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VELPI Virginia Electric & Power

Filed: 5 May 20, 11:40am
0000715957 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:InterestRateContractMember d:DominionEnergyGasHoldingsLLCMember 2019-12-31

 

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 March 31, 2020

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

 

Exact name of registrants as specified in their charters, address of

principal executive offices and registrants’ telephone number

 

I.R.S. Employer

Identification Number

 

 

 

 

 

001-08489

 

DOMINION ENERGY, INC.

 

54-1229715

 

 

 

 

 

000-55337

 

VIRGINIA ELECTRIC AND POWER COMPANY

 

54-0418825

 

 

 

 

 

001-37591

 

DOMINION ENERGY GAS HOLDINGS, LLC

 

46-3639580

 

 

 

 

 

 

 

120 Tredegar Street

Richmond, Virginia 23219

(804) 819-2000

 

 

 

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

DOMINION ENERGY, INC.

D

Common Stock, no par value

New York Stock Exchange

 

DRUA

2016 Series A 5.25% Enhanced Junior Subordinated Notes

New York Stock Exchange

DOMINION ENERGY GAS

HOLDINGS, LLC

DCUE

2019 Series A Corporate Units

2014 Series C 4.6% Senior Notes

New York Stock Exchange

New York Stock Exchange

 

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.

 

Large accelerated filer

 

Accelerated filer

Emerging growth company

Non-accelerated filer

 

Smaller reporting company

 

 

 

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

 

 

 

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

 

Large accelerated filer

 

Accelerated filer

Emerging growth company

Non-accelerated filer

 

Smaller reporting company

 

 

 

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 April 17, 2020, the latest practicable date for determination, Dominion Energy, Inc. had 839,251,000 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 all 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 Dominion Energy Gas Holdings, LLC make no representations as to the information relating to Dominion Energy, Inc.’s other operations.

VIRGINIA ELECTRIC AND POWER COMPANY AND DOMINION ENERGY GAS HOLDINGS, LLC MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND ARE FILING THIS FORM 10-Q UNDER THE REDUCED DISCLOSURE FORMAT.

 

 

 


 

COMBINED INDEX

 

 

 

 

2


 

GLOSSARY OF TERMS

The following abbreviations or acronyms used in this Form 10-Q are defined below:

 

Abbreviation or Acronym

 

Definition

2019 Equity Units

 

Dominion Energy’s 2019 Series A Equity Units issued in June 2019, initially in the form of 2019 Series A Corporate Units, consisting of a stock purchase contract and a 1/10 interest in a share of the Series A Preferred Stock

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

ACE Rule

 

Affordable Clean Energy Rule

AFUDC

 

Allowance for funds used during construction

AMI

 

Advanced Metering Infrastructure

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

 

The approximately 600-mile natural gas pipeline running from West Virginia through Virginia to North Carolina which will be owned by Dominion Energy and Duke to be constructed and operated by DETI

BACT

 

Best available control technology

bcf

 

Billion cubic feet

Blue Racer

 

Blue Racer Midstream, LLC, a joint venture between Caiman Energy II, LLC and FR BR Holdings, LLC

Brookfield

 

Brookfield Super-Core Infrastructure Partners, an infrastructure fund managed by Brookfield Asset Management Inc.

CAA

 

Clean Air Act

CARES Act

 

Coronavirus Aid, Relief and Economic Security Act, enacted on March 27, 2020

CCR

 

Coal combustion residual

CEO

 

Chief Executive Officer

CEP

 

Capital Expenditure Program, as established by House Bill 95, Ohio legislation enacted in 2011, deployed by East Ohio to recover certain costs associated with capital investment

CERCLA

 

Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as Superfund

CFO

 

Chief Financial Officer

CO2

 

Carbon dioxide

Colonial Trail West

 

A 142 MW utility-scale solar power station located in Surry County, Virginia

Companies

 

Dominion Energy, Virginia Power and Dominion Energy Gas, collectively

Contracted Generation

 

Contracted Generation operating segment

Cooling degree days

 

Units measuring the extent to which the average daily temperature is greater than 65 degrees Fahrenheit, or 75 degrees Fahrenheit in DESC’s service territory, calculated as the difference between 65 or 75 degrees, as applicable, and the average temperature for that day

Cove Point

 

Dominion Energy Cove Point LNG, LP

Cove Point LNG Facility

 

An LNG import/export and storage facility, including the Liquefaction Facility, located on the Chesapeake Bay in Lusby, Maryland

CPCN

 

Certificate of Public Convenience and Necessity

3


 

CWA

 

Clean Water Act

DCP

 

The legal entity, Dominion Cove Point, LLC, one or more of its consolidated subsidiaries, or the entirety of Dominion Cove Point, LLC and its consolidated subsidiaries

DECG

 

Dominion Energy Carolina Gas Transmission, Inc.

DECGS

 

Dominion Energy Carolina Gas Services, Inc.

DEQPS

 

Dominion Energy Questar Pipeline Services, Inc.

DES

 

Dominion Energy Services, Inc.

DESC

 

The legal entity, Dominion Energy South Carolina, Inc., one or more of its consolidated entities or operating segment, or the entirety of Dominion Energy South Carolina, Inc. and its consolidated entities

DETI

 

Dominion Energy Transmission, Inc.

DGI

 

Dominion Generation, Inc.

DGP

 

Dominion Gathering and Processing, Inc.

DMLPHCII

 

Dominion MLP Holding Company II, LLC

DOE

 

U.S. Department of Energy

Dominion Energy

 

The legal entity, Dominion Energy, Inc., one or more of its consolidated subsidiaries (other than Virginia Power and Dominion Energy Gas) or operating segments, or the entirety of Dominion Energy, Inc. and its consolidated subsidiaries

 

Dominion Energy Gas

 

The legal entity, Dominion Energy Gas Holdings, LLC, one or more of its consolidated subsidiaries or operating segment, or the entirety of Dominion Energy Gas Holdings, LLC and its consolidated subsidiaries

 

Dominion Energy Gas

   Restructuring

 

The acquisition of DCP and DMLPHCII from, and the disposition of East Ohio and DGP to, Dominion

 

    Energy by Dominion Energy Gas on November 6, 2019

 

Dominion Energy Midstream

 

The legal entity, Dominion Energy Midstream Partners, LP, one or more of its consolidated subsidiaries, or the entirety of Dominion Energy Midstream Partners, LP and its consolidated subsidiaries

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

Dominion Energy South Carolina

 

Dominion Energy South Carolina operating segment

Dominion Energy Virginia

 

Dominion Energy Virginia operating segment

DSM

 

Demand-side management

Dth

 

Dekatherm

Duke

 

The legal entity, Duke Energy Corporation, one or more of its consolidated subsidiaries, or the entirety of Duke Energy Corporation and its consolidated subsidiaries

East Ohio

 

The East Ohio Gas Company, doing business as Dominion Energy Ohio

EPA

 

U.S. Environmental Protection Agency

EPS

 

Earnings per share

Export Customers

 

ST Cove Point, LLC, a joint venture of Sumitomo Corporation and Tokyo Gas Co., LTD., and GAIL Global (USA) LNG, LLC

FERC

 

Federal Energy Regulatory Commission

FILOT

 

Fee in lieu of taxes

4


 

Four Brothers

 

Four Brothers Solar, LLC, a limited liability company owned by Dominion Energy and Four Brothers Holdings, LLC, a subsidiary of GIP

FTRs

 

Financial transmission rights

GAAP

 

U.S. generally accepted accounting principles

Gal

 

Gallon

Gas Distribution

 

Gas Distribution operating segment

Gas Transmission & Storage

 

Gas Transmission & Storage operating segment

GENCO

 

South Carolina Generating Company, Inc.

GHG

 

Greenhouse gas

GIP

 

The legal entity, Global Infrastructure Partners, one or more of its consolidated subsidiaries, or the entirety of Global Infrastructure Partners and its consolidated subsidiaries

Granite Mountain

 

Granite Mountain Holdings, LLC, a limited liability company owned by Dominion Energy and Granite Mountain Renewables, LLC, a subsidiary of GIP

GTSA

 

Virginia Grid Transformation and Security Act of 2018

GW

 

Gigawatt

Heating degree days

 

Units measuring the extent to which the average daily temperature is less than 65 degrees Fahrenheit, or 60 degrees Fahrenheit in DESC’s service territory, calculated as the difference between 65 or 60 degrees, as applicable, and the average temperature for that day

Hope

 

Hope Gas, Inc., doing business as Dominion Energy West Virginia

Iron Springs

 

Iron Springs Holdings, LLC, a limited liability company owned by Dominion Energy and Iron Springs Renewables, LLC, a subsidiary of GIP

Iroquois

 

Iroquois Gas Transmission System, L.P.

ISO

 

Independent system operator

Jones Act

 

The Coastwise Merchandise Statute (commonly known as the Jones Act) 46 U.S.C. 55102 regulating U.S. maritime commerce

June 2006 hybrids

 

Dominion Energy’s 2006 Series A Enhanced Junior Subordinated Notes due 2066

Kewaunee

 

Kewaunee nuclear power station

Liquefaction Facility

 

A natural gas export/liquefaction facility at the Cove Point LNG Facility

LNG

 

Liquefied natural gas

MATS

 

Utility Mercury and Air Toxics Standard Rule

MD&A

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

MGD

 

Million gallons a day

Millstone

 

Millstone nuclear power station

Millstone 2019 power purchase agreements

 

Power purchase agreements with Eversource Energy and The United Illuminating Company for Millstone to provide nine million MWh per year of electricity for ten years

MW

 

Megawatt

MWh

 

Megawatt hour

NAV

 

Net asset value

NGL

 

Natural gas liquid

NND Project

 

V.C. Summer Units 2 and 3 nuclear development project under which DESC and Santee Cooper undertook to construct two Westinghouse AP1000 Advanced Passive Safety nuclear units in Jenkinsville, South Carolina

5


 

North Carolina Commission

 

North Carolina Utilities Commission

NRC

 

U.S. Nuclear Regulatory Commission

NSPS

 

New Source Performance Standards

NWP 12

 

A nationwide permit from the Army Corp of Engineers authorizing activities required for the construction, maintenance, repair and removal of utility lines, including electric transmission, gas pipelines, water and communications conduit and associated facilities in waters of the U.S.

NYSE

 

New York Stock Exchange

Ohio Commission

 

Public Utilities Commission of Ohio

Order 1000

 

Order issued by FERC adopting requirements for electric transmission planning, cost allocation and development

PIR

 

Pipeline Infrastructure Replacement program deployed by East Ohio

PJM

 

PJM Interconnection, L.L.C.

Predecessor

 

Dominion Energy as the predecessor for accounting purposes for the period of Dominion Energy’s ownership of DCP and DMLPHCII until the completion of the Dominion Energy Gas Restructuring

PSD

 

Prevention of significant deterioration

PSNC

 

Public Service Company of North Carolina, Incorporated, doing business as Dominion Energy North Carolina

Questar Gas

 

Questar Gas Company, doing business as Dominion Energy Utah, Dominion Energy Wyoming and Dominion Energy Idaho

RCC

 

Replacement Capital Covenant

RGGI

 

Regional Greenhouse Gas Initiative

RICO

 

Racketeer Influenced and Corrupt Organizations Act

Rider US-3

 

A rate adjustment clause associated with the recovery of costs related to Colonial Trail West and Spring Grove 1

Rider US-4

 

A rate adjustment clause associated with the recovery of costs related to Sadler Solar

ROE

 

Return on equity

RTO

 

Regional transmission organization

Sadler Solar

 

An approximately 100 MW proposed utility-scale solar power station located in Greensville County, Virginia

Santee Cooper

 

South Carolina Public Service Authority

SBL Holdco

 

SBL Holdco, LLC, a wholly-owned subsidiary of DGI

SCANA

 

The legal entity, SCANA Corporation, one or more of its consolidated subsidiaries, or the entirety of SCANA Corporation and its consolidated subsidiaries

SCANA Combination

 

Dominion Energy’s acquisition of SCANA completed on January 1, 2019 pursuant to the terms of the agreement and plan of merger entered on January 2, 2018 between Dominion Energy and SCANA

SCANA Merger Approval Order

 

Final order issued by the South Carolina Commission on December 21, 2018 setting forth its approval of the SCANA Combination

SCDHEC

 

South Carolina Department of Health and Environmental Control

SCDOR

 

South Carolina Department of Revenue

SEC

 

U.S. Securities and Exchange Commission

SEMI

 

SCANA Energy Marketing, LLC (formerly known as SCANA Energy Marketing, Inc.), a subsidiary of SCANA through December 2019, and effective December 2019, a subsidiary of Wrangler

September 2006 hybrids

 

Dominion Energy’s 2006 Series B Enhanced Junior Subordinated Notes due 2066

6


 

Series A Preferred Stock

 

Dominion Energy’s 1.75% Series A Cumulative Perpetual Convertible Preferred Stock, without par value, with a liquidation preference of $1,000 per share

Series B Preferred Stock

 

Dominion Energy’s 4.65% Series B Fixed-Rate Cumulative Redeemable Perpetual Preferred Stock, without par value, with a liquidation preference of $1,000 per share

South Carolina Commission

 

Public Service Commission of South Carolina

Southern

 

 

The legal entity, The Southern Company, one or more of its consolidated subsidiaries, or the entirety of The Southern Company and its consolidated subsidiaries

Spring Grove 1

 

An approximately 98 MW proposed utility-scale solar power station located in Surry County, Virginia

Standard & Poor’s

 

Standard & Poor’s Ratings Services, a division of S&P Global Inc.

