Dominion Power 2007 Annual Report Download - page 70

Notes to Consolidated Financial Statements
N OTE 1. N ATURE OF O PERATIONS
Dominion Resources, Inc. (Dominion), headquartered in Rich-
mond, Virginia, is one of the nation’s largest producers and
transporters of energy. On June 30, 2007, we merged our wholly-
owned subsidiary, Consolidated Natural Gas Company (CNG),
with our holding company, Dominion. As a result of the merger,
all of CNG’s subsidiaries became direct subsidiaries of Dominion.
We completed the sale of our non-Appalachian natural gas
and oil exploration and production (E&P) operations during the
third quarter of 2007. We chose to retain our Appalachian assets
due to their strategic fit with our natural gas transmission and
storage assets. These transactions are discussed in Note 6.
Following the sales of our non-Appalachian E&P operations,
our principal subsidiaries are Virginia Electric and Power Com-
pany (Virginia Power), Dominion Energy, Inc. (DEI), Dominion
Transmission, Inc. (DTI), Virginia Power Energy Marketing, Inc.
(VPEM), Dominion Exploration and Production, Inc. (DEPI)
and The East Ohio Gas Company (Dominion East Ohio).
Virginia Power is a regulated public utility that generates,
transmits and distributes electricity for sale in Virginia and north-
eastern North Carolina. As of December 31, 2007, Virginia
Power served approximately 2.4 million retail customer accounts,
including governmental agencies, as well as, wholesale customers
such as rural electric cooperatives and municipalities. Virginia
Power is a member of PJM Interconnection, LLC (PJM), a
regional transmission organization (RTO), and its electric trans-
mission facilities are integrated into the PJM wholesale electricity
markets.
DEI is involved in merchant generation, energy marketing
and price risk management activities and natural gas exploration
and production in the Appalachian basin of the United States
(U.S.).
DTI operates a regulated interstate natural gas transmission
pipeline and underground storage system in the Northeast,
mid-Atlantic and Midwest states and is engaged in the pro-
duction, gathering and extraction of natural gas in the Appa-
lachian basin.
VPEM provides fuel, gas supply management and price risk
management services to other Dominion affiliates and engages in
energy trading activities.
DEPI explores for, develops and produces gas and oil in the
Appalachian basin of the U.S.
As of December 31, 2007, our regulated gas distribution sub-
sidiaries, Dominion East Ohio, Peoples Natural Gas Company
(Peoples) and Hope Gas, Inc. (Hope), served approximately
1.7 million residential, commercial and industrial gas sales and
transportation customer accounts in Ohio, Pennsylvania and
West Virginia. Of these customers, approximately 500,000 are
served by Peoples and Hope, which are held for sale as discussed
in Note 6. We also operate a liquefied natural gas (LNG) import
and storage facility in Maryland. Our producer services operations
involve the aggregation of natural gas supply and related whole-
sale activities. We also have nonregulated retail energy marketing
operations that include the marketing of gas, electricity and
related products and services to residential and small commercial
customers. As of December 31, 2007, our retail energy marketing
operations served approximately 1.6 million residential and
commercial customer accounts in the Northeast, mid-Atlantic
and Midwest regions of the U.S.
We have substantially exited the core operating businesses of
Dominion Capital, Inc. (DCI) whose primary business was
financial services, including loan administration, commercial
lending and residential mortgage lending. Refer to Note 28 for
information on a third-party collateralized debt obligation
(CDO) entity that we consolidate.
Prior to a fourth quarter 2007 segment realignment, we
managed our daily operations through four primary operating
segments: Dominion Delivery, Dominion Energy, Dominion
Generation and Dominion E&P. During the fourth quarter of
2007, we realigned our business units to reflect our strategic
refocusing and began managing our daily operations through
three primary operating segments: Dominion Virginia Power
(DVP), Dominion Generation and Dominion Energy. In addi-
tion, we also report a Corporate and Other segment that includes
our corporate, service company and other functions and the net
impact of certain operations disposed of or to be disposed of,
which are discussed in Note 6. Our assets remain wholly owned
by us and our legal subsidiaries.
The terms “Dominion,” “Company,” “we,” “our” and “us”
are used throughout this report and, depending on the context of
their use, may represent any of the following: the legal entity,
Dominion Resources, Inc., one or more of Dominion Resources,
Inc.’s consolidated subsidiaries or operating segments, or the
entirety of Dominion Resources, Inc. and its consolidated sub-
sidiaries.
N OTE 2. S IGNIFICANT A CCOUNTING
P OLICIES
General
We make certain estimates and assumptions in preparing our
Consolidated Financial Statements in accordance with accounting
principles generally accepted in the United States of America
(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 pre-
sented. Actual results may differ from those estimates.
Our Consolidated Financial Statements include, after eliminat-
ing intercompany transactions and balances, the accounts of
Dominion and our majority-owned subsidiaries, and those varia-
ble interest entities (VIEs) where Dominion has been determined
to be the primary beneficiary.
Certain amounts in the 2006 and 2005 Consolidated Finan-
cial Statements and footnotes have been recast to conform to the
2007 presentation.
Reapplication of SFAS No. 71
In March 1999, we discontinued the application of Statement of
Financial Accounting Standards (SFAS) No. 71, Accounting for
the Effects of Certain Types of Regulation (SFAS No. 71), to the
majority of our utility generation operations upon the enactment
of deregulation legislation in Virginia. Our electric utility trans-
mission and distribution operations continued to apply the provi-
sions of SFAS No. 71 since they remained subject to
cost-of-service rate regulation.
In April 2007, the Virginia General Assembly passed legis-
lation that returned the Virginia jurisdiction of our utility gen-
68 Dominion 2007 Annual Report