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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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Commission File Number |
Exact name of registrants as specified in their charters |
I.R.S. Employer Identification Number |
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Virginia ELECTRIC AND POWER COMPANY |
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(State or other jurisdiction of incorporation or organization) |
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(Address of principal executive offices) |
(Zip Code) |
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( (Registrants’ telephone number) |
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Securities registered pursuant to Section 12(b) of the Act:
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Registrant |
Trading Symbol |
Title of Each Class |
Name of Each Exchange on Which Registered |
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DOMINION ENERGY, INC. |
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Securities registered pursuant to Section 12(g) of the Act:
VIRGINIA ELECTRIC AND POWER COMPANY
Common Stock, no par value
Indicate by check mark whether the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.
Dominion Energy, Inc.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Dominion Energy, Inc. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Dominion Energy, Inc.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Dominion Energy, Inc.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Dominion Energy, Inc.
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☒ |
Accelerated filer |
☐ |
Emerging growth company |
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Non-accelerated filer |
☐ |
Smaller reporting company |
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Virginia Electric and Power Company
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Large accelerated filer |
☐ |
Accelerated filer |
☐ |
Emerging growth company |
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☒ |
Smaller reporting company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Dominion Energy, Inc. Yes
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).
Dominion Energy, Inc. Yes
The aggregate market value of Dominion Energy, Inc. common stock held by non-affiliates of Dominion Energy was approximately $
DOCUMENT INCORPORATED BY REFERENCE
Portions of Dominion Energy’s 2022 Proxy Statement are incorporated by reference in Part III.
This combined Form 10-K represents separate filings by Dominion Energy, Inc. and Virginia Electric and Power Company. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Virginia Electric and Power Company makes no representations as to the information relating to Dominion Energy, Inc.’s other operations.
VIRGINIA ELECTRIC AND POWER COMPANY MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K AND IS FILING THIS FORM 10-K UNDER THE REDUCED DISCLOSURE FORMAT.
Dominion Energy, Inc. and Virginia Electric and Power Company
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Item Number |
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Page Number |
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3 |
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1. |
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10 |
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1A. |
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37 |
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1B. |
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46 |
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2. |
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47 |
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3. |
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52 |
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4. |
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52 |
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53 |
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5. |
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54 |
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6. |
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54 |
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7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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55 |
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7A. |
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78 |
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8. |
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80 |
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9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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207 |
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9A. |
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207 |
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9B. |
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210 |
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9C. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
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210 |
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10. |
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211 |
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11. |
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211 |
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12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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211 |
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13. |
Certain Relationships and Related Transactions, and Director Independence |
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211 |
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14. |
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211 |
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15. |
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213 |
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16. |
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219 |
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2
Glossary of Terms
The following abbreviations or acronyms used in this Form 10-K are defined below:
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Abbreviation or Acronym |
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Definition |
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2016 Equity Units |
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Dominion Energy’s 2016 Series A Equity Units issued in August 2016, initially in the form of 2016 Series A Corporate Units, consisting of a stock purchase contract and a 1/40 interest in RSNs issued by Dominion Energy |
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2017 Tax Reform Act |
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An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (previously known as The Tax Cuts and Jobs Act) enacted on December 22, 2017 |
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2019 Equity Units |
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Dominion Energy’s 2019 Series A Equity Units issued in June 2019, initially in the form of 2019 Series A Corporate Units, consisting of a stock purchase contract and a 1/10 interest in a share of the Series A Preferred Stock |
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2020 BLS Industry Average OSHA Recordable Rate |
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An average of the OSHA Recordable Rate for 2020 published by the Bureau of Labor Statistics for electric power generation, transmission and distribution (NAICS code 2211) and natural gas distribution (NAICS code 2212) |
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2021 Triennial Review |
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Virginia Commission review of Virginia Power’s earned return on base rate generation and distribution services for the four successive 12-month test periods beginning January 1, 2017 and ending December 31, 2020 |
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2022 Proxy Statement |
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Dominion Energy 2022 Proxy Statement, File No. 001-08489 |
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ABO |
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Accumulated benefit obligation |
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ACE Rule |
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Affordable Clean Energy Rule |
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AFUDC |
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Allowance for funds used during construction |
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Align RNG |
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Align RNG, LLC, a joint venture between Dominion Energy and Smithfield Foods, Inc. |
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Altavista |
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Altavista biomass power station |
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AMI |
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Advanced Metering Infrastructure |
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AOCI |
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Accumulated other comprehensive income (loss) |
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ARO |
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Asset retirement obligation |
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Atlantic Coast Pipeline |
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Atlantic Coast Pipeline, LLC, a limited liability company owned by Dominion Energy and Duke Energy |
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Atlantic Coast Pipeline Project |
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A previously proposed approximately 600-mile natural gas pipeline running from West Virginia through Virginia to North Carolina which would have been owned by Dominion Energy and Duke Energy |
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bcf |
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Billion cubic feet |
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bcfe |
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Billion cubic feet equivalent |
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Bear Garden |
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A 622 MW combined-cycle, natural gas-fired power station in Buckingham County, Virginia |
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BHE |
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The legal entity, Berkshire Hathaway Energy Company, one or more of its consolidated subsidiaries (including Dominion Energy Gas, Dominion Energy Midstream and Cove Point effective November 1, 2020), or the entirety of Berkshire Hathaway Energy Company and its consolidated subsidiaries |
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Birdseye |
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Birdseye Renewable Energy, LLC |
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Blue Racer |
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Blue Racer Midstream, LLC, a joint venture between Caiman Energy II, LLC and FR BR Holdings, LLC effective December 2018 |
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BP |
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BP Wind Energy North America Inc. |
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Brookfield |
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Brookfield Super-Core Infrastructure Partners, an infrastructure fund managed by Brookfield Asset Management Inc. |
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Brunswick County |
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A 1,376 MW combined-cycle, natural gas-fired power station in Brunswick County, Virginia |
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CAA |
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Clean Air Act |
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CAISO |
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California ISO |
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CAO |
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Chief Accounting Officer |
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CCR |
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Coal combustion residual |
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CCRO |
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Customer credit reinvestment offset |
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CEA |
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Commodity Exchange Act |
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CEO |
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Chief Executive Officer |
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CEP |
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Capital Expenditure Program, as established by House Bill 95, Ohio legislation enacted in 2011, deployed by East Ohio to recover certain costs associated with capital investment |
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CERCLA |
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Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as Superfund
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CFO |
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Chief Financial Officer |
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CH4 |
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Methane |
3
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Abbreviation or Acronym |
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Definition |
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Clearway |
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The legal entity, Clearway Energy, Inc. (a subsidiary of Global Infrastructure Partners), one or more of its consolidated subsidiaries, or the entirety of Clearway Energy, Inc. and its consolidated subsidiaries |
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CNG |
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Consolidated Natural Gas Company |
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CO2 |
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Carbon dioxide |
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Colonial Trail West |
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A 142 MW utility-scale solar power station located in Surry County, Virginia |
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Companies |
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Dominion Energy and Virginia Power, collectively |
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Contracted Assets |
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Contracted Assets operating segment |
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COO |
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Chief Operating Officer |
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Cooling degree days |
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Units measuring the extent to which the average daily temperature is greater than 65 degrees Fahrenheit, or 75 degrees Fahrenheit in DESC’s service territory, calculated as the difference between 65 or 75 degrees, as applicable, and the average temperature for that day |
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Cove Point |
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Cove Point LNG, LP (formerly known as Dominion Energy Cove Point LNG, LP) |
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Cove Point LNG Facility |
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An LNG import/export and storage facility, including the Liquefaction Facility, located on the Chesapeake Bay in Lusby, Maryland |
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CPCN |
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Certificate of Public Convenience and Necessity |
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CVOW Commercial Project |
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A proposed 2.6 GW wind generation facility 27 miles off the coast of Virginia Beach, Virginia in federal waters adjacent to the CVOW Pilot Project and associated interconnection facilities in and around Virginia Beach, Virginia |
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CVOW Pilot Project |
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A 12 MW wind generation facility 27 miles off the coast of Virginia Beach, Virginia in federal waters |
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CWA |
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Clean Water Act |
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DCP |
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The legal entity, CPMLP Holding Company, LLC (formerly known as Dominion Cove Point, LLC), one or more of its consolidated subsidiaries (including Dominion Energy Midstream), or the entirety of CPMLP Holding Company, LLC and its consolidated subsidiaries |
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DECGS |
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Carolina Gas Services, Inc. (formerly known as Dominion Energy Carolina Gas Services, Inc.) |
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DECP Holdings |
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The legal entity DECP Holdings, Inc., which holds Dominion Energy’s noncontrolling interest in Cove Point |
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DEQPS |
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Dominion Energy Questar Pipeline Services, Inc. |
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DES |
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Dominion Energy Services, Inc. |
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DESC |
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The legal entity, Dominion Energy South Carolina, Inc., one or more of its consolidated entities or operating segment, or the entirety of Dominion Energy South Carolina, Inc. and its consolidated entities |
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DETI |
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Eastern Gas Transmission and Storage, Inc. (formerly known as Dominion Energy Transmission, Inc.) |
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DGI |
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Dominion Generation, Inc. |
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DGP |
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Eastern Gathering and Processing, Inc. (formerly known as Dominion Gathering and Processing, Inc.) |
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DMLPHCII |
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Eastern MLP Holding Company II, LLC (formerly known as Dominion MLP Holding Company II, LLC) |
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Dodd-Frank Act |
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The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 |
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DOE |
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U.S. Department of Energy |
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Dominion Energy |
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The legal entity, Dominion Energy, Inc., one or more of its consolidated subsidiaries (other than Virginia Power) or operating segments, or the entirety of Dominion Energy, Inc. and its consolidated subsidiaries |
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Dominion Energy Direct® |
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A dividend reinvestment and open enrollment direct stock purchase plan |
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Dominion Energy Gas |
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The legal entity, Eastern Energy Gas Holdings, LLC (formerly known as Dominion Energy Gas Holdings, LLC), one or more of its consolidated subsidiaries (consisting of DETI, DCP, DMLPHCII and Dominion Iroquois), or the entirety of Eastern Energy Gas Holdings, LLC and its consolidated subsidiaries |
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Dominion Energy Gas Restructuring |
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The acquisition of DCP and DMLPHCII from, and the disposition of East Ohio and DGP to, Dominion Energy by Dominion Energy Gas on November 6, 2019 |
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Dominion Energy Midstream |
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The legal entity, Northeast Midstream Partners, LP (formerly known as Dominion Energy Midstream Partners, LP), one or more of its consolidated subsidiaries, or the entirety of Northeast Midstream Partners, LP and its consolidated subsidiaries |
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Dominion Energy Questar |
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The legal entity, Dominion Energy Questar Corporation, one or more of its consolidated subsidiaries (other than Dominion Energy Gas, effective November 2019), or the entirety of Dominion Energy Questar Corporation and its consolidated subsidiaries |
4
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Abbreviation or Acronym |
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Definition |
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Dominion Energy Questar Pipeline |
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The legal entity, Dominion Energy Questar Pipeline, LLC, one or more of its consolidated subsidiaries (including its 50% noncontrolling interest in White River Hub), or the entirety of Dominion Energy Questar Pipeline, LLC and its consolidated subsidiaries |
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Dominion Energy South Carolina |
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Dominion Energy South Carolina operating segment |
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Dominion Energy Virginia |
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Dominion Energy Virginia operating segment |
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Dominion Iroquois |
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The legal entity Iroquois Inc. (formerly known as Dominion Iroquois Inc.), one or more of its consolidated subsidiaries, or the entirety of Iroquois, Inc. and its consolidated subsidiaries, which held a 50% noncontrolling interest in Iroquois |
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Dominion Privatization |
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Dominion Utility Privatization, LLC, a partnership between Dominion Energy and Patriot |
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DSM |
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Demand-side management |
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DSM Riders |
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Rate adjustment clauses, designated Riders C1A, C2A, C3A and C4A, associated with the recovery of costs related to certain Virginia DSM programs approved in DSM cases |
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Dth |
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Dekatherm |
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Duke Energy |
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The legal entity, Duke Energy Corporation, one or more of its consolidated subsidiaries, or the entirety of Duke Energy Corporation and its consolidated subsidiaries |
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Eagle Solar |
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Eagle Solar, LLC, a wholly-owned subsidiary of DGI |
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East Ohio |
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The East Ohio Gas Company, doing business as Dominion Energy Ohio |
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Energy Choice |
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Program authorized by the Ohio Commission which provides energy customers with the ability to shop for energy options from a group of suppliers certified by the Ohio Commission |
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EnergySolutions |
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EnergySolutions, LLC |
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EPA |
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U.S. Environmental Protection Agency |
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EPACT |
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Energy Policy Act of 2005 |
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EPS |
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Earnings per common share |
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ERISA |
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Employee Retirement Income Security Act of 1974 |
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ESA Excess Tax Benefits |
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Endangered Species Act Benefits of tax deductions in excess of the compensation cost recognized for stock-based compensation |
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FASB |
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Financial Accounting Standards Board |
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FERC |
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Federal Energy Regulatory Commission |
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FILOT |
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Fee in lieu of taxes |
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Fitch |
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Fitch Ratings Ltd. |
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Four Brothers |
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Four Brothers Solar, LLC, a limited liability company owned by Dominion Energy (through December 2021) and Four Brothers Holdings, LLC, a subsidiary of Clearway |
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Fowler Ridge |
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Fowler I Holdings LLC, a wind-turbine facility in Benton County, Indiana |
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FTRs |
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Financial transmission rights |
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GAAP |
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U.S. generally accepted accounting principles |
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Gas Distribution |
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Gas Distribution operating segment |
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GENCO |
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South Carolina Generating Company, Inc. |
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GHG |
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Greenhouse gas |
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Granite Mountain |
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Granite Mountain Holdings, LLC, a limited liability company owned by Dominion Energy (through December 2021) and Granite Mountain Renewables, LLC, a subsidiary of Clearway |
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Grassfield Solar |
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An approximate 20 MW utility-scale solar power station under development in Chesapeake, Virginia |
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Green Mountain |
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Green Mountain Power Corporation |
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Greensville County |
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A 1,629 MW combined-cycle, natural gas-fired power station in Greensville County, Virginia |
5
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Abbreviation or Acronym |
|
Definition |
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GT&S Transaction |
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The sale by Dominion Energy to BHE of Dominion Energy Gas, DGP, DECGS, Eastern Energy Field Services, Inc. (formerly known as Dominion Energy Field Services, Inc.) and Modular LNG Holdings, Inc. (formerly known as Dominion Modular LNG Holdings, Inc.) (which holds a 50% noncontrolling interest in JAX LNG) pursuant to a purchase and sale agreement entered into on July 3, 2020, which was completed on November 1, 2020 |
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GTSA |
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Virginia Grid Transformation and Security Act of 2018 |
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GW |
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Gigawatt |
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Heating degree days |
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Units measuring the extent to which the average daily temperature is less than 65 degrees Fahrenheit, or 60 degrees Fahrenheit in DESC’s service territory, calculated as the difference between 65 or 60 degrees, as applicable, and the average temperature for that day |
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Hope |
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Hope Gas, Inc., doing business as Dominion Energy West Virginia |
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Hopewell |
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Polyester biomass power station |
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Idaho Commission |
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Idaho Public Utilities Commission |
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Iron Springs |
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Iron Springs Holdings, LLC, a limited liability company owned by Dominion Energy (through December 2021) and Iron Springs Renewables, LLC, a subsidiary of Clearway |
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Iroquois |
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Iroquois Gas Transmission System, L.P. |
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IRS |
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Internal Revenue Service |
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ISO |
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Independent system operator |
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ISO-NE |
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ISO New England |
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JAX LNG |
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JAX LNG, LLC, an LNG supplier in Florida serving the marine and LNG markets |
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Jones Act |
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The Coastwise Merchandise Statute (commonly known as the Jones Act) 46 U.S.C. §55102 regulating U.S. maritime commerce |
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July 2016 hybrids |
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Dominion Energy’s 2016 Series A Enhanced Junior Subordinated Notes due 2076 |
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June 2006 hybrids |
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Dominion Energy’s 2006 Series A Enhanced Junior Subordinated Notes due 2066 |
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Kewaunee |
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Kewaunee nuclear power station |
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kV |
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Kilovolt |
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LIBOR |
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London Interbank Offered Rate |
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LIFO |
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Last-in-first-out inventory method |
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Liquefaction Facility |
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A natural gas export/liquefaction facility at the Cove Point LNG Facility |
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LNG |
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Liquefied natural gas |
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LTIP |
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Long-term incentive program |
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Massachusetts Municipal |
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Massachusetts Municipal Wholesale Electric Company |
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mcfe |
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Thousand cubic feet equivalent |
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MD&A |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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MGD |
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Million gallons per day |
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Millstone |
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Millstone nuclear power station |
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Millstone 2019 power purchase agreements |
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Power purchase agreements with Eversource Energy and The United Illuminating Company for Millstone to provide nine million MWh per year of electricity for ten years |
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Moody’s |
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Moody’s Investors Service |
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Mtpa |
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Million metric tons per annum |
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MW |
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Megawatt |
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MWh |
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Megawatt hour |
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N2O |
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Nitrous oxide |
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Natural Gas Rate Stabilization Act |
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Legislation effective February 2005 designed to improve and maintain natural gas service infrastructure to meet the needs of customers in South Carolina |
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NAV |
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Net asset value |
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NEIL |
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Nuclear Electric Insurance Limited |
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NERC |
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North American Electric Reliability Corporation |
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NGL |
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Natural gas liquid |
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NND Project |
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V.C. Summer Units 2 and 3 nuclear development project under which DESC and Santee Cooper undertook to construct two Westinghouse AP1000 Advanced Passive Safety nuclear units in Jenkinsville, South Carolina |
6
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Abbreviation or Acronym |
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Definition |
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Norge Solar |
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An approximate 20 MW utility-scale solar power station under development in James City County, Virginia |
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North Anna |
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North Anna nuclear power station |
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North Carolina Commission |
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North Carolina Utilities Commission |
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NOX |
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Nitrogen oxide |
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NRC |
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U.S. Nuclear Regulatory Commission |
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NRG |
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The legal entity, NRG Energy, Inc., one or more of its consolidated subsidiaries (including, effective November 2016 through August 2018, Four Brothers Holdings, LLC, Granite Mountain Renewables, LLC and Iron Springs Renewables, LLC) or operating segments, or the entirety of NRG Energy, Inc. and its consolidated subsidiaries |
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NWP 12 |
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A nationwide permit from the Army Corps of Engineers authorizing activities required for the construction, maintenance, repair and removal of utility lines, including electric transmission, gas pipelines, water and communications conduit and associate facilities in waters of the U.S. |
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NYSE |
|
New York Stock Exchange |
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October 2014 hybrids |
|
Dominion Energy’s 2014 Series A Enhanced Junior Subordinated Notes due 2054 |
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ODEC |
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Old Dominion Electric Cooperative |
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Ohio Commission |
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Public Utilities Commission of Ohio |
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Order 1000 |
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Order issued by FERC adopting requirements for electric transmission planning, cost allocation and development |
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OSHA Recordable Rate |
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Number of recordable cases, as defined by the Occupational Health and Safety Administration, a division of the U.S. Department of Labor, for every 100 employees over the course of a year |
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Patriot |
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Patriot Utility Privatizations, LLC, a partnership between Foundation Infrastructure Partners, LLC and John Hancock Life Insurance Company (U.S.A.) and affiliates |
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PHMSA |
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Pipeline and Hazardous Materials Safety Administration |
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PIR |
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Pipeline Infrastructure Replacement program deployed by East Ohio |
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PJM |
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PJM Interconnection, LLC |
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PREP |
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Pipeline Replacement and Expansion Program, a program of replacing, upgrading and expanding natural gas utility infrastructure deployed by Hope |
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PSD |
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Prevention of significant deterioration |
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PSNC |
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Public Service Company of North Carolina, Incorporated, doing business as Dominion Energy North Carolina |
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Q-Pipe Group |
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Collectively, Dominion Energy Questar Pipeline, DEQPS and QPC Holding Company, LLC (including its subsidiary Questar Southern Trails Pipeline Company) |
|
Q-Pipe Transaction |
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A previously proposed sale by Dominion Energy to BHE of the Q-Pipe Group pursuant to a purchase and sale agreement entered into on October 5, 2020 and terminated on July 9, 2021 |
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Questar Gas |
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Questar Gas Company, doing business as Dominion Energy Utah, Dominion Energy Wyoming and Dominion Energy Idaho |
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RCC |
|
Replacement Capital Covenant |
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Regulation Act |
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Legislation effective July 1, 2007, that amended the Virginia Electric Utility Restructuring Act and fuel factor statute, which legislation is also known as the Virginia Electric Utility Regulation Act, as amended in 2015 and 2018 |
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RGGI |
|
Regional Greenhouse Gas Initiative |
|
RICO |
|
Racketeer Influenced and Corrupt Organizations Act |
|
Rider B |
|
A rate adjustment clause associated with the recovery of costs related to the conversion of three of Virginia Power’s coal-fired power stations to biomass |
|
Rider BW |
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A rate adjustment clause associated with the recovery of costs related to Brunswick County |
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Rider CCR |
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A rate adjustment clause associated with the recovery of costs related to the removal of CCR at certain power stations |
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Rider CE |
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A rate adjustment clause associated with the recovery of costs related to certain renewable generation facilities in Virginia |
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Rider D |
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A rate mechanism which allows PSNC to recover from customers all prudently incurred gas costs and certain uncollectible expenses as well as losses on negotiated gas and transportation sales |
|
Rider E |
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A rate adjustment clause associated with the recovery of costs related to certain capital projects at Virginia Power’s electric generating stations to comply with federal and state environmental laws and regulations |
|
Rider GT |
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A rate adjustment clause associated with the recovery of costs associated with electric distribution grid transformation projects that the Virginia Commission has approved as authorized by the GTSA |
|
Rider GV |
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A rate adjustment clause associated with the recovery of costs related to Greensville County |
7
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Abbreviation or Acronym |
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Definition |
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Rider R |
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A rate adjustment clause associated with the recovery of costs related to Bear Garden |
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Rider OSW |
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A rate adjustment clause associated with costs incurred to construct, own and operate the CVOW Commercial Project |
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Rider RGGI |
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A rate adjustment clause associated with the recovery of costs related to the purchase of allowances through the RGGI market-based trading program for CO2 |
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Rider RPS |
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A rate adjustment clause associated with the recovery of costs related to the mandatory renewable portfolio standard program established by the VCEA |
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Rider S |
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A rate adjustment clause associated with the recovery of costs related to the Virginia City Hybrid Energy Center |
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Rider SNA |
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A rate adjustment clause associated with costs relating to the preparation of the applications for subsequent license renewal to the NRC to extend the operating licenses of Surry and North Anna and related projects |
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Rider T1 |
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A rate adjustment clause to recover the difference between revenues produced from transmission rates included in base rates, and the new total revenue requirement developed annually for the rate years effective September 1 |
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Rider U |
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A rate adjustment clause associated with the recovery of costs of new underground distribution facilities |
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Rider US-2 |
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A rate adjustment clause associated with the recovery of costs related to Woodland Solar, Scott Solar and Whitehouse Solar |
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Rider US-3 |
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A rate adjustment clause associated with the recovery of costs related to Colonial Trail West and Spring Grove 1 |
|
|
Rider US-4 |
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A rate adjustment clause associated with the recovery of costs related to Sadler Solar |
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Rider W |
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A rate adjustment clause associated with the recovery of costs related to Warren County |
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ROE |
|
Return on equity |
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ROIC |
|
Return on invested capital |
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RSN |
|
Remarketable subordinated note |
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RTEP |
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Regional transmission expansion plan |
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RTO |
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Regional transmission organization |
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Sadler Solar |
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A 100 MW utility-scale solar power station located in Greensville County, Virginia, also referred to as Dry Bread |
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SAFSTOR |
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A method of nuclear decommissioning, as defined by the NRC, in which a nuclear facility is placed and maintained in a condition that allows the facility to be safely stored and subsequently decontaminated to levels that permit release for unrestricted use |
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SAIDI |
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System Average Interruption Duration Index, metric used to measure electric service reliability |
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Santee Cooper |
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South Carolina Public Service Authority |
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SBL Holdco |
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SBL Holdco, LLC, a wholly-owned subsidiary of DGI through December 2021 |
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SCANA |
|
The legal entity, SCANA Corporation, one or more of its consolidated subsidiaries, or the entirety of SCANA Corporation and its consolidated subsidiaries
|
|
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SCANA Combination |
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Dominion Energy’s acquisition of SCANA completed on January 1, 2019 pursuant to the terms of the agreement and plan of merger entered on January 2, 2018 between Dominion Energy and SCANA |
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SCANA Merger Approval Order |
|
Final order issued by the South Carolina Commission on December 21, 2018 setting forth its approval of the SCANA Combination |
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SCDOR |
|
South Carolina Department of Revenue |
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Scope 1 emissions |
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Emissions that are produced directly by an entity’s own operations |
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Scope 2 emissions |
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Emissions from electricity a company consumes but does not generate from its own facilities |
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Scope 3 emissions |
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Emissions generated downstream of company operations by customers and upstream by suppliers |
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Scott Solar |
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A 17 MW utility-scale solar power station in Powhatan County, Virginia |
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SEC |
|
U.S. Securities and Exchange Commission |
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SEMI |
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SCANA Energy Marketing, Inc. |
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September 2006 hybrids |
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Dominion Energy’s 2006 Series B Enhanced Junior Subordinated Notes due 2066 |
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SERC |
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Southeast Electric Reliability Council |
|
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Series A Preferred Stock |
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Dominion Energy’s 1.75% Series A Cumulative Perpetual Convertible Preferred Stock, without par value, with a liquidation preference of $1,000 per share |
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Series B Preferred Stock |
|
Dominion Energy’s 4.65% Series B Fixed-Rate Cumulative Redeemable Perpetual Preferred Stock, without par value, with a liquidation preference of $1,000 per share |
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Series C Preferred Stock |
|
Dominion Energy’s 4.35% Series C Fixed-Rate Cumulative Redeemable Perpetual Preferred Stock, without par value, with a liquidation preference of $1,000 per share |
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SF6 |
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Sulfur hexafluoride |
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SO2 |
|
Sulfur dioxide |
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South Carolina Commission |
|
Public Service Commission of South Carolina |
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|
Abbreviation or Acronym |
|
Definition |
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Southampton |
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Southampton biomass power station |
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Southern |
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The legal entity, The Southern Company, one or more of its consolidated subsidiaries, or the entirety of The Southern Company and its consolidated subsidiaries |
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Southwest Gas |
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The legal entity, Southwest Gas Holdings, Inc., one or more of its consolidated subsidiaries, or the entirety of Southwest Gas Holdings, Inc. and its consolidated subsidiaries |
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Spring Grove 1 |
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A 98 MW utility-scale solar power station located in Surry County, Virginia |
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Standard & Poor’s |
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Standard & Poor’s Ratings Services, a division of S&P Global Inc. |
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Summer |
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V.C. Summer nuclear power station |
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Supply Header Project |
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A project previously intended for DETI to provide approximately 1,500,000 Dths of firm transportation service to various customers in connection with the Atlantic Coast Pipeline Project |
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Surry |
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Surry nuclear power station |
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Sycamore Solar |
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An approximate 42 MW utility-scale solar power station under development in Pittsylvania County, Virginia |
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Terra Nova Renewable Partners |
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The legal entity, Terra Nova Renewable Partners, LLC, a partnership comprised primarily of institutional investors advised by J.P. Morgan Asset Management-Global Real Assets, or one or more of its consolidated subsidiaries |
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Three Cedars |
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Granite Mountain and Iron Springs, collectively |
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TSR |
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Total shareholder return |
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UEX Rider |
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Uncollectible Expense Rider deployed by East Ohio |
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Ullico |
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The legal entity, Ullico Inc., one or more of its consolidated subsidiaries, or the entirety of Ullico Inc. and its consolidated subsidiaries |
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Utah Commission |
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Utah Public Service Commission |
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VCEA |
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Virginia Clean Economy Act of March 2020 |
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VEBA |
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Voluntary Employees’ Beneficiary Association |
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VIE |
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Variable interest entity |
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Virginia City Hybrid Energy Center |
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A 610 MW baseload carbon-capture compatible, clean coal powered electric generation facility in Wise County, Virginia |
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Virginia Commission |
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Virginia State Corporation Commission |
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Virginia Facilities |
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Proposed electric interconnection and transmission facilities in and around Virginia Beach, Virginia, comprising transmission facilities required to interconnect the CVOW Commercial Project reliably with the existing transmission system; including 3 miles of 230 kV offshore export circuits, 4 miles of underground 230 kV onshore export circuits, a new Harpers switching station, 14 miles of three new overhead 230 kV transmission circuits between a new Harpers switching station and the Fentress substation, rebuild eight miles of two existing 230 kV overhead lines and an expansion of the Fentress substation |
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Virginia Power |
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The legal entity, Virginia Electric and Power Company, one or more of its consolidated subsidiaries or operating segment, or the entirety of Virginia Electric and Power Company and its consolidated subsidiaries |
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VOC |
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Volatile organic compounds |
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Warren County |
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A 1,349 MW combined-cycle, natural gas-fired power station in Warren County, Virginia |
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WECTEC |
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WECTEC Global Project Services, Inc., a wholly-owned subsidiary of Westinghouse |
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West Virginia Commission |
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Public Service Commission of West Virginia |
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Westinghouse |
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Westinghouse Electric Company LLC |
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Wexpro |
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The legal entity, Wexpro Company, one or more of its consolidated subsidiaries, or the entirety of Wexpro Company and its consolidated subsidiaries |
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Wexpro Agreement |
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An agreement which sets forth the rights of Questar Gas to receive certain benefits from Wexpro’s operations, including cost-of-service gas |
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Wexpro II Agreement |
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An agreement with the states of Utah and Wyoming modeled after the Wexpro Agreement that allows for the addition of properties under the cost-of-service methodology for the benefit of Questar Gas customers |
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Whitehouse Solar |
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A 20 MW utility-scale solar power station in Louisa County, Virginia |
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White River Hub |
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White River Hub, LLC |
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Wisconsin Commission |
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Public Services Commission of Wisconsin |
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Woodland Solar |
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A 19 MW utility-scale solar power station in Isle of Wight County, Virginia |
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WP&L |
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Wisconsin Power and Light Company, a subsidiary of Alliant Energy Corporation |
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WPSC |
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Wisconsin Public Service Corporation, a subsidiary of WEC Energy Group |
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Wrangler |
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Wrangler Retail Gas Holdings, LLC, a partnership between Dominion Energy and Interstate Gas Supply, Inc. |
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Wyoming Commission |
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Wyoming Public Service Commission |
9
Part I
Item 1. Business
GENERAL
Dominion Energy, headquartered in Richmond, Virginia and incorporated in Virginia in 1983, is one of the nation’s largest producers and distributors of energy. Dominion Energy is committed to safely delivering sustainable, reliable and affordable energy and achieving net zero carbon and methane emissions by 2050. Dominion Energy’s strategy is to be a leading sustainable provider of electricity, natural gas and related services to customers primarily in the eastern and Rocky Mountain regions of the U.S. As of December 31, 2021, Dominion Energy’s portfolio of assets includes approximately 30.2 GW of electric generating capacity, 10,700 miles of electric transmission lines, 78,000 miles of electric distribution lines and 95,700 miles of gas distribution mains and related service facilities, which are supported by 6,000 miles of gas transmission, gathering and storage pipeline. As of December 31, 2021, Dominion Energy operates in 13 states and serves approximately 7 million customers.
Dominion Energy continues to focus on expanding and improving its regulated and long-term contracted electric and natural gas utility businesses while transitioning to a cleaner energy future. Its growth capital expenditure plan for 2022 through 2026 includes a focus on upgrading the electric system in Virginia through investments in additional renewable generation facilities, strategic undergrounding and energy conservation programs. Renewable generation facilities are expected to include significant investments in utility-scale solar and offshore wind projects. In addition, Dominion Energy has either received or applied for license extensions for its regulated nuclear power stations in Virginia. Other drivers for the growth capital plan include renewable natural gas initiatives and the replacement and modernization of gas distribution pipeline. Dominion Energy also plans to continue upgrading its gas and electric transmission and distribution networks while also meeting environmental requirements and standards set by various regulatory bodies.
Dominion Energy has continued its transition to a more state-regulated earnings mix as evidenced by its capital investments in regulated infrastructure, the SCANA Combination, the completed sale of substantially all of its gas transmission and storage operations and the divestiture of interests in certain nonregulated generating facilities and natural gas gathering and processing investments. Dominion Energy expects approximately 90% of earnings from its primary operating segments to come from state-regulated electric and natural gas utility businesses. Dominion Energy’s nonregulated operations consist of primarily long-term contracted electric generation operations and its investment in Cove Point. Dominion Energy’s operations are conducted through various subsidiaries, including SCANA and Virginia Power.
SCANA, which operates as a wholly-owned subsidiary of Dominion Energy, is primarily engaged in the generation, transmission and distribution of electricity in the central, southern and southwestern portions of South Carolina and in the distribution of natural gas in North Carolina and South Carolina. DESC, a wholly-owned subsidiary of SCANA, is consolidated by Dominion Energy and is an SEC registrant. However, its Form 10-K is filed separately and is not combined herein.
Virginia Power, headquartered in Richmond, Virginia and incorporated in Virginia in 1909 as a Virginia public service corporation, is a wholly-owned subsidiary of Dominion Energy and a regulated public utility that generates, transmits and distributes electricity for sale in Virginia and North Carolina. In Virginia, Virginia Power conducts business under the name “Dominion Energy Virginia” and primarily serves retail customers. In North Carolina, it conducts business under the name “Dominion Energy North Carolina” and serves retail customers located in the northeastern region of the state, excluding certain municipalities. In addition, Virginia Power sells and transmits electricity at wholesale prices to rural electric cooperatives, municipalities and into wholesale electricity markets. All of Virginia Power’s stock is owned by Dominion Energy.
Amounts and information disclosed for Dominion Energy are inclusive of Virginia Power, where applicable.
WHERE YOU CAN FIND MORE INFORMATION ABOUT THE COMPANIES
The Companies file their annual, quarterly and current reports, proxy statements and other information with the SEC. Their SEC filings are available to the public over the Internet at the SEC’s website at http://www.sec.gov.
The Companies make their SEC filings, including the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, available, free of charge, through Dominion Energy’s website, http://www.dominionenergy.com, as soon as reasonably practicable after filing or furnishing the material to the SEC. We also make available on the “Investors” page of our website additional information which may be important to investors, such as investor presentations, earnings release kits and other materials and presentations. Information contained on Dominion Energy’s website, including but not limited to reports mentioned in Environmental Strategy, is not incorporated by reference in this report.
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ACQUISITIONS AND DISPOSITIONS
The following acquisitions and divestitures within the last three years are considered significant to the Companies.
Gas Transmission and Storage Operations
Sales to BHE and Southwest Gas
In November 2020, Dominion Energy completed the GT&S Transaction with BHE for approximately $2.7 billion in cash proceeds and the assumption by BHE of approximately $5.3 billion of related long-term debt.
In December 2021, Dominion Energy completed the sale of the Q-Pipe Group to Southwest Gas for approximately $1.5 billion in cash proceeds and the assumption by Southwest Gas of $430 million of related long-term debt.
See Note 3 to the Consolidated Financial Statements for additional information.
Acquisition of Interest in Atlantic Coast Pipeline and Pivotal LNG, Inc.
In March 2020, Dominion Energy completed the acquisition from Southern of its 5% membership interest in Atlantic Coast Pipeline and its 100% ownership interest in Pivotal LNG, Inc., for $184 million in aggregate, plus certain purchase price adjustments. See Note 9 to the Consolidated Financial Statements for additional information, including the cancellation of the Atlantic Coast Pipeline Project. Pivotal LNG, Inc. was included within the GT&S Transaction and sold to BHE in November 2020.
Purchase of Dominion Energy Midstream Units
In January 2019, Dominion Energy acquired all outstanding partnership interests of Dominion Energy Midstream not owned by Dominion Energy through the issuance of 22.5 million shares of Dominion Energy common stock. See Note 20 to the Consolidated Financial Statements for additional information. Dominion Energy Midstream was included within the GT&S Transaction and sold to BHE in November 2020.
Sale of Interest in Cove Point
In December 2019, Dominion Energy completed the sale of a 25% noncontrolling interest in Cove Point to Brookfield in exchange for cash consideration of $2.1 billion, subject to working capital adjustments. See Note 3 to the Consolidated Financial Statements for additional information.
In addition, a 25% controlling interest in Cove Point was included within the GT&S Transaction and sold to BHE in November 2020.
SCANA
In January 2019, Dominion Energy and SCANA completed a stock-for-stock merger valued at $13.4 billion, inclusive of SCANA’s outstanding debt, which totaled $6.9 billion at closing. SCANA operates as a wholly-owned subsidiary of Dominion Energy. See Note 3 to the Consolidated Financial Statements for additional information.
Hope
In February 2022, Dominion Energy entered into an agreement to sell 100% of the equity interests in Hope to Ullico for $690 million in cash consideration, subject to customary closing adjustments. This transaction is expected to close by the end of 2022, contingent on clearance or approval under the Hart-Scott-Rodino Act and from the West Virginia Commission, and other customary closing and regulatory conditions. See Note 3 to the Consolidated Financial Statements for additional information.
Electric Generation Facilities
Acquisition of Virginia Power Solar Projects
In 2019 through 2021, Virginia Power entered into and completed the acquisitions of several primarily early-stage solar development projects in Virginia, including both non-jurisdictional facilities and those expected to be recovered under Rider CE.
In 2021, Virginia Power entered into and completed the acquisitions of various solar development projects in Virginia. These projects are expected to cost a total of approximately $1.3 billion once constructed, including initial acquisition costs, and generate approximately 697 MW combined.
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In 2020, Virginia Power entered into and completed the acquisition of various solar development projects in Virginia. These projects are expected to cost a total of approximately $560 million once constructed, including initial acquisition costs, and generate approximately 282 MW combined.
In 2019, Virginia Power entered into agreements to acquire various solar development projects in Virginia, with the acquisitions completed in 2019 and 2020. These projects are expected to cost a total of approximately $760 million once constructed, including initial acquisition costs, and generate approximately 448 MW combined.
See Notes 10 and 13 to the Consolidated Financial Statements for additional information.
Acquisition of Nonregulated Solar Projects
In 2020, Dominion Energy entered into agreements and completed the acquisition of various nonregulated solar projects in Ohio, South Carolina and Virginia with one project expected to close in 2022. These projects are expected to cost a total of approximately $730 million once constructed, including the initial acquisition cost, and generate approximately 398 MW combined.
In 2019, Dominion Energy completed the acquisition of various nonregulated solar projects in North Carolina, South Carolina and Virginia. These projects cost $415 million to construct, including the initial acquisition cost, and generate approximately 242 MW combined.
See Note 10 to the Consolidated Financial Statements for additional information.
Sale of Non-Wholly-Owned Nonregulated Solar Facilities
In 2021, Dominion Energy completed the sale of SBL Holdco, which held Dominion Energy’s remaining 67% controlling interest in certain nonregulated solar projects, to Terra Nova Renewable Partners for cash proceeds of $209 million and the assumption by Terra Nova Renewable Partners of $265 million of related long-term debt.
In 2021, Dominion Energy completed the sale of its remaining 50% controlling interest in Four Brothers and Three Cedars to Clearway for cash proceeds of $331 million.
See Note 10 to the Consolidated Financial Statements for additional information.
Equity Method Investments
Acquisition of Interest in Wrangler
In December 2019, Dominion Energy acquired a 20% noncontrolling interest in Wrangler along with $301 million in cash as part of its initial contribution of certain retail energy marketing operations. In November 2020, Dominion Energy completed the second contribution consisting of certain retail energy natural gas contracts, receiving $74 million in cash and maintaining its 20% noncontrolling interest in Wrangler. In December 2021, Dominion Energy completed the final contribution consisting of its remaining nonregulated natural gas retail energy marketing operations and receiving $127 million in cash.
See Note 9 to the Consolidated Financial Statements for additional information.
Expected Acquisition of Interest in Dominion Privatization
In February 2022, Dominion Energy entered into an agreement to form Dominion Privatization, a partnership with Patriot. Dominion Energy expects to contribute its existing privatization operations, excluding contracts held by DESC, in South Carolina, Texas, Pennsylvania and Virginia for cash proceeds totaling $168 million, subject to customary closing adjustments, and a 50% noncontrolling ownership interest in Dominion Privatization following closing of the contributions expected to occur by the end of 2022, contingent on clearance or approval under the Hart-Scott-Rodino Act and other customary closing and regulatory conditions.
See Note 9 to the Consolidated Financial Statements for additional information.
HUMAN CAPITAL
One of Dominion Energy's greatest strengths is its employees and Dominion Energy is committed to providing them with a safe, diverse and inclusive workplace. The ability to attract, develop and retain a diverse workforce is integral to the long-term success of Dominion Energy. At December 31, 2021, Dominion Energy had approximately 17,100 full-time employees, of which approximately 4,700 are subject to collective bargaining agreements, including approximately 6,000 full-time employees at Virginia Power, of which approximately 2,500 are subject to collective bargaining agreements.
Safety is the highest priority of Dominion Energy’s five core values with the fundamental goal to send every employee home safe and sound every day. In 2021, Dominion Energy experienced an OSHA Recordable Rate of 0.46 compared to 0.41 in 2020. These rates reflect Dominion Energy’s dedication to safety when compared to a 2020 BLS Industry Average OSHA Recordable Rate of 1.5. As
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evidence of Dominion Energy’s commitment to safety, annual incentive plans for all employees, except as restricted by any collective bargaining agreements, include a safety performance measure. Furthermore, Dominion Energy has been proactive in protecting its workforce during the global COVID-19 pandemic by establishing safety protocols, including requirements to wear face coverings and maintain physical distancing as well as new procedures for enhanced cleaning and temperature screening, adapting its approach as the pandemic has evolved. Dominion Energy also facilitated telecommuting and hybrid work options for many employees and expanded paid time off and other benefits to help employees cope with disruptions caused by the pandemic.
Dominion Energy works to recruit, retain and develop the careers of talented individuals who reflect the communities it serves. To cultivate this diversified workforce, Dominion Energy focuses on workforce diversity and inclusion while fostering an environment where employees can utilize their unique strengths, skills, personalities and life experiences. In October 2020, Dominion Energy announced its commitment to increase workforce diversity by 1% annually until it achieves at least 40% diverse representation. During 2021, Dominion Energy increased diverse representation within its workforce from 34.6% to 35.4%. For the purposes of measuring diversity, Dominion Energy includes non-minority female, minority male, minority female and undeclared female. In 2021 and 2020, the percentage of new hires that are diverse was 56% and 50%, respectively. Dominion Energy sponsors eight employee resource groups to support and reinforce its culture of inclusiveness by enabling employees with shared interests and backgrounds to work together to create community, provide networking opportunities and encourage professional development. The employee resource groups are aligned to support various forms of diversity and inclusion, including gender, sexual orientation, gender identity and expression, race, veteran status, age, ability and cultural heritage. To further advance these initiatives, annual incentive plans for all employees, except as restricted by any collective bargaining agreements, include a performance measure for participation in diversity and inclusion training.
Dominion Energy attracts and retains its employees by offering competitive compensation and benefits packages, including healthcare, retirement, paid time off, parental leave and other benefits. Dominion Energy also offers a variety of training and development opportunities for all employees with the goal to provide a consistent and progressive approach to training that engages the workforce and fosters a culture of learning. To this end, Dominion Energy offers continuous learning opportunities including tuition assistance programs, professional development resources, access to a career center and a self-guided training program for independent learning as well as leadership development programs. These resources and programs are designed not only to engage and retain talented employees but also to allow Dominion Energy to meet the needs of its customers in an ever-changing industry with a skilled workforce.
CYBERSECURITY
In an effort to reduce the likelihood and severity of cyber intrusions, the Companies have a comprehensive cybersecurity program designed to protect and preserve the confidentiality, integrity and availability of data and systems, including oversight by the Board of Directors as well as the finance and risk oversight board committee. The Companies are subject to mandatory cybersecurity regulatory requirements, interface regularly with a wide range of external organizations and participate in classified briefings to maintain an awareness of current cybersecurity threats and vulnerabilities. The Companies’ current security posture and regulatory compliance efforts are intended to address the evolving and changing cyber threats. See Item 1A. Risk Factors for discussion of related risks.
OPERATING SEGMENTS
Dominion Energy manages its daily operations through four primary operating segments: Dominion Energy Virginia, Gas Distribution, Dominion Energy South Carolina and Contracted Assets. See Note 26 to the Consolidated Financial Statements for a summary description of operations within each of the four primary operating segments. Dominion Energy also reports a Corporate and Other segment, which includes its corporate, service companies and other functions (including unallocated debt) as well as Dominion Energy’s noncontrolling interest in Wrangler. Corporate and Other includes specific items attributable to Dominion Energy’s operating segments that are not included in profit measures evaluated by executive management in assessing the operating segments’ performance or in allocating resources. In addition, Corporate and Other includes the net impact of discontinued operations consisting of Dominion Energy’s gas transmission and storage operations as discussed in Note 3 to the Consolidated Financial Statements and its equity investment in Atlantic Coast Pipeline as discussed in Note 9 to the Consolidated Financial Statements.
Virginia Power manages its daily operations through its primary operating segment: Dominion Energy Virginia. It also reports a Corporate and Other segment that primarily includes specific items attributable to its operating segments that are not included in profit measures evaluated by executive management in assessing the segment’s performance or in allocating resources.
While daily operations are managed through the operating segments previously discussed, assets remain wholly-owned by the Companies and their respective legal subsidiaries.
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DOMINION ENERGY VIRGINIA
The Dominion Energy Virginia Operating Segment is substantially composed of Virginia Power’s regulated electric transmission, distribution (including customer service) and generation (regulated electric utility and its related energy supply) operations, which serve approximately 2.7 million residential, commercial, industrial and governmental customers in Virginia and North Carolina.
Virginia Power’s growth capital plan includes spending approximately $27 billion from 2022 through 2026 to construct new generation capacity, including the CVOW Commercial Project, to meet its renewable generation targets and growing electricity demand within its service territory in order to maintain reliability and regulatory compliance and to upgrade or add new transmission lines, distribution lines, substations, and other facilities, as well as maintain existing generation capacity. The proposed infrastructure projects and investment commitments are intended to address both continued customer growth and increases in electricity consumption which are primarily driven by new and larger data center customers, as well as support its Subsequent License Renewal projects as it has received approval for or is seeking 20-year license extensions for the regulated nuclear fleet in Virginia. See Properties and Environmental Strategy for additional information on this and other utility projects.
Virginia Power has also created a ten-year plan through 2028 to transform its electric grid into a smarter, stronger and greener grid. This plan will address the structural limitations of Virginia Power’s distribution grid in a systematic manner in order to recognize and accommodate fundamental changes and requirements in the energy industry. The objective is to address both customer and system needs by (i) achieving even higher levels of reliability and resiliency against natural and man-made threats, (ii) leveraging technology to enhance the customer experience and improve the operation of the system and (iii) safely and effectively integrating new utility-scale renewable generation and storage as well as customer–level distributed energy resources such as rooftop solar and battery storage. The Virginia Commission has approved portions of this plan through 2023.
Revenue provided by electric distribution and generation operations is based primarily on rates established by the Virginia and North Carolina Commissions. Approximately 82% of revenue comes from serving Virginia jurisdictional customers. Base rates for the Virginia jurisdiction are set using a modified cost-of-service rate model, and are generally designed to allow an opportunity to recover the cost of providing utility service and earn a reasonable return on investments used to provide that service. Variability in earnings is driven primarily by changes in rates, weather, customer growth and other factors impacting consumption such as the economy and energy conservation, in addition to operating and maintenance expenditures. Electric operations continue to focus on improving service and experience levels while striving to reduce costs and link investments to operational results. SAIDI performance results, excluding major events, were 141 minutes for the three-year average ending 2021, down from the previous three-year average of 146 minutes. This decrease is primarily due to decreased storm activity.
Earnings may also reflect variations in the timing or nature of expenses as compared to those contemplated in current rates, such as labor and benefit costs, capacity expenses, the timing, duration and costs of scheduled and unscheduled outages as well as certain customers’ ability to choose a generation service provider. The cost of fuel and purchased power is generally collected through fuel cost-recovery mechanisms established by regulators and does not materially impact net income. The cost of new generation facilities is generally recovered through riders in Virginia. Variability in earnings from riders reflects changes in the authorized ROE and the carrying amount of these facilities, which are largely driven by the timing and amount of capital investments, as well as depreciation. See Note 13 to the Consolidated Financial Statements for additional information.
Revenue provided by Virginia Power’s electric transmission operations is based primarily on rates approved by FERC. The profitability of this business is dependent on its ability, through the rates it is permitted to charge, to recover costs and earn a reasonable ROIC. Variability in earnings primarily results from changes in rates and the timing of property additions, retirements and depreciation.
Virginia Power is a member of PJM, an RTO, and its electric transmission facilities are integrated into PJM wholesale electricity markets. Consistent with the increased authority given to NERC by EPACT, Virginia Power is committed to meeting NERC standards, modernizing its infrastructure and maintaining superior system reliability with respect to its electric transmission operations.
