Dominion Power 2006 Annual Report Download - page 90

GOAL-BASED STOCK
In April 2006, goal-based stock awards were granted to key
non-officer employees. The issuance of shares under the awards is
based on the achievement of multiple performance metrics during
2006 and 2007, including business unit goals, return on invested
capital and total shareholder return relative to that of a peer group
of companies. At December 31, 2006, the targeted number of
shares to be issued is 97,150, but the actual number of shares
issued will vary between zero and 200% of targeted shares,
depending on the levelofperformance metrics achieved. The fair
value of goal-based stock is equal to the market price of our stock
on the date of grant. Awards will vest in April 2009 and be settled
by issuing new shares. The following table providesasummary of
goal-based stock activity:
Targeted
Number of
Shares
Weighted-
Average
Grant
Date Fair
Value
(thousands)
Nonvested at December 31, 2005 —$—
Granted 100.0 69.53
Vested ——
Cancelled and forfeited (2.85) 69.53
Nonvested at December 31, 2006 97.15 $69.53
As of December 31, 2006, unrecognized compensation cost
related to nonvested goal-based stock awards totaled $5 million
and is expected to be recognized over aweighted-average period
of 1.7 years.
CASH-BASED PERFORMANCE GRANT
In April 2006, a cash-based performance grant was made to offi-
cers. Payout of the performance grant will occur by March 15,
2008 and is based on the achievement of two performance met-
rics during 2006 and 2007: return on invested capital and total
shareholder return relative to that of a peer group of companies.
At December 31, 2006, the targeted amount of the grant is $14
million, but actual payout will vary between zero and 200% of
the targeted amount, depending on the levelofperformance met-
rics achieved. At December 31, 2006, a liability of $6 million has
been accrued forthis award.
NOTE 21. DIVIDEND RESTRICTIONS
The VirginiaState Corporation Commission (Virginia Commis-
sion) may prohibit any public servicecompany, including
VirginiaPower,from declaring or paying adividend to an affili-
ate, if foundto be detrimental to the public interest. At
December 31, 2006, the VirginiaCommission had not restricted
the payment of dividends by VirginiaPower.
Certain agreements associated with our credit facilities contain
restrictions on the ratio ofourdebt tototalcapitalization. These
limitationsdid not restrict our ability to paydividends or receive
dividends from our subsidiaries at December 31, 2006.
See Note 18 foradescription of potential restrictionsondivi-
dend payments by us and certain of our subsidiaries in connection
with thedeferral of distribution payments on trust preferred secu-
ritiesand interest payments on enhanced junior subordinated
notes.
NOTE 22. EMPLOYEE BENEFIT PLANS
We provide certain benefits to eligible active employees, retirees
and qualifying dependents.Under the terms of our benefit plans,
we reserve the right to change, modify or terminate the plans.
From timetotime in the past, benefits have changed, and some
of these changes have reduced benefits.
We maintain qualified noncontributory defined benefit pen-
sion planscovering virtually all employees. Retirement benefits
are basedprimarily on years of service, age and the employee’s
compensation. Our funding policy is to generally contribute
annually an amount that is in accordance with the provisions of
the Employment Retirement Income SecurityAct of 1974. The
pension program also provides benefits to certain retired execu-
tives under company-sponsored nonqualified employee benefit
plans. Certain of these nonqualified plans are fundedthrough
contributions to agrantor trust.
We provide retiree health care and life insurance benefits with
annual employee premiums based on several factors such as age,
retirement date and years of service.
On December 8, 2003, the Medicare Prescription Drug,
Improvement and Modernization Actof 2003 (the Medicare Act)
was signed intolaw. The Medicare Actintroduces aprescription
drug benefit under Medicare(Medicare PartD)as well as afederal
subsidy tosponsors of retiree healthcarebenefit plansthatprovide
abenefit that is at least actuarially equivalent to Medicare Part D.
Based on ananalysisperformed byathird-party actuary, wehave
determined that the prescription drug benefitoffered under our
other postretirement benefit plans isatleast actuarially equivalent
to Medicare Part Dandtherefore we expect toreceive the federal
subsidy offered under the Medicare Act.
We use December 31asthemeasurement datefor all of our
employee benefitplans. Weusethemarket-related value of pen-
sion plan assets to determinetheexpected return on pension plan
assets, acomponent ofnetperiodic pension cost. The market-
related value recognizes changes infair value on astraight-line
basis overafour-year period. Changes in fair value are measured as
the differencebetween the expected and actual plan asset returns,
including dividends, interest and realized and unrealized invest-
ment gainsand losses.
DOMINION2006 Annual Report 89