Dominion Power 2002 Annual Report Download - page 86

Notes to Consolidated Financial Statements, Continued
The components of the provision for net periodic benefit
cost were as follows:
Year Ended December 31, 2002 2001 2000
(millions)
Pension Benefits
Service cost $77 $71 $65
Interest cost 177 173 161
Expected return on plan assets (349) (331) (298)
Recognized loss 236
Amortization of prior service cost 123
Amortization of transition obligation (4) (4) (4)
Curtailment gains —— (20)
ERP benefit costs —— 81
Settlement loss — 7 —
Special termination benefits — 15 —
Curtailment loss — 2 —
Net periodic benefit credit $ (96) $ (62) $ (6)
Other Postretirement Benefits
Service cost $44 $40 $30
Interest cost 68 63 52
Expected return on plan assets (34) (32) (31)
Amortization of prior service cost 1(1) —
Amortization of transition obligation 11 10 13
Amortization of unrecognized net loss 5 ——
Curtailment gains —— (6)
ERP benefit costs —— 33
Net amortization and deferral —— (2)
Net periodic benefit cost $95 $80 $89
Significant assumptions used in determining net periodic
cost, the projected benefit obligation and postretirement benefit
obligations were:
Other
Pension Benefits Postretirement Benefits
2002 2001 2002 2001
Discount rates 6.75% 7.25% 6.75% 7.25%
Expected return on
plan assets(1) 9.50% 9.50% 7.82% 7.88%
Rate of increase for
compensation 4.70% 4.60% 4.70% 4.60%
Medical cost trend rate 9.00% 9.00%
Decreasing to
4.75% in 2007
and years
thereafter
(1) Dominion has adopted 8.75 percent for pension benefits in 2003.
Assumed health care cost trend rates have a significant
effect on the amounts reported for the health care plans. A one-
percentage-point change in assumed health care cost trend rates
would have the following effects:
Other Postretirement Benefits
One percentage One percentage
point increase point decrease
(millions)
Effect on total service and interest
cost components for 2002 $ 18 $ (14)
Effect on postretirement benefit
obligation at December 31, 2002 $147 $(119)
In addition, Dominion sponsors defined contribution
thrift-type savings plans. During 2002, 2001 and 2000,
Dominion recognized $26 million, $27 million and $30 mil-
lion, respectively, as contributions to these plans.
Certain regulatory authorities have held that amounts
recovered in utility customers’ rates for other postretirement
benefits, in excess of benefits actually paid during the year, must
be deposited in trust funds dedicated for the sole purpose of
paying such benefits. Accordingly, certain subsidiaries fund
postretirement benefit costs through Voluntary Employees’
Beneficiary Associations. The remaining subsidiaries do not
prefund postretirement benefit costs but instead pay claims
as presented.
27 Commitments and Contingencies
As the result of issues generated in the ordinary course of busi-
ness, Dominion and its subsidiaries are involved in legal, tax and
regulatory proceedings before various courts, regulatory com-
missions and governmental agencies, some of which involve sub-
stantial amounts of money. Management believes that the final
disposition of these proceedings will not have a material adverse
effect on its financial position, liquidity or results of operations.
Cash Requirements for Planned Capital Expenditures
Dominion has made substantial commitments in connection
with its capital expenditures program. Cash requirements for
those expenditures are estimated to total approximately $2.4
billion, $2.2 billion and $2.1 for 2003, 2004 and 2005 respec-
tively. Purchases of nuclear fuel are included in Fuel Purchase
Commitments below. Dominion expects that these expenditures
will be met through a combination of sales of securities and
short-term borrowings to the extent not funded by cash flows
from operations.
84 Dominion ’02 Annual Report