Competition
There is no competition for electric distribution service within Virginia Power’s service territory in Virginia and North Carolina and no such competition is currently permitted. Historically, since its electric transmission facilities are integrated into PJM and electric transmission services are administered by PJM, there was no competition in relation to transmission service provided to customers within the PJM region. However, competition from non-incumbent PJM transmission owners for development, construction and ownership of certain transmission facilities in Virginia Power’s service territory is permitted pursuant to Order 1000, subject to state and local siting and permitting approvals. This could result in additional competition to build and own transmission infrastructure in Virginia Power’s service area in the future and could allow Dominion Energy to seek opportunities to build and own facilities in other service territories. Additionally, there is some competition for Virginia Power’s generation operations for Virginia jurisdictional electric utility customers that meet certain size requirements or that currently are purchasing energy from competitive suppliers deemed to be 100% renewable by the Virginia Commission. See Electric under State Regulations in Regulation for more information. Currently, North Carolina does not offer retail choice to electric customers.
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Virginia Power’s non-jurisdictional operations are not currently subject to significant competition as the output from these facilities is primarily sold under long-term power purchase agreements with terms generally ranging from 16 to 25 years. However, in the future, such operations may compete with other power generation facilities to serve certain large-scale customers after the power purchase agreements expire.
Regulation
Virginia Power’s electric distribution and generation operations, including the rates it may charge to jurisdictional customers, as well as wholesale electric transmission rates, tariffs and terms of service, are subject to regulation by the Virginia and North Carolina Commissions as well as FERC, the NRC, the EPA, the DOE and the Army Corps of Engineers. See State Regulations and Federal Regulations in Regulation, Future Issues and Other Matters in Item 7. MD&A and Notes 13 and 23 to the Consolidated Financial Statements for additional information.
Properties
For a description of existing facilities see Item 2. Properties.
In September 2019, Virginia Power filed applications with PJM for the CVOW Commercial Project and for certain approvals and rider recovery from the Virginia Commission in November 2021. The total cost of the project is estimated to be approximately $10 billion, excluding financing costs. Virginia Power’s estimate for the 2.6 GW project’s projected levelized cost of energy is approximately $80-90/MWh. Following a competitive procurement process, Virginia Power has entered into fixed price contracts for the major offshore construction and equipment components. The contracts include services denominated in currencies other than the U.S. dollar for approximately €2.6 billion and 5.1 billion kr., which have been included within the cost estimate above based on a spot price from the third quarter of 2021. In addition, certain of the fixed price contracts, approximately €0.7 billion, contain commodity indexing provisions linked to steel. As a result, any changes in applicable exchange rates or commodity indices could result in a change to the ultimate cost of the project. Virginia Power is evaluating hedging strategies, subject to approval by the Virginia Commission, to mitigate such risk. In December 2021, Virginia Power filed an application with the Virginia Commission for approval of a lease contract with an affiliated entity for the use of a Jones Act compliant offshore wind installation vessel currently under development. The proposed lease is expected to begin in August 2025 with a total cost of approximately $240 million. Virginia Power has completed the conceptual design phase for the project’s onshore electric transmission facilities and selected a recommended route with consideration given for resiliency and minimizing environmental impacts. Any changes to the onshore route necessitated by the receipt of various permitting approvals could result in upward pressure on the estimated cost of the project. Upon receiving approvals from the Virginia Commission and other permitting entities, Virginia Power anticipates commencing major construction activities in 2023 and the project is expected to be placed in service by the end of 2026. Virginia Power expects to incur approximately 80% of the project costs from 2023 through 2025. Through December 31, 2021, Virginia Power had incurred approximately $290 million of costs. Virginia Power anticipates funding the project consistent with its approved debt to equity capitalization structure. The project is vital for Virginia Power to meet the renewable energy portfolio standard established in the VCEA and is consistent with the criteria within the VCEA for the construction of an offshore wind facility deemed to be in the public interest as well as the guidelines facilitating cost recovery. See additional discussion of the VCEA provisions concerning renewable generation projects in Note 13 to the Consolidated Financial Statements.
In addition, Virginia Power is developing, financing and constructing new generation capacity as well as seeking license extensions on zero carbon generation facilities to meet its renewable generation targets and growing electricity demand within its service territory. Significant projects under construction or development as well as significant projects under consideration are set forth below:
|
• |
Virginia Power plans to invest approximately $6.8 billion from 2022 to 2026 to acquire or construct several solar facilities totaling approximately 3.4 GW of expected generating capacity when placed in service. Virginia Power has projects under various stages of development which, as of December 31, 2021, represent a potential generating capacity of approximately 4.8 GW. The facilities include both those to serve utility and non-jurisdictional customers. See Notes 10 and 13 to the Consolidated Financial Statements for more information. |
|
• |
To support its development of solar generation facilities serving utility customers, Virginia Power plans to invest approximately $0.6 billion from 2022 to 2026 to acquire or construct multiple battery storage facilities in Virginia, totaling approximately 309 MW of expected storage capacity when placed in service. Virginia Power has projects under various stages of development which, as of December 31, 2021, represent a potential storage capacity of approximately 1.1 GW. See Note 13 to the Consolidated Financial Statements for more information. |
|
• |
Virginia Power has received a 20-year extension of the operating licenses for its two units at Surry and has commenced the process to extend the operating licenses for its two nuclear units at North Anna. See Nuclear Decommissioning below for more information on these facilities. |
15
|
• |
Virginia Power continues to consider the construction of a third nuclear unit at a site located at North Anna. See Future Issues and Other Matters in Item 7 for more information on this project. |
|
• |
Virginia Power is considering the construction of a hydroelectric pumped storage facility in Southwest Virginia. |
|
• |
Virginia Power is considering the construction of simple cycle combustion turbines in Virginia for reliability purposes. |
Virginia Power continues to invest in transmission projects that are a part of PJM’s RTEP process which focus on reliability improvements and replacement of aging infrastructure. The projects that have been authorized by PJM are expected to result in capital expenditures of approximately $1.6 billion from 2022 through 2026.
Virginia Power is investing in transmission substation physical security and expects to invest an additional $100 million to $150 million through 2026 to strengthen its electrical system to better protect critical equipment, enhance its spare equipment process and create multiple levels of security.
Virginia legislation provides for the recovery of costs, subject to approval by the Virginia Commission, for Virginia Power to move approximately 4,000 miles of electric distribution lines underground. The program is designed to reduce restoration outage time by moving Virginia Power’s most outage-prone overhead distribution lines underground, has an annual investment cap of approximately $175 million and is expected to be completed by 2028. The Virginia Commission has approved five phases of the program encompassing approximately 1,672 miles of converted lines and $728 million in capital spending (with $706 million recoverable through Rider U).
See Note 13 to the Consolidated Financial Statements for more information.
Investments
In February 2022, Dominion Energy entered into an agreement to form Dominion Privatization, a partnership with Patriot. Dominion Energy expects to contribute its existing privatization operations, excluding contracts held by DESC, in South Carolina, Texas, Pennsylvania and Virginia for cash proceeds totaling $168 million, subject to customary closing adjustments, and a 50% noncontrolling ownership interest in Dominion Privatization following closing of the contributions expected to occur by the end of 2022, contingent on clearance or approval under the Hart-Scott-Rodino Act and other customary closing and regulatory conditions.
See Note 9 to the Consolidated Financial Statements for additional information.
Sources of Energy Supply
Virginia Power uses a variety of fuels to power its electric generation fleet and purchases power for utility system load requirements and to satisfy physical forward sale requirements. Some of these agreements have fixed commitments and are detailed further in Fuel and Other Purchase Commitments in Item 7. MD&A.
Presented below is a summary of Virginia Power’s actual system output by energy source:
|
Source |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
|||
|
Natural gas |
|
|
40 |
|
% |
|
48 |
|
% |
|
41 |
|
% |
|
Nuclear(1) |
|
|
29 |
|
|
|
32 |
|
|
|
29 |
|
|
|
Purchased power, net |
|
|
17 |
|
|
|
7 |
|
|
|
17 |
|
|
|
Coal(2) |
|
|
9 |
|
|
|
9 |
|
|
|
8 |
|
|
|
Renewable and Hydro(3) |
|
|
5 |
|
|
|
4 |
|
|
|
5 |
|
|
|
Total |
|
|
100 |
|
% |
|
100 |
|
% |
|
100 |
|
% |
|
|
(1) |
Excludes ODEC’s 11.6% undivided ownership interest in North Anna. |
|
|
(2) |
Excludes ODEC’s 50.0% undivided ownership interest in the Clover power station. |
|
|
(3) |
Includes solar and biomass. |
Nuclear Fuel—Virginia Power primarily utilizes long-term contracts to support its nuclear fuel requirements. Worldwide market conditions are continuously evaluated to ensure a range of supply options at reasonable prices which are dependent on the market environment. Current agreements, inventories and spot market availability are expected to support current and planned fuel supply needs. Additional fuel is purchased as required to ensure optimal cost and inventory levels.
16
Fossil Fuel— Virginia Power primarily utilizes natural gas and coal in its fossil fuel plants. All recent fossil fuel plant construction involves natural gas generation.
Virginia Power’s natural gas and oil supply is obtained from various sources including purchases from major and independent producers in the Mid-Continent and Gulf Coast regions, purchases from local producers in the Appalachian area and Marcellus and Utica regions, purchases from gas marketers and withdrawals from underground storage fields owned by third parties. Virginia Power manages a portfolio of natural gas transportation contracts (capacity) that provides for reliable natural gas deliveries to its gas turbine fleet, while minimizing costs.
Virginia Power’s coal supply is obtained through long-term contracts and short-term spot agreements from domestic suppliers.
Biomass— Virginia Power’s biomass supply is obtained through long-term contracts and short-term spot agreements from local suppliers.
Purchased Power— Virginia Power purchases electricity from the PJM spot market and through power purchase agreements with other suppliers to provide for utility system load requirements.
Seasonality
Virginia Power’s earnings vary seasonally as a result of the impact of changes in temperature, the impact of storms and other catastrophic weather events, and the availability of alternative sources for heating on demand by residential and commercial customers. Generally, the demand for electricity peaks during the summer and winter months to meet cooling and heating needs, respectively. An increase in heating degree days for Virginia Power’s electric utility-related operations does not produce the same increase in revenue as an increase in cooling degree days, due to seasonal pricing differentials and because alternative heating sources are more readily available.
Nuclear Decommissioning
Virginia Power has a total of four licensed, operating nuclear reactors at Surry and North Anna in Virginia.
Decommissioning involves the decontamination and removal of radioactive contaminants from a nuclear power station once operations have ceased, in accordance with standards established by the NRC. Amounts collected from ratepayers have been placed into trusts and are invested to fund the expected future costs of decommissioning the Surry and North Anna units.
Virginia Power believes that the decommissioning funds and their expected earnings for the Surry and North Anna units will be sufficient to cover expected decommissioning costs, particularly when combined with future ratepayer collections and contributions to these decommissioning trusts, if such future collections and contributions are required. This reflects the long-term investment horizon, since the units will not be decommissioned for decades, and a positive long-term outlook for trust fund investment returns. Virginia Power will continue to monitor these trusts to ensure they meet the NRC minimum financial assurance requirements, which may include, if needed, the use of parent company guarantees, surety bonding or other financial instruments recognized by the NRC.
The estimated cost to decommission Virginia Power’s four nuclear units is reflected in the table below and is primarily based upon site-specific studies completed in 2019. These cost studies are generally completed every four to five years. The current cost estimates assume decommissioning activities will begin shortly after cessation of operations, which will occur when the operating licenses expire.
Under the current operating licenses, Virginia Power is scheduled to decommission the Surry and North Anna units during the period 2038 to 2112. NRC regulations allow licensees to apply for extension of an operating license in up to 20-year increments. In 2021, Virginia Power was granted an additional 20 years for its operating licenses for the two units at Surry. Under these license extensions, the two units will be allowed to generate electricity through 2052 and 2053. In 2020, Virginia Power submitted a license renewal application for the two units at North Anna. Under this renewal application, the two units will be allowed to generate electricity through 2058 and 2060, if approved. Between the four units, Virginia Power estimates that it could spend approximately $4 billion through 2035 on capital improvements. The existing regulatory framework in Virginia provides rate recovery mechanisms for such costs.
17
The estimated decommissioning costs, funds in trust and current license expiration dates for Surry and North Anna are shown in the following table:
|
|
|
NRC license expiration year |
|
Most recent cost estimate (2021 dollars)(1) |
|
|
Funds in trusts at December 31, 2021(2) |
|
||
|
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
Surry |
|
|
|
|
|
|
|
|
|
|
|
Unit 1 |
|
2052 |
|
$ |
833 |
|
|
$ |
1,056 |
|
|
Unit 2 |
|
2053 |
|
|
824 |
|
|
|
1,040 |
|
|
North Anna |
|
|
|
|
|
|
|
|
|
|
|
Unit 1(3) |
|
2038 |
|
|
747 |
|
|
|
844 |
|
|
Unit 2(3) |
|
2040 |
|
|
751 |
|
|
|
794 |
|
|
Total |
|
|
|
$ |
3,155 |
|
|
$ |
3,734 |
|
|
(1) |
The cost estimates shown above reflect reductions for the expected future recovery of certain spent fuel costs based on Virginia Power’s contracts with the DOE for disposal of spent nuclear fuel consistent with the reductions reflected in Virginia Power’s nuclear decommissioning AROs and includes the expectation that 20-year license extensions are approved for both units at North Anna. |
|
(2) |
Virginia Power did not make any contributions to its nuclear decommissioning trust funds during 2021. |
|
(3) |
North Anna is jointly owned by Virginia Power (88.4%) and ODEC (11.6%). However, Virginia Power is responsible for 89.26% of the decommissioning obligation. Amounts reflect 89.26% of the decommissioning cost for both of North Anna’s units. |
Also see Notes 14 and 23 to the Consolidated Financial Statements for further information about AROs and nuclear decommissioning, respectively, and Note 9 to the Consolidated Financial Statements for information about nuclear decommissioning trust investments.
GAS DISTRIBUTION
The Gas Distribution Operating Segment of Dominion Energy includes Dominion Energy’s regulated natural gas sales, transportation, gathering, storage and distribution operations in Ohio, West Virginia, North Carolina, Utah, southwestern Wyoming and southeastern Idaho (through East Ohio, Hope, PSNC and Questar Gas) which collectively serve approximately 3.1 million residential, commercial and industrial customers. Gas Distribution also includes nonregulated renewable natural gas facilities in operation and under development, including Dominion Energy’s investment in Align RNG. See Investments below for additional information regarding the Align RNG investment.
Gas Distribution’s growth capital plan includes spending approximately $5 billion from 2022 through 2026 to upgrade existing or add new infrastructure to meet growing energy needs and retain reliability within its service territory as well as investments in renewable natural gas infrastructure projects. Planned capital spending is driven by infrastructure needs from a growing customer base in states with expanding economies, replacing aging assets for reliability, safety and sustainability and meeting demands for natural gas to support the transition from more carbon intensive fuels.
Earnings for the Gas Distribution Operating Segment of Dominion Energy primarily result from rates established by the Ohio, West Virginia, North Carolina, Utah, Wyoming and Idaho Commissions. The profitability of these businesses is dependent on their ability, through the rates they are permitted to charge, to recover costs and earn a reasonable return on their capital investments. Variability in earnings primarily results from changes in operating and maintenance expenditures, as well as changes in rates and the economy, including customer growth.
Competition
Questar Gas and Hope do not currently face direct competition from other distributors of natural gas for residential and commercial customers in their service territories as state regulations in Utah, Wyoming and Idaho for Questar Gas, and West Virginia for Hope, do not allow customers to choose their provider at this time. See State Regulations in Regulation for additional information.
East Ohio offers an Energy Choice program, under which residential customers are encouraged to purchase gas directly from retail suppliers or through a community aggregation program and have it delivered by East Ohio. At December 31, 2021, approximately 1.1 million of East Ohio’s 1.2 million Ohio customers were participating in the Energy Choice program.
Competition in PSNC’s natural gas distribution operations is generally based on price and convenience. Large commercial and industrial customers often have the ability to switch from natural gas to an alternate fuel, such as propane or fuel oil. Natural gas competes with these alternate fuels based on price. As a result, any significant disparity between supply and demand, either of natural gas or of alternate fuels, and due either to production or delivery disruptions or other factors, will affect price and the ability to retain large commercial and industrial customers.
18
In all of Dominion Energy’s gas service territories, electric utilities offer electricity as a rival energy source and compete for the space heating, water heating and cooking markets. The principal means to compete against alternative fuels is lower prices, and natural gas historically has maintained its price advantage in the residential and commercial markets. Competition for heating as well as general household and small commercial energy needs generally occurs at the initial installation phase when the customer or builder makes the decision as to which types of equipment to install. As a result, customers tend to use their chosen energy source for the life of the equipment.
Regulation
Gas Distribution’s operations, including the rates that it may charge customers, are regulated by the Ohio, West Virginia, North Carolina, Utah, Wyoming and Idaho Commissions as well as PHMSA and the U.S. Department of Transportation. See Federal Regulations and State Regulations in Regulation for more information.
Properties
For a description of existing facilities see Item 2. Properties.
Dominion Energy has the following significant projects under construction or development to better serve utility customers or expand its service offerings within its utility service territory as well as to support its strategy to achieve net zero emissions.
East Ohio—In 2008, East Ohio began PIR, aimed at replacing approximately 25% of its pipeline system. In September 2016, the Ohio Commission approved a stipulation filed jointly by East Ohio and the Staff of the Ohio Commission to continue the PIR program and associated cost recovery for another five-year term beginning in 2017, and to permit East Ohio to increase its annual capital expenditures to $200 million by 2018 with a 3% increase per year thereafter subject to the annual cost recovery rate increase caps proposed by East Ohio. In December 2020, East Ohio filed an application with the Ohio Commission to extend the PIR program for an additional five years with continuation of 3% increases per year. See Note 13 to the Consolidated Financial Statements for further information.
In 2011, East Ohio began CEP which enables East Ohio to defer depreciation expense, property tax expense and carrying costs on capital investments not covered by its PIR program to expand, upgrade or replace its pipeline system and information technology systems as well as investments necessary to comply with the Ohio Commission or other government regulation. See Note 13 to the Consolidated Financial Statements for further information.
Questar Gas— In 2010, Questar Gas began replacing aging high pressure infrastructure under a cost-tracking mechanism that allows it to place into rate base and earn a return on capital expenditures associated with a multi-year natural gas infrastructure-replacement program upon the completion of each project. As part of the 2019 Utah base rate case, the Utah Commission approved an annual spending budget of $72 million for the replacement program, to be adjusted annually for inflation.
In 2018, legislation became effective in Utah which is designed to spur economic growth in rural communities without natural gas service. Pursuant to its 2019 Utah base rate case, Questar Gas is permitted to spend up to $70 million over the three years, and up to $174 million over five years, for expansion of distribution facilities to bring natural gas to residential and commercial customers in rural parts of Utah, as approved by the Utah Commission.
The Utah Commission has provided approval for Questar Gas to construct an LNG storage facility with a liquefaction rate of 8.2 million cubic feet per day. The project is expected to cost approximately $210 million, excluding financing costs, and is anticipated to be placed into service in late 2022.
PSNC—The North Carolina Commission has authorized PSNC to use a tracker mechanism to recover the incurred capital investment and associated costs of complying with federal standards for pipeline integrity and safety requirements that are not in current base rates. Projected integrity management plan investment, excluding the costs associated with the project noted below, for the period 2021 to 2023 is expected to be approximately $111 million.
During 2020, construction began on 11 miles of transmission pipeline in Buncombe County, NC. After an analysis was performed under the integrity management program, the new transmission line was deemed necessary to offset the capacity losses on the existing line due to lower pressure being utilized in order to meet federal safety requirements. The project is expected to cost approximately $55 million and had approximately 10 miles placed into service in December 2021 with the remaining portion anticipated to be placed into service in late 2022.
19
Non-Utility Renewable Natural Gas—In December 2019, Dominion Energy announced the formation of a strategic alliance with Vanguard Renewables in collaboration with the Dairy Farmers of America to capture methane from dairy farms and convert it into pipeline quality natural gas. In August 2021, Dominion Energy announced an expansion of the partnership, increasing its commitment up to $1 billion. During 2020 and 2021 construction began on seven dairy renewable natural gas facilities located in Colorado, Nevada, Idaho, Georgia and Texas expected to be placed in service in 2022 and 2023 with an estimated total cost of approximately $345 million, excluding financing costs.
Investments
Align RNG—In November 2018, Dominion Energy announced the formation of Align RNG, an equal partnership with Smithfield Foods, Inc. Align RNG expects to invest $500 million to develop assets to capture methane from swine farms across Virginia, North Carolina, Utah, Arizona and California and convert it into pipeline quality natural gas. In July 2020, Align RNG placed its first project, located in Milford, UT, in service and the project produced 11,200 Dths of renewable natural gas through December 31, 2020. In 2021, the project produced 39,800 Dths of renewable natural gas. Currently, Align RNG has three additional projects under construction in North Carolina, Arizona and Virginia with an estimated total cost of approximately $150 million. These facilities are expected to be placed in service by the end of 2022.
Sources of Energy Supply
Dominion Energy’s natural gas supply is obtained from various sources including purchases from major and independent producers in the Mid-Continent and Gulf Coast regions, local producers in the Appalachian area, gas marketers and, for Questar Gas specifically, from Wexpro and other producers in the Rocky Mountain region. Wexpro’s gas development and production operations serve over half of Questar Gas’ gas supply requirements in accordance with the Wexpro Agreement and the Wexpro II Agreement, comprehensive agreements with the states of Utah and Wyoming.
Seasonality
Gas Distribution’s customer demand varies seasonally as a result of the impact of changes in temperature on demand by residential and commercial customers for gas to meet heating needs. Accordingly, customer demand is highest during the heating season which is generally from November to March; however, implementation of rate mechanisms for transportation services for East Ohio, and gas sales for Questar Gas and PSNC mitigate the earnings impact of weather-related fluctuations.
DOMINION ENERGY SOUTH CAROLINA
The Dominion Energy South Carolina Operating Segment is comprised of DESC’s generation, transmission and distribution of electricity to approximately 772,000 customers in the central, southern and southwestern portions of South Carolina and the distribution of natural gas to approximately 419,000 residential, commercial and industrial customers in South Carolina.
DESC’s growth capital plan includes spending approximately $2 billion from 2022 through 2026 to upgrade existing or add new infrastructure to meet growing energy needs within its service territory and maintain reliability.
Revenue provided by DESC’s electric distribution operations is based primarily on rates established by the South Carolina Commission. Variability in earnings is driven primarily by changes in rates, weather, customer growth and other factors impacting consumption such as the economy and energy conservation, in addition to operating and maintenance expenditures.
DESC’s electric transmission operations serve its electric distribution operations as well as certain wholesale customers. Revenue provided by such electric transmission operations is based on a FERC-approved formula rate mechanism under DESC’s open access transmission tariff or based on retail rates established by the South Carolina Commission.
Revenue provided by DESC’s electric generation operations is primarily derived from the sale of electricity generated by its utility generation assets and is based on rates established by the South Carolina Commission. Variability in earnings may arise when revenues are impacted by factors not reflected in current rates, such as the impact of weather, customer demand or the timing and nature of expenses or outages. Electric operations continue to focus on improving service and experience levels while striving to reduce costs and link investments to operational results. SAIDI performance results, excluding major events, were 82 minutes for the three-year average ending 2021, compared to the previous three-year average of 87 minutes.
Revenue provided by DESC’s natural gas distribution operations primarily results from rates established by the South Carolina Commission. Variability in earnings results from changes in operating and maintenance expenditures, as well as changes in rates and the demand for services, the availability and prices of alternative fuels and the economy.
20
DESC is a member of the Virginia-Carolinas Reliability Group, one of several geographic divisions within the SERC. The SERC is one of seven regional entities with delegated authority from NERC for the purpose of proposing and enforcing reliability standards approved by NERC.
Competition
There is no competition for electric distribution or generation service within DESC’s retail electric service territory in South Carolina and no such competition is currently permitted. However, competition from third-party owners for development, construction and ownership of certain transmission facilities in DESC’s service territory is permitted pursuant to Order 1000, subject to state and local siting and permitting approvals. This could result in additional competition to build and own transmission infrastructure in DESC’s service area in the future.
Competition in DESC’s natural gas distribution operations is generally based on price and convenience. Large commercial and industrial customers often have the ability to switch from natural gas to an alternate fuel, such as propane or fuel oil. Natural gas competes with these alternate fuels based on price. As a result, any significant disparity between supply and demand, either of natural gas or of alternate fuels, and due either to production or delivery disruptions or other factors, will affect price and the ability to retain large commercial and industrial customers.
Regulation
DESC’s electric distribution service, including the rates it may charge to jurisdictional customers, is subject to regulation by the South Carolina Commission. DESC’s electric generation operations are subject to regulation by the South Carolina Commission, FERC, the NRC, the EPA, the DOE and various other federal, state and local authorities. DESC’s electric transmission service is primarily regulated by FERC and the DOE. DESC’s gas distribution operations are subject to regulation by the South Carolina Commission, as well as PHMSA, the U.S. Department of Transportation and the South Carolina Office of Regulatory Staff for enforcement of federal and state pipeline safety requirements. See State Regulations and Federal Regulations in Regulation for more information.
Properties
For a description of existing facilities see Item 2. Properties.
DESC has the following significant projects under construction or development to better serve customers or expand its service offerings within its service territory:
In 2020, DESC began the upgrade of its electric and gas systems to an AMI whereby smart meters will be installed throughout its service area. As of December 31, 2021, DESC has completed the installation of approximately 550,000 of the planned 1.1 million smart meters. This project is estimated to cost approximately $140 million and be completed in mid-2023.
DESC continues to develop electric transmission projects which commenced in 2020 in connection with two new nuclear plants under development by Southern. These transmission projects are required to be in place prior to these plants beginning operations to maintain reliability. These projects, costing approximately $75 million in aggregate, were scheduled to be placed in service in phases through 2022. Approximately 65 miles have been completed through December 2021 with the remaining approximately 23 miles scheduled to be completed by the end of 2022.
In January 2022, DESC committed to a plan to retire certain existing gas combustion turbine facilities, including certain units which currently do not have any net summer capability, and replace them with new gas combustion turbine units at the Williams and Parr facilities to increase reliability and reduce emissions. The replacement facilities are expected to be placed in service by the end of 2025 at an estimated cost of approximately $310 million, excluding financing costs, and have a total winter generating capacity of approximately 171 MW.
21
Sources of Energy Supply
DESC uses a variety of fuels to power its electric generation fleet and purchases power for utility system load requirements. Presented below is a summary of DESC’s actual system output by energy source:
|
Source |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
|||
|
Natural gas |
|
|
49 |
|
% |
|
47 |
|
% |
|
46 |
|
% |
|
Coal |
|
|
20 |
|
|
|
22 |
|
|
|
27 |
|
|
|
Nuclear(1) |
|
|
20 |
|
|
|
20 |
|
|
|
23 |
|
|
|
Renewable and Hydro(2) |
|
|
11 |
|
|
|
11 |
|
|
|
4 |
|
|
|
Total |
|
|
100 |
|
% |
|
100 |
|
% |
|
100 |
|
% |
|
(1) |
Excludes Santee Cooper’s 33.3% undivided ownership interest in Summer. |
|
(2) |
Includes solar. |
Natural gas— DESC purchases natural gas under contracts with producers and marketers on both a short-term and long-term basis at market-based prices. The gas is delivered to South Carolina through firm transportation agreements with various counterparties, which expire between 2022 and 2084.
Coal— DESC primarily obtains coal through short-term and long-term contracts with suppliers located in eastern Kentucky, Tennessee, Virginia and West Virginia that will expire at various times throughout 2022 and 2023. Spot market purchases may occur when needed or when prices are believed to be favorable.
Nuclear— DESC primarily utilizes long-term contracts to support its nuclear fuel requirements. DESC, for itself and as agent for Santee Cooper, and Westinghouse are parties to a fuel alliance agreement and contracts for fuel fabrication and related services. Under these contracts, DESC supplies enriched products to Westinghouse, who in turn supplies nuclear fuel assemblies for Summer. Westinghouse is DESC’s exclusive provider of such fuel assemblies on a cost-plus basis. The fuel assemblies to be delivered under the contracts are expected to supply the nuclear fuel requirements through 2033.
In addition, DESC has contracts covering its nuclear fuel needs for uranium, conversion services and enrichment services. These contracts have varying expiration dates through 2024. DESC believes that it will be able to renew these contracts as they expire or enter into similar contractual arrangements with other suppliers of nuclear fuel materials and services and that sufficient capacity for nuclear fuel supplies and processing exists to allow for normal operations of its nuclear generating unit. Current agreements, inventories and spot market availability are expected to support current and planned fuel supply needs. Additional fuel is purchased as required to ensure optimal fuel and inventory levels.
Seasonality
DESC’s electric distribution and transmission business earnings vary seasonally as a result of the impact of changes in temperature, the impact of storms and other catastrophic weather events and the availability of alternative sources for heating on demand by residential and commercial customers. Generally, the demand for electricity peaks during the summer and winter months to meet cooling and heating needs, respectively. An increase in heating degree days does not produce the same increase in revenue as an increase in cooling degree days, due to seasonal pricing differentials and because alternative heating sources are more readily available.
DESC’s gas distribution and storage business earnings vary seasonally as a result of the impact of changes in temperature on demand by residential and commercial customers for gas to meet heating needs. The majority of these earnings are generated during the heating season, which is generally from November to March; however, South Carolina has certain rate mechanisms designed to reduce the impact of weather-related fluctuations.
Nuclear Decommissioning
DESC has a two-thirds interest in one licensed, operating nuclear reactor at Summer in South Carolina.
Decommissioning involves the decontamination and removal of radioactive contaminants from a nuclear power station once operations have ceased, in accordance with standards established by the NRC. Amounts collected from ratepayers are placed into trusts and are invested to fund the expected future costs of decommissioning Summer.
22
DESC believes that the decommissioning funds and their expected earnings will be sufficient to cover expected decommissioning costs, particularly when combined with future ratepayer collections and contributions to this trust. DESC will continue to monitor this trust to ensure that it meets the NRC minimum financial assurance requirements, which may include, if needed, the use of Dominion Energy guarantees, surety bonding or other financial instruments recognized by the NRC.
The estimated cost to DESC to decommission its 66.7% ownership in Summer is reflected in the table below and is primarily based upon site-specific studies completed in 2020. These cost studies are generally completed every four to five years. Santee Cooper is responsible for the remaining decommissioning costs, proportionate with its 33.3% ownership in Summer. The cost estimates assume decommissioning activities will begin shortly after cessation of operations, which will occur when the operating license expires. NRC regulations allow licensees to apply for extension of an operating license in up to 20-year increments. DESC expects to apply for an operating license renewal for Summer.
The estimated decommissioning costs, funds in trust and current license expiration dates for Summer are shown in the following table:
|
|
|
NRC license expiration year |
|
Most recent cost estimate (2021 dollars)(1) |
|
|
Funds in trusts at December 31, 2021(2) |
|
||
|
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
Summer – Unit 1 |
|
2042 |
|
$ |
764 |
|
|
$ |
256 |
|
|
|
(1) |
The cost estimates shown above reflect reductions for the expected future recovery of certain spent fuel costs based on DESC’s contracts with the DOE for disposal of spent nuclear fuel consistent with the reductions reflected in DESC’s nuclear decommissioning AROs and includes the expectation that a 20-year license extension is obtained. |
|
|
(2) |
Excludes any funds held in trust by Santee Cooper. DESC made contributions of $3 million to its nuclear decommissioning trust funds during 2021. |
Also see Notes 14 and 23 to the Consolidated Financial Statements for further information about AROs and nuclear decommissioning, respectively, and Note 9 to the Consolidated Financial Statements for information about nuclear decommissioning trust investments.
CONTRACTED ASSETS
The Contracted Assets Operating Segment includes the operations of Millstone, and associated energy marketing and price risk activities, Dominion Energy’s nonregulated long-term contracted renewable electric generation fleet, solar generation facility development operations and Dominion Energy’s 50% noncontrolling interest in Cove Point.
Contracted Assets’ growth capital plan includes spending approximately $3 billion from 2022 through 2026 to expand its renewable generation fleet.
Contracted Assets derives its earnings primarily from Dominion Energy’s nonregulated generation assets, including associated capacity and ancillary services, and from its noncontrolling interest in Cove Point. Variability in earnings provided by Millstone relates to changes in market-based prices received for electricity and capacity as well as the timing, duration and costs of scheduled and unscheduled outages. Approximately half of Millstone’s output is sold under the Millstone 2019 power purchase agreements, which commenced in October 2019. Market-based prices for electricity are largely dependent on commodity prices and the demand for electricity. Capacity prices are dependent upon resource requirements in relation to the supply available (both existing and new) in the forward capacity auctions, which are held approximately three years in advance of the associated delivery year. Dominion Energy manages the electric price volatility of Millstone by hedging a substantial portion of its expected near-term energy sales not subject to the Millstone 2019 power purchase agreements with derivative instruments.
Dominion Energy’s nonregulated generation fleet includes solar generation facilities in operation or development in nine states, including Virginia. The output of these facilities is sold under long-term power purchase agreements with terms generally ranging from 15 to 25 years. Variability in earnings provided by these assets relates to changes in irradiance levels due to changes in weather. See Notes 3 and 10 to the Consolidated Financial Statements for additional information regarding certain solar projects.
23
Competition
Contracted Asset’s renewable generation projects are not currently subject to significant competition as the output from these facilities is primarily sold under long-term power purchase agreements with terms generally ranging from 15 to 25 years. However, in the future, such operations may compete with other power generation facilities to serve certain large-scale customers after the power purchase agreements expire. Competition for the nonregulated fleet is impacted by electricity and fuel prices, new market entrants, construction by others of generating assets and transmission capacity, technological advances in power generation, the actions of environmental and other regulatory authorities and other factors. These competitive factors may negatively impact the nonregulated fleet’s ability to profit from the sale of electricity and related products and services.
Millstone is dependent on its ability to operate in a competitive environment and does not have a predetermined rate structure that provides for an ROIC. Millstone operates within a functioning RTO and primarily competes on the basis of price. Competitors include other generating assets bidding to operate within the RTO. Millstone competes in the wholesale market with other generators to sell a variety of products including energy, capacity and ancillary services. It is difficult to compare various types of generation given the wide range of fuels used by generation facilities, fuel procurement strategies, efficiencies and operating characteristics of the fleet within any given RTO. However, Dominion Energy applies its expertise in operations, dispatch and risk management to maximize the degree to which Millstone is competitive compared to similar assets within the region.
Regulation
Contracted Assets’ generation fleet is subject to regulation by the NRC, the EPA, the DOE, the Army Corps of Engineers and other federal, state and local authorities. See Regulation, Future Issues and Other Matters in Item 7, MD&A and Notes 13 and 23 to the Consolidated Financial Statements for more information.
Properties
For a listing of facilities, see Item 2. Properties.
Dominion Energy plans to invest approximately $2.9 billion from 2022 to 2026 to acquire or construct several solar facilities in the Mid-Atlantic, Southeast and Midwest, including facilities currently under development, totaling approximately 1.6 GW of expected generating capacity when placed in service. Dominion Energy has projects under various stages of development which, as of December 31, 2021, represent a potential generating capacity of approximately 2.4 GW. See Note 10 to the Consolidated Financial Statements for more information.
Investments
Contracted Assets includes Dominion Energy’s 50% noncontrolling interest in Cove Point. Cove Point’s gas transportation, LNG import and storage operations, as well as the Liquefaction Facility’s capacity, are contracted primarily under long-term fixed reservation fee agreements. The Liquefaction Facility has a firm contracted capacity for LNG loading onto ships of approximately 4.6 Mtpa (0.66 bcfe/day) under normal operating conditions and after accounting for maintenance downtime. In addition to the operations of the Liquefaction Facility, Cove Point receives revenue from firm fee-based contractual arrangements, including negotiated rates, for its pipeline operations and certain LNG storage and terminalling services as provided for in FERC-approved tariffs. Variability in earnings results from changes in operating and maintenance expenditures and, for FERC-regulated operations, changes in rates and demand for services.
See Item 2. Properties for a description of Cove Point’s physical assets.
See Note 9 to the Consolidated Financial Statements for further information about Dominion Energy’s equity method investment in Cove Point.
24
Leasing Arrangement
In December 2020, Dominion Energy signed an agreement with a lessor to complete construction of and lease a Jones Act compliant offshore wind installation vessel. This vessel is designed to handle current turbine technologies as well as next generation turbines. The lessor is providing equity and has obtained financing commitments from debt investors, totaling $550 million, to fund the estimated project costs. The project is expected to be completed by the end of 2023. The initial lease term will commence once construction is substantially complete and the vessel is delivered and will mature in November 2027. See Note 15 to the Consolidated Financial Statements for more information.
Sources of Energy Supply
Contracted Asset’s renewable fleet utilizes solar energy to power its electric generation while Millstone utilizes nuclear fuel, which is acquired primarily through a series of 5-year contracts, to power its electric generation. In addition, Dominion Energy occasionally purchases electricity from the ISO-NE spot market to satisfy physical forward sale requirements, as described below. Some of these agreements have fixed commitments and are detailed further in Fuel and Other Purchase Commitments in Item 7. MD&A.
Seasonality
Sales of electricity for Contracted Assets are subject to seasonal variation as a result of the weather, partially mitigated by the Millstone 2019 power purchase agreements.
Nuclear Decommissioning
Dominion Energy has two licensed, operating nuclear reactors at Millstone in Connecticut. A third Millstone unit ceased operations before Dominion Energy acquired the power station. In May 2013, Dominion Energy ceased operations at its single Kewaunee unit in Wisconsin and commenced decommissioning activities using the SAFSTOR methodology. The planned decommissioning completion date is 2073, which is within the NRC allowed 60-year window.
As part of Dominion Energy’s acquisition of both Millstone and Kewaunee, it acquired decommissioning funds for the related units. Any funds remaining in Kewaunee’s trust after decommissioning is completed are required to be refunded to Wisconsin ratepayers. Dominion Energy believes that the decommissioning funds and their expected earnings will be sufficient to cover expected decommissioning costs for the Millstone and Kewaunee units. Dominion Energy will continue to monitor these trusts to ensure they meet the NRC minimum financial assurance requirements, which may include, if needed, the use of parent company guarantees, surety bonding or other financial instruments recognized by the NRC. The most recent site-specific studies completed for Millstone and for Kewaunee were performed in 2019 and 2018, respectively.
The estimated decommissioning costs, funds in trust and current license expiration dates for Millstone and Kewaunee are shown in the following table:
|
|
|
NRC license expiration year |
|
Most recent cost estimate (2021 dollars)(1) |
|
|
Funds in trusts at December 31, 2021(2) |
|
||
|
(dollars in millions) |
|
|
|
|
|
|
|
|
|
|
|
Millstone |
|
|
|
|
|
|
|
|
|
|
|
Unit 1(3) |
|
N/A |
|
$ |
462 |
|
|
$ |
803 |
|
|
Unit 2 |
|
2035 |
|
|
680 |
|
|
|
1,096 |
|
|
Unit 3(4) |
|
2045 |
|
|
771 |
|
|
|
1,089 |
|
|
Kewaunee |
|
|
|
|
|
|
|
|
|
|
|
Unit 1(5) |
|
N/A |
|
|
600 |
|
|
|
972 |
|
|
Total |
|
|
|
$ |
2,513 |
|
|
$ |
3,960 |
|
|
|
(1) |
The cost estimates shown above reflect reductions for the expected future recovery of certain spent fuel costs based on Dominion Energy’s contracts with the DOE for disposal of spent nuclear fuel consistent with the reductions reflected in Dominion Energy’s nuclear decommissioning AROs. |
|
|
(2) |
Dominion Energy did not make any contributions to its nuclear decommissioning trust funds related to Millstone or Kewaunee during 2021. |
|
|
(3) |
Unit 1 permanently ceased operations in 1998, before Dominion Energy’s acquisition of Millstone. |
|
|
(4) |
Millstone Unit 3 is jointly owned by Dominion Energy Nuclear Connecticut, Inc., with a 6.53% undivided interest in Unit 3 owned by Massachusetts Municipal and Green Mountain. Decommissioning cost is shown at Dominion Energy’s ownership percentage. At December 31, 2021, the minority owners held $63 million of trust funds related to Millstone Unit 3 that are not reflected in the table above. |
|
|
(5) |
Permanently ceased operations in 2013. See Note 3 for additional information. |
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Also see Notes 14 and 23 to the Consolidated Financial Statements for further information about AROs and nuclear decommissioning, respectively, and Note 9 to the Consolidated Financial Statements for information about nuclear decommissioning trust investments.
CORPORATE AND OTHER
Corporate and Other Segment-Virginia Power
Virginia Power’s Corporate and Other segment primarily includes certain specific items attributable to its operating segments that are not included in profit measures evaluated by executive management in assessing the segment’s performance or in allocating resources.
Corporate and Other Segment-Dominion Energy
Dominion Energy’s Corporate and Other segment includes its corporate, service company and other functions (including unallocated debt) as well as Dominion Energy’s noncontrolling interest in Wrangler. Corporate and Other includes specific items attributable to Dominion Energy’s operating segments that are not included in profit measures evaluated by executive management in assessing the segments’ performance or in allocating resources. In addition, Corporate and Other includes the net impact of discontinued operations consisting of Dominion Energy’s disposed gas transmission and storage operations as discussed in Note 3 to the Consolidated Financial Statements and its equity investment in Atlantic Coast Pipeline as discussed in Note 9 to the Consolidated Financial Statements.
Dominion Energy owns a 15% noncontrolling interest in Wrangler, following the sale of a 5% noncontrolling interest in December 2021. Wrangler’s operations, contributed by Dominion Energy in 2019 through 2021, consist of nonregulated natural gas retail energy marketing business serving customers in Ohio, Pennsylvania and Georgia as well as other southeastern states in the U.S.
Dominion Energy owns a 53% noncontrolling interest in Atlantic Coast Pipeline. In July 2020, as a result of the continued permitting delays, growing legal uncertainties and the need to incur significant capital expenditures to maintain project timing before such uncertainties could be resolved, Dominion Energy and Duke Energy announced the cancellation of the Atlantic Coast Pipeline Project.
See Notes 3 and 9 to the Consolidated Financial Statements for more information.
REGULATION
The Companies are subject to regulation by various federal, state and local authorities, including the state commissions of Virginia, North Carolina, South Carolina, Ohio, West Virginia, Utah, Wyoming and Idaho, SEC, FERC, EPA, DOE, PHMSA, NRC, Army Corps of Engineers and the U.S. Department of Transportation.
State Regulations
Electric
Virginia Power and DESC’s electric utility retail services are subject to regulation by the Virginia and North Carolina Commissions and the South Carolina Commission, respectively.
Virginia Power and DESC hold CPCNs which authorize them to maintain and operate their electric facilities already in operation and to sell electricity to customers. However, Virginia Power and DESC may not construct generating facilities or large capacity transmission lines without the prior approval of various state and federal government agencies. In addition, the Virginia Commission and the North Carolina Commission regulate Virginia Power’s and the South Carolina Commission regulates DESC’s transactions with affiliates and transfers of certain facilities. The Virginia, North Carolina and South Carolina Commissions also regulate the issuance of certain securities.
Electric Regulation in Virginia
The Regulation Act provides for a cost-of-service rate model and permits Virginia Power to seek recovery of costs for new generation projects, including pumped hydroelectricity generation and storage facilities as well as extensions of operating licenses of nuclear power generation facilities, FERC-approved transmission costs, underground distribution lines, certain environmental compliance, conservation, energy efficiency and demand response programs and renewable energy facilities and programs through stand-alone riders, and also contains statutory provisions directing Virginia Power to file annual fuel cost recovery cases with the Virginia Commission.
In March 2018, the GTSA reinstated base rate reviews on a triennial basis other than the 2021 Triennial Review. In the triennial review proceedings, earnings that are more than 70 basis points above the utility’s authorized ROE that might have been refunded to customers and served as the basis for a reduction in future rates, may be reduced by Virginia Commission-approved investment amounts in qualifying solar or wind generation facilities or electric distribution grid transformation projects that Virginia Power elects to include as a CCRO. The legislation declares that electric distribution grid transformation projects are in the public interest and
26
provides that Virginia Power may seek to recover the costs of such projects through a rider if not the subject of a CCRO. Any costs that are the subject of a CCRO are deemed recovered in base rates during the triennial period under review and may not be included in base rates in future triennial review proceedings. In any triennial review in which the Virginia Commission determines that the utility’s earnings are more than 70 basis points above its authorized ROE, base rates are subject to reduction prospectively and customer refunds would be due unless the total CCRO elected by the utility equals or exceeds the amount of earnings in excess of the 70 basis points. For the purposes of measuring any customer refunds or CCRO amounts utilized under the GTSA, associated income taxes are factored into the determination of such amounts.
In April 2020, the VCEA replaced Virginia’s voluntary renewable energy portfolio standard for Virginia Power with a mandatory program setting annual renewable energy portfolio standard requirements based on the percentage of total electric energy sold by Virginia Power, excluding existing nuclear generation and certain new carbon-free resources, reaching 100% by the end of 2045. The VCEA includes related requirements concerning deployment of wind, solar and energy storage resources, as well as provides for certain measures to increase net-metering, including an allocation for low-income customers, incentivizes energy efficiency programs and directs Virginia to participate in a carbon trading program.
See Note 13 to the Consolidated Financial Statements for additional information.
Electric Regulation in North Carolina
Virginia Power’s retail electric base rates in North Carolina are regulated on a cost-of-service/rate-of-return basis subject to North Carolina statutes and the rules and procedures of the North Carolina Commission. North Carolina base rates are set by a process that allows Virginia Power to recover its operating costs and an ROIC. If retail electric earnings exceed the authorized ROE established by the North Carolina Commission, retail electric rates may be subject to review and possible reduction by the North Carolina Commission, which may decrease Virginia Power’s future earnings. Additionally, if the North Carolina Commission does not allow recovery of costs incurred in providing service on a timely basis, Virginia Power’s future earnings could be negatively impacted. Fuel rates are subject to revision under annual fuel cost adjustment proceedings.
Virginia Power’s transmission service rates in North Carolina are regulated by the North Carolina Commission as part of Virginia Power’s bundled retail service to North Carolina customers. See Note 13 to the Consolidated Financial Statements for additional information.
Electric Regulation in South Carolina
DESC’s retail electric base rates in South Carolina are regulated on a cost-of-service/rate-of-return basis subject to South Carolina statutes and the rules and procedures of the South Carolina Commission. South Carolina base rates are set by a process that allows DESC to recover its operating costs and an ROIC. If retail electric earnings exceed the authorized ROE established by the South Carolina Commission, retail electric rates may be subject to review and possible reduction, which may decrease DESC’s future earnings. Additionally, if the South Carolina Commission does not allow recovery of costs incurred in providing service on a timely basis, DESC’s future earnings could be negatively impacted. Fuel costs are reviewed annually by the South Carolina Commission, as required by statute, and fuel rates are subject to revision in these annual fuel proceedings. DESC also submits annual filings to the South Carolina Commission for rider recovery related to its DSM program and pension costs. The DSM rider includes recovery of any net lost revenues and for a shared savings incentive.
Pursuant to the SCANA Merger Approval Order, DESC is recovering capital costs and a return on capital cost rate base related to the NND Project over a 20-year period through a capital cost rider. The capital cost rider also provides for the return to retail electric customers of certain amounts associated with the NND Project. Revenue from the capital cost rider component of retail electric rates will continue to decline over the 20-year period as capital cost rate base is reduced.
See Notes 3 and 13 to the Consolidated Financial Statements for additional information.
Gas
Questar Gas and Wexpro’s natural gas development, production, transportation, and distribution services, including the rates it may charge its customers, are regulated by the state commissions of Utah, Wyoming and Idaho. East Ohio’s natural gas distribution services, including the rates it may charge its customers, are regulated by the Ohio Commission. Hope’s natural gas distribution services, including the rates it may charge its customers, are regulated by the West Virginia Commission. DESC and PSNC’s natural gas distribution services, including the rates they may charge their customers, are regulated by the South Carolina Commission and North Carolina Commission, respectively.
27
Gas Regulation in Utah, Wyoming and Idaho
Questar Gas is subject to regulation of rates and other aspects of its business by the Utah, Wyoming and Idaho Commissions. The Idaho Commission has contracted with the Utah Commission for rate oversight of Questar Gas’ operations in a small area of southeastern Idaho. When necessary, Questar Gas seeks general base rate increases to recover increased operating costs and a fair return on rate base investments. Base rates are set based on the cost-of-service by rate class. Base rates for Questar Gas are designed primarily based on rate design methodology in which the majority of operating costs are recovered through volumetric charges. The volumetric charges for the residential and small commercial customers in Utah and Wyoming are subject to revenue decoupling and adjusted for changes in usage per customer.
Questar Gas makes routine separate filings with the Utah and Wyoming Commissions to reflect changes in the costs of purchased gas. Questar Gas’ purchased gas adjustment allows it to recover from customers all prudently incurred gas costs, including transportation costs, and certain related uncollectible expenses. A large portion of these purchased gas costs are subject to rate recovery through the Wexpro Agreement and Wexpro II Agreement. Costs that are expected to be recovered in future rates are deferred as regulatory assets. The purchased gas recovery filings generally cover a prospective twelve-month period. Approved increases or decreases in gas cost recovery rates result in increases or decreases in revenues with corresponding increases or decreases in net purchased gas cost expenses.
