Dominion Power 2005 Annual Report Download - page 39

Dominion 2005 37
Dominion Delivery
Dominion Delivery includes our regulated electric and gas distribu-
tion and customer service business, as well as nonregulated retail
energy marketing operations.
Presented below, on an after-tax basis, are the key factors
impacting Dominion Delivery’s net income contribution:
2005 vs. 2004
Increase (Decrease)
Amount EPS
(millions, except EPS)
Interest expense(1) $(25) $(0.08)
Salaries, wages and benefits expense (14) (0.04)
Depreciation expense (10) (0.03)
Bad debt expense(2) (7) (0.02)
Regulated electric sales:
Weather 14 0.04
Customer growth 11 0.03
Regulated gas sales — weather 8 0.02
Other 5 0.02
Share dilution — (0.05)
Change in net income contribution $(18) $(0.11)
(1) Represents the impact of additional long-term affiliate borrowings and variable rate debt,
higher interest rates on affiliate borrowings and prepayment penalties resulting from the
early redemption of debt.
(2) Higher bad debt expense primarily reflects the absence of a 2004 reduction in reserves.
2004 vs. 2003
Increase (Decrease)
Amount EPS
(millions, except EPS)
Nonregulated retail energy marketing operations(1) $ 32 $0.10
Regulated electric sales:
Customer growth 9 0.03
Weather 4 0.01
Reliability expenses(2) (11) (0.03)
Regulated gas sales — weather (9) (0.03)
Other(3) (12) (0.04)
Share dilution — (0.05)
Change in net income contribution $ 13 $(0.01)
(1) Higher contribution primarily reflects an increase in average customer accounts and higher
electric and gas margins.
(2) Higher reliability expenses, largely due to increased tree trimming.
(3) Other factors, including a decrease in net pension credits.
Dominion Energy
Dominion Energy includes our tariff-based electric transmission,
natural gas transmission pipeline and storage businesses and an
LNG facility. It also includes certain natural gas production and pro-
ducer services, which consist of aggregation of gas supply, market-
based services related to gas transportation and storage and
associated gas trading and the prior year’s results of certain energy
trading activities exited in December 2004.
Presented below, on an after-tax basis, are the key factors
impacting Dominion Energy’s net income contribution:
2005 vs. 2004
Increase (Decrease)
Amount EPS
(millions, except EPS)
Producer services(1) $119 $ 0.36
Economic hedges(2) 22 0.07
Cove Point(3) 13 0.04
Gas transmission rate reduction(4) (17) (0.05)
Salaries, wages and benefits expense (11) (0.03)
Other 3 0.01
Share dilution — (0.04)
Change in net income contribution $129 $ 0.36
(1) Reflects the impact of losses in the prior year related to certain energy trading activities that
were exited in December 2004 and higher contributions from market-based gas trading,
storage, transportation and aggregation activities.
(2) Represents the impact of price movements in 2004 associated with a portfolio of financial
derivative instruments used to manage price risk associated with a portion of our anticipated
sales of 2004 natural gas production that had not been considered in the hedging activities of
the Dominion E&P segment. In 2005, we did not enter into similar economic hedging
transactions.
(3) Reflects the addition of a fifth storage tank in December 2004 and increased pipeline
capacity.
(4) Represents the impact of a comprehensive rate settlement between Dominion Transmission,
Inc. (DTI) and its customers. The settlement, which became effective July 1, 2005, will reduce
our natural gas transportation and storage service revenues by approximately $49 million
annually.
2004 vs. 2003
Increase (Decrease)
Amount EPS
(millions, except EPS)
Energy trading and marketing(1) $(116) $(0.37)
Electric transmission revenue(2) (15) (0.05)
Economic hedges (12) (0.04)
Other(3) (13) (0.04)
Share dilution — (0.02)
Change in net income contribution $(156) $(0.52)
(1) The loss from energy trading and marketing activities reflects comparatively lower price
volatility on natural gas option positions and the effect of unfavorable price changes on
electric trading margins.
(2) Reflects decreased wheeling revenue resulting from lower contractual volumes and
unfavorable market conditions.
(3) Other factors including losses from asset and price risk management activities related to
intersegment marketing.
Dominion Generation
Dominion Generation includes the generation operations of our
electric utility and merchant fleet as well as energy marketing and
risk management activities associated with the optimization of
generation assets.