Dominion Power 2007 Annual Report Download - page 102

Notes to Consolidated Financial Statements, Continued
Rental expense totaled $185 million, $178 million and $160
million for 2007, 2006 and 2005, respectively, the majority of
which is reflected in other operations and maintenance expense.
We lease the Fairless power station (Fairless) in Pennsylvania,
which began commercial operations in June 2004. During con-
struction, we acted as the construction agent for the lessor, con-
trolled the design and construction of the facility and have since
been reimbursed for all project costs ($898 million) advanced to
the lessor. We make annual lease payments of $53 million that
are reflected in the lease commitments table. The lease expires in
2013 and at that time, we may renew the lease at negotiated
amounts based on original project costs and current market con-
ditions, subject to lessor approval; purchase Fairless at its original
construction cost; or sell Fairless, on behalf of the lessor, to an
independent third party. If Fairless is sold and the proceeds from
the sale are less than its original construction cost, we would be
required to make a payment to the lessor in an amount up to
70.75% of the original project costs adjusted for certain other
costs as specified in the lease. The lease agreement does not con-
tain any provisions that involve credit rating or stock price trigger
events.
Wind Farm Power Projects
M T .S TORM W IND F ARM
In December 2006, we acquired a 50% interest in a joint venture
with Shell WindEnergy Inc. (Shell) to develop a wind-turbine
facility in Grant County, West Virginia (NedPower). NedPower
consists of two construction phases totaling 264 Mw. The first
phase (164 Mw) is expected to become fully operational by June
2008 and the second phase is expected to be fully operational by
December 2008. During 2007, we made cash contributions of
$67 million to NedPower and expect to contribute an additional
$57 million in 2008. The remaining cost of both phases is
expected to be funded by NedPower through non-recourse con-
struction financing with third-party banks.
F
OWLER R IDGE W IND F ARM
In January 2008, we acquired a 50% interest in a joint venture
with BP Alternative Energy Inc. (BP) to develop a wind-turbine
facility in Benton County, Indiana. The facility is expected to be
built in two phases and generate a total of 750 Mw. We will
jointly own 650 Mw with BP and BP will retain sole ownership
of 100 Mw. We have committed to contribute approximately
$340 million of cash at various dates through January 2009,
which includes our initial investment and funding for the
development of the first 300 Mw phase. Construction of the
second 350 Mw phase could begin as early as 2009, with funding
to be contributed to the joint venture to maintain 50/50 owner-
ship between the partners. Our ultimate funding requirements
may decrease to the extent that the joint venture obtains non-
recourse construction and term financing.
Environmental Matters
We are subject to costs resulting from a number of federal, state
and local laws and regulations designed to protect human health
and the environment. These laws and regulations affect future
planning and existing operations. They can result in increased
capital, operating and other costs as a result of compliance,
remediation, containment and monitoring obligations.
To the extent environmental costs are incurred in connection
with operations regulated by the Virginia Commission during the
period ending December 31, 2008, in excess of the level currently
included in Virginia jurisdictional rates, our results of operations
could decrease. After that date, we may seek recovery through
rates.
S
UPERFUND S ITES
From time to time, we may be identified as a potentially respon-
sible party (PRP) to a Superfund site. The EPA (or a state) can
either (a) allow such a party to conduct and pay for a remedial
investigation, feasibility study and remedial action or (b) conduct
the remedial investigation and action and then seek reimburse-
ment from the parties. Each party can be held jointly, severally
and strictly liable for all costs. These parties can also bring con-
tribution actions against each other and seek reimbursement from
their insurance companies. As a result, we may be responsible for
the costs of remedial investigation and actions under the Super-
fund Act or other laws or regulations regarding the remediation of
waste. We do not believe that any currently identified sites will
result in significant liabilities.
O
THER
We have determined that we are associated with 21 former manu-
factured gas plant sites. Studies conducted by other utilities at
their former manufactured gas plants have indicated that their
sites contain coal tar and other potentially harmful materials.
None of the 21 former sites with which we are associated is under
investigation by any state or federal environmental agency. One
of the former sites is conducting a state-approved post closure
groundwater monitoring program and an environmental land use
restriction has been recorded. At another site we have been
accepted into a state-based voluntary remediation program and
have not yet estimated the future remediation costs. It is not
known to what degree the other former sites may contain
environmental contamination. We are not able to estimate the
cost, if any, that may be required for the possible remediation of
these other sites.
Nuclear Operations
N UCLEAR D ECOMMISSIONING —M INIMUM
F INANCIAL A SSURANCE
The Nuclear Regulatory Commission (NRC) requires nuclear
power plant owners to annually update minimum financial assur-
ance amounts for the future decommissioning of their nuclear
facilities. Our 2007 calculation for the NRC minimum financial
assurance amount, aggregated for our nuclear units, was $2.4 bil-
lion and has been satisfied by a combination of the funds being
collected and deposited in the nuclear decommissioning trusts
and the real annual rate of return growth of the funds allowed by
the NRC.
N UCLEAR I NSURANCE
The Price-Anderson Act provides the public up to $10.8 billion
of liability protection per nuclear incident via obligations required
of owners of nuclear power plants. The Price-Anderson Act
Amendment of 1988 allows for an inflationary provision adjust-
ment every five years. We have purchased $300 million of
100 Dominion 2007 Annual Report