The Utah Commission has approved a standalone cost recovery mechanism to recover specified costs and a return for infrastructure projects between general base rate cases.
See Note 13 to the Consolidated Financial Statements for additional information.
Gas Regulation in Ohio
East Ohio is subject to regulation of rates and other aspects of its business by the Ohio Commission. When necessary, East Ohio seeks general base rate increases to recover increased operating costs and a fair return on rate base investments. Base rates are set based on the cost-of-service by rate class. A straight-fixed-variable rate design, in which the majority of operating costs are recovered through a monthly charge rather than a volumetric charge, is utilized to establish rates for a majority of East Ohio’s customers pursuant to a 2008 rate case settlement.
East Ohio makes routine filings with the Ohio Commission to reflect changes in the costs of gas purchased for operational balancing on its system. These purchased gas costs are subject to rate recovery through a mechanism that ensures dollar for dollar recovery of prudently incurred costs. Costs that are expected to be recovered in future rates are deferred as regulatory assets. The rider filings cover unrecovered gas costs plus prospective annual demand costs. Increases or decreases in gas cost rider rates result in increases or decreases in revenues with corresponding increases or decreases in net purchased gas cost expenses.
The Ohio Commission has also approved several stand-alone cost recovery mechanisms to recover specified costs and a return for infrastructure, information technology and integrity or compliance-related projects between general base rate cases.
See Note 13 to the Consolidated Financial Statements for additional information.
Gas Regulation in West Virginia
Hope is subject to regulation of rates and other aspects of its business by the West Virginia Commission. When necessary, Hope seeks general base rate increases to recover increased operating costs and a fair return on rate base investments. Base rates are set based on the cost-of-service by rate class. Base rates for Hope are designed primarily based on rate design methodology in which the majority of operating costs are recovered through volumetric charges.
Hope makes routine separate filings with the West Virginia Commission to reflect changes in the costs of purchased gas. The majority of these purchased gas costs are subject to rate recovery through a mechanism that ensures dollar for dollar recovery of prudently incurred costs. Costs that are expected to be recovered in future rates are deferred as regulatory assets. The purchased gas cost recovery filings generally cover a prospective twelve-month period. Approved increases or decreases in gas cost recovery rates result in increases or decreases in revenues with corresponding increases or decreases in net purchased gas cost expenses.
The West Virginia Commission has also approved a stand-alone cost recovery mechanism to recover specified costs and a return for infrastructure projects between general base rate cases.
See Note 13 to the Consolidated Financial Statements for additional information.
28
Gas Regulation in North Carolina
PSNC is subject to regulation of rates and other aspects of its business by the North Carolina Commission. When necessary, PSNC seeks general base rate increases to recover increased operating costs and a fair return on rate base investments. Base rates are set based on the cost-of-service by rate class. Base rates for PSNC are designed primarily based on rate design methodology in which the majority of operating costs are recovered through volumetric charges. The volumetric charges for the residential and commercial customers are subject to revenue decoupling and adjusted for changes in usage per customer.
PSNC makes routine separate filings with the North Carolina Commission to reflect changes in the costs of purchased gas. PSNC’s purchased gas adjustment allows it to recover from customers all prudently incurred gas costs, including transportation costs, and certain related uncollectible expenses. Costs that are expected to be recovered in future rates are deferred as regulatory assets. The purchased gas recovery filings are made periodically to reflect prospective costs and recovery. Approved increases or decreases in gas cost recovery rates result in increases or decreases in revenues with corresponding increases or decreases in net purchased gas cost expenses.
The North Carolina Commission has also approved a stand-alone cost recovery mechanism to recover specified capital costs and a return for pipeline integrity management infrastructure projects between general base rate cases.
See Note 13 to the Consolidated Financial Statements for additional information.
Gas Regulation in South Carolina
DESC is subject to regulation of rates and other aspects of its natural gas distribution service by the South Carolina Commission. DESC provides retail natural gas service to customers in areas in which it has received authorization from the South Carolina Commission and in municipalities in which it holds a franchise. DESC’s base rates can be adjusted annually, pursuant to the Natural Gas Rate Stabilization Act, for recovery of costs related to natural gas infrastructure. Base rates are set based on the cost-of-service by rate class approved by the South Carolina Commission in the latest general rate case. Base rates for DESC are based primarily on a rate design methodology in which the majority of operating costs are recovered through volumetric charges. DESC also utilizes a weather normalization adjustment to adjust its base rates during the winter billing months for residential and commercial customers to mitigate the effects of unusually cold or warm weather.
DESC’s natural gas tariffs include a purchased gas adjustment that provides for the recovery of prudently incurred gas costs, including transportation costs. DESC is authorized to adjust its purchased gas rates monthly and makes routine filings with the South Carolina Commission to provide notification of changes in these rates. Costs that are under or over recovered are deferred as regulatory assets or liabilities, respectively, and considered in subsequent purchased gas adjustments. The purchased gas adjustment filings generally cover a prospective twelve-month period. Increases or decreases in purchased gas costs can result in corresponding changes in purchased gas adjustment rates and the revenue generated by those rates. The South Carolina Commission reviews DESC’s gas purchasing policies and practices, including its administration of the purchased gas adjustment, annually.
See Note 13 to the Consolidated Financial Statements for additional information.
Federal Regulations
Federal Energy Regulatory Commission
Under the Federal Power Act, FERC regulates wholesale sales and transmission of electricity in interstate commerce by public utilities. Virginia Power purchases and, under its market-based rate authority, sells electricity in the PJM wholesale market and to wholesale purchasers in Virginia and North Carolina. Dominion Energy’s nonregulated generators sell electricity in the PJM, CAISO and ISO-NE wholesale markets, and to wholesale purchasers in the states of Virginia, North Carolina, Ohio, Connecticut, California and South Carolina, under Dominion Energy’s market-based sales tariffs authorized by FERC or pursuant to FERC authority to sell as a qualified facility. DESC may make wholesale sales at market-based rates outside its balancing authority pursuant to its market-based sales tariff authorized by FERC. In addition, Virginia Power and DESC have FERC approved tariffs to sell wholesale power at capped rates based on their respective embedded cost of generation. These cost-based sales tariffs could be used to sell to loads within or outside Virginia Power and DESC’s respective service territories. Any such sales are voluntary.
In January 2021, Virginia Power notified PJM that it was electing to satisfy its capacity requirements by becoming a Fixed Resource Requirement Entity that self-supplies the capacity needed to serve load rather than satisfying this requirement by purchasing capacity in PJM’s Reliability Pricing Model capacity market. This change is effective for the delivery year beginning June 2022. This decision does not affect day-to-day operations.
29
The Companies are subject to FERC’s Standards of Conduct that govern conduct between transmission function employees of interstate gas and electricity transmission providers and the marketing function employees of their affiliates. The rule defines the scope of transmission and marketing-related functions that are covered by the standards and is designed to prevent transmission providers from giving their affiliates undue preferences.
The Companies are also subject to FERC’s affiliate restrictions that (1) prohibit power sales between nonregulated plants and utility plants without first receiving FERC authorization, (2) require the nonregulated and utility plants to conduct their wholesale power sales operations separately, and (3) prohibit utilities from sharing market information with nonregulated plant operating personnel. The rules are designed to prohibit utilities from giving the nonregulated plants a competitive advantage.
EPACT included provisions to create an Electric Reliability Organization, which is required to promulgate mandatory reliability standards governing the operation of the bulk power system in the U.S. FERC has certified NERC as the Electric Reliability Organization and also issued an initial order approving many reliability standards that went into effect in 2007. Entities that violate standards will be subject to fines of up to $1.4 million per day, per violation and can also be assessed non-monetary penalties, depending upon the nature and severity of the violation.
In April 2008, FERC granted an application for Virginia Power’s electric transmission operations to establish a forward-looking formula rate mechanism that updates transmission rates on an annual basis and approved an ROE effective as of January 1, 2008. The formula rate is designed to recover the expected revenue requirement for each calendar year and is updated based on actual costs. The FERC-approved formula method, which is based on projected costs, allows Virginia Power to earn a current return on its growing investment in electric transmission infrastructure.
In October 2011, FERC issued an order approving the settlement of DESC’s formula rate that updates transmission rates on an annual basis, including its ROE. The formula rate is designed to recover the expected revenue requirement for the calendar year and is updated annually based on actual costs. This FERC accepted formula rate enables DESC to earn a return on its investment in electric transmission infrastructure.
In February 2021, DESC and the other members of the Southeast Energy Exchange Market submitted the Southeast Energy Exchange Market Agreement to FERC for authorization. This agreement sets forth the framework and rules for establishing and maintaining a new voluntary electronic trading platform designed to enhance the existing bilateral market in the Southeast utilizing zero-charge transmission service. That transmission service, in turn, will be voluntarily provided by participating transmission service providers, including DESC. In October 2021, the Southeast Energy Exchange Market Agreement became effective by operation of law as a result of a split FERC vote. The members expect the Southeast Energy Exchange Market platform to be operational in the third quarter of 2022.
Nuclear Regulatory Commission
All aspects of the operation and maintenance of the Companies’ nuclear power stations are regulated by the NRC. Operating licenses issued by the NRC are subject to revocation, suspension or modification, and the operation of a nuclear unit may be suspended if the NRC determines that the public interest, health or safety so requires.
From time to time, the NRC adopts new requirements for the operation and maintenance of nuclear facilities. In many cases, these new regulations require changes in the design, operation and maintenance of existing nuclear facilities. If the NRC adopts such requirements in the future, it could result in substantial increases in the cost of operating and maintaining the Companies’ nuclear generating units. See Note 23 to the Consolidated Financial Statements for further information.
The NRC also requires the Companies to decontaminate their nuclear facilities once operations cease. This process is referred to as decommissioning, and the Companies are required by the NRC to be financially prepared. For information on decommissioning trusts, see Dominion Energy Virginia-Nuclear Decommissioning, Dominion Energy South Carolina-Nuclear Decommissioning, and Contracted Assets-Nuclear Decommissioning above and Notes 3 and 9 to the Consolidated Financial Statements. See Note 23 to the Consolidated Financial Statements for information on spent nuclear fuel.
Cyber Regulations
The Companies plan and operate their facilities in compliance with approved government cyber regulatory requirements. The Companies’ employees participate on various regulatory committees, track the development and implementation of standards, and maintain proper compliance registration with NERC’s regional organizations. The Companies anticipate incurring additional compliance expenditures over the next several years because of the implementation of new cybersecurity programs such as the Transportation Security Administration’s gas sector cyber security directives. In addition, NERC continues to develop additional requirements specifically regarding supply chain standards and control centers that impact the bulk electric system. While the
30
Companies expect to incur additional compliance costs in connection with NERC, Transportation Security Administration and other governmental agency regulations, such expenses are not expected to significantly affect results of operations.
Safety Regulations
Dominion Energy is also subject to the Pipeline Safety Improvement Act of 2002 and the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011, which mandate inspections of interstate and intrastate natural gas transmission and storage pipelines, particularly those located in areas of high-density population. Dominion Energy has evaluated its natural gas transmission and storage properties, as required by the U.S. Department of Transportation regulations under these Acts, and has implemented a program of identification, testing and potential remediation activities. These activities are ongoing.
The Companies are subject to a number of federal and state laws and regulations, including Occupational Safety and Health Administration, and comparable state statutes, whose purpose is to protect the health and safety of workers. The Companies have an internal safety, health and security program designed to monitor and enforce compliance with worker safety requirements, which is routinely reviewed and considered for improvement. The Companies believe that they are in material compliance with all applicable laws and regulations related to worker health and safety. Notwithstanding these preventive measures, incidents may occur that are outside of the Companies’ control.
Environmental Regulations
Each of the Companies’ operating segments is subject to substantial laws, regulations and compliance costs with respect to environmental matters. In addition to imposing continuing compliance obligations, these laws and regulations authorize the imposition of significant penalties for noncompliance, including fines, injunctive relief and other sanctions. The cost of complying with applicable environmental laws, regulations and rules is material to the Companies. If compliance expenditures and associated operating costs are not recoverable from customers through regulated rates (in regulated businesses) or market prices (in unregulated businesses), those costs could adversely affect future results of operations and cash flows. The Companies have applied for or obtained the necessary environmental permits for the construction and operation of their facilities. Many of these permits are subject to reissuance and continuing review. For a discussion of significant aspects of these matters, including current and planned capital expenditures relating to environmental compliance required to be discussed in this Item, see Environmental Matters in Future Issues and Other Matters in Item 7. MD&A. Additional information can also be found in Note 23 to the Consolidated Financial Statements.
Global Climate Change
The Companies support a federal climate change program that would provide a consistent, economy-wide approach to addressing this issue. Regardless of federal action, the Companies are reducing their GHG emissions while meeting the growing needs of their customers. In 2020, Virginia enacted the VCEA which addresses climate change matters such as the reduction of GHG emissions and renewable energy portfolio standards. Dominion Energy’s CEO and executive operational leadership within each operating segment are responsible for compliance with the laws and regulations governing environmental matters, including GHG emissions, and Dominion Energy’s Board of Directors receives periodic updates on these matters. See State Regulations—Electric—Electric Regulation in Virginia above, Environmental Strategy below, Environmental Matters in Future Issues and Other Matters in Item 7. MD&A and Note 23 to the Consolidated Financial Statements for information on climate change legislation and regulation.
Air
The CAA is a comprehensive program utilizing a broad range of regulatory tools to protect and preserve the nation’s air quality. Regulated emissions include, but are not limited to, carbon, methane, VOC, NOX, other GHGs, mercury, other toxic metals, hydrogen chloride, SO2 and particulate matter. At a minimum, delegated states are required to establish regulatory programs to address all requirements of the CAA. However, states may choose to develop regulatory programs that are more restrictive. Many of the Companies’ facilities are subject to the CAA’s permitting and other requirements.
Water
The CWA is a comprehensive program requiring a broad range of regulatory tools including a permit program to authorize and regulate discharges to surface waters with strong enforcement mechanisms. The CWA and analogous state laws impose restrictions and strict controls regarding discharges of effluent into surface waters and require permits to be obtained from the EPA or the analogous state agency for those discharges. Containment berms and similar structures may be required to help prevent accidental releases. Dominion Energy must comply with applicable CWA requirements at its current and former operating facilities. Stormwater related to construction activities is also regulated under the CWA and by state and local stormwater management and erosion and sediment control laws. From time to time, Dominion Energy’s projects and operations may impact tidal and non-tidal wetlands. In these instances, Dominion Energy must obtain authorization from the appropriate federal, state and local agencies prior to impacting
31
wetlands. The authorizing agency may impose significant direct or indirect mitigation costs to compensate for such impacts to wetlands.
Waste and Chemical Management
Dominion Energy is subject to various federal and state laws and implementing regulations governing the management, storage, treatment, reuse and disposal of waste materials and hazardous substances, including the Resource Conservation and Recovery Act of 1976, CERCLA, the Emergency Planning and Community Right-to-Know Act of 1986 and the Toxic Substances Control Act of 1976. Dominion Energy’s operations and construction activities, including activities associated with oil and gas production and gas storage wells, generate waste. Across Dominion Energy, completion water is disposed at commercial disposal facilities. Produced water is either hauled for disposal, evaporated or injected into company and third-party owned underground injection wells. Wells drilled in tight-gas-sand and shale reservoirs require hydraulic-fracture stimulation to achieve economic production rates and recoverable reserves. The majority of Wexpro’s current and future production and reserve potential is derived from reservoirs that require hydraulic-fracture stimulation to be commercially viable. Currently, all well construction activities, including hydraulic-fracture stimulation and management and disposal of hydraulic fracturing fluids, are regulated by federal and state agencies that review and approve all aspects of gas- and oil-well design and operation.
Protected Species
The ESA and analogous state laws prohibit activities that can result in harm to specific species of plants and animals, as well as impacts to the habitat on which those species depend. In addition to ESA programs, the Migratory Bird Treaty Act of 1918 and Bald and Golden Eagle Protection Act establish broader prohibitions on harm to protected birds. Many of the Companies’ facilities are subject to requirements of the ESA, Migratory Bird Treaty Act of 1918 and Bald and Golden Eagle Protection Act. The ESA and Bald and Golden Eagle Protection Act require potentially lengthy coordination with the state and federal agencies to ensure potentially affected species are protected. Ultimately, the suite of species protections may restrict company activities to certain times of year, project modifications may be necessary to avoid harm, or a permit may be needed for unavoidable taking of the species. The authorizing agency may impose mitigation requirements and costs to compensate for harm of a protected species or habitat loss. These requirements and time of year restrictions can result in adverse impacts on project plans and schedules such that the Companies’ businesses may be materially affected.
Other Regulations
Other significant environmental regulations to which the Companies are subject include federal and state laws protecting graves, sacred sites, historic sites and cultural resources, including those of American Indian tribal nations and tribal communities. These can result in compliance and mitigation costs as well as potential adverse effects on project plans and schedules such that the Companies’ businesses may be materially affected.
ENVIRONMENTAL STRATEGY
Dominion Energy is committed to a safe, sustainable, reliable and affordable energy future. In February 2020, Dominion Energy set a goal to achieve net zero carbon and methane Scope 1 emissions by 2050. In February 2022, Dominion Energy expanded this commitment to cover Scope 2 emissions and material categories of Scope 3 emissions: electricity purchased to power the grid, fuel for its power stations and gas distribution systems and consumption by natural gas customers. As part of the net zero commitment, Dominion Energy has specifically committed to interim targets to cut Scope 1 carbon emissions from its electric operations by 55% by 2030, relative to 2005 emissions, and cut Scope 1 methane emissions from its natural gas infrastructure operations by 65% by 2030 and by 80% by 2040, in each case relative to 2010 emissions. Dominion Energy’s commitment is highlighted by its anticipated capital investment of approximately $73 billion in projects supporting decarbonization efforts from 2022 to 2035.
To reach net zero emissions, in the near term Dominion Energy is seeking extension of the licenses of its zero-carbon nuclear fleet at North Anna similar to the license extension received for Surry, rapidly expanding wind and solar generation as well as energy storage, investing in carbon-beneficial renewable natural gas, expanding its industry-leading methane emissions-reduction programs including pursuing innovative uses of clean burning hydrogen and using low-carbon natural gas to support the integration of wind and solar generation facilities as well as energy storage facilities into the grid and requesting offers for responsibly sourced gas or from those suppliers who are committed to net zero. The strategy to meet these objectives consists of three major elements which will significantly reduce GHG emissions:
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• |
Clean energy diversity; |
|
• |
Innovation and energy infrastructure modernization; and |
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|
• |
Conservation and energy efficiency. |
Over the long term, Dominion Energy’s ability to achieve net zero emissions will require supportive legislative and regulatory policies, advancements in technology and broader investments across the economy. Dominion Energy will pursue solutions, including pilot programs, of technologies such as large-scale battery storage, carbon capture and storage, small modular reactors and hydrogen if and when they become technologically and economically feasible.
Environmental Justice
Dominion Energy seeks to build partnerships and engage with local communities, stakeholders and customers on environmental issues important to them, including environmental justice considerations such as fair treatment, inclusive involvement and effective communication. Dominion Energy commits to inclusiveness during its stakeholder engagement on decisions regarding the siting and operation of energy infrastructure and strives to include all people and communities, regardless of race, color, national origin, or income to ensure a diversity of views are considered in its public engagement process.
Transparency
As part of its broader commitment to transparency, Dominion Energy increased its disclosures around carbon and methane emissions. Dominion Energy discloses its environmental commitments, policies and initiatives in a Sustainability and Corporate Responsibility Report as well as a Climate Report in addition to other reports included on Dominion Energy’s dedicated Environmental, Social and Governance website.
Clean Energy Diversity
To achieve its net zero commitment, Dominion Energy is pursuing a diverse mix of cleaner, more efficient and lower-emitting methods of generating and delivering energy, while advancing measures to continue dramatically reducing emissions from traditional generation and delivery. Diversifying the energy portfolio enables Dominion Energy to provide customers with cleaner options while protecting the power supply from potential disruption.
Over the past two decades, Dominion Energy has changed the fuel mix it uses to generate electricity, as well as improved the systems that make up its natural gas operations, to achieve a cleaner future. In addition to reducing GHG emissions, Dominion Energy’s environmental strategy has also resulted in measurable reductions of other air pollutants such as NOX, SO2 and mercury and reduced the amount of coal ash generated and the amount of water withdrawn. Dominion Energy achieved GHG and other air pollutant reductions by implementing an integrated environmental strategy that addresses electric energy production and delivery and energy management. As part of this strategy, Dominion Energy has retired, or committed to retire, several of its fossil fuel electric generating facilities, including those powered by coal, oil and gas with the replacement of this capacity coming from the development of renewable energy facilities.
Renewable energy is an important component of a diverse and reliable energy mix. Dominion Energy expects to invest up to $21 billion from 2022 through 2035 in solar generation to achieve its target of 13.4 GW generating capacity in-service by the end of 2035. As of December 31, 2021, Dominion Energy had 2.0 GW of solar generation capacity in operation across five states. In addition, Dominion Energy has projects in seven states under various stages of development which, as of December 31, 2021, represent a potential generating capacity of approximately 7.2 GW. In addition, Dominion Energy expects to invest up to $21 billion from 2022 through 2035 in offshore wind generation facilities. Dominion Energy has commenced development of the CVOW Commercial Project, expected to be placed in service by the end of 2026, along with the CVOW Pilot Project which achieved commercial operation in January 2021. To support these renewable generation facilities, Dominion Energy expects to invest up to $4 billion in energy storage facilities from 2022 through 2035. Virginia Power has projects under various stages development which, as of December 31, 2021, represent a potential storage capacity of approximately 1.1 GW.
Preservation of Dominion Energy’s existing carbon-free baseload nuclear generation is also an important component of Dominion Energy’s GHG emissions reduction strategy. Dominion Energy expects to invest from 2022 through 2035 approximately $4 billion supporting 20-year life extensions of its units at Surry and North Anna. Virginia Power has received a 20-year extension of the operating licenses for its two units at Surry and has commenced the process to extend the operating licenses for its two units at North Anna.
Dominion Energy is pursuing renewable natural gas through its investment in Align RNG, which is developing projects to capture and convert methane emissions from swine farms, and its strategic alliance with Vanguard Renewables in collaboration with the Dairy Farmers of America to develop projects to capture and convert methane emissions from dairy farms across the U.S. Dominion Energy expects to invest approximately $2 billion in renewable natural gas facilities from 2022 through 2035.
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See Operating Segments and Item 2. Properties for additional information.
Innovation and Energy Infrastructure Modernization
One of the pillars of Dominion Energy’s net zero strategy is a focus on innovation as way to advance technology and sustainability. This includes investing in and building upon previously proven technology, including large-scale battery storage, hydrogen, advanced nuclear technology and carbon capture technology. Further, Dominion Energy’s growth capital plan from 2022 through 2026 includes a focus on upgrading the electric system in Virginia through investments in additional renewable generation facilities, smart meters, customer information platform, intelligent grid devices and associated control systems, physical and cyber security investments, strategic undergrounding and energy conservation programs. Dominion Energy also plans to upgrade its gas and electric transmission and distribution networks and meet environmental requirements and standards set by various regulatory bodies. These enhancements are aimed at meeting Dominion Energy’s continued goal of providing safe, reliable service while addressing increasing electricity consumption, making Dominion Energy’s system more responsive to its customers’ desire to more efficiently manage their energy consumption and transforming its grid to be more adaptive to renewable generation resources and battery technologies.
Dominion Energy has also implemented infrastructure improvements and improved operational practices to reduce the GHG emissions for its natural gas facilities. Dominion Energy is also pursuing the construction or upgrade of regulated infrastructure in its natural gas businesses. Dominion Energy has made voluntary commitments as part of the EPA’s Natural Gas STAR Methane Challenge Program to continue to reduce methane emissions as part of these improvements. Dominion Energy is also a member of the EPA’s voluntary Natural Gas STAR Program, which the entities acquired in the SCANA Combination are expected to join in 2022. In addition, Dominion Energy is a member of the One Future Coalition, an industry group with members pledging to limit methane emissions to below 1% of gas throughput across the entire natural gas value chain.
See Operating Segments for additional information.
Conservation and Energy Efficiency
Conservation and load management play a significant role in meeting the growing demand for electricity and natural gas, while also helping to reduce the environmental footprint of Dominion Energy’s customers and lower their bills. Dominion Energy offers various efficiency programs designed to reduce energy consumption in Virginia, North Carolina, Ohio, South Carolina, Utah and Wyoming, including programs such as:
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|
• |
Energy audits and assessments; |
|
|
• |
Incentives for customers to upgrade or install certain energy efficient measures and/or systems; |
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|
• |
Weatherization assistance to help income-eligible customers reduce their energy usage; |
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|
• |
Home energy planning, which provides homeowners with a step-by-step roadmap to efficiency improvements to reduce gas usage; and |
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|
• |
Rebates for installing high-efficiency equipment and qualified electric vehicle chargers. |
GHG Emissions
Dominion Energy continues to make progress on achieving its net zero emissions commitment. Through 2020, Dominion Energy has reduced direct Scope 1 CO2 equivalent carbon and methane emissions from its electric generation and natural gas operations by 42%. Through 2020, Dominion Energy has reduced carbon emissions from its electric generating units by 43% since 2005 and reduced methane emissions from its natural gas infrastructure operations by 32% since 2010. For the purposes of these calculations, Dominion Energy’s baseline data includes pro forma adjustments to include the operations acquired in the SCANA Combination as well as Questar Gas and Wexpro. In addition, both the baseline and 2020 emissions data excludes the operations sold as part of the GT&S Transaction and of the Q-Pipe Group.
Dominion Energy’s 2021 emissions data is not yet available.
Corporate GHG Inventory
Dominion Energy maintains a comprehensive Corporate GHG Inventory, which follows methodologies specified in the EPA’s Mandatory GHG Reporting Rule, 40 Code of Federal Regulations Part 98 for calculating emissions, as well as approved industry protocols. In its annual Corporate GHG Inventory, Dominion Energy voluntarily includes carbon and methane emission estimates
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from smaller sources that are not required to be included under the EPA’s mandatory GHG Reporting Program, including smaller electric generation, natural gas compressor stations and other sources. Dominion Energy’s Corporate GHG Inventory also includes emissions sources Dominion Energy voluntarily reports to various programs it participates in. As a result, Dominion Energy’s reported methane emissions in its Corporate GHG Inventory are higher than what is reported to the EPA. Dominion Energy includes emissions data in its Corporate GHG Inventory based on its ownership percentage of the associated assets and for the period in which the operations are owned by Dominion Energy.
Total CO2 equivalent emissions reported under Dominion Energy’s Corporate GHG Inventory were 37.4 million metric tons in 2020. Reported CO2 equivalent emissions include CO2, CH4, N2O and SF6 emissions from Dominion Energy’s electric generation operations, electric transmission and distribution operations and natural gas operations. Dominion Energy’s 2020 emissions data reported under its Corporate GHG Inventory includes the results of the operations included in the GT&S Transaction through November 2020 as well as the entire year of the operations included in the Q-Pipe Group.
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• |
For Dominion Energy’s electric generation operations, total CO2 equivalent emissions were 33.2 million metric tons in 2020, including 8.6 million metric tons from DESC and 24.6 million metric tons from Virginia Power. |
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• |
For Dominion Energy’s electric transmission and distribution operations, direct CO2 equivalent emissions were 0.06 million metric tons in 2020. |
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• |
For Dominion Energy’s natural gas assets, total CO2 equivalent emissions were 3.5 million metric tons in 2020, including 1.6 million metric tons associated with operations included in the GT&S Transaction and with the Q-Pipe Group. |
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• |
For Dominion Energy’s proportional interest in Cove Point’s operations, total CO2 equivalent emissions were 0.6 million metric tons in 2020. |
EPA Mandatory GHG Reporting Program
Dominion Energy has been reporting GHG emissions, including carbon, methane, N2O and SF6, from its natural gas infrastructure, electric generation and power delivery operations to the EPA since 2011 under the EPA mandatory GHG Reporting Program. The EPA’s mandatory GHG Reporting Program requires annual reporting based on full equity asset ownership at the end of the calendar year. Dominion Energy’s 2020 GHG emissions reported under various subparts of the EPA’s Mandatory GHG Reporting Program as of December 31, 2020, which exclude the operations included in the GT&S Transaction and include the operations of the Q-Pipe Group, are as follows:
Natural Gas Operations – 2020 Emissions
|
Segment |
|
Subpart W CH4 Emissions |
|
|
Subpart C CH4 Emissions |
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|
Subparts W & C CH4 Emissions |
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Subparts W & C CO2 Emissions |
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Subparts W & C N2O Emissions |
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Subparts W & C as CO2 Equivalent Emissions(3) |
|
||||||
|
(metric tons) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution |
|
|
34,116 |
|
|
|
|
|
|
|
34,116 |
|
|
|
2,355 |
|
|
|
— |
|
|
|
855,251 |
|
|
Production |
|
|
15,053 |
|
|
|
|
|
|
|
15,053 |
|
|
|
16,527 |
|
|
|
0.04 |
|
|
|
392,874 |
|
|
Transmission pipelines |
|
|
496 |
|
|
|
|
|
|
|
496 |
|
|
|
14 |
|
|
|
|
|
|
|
12,412 |
|
|
Transmission compressor stations |
|
|
843 |
|
|
|
4 |
|
|
|
847 |
|
|
|
210,737 |
|
|
|
0.40 |
|
|
|
232,036 |
|
|
Gathering and boosting |
|
|
2,733 |
|
|
|
|
|
|
|
2,733 |
|
|
|
88,767 |
|
|
|
0.18 |
|
|
|
157,151 |
|
|
Storage |
|
|
323 |
|
|
|
2 |
|
|
|
324 |
|
|
|
85,993 |
|
|
|
0.16 |
|
|
|
94,149 |
|
|
LNG storage |
|
|
70 |
|
|
|
— |
|
|
|
70 |
|
|
|
482 |
|
|
|
— |
|
|
|
2,240 |
|
|
LNG import/export(1) |
|
|
165 |
|
|
|
20 |
|
|
|
185 |
|
|
|
1,120,158 |
|
|
|
2.06 |
|
|
|
1,125,388 |
|
|
Total(2)(3) |
|
|
53,799 |
|
|
|
25 |
|
|
|
53,825 |
|
|
|
1,525,034 |
|
|
|
2.84 |
|
|
|
2,871,500 |
|
|
(1) |
Includes Cove Point at 100% ownership as required by the EPA. |
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(2) |
As of December 31, 2020, Dominion Energy’s only facility classified as processing did not operate in 2020 resulting in no emissions data to report. |
|
(3) |
Totals may not foot due to rounding. |
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Electric Generation Operations – 2020 Emissions
|
Company |
|
Subparts C & D CO2 Emissions |
|
|
Subparts C & D CH4 Emissions |
|
|
Subparts C & D N2O Emissions |
|
|
Subparts C & D CH4 Emissions as CO2 Equivalent Emissions |
|
|
Subparts C & D N2O Emissions as CO2 Equivalent Emissions |
|
|
Subparts C & D as CO2 Equivalent Emissions(2) |
|
||||||
|
(metric tons) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia Power(1) |
|
|
24,987,534 |
|
|
|
1,317 |
|
|
|
183 |
|
|
|
32,935 |
|
|
|
54,455 |
|
|
|
25,074,923 |
|
|
DESC |
|
|
8,527,718 |
|
|
|
523 |
|
|
|
72 |
|
|
|
13,087 |
|
|
|
21,445 |
|
|
|
8,562,250 |
|
|
Total(2) |
|
|
33,515,252 |
|
|
|
1,841 |
|
|
|
255 |
|
|
|
46,021 |
|
|
|
75,900 |
|
|
|
33,637,174 |
|
|
(1) |
Virginia Power totals include biomass, which were not included in the Corporate GHG inventory. |
|
(2) |
Totals may not foot due to rounding. |
Electric Transmission and Distribution Operations – 2020 Emissions
|
Company |
|
Subpart DD SF6 Emissions |
|
|
Subpart DD SF6 as CO2 Equivalent Emissions |
|
||
|
(metric tons) |
|
|
|
|
|
|
|
|
|
Virginia Power |
|
|
1.36 |
|
|
|
30,974 |
|
|
DESC(1) |
|
|
1.23 |
|
|
|
28,037 |
|
|
Total(2) |
|
|
2.59 |
|
|
|
59,011 |
|
|
(1) |
DESC triggered EPA mandatory GHG reporting in 2020. |
|
(2) |
Totals may not foot due to rounding. |
ENVIRONMENTAL PROTECTION AND MONITORING EXPENDITURES
Dominion Energy incurred $221 million, $238 million and $260 million of expenses (including accretion and depreciation) during 2021, 2020, and 2019 respectively, in connection with environmental protection and monitoring activities. Dominion Energy expects these expenses to be approximately $223 million and $216 million in 2022 and 2023, respectively. In addition, capital expenditures related to environmental controls were $37 million, $58 million, and $134 million for 2021, 2020, and 2019, respectively. Dominion Energy expects these expenditures to be approximately $108 million and $160 million for 2022 and 2023, respectively.
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Item 1A. Risk Factors
The Companies’ businesses are influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond their control. A number of these factors have been identified below. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement or projection contained in this report, see Forward-Looking Statements in Item 7. MD&A.
Regulatory, Legislative and Legal Risks
The rates of the Companies’ principal electric transmission, distribution and generation operations and gas distribution operations are subject to regulatory review. Revenue provided by the Companies’ electric transmission, distribution and generation operations and by gas distribution operations is based primarily on rates approved by state and federal regulatory agencies. The profitability of the Companies’ businesses is dependent on their ability, through the rates that they are permitted to charge, to recover costs and earn a reasonable rate of return on their capital investment.
At the federal level, the Companies’ wholesale rates for electric transmission service are regulated by FERC. Rates for electric transmission services are updated annually according to a FERC-approved formula rate mechanism, and may be subject to additional prospective adjustments and retroactive corrections. A failure by the Companies to support these rates could result in rate decreases from current rate levels, which could adversely affect the Companies’ results of operations, cash flows and financial condition.
At the state level, Virginia Power’s retail base rates, terms and conditions for generation and distribution services to customers in Virginia are reviewed by the Virginia Commission in a proceeding that involves the determination of Virginia Power’s actual earned ROE during a historic test period, and the determination of Virginia Power’s authorized ROE prospectively. The GTSA reinstated triennial reviews commencing with the 2021 Triennial Review. Under certain circumstances described in the Regulation Act, Virginia Power may be required to refund a portion of its earnings to customers through a refund process and to reduce its rates. Additionally, Virginia Power’s ability to utilize CCROs for certain qualifying projects as provided for in the GTSA may be limited if the Virginia Commission does not approve such projects. Virginia Power makes assessments throughout the review period and will record a regulatory liability for refunds and/or CCRO benefits to customers in any period it is determined probable, which could be material to the Companies’ results of operations in the period recognized and to cash flows on completion of any triennial review.
In states other than Virginia, the Companies’ retail electric base rates for generation and distribution services to customers are regulated on a cost-of-service/rate-of-return basis subject to the statutes, rules and procedures of such states. Dominion Energy’s rates for gas distribution to retail customers are similarly regulated at the state level. If retail electric or gas earnings exceed the returns established by state utility commissions, retail electric rates or gas rates may be subject to review and possible reduction, which may decrease the Companies’ future earnings. Additionally, if any state utility commission does not allow recovery through base rates, on a timely basis, of costs incurred in providing service, the Company’s future earnings could be negatively impacted.
Under certain circumstances, state utility regulators may impose a moratorium on increases to retail base rates for a specified period of time, which could delay recovery of costs incurred in providing service. Additionally, governmental officials, stakeholders and advocacy groups may challenge any of these regulatory reviews. Such challenges may lengthen the time, complexity and costs associated with such regulatory reviews.
The Companies’ generation business may be negatively affected by possible FERC actions that could change market design in the wholesale markets or affect pricing rules or revenue calculations in the RTO markets. The Companies’ generation stations operating in RTO markets sell capacity, energy and ancillary services into wholesale electricity markets regulated by FERC. The wholesale markets allow these generation stations to take advantage of market price opportunities, but also expose them to market risk. Properly functioning competitive wholesale markets depend upon FERC’s continuation of clearly identified market rules. From time to time FERC may investigate and authorize RTOs to make changes in market design. FERC also periodically reviews the Companies’ authority to sell at market-based rates. Material changes by FERC to the design of the wholesale markets or its interpretation of market rules, the Companies’ authority to sell power at market-based rates, or changes to pricing rules or rules involving revenue calculations, could adversely impact the future results of the Companies’ generation business. For example, in September 2021, FERC issued a final order that allows distributed energy resource aggregators to compete in regional wholesale electric markets. This rule followed a previous order which mandated that distributed energy resources be allowed to participate in wholesale markets. RTOs, including PJM, are responsible for issuing implementation rules to FERC for approval. In addition, in December 2019, FERC issued an order on PJM’s Minimum Offer Price Rule proposals finding the PJM tariff unjust and unreasonable and directed PJM to expand the Minimum Offer Price Rule to all existing and new generation resources benefitting from a state subsidy to address the effects of state subsidies on new and existing resources on the PJM capacity market. The expanded Minimum Offer Price Rule will set a floor price on new and existing renewable and non-renewable state subsidized resources that do not seek a FERC exemption, increasing their risk of failing to clear the capacity auction and not obtaining a capacity payment and obligation. In addition, changes to the interpretation and application of FERC’s market manipulation rules may occur from time to time. A failure to comply with these market manipulation rules could lead to civil and criminal penalties.
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The Companies are subject to complex governmental regulation, including tax regulation, that could adversely affect their results of operations and subject the Companies to monetary penalties. The Companies’ operations are subject to extensive federal, state and local regulation and require numerous permits, approvals and certificates from various governmental agencies. Such laws and regulations govern the terms and conditions of the services we offer, our relationships with affiliates, protection of our critical electric infrastructure assets and pipeline safety, among other matters. These operations are also subject to legislation governing taxation at the federal, state and local level. They must also comply with environmental legislation and associated regulations. Management believes that the necessary approvals have been obtained for existing operations and that the businesses are conducted in accordance with applicable laws. The Companies’ businesses are subject to regulatory regimes which could result in substantial monetary penalties if any of the Companies is found not to be in compliance, including mandatory reliability standards and interaction in the wholesale markets. New laws or regulations, the revision or reinterpretation of existing laws or regulations, changes in enforcement practices of regulators, or penalties imposed for non-compliance with existing laws or regulations may result in substantial additional expense. Recent legislative and regulatory changes that are impacting the Companies include the VCEA, the 2017 Tax Reform Act and tariffs imposed on imported solar panels by the U.S. government in 2018.
The Companies have been and may continue to be or become subject to legal proceedings and governmental investigations and examinations. Dominion Energy, following the SCANA Combination, has been subject to numerous federal and state legal proceedings and governmental investigations relating to the decision of SCANA and DESC to abandon construction at the NND Project. Dominion Energy has spent, and continues to spend, substantial amounts of time and money defending these lawsuits and proceedings and on related investigations. In addition, juries have demonstrated a willingness to grant large awards in certain cases, including personal injury claims. Accordingly, actual costs incurred may differ materially from insured or reserved amounts and may not be recoverable, in whole or in part, by insurance or in rates from our customers. The outcome of these or future legal proceedings, investigations and examinations, including settlements, may adversely affect the Companies’ financial condition or results of operation.
Environmental Risks
Compliance with federal and/or state requirements imposing limitations on GHG emissions or efficiency improvements, as well as Dominion Energy’s commitment to achieve net zero carbon and methane emissions by 2050, may result in significant compliance costs, could result in certain of the Companies’ existing electric generation units being uneconomical to maintain or operate and may depend upon technological advancements which may be beyond the Companies’ control. Virginia has adopted the VCEA which establishes renewable energy and CO2 reduction targets for Virginia Power’s generation fleet and grid operations, including the requirement that 100% of Virginia Power’s electricity come from zero-carbon generation by the end of 2045. The legislation mandates the development of 16.1 GW of solar or onshore wind capacity by the end of 2035, which includes specific requirements for utility-scale solar of 3.0 GW by the end of 2024, up to 15.0 GW by the end of 2035 and 1.1 GW of small-scale solar by the end of 2035. The legislation also deems 5.2 GW of offshore wind capacity before 2035 and 2.7 GW of energy storage by the end of 2035 to be in the public interest. The VCEA and related legislation also directs Virginia to participate in a program consistent with RGGI, requiring the purchase of carbon credits to offset emissions from Virginia Power’s generating fleet within the state. In January 2022, the Governor of Virginia issued an executive order which puts directives in place to start the withdrawal of Virginia from RGGI. Cost recovery for these initiatives will require approval by the Virginia Commission which may be denied or materially altered to the detriment of the Companies. In addition, permitting and other project execution challenges may hinder Virginia Power’s ability to meet the requirements of the VCEA. The Companies could face similar risks if there is further legislation at the federal and/or state level mandating additional limitations on GHG emissions or requiring additional efficiency improvements.
In February 2020, Dominion Energy announced its commitment to achieve net zero carbon and methane Scope 1 emissions by 2050. In February 2022, Dominion Energy expanded this commitment to cover Scope 2 emissions and material categories of Scope 3 emissions. To meet this commitment, the Companies expect to construct new electric generation facilities, including renewable facilities such as wind and solar, and to seek the extension of operating licenses for the Companies’ nuclear generation facilities. The Companies also need to depend on technological improvements not currently in commercial development. Additionally, actions taken in furtherance of Dominion Energy’s net zero commitment may impact existing generation facilities, including as a result of fuel switching and/or the retirement of high-emitting generation facilities and their potential replacement with lower-emitting generation facilities. Further, the ability to realize this commitment will require the Companies to be able to obtain significant financing. These efforts will require approvals from various regulatory bodies for the siting and construction of such new facilities and a determination by the applicable state commissions that costs related to the construction are prudent. Given these and other uncertainties associated with the implementation of Dominion Energy’s net zero commitment, the Companies cannot estimate the aggregate effect of future actions taken in furtherance of this commitment on their results of operations or financial condition or on their customers. However, such actions could render additional existing generation facilities uneconomical to operate, result in the impairment of assets, or otherwise adversely affect the Companies’ results of operations, financial performance or liquidity.
There are also potential impacts on Dominion Energy’s natural gas business from its net zero emissions commitment as well as federal or state GHG regulations which may require further GHG emission reductions from the natural gas sector which, in addition to
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resulting in increased costs, could affect demand for natural gas. Additionally, GHG requirements could result in increased demand for energy conservation and renewable products, which could impact the natural gas business. Dominion Energy’s renewable natural gas projects, expected to be a key component of Dominion Energy’s environmental strategy, require approvals from various regulatory bodies for the siting and construction of such facilities.
The Companies’ operations and construction activities are subject to a number of environmental laws and regulations which impose significant compliance costs on the Companies. The Companies’ operations and construction activities are subject to extensive federal, state and local environmental statutes, rules and regulations relating to air quality, water quality, waste management, natural resources, and health and safety. Compliance with these legal requirements requires the Companies to commit significant capital toward permitting, emission fees, environmental monitoring, installation and operation of environmental control equipment and purchase of allowances and/or offsets. Additionally, the Companies could be responsible for expenses relating to remediation and containment obligations, including at sites where they have been identified by a regulatory agency as a potentially responsible party. Expenditures relating to environmental compliance have been significant in the past, and the Companies expect that they will remain significant in the future. Certain facilities have become uneconomical to operate and have been shut down, converted to new fuel types or sold. These types of events could occur again in the future.
We expect that existing environmental laws and regulations may be revised and/or new laws may be adopted including regulation of GHG emissions which could have an impact on the Companies’ business (risks relating to regulation of GHG emissions from existing fossil fuel-fired electric generating units are discussed in more detail below). In addition, further regulation of air quality and GHG emissions under the CAA may be imposed on the natural gas sector. The Companies are also subject to federal water and waste regulations, including regulations concerning cooling water intake structures, coal combustion by-product handling and disposal practices, wastewater discharges from steam electric generating stations, management and disposal of hydraulic fracturing fluids and the potential further regulation of polychlorinated biphenyls.
Compliance costs cannot be estimated with certainty due to the inability to predict the requirements and timing of implementation of any new environmental rules or regulations. Other factors which affect the ability to predict future environmental expenditures with certainty include the difficulty in estimating clean-up costs and quantifying liabilities under environmental laws that impose joint and several liabilities on all responsible parties. However, such expenditures, if material, could make the Companies’ facilities uneconomical to operate, result in the impairment of assets, or otherwise adversely affect the Companies’ results of operations, financial performance or liquidity.
The Companies are subject to risks associated with the disposal and storage of coal ash. The Companies historically produced and continue to produce coal ash, or CCRs, as a by-product of their coal-fired generation operations. The ash is stored and managed in impoundments (ash ponds) and landfills located at 11 different facilities, eight of which are at Virginia Power.
The EPA has issued regulations concerning the management and storage of CCRs, which Virginia has adopted. These CCR regulations require the Companies to make additional capital expenditures and increase operating and maintenance expenses. In addition, the Companies will incur expenses and other costs associated with closing, corrective action and ongoing monitoring of certain ash ponds and landfills. The Companies also may face litigation concerning their coal ash facilities.
Further, while the Companies operate their ash ponds and landfills in compliance with applicable state safety regulations, a release of coal ash with a significant environmental impact could result in remediation costs, civil and/or criminal penalties, claims, litigation, increased regulation and compliance costs, and reputational damage, and could impact the financial condition of the Companies.
Construction Risks
The Companies’ infrastructure build and expansion plans often require regulatory approval, including environmental permits, before commencing construction and completing projects. The Companies may not complete the facility construction, pipeline, conversion or other infrastructure projects that they commence, or they may complete projects on materially different terms, costs or timing than initially estimated or anticipated, and they may not be able to achieve the intended benefits of any such project, if completed. A number of large and small scale projects have been announced, including pipelines, electric transmission lines, facility expansions or renewed licensing, conversions and other infrastructure developments or construction. Additional projects may be considered in the future. The Companies compete for projects with companies of varying size and financial capabilities, including some that may have competitive advantages. Commencing construction on announced and future projects may require approvals from applicable state and federal agencies, and such approvals could include mitigation costs which may be material to the Companies. Projects may not be able to be completed on time or in accordance with our estimated costs as a result of weather conditions, delays in obtaining or failure to obtain regulatory and other, including PJM, approvals, delays in obtaining key materials, labor difficulties, difficulties with partners or potential partners, concerns raised during stakeholder engagement, a decline in the credit strength of counterparties or vendors, inflation, or other factors beyond the Companies’ control. For example, Dominion Energy has been involved with projects which have experienced certain delays in obtaining and maintaining permits necessary for construction along with construction delays due to judicial actions which impacted the cost and schedule such as
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the Atlantic Coast Pipeline Project and ultimately led to its cancellation. Even if facility construction, pipeline, expansion, electric transmission line, conversion and other infrastructure projects are completed, the total costs of the projects may be higher than anticipated and the performance of the business of the Companies following completion of the projects may not meet expectations.
Start-up and operational issues can arise in connection with the commencement of commercial operations at our facilities. Such issues may include failure to meet specific operating parameters, which may require adjustments to meet or amend these operating parameters. Additionally, the Companies may not be able to timely and effectively integrate the projects into their operations and such integration may result in unforeseen operating difficulties or unanticipated costs. Further, regulators may disallow recovery of some of the costs of a project if they are deemed not to be prudently incurred. Any of these or other factors could adversely affect the Companies’ ability to realize the anticipated benefits from the facility construction, pipeline, electric transmission line, expansion, conversion and other infrastructure projects.
The development and construction of the CVOW Commercial Project involves significant risks. The CVOW Commercial Project is a large-scale, complex project that will take several years to complete. Significant delays or cost increases, or an inability to recover certain project costs, could have an adverse effect on the Companies’ financial condition, cash flows and results of operations. If the Companies are unable to complete the development and construction of the CVOW Commercial Project or decide in the future to delay or cancel the project, the Companies may not be able to recover all or a portion of their investment in the project and may incur substantial cancellation payments under existing contracts or other substantial costs associated with any such delay or cancellation. The Companies’ ability to complete the CVOW Commercial Project within the currently proposed timeline, or at all, and consistent with current cost estimates is subject to various risks and uncertainties, certain of which are beyond the Companies’ control.
The development and construction of the CVOW Commercial Project is dependent on the Companies’ ability to obtain and maintain various local, state and federal permits and other regulatory approvals, including Virginia Commission approval for rider recovery of project costs. In addition, the design and route of the project’s onshore electric transmission, network upgrades and other facilities remain subject to regulatory and PJM review and approval. Changes in the design and route of these onshore facilities, including an increase in amount of undergrounding, would likely increase project costs. Also, the CVOW Commercial Project may become the subject of litigation or other forms of intervention by third parties, including stakeholders or advocacy groups, that may impact the timing and receipt of permits or other regulatory approvals or otherwise delay or increase the cost of the project.
The Companies’ ability to invest the significant financial resources necessary for the CVOW Commercial Project is dependent on the Companies’ access to the financial markets in a timely and cost-effective manner. A decline in the Companies’ credit worthiness, an unfavorable market reputation of either the Companies or their industry or general market disruptions could adversely impact financing costs and increase the overall cost of the project.
