Dominion Power 2007 Annual Report Download

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Table of contents

  • Page 1
      

  • Page 2
    Trading on the New York Stock Exchange under the symbol "D," Dominion is one of America's leading energy companies, serving more than 5 million customers in the mid-Atlantic, Midwest and Northeast regions. We are privileged to employ 17,000 energetic, dedicated and talented employees who share a ...

  • Page 3
    ...'06 '07 * All per-share figures reï¬,ect the November 2007 2-for-1 stock split. ** Prior years' operating earnings and revenue have been recast to exclude certain discontinued operations. *** Based on Non-GAAP Financial Measures. See page 26 for GAAP reconciliations. Dominion 2007 Annual Report 1

  • Page 4
    ... provides electric service to nearly 2.4 million homes and businesses in the two-state area. Dominion Retail and all customer service functions also are part of this unit. Business Lines D O M I N I O N G E N E R AT I O N Dominion Generation operates the company's ï¬,eet of regulated power stations...

  • Page 5
    ... Natural Gas Nuclear Oil / Gas Biomass Kewaunee Salem Harbor Manchester Millstone Brayton Point New Generation Stations Under Construction Wind Remington Fairless Energy Mt.Storm/ North Branch Yorktown Kincaid NedPower Bath Gordonsville Ladysmith Bremo Chesterfield/Bellemeade/Hopewell Altavista...

  • Page 6
    Thomas F. Farrell II Chairman, President and Chief Executive Officer 4 Dominion 2007 Annual Report

  • Page 7
    ...repositioned company has a lower risk profile yet retains prospects tunities-fulfilling a vision-requires decisive action. Targeted Dividend Increase Recent increase puts targeted 2010 payout ratio of 55% in reach. Dollars per Share ~55% Payout Ratio* 1.46 1.58 By the end of 2007 investors had...

  • Page 8
    ... distribution customers, who also benefit from our repositioning. Subject to regulatory approval, the plan will be built on a foundation of conservation and efficiency; a balanced portfolio of new electric generation fueled by renewable resources, advanced-technology coal, natural gas and nuclear...

  • Page 9
    ..., Midwest and Northeast. Each market has a need for more energy and expanded energy infrastructure. And each operates under starkly different rules. We serve regulated electric markets in fast-growing Virginia and regulated retail natural gas markets in Ohio, Pennsylvania and West Virginia. We also...

  • Page 10
    ...Virginia City Hybrid Energy Center. This clean-coal, carbon capture-compatible facility will be able to burn coal, waste coal and biomass. In addition, we entered into an agreement to purchase a power station development project that will add about 600 megawatts in Buckingham, Va., using natural gas...

  • Page 11
    ... Power Station in Hurt, Va., one of the largest biomass generators on the East Coast, and 320 megawatts of hydropower. In early 2008 production began at a wind farm project in West Virginia that we jointly own with Shell WindEnergy. When it comes to limiting greenhouse gas emissions, Dominion...

  • Page 12
    ... both our regulated and merchant coal-powered units-and are planning to spend another $1.3 billion by 2015. Water use at our Brayton Point Power Station on Mt. Hope Bay in Massachusetts is also important to us. Late last year we forged an agreement with the U.S. Environmental Protection Agency (EPA...

  • Page 13
    ... Line Power Station in Hammond, Ind., near Chicago. As part of reregulation, Virginia Power in 2009 will file for a review of its base rates for the first time in a decade. As in the past, the Virginia State Corporation Commission will set future rates that balance share- Dominion 2007 Annual...

  • Page 14
    ... expansion program under way, Dominion will need to maintain its solid credit ratings to ensure that financing costs for projects are affordable. Cash generated by our businesses will cover the expected dividend payments and maintenance capital. Financing the planned new infrastructure investments...

  • Page 15
    ... are pointed and painful reminders of the reasons that we ALWAYS WILL BE OUR PRIORITY. A CORE S AFETY VALUE . buyers for our Dominion Peoples and Dominion Hope gas distribution companies. be issued in 2008 is expected to be through our dividend reinvestment and direct stock purchase programs. In...

