Dominion Power 2006 Annual Report Download - page 101

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
certain energy trading activities exited in connection with the
reorganization continue to be reported in the Dominion Energy
segment.
Additionally, in January 2005, in connection with the
reorganization, commodity derivative contracts held by the Clear-
inghouse were assessed to determine if they contribute to the
optimization of our assets. As aresult of this review, certain
commodity derivative contracts previously designated as held for
trading purposes were redesignated as held for non-trading pur-
poses. Under our derivative income statement classification policy
described in Note 2, all changes in fair value, including amounts
realized upon settlement, related to the redesignated contracts
were previouslypresented in operatingrevenueon a net basis.
Upon redesignation as non-trading, all unrealized changes in fair
value and settlements related to thosederivative contracts that are
financially settled are reported in other operations and main-
tenance expense. The statement of income related amounts for
those reclassified derivative sales contracts that are physically set-
tled are presented in operatingrevenue, while the statement of
income related amounts forphysically-settled purchasecontracts
are reported in operatingexpenses.
We are organized primarilyon the basis of productsandserv-
ices sold in the U.S. We manage our operations through the fol-
lowing segments:
The netexpenses in 2006 primarily related to the impact of the
following:
A$166 million ($104 million after-tax) charge resulting from
the write-off of certain regulatoryassets related to the pending
sale of Peoples and Hope, attributable to Dominion Delivery;
A$21million tax benefit from the partial reduction of pre-
viously recorded valuation allowances on certain federal and
state taxloss carryforwards (attributable to Dominion
Generation), since these carryforwards are expected to be uti-
lized to offset capital gain income that will be generated from
the sale of Peoples and Hope;
A$27million ($17 million after-tax) charge resulting from the
cancellation of apipeline project, attributable to the Energy
segment; and
A$26million impairment($15 million after-tax) charge in
the fourth quarter resulting from achange in our method of
assessingother-than-temporary declines in the fair value of
securities held as investments in our nuclear decommissioning
trusts.
In 2005, we reported net expenses of $505 million in the
Corporate segmentattributable to our operating segments. The
net expenses in 2005 primarily related to the impact of the
following:
A$556 million loss ($357 million after-tax) related to the
discontinuance of hedge accounting in August and September
2005 for certain gas and oil hedges resulting from an inter-
ruption of gas and oil production in the Gulf of Mexico
caused by 2005 hurricanes and subsequent changes in the fair
value of thosehedges during the third quarter, attributable to
Dominion E&P;
A$77million charge ($47 million after-tax) resulting from the
termination of along-term power purchaseagreement,
attributable to Dominion Generation;and
A$51million charge related to credit exposure associated with
the bankruptcy of Calpine Corporation, attributable to
Dominion Generation.At December 31, 2005, we had not
recognized any deferred taxbenefits related to the charge,since
realization of taxbenefits was not anticipated at that time
based on our expected future tax profile.
In 2004, we reported net expenses of $224 million in the
Corporate segmentattributable to our operating segments. The
net expenses in 2004 primarily related to the impact of the
following:
A$184 million charge ($112 million after-tax) related to our
interest in along-term power tolling contract that was divested
in 2005, attributable to Dominion Generation;
A$96million loss ($61 million after-tax) related to the dis-
continuance of hedge accounting in September 2004 forcer-
tain oil hedges resulting from an interruptionofoil
productionin the Gulf of Mexico caused by Hurricane Ivan
and subsequent changes in the fair value of thosehedges dur-
ing the third quarter, attributable to Dominion E&P; and
A$71million charge ($43 million after-tax) resulting from the
termination of three long-term power purchaseagreements,
attributable to Dominion Generation.
Intersegment sales and transfers are basedonunderlying con-
tractual arrangements and agreements and mayresult in
intersegment profit or loss.
100 DOMINION2006 Annual Report
Dominion Delivery INCLUDES OUR REGULATED ELECTRIC AND GASäDISTRI
BUTION AND CUSTOMER SERVICE BUSINESS AS WELL AS NONREGULATED
RETAIL ENERGY MARKETING OPERATIONS
Dominion Energy INCLUDES OUR TARIFFBASED ELECTRIC TRANSMISSION
NATURAL GAS TRANSMISSION PIPELINE AND UNDERGROUND NATURALäGAS
STORAGE BUSINESSES AND THE #OVE 0OINT ,.' FACILITY )T ALSOäIN
CLUDES GATHERING AND EXTRACTION ACTIVITIES CERTAIN !PPALACHIAN
NATURAL GAS PRODUCTION AND PRODUCER SERVICES WHICH CONSIST OF
AGGREGATION OF GAS SUPPLY MARKETBASED SERVICES RELATED TO GAS
TRANSPORTATION AND STORAGE ASSOCIATED GAS TRADING AND THE RESULTS
OF CERTAIN ENERGY TRADING ACTIVITIES EXITED IN $ECEMBER 
Dominion Generation INCLUDES THE GENERATION OPERATIONSäOFäOUR
ELECTRIC UTILITY AND MERCHANT FLEET AS WELL AS ENERGY MARKETING
AND PRICE RISK MANAGEMENT ACTIVITIES ASSOCIATED WITH OUR GENER
ATION ASSETS
Dominion E&P INCLUDES OUR GAS AND OIL EXPLORATIONäDEVELOP
MENT AND PRODUCTION OPERATIONS 4HESE OPERATIONS AREäLOCATED
IN SEVERAL MAJOR PRODUCING BASINS IN THE LOWER  STATESäIN
CLUDING THE OUTER CONTINENTAL SHELF AND DEEPWATER AREAS OF THE
'ULFäOF -EXICO 7EST 4EXAS -ID#ONTINENT THE 2OCKIES AND
!PPALACHIA AS WELL AS THE 7ESTERN #ANADIAN 3EDIMENTARY "ASIN
Corporate INCLUDES OUR CORPORATE SERVICE COMPANY ANDäOTHER
FUNCTIONS INCLUDING UNALLOCATED DEBT CORPORATEWIDEäCOM
MODITY RISK MANAGEMENT THE REMAINING ASSETS OF $#) THEäNET
IMPACT OF OUR DISCONTINUED TELECOMMUNICATIONS OPERATIONS
THAT WERE SOLD IN -AY  AND THE NET IMPACT OF THE DIS
CONTINUED OPERATIONS OF THE 0EAKER FACILITIES )N ADDITION THE
CONTRIBUTION TO NET INCOME BY OUR PRIMARY OPERATING SEGMENTS IS
DETERMINED BASED ON A MEASURE OF PROFIT THAT EXECUTIVE MANAGE
MENT BELIEVES REPRESENTS THE SEGMENTS CORE EARNINGS !S A RESULT
CERTAIN SPECIFIC ITEMS ATTRIBUTABLE TO THOSE SEGMENTS ARE NOT
INCLUDED IN PROFIT MEASURES EVALUATED BY EXECUTIVE MANAGEMENT
IN ASSESSING THE SEGMENTS PERFORMANCE OR ALLOCATING RESOURCES
AMONG THE SEGMENTS AND ARE INSTEAD REPORTED IN THE #ORPORATE
SEGMENT )N  WE REPORTED NET EXPENSES OF  MILLION IN
THE #ORPORATE SEGMENT ATTRIBUTABLE TO OUR OPERATING SEGMENTS