The development and construction of the CVOW Commercial Project is also dependent on the ability of certain key suppliers and contractors to timely satisfy their obligations under contracts entered into or expected to be entered into. Given the unique equipment and expertise required for this project, the Companies may not be able to remedy in a timely and cost-effective manner, if at all, any failure by one or more of these suppliers or contractors to timely satisfy their contractual obligations. Certain of the fixed price contracts for major offshore construction and equipment components are denominated in Euros and Danish kroner, including those which contain commodity indexing provisions linked to steel. Accordingly, to the extent the Companies are unable to, including from the inability to receive approval from the Virginia Commission, or elect not to, hedge their exposure to these currencies, adverse fluctuations in the applicable exchange rates would likely adversely affect the cost of the CVOW Commercial Project. Similarly, adverse fluctuations in the price of certain raw materials, including steel, would likely, to the extent not hedged by the Companies, adversely affect the overall costs incurred to develop and construct the project.
The development and construction of the CVOW Commercial Project involves the use of new turbine technology and will take place in a marine environment, which presents unique challenges and will require the use of a specialized workforce and specialized equipment. In addition, the timely installation of the turbines is dependent on the completion and availability of a Jones Act compliant vessel currently under construction, and regulatory approval for Virginia Power to use an affiliate’s vessel.
The timeline for development and construction of the CVOW Commercial Project may also be negatively impacted by severe weather events or marine wildlife, including migration patterns of endangered and protected species, both of which are outside of the control of the Companies and its contractors. Any significant delays in the project timeline, including from any of the factors discussed above, resulting in both the delay of commencement of construction to 2024 or later combined with a delay to the in-service date to 2028 or later may impact the ability of the Companies to recover the costs of the CVOW Commercial Project.
The development, construction and commissioning of several large-scale infrastructure projects simultaneously involves significant execution risk. To achieve Dominion Energy’s commitment to net zero emissions by 2050 and comply with the requirements of the VCEA, the Companies are currently simultaneously developing or constructing several electric generation projects, including Subsequent License Renewal projects at Surry and North Anna, the CVOW Commercial Project and various solar projects. Several of the Companies’ key projects are increasingly large-scale, complex and being constructed in constrained
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geographic areas or in unfamiliar environments such as the marine environment for the Coastal Virginia Offshore Wind projects. The advancement of the Companies’ ventures is also affected by the interventions, litigation or other activities of stakeholder and advocacy groups, some of which oppose natural gas-related and energy infrastructure projects. For example, certain stakeholder groups oppose solar farms due to the increasing quantities of land tracts required for these facilities. Given that these projects provide the foundation for the Companies’ strategic growth plan, if the Companies are unable to obtain or maintain the required regulatory and other, including PJM, approvals, develop the necessary technical expertise, allocate and coordinate sufficient resources, adhere to budgets and timelines, effectively handle public outreach efforts, or otherwise fail to successfully execute the projects, there could be an adverse impact to the Companies’ financial position, results of operations and cash flows. Failure to comply with regulatory approval conditions or an adverse ruling in any future litigation could adversely affect the Companies’ ability to execute their business plan.
The Companies are dependent on their contractors for the successful and timely completion of large-scale infrastructure projects. The construction of such projects is expected to take several years, is typically confined within a limited geographic area or difficult environments and could be subject to delays, supply chain disruption, cost overruns, inflation, labor disputes or shortages and other factors that could cause the total cost of the project to exceed the anticipated amount and adversely affect the Companies’ financial performance and/or impair the Companies’ ability to execute the business plan for the project as scheduled.
Further, an inability to obtain financing or otherwise provide liquidity for the projects on acceptable terms could negatively affect the Companies’ financial condition, cash flows, the projects’ anticipated financial results and/or impair the Companies’ ability to execute the business plan for the projects as scheduled.
Operational Risks
The Companies’ financial performance and condition can be affected by changes in the weather, including the effects of global climate change. Fluctuations in weather can affect demand for the Companies’ services. For example, milder than normal weather can reduce demand for electricity and gas distribution services. In addition, severe weather or acts of nature, including hurricanes, winter storms, earthquakes, floods and other natural disasters can stress systems, disrupt operation of the Companies’ facilities and cause service outages, production delays and property damage that require incurring additional expenses. Changes in weather conditions can result in reduced water levels or changes in water temperatures that could adversely affect operations at some of the Companies’ power stations. Furthermore, the Companies’ operations could be adversely affected and their physical plant placed at greater risk of damage should changes in global climate produce, among other possible conditions, unusual variations in temperature and weather patterns, resulting in more intense, frequent and extreme weather events, abnormal levels of precipitation and, for operations located on or near coastlines, a change in sea level or sea temperatures. Due to the location of the Companies’ electric utility service territories and a number of its other facilities in the eastern portions of the states of South Carolina, North Carolina and Virginia which are frequently in the path of hurricanes, we experience the consequences of these weather events to a greater degree than many of our industry peers.
Hostile cyber intrusions could severely impair the Companies’ operations, lead to the disclosure of confidential information, damage the reputation of the Companies and otherwise have an adverse effect on the Companies’ business. The Companies own assets deemed as critical infrastructure, the operation of which is dependent on information technology systems. Further, the computer systems that run the Companies’ facilities are not completely isolated from external networks. There appears to be an increasing level of activity, sophistication and maturity of threat actors, in particular nation state actors, that wish to disrupt the U.S. bulk power system and the U.S. gas transmission or distribution system. Such parties could view the Companies’ computer systems, software or networks as attractive targets for cyber attack. For example, malware has been designed to target software that runs the nation’s critical infrastructure such as power transmission grids and gas pipelines. In addition, the Companies’ businesses require that they and their vendors collect and maintain sensitive customer data, as well as confidential employee and shareholder information, which is subject to electronic theft or loss.
A successful cyber attack through third-party or insider action on the systems that control the Companies’ electric generation, electric transmission or distribution assets could severely disrupt business operations, preventing the Companies from serving customers or collecting revenues. The breach of certain business systems could affect the Companies’ ability to correctly record, process and report financial information. A major cyber incident could result in significant expenses to investigate and repair security breaches or system damage and could lead to litigation, fines, other remedial action, heightened regulatory scrutiny and damage to the Companies’ reputation. In addition, the misappropriation, corruption or loss of personally identifiable information and other confidential data at the Companies or one of their vendors could lead to significant breach notification expenses and mitigation expenses such as credit monitoring. If a significant breach were to occur, the reputation of the Companies also could be adversely affected. While the Companies maintain property and casualty insurance, along with other contractual provisions, that may cover certain damage caused by potential cyber incidents, all damage and claims arising from such incidents may not be covered or may exceed the amount of any insurance available. For these reasons, a significant cyber incident could materially and adversely affect the Companies’ business, financial condition and results of operations.
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The Companies’ operations are subject to operational hazards, equipment failures, supply chain disruptions and personnel issues which could negatively affect the Companies. Operation of the Companies’ facilities involves risk, including the risk of potential breakdown or failure of equipment or processes due to aging infrastructure, fuel supply, pipeline integrity or transportation disruptions, accidents, labor disputes or work stoppages by employees, acts of terrorism or sabotage, construction delays or cost overruns, shortages of or delays in obtaining equipment, material and labor, operational restrictions resulting from environmental limitations and governmental interventions, changes to the environment and performance below expected levels. The Companies’ businesses are dependent upon sophisticated information technology systems and network infrastructure, the failure of which could prevent them from accomplishing critical business functions. Because the Companies’ transmission facilities, pipelines and other facilities are interconnected with those of third parties, the operation of their facilities and pipelines could be adversely affected by unexpected or uncontrollable events occurring on the systems of such third parties.
Operation of the Companies’ facilities below expected capacity levels could result in lost revenues and increased expenses, including higher maintenance costs. Unplanned outages of the Companies’ facilities and extensions of scheduled outages due to mechanical failures or other problems occur from time to time and are an inherent risk of the Companies’ business. Unplanned outages typically increase the Companies’ operation and maintenance expenses and may reduce their revenues as a result of selling less output or may require the Companies to incur significant costs as a result of operating higher cost units or obtaining replacement output from third parties in the open market to satisfy forward energy and capacity or other contractual obligations. Moreover, if the Companies are unable to perform their contractual obligations, penalties or liability for damages could result.
In addition, there are many risks associated with the Companies’ principal operations and the transportation and storage of natural gas including nuclear accidents, fires, explosions, uncontrolled release of natural gas and other environmental hazards, pole strikes, electric contact cases, the collision of third party equipment with pipelines and avian and other wildlife impacts. Such incidents could result in loss of human life or injuries among employees, customers or the public in general, environmental pollution, damage or destruction of facilities or business interruptions and associated public or employee safety impacts, loss of revenues, increased liabilities, heightened regulatory scrutiny and reputational risk. Further, the location of natural gas pipelines and associated distribution facilities, or electric generation, transmission, substations and distribution facilities near populated areas, including residential areas, commercial business centers and industrial sites, could increase the level of damages resulting from these risks.
The Companies’ financial results can be adversely affected by various factors driving supply and demand for electricity and gas and related services. Technological advances required by federal laws mandate new levels of energy efficiency in end-use devices, including lighting, furnaces and electric heat pumps and could lead to declines in per capita energy consumption. Additionally, certain regulatory and legislative bodies have introduced or are considering requirements and/or incentives to reduce energy consumption by a fixed date. Consumer demand for our services may also be impacted by any price increases, including those driven by factors beyond our control such as inflation or increased prices in natural gas. Further, Virginia Power’s business model is premised upon the cost efficiency of the production, transmission and distribution of large-scale centralized utility generation. However, advances in distributed generation technologies, such as solar cells, gas microturbines, battery storage and fuel cells, may make these alternative generation methods competitive with large-scale utility generation, and change how customers acquire or use our services. The widescale implementation of alternative generation methods could negatively impact the reliability of the Companies’ electric grid and/or result in significant costs to enhance the grid. Virginia Power has an exclusive franchise to serve retail electric customers in Virginia. However, Virginia’s Retail Access Statutes allow certain electric generation customers exceptions to this franchise. As market conditions change, Virginia Power’s customers may further pursue exceptions and Virginia Power’s exclusive franchise may erode.
Reduced energy demand or significantly slowed growth in demand due to customer adoption of energy efficient technology, conservation, distributed generation, regional economic conditions, or the impact of additional compliance obligations, unless substantially offset through regulatory cost allocations, could adversely impact the value of the Companies’ business activities.
The Companies may be materially adversely affected by negative publicity or the inability of Dominion Energy to meet its stated commitments. From time to time, political and public sentiment may result in a significant amount of adverse press coverage and other adverse public statements affecting the Companies. Any failure by Dominion Energy to realize its commitments to achieve net zero carbon and methane emissions by 2050, increase workforce diversity, enhance the customer experience or other long-term goals could lead to adverse press coverage and other adverse public statements affecting the Companies. The ability to comply with some or all of Dominion Energy’s voluntary commitments may be outside of its control. For example, Dominion Energy is dependent on the actions of third parties to meet the expanded commitment regarding Scope 2 emissions and Scope 3 emissions. If downstream customers or upstream suppliers do not sufficiently reduce their GHG emissions, Dominion Energy may not achieve its net zero emissions goal. In addition, while the Atlantic Coast Pipeline project was cancelled in July 2020 and several of the legal proceedings and governmental investigations relating to the abandonment of the NND Project have been resolved, there is a risk that lingering negative publicity may continue. Adverse press coverage and other adverse statements, whether or not driven by political or public sentiment, may also result in investigations by regulators, legislators and law enforcement officials or in legal claims as well as adverse outcomes.
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Addressing any adverse publicity, governmental scrutiny or enforcement or other legal proceedings is time consuming and expensive and, regardless of the factual basis for the assertions being made, can have a negative impact on the reputation of the Companies, on the morale and performance of their employees and on their relationships with their respective regulators, customers and commercial counterparties. It may also have a negative impact on the Companies’ ability to take timely advantage of various business and market opportunities. The direct and indirect effects of negative publicity, and the demands of responding to and addressing it, may have a material adverse effect on the Companies’ business, financial condition and results of operations.
Dominion Energy’s nonregulated generation business operates in a challenging market, which could adversely affect its results of operations and future growth. The success of Dominion Energy’s contracted generation business depends upon favorable market conditions including the ability to sell power at prices sufficient to cover its operating costs. Dominion Energy operates in active wholesale markets that expose it to price volatility for electricity and nuclear fuel as well as the credit risk of counterparties. Dominion Energy attempts to manage its price risk by entering into long-term power purchase agreements with customers as well as hedging transactions, including short-term and long-term fixed price sales and purchase contracts. The failure of Dominion Energy to maintain, renew or replace its existing long-term contracts on similar terms or with counterparties with similar credit profiles could result in a loss of revenue and/or decreased earnings and cash flows for Dominion Energy.
In these wholesale markets, the spot market price of electricity for each hour is generally determined by the cost of supplying the next unit of electricity to the market during that hour. In many cases, the next unit of electricity supplied would be provided by generating stations that consume fossil fuels, primarily natural gas. Consequently, the open market wholesale price for electricity generally reflects the cost of natural gas plus the cost to convert the fuel to electricity. Therefore, changes in the price of natural gas generally affect the open market wholesale price of electricity. To the extent Dominion Energy does not enter into long-term power purchase agreements or otherwise effectively hedge its output, these changes in market prices could adversely affect its financial results.
Dominion Energy purchases nuclear fuel primarily under long-term contracts. Dominion Energy is exposed to nuclear fuel cost volatility for the portion of its nuclear fuel obtained through short-term contracts or on the spot market, including as a result of market supply shortages. Nuclear fuel prices can be volatile and the price that can be obtained for power produced may not change at the same rate as nuclear fuel costs, thus adversely impacting Dominion Energy’s financial results. In addition, in the event that any of the contracted generation facilities experience a forced outage, Dominion Energy may not receive the level of revenue it anticipated.
Dominion Energy conducts certain operations through partnership arrangements involving third-party investors which may limit Dominion Energy’s operational flexibility or result in an adverse impact on its financial results. Certain of Dominion Energy’s operations are conducted through entities subject to partnership arrangements under which Dominion Energy has significant influence but does not control the operations of such entities or in which Dominion Energy’s control over such entities may be subject to certain rights of third-party investors. Accordingly, while Dominion Energy may have a certain level of control or influence over these entities, it may not have unilateral, or any, control over the day-to-day operations of these entities or over decisions that may have a material financial impact on the partnership participants, including Dominion Energy. In each case such partnership arrangements operate in accordance with their respective governance documents, and Dominion Energy is dependent upon third parties satisfying their respective obligations, including, as applicable, funding of their required share of capital expenditures. Such third-party investors have their own interests and objectives which may differ from those of Dominion Energy and, accordingly, disputes may arise amongst the owners of such partnership arrangements that may result in delays, litigation or operational impasses.
For example, Dominion Energy has a noncontrolling 50% interest in Cove Point following the sale of a 25% controlling interest to BHE in November 2020. This controlling interest allows BHE to make decisions affecting Cove Point’s ability to retain its long-term contracts. Cove Point is a party to certain contracts that allow a regulated service provider and a customer to mutually agree to sign a contract for service at a “negotiated rate” which may be above or below the FERC regulated, cost-based recourse rate for that service. These “negotiated rate” contracts are not generally subject to adjustment for increased costs which could be produced by inflation or other factors relating to the specific facilities being used to perform the services. Any shortfall of revenue as a result of these “negotiated rate” contracts could decrease Cove Point’s earnings and cash flows. The inability to maintain or renew such contracts on favorable terms may have a material impact to Dominion Energy’s results of operations, financial position or cash flows. Dominion Energy is also dependent upon BHE for managing counterparty credit risk relating to Cove Point’s terminal services agreements for its liquefied natural gas export/liquefaction facility. While the counterparties’ obligations are supported by parental guarantees and letters of credit, there is no assurance that such credit support would be sufficient to satisfy the obligations in the event of a counterparty default. In addition, if a controversy arises under either terminal services agreement resulting in a judgment in Cove Point’s favor, Cove Point may need to seek to enforce a final U.S. court judgment in a foreign tribunal, which could involve a lengthy process. Accordingly, there is no assurance that BHE may pursue remedies in the event of default in the same manner as Dominion Energy would if it had unilateral control over such decisions.
War, acts and threats of terrorism, intentional acts and other significant events could adversely affect the Companies’ operations. The Companies cannot predict the impact that any future terrorist attacks or retaliatory military or other action may have on the energy industry in general or on the Companies’ businesses in particular. Any such future attacks or retaliatory action may adversely affect the Companies’ operations in a variety of ways, including by disrupting the power, fuel and other markets in which
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the Companies operate or requiring the implementation of additional, more costly security guidelines and measures. The Companies’ infrastructure facilities, including nuclear facilities and projects under construction, could be direct targets or indirect casualties of an act of terror or other physical attack. Any physical compromise of the Companies’ facilities could adversely affect the Companies’ ability to generate, purchase, transmit or distribute electricity, distribute natural gas or otherwise operate their respective facilities in the most efficient manner or at all. In addition, the amount and scope of insurance coverage maintained against losses resulting from any such attack may not be sufficient to cover such losses or otherwise adequately compensate for any business disruptions that could result.
Instability in financial markets as a result of terrorism, war, intentional acts, pandemic, credit crises, recession or other factors could result in a significant decline in the U.S. economy and/or increase the cost or limit the availability of insurance or adversely impact the Companies’ ability to access capital on acceptable terms.
Failure to attract and retain key executive officers and an appropriately qualified workforce could have an adverse effect on the Companies’ operations. The Companies’ business strategy is dependent on their ability to recruit, retain and motivate employees. The Companies’ key executive officers are the CEO, CFO, COO and presidents and those responsible for financial, operational, legal, regulatory, accounting, information technology and cybersecurity functions. Competition for skilled management employees in these areas of the Companies’ business operations is high. Certain events, such as an aging workforce, mismatch of skill set, or unavailability of contract resources may lead to operating challenges and increased costs. The challenges include lack of resources, loss of knowledge base and the length of time required for skill development. In this case, costs, including costs for contractors to replace employees, productivity costs and safety costs, may rise. Failure to hire and adequately train replacement employees, including the transfer of significant internal historical knowledge and expertise to new employees, or future availability and cost of contract labor may adversely affect the ability to manage and operate the Companies’ business. In addition, certain specialized knowledge is required of the Companies’ technical employees for construction and operation of transmission, generation and distribution assets. The Companies’ inability to attract and retain these employees could adversely affect their business and future operating results.
Nuclear Generation Risks
The Companies have substantial ownership interests in and operate nuclear generating units; as a result, each may incur substantial costs and liabilities. The Companies’ nuclear facilities are subject to operational, environmental, health and financial risks such as the on-site storage of spent nuclear fuel, the ability to dispose of such spent nuclear fuel, the ability to maintain adequate reserves for decommissioning, limitations on the amounts and types of insurance available, potential operational liabilities and extended outages, the costs of replacement power, the costs of maintenance and the costs of securing the facilities against possible terrorist attacks. The Companies maintain decommissioning trusts and external insurance coverage to minimize the financial exposure to these risks; however, it is possible that future decommissioning costs could exceed amounts in the decommissioning trusts and/or damages could exceed the amount of insurance coverage. If the Companies’ decommissioning trust funds are insufficient, and they are not allowed to recover the additional costs incurred through insurance or regulatory mechanisms, their results of operations could be negatively impacted.
The Companies’ nuclear facilities are also subject to complex government regulation which could negatively impact their results of operations. The NRC has broad authority under federal law to impose licensing and safety-related requirements for the operation of nuclear generating facilities. In the event of noncompliance, the NRC has the authority to impose fines, set license conditions, shut down a nuclear unit, or take some combination of these actions, depending on its assessment of the severity of the situation, until compliance is achieved. Revised safety requirements promulgated by the NRC could require the Companies to make substantial expenditures at their nuclear plants. In addition, although the Companies have no reason to anticipate a serious nuclear incident at their plants, if an incident did occur, it could materially and adversely affect their results of operations and/or financial condition. A major incident at a nuclear facility anywhere in the world, such as the nuclear events in Japan in 2011, could cause the NRC to adopt increased safety regulations or otherwise limit or restrict the operation or licensing of domestic nuclear units.
Financial, Economic and Market Risks
Changing rating agency requirements could negatively affect the Companies’ growth and business strategy. In order to maintain appropriate credit ratings to obtain needed credit at a reasonable cost in light of existing or future rating agency requirements, the Companies may find it necessary to take steps or change their business plans in ways that may adversely affect their growth and earnings. A reduction in the Companies’ credit ratings could result in an increase in borrowing costs, loss of access to certain markets, or both, thus adversely affecting operating results and could require the Companies to post additional collateral in connection with some of its price risk management activities.
An inability to access financial markets and, in the case of Dominion Energy, obtain cash from subsidiaries could adversely affect the execution of the Companies’ business plans. The Companies rely on access to short-term money markets and longer-term capital markets as significant sources of funding and liquidity for business plans with increasing capital expenditure needs,
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normal working capital and collateral requirements related to hedges of future sales and purchases of energy-related commodities. Deterioration in the Companies’ creditworthiness, as evaluated by credit rating agencies or otherwise, or declines in market reputation either for the Companies or their industry in general, or general financial market disruptions outside of the Companies’ control could increase their cost of borrowing or restrict their ability to access one or more financial markets. Market disruptions could stem from general market disruption due to general credit market or political events, the planned phase out of LIBOR by the end of 2023 or the reform or replacement of other benchmark rates, the failure of financial institutions on which the Companies rely or the bankruptcy of an unrelated company. Increased costs and restrictions on the Companies’ ability to access financial markets may be severe enough to affect their ability to execute their business plans as scheduled.
Dominion Energy is a holding company that conducts all of its operations through its subsidiaries. Accordingly, Dominion Energy’s ability to execute its business plan is further subject to the earnings and cash flows of its subsidiaries and the ability of its subsidiaries to pay dividends or advance or repay funds to it, which may, from time to time, be subject to certain contractual restrictions or restrictions imposed by regulators.
Market performance, interest rates and other changes may decrease the value of the Companies’ decommissioning trust funds and Dominion Energy’s benefit plan assets or increase Dominion Energy’s liabilities, which could then require significant additional funding. The performance of the capital markets affects the value of the assets that are held in trusts to satisfy future obligations to decommission the Companies’ nuclear plants and under Dominion Energy’s pension and other postretirement benefit plans. The Companies have significant obligations in these areas and hold significant assets in these trusts. These assets are subject to market fluctuation and will yield uncertain returns, which may fall below expected return rates.
With respect to decommissioning trust funds, a decline in the market value of these assets may increase the funding requirements of the obligations to decommission the Companies’ nuclear plants or require additional NRC-approved funding assurance.
A decline in the market value of the assets held in trusts to satisfy future obligations under Dominion Energy’s pension and other postretirement benefit plans may increase the funding requirements under such plans. Additionally, changes in interest rates will affect the liabilities under Dominion Energy’s pension and other postretirement benefit plans; as interest rates decrease, the liabilities increase, potentially requiring additional funding. Further, changes in demographics, including increased numbers of retirements or changes in mortality assumptions, may also increase the funding requirements of the obligations related to the pension and other postretirement benefit plans.
If the decommissioning trust funds and benefit plan assets are negatively impacted by market fluctuations or other factors, the Companies’ results of operations, financial condition and/or cash flows could be negatively affected.
The use of derivative instruments could result in financial losses and liquidity constraints. The Companies use derivative instruments, including futures, swaps, forwards, options and FTRs, to manage commodity, interest rate and/or foreign currency exchange rate risks.
The Dodd-Frank Act was enacted into law in July 2010 in an effort to improve regulation of financial markets. The CEA, as amended by Title VII of the Dodd-Frank Act, requires certain over-the-counter derivatives, or swaps, to be cleared through a derivatives clearing organization and, if the swap is subject to a clearing requirement, to be executed on a designated contract market or swap execution facility. Non-financial entities that use swaps to hedge or mitigate commercial risk, often referred to as end users, may elect the end-user exception to the CEA’s clearing requirements. The Companies have elected to exempt their swaps from the CEA’s clearing requirements. If, as a result of changes to the rulemaking process, the Companies’ derivative activities are not exempted from the clearing, exchange trading or margin requirements, the Companies could be subject to higher costs due to decreased market liquidity or increased margin payments. In addition, the Companies’ swap dealer counterparties may attempt to pass-through additional trading costs in connection with changes to or the elimination of rulemaking that implements Title VII of the Dodd-Frank Act.
Future impairments of goodwill or other intangible assets or long-lived assets may have a material adverse effect on the Companies’ results. Goodwill is evaluated for impairment annually or more frequently if an event or circumstance occurs that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Other intangible assets and long-lived assets are evaluated for impairment on an annual basis or more frequently whenever events or circumstances indicate that an asset’s carrying value may not be recoverable. If Dominion Energy’s goodwill or the Companies’ other intangible assets or long-lived assets are in the future determined to be impaired, the applicable Company would be required during the period in which the impairment is determined to record a noncash charge to earnings that may have a material adverse effect on the Company’s results.
Exposure to counterparty performance may adversely affect the Companies’ financial results of operations. The Companies are exposed to credit risks of their counterparties and the risk that one or more counterparties may fail or delay the performance of their contractual obligations, including but not limited to payment for services. Some of Dominion Energy’s operations are conducted through partnership arrangements, as noted above. Counterparties could fail or delay the performance of their contractual obligations
45
for a number of reasons, including the effect of regulations on their operations. Defaults or failure to perform by customers, suppliers, contractors, joint venture partners, financial institutions or other third parties may adversely affect the Companies’ financial results.
Public health crises and epidemics or pandemics, such as COVID-19, could adversely affect the Companies’ business, results of operations, financial condition, liquidity and/or cash flows. The effects of the continued outbreak of the COVID-19 pandemic and related government responses could include extended disruptions to supply chains and capital markets, reduced labor availability and productivity and a prolonged reduction in economic activity. The effects could also have a variety of adverse impacts on the Companies, including reduced demand for energy, particularly from commercial and industrial customers, impairment of goodwill or long-lived assets and diminished ability of the Companies to access funds from financial institutions and capital markets. There remains uncertainty regarding the extent and duration of measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns. Such restrictions may cause operational interruptions and delays in construction projects, which, in the case of renewable energy projects, could delay the expected in-service dates of these projects and financial statement impact of the investment tax credits associated with these projects. For the duration of the outbreak of COVID-19, voluntary suspension, or potential legislative or government action, such as legislation enacted in Virginia in November 2020, may limit the Companies’ ability to collect on overdue accounts or disconnect services for non-payment, which may cause a decrease in the Companies’ results of operations and cash flows.
Item 1B. Unresolved Staff Comments
None.
46
Item 2. Properties
As of December 31, 2021, Dominion Energy owned its principal executive office in Richmond, Virginia and five other corporate offices. Dominion Energy also leases corporate offices in Richmond, Virginia and other cities in which its subsidiaries operate. Virginia Power shares Dominion Energy’s principal executive office in Richmond, Virginia. In addition, Virginia Power leases certain buildings and equipment.
Dominion Energy’s assets consist primarily of its investments in its subsidiaries, the principal properties of which are described below by operating segment.
Certain of Virginia Power’s properties are subject to the lien of the Indenture of Mortgage securing its First and Refunding Mortgage Bonds. There were no bonds outstanding as of December 31, 2021; however, by leaving the indenture open, Virginia Power retains the flexibility to issue mortgage bonds in the future. Certain of Dominion Energy’s nonregulated generation facilities are also subject to liens. Additionally, DESC’s bond indenture, which secures its First Mortgage Bonds, constitutes a direct mortgage lien on substantially all of its electric utility property.
DOMINION ENERGY VIRGINIA
Virginia Power has approximately 6,900 miles of electric transmission lines of 69 kV or more located in North Carolina, Virginia and West Virginia. Portions of Virginia Power’s electric transmission lines cross national parks and forests under permits entitling the federal government to use, at specified charges, any surplus capacity that may exist in these lines. While Virginia Power owns and maintains its electric transmission facilities, they are a part of PJM, which coordinates the planning, operation, emergency assistance and exchange of capacity and energy for such facilities.
In addition, Virginia Power’s electric distribution network includes approximately 59,300 miles of distribution lines, exclusive of service level lines, in Virginia and North Carolina. The grants for most of its electric lines contain rights-of-way that have been obtained from the apparent owners of real estate, but underlying titles have not been examined. Where rights-of-way have not been obtained, they could be acquired from private owners by condemnation, if necessary. Many electric lines are on publicly-owned property, where permission to operate can be revoked. In addition, Virginia Power owns 468 substations and 16MW of battery storage. Dominion Energy also owns various solar facilities, primarily at schools in Virginia, with an aggregate generation capacity of 17 MW.
The following tables list Virginia Power’s generating units and capability as of December 31, 2021.
47
VIRGINIA POWER UTILITY GENERATION
|
Plant |
|
Location |
|
Net Summer Capability (MW) |
|
|
Percentage Net Summer Capability |
|
|
||
|
Gas |
|
|
|
|
|
|
|
|
|
|
|
|
Greensville County (CC) |
|
Greensville County, VA |
|
|
1,629 |
|
|
|
|
|
|
|
Brunswick County (CC) |
|
Brunswick County, VA |
|
|
1,376 |
|
|
|
|
|
|
|
Warren County (CC) |
|
Warren County, VA |
|
|
1,349 |
|
|
|
|
|
|
|
Ladysmith (CT) |
|
Ladysmith, VA |
|
|
783 |
|
|
|
|
|
|
|
Bear Garden (CC) |
|
Buckingham County, VA |
|
|
622 |
|
|
|
|
|
|
|
Remington (CT) |
|
Remington, VA |
|
|
622 |
|
|
|
|
|
|
|
Possum Point (CC) |
|
Dumfries, VA |
|
|
573 |
|
|
|
|
|
|
|
Chesterfield (CC) |
|
Chester, VA |
|
|
392 |
|
|
|
|
|
|
|
Elizabeth River (CT) |
|
Chesapeake, VA |
|
|
330 |
|
|
|
|
|
|
|
Gordonsville Energy (CC) |
|
Gordonsville, VA |
|
|
218 |
|
|
|
|
|
|
|
Gravel Neck (CT) |
|
Surry, VA |
|
|
170 |
|
|
|
|
|
|
|
Darbytown (CT) |
|
Richmond, VA |
|
|
168 |
|
|
|
|
|
|
|
Total Gas |
|
|
|
|
8,232 |
|
|
|
41 |
|
% |
|
Coal |
|
|
|
|
|
|
|
|
|
|
|
|
Mt. Storm |
|
Mt. Storm, WV |
|
|
1,621 |
|
|
|
|
|
|
|
Chesterfield(1) |
|
Chester, VA |
|
|
1,014 |
|
|
|
|
|
|
|
Virginia City Hybrid Energy Center |
|
Wise County, VA |
|
|
610 |
|
|
|
|
|
|
|
Clover |
|
Clover, VA |
|
|
439 |
|
(2) |
|
|
|
|
|
Total Coal |
|
|
|
|
3,684 |
|
|
|
18 |
|
|
|
Nuclear |
|
|
|
|
|
|
|
|
|
|
|
|
Surry |
|
Surry, VA |
|
|
1,676 |
|
|
|
|
|
|
|
North Anna |
|
Mineral, VA |
|
|
1,672 |
|
(3) |
|
|
|
|
|
Total Nuclear |
|
|
|
|
3,348 |
|
|
|
16 |
|
|
|
Hydro |
|
|
|
|
|
|
|
|
|
|
|
|
Bath County |
|
Warm Springs, VA |
|
|
1,808 |
|
(4) |
|
|
|
|
|
Gaston |
|
Roanoke Rapids, NC |
|
|
220 |
|
|
|
|
|
|
|
Roanoke Rapids |
|
Roanoke Rapids, NC |
|
|
95 |
|
|
|
|
|
|
|
Other |
|
|
|
|
1 |
|
|
|
|
|
|
|
Total Hydro |
|
|
|
|
2,124 |
|
|
|
10 |
|
|
|
Oil |
|
|
|
|
|
|
|
|
|
|
|
|
Yorktown(1) |
|
Yorktown, VA |
|
790 |
|
|
|
|
|
|
|
|
Gravel Neck (CT) |
|
Surry, VA |
|
198 |
|
|
|
|
|
|
|
|
Darbytown (CT) |
|
Richmond, VA |
|
168 |
|
|
|
|
|
|
|
|
Rosemary (CC) |
|
Roanoke Rapids, NC |
|
160 |
|
|
|
|
|
|
|
|
Possum Point (CT) |
|
Dumfries, VA |
|
72 |
|
|
|
|
|
|
|
|
Low Moor (CT) |
|
Covington, VA |
|
48 |
|
|
|
|
|
|
|
|
Northern Neck (CT) |
|
Lively, VA |
|
47 |
|
|
|
|
|
|
|
|
Chesapeake (CT) |
|
Chesapeake, VA |
|
39 |
|
|
|
|
|
|
|
|
Total Oil |
|
|
|
|
1,522 |
|
|
|
7 |
|
|
|
Solar(5) |
|
|
|
|
|
|
|
|
|
|
|
|
Colonial Trail West |
|
Surry County, VA |
|
|
142 |
|
|
|
|
|
|
|
Dry Bread |
|
Emporia, VA |
|
|
100 |
|
|
|
|
|
|
|
Spring Grove |
|
Surry County, VA |
|
|
98 |
|
|
|
|
|
|
|
Whitehouse Solar |
|
Louisa County, VA |
|
|
20 |
|
|
|
|
|
|
|
Woodland Solar |
|
Isle of Wight County, VA |
|
|
19 |
|
|
|
|
|
|
|
Scott Solar |
|
Powhatan, VA |
|
|
17 |
|
|
|
|
|
|
|
Total Solar |
|
|
|
|
396 |
|
|
|
2 |
|
|
|
Biomass |
|
|
|
|
|
|
|
|
|
|
|
|
Altavista(6) |
|
Altavista, VA |
|
|
51 |
|
|
|
|
|
|
|
Polyester(6) |
|
Hopewell, VA |
|
|
51 |
|
|
|
|
|
|
|
Southampton(6) |
|
Southampton, VA |
|
|
51 |
|
|
|
|
|
|
|
Total Biomass |
|
|
|
|
153 |
|
|
|
1 |
|
|
|
Wind |
|
|
|
|
|
|
|
|
|
|
|
|
CVOW Pilot Project |
|
Virginia Beach, VA |
|
|
12 |
|
|
|
— |
|
|
|
Various |
|
|
|
|
|
|
|
|
|
|
|
|
Mt. Storm (CT) |
|
Mt. Storm, WV |
|
|
11 |
|
|
|
— |
|
|
|
|
|
|
|
|
19,482 |
|
|
|
|
|
|
|
Power Purchase Agreements |
|
|
|
|
1,075 |
|
|
|
5 |
|
|
|
Total Utility Generation |
|
|
|
|
20,577 |
|
|
|
100 |
|
% |
Note: (CT) denotes combustion turbine and (CC) denotes combined cycle.
(1) Will be retired after it meets its capacity obligation in 2023. See Note 2 to the Consolidated Financial Statements for additional information.
(2) Excludes 50% undivided interest owned by ODEC.
(3) Excludes 11.6% undivided interest owned by ODEC.
(4) Excludes 40% undivided interest owned by Allegheny Generating Company, a subsidiary of FirstEnergy Corp.
48
(5) All solar facilities are alternating current.
(6) In accordance with the VCEA, these units will be retired no later than 2028.
VIRGINIA POWER NON-JURISDICTIONAL GENERATION
|
Plant |
|
Location |
|
Net Summer Capability (MW) |
|
|
|
Solar(1) |
|
|
|
|
|
|
|
Desper |
|
Louisa, VA |
|
|
88 |
|
|
Gutenberg |
|
Garysburg, NC |
|
|
80 |
|
|
Butcher Creek |
|
Chase City, VA |
|
|
80 |
|
|
Pecan |
|
Pleasant Hill, NC |
|
|
75 |
|
|
Chestnut |
|
Halifax County, NC |
|
|
75 |
|
|
Bedford |
|
Chesapeake, VA |
|
|
70 |
|
|
Gloucester |
|
Gloucester County, VA |
|
|
20 |
|
|
Montross |
|
Westmoreland County, VA |
|
|
20 |
|
|
Morgans Corner |
|
Pasquotank County, NC |
|
|
20 |
|
|
Remington |
|
Fauquier County, VA |
|
|
20 |
|
|
Rochambeau |
|
James City County, VA |
|
|
20 |
|
|
Oceana |
|
Virginia Beach, VA |
|
|
18 |
|
|
Hollyfield |
|
Manquin, VA |
|
|
17 |
|
|
Puller |
|
Topping, VA |
|
|
15 |
|
|
Total Non-Jurisdictional Generation |
|
|
|
|
618 |
|
|
(1) |
All solar facilities are alternating current. |
GAS DISTRIBUTION
Gas Distribution’s network is located in Ohio, West Virginia, North Carolina, Utah, southwestern Wyoming and southeastern Idaho. This network includes approximately 76,500 miles of distribution mains and related service facilities which are supported by approximately 5,600 miles of transmission, gathering and storage pipeline. The right-of-way grants for many natural gas pipelines have been obtained from the actual owners of real estate, as underlying titles have been examined. Where rights-of-way have not been obtained, they could be acquired from private owners by condemnation, if necessary. Many natural gas pipelines are on publicly-owned property, where company rights and actions are determined on a case-by-case basis, with results that range from reimbursed relocation to revocation of permission to operate.
East Ohio’s integrated underground storage facilities have more than 60 bcf of working gas capacity to serve base and peak demand. PSNC owns one LNG facility that stores the liquefied equivalent of 1.0 bcf of natural gas, can regasify approximately 10% of its storage capacity per day and can liquefy less than 1% of its storage capacity per day.
DOMINION ENERGY SOUTH CAROLINA
DESC has approximately 3,800 miles and 18,700 miles of electric transmission and distribution lines, respectively, exclusive of service level lines, in South Carolina. The grants for most of DESC’s electric lines contain rights-of-way that have been obtained from the apparent owners of real estate, but underlying property titles have not been examined. Where rights-of-way have not been obtained, they could be acquired from private owners by condemnation, if necessary. Many electric lines are on publicly-owned property, where permission to operate can be revoked. In addition, DESC owns 458 substations.
DESC’s natural gas system includes approximately 19,200 miles of distribution mains and related service facilities, which are supported by approximately 400 miles of transmission pipeline.
DESC owns two LNG facilities, one located near Charleston, South Carolina, and the other in Salley, South Carolina. The Charleston facility can store the liquefied equivalent of approximately 1.0 bcf of natural gas, can regasify approximately 6% of its storage capacity per day and can liquefy less than 1% of its storage capacity per day. The Salley facility can store the liquefied equivalent of approximately 0.9 bcf of natural gas and can regasify approximately 10% of its storage capacity per day. The Salley facility has no liquefying capabilities.
49
The following table lists DESC’s generating units and capability as of December 31, 2021.
|
Plant |
|
Location |
|
Net Summer Capability (MW) |
|
|
Percentage Net Summer Capability |
|
|
||
|
Gas |
|
|
|
|
|
|
|
|
|
|
|
|
Jasper (CC) (1) |
|
Hardeeville, SC |
|
|
863 |
|
|
|
|
|
|
|
Columbia Energy Center (CC) (1) |
|
Gaston, SC |
|
|
519 |
|
|
|
|
|
|
|
Urquhart (CC) (1) |
|
Beech Island, SC |
|
|
458 |
|
|
|
|
|
|
|
McMeekin |
|
Irmo, SC |
|
|
250 |
|
|
|
|
|
|
|
Hagood (CT) (1) |
|
Charleston, SC |
|
|
126 |
|
|
|
|
|
|
|
Urquhart Unit 3 |
|
Beech Island, SC |
|
|
95 |
|
|
|
|
|
|
|
Urquhart (CT) (1) |
|
Beech Island, SC |
|
|
87 |
|
|
|
|
|
|
|
Parr (CT) (1)(2) |
|
Jenkinsville, SC |
|
|
47 |
|
|
|
|
|
|
|
Coit (CT) (1)(2) |
|
Columbia, SC |
|
|
26 |
|
|
|
|
|
|
|
Williams (CT) (1)(2) |
|
Goose Creek, SC |
|
|
16 |
|
|
|
|
|
|
|
Total Gas(3) |
|
|
|
|
2,487 |
|
|
|
40 |
|
% |
|
Coal |
|
|
|
|
|
|
|
|
|
|
|
|
Williams |
|
Goose Creek, SC |
|
|
605 |
|
|
|
|
|
|
|
Cope (4) |
|
Cope, SC |
|
|
415 |
|
|
|
|
|
|
|
Wateree (5) |
|
Eastover, SC |
|
|
342 |
|
|
|
|
|
|
|
Total Coal |
|
|
|
|
1,362 |
|
|
|
22 |
|
|
|
Hydro |
|
|
|
|
|
|
|
|
|
|
|
|
Fairfield |
|
Jenkinsville, SC |
|
|
576 |
|
|
|
|
|
|
|
Saluda |
|
Irmo, SC |
|
|
190 |
|
|
|
|
|
|
|
Other |
|
Various |
|
|
18 |
|
|
|
|
|
|
|
Total Hydro |
|
|
|
|
784 |
|
|
|
13 |
|
|
|
Nuclear |
|
|
|
|
|
|
|
|
|
|
|
|
Summer |
|
Jenkinsville, SC |
|
|
651 |
|
(6) |
|
11 |
|
|
|
|
|
|
|
|
5,284 |
|
|
|
|
|
|
|
Power Purchase Agreements |
|
|
|
|
898 |
|
(7) |
|
14 |
|
|
|
Total Utility Generation |
|
|
|
|
6,182 |
|
|
|
100 |
|
% |
Note: (CT) denotes combustion turbine and (CC) denotes combined cycle.
|
(1) |
Capable of burning fuel oil as a secondary source. |
|
(2) |
Expected to be retired by the end of 2025. |
|
(3) |
Excludes the Hardeeville gas combustion turbine which currently does not have any net summer capability and is expected to be retired by the end of 2025. |
|
(4) |
Capable of burning natural gas as a secondary source. |
|
(5) |
Excludes Wateree Unit 2 (342 MW) that is temporarily unavailable and it is expected to be returned to service in 2022. |
|
(6) |
Excludes 33.3% undivided interest owned by Santee Cooper. |
|
(7) |
Includes 189 MW from agreements with certain solar facilities within Contracted Assets. |
CONTRACTED ASSETS
Contracted Assets includes Dominion Energy’s 50% noncontrolling interest in Cove Point. The Cove Point LNG Facility has an operational peak regasification daily send-out capacity of approximately 1.8 million Dths and an aggregate LNG storage capacity of approximately 14.6 bcfe. In addition, Cove Point has a small liquefier that has the potential to create approximately 15,000 Dths/day. The Liquefaction Facility consists of one LNG train with a nameplate outlet capacity of 5.25 Mtpa. Cove Point has authorization from the DOE to export up to 0.77 bcfe/day (approximately 5.75 Mtpa) should the Liquefaction Facility perform better than expected. In addition, Cove Point operates a 136-mile natural gas pipeline that connects the Cove Point LNG Facility to interstate natural gas pipelines.
50
The following table lists Contracted Assets’ generating units and capability as of December 31, 2021.
|
Plant |
|
Location |
|
Net Summer Capability (MW) |
|
|
Percentage Net Summer Capability |
|
|
||
|
Nuclear |
|
|
|
|
|
|
|
|
|
|
|
|
Millstone |
|
Waterford, CT |
|
|
2,001 |
|
(1) |
|
|
|
|
|
Total Nuclear |
|
|
|
|
2,001 |
|
|
|
67 |
|
% |
|
Solar(2) |
|
|
|
|
|
|
|
|
|
|
|
|
Hardin I |
|
Hardin County, OH |
|
|
150 |
|
|
|
|
|
|
|
Amazon Solar Farm Virginia – Southampton |
|
Newsoms, VA |
|
|
100 |
|
(3) |
|
|
|
|
|
Amazon Solar Farm Virginia – Accomack |
|
Oak Hall, VA |
|
|
80 |
|
(3) |
|
|
|
|
|
Greensville |
|
Greensville County, VA |
|
|
80 |
|
|
|
|
|
|
|
Innovative Solar 37 |
|
Morven, NC |
|
|
79 |
|
(3) |
|
|
|
|
|
Wilkinson |
|
Pantego, NC |
|
|
74 |
|
|
|
|
|
|
|
Seabrook |
|
Beaufort County, SC |
|
|
73 |
|
|
|
|
|
|
|
Moffett Solar 1 |
|
Ridgeland, SC |
|
|
71 |
|
(3) |
|
|
|
|
|
Summit Farms Solar |
|
Moyock, NC |
|
|
60 |
|
(3) |
|
|
|
|
|
Midway II |
|
Calipatria, CA |
|
|
30 |
|
(3) |
|
|
|
|
|
Amazon Solar Farm Virginia – Buckingham |
|
Cumberland, VA |
|
|
20 |
|
(3) |
|
|
|
|
|
Amazon Solar Farm Virginia – Correctional |
|
Barhamsville, VA |
|
|
20 |
|
(3) |
|
|
|
|
|
Hecate Cherrydale |
|
Cape Charles, VA |
|
|
20 |
|
(3) |
|
|
|
|
|
Amazon Solar Farm Virginia – Sussex Drive |
|
Stoney Creek, VA |
|
|
20 |
|
(3) |
|
|
|
|
|
Amazon Solar Farm Virginia – Scott II |
|
Powhatan, VA |
|
|
20 |
|
(3) |
|
|
|
|
|
Myrtle |
|
Suffolk, VA |
|
|
15 |
|
|
|
|
|
|
|
Trask |
|
Beaufort County, SC |
|
|
12 |
|
|
|
|
|
|
|
Hecate Energy Clarke County |
|
White Post, VA |
|
|
10 |
|
(3) |
|
|
|
|
|
Ridgeland Solar Farm I |
|
Ridgeland, SC |
|
|
10 |
|
(3) |
|
|
|
|
|
Yemassee |
|
Hampton County, SC |
|
|
10 |
|
|
|
|
|
|
|
Other |
|
Various |
|
|
48 |
|
(3) |
|
|
|
|
|
Total Solar |
|
|
|
|
1,002 |
|
|
|
33 |
|
|
|
Total Nonregulated Generation |
|
|
|
|
3,003 |
|
|
|
100 |
|
% |
|
(1) |
Excludes 6.53% undivided interest in Unit 3 owned by Massachusetts Municipal and Green Mountain. |
|
(2) |
All solar facilities are alternating current. |
|
(3) |
Dominion Energy’s interest is subject to a lien securing Eagle Solar’s debt. |
51
Item 3. Legal Proceedings
From time to time, the Companies are parties to various legal, environmental or other regulatory proceedings, including in the ordinary course of business. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Companies reasonably believe will exceed a specified threshold. Pursuant to the SEC regulations, the Companies use a threshold of $1 million for such proceedings. See Notes 13 and 23 to the Consolidated Financial Statements, which information is incorporated herein by reference, for discussion of certain legal, environmental and other regulatory proceedings to which the Companies are a party.
Item 4. Mine Safety Disclosures
Not applicable.
52
Information about our Executive Officers
Information concerning the executive officers of Dominion Energy, each of whom is elected annually, is as follows:
|
Name and Age |
|
Business Experience Past Five Years(1) |
|
Robert M. Blue (54) |
|
Chair of the Board of Directors from April 2021 to present; President and CEO from October 2020 to present; Director from November 2020 to present; Executive Vice President and Co-COO from December 2019 to September 2020; Executive Vice President and President & CEO—Power Delivery Group from May 2017 to November 2019; Senior Vice President and President & CEO—Dominion Virginia Power from January 2017 to May 2017. |
|
|
|
|
|
James R. Chapman (52) |
|
Executive Vice President, CFO and Treasurer from January 2019 to present; Senior Vice President, CFO and Treasurer from November 2018 to December 2018; Senior Vice President—Mergers & Acquisitions and Treasurer from February 2016 to October 2018. |
|
|
|
|
|
Diane Leopold (55) |
|
Executive Vice President and COO from October 2020 to present; Executive Vice President and Co-COO from December 2019 to September 2020; Executive Vice President and President & CEO—Gas Infrastructure Group from May 2017 to November 2019; Senior Vice President and President & CEO—Dominion Energy from January 2017 to May 2017. |
|
|
|
|
|
Edward H. Baine (48) |
|
President—Dominion Energy Virginia from October 2020 to present; Senior Vice President—Power Delivery of Virginia Power from December 2019 to September 2020; Senior Vice President—Distribution of Virginia Power from February 2016 to November 2019. |
|
|
|
|
|
P. Rodney Blevins (57)
|
|
President—Gas Distribution from January 2022 to present; President—Dominion Energy South Carolina from December 2019 to December 2021; President & Chief Executive Officer—Southeast Energy Group from January 2019 to November 2019; Senior Vice President and Chief Information Officer from January 2014 to December 2018. |
|
|
|
|
|
W. Keller Kissam (55) |
|
President—Dominion Energy South Carolina from January 2022 to present; President—Electric Operations of DESC from January 2019 to December 2021; President—Generation, Transmission and Distribution and Chief Operating Officer of DESC from January 2018 to December 2018; President—Retail Operations of DESC from December 2011 to December 2017; Senior Vice President of SCANA Corporation from 2011 to December 2018. |
|
|
|
|
|
Daniel G. Stoddard (59)
|
|
Senior Vice President, Chief Nuclear Officer and President—Contracted Assets from September 2020 to present; Senior Vice President, Chief Nuclear Officer and President—Contracted Generation from December 2019 to August 2020; Senior Vice President and Chief Nuclear Officer of Virginia Power from October 2016 to present. |
|
|
|
|
|
Carlos M. Brown (47)
|
|
Senior Vice President, General Counsel and Chief Compliance Officer from December 2019 to present; Senior Vice President and General Counsel from January 2019 to November 2019; Vice President and General Counsel from January 2017 to December 2018. |
|
|
|
|
|
Michele L. Cardiff (54)
|
|
Senior Vice President, Controller and Chief Accounting Officer from October 2020 to present; Vice President, Controller and CAO from April 2014 to September 2020. |
|
William L. Murray (54) |
|
Senior Vice President—Corporate Affairs & Communications from February 2019 to present; Vice President—State & Electric Public Policy of DES from May 2017 to January 2019; Senior Policy Director—Public Policy of DES from April 2016 to May 2017. |
|
(1) |
All positions held at Dominion Energy, unless otherwise noted. Any service listed for Virginia Power, DESC, SCANA and DES reflects service at a current or previous subsidiary of Dominion Energy. |
53
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
DOMINION ENERGY
Dominion Energy’s common stock is listed on the NYSE under the ticker symbol D. At February 11, 2022, there were approximately 126,000 record holders of Dominion Energy’s common stock. The number of record holders is comprised of individual shareholder accounts maintained on Dominion Energy’s transfer agent records and includes accounts with shares held in (1) certificate form, (2) book-entry in the Direct Registration System and (3) book-entry under Dominion Energy Direct®. Discussions of expected dividend payments required by this Item are contained in Liquidity and Capital Resources in Item 7. MD&A.