  • Page 16
    ...stay warm. We created this ï¬,exible safety net program to help our most vulnerable customers pay their heating bills. Last year we expanded the program to include assistance for cooling in the sweltering summer months common to North Carolina and Virginia. DOMINION HAS CHANGED TO B E T T E R S E RV...

  • Page 17
    ... opportunity to create enduring shareholder value by building on our embedded strengths and competitive advantages. Backed by a skilled work force, a sound business plan and industry-leading performance efficiency, Dominion is well positioned for long-term success. Dominion 2007 Annual Report 15

  • Page 18
    North Anna Power Station in Virginia plays a key role in our emissions-free nuclear ï¬,eet. 16 Dominion 2007 Annual Report

  • Page 19
    ...-free nuclear energy. In mid-Atlantic natural gas markets we are expanding critically needed transportation and storage facilities that link supply to Northeast markets. And our merchant generation ï¬,eet serving customers beyond our electric utility service area continues to operate at high levels...

  • Page 20
    ... on the environment at all times. Our approach to protecting natural resources draws on many tools. One tool is to build cleaner generation by harnessing nuclear energy and wind to produce emissions-free electricity. Another is helping customers to reduce their energy demand. Yet another is funding...

  • Page 21
    Cove Point, on the Chesapeake Bay in Maryland, helps meet growing demand for natural gas as one of the nation's largest LNG facilities. Our joint ownership of a wind farm project in West Virginia illustrates our increasing commitment to renewable energy sources. Dominion 2007 Annual Report 19

  • Page 22
    ... natural gas service every hour of every day. Sustaining a healthy environment is an integral part of our obligation to provide energy responsibly. Our success rests on our ability to continue providing reasonable customer rates and competitive shareholder returns. 20 Dominion 2007 Annual Report

  • Page 23
    ... help to minimize significant base rate increases while allowing returns competitive with our electric utility peer groups. It also includes incentives to provide excellent customer service, operating efficiency and investments in renewable sources of generation. Dominion 2007 Annual Report 21

  • Page 24
    ... 2008. e work diligently to earn our investors' Supported by the company's solid financial performance, your Board of Directors approved an 11 percent increase in the common stock dividend in 2007. The board coupled this with a 2-for-1 stock split. Management has set ambitious but realistic We...

  • Page 25
    Norris Tyler, Katharine Bond and Tanya Ross are among many skilled and energetic Dominion employees helping us to manage our budgets efficiently. Dominion 2007 Annual Report 23

  • Page 26
    ... for troops serving overseas. As part of Dominion's pipeline integrity process, the outer coating is removed to prepare to conduct tests for possible internal corrosion. Dominion North Carolina Power lineman Gregory Smith knows that safety is his No.1 priority. 24 Dominion 2007 Annual Report

  • Page 27
     seriously. And we enjoy giving back. afety, ethics and operating excellence are Dominion core values. Working together as a team is our other core value. Although our employees work hard to produce, transmit, distribute and store energy safely, reliably, efficiently and effectively, we always...

  • Page 28
    ... assets - - Income (loss) from discontinued operations of merchant generation plants 7 0.01 Dominion Capital related charges (84) (0.13) Income (loss) related to Telecom business (750) (1.18) Termination of power purchase and sales contracts (65) (0.10) Charges related to hurricanes (122) (0.19) Net...

  • Page 29
    ... to Reported Earnings. For factors that could cause actual results to differ, see Forward-Looking Statements, Risk Factors and Market Risk Sensitive Instruments and Risk Management in Management's Discussion and Analysis of Financial Condition and Results of Operations. Dominion 2007 Annual Report...

  • Page 30
    ... of Financial Condition and Results of Operations 29 Management's Annual Report on Internal Control over Financial Reporting 60 Reports of Independent Registered Public Accounting Firm 61 Consolidated Statements of Income for the years ended December 31, 2007, 2006 and 2005 63 Consolidated Balance...

  • Page 31
    ... of Financial Condition and Results of Operations (MD&A) discusses our results of operations 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...