Surry

 

Surry nuclear power station

Terra Nova Renewable Partners

 

A partnership comprised primarily of institutional investors advised by J.P. Morgan Asset Management-Global Real Assets

Three Cedars

 

Granite Mountain and Iron Springs, collectively

Utah Commission

 

Utah Public Service Commission

VCEA

 

Virginia Clean Economy Act, passed by the Virginia General Assembly in March 2020 and enacted on April 11, 2020

VDEQ

 

Virginia Department of Environmental Quality

VEBA

 

Voluntary Employees' Beneficiary Association

VIE

 

Variable interest entity

Virginia Commission

 

Virginia State Corporation Commission

Virginia Power

 

The legal entity, Virginia Electric and Power Company, one or more of its consolidated subsidiaries or operating segment, or the entirety of Virginia Electric and Power Company and its consolidated subsidiaries

VOC

 

Volatile organic compounds

WECTEC

 

WECTEC Global Project Services, Inc., a wholly-owned subsidiary of Westinghouse

Westinghouse

 

Westinghouse Electric Company LLC

Wexpro

 

The legal entity, Wexpro Company, one or more of its consolidated subsidiaries, or the entirety of Wexpro Company and its consolidated subsidiaries

White River Hub

 

White River Hub, LLC

Wrangler

 

Wrangler Retail Gas Holdings, LLC, a partnership between Dominion Energy and Interstate Gas Supply, Inc.

Wyoming Commission

 

Wyoming Public Service Commission

 

 

 

7


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DOMINION ENERGY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

(millions, except per share amounts)

 

 

 

 

 

 

 

 

Operating Revenue(1)

 

$

4,496

 

 

$

3,858

 

Operating Expenses

 

 

 

 

 

 

 

 

Electric fuel and other energy-related purchases

 

 

668

 

 

 

791

 

Purchased electric capacity

 

 

2

 

 

 

39

 

Purchased gas

 

 

427

 

 

 

730

 

Other operations and maintenance

 

 

1,043

 

 

 

1,002

 

Depreciation, depletion and amortization

 

 

673

 

 

 

651

 

Other taxes

 

 

284

 

 

 

292

 

Impairment of assets and other charges

 

 

768

 

 

 

835

 

Total operating expenses

 

 

3,865

 

 

 

4,340

 

Income (loss) from operations

 

 

631

 

 

 

(482

)

Other income (expense)

 

 

(399

)

 

 

388

 

Interest and related charges

 

 

490

 

 

 

469

 

Loss from operations including noncontrolling interests

    before income tax expense (benefit)

 

 

(258

)

 

 

(563

)

Income tax expense (benefit)

 

 

(19

)

 

 

114

 

Net Loss Including Noncontrolling Interests

 

 

(239

)

 

 

(677

)

Noncontrolling Interests

 

 

31

 

 

 

3

 

Net Loss Attributable to Dominion Energy

 

$

(270

)

 

$

(680

)

Earnings Per Common Share

 

 

 

 

 

 

 

 

Net loss attributable to Dominion Energy - Basic

 

$

(0.34

)

 

$

(0.86

)

Net loss attributable to Dominion Energy - Diluted

 

 

(0.34

)

 

 

(0.86

)

 

(1)

See Note 10 for amounts attributable to related parties.

The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.

8


 

DOMINION ENERGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

(millions)

 

 

 

 

 

 

 

 

Net loss including noncontrolling interests

 

$

(239

)

 

$

(677

)

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

 

 

Net deferred losses on derivatives-hedging activities(1)

 

 

(266

)

 

 

(24

)

Changes in unrealized net gains on investment

   securities(2)

 

 

9

 

 

 

16

 

Amounts reclassified to net income (loss):

 

 

 

 

 

 

 

 

Net derivative (gains) losses-hedging activities(3)

 

 

22

 

 

 

(31

)

Net realized (gains) losses on investment securities(4)

 

 

(9

)

 

 

 

Net pension and other postretirement benefit costs(5)

 

 

19

 

 

 

8

 

Total other comprehensive loss

 

 

(225

)

 

 

(31

)

Comprehensive loss including noncontrolling interests

 

 

(464

)

 

 

(708

)

Comprehensive income attributable to noncontrolling interests

 

 

31

 

 

 

3

 

Comprehensive loss attributable to Dominion Energy

 

$

(495

)

 

$

(711

)

 

(1)

Net of $93 million and $5 million tax for the three months ended March 31, 2020 and 2019, respectively.

(2)

Net of $(4) million and $(6) million tax for the three months ended March 31, 2020 and 2019, respectively.

(3)

Net of $(7) million and $10 million tax for the three months ended March 31, 2020 and 2019, respectively.

(4)

Net of $4 million and $— million tax for the three months ended March 31, 2020 and 2019, respectively.

(5)

Net of $(5) million and $(14) million tax for the three months ended March 31, 2020 and 2019, respectively.

The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.

9


 

DOMINION ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

March 31, 2020

 

 

December 31, 2019(1)

 

(millions)

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,192

 

 

$

166

 

Customer receivables (less allowance for doubtful accounts of $20 at both dates)

 

 

2,177

 

 

 

2,278

 

Other receivables (less allowance for doubtful accounts of $3 at both dates)(2)

 

 

248

 

 

 

367

 

Inventories

 

 

1,677

 

 

 

1,742

 

Regulatory assets

 

 

668

 

 

 

879

 

Other

 

 

574

 

 

 

656

 

Total current assets

 

 

6,536

 

 

 

6,088

 

Investments

 

 

 

 

 

 

 

 

Nuclear decommissioning trust funds

 

 

5,313

 

 

 

6,192

 

Investment in equity method affiliates

 

 

1,886

 

 

 

1,646

 

Other

 

 

376

 

 

 

379

 

Total investments

 

 

7,575

 

 

 

8,217

 

Property, Plant and Equipment

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

95,341

 

 

 

97,466

 

Accumulated depreciation, depletion and amortization

 

 

(27,945

)

 

 

(28,384

)

Total property, plant and equipment, net

 

 

67,396

 

 

 

69,082

 

Deferred Charges and Other Assets

 

 

 

 

 

 

 

 

Goodwill

 

 

8,946

 

 

 

8,946

 

Regulatory assets

 

 

9,564

 

 

 

7,687

 

Other

 

 

4,109

 

 

 

3,803

 

Total deferred charges and other assets

 

 

22,619

 

 

 

20,436

 

Total assets

 

$

104,126

 

 

$

103,823

 

 

(1)

Dominion Energy’s Consolidated Balance Sheet at December 31, 2019 has been derived from the audited Consolidated Balance Sheet at that date.

(2)

See Note 10 for amounts attributable to related parties.

The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.

10


 

DOMINION ENERGY, INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

 

 

March 31, 2020

 

 

December 31, 2019(1)

 

(millions)

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Securities due within one year

 

$

2,919

 

 

$

3,162

 

Short-term debt

 

 

2,190

 

 

 

911

 

Accounts payable

 

 

842

 

 

 

1,115

 

Accrued interest, payroll and taxes

 

 

1,089

 

 

 

1,323

 

Regulatory liabilities

 

 

641

 

 

 

497

 

Reserves for SCANA legal proceedings

 

 

560

 

 

 

696

 

Derivative liabilities

 

 

793

 

 

 

408

 

Other(2)

 

 

1,414

 

 

 

1,827

 

Total current liabilities

 

 

10,448

 

 

 

9,939

 

Long-Term Debt

 

 

 

 

 

 

 

 

Long-term debt

 

 

31,097

 

 

 

30,313

 

Junior subordinated notes

 

 

3,407

 

 

 

3,406

 

Finance leases

 

 

111

 

 

 

105

 

Total long-term debt

 

 

34,615

 

 

 

33,824

 

Deferred Credits and Other Liabilities

 

 

 

 

 

 

 

 

Deferred income taxes and investment tax credits

 

 

6,158

 

 

 

6,277

 

Regulatory liabilities

 

 

10,589

 

 

 

11,001

 

Derivative liabilities

 

 

853

 

 

 

332

 

Other(2)

 

 

8,711

 

 

 

8,417

 

Total deferred credits and other liabilities

 

 

26,311

 

 

 

26,027

 

Total liabilities

 

 

71,374

 

 

 

69,790

 

Commitments and Contingencies (see Note 17)

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Preferred stock (See Note 16)

 

 

2,387

 

 

 

2,387

 

Common stock – no par(3)

 

 

23,902

 

 

 

23,824

 

Retained earnings

 

 

6,455

 

 

 

7,576

 

Accumulated other comprehensive loss

 

 

(2,018

)

 

 

(1,793

)

Total shareholders' equity

 

 

30,726

 

 

 

31,994

 

Noncontrolling interests

 

 

2,026

 

 

 

2,039

 

Total equity

 

 

32,752

 

 

 

34,033

 

Total liabilities and equity

 

$

104,126

 

 

$

103,823

 

 

(1) Dominion Energy’s Consolidated Balance Sheet at December 31, 2019 has been derived from the audited Consolidated Balance Sheet at that date.

(2) See Note 10 for amounts attributable to related parties

(3) 1.8 billion shares authorized; 839 million shares and 838 million shares outstanding at March 31, 2020 and December 31, 2019, respectively.

The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.

11


 

DOMINION ENERGY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(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, 2018

 

 

 

 

 

 

 

 

 

 

681

 

 

$

12,588

 

 

$

9,219

 

 

$

(1,700

)

 

$

20,107

 

 

$

1,941

 

 

$

22,048

 

Net income (loss) including noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(680

)

 

 

 

 

 

 

(680

)

 

 

3

 

 

 

(677

)

Issuance of common stock

 

 

 

 

 

 

 

 

 

 

3

 

 

 

247

 

 

 

 

 

 

 

 

 

 

 

247

 

 

 

 

 

 

 

247

 

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

)

Dividends ($0.9175 per common share) and distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(733

)

 

 

 

 

 

 

(733

)

 

 

(33

)

 

 

(766

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31

)

 

 

(31

)

 

 

 

 

 

 

(31

)

March 31, 2019

 

 

 

 

$

 

 

 

802

 

 

$

20,834

 

 

$

7,806

 

 

$

(1,731

)

 

$

26,909

 

 

$

690

 

 

$

27,599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

2

 

 

$

2,387

 

 

 

838

 

 

$

23,824

 

 

$

7,576

 

 

$

(1,793

)

 

$

31,994

 

 

$

2,039

 

 

$

34,033

 

Cumulative-effect of changes in accounting principles

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(48

)

 

 

 

 

 

 

(48

)

 

 

 

 

 

 

(48

)

Net income (loss) including noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(270

)

 

 

 

 

 

 

(270

)

 

 

31

 

 

 

(239

)

Issuance of stock

 

 

 

 

 

 

 

 

 

1

 

 

78

 

 

 

 

 

 

 

 

 

 

 

78

 

 

 

 

 

 

 

78

 

Preferred stock dividends (See Note 16)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16

)

 

 

 

 

 

 

(16

)

 

 

 

 

 

 

(16

)

Common stock dividends ($0.940 per share) and distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(788

)

 

 

 

 

 

 

(788

)

 

 

(44

)

 

 

(832

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(225

)

 

 

(225

)

 

 

 

 

 

 

(225

)

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

1

 

March 31, 2020

 

 

2

 

 

$

2,387

 

 

 

839

 

 

$

23,902

 

 

$

6,455

 

 

$

(2,018

)

 

$

30,726

 

 

$

2,026

 

 

$

32,752

 

 

The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.

