Dominion Power 2006 Annual Report Download - page 31

MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion andAnalysis of Financial Condition
and Results of Operations (MD&A) discusses our results of oper-
ations and general financial condition. MD&A should be read in
conjunction with our Consolidated Financial Statements. The
terms “Dominion,” “Company,” “we,” “our” and “us” are used
throughout this report and, depending on the context of its use,
mayrepresent any of the following: the legal entity, Dominion
Resources,Inc., oneof Dominion Resources,Inc.’s consolidated
subsidiaries or operating segments or the entirety of Dominion
Resources,Inc. and its consolidated subsidiaries.
CONTENTS OF MD&A
The reader will find the following information in our MD&A:
Forward-Looking Statements
Introduction
Accounting Matters
Results of Operations
Segment Resultsof Operations
Selected Information—Energy Trading Activities
Liquidity and Capital Resources
Future IssuesandOther Matters
Market Risk Sensitive Instruments and Risk Management
Risk Factors
Selected Financial Data
FORWARD-LOOKING STATEMENTS
This report contains statements concerning our expectations,
plans, objectives, future financial performance and other state-
ments that are not historical facts. These statements are “forward-
looking statements” within the meaningof the Private Securities
Litigation Reform Act of 1995. In most cases, the reader can
identify these forward-looking statements by such words as
“anticipate,” “estimate,” “forecast,” “expect,” “believe,” “should,”
“could,” “plan,” “may,” “target” or othersimilar words.
We make forward-looking statements with full knowledge that
risks and uncertainties exist that may cause actual results to differ
materially from predicted results. Factors that maycause actual
results to differ are oftenpresented with the forward-looking
statements themselves. Additionally, other factorsmaycause
actual results to differ materially from thoseindicatedinany
forward-looking statement. These factors include but are not lim-
ited to:
Unusual weather conditions and their effect on energy sales to
customers and energy commodity prices;
Extreme weather events, including hurricanes and winter
storms, that can cause outages, productiondelays and property
damageto our facilities;
State and federal legislative and regulatorydevelopments,
including a movement towardsahybrid form of regulation,
and changes to environmental and other laws and regulations
to which we are subject;
Cost of environmental compliance;
Risks associated with the operation of nuclear facilities;
Fluctuations in energy-related commodity prices and the effect
these could have on our earnings, liquidity position andthe
underlying value of our assets;
Counterparty credit risk;
Capital market conditions, including price risk due to market-
able securities held as investments in nuclear decommissioning
and benefit plan trusts;
Fluctuations in interest rates;
Changes in rating agency requirements or credit ratings and
their effect on availability and cost of capital;
Changes in financial or regulatoryaccounting principles or
policies imposed by governing bodies;
Employee workforce factors including collective bargaining
agreements and labor negotiations with union employees;
The risks of operating businesses in regulated industries that
are subject tochanging regulatorystructures;
Changes in our ability to recoverinvestments made under
traditional regulation through rates;
Receiptofapprovals forand timing of closing dates for acquis-
itions anddivestitures, including our divestiture of The Peo-
ples Natural GasCompany (Peoples) and Hope Gas, Inc.
(Hope) and any divestiture of our exploration andproduction
(E&P) business;
Risks associated with any realignment of our operatingassets,
including the potential dilutiveeffect on earnings in the near
term, costs associated with any sale of our E&P business and
the costs and reinvestment risks related to deployment of pro-
ceeds from any sale;
Political and economic conditions, including the threat of
domestic terrorism, inflation and deflation;
Completing the divestiture of investments held by our finan-
cial services subsidiary, Dominion Capital, Inc. (DCI);
Additional risk exposure associated with the termination of
business interruption and offshore property damage insurance
related to our E&P operations and our inability to replace
such insurance on commercially reasonable terms; and
Changes in rulesfor regional transmission organizations
(RTOs) in which we participate,including changes in rate
designs and new and evolving capacity models.
Additionally, other risks that could cause actual results to dif-
fer from predicted results are setforth in Risk Factors.
Our forward-looking statements are basedonourbeliefs and
assumptions using information available at the time the state-
ments are made. We caution the reader not toplace undue reli-
ance on our forward-looking statements because the assumptions,
beliefs, expectations and projections about future eventsmay, and
often do, differ materially from actual results. We undertake no
obligation to update any forward-looking statement to reflect
developments occurring after the statement is made.
INTRODUCTION
Dominion is afullyintegrated gas and electric holding company
headquartered in Richmond, Virginia. Our strategy is to be a
leading provider of electricity, natural gasand related services to
customers in the eastern region of the United States (U.S.). Our
portfolio of assets includes approximately:
28,000 megawatts (Mw) of generation capacity;
7,800 miles of interstate natural gastransmission, gathering
and storage pipeline;
6,000 miles of electric transmission lines;
55,000 miles of electric distribution lines in Virginiaand
North Carolina;
6.5 trillioncubic feet equivalent of proved gas and oil reserves;
and
An underground natural gas storage systemwith 979 billion
cubic feet of capacity.
30 DOMINION2006 Annual Report