|
| (755 | ) |
|
| (23 | ) |
|
| (778 | ) |
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (94 | ) |
|
| (94 | ) |
|
|
|
|
|
| (94 | ) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (13 | ) |
|
| (1 | ) |
|
|
|
|
|
| (14 | ) |
|
|
|
|
|
| (14 | ) |
September 30, 2019 |
|
| 2 |
|
| $ | 1,596 |
|
|
| 823 |
|
| $ | 22,131 |
|
| $ | 7,336 |
|
| $ | (1,777 | ) |
| $ | 29,286 |
|
| $ | 671 |
|
| $ | 29,957 |
|
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
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 |
|
| — |
|
| $ | — |
|
|
| 645 |
|
| $ | 9,865 |
|
| $ | 7,936 |
|
| $ | (659 | ) |
| $ | 17,142 |
|
| $ | 2,228 |
|
| $ | 19,370 |
|
Cumulative-effect of changes in accounting principles |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (127 | ) |
|
| 1,029 |
|
|
| (1,023 | ) |
|
| (121 | ) |
|
| 127 |
|
|
| 6 |
|
Net income including noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,806 |
|
|
|
|
|
|
| 1,806 |
|
|
| 81 |
|
|
| 1,887 |
|
Issuance of stock |
|
|
|
|
|
|
|
|
|
| 10 |
|
|
| 737 |
|
|
|
|
|
|
|
|
|
|
| 737 |
|
|
|
|
|
|
| 737 |
|
Sale of Dominion Energy Midstream common units - net of offering costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| 4 |
|
|
| 4 |
|
Remeasurement of noncontrolling interest in Dominion Energy Midstream |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 375 |
|
|
|
|
|
|
|
|
|
|
| 375 |
|
|
| (375 | ) |
|
| — |
|
Stock awards (net of change in unearned compensation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 17 |
|
|
|
|
|
|
|
|
|
|
| 17 |
|
|
|
|
|
|
| 17 |
|
Dividends ($2.505 per common share) and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,635 | ) |
|
|
|
|
|
| (1,635 | ) |
|
| (110 | ) |
|
| (1,745 | ) |
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 162 |
|
|
| 162 |
|
|
| 1 |
|
|
| 163 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5 | ) |
|
| (8 | ) |
|
|
|
|
|
| (13 | ) |
|
|
|
|
|
| (13 | ) |
September 30, 2018 |
|
| — |
|
| $ | — |
|
|
| 655 |
|
| $ | 10,862 |
|
| $ | 9,128 |
|
| $ | (1,520 | ) |
| $ | 18,470 |
|
| $ | 1,956 |
|
| $ | 20,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
| — |
|
| $ | — |
|
|
| 681 |
|
| $ | 12,588 |
|
| $ | 9,219 |
|
| $ | (1,700 | ) |
| $ | 20,107 |
|
| $ | 1,941 |
|
| $ | 22,048 |
|
Net income including noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 349 |
|
|
|
|
|
|
| 349 |
|
|
| 17 |
|
|
| 366 |
|
Issuance of stock |
|
| 2 |
|
|
| 1,596 |
|
|
| 24 |
|
|
| 1,802 |
|
|
|
|
|
|
|
|
|
|
| 3,398 |
|
|
|
|
|
|
| 3,398 |
|
Stock purchase contract component of 2019 Equity Units(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (264 | ) |
|
|
|
|
|
|
|
|
|
| (264 | ) |
|
|
|
|
|
| (264 | ) |
Acquisition of SCANA |
|
|
|
|
|
|
|
|
|
| 96 |
|
|
| 6,818 |
|
|
|
|
|
|
|
|
|
|
| 6,818 |
|
|
|
|
|
|
| 6,818 |
|
Acquisition of public interest in Dominion Energy Midstream |
|
|
|
|
|
|
|
|
|
| 22 |
|
|
| 1,181 |
|
|
|
|
|
|
|
|
|
|
| 1,181 |
|
|
| (1,221 | ) |
|
| (40 | ) |
Stock awards (net of change in unearned compensation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19 |
|
|
|
|
|
|
|
|
|
|
| 19 |
|
|
|
|
|
|
| 19 |
|
Preferred stock dividends ($5.104 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (8 | ) |
|
|
|
|
|
| (8 | ) |
|
|
|
|
|
| (8 | ) |
Common stock dividends ($2.753 per share) and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,224 | ) |
|
|
|
|
|
| (2,224 | ) |
|
| (66 | ) |
|
| (2,290 | ) |
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (77 | ) |
|
| (77 | ) |
|
|
|
|
|
| (77 | ) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (13 | ) |
|
|
|
|
|
|
|
|
|
| (13 | ) |
|
|
|
|
|
| (13 | ) |
September 30, 2019 |
|
| 2 |
|
| $ | 1,596 |
|
|
| 823 |
|
| $ | 22,131 |
|
| $ | 7,336 |
|
| $ | (1,777 | ) |
| $ | 29,286 |
|
| $ | 671 |
|
| $ | 29,957 |
|
|
|
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
DOMINION ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, |
| 2019 |
|
| 2018 |
| ||
(millions) |
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
Net income including noncontrolling interests |
| $ | 366 |
|
| $ | 1,887 |
|
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization (including nuclear fuel) |
|
| 2,235 |
|
|
| 1,706 |
|
Deferred income taxes and investment tax credits |
|
| 112 |
|
|
| 486 |
|
Provision for refunds and rate credits to electric utility customers |
|
| 936 |
|
|
| 77 |
|
Impairment of assets and other charges |
|
| 982 |
|
|
| 139 |
|
Charge related to a voluntary retirement program |
|
| 384 |
|
|
| — |
|
Gains on sales of assets and equity method investments |
|
| (20 | ) |
|
| (196 | ) |
Net gains on nuclear decommissioning trust funds and other investments |
|
| (418 | ) |
|
| (208 | ) |
Charge associated with future ash pond and landfill closure costs |
|
| — |
|
|
| 81 |
|
Revision to future ash pond and landfill closure costs |
|
| (113 | ) |
|
| — |
|
Other adjustments |
|
| (9 | ) |
|
| — |
|
Changes in: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 354 |
|
|
| 129 |
|
Inventories |
|
| (106 | ) |
|
| (37 | ) |
Deferred fuel and purchased gas costs, net |
|
| 158 |
|
|
| (226 | ) |
Prepayments |
|
| 31 |
|
|
| (81 | ) |
Accounts payable |
|
| (446 | ) |
|
| (167 | ) |
Accrued interest, payroll and taxes |
|
| (123 | ) |
|
| (14 | ) |
Customer deposits |
|
| (94 | ) |
|
| 7 |
|
Margin deposit assets and liabilities |
|
| 54 |
|
|
| (5 | ) |
Net realized and unrealized changes related to derivative activities |
|
| 1 |
|
|
| 101 |
|
Pension and other postretirement benefits |
|
| (107 | ) |
|
| (79 | ) |
Other operating assets and liabilities |
|
| (468 | ) |
|
| 111 |
|
Net cash provided by operating activities |
|
| 3,709 |
|
|
| 3,711 |
|
Investing Activities |
|
|
|
|
|
|
|
|
Plant construction and other property additions (including nuclear fuel) |
|
| (3,407 | ) |
|
| (3,111 | ) |
Cash and restricted cash acquired in the SCANA Combination |
|
| 389 |
|
|
| — |
|
Acquisition of solar development projects |
|
| (183 | ) |
|
| (108 | ) |
Proceeds from sales of securities |
|
| 1,311 |
|
|
| 1,301 |
|
Purchases of securities |
|
| (1,330 | ) |
|
| (1,364 | ) |
Proceeds from sales of assets and equity method investments |
|
| 211 |
|
|
| 200 |
|
Contributions to equity method affiliates |
|
| (187 | ) |
|
| (282 | ) |
Other |
|
| 36 |
|
|
| (5 | ) |
Net cash used in investing activities |
|
| (3,160 | ) |
|
| (3,369 | ) |
Financing Activities |
|
|
|
|
|
|
|
|
Issuance (repayment) of short-term debt, net |
|
| 1,913 |
|
|
| (363 | ) |
Issuance of short-term notes |
|
| 3,000 |
|
|
| 1,450 |
|
Repayment of short-term notes |
|
| — |
|
|
| (1,450 | ) |
Credit facility borrowings |
|
| — |
|
|
| 73 |
|
Repayment of credit facility borrowings |
|
| (113 | ) |
|
| — |
|
Issuance of long-term debt |
|
| 2,298 |
|
|
| 4,400 |
|
Repayment of long-term debt, including redemption premiums |
|
| (8,595 | ) |
|
| (3,154 | ) |
Issuance of 2019 Equity Units |
|
| 1,582 |
|
|
| — |
|
Issuance of common stock |
|
| 1,802 |
|
|
| 737 |
|
Common dividend payments |
|
| (2,224 | ) |
|
| (1,635 | ) |
Other |
|
| (163 | ) |
|
| (198 | ) |
Net cash used in financing activities |
|
| (500 | ) |
|
| (140 | ) |
Increase in cash, restricted cash and equivalents |
|
| 49 |
|
|
| 202 |
|
Cash, restricted cash and equivalents at beginning of period |
|
| 391 |
|
|
| 185 |
|
Cash, restricted cash and equivalents at end of period |
| $ | 440 |
|
| $ | 387 |
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
Significant noncash investing and financing activities:(1)(2)(3) |
|
|
|
|
|
|
|
|
Accrued capital expenditures |
| $ | 378 |
|
| $ | 197 |
|
Leases(4) |
|
| 102 |
|
|
| — |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
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) |
| $ | 2,264 |
|
| $ | 2,232 |
|
| $ | 6,167 |
|
| $ | 5,809 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric fuel and other energy-related purchases(1) |
|
| 559 |
|
|
| 648 |
|
|
| 1,691 |
|
|
| 1,747 |
|
Purchased (excess) electric capacity |
|
| (1 | ) |
|
| 50 |
|
|
| 45 |
|
|
| 87 |
|
Other operations and maintenance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliated suppliers |
|
| 74 |
|
|
| 72 |
|
|
| 287 |
|
|
| 229 |
|
Other |
|
| 379 |
|
|
| 332 |
|
|
| 1,010 |
|
|
| 1,013 |
|
Depreciation and amortization |
|
| 313 |
|
|
| 295 |
|
|
| 916 |
|
|
| 839 |
|
Other taxes |
|
| 82 |
|
|
| 79 |
|
|
| 257 |
|
|
| 241 |
|
Impairment of assets and other charges |
|
| 38 |
|
|
| — |
|
|
| 781 |
|
|
| — |
|
Total operating expenses |
|
| 1,444 |
|
|
| 1,476 |
|
|
| 4,987 |
|
|
| 4,156 |
|
Income from operations |
|
| 820 |
|
|
| 756 |
|
|
| 1,180 |
|
|
| 1,653 |
|
Other income |
|
| 15 |
|
|
| 25 |
|
|
| 68 |
|
|
| 49 |
|
Interest and related charges(1) |
|
| 138 |
|
|
| 130 |
|
|
| 408 |
|
|
| 388 |
|
Income before income tax expense |
|
| 697 |
|
|
| 651 |
|
|
| 840 |
|
|
| 1,314 |
|
Income tax expense |
|
| 95 |
|
|
| 131 |
|
|
| 118 |
|
|
| 271 |
|
Net Income |
| $ | 602 |
|
| $ | 520 |
|
| $ | 722 |
|
| $ | 1,043 |
|
|
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
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 |
| $ | 602 |
|
| $ | 520 |
|
| $ | 722 |
|
| $ | 1,043 |
|
Other comprehensive income (loss), net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred gains (losses) on derivatives-hedging activities(1) |
|
| (16 | ) |
|
| 3 |
|
|
| (34 | ) |
|
| 10 |
|
Changes in unrealized net gains (losses) on nuclear decommissioning trust funds(2) |
|
| 1 |
|
|
| — |
|
|
| 5 |
|
|
| (2 | ) |
Amounts reclassified to net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative losses-hedging activities(3) |
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
Net realized gains on nuclear decommissioning trust funds(4) |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| — |
|
Total other comprehensive income (loss) |
|
| (15 | ) |
|
| 3 |
|
|
| (29 | ) |
|
| 8 |
|
Comprehensive income |
| $ | 587 |
|
| $ | 523 |
|
| $ | 693 |
|
| $ | 1,051 |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
| September 30, 2019 |
|
| December 31, 2018(1) |
| ||
(millions) |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 29 |
|
| $ | 29 |
|
Customer receivables (less allowance for doubtful accounts of $9 at both dates) |
|
| 1,177 |
|
|
| 999 |
|
Other receivables (less allowance for doubtful accounts of $2 and $3) |
|
| 51 |
|
|
| 76 |
|
Affiliated receivables |
|
| 8 |
|
|
| 101 |
|
Inventories (average cost method) |
|
| 850 |
|
|
| 837 |
|
Other(2) |
|
| 530 |
|
|
| 529 |
|
Total current assets |
|
| 2,645 |
|
|
| 2,571 |
|
Investments |
|
|
|
|
|
|
|
|
Nuclear decommissioning trust funds |
|
| 2,738 |
|
|
| 2,369 |
|
Other |
|
| 3 |
|
|
| 3 |
|
Total investments |
|
| 2,741 |
|
|
| 2,372 |
|
Property, Plant and Equipment |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
| 46,438 |
|
|
| 44,524 |
|
Accumulated depreciation and amortization |
|
| (14,036 | ) |
|
| (14,003 | ) |
Total property, plant and equipment, net |
|
| 32,402 |
|
|
| 30,521 |
|
Deferred Charges and Other Assets |
|
|
|
|
|
|
|
|
Regulatory assets |
|
| 1,917 |
|
|
| 737 |
|
Operating lease assets |
|
| 184 |
|
|
| — |
|
Other(2) |
|
| 876 |
|
|
| 679 |
|
Total deferred charges and other assets |
|
| 2,977 |
|
|
| 1,416 |
|
Total assets |
| $ | 40,765 |
|
| $ | 36,880 |
|
|
|
|
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
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 |
| $ | 3 |
|
| $ | 350 |
|
Short-term debt |
|
| 685 |
|
|
| 314 |
|
Accounts payable |
|
| 286 |
|
|
| 339 |
|
Payables to affiliates |
|
| 138 |
|
|
| 209 |
|
Affiliated current borrowings |
|
| 9 |
|
|
| 224 |
|
Accrued interest, payroll and taxes |
|
| 321 |
|
|
| 248 |
|
Derivative liabilities(2) |
|
| 165 |
|
|
| 25 |
|
Regulatory liabilities |
|
| 180 |
|
|
| 299 |
|
Other |
|
| 867 |
|
|
| 807 |
|
Total current liabilities |
|
| 2,654 |
|
|
| 2,815 |
|
Long-Term Debt |
|
| 11,792 |
|
|
| 11,321 |
|
Deferred Credits and Other Liabilities |
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
| 2,911 |
|
|
| 3,017 |
|
Asset retirement obligations |
|
| 3,418 |
|
|
| 1,200 |
|
Regulatory liabilities |
|
| 4,978 |
|
|
| 4,647 |
|
Operating lease liabilities |
|
| 152 |
|
|
| — |
|
Other(2) |
|
| 1,310 |
|
|
| 833 |
|
Total deferred credits and other liabilities |
|
| 12,769 |
|
|
| 9,697 |
|
Total liabilities |
|
| 27,215 |
|
|
| 23,833 |
|
Commitments and Contingencies (see Note 18) |
|
|
|
|
|
|
|
|
Common Shareholder’s Equity |
|
|
|
|
|
|
|
|
Common stock – no par(3) |
|
| 5,738 |
|
|
| 5,738 |
|
Other paid-in capital |
|
| 1,113 |
|
|
| 1,113 |
|
Retained earnings |
|
| 6,740 |
|
|
| 6,208 |
|
Accumulated other comprehensive loss |
|
| (41 | ) |
|
| (12 | ) |
Total common shareholder’s equity |
|
| 13,550 |
|
|
| 13,047 |
|
Total liabilities and shareholder’s equity |
| $ | 40,765 |
|
| $ | 36,880 |
|
|
|
|
|
|
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
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 |
|
| 275 |
|
| $ | 5,738 |
|
| $ | 1,113 |
|
| $ | 5,655 |
|
| $ | (9 | ) |
| $ | 12,497 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 520 |
|
|
|
|
|
|
| 520 |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (104 | ) |
|
|
|
|
|
| (104 | ) |
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3 |
|
|
| 3 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1 |
|
|
|
|
|
|
| 1 |
|
September 30, 2018 |
|
| 275 |
|
| $ | 5,738 |
|
| $ | 1,113 |
|
| $ | 6,072 |
|
| $ | (6 | ) |
| $ | 12,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019 |
|
| 275 |
|
| $ | 5,738 |
|
| $ | 1,113 |
|
| $ | 6,139 |
|
| $ | (26 | ) |
| $ | 12,964 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 602 |
|
|
|
|
|
|
| 602 |
|
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (15 | ) |
|
| (15 | ) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1 | ) |
|
|
|
|
|
| (1 | ) |
September 30, 2019 |
|
| 275 |
|
| $ | 5,738 |
|
| $ | 1,113 |
|
| $ | 6,740 |
|
| $ | (41 | ) |
| $ | 13,550 |
|
YEAR-TO-DATE
|
| Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Shares |
|
| Amount |
|
| Other Paid-In Capital |
|
| Retained Earnings |
|
| AOCI |
|
| Total |
| ||||||
(millions, except for shares) |
| (thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
December 31, 2017 |
|
| 275 |
|
| $ | 5,738 |
|
| $ | 1,113 |
|
| $ | 5,311 |
|
| $ | 62 |
|
| $ | 12,224 |
|
Cumulative-effect of changes in accounting principles |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 79 |
|
|
| (76 | ) |
|
| 3 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,043 |
|
|
|
|
|
|
| 1,043 |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (361 | ) |
|
|
|
|
|
| (361 | ) |
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8 |
|
|
| 8 |
|
September 30, 2018 |
|
| 275 |
|
| $ | 5,738 |
|
| $ | 1,113 |
|
| $ | 6,072 |
|
| $ | (6 | ) |
| $ | 12,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
| 275 |
|
| $ | 5,738 |
|
| $ | 1,113 |
|
| $ | 6,208 |
|
| $ | (12 | ) |
| $ | 13,047 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 722 |
|
|
|
|
|
|
| 722 |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (189 | ) |
|
|
|
|
|
| (189 | ) |
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (29 | ) |
|
| (29 | ) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1 | ) |
|
|
|
|
|
| (1 | ) |
September 30, 2019 |
|
| 275 |
|
| $ | 5,738 |
|
| $ | 1,113 |
|
| $ | 6,740 |
|
| $ | (41 | ) |
| $ | 13,550 |
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, |
| 2019 |
|
|
|
| 2018 |
| ||
(millions) |
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 722 |
|
|
|
| $ | 1,043 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including nuclear fuel) |
|
| 1,045 |
|
|
|
|
| 974 |
|
Deferred income taxes and investment tax credits |
|
| (141 | ) |
|
|
|
| 175 |
|
Charge associated with future ash pond and landfill closure costs |
|
| — |
|
|
|
|
| 81 |
|
Revision to future ash pond and landfill closure costs |
|
| (113 | ) |
|
|
|
| — |
|
Impairment of assets and other charges |
|
| 646 |
|
|
|
|
| — |
|
Provision for rate credits to customers |
|
| — |
|
|
|
|
| 77 |
|
Charge related to a voluntary retirement program |
|
| 138 |
|
|
|
|
| — |
|
Other adjustments |
|
| (60 | ) |
|
|
|
| (48 | ) |
Changes in: |
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (154 | ) |
|
|
|
| (113 | ) |
Affiliated receivables and payables |
|
| 21 |
|
|
|
|
| (8 | ) |
Inventories |
|
| (34 | ) |
|
|
|
| 40 |
|
Prepayments |
|
| (4 | ) |
|
|
|
| (1 | ) |
Deferred fuel expenses, net |
|
| 232 |
|
|
|
|
| (273 | ) |
Accounts payable |
|
| (38 | ) |
|
|
|
| (28 | ) |
Accrued interest, payroll and taxes |
|
| 73 |
|
|
|
|
| 50 |
|
Net realized and unrealized changes related to derivative activities |
|
| 18 |
|
|
|
|
| 69 |
|
Asset retirement obligations |
|
| 33 |
|
|
|
|
| (29 | ) |
Other operating assets and liabilities |
|
| (316 | ) |
|
|
|
| 197 |
|
Net cash provided by operating activities |
|
| 2,068 |
|
|
|
|
| 2,206 |
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
Plant construction and other property additions |
|
| (1,816 | ) |
|
|
|
| (1,696 | ) |
Purchases of nuclear fuel |
|
| (96 | ) |
|
|
|
| (82 | ) |
Acquisition of solar development projects |
|
| (169 | ) |
|
|
|
| (98 | ) |
Proceeds from sales of securities |
|
| 677 |
|
|
|
|
| 651 |
|
Purchases of securities |
|
| (717 | ) |
|
|
|
| (681 | ) |
Other |
|
| (18 | ) |
|
|
|
| (47 | ) |
Net cash used in investing activities |
|
| (2,139 | ) |
|
|
|
| (1,953 | ) |
Financing Activities |
|
|
|
|
|
|
|
|
|
|
Issuance of short-term debt, net |
|
| 371 |
|
|
|
|
| 392 |
|
Repayment of affiliated current borrowings, net |
|
| (215 | ) |
|
|
|
| (18 | ) |
Issuance of long-term debt |
|
| 698 |
|
|
|
|
| 700 |
|
Repayment of long-term debt |
|
| (590 | ) |
|
|
|
| (951 | ) |
Common dividend payments to parent |
|
| (189 | ) |
|
|
|
| (361 | ) |
Other |
|
| (5 | ) |
|
|
|
| (7 | ) |
Net cash provided by (used in) financing activities |
|
| 70 |
|
|
|
|
| (245 | ) |
Increase (decrease) in cash, restricted cash and equivalents |
|
| (1 | ) |
|
|
|
| 8 |
|
Cash, restricted cash and equivalents at beginning of period |
|
| 38 |
|
|
|
|
| 24 |
|
Cash, restricted cash and equivalents at end of period |
| $ | 37 |
|
|
|
| $ | 32 |
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
|
|
Significant noncash investing activities:(1) |
|
|
|
|
|
|
|
|
|
|
Accrued capital expenditures |
| $ | 231 |
|
|
|
| $ | 96 |
|
Financing leases |
|
| 13 |
|
|
|
|
| — |
|
|
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
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) |
| $ | 392 |
|
| $ | 423 |
|
| $ | 1,303 |
|
| $ | 1,408 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased (excess) gas(1) |
|
| 5 |
|
|
| (7 | ) |
|
| 49 |
|
|
| 22 |
|
Other energy-related purchases |
|
| 17 |
|
|
| 26 |
|
|
| 62 |
|
|
| 88 |
|
Other operations and maintenance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliated suppliers |
|
| 22 |
|
|
| 21 |
|
|
| 95 |
|
|
| 70 |
|
Other |
|
| 137 |
|
|
| 159 |
|
|
| 452 |
|
|
| 502 |
|
Depreciation and amortization |
|
| 64 |
|
|
| 61 |
|
|
| 188 |
|
|
| 173 |
|
Other taxes |
|
| 47 |
|
|
| 45 |
|
|
| 162 |
|
|
| 152 |
|
Impairment of assets and other charges |
|
| — |
|
|
| 1 |
|
|
| 13 |
|
|
| 127 |
|
Gains on sales of assets |
|
| (7 | ) |
|
| (65 | ) |
|
| (7 | ) |
|
| (116 | ) |
Total operating expenses |
|
| 285 |
|
|
| 241 |
|
|
| 1,014 |
|
|
| 1,018 |
|
Income from operations |
|
| 107 |
|
|
| 182 |
|
|
| 289 |
|
|
| 390 |
|
Earnings from equity method investee |
|
| 3 |
|
|
| 4 |
|
|
| 13 |
|
|
| 18 |
|
Other income |
|
| 35 |
|
|
| 34 |
|
|
| 103 |
|
|
| 99 |
|
Interest and related charges(1) |
|
| 26 |
|
|
| 28 |
|
|
| 77 |
|
|
| 79 |
|
Income from operations before income taxes |
|
| 119 |
|
|
| 192 |
|
|
| 328 |
|
|
| 428 |
|
Income tax expense |
|
| 27 |
|
|
| 56 |
|
|
| 73 |
|
|
| 111 |
|
Net Income |
| $ | 92 |
|
| $ | 136 |
|
| $ | 255 |
|
| $ | 317 |
|
|
|
The accompanying notes are an integral part of Dominion Energy Gas’Eastern Energy’s Consolidated Financial Statements.
8
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 |
| $ | 92 |
|
| $ | 136 |
|
| $ | 255 |
|
| $ | 317 |
|
Other comprehensive income (loss), net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred gains (losses) on derivatives-hedging activities(1) |
|
| (36 | ) |
|
| 3 |
|
|
| (87 | ) |
|
| (4 | ) |
Changes in unrecognized pension and other postretirement benefit costs(2) |
|
| (1 | ) |
|
| — |
|
|
| 28 |
|
|
| — |
|
Amounts reclassified to net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative losses-hedging activities(3) |
|
| 9 |
|
|
| 5 |
|
|
| 11 |
|
|
| 16 |
|
Net pension and other postretirement benefit costs(4) |
|
| 1 |
|
|
| 2 |
|
|
| 4 |
|
|
| 4 |
|
Total other comprehensive income (loss) |
|
| (27 | ) |
|
| 10 |
|
|
| (44 | ) |
|
| 16 |
|
Comprehensive income |
| $ | 65 |
|
| $ | 146 |
|
| $ | 211 |
|
| $ | 333 |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.
DOMINION ENERGY GAS HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
| September 30, 2019 |
|
| December 31, 2018(1) |
| ||
(millions) |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 11 |
|
| $ | 10 |
|
Customer receivables (less allowance for doubtful accounts of less than $1 at both dates)(2) |
|
| 212 |
|
|
| 309 |
|
Other receivables (less allowance for doubtful accounts of $1 and $2)(2) |
|
| 21 |
|
|
| 17 |
|
Affiliated receivables |
|
| 40 |
|
|
| 10 |
|
Inventories |
|
| 105 |
|
|
| 65 |
|
Regulatory assets |
|
| 42 |
|
|
| 29 |
|
Gas imbalances(2) |
|
| 29 |
|
|
| 162 |
|
Other(2) |
|
| 77 |
|
|
| 145 |
|
Total current assets |
|
| 537 |
|
|
| 747 |
|
Investments |
|
| 81 |
|
|
| 93 |
|
Property, Plant and Equipment |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
| 11,780 |
|
|
| 11,238 |
|
Accumulated depreciation and amortization |
|
| (3,114 | ) |
|
| (2,971 | ) |
Total property, plant and equipment, net |
|
| 8,666 |
|
|
| 8,267 |
|
Deferred Charges and Other Assets |
|
|
|
|
|
|
|
|
Pension and other postretirement benefit assets(2) |
|
| 2,016 |
|
|
| 1,775 |
|
Operating lease assets |
|
| 56 |
|
|
| — |
|
Other(2) |
|
| 1,390 |
|
|
| 1,469 |
|
Total deferred charges and other assets |
|
| 3,462 |
|
|
| 3,244 |
|
Total assets |
| $ | 12,746 |
|
| $ | 12,351 |
|
|
|
|
|
The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.
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 |
| $ | 452 |
|
| $ | 449 |
|
Short-term debt |
|
| 280 |
|
|
| 10 |
|
Accounts payable |
|
| 87 |
|
|
| 196 |
|
Payables to affiliates |
|
| 23 |
|
|
| 65 |
|
Affiliated current borrowings |
|
| 160 |
|
|
| 218 |
|
Other(2) |
|
| 460 |
|
|
| 463 |
|
Total current liabilities |
|
| 1,462 |
|
|
| 1,401 |
|
Long-Term Debt |
|
| 3,606 |
|
|
| 3,609 |
|
Deferred Credits and Other Liabilities |
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
| 1,509 |
|
|
| 1,465 |
|
Regulatory liabilities |
|
| 1,299 |
|
|
| 1,285 |
|
Operating lease liabilities |
|
| 44 |
|
|
| — |
|
Other |
|
| 218 |
|
|
| 194 |
|
Total deferred credits and other liabilities |
|
| 3,070 |
|
|
| 2,944 |
|
Total liabilities |
|
| 8,138 |
|
|
| 7,954 |
|
Commitments and Contingencies (see Note 18) |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Membership interests |
|
| 4,821 |
|
|
| 4,566 |
|
Accumulated other comprehensive loss |
|
| (213 | ) |
|
| (169 | ) |
Total equity |
|
| 4,608 |
|
|
| 4,397 |
|
Total liabilities and equity |
| $ | 12,746 |
|
| $ | 12,351 |
|
|
|
|
|
The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.
