Dominion Power 2007 Annual Report Download - page 97

G OAL -B ASED S TOCK
Goal-based stock awards are generally granted to key non-officer
employees on an annual basis. Goal-based stock awards were also
granted in lieu of cash-based performance grants to certain offi-
cers who had not achieved a certain level of share ownership. The
issuance of awards is based on the achievement of multiple per-
formance metrics during a two-year period, including return on
invested capital and total shareholder return relative to that of a
peer group of companies. The actual number of shares issued will
vary between zero and 200% of targeted shares depending on the
level of performance metrics achieved. The fair value of goal-
based stock is equal to the market price of our stock on the date
of grant. These awards generally vest over a three-year service
period and are settled by issuing new shares. The following table
provides a summary of goal-based stock activity for the years
ended December 31, 2007 and 2006:
Targeted
Number of
Shares
Weighted-
average
Grant
Date Fair
Value
(thousands)
Nonvested at December 31, 2005 —$—
Granted 200 34.77
Vested ——
Cancelled and forfeited (6) 34.77
Nonvested at December 31, 2006 194 $34.77
Granted 160 44.24
Vested (32) 34.77
Cancelled and forfeited (33) 35.03
Nonvested at December 31, 2007 289 $39.16
At December 31, 2007, the targeted number of shares
expected to be issued under these awards was approximately 289
thousand. In January 2008, the CGN determined that the total
number of shares expected to be issued under the goal-based stock
awards is 359 thousand, based on the actual performance against
metrics, as amended in January 2008, established for those awards
whose performance period ended on December 31, 2007.
As of December 31, 2007, unrecognized compensation cost
related to nonvested goal-based stock awards totaled $8 million
and is expected to be recognized over a weighted-average period
of 1.5 years.
C
ASH -B ASED P ERFORMANCE G RANT
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.
Actual payout will vary between zero and 200% of the targeted
amount, depending on the level of performance metrics achieved.
At December 31, 2007, the targeted amount of the grant was $13
million, however the actual payout will be $18 million based on
the performance metrics achieved.
In April 2007, a cash-based performance grant was made to
officers. Payout of the performance grant will occur by March 15,
2009 and is based on the achievement of two performance met-
rics during 2007 and 2008: return on invested capital and total
shareholder return relative to that of a peer group of companies.
At December 31, 2007, 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 level of performance met-
rics achieved.
At December 31, 2007, a liability of $25 million has been
accrued for these awards.
N OTE 22. D IVIDEND R ESTRICTIONS
The Virginia Commission may prohibit any public service com-
pany, including Virginia Power, from declaring or paying a divi-
dend 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 with our credit facilities contain
restrictions on the ratio of our debt to total capitalization. These
limitations did not restrict our ability to pay dividends or receive
dividends from our subsidiaries at December 31, 2007.
See Note 19 for a description of potential restrictions on divi-
dend payments by us and certain of our subsidiaries in connection
with the deferral of distribution payments on trust preferred secu-
rities or interest payments on enhanced junior subordinated
notes.
N OTE 23. E MPLOYEE B ENEFIT P LANS
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 time to time in the past, benefits have changed, and some
of these changes have reduced benefits.
We maintain qualified noncontributory defined benefit pen-
sion plans covering virtually all employees. Retirement benefits
are based primarily 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 Security Act 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 funded through
contributions to a grantor 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.
In December 2003, the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (the Medicare Act)
was signed into law. The Medicare Act introduces a prescription
drug benefit under Medicare (Medicare Part D), as well as a
federal subsidy to sponsors of retiree health care benefit plans that
provide a benefit that is at least actuarially equivalent to Medicare
Part D. We have determined that the prescription drug benefit
offered under our other postretirement benefit plans is at least
actuarially equivalent to Medicare Part D and therefore, we expect
to receive the federal subsidy offered under the Medicare Act.
We use December 31 as the measurement date for all of our
employee benefit plans. We use the market-related value of pen-
sion plan assets to determine the expected return on pension plan
assets, a component of net periodic pension cost. The market-
Dominion 2007 Annual Report 95