Dominion Power 2006 Annual Report Download - page 78

Sale of Regulated Gas Distribution Subsidiaries
On March 1, 2006, we entered into an agreementwith Equitable
Resources,Inc., to sell two ofourwholly-owned regulated gas
distribution subsidiaries, Peoples and Hope, forapproximately
$970 million plus adjustments to reflect capital expenditures and
changes in workingcapital.Peoples and Hope serve approx-
imately 500,000 customer accounts in Pennsylvania and West
Virginia. The transaction is expected to close by the end of the
second quarter of 2007, subject tostate regulatory approvals in
Pennsylvania and West Virginia, as well as approval under the
federal Hart-Scott-Rodino Act. The carrying amounts of the
major classes of assetsand liabilities classified as held forsale in
our Consolidated Balance Sheet are as follows:
At December 31, 2006
(millions)
ASSETS
Current Assets
Cash $4
Customer accounts receivable 144
Unrecovered gas costs 31
Other 90
Total current assets 269
Investments 2
Property, Plant and Equipment
Property, plant andequipment 1,129
Accumulated depreciation, depletion andamortization (375)
Total property, plant and equipment, net 754
Deferred Charges and Other Assets
Regulatory assets 106
Other 2
Total deferred charges and other assets 108
Assets held for sale $1,133
LIABILITIES
Current Liabilities
Accounts payable $90
Payablesto affiliates 40
Accrued taxes 23
Deferred income taxes 9
Other 74
Total current liabilities 236
Deferred Credits and Other Liabilities
Asset retirement obligations 38
Deferred income taxes and investment tax credits 187
Regulatory liabilities 26
Other 7
Total deferred credits and other liabilities 258
Liabilities held for sale $494
The following table presents selected information regarding
the results of operations of Peoples and Hope:
December 31, 2006 2005 2004
(millions)
Operating Revenue $699 $742 $617
Income (loss) before income taxes (112) 54 71
During 2006, we recognized a $166 million ($104 million
after-tax) charge, recorded in other operations and maintenance
expense in our Consolidated Statement of Income, resulting from
the write-off of certain regulatoryassets related to the pending sale
of Peoples and Hope, since the recovery of thoseassets is no lon-
ger probable. We also established $145 millionofdeferred tax
liabilities in our Consolidated Balance Sheet in accordance with
EITF 93-17.
EITF Issue No. 03-13, Applying theConditions ofParagraph
42 of FASB Statement No.144 in DeterminingWhether to Report
Discontinued Operations (EITF 03-13), provides that the results
of operations of a component of an entity that has been disposed
of or is classified as held forsale shall be reported in discontinued
operations if both of the following conditions are met: (a) the
operations and cash flows of the components have been (or will
be) eliminated from the ongoing operations of the entity as a
result of the disposal transaction and (b) the entity will not have
any significant continuing involvement in the operations of the
component after the disposal transaction. While we do notexpect
to have significant continuing involvement with Peoples or Hope
after their disposal, we do expect to have continuing cash flows
related primarily to our sale to them of natural gas production
from our Appalachian E&P operations, as well as natural gas
transportation and storage services provided to them by our gas
transmission operations. Due to these expected significant con-
tinuing cash flows, the results of Peoples and Hope have not been
reportedasdiscontinued operations in ourConsolidated State-
ments of Income. We will continue to assess the levelof our
involvement and continuing cash flows with Peoples and Hope
forone year after the date of sale in accordance with EITF 03-13,
and if circumstances change, we mayberequired to reclassify the
results of Peoples and Hope as discontinued operationsin our
Consolidated Statements of Income.
Discontinued Operations—Telecommunications Operations
Dominion Fiber Ventures,LLC was ajoint venture originally
formed by Dominion and a third-party investor trust (Investor
Trust) to fund the development of its principal subsidiary,
Dominion Telecom, Inc. (Dominion Telecom). Dominion Tele-
com was afacilities-based interchange and emerging local carrier,
providing broadband solutions to wholesale customers through-
out the eastern region of the U.S. Due to aweak pricing
environment resulting from excess capacityin the tele-
communications industry and the markets for these services not
growing at rates originally contemplated, we approved a strategy
to sell our interest in the telecommunications business and began
reporting Dominion Telecom as adiscontinued operation in the
fourth quarter of 2003.
In May2004, we completed the sale of ourdiscontinued tele-
communication operations to Elantic Telecom, Inc. (ETI), realiz-
ing a loss of $11 million ($7 million after-tax, $0.02 per share).
The results of telecommunications operations, including revenue
of $8 million andaloss before income taxesof $19 million, are
presented as discontinued operations, on anetbasis, in our Con-
solidated Statement of Income for2004. In July 2004, ETI filed a
voluntary petition forreorganization under Chapter 11 of the
U.S. Bankruptcy Code,which was subsequently approved by the
U.S. Bankruptcy Court. ETI’s plan of reorganization became
effective in May 2005, and ETI emerged from bankruptcy. In
September 2005, ETI, its parent and various Dominion entities
reached a comprehensive settlement of various issues that was
subsequently approved by the U.S. Bankruptcy Court. We recog-
nized a benefit of $8 million ($5 million after-tax) in 2005, from
the revaluation of an outstandingguarantee associated with the
DOMINION2006 Annual Report 77