  • Page 32
    ... North Carolina. Retail energy marketing operations include the marketing of gas, electricity and related products and services to residential and small commercial customers in the Northeast, mid-Atlantic and Midwest. Revenue provided by our electric transmission operations is based primarily...

  • Page 33
    ... energy marketing and price risk management activities for our generation assets. Our generation mix is diversified and includes coal, nuclear, gas, oil, renewables and purchased power. The generation facilities of our electric utility fleet are located in Virginia, West Virginia and North Carolina...

  • Page 34
    ... charge ($12 million after-tax) for two of these gas turbines that were sold by our merchant generation operations to our utility generation operations based upon amounts to be recovered by our utility in jurisdictional rate base. These turbines will be used in the Dominion 2007 Annual Report

  • Page 35
    ... electric and gas operations differs from the accounting for nonregulated operations in that we are required to reflect the effect of rate regulation in our Consolidated Financial Statements. For regulated businesses subject to federal or state cost-of-service rate regulation, regulatory practices...

  • Page 36
    ... and Analysis of Financial Condition and Results of Operations, Continued We utilize periodic site-specific base year cost studies in order to estimate the nature, cost and timing of planned decommissioning activities for our utility and merchant nuclear plants. We obtained updated cost studies for...

  • Page 37
    ... business and the reinstatement of annual fuel rate adjustments, effective July 1, 2007, for the Virginia jurisdiction of our utility generation operations, with deferred fuel accounting for over- or under-recoveries of fuel costs. Unfavorable drivers include a decrease in gas and oil production due...

  • Page 38
    ...in sales to retail customers attributable to variations in rates resulting from changes in sales mix and other factors ($95 million) and new customer connections ($67 million) primarily in our residential and commercial customer classes; ‰ ‰ Analysis of Consolidated Operations Presented below...

  • Page 39
    ... of deferred fuel accounting for the Virginia jurisdiction. These FTR proceeds are used to offset congestion costs associated with PJM spot market activity incurred by our utility generation operations; and ‰ A $23 million increase related to outside services for tree trimming and brush...

  • Page 40
    ... associated with requirements-based power sales contracts, as discussed in Operating Revenue; ‰ A $162 million decrease for our utility generation operations, primarily due to lower commodity prices, including purchased power, and decreased consumption of fossil fuel, Dominion 2007 Annual Report

  • Page 41
    ... $51 million charge related to credit exposure associated with the bankruptcy of Calpine Corporation; partially offset by ‰ A $24 million net benefit resulting from the establishment of certain regulatory assets and liabilities in connection with the settlement of a North Carolina rate case in the...

  • Page 42
    ... statistics related to DVP's operations: Year Ended December 31, 2007 % Change 2006 % Change 2005 Electricity delivered (million mwhrs)(1) Degree days: Cooling(2) Heating(3) Average electric distribution customer accounts(4) Average retail energy marketing customer accounts(4) 84.7 1,794 3,500...

  • Page 43
    ...impacting Dominion Energy's net income contribution: 2007 VS . (millions, except EPS) 2006 Increase (Decrease) Amount EPS Retail energy marketing operations Interest expense(1) Regulated electric sales: Weather Customer growth Major storm damage and service restoration(2) North Carolina rate case...

  • Page 44
    ...income contribution: 2007 VS . Merchant generation margin(1) Unrecovered Virginia fuel expenses Regulated electric sales: Customer growth Weather Sales of emissions allowances Energy supply margin(2) Outage costs(3) Salaries, wages and benefits expense 2005 North Carolina rate case settlement Other...

  • Page 45
    ... activities. As part of these operations, we enter into contracts for purchases and sales of energy-related commodities, including natural gas, electricity, oil and coal. Settlements of contracts may require physical delivery of the underlying We depend on both internal and external sources...

  • Page 46
    ...and, in the case of Virginia Electric and Power Company (Virginia Power), approval by the Virginia State Corporation Commission (Virginia Commission). In December 2005, the SEC adopted the rules that currently govern the registration, communications and offering processes under the Securities Act of...