12


 

DOMINION ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Three Months Ended March 31,

 

2020

 

 

2019

 

(millions)

 

 

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

 

 

 

Net loss including noncontrolling interests

 

$

(239

)

 

$

(677

)

Adjustments to reconcile net loss including noncontrolling interests to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization (including nuclear fuel)

 

 

759

 

 

 

734

 

Deferred income taxes and investment tax credits

 

 

(65

)

 

 

106

 

Provision for refunds and rate credits to electric utility customers

 

 

 

 

 

988

 

Impairment of assets and other charges

 

 

768

 

 

 

835

 

Net losses (gains) on nuclear decommissioning trust funds and other investments

 

 

526

 

 

 

(271

)

Revision to future ash pond and landfill closure costs

 

 

 

 

 

(113

)

Other adjustments

 

 

4

 

 

 

(11

)

Changes in:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

245

 

 

 

153

 

Inventories

 

 

71

 

 

 

53

 

Deferred fuel and purchased gas costs, net

 

 

162

 

 

 

27

 

Prepayments

 

 

38

 

 

 

89

 

Accounts payable

 

 

(164

)

 

 

(284

)

Accrued interest, payroll and taxes

 

 

(234

)

 

 

(329

)

Customer deposits

 

 

(13

)

 

 

(35

)

Margin deposit assets and liabilities

 

 

46

 

 

 

93

 

Other operating assets and liabilities

 

 

(271

)

 

 

(187

)

Net cash provided by operating activities

 

 

1,633

 

 

 

1,171

 

Investing Activities

 

 

 

 

 

 

 

 

Plant construction and other property additions (including nuclear fuel)

 

 

(1,462

)

 

 

(1,002

)

Cash and restricted cash acquired in the SCANA Combination

 

 

 

 

 

389

 

Acquisition of solar development projects

 

 

(8

)

 

 

(29

)

Proceeds from sales of securities

 

 

602

 

 

 

506

 

Purchases of securities

 

 

(631

)

 

 

(494

)

Proceeds from sales of assets and equity method investments

 

 

14

 

 

 

154

 

Contributions to equity method affiliates

 

 

(11

)

 

 

(69

)

Acquisitions of equity method investments

 

 

(178

)

 

 

 

Other

 

 

33

 

 

 

(7

)

Net cash used in investing activities

 

 

(1,641

)

 

 

(552

)

Financing Activities

 

 

 

 

 

 

 

 

Issuance of short-term debt, net

 

 

1,279

 

 

 

1,905

 

Issuance of short-term notes

 

 

500

 

 

 

 

Repayment of credit facility borrowings

 

 

 

 

 

(113

)

Issuance of long-term debt

 

 

950

 

 

 

600

 

Repayment of long-term debt, including redemption premiums

 

 

(932

)

 

 

(2,217

)

Issuance of common stock

 

 

78

 

 

 

247

 

Common dividend payments

 

 

(788

)

 

 

(733

)

Other

 

 

(81

)

 

 

(72

)

Net cash provided by (used in) financing activities

 

 

1,006

 

 

 

(383

)

Increase in cash, restricted cash and equivalents

 

 

998

 

 

 

236

 

Cash, restricted cash and equivalents at beginning of period

 

 

269

 

 

 

391

 

Cash, restricted cash and equivalents at end of period

 

$

1,267

 

 

$

627

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

Significant noncash investing and financing activities:(1)(2)

 

 

 

 

 

 

 

 

Accrued capital expenditures

 

$

343

 

 

$

201

 

Financing leases

 

 

17

 

 

 

11

 

 

(1)

See Note 3 for noncash investing and financing activities related to the SCANA Combination.

(2)

See Note 16 for noncash financing activities related to the acquisition of the public interest in Dominion Energy Midstream.

The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.

13


 

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

(millions)

 

 

 

 

 

 

 

 

Operating Revenue(1)

 

$

1,930

 

 

$

1,965

 

Operating Expenses

 

 

 

 

 

 

 

 

Electric fuel and other energy-related purchases(1)

 

 

492

 

 

 

596

 

Purchased (excess) electric capacity

 

 

(9

)

 

 

33

 

Other operations and maintenance:

 

 

 

 

 

 

 

 

Affiliated suppliers

 

 

87

 

 

 

86

 

Other

 

 

331

 

 

 

193

 

Depreciation and amortization

 

 

311

 

 

 

304

 

Other taxes

 

 

87

 

 

 

85

 

Impairment of assets and other charges

 

 

764

 

 

 

546

 

Total operating expenses

 

 

2,063

 

 

 

1,843

 

Income (loss) from operations

 

 

(133

)

 

 

122

 

Other income (loss)

 

 

(52

)

 

 

37

 

Interest and related charges(1)

 

 

126

 

 

 

135

 

Income (loss) before income tax expense

 

 

(311

)

 

 

24

 

Income tax expense (benefit)

 

 

(31

)

 

 

4

 

Net Income (Loss)

 

$

(280

)

 

$

20

 

 

(1)

See Note 19 for amounts attributable to affiliates.

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

 


14


 

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

 

Three Months Ended March 31,

 

 

 

 

2020

 

 

2019

 

 

(millions)

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(280

)

 

$

20

 

 

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

 

 

 

Net deferred losses on derivatives-hedging activities(1)

 

 

(45

)

 

 

(7

)

 

Changes in unrealized net gains (losses) on nuclear

   decommissioning trust funds(2)

 

 

(2

)

 

 

2

 

 

Amounts reclassified to net income (loss):

 

 

 

 

 

 

 

 

 

Net realized losses on nuclear decommissioning

   trust funds(3)

 

 

1

 

 

 

 

 

Total other comprehensive loss

 

 

(46

)

 

 

(5

)

 

Comprehensive income (loss)

 

$

(326

)

 

$

15

 

 

 

(1)

Net of $16 million and $2 million tax for the three months ended March 31, 2020 and 2019, respectively.   

(2)

Net of $— million and $(1) million tax for the three months ended March 31, 2020 and 2019, respectively.  

(3)

Net of $(1) million and $— million tax for the three months ended March 31, 2020 and 2019, respectively.

 

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

 

15


 

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

March 31, 2020

 

 

December 31, 2019(1)

 

(millions)

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

71

 

 

$

17

 

Customer receivables (less allowance for doubtful accounts of $8 and $9)

 

 

1,063

 

 

 

1,163

 

Other receivables (less allowance for doubtful accounts of $2 at both dates)

 

 

93

 

 

 

106

 

Affiliated receivables

 

 

3

 

 

 

27

 

Inventories (average cost method)

 

 

868

 

 

 

873

 

Regulatory assets

 

 

295

 

 

 

433

 

Other(2)

 

 

54

 

 

 

57

 

Total current assets

 

 

2,447

 

 

 

2,676

 

Investments

 

 

 

 

 

 

 

 

Nuclear decommissioning trust funds

 

 

2,468

 

 

 

2,881

 

Other

 

 

3

 

 

 

3

 

Total investments

 

 

2,471

 

 

 

2,884

 

Property, Plant and Equipment

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

44,446

 

 

 

47,038

 

Accumulated depreciation and amortization

 

 

(13,434

)

 

 

(14,156

)

Total property, plant and equipment, net

 

 

31,012

 

 

 

32,882

 

Deferred Charges and Other Assets

 

 

 

 

 

 

 

 

Regulatory assets

 

 

3,724

 

 

 

1,863

 

Other(2)

 

 

1,394

 

 

 

1,123

 

Total deferred charges and other assets

 

 

5,118

 

 

 

2,986

 

Total assets

 

$

41,048

 

 

$

41,428

 

 

(1)

Virginia Power’s Consolidated Balance Sheet at December 31, 2019 has been derived from the audited Consolidated Balance Sheet at that date.

(2)

See Note 19 for amounts attributable to affiliates.

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

16


 

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

 

 

 

March 31, 2020

 

 

December 31, 2019(1)

 

(millions)

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDER’S EQUITY

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Securities due within one year

 

$

5

 

 

$

4

 

Short-term debt

 

 

135

 

 

 

243

 

Accounts payable

 

 

261

 

 

 

334

 

Payables to affiliates

 

 

339

 

 

 

210

 

Affiliated current borrowings

 

 

 

 

 

107

 

Accrued interest, payroll and taxes

 

 

270

 

 

 

253

 

Asset retirement obligations

 

 

78

 

 

 

340

 

Derivative liabilities(2)

 

 

481

 

 

 

243

 

Other

 

 

732

 

 

 

738

 

Total current liabilities

 

 

2,301

 

 

 

2,472

 

Long-Term Debt

 

 

 

 

 

 

 

 

Long-term debt

 

 

12,327

 

 

 

12,325

 

Finance leases

 

 

23

 

 

 

16

 

Total long-term debt

 

 

12,350

 

 

 

12,341

 

Deferred Credits and Other Liabilities

 

 

 

 

 

 

 

 

Deferred income taxes and investment tax credits

 

 

2,807

 

 

 

2,962

 

Asset retirement obligations

 

 

3,516

 

 

 

3,241

 

Regulatory liabilities

 

 

4,820

 

 

 

5,074

 

Other(2)

 

 

1,698

 

 

 

1,349

 

Total deferred credits and other liabilities

 

 

12,841

 

 

 

12,626

 

Total liabilities

 

 

27,492

 

 

 

27,439

 

Commitments and Contingencies (see Note 17)

 

 

 

 

 

 

 

 

Common Shareholder’s Equity

 

 

 

 

 

 

 

 

Common stock – no par(3)

 

 

5,738

 

 

 

5,738

 

Other paid-in capital

 

 

1,113

 

 

 

1,113

 

Retained earnings

 

 

6,780

 

 

 

7,167

 

Accumulated other comprehensive loss

 

 

(75

)

 

 

(29

)

Total common shareholder’s equity

 

 

13,556

 

 

 

13,989

 

Total liabilities and shareholder’s equity

 

$

41,048

 

 

$

41,428

 

 

(1)

Virginia Power’s Consolidated Balance Sheet at December 31, 2019 has been derived from the audited Consolidated Balance Sheet at that date.

(2)

See Note 19 for amounts attributable to affiliates.

(3)

500,000 shares authorized; 274,723 shares outstanding at March 31, 2020 and December 31, 2019.

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

17


 

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER’S EQUITY

(Unaudited)

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Other Paid-In Capital

 

 

Retained Earnings

 

 

AOCI

 

 

Total

 

(millions, except for shares)

 

(thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

6,208

 

 

$

(12

)

 

$

13,047

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20

 

 

 

 

 

 

 

20

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(118

)

 

 

 

 

 

 

(118

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

(5

)

March 31, 2019

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

6,110

 

 

$

(17

)

 

$

12,944

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

7,167

 

 

$

(29

)

 

$

13,989

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(280

)

 

 

 

 

 

 

(280

)

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(108

)

 

 

 

 

 

 

(108

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(46

)

 

 

(46

)

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

1

 

March 31, 2020

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

6,780

 

 

$

(75

)

 

$

13,556

 

 

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

18


 

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Three Months Ended March 31,

 

2020

 

 

 

 

2019

 

(millions)

 

 

 

 

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(280

)

 

 

 

$

20

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization (including nuclear fuel)

 

 

357

 

 

 

 

 

346

 

Deferred income taxes and investment tax credits

 

 

(135

)

 

 

 

 

(49

)

Revision to future ash pond and landfill closure costs

 

 

 

 

 

 

 

(113

)

Impairment of assets and other charges

 

 

764

 

 

 

 

 

546

 

Other adjustments

 

 

53

 

 

 

 

 

(39

)

Changes in:

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

123

 

 

 

 

 

62

 

Affiliated receivables and payables

 

 

24

 

 

 

 

 

(63

)

Inventories

 

 

5

 

 

 

 

 

(19

)

Prepayments

 

 

(5

)

 

 

 

 

(2

)

Deferred fuel expenses, net

 

 

70

 

 

 

 

 

24

 

Accounts payable

 

 

99

 

 

 

 

 

(33

)

Accrued interest, payroll and taxes

 

 

13

 

 

 

 

 

15

 

Net realized and unrealized changes related to derivative activities

 

 

(12

)

 

 

 

 

14

 

Asset retirement obligations

 

 

14

 

 

 

 

 

 

Other operating assets and liabilities

 

 

59

 

 

 

 

 

(66

)

Net cash provided by operating activities

 

 

1,149

 

 

 

 

 

643

 

Investing Activities

 

 

 

 

 

 

 

 

 

 

Plant construction and other property additions

 

 

(764

)

 

 

 

 

(563

)

Purchases of nuclear fuel

 

 

(25

)

 

 

 

 

(11

)

Acquisition of solar development projects

 

 

(6

)

 

 

 

 

(27

)

Proceeds from sales of securities

 

 

294

 

 

 

 

 

253

 

Purchases of securities

 

 

(310

)

 

 

 

 

(269

)

Other

 

 

37

 

 

 

 

 

(3

)

Net cash used in investing activities

 

 

(774

)

 

 

 

 

(620

)

Financing Activities

 

 

 

 

 

 

 

 

 

 

Issuance (repayment) of short-term debt, net

 

 

(108

)

 

 

 

 

281

 

Repayment of affiliated current borrowings, net

 

 

(106

)

 

 

 

 

(200

)

Common dividend payments to parent

 

 

(108

)

 

 

 

 

(118

)

Other

 

 

(1

)

 

 

 

 

(1

)

Net cash used in financing activities

 

 

(323

)

