Dominion Power 2000 Annual Report Download - page 37

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•exploration and production expenditures of $353 million that
included the purchase of gas and oil producing properties,
drilling and equipment costs and undeveloped lease acquisitions;
•proceeds from the sales of non-core businesses of $836
million; and
•repayments of loans (net of new originations) associated with
DCI of $1.3 billion.
Capital Requirements
Capital Expenditures
Dominion’s planned capital expenditures during 2001, 2002 and 2003
are expected to total $2.0 billion, $3.0 billion and $2.8 billion, respec-
tively. These expenditures include construction and expansion of
generation facilities, environmental upgrades, purchase of nuclear
fuel, construction improvements of gas and electric transmission
and distribution assets, and expenditures for natural gas and oil
producing properties.
Maturities
Dominion will require $336 million to meet current maturities of
long-term securities in 2001.
Dominion expects to fund its capital requirements and debt
maturities with cash flow from operations and a combination of
sales of securities and short-term borrowings.
Electric and Gas Industry Issues
Deregulation Legislation—Electric Industry
Virginia
Historically, Dominion has had the exclusive right to provide elec-
tricity at retail within its assigned service areas in Virginia and
North Carolina.
However, during 1998 and 1999, deregulation legislation was
enacted in Virginia that established a plan to restructure Virginia’s
electric utility industry and provided for a phased-in transition to a
fully competitive retail electric market during the period January 1,
2002 through January 1, 2004. In connection with the implementa-
tion of the phase-in of retail electric competition, the Virginia
Commission Staff recommended transition schedules for each of
Virginia’s electric utilities. For Dominion, the Virginia Commission
Staff’s plan recommended the phase-in of retail choice for all
customers by January 1, 2003. Dominion filed comments on the
Commission Staff’s recommended plan in February 2001.
Under the deregulation legislation, the generation portion of
Dominion’s Virginia jurisdictional operations will no longer be sub-
ject to cost-based rate regulation beginning in 2002. Base rates will
remain unchanged until July 2007 and recovery of generation-
related costs will continue to be provided through capped rates and
a wires charge assessed to those customers opting for alternate
suppliers. In addition, under the deregulation legislation, Dominion
may petition the Virginia Commission to terminate the capped rates
after January 1, 2004. The capped rates may be terminated if the
Virginia Commission finds that a competitive market for generation
services exists within Dominion’s service area.
As discussed further in sections below, the deregulation legisla-
tion addressed divestiture, functional separation, regional transmis-
sion entities and other corporate relationships. It also established a
task force to work with the Virginia Commission during the phase-in
of competition. The task force’s specific assignments include the
monitoring of possible over or under-recovery of stranded costs by
incumbent utilities. Technical amendments to the deregulation
legislation were approved by the 2001 General Assembly.
North Carolina
The North Carolina General Assembly is exploring the future of
electric service in North Carolina, including retail competition.
Federal
The United States Congress may consider federal legislation in the
near future authorizing or requiring retail competition or repealing
the 1935 Act and the Public Utility Regulatory Policy Act of 1978.
Deregulation Legislation
— Gas Industry
Each of the three states in which Dominion has gas distribution
operations has enacted or considered legislation regarding deregu-
lation of natural gas sales at the retail level.
Pennsylvania
As early as 1984, large industrial customers in Pennsylvania began
to buy natural gas supplies from third parties, rather than directly
from local utilities. Local distributors transported these third-party
gas supplies to the industrial facilities. Since that time, nearly all
Pennsylvania industrial and large commercial customers have
started buying natural gas from unregulated suppliers.
In 1997, Dominion’s Pennsylvania gas utility voluntarily launched
an Energy Choice program for all of its retail consumers in Pennsyl-
vania. Subsequently, in 1999, Pennsylvania enacted legislation
mandating supplier choice for residential and small commercial
customers. At December 31, 2000, approximately 106,000 customers
had opted for Energy Choice in the Company’s Pennsylvania
service area.
Ohio
Large industrial customers in Ohio also began to source their own
natural gas supplies in the mid-1980s, as interstate pipeline trans-
portation services became more widely available. However, to
date Ohio has not enacted legislation requiring supplier choice for
residential and commercial natural gas consumers. Dominion has
made significant progress in offering Energy Choice to customers
on its own initiative, in cooperation with the Public Utilities Com-
mission of Ohio. In 1997, Dominion’s Ohio gas utility launched a pilot
program, designed to make gas transportation service available to
residential and small commercial customers, and to the suppliers
that market gas to these customer classes. In 2000, the Energy
Choice program was expanded to all 1.2 million customers in
Dominion’s Ohio service area. At December 31, 2000, approximately