  • Page 47
    ... exercise of employee stock options. During 2007, we purchased our common stock on the open market with the proceeds received through Dominion Direct® (a dividend reinvestment and open enrollment direct stock purchase plan) and employee savings plans, rather than having additional new common shares...

  • Page 48
    ... us may affect the Dominion Companies' ability to access these funding sources or cause an increase in the return required by investors. Both quantitative (financial strength) and qualitative (business or operating characteristics) factors are considered by the credit rating agencies in establishing...

  • Page 49
    .... For purposes of the RCCs, non-affiliates include individuals enrolled in our dividend reinvestment plan, direct stock purchase plan and employee benefit plans. We initially designated the 8.4% Capital Securities of Dominion Resources Capital Trust III as covered debt for purposes of the RCCs...

  • Page 50
    ...for financial accounting purposes, the asset and related borrowings used to finance the construction of the asset are not included in our Consolidated Balance Sheets. Although this improves measures of leverage calculated using amounts reported in our Consolidated Financial Statements, credit rating...

  • Page 51
    ... renewable energy programs; and Authorize an enhanced ROE on new capital expenditures as a financial incentive for construction of certain major generation projects. The legislation also continues statutory provisions directing us to file annual fuel cost recovery cases with the Virginia Commission...

  • Page 52
    ... designed to improve the reliability of service to our customers and the region. The siting and construction of these transmission lines will be subject to applicable state and federal permits and approvals. In April 2007, we, along with TransAllegheny Interstate Line Company, filed an application...

  • Page 53
    ... of the Virginia City Hybrid Energy Center entering service. We are considering the construction of a third nuclear unit within the next twenty years at a site located at the North Anna power station (North Anna) which we own along with Old Dominion Electric Cooperative (ODEC). In November 2007, the...

  • Page 54
    ... infrastructure replacement program with Dominion East Ohio's current rate case application in order to give the Ohio Commission and other parties the opportunity to consider the two filings together. Environmental Matters We are subject to costs resulting from a number of federal, state and local...

  • Page 55
    ...impacting our affected power stations in the Northeast. In April 2007, the U.S. Supreme Court ruled that the EPA has the authority to regulate greenhouse gas emissions which could result in future EPA action. In June 2007, the President announced U.S. support for an effort to develop a new post-2012...

  • Page 56
    ... using up to 20% biomass (woodwaste) at the proposed Virginia City Hybrid Energy Center. We have announced a comprehensive generation growth program, referred to as Powering Virginia, which involves the development, financing, construction and operation of new multi-fuel, multi-technology generation...

  • Page 57
    ...for trading purposes as of December 31, 2007 and 2006, respectively. The impact of a change in energy commodity prices on our non-trading commodity-based financial derivative instruments at a point in time is not necessarily representative of the results that will be realized when such contracts are...

  • Page 58
    ... have operations. For example, Massachusetts has implemented regulations requiring reductions in carbon dioxide emissions and RGGI, a cap and trade program covering carbon dioxide emissions from power plants in the Northeast, will affect several of our facilities. In addition, a number of bills have...

  • Page 59
    ...by the Virginia Commission and may reduce rates if our electric utility company is found to have had earnings in excess of the established return on equity level during two consecutive biennial review periods. Energy conservation could negatively impact our financial results. A number of regulatory...

  • Page 60
    ...future sales of merchant generation and gas and oil production, not satisfied by the cash flows from our operations. Management believes that Dominion and Virginia Power will maintain sufficient access to these financial markets based upon current credit ratings. However, certain disruptions outside...

  • Page 61
    .... 71, to the Virginia jurisdiction of our utility generation operations as discussed in Note 2 to our Consolidated Financial Statements. Also includes a $137 million after-tax charge resulting from the termination of the long-term power sales agreement associated with State Line. (2) Includes a $164...

  • Page 62
    ... require our 2007 Annual Report to contain a management's report and a report of the independent registered public accounting firm regarding the effectiveness of internal control. As a basis for our report, we tested and evaluated the design and operating effectiveness of internal controls. Based...