 

 

 

 

(38

)

Increase (decrease) in cash, restricted cash and equivalents

 

 

52

 

 

 

 

 

(15

)

Cash, restricted cash and equivalents at beginning of period

 

 

24

 

 

 

 

 

38

 

Cash, restricted cash and equivalents at end of period

 

$

76

 

 

 

 

$

23

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

 

 

Significant noncash investing activities:

 

 

 

 

 

 

 

 

 

 

Accrued capital expenditures

 

$

210

 

 

 

 

$

117

 

Financing leases

 

 

10

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

19


 

DOMINION ENERGY GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

(millions)

 

 

 

 

 

 

 

 

Operating Revenue(1)

 

$

556

 

 

$

566

 

Operating Expenses

 

 

 

 

 

 

 

 

Purchased gas(1)

 

 

8

 

 

 

12

 

Other energy-related purchases

 

 

 

 

 

1

 

Other operations and maintenance:

 

 

 

 

 

 

 

 

Affiliated suppliers

 

 

40

 

 

 

39

 

Other

 

 

125

 

 

 

137

 

Depreciation and amortization

 

 

93

 

 

 

91

 

Other taxes

 

 

42

 

 

 

39

 

Total operating expenses

 

 

308

 

 

 

319

 

Income from operations

 

 

248

 

 

 

247

 

Earnings from equity method investees

 

 

15

 

 

 

13

 

Other income(1)

 

 

49

 

 

 

42

 

Interest and related charges(1)

 

 

58

 

 

 

87

 

Income from continuing operations

 

 

254

 

 

 

215

 

Income tax expense

 

 

52

 

 

 

43

 

Net Income from continuing operations

 

 

202

 

 

 

172

 

Net Income from discontinued operations

 

 

 

 

 

54

 

Net Income including noncontrolling interests

 

 

202

 

 

 

226

 

Noncontrolling interests

 

 

33

 

 

 

36

 

Net Income attributable to Dominion Energy Gas

 

$

169

 

 

$

190

 

 

(1)

See Note 19 for amounts attributable to related parties.

The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.

20


 

DOMINION ENERGY GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

(millions)

 

 

 

 

 

 

 

 

Net Income including noncontrolling interests

 

$

202

 

 

$

226

 

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

 

 

Net deferred losses on derivatives-hedging activities(1)

 

 

(91

)

 

 

(27

)

Amounts reclassified to net income (loss):

 

 

 

 

 

 

 

 

Net derivative losses-hedging activities(2)

 

 

6

 

 

 

3

 

Net pension and other postretirement benefit costs(3)

 

 

1

 

 

 

1

 

Total other comprehensive loss

 

 

(84

)

 

 

(23

)

Comprehensive income including noncontrolling interests

 

 

118

 

 

 

203

 

Comprehensive income attributable to noncontrolling interests

 

 

33

 

 

 

35

 

Comprehensive income attributable to Dominion Energy Gas

 

$

85

 

 

$

168

 

 

(1)

Net of $32 million and $9 million tax for the three months ended March 31, 2020 and 2019, respectively.

(2)

Net of $(2) million and $— million tax for the three months ended March 31, 2020 and 2019, respectively.

(3)

Net of $(1) million tax for both the three months ended March 31, 2020 and 2019.    

The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.

21


 

DOMINION ENERGY GAS HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

March 31, 2020

 

 

December 31, 2019(1)

 

(millions)

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

46

 

 

$

27

 

Customer receivables (less allowance for doubtful accounts of $2 at both dates)

 

 

157

 

 

 

173

 

Other receivables(2)

 

 

33

 

 

 

26

 

Affiliated receivables

 

 

87

 

 

 

362

 

Affiliated notes receivable

 

 

262

 

 

 

 

Inventories

 

 

125

 

 

 

122

 

Gas imbalances(2)

 

 

39

 

 

 

52

 

Other

 

 

84

 

 

 

96

 

Total current assets

 

 

833

 

 

 

858

 

Investments

 

 

 

 

 

 

 

 

Affiliated notes receivable

 

 

3,437

 

 

 

3,437

 

Investment in equity method affiliates

 

 

312

 

 

 

312

 

Total investments

 

 

3,749

 

 

 

3,749

 

Property, Plant and Equipment

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

15,224

 

 

 

15,166

 

Accumulated depreciation and amortization

 

 

(3,620

)

 

 

(3,538

)

Total property, plant and equipment, net

 

 

11,604

 

 

 

11,628

 

Deferred Charges and Other Assets

 

 

 

 

 

 

 

 

Goodwill

 

 

1,471

 

 

 

1,471

 

Other(2)

 

 

1,087

 

 

 

1,078

 

Total deferred charges and other assets

 

 

2,558

 

 

 

2,549

 

Total assets

 

$

18,744

 

 

$

18,784

 

 

(1)

Dominion Energy Gas’ Consolidated Balance Sheet at December 31, 2019 has been derived from the audited Consolidated Balance Sheet at that date.

(2)

See Note 19 for amounts attributable to related parties.

The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.

22


 

DOMINION ENERGY GAS HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

 

 

March 31, 2020

 

 

December 31, 2019(1)

 

(millions)

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Securities due within one year

 

$

699

 

 

$

700

 

Short-term debt

 

 

30

 

 

 

62

 

Accounts payable

 

 

40

 

 

 

59

 

Payables to affiliates

 

 

131

 

 

 

82

 

Affiliated current borrowings

 

 

256

 

 

 

260

 

Accrued interest, payroll and taxes

 

 

143

 

 

 

128

 

Other(2)

 

 

190

 

 

 

161

 

Total current liabilities

 

 

1,489

 

 

 

1,452

 

Long-Term Debt

 

 

 

 

 

 

 

 

Long-term debt

 

 

4,817

 

 

 

4,821

 

Finance leases

 

 

5

 

 

 

5

 

Total long-term debt

 

 

4,822

 

 

 

4,826

 

Deferred Credits and Other Liabilities

 

 

 

 

 

 

 

 

Deferred income taxes and investment tax credits

 

 

1,277

 

 

 

1,288

 

Other

 

 

1,078

 

 

 

989

 

Total deferred credits and other liabilities

 

 

2,355

 

 

 

2,277

 

Total liabilities

 

 

8,666

 

 

 

8,555

 

Commitments and Contingencies (see Note 17)

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Membership interests

 

 

8,968

 

 

 

9,031

 

Accumulated other comprehensive loss

 

 

(271

)

 

 

(187

)

Total members' equity

 

 

8,697

 

 

 

8,844

 

Noncontrolling interests

 

 

1,381

 

 

 

1,385

 

Total equity

 

 

10,078

 

 

 

10,229

 

Total liabilities and equity

 

$

18,744

 

 

$

18,784

 

 

(1)

Dominion Energy Gas’ Consolidated Balance Sheet at December 31, 2019 has been derived from the audited Consolidated Balance Sheet at that date.

(2)

See Note 19 for amounts attributable to related parties.

The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.

23


 

DOMINION ENERGY GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

 

 

 

Predecessor Equity

 

 

Membership Interests

 

 

AOCI

 

 

Total

Members'

Equity

 

 

Noncontrolling Interests

 

 

Total

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

$

1,804

 

 

$

4,566

 

 

$

(169

)

 

$

6,201

 

 

$

2,664

 

 

$

8,865

 

Net income

 

 

74

 

 

 

116

 

 

 

 

 

 

 

190

 

 

 

36

 

 

 

226

 

Acquisition of public interest in Dominion Energy Midstream

 

 

1,181

 

 

 

 

 

 

 

 

 

 

 

1,181

 

 

 

(1,221

)

 

 

(40

)

Dividends and distributions

 

 

(113

)

 

 

 

 

 

 

 

 

 

 

(113

)

 

 

(46

)

 

 

(159

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

(22

)

 

 

(22

)

 

 

(1

)

 

 

(23

)

Other

 

 

(8

)

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

 

 

 

 

(8

)

March 31, 2019

 

$

2,938

 

 

$

4,682

 

 

$

(191

)

 

$

7,429

 

 

$

1,432

 

 

$

8,861

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

$

 

 

$

9,031

 

 

$

(187

)

 

$

8,844

 

 

$

1,385

 

 

$

10,229

 

Net income

 

 

 

 

 

 

169

 

 

 

 

 

 

 

169

 

 

 

33

 

 

 

202

 

Dividends and distributions

 

 

 

 

 

 

(232

)

 

 

 

 

 

 

(232

)

 

 

(37

)

 

 

(269

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

(84

)

 

 

(84

)

 

 

 

 

 

 

(84

)

March 31, 2020

 

$

 

 

$

8,968

 

 

$

(271

)

 

$

8,697

 

 

$

1,381

 

 

$

10,078

 

 

The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.

24


 

DOMINION ENERGY GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Three Months Ended March 31,

 

2020

 

 

2019

 

(millions)

 

 

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

 

 

 

Net income including noncontrolling interest

 

$

202

 

 

$

226

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

93

 

 

 

113

 

Deferred income taxes and investment tax credits

 

 

15

 

 

 

21

 

Other adjustments

 

 

(8

)

 

 

4

 

Changes in:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

9

 

 

 

(32

)

Affiliated receivables and payables

 

 

325

 

 

 

(26

)

Inventories

 

 

(3

)

 

 

(20

)

Prepayments

 

 

14

 

 

 

33

 

Accounts payable

 

 

(11

)

 

 

(23

)

Accrued interest, payroll and taxes

 

 

16

 

 

 

(40

)

Customer deposits

 

 

 

 

 

(32

)

Pension and other postretirement benefits

 

 

(18

)

 

 

(35

)

Other operating assets and liabilities

 

 

33

 

 

 

(14

)

Net cash provided by operating activities

 

 

667

 

 

 

175

 

Investing Activities

 

 

 

 

 

 

 

 

Plant construction and other property additions

 

 

(76

)

 

 

(150

)

Advances to affiliates

 

 

(262

)

 

 

 

Other

 

 

(4

)

 

 

(1

)

Net cash used in investing activities

 

 

(342

)

 

 

(151

)

Financing Activities

 

 

 

 

 

 

 

 

Issuance (repayment) of short-term debt, net

 

 

(32

)

 

 

270

 

Repayment of affiliated current borrowings, net

 

 

(5

)

 

 

(145

)

Repayment of long-term debt

 

 

 

 

 

(300

)

Issuance of affiliated long-term debt

 

 

 

 

 

395

 

Repayment of credit facility borrowings

 

 

 

 

 

(73

)

Dividends and distributions

 

 

(269

)

 

 

(159

)

Other

 

 

 

 

 

(1

)

Net cash used in financing activities

 

 

(306

)

 

 

(13

)

Increase in cash, restricted cash and equivalents

 

 

19

 

 

 

11

 

Cash, restricted cash and equivalents at beginning of period

 

 

39

 

 

 

198

 

Cash, restricted cash and equivalents at end of period

 

$

58

 

 

$

209

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

Significant noncash investing activities:

 

 

 

 

 

 

 

 

Accrued capital expenditures

 

$

13

 

 

$

31

 

Financing leases

 

 

1

 

 

 

2

 

 

The accompanying notes are an integral part of Dominion Energy Gas’ Consolidated Financial Statements.

25


 

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1. Nature of Operations

Dominion 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. Dominion Energy’s operations also include DESC, an equity investment in Atlantic Coast Pipeline and regulated gas distribution operations primarily in the eastern and Rocky Mountain regions of the U.S. Dominion Energy’s nonregulated operations include merchant generation and retail energy marketing operations. 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 FERC-regulated interstate natural gas transmission pipeline and underground storage systems in the eastern and Rocky Mountain regions of the U.S., as well as the Cove Point LNG Facility. In addition, Dominion Energy Gas owns a 50% noncontrolling interest in both Iroquois and White River Hub. See Note 3 for additional information on the Dominion Energy Gas Restructuring.

 

 

Note 2. Significant Accounting Policies

As permitted by the rules and regulations of the SEC, the Companies’ 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’ Annual Report on Form 10-K for the year ended December 31, 2019.

In the Companies’ opinion, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly their financial position at March 31, 2020 and their results of operations, changes in equity and cash flows for the three months ended March 31, 2020 and 2019. Such adjustments are normal and recurring in nature unless otherwise noted.

The Companies make certain estimates and assumptions in preparing their 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’ accompanying unaudited Consolidated Financial Statements include, after eliminating intercompany transactions and balances, their accounts, those of their respective majority-owned subsidiaries and non-wholly-owned entities in which they have a controlling financial interest. For certain partnership structures, income is allocated based on the liquidation value of the underlying contractual arrangements. At March 31, 2020, Dominion Energy owns 50% of the voting interests in Four Brothers and Three Cedars and has a controlling financial interest over the entities through its right to control operations. GIP’s ownership interest in Four Brothers and Three Cedars, Terra Nova Renewable Partners’ 33% interest in certain Dominion Energy merchant solar projects, Brookfield’s 25% interest in Cove Point (effective December 2019) and the non-Dominion Energy held interest in Dominion Energy Midstream (through January 2019) are 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 certain merchant projects upon the occurrence of certain events, none of which are expected to occur in the next 12 months. Brookfield’s 25% interest in Cove Point (effective December 2019) and the public’s ownership interest in Dominion Energy Midstream (through January 2019) are reflected as noncontrolling interest in Dominion Energy Gas’ Consolidated Financial Statements.

