Exhibit 12.a
Dominion Resources Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(millions of dollars)
Years Ended December, 31 | ||||||||||||||||||||
2011 (a) | 2010 (b) | 2009 (c) | 2008 (d) | 2007 (e) | ||||||||||||||||
Earnings, as defined: | ||||||||||||||||||||
Income from continuing operations including noncontrolling interest before income taxes, extraordinary item and cumulative effect of change in accounting principle | $ | 2,171 | $ | 5,037 | $ | 1,874 | $ | 2,613 | $ | 4,442 | ||||||||||
Distributed income from unconsolidated investees, less equity in earnings | (23 | ) | (30 | ) | (30 | ) | (39 | ) | (20 | ) | ||||||||||
Fixed charges, as defined | 1,003 | 971 | 1,022 | 990 | 1,325 | |||||||||||||||
Capitalized interest | (37 | ) | (27 | ) | (18 | ) | (44 | ) | (73 | ) | ||||||||||
Preference security dividend requirement of consolidated subsidiary | (25 | ) | (28 | ) | (24 | ) | (26 | ) | (26 | ) | ||||||||||
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Total earnings, as defined | $ | 3,089 | $ | 5,923 | $ | 2,824 | $ | 3,494 | $ | 5,648 | ||||||||||
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Fixed charges, as defined: | ||||||||||||||||||||
Interest charges | $ | 928 | $ | 886 | $ | 941 | $ | 911 | $ | 1,238 | ||||||||||
Preference security dividend requirement of consolidated subsidiary | 25 | 28 | 24 | 26 | 26 | |||||||||||||||
Rental interest factor | 50 | 57 | 57 | 53 | 61 | |||||||||||||||
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Total fixed charges, as defined | $ | 1,003 | $ | 971 | $ | 1,022 | $ | 990 | $ | 1,325 | ||||||||||
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Ratio of Earnings to Fixed Charges | 3.08 | 6.10 | 2.76 | 3.53 | 4.26 |
(a) Earnings for the twelve months ended December 31, 2011 include $283 million of impairment charges related to generation assets; $96 million of restoration costs associated with Hurricane Irene; $57 million impairment of excess emission allowances resulting from a new EPA Air Pollution Rule; $33 million for severance and other costs resulting from expected closings of our Salem Harbor and State Line merchant generation plants; $31 million net charge in connection with the Virginia Commission’s final ruling associated with its biennial review of Virginia Power’s base rates for 2009 and 2010 test years; $21 million of earthquake related costs, largely related to inspections following the safe shutdown of reactors at our North Anna nuclear power station; and $45 million net charge related to other items; partially offset by a $24 million benefit related to litigation with the Department of Energy for spent nuclear fuel-related costs at our Millstone nuclear power station. Excluding these items from the calculation would result in a higher ratio of earnings to fixed charges for the twelve months ended December 31, 2011.
(b) Earnings for the twelve months ended December 31, 2010 include a $2.4 billion benefit resulting from the sale of our Appalachian E&P operations—primarily reflecting the gain on the sale partially offset by certain transaction costs and other related charges. Earnings for the period also include a $338 million charge related to the workforce reduction program primarily reflecting severance pay and other benefits to affected employees, $194 million of charges related to our State Line and Salem Harbor merchant power stations, and a $1 million net charge related to other items. Excluding these items from the calculation would result in a lower ratio of earnings to fixed charges for the twelve months ended December 31, 2010.
(c) Earnings for the twelve months ended December 31, 2009 include a $455 million impairment charge as a result of the quarterly ceiling test performed on our gas and oil properties under the full cost method of accounting, a $712 million charge in connection with the proposed settlement of Virginia Power’s 2009 rate case proceeding and a $41 million net charge related to other items. Earnings for the period also include a $103 million reduction in other operation and maintenance expense due to a downward revision in the nuclear decommissioning asset retirement obligation for a power station that is no longer in service. Excluding these items from the calculation would result in a higher ratio of earnings to fixed charges for the twelve months ended December 31, 2009.
(d) Earnings for the twelve months ended December 31, 2008 include $180 million of impairment charges reflecting other-than-temporary declines in the fair value of securities held in nuclear decommissioning trust funds, $59 million of impairment charges related to Dominion Capital, Inc. (DCI) assets, a $42 million reduction in the gain recognized in 2007 from the sale of the majority of our U.S. exploration and production (E&P) businesses as a result of post-closing adjustments, and a $30 million net charge related to other items. Excluding these items from the calculation would result in a higher ratio of earnings to fixed charges for the twelve months ended December 31, 2008.
(e) Earnings for the twelve months ended December 31, 2007 include a $3.6 billion gain from the disposition of the majority of our U.S. E&P operations, partially offset by $1 billion of charges related to the disposition which are comprised of $541 million related to the discontinuance of hedge accounting for certain gas and oil derivatives and subsequent changes in the fair value of these derivatives, $171 million primarily related to the settlement of volumetric production payment agreements, $242 million of charges related to the early retirement of debt, and $91 million of employee-related expenses. Earnings for the period also include a $387 million charge related to the impairment of the partially-completed Dresden generation facility; a $231 million charge due to the termination of a power sales agreement at our State Line generating facility; $88 million of impairment charges related to DCI assets; $48 million of charges related to litigation reserves, and $70 million of charges related to other items. Fixed charges for the twelve months ended December 31, 2007 include $234 million of costs related to the early retirement of debt associated with our debt tender offer completed in July 2007. Excluding these items from the calculation would result in a lower ratio of earnings to fixed charges for the twelve months ended December 31, 2007.