  • Page 63
    ... December 31, 2007 of the Company and our report dated February 26, 2008, expresses an unqualified opinion on those financial statements and includes an explanatory paragraph relating to the adoption of new accounting standards. Richmond, Virginia February 26, 2008 Dominion 2007 Annual Report 61

  • Page 64
    ..., the Company changed its methods of accounting to adopt new accounting standards for uncertain tax positions in 2007, pension and other postretirement benefit plans, share-based payments, and purchases and sales of inventory with the same counterparty in 2006, and conditional asset retirement...

  • Page 65
    ...million in 2007. (5) Net of income tax benefit of $4 million in 2005. (6) All per share amounts have been adjusted to reflect a two-for-one stock split distributed in November 2007. The accompanying notes are an integral part of our Consolidated Financial Statements. Dominion 2007 Annual Report 63

  • Page 66
    ...Balance Sheets At December 31, (millions) 2007 2006 A SSETS Current Assets Cash and cash equivalents Customer receivables (less allowance for doubtful accounts of $37 and $26) Other receivables (less allowance for doubtful accounts of $10 and $13) Inventories: Materials and supplies Fossil fuel Gas...

  • Page 67
    ... and shareholders' equity The accompanying notes are an integral part of our Consolidated Financial Statements. (1) 1 billion shares authorized; 577 million shares and 698 million shares outstanding at December 31, 2007 and December 31, 2006, respectively. Dominion 2007 Annual Report 65

  • Page 68
    ...- employee and direct stock purchase plans Stock awards and stock options exercised (net of change in unearned compensation) Issuance of stock-forward equity transaction Stock repurchase and retirement Tax benefit from stock awards and stock options exercised Dividends and other adjustments Balance...

  • Page 69
    ... Inventories Deferred fuel and purchased gas costs, net Accounts payable Accrued interest, payroll and taxes Deferred revenue Margin deposit assets and liabilities Other operating assets and liabilities Net cash provided by (used in) operating activities Investing Activities Plant construction and...

  • Page 70
    ... Virginia Power Energy Marketing, Inc. (VPEM), Dominion Exploration and Production, Inc. (DEPI) and The East Ohio Gas Company (Dominion East Ohio). Virginia Power is a regulated public utility that generates, transmits and distributes electricity for sale in Virginia and northeastern North Carolina...

  • Page 71
    ... of electricity from merchant generation facilities at market-based rates, sales of electricity to residential and commercial customers at contracted fixed prices and market-based rates, and electric trading revenue; Regulated gas sales consist primarily of state-regulated retail natural gas sales...

  • Page 72
    ...benefits) to be classified as a financing cash flow. In accordance with FASB Staff Position No. FAS 123(R)-3, Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards, we have elected to use the simplified method to determine the impact Dominion 2007 Annual Report

  • Page 73
    ...in local gas distribution operations is valued using the last-in-first-out (LIFO) method. Under the LIFO method, those inventories were valued at $8 million at December 31, 2007 and 2006. Based on the average price of gas purchased during 2007, the cost of replacing the current portion of stored gas...

  • Page 74
    ... hedges of the variable price risk associated with the purchase and sale of electricity, natural gas and other energy-related products. We also use foreign currency forward contracts to hedge the variability in foreign exchange rates and interest rate swaps to hedge our exposure to variable interest...

  • Page 75
    ... We report the amortization of nuclear fuel in electric fuel and energy purchases expense in our Consolidated Statements of Income and in depreciation, depletion and amortization in our Consolidated Statements of Cash Flows. We follow the full cost method of accounting for gas and oil E&P activities...

  • Page 76
    ...nuclear power stations due to the passage of time as an adjustment to the related regulatory liability consistent with our practice for our other cost-of-service rate regulated operations. Previously, we reported such expense in other operations and maintenance expense in our Consolidated Statements...