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’ 2019 Consolidated Financial Statements and Notes have been reclassified to conform to the 2020 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’ Annual Report on Form 10-K for the year ended December 31, 2019, with the exception of the items described below.

26


 

Cash, Restricted Cash and Equivalents

The following table provides a reconciliation of the total cash, restricted cash and equivalents reported within the Companies’ Consolidated Balance Sheets to the corresponding amounts reported within the Companies’ Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019:

 

 

 

Cash, Restricted Cash and Equivalents

at End of Period

 

 

Cash, Restricted Cash and Equivalents

at Beginning of Period

 

 

 

March 31, 2020

 

 

March 31, 2019

 

 

December 31, 2019

 

 

December 31, 2018

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dominion Energy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,192

 

 

$

422

 

 

$

166

 

 

$

268

 

Restricted cash and equivalents(1)

 

 

75

 

 

 

205

 

 

 

103

 

 

 

123

 

Cash, restricted cash and equivalents shown in the Consolidated Statements of Cash Flows

 

$

1,267

 

 

$

627

 

 

$

269

 

 

$

391

 

Virginia Power

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

71

 

 

$

14

 

 

$

17

 

 

$

29

 

Restricted cash and equivalents(1)

 

 

5

 

 

 

9

 

 

 

7

 

 

 

9

 

Cash, restricted cash and equivalents shown in the Consolidated Statements of Cash Flows

 

$

76

 

 

$

23

 

 

$

24

 

 

$

38

 

Dominion Energy Gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents(2)

 

$

46

 

 

$

147

 

 

$

27

 

 

$

108

 

Restricted cash and equivalents (1)

 

 

12

 

 

 

62

 

 

 

12

 

 

 

90

 

Cash, restricted cash and equivalents shown in the Consolidated Statements of Cash Flows

 

$

58

 

 

$

209

 

 

$

39

 

 

$

198

 

 

(1)

Restricted cash and equivalent balances are presented within other current assets in the Companies’ Consolidated Balance Sheets.

(2)

At March 31, 2019 and December 31, 2018, Dominion Energy Gas had $4 million and $9 million of cash and cash equivalents included in current assets of discontinued operations, respectively.

 

Property, Plant and Equipment

In January 2019, Virginia Power committed to a plan to retire certain automated metering reading infrastructure associated with its electric operations before the end of its estimated useful life and replace such equipment with more current AMI technology. As a result, Virginia Power recorded a charge of $160 million ($119 million after-tax), included in impairment of assets and other charges in its 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, 2019.

 

In March 2019, Virginia Power committed to retire certain electric generating units before the end 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 Power recorded a charge of $369 million ($275 million after-tax), primarily included in impairment of assets and other charges in its 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, 2019.

 

In March 2020, Virginia Power committed to retire certain coal- and oil-fired generating units before the end of their useful lives based on economic and other factors, including but not limited to market power prices and the VCEA. These units will be retired after they meet their capacity obligations to PJM in 2023. As a result, Virginia Power recorded a charge of $754 million ($561 million after-tax), primarily included in impairment of assets and other charges in its 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, 2019.

 

27


 

In the first quarter of 2020, Virginia Power updated depreciation rates for its nuclear plants to reflect lower depreciation rates as a result of the expected approval of license extensions from the NRC. This adjustment resulted in a decrease of $8 million ($6 million after-tax) in depreciation expense in Virginia Power’s Consolidated Statements of Income and a $0.01 increase in Dominion Energy’s EPS, for the three months ended March 31, 2020. This revision is expected to decrease annual depreciation expense by approximately $31 million ($23 million after-tax) and increase Dominion Energy’s EPS by $0.03 for the year ended December 31, 2020.

 

Credit Risk

Credit risk is the risk of financial loss if counterparties fail to perform their contractual obligations. In order to minimize overall credit risk, credit policies are maintained, including the evaluation of counterparty financial condition, collateral requirements and the use of standardized agreements that facilitate the netting of cash flows associated with a single counterparty. In addition, counterparties may make available collateral, including letters of credit or cash held as margin deposits, as a result of exceeding agreed-upon credit limits, or may be required to prepay the transaction.

 

Effective January 2020, expected credit losses are estimated and recorded based on historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of financial assets held at amortized cost as well as expected credit losses on commitments with respect to financial guarantees.

 

Investments

Debt and Equity Securities with Readily Determinable Fair Value

Dominion Energy accounts for and classifies investments in debt securities as trading or available-for-sale securities. Virginia Power classifies investments in debt securities as available-for-sale securities.

 

Debt securities classified as trading securities include securities held by Dominion Energy in rabbi trusts associated with certain deferred compensation plans. These securities are reported in other investments in the Consolidated Balance Sheets at fair value with net realized and unrealized gains and losses included in other income in the Consolidated Statements of Income.

 

Debt securities classified as available-for-sale securities include all other debt securities, primarily comprised of securities held in the nuclear decommissioning trusts. These investments are reported at fair value in nuclear decommissioning trust funds in the Consolidated Balance Sheets. Net realized and unrealized gains and losses (including any credit-related impairments) on investments held in Virginia Power’s nuclear decommissioning trusts are deferred to a regulatory asset or liability as applicable for certain jurisdictions subject to cost-based regulation. For all other available-for-sale debt securities, including those held in Dominion Energy’s merchant generation nuclear decommissioning trusts, net realized gains and losses (including any credit-related impairments) are included in other income and unrealized gains and losses are reported as a component of AOCI, after-tax.

 

In determining realized gains and losses for debt securities, the cost basis of the security is based on the specific identification method.

 

Equity securities with readily determinable fair values include securities held by Dominion Energy in rabbi trusts associated with certain deferred compensation plans and securities held by Dominion Energy and Virginia Power in the nuclear decommissioning trusts. Dominion Energy and Virginia Power record all equity securities with a readily determinable fair value, or for which they are permitted to estimate fair value using NAV (or its equivalent), at fair value in nuclear decommissioning trust funds and other investments in the Consolidated Balance Sheets. However, Dominion Energy and Virginia Power may elect a measurement alternative for equity securities without a readily determinable fair value. Under the measurement alternative, equity securities are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Dominion Energy and Virginia Power qualitatively assess equity securities reported using the measurement alternative to determine whether an investment is impaired on an ongoing basis. Net realized and unrealized gains and losses on equity securities held in Virginia Power’s nuclear decommissioning trusts are deferred to a regulatory asset or liability, as applicable, for certain jurisdictions subject to cost-based regulation. For all other equity securities, including those held in Dominion Energy’s merchant generation nuclear decommissioning trusts and rabbi trusts, net realized and unrealized gains and losses are included in other income in the Consolidated Statements of Income.

 

28


 

Equity Securities without Readily Determinable Fair Values

The Companies account for illiquid and privately held securities without readily determinable fair values under either the equity method or cost method. Equity securities without readily determinable fair values include:

 

Equity method investments when the Companies have the ability to exercise significant influence, but not control, over the investee. Dominion Energy and Dominion Energy Gas’ investments are included in investments in equity method affiliates in their Consolidated Balance Sheets. Dominion Energy and Dominion Energy Gas record equity method adjustments in other income and earnings from equity method investees, respectively, in their Consolidated Statements of Income, including their proportionate share of investee income or loss, gains or losses resulting from investee capital transactions, amortization of certain differences between the carrying value and the equity in the net assets of the investee at the date of investment and other adjustments required by the equity method.

 

Cost method investments when Dominion Energy and Virginia Power do not have the ability to exercise significant influence over the investee. Dominion Energy and Virginia Power’s investments are included in other investments and nuclear decommissioning trust funds. Cost method investments are reported at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

 

Other-Than-Temporary Impairment

The Companies periodically review their equity method investments to determine whether a decline in fair value should be considered other-than-temporary. If a decline in the fair value of any equity method investment is determined to be other-than-temporary, the investment is written down to its fair value at the end of the reporting period.

 

Credit Impairment

Effective January 2020, Dominion Energy and Virginia Power periodically review their available-for-sale debt securities to determine whether a decline in fair value should be considered credit related. If a decline in the fair value of any available-for-sale debt security is determined to be credit related, the credit-related impairment is recorded to an allowance included in nuclear decommissioning trust funds in Dominion Energy and Virginia Power’s Consolidated Balance Sheets at the end of the reporting period, with such allowance for credit losses subject to reversal in subsequent evaluations.

 

Using information obtained from their nuclear decommissioning trust fixed-income investment managers, Dominion Energy and Virginia Power record in earnings, or defer as applicable for certain jurisdictions subject to cost-based regulation, any unrealized loss for a debt security when the manager intends to sell the debt security or it is more-likely-than-not that the manager will have to sell the debt security before recovery of its fair value up to its cost basis. If that is not the case, but the debt security is deemed to have experienced a credit loss, Dominion Energy and Virginia Power record the credit loss in earnings with the remaining non-credit portion of the unrealized loss recorded in AOCI. Credit losses are evaluated primarily by considering the credit ratings of the issuer, prior instances of non-performance by the issuer and other factors.

 

 

Note 3. Acquisitions and Dispositions

Acquisition of SCANA

In January 2019, 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, 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, at the closing of the SCANA Combination, SCANA marketed natural gas to retail customers in the southeast U.S. Following completion of the SCANA Combination, SCANA operates as a wholly-owned subsidiary of Dominion Energy. In addition, SCANA’s debt totaled $6.9 billion at closing. The SCANA Combination expanded Dominion Energy’s portfolio of regulated electric generation, transmission 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, 2019 for more information on the SCANA Combination, including merger approval and conditions, information on assets acquired and liabilities assumed and purchase price allocation. In addition, see Note 17 for a discussion of certain legal proceedings involving Dominion Energy, SCANA or DESC relating to events occurring before closing of the SCANA Combination.

29


 

In accordance with the SCANA Merger Approval Order, Dominion Energy incurred certain charges to its Consolidated Statements of Income for the following:

 

In the first quarter of 2019, DESC recorded a reduction in operating revenue and a corresponding regulatory liability of $1.0 billion 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, effective January 2019, As a result, Dominion Energy’s Consolidated Statement of Income for the three months ended March 31, 2019 includes a $756 million after-tax charge.

 

Dominion Energy committed to forgo recovery of $105 million of certain property, plant and equipment associated with the NND Project. As a result, Dominion Energy’s Consolidated Statements of Income for the three months ended March 31, 2019 includes a charge of $105 million ($79 million after-tax), included in impairment of assets and other charges.

 

Dominion Energy committed to forgo recovery of $264 million of certain income tax-related regulatory assets associated with the NND Project.  As a result, Dominion Energy’s Consolidated Statement of Income for the three months ended March 31, 2019 includes a charge of $198 million included in income tax expense.

Results of Operations and Unaudited Pro Forma Information

The impact of the SCANA Combination on Dominion Energy’s operating revenue was an increase of $914 million and $170 million for the three months ended March 31, 2020 and 2019, respectively, in the Consolidated Statements of Income. The impact of the SCANA Combination on net income attributable to Dominion Energy was an increase of $54 million and a decrease of $1.1 billion for the three months ended March 31, 2020 and 2019, respectively, in the Consolidated Statements of Income.

Dominion Energy incurred merger and integration-related costs of $19 million for the three months ended March 31, 2020, recorded in other operations and maintenance expense in the Consolidated Statements of Income. For the three months ended March 31, 2019, Dominion Energy incurred merger and integration-related costs of which $115 million was recorded in other operations and maintenance expense and $9 million was recorded in interest and related charges in the Consolidated Statements of Income. These costs consist of professional fees, charitable contribution commitments, employee-related expenses, certain financing costs and other miscellaneous costs.

The following unaudited pro forma financial information reflects the consolidated results of operations of Dominion Energy assuming the SCANA Combination had taken place on January 1, 2018. The unaudited pro forma financial information has been presented for illustrative purposes only and 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.

 

 

 

Three Months Ended

March 31, 2019(1)

 

(millions, except EPS)

 

 

 

 

Operating Revenue

 

$

4,887

 

Net income attributable to Dominion Energy

 

 

605

 

Earnings Per Common Share Basic

 

$

0.76

 

Earnings Per Common Share Diluted

 

$

0.76

 

 

(1)

Amounts include adjustments for non-recurring costs directly related to the SCANA Combination.

