SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
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 1-8489
DOMINION RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 54-1229715
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
901 EAST BYRD STREET
RICHMOND, VIRGINIA 23261-6532
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(804) 775-5700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, no par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE:
(TITLE OF CLASS)
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 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. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( X )
The aggregate market value of voting stock held by nonaffiliates of the
registrant was $6,558,572,914 at January 31, 1995, based on the closing price of
the Common Stock on such date, as reported on the composite tape by The Wall
Street Journal.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JANUARY 31, 1995
Common Stock, no par value 172,028,142
DOCUMENTS INCORPORATED BY REFERENCE:
(a) Portions of the 1994 Annual Report to Shareholders for the fiscal year ended
December 31, 1994 are incorporated by reference in Parts I, II and IV
hereof.
(b) Portions of the 1995 Proxy Statement, dated March 16, 1995, are incorporated
by reference in Part III hereof.
DOMINION RESOURCES, INC.
ITEM PAGE
NUMBER NUMBER
PART I
1. Business
The Company............................................................................................... 1
Capital Requirements and Financing Program................................................................ 2
Capital Requirements...................................................................................... 2
Construction and Nuclear Fuel Expenditures................................................................ 2
Financing Program......................................................................................... 2
Rates..................................................................................................... 3
Virginia Power............................................................................................ 3
Regulation................................................................................................ 4
Virginia Power Sources of Power........................................................................... 6
Virginia Power Sources of Energy Used and Fuel Costs...................................................... 7
Interconnections.......................................................................................... 9
Future Sources of Power................................................................................... 9
Competition............................................................................................... 10
Conservation and Load Management.......................................................................... 10
2. Properties................................................................................................ 10
3. Legal Proceedings......................................................................................... 11
4. Submission of Matters to a Vote of Security Holders....................................................... 12
Executive Officers of the Registrant...................................................................... 13
PART II
5. Market for the Registrant's Common Stock and Related Shareholder Matters.................................. 14
6. Selected Financial Data................................................................................... 14
7. Management's Discussion and Analysis...................................................................... 14
8. Financial Statements and Supplementary Data............................................................... 14
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................... 14
PART III
10. Directors and Executive Officers of the Registrant........................................................ 14
11. Executive Compensation.................................................................................... 14
12. Security Ownership of Certain Beneficial Owners and Management............................................ 14
13. Certain Relationships and Related Transactions............................................................ 14
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......................................... 15
PART I
ITEM 1. BUSINESS
THE COMPANY
Dominion Resources, Inc. (Dominion Resources), organized in 1983, has its
principal office at 901 East Byrd Street, Richmond, Virginia 23219, telephone
(804) 775-5700. The principal assets of Dominion Resources are its investments
in its subsidiaries.
At December 31, 1994, Dominion Resources owned all of the outstanding
common stock of its subsidiaries: Dominion Capital, Inc. (Dominion Capital);
Dominion Energy, Inc. (Dominion Energy) and Virginia Electric and Power Company
(Virginia Power), its largest subsidiary.
Dominion Capital, which was established as a subsidiary of Dominion
Resources in 1985, provides financial services to the holding company and other
nonutility subsidiaries and also uses its own assets to make equity and
fixed-income investments. The principal assets of Dominion Capital are a 50%
limited partnership interest in a Louisiana hydroelectric project, investments
in marketable securities, and Rincon Securities Inc., a Dominion Capital
subsidiary which holds a diversified portfolio of preferred stocks. Dominion
Capital also has investments in affordable housing, real estate and leases.
Dominion Financing, Inc., another subsidiary of Dominion Capital, is engaged in
the issuance of medium-term notes to finance a portion of Dominion Capital's
activities. In 1994, Dominion Lands, Inc. (Dominion Lands), formerly a direct
subsidiary of Dominion Resources, became a subsidiary of Dominion Capital to
consolidate its residential projects with other company real estate ventures.
Dominion Lands was established in 1986 and is involved in joint venture
real estate development projects in Virginia and North Carolina. It also holds
properties in those states for future development or sale. Dominion Lands began
to market its first three projects in the fourth quarter of 1990: Harborside, a
condominium townhouse development on the Potomac River in Old Town, Alexandria,
Virginia; Governor's Land, a 1,400-acre residential community near Williamsburg,
Virginia, and Uwharrie Point, a 900-acre lake resort and second-home development
near Charlotte, North Carolina. Dominion Lands has not invested in commercial
real estate projects such as office buildings and retail developments. It has,
instead, pursued development of amenity-oriented communities offering
recreational and residential life styles.
Dominion Energy was established as a subsidiary of Dominion Resources in
1987 and is active in a number of partnerships to develop nonutility electric
power generation projects outside the territory served by Virginia Power.
Dominion Energy is involved in projects in six states, Argentina and Belize,
which total approximately 2,031 Mw. Projects in operation throughout 1994 in
which Dominion Energy has an interest include three gas-fueled projects totaling
1,290 Mw owned by Enron/Dominion Cogen Corporation, two geothermal projects in
California, a solar project in California, four small hydroelectric projects in
New York, a waste coal-fueled project in West Virginia, a wood- and coal-fueled
project in Maine, a hydroelectric and a gas-fired project in Argentina and two
gas-fired projects in California. During 1991, Dominion Energy announced its
plans to develop a 25 Mw run-of-river hydroelectric project in Belize which
began construction in 1992. This facility is scheduled to begin commercial
operation in the summer of 1995. Dominion Energy also participates in
partnerships to acquire and develop natural gas reserves. In 1994, it added 82
billion cubic feet (BCFE) of natural gas reserves. Production from company
holdings in 1994 totaled 36 BCFE. In connection with the establishment in 1994
of the Dominion Resources Black Warrior Trust, Dominion Energy sold 63 BCFE of
natural gas reserves. By the end of 1994, Dominion Energy held 325 BCFE in
natural gas reserves.
For additional information on the nonutility businesses, see NONUTILITY
ISSUES under FUTURE ISSUES in MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
on page 23 of the 1994 Annual Report to Shareholders. For additional information
on significant corporate governance issues and changes in the composite of the
Boards of Directors of Dominion Resources and Virginia Power see Item 3. LEGAL
PROCEEDINGS and Item 10. DIRECTORS AND OFFICERS OF THE REGISTRANT.
Dominion Resources is currently exempt from registration as a holding
company under the Public Utility Holding Company Act of 1935 (1935 Act).
Virginia Electric and Power Company, incorporated in 1909, Dominion
Resources' largest subsidiary, is a regulated public utility engaged in the
generation, transmission, distribution and sale of electric energy within a
30,000 square mile area in Virginia and northeastern North Carolina. It
transacts business under the name VIRGINIA POWER in Virginia and under the name
NORTH CAROLINA POWER in North Carolina. It sells electricity to retail customers
(including governmental agencies) and to wholesale customers such as rural
electric cooperatives and municipalities. The Virginia service area comprises
about 65%
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of Virginia's total land area but accounts for over 80% of its population. As
used herein, the term "Virginia Power" shall be deemed to refer to the entirety
of Virginia Electric and Power Company, including, without limitation, its
Virginia and North Carolina operations.
Virginia Power has nonexclusive franchises or permits for electric
operations in substantially all cities and towns now served. It also has
certificates of convenience and necessity from the Virginia State Corporation
Commission (the Virginia Commission) for service in all territory served at
retail in Virginia. The North Carolina Utilities Commission (the North Carolina
Commission) has assigned territory to Virginia Power for substantially all of
its retail service outside certain municipalities in North Carolina.
Virginia Power strives to operate its generating facilities in accordance
with prudent utility industry practices and in conformity with applicable
statutes, rules and regulations. Like other electric utilities, Virginia Power's
generating facilities are subject to unanticipated or extended outages for
repairs, replacements or modifications of equipment or otherwise to comply with
regulatory requirements. Such outages may involve significant expenditures not
previously budgeted, including replacement energy costs. See NUCLEAR under
REGULATION below and NUCLEAR OPERATIONS AND FUEL SUPPLY under VIRGINIA POWER
SOURCES OF ENERGY USED AND FUEL COSTS.
Dominion Resources and its subsidiaries had 10,789 employees as of December
31, 1994.
CAPITAL REQUIREMENTS AND FINANCING PROGRAM
CAPITAL REQUIREMENTS
See MANAGEMENT'S DISCUSSION AND ANALYSIS OF CASH FLOWS AND FINANCIAL
CONDITION on pages 27 and 28 of the 1994 Annual Report to Shareholders.