DOMINIONEASTERN ENERGY GAS HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
QUARTER-TO-DATE
|
| Membership Interests |
|
| AOCI |
|
| Total |
|
| Predecessor Equity |
|
| Membership Interests |
|
| AOCI |
|
| Total Members' Equity |
|
| Noncontrolling Interests |
|
| Total |
| |||||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018 |
| $ | 4,446 |
|
| $ | (118 | ) |
| $ | 4,328 |
| ||||||||||||||||||||||||
Net income |
|
| 136 |
|
|
|
|
|
|
| 136 |
| ||||||||||||||||||||||||
Other comprehensive income, net of tax |
|
|
|
|
|
| 10 |
|
|
| 10 |
| ||||||||||||||||||||||||
September 30, 2018 |
| $ | 4,582 |
|
| $ | (108 | ) |
| $ | 4,474 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
June 30, 2019 |
| $ | 4,729 |
|
| $ | (186 | ) |
| $ | 4,543 |
|
| $ | 2,859 |
|
| $ | 4,729 |
|
| $ | (186 | ) |
| $ | 7,402 |
|
| $ | 1,427 |
|
| $ | 8,829 |
|
Net income |
|
| 92 |
|
|
|
|
|
|
| 92 |
|
|
| 59 |
|
|
| 92 |
|
|
|
|
|
|
| 151 |
|
|
| 24 |
|
|
| 175 |
|
Dividends and distributions |
|
| (189 | ) |
|
|
|
|
|
|
|
|
|
| (189 | ) |
|
| (51 | ) |
|
| (240 | ) | ||||||||||||
Other comprehensive loss, net of tax |
|
|
|
|
|
| (27 | ) |
|
| (27 | ) |
|
|
|
|
|
|
|
|
|
| (27 | ) |
|
| (27 | ) |
|
|
|
|
|
| (27 | ) |
Other |
|
| 4 |
|
|
|
|
|
|
|
|
|
|
| 4 |
|
|
|
|
|
|
| 4 |
| ||||||||||||
September 30, 2019 |
| $ | 4,821 |
|
| $ | (213 | ) |
| $ | 4,608 |
|
| $ | 2,733 |
|
| $ | 4,821 |
|
| $ | (213 | ) |
| $ | 7,341 |
|
| $ | 1,400 |
|
| $ | 8,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
June 30, 2020 |
| $ | — |
|
| $ | 7,352 |
|
| $ | (271 | ) |
| $ | 7,081 |
|
| $ | 1,375 |
|
| $ | 8,456 |
| ||||||||||||
Net income |
|
|
|
|
|
| 86 |
|
|
|
|
|
|
| 86 |
|
|
| 32 |
|
|
| 118 |
| ||||||||||||
Dividends and distributions |
|
|
|
|
|
| (2,394 | ) |
|
|
|
|
|
| (2,394 | ) |
|
| (36 | ) |
|
| (2,430 | ) | ||||||||||||
Equity contributions from Dominion Energy Questar |
|
|
|
|
|
| 299 |
|
|
|
|
|
|
| 299 |
|
|
|
|
|
|
| 299 |
| ||||||||||||
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
| 107 |
|
|
| 107 |
|
|
|
|
|
|
| 107 |
| ||||||||||||
September 30, 2020 |
| $ | — |
|
| $ | 5,343 |
|
| $ | (164 | ) |
| $ | 5,179 |
|
| $ | 1,371 |
|
| $ | 6,550 |
|
YEAR-TO-DATE
|
| Membership Interests |
|
| AOCI |
|
| Total |
|
| Predecessor Equity |
|
| Membership Interests |
|
| AOCI |
|
| Total Members' Equity |
|
| Noncontrolling Interests |
|
| Total |
| |||||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
| $ | 4,261 |
|
| $ | (98 | ) |
| $ | 4,163 |
| ||||||||||||||||||||||||
Cumulative-effect of changes in accounting principles |
|
| 29 |
|
|
| (26 | ) |
|
| 3 |
| ||||||||||||||||||||||||
Net income |
|
| 317 |
|
|
|
|
|
|
| 317 |
| ||||||||||||||||||||||||
Distributions |
|
| (25 | ) |
|
|
|
|
|
| (25 | ) | ||||||||||||||||||||||||
Other comprehensive income, net of tax |
|
|
|
|
|
| 16 |
|
|
| 16 |
| ||||||||||||||||||||||||
September 30, 2018 |
| $ | 4,582 |
|
| $ | (108 | ) |
| $ | 4,474 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
December 31, 2018 |
| $ | 4,566 |
|
| $ | (169 | ) |
| $ | 4,397 |
|
| $ | 1,804 |
|
| $ | 4,566 |
|
| $ | (169 | ) |
| $ | 6,201 |
|
| $ | 2,664 |
|
| $ | 8,865 |
|
Net income |
|
| 255 |
|
|
|
|
|
|
| 255 |
|
|
| 205 |
|
|
| 255 |
|
|
|
|
|
|
| 460 |
|
|
| 90 |
|
|
| 550 |
|
Acquisition of public interest in Dominion Energy Midstream |
|
| 1,181 |
|
|
|
|
|
|
|
|
|
|
| 1,181 |
|
|
| (1,221 | ) |
|
| (40 | ) | ||||||||||||
Dividends and distributions |
|
| (457 | ) |
|
|
|
|
|
|
|
|
|
| (457 | ) |
|
| (132 | ) |
|
| (589 | ) | ||||||||||||
Other comprehensive loss, net of tax |
|
|
|
|
|
| (44 | ) |
|
| (44 | ) |
|
|
|
|
|
|
|
|
|
| (44 | ) |
|
| (44 | ) |
|
| (1 | ) |
|
| (45 | ) |
September 30, 2019 |
| $ | 4,821 |
|
| $ | (213 | ) |
| $ | 4,608 |
|
| $ | 2,733 |
|
| $ | 4,821 |
|
| $ | (213 | ) |
| $ | 7,341 |
|
| $ | 1,400 |
|
| $ | 8,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
December 31, 2019 |
| $ | — |
|
| $ | 9,031 |
|
| $ | (187 | ) |
| $ | 8,844 |
|
| $ | 1,385 |
|
| $ | 10,229 |
| ||||||||||||
Net income |
|
|
|
|
|
| 57 |
|
|
|
|
|
|
| 57 |
|
|
| 97 |
|
|
| 154 |
| ||||||||||||
Dividends and distributions |
|
|
|
|
|
| (4,044 | ) |
|
|
|
|
|
| (4,044 | ) |
|
| (111 | ) |
|
| (4,155 | ) | ||||||||||||
Equity contributions from Dominion Energy Questar |
|
|
|
|
|
| 299 |
|
|
|
|
|
|
| 299 |
|
|
|
|
|
|
| 299 |
| ||||||||||||
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
| 23 |
|
|
| 23 |
|
|
|
|
|
|
| 23 |
| ||||||||||||
September 30, 2020 |
| $ | — |
|
| $ | 5,343 |
|
| $ | (164 | ) |
| $ | 5,179 |
|
| $ | 1,371 |
|
| $ | 6,550 |
|
The accompanying notes are an integral part of Dominion Energy Gas’Eastern Energy’s Consolidated Financial Statements.Statements.
9
DOMINIONEASTERN ENERGY GAS HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, |
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 255 |
|
| $ | 317 |
| ||||||||
Net income including noncontrolling interests |
| $ | 154 |
|
| $ | 550 |
| ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 188 |
|
|
| 173 |
|
|
| 282 |
|
|
| 344 |
|
Deferred income taxes and investment tax credits |
|
| 40 |
|
|
| 86 |
| ||||||||
Deferred income taxes |
|
| (103 | ) |
|
| 40 |
| ||||||||
Charge related to a voluntary retirement program |
|
| 39 |
|
|
| — |
|
|
| 0 |
|
|
| 40 |
|
Impairment of assets and other charges |
|
| 13 |
|
|
| 129 |
|
|
| 463 |
|
|
| 13 |
|
Gains on sales of assets |
|
| (7 | ) |
|
| (109 | ) |
|
| 0 |
|
|
| (7 | ) |
Other adjustments |
|
| 6 |
|
|
| 5 |
|
|
| 30 |
|
|
| 67 |
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 93 |
|
|
| 98 |
|
|
| 41 |
|
|
| 107 |
|
Affiliated receivables and payables |
|
| (72 | ) |
|
| (25 | ) |
|
| 225 |
|
|
| (34 | ) |
Inventories |
|
| (40 | ) |
|
| (25 | ) |
|
| (6 | ) |
|
| (51 | ) |
Deferred purchased gas costs, net |
|
| 5 |
|
|
| 8 |
| ||||||||
Prepayments |
|
| 49 |
|
|
| 46 |
|
|
| (17 | ) |
|
| 31 |
|
Accounts payable |
|
| (106 | ) |
|
| (110 | ) |
|
| 12 |
|
|
| (110 | ) |
Accrued interest, payroll and taxes |
|
| (49 | ) |
|
| (46 | ) |
|
| 32 |
|
|
| (45 | ) |
Customer deposits |
|
| 4 |
|
|
| (82 | ) | ||||||||
Pension and other postretirement benefits |
|
| (107 | ) |
|
| (108 | ) |
|
| (46 | ) |
|
| (105 | ) |
Other operating assets and liabilities |
|
| (60 | ) |
|
| 23 |
|
|
| 188 |
|
|
| (34 | ) |
Net cash provided by operating activities |
|
| 247 |
|
|
| 462 |
|
|
| 1,259 |
|
|
| 724 |
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant construction and other property additions |
|
| (462 | ) |
|
| (550 | ) |
|
| (258 | ) |
|
| (537 | ) |
Proceeds from assignments of shale development rights |
|
| — |
|
|
| 109 |
| ||||||||
Repayment of loan by Dominion Energy to Cove Point |
|
| 0 |
|
|
| 2,986 |
| ||||||||
Repayment of loans by affiliates |
|
| 3,422 |
|
|
| 0 |
| ||||||||
Advances to affiliates, net of repayments |
|
| (225 | ) |
|
| 0 |
| ||||||||
Other |
|
| (13 | ) |
|
| (14 | ) |
|
| (9 | ) |
|
| (19 | ) |
Net cash used in investing activities |
|
| (475 | ) |
|
| (455 | ) | ||||||||
Net cash provided by investing activities |
|
| 2,930 |
|
|
| 2,430 |
| ||||||||
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance (repayment) of short-term debt, net |
|
| 270 |
|
|
| (488 | ) |
|
| (62 | ) |
|
| 270 |
|
Issuance of long-term debt |
|
| — |
|
|
| 500 |
| ||||||||
Issuance (repayment) of affiliated current borrowings, net |
|
| (58 | ) |
|
| 6 |
|
|
| (253 | ) |
|
| 32 |
|
Distribution payments to parent |
|
| — |
|
|
| (25 | ) | ||||||||
Repayment of long-term debt |
|
| 0 |
|
|
| (3,300 | ) | ||||||||
Issuance of affiliated long-term debt |
|
| 0 |
|
|
| 395 |
| ||||||||
Repayment of credit facility borrowings |
|
| 0 |
|
|
| (73 | ) | ||||||||
Equity contributions from Dominion Energy Questar |
|
| 299 |
|
|
| 0 |
| ||||||||
Dividends and distributions |
|
| (4,155 | ) |
|
| (589 | ) | ||||||||
Other |
|
| — |
|
|
| (4 | ) |
|
| (1 | ) |
|
| (1 | ) |
Net cash provided by (used in) financing activities |
|
| 212 |
|
|
| (11 | ) | ||||||||
Decrease in cash, restricted cash and equivalents |
|
| (16 | ) |
|
| (4 | ) | ||||||||
Net cash used in financing activities |
|
| (4,172 | ) |
|
| (3,266 | ) | ||||||||
Increase (decrease) in cash, restricted cash and equivalents |
|
| 17 |
|
|
| (112 | ) | ||||||||
Cash, restricted cash and equivalents at beginning of period |
|
| 34 |
|
|
| 30 |
|
|
| 39 |
|
|
| 198 |
|
Cash, restricted cash and equivalents at end of period |
| $ | 18 |
|
| $ | 26 |
|
| $ | 56 |
|
| $ | 86 |
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant noncash investing activities:(1) |
|
|
|
|
|
|
|
| ||||||||
Significant noncash investing and financing activities: |
|
|
|
|
|
|
|
| ||||||||
Accrued capital expenditures |
| $ | 35 |
|
| $ | 43 |
|
| $ | 44 |
|
| $ | 19 |
|
Financing leases |
|
| 10 |
|
|
| — |
|
|
| 1 |
|
|
| 10 |
|
|
|
The accompanying notes are an integral part of Dominion Energy Gas’Eastern Energy’s Consolidated Financial Statements.
10
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Nature of Operations
DominionEastern 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 regulatedFERC-regulated interstate natural gas transmission pipeline and underground storage systemsystems in the Northeast, mid-Atlanticeastern region of the U.S., as well as the Cove Point LNG Facility and Midwest states, regulated gas transportation and distribution operationsowns a 50% noncontrolling interest in Ohio, and gas gathering and processingIroquois. Through October 31, 2020, Eastern Energy also conducted business activities primarily in West Virginia, Ohio and Pennsylvania. In addition, other Dominion Energy subsidiaries provide merchant generation, LNG terminalling services,through FERC-regulated interstate natural gas transmission pipeline and distribution services primarilyunderground storage systems in the eastern and Rocky Mountain regionsRegion of the U.S. The SCANA Combination was completedand owned a 50% noncontrolling interest in January 2019.White River Hub. Beginning in September 2020, Eastern Energy manages its daily operations through one segment, which includes its gas transmission and storage operations. See Note 3 for a descriptioninformation on the acquisition of operations acquired inEastern Energy by BHE and the SCANA Combination.Dominion Energy Gas Restructuring.
Note 2. Significant Accounting Policies
As permitted by the rules and regulations of the SEC, the Companies’Eastern Energy’s 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’Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.
In the Companies’Eastern Energy’s opinion, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly theirits financial position at September 30, 2019, their2020, its results of operations and changes in equity for the three and nine months ended September 30, 2020 and 2019 and 2018 and theirits cash flows for the nine months ended September 30, 20192020 and 2018.2019. Such adjustments are normal and recurring in nature unless otherwise noted.
The Companies makeEastern Energy makes certain estimates and assumptions in preparing theirits 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’Eastern Energy’s accompanying unaudited Consolidated Financial Statements include, after eliminating intercompany transactions and balances, theirits accounts, those of theirits respective majority-owned subsidiaries and non-wholly-owned entities in which they haveit has a controlling financial interest. For certain partnership structures, income is allocated based onBrookfield’s 25% interest in Cove Point (effective December 2019) and the liquidation value of the underlying contractual arrangements. At December 31, 2018, Dominion Energy owned the general partner, 60.9% of the common units and 37.5% of the convertible preferred interestspublic’s ownership interest in Dominion Energy Midstream with the public’s ownership interest(through January 2019) are reflected as noncontrolling interest in DominionEastern Energy’s Consolidated Financial Statements. In January 2019, Dominion Energy acquired all outstanding partnership interests not owned by Dominion Energy and Dominion Energy Midstream became a wholly-owned subsidiary of Dominion Energy. Also, at September 30, 2019, Dominion Energy owns 50% of the units in and consolidates Four Brothers and Three Cedars. GIP’s ownership interest in Four Brothers and Three Cedars, as well as Terra Nova Renewable Partners’ 33% interest in certain Dominion Energy merchant solar projects, is reflected as noncontrolling interest in Dominion Energy’s Consolidated Financial Statements. Terra Nova Renewable Partners has a future option to buy all or a portion of Dominion Energy’s remaining 67% ownership in the projects upon the occurrence of certain events, none of which had occurred at September 30, 2019 nor are expected to occur in the remainder of 2019.
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’ 2018Eastern Energy’s 2019 Consolidated Financial Statements and Notes have been reclassified to conform to the 20192020 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’Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2018,2019, with the exception of the items described below.
11
Cash, Restricted Cash and Equivalents
The following table provides a reconciliation of the total cash, restricted cash and equivalents reported within the Companies’Eastern Energy’s Consolidated Balance Sheets to the corresponding amounts reported within the Companies’ Consolidated Statements of Cash Flows for the nine months ended September 30, 20192020 and 2018:2019:
|
| 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 |
| $ | 378 |
|
| $ | 310 |
|
| $ | 268 |
|
| $ | 120 |
|
Restricted cash and equivalents(1) |
|
| 62 |
|
|
| 77 |
|
|
| 123 |
|
|
| 65 |
|
Cash, restricted cash and equivalents shown in the Consolidated Statements of Cash Flows |
| $ | 440 |
|
| $ | 387 |
|
| $ | 391 |
|
| $ | 185 |
|
Virginia Power |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 29 |
|
| $ | 22 |
|
| $ | 29 |
|
| $ | 14 |
|
Restricted cash and equivalents(1) |
|
| 8 |
|
|
| 10 |
|
|
| 9 |
|
|
| 10 |
|
Cash, restricted cash and equivalents shown in the Consolidated Statements of Cash Flows |
| $ | 37 |
|
| $ | 32 |
|
| $ | 38 |
|
| $ | 24 |
|
Dominion Energy Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 11 |
|
| $ | 4 |
|
| $ | 10 |
|
| $ | 4 |
|
Restricted cash and equivalents (1) |
|
| 7 |
|
|
| 22 |
|
|
| 24 |
|
|
| 26 |
|
Cash, restricted cash and equivalents shown in the Consolidated Statements of Cash Flows |
| $ | 18 |
|
| $ | 26 |
|
| $ | 34 |
|
| $ | 30 |
|
|
| Cash, Restricted Cash and Equivalents at End of Period |
|
| Cash, Restricted Cash and Equivalents at Beginning of Period |
| ||||||||||
|
| September 30, 2020 |
|
| September 30, 2019 |
|
| December 31, 2019 |
|
| December 31, 2018 |
| ||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents(1) |
| $ | 40 |
|
| $ | 74 |
|
| $ | 27 |
|
| $ | 108 |
|
Restricted cash and equivalents(2) |
|
| 16 |
|
|
| 12 |
|
|
| 12 |
|
|
| 90 |
|
Cash, restricted cash and equivalents shown in the Consolidated Statements of Cash Flows |
| $ | 56 |
|
| $ | 86 |
|
| $ | 39 |
|
| $ | 198 |
|
(1) |
|
(2) Restricted cash and equivalent balances are presented within other current assets in the Consolidated Balance Sheets.
Property, Plant and Equipment
In January 2019, Virginia Power committed toDecember 2014, DETI entered into a plan to retire certain automated meter reading infrastructure associatedprecedent agreement with its electric operations beforeAtlantic Coast Pipeline for the end of its useful life and replace such equipment with more current AMI technology.Supply Header Project. As a result Virginia Powerof the cancellation of the Atlantic Coast Pipeline Project, in the second quarter of 2020 Eastern Energy recorded a charge of $160$482 million ($119359 million after-tax) in the first quarter of 2019, included in impairment of assets and other charges (benefits) in its Consolidated Statements of Income. ThisIncome associated with the probable abandonment of a significant portion of the project as well as the establishment of a $75 million ARO. In the third quarter of 2020, Eastern Energy recorded an additional charge is consideredof $10 million ($7 million after-tax) associated with the probable abandonment of a componentsignificant portion of Virginia Power’s base rates deemed recovered under the GTSA, subject to review as discussed in Note 13project and a $29 million ($20 million after-tax) benefit from a revision to the Consolidated Financial Statements in Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2018.
In March 2019, Virginia Power committed to retire certain electric generating units before the endpreviously established ARO, both of their useful lives and completed the retirement of certain units at 6 facilities representing 1,292 MW of electric generating capacity, which had previously been placed in cold reserve. An additional unit at Possum Point power station will be retired after it meets its capacity obligation to PJM in 2021. As a result, Virginia Powerwere recorded a charge of $369 million ($275 million after-tax) in the first quarter of 2019, primarily included in impairment of assets and other charges (benefits) in itsEastern Energy’s Consolidated Statements of Income. This charge is considered a component of Virginia Power’s base rates deemed recovered under the GTSA, subject to review as discussed in Note 13 to the Consolidated Financial Statements in Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2018.
In May 2019, Virginia Power abandoned a coal rail project atAs DETI evaluates its Mt. Storm generating facility. As a result, Virginia Power recorded a charge of $62future use, approximately $40 million ($46 million after-tax) in the second quarter of 2019, included in impairment of assets and other charges in its Consolidated Statements of Income.
In September 2019, Dominion Energy and Virginia Power abandoned certainremains within property, plant and equipment before the endfor a potential modified project.
Goodwill
Eastern Energy has evaluated goodwill annually as of its useful life. As a result, Dominion Energy recorded a charge of $26 million ($19 million after-tax)April 1 and Virginia Power recorded a charge of $17 million ($12 million after-tax), included in impairment of assets and other charges in their Consolidated Statements of Income for the three and nine months ended September 30, 2019.
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 expensewhenever an event occurs or circumstances change in the Companies’ Consolidated Statements of Income. Rent expense associated with finance leases results ininterim that would more-likely-than-not reduce 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.
Certain of the Companies’ leases include one or more options to renew, with renewal terms that can extend the lease from one to 70 years. The exercise of renewal options is solely at the Companies’ discretion and is included in the lease term if the option is reasonably certain to be exercised. A right-of-use asset and corresponding lease liability for leases with original lease terms of one year or less are not included in the Consolidated Balance Sheets, unless such leases contain renewal options that the Companies are reasonably certain will be exercised. Additionally, certain of the Companies’ leases contain escalation clauses whereby payments are adjusted for consumer price or other indices or contain fixed dollar or percentage increases. The Companies also have leases with variable payments based upon usage of, or revenues associated with, the leased assets.
The determination of the discount rate utilized has a significant impact on the calculation of the presentfair value of the lease liability included in the Companies’ Consolidated Balance Sheets. For the Companies’ fleet of leased vehicles, the discount rate is equala reporting unit below its carrying amount. Eastern Energy evaluated goodwill on April 1, 2020 and intends to the prevailing borrowing rate earned by the lessor. For the Companies’ remaining leased assets, the discount rate implicit in the lease is generally unableevaluate goodwill annually on October 31, effective October 31, 2020, 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 30 years.
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 connectionalign with the adoption of this revised accounting guidance, Dominion Energy, Virginia Power and Dominion Energy Gas recorded $504 million, $209 million and $64 million, respectively, of offsetting right-of-use assets and liabilities for operating leases in effect at the adoption date. See Note 15 for additional information.BHE’s policy.
Note 3. Acquisitions and Dispositions
Acquisition of SCANAEastern Energy by BHE
In January 2019,July 2020, Dominion Energy issued 95.6 million sharesentered into an agreement to sell substantially all of its gas transmission and storage operations, including Eastern Energy, to BHE. Approval of the transaction under the Hart-Scott Rodino Act was not obtained within 75 days and Dominion Energy and BHE mutually agreed to a dual-phase closing consisting of two separate disposal groups identified as the GT&S Transaction and the Q-Pipe Transaction. A separate agreement was entered into between Dominion Energy and BHE in October 2020 for the Q-Pipe Transaction, which is currently anticipated to close in early 2021, contingent on clearance or approval under the Hart-Scott-Rodino Act, and other customary closing and regulatory conditions. In November 2020, Eastern Energy finalized a restructuring whereby Eastern Energy disposed of Dominion Energy Questar Pipeline and a 50% noncontrolling interest in Cove Point to Dominion Energy. This restructuring was accounted for by Eastern Energy as a reorganization of entities under common stock, valued at $6.8 billion, representing 0.6690 ofcontrol and the disposition was reflected as an equity transaction. The disposition was not reported as a sharediscontinued operation as the disposal did not represent a strategic shift in the way management had intended to run the business.
12
In November 2020, the GT&S Transaction was completed and Eastern Energy, with the exception of Dominion Energy common stock for each share of SCANA common stock, in connection with the completion of the SCANA Combination. SCANA, through its regulated subsidiaries, is primarily engaged in the generation, transmission and distribution of electricity in the central, southern and southwestern portions of South Carolina and in the distribution of natural gas in North Carolina and South Carolina. In addition, SCANA markets natural gas to retail customers in the southeast U.S. Following completion of the SCANA Combination, SCANA operatesQuestar Pipeline as adiscussed above, became an indirect wholly-owned subsidiary of BHE. Dominion Energy. In addition, SCANA’s debt totaled $6.9 billion atEnergy retained a 50% noncontrolling interest in Cove Point as well as the assets and obligations of the pension and other postretirement employee benefit plans associated with the operations sold and relating to services provided before closing. The SCANA Combination expanded Dominion Energy’s portfolio of regulated electric generation, transmissionSee Notes 5 and distribution and regulated natural gas distribution infrastructure operations.
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 188 for more information on the SCANA Combination,GT&S Transaction.
Based on the recorded balances at September 30, 2020, Eastern Energy expects to record a distribution of net assets of approximately $700 million, including information ongoodwill of approximately $185 million, for the distribution of Dominion Energy Questar Pipeline to Dominion Energy and a distribution of net assets of approximately $900 million related to the pension and liabilities acquired, significant financingother postretirement employee benefit plans retained by Dominion Energy. Additionally, Eastern Energy expects to record an approximately $2.7 billion increase in noncontrolling interests for Dominion Energy’s retained 50% noncontrolling interest in Cove Point. These equity transactions regulatory matters and proceedings, legal proceedings and commitments and contingencies.will be recorded in the Consolidated Balance Sheets in the fourth quarter of 2020.
Merger Approval and Conditions
Merger ApprovalDominion Energy Gas Restructuring
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 $2.0 billion over 20 years with capital support from Dominion Energy.
In September and October 2017, DESC received proceeds totaling $1.1 billion in full satisfaction of its share of a settlement agreement among DESC, Santee Cooper and Toshiba Corporation in connection with Westinghouse and WECTEC, both wholly-owned subsidiaries of Toshiba Corporation and responsible for the engineering and construction of the NND Project, filing for bankruptcy. The purchase price allocation below includes a previously established regulatory liability at DESC totaling $1.1 billion, of which $67 millionEnergy Gas Restructuring was considered current, associated with the monetization of the bankruptcy settlement with Toshiba Corporation. In accordance with the terms of the SCANA Merger Approval Order, this regulatory liability, net of amounts that may be required to satisfy any liens against NND Project property, totaling $1.0 billion will be refunded to DESC electric service customers over a 20-year period ending in 2039.
Additionally, in the first quarter of 2019, DESC recorded a reduction in operating revenue and a corresponding regulatory liability of $1.0 billion, of which $137 million was considered current, representing a refund of amounts previously collected from retail electric customers of DESC for the NND Project to be credited over an estimated 11-year period.a reorganization of entities under common control. As a result, Eastern Energy’s basis in DCP and DMLPHCII, which included the general partner of Dominion Energy Midstream, a controlling 75% interest in Cove Point, DECG, Dominion Energy Questar Pipeline, a 50% noncontrolling interest in White River Hub and a 25.93% noncontrolling interest in Iroquois, is equal to Dominion Energy’s Consolidated Statement of Income for the nine months ended September 30, 2019 includes a $756 million after-tax charge.
NND Project
As a condition to the SCANA Merger Approval Order, DESC committed to excluding from rate recovery $2.4 billion of costs related to the NND Project and $180 million of costs associated with the purchase of the Columbia Energy Center power station. Regulatory assets includedcost basis in SCANA’s historical balance sheet at December 31, 2018 reflected these disallowances.
The remaining regulatory asset associated with the NND Project of $2.8 billion, of which $138 million was considered current, will be collected over a 20-year period, including a return on investment. In January 2019, DESC filed the NND Project rider in accordance with the terms of the SCANA Merger Approval Order for rates effective in February 2019 for DESC’s retail electric customers. The South Carolina Commission approved this filing in January 2019.
Other Terms and Conditions
|
|
|
|
|
|
|
|
|
|
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, norof such entities since the unaudited pro forma financial information, reflect any adjustments related to these amounts.
The fair valueapplicable inception dates 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 excesscommon control. In November 2019, following completion 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 analysisGas Restructuring, DCP and reviewDMLPHCII are wholly-owned subsidiaries of applicable tax matters.
| Amount |
| ||
(millions) |
|
|
|
|
Total current assets(1) |
| $ | 1,782 |
|
Investments |
|
| 224 |
|
Property, plant and equipment(2) |
|
| 11,006 |
|
Goodwill |
|
| 2,576 |
|
Regulatory assets(3) |
|
| 3,940 |
|
Other deferred charges and other assets, including intangible assets |
|
| 430 |
|
Total Assets |
|
| 19,958 |
|
Total current liabilities |
|
| 1,515 |
|
Long-term debt |
|
| 6,707 |
|
Deferred income taxes |
|
| 1,114 |
|
Regulatory liabilities |
|
| 2,668 |
|
Other deferred credits and other liabilities(4) |
|
| 1,115 |
|
Total Liabilities |
|
| 13,119 |
|
Total purchase price(5) |
| $ | 6,839 |
|
|
|
|
|
|
|
|
|
|
|
See Note 3 to theEastern Energy and therefore are consolidated by Eastern Energy. The accompanying Consolidated Financial Statements and Notes of Eastern Energy have been retrospectively adjusted to include the historical results and financial position of DCP and DMLPHCII. The 25% interest in Cove Point retained by Dominion Energy, and subsequently sold to Brookfield in December 2019, and the non-Dominion Energy held interest in Dominion Energy Midstream (through January 2019) are reflected as noncontrolling interest.
The Dominion Energy Gas Restructuring includes the disposition of East Ohio and DGP by Eastern Energy in November 2019. This restructuring represented a strategic shift in the Companies’ Annual Report on Form 10-K foroperations of Eastern Energy as Eastern Energy’s operations consist of LNG import/export and storage and regulated gas transmission and storage operations. As a result, the year ended December 31, 2018 for a descriptionaccompanying Consolidated Financial Statements and Notes of assets acquiredEastern Energy have been retrospectively adjusted to include the historical results and liabilities assumed in connection withfinancial position of East Ohio and DGP as discontinued operations until November 2019. As 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 inGas Restructuring is considered to be a reorganization of entities under common control, Eastern Energy has reflected the Consolidated Statements of Income wasdisposition as an increase of $979 million and $97 million for the three months ended September 30, 2019, respectively, and an increase of $2.1 billion and a decrease of $1.1 billion for the nine months ended September 30, 2019, respectively.