Dominion Energy Gas Restructuring

The Dominion Energy Gas Restructuring is considered to be a reorganization of entities under common control. As a result, Dominion Energy Gas’ basis in DCP and DMLPHCII, which includes 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 cost basis in the assets and liabilities of such entities since the applicable inception dates of common control. In November 2019, following completion of the Dominion Energy Gas Restructuring, DCP and DMLPHCII are wholly-owned subsidiaries of Dominion Energy Gas and therefore are consolidated by Dominion Energy Gas. The accompanying Consolidated Financial Statements and Notes of Dominion Energy Gas 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.

30


 

The Dominion Energy Gas Restructuring includes the disposition of East Ohio and DGP by Dominion Energy Gas in November 2019. This restructuring represents a strategic shift in the operations of Dominion Energy Gas as Dominion Energy Gas’ operations consist of LNG import/export and storage and regulated gas transmission and storage operations. As a result, the accompanying Consolidated Financial Statements and Notes of Dominion Energy Gas have been retrospectively adjusted to include the historical results and financial position of East Ohio and DGP as discontinued operations until November 2019, presented within the Corporate and Other segment. As the Dominion Energy Gas Restructuring is considered to be a reorganization of entities under common control, Dominion Energy Gas has reflected the disposition as an equity transaction. The following table represents selected information regarding the results of operations of East Ohio, which are reported as discontinued operations in Dominion Energy Gas’ Consolidated Statements of Income:

 

 

 

Three Months Ended

March 31, 2019

 

(millions)

 

 

 

 

Operating revenue

 

$

229

 

Depreciation and amortization

 

 

21

 

Other operating expenses

 

 

148

 

Other income

 

 

18

 

Interest and related charges

 

 

10

 

Income tax expense

 

 

14

 

Net income from discontinued operations

 

$

54

 

 

Capital expenditures and significant noncash items relating to East Ohio included the following:

 

 

 

Three Months Ended

March 31, 2019

 

(millions)

 

 

 

 

Capital expenditures

 

$

65

 

Significant noncash items

 

 

 

 

Accrued capital expenditures

 

 

6

 

 

The following table represents selected information regarding the results of operations of DGP, which are reported as discontinued operations in Dominion Energy Gas’ Consolidated Statements of Income:

 

 

 

Three Months Ended

March 31, 2019

 

(millions)

 

 

 

 

Operating revenue

 

$

45

 

Depreciation and amortization

 

 

1

 

Other operating expenses

 

 

44

 

Net income from discontinued operations

 

$

 

 

Capital expenditures and significant noncash items of DGP included the following:

 

 

 

Three Months Ended

March 31, 2019

 

(millions)

 

 

 

 

Capital expenditures

 

$

3

 

 

 

31


 

Note 4. Operating Revenue

The Companies’ operating revenue consists of the following:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

(millions)

 

 

 

 

 

 

 

 

Dominion Energy

 

 

 

 

 

 

 

 

Regulated electric sales:

 

 

 

 

 

 

 

 

Residential

 

$

1,158

 

 

$

646

 

Commercial

 

 

798

 

 

 

496

 

Industrial

 

 

182

 

 

 

30

 

Government and other retail

 

 

219

 

 

 

200

 

Wholesale

 

 

33

 

 

 

48

 

Nonregulated electric sales

 

 

232

 

 

 

316

 

Regulated gas sales:

 

 

 

 

 

 

 

 

Residential

 

 

548

 

 

 

602

 

Commercial

 

 

191

 

 

 

191

 

Other

 

 

28

 

 

 

38

 

Nonregulated gas sales

 

 

83

 

 

 

247

 

Regulated gas transportation and storage:

 

 

 

 

 

 

 

 

FERC-regulated

 

 

281

 

 

 

277

 

State-regulated

 

 

232

 

 

 

213

 

Nonregulated gas transportation and storage

 

 

175

 

 

 

174

 

Other regulated revenues(1)

 

 

75

 

 

 

58

 

Other nonregulated revenues(1)(2)

 

 

88

 

 

 

95

 

Total operating revenue from contracts

   with customers

 

 

4,323

 

 

 

3,631

 

Other revenues(3)

 

 

173

 

 

 

227

 

Total operating revenue

 

$

4,496

 

 

$

3,858

 

Virginia Power

 

 

 

 

 

 

 

 

Regulated electric sales:

 

 

 

 

 

 

 

 

Residential

 

$

896

 

 

$

923

 

Commercial

 

 

614

 

 

 

636

 

Industrial

 

 

97

 

 

 

112

 

Government and other retail

 

 

203

 

 

 

204

 

Wholesale

 

 

24

 

 

 

37

 

Other regulated revenues(2)

 

 

62

 

 

 

33

 

Other nonregulated revenues(1)(2)

 

 

13

 

 

 

6

 

Total operating revenue from contracts

   with customers

 

 

1,909

 

 

 

1,951

 

Other revenues(2)(3)

 

 

21

 

 

 

14

 

Total operating revenue

 

$

1,930

 

 

$

1,965

 

Dominion Energy Gas

 

 

 

 

 

 

 

 

Regulated gas sales - wholesale

 

$

2

 

 

$

2

 

Nonregulated gas sales(2)

 

 

1

 

 

 

2

 

Regulated gas transportation and storage

 

 

344

 

 

 

340

 

Nonregulated gas transportation and storage

 

 

175

 

 

 

174

 

Management service revenue(2)

 

 

31

 

 

 

44

 

Other regulated revenues(1)(2)

 

 

1

 

 

 

3

 

Other nonregulated revenues(1)(2)

 

 

1

 

 

 

 

Total operating revenue from contracts

   with customers

 

 

555

 

 

 

565

 

Other revenues

 

 

1

 

 

 

1

 

Total operating revenue

 

$

556

 

 

$

566

 

 

1)

Amounts above include sales which are considered to be goods transferred at a point in time. For the three months ended March 31, 2020 and 2019, such amounts included $39 million and $48 million, respectively, at Dominion Energy and $1 million for both the three months ended March 31, 2020 and 2019, at Dominion Energy Gas, consisting of NGL sales. Additionally, amounts above include sales of renewable energy credits. For the three months ended March 31, 2020 and 2019, such sales were $4 million and $3 million, respectively, at Dominion Energy and $3 million and $1 million, respectively, at Virginia Power.

2)

See Notes 10 and 19 for amounts attributable to related parties and affiliates.

32


 

3)

Includes alternative revenue. For the three months ended March 31, 2020 and 2019, such amounts included $36 million and $14 million, respectively, at Dominion Energy and $17 million and $8 million, respectively, at Virginia Power.

 

 

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 expect to recognize this revenue. These revenues relate to contracts containing fixed prices where the Companies will earn the associated revenue over time as they stand 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 elect to recognize revenue in the amount they have a right to invoice.

 

Revenue expected to be recognized on multi-year

   contracts in place at March 31, 2020

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 

2024

 

 

Thereafter

 

 

Total

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dominion Energy

 

$

1,222

 

 

$

1,562

 

 

$

1,474

 

 

$

1,312

 

 

$

1,187

 

 

$

13,089

 

 

$

19,846

 

Virginia Power

 

 

2

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

Dominion Energy Gas

 

 

1,336

 

 

 

1,714

 

 

 

1,581

 

 

 

1,395

 

 

 

1,242

 

 

 

13,270

 

 

 

20,538

 

 

Contract assets represent an entity’s right to consideration in exchange for goods and services that the entity has transferred to a customer. At March 31, 2020 and December 31, 2019, Dominion Energy’s contract asset balances were $26 million and $28 million, respectively. Dominion Energy Gas’ contract asset balances were $37 million and $40 million at March 31, 2020 and December 31, 2019, respectively. Dominion Energy and Dominion Energy Gas’ 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 March 31, 2020 and December 31, 2019, Dominion Energy’s contract liability balances were $86 million and $123 million, respectively. At March 31, 2020 and December 31, 2019, Virginia Power’s contract liability balances were $23 million and $24 million, respectively. At March 31, 2020 and December 31, 2019, Dominion Energy Gas’ contract liability balances were $21 million and $20 million, respectively. The Companies’ contract liabilities are recorded in other current liabilities and other deferred credits and other liabilities in the Consolidated Balance Sheets. The Companies recognize revenue as they fulfill their obligations to provide service to their customers.  During the three months ended March 31, 2020 and 2019, Dominion Energy recognized revenue of $105 million and $85 million, respectively, from the beginning contract liability balances. During the three months ended March 31, 2020 and 2019, Virginia Power recognized $24 million and $22 million, respectively, from the beginning contract liability balance. During the three months ended March 31, 2020 and 2019, Dominion Energy Gas recognized $1 million and $25 million from the beginning contract liability balance.

Note 5. Income Taxes

For continuing operations, including noncontrolling interests, the statutory U.S. federal income tax rate reconciles to the Companies’ effective income tax rate as follows:

 

 

 

Dominion Energy

 

 

Virginia Power

 

 

Dominion Energy Gas

 

 

Three Months Ended March 31,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

U.S. statutory rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

 

Increases (reductions) resulting from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State taxes, net of federal benefit

 

 

4.4

 

 

 

2.2

 

 

 

4.8

 

 

 

4.6

 

 

 

2.9

 

 

 

3.4

 

 

Investment tax credits

 

 

(4.1

)

 

 

(1.5

)

 

 

(6.4

)

 

 

(3.2

)

 

 

 

 

 

 

 

Production tax credits

 

 

(0.4

)

 

 

(0.8

)

 

 

(0.8

)

 

 

(1.0

)

 

 

 

 

 

 

 

Reversal of excess deferred income

   taxes

 

 

(9.5

)

 

 

(5.1

)

 

 

(8.1

)

 

 

(5.0

)

 

 

(0.7

)

 

 

(0.7

)

 

Write-off of regulatory assets

 

 

 

 

 

(34.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

AFUDC - equity

 

 

(1.6

)

 

 

(1.4

)

 

 

(0.7

)

 

 

 

 

 

(0.4

)

 

 

(0.5

)

 

Other, net

 

 

(2.5

)

 

 

(0.6

)

 

 

0.3

 

 

 

0.1

 

 

 

(2.4

)

(1)

 

(3.3

)

(1)

Effective tax rate

 

 

7.3

%

 

 

(20.3

)%

 

 

10.1

%

 

 

16.5

%

 

 

20.4

%

 

 

19.9

%

 

 

(1)

Includes (2.7)% and  (3.6) % relating to the absence of tax on noncontrolling interest in 2020 and 2019, respectively.

 

33


 

For the Companies’ rate-regulated entities, deferred taxes will reverse at the weighted average rate used to originate the deferred tax liability, which in some cases will be 35%. The Companies have recorded an estimate of excess deferred income tax amortization in 2020. The reversal of these excess deferred income taxes will impact the effective tax rate and rates charged to customers. See Note 13 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2019 for more information.

In March 2020, the CARES Act was enacted which includes several significant business tax provisions that modify or temporarily suspend certain provisions of the 2017 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 Dominion Energy intends to utilize the income tax provisions of the CARES Act to accelerate the recognition of certain tax attributes, where applicable, they are not expected to provide a material benefit.

In connection with the SCANA Combination, Dominion Energy committed to forgo, or limit, the recovery of certain income tax-related regulatory assets associated with the NND Project.  Dominion Energy’s 2019 effective tax rate reflects deferred income tax expense of $198 million in satisfaction of this commitment.  Dominion Energy’s 2019 effective tax rate also reflects the changes in consolidated state income taxes resulting from the SCANA Combination.

As of March 31, 2020, there have been no material changes in the Companies’ unrecognized tax benefits or possible changes that could reasonably be expected to occur during the next twelve months. See Note 5 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2019, for a discussion of these unrecognized tax benefits.

 

Note 6. Earnings Per Share

The following table presents the calculation of Dominion Energy’s basic and diluted EPS:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

(millions, except EPS)

 

 

 

 

 

 

 

 

Net loss attributable to Dominion Energy

 

$

(270

)

 

$

(680

)

Preferred stock dividends (see Note 16)

 

 

(16

)

 

 

 

Net loss attributable to Dominion Energy – Basic & Diluted

 

 

(286

)

 

 

(680

)

Average shares of common stock outstanding – Basic & Diluted

 

 

838.2

 

 

 

793.1

 

Earnings Per Common Share – Basic & Diluted

 

$

(0.34

)

 

$

(0.86

)

 

As a result of a net loss for both the three months ended March 31, 2020 and 2019, the issuance of common stock under potentially-dilutive securities, as discussed in Note 8 to the Consolidated Financial Statements in the Companies’ Annual  Report on Form 10-K for the year ended December 31, 2019, was considered antidilutive and therefore excluded from the calculation of diluted EPS.

