Dominion Power 2006 Annual Report Download - page 41

Download and view the complete annual report

Please find page 41 of the 2006 Dominion Power annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 111

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111

MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
A$120 million benefit due to favorable changesin the fair
value of certain oil options related to E&P operations.
Depreciation, depletion and amortization expense increased 8%
to $1.4 billion, largely due to incremental depreciation and amor-
tizationexpense resulting from our acquisition of the Dominion
New England power plants and other property additions.
Other taxes increased 12% to $581 million, primarily due to
higherproperty taxes resulting from the Dominion New England
power plants and higher severance taxes associated with increased
commodity prices.
Loss from discontinued operations reflects charges related to the
Peaker facilities, whose operating losses were reclassified to dis-
continued operations as aresult of their pending sale.
SEGMENT RESULTSOF OPERATIONS
Segment resultsinclude the impact of intersegment revenuesand
expenses, which mayresult in intersegment profit or loss. Pre-
sented below is a summary of contributions by our operating
segments to net income:
Year Ended
December 31, 2006 2005 2004
Net
Income
Diluted
EPS
Net
Income
Diluted
EPS
Net
Income
Diluted
EPS
(millions, except EPS)
Dominion Delivery $438$1.25 $448 $1.30 $466 $1.41
Dominion Energy 360 1.02319 0.931900.57
Dominion Generation 537 1.53 416 1.20 533 1.61
Dominion E&P 680 1.93 565 1.64 595 1.80
Primary operating
segments 2,015 5.73 1,748 5.07 1,784 5.39
Corporate (635) (1.80) (715) (2.07) (535) (1.61)
Consolidated $1,380 $ 3.93 $1,033 $3.00 $1,249 $ 3.78
Dominion Delivery
Presented below are operating statistics related to Dominion
Delivery’s operations:
Year Ended December 31, 2006 %Change 2005 % Change 2004
Electricity delivered
(million mwhrs)(1) 79.8 (2)% 81.4 4%78.0
Degree days (electric
service area):
Cooling(2) 1,557 (9) 1,707 81,585
Heating(3) 3,178 (16) 3,784 3 3,682
Average electric delivery
customer accounts(4) 2,327 2 2,286 2 2,244
Gas throughput (bcf):
Gas sales 94 (28) 131 3127
Gas transportation 240 —241 (1)244
Heating degree days
(gas service area)(3) 5,190 (12) 5,899 35,716
Average gas delivery
customer
accounts(4):
Gas sales 858 (17) 1,030 3996
Gas transportation 830 26 661 (5) 693
Average nonregulated
retail energy
marketing customer
accounts(4) 1,354 17 1,162 (13) 1,341
mwhrs =megawatt hours
bcf = billion cubic feet
(1) Includes electricity delivered through the retail choice program for our Virginia
jurisdictional electric customers.
(2) Cooling degree days (CDDs)areunits measuring the extent to which the aver-
age daily temperature is greater than 65 degrees. CDDsare calculatedasthe
difference between the average temperature for each day and 65 degrees.
(3) Heatingdegree days (HDDs)areunits measuring the extent to which the
average daily temperature is lessthan 65 degrees. HDDs are calculatedasthe
difference between the average temperature for each day and 65 degrees.
(4) Thirteen-month average, in thousands.
Presented below, on an after-tax basis, are the key factors
impacting Dominion Delivery’s net income contribution:
2006 VS. 2005
Increase (Decrease)
Amount EPS
(millions, except EPS)
Regulated electric sales:
Weather $(29) $(0.08)
Customer growth 11 0.03
Other(1) 15 0.04
Regulated gas sales—weather (26) (0.07)
Major stormdamage and service restoration (18) (0.05)
Interest expense(2) (11) (0.03)
Other margins—gas(3) (10) (0.03)
2005 North Carolina rate case settlement (6) (0.02)
Nonregulated retail energy marketing operations(4) 57 0.17
Other 70.02
Share dilution —(0.03)
Change in net income contribution $(10) $(0.05)
(1) Attributable to rate variations from changes in customer usage patterns and
sales mix, and other factors.
(2) Principally reflects additional intercompany borrowings and higher interest
rates on those borrowings.
(3) Largely reflects reduced customer usage at our regulated gas distribution
operations, due in partto price sensitivity.
(4) Largely reflects higher electric and gas margins due to higher rates, increased
gas customers and lower commodity costs.
2005 VS. 2004
Increase (Decrease)
Amount EPS
(millions, except EPS)
Interest expense(1) $(25) $(0.08)
Salaries, wages andbenefits expense (14) (0.04)
Depreciation expense (10) (0.03)
Bad debtexpense(2) (7) (0.02)
Regulated electric sales:
Weather 14 0.04
Customer growth 11 0.03
Regulated gas sales—weather 80.02
2005 North Carolina rate case settlement 60.02
Other (1) —
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 penal-
ties resulting from the early redemption of debt.
(2) Higher bad debt expense primarily reflects the absence of a2004 reduction in
reserves.
40 DOMINION2006 Annual Report