Dominion Energy incurred merger and integration-related costs of $29 million and $596 million in the Consolidated Statements of Income for the three and nine months ended September 30, 2019, respectively. These amounts for the three and nine months ended September 30, 2019 include $4 million and $427 million, respectively, for a charge related to a voluntary retirement program. See Note 21 for additional information. Of the remaining merger and integration-related costs, $25 million and $160 million was recorded in other operations and maintenance expense in the Consolidated Statements of Income for the three and nine months ended September 30, 2019, respectively, and less than $1 million and $9 million was recorded in interest and related charges in the Consolidated Statements of Income for the three and nine months ended September 30, 2019, respectively. During the three and nine months ended September 30, 2018, Dominion Energy incurred merger and integration-related costs of $3 million and $17 million, respectively, recorded primarily in other operations and maintenance expense in the Consolidated Statements of Income. These costs consist of professional fees, the charitable contribution commitment described above, employee-related expenses, certain financing costs and other miscellaneous costs.
equity transaction. The following unaudited pro forma financialtable represents selected information reflectsregarding the consolidated results of operations of Dominion Energy assumingEast Ohio, which are reported as discontinued operations in Eastern Energy’s Consolidated Statements of Income:
|
| Three Months Ended September 30, 2019 |
|
| Nine Months Ended September 30, 2019 |
| ||
(millions) |
|
|
|
|
|
|
|
|
Operating revenue |
| $ | 155 |
|
| $ | 538 |
|
Depreciation and amortization |
|
| 23 |
|
|
| 66 |
|
Other operating expenses |
|
| 90 |
|
|
| 364 |
|
Other income |
|
| 20 |
|
|
| 55 |
|
Interest and related charges |
|
| 11 |
|
|
| 30 |
|
Income tax expense |
|
| 8 |
|
|
| 25 |
|
Net income from discontinued operations |
| $ | 43 |
|
| $ | 108 |
|
Capital expenditures and significant noncash items relating to East Ohio included the SCANA Combination had taken place on January 1, 2018. following:
|
| Nine Months Ended September 30, 2019 |
| |
(millions) |
|
|
|
|
Capital expenditures |
| $ | 267 |
|
Significant noncash items |
|
|
|
|
Charge related to a voluntary retirement program |
|
| 20 |
|
Accrued capital expenditures |
|
| 10 |
|
13
The unaudited pro forma financialfollowing table represents selected information has been presented for illustrative purposes only and may change as Dominion Energy finalizes its valuation of certain assets acquired and liabilities assumed atregarding 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.DGP, which are reported as discontinued operations in Eastern Energy’s Consolidated Statements of Income:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2019(1) |
|
| 2018(1) |
|
| 2019(1) |
|
| 2018(1) |
| ||||
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenue |
| $ | 4,269 |
|
| $ | 4,356 |
|
| $ | 13,104 |
|
| $ | 12,902 |
|
Net income attributable to Dominion Energy |
|
| 1,029 |
|
|
| 923 |
|
|
| 1,991 |
|
|
| 2,054 |
|
Earnings Per Common Share – Basic |
| $ | 1.28 |
|
| $ | 1.23 |
|
| $ | 2.47 |
|
| $ | 2.74 |
|
Earnings Per Common Share – Diluted |
| $ | 1.26 |
|
| $ | 1.23 |
|
| $ | 2.44 |
|
| $ | 2.74 |
|
|
| Three Months Ended September 30, 2019 |
|
| Nine Months Ended September 30, 2019 |
| ||
(millions) |
|
|
|
|
|
|
|
|
Operating revenue |
| $ | 31 |
|
| $ | 110 |
|
Depreciation and amortization |
|
| 1 |
|
|
| 4 |
|
Other operating expenses |
|
| 27 |
|
|
| 83 |
|
Income tax expense |
|
| 1 |
|
|
| 6 |
|
Net income from discontinued operations |
| $ | 2 |
|
| $ | 17 |
|
|
|
Expected SaleCapital expenditures and significant noncash items of Interest in Cove Point
In October 2019, Dominion Energy signed an agreement to sell a noncontrolling interest (consisting of 25% ofDGP included the limited partnership interests) in Cove Point to Brookfield for cash consideration of approximately $2.1 billion, subject to working capital adjustments, which is expected to close in December 2019.
following:
|
| Nine Months Ended September 30, 2019 |
| |
(millions) |
|
|
|
|
Capital expenditures |
| $ | 10 |
|
14
Note 4. Operating Revenue
The Companies’Eastern Energy’s 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 |
| $ | 1,440 |
|
| $ | 1,036 |
|
| $ | 3,180 |
|
| $ | 2,641 |
|
Commercial |
|
| 962 |
|
|
| 737 |
|
|
| 2,347 |
|
|
| 1,897 |
|
Industrial |
|
| 227 |
|
|
| 143 |
|
|
| 474 |
|
|
| 371 |
|
Government and other retail |
|
| 244 |
|
|
| 224 |
|
|
| 658 |
|
|
| 647 |
|
Wholesale |
|
| 45 |
|
|
| 30 |
|
|
| 134 |
|
|
| 95 |
|
Nonregulated electric sales |
|
| 197 |
|
|
| 322 |
|
|
| 688 |
|
|
| 1,022 |
|
Regulated gas sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
| 121 |
|
|
| 73 |
|
|
| 900 |
|
|
| 553 |
|
Commercial |
|
| 52 |
|
|
| 15 |
|
|
| 316 |
|
|
| 152 |
|
Other |
|
| 23 |
|
|
| 3 |
|
|
| 86 |
|
|
| 14 |
|
Nonregulated gas sales |
|
| 51 |
|
|
| 42 |
|
|
| 369 |
|
|
| 139 |
|
Regulated gas transportation and storage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERC-regulated |
|
| 248 |
|
|
| 266 |
|
|
| 772 |
|
|
| 800 |
|
State-regulated |
|
| 168 |
|
|
| 138 |
|
|
| 547 |
|
|
| 472 |
|
Nonregulated gas transportation and storage |
|
| 153 |
|
|
| 162 |
|
|
| 501 |
|
|
| 286 |
|
Other regulated revenues(1) |
|
| 54 |
|
|
| 38 |
|
|
| 180 |
|
|
| 132 |
|
Other nonregulated revenues(1)(2) |
|
| 96 |
|
|
| 133 |
|
|
| 305 |
|
|
| 410 |
|
Total operating revenue from contracts with customers |
|
| 4,081 |
|
|
| 3,362 |
|
|
| 11,457 |
|
|
| 9,631 |
|
Other revenues(3) |
|
| 188 |
|
|
| 89 |
|
|
| 640 |
|
|
| 374 |
|
Total operating revenue |
| $ | 4,269 |
|
| $ | 3,451 |
|
| $ | 12,097 |
|
| $ | 10,005 |
|
Virginia Power |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated electric sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | 1,085 |
|
| $ | 1,036 |
|
| $ | 2,816 |
|
| $ | 2,641 |
|
Commercial |
|
| 732 |
|
|
| 737 |
|
|
| 2,049 |
|
|
| 1,897 |
|
Industrial |
|
| 121 |
|
|
| 143 |
|
|
| 351 |
|
|
| 371 |
|
Government and other retail |
|
| 224 |
|
|
| 224 |
|
|
| 625 |
|
|
| 647 |
|
Wholesale |
|
| 31 |
|
|
| 30 |
|
|
| 97 |
|
|
| 95 |
|
Other regulated revenues(1) |
|
| 36 |
|
|
| 30 |
|
|
| 124 |
|
|
| 95 |
|
Other nonregulated revenues(2) |
|
| 21 |
|
|
| 10 |
|
|
| 54 |
|
|
| 41 |
|
Total operating revenue from contracts with customers |
|
| 2,250 |
|
|
| 2,210 |
|
|
| 6,116 |
|
|
| 5,787 |
|
Other revenues(2)(3) |
|
| 14 |
|
|
| 22 |
|
|
| 51 |
|
|
| 22 |
|
Total operating revenue |
| $ | 2,264 |
|
| $ | 2,232 |
|
| $ | 6,167 |
|
| $ | 5,809 |
|
Dominion Energy Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated gas sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
| $ | 9 |
|
| $ | 12 |
|
| $ | 51 |
|
| $ | 54 |
|
Other |
|
| 1 |
|
|
| — |
|
|
| 3 |
|
|
| 9 |
|
Nonregulated gas sales(2) |
|
| 2 |
|
|
| 2 |
|
|
| 5 |
|
|
| 5 |
|
Regulated gas transportation and storage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FERC-regulated(2) |
|
| 180 |
|
|
| 179 |
|
|
| 566 |
|
|
| 561 |
|
State-regulated(2) |
|
| 139 |
|
|
| 131 |
|
|
| 460 |
|
|
| 450 |
|
NGL revenue(1)(2) |
|
| 31 |
|
|
| 42 |
|
|
| 112 |
|
|
| 146 |
|
Management service revenue(2) |
|
| 23 |
|
|
| 50 |
|
|
| 81 |
|
|
| 157 |
|
Other regulated revenues(2) |
|
| 4 |
|
|
| 4 |
|
|
| 17 |
|
|
| 16 |
|
Other nonregulated revenues(1)(2) |
|
| 3 |
|
|
| 3 |
|
|
| 7 |
|
|
| 9 |
|
Total operating revenue from contracts with customers |
|
| 392 |
|
|
| 423 |
|
|
| 1,302 |
|
|
| 1,407 |
|
Other revenues |
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 1 |
|
Total operating revenue |
| $ | 392 |
|
| $ | 423 |
|
| $ | 1,303 |
|
| $ | 1,408 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated gas transportation and storage(1) |
| $ | 311 |
|
| $ | 306 |
|
| $ | 957 |
|
| $ | 952 |
|
Nonregulated gas transportation and storage |
|
| 175 |
|
|
| 153 |
|
|
| 525 |
|
|
| 501 |
|
Management service revenue(1) |
|
| 16 |
|
|
| 37 |
|
|
| 76 |
|
|
| 126 |
|
Regulated gas sales - wholesale |
|
| 25 |
|
|
| 0 |
|
|
| 27 |
|
|
| 2 |
|
Nonregulated gas sales(1) |
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
|
| 4 |
|
Other regulated revenues(2) |
|
| 1 |
|
|
| 3 |
|
|
| 4 |
|
|
| 8 |
|
Other nonregulated revenues(1)(2) |
|
| 1 |
|
|
| 1 |
|
|
| 3 |
|
|
| 2 |
|
Total operating revenue from contracts with customers |
|
| 530 |
|
|
| 501 |
|
|
| 1,594 |
|
|
| 1,595 |
|
Other revenues(1) |
|
| 1 |
|
|
| 1 |
|
|
| 3 |
|
|
| 3 |
|
Total operating revenue |
| $ | 531 |
|
| $ | 502 |
|
| $ | 1,597 |
|
| $ | 1,598 |
|
(1) See Note 16 for amounts attributable to related parties and affiliates.
| Amounts above include |
|
|
|
|
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 expectEastern Energy expects to recognize this revenue. These revenues relate to contracts containing fixed prices where the CompaniesEastern Energy will earn the associated revenue over time as they standits stands 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 electEastern Energy elects to recognize revenue in the amount they haveit has 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 |
| $ | 431 |
|
| $ | 1,545 |
|
| $ | 1,446 |
|
| $ | 1,344 |
|
| $ | 1,199 |
|
| $ | 13,502 |
|
| $ | 19,467 |
|
Virginia Power |
|
| 5 |
|
|
| 3 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9 |
|
Dominion Energy Gas |
|
| 168 |
|
|
| 617 |
|
|
| 541 |
|
|
| 443 |
|
|
| 325 |
|
|
| 1,902 |
|
|
| 3,996 |
|
Revenue expected to be recognized on multi-year contracts in place at September 30, 2020 |
| 2020 |
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| Thereafter |
|
| Total |
| |||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 468 |
|
| $ | 1,790 |
|
| $ | 1,669 |
|
| $ | 1,476 |
|
| $ | 1,304 |
|
| $ | 13,412 |
|
| $ | 20,119 |
|
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, DominionEastern Energy’s contract asset balances were $34$32 million and $42 million, respectively. Dominion Energy Gas’ contract asset balances were $47 million and $58$40 million at September 30, 20192020 and December 31, 2018,2019, respectively. Dominion Energy and Dominion Energy Gas’Eastern Energy’s contract assets are recorded in other deferred charges and other assets in the Consolidated Balance Sheets. Contract liabilities represent an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration, or the amount that is due, from the customer. At both September 30, 20192020 and December 31, 2018, Dominion2019, Eastern Energy’s contract liability balances were $127 million and $106 million, respectively. At September 30, 2019 and December 31, 2018, Virginia Power’s contract liability balances were $25 million and $22 million, respectively. At September 30, 2019 and December 31, 2018, Dominion Energy Gas’ contract liability balances were $38 million and $40 million, respectively. During the nine months ended September 30, 2019, Dominion Energy, Virginia Power and Dominion Energy Gas recognized revenue of $92 million, $22 million and $40 million, respectively, from the beginning contract liability balances as the Companies fulfilled their obligations to provide service to their customers. The Companies’$20 million. Eastern Energy’s contract liabilities are recorded in other current liabilities and other deferred credits and other liabilities in the Consolidated Balance Sheets.
Eastern Energy recognizes revenue as it fulfills its obligations to provide service to its customers. During the nine months ended September 30, 2020 and 2019, Eastern Energy recognized $1 million and $30 million, respectively, from the beginning contract liability balance.
15
Note 5. Income Taxes
For continuing operations, including noncontrolling interests, the statutory U.S. federal income tax rate reconciles to the Companies’Eastern Energy’s effective income tax rate as follows:
|
| Dominion Energy |
|
| Virginia Power |
|
| Dominion Energy Gas |
|
|
|
|
| ||||||||||||||||||||
Nine Months Ended September 30, |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| ||||||||
U.S. statutory rate |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 21.0 | % |
|
Increases (reductions) resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State taxes, net of federal benefit |
|
| 0.2 |
|
|
| 3.3 |
|
|
| 4.5 |
|
|
| 4.6 |
|
|
| 4.2 |
|
|
| 3.9 |
|
|
| (10.4 | ) |
|
| 3.6 |
|
|
Investment tax credits |
|
| (5.7 | ) |
|
| (0.9 | ) |
|
| (5.3 | ) |
|
| (1.4 | ) |
|
| — |
|
|
| — |
| |||||||||
Production tax credits |
|
| (1.2 | ) |
|
| (0.7 | ) |
|
| (0.8 | ) |
|
| (0.7 | ) |
|
| — |
|
|
| — |
| |||||||||
Reversal of excess deferred income taxes |
|
| (6.8 | ) |
|
| (1.5 | ) |
|
| (4.1 | ) |
|
| (1.9 | ) |
|
| (1.1 | ) |
|
| (1.3 | ) |
|
| (4.4 | ) |
|
| (0.9 | ) |
|
Federal legislative change |
|
| — |
|
|
| 2.0 |
|
|
| — |
|
|
| (0.2 | ) |
|
| — |
|
|
| 2.0 |
| |||||||||
State legislative change |
|
| — |
|
|
| (0.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.1 |
| |||||||||
Write-off of regulatory assets |
|
| 33.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8.2 |
|
|
| 0 |
|
|
Changes in tax status |
|
| (20.9 | ) |
|
| 0 |
|
| ||||||||||||||||||||||||
AFUDC - equity |
|
| (2.0 | ) |
|
| (0.9 | ) |
|
| — |
|
|
| (0.5 | ) |
|
| (0.6 | ) |
|
| (0.4 | ) |
|
| (1.7 | ) |
|
| (0.5 | ) |
|
Absence of tax on noncontrolling interest |
|
| (17.9 | ) |
|
| (3.7 | ) |
| ||||||||||||||||||||||||
Other, net |
|
| (2.7 | ) |
|
| (1.0 | ) |
|
| (1.2 | ) |
|
| (0.3 | ) |
|
| (1.3 | ) |
|
| 0.7 |
|
|
| (8.9 | ) |
|
| 0.2 |
|
|
Effective tax rate |
|
| 36.3 | % |
|
| 20.5 | % |
|
| 14.1 | % |
|
| 20.6 | % |
|
| 22.2 | % |
|
| 26.0 | % |
|
| (35.0 | )% |
|
| 19.7 | % |
|
For the Companies’Eastern Energy’s rate-regulated entities,subsidiaries, deferred taxes will reverse at the weighted average rate used to originate the deferred tax liability, which in some cases will be 35%. The CompaniesEastern Energy’s rate regulated subsidiaries have recorded an estimate of the portion of excess deferred income tax amortization in 2019.2020. The reversal of these excess deferred income taxes will impact the effective tax rate and may ultimately impact rates charged to customers. As described inSee Note 13 to the Consolidated Financial Statements in the Companies’Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2018, the Companies decreased revenue and increased regulatory liabilities to offset these deferred tax impacts in accordance with applicable regulatory commission orders or formula rate mechanisms. See Note 132019 for current year developments.more information.
In connection withFor the SCANA Combination, Dominion Energy committed to forgo, or limit, the recovery of certain income tax-related regulatory assets associated with the NND Project. Dominionnine months ended September 30, 2020, Eastern Energy’s effective tax rate reflects deferredis primarily a function of the nominal year-to-date pre-tax income tax expense of $198 milliondriven by charges associated with the Supply Header Project as discussed in satisfaction of this commitment. Dominion Energy’sNote 2. In addition, the effective tax rate also reflects an income tax benefit of $24 million associated with finalizing the effects of changes in consolidated state income taxes resulting fromtax status of certain subsidiaries in connection with the SCANA Combination.Dominion Energy Gas Restructuring.
As partIn March 2020, the CARES Act was enacted which includes several significant business tax provisions that modify or temporarily suspend certain provisions of the SCANA Combination, Dominion2017 Tax Reform Act. The CARES Act provisions are intended to improve cash flow and liquidity by, among other things, providing a temporary five-year carryback for certain net operating losses, accelerating the refund of previously generated corporate alternative minimum tax credits and temporarily loosening the business interest limitation to 50% of adjusted taxable income for certain businesses. While Eastern Energy acquired SCANA’s unrecognized tax benefits of $106 million. Inintends to utilize the first quarter of 2019, Dominion Energy completed the evaluation of a state income tax position acquiredprovisions of the CARES Act where applicable, they are not expected to provide a material benefit.
In July 2020, the U.S. Department of Treasury issued final regulations providing guidance about the limitation on the deduction for business interest expenses and issued proposed regulations on the application of these rules to certain pass-through entities and partners in those entities under the SCANA Combination that increased unrecognized tax benefits2017 Tax Reform Act as modified by $51 million. In the second quarter, DominionCARES Act. Eastern Energy completedis currently assessing the evaluationimpact of a federal income tax position acquired in the SCANA Combination that increased unrecognized tax benefits by $18 million. In the third quarter, DESC’s unrecognized tax benefits increased by $1 million and both accrued interest and penalties increased by $7 million. In total, these adjustments resulted in an increase to goodwill of $72 million and had no impact on Dominion Energy’s income tax expense,regulations, but expects interest expense or other income.
to be deductible in 2020.
As of September 30, 2019,2020, there have been no other material changes in the Companies’unrecognized tax benefits. Dominion Energy will retain Eastern Energy’s existing unrecognized tax benefits or possible changes that could reasonably be expected to occur duringin connection with the next twelve months.GT&S Transaction. See Note 5 to the Consolidated Financial Statements in the Companies’Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2018,2019, for a discussion of these unrecognized tax benefits.
The 2017 Tax Reform Act limits the deductibility of interest expense to 30% of adjusted taxable income for certain businesses, with any disallowed interest carried forward indefinitely. Subject to additional guidance in yet to be finalized regulations, the Companies expect interest expense to be deductible in 2019.16
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 |
| $ | 975 |
|
| $ | 854 | �� |
| $ | 349 |
|
| $ | 1,806 |
|
Series A Preferred Stock dividends |
|
| (7 | ) |
|
| — |
|
|
| (8 | ) |
|
| — |
|
Net income attributable to Dominion Energy - Basic |
|
| 968 |
|
|
| 854 |
|
|
| 341 |
|
|
| 1,806 |
|
Dilutive effect of Series A Preferred Stock |
|
| (13 | ) |
|
| — |
|
|
| (26 | ) |
|
| — |
|
Net income attributable to Dominion Energy - Diluted |
|
| 955 |
|
|
| 854 |
|
|
| 315 |
|
|
| 1,806 |
|
Average shares of common stock outstanding – Basic |
|
| 813.0 |
|
|
| 653.9 |
|
|
| 802.9 |
|
|
| 652.4 |
|
Net effect of dilutive securities |
|
| — |
|
|
| 1.0 |
|
|
| 0.1 |
|
|
| 0.4 |
|
Average shares of common stock outstanding – Diluted |
|
| 813.0 |
|
|
| 654.9 |
|
|
| 803.0 |
|
|
| 652.8 |
|
Earnings Per Common Share – Basic |
| $ | 1.19 |
|
| $ | 1.31 |
|
| $ | 0.42 |
|
| $ | 2.77 |
|
Earnings Per Common Share – Diluted |
| $ | 1.17 |
|
| $ | 1.30 |
|
| $ | 0.39 |
|
| $ | 2.77 |
|
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.
Note 7.6. Accumulated Other Comprehensive Income
Dominion Energy
The following table presents DominionEastern 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 |
|
| Deferred gains and losses on derivatives- hedging activities |
|
| Unrecognized pension costs |
|
| Total |
| ||||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Beginning balance |
| $ | (168 | ) |
| $ | (103 | ) |
| $ | (271 | ) | ||||||||||||||||||||
Other comprehensive income before reclassifications: gains (losses) |
|
| 12 |
|
|
| (4 | ) |
|
| 8 |
| ||||||||||||||||||||
Amounts reclassified from AOCI: (gains) losses(1) |
|
| 99 |
|
|
| 0 |
|
|
| 99 |
| ||||||||||||||||||||
Net current period other comprehensive income (loss) |
|
| 111 |
|
|
| (4 | ) |
|
| 107 |
| ||||||||||||||||||||
Ending balance |
| $ | (57 | ) |
| $ | (107 | ) |
| $ | (164 | ) | ||||||||||||||||||||
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | (389 | ) |
| $ | 30 |
|
| $ | (1,322 | ) |
| $ | (2 | ) |
| $ | (1,683 | ) |
| $ | (74 | ) |
| $ | (112 | ) |
| $ | (186 | ) |
Other comprehensive income before reclassifications: gains (losses) |
|
| (107 | ) |
|
| 8 |
|
|
| (4 | ) |
|
| (1 | ) |
|
| (104 | ) |
|
| (36 | ) |
|
| (1 | ) |
|
| (37 | ) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
| (6 | ) |
|
| (4 | ) |
|
| 20 |
|
|
| — |
|
|
| 10 |
|
|
| 9 |
|
|
| 1 |
|
|
| 10 |
|
Net current period other comprehensive income (loss) |
|
| (113 | ) |
|
| 4 |
|
|
| 16 |
|
|
| (1 | ) |
|
| (94 | ) |
|
| (27 | ) |
|
| — |
|
|
| (27 | ) |
Ending balance |
| $ | (502 | ) |
| $ | 34 |
|
| $ | (1,306 | ) |
| $ | (3 | ) |
| $ | (1,777 | ) |
| $ | (101 | ) |
| $ | (112 | ) |
| $ | (213 | ) |
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Nine Months Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Beginning balance |
| $ | (248 | ) |
| $ | (2 | ) |
| $ | (1,286 | ) |
| $ | (2 | ) |
| $ | (1,538 | ) |
| $ | (81 | ) |
| $ | (106 | ) |
| $ | (187 | ) |
Other comprehensive income before reclassifications: gains (losses) |
|
| (27 | ) |
|
| (6 | ) |
|
| — |
|
|
| — |
|
|
| (33 | ) |
|
| (79 | ) |
|
| (4 | ) |
|
| (83 | ) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
| 30 |
|
|
| 3 |
|
|
| 18 |
|
|
| — |
|
|
| 51 |
|
|
| 103 |
|
|
| 3 |
|
|
| 106 |
|
Net current period other comprehensive income (loss) |
|
| 3 |
|
|
| (3 | ) |
|
| 18 |
|
|
| — |
|
|
| 18 |
|
|
| 24 |
|
|
| (1 | ) |
|
| 23 |
|
Ending balance |
| $ | (245 | ) |
| $ | (5 | ) |
| $ | (1,268 | ) |
| $ | (2 | ) |
| $ | (1,520 | ) |
| $ | (57 | ) |
| $ | (107 | ) |
| $ | (164 | ) |
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | (235 | ) |
| $ | 2 |
|
| $ | (1,465 | ) |
| $ | (2 | ) |
| $ | (1,700 | ) |
| $ | (25 | ) |
| $ | (144 | ) |
| $ | (169 | ) |
Other comprehensive income before reclassifications: gains (losses) |
|
| (209 | ) |
|
| 37 |
|
|
| 109 |
|
|
| (1 | ) |
|
| (64 | ) |
|
| (87 | ) |
|
| 28 |
|
|
| (59 | ) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
| (58 | ) |
|
| (5 | ) |
|
| 50 |
|
|
| — |
|
|
| (13 | ) |
|
| 10 |
|
|
| 4 |
|
|
| 14 |
|
Net current period other comprehensive income (loss) |
|
| (267 | ) |
|
| 32 |
|
|
| 159 |
|
|
| (1 | ) |
|
| (77 | ) |
|
| (77 | ) |
|
| 32 |
|
|
| (45 | ) |
Less other comprehensive income (loss) attributable to noncontrolling interest |
|
| (1 | ) |
|
| 0 |
|
|
| (1 | ) | ||||||||||||||||||||
Ending balance |
| $ | (502 | ) |
| $ | 34 |
|
| $ | (1,306 | ) |
| $ | (3 | ) |
| $ | (1,777 | ) |
| $ | (101 | ) |
| $ | (112 | ) |
| $ | (213 | ) |
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Beginning balance |
| $ | (302 | ) |
| $ | 747 |
|
| $ | (1,101 | ) |
| $ | (3 | ) |
| $ | (659 | ) | ||||||||||||
Other comprehensive income before reclassifications: gains (losses) |
|
| 51 |
|
|
| (24 | ) |
|
| — |
|
|
| 1 |
|
|
| 28 |
| ||||||||||||
Amounts reclassified from AOCI: (gains) losses(1) |
|
| 71 |
|
|
| 4 |
|
|
| 60 |
|
|
| — |
|
|
| 135 |
| ||||||||||||
Net current period other comprehensive income (loss) |
|
| 122 |
|
|
| (20 | ) |
|
| 60 |
|
|
| 1 |
|
|
| 163 |
| ||||||||||||
Cumulative-effect of changes in accounting principle |
|
| (64 | ) |
|
| (732 | ) |
|
| (227 | ) |
|
| — |
|
|
| (1,023 | ) | ||||||||||||
Less other comprehensive income attributable to noncontrolling interest |
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
| ||||||||||||
Ending balance |
| $ | (245 | ) |
| $ | (5 | ) |
| $ | (1,268 | ) |
| $ | (2 | ) |
| $ | (1,520 | ) |
(1) | See table below for details about these reclassifications. |
17
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 |
| $ | (35 | ) |
| Operating revenue |
|
|
| 2 |
|
| Purchased gas |
Interest rate contracts |
|
| 14 |
|
| Interest and related charges |
Foreign currency contracts |
|
| 12 |
|
| Other income |
Total |
|
| (7 | ) |
|
|
Tax |
|
| 1 |
|
| Income tax expense |
Total, net of tax |
| $ | (6 | ) |
|
|
Unrealized (gains) and losses on investment securities: |
|
|
|
|
|
|
Realized (gain) loss on sale of securities |
| $ | (5 | ) |
| Other income |
Total |
|
| (5 | ) |
|
|
Tax |
|
| 1 |
|
| Income tax expense |
Total, net of tax |
| $ | (4 | ) |
|
|
Unrecognized pension and other postretirement benefit costs: |
|
|
|
|
|
|
Amortization of prior-service costs (credits) |
| $ | (5 | ) |
| Other income |
Amortization of actuarial losses |
|
| 31 |
|
| Other income |
Total |
|
| 26 |
|
|
|
Tax |
|
| (6 | ) |
| Income tax expense |
Total, net of tax |
| $ | 20 |
|
|
|
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
|
Commodity contracts |
| $ | 26 |
|
| Operating revenue |
Interest rate contracts |
|
| 12 |
|
| Interest and related charges |
Foreign currency contracts |
|
| 2 |
|
| Other income |
Total |
|
| 40 |
|
|
|
Tax |
|
| (10 | ) |
| Income tax expense |
Total, net of tax |
| $ | 30 |
|
|
|
Unrealized (gains) and losses on investment securities: |
|
|
|
|
|
|
Realized (gain) loss on sale of securities |
| $ | 3 |
|
| Other income |
Total |
|
| 3 |
|
|
|
Tax |
|
| — |
|
| Income tax expense |
Total, net of tax |
| $ | 3 |
|
|
|
Unrecognized pension and other postretirement benefit costs: |
|
|
|
|
|
|
Amortization of prior-service costs (credits) |
| $ | (5 | ) |
| Other income |
Amortization of actuarial losses |
|
| 30 |
|
| Other income |
Total |
|
| 25 |
|
|
|
Tax |
|
| (7 | ) |
| Income tax expense |
Total, net of tax |
| $ | 18 |
|
|
|
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 |
| $ | (127 | ) |
| Operating revenue |
|
|
| (1 | ) |
| Purchased gas |
Interest rate contracts |
|
| 37 |
|
| Interest and related charges |
Foreign currency contracts |
|
| 14 |
|
| Other income |
Total |
|
| (77 | ) |
|
|
Tax |
|
| 19 |
|
| Income tax expense |
Total, net of tax |
| $ | (58 | ) |
|
|
Unrealized (gains) and losses on investment securities: |
|
|
|
|
|
|
Realized (gain) loss on sale of securities |
| $ | (6 | ) |
| Other income |
Total |
|
| (6 | ) |
|
|
Tax |
|
| 1 |
|
| Income tax expense |
Total, net of tax |
| $ | (5 | ) |
|
|
Unrecognized pension and other postretirement benefit costs: |
|
|
|
|
|
|
Amortization of prior-service costs (credits) |
| $ | (18 | ) |
| Other income |
Amortization of actuarial losses |
|
| 85 |
|
| Other income |
Total |
|
| 67 |
|
|
|
Tax |
|
| (17 | ) |
| Income tax expense |
Total, net of tax |
| $ | 50 |
|
|
|
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
|
Commodity contracts |
| $ | 55 |
|
| Operating revenue |
|
|
| 2 |
|
| Purchased gas |
|
|
| (8 | ) |
| Electric fuel and other energy-related purchases |
Interest rate contracts |
|
| 36 |
|
| Interest and related charges |
Foreign currency contracts |
|
| 10 |
|
| Other income |
Total |
|
| 95 |
|
|
|
Tax |
|
| (24 | ) |
| Income tax expense |
Total, net of tax |
| $ | 71 |
|
|
|
Unrealized (gains) and losses on investment securities: |
|
|
|
|
|
|
Realized (gain) loss on sale of securities |
| $ | 5 |
|
| Other income |
Total |
|
| 5 |
|
|
|
Tax |
|
| (1 | ) |
| Income tax expense |
Total, net of tax |
| $ | 4 |
|
|
|
Unrecognized pension and other postretirement benefit costs: |
|
|
|
|
|
|
Amortization of prior-service costs (credits) |
| $ | (16 | ) |
| Other income |
Amortization of actuarial losses |
|
| 91 |
|
| Other income |
Total |
|
| 75 |
|
|
|
Tax |
|
| (15 | ) |
| Income tax expense |
Total, net of tax |
| $ | 60 |
|
|
|
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 |
| $ | (30 | ) |
| $ | 4 |
|
| $ | (26 | ) |
Other comprehensive income before reclassifications: gains (losses) |
|
| (16 | ) |
|
| 1 |
|
|
| (15 | ) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
| — |
|
|
| — |
|
|
| — |
|
Net current period other comprehensive income (loss) |
|
| (16 | ) |
|
| 1 |
|
|
| (15 | ) |
Ending balance |
| $ | (46 | ) |
| $ | 5 |
|
| $ | (41 | ) |
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | (8 | ) |
| $ | (1 | ) |
| $ | (9 | ) |
Other comprehensive income before reclassifications: gains (losses) |
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Amounts reclassified from AOCI: (gains) losses(1) |
|
| — |
|
|
| — |
|
|
| — |
|
Net current period other comprehensive income (loss) |
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Ending balance |
| $ | (5 | ) |
| $ | (1 | ) |
| $ | (6 | ) |
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | (13 | ) |
| $ | 1 |
|
| $ | (12 | ) |
Other comprehensive income before reclassifications: gains (losses) |
|
| (34 | ) |
|
| 5 |
|
|
| (29 | ) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
| 1 |
|
|
| (1 | ) |
|
| — |
|
Net current period other comprehensive income (loss) |
|
| (33 | ) |
|
| 4 |
|
|
| (29 | ) |
Ending balance |
| $ | (46 | ) |
| $ | 5 |
|
| $ | (41 | ) |
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | (12 | ) |
| $ | 74 |
|
| $ | 62 |
|
Other comprehensive income before reclassifications: gains (losses) |
|
| 10 |
|
|
| (2 | ) |
|
| 8 |
|
Amounts reclassified from AOCI: (gains) losses(1) |
|
| — |
|
|
| — |
|
|
| — |
|
Net current period other comprehensive income (loss) |
|
| 10 |
|
|
| (2 | ) |
|
| 8 |
|
Cumulative-effect of changes in accounting principle |
|
| (3 | ) |
|
| (73 | ) |
|
| (76 | ) |
Ending balance |
| $ | (5 | ) |
| $ | (1 | ) |
| $ | (6 | ) |
|
|
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 |
| $ | (74 | ) |
| $ | (112 | ) |
| $ | (186 | ) |
Other comprehensive income before reclassifications: gains (losses) |
|
| (36 | ) |
|
| (1 | ) |
|
| (37 | ) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
| 9 |
|
|
| 1 |
|
|
| 10 |
|
Net current period other comprehensive income (loss) |
|
| (27 | ) |
|
| — |
|
|
| (27 | ) |
Ending balance |
| $ | (101 | ) |
| $ | (112 | ) |
| $ | (213 | ) |
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | (24 | ) |
| $ | (94 | ) |
| $ | (118 | ) |
Other comprehensive income before reclassifications: gains (losses) |
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Amounts reclassified from AOCI: (gains) losses(1) |
|
| 5 |
|
|
| 2 |
|
|
| 7 |
|
Net current period other comprehensive income (loss) |
|
| 8 |
|
|
| 2 |
|
|
| 10 |
|
Ending balance |
| $ | (16 | ) |
| $ | (92 | ) |
| $ | (108 | ) |
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | (25 | ) |
| $ | (144 | ) |
| $ | (169 | ) |
Other comprehensive income before reclassifications: gains (losses) |
|
| (87 | ) |
|
| 28 |
|
|
| (59 | ) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
| 11 |
|
|
| 4 |
|
|
| 15 |
|
Net current period other comprehensive income (loss) |
|
| (76 | ) |
|
| 32 |
|
|
| (44 | ) |
Ending balance |
| $ | (101 | ) |
| $ | (112 | ) |
| $ | (213 | ) |
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | (23 | ) |
| $ | (75 | ) |
| $ | (98 | ) |
Other comprehensive income before reclassifications: gains (losses) |
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
Amounts reclassified from AOCI: (gains) losses(1) |
|
| 16 |
|
|
| 4 |
|
|
| 20 |
|
Net current period other comprehensive income (loss) |
|
| 12 |
|
|
| 4 |
|
|
| 16 |
|
Cumulative-effect of changes in accounting principle |
|
| (5 | ) |
|
| (21 | ) |
|
| (26 | ) |
Ending balance |
| $ | (16 | ) |
| $ | (92 | ) |
| $ | (108 | ) |
|
|
The following table presents Dominion Energy Gas’Eastern 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 |
| Amounts reclassified from AOCI |
|
| Affected line item in the Consolidated Statements of Income | ||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020 |
|
|
|
|
|
| ||||||
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
| ||||||
Interest rate contracts |
| $ | 145 |
|
| Interest and related charges | ||||||
Foreign currency contracts |
|
| (12 | ) |
| Other income | ||||||
Total |
|
| 133 |
|
|
| ||||||
Tax |
|
| (34 | ) |
| Income tax expense (benefit) | ||||||
Total, net of tax |
| $ | 99 |
|
|
| ||||||
Unrecognized pension and other postretirement benefit costs: |
|
|
|
|
|
| ||||||
Actuarial losses |
| $ | 1 |
|
| Other income | ||||||
Total |
|
| 1 |
|
|
| ||||||
Tax |
|
| (1 | ) |
| Income tax expense (benefit) | ||||||
Total, net of tax |
| $ | 0 |
|
|
| ||||||
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
| $ | (2 | ) |
| Operating revenue |
| $ | (2 | ) |
| Net income from discontinued operations |
Interest rate contracts |
|
| 2 |
|
| Interest and related charges |
|
| 2 |
|
| Interest and related charges |
Foreign currency contracts |
|
| 12 |
|
| Other income |
|
| 12 |
|
| Other income |
Total |
|
| 12 |
|
|
|
|
| 12 |
|
|
|
Tax |
|
| (3 | ) |
| Income tax expense |
|
| (3 | ) |
| Income tax expense (benefit) |
Total, net of tax |
| $ | 9 |
|
|
|
| $ | 9 |
|
|
|
Unrecognized pension costs: |
|
|
|
|
|
| ||||||
Unrecognized pension and other postretirement benefit costs: |
|
|
|
|
|
| ||||||
Actuarial losses |
| $ | 1 |
|
| Other income |
| $ | 1 |
|
| Other income |
Total |
|
| 1 |
|
|
|
|
| 1 |
|
|
|
Tax |
|
| — |
|
| Income tax expense |
|
| 0 |
|
| Income tax expense (benefit) |
Total, net of tax |
| $ | 1 |
|
|
|
| $ | 1 |
|
|
|
Three Months Ended September 30, 2018 |
|
|
|
|
|
| ||||||
Nine Months Ended September 30, 2020 |
|
|
|
|
|
| ||||||
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
| $ | 3 |
|
| Operating revenue | ||||||
Interest rate contracts |
|
| 2 |
|
| Interest and related charges |
| $ | 151 |
|
| Interest and related charges |
Foreign currency contracts |
|
| 2 |
|
| Other income |
|
| (12 | ) |
| Other income |
Total |
|
| 7 |
|
|
|
|
| 139 |
|
|
|
Tax |
|
| (2 | ) |
| Income tax expense |
|
| (36 | ) |
| Income tax expense (benefit) |
Total, net of tax |
| $ | 5 |
|
|
|
| $ | 103 |
|
|
|
Unrecognized pension costs: |
|
|
|
|
|
| ||||||
Unrecognized pension and other postretirement benefit costs: |
|
|
|
|
|
| ||||||
Actuarial losses |
| $ | 2 |
|
| Other income |
| $ | 5 |
|
| Other income |
Total |
|
| 2 |
|
|
|
|
| 5 |
|
|
|
Tax |
|
| — |
|
| Income tax expense |
|
| (2 | ) |
| Income tax expense (benefit) |
Total, net of tax |
| $ | 2 |
|
|
|
| $ | 3 |
|
|
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
| $ | (4 | ) |
| Operating revenue |
| $ | (4 | ) |
| Net income from discontinued operations |
Interest rate contracts |
|
| 5 |
|
| Interest and related charges |
|
| 3 |
|
| Interest and related charges |
Foreign currency contracts |
|
| 14 |
|
| Other income |
|
| 14 |
|
| Other income |
Total |
|
| 15 |
|
|
|
|
| 13 |
|
|
|
Tax |
|
| (4 | ) |
| Income tax expense |
|
| (3 | ) |
| Income tax expense (benefit) |
Total, net of tax |
| $ | 11 |
|
|
|
| $ | 10 |
|
|
|
Unrecognized pension costs: |
|
|
|
|
|
| ||||||
Unrecognized pension and other postretirement benefit costs: |
|
|
|
|
|
| ||||||
Actuarial losses |
| $ | 5 |
|
| Other income |
| $ | 5 |
|
| Other income |
Total |
|
| 5 |
|
|
|
|
| 5 |
|
|
|
Tax |
|
| (1 | ) |
| Income tax expense |
|
| (1 | ) |
| Income tax expense (benefit) |
Total, net of tax |
| $ | 4 |
|
|
|
| $ | 4 |
|
|
|
Nine Months Ended September 30, 2018 |
|
|
|
|
|
| ||||||
Deferred (gains) and losses on derivatives-hedging activities: |
|
|
|
|
|
| ||||||
Commodity contracts |
| $ | 8 |
|
| Operating revenue | ||||||
Interest rate contracts |
|
| 4 |
|
| Interest and related charges | ||||||
Foreign currency contracts |
|
| 10 |
|
| Other income | ||||||
Total |
|
| 22 |
|
|
| ||||||
Tax |
|
| (6 | ) |
| Income tax expense | ||||||
Total, net of tax |
| $ | 16 |
|
|
| ||||||
Unrecognized pension costs: |
|
|
|
|
|
| ||||||
Actuarial losses |
| $ | 5 |
|
| Other income | ||||||
Total |
|
| 5 |
|
|
| ||||||
Tax |
|
| (1 | ) |
| Income tax expense |
|
|
|
18
Note 8.7. Fair Value Measurements
The Companies’Eastern Energy’s fair value measurements are made in accordance with the policies discussed in Note 6 to the Consolidated Financial Statements in the Companies’Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2018.2019. See Note 98 in this report for further information about the Companies’Eastern Energy’s derivatives and hedge accounting activities.