CONSTRUCTION AND NUCLEAR FUEL EXPENDITURES
Virginia Power's estimated construction and nuclear fuel expenditures,
including Allowance for Funds Used During Construction (AFC), for the three-year
period 1995-1997, total $1.9 billion. It has adopted a 1995 budget for
construction and nuclear fuel expenditures as set forth below:
ESTIMATED 1995
EXPENDITURES
(MILLIONS)
New Generating Facilities:
Clover Unit 1 and Unit 2............................................................ $ 52
Other Production:
North Anna Unit 2 steam generator replacement....................................... 70
Clean Air Act....................................................................... 25
Other............................................................................... 90
General Support Facilities............................................................ 56
Transmission.......................................................................... 59
Distribution.......................................................................... 262
Nuclear Fuel.......................................................................... 59
Total Construction Requirements and Nuclear Fuel.................................... 673
AFC................................................................................... 11
Total Expenditures.................................................................. $684
FINANCING PROGRAM
See MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS and MANAGEMENT'S
DISCUSSION AND ANALYSIS OF CASH FLOWS AND FINANCIAL CONDITION on pages 19
through 28 of the 1994 Annual Report to Shareholders.
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RATES
VIRGINIA POWER
Virginia Power was subject to rate regulation in 1994 as follows:
1994
PERCENT PERCENT
OF OF
REVENUES KWH SALES
Virginia retail:
Non-Governmental customers.................... Virginia Commission 78% 73%
Governmental customers........................ Negotiated Agreements 11 12
North Carolina retail........................... North Carolina Commission 4 4
Wholesale:
Requirements -- Sales for Resale.............. Federal Energy Regulatory 5 8
Commission (FERC)
Non-Requirements -- Sales for Resale.......... FERC 2 3
100% 100%
Substantially all of Virginia Power's electric sales are subject to
recovery of changes in fuel costs either through fuel adjustment factors or
periodic adjustments to base rates, each of which requires prior regulatory
approval.
Each of these jurisdictions has the authority to disallow recovery of costs
it determines to be excessive or imprudently incurred. Various cost items may be
reviewed on occasion, including costs of constructing or modifying facilities,
on-going purchases of capacity or providing replacement power during generating
unit outages.
The principal rate proceedings in which Virginia Power was involved in 1994
are described below by jurisdiction. Rate relief obtained by Virginia Power is
frequently less than requested.
VIRGINIA
On February 3, 1994, the Virginia Commission entered its Final Order in
Virginia Power's 1992 rate case, approving an increase in annual revenues of
$241.9 million. Refunds of $129.2 million (representing the amount recovered
under interim rates in excess of the rates finally approved, with interest) were
completed by the end of April. The Commission also approved continuation of
deferral accounting to recover purchased power capacity costs, allowed inclusion
of salary incentive pay in the cost of service, accepted Virginia Power's
calculation of postretirement benefits other than pensions, allowed rate base to
be updated to November 30, 1992, and recommended a return on equity in the range
of 10.5% to 11.5% with rates to be based on 11.4% to reflect superior operating
performance of Virginia Power's generating units. The Commission disapproved
proposed changes in Virginia Power's line extension policy and a proposed
increase in its summer/winter rate differential, and it disallowed from recovery
through rates the gross receipts tax component of capacity payments under
certain previously executed power purchase contracts. The Commission directed
Virginia Power, the Commission's Staff and other interested parties to explore
the concept of expanding the generating unit performance program to include
purchases of capacity and to present testimony on that issue in Virginia Power's
next rate case. Virginia Power and several non-utility generators that will be
adversely affected by the ruling that disallowed rate recovery of the gross
receipts tax component of purchased power costs appealed that ruling to the
Virginia Supreme Court. On January 13, 1995, the Court issued its Opinion
affirming the Virginia Commission's decision. On January 23, 1995, Virginia
Power and the other appellants filed Motions of Intent to Seek Rehearing.
On January 31, 1994, a hearing before a Hearing Examiner was held on
Virginia Power's application requesting approval of Schedule DEF -- Dispersed
Energy Facility, a rate schedule that would allow Virginia Power to respond to
the request of an industrial or commercial customer to build and operate a
generating facility at its business location and to sell to that customer all of
the electricity and associated steam from that facility under a long-term
contract. On June 23, 1994, the Hearing Examiner recommended approval on an
experimental basis (see COMPETITION below).
On January 10, 1994, a hearing was held before a Hearing Examiner on
Virginia Power's application to revise its Schedule 19 (rates to be paid to
small qualifying facilities), which sought, among other things, approval of (a)
limiting the schedule's applicability to facilities of 100 Kw or less and (b)
postponing the commencement of capacity payments until the capacity is needed by
Virginia Power. On April 25, 1994, the Hearing Examiner issued his Report
recommending approval of
3
these and other features of Virginia Power's application, and on July 1, 1994,
the Commission entered its Final Order accepting the Examiner's recommendation
as to these and most other issues.
On September 19, 1994, Virginia Power filed with the Virginia Commission an
application for a $25 million increase in the fuel factor. A hearing was held on
October 28, 1994, and the Commission approved an increase of $9.9 million
effective November 1, 1994.
Virginia Power filed an application with the Virginia Commission on
December 21, 1994, seeking approval, on an experimental basis, to implement a
real time pricing (RTP) option for its industrial customers with loads in excess
of 10 Mw. Under this option, all or a portion of an industrial customer's load
growth would be supplied at projected incremental hourly production costs,
adjusted for line losses and taxes, plus a margin of 0.6 cents per Kwh, and a
marginal cost-based Generation Capacity Adder and a Transmission Capacity Adder
would be applicable during those hours when the Virginia Power system is
approaching its forecasted annual peak demand. Up to 20% of an industrial
customer's existing load could be served on an RTP basis if the customer
executes a five-year contract for such service.
COUNTY AND MUNICIPAL
On January 30, 1995, Virginia Power reached agreement on the terms of a
three-year contract governing rates for county and municipal customers in
Virginia, which will continue through June 30, 1997. This contract resulted in a
decrease of $25.5 million in annual base revenue from the previous contract and
became effective July 1, 1994, with base rates remaining constant through the
term of the contract.
NORTH CAROLINA
In Virginia Power's 1992 rate case before the North Carolina Commission,
the Commission disallowed recovery of certain capacity costs paid to a
cogenerator and a portion of the compensation of certain Virginia Power
officers. Virginia Power appealed the Commission's Order on those issues, and on
December 9, 1994, the North Carolina Supreme Court affirmed the disallowance of
each by the Commission. Virginia Power filed a Motion for Rehearing on January
13, 1995.
Virginia Power filed an application with the North Carolina Commission on
September 9, 1994 for a $1.5 million increase in fuel rates. A hearing was held
on November 8, 1994, and the increase was approved on December 19, 1994.
On December 22, 1994, Virginia Power filed an application with the North
Carolina Commission for approval of Self-Generation Deferral Rates that are a
part of an Energy Agreement between North Carolina Power and Weyerhaeuser. The
Energy Agreement involves the use of a negotiated pricing structure which will
result in the deferral of the installation of additional self-generation
facilities by Weyerhaeuser.
REGULATION
GENERAL
In a wide variety of matters in addition to rates, Virginia Power is
presently subject to regulation by the Virginia Commission and the North
Carolina Commission, the Environmental Protection Agency (EPA), Department of
Energy (DOE), Nuclear Regulatory Commission (NRC), FERC, the Army Corps of
Engineers, and other federal, state and local authorities. Compliance with
numerous laws and regulations increases Virginia Power's operating and capital
costs by requiring, among other things, changes in the design and operation of
existing facilities and changes or delays in the location, design, construction
and operation of new facilities. The commissions regulating Virginia Power's
rates have historically permitted recovery of such costs.
Virginia Power may not construct, or incur financial commitments for
construction of, any substantial generating facilities or large capacity
transmission lines without the prior approval of state and federal governmental
agencies having jurisdiction over various aspects of its business. Such
approvals relate to, among other things, the environmental impact of such
activities, the relationship of such activities to the need for providing
adequate utility service and the design and operation of proposed facilities.
Various provisions of the Energy Policy Act of 1992 (Energy Act) that could
affect Virginia Power include those provisions encouraging the development of
nonutility generation, giving FERC authority to order transmission access for
wholesale transactions, requiring higher energy efficiency and alternative fuels
use, restructuring of nuclear plant licensing procedures, and requiring state
regulatory authorities to give full rate treatment for the effects of
conservation and demand
4
management programs, including the effects of reduced sales. While the full
impact of the Energy Act on Virginia Power cannot at this time be quantified, it
is likely, over time, to be significant. See COMPETITION below and COMPETITION
in UTILITY ISSUES in FUTURE ISSUES under MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS on pages 21 and 22 of the 1994 Annual Report to Shareholders.