 

34


 

Note 7. Accumulated Other Comprehensive Income

Dominion Energy

The following table presents Dominion 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

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(407

)

 

$

37

 

 

$

(1,421

)

 

$

(2

)

 

$

(1,793

)

Other comprehensive income before reclassifications:

   gains (losses)

 

 

(266

)

 

 

9

 

 

 

 

 

 

 

 

 

(257

)

Amounts reclassified from AOCI: (gains) losses(1)

 

 

22

 

 

 

(9

)

 

 

19

 

 

 

 

 

 

32

 

Net current period other comprehensive income (loss)

 

 

(244

)

 

 

 

 

 

19

 

 

 

 

 

 

(225

)

Ending balance

 

$

(651

)

 

$

37

 

 

$

(1,402

)

 

$

(2

)

 

$

(2,018

)

Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(235

)

 

$

2

 

 

$

(1,465

)

 

$

(2

)

 

$

(1,700

)

Other comprehensive income before reclassifications:

   gains (losses)

 

 

(24

)

 

 

16

 

 

 

 

 

 

 

 

 

(8

)

Amounts reclassified from AOCI: (gains) losses(1)

 

 

(31

)

 

 

 

 

 

8

 

 

 

 

 

 

(23

)

Net current period other comprehensive income (loss)

 

 

(55

)

 

 

16

 

 

 

8

 

 

 

 

 

 

(31

)

Ending balance

 

$

(290

)

 

$

18

 

 

$

(1,457

)

 

$

(2

)

 

$

(1,731

)

 

(1)

See table below for details about these reclassifications.

35


 

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 March 31, 2020

 

 

 

 

 

 

Deferred (gains) and losses on derivatives-hedging activities:

 

 

 

 

 

 

Commodity contracts

 

$

(7

)

 

Operating revenue

 

 

 

3

 

 

Purchased gas

Interest rate contracts

 

 

27

 

 

Interest and related charges

Foreign currency contracts

 

 

6

 

 

Other income (expense)

Total

 

 

29

 

 

 

Tax

 

 

(7

)

 

Income tax expense (benefit)

Total, net of tax

 

$

22

 

 

 

Unrealized (gains) and losses on investment securities:

 

 

 

 

 

 

Realized (gains) losses on sale of securities

 

$

(13

)

 

Other income (expense)

Total

 

 

(13

)

 

 

Tax

 

 

4

 

 

Income tax expense (benefit)

Total, net of tax

 

$

(9

)

 

 

Unrecognized pension and other postretirement benefit costs:

 

 

 

 

 

 

Amortization of prior-service costs (credits)

 

$

(6

)

 

Other income (expense)

Amortization of actuarial losses

 

 

30

 

 

Other income (expense)

Total

 

 

24

 

 

 

Tax

 

 

(5

)

 

Income tax expense (benefit)

Total, net of tax

 

$

19

 

 

 

Three Months Ended March 31, 2019

 

 

 

 

 

 

Deferred (gains) and losses on derivatives-hedging activities:

 

 

 

 

 

 

Commodity contracts

 

$

(54

)

 

Operating revenue

 

 

 

(3

)

 

Purchased gas

Interest rate contracts

 

 

10

 

 

Interest and related charges

Foreign currency contracts

 

 

6

 

 

Other income (expense)

Total

 

 

(41

)

 

 

Tax

 

 

10

 

 

Income tax expense (benefit)

Total, net of tax

 

$

(31

)

 

 

Unrecognized pension and other postretirement benefit costs:

 

 

 

 

 

 

Amortization of prior-service costs (credits)

 

$

(5

)

 

Other income (expense)

Amortization of actuarial losses

 

 

27

 

 

Other income (expense)

Total

 

 

22

 

 

 

Tax

 

 

(14

)

 

Income tax expense (benefit)

Total, net of tax

 

$

8

 

 

 

 

36


 

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 March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(34

)

 

$

5

 

 

$

(29

)

Other comprehensive income before reclassifications:

   gains (losses)

 

 

(45

)

 

 

(2

)

 

 

(47

)

Amounts reclassified from AOCI: (gains) losses(1)

 

 

 

 

 

1

 

 

 

1

 

Net current period other comprehensive income (loss)

 

 

(45

)

 

 

(1

)

 

 

(46

)

Ending balance

 

$

(79

)

 

$

4

 

 

$

(75

)

Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(13

)

 

$

1

 

 

$

(12

)

Other comprehensive income before reclassifications:

   gains (losses)

 

 

(7

)

 

 

2

 

 

 

(5

)

Amounts reclassified from AOCI: (gains) losses

 

 

 

 

 

 

 

 

 

Net current period other comprehensive income (loss)

 

 

(7

)

 

 

2

 

 

 

(5

)

Ending balance

 

$

(20

)

 

$

3

 

 

$

(17

)

 

(1)

See table below for details about these reclassifications.

The following table presents Virginia Power’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 March 31, 2020

 

 

 

 

 

 

Unrealized (gains) and losses on investment securities:

 

 

 

 

 

 

Realized (gains) losses on sale of securities

 

$

2

 

 

Other income (loss)

Total

 

 

2

 

 

 

Tax

 

 

(1

)

 

Income tax expense (benefit)

Total, net of tax

 

$

1

 

 

 

 

37


 

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 March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(81

)

 

$

(106

)

 

$

(187

)

Other comprehensive income before reclassifications:

   gains (losses)

 

 

(91

)

 

 

 

 

 

(91

)

Amounts reclassified from AOCI: (gains) losses(1)

 

 

6

 

 

 

1

 

 

 

7

 

Net current period other comprehensive income (loss)

 

 

(85

)

 

 

1

 

 

 

(84

)

Ending balance

 

$

(166

)

 

$

(105

)

 

$

(271

)

Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(25

)

 

$

(144

)

 

$

(169

)

Other comprehensive income before reclassifications:

   gains (losses)

 

 

(27

)

 

 

 

 

 

(27

)

Amounts reclassified from AOCI: (gains) losses(1)

 

 

3

 

 

 

1

 

 

 

4

 

Net current period other comprehensive income (loss)

 

 

(24

)

 

 

1

 

 

 

(23

)

Less other comprehensive income (loss) attributable to noncontrolling

   interest

 

 

(1

)

 

 

 

 

 

(1

)

Ending balance

 

$

(48

)

 

$

(143

)

 

$

(191

)

 

(1)

See table below for details about these reclassifications.

38


 

The following table presents Dominion Energy Gas’ 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 March 31, 2020

 

 

 

 

 

 

Deferred (gains) and losses on derivatives-hedging activities:

 

 

 

 

 

 

Interest rate contracts

 

$

2

 

 

Interest and related charges

Foreign currency contracts

 

 

6

 

 

Other income

Total

 

 

8

 

 

 

Tax

 

 

(2

)

 

Income tax expense

Total, net of tax

 

$

6

 

 

 

Unrecognized pension costs:

 

 

 

 

 

 

Actuarial losses

 

$

2

 

 

Other income

Total

 

 

2

 

 

 

Tax

 

 

(1

)

 

Income tax expense

Total, net of tax

 

$

1

 

 

 

Three Months Ended March 31, 2019

 

 

 

 

 

 

Deferred (gains) and losses on derivatives-hedging activities:

 

 

 

 

 

 

Commodity contracts

 

$

(2

)

 

Net income from discontinued operations

Interest rate contracts

 

 

(1

)

 

Interest and related charges

Foreign currency contracts

 

 

6

 

 

Other income

Total

 

 

3

 

 

 

Tax

 

 

 

 

Income tax expense

Total, net of tax

 

$

3

 

 

 

Unrecognized pension costs:

 

 

 

 

 

 

Actuarial losses

 

$

2

 

 

Other income

Total

 

 

2

 

 

 

Tax

 

 

(1

)

 

Income tax expense

Total, net of tax

 

$

1

 

 

 

 

Note 8. Fair Value Measurements

The Companies’ fair value measurements are made in accordance with the policies discussed in Note 6 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2019. See Note 9 in this report for further information about the Companies’ derivatives and hedge accounting activities.

The Companies enter into certain physical and financial forwards, futures, options and swaps, which 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.

39


 

The following table presents Dominion Energy’s quantitative information about Level 3 fair value measurements at March 31, 2020.  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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas(2)

 

$

48

 

 

Discounted cash flow

 

Market price (per Dth)

(3)

 

(2) - 3

 

 

(1

)

FTRs

 

 

1

 

 

Discounted cash flow

 

Market price (per MWh)

(3)

 

(1) - 2

 

 

 

Total assets

 

$

49

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial forwards:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FTRs

 

$

4

 

 

Discounted cash flow

 

Market price (per MWh)

(3)

 

(2) - 2

 

 

 

Physical options:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

 

2

 

 

Option model

 

Market price (per Dth)

(3)

 

1 - 2

 

 

1

 

 

 

 

 

 

 

 

 

Price volatility

(4)

 

45% - 83%

 

 

57

%

Total liabilities

 

$

6

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Averages weighted by volume.

(2)

Includes basis.

(3)

Represents market prices beyond defined terms for Levels 1 and 2.

(4)

Represents volatilities unrepresented in published markets.    

Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:

 

Significant Unobservable Inputs

 

Position

 

Change to Input

 

Impact on Fair Value

Measurement

Market price

 

Buy

 

Increase (decrease)

 

Gain (loss)

Market price

 

Sell

 

Increase (decrease)

 

Loss (gain)

Price volatility

 

Buy

 

Increase (decrease)

 

Gain (loss)

Price volatility

 

Sell

 

Increase (decrease)

 

Loss (gain)

40


 

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 March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

 

 

$

72

 

 

$

49

 

 

$

121

 

Interest rate

 

 

 

 

 

29

 

 

 

 

 

 

29

 

Investments(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

3,313

 

 

 

 

 

 

 

 

 

3,313

 

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt instruments

 

 

 

 

 

496

 

 

 

 

 

 

496

 

Government securities

 

 

437

 

 

 

739

 

 

 

 

 

 

1,176

 

Cash equivalents and other

 

 

18

 

 

 

2

 

 

 

 

 

 

20

 

Total assets

 

$

3,768

 

 

$

1,338

 

 

$

49

 

 

$

5,155

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

 

 

$

43

 

 

$

6

 

 

$

49

 

Interest rate

 

 

 

 

 

1,580

 

 

 

 

 

 

1,580

 

Foreign currency

 

 

 

 

 

17

 

 

 

 

 

 

17

 

Total liabilities

 

$

 

 

$

1,640

 

 

$

6

 

 

$

1,646

 

At December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

 

 

$

55

 

 

$

19

 

 

$

74

 

Interest rate

 

 

 

 

 

11

 

 

 

 

 

 

11

 

Foreign currency

 

 

 

 

 

8

 

 

 

 

 

 

8

 

Investments(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

4,195

 

 

 

 

 

 

 

 

 

4,195

 

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt instruments

 

 

 

 

 

463

 

 

 

 

 

 

463

 

Government securities

 

 

473

 

 

 

719

 

 

 

 

 

 

1,192

 

Cash equivalents and other

 

 

19

 

 

 

1

 

 

 

 

 

 

20

 

Total assets

 

$

4,687

 

 

$

1,257

 

 

$

19

 

 

$

5,963

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

 

 

$

75

 

 

$

56

 

 

$

131

 

Interest rate

 

 

 

 

 

606

 

 

 

 

 

 

606

 

Foreign currency

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Total liabilities

 

$

 

 

$

684

 

 

$

56

 

 

$

740

 

(1)

Includes investments held in the nuclear decommissioning and rabbi trusts. Excludes $277 million and $274 million of assets at March 31, 2020 and December 31, 2019, respectively, measured at fair value using NAV (or its equivalent) as a practical expedient which are not required to be categorized in the fair value hierarchy.

41


 

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

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

(millions)

 

 

 

 

 

 

 

 

Beginning balance

 

$

(37

)

 

$

64

 

Total realized and unrealized gains (losses):

 

 

 

 

 

 

 

 

Included in earnings:

 

 

 

 

 

 

 

 

Operating revenue

 

 

 

 

 

(1

)

Electric fuel and other energy-related purchases

 

 

(22

)

 

 

(4

)

Included in regulatory assets/liabilities

 

 

80

 

 

 

7

 

Settlements

 

 

22

 

 

 

(1

)

Purchases

 

 

 

 

 

(10

)

Transfers out of Level 3

 

 

 

 

 

(2

)

Ending balance

 

$

43

 

 

$

53

 

 

There are 0 unrealized gains and losses included in earnings in the Level 3 fair value category related to assets/liabilities still held at the reporting date for the quarters ended March 31, 2020 and 2019.