The Companies enter into certain physical and financial forwards, futures, options and swaps, which All of Eastern Energy’s derivatives 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 presented2 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) |
| $ | 13 |
|
| Discounted cash flow |
| Market price (per Dth) | (3) |
| (1) - 6 |
|
| — |
|
FTRs |
|
| 5 |
|
| Discounted cash flow |
| Market price (per MWh) | (3) |
| (2) - 8 |
|
| 1 |
|
Physical options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
| 2 |
|
| Option model |
| Market price (per Dth) | (3) |
| 1 - 6 |
|
| 4 |
|
|
|
|
|
|
|
|
| Price volatility | (4) |
| 1% - 70% |
|
| 47 | % |
Total assets |
| $ | 20 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical and financial forwards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas(2) |
| $ | 10 |
|
| Discounted Cash Flow |
| Market price (per Dth) | (3) |
| (2) - 7 |
|
| (1 | ) |
FTRs |
|
| 5 |
|
| Discounted cash flow |
| Market price (per MWh) | (3) |
| (5) - 3 |
|
| — |
|
Physical options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
| 6 |
|
| Option model |
| Market price (per Dth) | (3) |
| 1 - 6 |
|
| 3 |
|
|
|
|
|
|
|
|
| Price volatility | (4) |
| 1% - 71% |
|
| 26 | % |
Total liabilities |
| $ | 21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:hierarchy.
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
|
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 |
| $ | 6 |
|
| $ | 54 |
|
| $ | 20 |
|
| $ | 80 |
|
Interest rate |
|
| — |
|
|
| 10 |
|
|
| — |
|
|
| 10 |
|
Foreign currency |
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Investments(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
| 3,881 |
|
|
| — |
|
|
| — |
|
|
| 3,881 |
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
| — |
|
|
| 472 |
|
|
| — |
|
|
| 472 |
|
Government securities |
|
| 474 |
|
|
| 694 |
|
|
| — |
|
|
| 1,168 |
|
Cash equivalents and other |
|
| 26 |
|
|
| 5 |
|
|
| — |
|
|
| 31 |
|
Total assets |
| $ | 4,387 |
|
| $ | 1,238 |
|
| $ | 20 |
|
| $ | 5,645 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | 14 |
|
| $ | 45 |
|
| $ | 21 |
|
| $ | 80 |
|
Interest rate |
|
| — |
|
|
| 850 |
|
|
| — |
|
|
| 850 |
|
Foreign currency |
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| 4 |
|
Total liabilities |
| $ | 14 |
|
| $ | 899 |
|
| $ | 21 |
|
| $ | 934 |
|
At December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | — |
|
| $ | 180 |
|
| $ | 70 |
|
| $ | 250 |
|
Interest rate |
|
| — |
|
|
| 18 |
|
|
| — |
|
|
| 18 |
|
Foreign currency |
|
| — |
|
|
| 26 |
|
|
| — |
|
|
| 26 |
|
Investments(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
| 3,277 |
|
|
| — |
|
|
| — |
|
|
| 3,277 |
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
| — |
|
|
| 431 |
|
|
| — |
|
|
| 431 |
|
Government securities |
|
| 455 |
|
|
| 688 |
|
|
| — |
|
|
| 1,143 |
|
Cash equivalents and other |
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| 11 |
|
Total assets |
| $ | 3,743 |
|
| $ | 1,343 |
|
| $ | 70 |
|
| $ | 5,156 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | — |
|
| $ | 129 |
|
| $ | 6 |
|
| $ | 135 |
|
Interest rate |
|
| — |
|
|
| 142 |
|
|
| — |
|
|
| 142 |
|
Foreign currency |
|
| — |
|
|
| 2 |
|
|
| — |
|
|
| 2 |
|
Total liabilities |
| $ | — |
|
| $ | 273 |
|
| $ | 6 |
|
| $ | 279 |
|
|
|
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 |
| $ | 75 |
|
| $ | 119 |
|
| $ | 64 |
|
| $ | 150 |
|
Total realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| (2 | ) |
Purchased gas |
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
Electric fuel and other energy-related purchases |
|
| (5 | ) |
|
| (7 | ) |
|
| (12 | ) |
|
| (25 | ) |
Included in other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
Included in regulatory assets/liabilities |
|
| (76 | ) |
|
| (16 | ) |
|
| (51 | ) |
|
| (26 | ) |
Settlements |
|
| 5 |
|
|
| (4 | ) |
|
| 7 |
|
|
| (7 | ) |
Purchases |
|
| — |
|
|
| — |
|
|
| (10 | ) |
|
| — |
|
Transfers out of Level 3 |
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| 1 |
|
Ending balance |
| $ | (1 | ) |
| $ | 92 |
|
| $ | (1 | ) |
| $ | 92 |
|
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 |
| $ | — |
|
| $ | — |
|
| $ | 2 |
|
| $ | — |
|
Purchased gas |
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
Total |
| $ | — |
|
| $ | — |
|
| $ | 3 |
|
| $ | — |
|
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) |
| $ | 12 |
|
| Discounted cash flow |
| Market price (per Dth) | (3) |
| (1) - 3 |
|
| — |
|
FTRs |
|
| 5 |
|
| Discounted cash flow |
| Market price (per MWh) | (3) |
| (2) - 8 |
|
| 1 |
|
Total assets |
| $ | 17 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical and financial forwards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas(2) |
| $ | 10 |
|
| Discounted cash flow |
| Market price (per Dth) | (3) |
| (2) - 6 |
|
| (1 | ) |
FTRs |
|
| 5 |
|
| Discounted cash flow |
| Market price (per MWh) | (3) |
| (5) - 3 |
|
| — |
|
Physical options: |
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
Natural gas |
|
| 1 |
|
| Option model |
| Market price (per Dth) | (3) |
| 1 - 6 |
|
| 3 |
|
|
|
|
|
|
|
|
| Price volatility | (4) |
| 24% - 52% |
|
| 35 | % |
Total liabilities |
| $ | 16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
| |||
|
|
|
|
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 |
| $ | — |
|
| $ | 3 |
|
| $ | 17 |
|
| $ | 20 |
|
Investments(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
| 1,783 |
|
|
| — |
|
|
| — |
|
|
| 1,783 |
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
| — |
|
|
| 273 |
|
|
| — |
|
|
| 273 |
|
Government securities |
|
| 184 |
|
|
| 337 |
|
|
| — |
|
|
| 521 |
|
Cash equivalents and other |
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| 6 |
|
Total assets |
| $ | 1,973 |
|
| $ | 613 |
|
| $ | 17 |
|
| $ | 2,603 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | — |
|
| $ | 17 |
|
| $ | 16 |
|
| $ | 33 |
|
Interest rate |
|
| — |
|
|
| 521 |
|
|
| — |
|
|
| 521 |
|
Total liabilities |
| $ | — |
|
| $ | 538 |
|
| $ | 16 |
|
| $ | 554 |
|
At December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | — |
|
| $ | 24 |
|
| $ | 66 |
|
| $ | 90 |
|
Interest rate |
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Investments(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
| 1,476 |
|
|
| — |
|
|
| — |
|
|
| 1,476 |
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
| — |
|
|
| 221 |
|
|
| — |
|
|
| 221 |
|
Government securities |
|
| 164 |
|
|
| 343 |
|
|
| — |
|
|
| 507 |
|
Total assets |
| $ | 1,640 |
|
| $ | 591 |
|
| $ | 66 |
|
| $ | 2,297 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | — |
|
| $ | 9 |
|
| $ | 6 |
|
| $ | 15 |
|
Interest rate |
|
| — |
|
|
| 88 |
|
|
| — |
|
|
| 88 |
|
Total liabilities |
| $ | — |
|
| $ | 97 |
|
| $ | 6 |
|
| $ | 103 |
|
|
|
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 |
| $ | 77 |
|
| $ | 115 |
|
| $ | 60 |
|
| $ | 147 |
|
Total realized and unrealized losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric fuel and other energy-related purchases |
|
| (5 | ) |
|
| (6 | ) |
|
| (12 | ) |
|
| (25 | ) |
Included in regulatory assets/liabilities |
|
| (76 | ) |
|
| (19 | ) |
|
| (50 | ) |
|
| (30 | ) |
Settlements |
|
| 5 |
|
|
| (4 | ) |
|
| 3 |
|
|
| (6 | ) |
Ending balance |
| $ | 1 |
|
| $ | 86 |
|
| $ | 1 |
|
| $ | 86 |
|
There were 0 unrealized gains or losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the three and nine months ended September 30, 2019 and 2018.
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 |
| $ | — |
|
| $ | 2 |
|
| $ | — |
|
| $ | 2 |
|
Foreign currency |
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Total assets |
| $ | — |
|
| $ | 5 |
|
| $ | — |
|
| $ | 5 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
| $ | — |
|
| $ | 113 |
|
| $ | — |
|
| $ | 113 |
|
Foreign currency |
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| 4 |
|
Total liabilities |
| $ | — |
|
| $ | 117 |
|
| $ | — |
|
| $ | 117 |
|
At December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | — |
|
| $ | 3 |
|
| $ | — |
|
| $ | 3 |
|
Foreign currency |
|
| — |
|
|
| 26 |
|
|
| — |
|
|
| 26 |
|
Total assets |
| $ | — |
|
| $ | 29 |
|
| $ | — |
|
| $ | 29 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
| $ | — |
|
| $ | 17 |
|
| $ | — |
|
| $ | 17 |
|
Foreign currency |
|
| — |
|
|
| 2 |
|
|
| — |
|
|
| 2 |
|
Total liabilities |
| $ | — |
|
| $ | 19 |
|
| $ | — |
|
| $ | 19 |
|
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 0 net changes in assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category for the three and nine months ended September 30, 2019 and the three months ended September 30, 2018.
|
| Nine Months Ended |
| |
|
| September 30, |
| |
|
| 2018 |
| |
(millions) |
|
|
|
|
Beginning balance |
| $ | (2 | ) |
Total realized and unrealized gains: |
|
|
|
|
Included in other comprehensive income |
|
| 1 |
|
Transfers out of Level 3 |
|
| 1 |
|
Ending balance |
| $ | — |
|
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 0 unrealized gains or losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the nine months ended September 30, 2018.
Fair Value of Financial Instruments
Substantially all of the Companies’Eastern Energy’s 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. For the Companies'Eastern Energy’s financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:
|
| 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) |
| $ | 34,662 |
|
| $ | 38,894 |
|
| $ | 29,952 |
|
| $ | 31,045 |
|
Credit facility borrowings |
|
| — |
|
|
| — |
|
|
| 73 |
|
|
| 73 |
|
Junior subordinated notes(3) |
|
| 3,797 |
|
|
| 3,951 |
|
|
| 3,430 |
|
|
| 3,358 |
|
Remarketable subordinated notes(3) |
|
| — |
|
|
| — |
|
|
| 1,386 |
|
|
| 1,340 |
|
Virginia Power |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, including securities due within one year(3) |
| $ | 11,795 |
|
| $ | 13,732 |
|
| $ | 11,671 |
|
| $ | 12,400 |
|
Dominion Energy Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, including securities due within one year(4) |
| $ | 4,058 |
|
| $ | 4,309 |
|
| $ | 4,058 |
|
| $ | 4,072 |
|
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||||||||
|
| Carrying Amount |
|
| Estimated Fair Value(1) |
|
| Carrying Amount |
|
| Estimated Fair Value(1) |
| ||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt(2) |
| $ | 5,536 |
|
| $ | 6,042 |
|
| $ | 5,520 |
|
| $ | 5,738 |
|
(1) | Fair value is estimated using market prices, where available, and interest rates currently available for issuance of debt with similar terms and remaining maturities. All fair value measurements are classified as Level 2. The carrying amount of debt |
(2) | Carrying amount includes |
|
|
|
|
Note 9.8. Derivatives and Hedge Accounting Activities
The Companies’Eastern Energy’s accounting policies, objectives and strategies for using derivative instruments are discussed in Note 2 to the Consolidated Financial Statements in the Companies’Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2018.2019. See Note 87 in this report for further information about fair value measurements and associated valuation methods for derivatives.
Derivative assets and liabilities are presented gross on the Companies’ Consolidated Balance Sheets. DominionEastern 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-counterOver-the-counter transactions and all exchange contracts arecan be subject to collateral requirements. Types of collateral for over-the-counter and exchange contracts could 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 1915 for further information regarding credit-related contingent features for the Companies’ derivative instruments.
19
Dominion Energy
Balance Sheet Presentation
The tables below present DominionEastern 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 |
|
|
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
|
| Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
|
|
|
| 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 |
|
| 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 |
| $ | 39 |
|
| $ | 18 |
|
| $ | — |
|
| $ | 21 |
|
| $ | 175 |
|
| $ | 12 |
|
| $ | — |
|
| $ | 163 |
| ||||||||||||||||||||||||||||||||
Exchange |
|
| 37 |
|
|
| 26 |
|
|
| — |
|
|
| 11 |
|
|
| 68 |
|
|
| 68 |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Over-the-counter |
|
| 10 |
|
|
| 4 |
|
|
| — |
|
|
| 6 |
|
|
| 18 |
|
|
| 1 |
|
|
| — |
|
|
| 17 |
| ||||||||||||||||||||||||||||||||
Foreign currency contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
| 3 |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 26 |
|
|
| 2 |
|
|
| — |
|
|
| 24 |
|
| $ | 6 |
|
| $ | 6 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 8 |
|
| $ | 8 |
|
| $ | 0 |
|
| $ | 0 |
|
Total derivatives, subject to a master netting or similar arrangement |
| $ | 89 |
|
| $ | 51 |
|
| $ | — |
|
| $ | 38 |
|
| $ | 287 |
|
| $ | 83 |
|
| $ | — |
|
| $ | 204 |
|
| $ | 6 |
|
| $ | 6 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 8 |
|
| $ | 8 |
|
| $ | 0 |
|
| $ | 0 |
|
|
|
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||||||||||||||||||||||||
|
| 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 |
| $ | 182 |
|
| $ | 2 |
|
| $ | 0 |
|
| $ | 180 |
|
| $ | 83 |
|
| $ | 5 |
|
| $ | 0 |
|
| $ | 78 |
|
Foreign currency contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
| 4 |
|
|
| 4 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3 |
|
|
| 3 |
|
|
| 0 |
|
|
| 0 |
|
Total derivatives, subject to a master netting or similar arrangement |
| $ | 186 |
|
| $ | 6 |
|
| $ | 0 |
|
| $ | 180 |
|
| $ | 86 |
|
| $ | 8 |
|
| $ | 0 |
|
| $ | 78 |
|
|
|
|
|
| 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 |
| $ | 43 |
|
| $ | 18 |
|
| $ | 1 |
|
| $ | 24 |
|
| $ | 19 |
|
| $ | 12 |
|
| $ | — |
|
| $ | 7 |
|
Exchange |
|
| 34 |
|
|
| 26 |
|
|
| 8 |
|
|
| — |
|
|
| 115 |
|
|
| 68 |
|
|
| 47 |
|
|
| — |
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
| 850 |
|
|
| 4 |
|
|
| 41 |
|
|
| 805 |
|
|
| 142 |
|
|
| 1 |
|
|
| — |
|
|
| 141 |
|
Foreign currency contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
| 4 |
|
|
| 3 |
|
|
| — |
|
|
| 1 |
|
|
| 2 |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
Total derivatives, subject to a master netting or similar arrangement |
| $ | 931 |
|
| $ | 51 |
|
| $ | 50 |
|
| $ | 830 |
|
| $ | 278 |
|
| $ | 83 |
|
| $ | 47 |
|
| $ | 148 |
|
|
|
Volumes
The following table presents the volume of DominionEastern 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.2020.
|
| Current |
|
| Noncurrent |
| ||
Natural Gas (bcf): |
|
|
|
|
|
|
|
|
Fixed price(1) |
|
| 125 |
|
|
| 63 |
|
Basis |
|
| 256 |
|
|
| 541 |
|
Electricity (MWh): |
|
|
|
|
|
|
|
|
Fixed price |
|
| 3,262,550 |
|
|
| 369,850 |
|
FTRs |
|
| 74,936,524 |
|
|
| — |
|
NGLs (Gal) |
|
| 17,892,000 |
|
|
| — |
|
Interest rate(2) |
| $ | 850,000,000 |
|
| $ | 5,384,447,114 |
|
Foreign currency(2)(3) |
| $ | — |
|
| $ | 280,000,000 |
|
|
| Current |
|
| Noncurrent |
| ||
Interest rate(1) |
| $ | 1,300,000,000 |
|
| $ | 0 |
|
Foreign currency(1) |
| € | 0 |
|
| € | 250,000,000 |
|
(1) |
|
| Maturity is determined based on final settlement period. |
|
|
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 |
| $ | (6 | ) |
| $ | (5 | ) |
| 27 months |
Electricity |
|
| 9 |
|
|
| 8 |
|
| 15 months |
Other |
|
| 2 |
|
|
| 2 |
|
| 6 months |
Interest rate |
|
| (512 | ) |
|
| (49 | ) |
| 387 months |
Foreign currency |
|
| 5 |
|
|
| (3 | ) |
| 81 months |
Total |
| $ | (502 | ) |
| $ | (47 | ) |
|
|
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.
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 |
| $ | (1,156 | ) |
| $ | (1,631 | ) |
| $ | (6 | ) |
| $ | 20 |
|
|
|
|
|
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 |
| $ | 18 |
|
| $ | 53 |
|
| $ | 71 |
|
Interest rate |
|
| 2 |
|
|
| — |
|
|
| 2 |
|
Total current derivative assets(1) |
|
| 20 |
|
|
| 53 |
|
|
| 73 |
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
| 2 |
|
|
| 7 |
|
|
| 9 |
|
Interest rate |
|
| 8 |
|
|
| — |
|
|
| 8 |
|
Foreign currency |
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Total noncurrent derivative assets(2) |
|
| 13 |
|
|
| 7 |
|
|
| 20 |
|
Total derivative assets |
| $ | 33 |
|
| $ | 60 |
|
| $ | 93 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | 9 |
|
| $ | 50 |
|
| $ | 59 |
|
Interest rate |
|
| 200 |
|
|
| 2 |
|
|
| 202 |
|
Foreign currency |
|
| 4 |
|
|
| — |
|
|
| 4 |
|
Total current derivative liabilities(3) |
|
| 213 |
|
|
| 52 |
|
|
| 265 |
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
| 2 |
|
|
| 19 |
|
|
| 21 |
|
Interest rate |
|
| 627 |
|
|
| 21 |
|
|
| 648 |
|
Total noncurrent derivative liabilities(4) |
|
| 629 |
|
|
| 40 |
|
|
| 669 |
|
Total derivative liabilities |
| $ | 842 |
|
| $ | 92 |
|
| $ | 934 |
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | 55 |
|
| $ | 154 |
|
| $ | 209 |
|
Interest rate |
|
| 14 |
|
|
| — |
|
|
| 14 |
|
Total current derivative assets(1) |
|
| 69 |
|
|
| 154 |
|
|
| 223 |
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
| 6 |
|
|
| 35 |
|
|
| 41 |
|
Interest rate |
|
| 4 |
|
|
| — |
|
|
| 4 |
|
Foreign currency |
|
| 26 |
|
|
| — |
|
|
| 26 |
|
Total noncurrent derivative assets(2) |
|
| 36 |
|
|
| 35 |
|
|
| 71 |
|
Total derivative assets |
| $ | 105 |
|
| $ | 189 |
|
| $ | 294 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | 17 |
|
| $ | 112 |
|
| $ | 129 |
|
Interest rate |
|
| 26 |
|
|
| — |
|
|
| 26 |
|
Foreign currency |
|
| 2 |
|
|
| — |
|
|
| 2 |
|
Total current derivative liabilities(3) |
|
| 45 |
|
|
| 112 |
|
|
| 157 |
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
| 5 |
|
|
| 1 |
|
|
| 6 |
|
Interest rate |
|
| 116 |
|
|
| — |
|
|
| 116 |
|
Total noncurrent derivative liabilities(4) |
|
| 121 |
|
|
| 1 |
|
|
| 122 |
|
Total derivative liabilities |
| $ | 166 |
|
| $ | 113 |
|
| $ | 279 |
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
| $ | 35 |
|
|
|
|
|
Purchased gas |
|
|
|
|
|
| (2 | ) |
|
|
|
|
Total commodity |
| $ | (5 | ) |
| $ | 33 |
|
| $ | — |
|
Interest rate(3) |
|
| (124 | ) |
|
| (14 | ) |
|
| (190 | ) |
Foreign currency(4) |
|
| (15 | ) |
|
| (12 | ) |
|
| — |
|
Total |
| $ | (144 | ) |
| $ | 7 |
|
| $ | (190 | ) |
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
| $ | (26 | ) |
|
|
|
|
Total commodity |
| $ | (58 | ) |
| $ | (26 | ) |
| $ | — |
|
Interest rate(3) |
|
| 23 |
|
|
| (12 | ) |
|
| 48 |
|
Foreign currency(4) |
|
| (1 | ) |
|
| (2 | ) |
|
| — |
|
Total |
| $ | (36 | ) |
| $ | (40 | ) |
| $ | 48 |
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
| $ | 127 |
|
|
|
|
|
Purchased gas |
|
|
|
|
|
| 1 |
|
|
|
|
|
Total commodity |
| $ | 96 |
|
| $ | 128 |
|
| $ | — |
|
Interest rate(3) |
|
| (350 | ) |
|
| (37 | ) |
|
| (405 | ) |
Foreign currency(4) |
|
| (24 | ) |
|
| (14 | ) |
|
| — |
|
Total |
| $ | (278 | ) |
| $ | 77 |
|
| $ | (405 | ) |
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
| $ | (55 | ) |
|
|
|
|
Purchased gas |
|
|
|
|
|
| (2 | ) |
|
|
|
|
Electric fuel and other energy-related purchases |
|
|
|
|
|
| 8 |
|
|
|
|
|
Total commodity |
| $ | (1 | ) |
| $ | (49 | ) |
| $ | — |
|
Interest rate(3) |
|
| 70 |
|
| �� | (36 | ) |
|
| 141 |
|
Foreign currency(4) |
|
| (1 | ) |
|
| (10 | ) |
|
| — |
|
Total |
| $ | 68 |
|
| $ | (95 | ) |
| $ | 141 |
|
|
|
|
|
|
|
|
|
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 |
| $ | 7 |
|
|
|
| $ | (5 | ) |
| $ | 37 |
|
|
| $ | (8 | ) |
|
Purchased gas |
|
| (10 | ) |
|
|
|
| 1 |
|
|
| (18 | ) |
|
|
| 5 |
|
|
Electric fuel and other energy-related purchases |
|
| (6 | ) |
|
|
|
| (7 | ) |
|
| (18 | ) |
|
|
| (23 | ) |
|
Total |
| $ | (9 | ) |
|
|
| $ | (11 | ) |
| $ | 1 |
|
|
| $ | (26 | ) |
|
|
|
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 |
| $ | 17 |
|
| $ | 15 |
|
| $ | — |
|
| $ | 2 |
|
| $ | 64 |
|
| $ | 6 |
|
| $ | — |
|
| $ | 58 |
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
Total derivatives, subject to a master netting or similar arrangement |
| $ | 17 |
|
| $ | 15 |
|
| $ | — |
|
| $ | 2 |
|
| $ | 67 |
|
| $ | 6 |
|
| $ | — |
|
| $ | 61 |
|
|
|
|
|
|
|
|
| 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 |
| $ | 16 |
|
| $ | 15 |
|
| $ | — |
|
| $ | 1 |
|
| $ | 6 |
|
| $ | 6 |
|
| $ | — |
|
| $ | — |
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
| 521 |
|
|
| — |
|
|
| — |
|
|
| 521 |
|
|
| 88 |
|
|
| — |
|
|
| — |
|
|
| 88 |
|
Total derivatives, subject to a master netting or similar arrangement |
| $ | 537 |
|
| $ | 15 |
|
| $ | — |
|
| $ | 522 |
|
| $ | 94 |
|
| $ | 6 |
|
| $ | — |
|
| $ | 88 |
|
|
|
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) |
|
| 44 |
|
|
| 16 |
|
Basis |
|
| 151 |
|
|
| 472 |
|
Electricity (MWh): |
|
|
|
|
|
|
|
|
FTRs |
|
| 74,936,524 |
|
|
| — |
|
Interest rate(2) |
| $ | 550,000,000 |
|
| $ | 1,200,000,000 |
|
|
|
|
|
AOCI
The following table presents selected information related to losses on cash flow hedges included in AOCI in Virginia Power’sEastern Energy’s Consolidated Balance Sheet at September 30, 2019:2020:
|
| AOCI After-Tax |
|
| Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax |
|
| Maximum Term |
| AOCI After-Tax |
|
| Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax |
|
| Maximum Term | ||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
| $ | (46 | ) |
| $ | (1 | ) |
| 387 months |
| $ | (49 | ) |
| $ | (9 | ) |
| 291 months |
Foreign currency |
|
| (8 | ) |
|
| (3 | ) |
| 69 months | ||||||||||
Total |
| $ | (46 | ) |
| $ | (1 | ) |
|
|
| $ | (57 | ) |
| $ | (12 | ) |
|
|
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.20
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 |
| $ | — |
|
| $ | 19 |
|
| $ | 19 |
|
Total current derivative assets(1) |
|
| — |
|
|
| 19 |
|
|
| 19 |
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
| — |
|
|
| 1 |
|
|
| 1 |
|
Total noncurrent derivative assets(2) |
|
| — |
|
|
| 1 |
|
|
| 1 |
|
Total derivative assets |
| $ | — |
|
| $ | 20 |
|
| $ | 20 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | — |
|
| $ | 16 |
|
| $ | 16 |
|
Interest rate |
|
| 149 |
|
|
| — |
|
|
| 149 |
|
Total current derivative liabilities |
|
| 149 |
|
|
| 16 |
|
|
| 165 |
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
| — |
|
| 17 |
|
|
| 17 |
| |
Interest rate |
|
| 372 |
|
|
| — |
|
|
| 372 |
|
Total noncurrent derivatives liabilities(3) |
|
| 372 |
|
|
| 17 |
|
|
| 389 |
|
Total derivative liabilities |
| $ | 521 |
|
| $ | 33 |
|
| $ | 554 |
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | — |
|
| $ | 60 |
|
| $ | 60 |
|
Interest rate |
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Total current derivative assets(1) |
|
| 3 |
|
|
| 60 |
|
|
| 63 |
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
| — |
|
|
| 30 |
|
|
| 30 |
|
Total noncurrent derivative assets(2) |
|
| — |
|
|
| 30 |
|
|
| 30 |
|
Total derivative assets |
| $ | 3 |
|
| $ | 90 |
|
| $ | 93 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
| $ | — |
|
| $ | 15 |
|
| $ | 15 |
|
Interest rate |
|
| 10 |
|
|
| — |
|
|
| 10 |
|
Total current derivative liabilities |
|
| 10 |
|
|
| 15 |
|
|
| 25 |
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
| 78 |
|
|
| — |
|
|
| 78 |
|
Total noncurrent derivatives liabilities(3) |
|
| 78 |
|
|
| — |
|
|
| 78 |
|
Total derivative liabilities |
| $ | 88 |
|
| $ | 15 |
|
| $ | 103 |
|
|
|
|
|
|
|
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) |
| $ | (21 | ) |
| $ | — |
|
| $ | (190 | ) |
Total |
| $ | (21 | ) |
| $ | — |
|
| $ | (190 | ) |
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate(3) |
| $ | 4 |
|
| $ | — |
|
| $ | 48 |
|
Total |
| $ | 4 |
|
| $ | — |
|
| $ | 48 |
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate(3) |
| $ | (45 | ) |
| $ | (1 | ) |
| $ | (408 | ) |
Total |
| $ | (45 | ) |
| $ | (1 | ) |
| $ | (408 | ) |
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate(3) |
| $ | 13 |
|
| $ | — |
|
| $ | 141 |
|
Total |
| $ | 13 |
|
| $ | — |
|
| $ | 141 |
|
|
|
|
|
|
|
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) |
| $ | (6 | ) |
|
| $ | (9 | ) |
| $ | (18 | ) |
|
| $ | (12 | ) |
|
Total |
| $ | (6 | ) |
|
| $ | (9 | ) |
| $ | (18 | ) |
|
| $ | (12 | ) |
|
|
|
|
|
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 |
| $ | 2 |
|
| $ | — |
|
| $ | — |
|
| $ | 2 |
|
| $ | 3 |
|
| $ | — |
|
| $ | — |
|
| $ | 3 |
|
Foreign currency contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
| 3 |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 26 |
|
|
| 2 |
|
|
| — |
|
|
| 24 |
|
Total derivatives, subject to a master netting or similar arrangement |
| $ | 5 |
|
| $ | 3 |
|
| $ | — |
|
| $ | 2 |
|
| $ | 29 |
|
| $ | 2 |
|
| $ | — |
|
| $ | 27 |
|
|
|
|
|
|
| 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 |
| $ | 113 |
|
| $ | — |
|
| $ | — |
|
| $ | 113 |
|
| $ | 17 |
|
| $ | — |
|
| $ | — |
|
| $ | 17 |
|
Foreign currency contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
| 4 |
|
|
| 3 |
|
|
| — |
|
|
| 1 |
|
|
| 2 |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
Total derivatives, subject to a master netting or similar arrangement |
| $ | 117 |
|
| $ | 3 |
|
| $ | — |
|
| $ | 114 |
|
| $ | 19 |
|
| $ | 2 |
|
| $ | — |
|
| $ | 17 |
|
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) |
|
| 17,892,000 |
|
|
| — |
|
Interest rate(1) |
| $ | 300,000,000 |
|
| $ | 1,000,000,000 |
|
Foreign currency(1)(2) |
| $ | — |
|
| $ | 280,000,000 |
|
|
|
|
|
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 |
| $ | 2 |
|
| $ | 2 |
|
| 6 months |
Interest rate |
|
| (108 | ) |
|
| (7 | ) |
| 303 months |
Foreign currency |
|
| 5 |
|
|
| (3 | ) |
| 81 months |
Total |
| $ | (101 | ) |
| $ | (8 | ) |
|
|
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.