  • Page 77
    ...payment transactions be recognized in the financial statements based on the fair value of the equity or liability instruments issued. SFAS No. 123R covers a wide range of share plans, performancebased awards, share appreciation rights and employee share purchase plans. We adopted SFAS No. 123R using...

  • Page 78
    ...activity included in operating expenses(1) $67 72 $576 578 $623 651 (1) Included in other energy-related commodity purchases expense and purchased gas expense in our Consolidated Statements of Income. 2005 FIN 47 We adopted FASB Interpretation No. 47, Accounting for Conditional Asset Retirement...

  • Page 79
    ... of operations or financial condition. EITF 06-11 In June 2007, the FASB ratified the consensus reached by the EITF on Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (EITF 06-11). EITF 06-11 addresses the recognition of income tax benefits realized...

  • Page 80
    ... nuclear power station (Kewaunee), located in northeastern Wisconsin, from Wisconsin Public Service Corporation, a subsidiary of WPS Resources Corporation, and Wisconsin Power and Light Company, a subsidiary of Alliant Energy Corporation, for approximately $192 million in cash. The operations...

  • Page 81
    ... of our wholly-owned regulated gas distribution subsidiaries, Peoples and Hope. Peoples and Hope serve approximately 500,000 customer accounts in Pennsylvania and West Virginia. This sale was subject to regulatory approvals in the states in which the companies operate, as well as antitrust clearance...

  • Page 82
    ... and storage services provided to them by our gas transmission operations. Due to these expected significant continuing cash flows, the results of Peoples and Hope have not been reported as discontinued operations in our Consolidated Statements of Income. We will continue to assess the level of our...

  • Page 83
    ...of deferred taxes-stock of subsidiaries held for sale State taxes, net of federal benefit Valuation allowances Domestic production activities deduction Amortization of investment tax credits Employee stock ownership plan deduction Employee pension and other benefits Other, net Effective tax rate 35...

  • Page 84
    ... business and $27 million related to our use of certain tax credits to reduce tax payments. With the adoption of FIN 48, effective January 1, 2007, we recognize in the financial statements only those positions taken, or expected to be taken, in income tax returns that are morelikely-than-not to be...

  • Page 85
    ... Earliest Open Tax Year State Pennsylvania Connecticut Massachusetts Virginia West Virginia 2000 2001 2005 2004 2004 We are also obligated to report adjustments resulting from IRS settlements to state tax authorities. In addition, if we utilize state net operating losses or tax credits generated...

  • Page 86
    ...for a discussion of the discontinuance of hedge accounting for non-Appalachian E&P gas and oil derivatives during 2007. In 2007, as a result of the termination of the long-term power sales agreement associated with our 515 Mw State Line power station (State Line), we discontinued applying the normal...

  • Page 87
    ...securities: Proceeds from sales Realized gains(1) Realized losses(1) Trading securities: Net unrealized gain (loss) $916 100 144 (3) $1,025 90 77 9 $754 46 49 6 (1) Includes realized gains and losses recorded to a regulatory liability in 2007, as discussed in Note 2. Dominion 2007 Annual Report...

  • Page 88
    ... these agreements. Major classes of property, plant and equipment and their respective balances are: At December 31, (millions) 2007 2006 Utility: Generation Transmission Distribution Storage Nuclear fuel Gas gathering and processing General and other Other-including plant under construction Total...

  • Page 89
    ...due to the transfer of: • Regulated electric distribution and nonregulated retail energy marketing operations from Dominion Delivery to DVP; • Dominion East Ohio from Dominion Delivery to Dominion Energy; • Regulated electric transmission operations from Dominion Energy to DVP; • Appalachian...

  • Page 90
    ...: Unrecovered gas costs Regulatory assets-current(1) Unrecognized pension and other postretirement benefit costs(2) Customer bad debts(3) RTO start-up costs and administration fees(4) Deferred cost of fuel used in electric generation(5) Other postretirement benefit costs(6) Income taxes recoverable...

  • Page 91
    ... program. Collateral requirements are impacted by commodity prices, hedging levels, our credit quality and the credit quality of our counterparties. At December 31, 2007, we had committed lines of credit totaling $4.9 billion. These lines of credit support commercial paper borrowings and letter...

