Dominion Power 2000 Annual Report Download - page 62

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Notes to Consolidated Financial Statements (continued)
In addition, Dominion sponsors defined contribution thrift-type sav-
ings plans. During 2000, 1999 and 1998, Dominion’s recognized $30
million, $29 million and $28 million, respectively, as contributions to
these plans.
The funds collected for other postretirement benefits in
regulated utility rates, in excess of other postretirement benefits
actually paid during the year, are contributed to external
benefit trusts.
Note 22 Commitments and Contingencies
As the result of issues generated in the course of daily business,
Dominion and its subsidiaries are involved in legal, tax and regula-
tory proceedings before various courts, regulatory commissions and
governmental agencies, some of which involve substantial amounts
of money. Management believes that the final disposition of these
proceedings will not have an adverse material effect on its opera-
tions or the financial position, liquidity or results of operations.
Utility Rate Regulation
The acquisition of CNG has expanded the Company’s exposure to
utility rate regulation. Dominion’s retail gas distribution companies
are subject to price regulation in the states of Ohio, Pennsylvania
and West Virginia. In addition, Dominion’s gas transmission busi-
ness is subject to rate regulation.
Dominion currently faces competition as a result of utility indus-
try deregulation. Under Virginia’s electric utility industry deregula-
tion legislation, the Company’s base rates will remain unchanged
until July 2007 and recovery of certain generation-related costs will
be provided through these capped rates. The Company remains
exposed to numerous risks, including, among others, exposure to
potentially stranded costs, future environmental compliance
requirements, changes in tax laws, inflation and increased capital
costs. At December 31, 2000, Dominion’s exposure to potentially
stranded costs was comprised of the following:
•long-term purchased power contracts that could ultimately be
determined to be above market — See Purchased Power
Contracts below;
•generating plants that could possibly become uneconomic in a
deregulated environment; and
•unfunded obligations for nuclear plant decommissioning and
postretirement benefits not yet recognized in the financial state-
ments — See Notes 14 and 21.
Purchased Power Contracts
Dominion has contracts for the long-term purchase of capacity
and energy from other utilities, qualifying facilities and indepen-
dent power producers. Dominion has 54 power purchase contracts
with a combined dependable summer capacity of 3,973 megawatts.
The following table reflects the Company’s minimum commit-
ments as of December 31, 2000, for power purchases from utility
and nonutility suppliers.
(millions) Commitment
Year Capacity Other
2001 $ 727 $ 43
2002 724 43
2003 674 31
2004 672 29
2005 665 25
Later years 6,683 169
Total $10,145 $340
Present value of the total $ 5,580 $193
In addition to the minimum purchase commitments in the table
above, under some of these contracts Dominion may purchase, at
its option, additional power as needed. Purchased power expendi-
tures, subject to cost of service rate regulation, (including economy,
emergency, limited term, short-term and long-term purchases) for
the years 2000, 1999 and 1998 were $1.1 billion, $1.2 billion and
$1.1 billion, respectively.
See Note 7 for an evaluation of Dominion’s potential exposure
under its long-term purchased power commitments.
Fuel Purchase Commitments
Estimated fuel purchase commitments for the next five years
for system generation are as follows: 2001 — $379 million;
2002 — $193 million; 2003 — $166 million; 2004 — $153 million; and
2005 — $133 million.
Leases
Future minimum lease payments under the Company’s
noncancellable capital leases and operating leases that have
initial or remaining lease terms in excess of one year as of
December 31, 2000 are: 2001-$115 million; 2002-$58 million; 2003-
$51 million; 2004-$40 million; 2005-$29 million; and years after
2005-$92 million. Rental expense included in other operation and
maintenance expense was $107 million, $31 million and $27 million
for 2000, 1999 and 1998, respectively.
Sales of Power
Subsidiaries of Dominion enter into agreements with other utilities
and with other parties to purchase and sell electric capacity and
energy. These agreements may cover current and future periods.
The volume of these transactions varies from day to day, based on
the market conditions, Dominion’s current and anticipated load, and
other factors. The combined amounts of sales and purchases range
from 3,000 megawatts to 15,000 megawatts at various times during
a given year. These operations are closely monitored from a risk-
management perspective.
Environmental Matters
Dominion is subject to rising costs resulting from a steadily
increasing 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.
These laws and regulations can result in increased capital,