In July 2020, Eastern Energy recorded a loss of $141 million ($105 million after-tax) in interest and related charges in the Consolidated Statements of Income, for cash flow hedges of debt-related items that are probable of not occurring as a result of the GT&S Transaction. The derivatives related to these hedges were settled in October 2020 for a cash payment of $165 million.
Fair Value and Gains and Losses on Derivative Instruments
The following tables present the fair values of Dominion Energy Gas’Eastern 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 |
|
| Fair Value- Derivatives Under Hedge Accounting |
|
| Fair Value-Derivatives Not Under Hedge Accounting |
|
| Total Fair Value |
| ||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commodity |
| $ | 2 |
|
| $ | — |
|
| $ | 2 |
| ||||||||||||
Total current derivative assets(1) |
|
| 2 |
|
|
| — |
|
|
| 2 |
| ||||||||||||
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency |
|
| 3 |
|
|
| — |
|
|
| 3 |
|
| $ | 6 |
|
| $ | 0 |
|
| $ | 6 |
|
Total noncurrent derivative assets(2) |
|
| 3 |
|
|
| — |
|
|
| 3 |
| ||||||||||||
Total noncurrent derivative assets(1) |
|
| 6 |
|
|
| 0 |
|
|
| 6 |
| ||||||||||||
Total derivative assets |
| $ | 5 |
|
| $ | — |
|
| $ | 5 |
|
| $ | 6 |
|
| $ | 0 |
|
| $ | 6 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
| $ | 47 |
|
| $ | — |
|
| $ | 47 |
|
| $ | 0 |
|
| $ | 182 |
|
| $ | 182 |
|
Foreign currency |
|
| 4 |
|
|
| — |
|
|
| 4 |
|
|
| 4 |
|
|
| 0 |
|
|
| 4 |
|
Total current derivative liabilities(3) |
|
| 51 |
|
|
| — |
|
|
| 51 |
| ||||||||||||
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Interest rate |
|
| 66 |
|
|
| — |
|
|
| 66 |
| ||||||||||||
Total noncurrent derivative liabilities(4) |
|
| 66 |
|
|
| — |
|
|
| 66 |
| ||||||||||||
Total current derivative liabilities |
|
| 4 |
|
|
| 182 |
|
|
| 186 |
| ||||||||||||
Total derivative liabilities |
| $ | 117 |
|
| $ | — |
|
| $ | 117 |
|
| $ | 4 |
|
| $ | 182 |
|
| $ | 186 |
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commodity |
| $ | 3 |
|
| $ | — |
|
| $ | 3 |
| ||||||||||||
Total current derivative assets(1) |
|
| 3 |
|
|
| — |
|
|
| 3 |
| ||||||||||||
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency |
|
| 26 |
|
|
| — |
|
|
| 26 |
|
| $ | 8 |
|
| $ | 0 |
|
| $ | 8 |
|
Total noncurrent derivative assets(2) |
|
| 26 |
|
|
| — |
|
|
| 26 |
| ||||||||||||
Total noncurrent derivative assets(1) |
|
| 8 |
|
|
| 0 |
|
|
| 8 |
| ||||||||||||
Total derivative assets |
| $ | 29 |
|
| $ | — |
|
| $ | 29 |
|
| $ | 8 |
|
| $ | 0 |
|
| $ | 8 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
| $ | 9 |
|
| $ | — |
|
| $ | 9 |
|
| $ | 30 |
|
| $ | 0 |
|
| $ | 30 |
|
Foreign currency |
|
| 2 |
|
|
| — |
|
|
| 2 |
|
|
| 3 |
|
|
| 0 |
|
|
| 3 |
|
Total current derivative liabilities(3) |
|
| 11 |
|
|
| — |
|
|
| 11 |
| ||||||||||||
Total current derivative liabilities |
|
| 33 |
|
|
| 0 |
|
|
| 33 |
| ||||||||||||
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
| 8 |
|
|
| — |
|
|
| 8 |
|
|
| 53 |
|
|
| 0 |
|
|
| 53 |
|
Total noncurrent derivative liabilities(4) |
|
| 8 |
|
|
| — |
|
|
| 8 |
| ||||||||||||
Total noncurrent derivative liabilities(2) |
|
| 53 |
|
|
| 0 |
|
|
| 53 |
| ||||||||||||
Total derivative liabilities |
| $ | 19 |
|
| $ | — |
|
| $ | 19 |
|
| $ | 86 |
|
| $ | 0 |
|
| $ | 86 |
|
(1) |
|
| Noncurrent derivatives assets are presented in other deferred charges and other assets in |
|
|
| Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in |
21
The following table presents the gains and losses on Dominion Energy Gas’Eastern 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 |
|
| 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, 2020 |
|
|
|
|
|
|
|
| ||||||||
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
| ||||||||
Interest rate(2) |
| $ | 1 |
|
| $ | (145 | ) | ||||||||
Foreign currency(3) |
|
| 14 |
|
|
| 12 |
| ||||||||
Total |
| $ | 15 |
|
| $ | (133 | ) | ||||||||
Three Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Type and Location of Gains (Losses): |
|
|
|
|
|
|
|
| ||||||||
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
| ||||||||
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
| $ | 2 |
| ||||||||
Net income from discontinued operations |
|
|
|
|
| $ | 2 |
| ||||||||
Total commodity |
| $ | 1 |
|
| $ | 2 |
|
| $ | 1 |
|
| $ | 2 |
|
Interest rate(2) |
|
| (36 | ) |
|
| (2 | ) |
|
| (36 | ) |
|
| (2 | ) |
Foreign currency(3) |
|
| (14 | ) |
|
| (12 | ) |
|
| (14 | ) |
|
| (12 | ) |
Total |
| $ | (49 | ) |
| $ | (12 | ) |
| $ | (49 | ) |
| $ | (12 | ) |
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
| ||||||||
Derivative Type and Location of Gains (Losses): |
|
|
|
|
|
|
|
| ||||||||
Nine Months Ended September 30, 2020 |
|
|
|
|
|
|
|
| ||||||||
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
| ||||||||
Interest rate(2) |
| $ | (104 | ) |
| $ | (151 | ) | ||||||||
Foreign currency(3) |
|
| (3 | ) |
|
| 12 |
| ||||||||
Total |
| $ | (107 | ) |
| $ | (139 | ) | ||||||||
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
| ||||||||
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
| ||||||||
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
| $ | (3 | ) | ||||||||
Net income from discontinued operations |
|
|
|
|
| $ | 4 |
| ||||||||
Total commodity |
| $ | (5 | ) |
| $ | (3 | ) |
| $ | 3 |
|
| $ | 4 |
|
Interest rate(2) |
|
| 10 |
|
|
| (2 | ) |
|
| (96 | ) |
|
| (3 | ) |
Foreign currency(3) |
|
| (1 | ) |
|
| (2 | ) |
|
| (24 | ) |
|
| (14 | ) |
Total |
| $ | 4 |
|
| $ | (7 | ) |
| $ | (117 | ) |
| $ | (13 | ) |
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
| ||||||||
Derivative Type and Location of Gains (Losses): |
|
|
|
|
|
|
|
| ||||||||
Commodity: |
|
|
|
|
|
|
|
| ||||||||
Operating revenue |
|
|
|
|
| $ | 4 |
| ||||||||
Total commodity |
| $ | 3 |
|
| $ | 4 |
| ||||||||
Interest rate(2) |
|
| (96 | ) |
|
| (5 | ) | ||||||||
Foreign currency(3) |
|
| (24 | ) |
|
| (14 | ) | ||||||||
Total |
| $ | (117 | ) |
| $ | (15 | ) | ||||||||
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
| ||||||||
Derivative Type and Location of Gains (Losses): |
|
|
|
|
|
|
|
| ||||||||
Commodity: |
|
|
|
|
|
|
|
| ||||||||
Operating revenue |
|
|
|
|
| $ | (8 | ) | ||||||||
Total commodity |
| $ | (11 | ) |
| $ | (8 | ) | ||||||||
Interest rate(2) |
|
| 6 |
|
|
| (4 | ) | ||||||||
Foreign currency(3) |
|
| (1 | ) |
|
| (10 | ) | ||||||||
Total |
| $ | (6 | ) |
| $ | (22 | ) |
(1) | Amounts deferred into AOCI have no associated effect in |
(2) | Amounts recorded in |
(3) | Amounts recorded in |
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 $114million and $111 million at September 30, 2019 and December 31, 2018, respectively.
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. Dominion Energy’s decommissioning trust funds are summarized below:
|
| Amortized Cost |
|
| Total Unrealized Gains |
|
| Total Unrealized Losses |
|
|
| Fair Value |
| ||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | 1,787 |
|
| $ | 2,169 |
|
| $ | (30 | ) |
|
| $ | 3,926 |
|
Fixed income securities:(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
| 442 |
|
|
| 30 |
|
|
| — |
|
|
|
| 472 |
|
Government securities |
|
| 1,082 |
|
|
| 44 |
|
|
| (4 | ) |
|
|
| 1,122 |
|
Common/collective trust funds |
|
| 105 |
|
|
| 4 |
|
|
| — |
|
|
|
| 109 |
|
Insurance contracts |
|
| 210 |
|
|
| — |
|
|
| — |
|
|
|
| 210 |
|
Cash equivalents and other(3) |
|
| 21 |
|
|
| — |
|
|
| — |
|
|
|
| 21 |
|
Total |
| $ | 3,647 |
|
| $ | 2,247 |
|
| $ | (34 | ) | (4) |
| $ | 5,860 |
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | 1,741 |
|
| $ | 1,640 |
|
| $ | (51 | ) |
|
| $ | 3,330 |
|
Fixed income securities:(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
| 435 |
|
|
| 5 |
|
|
| (9 | ) |
|
|
| 431 |
|
Government securities |
|
| 1,092 |
|
|
| 17 |
|
|
| (12 | ) |
|
|
| 1,097 |
|
Common/collective trust funds |
|
| 76 |
|
|
| — |
|
|
| — |
|
|
|
| 76 |
|
Cash equivalents and other |
|
| 4 |
|
|
| — |
|
|
| — |
|
|
|
| 4 |
|
Total |
| $ | 3,348 |
|
| $ | 1,662 |
|
| $ | (72 | ) | (4) |
| $ | 4,938 |
|
Derivatives not designated as hedging instruments |
| Amount of Gain (Loss) Recognized in Income on Derivatives |
| |||||||||||||
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate(1) |
| $ | 5 |
|
| $ | 0 |
|
| $ | (3 | ) |
| $ | 0 |
|
Total |
| $ | 5 |
|
| $ | 0 |
|
| $ | (3 | ) |
| $ | 0 |
|
(1) |
|
|
|
|
|
|
|
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 |
| $ | 40 |
|
| $ | 243 |
|
| $ | 610 |
|
| $ | 267 |
|
Less: Net gains recognized during the period on securities sold during the period |
|
| (17 | ) |
|
| (7 | ) |
|
| (61 | ) |
|
| (42 | ) |
Unrealized gains recognized during the period on securities still held at September 30, 2019 and 2018(1) |
| $ | 23 |
|
| $ | 236 |
|
| $ | 549 |
|
| $ | 225 |
|
|
|
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 |
| $ | 212 |
|
Due after one year through five years |
|
| 412 |
|
Due after five years through ten years |
|
| 360 |
|
Due after ten years |
|
| 719 |
|
Total |
| $ | 1,703 |
|
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 |
| $ | 429 |
|
| $ | 457 |
|
| $ | 1,311 |
|
| $ | 1,301 |
|
Realized gains(1) |
|
| 53 |
|
|
| 24 |
|
|
| 152 |
|
|
| 96 |
|
Realized losses(1) |
|
| 25 |
|
|
| 18 |
|
|
| 75 |
|
|
| 60 |
|
|
|
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 |
| $ | 1 |
|
| $ | 8 |
|
| $ | 1 |
|
| $ | 25 |
|
Losses recognized in other comprehensive income (before taxes) |
|
| (1 | ) |
|
| (8 | ) |
|
| (1 | ) |
|
| (25 | ) |
Net impairment losses recognized in earnings |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
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. Virginia Power’s decommissioning trust funds are summarized below:
|
| Amortized Cost |
|
| Total Unrealized Gains |
|
| Total Unrealized Losses |
|
|
| Fair Value |
| ||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | 890 |
|
| $ | 1,013 |
|
| $ | (15 | ) |
|
| $ | 1,888 |
|
Fixed income securities:(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
| 257 |
|
|
| 16 |
|
|
| — |
|
|
|
| 273 |
|
Government securities |
|
| 504 |
|
|
| 17 |
|
|
| (1 | ) |
|
|
| 520 |
|
Common/collective trust funds |
|
| 46 |
|
|
| — |
|
|
| — |
|
|
|
| 46 |
|
Cash equivalents and other(3) |
|
| 11 |
|
|
| — |
|
|
| — |
|
|
|
| 11 |
|
Total |
| $ | 1,708 |
|
| $ | 1,046 |
|
| $ | (16 | ) | (4) |
| $ | 2,738 |
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
| $ | 858 |
|
| $ | 751 |
|
| $ | (24 | ) |
|
| $ | 1,585 |
|
Fixed income securities:(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
| 224 |
|
|
| 2 |
|
|
| (5 | ) |
|
|
| 221 |
|
Government securities |
|
| 504 |
|
|
| 7 |
|
|
| (5 | ) |
|
|
| 506 |
|
Common/collective trust funds |
|
| 51 |
|
|
| — |
|
|
| — |
|
|
|
| 51 |
|
Cash equivalents and other(3) |
|
| 6 |
|
|
| — |
|
|
| — |
|
|
|
| 6 |
|
Total |
| $ | 1,643 |
|
| $ | 760 |
|
| $ | (34 | ) | (4) |
| $ | 2,369 |
|
|
|
|
|
|
|
|
|
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 |
| $ | 30 |
|
| $ | 106 |
|
| $ | 286 |
|
| $ | 118 |
|
Less: Net gains recognized during the period on securities sold during the period |
|
| (7 | ) |
|
| (3 | ) |
|
| (15 | ) |
|
| (26 | ) |
Unrealized gains recognized during the period on securities still held at September 30, 2019 and 2018(1) |
| $ | 23 |
|
| $ | 103 |
|
| $ | 271 |
|
| $ | 92 |
|
|
|
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 |
| $ | 99 |
|
Due after one year through five years |
|
| 183 |
|
Due after five years through ten years |
|
| 180 |
|
Due after ten years |
|
| 377 |
|
Total |
| $ | 839 |
|
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 |
| $ | 230 |
|
| $ | 237 |
|
| $ | 677 |
|
| $ | 651 |
|
Realized gains(1) |
|
| 21 |
|
|
| 11 |
|
|
| 46 |
|
|
| 44 |
|
Realized losses(1) |
|
| 6 |
|
|
| 5 |
|
|
| 18 |
|
|
| 17 |
|
|
|
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.
Note 9. Equity Method Investments
Dominion EnergyIroquois and White River Hub
Eastern Energy’s
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, 48%; Duke, 47%; and Southern Company Gas, 5%.
Atlantic Coast Pipeline is focused on constructing an approximately 600-mile natural gas pipeline running from West Virginia through Virginia to North Carolina. Subsidiaries and affiliates of all 3 members plan to be customers of the pipeline under 20-year contracts. Atlantic Coast Pipeline is considered an equity method investment as Dominion Energy has the ability to exercise significant influence, but not control, over the investee. See Note 15 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-Kearnings totaled $30 million for the year ended December 31, 2018 for more information.
Dominion Energy recorded contributions of $47 million and $147 million during the three months ended September 30, 2019 and 2018, respectively, and $175 million and $306 million duringboth the nine months ended September 30, 20192020 and 2018, respectively, to Atlantic Coast Pipeline. At September 30, 2019, Dominion2019. Eastern Energy had $10 million of contributions payable to Atlantic Coast Pipeline included within other current liabilities in the Consolidated Balance Sheets.
DETI provides services to Atlantic Coast Pipeline which totaled $24 million and $50 million for the three months ended September 30, 2019 and 2018, respectively, and $81 million and $156 million for the nine months ended September 30, 2019 and 2018, respectively, included in operating revenue in Dominion Energy and Dominion Energy Gas’ Consolidated Statements of Income. Amounts receivable related to these services were $9 million and $13 million at September 30, 2019 and December 31, 2018, respectively, composed entirely of accrued unbilled revenue, included in other receivables in Dominion Energy and Dominion Energy Gas’ Consolidated Balance Sheets.
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 $7.3 billion to $7.8 billion, excluding financing costs. Given the status of current discussions with U.S. Fish and Wildlife Service regarding a new biological opinion and incidental take statement, as well as discussions with contractors regarding efficiencies which may be realized going forward, these estimates are under review and subject to upward
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 $151 million of additional consideration, including applicable interest, in connection with the sale of Dominion Energy’s 50% limited partnership interest in Blue Racer in December 2018, as discussed in Note 9 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018.
Other – Catalyst Old River Hydroelectric Limited Partnership
In September 2018, Dominion Energy completed the sale of its 25% limited partnership interest in Catalyst Old River Hydroelectric Limited Partnership and received proceeds of $91 million. The sale resulted in a gain of $87 million ($63 million after-tax), which is included in other income in Dominion Energy’s Consolidated Statement of Income.
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 $250 million in cash proceeds, subject to working capital adjustments, and expects to recognize a gain of approximately $135 million ($75 million after-tax), net of an approximately $70 million write-off of goodwill.
Dominion Energy will have a 20% noncontrolling ownership interest in Wrangler which will be accounted for as an equity method investment as Dominion Energy has the ability to exercise significant influence, but not control, over the investee.
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 $13 million and $18 million for the nine months ended September 30, 2019 and 2018, respectively. Dominion Energy Gas recorded contributions of $2$4 million for the nine months ended September 30, 2019. DominionEastern Energy Gas received distributions of $27$63 million and $20$60 million for the nine months ended September 30, 20192020 and 2018,2019, respectively. At September 30, 20192020 and December 31, 2018,2019, the carrying amount of Dominion Energy Gas’Eastern Energy’s investment of $79$279 million and $91$312 million, respectively, exceeded its share of underlying equity in net assets by $8$146 million. The difference reflects equity method goodwill and is not being amortized.
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 |
| ||
September 2017 |
| June 2019 |
| North Carolina |
| Gutenberg |
| $ | 142 |
|
| September 2019 |
|
| 80 |
|
June 2018 |
| February 2019 |
| Virginia |
| Gloucester |
|
| 37 |
|
| April 2019 |
|
| 20 |
|
August 2018 |
| March 2019 |
| Virginia |
| Grasshopper |
|
| 130 |
|
| Expected 2020 |
|
| 80 |
|
August 2018 |
| May 2019 |
| North Carolina |
| Chestnut |
|
| 130 |
|
| Expected 2019 |
|
| 75 |
|
June 2019 |
| June 2019 |
| Virginia |
| Ft. Powhatan |
|
| 270 |
|
| Expected 2021 |
|
| 150 |
|
June 2019 |
| August 2019 |
| Virginia |
| Belcher |
|
| 160 |
|
| Expected 2020 |
|
| 88 |
|
August 2019 |
| Pending |
| Virginia |
| Bedford |
|
| 110 |
|
| Expected 2021 |
|
| 70 |
|
October 2019 |
| October 2019 |
| Virginia |
| Maplewood |
|
| 190 |
|
| Expected 2022 |
|
| 120 |
|
|
|
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 |
| ||
August 2019 |
| August 2019 |
| Virginia |
| Greensville |
| $ | 130 |
|
| Expected 2020 |
|
| 80 |
|
August 2019 |
| August 2019 |
| Virginia |
| Myrtle |
|
| 35 |
|
| Expected 2020 |
|
| 15 |
|
September 2019 |
| September 2019 |
| South Carolina |
| Seabrook |
|
| 105 |
|
| Expected 2019 |
|
| 72 |
|
|
|
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 100,000 acres of Marcellus Shale development rights underneath several of its natural gas storage fields. The agreements provided for payments to Dominion Energy Gas, subject to customary adjustments, of up to approximately $200 million over a period of nine years, and an overriding royalty interest in gas produced from the acreage. In August 2017, Dominion Energy Gas and a natural gas producer signed an amendment to the agreement, which included the finalization of contractual matters on previous conveyances, the conveyance of Dominion Energy Gas’ remaining 68% interest in approximately 70,000 acres and the elimination of Dominion Energy Gas’ overriding royalty interest in gas produced from all acreage. Dominion Energy Gas received total consideration of $130 million, with $65 million received in the fourth quarter of 2017 and $65 million received in September 2018 in connection with the final conveyance. In September 2018, Dominion Energy Gas recognized a $65 million ($47 million after-tax) gain included in gains on sales of assets in Dominion Energy Gas’ Consolidated Statements of Income associated with the final conveyance of acreage.
In November 2014, Dominion Energy Gas closed an agreement with a natural gas producer to convey over time approximately 24,000 acres of Marcellus Shale development rights underneath 1 of its natural gas storage fields. In January 2018, Dominion Energy Gas and the natural gas producer closed on an amendment to the agreement, which included the conveyance of Dominion Energy Gas’ remaining 50% interest in approximately 18,000 acres and the elimination of Dominion Energy Gas’ overriding royalty interest in gas produced from all acreage. In February 2018, Dominion Energy Gas received proceeds of $28 million, resulting in an approximately $28 million ($20 million after-tax) gain recorded in gains on sales of assets in Dominion Energy Gas’ Consolidated Statements of Income.
In March 2018, Dominion Energy Gas closed an agreement with a natural gas producer to convey approximately 11,000 acres of Utica and Point Pleasant Shale development rights underneath 1 of its natural gas storage fields. The agreement provided for a payment to Dominion Energy Gas, subject to customary adjustments, of $16 million. In March 2018, Dominion Energy Gas received cash proceeds of $16 million associated with the conveyance of the acreage, resulting in a $16 million ($12 million after-tax) gain recorded in gains on sales of assets in Dominion Energy Gas’ Consolidated Statements of Income.
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 9,000 acres of Marcellus Shale development rights underneath 1 of its natural gas storage fields previously conveyed in December 2013. In June 2018, Dominion Energy Gas received proceeds of $6 million associated with the transaction, resulting in a $6 million ($4 million after-tax) gain recorded in gains on sales of assets in Dominion Energy Gas’ Consolidated Statements of Income.