Purchases of Equity Securities
|
Period |
|
Total Number of Shares (or Units) Purchased |
|
|
Average Price Paid per Share (or Unit)(2) |
|
|
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |
|
|
Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased under the Plans or Programs(3) |
|||
|
10/1/21-10/31/21 |
|
|
67,292 |
|
(1) |
$ |
72.29 |
|
|
|
— |
|
|
$ 0.92 billion |
|
11/1/21-11/30/21 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
0.92 billion |
|
12/1/21-12/31/21 |
|
|
407 |
|
(1) |
|
70.85 |
|
|
|
— |
|
|
0.92 billion |
|
Total |
|
|
67,699 |
|
|
$ |
72.28 |
|
|
|
— |
|
|
$ 0.92 billion |
|
(1) |
Represents shares of common stock that were tendered by employees to satisfy tax withholding obligations on vested restricted stock. |
|
(2) |
Represents the weighted-average price paid per share. |
|
(3) |
In November 2020, the Dominion Energy Board of Directors authorized the repurchase of up to $1.0 billion of shares of common stock. This repurchase program has no expiration date or price or volume targets and may be modified suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions or otherwise at the discretion of management subject to prevailing market conditions, applicable securities laws and other factors. |
VIRGINIA POWER
There is no established public trading market for Virginia Power’s common stock, all of which is owned by Dominion Energy. Virginia Power may pay cash dividends in 2022 but is neither required to nor restricted, except as described in Note 21 to the Consolidated Financial Statements, from making such payments.
Item 6. [Reserved]
54
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
MD&A discusses Dominion Energy’s results of operations, general financial condition and liquidity and Virginia Power’s results of operations as of and for the year ended December 31, 2021 as compared to the year ended December 31, 2020, as applicable. For a discussion of these items for the year ended December 31, 2020 as compared to the year ended December 31, 2019, please see Part II, Item 7. MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 25, 2021. MD&A should be read in conjunction with Item 1. Business and the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data. Virginia Power meets the conditions to file under the reduced disclosure format, and therefore has omitted certain sections of MD&A.
CONTENTS OF MD&A
MD&A consists of the following information:
|
• |
Forward-Looking Statements |
|
• |
Accounting Matters—Dominion Energy |
|
• |
Dominion Energy |
|
|
• |
Results of Operations |
|
|
• |
Outlook |
|
|
• |
Segment Results of Operations |
|
• |
Virginia Power |
|
|
• |
Results of Operations |
|
• |
Liquidity and Capital Resources—Dominion Energy |
|
• |
Future Issues and Other Matters—Dominion Energy |
FORWARD-LOOKING STATEMENTS
This report contains statements concerning the Companies’ expectations, plans, objectives, future financial performance and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In most cases, the reader can identify these forward-looking statements by such words as “anticipate,” “estimate,” “forecast,” “expect,” “believe,” “should,” “could,” “plan,” “may,” “continue,” “target” or other similar words.
The Companies make forward-looking statements with full knowledge that risks and uncertainties exist that may cause actual results to differ materially from predicted results. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Additionally, other factors may cause actual results to differ materially from those indicated in any forward-looking statement. These factors include but are not limited to:
|
• |
Unusual weather conditions and their effect on energy sales to customers and energy commodity prices; |
|
• |
Extreme weather events and other natural disasters, including, but not limited to, hurricanes, high winds, severe storms, earthquakes, flooding, climate changes and changes in water temperatures and availability that can cause outages and property damage to facilities; |
|
• |
The impact of extraordinary external events, such as the current pandemic health event resulting from COVID-19, and their collateral consequences, including extended disruption of economic activity in our markets and global supply chains; |
|
• |
Federal, state and local legislative and regulatory developments, including changes in or interpretations of federal and state tax laws and regulations; |
|
• |
Risks of operating businesses in regulated industries that are subject to changing regulatory structures; |
|
• |
Changes to regulated electric rates collected by the Companies and regulated gas distribution, transportation and storage rates collected by Dominion Energy; |
|
• |
Changes in rules for RTOs and ISOs in which the Companies join and/or participate, including changes in rate designs, changes in FERC’s interpretation of market rules and new and evolving capacity models; |
|
• |
Risks associated with Virginia Power’s membership and participation in PJM, including risks related to obligations created by the default of other participants; |
55
|
• |
Risks associated with entities in which Dominion Energy shares ownership with third parties, including risks that result from lack of sole decision making authority, disputes that may arise between Dominion Energy and third party participants and difficulties in exiting these arrangements; |
|
• |
Changes in future levels of domestic and international natural gas production, supply or consumption; |
|
• |
Impacts to Dominion Energy’s noncontrolling interest in Cove Point from fluctuations in future volumes of LNG imports or exports from the U.S. and other countries worldwide or demand for, purchases of, and prices related to natural gas or LNG; |
|
• |
Timing and receipt of regulatory approvals necessary for planned construction or growth projects and compliance with conditions associated with such regulatory approvals; |
|
• |
The inability to complete planned construction, conversion or growth projects at all, or with the outcomes or within the terms and time frames initially anticipated, including as a result of increased public involvement, intervention or litigation in such projects; |
|
• |
Risks and uncertainties that may impact the Companies’ ability to develop and construct the CVOW Commercial Project within the currently proposed timeline, or at all, and consistent with current cost estimates along with the ability to recover such costs from customers; |
|
• |
Changes to federal, state and local environmental laws and regulations, including those related to climate change, the tightening of emission or discharge limits for GHGs and other substances, more extensive permitting requirements and the regulation of additional substances; |
|
• |
Cost of environmental strategy and compliance, including those costs related to climate change; |
|
• |
Changes in implementation and enforcement practices of regulators relating to environmental standards and litigation exposure for remedial activities; |
|
• |
Difficulty in anticipating mitigation requirements associated with environmental and other regulatory approvals or related appeals; |
|
• |
Unplanned outages at facilities in which the Companies have an ownership interest; |
|
• |
The impact of operational hazards, including adverse developments with respect to pipeline and plant safety or integrity, equipment loss, malfunction or failure, operator error and other catastrophic events; |
|
• |
Risks associated with the operation of nuclear facilities, including costs associated with the disposal of spent nuclear fuel, decommissioning, plant maintenance and changes in existing regulations governing such facilities; |
|
• |
Changes in operating, maintenance and construction costs; |
|
• |
Domestic terrorism and other threats to the Companies’ physical and intangible assets, as well as threats to cybersecurity; |
|
• |
Additional competition in industries in which the Companies operate, including in electric markets in which Dominion Energy’s nonregulated generation facilities operate and potential competition from the development and deployment of alternative energy sources, such as self-generation and distributed generation technologies, and availability of market alternatives to large commercial and industrial customers; |
|
• |
Competition in the development, construction and ownership of certain electric transmission facilities in the Companies’ service territory in connection with Order 1000; |
|
• |
Changes in technology, particularly with respect to new, developing or alternative sources of generation and smart grid technologies; |
|
• |
Changes in demand for the Companies’ services, including industrial, commercial and residential growth or decline in the Companies’ service areas, changes in supplies of natural gas delivered to Dominion Energy’s pipeline system, failure to maintain or replace customer contracts on favorable terms, changes in customer growth or usage patterns, including as a result of energy conservation programs, the availability of energy efficient devices and the use of distributed generation methods; |
|
• |
Receipt of approvals for, and timing of, closing dates for acquisitions and divestitures; |
|
• |
Impacts of acquisitions, divestitures, transfers of assets to joint ventures and retirements of assets based on asset portfolio reviews; |
|
• |
The expected timing and likelihood of completing the sales of Kewaunee and Hope, including the ability to obtain the requisite regulatory approvals and the terms and conditions of such regulatory approvals; |
|
• |
Adverse outcomes in litigation matters or regulatory proceedings, including matters acquired in the SCANA Combination; |
|
• |
Counterparty credit and performance risk; |
56
|
• |
Fluctuations in the value of investments held in nuclear decommissioning trusts by the Companies and in benefit plan trusts by Dominion Energy; |
|
• |
Fluctuations in energy-related commodity prices and the effect these could have on Dominion Energy’s earnings and the Companies’ liquidity position and the underlying value of their assets; |
|
• |
Fluctuations in interest rates; |
|
• |
Fluctuations in currency exchange rates of the Euro or Danish Krone associated with the CVOW Commercial Project; |
|
• |
Changes in rating agency requirements or credit ratings and their effect on availability and cost of capital; |
|
• |
Global capital market conditions, including the availability of credit and the ability to obtain financing on reasonable terms; |
|
• |
Political and economic conditions, including inflation and deflation; |
|
• |
Employee workforce factors including collective bargaining agreements and labor negotiations with union employees; and |
|
• |
Changes in financial or regulatory accounting principles or policies imposed by governing bodies. |
Additionally, other risks that could cause actual results to differ from predicted results are set forth in Item 1A. Risk Factors.
The Companies’ forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. The Companies caution the reader not to place undue reliance on their forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. The Companies undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.
ACCOUNTING MATTERS
Critical Accounting Policies and Estimates
Dominion Energy has identified the following accounting policies, including certain inherent estimates, that as a result of the judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operations involved, could result in material changes to its financial condition or results of operations under different conditions or using different assumptions. Dominion Energy has discussed the development, selection and disclosure of each of these policies with the Audit Committee of its Board of Directors.
ACCOUNTING FOR REGULATED OPERATIONS
The accounting for Dominion Energy’s regulated electric and gas operations differs from the accounting for nonregulated operations in that Dominion Energy is required to reflect the effect of rate regulation in its Consolidated Financial Statements. For regulated businesses subject to federal or state cost-of-service rate regulation, regulatory practices that assign costs to accounting periods may differ from accounting methods generally applied by nonregulated companies. When it is probable that regulators will permit the recovery of current costs through future rates charged to customers, these costs that otherwise would be expensed by nonregulated companies are deferred as regulatory assets. Likewise, regulatory liabilities are recognized when it is probable that regulators will require customer refunds or other benefits through future rates or when revenue is collected from customers for expenditures that have yet to be incurred.
Dominion Energy evaluates whether or not recovery of its regulatory assets through future rates is probable as well as whether a regulatory liability due to customers is probable and makes various assumptions in its analyses. These analyses are generally based on:
|
|
• |
Orders issued by regulatory commissions, legislation and judicial actions; |
|
|
• |
Past experience; |
|
|
• |
Discussions with applicable regulatory authorities and legal counsel; |
|
|
• |
Forecasted earnings; and |
|
|
• |
Considerations around the likelihood of impacts from events such as unusual weather conditions, extreme weather events and other natural disasters and unplanned outages of facilities. |
If recovery of a regulatory asset is determined to be less than probable, it will be written off in the period such assessment is made. A regulatory liability, if considered probable, will be recorded in the period such assessment is made or reversed into earnings if no longer probable. In connection with the evaluation of Virginia Power’s earnings for the 2021 Triennial Review, in 2020 Virginia Power established a regulatory liability for benefits expected to be provided to Virginia retail electric customers through the use of a CCRO in accordance with the GTSA. In 2021, Virginia Power made further adjustments to this regulatory liability prior to its ultimate resolution through a comprehensive settlement agreement. See Notes 12 and 13 to the Consolidated Financial Statements for additional information.
57
ASSET RETIREMENT OBLIGATIONS
Dominion Energy recognizes liabilities for the expected cost of retiring tangible long-lived assets for which a legal obligation exists and the ARO can be reasonably estimated. These AROs are recognized at fair value as incurred or when sufficient information becomes available to determine fair value and are generally capitalized as part of the cost of the related long-lived assets. In the absence of quoted market prices, Dominion Energy estimates the fair value of its AROs using present value techniques, in which it makes various assumptions including estimates of the amounts and timing of future cash flows associated with retirement activities, credit-adjusted risk free rates and cost escalation rates. The impact on measurements of new AROs or remeasurements of existing AROs, using different cost escalation or credit-adjusted risk free rates in the future, may be significant. When Dominion Energy revises any assumptions used to calculate the fair value of existing AROs, it adjusts the carrying amount of both the ARO liability and the related long-lived asset for assets that are in service; for assets that have ceased or are expected to cease operations, Dominion Energy adjusts the carrying amount of the ARO liability with such changes either recognized in income or as a regulatory asset.
Dominion Energy’s AROs include a significant balance related to the future decommissioning of its nonregulated and utility nuclear facilities. These nuclear decommissioning AROs are reported in Dominion Energy Virginia, Dominion Energy South Carolina and Contracted Assets. At December 31, 2021 and 2020, Dominion Energy’s nuclear decommissioning AROs totaled $2.0 billion and $1.9 billion, respectively. The following discusses critical assumptions inherent in determining the fair value of AROs associated with Dominion Energy’s nuclear decommissioning obligations.
Dominion Energy obtains from third-party specialists periodic site-specific base year cost studies in order to estimate the nature, cost and timing of planned decommissioning activities for its nuclear plants. These cost studies are based on relevant information available at the time they are performed; however, estimates of future cash flows for extended periods of time are by nature highly uncertain and may vary significantly from actual results. These cash flows include estimates on timing of decommissioning, which for regulated nuclear units factors in the probability of NRC approval for license extensions. In addition, Dominion Energy’s cost estimates include cost escalation rates that are applied to the base year costs. Dominion Energy determines cost escalation rates, which represent projected cost increases over time due to both general inflation and increases in the cost of specific decommissioning activities, for each nuclear facility. The selection of these cost escalation rates is dependent on subjective factors which are considered to be critical assumptions. At December 31, 2021, a 0.25% increase in cost escalation rates would have resulted in an approximate $360 million increase in Dominion Energy’s nuclear decommissioning AROs.
INCOME TAXES
Judgment and the use of estimates are required in developing the provision for income taxes and reporting of tax-related assets and liabilities. The interpretation of tax laws and associated regulations involves uncertainty since tax authorities may interpret the laws differently. Ultimate resolution or clarification of income tax matters may result in favorable or unfavorable impacts to net income and cash flows, and adjustments to tax-related assets and liabilities could be material.
Given the uncertainty and judgment involved in the determination and filing of income taxes, there are standards for recognition and measurement in financial statements of positions taken or expected to be taken by an entity in its income tax returns. Positions taken by an entity in its income tax returns that are recognized in the financial statements must satisfy a more-likely-than-not recognition threshold, assuming that the position will be examined by tax authorities with full knowledge of all relevant information. At December 31, 2021 and 2020, Dominion Energy had $128 million and $167 million, respectively, of unrecognized tax benefits. Changes in these unrecognized tax benefits may result from remeasurement of amounts expected to be realized, settlements with tax authorities and expiration of statutes of limitations.
Deferred income tax assets and liabilities are recorded representing future effects on income taxes for temporary differences between the bases of assets and liabilities for financial reporting and tax purposes. Dominion Energy evaluates quarterly the probability of realizing deferred tax assets by considering current and historical financial results, expectations for future taxable income and the availability of tax planning strategies that can be implemented, if necessary, to realize deferred tax assets. Failure to achieve forecasted taxable income or successfully implement tax planning strategies may affect the realization of deferred tax assets. In addition, changes in tax laws or tax rates may require reconsideration of the realizability of existing deferred tax assets. Dominion Energy establishes a valuation allowance when it is more-likely-than-not that all or a portion of a deferred tax asset will not be realized. At December 31, 2021 and 2020, Dominion Energy had established $140 million and $155 million, respectively, of valuation allowances.
ACCOUNTING FOR DERIVATIVE CONTRACTS AND FINANCIAL INSTRUMENTS AT FAIR VALUE
Dominion Energy uses derivative contracts such as physical and financial forwards, futures, swaps, options and FTRs to manage commodity, interest rate and/or foreign currency exchange rate risks of its business operations. Derivative contracts, with certain exceptions, are reported in the Consolidated Balance Sheets at fair value. The majority of investments held in Dominion Energy’s nuclear decommissioning and rabbi trusts and pension and other postretirement funds are also subject to fair value accounting. See Notes 6 and 22 to the Consolidated Financial Statements for further information on these fair value measurements.
58
Fair value is based on actively-quoted market prices, if available. In the absence of actively-quoted market prices, management seeks indicative price information from external sources, including broker quotes and industry publications. When evaluating pricing information provided by brokers and other pricing services, Dominion Energy considers whether the broker is willing and able to trade at the quoted price, if the broker quotes are based on an active market or an inactive market and the extent to which brokers are utilizing a particular model if pricing is not readily available. If pricing information from external sources is not available, or if Dominion Energy believes that observable pricing information is not indicative of fair value, judgment is required to develop the estimates of fair value. In those cases, Dominion Energy must estimate prices based on available historical and near-term future price information and use of statistical methods, including regression analysis, that reflect its market assumptions.
Dominion Energy maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. See Note 6 to the Consolidated Financial Statements for quantitative information on unobservable inputs utilized in Dominion Energy’s fair value measurements of certain derivative contracts.
USE OF ESTIMATES IN GOODWILL IMPAIRMENT TESTING
In April of each year, Dominion Energy tests its goodwill for potential impairment, and performs additional tests more frequently if an event occurs or circumstances change in the interim that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. The 2021 annual test did not result in the recognition of any goodwill impairment.
In general, Dominion Energy estimates the fair value of its reporting units by using a combination of discounted cash flows and other valuation techniques that use multiples of earnings for peer group companies and analyses of recent business combinations involving peer group companies. Fair value estimates are dependent on subjective factors such as Dominion Energy’s estimate of future cash flows, the selection of appropriate discount and growth rates, and the selection of peer group companies and recent transactions. These underlying assumptions and estimates are made as of a point in time; subsequent modifications, particularly changes in discount rates or growth rates inherent in Dominion Energy’s estimates of future cash flows, could result in a future impairment of goodwill. Although Dominion Energy has consistently applied the same methods in developing the assumptions and estimates that underlie the fair value calculations, such as estimates of future cash flows, and based those estimates on relevant information available at the time, such cash flow estimates are highly uncertain by nature and may vary significantly from actual results. If the estimates of future cash flows used in the most recent test had been 10% lower or if the discount rate had been 0.25% higher, the resulting fair values would have still been greater than the carrying values of each of those reporting units tested, indicating that no impairment was present.
See Note 11 to the Consolidated Financial Statements for additional information.
USE OF ESTIMATES IN LONG-LIVED ASSET AND EQUITY METHOD INVESTMENT IMPAIRMENT TESTING
Impairment testing for an individual or group of long-lived assets, including intangible assets with definite lives, and equity method investments is required when circumstances indicate those assets may be impaired. When a long-lived asset’s carrying amount exceeds the undiscounted estimated future cash flows associated with the asset, the asset is considered impaired to the extent that the asset’s fair value is less than its carrying amount. When an equity method investment’s carrying amount exceeds its fair value, and the decline in value is deemed to be other-than-temporary, an impairment is recognized to the extent that the fair value is less than its carrying amount. Performing an impairment test on long-lived assets and equity method investments involves judgment in areas such as identifying if circumstances indicate an impairment may exist, identifying and grouping affected assets in the case of long-lived assets, and developing the undiscounted and discounted estimated future cash flows (used to estimate fair value in the absence of a market-based value) associated with the asset, including probability weighting such cash flows to reflect expectations about possible variations in their amounts or timing, expectations about the operations of the long-lived assets and equity method investments and the selection of an appropriate discount rate. When determining whether a long-lived asset or asset group has been impaired, management groups assets at the lowest level that has identifiable cash flows. Although cash flow estimates are based on relevant information available at the time the estimates are made, estimates of future cash flows are, by nature, highly uncertain and may vary significantly from actual results. For example, estimates of future cash flows would contemplate factors which may change over time, such as the expected use of the asset or underlying assets of equity method investees, including future production and sales levels, expected fluctuations of prices of commodities sold and consumed and expected proceeds from dispositions. There were no tests performed in 2021 of long-lived assets or equity method investments which could have resulted in material impairments.
HELD FOR SALE CLASSIFICATION
Dominion Energy recognizes the assets and liabilities of a disposal group as held for sale in the period (i) it has approved and committed to a plan to sell the disposal group, (ii) the disposal group is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the disposal group have been initiated, (iv) the sale of the disposal group is probable, (v) the disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Dominion Energy initially measures a disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell.
59
Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a disposal group until closing. Upon designation as held for sale, Dominion Energy stops recording depreciation expense and assesses the fair value of the disposal group less any costs to sell at each reporting period and until it is no longer classified as held for sale.
The determination as to whether the sale of the disposal group is probable may include significant judgments from management related to the expectation of obtaining approvals from applicable regulatory agencies such as state utility regulatory commissions, FERC or the U.S. Federal Trade Commission. This analysis is generally based on orders issued by regulatory commissions, past experience and discussions with applicable regulatory authorities and legal counsel.
In May 2021, Dominion Energy entered into an agreement to sell Kewaunee, subject to termination by either party if not completed by December 2022. The consideration as to whether the sale is probable includes judgments related to the ability to obtain the approvals, in a timely manner, of the NRC and the Wisconsin Commission. Due to the uncertainty surrounding the timing of or ability to obtain approval by the Wisconsin Commission, at December 31, 2021 Dominion Energy did not conclude that the sale is probable and, as a result, the disposal group was not classified as held for sale. Dominion Energy would have recognized a loss of approximately $725 million ($570 million after-tax) if such classification had been met. This loss primarily represents the difference between the nuclear decommissioning trust and AROs at December 31, 2021. The Wisconsin Commission requires that any excess decommissioning funds be returned to WPSC and WP&L customers following completion of all decommissioning activities.
See Note 3 to the Consolidated Financial Statements for additional information.
EMPLOYEE BENEFIT PLANS
Dominion Energy sponsors noncontributory defined benefit pension plans and other postretirement benefit plans for eligible active employees, retirees and qualifying dependents. The projected costs of providing benefits under these plans are dependent, in part, on historical information such as employee demographics, the level of contributions made to the plans and earnings on plan assets. Assumptions about the future, including the expected long-term rate of return on plan assets, discount rates applied to benefit obligations, mortality rates and the anticipated rate of increase in healthcare costs and participant compensation, also have a significant impact on employee benefit costs. The impact of changes in these factors, as well as differences between Dominion Energy’s assumptions and actual experience, is generally recognized in the Consolidated Statements of Income over the remaining average service period of plan participants, rather than immediately.
The expected long-term rates of return on plan assets, discount rates, healthcare cost trend rates and mortality rates are critical assumptions. Dominion Energy determines the expected long-term rates of return on plan assets for pension plans and other postretirement benefit plans by using a combination of:
|
• |
Expected inflation and risk-free interest rate assumptions; |
|
• |
Historical return analysis to determine long-term historic returns as well as historic risk premiums for various asset classes; |
|
• |
Expected future risk premiums, asset classes’ volatilities and correlations; |
|
• |
Forward-looking return expectations derived from the yield on long-term bonds and the expected long-term returns of major capital market assumptions; and |
|
• |
Investment allocation of plan assets. The strategic target asset allocation for Dominion Energy’s pension funds is 27% U.S. equity, 18% non-U.S. equity, 32% fixed income, 3% real estate and 20% other alternative investments, such as private equity investments. |
Strategic investment policies are established for Dominion Energy’s prefunded benefit plans based upon periodic asset/liability studies. Factors considered in setting the investment policy include those mentioned above such as employee demographics, liability growth rates, future discount rates, the funded status of the plans and the expected long-term rate of return on plan assets. Deviations from the plans’ strategic allocation are a function of Dominion Energy’s assessments regarding short-term risk and reward opportunities in the capital markets and/or short-term market movements which result in the plans’ actual asset allocations varying from the strategic target asset allocations. Through periodic rebalancing, actual allocations are brought back in line with the targets. Future asset/liability studies will focus on strategies to further reduce pension and other postretirement plan risk, while still achieving attractive levels of returns.
Dominion Energy develops non-investment related assumptions, which are then compared to the forecasts of an independent investment advisor to ensure reasonableness. An internal committee selects the final assumptions. Dominion Energy calculated its pension cost using an expected long-term rate of return on plan assets assumption that ranged from 7.00% to 8.45% for 2021, 7.00% to 8.60% for 2020 and 7.00% to 8.65% for 2019. For 2022, the expected long-term rate of return for the pension cost assumption ranged from 7.00% to 8.35% for Dominion Energy’s plans held as of December 31, 2021. Dominion Energy calculated its other
60
postretirement benefit cost using an expected long-term rate of return on plan assets assumption of 8.45% for 2021 and 8.50% for 2020 and 2019. For 2022, the expected long-term rate of return for other postretirement benefit cost assumption is 8.35%.
Dominion Energy determines discount rates from analyses of AA/Aa rated bonds with cash flows matching the expected payments to be made under its plans. The discount rates used to calculate pension cost and other postretirement benefit cost ranged from 2.73% to 3.29% for pension plans and 2.69% to 2.80% for other postretirement benefit plans in 2021, ranged from 2.77% to 3.63% for pension plans and 3.07% to 3.52% for other postretirement benefit plans in 2020 and ranged from 3.57% to 4.43% for pension plans and 4.05% to 4.41% for other postretirement benefit plans in 2019. Dominion Energy selected a discount rate ranging from 3.06% to 3.19% for pension plans and 3.04% to 3.11% for other postretirement benefit plans for determining its December 31, 2021 projected benefit obligations.
Dominion Energy establishes the healthcare cost trend rate assumption based on analyses of various factors including the specific provisions of its medical plans, actual cost trends experienced and projected and demographics of plan participants. Dominion Energy’s healthcare cost trend rate assumption as of December 31, 2021 was 6.25% and is expected to gradually decrease to 5.00% by 2026-2027 and continue at that rate for years thereafter.
The following table illustrates the effect on cost of changing the critical actuarial assumptions discussed above, while holding all other assumptions constant:
|
|
|
|
Increase in 2021 Net Periodic Cost |
|
|||||
|
|
Change in Actuarial Assumptions |
|
Pension Benefits |
|
|
Other Postretirement Benefits |
|
||
|
(millions, except percentages) |
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
Discount Rate |
(0.25)% |
|
$ |
18 |
|
|
$ |
— |
|
|
Long-term rate of return on plan assets |
(0.25)% |
|
|
25 |
|
|
|
5 |
|
|
Health care cost trend rate |
1% |
|
N/A |
|
|
|
9 |
|
|
In addition to the effects on cost, a 0.25% decrease in the discount rate would increase Dominion Energy’s projected pension benefit obligation at December 31, 2021 by $376 million and its accumulated postretirement benefit obligation at December 31, 2021 by $44 million, while a 1.00% increase in the healthcare cost trend rate would increase its accumulated postretirement benefit obligation at December 31, 2021 by $121 million.
See Note 22 to the Consolidated Financial Statements for additional information on Dominion Energy’s employee benefit plans.
New Accounting Standards
See Note 2 to the Consolidated Financial Statements for a discussion of new accounting standards.
DOMINION ENERGY
Results of Operations
Presented below is a summary of Dominion Energy’s consolidated results:
|
Year Ended December 31, |
|
2021 |
|
|
$ Change |
|
|
2020 |
|
|
$ Change |
|
|
2019 |
|
|||||
|
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Dominion Energy |
|
$ |
3,288 |
|
|
$ |
3,689 |
|
|
$ |
(401 |
) |
|
$ |
(1,759 |
) |
|
$ |
1,358 |
|
|
Diluted EPS |
|
|
3.98 |
|
|
|
4.55 |
|
|
|
(0.57 |
) |
|
|
(2.19 |
) |
|
|
1.62 |
|
Overview
2021 VS. 2020
Net income attributable to Dominion Energy increased $3.7 billion, primarily due to the absence of: charges associated with the cancellation of the Atlantic Coast Pipeline Project and related portions of the Supply Header Project which are presented in discontinued operations, the planned early retirements of certain electric generation facilities in Virginia, an impairment of interests in certain nonregulated solar generation facilities and the termination of a contract in connection with the sale of Fowler Ridge. In addition, there was an increase in net investment earnings on nuclear decommissioning trust funds, a decrease in charges associated with Virginia Power’s 2021 Triennial Review and a gain on the sale of the Q-Pipe Group to Southwest Gas. These increases were
61
partially offset by charges associated with the settlement of the South Carolina electric base rate case, increased unrealized losses on economic hedging activities and a net loss on the sales of non-wholly-owned nonregulated solar facilities.
Analysis of Consolidated Operations
Presented below are selected amounts related to Dominion Energy’s results of operations:
|
Year Ended December 31, |
|
2021 |
|
|
$ Change |
|
|
2020 |
|
|
$ Change |
|
|
2019 |
|
|||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
13,964 |
|
|
$ |
(208 |
) |
|
$ |
14,172 |
|
|
$ |
(229 |
) |
|
$ |
14,401 |
|
|
Electric fuel and other energy-related purchases |
|
|
2,368 |
|
|
|
125 |
|
|
|
2,243 |
|
|
|
(642 |
) |
|
|
2,885 |
|
|
Purchased electric capacity |
|
|
70 |
|
|
|
17 |
|
|
|
53 |
|
|
|
(35 |
) |
|
|
88 |
|
|
Purchased gas |
|
|
1,083 |
|
|
|
194 |
|
|
|
889 |
|
|
|
(671 |
) |
|
|
1,560 |
|
|
Other operations and maintenance |
|
|
3,734 |
|
|
|
49 |
|
|
|
3,685 |
|
|
|
(105 |
) |
|
|
3,790 |
|
|
Depreciation, depletion and amortization |
|
|
2,478 |
|
|
|
146 |
|
|
|
2,332 |
|
|
|
49 |
|
|
|
2,283 |
|
|
Other taxes |
|
|
909 |
|
|
|
38 |
|
|
|
871 |
|
|
|
(12 |
) |
|
|
883 |
|
|
Impairment of assets and other charges |
|
|
195 |
|
|
|
(1,910 |
) |
|
|
2,105 |
|
|
|
585 |
|
|
|
1,520 |
|
|
Loss (gain) on sales of assets |
|
|
108 |
|
|
|
169 |
|
|
|
(61 |
) |
|
|
91 |
|
|
|
(152 |
) |
|
Earnings from equity method investees |
|
|
276 |
|
|
|
236 |
|
|
|
40 |
|
|
|
32 |
|
|
|
8 |
|
|
Other income |
|
|
1,157 |
|
|
|
464 |
|
|
|
693 |
|
|
|
(110 |
) |
|
|
803 |
|
|
Interest and related charges |
|
|
1,354 |
|
|
|
(23 |
) |
|
|
1,377 |
|
|
|
(109 |
) |
|
|
1,486 |
|
|
Income tax expense |
|
|
425 |
|
|
|
342 |
|
|
|
83 |
|
|
|
(126 |
) |
|
|
209 |
|
|
Net income (loss) from discontinued operations including noncontrolling interests |
|
|
641 |
|
|
|
2,519 |
|
|
|
(1,878 |
) |
|
|
(2,594 |
) |
|
|
716 |
|
|
Noncontrolling interests |
|
|
26 |
|
|
|
175 |
|
|
|
(149 |
) |
|
|
(167 |
) |
|
|
18 |
|
An analysis of Dominion Energy’s results of operations follows:
2021 VS. 2020
Operating revenue decreased 1%, primarily reflecting:
|
• |
A $402 million decrease associated with market prices affecting Millstone, including economic hedging impacts of net realized and unrealized losses on freestanding derivatives ($495 million); |
|
• |
A $356 million decrease for refunds to be provided to retail electric customers in Virginia associated with the settlement of the 2021 Triennial Review; |
|
• |
A $151 million decrease from an unbilled revenue reduction at Virginia Power; |
|
• |
A $80 million decrease as a result of the contribution of certain nonregulated natural gas retail energy contracts to Wrangler; |
|
• |
A $62 million decrease associated with settlements of economic hedges of certain Virginia Power regulated electric sales; and |
|
• |
A $51 million decrease in PJM off-system sales. |
These decreases were partially offset by:
|
• |
A $390 million increase in the fuel cost component included in utility rates as a result of an increase in commodity costs associated with sales to gas utility customers ($239 million) and electric utility retail customers ($151 million); |
|
• |
A $117 million increase from gas utility capital cost riders; |
|
• |
A $75 million increase in sales to electric utility retail customers associated with growth; |
|
• |
A $62 million increase in sales to electric utility customers associated with economic and other usage factors; |
|
• |
A $52 million increase from the absence of planned outages at Millstone; |
|
• |
A $51 million increase in sales to electric utility retail customers from an increase in heating degree days during the heating season ($71 million) partially offset by a decrease in cooling degree days during the cooling season ($20 million); |
|
• |
A $26 million increase in sales to customers from non-jurisdictional solar generation facilities; and |
|
• |
A $22 million increase in sales to gas utility customers associated with growth. |
62
Electric fuel and other energy-related purchases increased 6%, primarily due to higher commodity costs for electric utilities ($151 million), partially offset by a decrease in PJM off-system sales ($51 million), which are offset in operating revenue and do not impact net income.
Purchased electric capacity increased 32%, primarily due to an increase in expense related to the annual PJM capacity performance market effective June 2021 ($24 million) and an increase in expense related to the annual PJM capacity performance market effective June 2020 ($17 million), partially offset by a decrease in expense associated with DESC’s electric utility operations ($24 million).
Purchased gas increased 22%, primarily due to an increase in commodity costs for gas utilities, which are offset in operating revenue and do not impact net income.
Other operations and maintenance increased 1%, primarily reflecting:
|
• |
A $117 million increase in salaries, wages and benefits, including $28 million of costs for employer-provided healthcare; |
|
• |
A $44 million charge related to a revision in estimated recovery of spent nuclear fuel costs associated with the decommissioning of Kewaunee; and |
|
• |
A $32 million increase in storm damage and restoration costs in Virginia Power’s service territory; partially offset by |
|
• |
A $58 million decrease in merger and integration-related costs associated with the SCANA Combination; |
|
• |
A $44 million decrease in certain Virginia Power expenditures which are primarily recovered through state- and FERC-regulated rates and do not impact net income; and |
|
• |
A $26 million net decrease in outage costs as a result of a decrease in Millstone outage costs ($45 million) partially offset by an increase in Virginia Power outage costs ($19 million). |
Depreciation, depletion and amortization increased 6%, primarily due to various projects being placed into service ($132 million) and an increase for amortization from the establishment of a regulatory asset associated with the 2021 Triennial Review ($61 million), partially offset by a decrease due to the impairment of certain nonregulated solar generation facilities in 2020 ($20 million).
Impairment of assets and other charges decreased 91%, primarily reflecting:
|
• |
The absence of a charge associated with the planned early retirements of certain electric generation facilities in Virginia ($747 million); |
|
• |
The absence of a charge associated with certain nonregulated solar generation facilities ($665 million); |
|
• |
A benefit from the establishment of a regulatory asset associated with the early retirements of certain coal- and oil-fired generating units associated with the settlement of the 2021 Triennial Review ($549 million); |
|
• |
The absence of a contract termination charge in connection with the sale of Fowler Ridge ($221 million); |
|
• |
The absence of a charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to legislation enacted in November 2020 ($127 million); and |
|
• |
The absence of dismantling costs associated with certain Virginia Power electric generation facilities ($54 million); partially offset by |
|
• |
Charges associated with the settlement of the South Carolina electric base rate case ($249 million); |
|
• |
A charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to Virginia’s 2021 budget process ($77 million); |
|
• |
A charge for corporate office lease termination ($62 million); |
|
• |
An increase in charges for CCRO benefits provided to retail electric customers in Virginia associated with Virginia Power’s 2021 Triennial Review ($58 million); and |
|
• |
A charge for the write-off of nonregulated retail software development assets ($20 million). |
63
Loss on sales of assets increased $169 million, primarily due to a net loss on the sales of non-wholly-owned nonregulated solar facilities ($211 million) partially offset by an increase in gains on the sale of nonregulated retail energy marketing assets ($23 million).
Earnings from equity method investees increased $236 million, primarily due to accounting for Cove Point as an equity method investment for a full year following the closing of the GT&S Transaction in November 2020.
Other income increased 67%, primarily due to an increase in net investment gains on nuclear decommissioning trust funds ($237 million), the absence of a charge for social justice commitments ($80 million), an increase in non-service components of pension and other postretirement employee benefit plan credits ($77 million), the absence of charges associated with litigation acquired in the SCANA Combination ($25 million) and an increase in AFUDC associated with rate-regulated projects ($25 million), partially offset by charges associated with the settlement of the South Carolina electric base rate case ($18 million).
Interest and related charges decreased 2%, primarily due to the absence of borrowings in response to COVID-19 in 2020 ($42 million), the absence of charges associated with the early redemption of certain securities in the first quarter of 2020 ($31 million) and a benefit associated with the effective settlement of uncertain tax positions ($21 million), partially offset by decreased carrying costs associated with the recovery of CEP beginning January 2021 ($29 million), charges associated with the early redemption of certain securities in the third quarter of 2021 ($23 million) and lower unrealized gains in 2021 associated with freestanding derivatives ($13 million).
Income tax expense increased $342 million, primarily due to higher pre-tax income ($365 million), lower investment tax credits ($38 million), the absence of prior year benefits including reductions in consolidated state deferred income taxes associated with gas transmission and storage operations ($45 million) and adjustments finalizing the effects of changes in tax status of certain subsidiaries in connection with the Dominion Energy Gas Restructuring ($24 million). These increases are partially offset by a benefit associated with the effective settlement of uncertain tax positions ($38 million), the benefit of a state legislative change ($21 million) and the absence of prior year expense primarily associated with the impairment of nonregulated solar generating assets held in partnerships attributable to the noncontrolling interest ($55 million).
Net income from discontinued operations including noncontrolling interests increased $2.5 billion, primarily due to a decrease in charges associated with the Atlantic Coast Pipeline Project and related portions of the Supply Header Project ($2.1 billion) and a gain on the sale of Q-Pipe ($493 million), partially offset by the absence of operations sold in the GT&S Transaction ($56 million).
Noncontrolling interests increased $175 million, primarily due to the absence of impairments associated with certain nonregulated solar generation facilities ($267 million) partially offset by the closing of the GT&S Transaction in November 2020 ($106 million).
Outlook
Dominion Energy’s 2022 net income is expected to increase on a per share basis as compared to 2021 primarily from the following:
|
• |
The absence of charges associated with Virginia Power’s 2021 Triennial Review; |
|
• |
The absence of charges associated with the settlement of the South Carolina electric base rate case; |
|
• |
The absence of a net loss on the sales of certain non-wholly-owned nonregulated solar facilities; |
|
• |
The absence of charges associated with litigation acquired in the SCANA Combination; and |
|
• |
Construction and operation of growth projects in electric utility and gas distribution operations. |
These increases are expected to be partially offset by the following:
|
• |
The absence of operations of the Q-Pipe Group sold to Southwest Gas and associated gain on sale; |
|
• |
The absence of a benefit from the establishment of a regulatory asset associated with the early retirements of certain coal- and oil-fired generating units associated with the 2021 Triennial Review and an increase from a full year of amortization of this regulatory asset; and |
|
• |
Share dilution. |
64
SEGMENT RESULTS OF OPERATIONS
Segment results include the impact of intersegment revenues and expenses, which may result in intersegment profit or loss. Presented below is a summary of contributions by Dominion Energy’s operating segments to net income (loss) attributable to Dominion Energy:
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||||||||||||||
|
|
|
Net income (loss) attributable to Dominion Energy |
|
|
Diluted EPS |
|
|
Net income (loss) attributable to Dominion Energy |
|
|
Diluted EPS |
|
|
Net income (loss) attributable to Dominion Energy |
|
|
Diluted EPS |
|
||||||
|
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy Virginia |
|
$ |
1,919 |
|
|
$ |
2.37 |
|
|
$ |
1,891 |
|
|
$ |
2.28 |
|
|
$ |
1,786 |
|
|
$ |
2.21 |
|
|
Gas Distribution |
|
|
600 |
|
|
|
0.74 |
|
|
|
560 |
|
|
|
0.67 |
|
|
|
487 |
|
|
|
0.60 |
|
|
Dominion Energy South Carolina |
|
|
437 |
|
|
|
0.54 |
|
|
|
419 |
|
|
|
0.51 |
|
|
|
430 |
|
|
|
0.53 |
|
|
Contracted Assets |
|
|
431 |
|
|
|
0.53 |
|
|
|
402 |
|
|
|
0.48 |
|
|
|
460 |
|
|
|
0.57 |
|
|
Corporate and Other |
|
|
(99 |
) |
|
|
(0.20 |
) |
|
|
(3,673 |
) |
|
|
(4.51 |
) |
|
|
(1,805 |
) |
|
|
(2.29 |
) |
|
Consolidated |
|
$ |
3,288 |
|
|
$ |
3.98 |
|
|
$ |
(401 |
) |
|
$ |
(0.57 |
) |
|
$ |
1,358 |
|
|
$ |
1.62 |
|
Dominion Energy Virginia
Presented below are operating statistics related to Dominion Energy Virginia’s operations:
|
Year Ended December 31, |
|
2021 |
|
|
% Change |
|
|
2020 |
|
|
% Change |
|
|
2019 |
|
|||||
|
Electricity delivered (million MWh) |
|
|
85.2 |
|
|
|
2 |
|
% |
|
83.3 |
|
|
|
(5 |
) |
% |
|
87.7 |
|
|
Electricity supplied (million MWh): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility |
|
|
85.7 |
|
|
|
(1 |
) |
|
|
87.0 |
|
|
|
(1 |
) |
|
|
88.2 |
|
|
Non-Jurisdictional |
|
|
1.0 |
|
|
|
43 |
|
|
|
0.7 |
|
|
|
75 |
|
|
|
0.4 |
|
|
Degree days (electric distribution and utility service area): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooling |
|
|
1,783 |
|
|
|
1 |
|
|
|
1,759 |
|
|
|
(13 |
) |
|
|
2,031 |
|
|
Heating |
|
|
3,210 |
|
|
|
8 |
|
|
|
2,970 |
|
|
|
(9 |
) |
|
|
3,259 |
|
|
Average electric distribution customer accounts (thousands) |
|
|
2,697 |
|
|
|
1 |
|
|
|
2,661 |
|
|
|
1 |
|
|
|
2,626 |
|
Presented below, on an after-tax basis, are the key factors impacting Dominion Energy Virginia’s net income contribution:
2021 VS. 2020
|
|
|
Increase (Decrease) |
|
|||||
|
|
|
Amount |
|
|
EPS |
|
||
|
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
Regulated electric sales: |
|
|
|
|
|
|
|
|
|
Weather |
|
$ |
44 |
|
|
$ |
0.05 |
|
|
Other |
|
|
20 |
|
|
|
0.02 |
|
|
Rider equity return |
|
|
41 |
|
|
|
0.05 |
|
|
Electric capacity |
|
|
(28 |
) |
|
|
(0.03 |
) |
|
Outages |
|
|
(14 |
) |
|
|
(0.02 |
) |
|
Depreciation and amortization |
|
|
(18 |
) |
|
|
(0.02 |
) |
|
Renewable energy investment tax credits |
|
|
7 |
|
|
|
0.01 |
|
|
Salaries, wages and benefits & administrative costs |
|
|
(22 |
) |
|
|
(0.03 |
) |
|
Other |
|
|
(2 |
) |
|
|
— |
|
|
Share accretion |
|
|
— |
|
|
|
0.06 |
|
|
Change in net income contribution |
|
$ |
28 |
|
|
$ |
0.09 |
|
65
Gas Distribution
Presented below are selected operating statistics related to Gas Distribution’s operations:
|
Year Ended December 31, |
|
2021 |
|
|
% Change |
|
|
2020 |
|
|
% Change |
|
|
2019 |
|
|||||
|
Gas distribution throughput (bcf): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
183 |
|
|
|
2 |
|
% |
|
180 |
|
|
|
(6 |
) |
% |
|
192 |
|
|
Transportation |
|
|
975 |
|
|
|
12 |
|
|
|
868 |
|
|
|
7 |
|
|
|
811 |
|
|
Heating degree days (gas distribution service area): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Carolina |
|
|
2,947 |
|
|
|
8 |
|
|
|
2,734 |
|
|
|
(7 |
) |
|
|
2,942 |
|
|
Ohio and West Virginia |
|
|
5,121 |
|
|
|
(1 |
) |
|
|
5,148 |
|
|
|
(4 |
) |
|
|
5,355 |
|
|
Utah, Wyoming, and Idaho |
|
|
4,874 |
|
|
|
(2 |
) |
|
|
4,973 |
|
|
|
(10 |
) |
|
|
5,501 |
|
|
Average gas distribution customer accounts (thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
1,935 |
|
|
|
2 |
|
|
|
1,897 |
|
|
|
2 |
|
|
|
1,857 |
|
|
Transportation |
|
|
1,131 |
|
|
|
1 |
|
|
|
1,123 |
|
|
|
1 |
|
|
|
1,108 |
|
Presented below, on an after-tax basis, are the key factors impacting Gas Distribution’s net income contribution:
2021 VS. 2020
|
|
|
Increase (Decrease) |
|
|||||
|
|
|
Amount |
|
|
EPS |
|
||
|
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
Regulated gas sales: |
|
|
|
|
|
|
|
|
|
Weather |
|
$ |
— |
|
|
$ |
— |
|
|
Other |
|
|
31 |
|
|
|
0.04 |
|
|
Rider equity return |
|
|
40 |
|
|
|
0.05 |
|
|
Salaries, wages and benefits & administrative costs |
|
|
(8 |
) |
|
|
(0.01 |
) |
|
Interest expense, net |
|
|
12 |
|
|
|
0.01 |
|
|
Other |
|
|
(35 |
) |
|
|
(0.04 |
) |
|
Share accretion |
|
|
— |
|
|
|
0.02 |
|
|
Change in net income contribution |
|
$ |
40 |
|
|
$ |
0.07 |
|
Dominion Energy South Carolina
Presented below are selected operating statistics related to Dominion Energy South Carolina’s operations:
|
Year Ended December 31, |
|
2021 |
|
|
% Change |
|
|
2020 |
|
|
% Change |
|
|
2019 |
|
|||||
|
Electricity delivered (million MWh) |
|
|
22.4 |
|
|
|
1 |
|
% |
|
22.1 |
|
|
|
(4 |
) |
% |
|
23.0 |
|
|
Electricity supplied (million MWh) |
|
|
23.5 |
|
|
|
2 |
|
|
|
23.0 |
|
|
|
(5 |
) |
|
|
24.1 |
|
|
Degree days (electric and gas distribution service areas): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cooling |
|
|
859 |
|
|
|
8 |
|
|
|
794 |
|
|
|
(17 |
) |
|
|
951 |
|
|
Heating |
|
|
1,280 |
|
|
|
19 |
|
|
|
1,074 |
|
|
|
(9 |
) |
|
|
1,179 |
|
|
Average electric distribution customer accounts (thousands) |
|
|
766 |
|
|
|
2 |
|
|
|
753 |
|
|
|
2 |
|
|
|
739 |
|
|
Gas distribution throughput (bcf): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
72 |
|
|
|
9 |
|
|
|
66 |
|
|
|
2 |
|
|
|
65 |
|
|
Average gas distribution customer accounts (thousands) |
|
|
412 |
|
|
|
3 |
|
|
|
399 |
|
|
|
3 |
|
|
|
386 |
|
66
Presented below, on an after-tax basis, are the key factors impacting Dominion Energy South Carolina’s net income contribution:
2021 VS. 2020
|
|
|
Increase (Decrease) |
|
|||||
|
|
|
Amount |
|
|
EPS |
|
||
|
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
Regulated electric sales: |
|
|
|
|
|
|
|
|
|
Weather |
|
$ |
(6 |
) |
|
$ |
(0.01 |
) |
|
Other |
|
|
48 |
|
|
|
0.06 |
|
|
Regulated gas sales |
|
|
9 |
|
|
|
0.01 |
|
|
Capital cost rider |
|
|
(6 |
) |
|
|
(0.01 |
) |
|
Depreciation and amortization |
|
|
(9 |
) |
|
|
(0.01 |
) |
|
Interest expense, net |
|
|
7 |
|
|
|
0.01 |
|
|
Salaries, wages and benefits & administrative costs |
|
|
(46 |
) |
|
|
(0.06 |
) |
|
Other |
|
|
21 |
|
|
|
0.02 |
|
|
Share accretion |
|
|
— |
|
|
|
0.02 |
|
|
Change in net income contribution |
|
$ |
18 |
|
|
$ |
0.03 |
|
Contracted Assets
Presented below are selected operating statistics related to Contracted Asset’s operations:
|
Year Ended December 31, |
|
2021 |
|
|
% Change |
|
|
2020 |
|
|
% Change |
|
|
2019 |
|
|||||
|
Electricity supplied (million MWh) |
|
|
20.8 |
|
|
|
8 |
|
% |
|
19.3 |
|
|
|
(4 |
) |
% |
|
20.2 |
|
Presented below, on an after-tax basis, are the key factors impacting Contracted Asset’s net income contribution:
2021 VS. 2020
|
|
|
Increase (Decrease) |
|
|||||
|
|
|
Amount |
|
|
EPS |
|
||
|
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
Margin(1) |
|
$ |
28 |
|
|
$ |
0.03 |
|
|
Planned outage costs |
|
|
33 |
|
|
|
0.04 |
|
|
Renewable energy investment tax credits |
|
|
(43 |
) |
|
|
(0.05 |
) |
|
Absence of contract associated with Fowler Ridge |
|
|
14 |
|
|
|
0.02 |
|
|
Other |
|
|
(3 |
) |
|
|
(0.00 |
) |
|
Share accretion |
|
|
— |
|
|
|
0.01 |
|
|
Change in net income contribution |
|
$ |
29 |
|
|
$ |
0.05 |
|
|
(1) |
Includes earnings associated with a 50% noncontrolling interest in Cove Point. |
Corporate and Other
Presented below are the Corporate and Other segment’s after-tax results:
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Specific items attributable to operating segments |
|
$ |
(493 |
) |
|
$ |
(1,241 |
) |
|
$ |
(1,901 |
) |
|
Specific items attributable to Corporate and Other segment |
|
|
590 |
|
|
|
(2,166 |
) |
|
|
384 |
|
|
Total specific items |
|
|
97 |
|
|
|
(3,407 |
) |
|
|
(1,517 |
) |
|
Other corporate operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(410 |
) |
|
|
(384 |
) |
|
|
(383 |
) |
|
Other |
|
|
214 |
|
|
|
118 |
|
|
|
95 |
|
|
Total other corporate operations |
|
|
(196 |
) |
|
|
(266 |
) |
|
|
(288 |
) |
|
Total net expense |
|
|
(99 |
) |
|
|
(3,673 |
) |
|
|
(1,805 |
) |
|
EPS impact |
|
$ |
(0.20 |
) |
|
$ |
(4.51 |
) |
|
$ |
(2.29 |
) |
67
TOTAL SPECIFIC ITEMS
Corporate and Other includes specific items attributable to Dominion Energy’s primary operating segments that are not included in profit measures evaluated by executive management in assessing the segments’ performance or in allocating resources. See Note 26 to the Consolidated Financial Statements for discussion of these items in more detail. Corporate and Other also includes specific items attributable to the Corporate and Other segment. In 2021, this primarily included $641 million net income from discontinued operations, primarily associated with the Q-Pipe Group, a $64 million after-tax benefit for derivative mark-to-market changes, $62 million of after-tax charges for workplace realignment, primarily related to a corporate office lease termination and $32 million of after-tax charges for merger and integration-related costs associated with the SCANA Combination. In 2020, this primarily included $2.2 billion of after-tax loss associated with discontinued operations, including the results of operations of the entities included in the GT&S and Q-Pipe Transactions as well as charges associated with the cancellation of the Atlantic Coast Pipeline Project, $82 million of after-tax charges for merger and integration-related costs associated with the SCANA Combination, a $78 million after-tax benefit of derivative mark-to-market changes and a $69 million tax benefit associated with the GT&S Transaction. In 2019, this primarily included $521 million of after-tax earnings for the results of operations of the entities included in the GT&S and Q-Pipe Transactions and $135 million of after-tax transaction and transition costs associated with the SCANA Combination.
