Dominion Power 2004 Annual Report Download - page 85

During 2004, 2003 and 2002, respectively, Dominion granted approxi-
mately 582,000 shares, 402,000 shares, and 14,000 shares of restricted
stock with weighted-average fair values of $63.29, $56.08 and $60.62.
20. Dividend Restrictions
The 1935 Act and related regulations issued by the SEC impose restrictions
on the transfer and receipt of funds by a registered holding company from
its subsidiaries, including a general prohibition against loans or advances
being made by the subsidiaries to benefit the registered holding company.
Under the 1935 Act, registered holding companies and their subsidiaries
may pay dividends only from retained earnings, unless the SEC specifically
authorizes payments from other capital accounts. Dominion received divi-
dends from its subsidiaries of $1.2 billion, $1.1 billion and $945 million in
2004, 2003 and 2002, respectively.
At December 31, 2004, Dominion’s consolidated subsidiaries had
approximately $9.3 billion in capital accounts other than retained earnings,
representing capital stock, other paid in capital and AOCI. Dominion
Resources, Inc. had approximately $10.0 billion in capital accounts other
than retained earnings at December 31, 2004. Generally, such amounts are
not available for the payment of dividends by affected subsidiaries, or by
Dominion itself, without specific authorization by the SEC.
In response to a Dominion request, the SEC granted relief in 2000,
authorizing payment of dividends by CNG from other capital accounts to
Dominion in amounts up to $1.6 billion, representing CNG’s retained earn-
ings prior to Dominion’s acquisition of CNG. The SEC granted further relief
in 2004, authorizing Dominion’s nonutility subsidiaries to pay dividends out
of capital or unearned surplus in situations where such subsidiary has
received excess cash from an asset sale, engaged in a restructuring, or is
returning capital to an associate company. Dominion’s ability to pay divi-
dends on its common stock at declared rates was not impacted by the
restrictions discussed above during 2004, 2003 and 2002.
The Virginia State Corporation Commission (Virginia Commission) may
prohibit any public service company, including Virginia Power, from declar-
ing or paying a dividend to an affiliate, if found not to be in the public inter-
est. At December 31, 2004, the Virginia Commission had not restricted the
payment of dividends by Virginia Power.
Certain agreements associated with Dominion’s credit facilities contain
restrictions on the ratio of debt to total capitalization. These limitations did
not restrict Dominion’s ability to pay dividends or receive dividends from its
subsidiaries at December 31, 2004.
See Note 17 for a description of potential restrictions on dividend pay-
ments by Dominion and certain subsidiaries in connection with the deferral
of distribution payments on trust preferred securities.
21. Employee Benefit Plans
Dominion and its subsidiaries provide certain benefits to eligible active
employees, retirees and qualifying dependents. Under the terms of its ben-
efit plans, Dominion and its subsidiaries reserve the right to change, mod-
ify or terminate the plans. From time to time in the past, benefits have
changed, and some of these changes have reduced benefits.
Dominion maintains qualified noncontributory defined benefit pension
plans covering virtually all employees. Retirement benefits are based
primarily on years of service, age and compensation. Dominion’s funding
policy is to generally contribute annually an amount that is in accordance
with the provisions of the Employment Retirement Income Security Act
of 1974. The pension program also provides benefits to certain retired
executives under company-sponsored nonqualified employee benefit plans.
Certain of these nonqualified plans are funded through contributions to
a grantor trust.
Dominion provides retiree health care and life insurance benefits with
annual premiums based on several factors such as age, retirement date
and years of service. In 2004, Dominion adopted a plan to amend its non-
union retiree health care and life insurance plans. In connection with the
amendment, eligible employees under age fifty-five share more of the
costs of benefits with Dominion, and certain retiree medical benefits were
enhanced. Dominion re-measured its accumulated postretirement benefit
obligation during the third quarter of 2004 and as a result reduced the lia-
bility by $59 million. The impact of re-measurement on the 2004 postretire-
ment net periodic benefits cost was not material. Dominion will amortize
the unrecognized actuarial gains associated with the plan amendment over
the average remaining service period of plan participants in accordance
with SFAS No. 106,
Employers’ Accounting for Postretirement Benefits
Other Than Pensions
.
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The following table provides certain information about stock options outstanding as of December 31, 2004:
Options Outstanding Options Exercisable
Weighted-
average Weighted- Weighted-
Remaining average average
Exercise Shares Contractual Exercise Shares Exercise
Price Outstanding Life Price Exercisable Price
(thousands) (years) (thousands)
$ 0-$19.99 2 4.0 $19.10 2 $19.10
$20-$30.99 24 4.1 $24.88 24 $24.88
$31-$40.99 30 5.0 $39.25 30 $39.25
$41-$50.99 1,318 5.7 $45.99 1,192 $45.50
$51-$60.99 8,021 4.2 $59.91 5,924 $59.90
$61-$69 4,413 6.4 $65.23 3,596 $65.41
Total 13,808 5.0 $60.17 10,768 $60.01