22
Note 12.10. 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) |
| $ | 78 |
|
| $ | 174 |
|
Deferred project costs and DSM programs for gas utilities(2) |
|
| 29 |
|
|
| 17 |
|
Unrecovered gas costs(3) |
|
| 118 |
|
|
| 14 |
|
Deferred rate adjustment clause costs for Virginia electric utility(4)(5) |
|
| 226 |
|
|
| 78 |
|
Deferred nuclear refueling outage costs(6) |
|
| 50 |
|
|
| 69 |
|
NND Project costs(7) |
|
| 138 |
|
|
| — |
|
PJM transmission rates(8) |
|
| 69 |
|
|
| 45 |
|
Other |
|
| 258 |
|
|
| 99 |
|
Regulatory assets-current |
|
| 966 |
|
|
| 496 |
|
Deferred cost of fuel used in electric generation(1) |
|
| — |
|
|
| 83 |
|
Unrecognized pension and other postretirement benefit costs(9) |
|
| 1,331 |
|
|
| 1,497 |
|
Deferred rate adjustment clause costs for Virginia electric utility(4)(5)(10) |
|
| 88 |
|
|
| 230 |
|
Deferred project costs for gas utilities(2) |
|
| 482 |
|
|
| 335 |
|
PJM transmission rates(8) |
|
| 169 |
|
|
| 192 |
|
Interest rate hedges(11) |
|
| 897 |
|
|
| 184 |
|
AROs and related funding(12) |
|
| 330 |
|
|
| — |
|
Cost of reacquired debt(13)(14) |
|
| 283 |
|
|
| 3 |
|
NND Project costs(7) |
|
| 2,537 |
|
|
| — |
|
Ash pond and landfill closure costs(15) |
|
| 1,003 |
|
|
| 27 |
|
Other |
|
| 549 |
|
|
| 125 |
|
Regulatory assets-noncurrent |
|
| 7,669 |
|
|
| 2,676 |
|
Total regulatory assets |
| $ | 8,635 |
|
| $ | 3,172 |
|
Regulatory liabilities: |
|
|
|
|
|
|
|
|
Provision for future cost of removal and AROs(16) |
| $ | 117 |
|
| $ | 117 |
|
Reserve for refunds and rate credits to electric utility customers(17) |
|
| 215 |
|
|
| 71 |
|
Cost-of-service impact of 2017 Tax Reform Act(18) |
|
| 2 |
|
|
| 104 |
|
Income taxes refundable through future rates(19) |
|
| 82 |
|
|
| — |
|
Monetization of guarantee settlement(20) |
|
| 67 |
|
|
| — |
|
Other |
|
| 64 |
|
|
| 64 |
|
Regulatory liabilities-current |
|
| 547 |
|
|
| 356 |
|
Income taxes refundable through future rates(19) |
|
| 5,007 |
|
|
| 4,071 |
|
Provision for future cost of removal and AROs(16) |
|
| 2,315 |
|
|
| 1,409 |
|
Nuclear decommissioning trust(21) |
|
| 1,354 |
|
|
| 1,070 |
|
Monetization of guarantee settlement(20) |
|
| 987 |
|
|
| — |
|
Reserve for refunds and rate credits to electric utility customers(17) |
|
| 707 |
|
|
| — |
|
Overrecovered other postretirement benefit costs(22) |
|
| 151 |
|
|
| 120 |
|
Other |
|
| 405 |
|
|
| 170 |
|
Regulatory liabilities-noncurrent |
|
| 10,926 |
|
|
| 6,840 |
|
Total regulatory liabilities |
| $ | 11,473 |
|
| $ | 7,196 |
|
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||
(millions) |
|
|
|
|
|
|
|
|
Regulatory assets: |
|
|
|
|
|
|
|
|
Unrecovered gas costs(1) |
| $ | 2 |
|
| $ | 2 |
|
Other |
|
| 6 |
|
|
| 6 |
|
Regulatory assets-current(2) |
|
| 8 |
|
|
| 8 |
|
Interest rate hedges(3) |
|
| 31 |
|
|
| 32 |
|
Other |
|
| 8 |
|
|
| 8 |
|
Regulatory assets-noncurrent(4) |
|
| 39 |
|
|
| 40 |
|
Total regulatory assets |
| $ | 47 |
|
| $ | 48 |
|
Regulatory liabilities: |
|
|
|
|
|
|
|
|
Provision for future cost of removal and AROs(5) |
| $ | 18 |
|
| $ | 18 |
|
Overrecovered gas costs(1) |
|
| 5 |
|
|
| 8 |
|
Other |
|
| 15 |
|
|
| 15 |
|
Regulatory liabilities-current(6) |
|
| 38 |
|
|
| 41 |
|
Income taxes refundable through future rates(7) |
|
| 563 |
|
|
| 560 |
|
Provision for future cost of removal and AROs(5) |
|
| 90 |
|
|
| 95 |
|
Overrecovered other postretirement benefit costs(8) |
|
| 160 |
|
|
| 133 |
|
Other |
|
| 10 |
|
|
| 12 |
|
Regulatory liabilities-noncurrent(9) |
|
| 823 |
|
|
| 800 |
|
Total regulatory liabilities |
| $ | 861 |
|
| $ | 841 |
|
(1) |
|
|
|
| Reflects unrecovered or overrecovered gas costs at regulated gas operations, which are recovered or refunded through filings with |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Reflects interest rate hedges recoverable from or refundable to customers. Certain of these instruments are settled and any related payments are being amortized into interest expense over the life of the related debt, which has a |
|
|
|
|
|
|
|
|
| Rates charged to customers by |
|
|
|
|
| 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. |
|
|
|
|
| Reflects a regulatory liability for the collection of postretirement benefit costs allowed in rates in excess of expense incurred. |
|
| September 30, 2019 |
|
| December 31, 2018 |
| ||
(millions) |
|
|
|
|
|
|
|
|
Virginia Power |
|
|
|
|
|
|
|
|
Regulatory assets: |
|
|
|
|
|
|
|
|
Deferred cost of fuel used in electric generation(1) |
| $ | 78 |
|
| $ | 174 |
|
Deferred rate adjustment clause costs(2)(3) |
|
| 226 |
|
|
| 78 |
|
Deferred nuclear refueling outage costs(4) |
|
| 50 |
|
|
| 69 |
|
PJM transmission rates(5) |
|
| 69 |
|
|
| 45 |
|
Other |
|
| 46 |
|
|
| 58 |
|
Regulatory assets-current(6) |
|
| 469 |
|
|
| 424 |
|
Deferred rate adjustment clause costs(2)(3)(7) |
|
| 88 |
|
|
| 230 |
|
PJM transmission rates(5) |
|
| 169 |
|
|
| 192 |
|
Interest rate hedges(8) |
|
| 555 |
|
|
| 151 |
|
Deferred cost of fuel used in electric generation(1) |
|
| — |
|
|
| 83 |
|
Ash pond and landfill closure costs(9) |
|
| 1,003 |
|
|
| 27 |
|
Other |
|
| 102 |
|
|
| 54 |
|
Regulatory assets-noncurrent |
|
| 1,917 |
|
|
| 737 |
|
Total regulatory assets |
| $ | 2,386 |
|
| $ | 1,161 |
|
Regulatory liabilities: |
|
|
|
|
|
|
|
|
Provision for future cost of removal(10) |
| $ | 92 |
|
| $ | 92 |
|
Cost-of-service impact of 2017 Tax Reform Act(11) |
|
| 2 |
|
|
| 95 |
|
Reserve for rate credits to electric utility customers(12) |
|
| — |
|
|
| 71 |
|
Income taxes refundable through future rates(13) |
|
| 74 |
|
|
| — |
|
Other |
|
| 12 |
|
|
| 41 |
|
Regulatory liabilities-current |
|
| 180 |
|
|
| 299 |
|
Income taxes refundable through future rates(13) |
|
| 2,405 |
|
|
| 2,579 |
|
Nuclear decommissioning trust(14) |
|
| 1,354 |
|
|
| 1,070 |
|
Provision for future cost of removal(10) |
|
| 1,056 |
|
|
| 940 |
|
Other |
|
| 163 |
|
|
| 58 |
|
Regulatory liabilities-noncurrent |
|
| 4,978 |
|
|
| 4,647 |
|
Total regulatory liabilities |
| $ | 5,158 |
|
| $ | 4,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2019 |
|
| December 31, 2018 |
| ||
(millions) |
|
|
|
|
|
|
|
|
Dominion Energy Gas |
|
|
|
|
|
|
|
|
Regulatory assets: |
|
|
|
|
|
|
|
|
Deferred project costs(1) |
| $ | 23 |
|
| $ | 18 |
|
PIPP(2) |
|
| 9 |
|
|
| — |
|
Unrecovered gas costs(3) |
|
| 4 |
|
|
| 9 |
|
Other |
|
| 6 |
|
|
| 2 |
|
Regulatory assets-current |
|
| 42 |
|
|
| 29 |
|
Unrecognized pension and other postretirement benefit costs(4) |
|
| 286 |
|
|
| 392 |
|
Deferred project costs(1) |
|
| 393 |
|
|
| 334 |
|
Other |
|
| 4 |
|
|
| 1 |
|
Regulatory assets-noncurrent(5) |
|
| 683 |
|
|
| 727 |
|
Total regulatory assets |
| $ | 725 |
|
| $ | 756 |
|
Regulatory liabilities: |
|
|
|
|
|
|
|
|
Provision for future cost of removal and AROs(6) |
| $ | 14 |
|
| $ | 14 |
|
PIPP(2) |
|
| — |
|
|
| 3 |
|
Other |
|
| 9 |
|
|
| 4 |
|
Regulatory liabilities-current(7) |
|
| 23 |
|
|
| 21 |
|
Income taxes refundable through future rates(8) |
|
| 1,000 |
|
|
| 1,011 |
|
Provision for future cost of removal and AROs(6) |
|
| 152 |
|
|
| 158 |
|
Overrecovered other postretirement benefit costs(9) |
|
| 110 |
|
|
| 92 |
|
Other |
|
| 37 |
|
|
| 24 |
|
Regulatory liabilities-noncurrent |
|
| 1,299 |
|
|
| 1,285 |
|
Total regulatory liabilities |
| $ | 1,322 |
|
| $ | 1,306 |
|
|
|
|
|
|
|
|
|
| Noncurrent |
|
|
|
|
|
|
|
|
At September 30, 2019, Dominion Energy, Virginia Power and Dominion Energy Gas’2020, Eastern Energy’s regulatory assets include $2.4 billion, $1.3 billion and $115$45 million, respectively, on which they doit does not expect to earn a return during the applicable recovery period. With the exception of certain items discussed above, the majority of these expenditures are expected to be recovered within the next two years.
Note 13.11. Regulatory Matters
Regulatory Matters Involving Potential Loss Contingencies
As a result of issues generated in the ordinary course of business, the Companies areEastern Energy is 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 CompaniesEastern Energy to estimate a range of possible loss. For regulatory matters that the CompaniesEastern Energy 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 areEastern Energy is able to estimate a range of possible loss. For regulatory matters that the Companies areEastern Energy is 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’Eastern Energy’s 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’Eastern Energy’s financial position, liquidity or results of operations.
FERC - Electric23
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.
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.DETI
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’Eastern Energy’s results of operations. In December 2017, DETI provided its response to the audit report. DETI recognized a charge of $129 million ($94 million after-tax) recorded primarily within impairment of assets and other charges in Dominion Energy and Dominion Energy Gas’ Consolidated Statements of Income during the second quarter of 2018 for a disallowance of plant, originally established beginning in 2012, in anticipation of resolution of one matter with FERC. DETI reached resolution of certain matters with FERC in the fourth quarter of 2018. Pending final resolution of the audit process and a determination by FERC, management is unable to estimate the potential impact of the remaining finding and no amounts have been recognized.
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 $171 million. Additionally, Virginia Power proposed to issue a one-time bill credit to customers within 90 days of this effective date, to true-up the difference between the final revenue reduction for the period January 1, 2018 through March 31, 2019 and the $125 million interim rate reduction implemented on July 1, 2018. In March 2019, the Virginia Commission issued an order approving an annual revenue reduction of approximately $183 million effective April 2019 and ordered Virginia Power to implement the one-time customer credit on or before July 1, 2019. In the second quarter of 2019, Virginia Power refunded to customers $132 million.
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 $14 million effective in early 2019. Virginia Power also proposed to issue a one-time bill credit in early 2019 for its 2018 tax savings collected provisionally from customers. The order allowed for the disposition of excess deferred income taxes to be deferred for consideration until the utilities’ next base rate case, but no longer than 3 years, and initiated a quarterly reporting requirement for such deferred amounts. In March 2019, the North Carolina Commission issued an order approving Virginia Power’s proposed annual base rate revenue decrease and one-time bill credit. In the second quarter of 2019, Virginia Power refunded to customers $13 million.
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.
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 andNote 13 to the Consolidated Financial Statements in the Companies’Eastern Energy’s 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 $816 million and the proposed operations and maintenance expenses were $102 million. In January 2019, the Virginia Commission issued its final order approving capital spending for the first three years of the plan totaling $68 million on cyber and physical security and related telecommunications infrastructure (Phase IA). The Virginia Commission declined to approve the remainder of the proposed components for the first three years of the plan, the proposed spending for which was not found reasonable and prudent based on the record in the proceeding.
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 $511 million and the proposed operations and maintenance investment is $83 million. This matter is pending.
Virginia Fuel Expenses
In May 2019, Virginia Power filed its annual fuel factor with the Virginia Commission to recover an estimated $1.5 billion in Virginia jurisdictional projected fuel expenses for the rate year beginning July 1, 2019 and the projected June 30, 2019 underrecovered balance of $124 million. Virginia Power’s proposed fuel rate represented a fuel revenue decrease of $192 million when applied to projected kilowatt-hour sales for the period July 1, 2019 to June 30, 2020. Subsequently in May 2019, Virginia Power revised its fuel factor filing to reduce the projected June 30, 2019 underrecovered balance to $107 million and a fuel revenue decrease of $254 million. In August 2019, the Virginia Commission approved Virginia Power’s fuel rate.
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 $35 million. These matters are pending.
Rate Adjustment Clauses
In December 2018, Virginia Power filed a petition requesting approval of Rider E and proposed a $114 million total revenue requirement for the rate year beginning November 1, 2019. In August 2019, the Virginia Commission issued an order approving in part and denying in part the petition. As a result, Virginia Power recorded a $21 million ($16 million after-tax) charge in impairment of assets and other charges in the Consolidated Statements of Income for the three and nine months ended September 30, 2019 to write-off certain disallowed environmental property, plant and equipment and regulatory assets. In August 2019, the Virginia Commission granted Virginia Power’s petition for reconsideration of the disallowed amount and stayed the order issued earlier in August 2019. In October 2019, the Virginia Commission approved Virginia Power’s request to implement a total revenue requirement of $104 million, subject to true-up, pending resolution of the petition for reconsideration. This matter is pending.
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 $123 million and a total $52 million revenue requirement for the rate year beginning February 1, 2020 for continuing recovery of the previously approved phase conversions and the proposed fourth phase conversions.
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 |
| October 2019 |
| Pending |
| September 2020 |
| $ | 120 |
|
| $ | 1 |
|
Rider US-2 |
| October 2019 |
| Pending |
| September 2020 |
|
| 10 |
|
|
| (5 | ) |
Electric Transmission Projects
In November 2013, the Virginia Commission issued an order granting Virginia Power a CPCN to construct approximately 7 miles of new overhead 500 kV transmission line from the existing Surry switching station in Surry County to a new Skiffes Creek switching station in James City County, and approximately 20 miles of new 230 kV transmission line in James City County, York County, and the City of Newport News from the proposed new Skiffes Creek switching station to Virginia Power’s existing Whealton substation in the City of Hampton. In February 2019, the transmission line project was placed into service. In March 2019, the U.S. Court of Appeals for the D.C. Circuit issued an order vacating the permit from the U.S. Army Corps of Engineers issued in July 2017 and ordered the U.S. Army Corps of Engineers to do a full environmental impact study of the project. In April 2019, Virginia Power and the U.S. Army Corps of Engineers filed petitions for rehearing with the U.S. Court of Appeals for the D.C. Circuit, asking that the permit from the U.S. Army Corps of Engineers remain in effect while an environmental impact study is performed. In May 2019, the U.S. Court of Appeals for the D.C. Circuit denied the request for rehearing and ordered the U.S. District Court for the D.C. Circuit to consider and issue a ruling on whether the permit should be vacated during the U.S. Army Corps of Engineers’ preparation of an environmental impact statement. This matter is pending.
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 |
| March 2019 |
| September 2019 |
| 230 kV |
| <1 |
| $ | 125 |
|
Rebuild and operate five segments between the Loudoun and Ox substations |
| August 2019 |
| Pending |
| 230 kV |
| 19 |
|
| 70 |
|
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 $27 million effective November 1, 2019 on an interim basis subject to refund, with any permanent rates ordered by the North Carolina Commission effective January 1, 2020. The base rate increase was proposed to recover the significant investments in generation, transmission and distribution infrastructure for the benefit of North Carolina customers. Virginia Power presented an earned return of 7.52% based upon a fully-adjusted test period, compared to its authorized 9.90% return, and proposed a 10.75% ROE. In September 2019, Virginia Power revised its filing to reduce the non-fuel base rate increase to $24 million. This matter is pending.
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 $18 million decrease to the fuel component of its electric rates for the rate year beginning February 1, 2020. This matter is pending.
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 $437 million. This represents a $7 million overall increase to its natural gas rates under the terms
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 $436 million effective with the first billing cycle of November 2019.
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 $3 million as of March 31, 2019, and recovery of prospective net bad debt expense projected to total approximately $15 million for the twelve-month period from April 2019 to March 2020 for the rate year beginning August 1, 2019.
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 $29 million and $39 million of projected capital investment for 2019 and 2020, respectively. The application also includes a true-up of PREP costs related to the 2018 actual capital investment of $30 million and sets forth $10 million of annual PREP costs to be recovered in proposed rates effective November 1, 2019. In October 2019, the West Virginia Commission approved PREP rates effective November 1, 2019.
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 8.2 million cubic feet per day. In October 2019, the Utah Commission granted pre-approval to construct the LNG storage facility.
FERC – Gas
Cove Point
In June 2015, Cove Point executed 2 binding precedent agreements forJanuary 2020, pursuant to the approximately $150 million Eastern Market Access Project. In January 2018, Cove Point received FERC authorization to construct and operate the project facilities. In October 2018, Cove Point announced it was evaluating alternatives toterms of a proposed Charles County, Maryland compressor station that was initially part of this project and in December 2018, after working with project customers for alternative solutions, decided not to pursue further construction at this location resulting in a revised project estimate of approximately $45 million and a write-off of $37 million ($28 million after-tax). In May 2019,previous settlement, Cove Point filed an applicationa general rate case for an amendmentits FERC-jurisdictional services, with proposed rates to vacate its FERC authorization for the Charles County, Maryland compressor station and revised its project scope. In August 2019,be effective March 1, 2020. Cove Point receivedproposed an annual cost-of-service of approximately $182 million. In February 2020, FERC authorization andapproved suspending the Eastern Market Access Project commenced commercial operationschanges in September 2019.rates for five months following the proposed effective date, until August 1, 2020, subject to refund.
In connection with the Eastern Market Access Project, in August 2019,February 2020, Cove Point filed to updatesubmitted its annual electric power cost adjustment to FERC requesting FERC approval to recover $25 million, representing an increase of $1 million from the adjustment approved in March 2019.$28 million. FERC approved the adjustment in August 2019.March 2020.
DETI
In December 2019, DETI filed an application to request FERC authorization to construct, operate and maintain the Tri-West project to provide 120,000 dekatherms per day of firm transportation service from Pennsylvania to Ohio for delivery to Tennessee Gas Pipeline Company, L.L.C. The application was automatically approved after a 60-day waiting period from the date of filing and the project commenced commercial operations in August 2020 at a cost of $17 million.
In September 2019,2020, DETI submitted its annual transportation cost rate adjustment to FERC requesting approval to recover $38$37 million. Also in September 2019,2020, DETI submitted its annual electric power cost adjustment to FERC requesting approval to recover $10$8 million. In October 2019,2020, FERC approved these adjustments.
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 $13 million ($10 million after-tax), included in impairment of assets and other charges (benefits) in Dominion Energy and Dominion Energy Gas’Eastern Energy’s Consolidated Statements of Income.
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. The changes to AROs during 2019 were as follows:
| Amount |
| ||
(millions) |
|
|
|
|
Dominion Energy |
|
|
|
|
AROs at December 31, 2018(1) | $ |
| 2,532 |
|
Obligations incurred during the period(2) |
|
| 2,404 |
|
Obligations settled during the period |
|
| (100 | ) |
AROs acquired in the SCANA Combination |
| 577 |
| |
Revisions in estimated cash flows(2) |
|
| (229 | ) |
Accretion |
| 153 |
| |
AROs at September 30, 2019(1) | $ |
| 5,337 |
|
Virginia Power |
|
|
|
|
AROs at December 31, 2018(3) | $ |
| 1,445 |
|
Obligations incurred during the period(2) |
|
| 2,403 |
|
Obligations settled during the period |
|
| (60 | ) |
Revisions in estimated cash flows(2) |
|
| (202 | ) |
Accretion |
| 94 |
| |
AROs at September 30, 2019(3) | $ |
| 3,680 |
|
Dominion Energy Gas |
|
|
|
|
AROs at December 31, 2018(4) | $ | 167 |
| |
Obligations settled during the period |
|
| (6 | ) |
Revisions in estimated cash flows |
|
| (26 | ) |
Accretion |
| 7 |
| |
AROs at September 30, 2019(4) | $ | 142 |
|
|
|
|
|
|
|
|
|
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 $5.9 billion and $4.9 billion, respectively. At September 30, 2019 and December 31, 2018, the aggregate fair value of Virginia Power’s trusts, consisting primarily of debt and equity securities, totaled $2.7 billion and $2.4 billion, respectively.
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 |
| $ | 455 |
|
Finance lease assets(1) |
|
| 159 |
|
Total lease assets |
| $ | 614 |
|
Lease liabilities: |
|
|
|
|
Operating lease liabilities(2) |
| $ | 58 |
|
Finance lease liabilities(3) |
|
| 30 |
|
Total lease liabilities - current |
|
| 88 |
|
Operating lease liabilities |
|
| 394 |
|
Finance lease liabilities(4) |
|
| 132 |
|
Total lease liabilities - noncurrent |
|
| 526 |
|
Total lease liabilities |
| $ | 614 |
|
Virginia Power |
|
|
|
|
Operating lease assets |
| $ | 184 |
|
Finance lease assets(1) |
|
| 15 |
|
Total lease assets |
| $ | 199 |
|
Lease liabilities: |
|
|
|
|
Operating lease liabilities(2) |
| $ | 30 |
|
Finance lease liabilities(3) |
|
| 3 |
|
Total lease liabilities - current |
|
| 33 |
|
Operating lease liabilities |
|
| 152 |
|
Finance lease liabilities(4) |
|
| 11 |
|
Total lease liabilities - noncurrent |
|
| 163 |
|
Total lease liabilities |
| $ | 196 |
|
Dominion Energy Gas |
|
|
|
|
Operating lease assets |
| $ | 56 |
|
Finance lease assets(1) |
|
| 10 |
|
Total lease assets |
| $ | 66 |
|
Lease liabilities: |
|
|
|
|
Operating lease liabilities(2) |
| $ | 12 |
|
Finance lease liabilities(3) |
|
| 2 |
|
Total lease liabilities - current |
|
| 14 |
|
Operating lease liabilities |
|
| 44 |
|
Finance lease liabilities(4) |
|
| 8 |
|
Total lease liabilities - noncurrent |
|
| 52 |
|
Total lease liabilities |
| $ | 66 |
|
|
|
|
|
|
|
|
|
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 $2.8 billion and $341 million, respectively, related to facilities subject to power purchase agreements under which Dominion Energy is the lessor.
For the three and nine months ended September 30, 2019, total lease cost associated with the Companies’ lessee leasing arrangements consisted of the following:
|
| Three Months Ended September 30, 2019 |
|
| Nine Months Ended September 30, 2019 |
| ||
(millions) |
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
Finance lease cost: |
|
|
|
|
|
|
|
|
Amortization |
| $ | 7 |
|
| $ | 14 |
|
Interest |
|
| 1 |
|
|
| 3 |
|
Operating lease cost |
|
| 20 |
|
|
| 64 |
|
Short-term lease cost |
|
| 7 |
|
|
| 20 |
|
Variable lease cost |
|
| 1 |
|
|
| 4 |
|
Total lease cost |
| $ | 36 |
|
| $ | 105 |
|
Virginia Power |
|
|
|
|
|
|
|
|
Operating lease cost |
| $ | 10 |
|
| $ | 31 |
|
Short-term lease cost |
|
| 3 |
|
|
| 7 |
|
Variable lease cost |
|
| 1 |
|
|
| 2 |
|
Total lease cost |
| $ | 14 |
|
| $ | 40 |
|
Dominion Energy Gas |
|
|
|
|
|
|
|
|
Operating lease cost |
| $ | 3 |
|
| $ | 10 |
|
Short-term lease cost |
|
| 2 |
|
|
| 5 |
|
Total lease cost |
| $ | 5 |
|
| $ | 15 |
|
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 |
| $ | 3 |
|
Operating cash flows for operating leases |
|
| 89 |
|
Financing cash flows for finance leases |
|
| 12 |
|
Virginia Power |
|
|
|
|
Operating cash flows for operating leases |
|
| 40 |
|
Dominion Energy Gas |
|
|
|
|
Operating cash flows for operating leases |
|
| 15 |
|
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 $64 million and $146 million, respectively, of rental revenue included in operating revenue and $23 million and $70 million, respectively, of depreciation expense, included in depreciation, depletion and amortization, related to facilities subject to power purchase agreements under which Dominion Energy is the lessor.
At September 30, 2019, the weighted average remaining lease term and weighted discount rate for the Companies’ finance and operating leases were as follows:
| ||
| ||
|
| |
|
| |
|
| |
|
| |
| ||
|
| |
|
| |
|
| |
|
| |
| ||
|
| |
|
| |
|
| |
|
|
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 |
| $ | 18 |
|
| $ | 10 |
|
| $ | 8 |
|
| $ | 1 |
|
| $ | 5 |
|
| $ | 1 |
|
2020 |
|
| 68 |
|
|
| 39 |
|
|
| 33 |
|
|
| 3 |
|
|
| 13 |
|
|
| 2 |
|
2021 |
|
| 61 |
|
|
| 33 |
|
|
| 29 |
|
|
| 3 |
|
|
| 11 |
|
|
| 2 |
|
2022 |
|
| 50 |
|
|
| 31 |
|
|
| 23 |
|
|
| 3 |
|
|
| 9 |
|
|
| 2 |
|
2023 |
|
| 40 |
|
|
| 28 |
|
|
| 18 |
|
|
| 2 |
|
|
| 6 |
|
|
| 2 |
|
After 2023 |
|
| 538 |
|
|
| 49 |
|
|
| 160 |
|
|
| 4 |
|
|
| 25 |
|
|
| 3 |
|
Total undiscounted lease payments |
|
| 775 |
|
|
| 190 |
|
|
| 271 |
|
|
| 16 |
|
|
| 69 |
|
|
| 12 |
|
Present value adjustment |
|
| (323 | ) |
|
| (28 | ) |
|
| (89 | ) |
|
| (2 | ) |
|
| (13 | ) |
|
| (2 | ) |
Present value of lease liabilities |
| $ | 452 |
|
| $ | 162 |
|
| $ | 182 |
|
| $ | 14 |
|
| $ | 56 |
|
| $ | 10 |
|
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 $365 million, which funded total project costs. The project became substantially complete in August 2019 at which point the facility was available for Dominion Energy’s use and the five-year lease term commenced.
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 five years, subject to the approval of the participants, at current market terms, (ii) purchase the property for an amount equal to the project costs or, (iii) subject to certain terms and conditions, sell the property on behalf of the lessor to a third party using commercially reasonable efforts to obtain the highest cash purchase price for the property. If the project is sold and the proceeds from the sale are insufficient to repay the investors for the project costs, Dominion Energy may be required to make a payment to the lessor, up to 87% of project costs, for the difference between the project costs and sale proceeds. No end-of-term options were deemed reasonably certain of exercise at commencement date. At commencement, Dominion Energy recorded a right-of-use asset and offsetting lease obligation of $67 million, representing the present value of consideration over the five-year term at the rate implicit in the lease.
Note 16.12. Variable Interest Entities
There have been no significant changes regarding the entities the Companies considerEastern Energy considers VIEs as described in Note 1516 to the Consolidated Financial Statements in the Companies’Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.
Dominion
Eastern Energy
At September 30, 2019 purchased shared services from DECGS and December 31, 2018, Dominion Energy’s securities due within one year includes $31DEQPS of $3 million and $31$7 million respectively, and long-term debt includes $290 million and $299 million, respectively, of debt issued by SBL Holdco, a VIE, net of issuance costs, that is nonrecourse to Dominion Energy and is secured by SBL Holdco’s interest in certain merchant solar facilities.
Virginia Power
Virginia Power had a long-term power and capacity contract with 1 non-utility generator with an aggregate summer generation capacity of approximately 218 MW. In May 2019, Virginia Power entered into an agreement and paid $135 million to terminate the remaining contract with the non-utility generator, effective April 2019. A $135 million ($100 million after-tax) charge was recorded in impairment of assets and other charges in Virginia Power’s Consolidated Statements of Income during the second quarter of 2019. Virginia Power paid $13 million for electric capacity and $4 million for electric energy to the non-utility generator in the three months ended September 30, 2018. Virginia Power paid2020, $4 million and $8 million for the three months ended September 30, 2019, $10 million and $21 million for the nine months ended September 30, 2020, and $13 million and $38$28 million for electric capacity and $1 million and $14 million for electric energy to the non-utility generator in the nine months ended September 30, 2019, respectively. Eastern Energy’s Consolidated Balance Sheets included amounts due to both DECGS and 2018, respectively.DEQPS of $29 million and $15 million at September 30, 2020 and December 31, 2019, respectively, recorded in payable to affiliates.
Virginia Power and DominionEastern Energy Gas
Virginia Power and Dominion Energy Gas purchased shared services from DES, an affiliated VIE, of $83$22 million and $31$25 million for the three months ended September 30, 2020 and 2019, $79respectively, and $80 million and $31 million for the three months ended September 30, 2018, $301 million and $116$92 million for the nine months ended September 30, 2020 and 2019, and $251 million and $94 million for the nine months ended September 30, 2018, respectively. Virginia Power and Dominion Energy Gas’Eastern Energy’s Consolidated Balance Sheets includedinclude amounts due to DES of $50$61 million and $19$27 million respectively, at September 30, 2019,2020 and $107 million and $46 million, respectively, at December 31, 2018,2019, respectively, recorded in payables to affiliates.
Note 17.13. Significant Financing Transactions
Credit Facilities and Short-term Debt
The Companies useEastern Energy uses 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
24
Eastern 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) |
| $ | 6,000 |
|
| $ | 2,394 |
|
| $ | 81 |
|
| $ | 3,525 |
|
|
|
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 $21 million in letters of credit. At September 30, 2019, Dominion Energy had $21 million in letters of credit outstanding under this agreement.
In March 2019, DESC’s existing $700 million credit facility was terminated and DESC was added as a borrower to the joint revolving credit facility discussed above with Dominion Energy, Virginia Power, Dominion Energy Gas and Questar Gas. At September 30, 2019, the sub-limit for DESC was $500 million.
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 $30 million of credit facilities which had an original stated maturity date of December 2017 with automatic one-year renewals through the maturity of the SBL Holdco term loan agreement in 2023. Dominion Solar Projects III, Inc. has $25 million of credit facilities which had an original stated maturity date of May 2018 with automatic one-year renewals through the maturity of the Dominion Solar Projects III, Inc. term loan agreement in 2024. At September 30, 2019, 0 amounts were outstanding under either of these facilities.
In February 2019, Dominion Energy Midstream terminated its $500 million revolving credit facility subsequent to repaying the outstanding balance of $73 million, plus accrued interest.
In September 2019, Dominion Energy Questar Corporation borrowed $3.0 billion under a 364-Day Term Loan Agreement that bears interest at a variable rate. The proceeds from the borrowing were used to repay the principal of Cove Point’s $3.0 billion term loan due in 2021. Dominion Energy has provided a guarantee to support Dominion Energy Questar Corporation’s obligation under the 364-Day Term Loan Agreement.
Virginia Power
Virginia Power’s short-term financing iswas supported through its access as co-borrower to the joint revolving credit facility. At September 30, 2020, a maximum of $1.5 billion of the facility was available to Eastern Energy and the sub-limit was $750 million. At September 30, 2020, Eastern Energy did not have any commercial paper or letters of credit outstanding under the joint credit facility. This credit facility can bewas 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 In October 2020, 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) |
| $ | 6,000 |
|
| $ | 685 |
|
| $ | 6 |
|
|
|
Dominion Energy Gas
Dominion Energy Gas’ short-term financing is supported through its access as co-borrower to the joint revolving credit facility. Thisfacility to remove Eastern Energy as a co-borrower. After the acquisition of Eastern Energy by BHE, short-term liquidity needs may be satisfied through short-term intercompany borrowings from BHE. In November 2020, Eastern Energy entered into a $400 million intercompany revolving credit agreement with BHE GT&S, LLC, an indirect wholly-owned subsidiary of BHE, expiring November 2021 with a recurring one-year extension option. The 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, 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) |
| $ | 1,500 |
|
| $ | 280 |
|
| $ | — |
|
|
|
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 $300 millionhas a variable rate term loan agreement due in December 2019 at the principal outstanding plus accrued interest.
In February and March 2019, DESC purchased certain of its first mortgage bonds having an aggregate purchase price of $1.2 billion pursuant to tender offers. Also in March 2019, SCANA purchased certain of its medium term notes having an aggregate purchase price of $300 million pursuant to a tender offer. Both DESC tender offers and the SCANA tender offer expired in the first quarter of 2019.
In March 2019, Dominion Energy issued $400 million of 4.60% senior notes that mature in 2049.
In March 2019, Dominion Energy issued an additional $200 million of its 4.25% senior notes that mature in 2028.
In May 2019, Virginia Power redeemed its $40 million 5.0% Economic Development Authority of the County of Chesterfield Pollution Control Refunding Revenue Bonds, Series 2009A, due in 2023 at the principal outstanding plus accrued interest.
In May 2019, GENCO redeemed its 5.49% senior secured notes due in 2024 at the remaining principal outstanding of $33 million plus accrued interest. In June 2019, the first mortgage lien on an electric generating facility that previously secured these notes was released.
In May 2019, Virginia Power remarketed 4 series of tax-exempt bonds, with an aggregate outstanding principal of $198 million to new investors. NaN of the bonds will bear interest at a coupon rate of 1.8% until April 2022, after which it will bear interest at a market rate to be determined at that time. NaN of the bonds will bear interest at a coupon rate of 1.9% until June 2023, after which they will bear interest at a market rate to be determined at that time.
In June 2019, Dominion Energy purchased and cancelled $12 million and $13 million of its June 2006 hybrids and September 2006 hybrids, respectively. All purchases were conducted in compliance with the applicable replacement capital covenant.
In July 2019, Virginia Power issued $500 million of 2.875% senior notes that mature in 2029.