ENVIRONMENTAL
From time to time, Virginia Power may be identified as a potentially
responsible party (PRP) with respect to a Superfund site. EPA (or a state) can
either (a) allow such a party to conduct and pay for a remedial investigation
and feasibility study and remedial action or (b) conduct the remedial
investigation and action and then seek reimbursement from the parties. Each
party can be held jointly, severally and strictly liable for all costs, but the
parties can then bring contribution actions against each other and seek
reimbursement from their insurance companies. As a result of the Superfund Act
or other laws or regulations regarding the remediation of waste, Virginia Power
may be required to expend amounts on remedial investigations and actions.
Although Virginia Power is not currently aware of any sites or events including
those sites currently identified likely to result in significant liabilities,
such amounts, in the future, could be significant.
Permits under the Clean Water Act and state laws have been issued for all
of Virginia Power's steam generating stations now in operation. Such permits are
subject to reissuance and continuing review.
Virginia Power is subject to the Clean Air Act (Air Act), which provides
the statutory basis for ambient air quality standards. In order to maintain
compliance with such standards and reduce the impact of emissions on ambient air
quality, Virginia Power may be required to incur significant additional
expenditures in constructing new facilities or in modifying existing facilities.
Virginia Power has installed a scrubber at its Mt. Storm Unit 3 Power Station.
This scrubber began operation on October 31, 1994. The cost of this scrubber and
related equipment was $147 million. Virginia Power is presently conducting
studies leading to the compliance plan for Phase II of the Clean Air Act, which
may involve the installation of two additional scrubbers, the addition of
nitrogen oxide controls and other methods for compliance. The present estimate
for the total capital cost for compliance, assuming the installation of three
scrubbers, nitrogen oxide controls and emission monitoring instrumentation, is
$481 million (1992 dollars). Annual incremental compliance costs for operation,
maintenance and fuel costs are estimated to be $128 million. These cost
estimates may change upon completion of the study effort now underway.
Virginia Power continues to work with the West Virginia Office of Air
Quality concerning opacity requirements applicable to the Mt. Storm Power
Station.
For additional information on ENVIRONMENTAL MATTERS, see Note O to the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS of the 1994 Annual Report to
Shareholders.
NUCLEAR
All aspects of the operation and maintenance of Virginia Power's nuclear
power stations are regulated by the NRC. Operating licenses issued by the NRC
are subject to revocation, suspension or modification, and operation of a
nuclear unit may be suspended if the NRC determines that the public interest,
health or safety so requires.
From time to time, the NRC adopts new requirements for the operation and
maintenance of nuclear facilities. In many cases, these new regulations require
changes in the design, operation and maintenance of existing nuclear facilities.
If the NRC adopts such requirements in the future, it could result in
substantial increases in the cost of operating and maintaining Virginia Power's
nuclear generating units.
WINTER PEAK
Due to record cold weather on January 19, 1994, Virginia Power reached a
record winter peak of 14,877 Mw, which exceeded the prior record of 13,478 Mw
that had been established one day earlier.
5
VIRGINIA POWER SOURCES OF POWER
VIRGINIA POWER GENERATING UNITS
TYPE SUMMER
YEARS OF CAPABILITY
NAME OF STATION, UNITS AND LOCATION INSTALLED FUEL MW
Nuclear:
Surry Units 1 & 2, Surry, Va..................................................... 1972-73 Nuclear 1,562
North Anna Units 1 & 2, Mineral, Va.............................................. 1978-80 Nuclear 1,787(a)
Total nuclear stations........................................................ 3,349
Fossil Fuel:
Steam:
Bremo Units 3 & 4, Bremo Bluff, Va............................................ 1950-58 Coal 227
Chesterfield Units 3-6, Chester, Va........................................... 1952-69 Coal 1,250
Mt. Storm Units 1-3, Mt. Storm, W. Va......................................... 1965-73 Coal 1,596
Chesapeake Units 1-4, Chesapeake, Va.......................................... 1953-62 Coal 595
Possum Point Units 3 & 4, Dumfries, Va........................................ 1955-62 Coal 322
Yorktown Units 1 & 2, Yorktown, Va............................................ 1957-59 Coal 326
Possum Point Units 1, 2, & 5, Dumfries, Va.................................... 1948-75 Oil 929
Yorktown Unit 3, Yorktown, Va................................................. 1974 Oil & Gas 720
North Branch Unit 1, Bayard, W. Va............................................ 1994(b) Waste Coal 74
Combustion Turbines:
35 units (8 locations)........................................................... 1967-90 Oil & Gas 1,019
Combined Cycle:
Chesterfield Units 7 & 8, Chester, Va............................................ 1990-92 Oil & Gas 397
Total fossil stations......................................................... 7,455
Hydroelectric:
Gaston Units 1-4, Roanoke Rapids, N.C............................................ 1963 Conventional 225
Roanoke Rapids Units 1-4, Roanoke Rapids, N.C.................................... 1955 Conventional 96
Other............................................................................ 1930-87 Conventional 3
Bath County Units 1-6, Warm Springs, Va.......................................... 1985 Pumped Storage 1,260(c)
Total hydro stations.......................................................... 1,584
Total Company generating unit capability...................................... 12,388
NET UTILITY PURCHASES.............................................................. 830
NON-UTILITY GENERATION............................................................. 3,244
Total Capability.............................................................. 16,462
(a) Includes an undivided interest of 11.6 percent (207 Mw) owned by Old
Dominion Electric Cooperative (ODEC).
(b) On December 30, 1994, Virginia Power acquired the North Branch 80 Mw
(nominal rating) waste coal power station located in Bayard, West Virginia in
Grant County.
(c) Reflects Virginia Power's 60 percent undivided ownership interest in the
2,100 Mw station. A 40 percent undivided interest in the facility is owned by
Allegheny Generating Company, a subsidiary of Allegheny Power System, Inc.
(APS).
Virginia Power's highest one-hour integrated service area summer peak
demand was 13,366 Mw on July 29, 1993, and the highest one-hour integrated
winter peak demand was 14,877 Mw on January 19, 1994.
6
VIRGINIA POWER SOURCES OF ENERGY USED AND FUEL COSTS
The average fuel cost of system energy output is shown below:
MILLS PER KILOWATT-HOUR
1994 1993 1992
Nuclear............................. 4.89 4.60 4.67
Coal................................ 14.61 14.69 14.87
Oil................................. 23.00 26.55 26.61
Purchased power, net................ 23.99 24.54 25.94
Other............................... 25.46 24.35 24.45
Average fuel cost................... 14.02 14.42 13.84
System energy output is shown below:
ESTIMATED ACTUAL
1995 1994 1993 1992
Nuclear(*).......................... 28% 34 % 31 % 35 %
Coal................................ 42 36 39 41
Oil................................. 1 3 3 2
Purchased power, net................ 26 23 23 19
Other............................... 3 4 4 3
100% 100 % 100 % 100 %
(*) Excludes ODEC's 11.6 percent ownership interest in the North Anna Power
Station (see Note E to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the
1994 Annual Report to Shareholders).
NUCLEAR OPERATIONS AND FUEL SUPPLY
In 1994, Virginia Power's four nuclear units achieved a combined capacity
factor of 86.7 percent.
The North Anna Unit 2 steam generator replacement project is scheduled to
begin at the end of the first quarter of 1995 at a total estimated Company cost
of $110 million.
Virginia Power utilizes both long-term contracts and spot purchases to
support its needs for nuclear fuel. Virginia Power's nuclear fuel supply and
related services are expected to be adequate to support current and planned
nuclear generation requirements. Virginia Power continually evaluates worldwide
market conditions in order to obtain an adequate nuclear fuel supply. Current
agreements, inventories and market availability should support planned fuel
cycles throughout the remainder of the 1990s.
On-site spent nuclear fuel storage at the Surry Power Station is adequate
for Virginia Power's needs through 1998 when, in accordance with the Nuclear
Waste Policy Act, the DOE is to begin acceptance of spent fuel for disposal.
Should acceptance be delayed, incremental dry storage facilities will be added
under the existing storage license. North Anna Power Station will require an
interim spent fuel storage facility in the late 1990's and Virginia Power plans
to submit a license application to the NRC in 1995 for such a facility at North
Anna.
For details regarding nuclear insurance and certain related contingent
liabilities as well as a NRC rule that requires proceeds from certain insurance
policies to be used first to pay stabilization and decontamination expenses, see
Note O to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the 1994 Annual
Report to Shareholders.
FOSSIL FUEL SUPPLY
Virginia Power's fossil fuel mix consists of coal, oil and natural gas. In
1994, Virginia Power consumed approximately 10.0 million tons of coal. As with
nuclear fuel, Virginia Power utilizes both long-term contracts and spot
purchases to support its needs. Virginia Power presently anticipates that
sufficient coal supplies at reasonable prices will be available for the
remainder of the 1990s. Current projections for an adequate supply of oil remain
favorable, barring unusual international events or extreme weather conditions
which could affect both price and supply.