 

Virginia Power

The following table presents Virginia Power’s quantitative information about Level 3 fair value measurements at March 31, 2020.  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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas(2)

 

$

48

 

 

Discounted cash flow

 

Market price (per Dth)

(3)

 

(2) - 2

 

 

(1

)

FTRs

 

 

1

 

 

Discounted cash flow

 

Market price (per MWh)

(3)

 

(1) - 2

 

 

 

Total assets

 

$

49

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial forwards:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FTRs

 

$

4

 

 

Discounted cash flow

 

Market price (per MWh)

(3)

 

(2) - 2

 

 

 

Physical options:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

 

2

 

 

Option model

 

Market price (per Dth)

(3)

 

1 - 2

 

 

1

 

 

 

 

 

 

 

 

 

Price volatility

(4)

 

45% - 83%

 

 

57

%

Total liabilities

 

$

6

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Averages weighted by volume.

(2)

Includes basis.

(3)

Represents market prices beyond defined terms for Levels 1 and 2.

(4)

Represents volatilities unrepresented in published markets.

Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:

 

Significant Unobservable Inputs

 

Position

 

Change to Input

 

Impact on Fair Value

Measurement

Market price

 

Buy

 

Increase (decrease)

 

Gain (loss)

Market price

 

Sell

 

Increase (decrease)

 

Loss (gain)

Price volatility

 

Buy

 

Increase (decrease)

 

Gain (loss)

Price volatility

 

Sell

 

Increase (decrease)

 

Loss (gain)

42


 

 

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 March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

 

 

$

2

 

 

$

49

 

 

$

51

 

Investments(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

1,506

 

 

 

 

 

 

 

 

 

1,506

 

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt instruments

 

 

 

 

 

285

 

 

 

 

 

 

285

 

Government securities

 

 

162

 

 

 

357

 

 

 

 

 

 

519

 

Total assets

 

$

1,668

 

 

$

644

 

 

$

49

 

 

$

2,361

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

 

 

$

18

 

 

$

6

 

 

$

24

 

Interest rate

 

 

 

 

 

991

 

 

 

 

 

 

991

 

Total liabilities

 

$

 

 

$

1,009

 

 

$

6

 

 

$

1,015

 

At December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

 

 

$

3

 

 

$

19

 

 

$

22

 

Interest rate

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Investments(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

1,920

 

 

 

 

 

 

 

 

 

1,920

 

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt instruments

 

 

 

 

 

256

 

 

 

 

 

 

256

 

Government securities

 

 

186

 

 

 

361

 

 

 

 

 

 

547

 

Cash equivalents and other

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Total assets

 

$

2,106

 

 

$

623

 

 

$

19

 

 

$

2,748

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

 

 

$

47

 

 

$

56

 

 

$

103

 

Interest rate

 

 

 

 

 

363

 

 

 

 

 

 

363

 

Total liabilities

 

$

 

 

$

410

 

 

$

56

 

 

$

466

 

 

(1)

Includes investments held in the nuclear decommissioning trusts. Excludes $157 million and $159 million of assets at March 31, 2020 and December 31, 2019, respectively, measured at fair value using NAV (or its equivalent) as a practical expedient which are not required to be categorized in the fair value hierarchy.

43


 

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

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

(millions)

 

 

 

 

 

 

 

 

Beginning balance

 

$

(37

)

 

$

60

 

Total realized and unrealized losses:

 

 

 

 

 

 

 

 

Included in earnings:

 

 

 

 

 

 

 

 

Electric fuel and other energy-related purchases

 

 

(22

)

 

 

(4

)

Included in regulatory assets/liabilities

 

 

80

 

 

 

8

 

Settlements

 

 

22

 

 

 

(5

)

Ending balance

 

$

43

 

 

$

59

 

 

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 months ended March 31, 2020 and 2019.

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 March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate

 

$

 

 

$

190

 

 

$

 

 

$

190

 

Foreign currency

 

 

 

 

 

17

 

 

 

 

 

 

17

 

Total liabilities

 

$

 

 

$

207

 

 

$

 

 

$

207

 

At December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency

 

$

 

 

$

8

 

 

$

 

 

$

8

 

Total assets

 

$

 

 

$

8

 

 

$

 

 

$

8

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate

 

$

 

 

$

83

 

 

$

 

 

$

83

 

Foreign currency

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Total liabilities

 

$

 

 

$

86

 

 

$

 

 

$

86

 

 

 

44


 

Fair Value of Financial Instruments

Substantially all of the Companies’ 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, 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' financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

Carrying

Amount

 

 

Estimated

Fair

Value(1)

 

 

Carrying

Amount

 

 

Estimated

Fair

Value(1)

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dominion Energy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt(2)

 

$

32,984

 

 

$

35,685

 

 

$

32,055

 

 

$

36,155

 

Junior subordinated notes(3)

 

 

4,407

 

 

 

4,381

 

 

 

4,797

 

 

 

4,953

 

Virginia Power

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt(3)

 

$

12,327

 

 

$

13,998

 

 

$

12,326

 

 

$

14,281

 

Dominion Energy Gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt(4)

 

$

5,516

 

 

$

5,479

 

 

$

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 issuances with short-term maturities and variable rates refinanced at current market rates is a reasonable estimate of their fair value.

(2)

Carrying amount includes current portions included in securities due within one year and amounts which represent the unamortized debt issuance costs, discount or premium and foreign currency remeasurement adjustments. At March 31, 2020 and December 31, 2019, includes the valuation of certain fair value hedges associated with fixed rate debt of $4 million and $4 million, respectively.

(3)

Carrying amount includes current portions included in securities due within one year and amounts which represent the unamortized debt issuance costs, discount or premium.

(4)

Carrying amount includes current portions included in securities due within one year and amounts which represent the unamortized debt issuance costs, discount or premium and foreign currency remeasurement adjustments.

Note 9. Derivatives and Hedge Accounting Activities

The Companies’ accounting policies, objectives and strategies for using derivative instruments are discussed in Note 2 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2019. See Note 8 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. Dominion 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-counter transactions and all exchange contracts are subject to collateral requirements. Types of collateral for over-the-counter and exchange contracts 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 18 for further information regarding credit-related contingent features for the Companies’ derivative instruments.

 

45


 

Dominion Energy

Balance Sheet Presentation

The tables below present Dominion 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:

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

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

 

$

55

 

 

$

3

 

 

$

 

 

$

52

 

 

$

35

 

 

$

21

 

 

$

 

 

$

14

 

Exchange

 

 

64

 

 

 

16

 

 

 

34

 

 

 

14

 

 

 

37

 

 

 

21

 

 

 

 

 

 

16

 

Interest rate contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

29

 

 

 

21

 

 

 

 

 

 

8

 

 

 

11

 

 

 

3

 

 

 

 

 

 

8

 

Foreign currency contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

8

 

 

 

 

 

 

 

Total derivatives, subject to a

   master netting or similar

   arrangement

 

$

148

 

 

$

40

 

 

$

34

 

 

$

74

 

 

$

91

 

 

$

53

 

 

$

 

 

$

38

 

 

(1)

Excludes $2 million and $2 million of derivative assets at March 31, 2020 and December 31, 2019, respectively, which are not subject to master netting or similar arrangements.

 

 

 

March 31, 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(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

 

$

27

 

 

$

3

 

 

$

1

 

 

$

23

 

 

$

105

 

 

$

21

 

 

$

 

 

$

84

 

Exchange

 

 

16

 

 

 

16

 

 

 

 

 

 

 

 

 

21

 

 

 

21

 

 

 

 

 

 

 

Interest rate contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

1,580

 

 

 

21

 

 

 

23

 

 

 

1,536

 

 

 

606

 

 

 

8

 

 

 

35

 

 

 

563

 

Foreign currency contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

17

 

 

 

 

 

 

 

 

 

17

 

 

 

3

 

 

 

3

 

 

 

 

 

 

 

Total derivatives, subject to a

   master netting or similar

   arrangement

 

$

1,640

 

 

$

40

 

 

$

24

 

 

$

1,576

 

 

$

735

 

 

$

53

 

 

$

35

 

 

$

647

 

 

(1)

Excludes $6 million and $5 million of derivative liabilities at March 31, 2020 and December 31, 2019, respectively, which are not subject to master netting or similar arrangements.

46


 

Volumes

The following table presents the volume of Dominion Energy’s derivative activity at March 31, 2020. 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)

 

 

81

 

 

 

36

 

Basis

 

 

268

 

 

 

574

 

Electricity (MWh):

 

 

 

 

 

 

 

 

Fixed price

 

 

3,088,875

 

 

 

 

FTRs

 

 

18,836,472

 

 

 

 

Liquids (Gal)(2)

 

 

39,690,000

 

 

 

 

Interest rate(3)

 

$

2,450,000,000

 

 

$

5,582,850,761

 

Foreign currency(3)

 

-

 

 

250,000,000

 

 

(1)

Includes options.

(2)

Includes NGLs.

(3)

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 March 31, 2020:

 

 

 

AOCI

After-Tax

 

 

Amounts Expected to be

Reclassified to Earnings

During the Next 12 Months

After-Tax

 

 

Maximum Term

(millions)

 

 

 

 

 

 

 

 

 

 

Commodities:

 

 

 

 

 

 

 

 

 

 

Gas

 

$

(2

)

 

$

(2

)

 

21 months

Electricity

 

 

14

 

 

 

14

 

 

9 months

NGL

 

 

1

 

 

 

1

 

 

9 months

Interest rate

 

 

(655

)

 

 

(50

)

 

381 months

Foreign currency

 

 

(9

)

 

 

(1

)

 

75 months

Total

 

$

(651

)

 

$

(38

)

 

 

 

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. There were 0 derivative instruments designated in fair value hedges during the three months ended March 31, 2020. Gains and losses on derivatives in fair value hedge relationships were immaterial for the three months ended March 31, 2019.

 

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)

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

March 31, 2020

 

 

December 31, 2019

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

$

(1,154

)

 

$

(1,154

)

 

$

(4

)

 

$

(4

)

 

(1)

Includes $(1.1) billion and $(397) million related to discontinued hedging relationships at March 31, 2020 and December 31, 2019, respectively.

(2)

Includes $(4) million and $3 million of hedging adjustments on discontinued hedging relationships at March 31, 2020 and December 31, 2019, respectively.

47


 

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)

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

 

 

$

80

 

 

$

80

 

Interest rate

 

 

 

 

 

11

 

 

 

11

 

Total current derivative assets(1)

 

 

 

 

 

91

 

 

 

91

 

Noncurrent Assets

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

 

 

 

 

41

 

 

 

41

 

Interest rate

 

 

 

 

 

18

 

 

 

18

 

Total noncurrent derivative assets(2)

 

 

 

 

 

59

 

 

 

59

 

Total derivative assets

 

$

 

 

$

150

 

 

$

150

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

 

 

$

45

 

 

$

45

 

Interest rate

 

 

515

 

 

 

232

 

 

 

747

 

Foreign currency

 

 

1

 

 

 

 

 

 

1

 

Total current derivative liabilities

 

 

516

 

 

 

277

 

 

 

793

 

Noncurrent Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

 

 

 

 

4

 

 

 

4

 

Interest rate

 

 

722

 

 

 

111

 

 

 

833

 

Foreign currency

 

 

16

 

 

 

 

 

 

16

 

Total noncurrent derivative liabilities

 

 

738

 

 

 

115

 

 

 

853

 

Total derivative liabilities

 

$

1,254

 

 

$

392

 

 

$

1,646

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

30

 

 

$

37

 

 

$

67

 

Interest rate

 

 

1

 

 

 

 

 

 

1

 

Total current derivative assets(1)

 

 

31

 

 

 

37

 

 

 

68

 

Noncurrent Assets

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

 

1

 

 

 

6

 

 

 

7

 

Interest rate

 

 

10

 

 

 

 

 

 

10

 

Foreign currency

 

 

8

 

 

 

 

 

 

8

 

Total noncurrent derivative assets(2)

 

 

19

 

 

 

6

 

 

 

25

 

Total derivative assets

 

$

50

 

 

$

43

 

 

$

93

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

6

 

 

$

77

 

 

$

83

 

Interest rate

 

 

321

 

 

 

1

 

 

 

322

 

Foreign currency

 

 

3

 

 

 

 

 

 

3

 

Total current derivative liabilities

 

 

330

 

 

 

78

 

 

 

408

 

Noncurrent Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

 

1

 

 

 

47

 

 

 

48

 

Interest rate

 

 

267

 

 

 

17

 

 

 

284

 

Total noncurrent derivative liabilities

 

 

268

 

 

 

64

 

 

 

332

 

Total derivative liabilities

 

$

598

 

 

$

142

 

 

$

740

 

 

(1)

Current derivative assets are presented in other current assets in Dominion Energy’s Consolidated Balance Sheets.

48


 

(2)

Noncurrent derivative assets are presented in other deferred charges and other assets in Dominion Energy’s Consolidated Balance Sheets.

 

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 March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Derivative type and location of gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

Commodity:

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

 

 

 

 

$

7

 

 

 

 

 

Purchased gas

 

 

 

 

 

 

(3

)

 

 

 

 

Total commodity

 

$

 

 

$

4

 

 

$

 

Interest rate(3)

 

 

(336

)