VIRGINIA POWER
Results of Operations
Presented below is a summary of Virginia Power’s consolidated results:
|
Year Ended December 31, |
|
2021 |
|
|
$ Change |
|
|
2020 |
|
|
$ Change |
|
|
2019 |
|
|||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,712 |
|
|
$ |
691 |
|
|
$ |
1,021 |
|
|
$ |
(128 |
) |
|
$ |
1,149 |
|
Overview
2021 VS. 2020
Net income increased 68%, primarily due to the absence of charges related to the planned early retirements of certain electric generation facilities and a decrease in charges associated with the 2021 Triennial Review.
Analysis of Consolidated Operations
Presented below are selected amounts related to Virginia Power’s results of operations:
|
Year Ended December 31, |
|
2021 |
|
|
$ Change |
|
|
2020 |
|
|
$ Change |
|
|
2019 |
|
|||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
7,470 |
|
|
$ |
(293 |
) |
|
$ |
7,763 |
|
|
$ |
(345 |
) |
|
$ |
8,108 |
|
|
Electric fuel and other energy-related purchases |
|
|
1,735 |
|
|
|
99 |
|
|
|
1,636 |
|
|
|
(542 |
) |
|
|
2,178 |
|
|
Purchased (excess) electric capacity |
|
|
24 |
|
|
|
41 |
|
|
|
(17 |
) |
|
|
(57 |
) |
|
|
40 |
|
|
Other operations and maintenance |
|
|
1,793 |
|
|
|
7 |
|
|
|
1,786 |
|
|
|
43 |
|
|
|
1,743 |
|
|
Depreciation and amortization |
|
|
1,364 |
|
|
|
112 |
|
|
|
1,252 |
|
|
|
29 |
|
|
|
1,223 |
|
|
Other taxes |
|
|
326 |
|
|
|
(1 |
) |
|
|
327 |
|
|
|
(1 |
) |
|
|
328 |
|
|
Impairment of assets and other charges (benefits) |
|
|
(269 |
) |
|
|
(1,362 |
) |
|
|
1,093 |
|
|
|
336 |
|
|
|
757 |
|
|
Other income |
|
|
146 |
|
|
|
66 |
|
|
|
80 |
|
|
|
(18 |
) |
|
|
98 |
|
|
Interest and related charges |
|
|
534 |
|
|
|
18 |
|
|
|
516 |
|
|
|
(8 |
) |
|
|
524 |
|
|
Income tax expense |
|
|
397 |
|
|
|
168 |
|
|
|
229 |
|
|
|
(35 |
) |
|
|
264 |
|
An analysis of Virginia Power’s results of operations follows:
2021 VS. 2020
Operating revenue decreased 4%, primarily reflecting:
|
• |
A $356 million decrease for refunds to be provided to retail electric customers in Virginia associated with the settlement of the 2021 Triennial Review; |
|
• |
A $151 million decrease from an unbilled revenue reduction; |
|
• |
A $62 million decrease associated with settlements of economic hedges of certain regulated electric sales; and |
68
|
• |
A $51 million decrease in PJM off-system sales; |
These decreases were partially offset by:
|
• |
A $125 million increase in the fuel cost component included in utility rates as a result of a net increase in commodity costs associated with sales to electric utility retail customers |
|
• |
A $59 million increase in sales to retail customers from an increase in heating degree days during the heating season ($65 million) partially offset by a decrease in cooling degree days during the cooling season ($6 million); |
|
• |
A $49 million increase in sales to electric utility retail customers associated with growth; |
|
• |
A $35 million increase in sales to electric utility retail customers associated with economic and other usage factors; and |
|
• |
A $26 million increase in sales to customers from non-jurisdictional solar generation facilities. |
Electric fuel and other energy-related purchases increased 6%, primarily due to higher commodity costs for electric utilities ($125 million), partially offset by a decrease in PJM off-system sales ($51 million), which are offset in operating revenue and do not impact net income.
Purchased electric capacity increased $41 million, primarily due to an increase in expense related to the annual PJM capacity performance market effective June 2021 ($24 million) and an increase in expense related to the annual PJM capacity performance market effective June 2020 ($17 million).
Other operations and maintenance increased $7 million, primarily reflecting:
|
• |
A $57 million increase in outside services; |
|
• |
A $32 million increase in storm damage and service restoration costs; |
|
• |
A $20 million increase in materials and supplies; and |
|
• |
A $19 million increase in planned outage costs; partially offset by |
|
• |
A $44 million decrease in certain expenses which are primarily recovered through state- and FERC-regulated rates and do not impact net income; |
|
• |
A $12 million gain on the sale of corporate office real estate; |
|
• |
The absence of a $11 million charge associated with ash pond and landfill closure costs; |
|
• |
The absence of a $11 million charge associated with credit risk on customer accounts related to COVID-19; |
|
• |
A $10 million reduction in bad debt expense due to the forgiveness of Virginia retail electric customer accounts in arrears pursuant to Virginia’s 2021 budget process; and |
|
• |
A $10 million decrease in environmental remediation costs. |
Depreciation and amortization increased 9%, primarily due to an increase for amortization from the establishment of a regulatory asset associated with the 2021 Triennial Review ($61 million), various projects being placed into service ($57 million), partially offset by the absence of depreciation from certain electric generation facilities that were retired early ($11 million).
Impairment of assets and other charges (benefits) decreased $1.4 billion, primarily reflecting:
|
• |
The absence of charges associated with the planned early retirements of certain electric generation facilities ($747 million); |
|
• |
A benefit from the establishment of a regulatory asset associated with the early retirements of certain coal- and oil-fired generating units associated with the settlement of the 2021 Triennial Review ($549 million); |
|
• |
The absence of a charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to legislation enacted in November 2020 ($127 million); and |
|
• |
The absence of charges for dismantling costs associated with certain electric generation facilities ($54 million); partially offset by |
|
• |
A charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to Virginia’s 2021 budget process ($77 million); and |
|
• |
An increase in charges for CCRO benefits provided to retail electric customers in Virginia associated with the 2021 Triennial Review ($58 million). |
69
Other income increased 83%, primarily due to an increase in net investment gains on nuclear decommissioning trust funds ($38 million) and an increase in AFUDC associated with rate-regulated projects ($24 million).
Income tax expense increased 73%, primarily due to higher pre-tax income ($192 million) partially offset by the benefit of a state legislative change ($16 million).
LIQUIDITY AND CAPITAL RESOURCES
Dominion Energy depends on both cash generated from operations and external sources of liquidity to provide working capital and as a bridge to long-term financings. Dominion Energy’s material cash requirements include capital and investment expenditures, repaying short-term and long-term debt obligations and paying dividends on its common and preferred stock.
Analysis of Cash Flows
Presented below are selected amounts related to Dominion Energy’s cash flows:
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, restricted cash and equivalents at beginning of year |
|
$ |
247 |
|
|
$ |
269 |
|
|
$ |
391 |
|
|
Cash flows provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
4,037 |
|
|
|
5,227 |
|
|
|
5,204 |
|
|
Investing activities |
|
|
(6,247 |
) |
|
|
(2,916 |
) |
|
|
(4,622 |
) |
|
Financing activities |
|
|
2,371 |
|
|
|
(2,333 |
) |
|
|
(704 |
) |
|
Net increase (decrease) in cash, restricted cash and equivalents |
|
|
161 |
|
|
|
(22 |
) |
|
|
(122 |
) |
|
Cash, restricted cash and equivalents at end of year |
|
$ |
408 |
|
|
$ |
247 |
|
|
$ |
269 |
|
Operating Cash Flows
Net cash provided by Dominion Energy's operating activities decreased $1.2 billion, including a $1.4 billion decrease from discontinued operations largely due to the absence of operations sold in the GT&S Transaction. Net cash provided by continuing operations increased $200 million, primarily as the result of higher operating cash flows from electric utility and gas distribution operations driven by weather, customer growth and riders ($737 million), the absence of a cash pension plan contribution ($250 million), increased distributions from Cove Point ($230 million), absence of a contract termination payment in connection with the sale of Fowler Ridge ($221 million), decreases in severance payments primarily related to a voluntary retirement program ($174 million) and a decrease in payments associated with litigation acquired in the SCANA Combination ($143 million), lower income tax payments ($132 million) and changes in working capital ($161 million). These increases were partially offset by lower deferred fuel cost recoveries ($1.2 billion) and increased margin deposits ($690 million).
Investing Cash Flows
Net cash used in Dominion Energy’s investing activities increased $3.3 billion, primarily due to a net decrease in proceeds from the sale of the Q-Pipe Group compared to the GT&S Transaction ($2.2 billion), the repayment of the Q-Pipe Transaction deposit ($1.3 billion), an increase in contributions to equity method affiliates including Atlantic Coast Pipeline ($873 million), partially offset by the proceeds from the sale of non-wholly-owned nonregulated solar facilities ($495 million), the absence of acquisitions of equity method investments ($178 million) and a decrease in acquisitions of solar development projects ($210 million).
Financing Cash Flows
Net cash provided by Dominion Energy’s financing activities was $2.4 billion for the year ended December 31, 2021, compared to net cash used by financing activities of $2.3 billion for the year ended December 31, 2020. This change is primarily due to the absence of common stock repurchases ($3.1 billion), higher net issuances of short-term debt ($1.4 billion), lower common stock dividend payments ($837 million) and the issuance of Series C Preferred Stock ($742 million), partially offset by increased repayments and redemptions of long-term debt ($871 million).
70
Credit Facilities and Short-Term Debt
Dominion Energy generally uses proceeds from short-term borrowings, including commercial paper, to satisfy short-term cash requirements not met through cash from operations. The levels of borrowing may vary significantly during the course of the year, depending on the timing and amount of cash requirements not satisfied by cash from operations. A description of Dominion Energy’s primary available sources of short-term liquidity follows.
Joint Revolving Credit Facility
Dominion Energy maintains a $6.0 billion joint revolving credit facility which provides for a discount in the pricing of certain annual fees and amounts borrowed by Dominion Energy under the facility if Dominion Energy achieves certain annual renewable electric generation and diversity and inclusion objectives.
Dominion Energy’s commercial paper and letters of credit outstanding, as well as capacity available under its credit facility were as follows:
|
|
|
Facility Limit |
|
|
Outstanding Commercial Paper(1) |
|
|
Outstanding Letters of Credit |
|
|
Facility Capacity Available |
|
||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint revolving credit facility(2) |
|
$ |
6,000 |
|
|
$ |
1,883 |
|
|
$ |
131 |
|
|
$ |
3,986 |
|
|
(1) |
The weighted-average interest rate of the outstanding commercial paper supported by Dominion Energy’s credit facility was 0.31% at December 31, 2021. |
|
(2) |
This credit facility matures in June 2026, with the potential to be extended by the borrowers to June 2028, and can be used by the borrowers under the credit facility to support bank borrowings and the issuance of commercial paper, as well as to support up to a combined $2.0 billion of letters of credit. |
Dominion Energy Reliability InvestmentSM Program
Dominion Energy has an effective registration statement with the SEC for the sale of up to $3.0 billion of variable denomination floating rate demand notes, called Dominion Energy Reliability InvestmentSM. The registration limits the principal amount that may be outstanding at any one time to $1.0 billion. The notes are offered on a continuous basis and bear interest at a floating rate per annum determined by the Dominion Energy Reliability Investment Committee, or its designee, on a weekly basis. The notes have no stated maturity date, are non-transferable and may be redeemed in whole or in part by Dominion Energy or at the investor’s option at any time. At December 31, 2021, Dominion Energy’s Consolidated Balance Sheets include $431 million presented within short-term debt. The proceeds are used for general corporate purposes and to repay debt.
Other Facilities
In addition to the primary sources of short-term liquidity discussed above, from time to time Dominion Energy enters into separate supplementary credit facilities or term loans as discussed in Note 17 to the Consolidated Financial Statements.
Long-Term Debt
Issuances and Borrowings of Long-Term Debt
During 2021, Dominion Energy issued or borrowed the following long-term debt. Unless otherwise noted, the proceeds were used for the repayment of existing long-term indebtedness and for general corporate purposes.
71
|
Month of Issuance |
|
Type |
|
Public / Private |
|
Issuer / Borrowing Entity |
|
Principal |
|
|
Rate |
|
|
Stated Maturity |
||
|
|
|
|
|
|
|
|
|
(millions) |
|
|
|
|
|
|
|
|
|
March |
|
Senior notes |
|
Private |
|
PSNC |
|
$ |
150 |
|
|
|
3.100 |
% |
|
2051 |
|
April |
|
Senior notes |
|
Public |
|
Dominion Energy |
|
|
600 |
|
|
|
1.450 |
% |
|
2026 |
|
April |
|
Senior notes |
|
Public |
|
Dominion Energy |
|
|
500 |
|
|
|
3.300 |
% |
|
2041 |
|
June |
|
Sustainability Revolving Credit Agreement(1) |
|
Private |
|
Dominion Energy |
|
|
250 |
|
|
variable |
|
|
2024 |
|
|
August |
|
Sustainability Revolving Credit Agreement(1) |
|
Private |
|
Dominion Energy |
|
|
650 |
|
|
variable |
|
|
2024 |
|
|
August |
|
Senior notes(2) |
|
Public |
|
Dominion Energy |
|
|
1,000 |
|
|
|
2.250 |
% |
|
2031 |
|
August |
|
Senior notes |
|
Private |
|
Questar Gas |
|
|
125 |
|
|
|
2.210 |
% |
|
2031 |
|
August |
|
Senior notes |
|
Private |
|
Questar Gas |
|
|
125 |
|
|
|
3.150 |
% |
|
2051 |
|
November |
|
Senior notes |
|
Public |
|
Virginia Power |
|
|
500 |
|
|
|
2.300 |
% |
|
2031 |
|
November |
|
Senior notes |
|
Public |
|
Virginia Power |
|
|
500 |
|
|
|
2.950 |
% |
|
2051 |
|
November |
|
First mortgage bonds |
|
Public |
|
DESC |
|
|
400 |
|
|
|
2.300 |
% |
|
2031 |
|
December |
|
Term loan(3) |
|
Private |
|
DECP Holdings |
|
|
2,500 |
|
|
variable |
|
|
2024 |
|
|
Total issuances and borrowings |
|
|
|
|
|
$ |
7,300 |
|
|
|
|
|
|
|
||
|
|
(1) |
This supplemental credit facility offers a reduced interest rate margin with respect to borrowed amounts allocated to certain environmental sustainability or social investment initiatives. Proceeds of the supplemental credit facility may also be used for general corporate purposes, but such proceeds are not eligible for a reduced interest rate margin. The proceeds from these borrowings were used to support environmental sustainability and social investment initiatives ($250 million) and for general corporate purposes ($650 million). At December 31, 2021, no amounts were outstanding under this arrangement. |
|
|
(2) |
The proceeds from this offering will be used to finance and/or refinance, in whole or in part, existing and future capital expenditures associated with the development, construction, acquisition and operation of certain solar projects. |
|
|
(3) |
The maturity date for this term loan has the potential to be extended to December 2026. |
Dominion Energy currently meets the definition of a well-known seasoned issuer under SEC rules governing the registration, communications and offering processes under the Securities Act of 1933, as amended. The rules provide for a streamlined shelf registration process to provide registrants with timely access to capital. This allows Dominion Energy to use automatic shelf registration statements to register any offering of securities, other than those for exchange offers or business combination transactions.
Dominion Energy anticipates, excluding potential opportunistic financings, issuing between approximately $3.2 billion and $4.4 billion of long-term debt during 2022, inclusive of $1.0 billion issued at Virginia Power in January 2022. The raising of external capital is subject to certain regulatory requirements, including registration with the SEC for certain issuances.
Repayment, Repurchases and Redemptions of Long-Term Debt
Dominion Energy may from time to time reduce its outstanding debt and level of interest expense through redemption of debt securities prior to maturity or repurchases of debt securities in the open market, in privately negotiated transactions, through tender offers or otherwise.
The following long-term debt was repaid, repurchased or redeemed in 2021:
|
Month of Redemption |
|
Type |
|
Entity |
|
Principal |
|
(1) |
Rate |
|
|
Stated Maturity |
|||
|
|
|
|
|
|
|
(millions) |
|
|
|
|
|
|
|
||
|
Debt scheduled to mature in 2021 |
|
|
|
$ |
2,109 |
|
(2) |
various |
|
|
|
||||
|
Early redemptions |
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
August |
|
July 2016 hybrids(3) |
|
Dominion Energy |
|
|
800 |
|
|
|
5.250 |
% |
|
2076 |
|
|
November |
|
Senior notes |
|
Virginia Power |
|
|
450 |
|
|
|
2.950 |
% |
|
2022 |
|
|
November |
|
Sustainability Revolving Credit Agreement |
|
Dominion Energy |
|
|
650 |
|
|
variable |
|
|
2024 |
||
|
December |
|
Sustainability Revolving Credit Agreement |
|
Dominion Energy |
|
|
250 |
|
|
variable |
|
|
2024 |
||
|
December |
|
Senior notes |
|
Dominion Energy |
|
|
400 |
|
|
|
2.750 |
% |
|
2022 |
|
|
December |
|
Term loan |
|
Dominion Solar Projects III, Inc. |
|
|
177 |
|
|
variable |
|
|
2024 |
||
|
Total repayments, repurchases and redemptions(4) |
|
|
|
$ |
4,836 |
|
|
|
|
|
|
|
|||
|
(1) |
Total amount redeemed prior to maturity includes remaining outstanding principal plus accrued interest. |
|
(2) |
Includes repayment of $225 million associated with supplemental 364-Day revolving credit facility borrowings. |
72
|
(3) |
The July 2016 hybrids were listed on the NYSE under the symbol DRUA. Expenses related to the early redemption were $23 million reflected within interest and related charges in Dominion Energy’s Consolidated Statements of Income for the year ended December 31, 2021. |
|
(4) |
Amounts exclude $265 million of long-term debt assumed by Terra Nova Renewable Partners in connection with the sale of SBL Holdco in December 2021. |
See Note 18 to the Consolidated Financial Statements for additional information regarding scheduled maturities and other cancellations of Dominion Energy’s long-term debt, including related average interest rates.
Remarketing of Long-Term Debt
In 2021, Dominion Energy was not required to and did not complete the remarketing of any of its long-term debt. In 2022, Dominion Energy expects to remarket approximately $165 million of its senior notes and tax-exempt bonds.
Credit Ratings
Dominion Energy’s credit ratings affect its liquidity, cost of borrowing under credit facilities and collateral posting requirements under commodity contracts, as well as the rates at which it is able to offer its debt securities. The credit ratings for Dominion Energy are affected by its financial profile, mix of regulated and nonregulated businesses and respective cash flows, changes in methodologies used by the rating agencies and event risk, if applicable, such as major acquisitions or dispositions.
Credit ratings and outlooks as of February 21, 2022 are as follows:
|
|
|
Fitch |
|
Moody's |
|
Standard & Poor's |
|
Dominion Energy |
|
|
|
|
|
|
|
Issuer |
|
BBB+ |
|
Baa2 |
|
BBB+ |
|
Senior unsecured debt securities |
|
BBB+ |
|
Baa2 |
|
BBB |
|
Junior subordinated notes |
|
BBB |
|
Baa3 |
|
BBB |
|
Enhanced junior subordinated notes |
|
BBB- |
|
Baa3 |
|
BBB- |
|
Preferred Stock |
|
BBB- |
|
Ba1 |
|
BBB- |
|
Commercial paper |
|
F2 |
|
P-2 |
|
A-2 |
|
Outlook |
|
Stable |
|
Stable |
|
Positive |
A credit rating is not a recommendation to buy, sell or hold securities and should be evaluated independently of any other rating. Ratings are subject to revision or withdrawal at any time by the applicable rating organization.
Financial Covenants
As part of borrowing funds and issuing both short-term and long-term debt or preferred securities, Dominion Energy must enter into enabling agreements. These agreements contain customary covenants that, in the event of default, could result in the acceleration of principal and interest payments; restrictions on distributions related to capital stock, including dividends, redemptions, repurchases, liquidation payments or guarantee payments; and in some cases, the termination of credit commitments unless a waiver of such requirements is agreed to by the lenders/security holders. These provisions are customary, with each agreement specifying which covenants apply. These provisions are not necessarily unique to Dominion Energy.
Dominion Energy is required to pay annual commitment fees to maintain its joint revolving credit facility. In addition, the credit agreement contains various terms and conditions that could affect Dominion Energy’s ability to borrow under the facility. They include a maximum debt to total capital ratio, which is also included in Dominion Energy’s Sustainability Revolving Credit Agreement entered into in 2021, and cross-default provisions.
As of December 31, 2021, the calculated total debt to total capital ratio, pursuant to the terms of the agreements, was as follows:
|
Company |
|
Maximum Allowed Ratio |
|
|
Actual Ratio(1) |
|
||
|
Dominion Energy |
|
|
67.5 |
% |
|
|
56.0 |
% |
|
(1) |
Indebtedness as defined by the agreements excludes certain junior subordinated notes reflected as long-term debt as well as AOCI reflected as equity in the Consolidated Balance Sheets. Capital is inclusive of preferred stock whether classified as equity or mezzanine equity. |
73
If Dominion Energy or any of its material subsidiaries fails to make payment on various debt obligations in excess of $100 million, the lenders could require the defaulting company, if it is a borrower under Dominion Energy’s joint revolving credit facility, to accelerate its repayment of any outstanding borrowings and the lenders could terminate their commitments, if any, to lend funds to that company under the credit facility. In addition, if the defaulting company is Virginia Power, Dominion Energy’s obligations to repay any outstanding borrowing under the credit facility could also be accelerated and the lenders’ commitments to Dominion Energy could terminate.
Dominion Energy monitors compliance with these covenants on a regular basis in order to ensure that events of default will not occur. As of December 31, 2021, there have been no events of default under Dominion Energy’s covenants.
Common Stock, Preferred Stock and Other Equity Securities
Issuances of Equity Securities
Dominion Energy maintains Dominion Energy Direct® and a number of employee savings plans through which contributions may be invested in Dominion Energy’s common stock. These shares may either be newly issued or purchased on the open market with proceeds contributed to these plans. In January 2021, Dominion Energy began issuing new shares of common stock for these direct stock purchase plans. During 2021, Dominion Energy issued 2.6 million of such shares and received proceeds of $192 million.
Dominion Energy also maintains sales agency agreements to effect sales under an at-the-market program. Under the sales agency agreements, Dominion Energy may, from time to time, offer and sell shares of its common stock through the sales agents or enter into one or more forward sale agreements with respect to shares of its common stock. Sales by Dominion Energy through the sales agents or by forward sellers pursuant to a forward sale agreement cannot exceed $1.0 billion in the aggregate. In November 2021, Dominion Energy entered forward sale agreements for approximately 1.1 million shares of its common stock to be settled by November 2022 at an average initial forward price of $74.66 per share. See Note 20 to the Consolidated Financial Statements for additional information.
In addition, Dominion Energy issued shares of its common and preferred stock, as discussed in Notes 19 and 20 to the Consolidated Financial Statements, respectively, as follows:
|
|
• |
In 2021, Dominion Energy issued 2.0 million shares of its common stock, valued at $149 million, to satisfy obligations under settlement agreements associated with litigation acquired in the SCANA Combination. |
|
|
• |
In December 2021, Dominion Energy issued 750,000 shares of Series C Preferred Stock and received cash proceeds of $742 million, net of issuance costs. Also in December 2021, Dominion Energy issued 250,000 shares of Series C Preferred Stock, valued at $250 million, to the qualified pension plans. |
Between Dominion Energy Direct® and its at-the-market program (including any related forward-sale agreements), and excluding potential opportunistic financings, Dominion Energy anticipates raising between $300 million and $500 million of capital through the issuance of common stock in 2022. In addition, Dominion Energy may issue up to $150 million of stock under settlement agreements associated with litigation acquired in the SCANA Combination as discussed in Note 23 to the Consolidated Financial Statements. As discussed in Note 19 to the Consolidated Financial Statements, in 2022, Dominion Energy will settle the stock purchase contract component of the 2019 Equity Units expected to result in proceeds of $1.6 billion and the issuance of up to 21.8 million shares, subject to a formula based on the average closing price of Dominion Energy common stock upon settlement.
Repurchases of Equity Securities
In November 2020, the Board of Directors authorized the repurchase of up to $1.0 billion of Dominion Energy’s common stock. This repurchase program does not include a specific timetable or price or volume targets and may be modified, suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions or otherwise at the discretion of management subject to prevailing market conditions, applicable securities laws and other factors. No purchases have been made under this authorization as of December 31, 2021.
Dominion Energy does not plan to repurchase shares of common stock in 2022, except for shares tendered by employees to satisfy tax withholding obligations on vested restricted stock, which does not impact the available capacity under its stock repurchase authorization.
74
Capital Expenditures
See Note 26 to the Consolidated Financial Statements for Dominion Energy’s historical capital expenditures by segment. Dominion Energy’s total planned capital expenditures for each segment over the next five years are presented in the table below:
|
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
Total(1) |
|
||||||
|
(billions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy Virginia |
|
$ |
5.8 |
|
|
$ |
7.2 |
|
|
$ |
7.5 |
|
|
$ |
7.5 |
|
|
$ |
5.3 |
|
|
$ |
33.2 |
|
|
Gas Distribution |
|
|
1.4 |
|
|
|
1.4 |
|
|
|
1.2 |
|
|
|
1.5 |
|
|
|
1.1 |
|
|
|
6.5 |
|
|
Dominion Energy South Carolina |
|
|
0.8 |
|
|
|
0.9 |
|
|
|
0.9 |
|
|
|
0.8 |
|
|
|
0.7 |
|
|
|
4.2 |
|
|
Contracted Assets |
|
|
0.6 |
|
|
|
0.9 |
|
|
|
0.9 |
|
|
|
0.9 |
|
|
|
0.5 |
|
|
|
3.8 |
|
|
Corporate and Other segment |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.4 |
|
|
Total(1) |
|
$ |
8.6 |
|
|
$ |
10.3 |
|
|
$ |
10.7 |
|
|
$ |
10.6 |
|
|
$ |
7.7 |
|
|
$ |
47.9 |
|
|
(1) |
Totals may not foot due to rounding. |
Dominion Energy’s planned growth expenditures are subject to approval by the Board of Directors as well as potentially by regulatory bodies based on the individual project and are expected to include significant investments in support of its clean energy profile. See Dominion Energy Virginia, Gas Distribution, Dominion Energy South Carolina and Contracted Assets in Item 1. Business for additional discussion of various significant capital projects currently under development. The above estimates are based on a capital expenditures plan reviewed and endorsed by Dominion Energy’s Board of Directors in December 2021 and are subject to continuing review and adjustment and actual capital expenditures may vary from these estimates. Dominion Energy may also choose to postpone or cancel certain planned capital expenditures in order to mitigate the need for future debt financings and equity issuances.
Dividends
Dominion Energy believes that its operations provide a stable source of cash flow to contribute to planned levels of capital expenditures and maintain or grow the dividend on common shares. In December 2021, Dominion Energy’s Board of Directors established an annual dividend rate for 2022 of $2.67 per share of common stock, a 6% increase over the 2021 rate. Dividends are subject to declaration by the Board of Directors. In January 2022, Dominion Energy’s Board of Directors declared dividends payable in March 2022 of 66.75 cents per share of common stock.
See Note 19 for a discussion of Dominion Energy’s outstanding preferred stock and associated dividend rates.
Subsidiary Dividend Restrictions
Certain of Dominion Energy’s subsidiaries may, from time to time, be subject to certain restrictions imposed by regulators or financing arrangements on their ability to pay dividends, or to advance or repay funds, to Dominion Energy. At December 31, 2021, these restrictions did not have a significant impact on Dominion Energy’s ability to pay dividends on its common or preferred stock or meet its other cash obligations.
See Note 21 to the Consolidated Financial Statements for a description of such restrictions and any other restrictions on Dominion Energy’s ability to pay dividends.
Collateral and Credit Risk
Collateral requirements are impacted by commodity prices, hedging levels, Dominion Energy’s credit ratings and the credit quality of its counterparties. In connection with commodity hedging activities, Dominion Energy is required to provide collateral to counterparties under some circumstances. Under certain collateral arrangements, Dominion Energy may satisfy these requirements by electing to either deposit cash, post letters of credit or, in some cases, utilize other forms of security. From time to time, Dominion Energy may vary the form of collateral provided to counterparties after weighing the costs and benefits of various factors associated with the different forms of collateral. These factors include short-term borrowing and short-term investment rates, the spread over these short-term rates at which Dominion Energy can issue commercial paper, balance sheet impacts, the costs and fees of alternative collateral postings with these and other counterparties and overall liquidity management objectives.
Dominion Energy’s exposure to potential concentrations of credit risk results primarily from its energy marketing and price risk management activities. Presented below is a summary of Dominion Energy’s credit exposure as of December 31, 2021 for these activities. Gross credit exposure for each counterparty is calculated as outstanding receivables plus any unrealized on- or off-balance sheet exposure, taking into account contractual netting rights.
75
|
|
|
Gross Credit Exposure |
|
|
Credit Collateral |
|
|
Net Credit Exposure |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment grade(1) |
|
$ |
32 |
|
|
$ |
— |
|
|
$ |
32 |
|
|
Non-Investment grade(2) |
|
|
6 |
|
|
|
— |
|
|
|
6 |
|
|
No external ratings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Internally rated—investment grade(3) |
|
|
98 |
|
|
|
— |
|
|
|
98 |
|
|
Internally rated—non-investment grade(4) |
|
|
39 |
|
|
|
28 |
|
|
|
16 |
|
|
Total |
|
$ |
175 |
|
|
$ |
28 |
|
|
$ |
152 |
|
|
(1) |
Designations as investment grade are based upon minimum credit ratings assigned by Moody’s and Standard & Poor’s. The five largest counterparty exposures, combined, for this category represented approximately 17% of the total net credit exposure. |
|
(2) |
The five largest counterparty exposures, combined, for this category represented approximately 4% of the total net credit exposure. |
|
(3) |
The five largest counterparty exposures, combined, for this category represented approximately 64% of the total net credit exposure. |
|
(4) |
The five largest counterparty exposures, combined, for this category represented approximately 5% of the total net credit exposure. |
Fuel and Other Purchase Commitments
Dominion Energy is party to various contracts for fuel and purchased power commitments related to both its regulated and nonregulated operations. Total estimated costs for such commitments at December 31, 2021 are presented in the table below. These costs represent estimated minimum obligations for various purchased power and capacity agreements and actual costs may differ from amounts presented below depending on actual quantities purchased and prices paid.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
Total |
|
||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased electric capacity for utility operations |
|
$ |
66 |
|
|
$ |
66 |
|
|
$ |
66 |
|
|
$ |
65 |
|
|
$ |
68 |
|
|
$ |
331 |
|
|
Fuel commitments for utility operations |
|
|
1,169 |
|
|
|
685 |
|
|
|
371 |
|
|
|
178 |
|
|
|
166 |
|
|
|
2,569 |
|
|
Fuel commitments for nonregulated operations |
|
|
104 |
|
|
|
134 |
|
|
|
88 |
|
|
|
68 |
|
|
|
59 |
|
|
|
453 |
|
|
Pipeline transportation and storage |
|
|
523 |
|
|
|
462 |
|
|
|
365 |
|
|
|
303 |
|
|
|
291 |
|
|
|
1,944 |
|
|
Total |
|
$ |
1,862 |
|
|
$ |
1,347 |
|
|
$ |
890 |
|
|
$ |
614 |
|
|
$ |
584 |
|
|
$ |
5,297 |
|
Other Material Cash Requirements
In addition to the financing arrangements discussed above, Dominion Energy is party to numerous contracts and arrangements obligating it to make cash payments in future years. Dominion Energy expects current liabilities to be paid within the next twelve months. In addition to the items already discussed, the following represent material expected cash requirements recorded on Dominion Energy’s Consolidated Balance Sheets at December 31, 2021. Such obligations include:
|
|
• |
Operating and financing lease obligations – See Note 15 to the Consolidated Financial Statements; |
|
|
• |
Regulatory liabilities – See Note 12 to the Consolidated Financial Statements; |
|
|
• |
AROs – See Note 14 to the Consolidated Financial Statements; |
|
|
• |
Employee benefit plan obligations – See Note 22 to the Consolidated Financial Statements; and |
|
|
• |
Charitable commitments – See Note 23 to the Consolidated Financial Statements. |
In addition, Dominion Energy is party to contracts and arrangements which may require it to make material cash payments in future years that are not recorded on its Consolidated Balance Sheets. Such obligations include:
|
|
• |
Off-balance sheet leasing arrangements – See Note 15 to the Consolidated Financial Statements |
|
|
• |
Guarantees – See notes 9 and 23 to the Consolidated Financial Statements |
FUTURE ISSUES AND OTHER MATTERS
See Item 1. Business and Notes 13 and 23 to the Consolidated Financial Statements for additional information on various environmental, regulatory, legal and other matters that may impact future results of operations, financial condition and/or cash flows.
76
Future Environmental Regulations
Climate Change
The federal government and several states in which Dominion Energy operates have announced a commitment to achieving carbon reduction goals. In February 2021, the U.S. rejoined the Paris Agreement, which establishes a universal framework for addressing GHG emissions. States may also enact legislation relating to climate change matters such as the reduction of GHG emissions and renewable energy portfolio standards, similar to the VCEA. To the extent legislation is enacted at the federal or state level that is more restrictive than the VCEA and/or Dominion Energy’s commitment to achieving net zero emissions by 2050, compliance with such legislation could have a material impact to Dominion Energy’s financial condition and/or cash flows.
State Actions Related to Air and GHG Emissions
In August 2017, the Ozone Transport Commission released a draft model rule for control of NOX emissions from natural gas pipeline compressor fuel-fire prime movers. States within the ozone transport region, including states in which Dominion Energy has natural gas operations, are expected to develop reasonably achievable control technology rules for existing sources based on the Ozone Transport Commission model rule. States outside of the Ozone Transport Commission may also consider the model rules in setting new reasonably achievable control technology standards. Several states in which Dominion Energy operates, including Virginia and Ohio, are developing or have announced plans to develop state-specific regulations to control GHG emissions, including methane. Dominion Energy cannot currently estimate the potential financial statement impacts related to these matters, but there could be a material impact to its financial condition and/or cash flows.
PHMSA Regulation
The most recent reauthorization of PHMSA included new provisions on historical records research, maximum-allowed operating pressure validation, use of automated or remote-controlled valves on new or replaced lines, increased civil penalties and evaluation of expanding integrity management beyond high-consequence areas. PHMSA has not yet issued new rulemaking on most of these items.
Dodd-Frank Act
The CEA, as amended by Title VII of the Dodd-Frank Act, requires certain over-the counter derivatives, or swaps, to be cleared through a derivatives clearing organization and, if the swap is subject to a clearing requirement, to be executed on a designated contract market or swap execution facility. Non-financial entities that use swaps to hedge or mitigate commercial risk may elect the end-user exception to the CEA’s clearing requirements. Dominion Energy utilizes the end-user exception with respect to its swaps. If, as a result of changes to the rulemaking process, Dominion Energy can no longer utilize the end-user exception or otherwise becomes subject to mandatory clearing, exchange trading or margin requirements, it could be subject to higher costs due to decreased market liquidity or increased margin payments. In addition, Dominion Energy’s swap dealer counterparties may attempt to pass-through additional trading costs in connection with changes to the rulemaking process. Due to the evolving rulemaking process, Dominion Energy is currently unable to assess the potential impact of the Dodd-Frank Act’s derivative-related provisions on its financial condition, results of operations or cash flows.
North Anna
Virginia Power is considering the construction of a third nuclear unit at a site located at North Anna. If Virginia Power decides to build a new unit, it would require a Combined Construction Permit and Operating License from the NRC, approval of the Virginia Commission and certain environmental permits and other approvals. In June 2017, the NRC issued the Combined Construction Permit and Operating License. Virginia Power has not yet committed to building a new nuclear unit at North Anna.
Federal Income Tax Laws
Under existing law, the Companies utilize a financial reporting method that classifies and recognizes investment tax credits on nonregulated operations as immediate reductions to income tax expense and, therefore, immediate increases in earnings. This immediate earnings benefit provides a significant incentive for renewable energy development. Provisions in recently proposed federal legislation would allow taxpayers to elect direct payment for investment tax credits. While effective from a cash flow perspective, this option may not provide the same level of incentive due to the financial reporting potentially applicable to the proposed direct pay benefits and “refundable” tax credits, regardless of whether such an option is selected by the taxpayer.
Because the investment tax credit could be received as a direct payment under this proposed legislation, Dominion Energy may be required to either report the benefit ratably over the life of the qualifying facility or over the five-year recapture period. Either of these alternatives may be required instead of maintaining our historical financial reporting method regardless of whether we elect the direct pay option. If this legislation is enacted into law, the application of these alternative accounting methodologies could have a material impact on the Companies’ future results of operations, financial condition and/or cash flows.
77
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The matters discussed in this Item may contain “forward-looking statements” as described in the introductory paragraphs of Item 7. MD&A. The reader’s attention is directed to those paragraphs and Item 1A. Risk Factors for discussion of various risks and uncertainties that may impact the Companies.
MARKET RISK SENSITIVE INSTRUMENTS AND RISK MANAGEMENT
The Companies’ financial instruments, commodity contracts and related financial derivative instruments are exposed to potential losses due to adverse changes in commodity prices, interest rates and equity security prices as described below. Commodity price risk is present in the Companies’ electric operations and Dominion Energy’s natural gas procurement and marketing operations due to the exposure to market shifts in prices received and paid for electricity, natural gas and other commodities. The Companies use commodity derivative contracts to manage price risk exposures for these operations. Interest rate risk is generally related to their outstanding debt and future issuances of debt. In addition, the Companies are exposed to investment price risk through various portfolios of equity and debt securities. The Companies’ exposure to foreign currency exchange rate risk is related to certain fixed price contracts entered into in 2021 in connection with the CVOW Commercial Project. The contracts include services denominated in currencies other than the U.S. dollar for approximately €2.6 billion and 5.1 billion kr. In addition, certain of the fixed price contracts, approximately €0.7 billion, contain commodity indexing provisions linked to steel. As a result, any changes in applicable exchange rates or commodity indices could result in a change to the ultimate cost of the project. Virginia Power is evaluating hedging strategies, subject to approval by the Virginia Commission, to mitigate such risk.
The following sensitivity analysis estimates the potential loss of future earnings or fair value from market risk sensitive instruments over a selected time period due to a 10% change in commodity prices or interest rates.
Commodity Price Risk
To manage price risk, the Companies hold commodity-based derivative instruments held for non-trading purposes associated with purchases and sales of electricity, natural gas and other energy-related products.
The derivatives used to manage commodity price risk are executed within established policies and procedures and may include instruments such as futures, forwards, swaps, options and FTRs that are sensitive to changes in the related commodity prices. For sensitivity analysis purposes, the hypothetical change in market prices of commodity-based derivative instruments is determined based on models that consider the market prices of commodities in future periods, the volatility of the market prices in each period, as well as the time value factors of the derivative instruments. Prices and volatility are principally determined based on observable market prices.
A hypothetical 10% increase in commodity prices would have resulted in a decrease of $16 million and $3 million in the fair value of Dominion Energy’s commodity-based derivative instruments as of December 31, 2021 and 2020, respectively.
A hypothetical 10% increase in commodity prices would have resulted in a decrease of $6 million in the fair value of Virginia Power’s commodity-based derivative instruments as of December 31, 2021. A hypothetical 10% decrease in commodity prices would have resulted in a decrease of $35 million in the fair value of Virginia Power’s commodity-based derivative instruments as of December 31, 2020.
The impact of a change in energy commodity prices on the Companies’ commodity-based derivative instruments at a point in time is not necessarily representative of the results that will be realized when the contracts are ultimately settled. Net losses from commodity-based financial derivative instruments used for hedging purposes, to the extent realized, will generally be offset by recognition of the hedged transaction, such as revenue from physical sales of the commodity.
Interest Rate Risk
The Companies manage their interest rate risk exposure predominantly by maintaining a balance of fixed and variable rate debt. They also enter into interest rate sensitive derivatives, including interest rate swaps and interest rate lock agreements. For variable rate debt outstanding for Dominion Energy and Virginia Power, a hypothetical 10% increase in market interest rates would not have resulted in a material change in earnings at December 31, 2021 or 2020.
The Companies also use interest rate derivatives, including forward-starting swaps, interest rate swaps and interest rate lock agreements to manage interest rate risk. As of December 31, 2021, Dominion Energy and Virginia Power had $11.4 billion and $2.8 billion, respectively, in aggregate notional amounts of these interest rate derivatives outstanding. A hypothetical 10% decrease in market interest rates would have resulted in a decrease of $191 million and $111 million, respectively, in the fair value of Dominion
78
Energy and Virginia Power’s interest rate derivatives at December 31, 2021. As of December 31, 2020, Dominion Energy and Virginia Power had $6.9 billion and $2.1 billion, respectively, in aggregate notional amounts of these interest rate derivatives outstanding. A hypothetical 10% decrease in market interest rates would have resulted in a decrease of $124 million and $75 million, respectively, in the fair value of Dominion Energy and Virginia Power’s interest rate derivatives at December 31, 2020.
The impact of a change in interest rates on the Companies’ interest rate-based financial derivative instruments at a point in time is not necessarily representative of the results that will be realized when the contracts are ultimately settled. Net gains and/or losses from interest rate derivative instruments used for hedging purposes, to the extent realized, will generally be offset by recognition of the hedged transaction.
Investment Price Risk
The Companies are subject to investment price risk due to securities held as investments in nuclear decommissioning and rabbi trust funds that are managed by third-party investment managers. These trust funds primarily hold marketable securities that are reported in the Consolidated Balance Sheets at fair value.
Dominion Energy recognized net investment gains (including investment income) on nuclear decommissioning and rabbi trust investments of $1.1 billion and $0.7 billion for the years ended December 31, 2021 and 2020, respectively. Net realized gains and losses include gains and losses from the sale of investments as well as any other-than-temporary declines in fair value. Dominion Energy recorded, in AOCI and regulatory liabilities, a net decrease in unrealized gains on debt investments of $64 million and a net increase in unrealized gains on debt investments of $57 million for the years ended December 31, 2021 and 2020, respectively.
Virginia Power recognized net investment gains (including investment income) on nuclear decommissioning trust investments of $568 million and $287 million for the years ended December 31, 2021 and 2020, respectively. Net realized gains and losses include gains and losses from the sale of investments as well as any other-than-temporary declines in fair value. Virginia Power recorded, in AOCI and regulatory liabilities, a net decrease in unrealized gains on debt investments of $31 million and a net increase in unrealized gains on debt investments of $29 million for the years ended December 31, 2021 and 2020, respectively.
Dominion Energy sponsors pension and other postretirement employee benefit plans that hold investments in trusts to fund employee benefit payments. Virginia Power employees participate in these plans. Dominion Energy’s pension and other postretirement plan assets experienced aggregate actual returns (losses) of $1.5 billion and $1.9 billion in 2021 and 2020, respectively, versus expected returns of $1.0 billion and $933 million, respectively. Differences between actual and expected returns on plan assets are accumulated and amortized during future periods. As such, any investment-related declines in these trusts will result in future increases in the net periodic cost recognized for such employee benefit plans and will be included in the determination of the amount of cash to be contributed to the employee benefit plans. A hypothetical 0.25% decrease in the assumed long-term rates of return on Dominion Energy’s plan assets would result in an increase in net periodic cost of $27 million and $25 million as of December 31, 2021 and 2020, respectively, for pension benefits and $6 million and $5 million as of December 31, 2021 and 2020, respectively, for other postretirement benefits.
Risk Management Policies
The Companies have established operating procedures with corporate management to ensure that proper internal controls are maintained. In addition, Dominion Energy has established an independent function at the corporate level to monitor compliance with the credit and commodity risk management policies of all subsidiaries, including Virginia Power. Dominion Energy maintains credit policies that include the evaluation of a prospective counterparty’s financial condition, collateral requirements where deemed necessary and the use of standardized agreements that facilitate the netting of cash flows associated with a single counterparty. In addition, Dominion Energy also monitors the financial condition of existing counterparties on an ongoing basis. Based on these credit policies and the Companies’ December 31, 2021 provision for credit losses, management believes that it is unlikely that a material adverse effect on the Companies’ financial position, results of operations or cash flows would occur as a result of counterparty nonperformance.
79
Item 8. Financial Statements and Supplementary Data
80
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Dominion Energy, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Dominion Energy, Inc. and subsidiaries ("Dominion Energy") at December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Dominion Energy at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), Dominion Energy's internal control over financial reporting at December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2022, expressed an unqualified opinion on Dominion Energy's internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of Dominion Energy's management. Our responsibility is to express an opinion on Dominion Energy's consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Dominion Energy in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Assets and Liabilities - Impact of Rate Regulation on the Consolidated Financial Statements — Refer to Notes 2, 12 and 13 to the Consolidated Financial Statements
Critical Audit Matter Description
Dominion Energy, through its regulated electric and gas subsidiaries, is subject to rate regulation by certain state public utility commissions and the Federal Energy Regulatory Commission (“FERC”) (collectively, the “relevant commissions”) which have jurisdiction with respect to the rates of electric utility and natural gas distribution companies. Management has determined its rate-regulated subsidiaries meet the requirements under accounting principles generally accepted in the United States of America to apply the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as property, plant and equipment, net; regulatory assets; regulatory liabilities; operating revenues; other operations and maintenance expense; depreciation, depletion and amortization expense; and impairment of assets and other charges, collectively, the “financial statement impacts of rate regulation.”