In August 2019, Dominion Energy issued $1.0 billion of 2.45% senior notes that mature in 2023 through a private placement.
In September 2019, DESC purchased certain of its first mortgage bonds with an outstanding principal balance of $552 million pursuant to a tender offer that expired in the third quarter of 2019.
In October 2019, Dominion Energy Terminal Company remarketed its $27 million Peninsula Ports Authority of Virginia Coal Terminal Revenue Refunding Bonds, Series 2003 due in 2033 resulting in a reset of the interest rate from 1.55% to 1.70% until 2022.
In October 2019, Dominion Energy Gas provided notice to holders to redeem its $450 million 2014 Series A 2.50% senior notes in full in November 2019 that would have otherwise matured in December 2019.
Remarketable Subordinated Notes
In June 2019, Dominion Energy successfully remarketed its $700 million 2016 Series A-1 2.0% RSNs due 2021 and $700 million 2016 Series A-2 2.0% RSNs due 2024 pursuant to the terms of the 2016 Equity Units. In connection with the remarketing, the interest ratesbased on the Series A-1 and Series A-2 notes were reset to 2.715% and 3.071%, respectively, payable onLondon Interbank Offered Rate plus a semi-annual basis, and Dominion Energy ceased to have the ability to redeem the notes at its option or defer interest payments. At September 30, 2019, the securities are included in junior subordinated notes in Dominion Energy's Consolidated Balance Sheets. Dominion Energy did not receive any proceeds from the remarketing. Remarketing proceeds belonged to the investors holding the related 2016 Equity Units and were used to purchase a portfolio of treasury securities. Upon maturity of the portfolio, the proceeds were applied on behalf of investors on the settlement date of the related stock purchase contracts to pay the purchase price to Dominion Energy for the issuance of 18.5 million shares of its common stock in August 2019.
fixed spread.
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 26.7 million common units representing limited partner interests in Dominion Energy Midstream. As a result of the increase in its ownership interest in Dominion Energy Midstream, Dominion Energy recorded a decrease in noncontrolling interest, and a corresponding increase in shareholders’ equity, of $375 million reflecting the change in the carrying value of the interest in the net assets of Dominion Energy Midstream held by others.
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 22.5 million shares of common stock valued at $1.6 billion. Under the terms of the agreement and plan of merger, each publicly held outstanding common unit representing limited partner interests in Dominion Energy Midstream was converted into the right to receive 0.2492 shares of Dominion Energy common stock. Immediately prior to the closing, each Series A Preferred Unit representing limited partner interests in Dominion Energy Midstream was converted into common units representing limited partner interests in Dominion Energy Midstream in accordance with the terms of Dominion Energy Midstream’s partnership agreement. The merger was accounted for by Dominion Energy following the guidance for a change in a parent company’s ownership interest in a consolidated subsidiary. Because Dominion Energy controls Dominion Energy Midstream both before and after the merger, the changes in Dominion Energy’s ownership interest in Dominion Energy Midstream were accounted for as an equity transaction and 0 gain or loss was recognized. In connection with the merger, Dominion Energy recognized $40 million of income taxes in equity primarily attributable to establishing additional regulatory liabilities related to excess deferred income taxes and changes in state income taxes.
2019 Corporate Units
In June 2019,Subsequent to this activity, as a result of the Dominion Energy issued $1.6 billionGas Restructuring, Eastern Energy is considered to have acquired all 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. The net proceeds were used for general corporate purposes and to repay short-term debt, including commercial paper.
Each 2019 Series A Corporate Unit consists of a stock purchase contract and a 1/10, or 10%, undivided beneficial ownership interest in one share of Series A Preferred Stock. Beginning in June 2022, the Series A Preferred Stock is convertible at the option of the holder into Dominion Energy common stock under a formula based upon the average closing price of Dominion Energy common stock prior to the conversion date. The Series A Preferred Stock is redeemable in cash by Dominion Energy beginning September 2022 at the liquidation preference. Settlement of any conversion is payable in cash, common stock or a combination thereof, at Dominion Energy’s election.
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 $100 per Corporate Unit and the number of shares to be purchased will be determined under a formula based upon the average closing price of Dominion Energy common stock near the settlement date. The Series A Preferred Stock was pledged upon issuance as collateral to secure the purchase of common stock under the related stock purchase contracts.
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
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 21.8 million.
Selected information about Dominion Energy’s 2019 Equity Units is presented below:
Issuance Date |
| Units Issued |
| Total Net Proceeds(1) |
|
| Total Preferred Stock |
|
| Cumulative Dividend Rate |
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| Stock Purchase Contract Annual Rate |
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| Stock Purchase Contract Liability(2) |
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| Stock Purchase Contract Settlement Date | |||||
(millions except interest rates) |
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6/14/2019 |
| 16 |
| $ | 1,582 |
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| $ | 1,610 |
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| 1.75 | % |
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| 5.5 | % |
| $ | 250 |
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| 6/1/2022 |
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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 byand Dominion Energy through the issuanceMidstream became a wholly-owned subsidiary of common stock as noted above.Eastern Energy.
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.
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 2.1 million shares and received cash proceeds of $154 million, net of fees and commissions paid of $2 million. Following these issuances, Dominion Energy has the ability to issue $645 million of securities under its existing at-the-market program.
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 20 million shares of Dominion Energy common stock. The underwriting agreement granted the underwriters a 30-day option to purchase up to an additional 3 million shares of Dominion Energy common stock, which the underwriters exercised with respect to approximately 2.1 million shares in April 2018. Dominion Energy entered into separate forward sale agreements with the forward purchasers with respect to the additional shares. In December 2018, Dominion Energy received proceeds of $1.4 billion (after deducting underwriting discounts, but before deducting expenses, and subject to forward price adjustments under the forward sale agreements) upon the physical settlement of 22.1 million shares.
Note 18.14. Commitments and Contingencies
As a result of issues generated in the ordinary course of business, the Companies areEastern Energy is 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 CompaniesEastern Energy to estimate a range of possible loss. For such matters that the CompaniesEastern Energy 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 areEastern Energy is able to estimate a range of possible loss. For legal proceedings and governmental examinations that the Companies areEastern Energy is 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’Eastern Energy’s 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’Eastern Energy’s financial position, liquidity or results of operations.
Environmental Matters
The Companies areEastern 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.
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
25
may choose to develop regulatory programs that are more restrictive. Many of the Companies’Eastern Energy’s 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 areEastern Energy is 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’Eastern Energy’s 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. UntilIn August 2020, the proposed rule regardingEPA issued two final amendments related to the reconsideration is final, Dominionof the NSPS for the oil and natural gas sector applicable to VOC and methane emissions. Together, the two amendments have the effect of rescinding the methane portion of the NSPS for all segments of the oil and natural gas sector, rescinding all NSPS for the transmission and storage segment and modifying some of the NSPS VOC requirements for facilities in the production and processing segments. The two amendments have been challenged in the U.S. Court of Appeals for the D.C. Circuit but remain in effect pending the outcome of the litigation. Eastern Energy and
Dominion Energy Gas are implementing the 2016 regulation. Dominion Energy and Dominion Energy Gas areis 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 PSDprevention of significant deterioration 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 75,000 tons per year of CO2carbon dioxide equivalent emissions under which a source would not be required to apply BACTbest available control technology for its GHG emissions. Until the EPA ultimately takes final action on this rulemaking, the CompaniesEastern Energy cannot predict the impact to theirits results of operations, financial condition and/or cash flows.
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 28.0 million ton initial state-wide carbon cap in 2020. The cap is reduced by approximately 3 percent per year through 2030, resulting in an ultimate cap of 19.6 million tons. The final rule includes a provision for VDEQ to delay implementation of the rule and possible adjustments to the baseline cap pending authorization from the General Assembly and Governor of Virginia. Once VDEQ is authorized to begin implementation of the rule, the impacts of this program could be material to Dominion Energy and Virginia Power’s results of operations, financial condition and/or cash flows; however, the existing regulatory framework in Virginia provides rate recovery mechanisms that could substantially mitigate any such impact.
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 aspectsAt a minimum, states are required to establish regulatory programs to address all requirements of the CWA. However, states may choose to develop regulatory programs that are more restrictive. Many of Eastern Energy’s facilities are subject to CWA permitting and other state requirements. Eastern Energy does not currently foresee the existing 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 employas having a cooling water intake structure and that have flow levels exceeding a minimum threshold became effective. The rule establishes a national standard for impingement basedmaterial effect 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 5 mandatory facility-specific factors, including a social cost-benefit test, and 6 optional facility-specific factors. The rule governs all electric generating stations with water withdrawals above two MGD, with a heightened entrainment analysis for those facilities over 125 MGD. Dominion Energy and Virginia Power currently have 13 and 7 facilities, respectively, that may be subject to the final regulations. Dominion Energy anticipates that it may have to install impingement control technologies at certain of these stations that have once-through cooling systems. Dominion Energy and Virginia Power are currently evaluating the need or potential for entrainment controls under the final rule as these decisions will be made on a case-by-case basis after a thorough review of detailed biological, technology, cost and benefit studies. 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.
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 2 separate petitions for reconsideration of the Effluent Limitations Guidelines final rule and stayed future compliance dates in the rule. Also in April 2017, the U.S. Court of Appeals for the Fifth Circuit granted the EPA’s request for a stay of the pending consolidated litigation challenging the rule while the EPA addresses the petitions for reconsideration. In September 2017, the EPA signed a rule to postpone the earliest compliance dates for certain waste streams regulations in the Effluent Limitations Guidelines final rule from November 2018 to November 2020; however, the latest date for compliance for these regulations remains December 2023. The EPA is proposing to complete new rulemaking for these waste streams. 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.
flows.
Waste Management and Remediation
The operations of Eastern Energy is subject to a variety of state and federal laws and regulations governing the management and disposal of solid and hazardous waste, and release of hazardous substances associated with current and/or historical operations. The CERCLA, as amended, providesand similar state laws, may impose joint, several and strict liability for immediate response and removal actions coordinatedcleanup on potentially responsible parties who owned, operated or arranged for disposal at facilities affected by the EPA in the eventa release of threatenedhazardous substances. In addition, many states have created programs to incentivize voluntary remediation of sites where historical releases of hazardous substances into the environmentare identified and authorizes the U.S. government either to clean up sites at which hazardous substances have created actualproperty owners 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 ordereddecide 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.initiate cleanups.
From time to time, DominionEastern Energy Virginia Power or Dominion Energy Gas may be identified as a potentially responsible party toin connection with the alleged release of hazardous substances or wastes at a Superfund site. The EPA (or a state) can either allow such a party to conductUnder applicable federal 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, Dominionstate laws, Eastern Energy Virginia Power or Dominion Energy Gas maycould be responsible for costs associated with the costs of remedial investigation and actions under the Superfund law or other laws or regulations regarding the remediation of waste. The Companies doimpacted sites, or subject to contribution claims by other responsible parties for their costs incurred at such sites. Eastern Energy also may identify, evaluate and remediate other potentially impacted sites under voluntary state programs. Remediation costs may be subject to reimbursement under Eastern Energy’s insurance policies, rate recovery mechanisms, or both. Eastern Energy does 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 22 former manufactured gas plant sites, 3 of which pertain to Virginia Power and 12 of which pertain to Dominion Energy Gas. Studies conducted by other utilities at their former manufactured gas plant sites have indicated that those sites contain coal tar and other potentially harmful materials. Except as disclosed below, none of the former sites with which the Companies are associated is under investigation by any state or federal environmental agency. At 1 of the former sites, Dominion26
Other Legal Matters
Eastern Energy is conducting a state-approved post closure groundwater monitoring program and an environmental land use restriction has been recorded. In addition, a Virginia Power site has been accepted into a state-based voluntary remediation program. In June 2018, Virginia Power submitted a proposed remedial action plan to remove material from this site at an estimated cost of $18 million. Pending VDEQ approval, Virginia Power expects to begin remedial work at this site in late 2019. As a result, in June 2018, Virginia Power recorded a charge of $16 million ($12 million after-tax) in other operations and maintenance expense in the Consolidated Statements of Income. The 4 sites Dominion Energy acquired in the SCANA Combination associated with DESC are in various states of investigation, remediation and monitoring under work plans approved by, or under review by, the SCDHEC or the EPA. Dominion Energy anticipates that activities at these sites will continue through 2020 at an estimated cost of $10 million. In September 2018, DESC submitted an updated remediation work plan at 1 site to SCDHEC, which if approved, would increase costs by approximately $8 million. DESC expects to recover costs arising from the remediation work at all four sites through rate recovery mechanisms. Due to the uncertainty surrounding the other sites, the Companies are unable to make an estimate of the potential financial statement impacts.
See below for discussion on ash pond and landfill closure costs.
Other Legal Matters
The Companies are defendantsdefendant 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 areEastern Energy is 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
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 $386 million included primarily within other current liabilities and insurance receivables of $173 million included within other receivables at September 30, 2019. During the three and nine months ended September 30, 2019, Dominion Energy’s Consolidated Statements of Income include charges of $38 million ($28 million after-tax) and $316 million ($236 million after-tax), respectively, included within impairment of assets and other charges.
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 $2.0 billion, net of a credit of up to $2.0 billion in future electric bill relief, which would inure to the benefit of the escrow account in favor of class members over a period of time established by the South Carolina Commission in its order related to matters before the South Carolina Commission related to the NND Project, (2) a cash payment of $115 million and (3) the transfer of certain DESC-owned real estate or sales proceeds from the sale of such properties, which counsel for the DESC Ratepayer Class estimate to have an aggregate value between $60 million and $85 million. At the closing of the SCANA Combination, SCANA and DESC funded the cash payment portion of the escrow account. The court held a fairness hearing on the settlement in May 2019. In June 2019, the court entered an order granting final approval of the settlement, which order became effective July 2019. In July 2019, DESC transferred $117 million representing the cash payment, plus accrued interest, to the plaintiffs. In addition, property, plant and equipment with a net recorded value of $54 million is in the process of being transferred to the plaintiffs in coordination with the court-appointed real estate trustee to satisfy the settlement agreement.
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.
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 $192.5 million, up to $32.5 million of which can be satisfied through the issuance of shares of Dominion Energy common stock, subject to approval by the U.S. District Court for the District of South Carolina.
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.
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 $100 million for 100% of the NND Project.
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 $410 million, excluding interest, from the SCDOR following its audit of DESC’s sales and use tax returns for the periods September 1, 2008 through December 31, 2017. The proposed assessment, which includes 100% of the NND Project, is based on the SCDOR’s position that DESC’s sales and use tax exemption for the NND Project does not apply because the facility will not become operational. DESC has protested the proposed assessment, which remains pending.
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 55%. Various difficulties were encountered in connection with the project. The ability of Westinghouse and WECTEC to adhere to established budgets and construction schedules was affected by many variables, including unanticipated difficulties encountered in connection with project engineering and the construction of project components, constrained financial resources of the contractors,
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 $285 million of filed liens in Fairfield County, South Carolina. Most of these asserted liens are claims that relate to work performed by Westinghouse subcontractors before the Westinghouse bankruptcy, although some of them are claims arising from work performed after the Westinghouse bankruptcy.
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 11 different facilities, 8 of which are at Virginia Power. This rule created a legal obligation for Dominion Energy and Virginia Power to retrofit or close all of its inactive and existing ash ponds over a certain period of time, as well as perform required monitoring, corrective action, and post-closure care activities as necessary.
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 2
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 4 stations, to include an evaluation of excavation for recycling or off-site disposal, surface and groundwater conditions and safety. Virginia Power completed the assessments and provided the report on December 1, 2017. In April 2018, the Governor of Virginia signed legislation into law extending the existing permit moratorium until July 2019. The legislation also required Virginia Power to solicit and compile by November 2018, information from third parties on the suitability, cost and market demand for beneficiation or recycling of coal ash from these units. The coal ash recycling business plan was submitted to the legislature in November 2018. The extended moratorium does not apply to a permit required for an impoundment where CCRs have already been removed and placed in another impoundment on-site, are being removed from an impoundment, or are being processed in connection with a recycling or beneficial use project. In connection with this legislation, in the second quarter of 2018, Virginia Power recorded an increase to its ARO and a related environmental liability related to future ash pond and landfill closure costs of $131 million, which resulted in an $81 million ($60 million after-tax) charge recorded in other operations and maintenance expense in its Consolidated Statement of Income, a $46 million increase in property, plant and equipment associated with asset retirement costs and a $4 million increase in regulatory assets.
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 6.8 million cubic yards of CCR be beneficially reused and that costs associated with the closure of these CCR units be recoverable through a rate adjustment clause approved by the Virginia Commission with a revenue requirement that cannot exceed $225 million in any 12-month period. In connection with this legislation, Virginia Power recorded a $2.4 billion ARO related to the cost of landfills and beneficial reuse, with an offsetting increase to property, plant and equipment of $1.3 billion for the Chesterfield power station and an increase primarily to regulatory assets for the remaining portion related to the Bremo, Chesapeake and Possum Point power stations during the first quarter of 2019. In addition, Virginia Power revised its estimated cash flows for the existing ARO related to future ash pond and landfill closure costs, which resulted in a decrease of $202 million and a corresponding $113 million ($84 million after-tax) benefit in other operations and maintenance expense in the Consolidated Statement of Income in the first quarter of 2019. The actual AROs related to CCRs may vary substantially from the estimates used to record the obligation.
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.
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 $14.1 billion to $13.9 billion. This decrease does not impact Dominion Energy’s responsibility per active unit under the Price-Anderson Amendments Act of 1988.
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 $3.4 billion revolving credit facility with a stated maturity date of October 2021. Dominion Energy’s maximum potential loss exposure under the terms of the guarantee is limited to 48% of the outstanding borrowings under the revolving credit facility, an equal percentage to Dominion Energy’s ownership in Atlantic Coast Pipeline. As of September 30, 2019, Atlantic Coast Pipeline has borrowed $1.7 billion against the revolving credit facility and borrowed an additional $41 million in October 2019. Dominion Energy’s Consolidated Balance Sheets include a liability of $15 million and $21 million associated with this guarantee agreement at September 30, 2019 and December 31, 2018, respectively.
In addition, at September 30, 2019, Dominion Energy had issued an additional $27 million of guarantees, primarily to support other equity method investees. No amounts related to the other guarantees have been recorded.
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.
At September 30, 2019, Dominion Energy had issued the following subsidiary guarantees:
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| Maximum Exposure |
| |
(millions) |
|
|
|
|
Commodity transactions(1) |
| $ | 2,517 |
|
Nuclear obligations(2) |
|
| 204 |
|
Cove Point(3) |
|
| 1,900 |
|
Solar(4) |
|
| 652 |
|
Other(5) |
|
| 390 |
|
Total(6) |
| $ | 5,663 |
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Additionally, at September 30, 2019, Dominion2020, Eastern Energy had purchased $185$28 million of surety bonds, including $81 million at Virginia Power and $26 million at Dominion Energy Gas, and authorized the issuance of letters of credit by financial institutions of $81 million to facilitate commercial transactions by its subsidiaries with third parties.bonds. Under the terms of surety bonds, the Companies areEastern Energy or BHE is obligated to indemnify the respective surety bond company for any amounts paid.
Note 19.15. Credit Risk
The Companies’Eastern Energy’s accounting policies for credit risk are discussed in Note 2324 to the Consolidated Financial Statements in the Companies’Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.
At September 30, 2019, Dominion2020, Eastern Energy’s gross credit exposure primarily related to energy marketing and price risk management activitieswholesale customers totaled $149$24 million. Of this amount, investment grade counterparties, including those internally rated, represented 91%98%. NaN single counterparty, whether investment grade or non-investment grade, exceeded $33 million of exposure. At September 30, 2019, Virginia Power’s exposure related to wholesale customers totaled $46 million. Of this amount, investment grade counterparties, including those internally rated, represented 88%. NaN single counterparty, whether investment grade or non-investment grade, exceeded $32 million of exposure. At September 30, 2019, Dominion Energy Gas’ exposure primarily related to wholesale customers totaled $35 million. Of this amount, investment grade counterparties, including those internally rated, represented 90%. NaN single counterparty, whether investment grade or non-investment grade, exceeded $6$5 million of exposure.
For the three and nine months ended September 30, 2020, the Export Customers comprised approximately 32% and 33%, respectively, of Eastern Energy’s total operating revenue, with Eastern Energy’s largest customer representing approximately 17% of such amounts during both periods. For the three and nine months ended September 30, 2019, the Export Customers comprised approximately 37% and 34%, respectively, of Eastern Energy’s total operating revenue, with Eastern Energy’s largest customer representing approximately 19% and 18%, respectively, of such amounts during the periods.
Credit-Related Contingent Provisions
The majority of Dominion Energy’s derivative instruments contain credit-relatedCredit-related contingent provisions. These provisions require Dominionfor Eastern 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 andwere not fully collateralized with cash were fully triggeredmaterial as of September 30, 20192020 and December 31, 2018, Dominion Energy would have been required to post $4 million and $1 million, respectively, of additional collateral to its counterparties. The collateral that would be required to be posted includes the impacts of any offsetting asset positions and any amounts already posted for derivatives, non-derivative contracts and derivatives elected under the normal purchases and normal sales exception, per contractual terms. Dominion Energy had posted no collateral at September 30, 2019 or December 31, 2018 related to derivatives with credit-related contingent provisions that are in a liability position and not fully collateralized with cash. The aggregate fair value of all derivative instruments with credit-related contingent provisions that are in a liability position and not fully collateralized with cash was immaterial at both September 30, 2019 and December 31, 2018, which does not include the impact of any offsetting asset positions. Credit-related contingent provisions for Virginia Power and Dominion Energy Gas were immaterial as of September 30, 2019 and December 31, 2018.2019. See Note 98 for further information about derivative instruments.
Note 20.16. Related-Party Transactions
Virginia Power and DominionEastern Energy Gas engageengages in related-party transactions primarily with other Dominion Energy subsidiaries (affiliates). Virginia Power's and Dominion Energy Gas’Eastern Energy’s 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 DominionThrough November 1, 2020, Eastern Energy Gas arewas 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 $3 million and $18 million, respectively. At December 31, 2018, Virginia Power’s derivative assets and liabilities with affiliates were $26 million and $10 million, respectively. See Note 9 for more information.
Virginia Power participates in certain DominionEastern 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 $750 million and $632 million, respectively. At September 30, 2019 and December 31, 2018, Virginia Power's amounts due from Dominion Energy associated with the Dominion Energy Retiree Health and Welfare Plan and included in other deferred charges and other assets in the Consolidated Balance Sheets were $272 million and $254 million, respectively.
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:
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| Nine Months Ended September 30, |
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Commodity purchases from affiliates |
| $ | 170 |
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| $ | 196 |
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| $ | 561 |
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| $ | 733 |
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Services provided by affiliates(1) |
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| 107 |
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| 106 |
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| 387 |
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| 338 |
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Services provided to affiliates |
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| 5 |
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| 6 |
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| 19 |
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| 17 |
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Virginia Power has borrowed funds from Dominion Energy under short-term borrowing arrangements. There were $9 million and $224 million in short-term demand note borrowings from Dominion Energy as of September 30, 2019 and December 31, 2018, respectively. Virginia Power had 0 outstanding borrowings, net of repayments, under the Dominion Energy money pool for its nonregulated subsidiaries as of September 30, 2019 and December 31, 2018. Interest charges related to Virginia Power’s borrowings from Dominion Energy were immaterial for the three and nine months ended September 30, 2019 and 2018.
There were 0 issuances of Virginia Power’s common stock to Dominion Energy for the three and nine months ended September 30, 2019 and 2018.
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, DominionEastern Energy Gas provides transportation and storage services to affiliates. DominionEastern 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, 20192020 and December 31, 2018, all of Dominion2019, Eastern Energy Gas'did 0t have any commodity derivatives werederivative assets or liabilities with affiliates. See Notes 76 and 98 for more information. See Note 103 for information regarding transactions with Atlantic Coast Pipeline.
the Dominion Energy Gas Restructuring, an affiliated transaction.
Eastern Energy participates in certain Dominion Energy benefit plans as described in Note 21 to the Consolidated Financial Statements in the Companies’Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2018.2019. At September 30, 20192020 and December 31, 2018,2019, amounts due from Dominion Energy associated with the Dominion Energy Pension Plan included in noncurrent pensionother deferred charges and other postretirement benefit assets in the Consolidated Balance Sheets were $793$339 million and $772$326 million, respectively. At September 30, 20192020 and December 31, 2018, Dominion Energy Gas’2019, Eastern Energy’s amounts due from Dominion Energy associated with the Dominion Energy Retiree Health and Welfare Plan included in noncurrent pensionother deferred charges and other postretirement benefit assets in the Consolidated Balance Sheets were $16$22 million and $14$17 million, respectively.
DES, DECGS, DEQPS and other affiliates provide accounting, legal, finance, marketing and certain administrative and technical services to DominionEastern Energy. Eastern 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, DECGS and DEQPS to DominionEastern Energy Gas on the basis of direct and allocated methods in accordance with Dominion Energy Gas’Eastern Energy’s services agreements with DES.DES, DECGS and DEQPS. Where costs incurred cannot be determined by specific identification, the costs are allocated based on the proportional level of effort devoted by DES, DECGS and DEQPS resources that isare attributable to the entity, determined by reference to number of employees, salaries and wages and other similar measures for the relevant DES, DECGS
27
and DEQPS service. Management believes the assumptions and methodologies underlying the allocation of general corporate overhead expenses are reasonable.
Subsequent to the GT&S Transaction, Eastern Energy’s transactions with other Dominion Energy subsidiaries are no longer related-party transactions.
Presented below are Dominion Energy Gas’Eastern Energy’s significant transactions with DES, DECGS, DEQPS and other affiliates and related parties:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of natural gas and transportation and storage services to affiliates |
| $ | 16 |
|
| $ | 17 |
|
| $ | 51 |
|
| $ | 51 |
| ||||||||||||||||
Purchases of natural gas from affiliates |
|
| 4 |
|
|
| 1 |
|
|
| 10 |
|
|
| 2 |
| ||||||||||||||||
Sales of natural gas and transportation and storage services |
| $ | 60 |
|
| $ | 60 |
|
| $ | 188 |
|
| $ | 187 |
| ||||||||||||||||
Purchases of natural gas and transportation and storage services |
|
| 3 |
|
|
| 0 |
|
|
| 9 |
|
|
| 0 |
| ||||||||||||||||
Services provided by related parties(1) |
|
| 32 |
|
|
| 32 |
|
|
| 117 |
|
|
| 98 |
|
|
| 34 |
|
|
| 41 |
|
|
| 114 |
|
|
| 145 |
|
Services provided to related parties(2) |
|
| 26 |
|
|
| 53 |
|
|
| 88 |
|
|
| 166 |
|
|
| 17 |
|
|
| 38 |
|
|
| 78 |
|
|
| 128 |
|
(1) | Includes capitalized expenditures of |
(2) |
|
The following table presents affiliated and related party balances reflected in Dominion Energy Gas’Eastern Energy’s Consolidated Balance Sheets:
|
| September 30, 2019 |
|
| December 31, 2018 |
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables(1) |
| $ | 9 |
|
| $ | 13 |
|
| $ | 0 |
|
| $ | 7 |
|
Customer receivables from related parties |
|
| — |
|
|
| 1 |
| ||||||||
Imbalances receivable from affiliates |
|
| — |
|
|
| 1 |
|
|
| 5 |
|
|
| 8 |
|
Imbalances payable to affiliates(2) |
|
| 1 |
|
|
| 13 |
|
|
| 1 |
|
|
| 1 |
|
Affiliated notes receivable(3) |
|
| 13 |
|
|
| 16 |
| ||||||||
Other deferred charges and other assets |
|
| 8 |
|
|
| 12 |
|
(1) | Represents amounts due from Atlantic Coast Pipeline, a related-party VIE. |
(2) | Amounts are presented in other current liabilities in |
|
|
DETI provides services to Atlantic Coast Pipeline which totaled $7 million and $24 million for the three months ended September 30, 2020 and 2019, respectively, and $44 million and $81 million for the nine months ended September 30, 2020 and 2019, respectively, included in operating revenue in Eastern Energy’s Consolidated Statements of Income.
Affiliated receivables at September 30, 2020 and December 31, 2019 included $18 million and $22 million, respectively, of accrued unbilled revenue. This revenue is based on estimated amounts of services provided but not yet billed to various affiliates.
Eastern Energy’s affiliated borrowings and investments are discussed in Note 25 to Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2019.
Eastern Energy had $240 million in affiliated notes receivable under the Dominion Energy Gas’money pool as of September 30, 2020 and 0 outstanding receivables as of December 31, 2019. Interest income related to the affiliated notes receivable was $1 million and $3 million for the three and nine months ended September 30, 2020, respectively.
Interest income on affiliated notes receivable from East Ohio and DGP for borrowings under intercompany revolving credit agreements with Eastern Energy was $4 million and $12 million for the three and nine months ended September 30, 2019, respectively.
Interest income earned on DMLPHCII’s promissory note to Dominion Energy was immaterial for both the three and nine months ended September 30, 2020 and 2019.
Interest income related to Dominion Energy’s promissory note borrowings with Cove Point was $28 million and $82 million for the three and nine months ended September 30, 2019, respectively.
Eastern Energy’s affiliated notes receivable from Dominion Energy totaled $1.8 billion at December 31, 2019. In August 2020, Dominion Energy repaid the remaining principal balance outstanding. Interest income on these promissory notes was $9 million and $32 million for the three and nine months ended September 30, 2020, respectively.
28
At December 31, 2019, Eastern Energy’s affiliated notes receivable from East Ohio totaled $1.7 billion. In June 2020, East Ohio repaid the remaining principal balance outstanding. Interest income on these promissory notes was $33 million for the nine months ended September 30, 2020, and $18 million and $54 million for the three and nine months ended September 30, 2019, respectively.
Eastern Energy’s borrowings under the intercompany revolving credit agreement with Dominion Energy were $160totaled $5 million and $218$251 million as of September 30, 20192020 and December 31, 2018,2019, respectively. Interest charges related to Dominion Energy Gas’Eastern Energy’s total borrowings from Dominion Energy were $1 million and less than $1 million for the three months ended September 30, 2020 and 2019, respectively, and 2018were $3 million and $2 million and less than $1 million for the nine months ended September 30, 2020 and 2019, respectively.
Interest charges related to DCP’s total borrowings from Dominion Energy under an intercompany revolving credit agreement totaled $30 million and 2018,$88 million for the three and nine months ended September 30, 2019, respectively.
DCP had borrowings of $9 million with DES as of December 31, 2019. NaN amounts were outstanding as of September 30, 2020. Interest related to DCP’s total borrowings from DES were $2 million and $1 million for the three months ended September 30, 2020 and 2019, respectively, and $3 million for both the nine months ended September 30, 2020 and 2019.
In the first quarter of 2019, Dominion Energy Midstream borrowed $395 million from Dominion Energy under a $400 million promissory note with Dominion Energy that was scheduled to mature in 2022. Interest charges of $4 million and $9 million were incurred for the three and nine months ended September 30, 2019, respectively.
For the nine months ended September 30, 2020 and 2019, Eastern Energy, including entities acquired in the Dominion Energy Gas Restructuring, distributed $4.2 billion and $551 million to Dominion Energy, respectively.
Note 21.17. Employee Benefit Plans
Eastern Energy participated in certain Dominion Energy benefit plans as described in Note 22 to the Consolidated Financial Statements in Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2019. See Note 16 for more information.