Virginia Power uses natural gas as needed throughout the year for two
combined cycle units and at several combustion turbine units. For winter usage
at the combined cycle sites, gas is purchased and stored during the summer and
fall and
7
consumed during the colder months when gas supplies are not available at
favorable prices. Virginia Power has firm transportation contracts for the
delivery of gas to the combined cycle units. Current projections indicate gas
supplies will be available for the next several years.
PURCHASES AND SALES OF POWER
Virginia Power relies on purchases of power to meet a portion of its
capacity requirements. Virginia Power also makes economy purchases of power from
other utility systems when it is available at a cost lower than Virginia Power's
own generation costs.
Under contracts effective January 1, 1985, Virginia Power agreed to
purchase 400 Mw of electricity annually through 1999 from Hoosier Energy Rural
Electric Cooperative, Inc. (Hoosier), and agreed to purchase 500 Mw of
electricity annually during 1987-99 from certain operating subsidiaries of
American Electric Power Company, Inc. (AEP).
On November 26, 1991, Virginia Power and ODEC signed an agreement whereby
Virginia Power will provide ODEC 300 Mw of firm capacity and associated energy
from January 1, 1993, until the commercial operation of Clover Unit 1 (currently
scheduled for April 1995) or December 31, 1995, whichever occurs first. Virginia
Power will also provide 100 Mw of firm capacity and associated energy from the
commercial operation of Clover Unit 1 until the commercial operation of Clover
Unit 2 (currently scheduled for April 1996) or December 31, 1996, whichever
occurs first.
Virginia Power has a diversity exchange agreement with APS under which APS
delivers 200 Mw to Virginia Power in the summer and Virginia Power delivers 200
Mw to APS in the winter.
On June 28, 1994, FERC accepted a Power Sales Tariff filed by Virginia
Power on March 8, 1994 and revised on May 27, 1994. This tariff allows the
Company to resell the 400 Mw Hoosier allotment to other eligible purchasers and
also allows Virginia Power to sell system and emergency power.
Virginia Power also has 75 nonutility power purchase contracts with a
combined dependable summer capacity of 3,506 Mw. Of this amount, 3,244 Mw were
operational at the end of 1994 with the balance scheduled to come on-line
through 1997 (see NONUTILITY GENERATION OF VIRGINIA POWER under FUTURE SOURCES
OF POWER and Note O to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the
1994 Annual Report to Shareholders).
8
INTERCONNECTIONS
Virginia Power maintains major interconnections with Carolina Power and
Light Company, AEP, APS and the utilities in the Pennsylvania-New
Jersey-Maryland Power Pool. Through this major transmission network, Virginia
Power has arrangements with these utilities for coordinated planning, operation,
emergency assistance and exchanges of capacity and energy.
On March 23, 1990, Virginia Power and Appalachian Power Company (Apco) (an
operating unit of AEP) announced an agreement to increase the ability to
exchange electricity between the two companies through the construction of major
transmission facilities. The proposed construction will consist of 212 miles of
new transmission lines and related substation improvements. The transmission
additions will include 116 miles of 765 Kv line to be constructed by Apco and
102 miles of 500 Kv line to be constructed by Virginia Power. Completion of the
project, expected to be in service in the year 2000, will take three to four
years after all final regulatory approvals have been obtained. A Hearing
Examiner of the Virginia Commission has issued reports dated December 2, 1993
and January 24, 1994, recommending Commission approval of the Apco and Company
lines, respectively, and both applications are before the Commission for final
decision. About 79 miles of the Apco line would be located in West Virginia
where regulatory approval must also be obtained. Virginia Power has stated that
it would not build its 500 Kv line unless Apco is authorized to build its 765 Kv
line and unless certain other regional transmission facilities are constructed
or the Virginia Power contractual rights to use the regional transmission
network are amended.
FUTURE SOURCES OF POWER
Virginia Power presently anticipates that system load growth will require
approximately 1,100 Mw of additional capacity during the 1990s. Virginia Power
has and will pursue capacity acquisition plans to provide that capacity and
maintain a high degree of service reliability. This capacity may be built, owned
and operated by others and sold to Virginia Power under a competitive bid
process pursuant to Commission rules or may be built by Virginia Power if it
determines it can build capacity at a lower overall cost. Virginia Power also
pursues conservation and demand-side management (see CONSERVATION AND LOAD
MANAGEMENT below and CAPITAL REQUIREMENTS under MANAGEMENT'S DISCUSSION AND
ANALYSIS OF CASH FLOWS AND FINANCIAL CONDITION on page 28 of the 1994 Annual
Report to Shareholders).
In May 1990, Virginia Power entered into an agreement with ODEC, under
which Virginia Power purchased a 50 percent undivided ownership interest in a
782 Mw coal-fired power station to be constructed near Clover, Virginia in
Halifax County. Virginia Power will operate the Clover Power Station after it is
completed. The cost of Virginia Power's 50 percent ownership interest is
expected to be approximately $533 million. The project is on schedule and
Virginia Power's share of costs incurred through December 31, 1994 amounted to
$450 million. Construction on Unit 1 is presently 98% complete and construction
on Unit 2 is 54% complete.
In Virginia Power's proceeding seeking approval of the Virginia Commission
for a 75 mile 500 Kv transmission line from the Clover Power Station to the
Carson Substation in Dinwiddie County, Virginia, the Commission approved the
line in its Order Granting Application on May 11, 1994. A protestant group has
appealed that Order to the Virginia Supreme Court. Initial briefs of all parties
have been filed. Oral argument is expected to be scheduled during the first
quarter of 1995 and a decision of the Court is likely before mid-1995.
Virginia Power's continuing program to meet future capacity requirements is
summarized in the following table:
VIRGINIA POWER OWNED GENERATION
SUMMER
CAPABILITY EXPECTED
NAME OF UNITS MW IN-SERVICE DATE
Clover Power Station:
Unit 1 391* April 1995
Unit 2 391* April 1996
* Includes the 50 percent undivided ownership interest of ODEC. See Note E to
the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the 1994 Annual Report to
Shareholders.
9
VIRGINIA POWER NONUTILITY GENERATION
NUMBER OF
PROJECTS MW
Projects Operational 65 3,244
Projects Financed 3 241
Unfinanced Projects 7 21
Total Contracts 75 3,506
COMPETITION
Competition is playing an increasingly important role in Virginia Power's
business both in terms of source of power supply available to Virginia Power and
alternative choices for customers meeting their energy needs. Both forms of
competition have increased as a result of changing federal and state
governmental regulations, technological developments, rising costs of
constructing generating facilities and availability of alternative energy
sources. The creation of exempt wholesale generators by the Energy Act and their
existence in the market for electric sales may have an impact on Virginia
Power's plans for the construction or purchase of electric capacity and energy.
In addition, the Energy Act gives FERC broad power to require utilities to
provide transmission access to others. Exempt wholesale generators and other
power suppliers may seek, and FERC may require, access to the transmission
systems of investor-owned utilities, including Virginia Power's system.
Several of Virginia Power's industrial customers are seeking means of
reducing their expenses for power through self-generation and other
alternatives. Virginia Power is having discussions with these customers and has
proposed a regulatory initiative in Virginia that would enable it to provide
on-site generation for such customers (see VIRGINIA under RATES). Virginia Power
has undertaken cost-cutting measures to maintain its position as a low-cost
producer of electricity and has pursued a strategic planning initiative, called
Vision 2000, to encourage innovative approaches to serving traditional markets
and to prepare appropriate methods by which to serve future markets. In
furtherance of these initiatives, Virginia Power has established its nuclear and
fossil and hydroelectric operations as separate business units, has proposed
innovative pricing arrangements for incremental industrial loads in Virginia and
North Carolina, has executed long-term contracts with key wholesale customers
and has begun to provide an array of energy services to its customers.
Potential competition also exists for Virginia Power's sales to its
cooperative and municipal customers. Virginia Power entered into discussions in
early 1993 with the City of Falls Church, Virginia, where it has approximately
4,100 customers, for the renewal of its franchise that expired on March 26,
1993. Before agreement on a new franchise, the City announced on October 12,
1994, that it would pursue the establishment of a municipal electric system or a
municipal purchasing agent and passed an ordinance purporting to extend Virginia
Power's franchise until March 26, 1997. The City issued an "Informal Request for
Power Supply Proposal" to other electric suppliers on October 13, 1994 to
determine the interest in providing power to the City. On January 11, 1995, the
City sent to Virginia Power a formal Request for Transmission Service pursuant
to Sections 211(a) and 213(a) of the Federal Power Act. Virginia Power,
consistent with the state and federal law, will still attempt to negotiate a new
long-term franchise with the City while responding as required to the City's
request for transmission services.
