Dominion Power 2003 Annual Report Download - page 74

72.Dominion 2003
Notes to Consolidated Financial Statements, Continued
12. Property, Plant and Equipment
Major classes of property, plant and equipment and their respec-
tive balances are:
At December 31, 2003 2002
(millions)
Utility
Generation $ 9,780 $ 8,497
Transmission 3,308 3,283
Distribution 7,713 7,347
Storage 999 781
Nuclear fuel 757 740
Gas gathering and processing 416 341
General 795 830
Plant under construction 698 972
Total utility 24,466 22,791
Nonutility
Exploration and production properties:
Proved 7,561 6,265
Unproved 1,721 1,440
Merchant generation properties — nuclear 929 921
Nuclear fuel 175 146
Merchant generation properties — other 1,214 629
Other — including plant under construction 1,041 439
Total nonutility 12,641 9,840
Total property, plant and equipment $37,107 $32,631
Costs of unproved properties capitalized under the full cost
method of accounting that were excluded from amortization at
December 31, 2003, and the years in which such excluded costs
were incurred, follow:
Years
Total 2003 2002 2001 Prior
(millions)
Property acquisition
costs $ 863 $ 84 $ 84 $645 $50
Exploration costs 171 76 43 32 20
Capitalized interest 120 53 5287
Total $1,154 $213 $179 $685 $77
Amortization rates for capitalized costs under the full cost
method of accounting for Dominion’s United States and Canadian
cost centers were as follows:
Year Ended December 31, 2003 2002 2001
(Per Mcf Equivalent)
United States cost center $1.20 $1.13 $1.13
Canadian cost center 1.00 0.85 0.78
Volumetric Production Payment Transaction
In 2003, Dominion received $266 million in cash for the sale of a
fixed-term overriding royalty interest in certain of its natural gas
reserves for the period August 2003 through August 2007. The
sale reduced Dominion’s natural gas reserves by approximately
66 billion cubic feet (bcf). While Dominion is obligated under the
agreement to deliver to the purchaser its portion of future natural
gas production from the properties, it retains control of the prop-
erties and rights to future development drilling. If production from
the properties is inadequate to deliver approximately 66 bcf of
natural gas scheduled for delivery to the purchaser, Dominion has
no obligation to make up the shortfall. Cash proceeds received
from this volumetric production payment transaction were
recorded as deferred revenue. Dominion will recognize revenue
from the transaction as natural gas is produced and delivered to
the purchaser.
Classification of Mineral Rights
Companies with gas and oil exploration and production opera-
tions have become aware that a question has arisen about
whether contractual mineral rights should be classified as intangi-
ble assets rather than tangible assets on the balance sheet as a
result of SFAS Nos. 141, Business Combinations, and 142. If, as a
result of the resolution of this issue, reclassification of the costs
associated with its mineral rights is required, Dominion’s net
intangible assets would increase and its net property, plant and
equipment would decrease. As of December 31, 2003, the
amount subject to reclassification was approximately $4.2 billion.
While resolution of this issue may affect the balance sheet classi-
fication of these assets, there would be no impact on Dominion’s
results of operations or cash flows.
Jointly-Owned Utility Plants
Dominion’s proportionate share of jointly-owned utility plants at
December 31, 2003 follows:
Bath
County North
Pumped Anna Clover
Storage Power Power
Station Station Station
(millions, except percentages)
Ownership interest 60.0% 88.4% 50.0%
Plant in service $1,019 $2,064 $546
Accumulated depreciation 360 864 103
Nuclear fuel 348
Accumulated amortization of nuclear fuel 286
Construction work in progress 17 28 1
The co-owners are obligated to pay their share of all future
construction expenditures and operating costs of the jointly
owned facilities in the same proportion as their respective owner-
ship interest. Dominion reports its share of operating costs in the
appropriate operating expense (fuel, other operations and main-
tenance, depreciation, and other taxes, etc.) in the Consolidated
Statements of Income.