Dominion Power 2001 Annual Report Download - page 79

77
cash flow from operations and through a combination of sales
of securities and short-term borrowings.
Power Purchase Contracts
Dominion has entered into contracts for the long-term pur-
chases of capacity and energy from other utilities, qualifying
facilities and independent power producers. As of December 31,
2001, Dominion had 43 non-utility purchase contracts with a
combined dependable summer capacity of 3,770 megawatts.
The table below reflects Dominion’s minimum commitments as
of December 31, 2001 under these contracts.
Commitment
(millions) Capacity Other
2002 $ 688 $ 33
2003 635 20
2004 634 17
2005 627 12
2006 613 12
Later years 5,856 128
Tot al $9,053 $222
Present value of the total $5,094 $116
In addition to the minimum commitments in the table
above, under some of these contracts Dominion may purchase,
at its option, energy as needed. Purchased power expenditures,
subject to cost of service rate regulation, (including economy,
emergency, limited term, short-term and long-term purchases)
for the years 2001, 2000 and 1999 were $1.1 billion, $1.1 billion,
and $1.2 billion, respectively.
In 2001, Dominion completed the purchase of three gener-
ating facilities and the termination of seven long-term power pur-
chase contracts with non-utility generators (NUG). Dominion
recorded an after-tax charge of $136 million in connection with
the purchase and termination of long-term power purchase con-
tracts. Cash payments related to the purchase of three generating
facilities totaled $207 million. The allocation of the purchase
price was assigned to the assets and liabilities acquired based
upon estimated fair values as of the date of acquisition. Substan-
tially all of the value was attributed to the power purchase
contracts which were terminated and resulted in a charge
included in operation and maintenance expense.
See Note 9 for additional disclosure regarding the evalua-
tion of Dominion’s potential exposure under its long-term power
purchase commitments.
Fuel Purchase Commitments
Dominion enters into long-term purchase commitments for fuel
used in electric generation and natural gas for purposes other
than trading. Estimated payments under these commitments
for the next five years are as follows: 2002—$549 million;
2003—$321 million; 2004—$212 million; 2005—$241 million;
2006—$143 million and years beyond 2006—$288 million.
These purchase commitments include those required for regu-
lated operations. Dominion recovers the costs of those purchases
through regulated rates. The natural gas purchase commitments
of Dominion’s field services operations are also included, net of
related sales commitments. In addition, Dominion has
committed to purchase certain volumes of natural gas at market
index prices determined in the period the natural gas is delivered.
These transactions have been designated as normal purchases and
sales under SFAS No. 133.
Natural Gas Pipeline and Storage Capacity Commitments
Dominion enters into long-term commitments for the purchase
of natural gas pipeline and storage for purposes other than trad-
ing. Estimated payments under these commitments for the next
five years are as follows: 2002—$43 million; 2003—$38 million;
2004—$23 million; 2005—$6 million; and 2006—$1 million.
There were no commitments beyond 2006.
Leases
Dominion leases various facilities, vehicles, aircraft, and equip-
ment under both operating and capital leases. Future minimum
lease payments under operating and capital leases that have ini-
tial or remaining lease terms in excess of one year as of Decem-
ber 31, 2001 are: 2002—$70 million; 2003—$95 million;
2004—$100 million; 2005—$91 million; 2006—$72 million;
and years after 2006—$166 million. Rental expense included in
other operations and maintenance expense was $63 million,
$107 million, and $31 million for 2001, 2000, and 1999,
respectively.
As of December 31, 2001, Dominion, through certain sub-
sidiaries, has entered into agreements with special purpose enti-
ties (Lessors) in order to finance and lease several new power
generation projects, as well as its corporate headquarters and
aircraft. The Lessors have an aggregate financing commitment
from equity and debt participants (Investors) of $2.2 billion, of
which $817 million has been used for total project costs to date.
Dominion, in its role as construction agent for the Lessors, is
responsible for completing construction by a specified date. In
the event a project is terminated before completion, Dominion
has the option to either purchase the project for 100 percent of
project costs or terminate the project and make a payment to
the Lessor of approximately but no more than 89.9 percent of
project costs. Upon completion of each individual project,
Dominion has use of the project assets subject to an operating
lease. Dominion’s lease payments to the Lessors are sufficient to
provide a return to the Investors. At the end of each individual
project’s lease term, Dominion may renew the lease at negotiated
amounts based on project costs and current market conditions,
subject to Investors’ approval; purchase the project at its original
construction cost; or sell the project, on behalf of the Lessor, to