Dominion Power 2001 Annual Report Download - page 39

(a realized loss). Until the contracts are settled, however,
Dominion must record the monthly changes in the fair value of
both contracts. These changes in fair value represent unrealized
gains and losses. To the extent purchase and sales contracts with
identical or similar terms are held by the Clearinghouse, the
changes in their fair values will generally offset one another.
Although the Clearinghouse may hold purchase or sales con-
tracts for delivery of commodities at particular locations and
times that have not been offset, such exposures are monitored
and actively managed on a daily basis. Dominion’s risk manage-
ment policy and procedures are designed to ensure that its
exposure to commodity price changes is limited. For additional
discussion of trading activities, see Market Rate Sensitive Instru-
ments and Risk Management and Notes 2, 15, and 28 to the
Consolidated Financial Statements.
A summary of the changes in the unrealized gains and
losses in Dominion’s portfolio of energy contracts held for trad-
ing purposes during 2001 follows:
Energy
Trading
(millions) Contracts
Net unrealized gain at December 31, 2000 $25
Contracts realized or otherwise settled during the period (1)
Net unrealized loss at inception of contracts initiated
during the period (4)
Change in unrealized gains and losses attributable to
net arbitrage gains and changes in market prices. 129
Changes in unrealized gains and losses attributable
to changes in valuation techniques 16
Net unrealized gain at December 31, 2001 $165
Unrealized gains and losses in Dominion’s portfolio of energy
trading contracts at December 31, 2001 are summarized in the
following table based on the approach used to determine fair
value and the contract settlement or delivery dates:
(millions) Maturity Based on Contract Settlement or Delivery Date(s)
Greater
Less than 1-2 2-3 3-5 than
Source of Fair Value 1 year years years years 5 years Total
Prices actively
quoted $20 41 11 —— $72
Prices provided
by other
external sources — $13 10 20 — $43
Prices based on
models and other
valuation methods $14 12 6 6 12 $50
Dominion Delivery
(millions, except per share amounts) 2001 2000 1999
Operating revenue $2,963 $2,826 $1,160
Operating expense 2,202 2,123 735
Net income contribution 366 339 175
EPS contribution $1.45 $ 1.43 $ 0.91
Electricity delivered (mmwhr) 72 74 71
Gas throughput (mmcf) 357 356 —
2001 Results
Dominion Delivery contributed $366 million and $1.45 per
diluted share for 2001, an increase of $27 million and $0.02
per diluted share over 2000 results. The increase in net income
reflects slightly higher gas throughput and slightly lower vol-
umes of electricity delivered, as well as overall higher gas and
electric rates.
Operating Revenue
Total operating revenue increased $137 million to $3.0 billion
for 2001 as compared to 2000, reflecting a full year of CNG
operations for 2001. This is reflected in higher regulated gas sales
and gas transportation and storage revenue. These revenues also
increased as a result of higher overall throughput and rates. Reg-
ulated electric sales for 2001 reflect customer growth and com-
paratively higher fuel rates partially offset by the comparatively
milder weather.
Operating Expenses
Operating expenses increased $79 million to $2.2 billion for
2001 as compared to 2000. Higher prices of commodities deliv-
ered or consumed contributed to increased purchased gas
expense. In addition, purchased gas increased as 2000 amounts
only included 11 months of CNG operations.
2000 Results
Dominion Delivery contributed $339 million and $1.43 per
diluted share for 2000, an increase of $164 million and $0.52
per diluted share over 1999 results. The increase in net income
reflects the inclusion of CNG operations.
Operating Revenue
Total operating revenue increased $1.7 billion to $2.8 billion for
2000 as compared to 1999 reflecting primarily the inclusion of
CNG operations for 2000. The introduction of regulated gas
sales and gas transportation and storage in 2000 resulted from
the inclusion of CNG operations beginning in late January
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