  • Page 92
    ... Notes Payable to Affiliated Trust, 7.8%, due 2041(4) Virginia Electric and Power Company: Secured First and Refunding Mortgage Bonds, 7.625%, due 2007(5) Secured Bank Debt, Variable rate, due 2007(6) Unsecured Senior and Medium-Term Notes: 4.5% to 5.73%, due 2007 to 2012 4.75% to 8.625%, due 2013...

  • Page 93
    ... senior notes, or treasury securities in some instances, were pledged as collateral to secure the purchase of common stock under the related stock purchase contracts. The holders were given the option to either satisfy their obligations under the stock purchase contracts by 91 Dominion 2007 Annual...

  • Page 94
    ... contract payments as a liability, offset by a charge to common stock in shareholders' equity. The stock purchase contracts carried an annual interest rate of 3.00% prior to their settlement in May 2006, by issuance of 9 million shares, recast to reflect the impact of our November 2007 stock split...

  • Page 95
    ... the proceeds received through Dominion Direct® (a dividend reinvestment and open enrollment direct stock purchase plan) and employee savings (1) Decrease is due to the sale of our Canadian E&P business in June 2007. Stock-Based Awards In April 2005, our shareholders approved the 2005 Incentive...

  • Page 96
    ... million and $10 million, respectively, of income tax benefits related to our stock-based compensation arrangements. Stock-based compensation cost is reported in other operations and maintenance expense in our Consolidated Statements of Income. STOCK OPTIONS The following table provides a summary of...

  • Page 97
    ... any public service company, including Virginia Power, from declaring or paying a dividend to an affiliate, if found to be detrimental to the public interest. At December 31, 2007, the Virginia Commission had not restricted the payment of dividends by Virginia Power. Certain agreements associated...

  • Page 98
    ... plan funding requirements annually, usually in the fourth quarter after receiving updated plan information from our actuary. Based on the funded status of each plan and other factors, we determine the amount of contributions for the current year, if any, at that time. We do not expect any pension...

  • Page 99
    ... Our overall objective for investing our pension and other postretirement plan assets is to achieve the best possible long-term rates of return commensurate with prudent levels of risk. To minimize risk, funds are broadly diversified among asset classes, investment strategies and investment advisors...

  • Page 100
    ...weighted-average basis: Pension Benefits At December 31, 2007 2006 Other Postretirement Benefits 2007 2006 Net actuarial loss Prior service (credit) cost $7 4 $8 (6) Discount rate Rate of increase for compensation 6.60% 6.20% 4.79% 4.79% 6.50% 6.10% 4.70% 4.70% 98 Dominion 2007 Annual Report

  • Page 101
    .... Long-Term Purchase Agreements At December 31, 2007, we had the following long-term commitments that are noncancelable or are cancelable only under certain conditions, and that third parties have used to secure financing for the facilities that will provide the contracted goods or services: 2008...

  • Page 102
    ... financing. Nuclear Operations NUCLEAR DECOMMISSIONING-MINIMUM FINANCIAL ASSURANCE The Nuclear Regulatory Commission (NRC) requires nuclear power plant owners to annually update minimum financial assurance amounts for the future decommissioning of their nuclear facilities. Our 2007 calculation for...

  • Page 103
    ... current level of property insurance coverage ($2.55 billion for North Anna power station (North Anna), $2.55 billion for Surry power station, $2.75 billion for Millstone power station (Millstone), and $1.8 billion for Kewaunee) exceeds the NRC minimum requirement for nuclear power plant licensees...

  • Page 104
    ... renewable energy programs; and Authorize an enhanced ROE on new capital expenditures as a financial incentive for construction of certain major generation projects. The legislation also continues statutory provisions directing us to file annual fuel cost recovery cases with the Virginia Commission...

  • Page 105
    ...-term power purchase contracts that could ultimately be determined to be above market prices; generating plants that could possibly become uneconomical in a deregulated environment; and unfunded obligations for nuclear plant decommissioning and postretirement benefits. Capped electric retail rates...