CONSERVATION AND LOAD MANAGEMENT
Virginia Power is committed to integrated resource planning and has
developed a detailed analysis procedure in which effective demand-side and
supply-side options are both considered in order to determine the least cost
method to satisfy the customers' needs. Demand-side programs are selected
annually at Virginia Power through an integrated resource planning process which
directly compares the stream of costs and benefits from supply-side and
demand-side options. This process ensures the ultimate selection of a
demand-side package which reduces the need for additional capacity while
efficiently using Virginia Power's existing generation facilities.
All portions of the 1994 Annual Report to Shareholders, for the fiscal year
ended December 31, 1994, filed herein as Exhibit 13, referenced in this Item 1.
BUSINESS, are hereby incorporated herein by reference.
ITEM 2. PROPERTIES
Dominion Resources owns the building at One James River Plaza, Richmond,
Virginia, in which Virginia Power has its principal offices. Dominion Resources'
other assets consist primarily of its investments in its subsidiaries, which
invest in various enterprises and assets, as described in THE COMPANY under Item
1. BUSINESS above. See also VIRGINIA POWER GENERATING UNITS under VIRGINIA POWER
SOURCES OF POWER under Item 1. BUSINESS.
10
ITEM 3. LEGAL PROCEEDINGS
From time to time, Virginia Power may be in violation of or in default
under orders, statutes, rules or regulations relating to protection of the
environment, compliance plans imposed upon or agreed to by Virginia Power or
permits issued by various local, state and federal agencies for the construction
or operation of facilities. There may be pending from time to time
administrative proceedings involving violations of state or federal
environmental regulations that Virginia Power believes are not material with
respect to it and for which its aggregate liability for fines or penalties will
not exceed $100,000. There are no material agency enforcement actions or citizen
suits pending or, to Virginia Power's present knowledge, threatened against
Virginia Power.
Virginia Power is involved in an arbitration with Smith Cogeneration of
Virginia, Inc. (SCV) before the Virginia Commission concerning the terms of the
purchase of power from two 158 megawatt generating units to be developed by SCV.
The arbitrator has submitted his Report to the Commission recommending that the
parties enter into a contract containing terms that would require Virginia Power
to pay what it considers to be excessive amounts for the power to be purchased.
The parties have been given until March 31, 1995 to file comments on the
arbitrator's report.
Virginia Power and Doswell Limited Partnership (Doswell) have been unable
to agree on the calculation of a Fixed Fuel Transportation Charge to be paid to
Doswell under a purchased power contract. Doswell filed suit in the Circuit
Court of the City of Richmond alleging breach of contract and actual and
constructive fraud and seeking damages of not less than $75 million. The issues
of actual and constructive fraud were dismissed from the case, with prejudice,
leaving only the contract claim, which reduced alleged damages to approximately
$19 million. On March 2, 1995, the Court announced its verdict in favor of
Virginia Power.
On February 23, 1994, Virginia Power filed with the Virginia Commission a
Petition for Declaratory Judgment seeking a declaration that an arrangement
proposed by E.I. DuPont de Nemours & Company (DuPont) and LG&E Power, Inc.
(LG&E) for a partnership between those two companies to furnish energy services
to DuPont in Virginia Power's service territory is illegal under Virginia law.
DuPont filed a Motion to dismiss for lack of jurisdiction, to which Virginia
Power responded. Prior to any action by the Commission, DuPont and LG&E
announced that they had terminated their negotiations, and the Commission has
directed the parties to comment on whether the proceeding should be dismissed.
On January 13, 1995, Virginia Power filed its response stating that the case
should not be dismissed in the absence of a clear statement on the record by
both DuPont and LG&E that each has abandoned the power partnering concept in
Virginia Power's service territory. DuPont renewed its Motion to Dismiss and the
Commission entered its dismissal order on January 24, 1995.
On November 1, 1993, Dominion Energy, a wholly-owned subsidiary of Dominion
Resources and Dominion Cogen D.C., Inc. (DCDC), a wholly-owned subsidiary of
Dominion Energy, filed suit in the United States District Court for the District
of Columbia (the District), against its mayor, and several officials of the
District, alleging that the failure of the District to issue a building permit
for a cogeneration project on the campus of Georgetown University has deprived
Dominion Energy, DCDC and other plaintiffs of their constitutional rights to due
process of law and constitutes tortious interference with their contract rights
and with their prospective economic advantage. The other plaintiffs are Tristar
Georgetown General Corporation (TGGC) and Tristar Georgetown Limited
Corporation. DCDC and TGGC are general partners in Georgetown Cogeneration L.P.
The lawsuit alleges compensatory damages of $40 million and punitive damages of
$40 million. The defendants have filed Motions to Dismiss to which the
plaintiffs have responded, and numerous motions relating to discovery have been
filed. On March 1, 1995, the Court denied the defendants' motion to dismiss the
case in its entirety, denied in part and granted in part the motion to dismiss
the District of Columbia council members as defendants, and denied in part and
granted in part motions for protective orders and to compel discovery. As a
result, the action will proceed against all defendants except one member of
council, and discovery is scheduled to close on July 1, 1995.
A dispute over corporate governance issues between Dominion Resources and
Virginia Power arose in 1994. On June 17, 1994, Dominion Resources and Virginia
Power received an order from the Virginia Commission (the 1994 Order) that,
among other things, initiated an investigation into the affiliate relationships
and corporate governance issues between Dominion Resources and Virginia Power
(the First Proceeding). The text of the 1994 Order was set forth in Dominion
Resources' Current Report on Form 8-K of June 17, 1994. Between June and August
1994, Dominion Resources and Virginia Power made various filings with the
Commission, and the Commission issued several procedural orders, in connection
with the First Proceeding. A description of those filings and orders is set
forth in Dominion Resources' Quarterly Report on Form 10-Q for the period ending
June 30, 1994.
On or around August 5, 1994, Dominion Resources received a letter from a
purported shareholder, Barbara Margulis, demanding that Dominion Resources
commence a suit against certain of its directors and officers for conduct
related to the corporate governance issues addressed in the 1994 Order. By
letter dated October 19, 1994 Ms. Margulis clarified her earlier letter to limit
it to certain defined matters including conduct relating to the renegotiation of
a coal transportation contract
11
between Virginia Power and CSX Transportation. The Board appointed a special
committee of directors to investigate these allegations, and that investigation
is ongoing.
On August 15, 1994, Dominion Resources, Virginia Power and their respective
directors entered into a Settlement Agreement resolving certain of the disputed
corporate governance issues. The terms of that settlement are summarized in the
Dominion Resources' Current Report on Form 8-K of August 17, 1994. Pursuant to
the Settlement Agreement, Dominion Resources and Virginia Power filed a Joint
Motion to Dismiss certain of the corporate governance issues from the First
Proceeding. The Commission denied that Motion on August 24, 1994, continued the
First Proceeding, and instituted a new proceeding (the Second Proceeding) into
the holding company structure and the relationship between Dominion Resources
and Virginia Power. The Commission stated that the Second Proceeding would be an
"investigation directed not at averting a crisis or penalizing past conduct, but
toward protecting the public interest in the future." The Commission directed
its Staff to conduct an investigation and file an interim report on or before
December 1, 1994.
On December 1, 1994, the Staff of the Virginia Commission and its
consultants filed an Interim Report in the Second Proceeding. That Report is
included in Dominion Resources' Current Report on Form 8-K of December 5, 1994.
The Interim Report made numerous recommendations for Commission involvement in
matters of corporate governance, corporate structure, affiliate service
arrangements, and operating relationships between Dominion Resources and
Virginia Power, and suggested certain financial constraints on Dominion
Resources and new regulatory authority for the Commission. Many of these
suggestions were far-reaching. On December 21, 1994, Dominion Resources and
Virginia Power filed a Joint Response to the Interim Report, in which they
accepted some of the recommendations and urged that the corporate governance
structure established by the Settlement Agreement continue while they considered
the other recommendations in the course of a strategic planning effort by
Dominion Resources.
On January 23, 1995, the Staff of the Virginia Commission issued a report
in the Second Proceeding on its investigation of a coal transportation contract
between Virginia Power and CSX Transportation. The Staff's report concluded that
Dominion Resources improperly pressured Virginia Power to renegotiate the
contract, and recommended that approximately $11 million ($8.3 million Virginia
jurisdictional) of the coal transportation costs incurred under the contract
from 1991 through May 31, 1994 be disallowed in determining Virginia Power's
rates. The Staff's report further recommended that any future transportation
costs that it identified as excess be disallowed over the remainder of the
contract, which expires on May 31, 2000.