Revenue provided by Dominion Energy’s electric transmission, distribution and generation operations and its gas distribution operations is based primarily on rates approved by the relevant commissions. Further, Virginia Electric and Power Company’s (“Virginia Power”) retail base rates, terms and conditions for generation and distribution services to customers in Virginia are reviewed by the Virginia State Corporation Commission (the “Virginia Commission”) in a proceeding that involves the determination of Virginia Power’s actual earned return on equity (“ROE”) during a historic test period, and determination of Virginia Power’s
81
authorized ROE prospectively. Under certain circumstances, Virginia Power may be required to credit a portion of its earnings to customers.
When it is probable that regulators will permit the recovery of current costs through future rates charged to customers, these costs that otherwise would be expensed by nonregulated companies are deferred as regulatory assets. Likewise, regulatory liabilities are recognized when it is probable that regulators will require customer refunds or other benefits through future rates or when revenue is collected from customers for expenditures that have yet to be incurred. Dominion Energy evaluates whether recovery of its regulatory assets through future rates is probable as well as whether a regulatory liability due to customers is probable and makes various assumptions in its analyses. These analyses are generally based on orders issued by regulatory commissions, legislation and judicial actions; past experience; discussions with applicable regulatory authorities and legal counsel; forecasted earnings; and considerations around the likelihood of impacts from events such as unusual weather conditions, extreme weather events, and other natural disasters, and unplanned outages of facilities.
We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about the financial statement impacts of rate regulation. Management judgments include assessing the likelihood of (1) recovery of its regulatory assets through future rates and (2) whether a regulatory liability is due to customers. Given management’s accounting judgments are based on assumptions about the outcome of future decisions by the relevant commissions, auditing these judgments required specialized knowledge of the accounting for rate regulation and the rate setting process due to its inherent complexities.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the assessment of whether recovery of regulatory assets through future rates or a regulatory liability due to customers is probable included the following, among others:
|
|
• |
We tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) recovery of regulatory assets through future rates, and (2) whether a regulatory liability is due to customers. We also tested the effectiveness of management’s controls over the initial recognition of amounts as regulatory assets or liabilities; and the monitoring and evaluation of regulatory and legislative developments that may impact the assessment of whether recovery of regulatory assets through future rates or a regulatory liability due to customers is probable. |
|
|
• |
We evaluated Dominion Energy’s disclosures related to the financial statement impacts of rate regulation. |
|
|
• |
We read and evaluated orders issued by the relevant commissions, as well as relevant regulatory statutes, interpretations, procedural memorandums, filings made by interveners, existing laws and other publicly available information to assess whether this external information was properly considered by management in concluding upon the financial statement impacts of rate regulation. |
|
|
• |
We considered the likelihood of (1) recovery of regulatory assets through future rates and (2) whether a regulatory liability is due to customers based on precedents established by the relevant commissions’ previous orders and Dominion Energy’s past experience with the relevant commissions. |
|
|
• |
For regulatory matters in process, we inspected associated documents and testimony filed with the relevant commissions for any evidence that might contradict management’s assertions. |
|
|
• |
We read and analyzed the minutes of the Boards of Directors of Dominion Energy and Dominion Energy’s rate-regulated subsidiaries for discussions of changes in legal, regulatory, or business factors which could impact management’s conclusions with respect to the financial statement impacts of rate regulation. |
/s/
February 24, 2022
We have served as Dominion Energy’s auditor since 1988.
82
Dominion Energy, Inc.
Consolidated Statements of Income
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Operating Expenses |
|
|
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|
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Electric fuel and other energy-related purchases |
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Purchased electric capacity |
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Purchased gas |
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Other operations and maintenance |
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Depreciation, depletion and amortization |
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Other taxes |
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Impairment of assets and other charges |
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Losses (gains) on sales of assets |
|
|
|
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( |
) |
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( |
) |
|
Total operating expenses |
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Income from operations |
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Earnings from equity method investees |
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Other income |
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Interest and related charges |
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Income from continuing operations including noncontrolling interests before income tax expense |
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Income tax expense |
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Net Income From Continuing Operations Including Noncontrolling Interests |
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|
Net Income (Loss) From Discontinued Operations Including Noncontrolling Interests(1)(2) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Net Income (Loss) Including Noncontrolling Interests |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Noncontrolling Interests |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Net Income (Loss) Attributable to Dominion Energy |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Amounts attributable to Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net income (loss) from discontinued operations |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Net income (loss) attributable to Dominion Energy |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
EPS - Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net income (loss) discontinued operations |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Net income (loss) attributable to Dominion Energy |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
EPS - Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net income (loss) discontinued operations |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Net income (loss) attributable to Dominion Energy |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
(1) |
|
|
(2) |
|
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
83
Dominion Energy, Inc.
Consolidated Statements of Comprehensive Income
|
Year Ended December 31, |
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2021 |
|
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2020 |
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2019 |
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|||
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(millions) |
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Net income (loss) including noncontrolling interests |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Other comprehensive income (loss), net of taxes: |
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|
|
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|
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|
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Net deferred gains (losses) on derivatives-hedging activities, net of $( $ |
|
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|
|
|
|
( |
) |
|
|
( |
) |
|
Changes in unrealized net gains (losses) on investment securities, net of $ |
|
|
( |
) |
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|
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|
Changes in net unrecognized pension and other postretirement benefit costs, net of $( |
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|
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|
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( |
) |
|
Amounts reclassified to net income (loss): |
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|
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|
Net derivative (gains) losses-hedging activities, net of $( $ |
|
|
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|
|
|
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|
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( |
) |
|
Net realized (gains) losses on investment securities, net of $ $ |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net pension and other postretirement benefit costs, net of $( and $( |
|
|
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Changes in other comprehensive income from equity method investees, net of $ |
|
|
( |
) |
|
|
|
|
|
|
— |
|
|
Total other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Comprehensive income (loss) including noncontrolling interests |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Comprehensive income (loss) attributable to noncontrolling interests |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Comprehensive income (loss) attributable to Dominion Energy |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
84
Dominion Energy, Inc.
Consolidated Balance Sheets
|
At December 31, |
|
2021 |
|
|
2020 |
|
||
|
(millions) |
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Customer receivables (less allowance for doubtful accounts of $ |
|
|
|
|
|
|
|
|
|
Other receivables (less allowance for doubtful accounts of $ |
|
|
|
|
|
|
|
|
|
Inventories: |
|
|
|
|
|
|
|
|
|
Materials and supplies |
|
|
|
|
|
|
|
|
|
Fossil fuel |
|
|
|
|
|
|
|
|
|
Gas stored |
|
|
|
|
|
|
|
|
|
Margin deposit assets |
|
|
|
|
|
|
|
|
|
Prepayments |
|
|
|
|
|
|
|
|
|
Regulatory assets |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Current assets held for sale(1) |
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
Nuclear decommissioning trust funds |
|
|
|
|
|
|
|
|
|
Investment in equity method affiliates |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total investments |
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment |
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
|
|
|
|
Accumulated depreciation, depletion and amortization |
|
|
( |
) |
|
|
( |
) |
|
Total property, plant and equipment, net |
|
|
|
|
|
|
|
|
|
Deferred Charges and Other Assets |
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
Pension and other postretirement benefit assets |
|
|
|
|
|
|
|
|
|
Intangible assets, net |
|
|
|
|
|
|
|
|
|
Regulatory assets |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total deferred charges and other assets |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
85
|
At December 31, |
|
2021 |
|
|
2020 |
|
||
|
(millions) |
|
|
|
|
|
|
|
|
|
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
Securities due within one year |
|
$ |
|
|
|
$ |
|
|
|
Supplemental 364-Day credit facility borrowings |
|
|
— |
|
|
|
|
|
|
Short-term debt |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
|
|
|
|
Accrued interest, payroll and taxes |
|
|
|
|
|
|
|
|
|
Regulatory liabilities |
|
|
|
|
|
|
|
|
|
Liability to Atlantic Coast Pipeline |
|
|
|
|
|
|
|
|
|
Q-Pipe Transaction deposit |
|
|
— |
|
|
|
|
|
|
Other(1) |
|
|
|
|
|
|
|
|
|
Current liabilities held for sale |
|
|
— |
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
|
|
Long-Term Debt |
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
Junior subordinated notes |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total long-term debt |
|
|
|
|
|
|
|
|
|
Deferred Credits and Other Liabilities |
|
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
|
|
|
|
|
|
|
|
Regulatory liabilities |
|
|
|
|
|
|
|
|
|
Asset retirement obligations |
|
|
|
|
|
|
|
|
|
Pension and other postretirement benefit liability |
|
|
|
|
|
|
|
|
|
Other(1) |
|
|
|
|
|
|
|
|
|
Total deferred credits and other liabilities |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (see Note 23) |
|
|
|
|
|
|
|
|
|
Mezzanine Equity |
|
|
|
|
|
|
|
|
|
Preferred stock (See Note 19) |
|
|
|
|
|
|
— |
|
|
Shareholders' Equity |
|
|
|
|
|
|
|
|
|
Preferred stock (See Note 19) |
|
|
|
|
|
|
|
|
|
Common stock – no par(2) |
|
|
|
|
|
|
|
|
|
Retained earnings |
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
Shareholders' equity |
|
|
|
|
|
|
|
|
|
Noncontrolling interests |
|
|
— |
|
|
|
|
|
|
Total shareholders' equity |
|
|
|
|
|
|
|
|
|
Total liabilities, mezzanine equity and shareholders' equity |
|
$ |
|
|
|
$ |
|
|
(1) See Note 9 for amounts attributable to related parties.
(2)
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
86
Dominion Energy, Inc.
Consolidated Statements of Equity
|
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Dominion Energy Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Retained Earnings |
|
|
AOCI |
|
|
Total Shareholders' Equity |
|
|
Noncontrolling Interests |
|
|
Total Equity |
|
|||||||||
|
(millions except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net income including noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock purchase contract component of 2019 Equity Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Acquisition of SCANA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of public interest in Dominion Energy Midstream |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Sale of interest in Cove Point |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock awards (net of change in unearned compensation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends (See Note 19) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Common dividends ($ and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
December 31, 2019 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Cumulative-effect of changes in accounting principles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net loss including noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Issuance of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock repurchases |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Stock awards (net of change in unearned compensation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends (See Note 19) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Common dividends ($ and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GT&S Transaction closing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net income including noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock awards (net of change in unearned compensation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends (See Note 19) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Common dividends ($ and distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of Series A Preferred Stock to Mezzanine Equity |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Sale of non-wholly-owned nonregulated solar facilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
|
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
87
Dominion Energy, Inc.
Consolidated Statements of Cash Flows
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) including noncontrolling interests |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Adjustments to reconcile net income (loss) including noncontrolling interests to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization (including nuclear fuel) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Gain from sale of Q-Pipe Group and GT&S Transaction |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
Contribution to pension plan |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Net loss on sale of interest in renewable generation facilities |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Provision for refunds and rate credits to electric utility customers |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Impairment of assets and other charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from investment in Atlantic Coast Pipeline |
|
|
|
|
|
|
|
|
|
|
— |
|
|
Charges related to a voluntary retirement program |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Gains on sales of assets and equity method investments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net (gains) losses on nuclear decommissioning trusts funds and other investments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Charge (revision) for future ash pond and landfill closure costs |
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
Other adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Inventories |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Deferred fuel and purchased gas costs, net |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Prepayments |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Accrued interest, payroll and taxes |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Customer deposits |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Margin deposit assets and liabilities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Net realized and unrealized changes related to derivative activities |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Pension and other postretirement benefits |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other operating assets and liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant construction and other property additions (including nuclear fuel) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Cash and restricted cash acquired in the SCANA Combination |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Acquisition of solar development projects |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from GT&S Transaction and sale of Q-Pipe Group |
|
|
|
|
|
|
|
|
|
|
— |
|
|
Repayment of Q-Pipe Transaction deposit |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
Proceeds from sale of non-wholly-owned nonregulated solar facilities |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Proceeds from sales of securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of securities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from sales of assets and equity method investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions to equity method affiliates |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Acquisition of equity method investments |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
Other |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance (repayment) of short-term debt, net |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Issuance of short-term notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment and repurchase of short-term notes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Supplemental 364-day credit facility borrowings |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Supplemental 364-day credit facility repayments |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
Credit facility borrowings (repayments) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Issuance and remarketing of long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment and repurchase of long-term debt (including redemption premiums) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from sale of interest in Cove Point |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Issuance of 2019 Equity Units |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Supplemental credit facility borrowings |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Supplemental credit facility repayments |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
Issuance of preferred stock |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Issuance of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
Common dividend payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Increase (decrease) in cash, restricted cash and equivalents |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Cash, restricted cash and equivalents at beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, restricted cash and equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
See Note 2 for disclosure of supplemental cash flow information.
The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.
88
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of Virginia Electric and Power Company
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Virginia Electric and Power Company (a wholly-owned subsidiary of Dominion Energy, Inc.) and subsidiaries ("Virginia Power") at December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, common shareholder's equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Virginia Power at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of Virginia Power's management. Our responsibility is to express an opinion on Virginia Power's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to Virginia Power in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Virginia Power is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of Virginia Power’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the Board of Directors and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Assets and Liabilities - Impact of Rate Regulation on the Consolidated Financial Statements — Refer to Notes 2, 12 and 13 to the Consolidated Financial Statements
Critical Audit Matter Description
Virginia Power is subject to utility rate regulation by certain state public utility commissions and the Federal Energy Regulatory Commission (“FERC”) (collectively, the “relevant commissions”), which have jurisdiction with respect to the rates of electric utility companies in the territories Virginia Power serves. Management has determined Virginia Power meets the requirements under accounting principles generally accepted in the United States of America to apply the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures such as property, plant, and equipment, net; regulatory assets; regulatory liabilities; operating revenues; other operations and maintenance expense; depreciation and amortization expense; and impairment of assets and other charges, collectively, the “financial statement impacts of rate regulation”.
Revenue provided by Virginia Power’s electric transmission, distribution and generation operations is based on rates approved by the relevant commissions. Further, Virginia Power’s retail base rates, terms and conditions for generation and distribution services to
89
customers in Virginia are reviewed by the Virginia State Corporation Commission (the “Virginia Commission”) in a proceeding that involves the determination of Virginia Power’s actual earned return on equity (“ROE”) during a historic test period and determination of Virginia Power’s authorized ROE prospectively. Under certain circumstances, Virginia Power may be required to credit a portion of its earnings to customers.
When it is probable that regulators will permit the recovery of current costs through future rates charged to customers, these costs that otherwise would be expensed by nonregulated companies are deferred as regulatory assets. Likewise, regulatory liabilities are recognized when it is probable that regulators will require customer refunds or other benefits through future rates or when revenue is collected from customers for expenditures that have yet to be incurred. Virginia Power evaluates whether recovery of its regulatory assets through future rates is probable as well as whether a regulatory liability due to customers is probable and makes various assumptions in its analyses. These analyses are generally based on orders issued by regulatory commissions, legislation and judicial actions; past experience; discussions with applicable regulatory authorities and legal counsel; forecasted earnings; and considerations around the likelihood of impacts from events such as unusual weather conditions, extreme weather events, and other natural disasters, and unplanned outages of facilities.
We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about the financial statement impacts of rate regulation. Management judgments include assessing the likelihood of (1) recovery of its regulatory assets through future rates and (2) whether a regulatory liability is due to customers. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these judgments required specialized knowledge of the accounting for rate regulation and the rate setting process due its inherent complexities.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the assessment of whether recovery of regulatory assets through future rates or a regulatory liability due to customers is probable included the following, among others:
|
|
• |
We tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) recovery of regulatory assets through future rates, and (2) whether a regulatory liability is due to customers. We also tested the effectiveness of management’s controls over the initial recognition of amounts as regulatory assets or liabilities; and the monitoring and evaluation of regulatory and legislative developments that may impact the assessment of whether recovery of regulatory assets through future rates or a regulatory liability due to customers is probable. |
|
|
• |
We evaluated Virginia Power’s disclosures related to the financial statement impacts of rate regulation. |
|
|
• |
We read and evaluated orders issued by the relevant commissions, as well as relevant regulatory statutes, interpretations, procedural memorandums, filings made by interveners, existing laws and other publicly available information to assess whether this external information was properly considered by management in concluding upon the financial statement impacts of rate regulation. |
|
|
• |
We considered the likelihood of (1) recovery of regulatory assets through future rates and (2) whether a regulatory liability is due to customers based on precedents established by the relevant commissions’ previous orders and Virginia Power’s past experience with relevant commissions. |
|
|
• |
For regulatory matters in process, we inspected associated documents and testimony filed with the relevant commissions for any evidence that might contradict management’s assertions. |
|
|
• |
We read and analyzed the minutes of the Board of Directors of Dominion Energy, Inc. and the Board of Directors of Virginia Power, for discussions of changes in legal, regulatory, or business factors which could impact management’s conclusions with respect to the financial statement impacts of rate regulation. |
/s/
February 24, 2022
We have served as Virginia Power's auditor since 1988.
90
Virginia Electric and Power Company
Consolidated Statements of Income
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenue(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric fuel and other energy-related purchases(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased (excess) capacity |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Other operations and maintenance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliated suppliers |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of assets and other charges (benefits) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and related charges(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
91
Virginia Electric and Power Company
Consolidated Statements of Comprehensive Income
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other comprehensive income (loss), net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred gains (losses) on derivatives-hedging activities, net of $( |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Changes in unrealized net gains (losses) on nuclear decommissioning trust funds, net of $—, $( |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Amounts reclassified to net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative (gains) losses-hedging activities, net of $( |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized (gains) losses on nuclear decommissioning trust funds, net of $ and $ |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive income (loss) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Comprehensive income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
92
Virginia Electric and Power Company
Consolidated Balance Sheets
|
|
|
2021 |
|
|
2020 |
|
||
|
(millions) |
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Customer receivables (less allowance for doubtful accounts of $ |
|
|
|
|
|
|
|
|
|
Other receivables (less allowance for doubtful accounts of $ |
|
|
|
|
|
|
|
|
|
Affiliated receivables |
|
|
|
|
|
|
|
|
|
Inventories (average cost method): |
|
|
|
|
|
|
|
|
|
Materials and supplies |
|
|
|
|
|
|
|
|
|
Fossil fuel |
|
|
|
|
|
|
|
|
|
Margin deposit assets |
|
|
|
|
|
|
|
|
|
Prepayments |
|
|
|
|
|
|
|
|
|
Regulatory assets |
|
|
|
|
|
|
|
|
|
Other(1) |
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
Nuclear decommissioning trust funds |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total investments |
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment |
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
|
|
|
|
Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
Total property, plant and equipment, net |
|
|
|
|
|
|
|
|
|
Deferred Charges and Other Assets |
|
|
|
|
|
|
|
|
|
Pension and other postretirement benefit assets(1) |
|
|
|
|
|
|
|
|
|
Intangible assets, net |
|
|
|
|
|
|
|
|
|
Regulatory assets |
|
|
|
|
|
|
|
|
|
Other(1) |
|
|
|
|
|
|
|
|
|
Total deferred charges and other assets |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
(1) |
See Note 25 for amounts attributable to affiliates. |
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
93
|
|
|
2021 |
|
|
2020 |
|
||
|
(millions) |
|
|
|
|
|
|
|
|
|
LIABILITIES AND COMMON SHAREHOLDER’S EQUITY |
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
Securities due within one year |
|
$ |
|
|
|
$ |
|
|
|
Short-term debt |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
|
|
|
|
Payables to affiliates |
|
|
|
|
|
|
|
|
|
Affiliated current borrowings |
|
|
|
|
|
|
|
|
|
Accrued interest, payroll and taxes |
|
|
|
|
|
|
|
|
|
Asset retirement obligations |
|
|
|
|
|
|
|
|
|
Regulatory liabilities |
|
|
|
|
|
|
|
|
|
Derivative liabilities (1) |
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
|
|
Long-Term Debt |
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total long-term debt |
|
|
|
|
|
|
|
|
|
Deferred Credits and Other Liabilities |
|
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
|
|
|
|
|
|
|
|
Asset retirement obligations |
|
|
|
|
|
|
|
|
|
Regulatory liabilities |
|
|
|
|
|
|
|
|
|
Other (1) |
|
|
|
|
|
|
|
|
|
Total deferred credits and other liabilities |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (see Note 23) |
|
|
|
|
|
|
|
|
|
Common Shareholder’s Equity |
|
|
|
|
|
|
|
|
|
Common stock – no par(2) |
|
|
|
|
|
|
|
|
|
Other paid-in capital |
|
|
|
|
|
|
|
|
|
Retained earnings |
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
Total common shareholder’s equity |
|
|
|
|
|
|
|
|
|
Total liabilities and shareholder’s equity |
|
$ |
|
|
|
$ |
|
|
|
(1) |
See Note 25 for amounts attributable to affiliates. |
|
(2) |
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
94
Virginia Electric and Power Company
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Shares |
|
|
Amount |
|
|
|
|
Other Paid-In Capital |
|
|
|
|
Retained Earnings |
|
|
|
|
AOCI |
|
|
|
|
Total |
|
||||||
|
(millions, except for shares) |
|
(thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
|
|
$ |
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Other comprehensive loss, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
|
|
$ |
|
|
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
95
Virginia Electric and Power Company
Consolidated Statements of Cash Flows
|
Year Ended December 31, |
|
2021 |
|
|
|
|
2020 |
|
|
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including nuclear fuel) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes and investment tax credits |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Charge (revision) for future ash pond and landfill closure costs |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Impairment of assets and other charges |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges related to a voluntary retirement program |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Provision for refunds to customers |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
Other adjustments |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Affiliated receivables and payables |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Prepayments |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
Deferred fuel expenses, net |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Accrued interest, payroll and taxes |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
Margin deposit assets and liabilities |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
— |
|
|
Net realized and unrealized changes related to derivative activities |
|
|
— |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
Other operating assets and liabilities |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant construction and other property additions |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Purchases of nuclear fuel |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Acquisition of solar development projects |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Proceeds from sales of securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of securities |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Other |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance (repayment) of short-term debt, net |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Issuance (repayment) of affiliated current borrowings, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Issuance and remarketing of long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment and repurchase of long-term debt |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Common dividend payments to parent |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Other |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash, restricted cash and equivalents |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Cash, restricted cash and equivalents at beginning of year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, restricted cash and equivalents at end of year |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
See Note 2 for disclosure of supplemental cash flow information.
The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.
96
Combined Notes to Consolidated Financial Statements
NOTE 1. NATURE OF OPERATIONS
Dominion Energy, headquartered in Richmond, Virginia, is one of the nation’s largest producers and distributors of energy. Dominion Energy’s operations are conducted through various subsidiaries, including Virginia Power. Dominion Energy’s operations also include DESC, regulated gas distribution operations primarily in the eastern and Rocky Mountain regions of the U.S., nonregulated electric generation and, following the completion of the GT&S Transaction in November 2020, a noncontrolling interest in Cove Point. See Note 3 for a description of the sale of substantially all of Dominion Energy’s gas transmission and storage operations through the GT&S Transaction completed in November 2020 and the sale of the Q-Pipe Group completed in December 2021.
Dominion Energy manages its daily operations through
Virginia Power is a regulated public utility that generates, transmits and distributes electricity for sale in Virginia and northeastern North Carolina. Virginia Power is a member of PJM, an RTO, and its electric transmission facilities are integrated into the PJM wholesale electricity markets. All of Virginia Power’s stock is owned by Dominion Energy.
Virginia Power manages its daily operations through
See Note 26 for further discussion of the Companies’ operating segments.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
General
The Companies make certain estimates and assumptions in preparing their Consolidated Financial Statements in accordance with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses and cash flows for the periods presented. Actual results may differ from those estimates.
The Companies report certain contracts, instruments and investments at fair value. See Note 6 for further information on fair value measurements.
The Companies consider acquisitions or dispositions in which substantially all of the fair value of the gross assets acquired or disposed of is concentrated into a single identifiable asset or group of similar identifiable assets to be an acquisition or a disposition of an asset, rather than a business. See Notes 3 and 10 for further information on such transactions.
Dominion Energy maintains pension and other postretirement benefit plans and Virginia Power participates in certain of these plans. See Note 22 for further information on these plans.
Certain amounts in the Companies’ 2020 and 2019 Consolidated Financial Statements and Notes have been reclassified to conform to the 2021 presentation for comparative purposes; however, such reclassifications did not affect the Companies’ net income, total assets, liabilities, equity or cash flows. Effective in the second quarter of 2021, the Companies updated their Statements of Cash Flows to present net charges for allowance for credit risk and write-offs of accounts receivables within other adjustments to reconcile net income to net cash provided by operating activities from the previous presentation within changes in accounts receivable. All prior period information has been conformed to this presentation, which does not result in a change to net cash provided by operating activities.
97
Amounts disclosed for Dominion Energy are inclusive of Virginia Power, where applicable.
Operating Revenue
Operating revenue is recorded on the basis of services rendered, commodities delivered, or contracts settled and includes amounts yet to be billed to customers. The Companies collect sales, consumption and consumer utility taxes; however, these amounts are excluded from revenue. Dominion Energy’s customer receivables at December 31, 2021 and 2020 included $
The primary types of sales and service activities reported as operating revenue for Dominion Energy are as follows:
Revenue from Contracts with Customers
|
|
• |
Regulated electric sales consist primarily of state-regulated retail electric sales, and federally-regulated wholesale electric sales and electric transmission services; |
|
|
• |
Nonregulated electric sales consist primarily of sales of electricity at market-based rates and contracted fixed rates and associated hedging activity and sales to Virginia Power customers from non-jurisdictional solar generation facilities; |
|
|
• |
Regulated gas sales consist primarily of state-regulated natural gas sales and related distribution services; |
|
|
• |
Nonregulated gas sales consist primarily of sales of natural gas production at market-based rates and contracted fixed prices, sales of gas purchased from third parties and associated hedging activity; |
|
|
• |
Regulated gas transportation and storage sales consist of state-regulated gas distribution charges to retail distribution service customers opting for alternate suppliers, sales of gathering services and sales of transportation services to off-system customers; |
|
|
• |
Other regulated revenue consists primarily of miscellaneous service revenue from electric and gas distribution operations and sales of excess electric capacity and other commodities; and |
|
|
• |
Other nonregulated revenue consists primarily of sales of commodities related to nonregulated extraction activities and other miscellaneous products. Other nonregulated revenue also includes sales of energy-related products and services from Dominion Energy’s retail energy marketing operations (through December 2021), service concession arrangements and revenue associated with services provided to entities presented in discontinued operations under transition services agreements. |
Other Revenue
|
|
• |
Other revenue consists primarily of alternative revenue programs, gains and losses from derivative instruments not subject to hedge accounting and lease revenues. |
The primary types of sales and service activities reported as operating revenue for Virginia Power are as follows:
Revenue from Contracts with Customers
|
|
• |
Regulated electric sales consist primarily of state-regulated retail electric sales and federally-regulated wholesale electric sales and electric transmission services; |
|
|
• |
Nonregulated electric sales consists of sales to customers from non-jurisdictional solar generation facilities; |
|
|
• |
Other regulated revenue consists primarily of sales of excess capacity and other commodities and miscellaneous service revenue from electric distribution operations; and |
|
|
• |
Other nonregulated revenue consists primarily of revenue from renting space on certain electric transmission poles and distribution towers and service concession arrangements. |
Other Revenue
|
|
• |
Other revenue consists primarily of alternative revenue programs, gains and losses from derivative instruments not subject to hedge accounting and lease revenues. |
98
The Companies record refunds to customers as required by state commissions as a reduction to regulated electric sales or regulated gas sales, as applicable. The Companies’ revenue accounted for under the alternative revenue program guidance primarily consists of the equity return for under-recovery of certain riders. Alternative revenue programs compensate the Companies for certain projects and initiatives. Revenues arising from these programs are presented separately from revenue arising from contracts with customers in the categories above.
Revenues from electric and gas sales are recognized over time, as the customers of the Companies consume gas and electricity as it is delivered. Fixed fees are recognized ratably over the life of the contract as the stand-ready performance obligation is satisfied, while variable usage fees are recognized when Dominion Energy has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the performance obligation completed to date. Sales of products and services typically transfer control and are recognized as revenue upon delivery of the product or service. The customer is able to direct the use of, and obtain substantially all of the benefits from, the product at the time the product is delivered. The contract with the customer states the final terms of the sale, including the description, quantity and price of each product or service purchased. Payment for most sales and services varies by contract type but is typically due within a month of billing.
Operating revenue for the gas transmission and storage operations sold to BHE as part of the GT&S Transaction and sold to Southwest Gas as part of the Q-Pipe Group sale primarily consisted of FERC-regulated sales of transmission and storage services, LNG terminalling services, sales of extracted products and associated hedging activities and NGL activities, including gathering and processing and sales of production and condensate as well as services performed for Atlantic Coast Pipeline. This revenue is included in discontinued operations in Dominion Energy’s Consolidated Statements of Income.
Transportation and storage contracts associated with the operations sold to BHE as part of the GT&S Transaction and sold to Southwest Gas as part of the Q-Pipe Group sale were primarily stand-ready service contracts that include fixed reservation and variable usage fees. LNG terminalling services, included in discontinued operations, are also stand-ready service contracts, primarily consisting of fixed fees, offset by service credits associated with the start-up phase of the Liquefaction Facility. NGLs received during natural gas processing are recorded in discontinued operations at fair value as service revenue recognized over time, and revenue continued to be recognized from the subsequent sale of the NGLs to customers upon delivery.
Credit Risk
Credit risk is the risk of financial loss if counterparties fail to perform their contractual obligations. In order to minimize overall credit risk, credit policies are maintained, including the evaluation of counterparty financial condition, collateral requirements and the use of standardized agreements that facilitate the netting of cash flows associated with a single counterparty. In addition, counterparties may make available collateral, including letters of credit or cash held as margin deposits, as a result of exceeding agreed-upon credit limits, or may be required to prepay the transaction.
The Companies maintain a provision for credit losses based on factors surrounding the credit risk of their customers, historical trends and other information. Effective January 2020, expected credit losses are estimated and recorded based on historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of financial assets held at amortized cost as well as expected credit losses on commitments with respect to financial guarantees.
Electric Fuel, Purchased Energy and Purchased Gas-Deferred Costs
Where permitted by regulatory authorities, the differences between the Companies’ actual electric fuel and purchased energy expenses and Dominion Energy’s purchased gas expenses and the related levels of recovery for these expenses in current rates are deferred and matched against recoveries in future periods. The deferral of costs in excess of current period fuel rate recovery is recognized as a regulatory asset, while rate recovery in excess of current period fuel expenses is recognized as a regulatory liability.
Of the cost of fuel used in electric generation and energy purchases to serve Virginia utility customers, at December 31, 2021, approximately
Virtually all of East Ohio, Questar Gas, Hope, DESC and PSNC’s natural gas purchases are either subject to deferral accounting or are recovered from the customer in the same accounting period as the sale.
99
Income Taxes
A consolidated federal income tax return is filed for Dominion Energy and its subsidiaries, including Virginia Power. In addition, where applicable, combined income tax returns for Dominion Energy and its subsidiaries are filed in various states; otherwise, separate state income tax returns are filed.
Virginia Power participates in intercompany tax sharing agreements with Dominion Energy and its subsidiaries. Current income taxes are based on taxable income or loss and credits determined on a separate company basis.
Under the agreements, if a subsidiary incurs a tax loss or earns a credit, recognition of current income tax benefits is limited to refunds of prior year taxes obtained by the carryback of the net operating loss or credit or to the extent the tax loss or credit is absorbed by the taxable income of other Dominion Energy consolidated group members. Otherwise, the net operating loss or credit is carried forward and is recognized as a deferred tax asset until realized.
Accounting for income taxes involves an asset and liability approach. Deferred income tax assets and liabilities are provided, representing future effects on income taxes for temporary differences between the bases of assets and liabilities for financial reporting and tax purposes. Accordingly, deferred taxes are recognized for the future consequences of different treatments used for the reporting of transactions in financial accounting and income tax returns. The Companies establish a valuation allowance when it is more-likely-than-not that all, or a portion, of a deferred tax asset will not be realized. Where the treatment of temporary differences is different for rate-regulated operations, a regulatory asset is recognized if it is probable that future revenues will be provided for the payment of deferred tax liabilities.
The Companies recognize positions taken, or expected to be taken, in income tax returns that are more-likely-than-not to be realized, assuming that the position will be examined by tax authorities with full knowledge of all relevant information.
If it is not more-likely-than-not that a tax position, or some portion thereof, will be sustained, the related tax benefits are not recognized in the financial statements. Unrecognized tax benefits may result in an increase in income taxes payable, a reduction of income tax refunds receivable or changes in deferred taxes. Also, when uncertainty about the deductibility of an amount is limited to the timing of such deductibility, the increase in income taxes payable (or reduction in tax refunds receivable) is accompanied by a decrease in deferred tax liabilities. Except when such amounts are presented net with amounts receivable from or amounts prepaid to tax authorities, noncurrent income taxes payable related to unrecognized tax benefits are classified in other deferred credits and other liabilities on the Consolidated Balance Sheets and current payables are included in accrued interest, payroll and taxes on the Consolidated Balance Sheets.
The Companies recognize interest on underpayments and overpayments of income taxes in interest expense and other income, respectively. Penalties are also recognized in other income.
In 2021, Dominion Energy reflected a $
At December 31, 2021, Virginia Power had an income tax-related affiliated receivable of $
At December 31, 2020, Virginia Power had an income tax-related affiliated payable of $
Investment tax credits are recognized by nonregulated operations in the year qualifying property is placed in service. For regulated operations, investment tax credits are deferred and amortized over the service lives of the properties giving rise to the credits. Production tax credits are recognized as energy is generated and sold.
100
Cash, Restricted Cash and Equivalents
Cash, restricted cash and equivalents include cash on hand, cash in banks and temporary investments purchased with an original maturity of three months or less.
Current banking arrangements generally do not require checks to be funded until they are presented for payment.
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At December 31, |
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2021 |
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2020 |
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||
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(millions) |
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|
|
|
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Dominion Energy |
|
$ |
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|
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$ |
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Virginia Power |
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Restricted Cash and Equivalents
The Companies hold restricted cash and equivalent balances that primarily consist of amounts held for litigation settlements, customer deposits, federal assistance funds and future debt payments on SBL Holdco and Dominion Solar Projects III, Inc.’s term loan agreements (through December 2021), on DECP Holdings’ term loan agreement and on Eagle Solar’s senior note agreement.
The following table provides a reconciliation of the total cash, restricted cash and equivalents reported within the Companies’ Consolidated Balance Sheets to the corresponding amounts reported within the Companies’ Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019:
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Cash, Restricted Cash and Equivalents at End/Beginning of Year |
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December 31, 2021 |
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December 31, 2020 |
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December 31, 2019 |
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December 31, 2018 |
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(millions) |
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Dominion Energy |
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Cash and cash equivalents(1) |
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$ |
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$ |
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|
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$ |
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$ |
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Restricted cash and equivalents(2)(3) |
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Cash, restricted cash and equivalents shown in the Consolidated Statements of Cash Flows |
|
$ |
|
|
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$ |
|
|
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$ |
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|
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$ |
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|
|
Virginia Power |
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|
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Cash and cash equivalents |
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$ |
|
|
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$ |
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|
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$ |
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|
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$ |
|
|
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Restricted cash and equivalents(3) |
|
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— |
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— |
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Cash, restricted cash and equivalents shown in the Consolidated Statements of Cash Flows |
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$ |
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|
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$ |
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|
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$ |
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$ |
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|
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(1) |
At December 31, 2020, December 31, 2019 and December 31, 2018, Dominion Energy had $ |
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(2) |
At December 31, 2020, December 31, 2019 and December 31, 2018, Dominion Energy had $ |
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(3) |
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Supplemental Cash Flow Information
The following table provides supplemental disclosure of cash flow information related to Dominion Energy:
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Year Ended December 31, |
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2021 |
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2020 |
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2019 |
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|||
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Cash paid during the year for: |
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|
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|
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Interest and related charges, excluding capitalized amounts |
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$ |
|
|
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$ |
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|
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$ |
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|
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Income taxes |
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|
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Significant noncash investing and financing activities:(1)(2)(3)(4)(5) |
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Accrued capital expenditures |
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Leases(6) |
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101
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(1) |
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(2) |
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(3) |
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(4) |
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(5) |
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(6) |
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The following table provides supplemental disclosure of cash flow information related to Virginia Power:
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Year Ended December 31, |
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2021 |
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2020 |
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2019 |
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Cash paid during the year for: |
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Interest and related charges, excluding capitalized amounts |
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$ |
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|
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$ |
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$ |
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Income taxes |
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Significant noncash investing activities:(1)(2) |
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Accrued capital expenditures |
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Leases (3) |
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(1) |
See the New Accounting Standards section below for noncash investing and financing activities related to the adoption of a new accounting standard for leasing arrangements. |
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(2) |
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(3) |
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Distributions from Equity Method Investees
Dominion Energy holds investments that are accounted for under the equity method of accounting and classifies distributions from equity method investees as either cash flows from operating activities or cash flows from investing activities in the Consolidated Statements of Cash Flows according to the nature of the distribution. Distributions received are classified on the basis of the nature of the activity of the investee that generated the distribution as either a return on investment (classified as cash flows from operating activities) or a return of an investment (classified as cash flows from investing activities) when such information is available to Dominion Energy.
Derivative Instruments
The Companies are exposed to the impact of market fluctuations in the price of electricity, natural gas and other energy-related products they market and purchase, as well as interest rate and foreign currency exchange rate risks in their business operations. The Companies use derivative instruments such as physical and financial forwards, futures, swaps, options, foreign currency transactions and FTRs to manage the commodity, interest rate and/or foreign currency exchange rate risks of their business operations.
All derivatives, except those for which an exception applies, are required to be reported in the Consolidated Balance Sheets at fair value. Derivative contracts representing unrealized gain positions and purchased options are reported as derivative assets. Derivative contracts representing unrealized losses and options sold are reported as derivative liabilities. One of the exceptions to fair value accounting, normal purchases and normal sales, may be elected when the contract satisfies certain criteria, including a requirement that physical delivery of the underlying commodity is probable. Expenses and revenues resulting from deliveries under normal purchase contracts and normal sales contracts, respectively, are included in earnings at the time of contract performance. See Note 6 for further information about fair value measurements and associated valuation methods for derivatives.
The Companies do not offset amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement. Dominion Energy had margin assets of $
To manage price and interest rate risk, the Companies hold derivative instruments that are not designated as hedges for accounting purposes. However, to the extent the Companies do not hold offsetting positions for such derivatives, they believe these instruments
102
represent economic hedges that mitigate their exposure to fluctuations in commodity prices or interest rates. All income statement activity, including amounts realized upon settlement, is presented in operating revenue, operating expenses, interest and related charges or discontinued operations based on the nature of the underlying risk.
Changes in the fair value of derivative instruments result in the recognition of regulatory assets or regulatory liabilities for jurisdictions subject to cost-based rate regulation. Realized gains or losses on the derivative instruments are generally recognized when the related transactions impact earnings.
Derivative Instruments Designated as Hedging Instruments
In accordance with accounting guidance pertaining to derivatives and hedge accounting, the Companies designate a portion of their derivative instruments as either cash flow or fair value hedges for accounting purposes. For derivative instruments that are accounted for as cash flow hedges or fair value hedges, the cash flows from the derivatives and from the related hedged items are classified in operating cash flows.
Cash Flow Hedges
A majority of the Companies’ hedge strategies represents cash flow hedges of the variable price risk primarily associated with the use of interest rate swaps to hedge their exposure to variable interest rates on long-term debt. For transactions in which the Companies are hedging the variability of cash flows, changes in the fair value of the derivatives are reported in AOCI, to the extent they are effective at offsetting changes in the hedged item, or as appropriate to regulatory assets or regulatory liabilities. Any derivative gains or losses reported in AOCI are reclassified to earnings when the forecasted item is included in earnings, or earlier, if it becomes probable that the forecasted transaction will not occur. For cash flow hedge transactions, hedge accounting is discontinued if the occurrence of the forecasted transaction is no longer probable.
Fair Value Hedges
Dominion Energy has also designated interest rate swaps as fair value hedges on certain fixed rate long-term debt to manage interest rate exposure. For fair value hedge transactions, changes in the fair value of the derivative are generally offset currently in earnings by the recognition of changes in the hedged item’s fair value. Hedge accounting is discontinued if the hedged item no longer qualifies for hedge accounting.
Property, Plant and Equipment
Property, plant and equipment is recorded at lower of original cost or fair value, if impaired. Capitalized costs include labor, materials and other direct and indirect costs such as asset retirement costs, capitalized interest and, for certain operations subject to cost-of-service rate regulation, AFUDC and overhead costs. The cost of repairs and maintenance, including minor additions and replacements, is generally charged to expense as it is incurred.
In 2021, 2020 and 2019, Dominion Energy capitalized interest costs and AFUDC to property, plant and equipment of $
Under Virginia law, certain Virginia jurisdictional projects qualify for current recovery of AFUDC through rate adjustment clauses. AFUDC on these projects is calculated and recorded as a regulatory asset and is not capitalized to property, plant and equipment. In 2021, 2020 and 2019, Virginia Power recorded $
For property subject to cost-of-service rate regulation, including the Companies’ electric distribution, electric transmission and generation property and Dominion Energy’s natural gas distribution property, the undepreciated cost of such property, less salvage value, is generally charged to accumulated depreciation at retirement. Cost of removal collections from utility customers not representing AROs are recorded as regulatory liabilities. For property subject to cost-of-service rate regulation that will be abandoned significantly before the end of its useful life, the net carrying value is reclassified from plant-in-service when it becomes probable it will be abandoned and recorded as a regulatory asset for amounts expected to be collected through future rates.
In 2020 and 2019, the Companies had the following charges, primarily recorded in impairment of assets and other charges in the Consolidated Statements of Income (reflected in the Corporate and Other segment), related to early retirements:
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• |
In March 2020, Virginia Power committed to retire certain coal- and oil-fired generating units before the end of their useful lives based on economic and other factors, including but not limited to market power prices and the VCEA. These units will |
103
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be retired after they meet their capacity obligations to PJM in 2023. As a result, Virginia Power recorded a charge of $ |
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• |
In January 2019, Virginia Power committed to a plan to retire certain automated metering reading infrastructure associated with its electric operations before the end of its estimated useful life and replace such equipment with more current AMI technology. As a result, Virginia Power recorded a charge of $ |
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• |
In March 2019, Virginia Power committed to retire certain electric generating units before the end of their useful lives and completed the retirement of certain units at |
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• |
In May 2019, Virginia Power abandoned a coal rail project at its Mt. Storm generating facility. As a result, Virginia Power recorded a charge of $ |
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• |
In September 2019, the Companies abandoned certain property, plant and equipment before the end of its useful life. As a result, Dominion Energy recorded a charge of $ |
For property that is not subject to cost-of-service rate regulation, including nonutility property, cost of removal not associated with AROs is charged to expense as incurred. The Companies also record gains and losses upon retirement based upon the difference between the proceeds received, if any, and the property’s net book value at the retirement date.
Depreciation of property, plant and equipment is computed on the straight-line method based on projected service lives.
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Year Ended December 31, |
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2021 |
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2020 |
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2019 |
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(percent) |
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Dominion Energy(1) |
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Generation |
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Transmission |
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Distribution |
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Storage |
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General and other |
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Virginia Power |
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Generation |
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Transmission |
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Distribution |
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General and other |
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(1) |
Excludes rates for depreciation reported as discontinued operations. |
In 2020, Virginia Power updated depreciation rates for its nuclear plants to reflect lower depreciation rates as a result of expected approval of license extensions from the NRC. For the year ended December 31, 2020, this adjustment resulted in a decrease of $
In January 2022, Dominion Energy revised the estimated useful life of its non-jurisdictional and certain nonregulated solar generation facilities to
Virginia Power’s non-jurisdictional property, plant and equipment is depreciated using the straight-line method over an estimated useful life of
104
Capitalized costs of development wells and leaseholds are amortized on a field-by-field basis using the unit-of-production method and the estimated proved developed or total proved gas and oil reserves, at a rate of $
Dominion Energy’s nonutility property, plant and equipment is depreciated using the straight-line method over the following estimated useful lives:
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Asset |
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Estimated Useful Lives |
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Nonregulated generation-nuclear |
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Nonregulated generation-solar |
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General and other |
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Nuclear fuel used in electric generation is amortized over its estimated service life on a units-of-production basis. The Companies report the amortization of nuclear fuel in electric fuel and other energy-related purchases expense in their Consolidated Statements of Income and in depreciation and amortization in their Consolidated Statements of Cash Flows.
Long-Lived and Intangible Assets
The Companies perform an evaluation for impairment whenever events or changes in circumstances indicate that the carrying amount of long-lived assets or intangible assets with finite lives may not be recoverable. A long-lived or intangible asset is written down to fair value if the sum of its expected future undiscounted cash flows is less than its carrying amount. Intangible assets with finite lives are amortized over their estimated useful lives. See Note 6 for further discussion on the impairment of long-lived assets.
Regulatory Assets and Liabilities
The accounting for the Companies’ regulated electric and gas operations differs from the accounting for nonregulated operations in that the Companies are required to reflect the effect of rate regulation in their Consolidated Financial Statements. For regulated businesses subject to federal or state cost-of-service rate regulation, regulatory practices that assign costs to accounting periods may differ from accounting methods generally applied by nonregulated companies. When it is probable that regulators will permit the recovery of current costs through future rates charged to customers, these costs that otherwise would be expensed by nonregulated companies are deferred as regulatory assets. Likewise, regulatory liabilities are recognized when it is probable that regulators will require customer refunds or other benefits through future rates or when revenue is collected from customers for expenditures that have yet to be incurred.
The Companies evaluate whether or not recovery of their regulatory assets through future rates is probable as well as whether a regulatory liability due to customers is probable and make various assumptions in their analyses. These analyses are generally based on:
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|
• |
Orders issued by regulatory commissions, legislation and judicial actions; |
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|
• |
Past experience; |
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|
• |
Discussions with applicable regulatory authorities and legal counsel; |
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|
• |
Forecasted earnings; and |
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|
• |
Considerations around the likelihood of impacts from events such as unusual weather conditions, extreme weather events and other natural disasters and unplanned outages of facilities. |
Generally, regulatory assets and liabilities are amortized into income over the period authorized by the regulator. If recovery of a regulatory asset is determined to be less than probable, it will be written off in the period such assessment is made. A regulatory liability, if considered probable, will be recorded in the period such assessment is made or reversed into earnings if no longer probable. See Notes 12 and 13 to the Consolidated Financial Statements for additional information.
105
Leases
The Companies lease certain assets including vehicles, real estate, office equipment and other operational assets under both operating and finance leases. For the Companies’ operating leases, rent expense is recognized on a straight-line basis over the term of the lease agreement, subject to regulatory framework. Rent expense associated with operating leases, short-term leases and variable leases is primarily recorded in other operations and maintenance expense in the Companies’ Consolidated Statements of Income. Rent expense associated with finance leases results in the separate presentation of interest expense on the lease liability and amortization expense of the related right-of-use asset in the Companies’ Consolidated Statements of Income or, subject to regulatory framework, is deferred within regulatory assets in the Consolidated Balance Sheets and amortized into the Consolidated Statements of Income.
Certain of the Companies’ leases include one or more options to renew, with renewal terms that can extend the lease from
The determination of the discount rate utilized has a significant impact on the calculation of the present value of the lease liability included in the Companies’ Consolidated Balance Sheets. For the Companies’ fleet of leased vehicles, the discount rate is equal to the prevailing borrowing rate earned by the lessor. For the Companies’ remaining leased assets, the discount rate implicit in the lease is generally unable to be determined from a lessee perspective. As such, the Companies use internally-developed incremental borrowing rates as a discount rate in the calculation of the present value of the lease liability. The incremental borrowing rates are determined based on an analysis of the Companies’ publicly available unsecured borrowing rates, adjusted for a collateral discount, over various lengths of time that most closely correspond to the Companies’ lease maturities.
In addition, Dominion Energy acts as lessor under certain power purchase agreements in which the counterparty or counterparties purchase substantially all of the output of certain solar facilities. These leases are considered operating in nature. For such leasing arrangements, rental revenue and an associated accounts receivable are recorded when the monthly output of the solar facility is determined. Depreciation on these solar facilities is computed on a straight-line basis over an estimated useful life of
Asset Retirement Obligations
The Companies recognize AROs at fair value as incurred or when sufficient information becomes available to determine a reasonable estimate of the fair value of future retirement activities to be performed, for which a legal obligation exists. These amounts are generally capitalized as costs of the related tangible long-lived assets. Since relevant market information is not available, fair value is estimated using discounted cash flow analyses. Quarterly, the Companies assess their AROs to determine if circumstances indicate that estimates of the amounts or timing of future cash flows associated with retirement activities have changed. AROs are adjusted when significant changes in the amounts or timing of future cash flows are identified. Dominion Energy reports accretion of AROs and depreciation on asset retirement costs associated with its natural gas pipelines of its distribution business as an adjustment to the related regulatory assets or liabilities when revenue is recoverable from customers for AROs. The Companies report accretion of AROs and depreciation on asset retirement costs associated with decommissioning its nuclear power stations as an adjustment to the regulatory asset or liability for certain jurisdictions. Additionally, the Companies report accretion of AROs and depreciation on asset retirement costs associated with certain rider and prospective rider projects and other electric generation and distribution facilities as an adjustment to the regulatory asset for certain jurisdictions. Accretion of all other AROs and depreciation of all other asset retirement costs are reported in other operations and maintenance expense and depreciation expense, respectively, in the Consolidated Statements of Income.