  • Page 106
    ... of our large and diverse customer base, we are not exposed to a significant concentration of credit risk for receivables arising from electric and gas utility operations, including transmission services and retail energy sales. Cost-Method Investments At December 31, 2007 and 2006, the carrying...

  • Page 107
    ... value of the loans are calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan, current economic conditions, and lending conditions. The estimates of maturity are based on...

  • Page 108
    ... our regulated electric distribution and electric transmission operations in Virginia and North Carolina, as well as nonregulated retail energy marketing and all customer service operations. Dominion Energy includes our Ohio regulated natural gas distribution company, regulated gas transmission...

  • Page 109
    ... the charge, since realization of tax benefits was not anticipated based on our expected future tax profile at that time. Intersegment sales and transfers are based on underlying contractual arrangements and agreements and may result in intersegment profit or loss. Dominion 2007 Annual Report 107

  • Page 110
    ... Financial Statements, Continued The following table presents segment information pertaining to our operations: Dominion Energy Dominion Generation Corporate and Other Adjustments & Eliminations Consolidated Total Year Ended December 31, (millions) DVP 2007 Total revenue from external customers...

  • Page 111
    ... our results of operations based on our historical financial statements. In addition to requiring different determinations of revenue and costs, the disclosures exclude the impact of interest expense and corporate overhead. Year Ended December 31, Total (millions) U.S. 2007 Canada Total U.S. 2006...

  • Page 112
    ... Financial Statements, Continued Company-Owned Reserves Estimated net quantities of proved gas and oil (including condensate) reserves in the U.S. and Canada at December 31, 2007, 2006 and 2005, and changes in the reserves during those years, are shown in the two schedules that follow: 2007...

  • Page 113
    ... of existing economic conditions. Future income taxes were computed by applying the appropriate year-end or future statutory tax rate to future pretax net cash flows, less the tax basis of the properties involved, and giving effect to tax deductions, permanent differences and tax credits. It is not...

  • Page 114
    ...November 2007 stock split. First Quarter (millions, except per share amounts) Second Quarter Third Quarter Fourth Quarter Full Year 2007 Operating revenue Income (loss) from operations Income (loss) from continuing operations Income (loss) from discontinued operations Extraordinary item, net of tax...

  • Page 115
    ... due to the reapplication of SFAS No. 71 to the Virginia jurisdiction of our utility generation operations and a $108 million after-tax charge for the recognition of certain forward gas contracts that no longer qualified for the normal purchase and sales exemption due to the sale of our U.S. non...

  • Page 116
    ...Virginia Surgical Associates Mark J. Kington, 48 Managing Director, X-10 Capital Management, LLC (investments) George A. Davidson, Jr., 69 Retired Chairman, Dominion... investments) David A. Wollard, 70 Founding Chairman of the Board, Emeritus, Exempla Healthcare 114 Dominion 2007 Annual Report

  • Page 117
    ..., Regulation and Integrated Planning Eva Teig Hardy, 63 Executive Vice President, Public Policy & Corporate Communications G. Scott Hetzer, 51 Senior Vice President and Treasurer Jay L. Johnson, 61 Executive Vice President Chief Executive Officer, Dominion Virginia Power Steven A. Rogers, 46...

  • Page 118
    ...Stock Purchase Plan You may buy Dominion common stock through Dominion Direct ®. Please contact Shareholder Services for a prospectus and enrollment form or visit www.dom.com and click "Investors." COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN Common Stock Listing New York Stock Exchange Trading...

  • Page 119
    ..., Inc. 120 Tredegar Street Richmond, Virginia 23219 Mailing Address Dominion Resources, Inc. P.O. Box 26532 Richmond, Virginia 23261-6532 Web Site www.dom.com Independent Registered Public Accounting Firm Deloitte & Touche LLP Richmond, Virginia Shareholder Inquiries [email protected]...

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    Dominion Resources P.O. Box 26532 Richmond, Virginia 23261-6532 www.dom.com