Virginia Power has recorded a regulatory liability of $10.5 million at
December 31, 1994. Virginia Power currently estimates that the total amount
called into question by the Virginia Commission Staff report is a net present
value of $60 million ($100 million over the life of the contract). On February
1, 1995, without admitting any imprudence, fault or liability, and believing
that their relationship with the Commission would be enhanced, Dominion
Resources and Virginia Power filed a motion in the Second Proceeding offering to
refund to Virginia Power customers $8.3 million in settlement of these issues
regarding transportation rates.
During the 1995 session of the Virginia General Assembly, the Virginia
Commission caused legislation to be introduced that addressed the Commission's
authority to intervene in disputes involving public utilities owned by separate
holding companies. That legislation was opposed by Dominion Resources. On
February 20, 1995, the proposed legislation was withdrawn and Dominion
Resources, Virginia Power and the Virginia Commission Staff consented to an
order that is included in Dominion Resources' Current Report on Form 8-K of
February 21, 1995. Under this order, which will be effective until July 2, 1996,
Dominion Resources must obtain the Commission's approval before taking steps
such as removing Virginia Power's board members or officers or changing Virginia
Power's articles of incorporation or by-laws. Although the order imposes for a
period of time significant restrictions on the ability of Dominion Resources to
select the Board and management of its subsidiary, Dominion Resources and
Virginia Power agreed to the order in the interest of enhancing relations with
the Virginia Commission and achieving the purposes of the Settlement Agreement.
Disagreements between the companies have arisen from time to time since the
Settlement Agreement was executed. On February 28, 1995, upon recommendation of
a Joint Committee created under the Settlement Agreement, the Boards of Dominion
Resources and Virginia Power took further action to enhance cooperation between
the two companies and their relationship with the Virginia Commission. Among
other things, the Boards expanded the authority of the Joint Committee to act
for the Boards on issues presented to it by the chief executives of the
companies. Each Board directed corporate officials and employees of its company
to cooperate fully with the Joint Committee in resolution of issues acted on by
the Committee and to support actions taken by the Committee. In connection with
these initiatives, the chief executive officers of both companies made known
their intentions to retire in July 1996 and the Boards directed the development
of executive succession plans for each company. Also, the Dominion Resources
Board received the resignations of directors Bruce C. Gottwald and John W. Snow
and the Virginia Power Board received the resignations of directors William W.
Berry and Frank S. Royal, and both Boards voted to reduce their size by two
members.
12
At this time, Dominion Resources is unable to predict the ultimate
resolution of these matters or their effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AND AGE BUSINESS EXPERIENCE PAST FIVE YEARS
Thos. E. Capps (59) Chairman of the Board of Directors and Chief Executive Officer from August 16,
1994 to date; Chairman of the Board of Directors, President and Chief
Executive Officer of Dominion Resources from December 30, 1992 to August 16,
1994; President and Chief Executive Officer of Dominion Resources and Vice
Chairman of the Virginia Electric and Power Company Board of Directors from
May 1, 1990 to December 30, 1992; President and Chief Operating Officer of
Dominion Resources and Vice Chairman of the Virginia Electric and Power
Company Board of Directors prior to May 1, 1990.
James T. Rhodes (53) President and Chief Executive Officer of Virginia Electric and Power Company.
Tyndall L. Baucom (53) President and Chief Operating Officer of Dominion Resources from August 16,
1994 to date; Senior Vice President of Dominion Resources prior to August 16,
1994.
Paul J. Bonavia (43) Senior Vice President and General Counsel from January 1, 1995 to date; Vice
President and General Counsel of Dominion Resources from February 1, 1994 to
January 1, 1995; Vice President-Regulation of Virginia Power from September 1,
1992 to February 1, 1994; Vice President and General Counsel of Dominion
Resources from June 3, 1991 to September 1, 1992; Partner in the law firm of
Steel, Hector and Davis, Miami, Florida, prior to June 3, 1991.
Thomas N. Chewning (49) Senior Vice President from October 1, 1994 to date; Vice President of Dominion
Resources from November 15, 1992 to October 1, 1994; Vice President, Treasurer
and Corporate Secretary of Virginia Power from October 1, 1991 to November 15,
1992; Vice President and Treasurer, Dominion Energy, Inc.; Vice President and
Treasurer, Dominion Lands, Inc. and Vice President-Administration, Dominion
Capital, Inc., prior to October 1, 1991; Assistant Treasurer, Dominion
Resources, prior to March 1, 1990.
David L. Heavenridge (48) Senior Vice President of Dominion Resources from March 1, 1994 to date; Senior
Vice President and Controller of Dominion Resources from April 1, 1992 to
March 1, 1994; Vice President and Controller of Dominion Resources prior to
April 1, 1992.
Linwood R. Robertson (55) Senior Vice President-Finance, Treasurer and Corporate Secretary, January 1,
1995 to date; Vice President-Finance and Treasurer of Dominion Resources from
March 1, 1994 to January 1, 1995; Vice President, Treasurer and Assistant
Corporate Secretary of Dominion Resources prior to March 1, 1994.
Donald T. Herrick, Jr. (51) Vice President of Dominion Resources.
Everard Munsey (61) Vice President Public Policy of Dominion Resources.
James L. Trueheart (43) Vice President and Controller of Dominion Resources from March 1, 1994 to
date; Assistant Controller of Dominion Resources from March 15, 1991 to March
1, 1994; Assistant Controller of Virginia Power prior to March 15, 1991.
13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SHAREHOLDER MATTERS
Dominion Resources common stock is listed on the New York Stock Exchange
and at December 31, 1994 there were 235,062 registered common shareholders of
record. Quarterly information concerning stock prices and dividends is contained
on page 43 of the 1994 Annual Report to Shareholders, for the fiscal year ended
December 31, 1994, in Note P to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
which is filed herein as Exhibit 13, is hereby incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
This information is contained under the caption "Selected Consolidated
Financial Data" on page 17 of the 1994 Annual Report to Shareholders, for the
fiscal year ended December 31, 1994, filed herein as Exhibit 13, is hereby
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
This information is contained under the caption "Management's Discussion
and Analysis of Operations" on pages 19 through 23 and "Management's Discussion
and Analysis of Cash Flows and Financial Condition" on pages 27 and 28 of the
1994 Annual Report to Shareholders, for the fiscal year ended December 31, 1994,
filed herein as Exhibit 13, is hereby incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
This information is contained in the CONSOLIDATED FINANCIAL STATEMENTS on
pages 18, 24 through 26. Notes to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
on pages 29 through 44 and related report thereon of Deloitte & Touche LLP,
independent auditors, appearing on page 45 of the 1994 Annual Report to
Shareholders, for the fiscal year ended December 31, 1994, filed herein as
Exhibit 13, is hereby incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the Directors of Dominion Resources contained on
pages 4 through 6 of the 1995 Proxy Statement, File No. 1-8489, dated March 16,
1995 is hereby incorporated herein by reference. The information concerning the
executive officers of Dominion Resources required by this Item is incorporated
by reference to the section in Part I hereof entitled "EXECUTIVE OFFICERS OF THE
REGISTRANT." The information regarding the Settlement Agreement and certain
changes in the composite of the Board of Directors of Dominion Resources,
contained on pages 2 through 4 in the 1995 Proxy Statement, is hereby
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information regarding executive and director compensation contained on
pages 16 through 25 of the 1995 Proxy Statement is hereby incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information concerning stock ownership by directors and executive
officers contained on page 8 of the 1995 Proxy Statement is hereby incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained on page 9 of the 1995 Proxy Statement under the
caption "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" and on
pages 26 and 27 of the 1995 Proxy Statement concerning certain transactions and
relationships of Dominion Resources and its subsidiaries with its executive
officers and directors is hereby incorporated herein by reference.
14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. The following documents are filed as part of this Form 10-K. The
Consolidated Financial Statements are incorporated herein by reference and are
found on the pages noted.
1. FINANCIAL STATEMENTS
1994
ANNUAL REPORT
TO SHAREHOLDERS
(PAGE)
Report of Independent Auditors 45
Consolidated Statements of Income and Retained Earnings
for the years ended December 31, 1994, 1993 and 1992 18
Consolidated Balance Sheets at December 31, 1994 and 1993 24-25
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 26
Notes to Consolidated Financial Statements 29-43
2. EXHIBITS
3(i) - Articles of Incorporation as in effect May 4, 1987 (Exhibit 3(i), Form 10-K for the fiscal year ended
December 31, 1993, File No. 1-8489, incorporated by reference).
3(ii) - Bylaws as in effect on September 21, 1994 (filed herewith).
4(i) - See Exhibit 3(i) above.
