Dominion Power 2000 Annual Report Download - page 63

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operating and other costs as a result of compliance, remediation,
containment and monitoring obligations of Dominion.
Dominion currently recovers environmental-related costs from
electric service customers through regulated utility rates. However,
to the extent environmental costs are incurred during the period
ending June 30, 2007, in excess of the level currently included in
Virginia jurisdictional rates, Dominion’s results of operations will
decrease. After that date, Dominion may seek recovery from cus-
tomers through utility rates of only those environmental costs
related to transmission and distribution operations.
In 1987, the U.S. Environmental Protection Agency (EPA) identi-
fied Dominion and several other entities as Potentially Responsible
Parties (PRPs) at two Superfund sites located in Kentucky and
Pennsylvania. Current cost studies estimate total remediation
costs for the sites to range from $98 million to $156 million.
Dominion’s proportionate share of the total cost is expected to be
in the range of $2 million to $3 million, based upon allocation for-
mulas and the volume of waste shipped to the sites. Dominion
has accrued a reserve of $2 million to meet its obligations at these
two sites. Based on a financial assessment of PRPs involved at
these sites, Dominion has determined that it is probable that the
PRPs will fully pay the costs apportioned to them. Dominion gener-
ally seeks to recover its costs associated with environmental reme-
diation from third-party insurers. Any pending or possible claims
were not recognized as an asset or offset against such obligations.
In 1999, Dominion was notified by the Department of Justice of
alleged noncompliance with EPA’s oil spill prevention, control and
counter-measures (SPCC) plans and facility response plan (FRP)
requirements at one of Dominion’s power stations. If, in a legal
proceeding, such instances of noncompliance are deemed to have
occurred, Dominion may be required to remedy any alleged defi-
ciencies and pay civil penalties. Settlement of this matter is cur-
rently in negotiation and is not expected to have a material impact
on Dominion’s financial condition or results of operations. Dominion
identified matters at certain other power stations that EPA might
view as not in compliance with the SPCC and FRP requirements.
Dominion reported these matters to the EPA and in December 1999
submitted revised FRP and SPCC plans. Presently, the EPA has not
assessed any penalties against Dominion, pending its review of
Dominion’s disclosure information. Future resolution of these mat-
ters is not expected to have a material impact on Dominion’s finan-
cial condition or results of operations.
During 2000, the Company received a Notice of Violation (NOV)
from the EPA alleging that Dominion is operating its Mt. Storm
Power Station in West Virginia in violation of the Clean Air Act.
The NOV alleges that Dominion failed to obtain New Source
Review permits prior to undertaking specified construction projects
at the station. Violations of the Clean Air Act may result in the
imposition of substantial civil penalties and injunctive relief. Also
in 2000, the Attorney General of New York filed a suit against
Dominion alleging similar violations of the Clean Air Act at the Mt.
Storm Power Station. Dominion has also received notices from
the Attorneys General of Connecticut and New Jersey of their
intentions to file suit against Dominion for similar violations.
Currently, Dominion has reached an agreement in principle with
the federal government and the state of New York about the resolu-
tion of various Clean Air Act matters. The agreement in principle
includes payment of a $5 million civil penalty, a commitment of $14
million for major environmental projects in Virginia, West Virginia,
Connecticut, New Jersey and New York, and a 12-year, $1.2 billion
capital investment program for environmental improvements at
Dominion’s coal-fired generating stations in Virginia and West
Virginia. Dominion has already committed to a substantial portion
of the $1.2 billion expeditures for SO2and NOXemissions controls in
response to other Clean Air Act requirements. Although Dominion
and EPA have reached an agreement in principle, the terms of a
final binding settlement are still being negotiated. As of December
31, 2000, Dominion has recorded, on a discounted basis, $17 million
for the civil penalty and environmental projects.
In 1990, Dominion Transmission entered into a Consent Order
and Agreement with the Commonwealth of Pennsylvania
Department of Environmental Protection (DEP) in which Dominion
Transmission has agreed with the DEP’s determination of certain
violations of the Pennsylvania Solid Waste Management Act, the
Pennsylvania Clean Streams Law and the rules and regulations
promulgated thereunder. No civil penalties have been assessed.
Pursuant to the Order and Agreement, Dominion Transmission
continues to perform sampling, testing and analysis, and conducts
remediation at some of its affected Pennsylvania facilities. Total
remediation costs in connection with these sites and the Order and
Agreement are not expected to be material with respect to the
Company’s financial position, results of operations or cash flows.
The Company has recognized an estimated liability amounting
to $6 million at December 31, 2000, for future costs expected to be
incurred to remediate or mitigate hazardous substances at these
sites and at facilities covered by the Order and Agreement.
Nuclear Insurance
The Price-Anderson Act limits the public liability of an owner of a
nuclear power plant to $9.5 billion for a single nuclear incident. The
Price-Anderson Act Amendment of 1988 allows for an inflationary
provision adjustment every five years. Dominion has purchased
$200 million of coverage from the commercial insurance pools, with
the remainder provided through a mandatory industry risk sharing
program. In the event of a nuclear incident at any licensed nuclear
reactor in the United States, Dominion could be assessed up to $88
million for each of its four licensed reactors not to exceed $10 mil-
lion per year per reactor. There is no limit to the number of incidents
for which this retrospective premium can be assessed.
Dominion’s current level of property insurance coverage ($2.55
billion for North Anna and $2.55 billion for Surry) exceeds the NRC’s
minimum requirement for nuclear power plant licensees of $1.06
billion per reactor site and includes coverage for premature decom-
missioning and functional total loss. The NRC requires that the
proceeds from this insurance be used first to return the reactor to