The service cost component and non-service cost components of net periodic benefit (credit) cost are reflected in other operations and maintenance expense and other income, respectively, in the Consolidated Statements of Income. The components of DominionEastern Energy’s provision for net periodic benefit cost (credit) werefor employees represented by collective bargaining units are as follows:
|
| Pension Benefits |
|
| Other Postretirement Benefits |
|
| Pension Benefits |
|
| Other Postretirement Benefits |
| ||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | 41 |
|
| $ | 39 |
|
| $ | 7 |
|
| $ | 7 |
|
| $ | 2 |
|
| $ | 4 |
|
| $ | 0 |
|
| $ | 0 |
|
Interest cost |
|
| 97 |
|
|
| 85 |
|
|
| 17 |
|
|
| 14 |
|
|
| 3 |
|
|
| 7 |
|
|
| 1 |
|
|
| 3 |
|
Expected return on plan assets |
|
| (177 | ) |
|
| (165 | ) |
|
| (37 | ) |
|
| (36 | ) |
|
| (14 | ) |
|
| (38 | ) |
|
| (4 | ) |
|
| (6 | ) |
Amortization of prior service credit |
|
| — |
|
|
| — |
|
|
| (13 | ) |
|
| (13 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (1 | ) |
|
| (1 | ) |
Amortization of net actuarial loss |
|
| 42 |
|
|
| 48 |
|
|
| 2 |
|
|
| 3 |
|
|
| 1 |
|
|
| 5 |
|
|
| 0 |
|
|
| 0 |
|
Settlements(1) |
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||
Net periodic benefit cost (credit) |
| $ | 5 |
|
| $ | 7 |
|
| $ | (24 | ) |
| $ | (25 | ) | ||||||||||||||||
Net periodic benefit credit |
| $ | (8 | ) |
| $ | (22 | ) |
| $ | (4 | ) |
| $ | (4 | ) | ||||||||||||||||
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | 121 |
|
| $ | 118 |
|
| $ | 20 |
|
| $ | 20 |
|
| $ | 5 |
|
| $ | 12 |
|
| $ | 1 |
|
| $ | 2 |
|
Interest cost |
|
| 296 |
|
|
| 253 |
|
|
| 51 |
|
|
| 42 |
|
|
| 8 |
|
|
| 23 |
|
|
| 3 |
|
|
| 8 |
|
Expected return on plan assets |
|
| (530 | ) |
|
| (498 | ) |
|
| (105 | ) |
|
| (107 | ) |
|
| (42 | ) |
|
| (116 | ) |
|
| (14 | ) |
|
| (20 | ) |
Amortization of prior service cost (credit) |
|
| 1 |
|
|
| 1 |
|
|
| (39 | ) |
|
| (39 | ) | ||||||||||||||||
Amortization of prior service credit |
|
| 0 |
|
|
| 0 |
|
|
| (3 | ) |
|
| (3 | ) | ||||||||||||||||
Amortization of net actuarial loss |
|
| 124 |
|
|
| 145 |
|
|
| 9 |
|
|
| 8 |
|
|
| 5 |
|
|
| 15 |
|
|
| 1 |
|
|
| 2 |
|
Settlements and curtailment(1) |
|
| 75 |
|
|
| — |
|
|
| 42 |
|
|
| — |
| ||||||||||||||||
Net periodic benefit cost (credit) |
| $ | 87 |
|
| $ | 19 |
|
| $ | (22 | ) |
| $ | (76 | ) | ||||||||||||||||
Curtailment(1) |
|
| 0 |
|
|
| 1 |
|
|
| 0 |
|
|
| 1 |
| ||||||||||||||||
Net periodic benefit credit |
| $ | (24 | ) |
| $ | (65 | ) |
| $ | (12 | ) |
| $ | (10 | ) |
(1) 2019 amounts relate to a voluntary retirement program. Employer Contributions 29 During the nine months ended September 30, 2020, Eastern Energy made 0 contributions to its qualified defined benefit pension plan or other postretirement benefit plans. Eastern Energy does 0t expect to make contributions to its qualified defined benefit pension plan during the remainder of 2020 and expects to contribute approximately $12 million to its other postretirement benefit plans through VEBAs on an annual basis. Pension Remeasurement In the third quarter of 2020, Eastern Energy remeasured a pension plan due to a curtailment resulting from the agreement for Dominion Energy to retain the assets and obligations of the pension benefit plan associated with the GT&S Transaction. The remeasurement resulted in an increase in the pension benefit obligation of $3 million and a decrease in the fair value of the pension plan assets of $7 million for Eastern Energy. The impact of the remeasurement on net periodic pension benefit credit was recognized prospectively from the remeasurement date and is not material. The discount rate used for the remeasurement was 3.16%. All other assumptions used for the remeasurement were consistent with the measurement as of December 31, 2019. |
|
Voluntary Retirement Program
In March 2019, the CompaniesDominion Energy announced a voluntary retirement program to employees that meetmet 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, DominionEastern Energy recorded a charge of $423$74 million ($31658 million after-tax) included within other operations and maintenance expense ($28839 million), other taxes ($232 million) and other income ($112 million), Virginia Power recorded a charge of $194 million ($144 million after-tax) included within other operations and maintenance expense ($186 million) and other taxes ($8 million) and Dominion Energy Gas recorded a charge of $63 million ($48 million after-tax) included within other operations and maintenance expense ($59 million), other taxes ($3 million) and other income ($1 million) and discontinued operations ($32 million) in the respectiveits Consolidated Statements of Income.
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 $484 million and $32 million and an increase in the fair value of the pension plan assets of $671 million and $146 million for Dominion Energy and Dominion Energy Gas, respectively. In addition, the remeasurement resulted in an increase in the accumulated postretirement benefit obligation of $101 million and $8 million and an increase in the fair value of the other postretirement benefit plan assets of $156 million and $29 million for Dominion Energy and Dominion Energy Gas, respectively. The impact of the remeasurement on net periodic benefit cost (credit) was recognized prospectively from the remeasurement date. The remeasurement is expected to increase the net periodic benefit credit for 2019 by approximately $6 million and $4 million for Dominion Energy and Dominion Energy Gas, respectively, excluding the impacts of curtailments. The discount rate used for the remeasurement was 4.07% - 4.10% for the Dominion Energy pension plans, 4.10% for Dominion Energy Gas pension plans, 4.05% - 4.08% for the Dominion Energy other postretirement benefit plans, and 4.05% for the Dominion Energy Gas other postretirement benefit plans. All other assumptions used for the remeasurement were consistent with the measurement as of December 31, 2018.
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 $37 million and an increase in the fair value of the pension plan assets of $51 million for Dominion Energy. The impact of the remeasurement on net periodic benefit cost (credit) was recognized prospectively from the remeasurement date. The remeasurement is expected to increase the net periodic benefit credit for 2019 by $7 million. The discount rate used for the remeasurement was 3.57%. All other assumptions used for the remeasurement were consistent with the measurement as of December 31, 2018.
Employer Contributions
During the nine months ended September 30, 2019, Dominion Energy made 0 contributions to its defined benefit pension plans or other postretirement benefit plans. Dominion Energy made a contribution of $21 million to its defined benefit pension plans in October 2019 and expects to make a $12 million contribution to its other postretirement benefit plans through VEBAs during the remainder of 2019.
Dominion Energy Gas
Dominion Energy Gas participates in certain Dominion Energy benefit plans as described in See Note 2122 to the Consolidated Financial Statements in the Companies’Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2018. See Note 202019 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 |
| $ | 4 |
|
| $ | 4 |
|
| $ | — |
|
| $ | 1 |
|
Interest cost |
|
| 7 |
|
|
| 7 |
|
|
| 3 |
|
|
| 3 |
|
Expected return on plan assets |
|
| (38 | ) |
|
| (36 | ) |
|
| (6 | ) |
|
| (7 | ) |
Amortization of prior service credit |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| (1 | ) |
Amortization of net actuarial loss |
|
| 5 |
|
|
| 4 |
|
|
| — |
|
|
| — |
|
Net periodic benefit credit |
| $ | (22 | ) |
| $ | (21 | ) |
| $ | (4 | ) |
| $ | (4 | ) |
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | 12 |
|
| $ | 13 |
|
| $ | 2 |
|
| $ | 3 |
|
Interest cost |
|
| 23 |
|
|
| 21 |
|
|
| 8 |
|
|
| 8 |
|
Expected return on plan assets |
|
| (116 | ) |
|
| (111 | ) |
|
| (20 | ) |
|
| (21 | ) |
Amortization of prior service credit |
|
| — |
|
|
| — |
|
|
| (3 | ) |
|
| (3 | ) |
Amortization of net actuarial loss |
|
| 15 |
|
|
| 14 |
|
|
| 2 |
|
|
| 2 |
|
Curtailment(1) |
|
| 1 |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
Net periodic benefit credit |
| $ | (65 | ) |
| $ | (63 | ) |
| $ | (10 | ) |
| $ | (11 | ) |
|
|
Employer Contributions
During the nine months ended September 30, 2019, Dominion Energy Gas made 0 contributions to its defined benefit pension plans or other postretirement benefit plans. Dominion Energy Gas expects to contribute approximately $12 million to its other postretirement benefit plans through VEBAs during the remainder of 2019.
Note 22. Operating Segments
The Companies are organized primarily on the basis of products and services sold in the U.S. A description of the operations included in the Companies’ primary operating segments is as follows:
|
|
|
|
| ||||
|
|
|
| |||||
|
|
| ||||||
|
|
|
| |||||
|
| |||||||
|
|
|
| |||||
|
|
| ||||||
|
|
| ||||||
|
| |||||||
|
| |||||||
|
|
| ||||||
|
| |||||||
|
| |||||||
|
| |||||||
|
|
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 $2.1 billion for specific items in the Corporate and Other segment, with $2.0 billion of net expenses attributable to its operating segments. In the nine months ended September 30, 2018, Dominion Energy reported after-tax net expenses of $253 million for specific items in the Corporate and Other segment, with $188 million of net expenses attributable to its operating segments.
The net expense for specific items attributable to Dominion Energy’s operating segments in 2019 primarily related to the impact of the following items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The net expense for specific items attributable to Dominion Energy’s operating segments in 2018 primarily related to the impact of the following items:
|
|
|
|
|
|
|
|
|
|
|
|
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 |
| $ | 678 |
|
| $ | 1,848 |
|
| $ | 788 |
|
| $ | 973 |
|
| $ | (18 | ) |
| $ | — |
|
| $ | 4,269 |
|
Intersegment revenue |
|
| 5 |
|
|
| 6 |
|
|
| 28 |
|
|
| — |
|
|
| 164 |
|
|
| (203 | ) |
|
| — |
|
Total operating revenue |
|
| 683 |
|
|
| 1,854 |
|
|
| 816 |
|
|
| 973 |
|
|
| 146 |
|
|
| (203 | ) |
|
| 4,269 |
|
Net income (loss) attributable to Dominion Energy |
|
| 185 |
|
|
| 490 |
|
|
| 232 |
|
|
| 147 |
|
|
| (79 | ) |
|
| — |
|
|
| 975 |
|
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from external customers |
| $ | 596 |
|
| $ | 2,021 |
|
| $ | 836 |
|
|
|
|
|
| $ | — |
|
| $ | (2 | ) |
| $ | 3,451 |
|
Intersegment revenue |
|
| 5 |
|
|
| 3 |
|
|
| 7 |
|
|
|
|
|
|
| 160 |
|
|
| (175 | ) |
|
| — |
|
Total operating revenue |
|
| 601 |
|
|
| 2,024 |
|
|
| 843 |
|
|
|
|
|
|
| 160 |
|
|
| (177 | ) |
|
| 3,451 |
|
Net income attributable to Dominion Energy |
|
| 163 |
|
|
| 414 |
|
|
| 264 |
|
|
|
|
|
|
| 13 |
|
|
| — |
|
|
| 854 |
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from external customers |
| $ | 1,861 |
|
| $ | 5,191 |
|
| $ | 3,042 |
|
| $ | 3,070 |
|
| $ | (1,067 | ) |
| $ | — |
|
| $ | 12,097 |
|
Intersegment revenue |
|
| 17 |
|
|
| 15 |
|
|
| 83 |
|
|
| — |
|
|
| 611 |
|
|
| (726 | ) |
|
| — |
|
Total operating revenue |
|
| 1,878 |
|
|
| 5,206 |
|
|
| 3,125 |
|
|
| 3,070 |
|
|
| (456 | ) |
|
| (726 | ) |
|
| 12,097 |
|
Net income (loss) attributable to Dominion Energy |
|
| 496 |
|
|
| 1,048 |
|
|
| 838 |
|
|
| 361 |
|
|
| (2,394 | ) |
|
| — |
|
|
| 349 |
|
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from external customers |
| $ | 1,687 |
|
| $ | 5,516 |
|
| $ | 2,972 |
|
|
|
|
|
| $ | (210 | ) |
| $ | 40 |
|
| $ | 10,005 |
|
Intersegment revenue |
|
| 17 |
|
|
| 8 |
|
|
| 21 |
|
|
|
|
|
|
| 505 |
|
|
| (551 | ) |
|
| — |
|
Total operating revenue |
|
| 1,704 |
|
|
| 5,524 |
|
|
| 2,993 |
|
|
|
|
|
|
| 295 |
|
|
| (511 | ) |
|
| 10,005 |
|
Net income (loss) attributable to Dominion Energy |
|
| 464 |
|
|
| 1,038 |
|
|
| 840 |
|
|
|
|
|
|
| (536 | ) |
|
| — |
|
|
| 1,806 |
|
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 $673 million for specific items in the Corporate and Other segment, with $653 million of net expenses attributable to its operating segments. In the nine months ended September 30, 2018, Virginia Power reported after-tax net expenses of $229 million for specific items in the Corporate and Other segment, with $226 million of net expenses attributable to its operating segments.
The net expense for specific items attributable to Virginia Power’s operating segments in 2019 primarily related to the impact of the following items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The net expense for specific items attributable to Virginia Power’s operating segments in 2018 primarily related to the impact of the following items:
|
|
|
|
|
|
|
|
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 |
| $ | 677 |
|
| $ | 1,587 |
|
| $ | — |
|
| $ | 2,264 |
|
Net income (loss) |
|
| 184 |
|
|
| 444 |
|
|
| (26 | ) |
|
| 602 |
|
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
| $ | 595 |
|
| $ | 1,637 |
|
| $ | — |
|
| $ | 2,232 |
|
Net income |
|
| 163 |
|
|
| 347 |
|
|
| 10 |
|
|
| 520 |
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
| $ | 1,860 |
|
| $ | 4,336 |
|
| $ | (29 | ) |
| $ | 6,167 |
|
Net income (loss) |
|
| 494 |
|
|
| 885 |
|
|
| (657 | ) |
|
| 722 |
|
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
| $ | 1,686 |
|
| $ | 4,338 |
|
| $ | (215 | ) |
| $ | 5,809 |
|
Net income (loss) |
|
| 462 |
|
|
| 796 |
|
|
| (215 | ) |
|
| 1,043 |
|
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 $53 million for specific items in the Corporate and Other segment, all of which are attributable to its operating segment. In the nine months ended September 30, 2018, Dominion Energy Gas reported after-tax net expenses of $100 million for specific items in the Corporate and Other segment, with $99 million of net expenses attributable to its operating segment.
The net expense for specific items attributable to Dominion Energy Gas’ operating segment in 2019 primarily related to a $63 million ($48 million after-tax) charge related to a voluntary retirement program, attributable to Gas Infrastructure.
The net expense for specific items attributable to Dominion Energy Gas’ operating segment in 2018 primarily related to a $124 million ($88 million after-tax) charge for disallowance of FERC-regulated plant, attributable to Gas Infrastructure.
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 |
| $ | 392 |
|
| $ | — |
|
| $ | 392 |
|
Net income (loss) |
|
| 100 |
|
|
| (8 | ) |
|
| 92 |
|
Three Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
| $ | 423 |
|
| $ | — |
|
| $ | 423 |
|
Net income (loss) |
|
| 146 |
|
|
| (10 | ) |
|
| 136 |
|
Nine Months Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
| $ | 1,314 |
|
| $ | (11 | ) |
| $ | 1,303 |
|
Net income (loss) |
|
| 316 |
|
|
| (61 | ) |
|
| 255 |
|
Nine Months Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
| $ | 1,408 |
|
| $ | — |
|
| $ | 1,408 |
|
Net income (loss) |
|
| 421 |
|
|
| (104 | ) |
|
| 317 |
|
30
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MD&A discusses DominionEastern 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’Eastern Energy’s Consolidated Financial Statements. Virginia Power and DominionEastern Energy Gas meetmeets the conditions to file under the reduced disclosure format, and therefore havehas omitted certain sections of MD&A.
Contents of MD&A
MD&A consists of the following information:
• | Forward-Looking Statements |
• |
|
|
|
| Results of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward-Looking Statements
This report contains statements concerning the Companies’Eastern Energy’s 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 makeEastern Energy makes 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 climate changes |
• | The impact of extraordinary external events, such as the current pandemic health event resulting from COVID-19, and their collateral consequences, including extended disruption of economic activity in our markets; |
• | 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 |
|
|
|
|
• | Risks associated with entities in which Eastern Energy shares ownership with third parties, including risks that result from lack of sole decision making authority, disputes that may arise between Eastern Energy and third party participants and difficulties in exiting these arrangements; |
• | Changes in future levels of domestic and international natural gas production, supply or consumption; |
• | Fluctuations in future volumes of LNG imports or exports from the U.S. and other countries worldwide or demand for, purchases of, and prices related to natural gas or LNG; |
• | 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; |
31
• | Unplanned outages at facilities in which |
• | 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; |
• |
|
| Changes in operating, maintenance and construction costs; |
• | Domestic terrorism and other threats to |
• | Additional competition in industries in which |
• |
|
|
|
| Changes in demand for |
• | Receipt of approvals for, and timing of, closing dates for acquisitions and divestitures; |
• | Impacts of acquisitions, |
• | Adverse outcomes in litigation matters or regulatory |
• | Counterparty credit and performance risk; |
• |
|
|
|
| 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; |
|
|
• | 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 Part I. Item 1A. Risk Factors in the Companies’Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2018.2019 and Part II. Item 1A. Risk Factors in Eastern Energy’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
The Companies’Eastern Energy’s forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. The Companies cautionEastern Energy cautions the reader not to place undue reliance on theirits forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. The Companies undertakeEastern Energy undertakes 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 DominionEastern 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 | ) |
|
| Third Quarter |
|
| Year-To-Date |
| ||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| $ Change |
|
| 2020 |
|
| 2019 |
|
| $ Change |
| ||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Eastern Energy |
| $ | 86 |
|
| $ | 151 |
|
| $ | (65 | ) |
| $ | 57 |
|
| $ | 460 |
|
| $ | (403 | ) |
Overview
Third Quarter 20192020 vs. 20182019
Net income attributable to DominionEastern Energy increased 14%decreased 43%, primarily due to operations acquired ina charge for cash flow hedges of debt-related items that are probable of not occurring as a result of 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 investmentGT&S Transaction and the absence of gainsnet income from discontinued operations related to agreements to convey shale development rights under natural gas storage fields.
Year-To-Date 2019 vs. 2018
Net income attributable tothe 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.Gas Restructuring. These decreases were partially offset by an increaseadjustment to finalize the effects of the changes in tax status in connection with the Dominion Energy Gas Restructuring and the absence of credits associated with the start-up phase of the Liquefaction Facility.
Year-To-Date 2020 vs. 2019
32
Net income attributable to Eastern Energy decreased 88%, primarily due to charges associated with the probable abandonment of a significant portion of the Supply Header Project related to the Atlantic Coast Pipeline Project, the absence of net investment earnings on nuclear decommissioning trust funds,income from discontinued operations related to the operations acquired in the SCANA Combination, the revisionDominion Energy Gas Restructuring and a charge for cash flow hedges of future ash pond and landfill closure costs debt-related items that are probable of not occurring as a result of Virginia legislation enacted in March 2019,the GT&S Transaction. These decreases were partially offset by the absence of charges associateda charge related to a voluntary retirement program and an adjustment to finalize the effects of the changes in tax status in connection with Virginia legislation enacted in March 2018 and April 2018 and the absence of disallowance of FERC-regulated plant.Dominion Energy Gas Restructuring.
Analysis of Consolidated Operations
Presented below are selected amounts related to DominionEastern Energy’s results of operations:
|
| Third Quarter |
|
| Year-To-Date |
|
| Third Quarter |
|
| Year-To-Date |
| ||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| $ Change |
|
| 2019 |
|
| 2018 |
|
| $ Change |
|
| 2020 |
|
| 2019 |
|
| $ Change |
|
| 2020 |
|
| 2019 |
|
| $ Change |
| ||||||||||||
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
| $ | 4,269 |
|
| $ | 3,451 |
|
| $ | 818 |
|
| $ | 12,097 |
|
| $ | 10,005 |
|
| $ | 2,092 |
|
| $ | 531 |
|
| $ | 502 |
|
| $ | 29 |
|
| $ | 1,597 |
|
| $ | 1,598 |
|
| $ | (1 | ) |
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 |
|
|
| 14 |
|
|
| 3 |
|
|
| 11 |
|
|
| 22 |
|
|
| 12 |
|
|
| 10 |
|
Other energy-related purchases |
|
| — |
|
|
| 1 |
|
|
| (1 | ) |
|
| 1 |
|
|
| 2 |
|
|
| (1 | ) | ||||||||||||||||||||||||
Net revenue |
|
| 3,331 |
|
|
| 2,635 |
|
|
| 696 |
|
|
| 8,630 |
|
|
| 7,381 |
|
|
| 1,249 |
|
|
| 517 |
|
|
| 498 |
|
|
| 19 |
|
|
| 1,574 |
|
|
| 1,584 |
|
|
| (10 | ) |
Other operations and maintenance |
|
| 1,010 |
|
|
| 770 |
|
|
| 240 |
|
|
| 3,295 |
|
|
| 2,438 |
|
|
| 857 |
|
|
| 136 |
|
|
| 166 |
|
|
| (30 | ) |
|
| 451 |
|
|
| 552 |
|
|
| (101 | ) |
Depreciation, depletion and amortization |
|
| 679 |
|
|
| 526 |
|
|
| 153 |
|
|
| 1,991 |
|
|
| 1,487 |
|
|
| 504 |
| ||||||||||||||||||||||||
Depreciation and amortization |
|
| 95 |
|
|
| 92 |
|
|
| 3 |
|
|
| 282 |
|
|
| 274 |
|
|
| 8 |
| ||||||||||||||||||||||||
Other taxes |
|
| 243 |
|
|
| 177 |
|
|
| 66 |
|
|
| 819 |
|
|
| 542 |
|
|
| 277 |
|
|
| 40 |
|
|
| 40 |
|
|
| — |
|
|
| 117 |
|
|
| 118 |
|
|
| (1 | ) |
Impairment of assets and other charges |
|
| 85 |
|
|
| 12 |
|
|
| 73 |
|
|
| 1,232 |
|
|
| 147 |
|
|
| 1,085 |
| ||||||||||||||||||||||||
Impairment of assets and other charges (benefits) |
|
| (19 | ) |
|
| — |
|
|
| (19 | ) |
|
| 463 |
|
|
| 13 |
|
|
| 450 |
| ||||||||||||||||||||||||
Gains on sales of assets |
|
| — |
|
|
| (2 | ) |
|
| 2 |
|
|
| — |
|
|
| (2 | ) |
|
| 2 |
| ||||||||||||||||||||||||
Earnings from equity method investees |
|
| 7 |
|
|
| 8 |
|
|
| (1 | ) |
|
| 30 |
|
|
| 30 |
|
|
| — |
| ||||||||||||||||||||||||
Other income |
|
| 173 |
|
|
| 373 |
|
|
| (200 | ) |
|
| 653 |
|
|
| 658 |
|
|
| (5 | ) |
|
| 22 |
|
|
| 46 |
|
|
| (24 | ) |
|
| 117 |
|
|
| 131 |
|
|
| (14 | ) |
Interest and related charges |
|
| 451 |
|
|
| 378 |
|
|
| 73 |
|
|
| 1,372 |
|
|
| 1,053 |
|
|
| 319 |
|
|
| 186 |
|
|
| 88 |
|
|
| 98 |
|
|
| 294 |
|
|
| 261 |
|
|
| 33 |
|
Income tax expense |
|
| 51 |
|
|
| 262 |
|
|
| (211 | ) |
|
| 208 |
|
|
| 485 |
|
|
| (277 | ) | ||||||||||||||||||||||||
Income tax expense (benefit) |
|
| (10 | ) |
|
| 38 |
|
|
| (48 | ) |
|
| (40 | ) |
|
| 104 |
|
|
| (144 | ) | ||||||||||||||||||||||||
Net income from discontinued operations |
|
| — |
|
|
| 45 |
|
|
| (45 | ) |
|
| — |
|
|
| 125 |
|
|
| (125 | ) | ||||||||||||||||||||||||
Noncontrolling interests |
|
| 10 |
|
|
| 29 |
|
|
| (19 | ) |
|
| 17 |
|
|
| 81 |
|
|
| (64 | ) |
|
| 32 |
|
|
| 24 |
|
|
| 8 |
|
|
| 97 |
|
|
| 90 |
|
|
| 7 |
|
An analysis of DominionEastern Energy’s results of operations follows:
Third Quarter 20192020 vs. 20182019
Net revenue increased 26%, primarily due to:
|
|
|
|
|
|
|
|
These increases were partially offset by:
|
|
|
|
Other operations and maintenance increased 31%4%, primarily reflecting:
• |
|
| The absence of |
|
|
|
|
|
|
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.
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:
|
|
|
|
|
|
|
|
|
|
|
|
These increases were partially offset by:
|
|
|
|
|
|
|
|
Other operations and maintenance increased 35%, primarily reflecting:
|
|
|
|
|
|
|
|
|
|
|
|
These increases were partially offset by:
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
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 |
|
|
|
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 | ) |
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 | ) |
|
|
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 | ) |
|
|
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 |
|
|
|
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 |
|
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 | ) |
|
|
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.
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 |
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:
|
|
|
|
|
|
• | A |
Other operations and maintenance increased 4%, primarily reflecting:
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
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.
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 $6 million decrease in |
Other operations and maintenance decreased 18%, due to a $17 million decrease in services performed for Atlantic Coast Pipeline, a $5 million decrease in salaries, wages and benefits and a $5 million decrease in services provided by affiliates.
Impairment of assets and other charges (benefits) decreased $19 million, due to a $29 million benefit from the revision of the previously established ARO, partially offset by a $10 million charge, both of which were related to the probable abandonment of a significant portion of the Supply Header Project.
Other income decreased 52%, primarily due to the absence of interest income from Cove Point’s promissory notes receivable from Dominion Energy ($28 million), partially offset by interest income from affiliated notes receivable from Dominion Energy ($9 million).
Interest and related charges increased $98 million,primarily due to:
• | A charge for cash flow hedges of debt-related items that are probable of not occurring as a result of the GT&S Transaction ($141 million); and |
33
• | Interest expense on Eastern Energy’s November 2019 senior note issuance ($8 million); partially offset by |
• |
|
• | The absence of interest expense from intercompany borrowings as a result of the Dominion Energy Gas Restructuring ($12 million). |
Other operations and maintenanceIncome tax expense (benefit) decreased 12%,$48 million, primarily due to a $26 million decreasean adjustment to finalize the effects of the changes in services performed for Atlantic Coast Pipeline. These expenses are billed to Atlantic Coast Pipelinetax status in connection with the Dominion Energy Gas Restructuring ($24 million) 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
Year-To-Date 2020 vs. 2019
Net revenuedecreased 8%,$10 million, primarily reflecting:
• | A |
|
|
• | A |
• |
|
Other operations and maintenance decreased 4% primarily reflecting:
|
|
• | A |
Other operations and maintenance decreased 18%, primarily reflecting:
• | A $39 million decrease due to the absence of a charge related to a voluntary retirement program; |
• | A $37 million decrease in services performed for Atlantic Coast Pipeline; and |
• | A $20 million decrease in services provided by affiliates. |
Impairment of assets and other charges (benefits) increased $450 million, due to:
• | A $492 million charge associated with the probable abandonment of a |
• |
|
Other income decreased 11%, primarily due to the absence of interest income from Cove Point’s promissory notes receivable from Dominion Energy ($82 million), partially offset by interest income from affiliated notes receivable from East Ohio ($33 million) and Dominion Energy ($32 million).
Interest and related charges increased 13%,primarily due to:
• | A charge for cash flow hedges of debt-related items that are probable of not occurring as a |
• |
|
• | The absence of interest expense from Cove Point’s term loan borrowings ($100 million); and |
• | The absence of interest expense from intercompany borrowings as a result of the Dominion Energy Gas Restructuring ($33 million). |
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 (benefit) decreased 34%,$144 million, primarily due to lower pre-tax income ($33120 million) and an adjustment to finalize 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 operationseffects 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 discussedchanges in Item 1A. Risk Factors in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2018.
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 |
|
|
|
|
|
|
|
|
|
|
|
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.
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,tax status 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
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
SeeNotes 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.
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. Restructuring ($24 million).
34
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 risksFor quantitative 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 fromqualitative disclosures about 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, Dominionaffecting Eastern Energy, and Virginia Power hold commodity-based derivative instruments held for non-trading purposes associated with purchases and salessee Item 7A 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 basedEastern Energy’s Annual Report 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.
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 millionForm 10-K for the year ended December 31, 2018. Net realized gains2019. Eastern Energy’s exposure to market risk and losses include gains and losses fromits management of such risk has not changed materially since December 31, 2019. Refer to Note 8 to the saleConsolidated Financial Statements in this report for disclosure of investmentsEastern Energy’s derivative positions 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, 2018.2020.
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 DominionEastern Energy, Virginia Powerincluding its President (principal executive officer) and Dominion Energy Gas, including Dominion Energy, Virginia Power and Dominion Energy Gas’ CEO and CFO (principal financial officer), evaluated the effectiveness of each of their respective company’sthe 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 PowerEastern Energy’s President (principal executive officer) and Dominion Energy Gas’ CEO and CFO (principal financial officer) have concluded that each of their respective company’sthe 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’Eastern Energy’s internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Companies areEastern Energy is 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 CompaniesEastern Energy and theirits subsidiaries are involved in various legal proceedings.
See the following for discussions on various legal, environmental and other regulatory proceedings to which the Companies areEastern Energy is a party, which information is incorporated herein by reference:
• | Notes |
• | Notes 13 and 17 to the Consolidated Financial Statements in |
• | Notes 13 and |
• | Notes |
ITEM 1A. RISK FACTORS
The Companies’Eastern Energy’s 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’Eastern Energy’s control. A number of these risk factors have been identified in the Companies’Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2018,2019 and updated in Eastern Energy’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, 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’Eastern Energy’s Annual Report on Form 10-K for the year ended December 31, 2018.2019 and Eastern Energy’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. 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 Energy35
ISSUER PURCHASES OF EQUITY SECURITIES
Period |
| 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) | |||
7/1/19-7/31/19 |
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| 2,002 |
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| $ | 77.47 |
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| 19,629,059 shares/ $1.18 billion |
8/1/19-8/31/19 |
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| 19,629,059 shares/ $1.18 billion |
9/1/19-9/30/19 |
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| 5,613 |
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| 78.49 |
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| 19,629,059 shares/ $1.18 billion |
Total |
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| 7,761 |
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| $ | 78.20 |
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| — |
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| 19,629,059 shares/ $1.18 billion |
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32.2 | Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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36
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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