Dominion Power 2006 Annual Report Download - page 81

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The co-owners are obligated to paytheir share of all future
construction expenditures and operatingcosts of the jointly-
owned facilities in thesame proportion as their respective owner-
ship interest. We report our share of operating costs in the appro-
priate operating expense (electric fuel and energy purchases, other
operations and maintenance, depreciation,depletion andamor-
tizationandother taxes, etc.) in our Consolidated Statements of
Income.
NOTE 13. GOODWILL AND INTANGIBLE ASSETS
Goodwill
There was no impairment of or material change to the carrying
amount or segment allocation of goodwill in 2006 or 2005.
Other Intangible Assets
All of our intangible assets, other than goodwill, are subject to
amortization. Amortization expense forintangible assetswas $106
million, $130 million and$62million for 2006, 2005 and 2004,
respectively. In 2006, we acquired $59 million of emissions
allowances with an estimated weighted-average amortization
period of 3.7 years. The components of our intangible assetsare
as follows:
At December 31, 2006 2005
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
(millions)
Software and software
licenses $642$359 $613$308
Emissions allowances 177 30 169 50
Other 235 37 225 30
Total $1,054 $426 $1,007 $388
Annual amortization expense forintangible assetsis estimated
to be $120 million for2007, $88 million for 2008, $74 million
for2009, $59 million for2010, and $29 million for 2011.
NOTE 14. REGULATORY ASSETS AND
LIABILITIES
Our regulatory assets and liabilities include the following:
At December 31, 2006 2005
(millions)
Regulatory assets:
Unrecovered gas costs $11$179
Regulatory assets—current(1) 11 179
Unrecognized pension andother postretirement benefit
costs(2) 135 —
Customer bad debts(3) 85 70
RTO start-up costs andadministration fees(4) 74 47
Deferred cost of fuel used in electric generation(5) 72 171
Other postretirement benefit costs(6) 61 80
Income taxesrecoverable through future rates(7) 46 260
Termination of certain power purchase agreements(8) 22 24
Other 44 106
Regulatory assets—non-current 539 758
Total regulatory assets $550 $937
Regulatory liabilities:
Provision forfuture cost of removal(9) 577 567
Other(10) 44 48
Total regulatory liabilities $621 $615
(1) Reported in other current assets.
(2) Represents unrecognized pension and other postretirement benefit costs
expected to be recovered through future ratesby certain of our rate-
regulated subsidiaries, which were required to be reflected in our Con-
solidated BalanceSheet upon our adoption of SFAS No. 158.
(3) Instead of recovering bad debt coststhrough our base rates, the Public Util-
ities Commission of Ohio (Ohio Commission) allows us to recover all eligible
bad debt expenses through abaddebt tracker. Annually, we assess the
need to adjust the trackerbased on the preceding year’s unrecovered
deferred bad debt expense. The Ohio Commission also has authorized the
collection of previously deferred costs associated with certain uncollectible
customer accounts from 2001 over five years through the trackerrider.
Remaining costs to be recovered totaled $25 million at December 31, 2006.
(4) FERC has conditionally authorized our deferral of start-up costs incurred in
connection with joining an RTO and ongoing administrative fees paidto
PJM. We have deferred $64 million in start-up costs and administration fees
and $10 million of associated carrying costs. We expect recovery from
Virginia jurisdictionalretail customers to commence at the end of the Virginia
retail rate cap period, subject to regulatory approval.
(5) In connection with thesettlement of the 2003 Virginia fuel rate proceeding,
we agreed to recover previously incurred costs through June 30, 2007 with-
out a return on aportion of the unrecovered balance. Remaining costs to be
recovered totaled $56 million at December 31, 2006.
(6) Costs recognized in excess of amounts included in regulated rates charged
by our regulated gas operations before rates were updated to reflect anew
method of accounting and the cost related to the accruedbenefit obligation
recognized as part of accounting for our acquisition of CNG.
(7) Income taxes recoverable through future ratesresulting from the recognition
of additional deferred income taxes, not recognized under ratemaking
practices.
(8) The North Carolina Utilities Commission has authorized the deferralofpre-
viously incurred costs associated with the termination of certain long-term
power purchase agreements with nonutility generators. The related costs are
being amortized over the original term of each agreement.
(9) Rates charged to customers by our regulated businesses include aprovision
for the cost of future activitiesto remove assets that are expected to be
incurred at the time of retirement.
(10) Includes $7 million and $8 million reported in other current liabilities in
2006 and 2005, respectively.
80 DOMINION2006 Annual Report