4(ii) - Indenture of Mortgage of Virginia Electric and Power Company, dated November 1, 1935, as supplemented and
modified by fifty-eight Supplemental Indentures (Exhibit 4(ii), Form 10-K for the fiscal year ended
December 31, 1985, File No. 1-2255, incorporated by reference); Fifty-Ninth Supplemental Indenture
(Exhibit 4(ii), Form 10-Q for the quarter ended March 31, 1986, File No. 1-2255, incorporated by
reference); Sixtieth Supplemental Indenture (Exhibit 4(ii), Form 10-Q for the quarter ended September 30,
1986, File No. 1-2255, incorporated by reference); Sixty-First Supplemental Indenture (Exhibit 4(ii), Form
10-Q for the quarter ended June 30, 1987, File No. 1-2255, incorporated by reference); Sixty-Second
Supplemental Indenture (Exhibit 4(ii), Form 8-K, dated November 3, 1987, File No. 1-2255, incorporated by
reference); Sixty-Third Supplemental Indenture (Exhibit 4(i), Form 8-K, dated June 8, 1988, File No.
1-2255, incorporated by reference); Sixty-Fourth Supplemental Indenture (Exhibit 4(i), Form 8-K, dated
February 8, 1989, File No. 1-2255, incorporated by reference); Sixty-Fifth Supplemental Indenture (Exhibit
4(i), Form 8-K, dated June 22, 1989, File No. 1-2255, incorporated by reference); Sixty-Sixth Supplemental
Indenture, (Exhibit 4(i), Form 8-K, dated February 27, 1990, File No. 1-2255, incorporated by reference);
Sixty-Seventh Supplemental Indenture (Exhibit 4(i), Form 8-K, dated April 2, 1991, File No. 1-2255,
incorporated by reference); Sixty-Eighth Supplemental Indenture, (Exhibit 4(i)), Sixty-Ninth Supplemental
Indenture, (Exhibit 4(ii)) and Seventieth Supplemental Indenture, (Exhibit 4(iii), Form 8-K, dated
February 25, 1992, File No. 1-2255, incorporated by reference); Seventy-First Supplemental Indenture
(Exhibit 4(i)) and Seventy-Second Supplemental Indenture, (Exhibit 4(ii), Form 8-K, dated July 7, 1992,
File No. 1-2255, incorporated by reference); Seventy-Third Supplemental Indenture, (Exhibit 4(i), Form
8-K, dated August 6, 1992, File No. 1-2255, incorporated by reference); Seventy-Fourth Supplemental
Indenture (Exhibit 4(i), Form 8-K, dated February 10, 1993, File No. 1-2255, incorporated by reference);
Seventy-Fifth Supplemental Indenture, (Exhibit 4(i), Form 8-K, dated April 6, 1993, File No. 1-2255,
incorporated by reference); Seventy-Sixth Supplemental Indenture, (Exhibit 4(i), Form 8-K, dated April 21,
1993, File No. 1-2255, incorporated by reference); Seventy-Seventh Supplemental Indenture, (Exhibit 4(i),
Form 8-K, dated June 8, 1993, File No. 1-2255, incorporated by reference); Seventy-Eighth Supplemental
Indenture, (Exhibit 4(i), Form 8-K, dated August 10, 1993, File No. 1-2255, incorporated by reference);
Seventy-Ninth Supplemental Indenture, (Exhibit 4(i), Form 8-K, dated August 10, 1993, File No. 1-2255,
incorporated by reference); Eightieth Supplemental Indenture, (Exhibit 4(i), Form 8-K, dated October 12,
1993, File No. 1-2255, incorporated by reference); Eighty-First Supplemental Indenture,
15
(Exhibit 4(iii), Form 10-K for the fiscal year ended December 31, 1993, File No. 1-2255, incorporated by
reference); Eighty-Second Supplemental Indenture, (Exhibit 4(i), Form 8-K, dated January 18, 1994, File
No. 1-2255, incorporated by reference) and Eighty-Third Supplemental Indenture (Exhibit 4(i), Form 8-K,
dated October 19, 1994, File No. 1-2255, incorporated by reference).
4(iii) - Indenture, dated April 1, 1985, between Virginia Electric and Power Company and Crestar Bank (formerly
United Virginia Bank) (Exhibit 4(iv), Form 10-K for the fiscal year ended December 31, 1993, File No.
1-2255, incorporated by reference).
4(iv) - Indenture, dated as of June 1, 1986, between Virginia Electric and Power Company and Chemical Bank
(Exhibit 4(v), Form 10-K for the fiscal year ended December 31, 1993, File No. 1-2255, incorporated by
reference).
4(v) - Indenture, dated April 1, 1988, between Virginia Electric and Power Company and Chemical Bank, as
supplemented and modified by a First Supplemental Indenture, dated August 1, 1989, (Exhibit 4(vi), Form
10-K for the fiscal year ended December 31, 1993, File No. 1-2255, incorporated by reference).
4(vi) - Dominion Resources agrees to furnish to the Commission upon request any other instrument with respect to
long-term debt as to which the total amount of securities authorized thereunder does not exceed 10% of
Dominion Resources' total assets.
10(i) - Operating Agreement, dated June 17, 1981, between Virginia Electric and Power Company and Monongahela
Power Company, the Potomac Edison Company, West Penn Power Company, and Allegheny Generating Company
(Exhibit 10(vi), Form 10-K for the fiscal year ended December 31, 1983, File No. 1-8489, incorporated by
reference).
10(ii) - Purchase, Construction and Ownership Agreement, dated as of December 28, 1982 but amended and restated on
October 17, 1983, between Virginia Electric and Power Company and Old Dominion Electric Cooperative
(Exhibit 10(viii), Form 10-K for the fiscal year ended December 31, 1983, File No. 1-8489, incorporated by
reference).
10(iii) - Interconnection and Operating Agreement, dated as of December 28, 1982 as amended and restated on October
17, 1983, between Virginia Electric and Power Company and Old Dominion Electric Cooperative (Exhibit
10(ix), Form 10-K for the fiscal year ended December 31, 1983, File No. 1-8489, incorporated by
reference).
10(iv) - Nuclear Fuel Agreement, dated as of December 28, 1982 as amended and restated on October 17, 1983, between
Virginia Electric and Power Company and Old Dominion Electric Cooperative (Exhibit 10(x), Form 10-K for
the fiscal year ended December 31, 1983, File No. 1-8489, incorporated by reference).
10(v) - Inter-Company Credit Agreement, dated July 1, 1986, as amended and restated December 31, 1992 between
Dominion Resources and Virginia Electric and Power Company (Exhibit 10(v), Form 10-K for the fiscal year
ended December 31, 1993, File No. 1-8489, incorporated by reference).
10(vi) - Inter-Company Credit Agreement, dated December 20, 1985, as modified on August 21, 1987, between Dominion
Resources and Dominion Capital, Inc. (Exhibit 10(vi), Form 10-K for the fiscal year ended December 31,
1993, File No. 1-8489, incorporated by reference).
10(vii) - Inter-Company Credit Agreement, dated October 1, 1987 as amended and restated as of May 1, 1988 between
Dominion Resources and Dominion Energy, Inc. (Exhibit 10(vii), Form 10-K for the fiscal year ended
December 31, 1993, File No. 1-8489, incorporated by reference).
10(viii) - Inter-Company Credit Agreement, dated as of September 1, 1988 between Dominion Resources and Dominion
Lands, Inc. (Exhibit 10(viii), Form 10-K for the fiscal year ended December 31, 1993, File No. 1-8489,
incorporated by reference).
10(ix) - Form of Amended and Restated Articles of Partnership in Commendam of Catalyst Old River Hydroelectric
Limited Partnership, by and between Catalyst Vidalia Corporation and Dominion Capital, Inc. effective as
of August 24, 1990 (Exhibit 10(xii) Form 10-K for the fiscal year ended December 31, 1990, File No.
1-8489, incorporated by reference).
10(x) - Supplemental Funding Agreement, dated as of August 24, 1990, by and among Dominion Capital, Inc., Catalyst
Old River Hydroelectric Limited Partnership and First National Bank of Commerce
16
(Exhibit 10(xiii) Form 10-K for the fiscal year ended December 31, 1990, File No. 1-8489, incorporated by
reference).
10(xi) - Credit Agreement, dated December 1, 1985, between Virginia Electric and Power Company and Old Dominion
Electric Cooperative (Exhibit 10(xix), Form 10-K for the fiscal year ended December 31, 1985, File No.
1-8489, incorporated by reference).
10(xii) - Agreement for Northern Virginia Services, dated as of November 1, 1985, between Potomac Electric Power
Company and Virginia Electric and Power Company (Exhibit 10(xxi), Form 10-K for the fiscal year ended
December 31, 1985, File No. 1-8489, incorporated by reference).
