Dominion Power 2007 Annual Report Download - page 90

Notes to Consolidated Financial Statements, Continued
N OTE 15. R EGULATORY A SSETS AND
L IABILITIES
Our regulatory assets and liabilities include the following:
At December 31, 2007 2006
(millions)
Regulatory assets:
Unrecovered gas costs $63 $11
Regulatory assets—current(1) 63 11
Unrecognized pension and other postretirement
benefit costs(2) 272 135
Customer bad debts(3) 70 85
RTO start-up costs and administration fees(4) 103 74
Deferred cost of fuel used in electric generation(5) 386 72
Other postretirement benefit costs(6) 47 61
Income taxes recoverable through future rates(7) 30 46
Other 49 66
Regulatory assets—non-current 957 539
Total regulatory assets $1,020 $550
Regulatory liabilities:
Provision for future cost of removal(8) 623 577
Decommissioning trust(9) 487 13
Other(10) 116 31
Total regulatory liabilities $1,226 $621
(1) Reported in other current assets.
(2) Represents unrecognized pension and other postretirement benefit costs
expected to be recovered through future rates by certain of our rate-
regulated subsidiaries.
(3) Instead of recovering bad debt costs through our base rates, the Public
Utilities Commission of Ohio (Ohio Commission) allows us to recover
all eligible bad debt expenses through a bad debt tracker. Annually, we
assess the need to adjust the tracker based on the preceding year’s
unrecovered deferred bad debt expense. The Ohio Commission also has
authorized the collection of previously deferred costs associated with cer-
tain uncollectible customer accounts from 2001 over five years, begin-
ning in July 2004 through the tracker rider. Remaining costs to be
recovered totaled $15 million at December 31, 2007.
(4) FERC has conditionally authorized our deferral of start-up costs incurred
in connection with joining an RTO and ongoing administrative fees
paid to PJM. We have deferred $87 million in start-up costs and admin-
istration fees and $16 million of associated carrying costs. We expect
recovery from Virginia jurisdictional retail customers to commence at the
end of the Virginia retail rate cap period, subject to regulatory approval.
(5) As discussed under Virginia Fuel Expenses in Note 24, in June 2007,
the Virginia Commission approved a fuel factor increase of approx-
imately $219 million, effective July 1, 2007, with the balance of
approximately $443 million to be deferred and subsequently recovered,
without interest, during the period commencing July 1, 2008, and end-
ing June 30, 2011.
(6) Costs recognized in excess of amounts included in regulated rates charged
by our regulated gas operations before rates were updated to reflect a new
method of accounting and the cost related to the accrued benefit obliga-
tion recognized as part of accounting for our acquisition of CNG.
(7) Income taxes recoverable through future rates resulting from the recog-
nition of additional deferred income taxes, not recognized under rate-
making practices.
(8) Rates charged to customers by our regulated businesses include a provi-
sion for the cost of future activities to remove assets that are expected to
be incurred at the time of retirement.
(9) Primarily reflects a regulatory liability established in 2007 representing
amounts previously collected from Virginia jurisdictional customers and
placed in external trusts (including income, losses and changes in fair
valuethereon)forthefuturedecommissioning of our utility nuclear gen-
eration stations, in excess of amounts recorded pursuant to SFAS No.
143.
(10) Includes $3 million and $7 million reported in other current liabilities
in 2007 and 2006, respectively.
At December 31, 2007, approximately $659 million of our
regulatory assets represented past expenditures on which we do
not earn a return. These expenditures consist primarily of deferred
fuel costs, unrecovered gas costs, RTO start-up costs and admin-
istration fees, and customer bad debts. Unrecovered gas costs and
the ongoing portion of bad debts are recovered within two years.
Previously deferred bad debts will be recovered through 2009.
N OTE 16. A SSET R ETIREMENT O BLIGATIONS
Our AROs are primarily associated with the decommissioning of
our nuclear generation facilities. In addition, our AROs include
plugging and abandonment of gas and oil wells; interim retire-
ments of natural gas gathering, transmission, distribution and
storage pipeline components; and the future abatement of asbes-
tos in our generation facilities. These obligations result from cer-
tain safety and environmental activities we are required to
perform when any pipeline is abandoned or asbestos is disturbed.
We also have AROs related to the retirement of the gas stor-
age wells in our underground natural gas storage network, certain
electric transmission and distribution assets located on property
that we do not own, hydroelectric generation facilities and LNG
processing and storage facilities. We currently do not have suffi-
cient information to estimate a reasonable range of expected
retirement dates for any of these assets. Thus, AROs for these
assets will not be reflected in our Consolidated Financial State-
ments until sufficient information becomes available to determine
a reasonable estimate of the fair value of the activities to be per-
formed. Generally, this will occur when the expected retirement
or abandonment dates are determined by our operational plan-
ning. The changes to our AROs during 2007 were as follows:
Amount
(millions)
Asset retirement obligations at December 31, 2006(1) $1,932
Obligations incurred during the period 18
Obligations settled during the period (35)
Obligations relieved due to sale of non-Appalachian E&P
business (275)
Accretion 99
Other (2)
Asset retirement obligations at December 31, 2007(1) $1,737
(1) Includes $2 million and $15 million reported in other current liabilities
at December 31, 2006 and 2007, respectively.
We have established trusts dedicated to funding the future
decommissioning of our nuclear plants. At December 31, 2007
and 2006, the aggregate fair value of these trusts, consisting pri-
marily of debt and equity securities, totaled $2.9 billion and
$2.8 billion, respectively.
88 Dominion 2007 Annual Report