Dominion Power 2000 Annual Report Download - page 43

41
Note 1 Nature of Operations
General Organization and Legal Description
Dominion Resources, Inc. (Dominion or the Company) is a holding
company headquartered in Richmond, Virginia. Its principal sub-
sidiaries are Virginia Electric and Power Company (Virginia Power)
and, with the completion of the acquisition on January 28, 2000,
Consolidated Natural Gas Company (CNG). Dominion is subject to
the Public Utility Holding Company Act of 1935 (1935 Act).
Virginia Power is a regulated public utility engaged in the gener-
ation, transmission, distribution and sale of electric energy within
a 30,000 square-mile area in Virginia and northeastern North
Carolina. Virginia Power sells electricity to approximately 2.1 million
retail customers (including governmental agencies) and to whole-
sale customers such as rural electric cooperatives, municipalities,
power marketers and other utilities. Virginia Power engages in off-
system wholesale purchases and sales of electricity and purchases
and sales of natural gas beyond the geographic limits of its retail
service territory.
CNG operates in all phases of the natural gas industry, including
exploration for and production of oil and natural gas in the United
States. Its regulated retail gas distribution subsidiaries serve
approximately 1.7 million residential, commercial and industrial gas
sales and transportation customers in Ohio, Pennsylvania and West
Virginia. Its interstate gas transmission pipeline system services
each of its distribution subsidiaries, non-affiliated utilities and end
use customers in the Midwest, the Mid-Atlantic and the Northeast
states. CNG’s exploration and production operations are conducted
in several of the major gas and oil producing basins in the United
States, both onshore and offshore. CNG also holds equity invest-
ments in energy activities in Australia, which are held for sale.
The Company’s other major subsidiaries are Dominion Energy,
Inc. (DEI) and Dominion Capital, Inc. (DCI). DEI is engaged in inde-
pendent power production and the acquisition and production of
natural gas and oil reserves. In Canada, DEI is engaged in natural
gas exploration, production and storage. DCI is Dominion’s financial
services subsidiary. DCI’s primary business is financial services
which includes commercial lending and residential mortgage lend-
ing. See Note 6 for a discussion of management’s strategy to exit
and windup DCI’s businesses as ordered by the Securities and
Exchange Commission (SEC) under the 1935 Act.
In mid-1998 Dominion sold East Midlands Electricity, plc (East
Midlands), an electricity distribution and supply company in the
United Kingdom.
Dominion created a subsidiary service company under the 1935
Act, Dominion Resources Services, Inc. (Services), which provided
certain services to Dominion’s operating subsidiaries. During 2000,
CNG also had a service company. Effective January 1, 2001, the two
service companies were combined into one service company.
Notes to Consolidated Financial Statements
Dominion manages its operations based on the following
operating segments: Dominion Energy, Dominion Delivery and
Dominion Exploration & Production. In addition, Dominion also
reviews the financial services business of DCI and Corporate
Operations as segments.
While Dominion manages its daily operations as described
above, assets remain wholly owned by its legal subsidiaries. For
more information on business segments, see Note 27.
“Dominion” or the “Company” is used throughout this report
and, depending on the context of its use, may represent any of the
following: the legal entity, Dominion Resources, Inc., one of
Dominion’s consolidated subsidiaries or the entirety of Dominion
Resources, Inc. and its consolidated subsidiaries.
Note 2 Significant Accounting Policies
General
The preparation of financial statements in conformity with gener-
ally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent liabilities at the
date of the financial statements and the reported amounts of rev-
enue and expenses during the reporting period. Actual results could
differ from those estimates.
The consolidated financial statements represent the accounts of
the Company after the elimination of intercompany transactions.
The Company follows the equity method of accounting for invest-
ments in partnerships and corporate joint ventures when the com-
pany is able to influence the financial and operating policies of the
investee. For all other investments, the cost method is applied.
Accounting for the utility businesses conforms with generally
accepted accounting principles as applied to regulated public utili-
ties and as prescribed by federal agencies and the commissions of
the states in which the utility business operates.
Revenue
Revenue is recorded on the basis of services rendered, commodi-
ties delivered or contracts settled and include amounts yet to be
billed to customers. Revenue from trading activities include
realized commodity contract revenue, net of related cost of sales,
amortization of option premiums, and unrealized gains and losses
resulting from marking to market those commodity contracts not
yet settled. Dividend income on securities owned is recognized
on the ex-dividend date.