Dominion Power 2005 Annual Report Download - page 49

Dominion 2005 47
•Provision for greater regulatory oversight by other federal and
state authorities;
•Extension of the Price Anderson Act for 20 years until 2025;
•Provision for standby financial support and production tax
credits for new nuclear plants;
•Grant of enhanced merger approval authority to FERC;
•Provision of authority to FERC for the siting of certain electric
transmission facilities if states cannot or will not act in a
timely manner;
•Grant of exclusive authority to FERC to approve applications for
construction of LNG facilities; and
•Improvement of the process for approval and permitting of
interstate pipelines.
Many of the changes Congress enacted must be implemented
through public notice and proposed rule making by the federal
agencies affected and this process is ongoing. We will continue to
evaluate the effects that EPACT may have on our business.
Common Stock Dividend Increase
In February 2005, our quarterly dividend rate increased from 66.5
cents per share to 67 cents per share for an annual rate in 2005 of
$2.68 per share. Our quarterly dividend rate increased again in Jan-
uary 2006, from 67 cents per share to 69 cents per share for an
annual rate in 2006 of $2.76. Our expected cash flow and earnings
should enable us to make future annual increases when our Board
of Directors deems it financially prudent. The Board of Directors
declares common stock dividends on a quarterly basis.
Environmental Matters
We are subject to costs resulting from a number of federal, state
and local laws and regulations designed to protect human health
and the environment. These laws and regulations affect future plan-
ning and existing operations. They can result in increased capital,
operating and other costs as a result of compliance, remediation,
containment and monitoring obligations. Historically, we recovered
such costs arising from regulated electric operations through utility
rates. However, to the extent that environmental costs are incurred
in connection with operations regulated by the Virginia Commission,
during the period ending December 31, 2010, in excess of the level
currently included in the Virginia jurisdictional electric retail rates,
our results of operations will decrease. After that date, recovery
through regulated rates may be sought for only those environmental
costs related to regulated electric transmission and distribution
operations and recovery, if any, through the generation component
of rates will be dependent upon the market price of electricity. We
also may seek recovery through regulated rates for environmental
expenditures related to regulated gas transmission and distribution
operations.
Environmental Protection and Monitoring Expenditures
We incurred approximately $205 million, $132 million and $113
million of expenses (including depreciation) during 2005, 2004 and
2003, respectively, in connection with environmental protection
and monitoring activities and expect these expenses to be approxi-
mately $201 million and $202 million in 2006 and 2007, respec-
tively. In addition, capital expenditures related to environmental
controls were $140 million, $94 million and $210 million for 2005,
2004 and 2003, respectively. These expenditures are expected to
be approximately $307 million and $278 million for 2006 and
2007, respectively.
Clean Air Act Compliance
We are required by the Clean Air Act (the Act) to reduce air emis-
sions of various air pollutants that are the by-products of fossil fuel
combustion. The Act’s new Clean Air Interstate Rule and Clean Air
Mercury Rule will require significant reductions in future SO2, NOX
and mercury emissions from our electric generating facilities and
will require capital expenditures. The Act’s existing SO2and NOX
reduction programs already include:
•The issuance of a limited number of SO2emissions allowances.
Each allowance permits the emission of one ton of SO2into the
atmosphere;
•NOXemission limitations applicable during the ozone season
months of May through September and on an annual average
basis; and
•SO2and NOXallowances may be transacted with a third party.
Implementation of projects to comply with these SO2, NOXand
mercury limitations, and other state emission control programs are
ongoing and will be influenced by changes in the regulatory environ-
ment, availability of allowances and emission control technology. In
response to these requirements, we estimate that we will make
capital expenditures at our affected generating facilities of
approximately $1.1 billion during the period 2006 through 2010.
Other
As part of its review of our request related to the reissuance of a
pollution discharge elimination permit for the Millstone Power Sta-
tion, the Connecticut Department of Environmental Protection is
evaluating the ecological impacts of the cooling water intake sys-
tem. Until the permit is reissued, it is not possible to predict the
financial impact that may result.
In October 2003, the Environmental Protection Agency (EPA)
and the Massachusetts Department of Environmental Protection
(DEP) each issued new National Pollutant Discharge Elimination
System permits for the Brayton Point Power Station. The new per-
mits contained identical conditions that in effect require the instal-
lation of cooling towers to address concerns over the withdrawal
and discharge of cooling water. In November 2003, appeals were
filed with the EPA Environmental Appeals Board (EAB) and the Divi-
sion of Administrative Law Appeals in Massachusetts, and both per-
mits were stayed. In February 2006 the EAB remanded a portion of
EPA’s permit to EPA for reconsideration. The DEP permit is still
stayed pending the outcome of the EPA process. Until the remand
and any resulting appeals are completed, the outcome cannot be
predicted.
Future Environmental Regulations
The U.S. Congress is considering various legislative proposals that
would require generating facilities to comply with more stringent air
emissions standards. Emission reduction requirements under con-
sideration would be phased in under a variety of periods of up to 15
years. If these new proposals are adopted, additional significant
expenditures may be required.
In 1997, the United States signed an international Protocol to
limit man-made greenhouse emissions under the United Nations
Framework Convention on Climate Change. However, the Protocol
will not become binding unless approved by the U.S. Senate. Cur-
rently, the Bush Administration has indicated that it will not pursue
ratification of the Protocol and has set a voluntary goal of reducing
the nation’s greenhouse gas emission intensity by 18% over the
period 2002-2012. Several legislative proposals that include provi-
sions seeking to impose mandatory reductions of greenhouse gas