10(xiii) - Purchase, Construction and Ownership Agreement, dated May 31, 1990, between Virginia Electric and Power
Company and Old Dominion Electric Cooperative (Exhibit 10(xi), Form 10-K for the fiscal year ended
December 31, 1990, File No. 1-2255, incorporated by reference).
10(xiv) - Operating Agreement, dated May 31, 1990, between Virginia Electric and Power Company and Old Dominion
Electric Cooperative (Exhibit 10(xii), Form 10-K for the fiscal year ended December 31, 1990, File No.
1-2255, incorporated by reference).
10(xv) - Coal-Fired Unit Turnkey Contract (Volume 1), dated April 6, 1989, and the United 2 Amendment (Volume 1),
dated May 31, 1990 between Virginia Electric and Power Company and Old Dominion Electric Cooperative,
Westinghouse, Black & Veatch, Combustion Engineering and H. B. Zachry (Volumes 2-11 contain technical
specifications) (Exhibit 10(xiii), Form 10-K for the fiscal year ended December 31, 1990, File No. 1-2255,
incorporated by reference).
10(xvi) - Receivables Purchase Agreement, dated as of December 11, 1991, between Virginia Electric and Power Company
and Dynamic Funding Corporation (Exhibit 10(xv), Form 10-K for the fiscal year ended December 31, 1991,
File No. 1-2255, incorporated by reference).
10(xvii) - Trust Agreement of Dominion Resources Black Warrior Trust, dated May 31, 1994, among Dominion Black
Warrior Basin, Inc., Dominion Resources, Inc., Mellon Bank (DE) National Association and Nationsbank of
Texas, N.A. (Exhibit 3.1, Amendment No. 1 to Registration Statement, File No. 33-53513, filed June 1,
1994, incorporated by reference).
10(xviii) - First Amendment of Trust Agreement of Dominion Resources Black Warrior Trust, dated June 27, 1994, among
Dominion Black Warrior Basin, Inc., Dominion Resources, Inc., Mellon Bank (DE) National Association and
Nationsbank of Texas, N.A. (Exhibit 10(ii), Form 10-Q for the quarter ended June 30, 1994, File No.
1-8489, incorporated by reference).
10(xix)* - Dominion Resources, Inc. Directors' Deferred Compensation Plan, effective July 1, 1986 (Exhibit 10(xx),
Form 10-K for the fiscal year ended December 31, 1988, File No. 1-8489, incorporated by reference).
10(xx)* - Dominion Resources, Inc. Performance Achievement Plan, effective January 1, 1986, as amended and restated
effective February 19, 1988 (Exhibit 10(xxi), Form 10-K for the fiscal year ended December 31, 1988, File
No. 1-8489, incorporated by reference).
10(xxi)* - Dominion Resources, Inc. Executive Supplemental Retirement Plan, effective January 1, 1981 as amended and
restated effective October 22, 1988 (Exhibit 10(xxii), Form 10-K for the fiscal year ended December 31,
1988, File No. 1-8489, incorporated by reference), amended and restated June 15, 1990 (Exhibit 10(xxiv),
Form 10-K for the fiscal year ended December 31, 1990, File No. 1-8489, incorporated by reference).
10(xxii)* - Arrangements with certain executive officers regarding additional credited years of service for retirement
and retirement life insurance purposes (Exhibit 10(xxv), Form 10-K for the fiscal year ended December 31,
1991, File No. 1-8489, incorporated by reference).
10(xxiii)* - Dominion Resources, Inc.'s Cash Incentive Plan as adopted December 20, 1991 (Exhibit 10(xxii), Form 10-K
for the fiscal year ended December 31, 1991, File No. 1-8489, incorporated by reference).
10(xxiv)* - Dominion Resources, Inc. Long-Term Incentive Plan, effective April 17, 1987 (1987 Proxy Statement, File
No. 1-8489, incorporated by reference).
10(xxv)* - Form of Employment Continuity Agreement for elected officers of Virginia Power (Exhibit 10(xxviii), Form
10-K for the fiscal year ended December 31, 1986, File No. 1-8489, incorporated by reference), amended May
15, 1987 (Exhibit 10(xxviii), Form 10-K for the fiscal year ended December 31, 1988, File No. 1-8489,
incorporated by reference).
17
10(xxvi)* - Form of Employment Continuity Agreement for certain officers of Dominion Resources (filed herewith)
10(xxvii)* - Dominion Resources, Inc. Retirement Benefit Funding Plan, effective June 29, 1990 (Exhibit 10(xxxiii),
Form 10-K for the fiscal year ended December 31, 1990, File No. 1-8489, incorporated by reference).
10(xxviii)* - Dominion Resources, Inc. Retirement Benefit Restoration Plan as adopted effective January 1, 1991 (Exhibit
10(xxvii), Form 10-K for the fiscal year ended December 31, 1992, File No. 1-8489, incorporated by
reference).
10(xxvix)* - Dominion Resources, Inc. Executives' Deferred Compensation Plan, effective January 1, 1994 (Exhibit
10(xxviii), Form 10-K for the fiscal year ended December 31, 1993, File No. 1-8489, incorporated by
reference).
10(xxx)* - Employment Agreement dated August 12, 1994 between Dominion Resources and Thos. E. Capps (filed herewith).
10(xxxi)* - Employment Agreement dated February 6, 1995 between Dominion Resources and Tyndall L. Baucom (filed
herewith).
10(xxxii)* - Employment Agreement dated June 30, 1994 between Virginia Power and James T. Rhodes (filed herewith).
10(xxxiii)* - Form of three year Employment Agreement between Dominion Resources and Paul J. Bonavia, David L.
Heavenridge and certain other executive officers of Dominion Resources (filed herewith).
10(xxxiv)* - Form of two year Employment Agreement between Dominion Resources and certain executive officers (filed
herewith).
11 - Computation of Earnings Per Share of Common Stock Assuming Full Dilution (filed herewith).
13 - Portions of the 1994 Annual Report to Shareholders for the fiscal year ended December 31, 1994 (filed
herewith).
22 - Subsidiaries of the Registrant (filed herewith).
23(i) - Consent of Hunton & Williams (filed herewith).
23(ii) - Consent of Jackson & Kelly (filed herewith).
23(iii) - Consent of Deloitte & Touche LLP (filed herewith).
27 - Financial Data Schedule (filed herewith).
* Indicates management contract or compensatory plan or arrangement.
B. Report of Form 8-K
Dominion Resources filed a report on Form 8-K, dated December 5, 1994,
reporting the release by the Staff of the Virginia State Corporation Commission
(the Staff) of a report filed December 1, 1994 entitled "Staff Investigation of
Corporate Relationships, Affiliate Arrangements, and Financial and
Diversification Issues of Dominion Resources, Inc. and Virginia Power."
Dominion Resources filed a report on Form 8-K, dated February 21, 1995
reporting the entry of a Consent Order by the Virginia State Corporation
Commission (the Commission) on the joint motion of Dominion Resources, Virginia
Power and the Staff and the withdrawal by Delegate Clinton Miller of certain
legislation introduced by Delegate Miller in the 1995 Virginia General Assembly
at the request of the Commission.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: THOS. E. CAPPS
(Thos. E. Capps, Chairman of the
Board of Directors
and Chief Executive Officer)
Date: MARCH 8, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the 8th day of March, 1995.
SIGNATURE TITLE
JOHN B. ADAMS, JR. Director
John B. Adams, Jr.
TYNDALL L. BAUCOM President (Chief Operating Officer)
Tyndall L. Baucom and Director
JOHN B. BERNHARDT Director
John B. Bernhardt
THOS. E. CAPPS Chairman of the Board of Directors
Thos. E. Capps (Chief Executive Officer)
and Director
Director
Bruce C. Gottwald
BENJAMIN J. LAMBERT, III Director
Benjamin J. Lambert, III
RICHARD L. LEATHERWOOD Director
Richard L. Leatherwood
HARVEY L. LINDSAY, JR. Director
Harvey L. Lindsay, Jr.
K. A. RANDALL Director
K. A. Randall
WILLIAM T. ROOS Director
William T. Roos
19
SIGNATURE TITLE
FRANK S. ROYAL Director
Frank S. Royal
JUDITH B. SACK Director
Judith B. Sack
Director
Richard L. Sharp
S. DALLAS SIMMONS Director
S. Dallas Simmons
Director
John W. Snow
ROBERT H. SPILMAN Director
Robert H. Spilman
LINWOOD R. ROBERTSON Senior Vice President
Linwood R. Robertson (Chief Financial Officer)
J. L. TRUEHEART Vice President and Controller
J. L. Trueheart (Principal Accounting Officer)
20
DOMINION RESOURCES, INC.
FINANCIAL SECTION
OF THE
1994
ANNUAL REPORT
TO
SHAREHOLDERS
(Incorporated by Reference)