Debt Issuance Costs
The Companies defer and amortize debt issuance costs and debt premiums or discounts over the expected lives of the respective debt issues, considering maturity dates and, if applicable, redemption rights held by others. Deferred debt issuance costs are recorded as a reduction in long-term debt in the Consolidated Balance Sheets. Amortization of the issuance costs is reported as interest expense. Unamortized costs associated with redemptions of debt securities prior to stated maturity dates are generally recognized and recorded in interest expense immediately. As permitted by regulatory authorities, gains or losses resulting from the refinancing or redemption of debt allocable to utility operations subject to cost-based rate regulation are deferred and amortized.
106
Investments
Debt Securities
Dominion Energy accounts for and classifies investments in debt securities as trading or available-for-sale securities. Virginia Power classifies investments in debt securities as available-for-sale securities.
|
• |
Debt securities classified as trading securities include securities held by Dominion Energy in rabbi trusts associated with certain deferred compensation plans. These securities are reported in other investments in the Consolidated Balance Sheets at fair value with net realized and unrealized gains and losses included in other income in the Consolidated Statements of Income. |
|
• |
Debt securities classified as available-for-sale securities include all other debt securities, primarily comprised of securities held in the nuclear decommissioning trusts. These investments are reported at fair value in nuclear decommissioning trust funds in the Consolidated Balance Sheets. Net realized and unrealized gains and losses (including any credit-related impairments) on investments held in nuclear decommissioning trusts are deferred to a regulatory asset or liability, as applicable, for certain jurisdictions subject to cost-based regulation. For all other available-for-sale debt securities, including those held in Dominion Energy’s nonregulated generation nuclear decommissioning trusts, net realized gains and losses (including any credit-related impairments) are included in other income and unrealized gains and losses are reported as a component of AOCI, after-tax. |
In determining realized gains and losses for debt securities, the cost basis of the security is based on the specific identification method.
Credit Impairment
The Companies periodically review their available-for-sale debt securities to determine whether a decline in fair value should be considered credit related. If a decline in the fair value of any available-for-sale debt security is determined to be credit related, the credit-related impairment is recorded to an allowance included in nuclear decommissioning trust funds in the Companies’ Consolidated Balance Sheets at the end of the reporting period, with such allowance for credit losses subject to reversal in subsequent evaluations.
Using information obtained from their nuclear decommissioning trust fixed-income investment managers, the Companies record in earnings, or defer as applicable for certain jurisdictions subject to cost-based regulation, any unrealized loss for a debt security when the manager intends to sell the debt security or it is more-likely-than-not that the manager will have to sell the debt security before recovery of its fair value up to its cost basis. If that is not the case, but the debt security is deemed to have experienced a credit loss, the Companies record the credit loss in earnings or defer as applicable for certain jurisdictions subject to cost-based regulation, with the remaining non-credit portion of the unrealized loss recorded in AOCI. Credit losses are evaluated primarily by considering the credit ratings of the issuer, prior instances of non-performance by the issuer and other factors
Equity Securities with Readily Determinable Fair Values
Equity securities with readily determinable fair values include securities held by Dominion Energy in rabbi trusts associated with certain deferred compensation plans and securities held by the Companies in the nuclear decommissioning trusts. The Companies record all equity securities with a readily determinable fair value, or for which they are permitted to estimate fair value using NAV (or its equivalent), at fair value in nuclear decommissioning trust funds and other investments in the Consolidated Balance Sheets. Net realized and unrealized gains and losses on equity securities held in the nuclear decommissioning trusts are deferred to a regulatory asset or liability, as applicable, for certain jurisdictions subject to cost-based regulation. For all other equity securities, including those held in Dominion Energy’s nonregulated generation nuclear decommissioning trusts and rabbi trusts, net realized and unrealized gains and losses are included in other income in the Consolidated Statements of Income.
Equity Securities without Readily Determinable Fair Values
The Companies account for illiquid and privately held securities without readily determinable fair values under either the equity method or cost method. Equity securities without readily determinable fair values include:
|
• |
Equity method investments when the Companies have the ability to exercise significant influence, but not control, over the investee. Dominion Energy’s investments are included in investments in equity method affiliates in its Consolidated Balance Sheets, except for the liability to Atlantic Coast Pipeline or where such investments are classified as held for sale. Dominion Energy records equity method adjustments in other income in its Consolidated Statements of Income, including its proportionate share of investee income or loss, gains or losses resulting from investee capital transactions, amortization of certain differences between the carrying value and the equity in the net assets of the investee at the date of investment and other adjustments required by the equity method. |
|
• |
Cost method investments when the Companies do not have the ability to exercise significant influence over the investee. The Companies’ investments are included in other investments and nuclear decommissioning trust funds. Cost method investments |
107
|
are reported at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. |
Other-Than-Temporary Impairment
The Companies periodically review their equity method investments to determine whether a decline in fair value should be considered other-than-temporary. If a decline in the fair value of any security is determined to be other-than-temporary, the investment is written down to its fair value at the end of the reporting period.
Inventories
Materials and supplies and fossil fuel inventories are valued primarily using the weighted-average cost method. Stored gas inventory is valued using the weighted-average cost method, except for East Ohio gas distribution operations, which are valued using the LIFO method. Under the LIFO method, current stored gas inventory was valued at $
Gas Imbalances
Natural gas imbalances occur when the physical amount of natural gas delivered from, or received by, a pipeline system or storage facility differs from the contractual amount of natural gas delivered or received. Dominion Energy values these imbalances due to, or from, shippers and operators at an appropriate index price at period end, subject to the terms of its tariff for regulated entities. Imbalances are primarily settled in-kind. Imbalances due to Dominion Energy from other parties are reported in other current assets and imbalances that Dominion Energy owes to other parties are reported in other current liabilities in the Consolidated Balance Sheets.
Goodwill
Dominion Energy evaluates goodwill for impairment annually as of April 1 and whenever an event occurs or circumstances change in the interim that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.
New Accounting Standards
Debt with Conversion Options and Contracts in an Entity’s Own Equity
In August 2020, the FASB issued revised accounting guidance for debt with conversion options and contracts in an entity’s own equity. The revised guidance eliminates the ability to assert cash settlement and exclude potential shares from the diluted EPS calculation for a contract that may be settled in stock or cash. The guidance became effective for Dominion Energy’s interim and annual reporting periods beginning January 1, 2022. Upon adoption, Dominion Energy will apply the guidance using a modified retrospective approach and will continue to apply the if-converted method to calculate diluted EPS in connection with any potentially dilutive instruments, or components of instruments, that may be settled in stock or cash.
Leases
In February 2016, the FASB issued revised accounting guidance for the recognition, measurement, presentation and disclosure of leasing arrangements. The update requires that a liability and corresponding right-of-use asset are recorded on the balance sheet for all leases, including those leases classified as operating leases, while also refining the definition of a lease. In addition, lessees are required to disclose key information about the amount, timing and uncertainty of cash flows arising from leasing arrangements. Lessor accounting remains largely unchanged.
The guidance became effective for the Companies’ interim and annual reporting periods beginning
108
NOTE 3. ACQUISITIONS AND DISPOSITIONS
Dominion Energy
Disposition of Gas Transmission & Storage Operations
In July 2020, Dominion Energy entered into an agreement with BHE with a total value of approximately $
In November 2020, Dominion Energy completed the GT&S Transaction and received cash proceeds of $
In connection with closing of the GT&S Transaction, Dominion Energy and BHE entered into a transition services agreement under which
Also in November 2020, BHE provided a $
In October 2021, Dominion Energy entered into an agreement with Southwest Gas to sell the Q-Pipe Group. The total value of this transaction is approximately $
In December 2021, Dominion Energy completed the sale of the Q-Pipe Group and received cash proceeds of $
109
In connection with the closing of the sale of the Q-Pipe Group, Dominion Energy and Southwest Gas entered into a transition services agreement under which
The operations included in both the GT&S Transaction and the Q-Pipe Group are presented in held-for-sale and discontinued operations effective July 2020. As a result, the previously reported amounts have been recast to reflect this presentation and depreciation and amortization ceased on the applicable assets. As Cove Point had previously been consolidated within Dominion Energy’s financial statements, balances associated with Cove Point prior to the closing of the GT&S Transaction are presented within held-for-sale and discontinued operations. See Note 9 for further information regarding Dominion Energy’s equity method investment in Cove Point.
The following table represents selected information regarding the results of operations, which are reported within discontinued operations in Dominion Energy’s Consolidated Statements of Income:
|
|
|
Year Ended December 31, 2021 |
|
|
Year Ended December 31, 2020 |
|
|
Year Ended December 31, 2019 |
|
|||||||||||
|
|
|
Q-Pipe Group(1) |
|
|
GT&S Transaction(1) |
|
|
Q-Pipe Group |
|
|
GT&S Transaction |
|
|
Q-Pipe Group |
|
|||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Operating expense(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss)(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and related charges(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)(5) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) including noncontrolling interests |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Net income (loss) attributable to Dominion Energy |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Operations associated with the Q-Pipe Group are through the December 31, 2021 closing date. Operations associated with the GT&S Transaction are through the November 1, 2020 closing date. |
|
(2) |
|
|
(3) |
|
|
(4) |
|
|
(5) |
|
The carrying amounts of major classes of assets and liabilities relating to the Q-Pipe Group, all of which was classified as current and reported as held for sale in Dominion Energy’s Consolidated Balance Sheets at December 31, 2020, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
Current assets(1) |
|
|
|
$ |
|
|
|
|
|
|
|
Equity method investments(2) |
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
|
|
|
|
|
|
|
|
|
Other deferred charges and other assets, including goodwill(3) and intangible assets |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
|
|
|
|
|
Other deferred credits and liabilities |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
110
|
(2) |
|
|
(3) |
|
Capital expenditures and significant noncash items relating to the disposal groups included the following:
|
|
|
Year Ended December 31, 2021 |
|
|
Year Ended December 31, 2020 |
|
|
Year Ended December 31, 2019 |
|
|||||||||||
|
|
|
Q-Pipe Group(1) |
|
|
GT&S Transaction(1) |
|
|
Q-Pipe Group |
|
|
GT&S Transaction |
|
|
Q-Pipe Group |
|
|||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Significant noncash items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of assets and other charges |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Charge related to a voluntary retirement program |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued capital expenditures |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Operations associated with the Q-Pipe Group are through the December 31, 2021 closing date. Operations associated with the GT&S Transaction are through the November 1, 2020 closing date. |
In October 2020, Dominion Energy settled various derivatives related to, but not included in, the GT&S Transaction for a payment of $
Acquisition of SCANA
In January 2019, Dominion Energy issued
Merger Conditions
Refunds to Customers
As a condition to the SCANA Merger Approval Order, DESC will provide refunds and restitution of $
In September and October 2017, DESC received proceeds totaling $
Additionally, in the first quarter of 2019, DESC recorded a reduction in operating revenue and a corresponding regulatory liability of $
111
NND Project
As a condition to the SCANA Merger Approval Order, DESC committed to excluding from rate recovery $
Other Terms and Conditions
|
|
• |
DESC agreed not to file an application for a general rate case with the South Carolina Commission with a requested effective date earlier than January 2021. See Note 13 for information on the status of DESC’s base rate case; |
|
|
• |
PSNC agreed not to file an application for a general rate case with the North Carolina Commission any earlier than April 2021. See Note 13 for information on the status of PSNC’s general rate case; |
|
|
• |
Dominion Energy committed to increasing SCANA’s historical level of corporate contributions to charities by $ |
|
|
• |
Dominion Energy will maintain DESC and PSNC’s headquarters in Cayce, South Carolina and Gastonia, North Carolina, respectively; and |
|
|
• |
Dominion Energy will seek to minimize reductions in local employment by allowing some DES employees supporting shared and common services functions and activities to be located in Cayce, South Carolina where it makes economic and practical sense to do so. |
Purchase Price Allocation
SCANA’s assets acquired and liabilities assumed have been measured at estimated fair value at closing and are included in Dominion Energy South Carolina and Gas Distribution. The majority of the operations acquired are subject to the rate setting authority of FERC and the North and South Carolina Commissions and are therefore accounted for pursuant to ASC 980, Regulated Operations. The fair values of SCANA’s assets and liabilities subject to rate-setting and cost recovery provisions provide revenues derived from costs, including a return on investment of assets and liabilities included in rate base. As such, the fair values of these assets and liabilities equal their carrying values. Accordingly, neither the assets and liabilities acquired, nor the unaudited pro forma financial information, reflect any adjustments related to these amounts.
The fair value of SCANA’s assets acquired and liabilities assumed that are not subject to the rate-setting provisions discussed above and the fair values of SCANA’s investments accounted for under the equity method were determined using the income approach and the market approach. The valuation of SCANA’s long-term debt is considered a Level 2 fair value measurement. All other valuations are considered Level 3 fair value measurements due to the use of significant judgmental and unobservable inputs, including projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future market prices.
The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was reflected as goodwill. The goodwill reflects the value associated with enhancing Dominion Energy’s portfolio of regulated operations in the growing southeast region of the U.S. The goodwill recognized is not deductible for income tax purposes, and as such, no deferred taxes have been recorded related to goodwill.
112
The table below shows the allocation of the purchase price to the assets acquired and liabilities assumed at closing, which reflects certain adjustments related to income taxes, as discussed in Note 5, from the preliminary valuation recognized during the measurement period.
|
|
Amount |
|
||
|
(millions) |
|
|
|
|
|
Total current assets(1) |
|
$ |
|
|
|
Investments(2) |
|
|
|
|
|
Property, plant and equipment(3)(4) |
|
|
|
|
|
Goodwill |
|
|
|
|
|
Regulatory assets(5) |
|
|
|
|
|
Other deferred charges and other assets, including intangible assets(6) |
|
|
|
|
|
Total Assets |
|
|
|
|
|
Total current liabilities(7) |
|
|
|
|
|
Long-term debt |
|
|
|
|
|
Deferred income taxes |
|
|
|
|
|
Regulatory liabilities |
|
|
|
|
|
Other deferred credits and other liabilities(8) |
|
|
|
|
|
Total Liabilities |
|
|
|
|
|
Total purchase price(9) |
|
$ |
|
|
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
(4) |
|
|
(5) |
|
|
(6) |
|
|
(7) |
|
|
(8) |
|
|
(9) |
|
Results of Operations and Unaudited Pro Forma Information
The impact of the SCANA Combination on Dominion Energy’s operating revenue was an increase of $
Dominion Energy incurred merger and integration-related costs of $
113
The following unaudited pro forma financial information reflects the consolidated results of operations of Dominion Energy assuming the SCANA Combination had taken place on January 1, 2018.
|
|
|
Twelve Months Ended |
|
|
|
|
|
December 31, 2019(1) |
|
|
|
(millions, except EPS) |
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
Net income attributable to Dominion Energy |
|
|
|
|
|
Earnings Per Common Share – Basic |
|
$ |
|
|
|
Earnings Per Common Share – Diluted |
|
$ |
|
|
|
(1) |
Amounts include adjustments for non-recurring costs directly related to the SCANA Combination. |
Sale of Interest in Cove Point
In October 2019, Dominion Energy signed an agreement to sell its
Sale of Hope
In February 2022, Dominion Energy entered into an agreement to sell
Sale of Kewaunee
In May 2021, Dominion Energy entered into an agreement to sell
In May 2021, Dominion Energy and EnergySolutions submitted a license transfer application to the NRC. Also in May 2021, Dominion Energy submitted an application to the Wisconsin Commission for approval. In July 2021, WPSC and WP&L submitted a joint request to the Wisconsin Commission for the waiver of both of their rights of first refusal to purchase Kewaunee, such rights having been granted as the former owners of Kewaunee. At December 31, 2021, Dominion Energy determined that the assets and liabilities associated with the Kewaunee sale, included in Contracted Assets, did not meet the criteria to be classified as held for sale due to the significant uncertainty surrounding the timing of or ability to obtain necessary regulatory approvals.
Dominion Energy expects to record a loss if and when it determines that criteria for the classification as held for sale have been met. If such classification had been made at December 31, 2021, Dominion Energy would have recognized a loss of approximately $
Acquisition of Birdseye
In May 2021, Dominion Energy acquired
114
the purchase price resulted in $
NOTE 4. OPERATING REVENUE
The Companies’ operating revenue consists of the following:
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated electric sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and other retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonregulated electric sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated gas sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonregulated gas sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated gas transportation and storage |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other regulated revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other nonregulated revenues(1)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenue from contracts with customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues(3)(4) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Total operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Virginia Power |
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated electric sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and other retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonregulated electric sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other regulated revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other nonregulated revenues(1)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenue from contracts with customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues(1)(3) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
See Notes 9 and 25 for amounts attributable to related parties and affiliates. |
|
(2) |
Includes sales which are considered to be goods transferred at a point in time of $ |
115
|
(3) |
Includes alternative revenue of $ |
|
(4) |
Includes revenue associated with services provided to discontinued operations of $ |
The table below discloses the aggregate amount of the transaction price allocated to fixed-price performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period and when Dominion Energy expects to recognize this revenue. These revenues relate to contracts containing fixed prices where Dominion Energy will earn the associated revenue over time as it stands ready to perform services provided. This disclosure does not include revenue related to performance obligations that are part of a contract with original durations of one year or less. In addition, this disclosure does not include expected consideration related to performance obligations for which Dominion Energy elects to recognize revenue in the amount it has a right to invoice.
|
Revenue expected to be recognized on multi-year contracts in place at December 31, 2021 |
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
Thereafter |
|
|
Total |
|
|||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Includes no amounts for Virginia Power. |
Contract liabilities represent an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration, or the amount that is due, from the customer. At December 31, 2021 and 2020, Dominion Energy’s contract liability balances were $
NOTE 5. INCOME TAXES
Judgment and the use of estimates are required in developing the provision for income taxes and reporting of tax-related assets and liabilities. The interpretation of tax laws and associated regulations involves uncertainty, since tax authorities may interpret the laws differently. The Companies are routinely audited by federal and state tax authorities. Ultimate resolution of income tax matters may result in favorable or unfavorable impacts to net income and cash flows, and adjustments to tax-related assets and liabilities could be material.
The Companies have accounted for the effects of the 2017 Tax Reform Act, although additional changes could occur as guidance is issued and finalized as described below.
In July 2020, the U.S. Department of Treasury issued final regulations providing guidance about the limitation on the deduction for business interest expenses under the 2017 Tax Reform Act. Under the 2017 Tax Reform Act, deductions for net interest expense are limited to
In December 2020, federal legislation was enacted that, among other things, provides a two-year extension of the beginning construction deadline for, and delays the phase-down of, the solar energy investment tax credit as well as extending the deadlines and phase-down rules for certain other renewable tax credits. The legislation provides that offshore wind facilities are eligible for the investment tax credit if construction on those facilities begins before 2026 with no phase-out. In addition, the U.S. Department of Treasury and the IRS issued guidance for offshore wind that extended the continuity of construction safe harbor to 10 years, which significantly enhances the ability for these projects to qualify for renewable energy tax credits.
As indicated in Note 2, certain of the Companies’ operations, including accounting for income taxes, are subject to regulatory accounting treatment. For regulated operations, many of the changes in deferred taxes from the 2017 Tax Reform Act represent amounts probable of collection from or return to customers, and were recorded as either an increase to a regulatory asset or liability. See Note 13 for more information and current year developments.
116
Continuing Operations
Details of income tax expense for continuing operations including noncontrolling interests were as follows:
|
|
|
Dominion Energy |
|
|
Virginia Power |
|
||||||||||||||||||
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
State |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Total current expense (benefit) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes before operating loss carryforwards, investment tax credits and tax reform |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Tax utilization expense of operating loss carryforwards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment tax credits |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
State |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred expense (benefit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Investment tax credit-gross deferral |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment tax credit-amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Total income tax expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
In 2021, Dominion Energy’s current income taxes reflect a benefit from continuing operations as the income tax expense associated with the QPipe Group’s operations, including taxes on the gain, is reflected in discontinued operations. Dominion Energy’s income tax expense reflects the utilization of investment tax credit carryforwards to offset a portion of the federal tax gain on the sale.
In 2020, Dominion Energy’s current income taxes reflect a benefit from continuing operations as the income tax expense associated with gas transmission and storage operations, including taxes on the gain, is reflected in discontinued operations. Dominion Energy’s income tax expense reflects the utilization of investment tax credit carryforwards to offset a portion of the federal tax gain on the sale. In addition, an $
In 2019, the Dominion Energy Gas Restructuring caused changes in tax status at certain of its subsidiaries. The impacts of the changes in tax status decreased deferred income tax expense from continuing operations by $
Discontinued Operations
Income tax expense (benefit) reflected in discontinued operations is $
117
Continuing Operations
For continuing operations including noncontrolling interests, the statutory U.S. federal income tax rate reconciles to the Companies’ effective income tax rate as follows:
|
|
|
Dominion Energy |
|
|
Virginia Power |
||||||||||||||||||||
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
||||||
|
U.S. statutory rate |
|
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Increases (reductions) resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State taxes, net of federal benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment tax credits |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
Production tax credits |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
Valuation allowances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal of excess deferred income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
State legislative change |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
Write-off of regulatory assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in tax status |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFUDC—equity |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
Changes in state deferred taxes associated with assets held for sale |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absence of tax on noncontrolling interest |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements of uncertain tax positions |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock ownership plan deduction |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nondeductible goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
Effective tax rate |
|
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
For the Companies’ rate-regulated entities, deferred taxes will reverse at the weighted average rate used to originate the deferred tax liability, which in some cases will be
In December 2021, unrecognized tax benefits related to several state uncertain tax positions acquired in the SCANA Combination were effectively settled through negotiations with the taxing authority. Management believed it was reasonably possible these unrecognized tax benefits could decrease through settlement negotiations or payments during 2021, however no income tax benefits could be recognized unless or until the positions were effectively settled. Resolution of these uncertain tax positions decreased income tax expense by $
Dominion Energy’s 2020 effective tax rate reflects an income tax benefit of $
In connection with the SCANA Combination, Dominion Energy committed to forgo, or limit, the recovery of certain income tax-related regulatory assets associated with the NND Project. Dominion Energy’s effective tax rate reflects deferred income tax expense of $
118
The Companies’ deferred income taxes consist of the following:
|
|
|
Dominion Energy |
|
|
Virginia Power |
|
||||||||||
|
At December 31, |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total deferred income tax liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net deferred income tax liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total deferred income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment, primarily depreciation method and basis differences |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Excess deferred income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Unrecovered NND Project costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DESC rate refund |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Toshiba Settlement |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Nuclear decommissioning |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred state income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal benefit of deferred state income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Deferred fuel, purchased energy and gas costs |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Pension benefits |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other postretirement benefits |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Loss and credit carryforwards |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Valuation allowances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership basis differences |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Total net deferred income tax liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Deferred Investment Tax Credits – Regulated Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deferred Taxes and Deferred Investment Tax Credits |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
At December 31, 2021, Dominion Energy had the following deductible loss and credit carryforwards:
|
|
|
Deductible |
|
|
Deferred |
|
|
Valuation |
|
|
Expiration |
|||
|
|
|
Amount |
|
|
Tax Asset |
|
|
Allowance |
|
|
Period |
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal losses |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
|
|
Federal investment credits |
|
— |
|
|
|
|
|
|
— |
|
|
2036-2041 |
||
|
Federal production and other credits |
|
— |
|
|
|
|
|
|
— |
|
|
2036-2041 |
||
|
State losses |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
2022-2041 |
|
State minimum tax credits |
|
— |
|
|
|
|
|
|
— |
|
|
No expiration |
||
|
State investment and other credits |
|
— |
|
|
|
|
|
|
|
( |
) |
|
2022-2031 |
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
|
119
At December 31, 2021, Virginia Power had the following deductible loss and credit carryforwards:
|
|
|
Deductible |
|
|
Deferred |
|
|
Valuation |
|
|
Expiration |
|||
|
|
|
Amount |
|
|
Tax Asset |
|
|
Allowance |
|
|
Period |
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal losses |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
Federal investment credits |
|
— |
|
|
|
|
|
|
— |
|
|
2036-2041 |
||
|
Federal production and other credits |
|
— |
|
|
|
|
|
|
— |
|
|
2036-2041 |
||
|
State investment and other credits |
|
— |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Total |
|
$ |
— |
|
|
$ |
|
|
|
$ |
( |
) |
|
|
A reconciliation of changes in the Companies’ unrecognized tax benefits follows:
|
|
|
Dominion Energy |
|
|
|
|
Virginia Power |
|
||||||||||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Acquired unrecognized tax benefits |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
(1 |
) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
Increases-prior period positions |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Decreases-prior period positions |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Increases-current period positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Settlements with tax authorities |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Expiration of statutes of limitations |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Balance at December 31 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
$ |
- |
|
|
$ |
— |
|
|
$ |
- |
|
|
(1) |
Acquired unrecognized tax benefits reflect $ |
Certain unrecognized tax benefits, or portions thereof, if recognized, would affect the effective tax rate. Changes in these unrecognized tax benefits may result from remeasurement of amounts expected to be realized, settlements with tax authorities and expiration of statutes of limitations. For Dominion Energy and its subsidiaries, these unrecognized tax benefits were $
Dominion Energy participates in the IRS Compliance Assurance Process which provides the opportunity to resolve complex tax matters with the IRS before filing its federal income tax returns, thus achieving certainty for such tax return filing positions agreed to by the IRS. The IRS has completed its audit of tax years through 2019. The statute of limitations has not yet expired for years after 2017. Although Dominion Energy has not received a final letter indicating no changes to its taxable income for tax year 2020, no material adjustments are expected. The IRS examination of tax year 2021 is ongoing.
120
It is reasonably possible that settlement negotiations and expiration of statutes of limitations could result in a decrease in unrecognized tax benefits in 2022 by up to $
For each of the major states in which Dominion Energy operates, the earliest tax year remaining open for examination is as follows:
|
|
|
Earliest |
|
|
|
Open Tax |
|
State |
|
Year |
|
Pennsylvania(1) |
|
|
|
Connecticut |
|
|
|
Virginia(2) |
|
|
|
Utah |
|
|
|
South Carolina |
|
|
|
|
(1) |
Considered a major state for entities presented in discontinued operations. |
|
|
(2) |
Considered a major state for Virginia Power’s operations |
The Companies are also obligated to report adjustments resulting from IRS settlements to state tax authorities. In addition, if Dominion Energy utilizes operating losses or tax credits generated in years for which the statute of limitations has expired, such amounts are generally subject to examination.
NOTE 6. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. However, the use of a mid-market pricing convention (the mid-point between bid and ask prices) is permitted. Fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. This includes not only the credit standing of counterparties involved and the impact of credit enhancements but also the impact of the Companies’ own nonperformance risk on their liabilities. Fair value measurements assume that the transaction occurs in the principal market for the asset or liability (the market with the most volume and activity for the asset or liability from the perspective of the reporting entity), or in the absence of a principal market, the most advantageous market for the asset or liability (the market in which the reporting entity would be able to maximize the amount received or minimize the amount paid). Dominion Energy applies fair value measurements to certain assets and liabilities including commodity, interest rate and/or foreign currency exchange rate derivative instruments, and other investments including those held in nuclear decommissioning, rabbi, and pension and other postretirement benefit plan trusts, in accordance with the requirements discussed above. Virginia Power applies fair value measurements to certain assets and liabilities including commodity, interest rate and/or foreign currency exchange rate derivative instruments and other investments including those held in the nuclear decommissioning trust, in accordance with the requirements discussed above. The Companies apply credit adjustments to their derivative fair values in accordance with the requirements described above.
Inputs and Assumptions
Fair value is based on actively-quoted market prices, if available. In the absence of actively-quoted market prices, price information is sought from external sources, including industry publications, and to a lesser extent, broker quotes. When evaluating pricing information provided by Designated Contract Market settlement pricing, other pricing services, or brokers, the Companies consider the ability to transact at the quoted price, i.e. if the quotes are based on an active market or an inactive market and to the extent which pricing models are used, if pricing is not readily available. If pricing information from external sources is not available, or if the Companies believe that observable pricing is not indicative of fair value, judgment is required to develop the estimates of fair value. In those cases the unobservable inputs are developed and substantiated using historical information, available market data, third-party data and statistical analysis. Periodically, inputs to valuation models are reviewed and revised as needed, based on historical information, updated market data, market liquidity and relationships and changes in third-party sources.
For options and contracts with option-like characteristics where observable pricing information is not available from external sources, the Companies generally use a modified Black-Scholes Model that considers time value, the volatility of the underlying commodities and other relevant assumptions when estimating fair value. The Companies use other option models under special circumstances, including but not limited to Spread Approximation Model and a Swing Option Model. For contracts with unique characteristics, the Companies may estimate fair value using a discounted cash flow approach deemed appropriate in the circumstances and applied consistently from period to period. For individual contracts, the use of different valuation models or assumptions could have a significant effect on the contract’s estimated fair value.
121
The inputs and assumptions used in measuring fair value include the following:
For commodity derivative contracts:
|
|
• |
Forward commodity prices |
|
|
• |
Transaction prices |
|
|
• |
Price volatility |
|
|
• |
Price correlation |
|
|
• |
Volumes |
|
|
• |
Commodity location |
|
|
• |
Interest rates |
|
|
• |
Credit quality of counterparties and the Companies |
|
|
• |
Credit enhancements |
|
|
• |
Time value |
For interest rate derivative contracts:
|
|
• |
Interest rate curves |
|
|
• |
Credit quality of counterparties and the Companies |
|
|
• |
Notional value |
|
|
• |
Credit enhancements |
|
|
• |
Time value |
For foreign currency exchange rate derivative contracts:
|
|
• |
Foreign currency forward exchange rates |
|
|
• |
Interest rates |
|
|
• |
Credit quality of counterparties and the Companies |
|
|
• |
Notional value |
|
|
• |
Time value |
For investments:
|
|
• |
Quoted securities prices and indices |
|
|
• |
Securities trading information including volume and restrictions |
|
|
• |
Maturity |
|
|
• |
Interest rates |
|
|
• |
Credit quality of counterparties and the Companies |
Levels
The Companies also utilize the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:
|
|
• |
Level 1—Quoted prices (unadjusted) in active markets for identical assets and liabilities that they have the ability to access at the measurement date. Instruments categorized in Level 1 primarily consist of financial instruments such as certain exchange-traded derivatives, and exchange-listed equities, U.S. and international equity securities, mutual funds and certain Treasury securities held in nuclear decommissioning trust funds for the Companies and benefit plan trust funds and rabbi trust funds for Dominion Energy. |
122
|
|
• |
Level 2—Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level 2 primarily include commodity forwards and swaps, interest rate swaps, foreign currency exchange rate instruments and cash and cash equivalents, corporate debt instruments, government securities and other fixed income investments held in nuclear decommissioning trust funds for the Companies and benefit plan trust funds and rabbi trust funds for Dominion Energy. |
|
|
• |
Level 3—Unobservable inputs for the asset or liability, including situations where there is little, if any, market activity for the asset or liability. Instruments categorized in Level 3 for the Companies consist of long-dated commodity derivatives, FTRs, certain natural gas options and other modeled commodity derivatives. |
The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable data (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. In these cases, the lowest level input that is significant to a fair value measurement in its entirety determines the applicable level in the fair value hierarchy. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. Alternative investments, consisting of investments in partnerships, joint ventures and other alternative investments held in nuclear decommissioning and benefit plan trust funds, are generally valued using NAV based on the proportionate share of the fair value as determined by reference to the most recent audited fair value financial statements or fair value statements provided by the investment manager adjusted for any significant events occurring between the investment manager’s and the Companies’ measurement date. Alternative investments recorded at NAV are not classified in the fair value hierarchy.
Transfers out of Level 3 represent assets and liabilities that were previously classified as Level 3 for which the inputs became observable for classification in either Level 1 or Level 2. Because the activity and liquidity of commodity markets vary substantially between regions and time periods, the availability of observable inputs for substantially the full term and value of the Companies’ over-the-counter derivative contracts is subject to change.
Level 3 Valuations
The Companies enter into certain physical and financial forwards, futures, options and swaps, which are considered Level 3 as they have one or more inputs that are not observable and are significant to the valuation. The discounted cash flow method is used to value Level 3 physical and financial forwards and futures contracts. An option model is used to value Level 3 physical options. The discounted cash flow model for forwards and futures calculates mark-to-market valuations based on forward market prices, original transaction prices, volumes, risk-free rate of return, and credit spreads. The option model calculates mark-to-market valuations using variations of the Black-Scholes option model. The inputs into the models are the forward market prices, implied price volatilities, risk-free rate of return, the option expiration dates, the option strike prices, the original sales prices and volumes. For Level 3 fair value measurements, certain forward market prices and implied price volatilities are considered unobservable.
The following table presents Dominion Energy’s quantitative information about Level 3 fair value measurements at December 31, 2021. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility.
|
|
|
Fair Value (millions) |
|
|
Valuation Techniques |
|
Unobservable Input |
|
|
Range |
|
Weighted Average(1) |
|
||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical and financial forwards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas(2) |
|
$ |
|
|
|
Discounted cash flow |
|
Market price (per Dth) |
(3) |
|
|
|
|
( |
) |
|
FTRs |
|
|
|
|
|
Discounted cash flow |
|
Market price (per MWh) |
(3) |
|
|
|
|
|
|
|
Electricity |
|
|
|
|
|
Discounted cash flow |
|
Market price (per MWh) |
(3) |
|
|
|
|
|
|
|
Physical options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
|
|
|
|
Option model |
|
Market price (per Dth) |
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price volatility |
(4) |
|
|
|
|
|
% |
|
Total assets |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical and financial forwards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas(2) |
|
$ |
|
|
|
Discounted cash flow |
|
Market price (per Dth) |
(3) |
|
|
|
|
( |
) |
|
FTRs |
|
|
|
|
|
Discounted cash flow |
|
Market price (per MWh) |
(3) |
|
|
|
|
|
|
|
Total liabilities |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
(2) |
|
123
|
(3) |
|
|
(4) |
|
Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:
|
Significant Unobservable Inputs |
|
Position |
|
Change to Input |
|
Impact on Fair Value Measurement |
|
Market price |
|
Buy |
|
Increase (decrease) |
|
Gain (loss) |
|
Market price |
|
Sell |
|
Increase (decrease) |
|
Loss (gain) |
|
Price volatility |
|
Buy |
|
Increase (decrease) |
|
Gain (loss) |
|
Price volatility |
|
Sell |
|
Increase (decrease) |
|
Loss (gain) |
Nonrecurring Fair Value Measurements
Dominion Energy
See Note 3 for information on the nonrecurring fair value measurement associated with the acquisition of Birdseye. See Note 9 for information regarding nonrecurring fair value measurements associated with Dominion Energy’s retained noncontrolling interest in Cove Point, charges related to Fowler Ridge and Dominion Energy’s retained noncontrolling interest in businesses and assets contributed to Wrangler. See Note 10 for information regarding an impairment charge recorded associated with non-wholly-owned nonregulated solar facilities in partnerships.
In 2021, Dominion Energy recorded a charge of $
In 2021, Dominion Energy recorded a charge of $
124
Recurring Fair Value Measurements
Fair value measurements are separately disclosed by level within the fair value hierarchy with a separate reconciliation of fair value measurements categorized as Level 3. Fair value disclosures for assets held in Dominion Energy’s pension and other postretirement benefit plans are presented in Note 22.
Dominion Energy
The following table presents Dominion Energy’s assets and liabilities that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions:
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Foreign currency exchange rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Investments(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Fixed income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Cash equivalents and other |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total liabilities |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Investments(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Fixed income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Cash equivalents and other |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total liabilities |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
125
The following table presents the net change in Dominion Energy’s assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category:
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Total realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenue |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Electric fuel and other energy-related purchases |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Purchased gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in regulatory assets/liabilities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Settlements |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Purchases |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Sales |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Transfers out of Level 3 |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Balance at December 31, |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
There were
Virginia Power
The following table presents Virginia Power’s quantitative information about Level 3 fair value measurements at December 31, 2021. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility.
|
|
|
Fair Value (millions) |
|
|
Valuation Techniques |
|
Unobservable Input |
|
|
Range |
|
Weighted Average(1) |
|
||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical and financial forwards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas(2) |
|
$ |
|
|
|
Discounted cash flow |
|
Market price (per Dth) |
(3) |
|
|
|
|
( |
) |
|
FTRs |
|
|
|
|
|
Discounted cash flow |
|
Market price (per MWh) |
(3) |
|
|
|
|
|
|
|
Physical options: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
|
|
|
|
Option model |
|
Market price (per Dth) |
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price volatility |
(4) |
|
|
|
|
|
% |
|
Total assets |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Physical and financial forwards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas(2) |
|
$ |
|
|
|
Discounted cash flow |
|
Market price (per Dth) |
(3) |
|
|
|
|
( |
) |
|
FTRs |
|
|
|
|
|
Discounted cash flow |
|
Market price (per MWh) |
(3) |
|
|
|
|
|
|
|
Total liabilities |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Averages weighted by volume. |
|
(2) |
Includes basis. |
|
(3) |
Represents market prices beyond defined terms for Levels 1 and 2. |
|
(4) |
Represents volatilities unrepresented in published markets. |
126
Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:
|
Significant Unobservable Inputs |
|
Position |
|
Change to Input |
|
Impact on Fair Value Measurement |
|
Market price |
|
Buy |
|
Increase (decrease) |
|
Gain (loss) |
|
Market price |
|
Sell |
|
Increase (decrease) |
|
Loss (gain) |
|
Price volatility |
|
Buy |
|
Increase (decrease) |
|
Gain (loss) |
|
Price volatility |
|
Sell |
|
Increase (decrease) |
|
Loss (gain) |
The following table presents Virginia Power’s assets and liabilities that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions:
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Foreign currency exchange rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Investments(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Fixed income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Cash equivalents and other |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total liabilities |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Investments(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Fixed income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Cash equivalents and other |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total liabilities |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
127
The following table presents the net change in Virginia Power’s assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category:
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Total realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric fuel and other energy-related purchases |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Included in regulatory assets/liabilities |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Settlements |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Balance at December 31, |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
There were
Fair Value of Financial Instruments
Substantially all of the Companies’ financial instruments are recorded at fair value, with the exception of the instruments described below, which are reported at historical cost. Estimated fair values have been determined using available market information and valuation methodologies considered appropriate by management. The carrying amount of cash, restricted cash and equivalents, customer and other receivables, affiliated receivables, short-term debt, affiliated current borrowings, payables to affiliates and accounts payable are representative of fair value because of the short-term nature of these instruments.
|
December 31, |
|
2021 |
|
|
2020 |
|
||||||||||
|
|
|
Carrying Amount |
|
|
Estimated Fair Value(1) |
|
|
Carrying Amount |
|
|
Estimated Fair Value(1) |
|
||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt(2)(3) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Supplemental 364-Day credit facility borrowings |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Junior subordinated notes(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia Power |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt(4) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
(4) |
|
NOTE 7. DERIVATIVES AND HEDGE ACCOUNTING ACTIVITIES
See Note 2 for the Companies’ accounting policies, objectives, and strategies for using derivative instruments. See Note 6 for further information about fair value measurements and associated valuation methods for derivatives.
Derivative assets and liabilities are presented gross on the Companies’ Consolidated Balance Sheets. Dominion Energy and Virginia Power’s derivative contracts include both over-the-counter transactions and those that are executed on an exchange or other trading platform (exchange contracts) and centrally cleared. Over-the-counter contracts are bilateral contracts that are transacted directly with a third party. Exchange contracts utilize a financial intermediary, exchange or clearinghouse to enter, execute or clear the transactions. Certain over-the-counter and exchange contracts contain contractual rights of setoff through master netting arrangements, derivative clearing agreements and contract default provisions. In addition, the contracts are subject to conditional rights of setoff through counterparty nonperformance, insolvency or other conditions.
In general, most over-the-counter transactions and all exchange contracts are subject to collateral requirements. Types of collateral for over-the-counter and exchange contracts include cash, letters of credit, and in some cases, other forms of security, none of which are subject to restrictions. Cash collateral is used in the table below to offset derivative assets and liabilities. In February 2022, Dominion Energy entered into contracts representing offsetting positions to certain existing exchange contracts with collateral requirements as
128
well as new over-the-counter transactions that are not subject to collateral requirements. These contracts resulted in positions which limit the risk of increased cash collateral requirements. Certain accounts receivable and accounts payable recognized on the Companies’ Consolidated Balance Sheets, letters of credit and other forms of securities, as well as certain other long-term debt, all of which are not included in the tables below, are subject to offset under master netting or similar arrangements and would reduce the net exposure. See Note 18 for further information regarding other long-term debt, in the form of restructured derivatives, subject to offset under master netting or similar agreements. See Note 24 for further information regarding credit-related contingent features for the Companies derivative instruments.
Dominion Energy
Balance Sheet Presentation
The tables below present Dominion Energy’s derivative asset and liability balances by type of financial instrument, if the gross amounts recognized in its Consolidated Balance Sheets were netted with derivative instruments and cash collateral received or paid:
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||||||||||||||||||||||||||
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
||||||||||||||||||||||||||
|
|
|
Gross Assets Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Received |
|
|
Net Amounts |
|
|
Gross Assets Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Received |
|
|
Net Amounts |
|
||||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Exchange |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Foreign currency exchange rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total derivatives, subject to a master netting or similar arrangement |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
(1) |
Excludes $ |
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||||||||||||||||||||||||||
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
||||||||||||||||||||||||||
|
|
|
Gross Liabilities Presented in the Consolidated Balance Sheet |
|
|
Financial Instruments |
|
|
Cash Collateral Paid |
|
|
Net Amounts |
|
|
Gross Liabilities Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Paid |
|
|
Net Amounts |
|
||||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives, subject to a master netting or similar arrangement |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Excludes $ |
129
Volumes
The following table presents the volume of Dominion Energy’s derivative activity as of December 31, 2021. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of their long and short positions.
|
|
|
Current |
|
|
Noncurrent |
|
||
|
Natural Gas (bcf): |
|
|
|
|
|
|
|
|
|
Fixed price(1) |
|
|
|
|
|
|
|
|
|
Basis |
|
|
|
|
|
|
|
|
|
Electricity (MWh in millions): |
|
|
|
|
|
|
|
|
|
Fixed price |
|
|
|
|
|
|
|
|
|
FTRs |
|
|
|
|
|
|
— |
|
|
Interest rate(2) (in millions) |
|
$ |
|
|
|
$ |
|
|
|
Foreign currency exchange rate(2) (in millions) |
|
|
|
|
|
|
||
(1)
|
(2) |
|
AOCI
The following table presents selected information related to losses on cash flow hedges included in AOCI in Dominion Energy’s Consolidated Balance Sheets at December 31, 2021:
|
|
|
AOCI After-Tax |
|
|
Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax |
|
|
Maximum Term |
||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
The amounts that will be reclassified from AOCI to earnings will generally be offset by the recognition of the hedged transactions (e.g., interest rate payments) in earnings, thereby achieving the realization of prices contemplated by the underlying risk management strategies and will vary from the expected amounts presented above as a result of changes in interest rates.
Fair Value Hedges
For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings and presented in the same line item. There were
The following table presents the amounts recorded on the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges all of which related to discontinued hedging relationships at both December 31, 2021 and 2020, respectively:
|
|
|
Carrying Amount of the Hedged Asset (Liability) |
|
|
Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Assets (Liabilities) |
|
||||||||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
130
Fair Value and Gains and Losses on Derivative Instruments
The following tables present the fair values of Dominion Energy’s derivatives and where they are presented in its Consolidated Balance Sheets:
|
|
|
Fair Value – Derivatives under Hedge Accounting |
|
|
Fair Value – Derivatives not under Hedge Accounting |
|
|
Total Fair Value |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange rate |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total current derivative assets(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange rate |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total noncurrent derivative assets(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current derivative liabilities(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent derivative liabilities(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
At December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total current derivative assets(1) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent derivative assets(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current derivative liabilities(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent derivative liabilities(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
131
|
(2) |
|
|
(3) |
|
|
(4) |
|
The following tables present the gains and losses on Dominion Energy’s derivatives, as well as where the associated activity is presented in its Consolidated Balance Sheets and Statements of Income:
|
Derivatives in cash flow hedging relationships |
|
Amount of Gain (Loss) Recognized in AOCI on Derivatives(1) |
|
|
Amount of Gain (Loss) Reclassified From AOCI to Income |
|
|
Increase (Decrease) in Derivatives Subject to Regulatory Treatment(2) |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity(3): |
|
|
|
|
|
$ |
( |
) |
|
|
|
|
|
Interest rate(4) |
|
$ |
|
|
|
|
( |
) |
|
$ |
|
|
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Year Ended December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
Purchased gas |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
Interest rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and related charges |
|
|
|
|
|
$ |
( |
) |
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total interest rate |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Foreign currency exchange rate(5) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Year Ended December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
Purchased gas |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commodity |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
Interest rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and related charges |
|
|
|
|
|
$ |
( |
) |
|
|
|
|
|
Discontinued operations |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total interest rate |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Foreign currency exchange rate(5) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
Total |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
(4) |
|
|
(5) |
|
|
|
132
|
Derivatives not designated as hedging instruments |
|
Amount of Gain (Loss) Recognized in Income on Derivatives(1) |
|
|||||||||
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Purchased gas |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Electric fuel and other energy-related purchases |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Discontinued operations |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Interest rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and related charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Foreign currency exchange rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Total |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
(1) |
|
Virginia Power
Balance Sheet Presentation
The tables below present Virginia Power’s derivative asset and liability balances by type of financial instrument, if the gross amounts recognized in its Consolidated Balance Sheets were netted with derivative instruments and cash collateral received or paid:
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||||||||||||||||||||||||||
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
||||||||||||||||||||||||||
|
|
|
Gross Assets Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Received |
|
|
Net Amounts |
|
|
Gross Assets Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Received |
|
|
Net Amounts |
|
||||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Exchange |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives, subject to a master netting or similar arrangement |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Excludes $ |
133
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||||||||||||||||||||||||||
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheet |
|
||||||||||||||||||||||||||
|
|
|
Gross Liabilities Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Paid |
|
|
Net Amounts |
|
|
Gross Liabilities Presented in the Consolidated Balance Sheet(1) |
|
|
Financial Instruments |
|
|
Cash Collateral Paid |
|
|
Net Amounts |
|
||||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
Exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Interest rate contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total derivatives, subject to a master netting or similar arrangement |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
(1) |
Excludes $ |
Volumes
The following table presents the volume of Virginia Power’s derivative activity at December 31, 2021. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of their long and short positions.
|
|
|
Current |
|
|
Noncurrent |
|
||
|
Natural Gas (bcf): |
|
|
|
|
|
|
|
|
|
Fixed price(1) |
|
|
|
|
|
|
|
|
|
Basis |
|
|
|
|
|
|
|
|
|
Electricity (MWh in millions): |
|
|
|
|
|
|
|
|
|
Fixed price |
|
|
|
|
|
|
|
|
|
FTRs |
|
|
|
|
|
|
— |
|
|
Interest rate(2) (in millions) |
|
$ |
|
|
|
$ |
|
|
|
Foreign currency exchange rate(2) (in millions) |
|
|
|
|
|
|
||
|
(1) |
Includes options. |
|
(2) |
Maturity is determined based on final settlement period. |
AOCI
The following table presents selected information related to losses on cash flow hedges included in AOCI in Virginia Power’s Consolidated Balance Sheets at December 31, 2021:
|
|
|
AOCI After-Tax |
|
|
Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax |
|
|
Maximum Term |
||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
The amounts that will be reclassified from AOCI to earnings will generally be offset by the recognition of the hedged transactions (e.g., interest payments) in earnings, thereby achieving the realization of interest rates contemplated by the underlying risk management strategies and will vary from the expected amounts presented above as a result of changes in interest rates.
134
Fair Value and Gains and Losses on Derivative Instruments
The following tables present the fair values of Virginia Power’s derivatives and where they are presented in its Consolidated Balance Sheets:
|
|
|
Fair Value – Derivatives under Hedge Accounting |
|
|
Fair Value – Derivatives not under Hedge Accounting |
|
|
Total Fair Value |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Foreign currency exchange rate |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total current derivative assets(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Foreign currency exchange rate |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total noncurrent derivative assets(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total current derivative liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total noncurrent derivatives liabilities(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
At December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
Total current derivative assets(1) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total noncurrent derivative assets(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total current derivative liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Interest rate |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total noncurrent derivatives liabilities(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Current derivative assets are presented in other current assets in Virginia Power’s Consolidated Balance Sheets. |
|
(2) |
Noncurrent derivative assets are presented in other deferred charges and other assets in Virginia Power’s Consolidated Balance Sheets. |
|
(3) |
|
135
The following tables present the gains and losses on Virginia Power’s derivatives, as well as where the associated activity is presented in its Consolidated Balance Sheets and Statements of Income:
|
Derivatives in cash flow hedging relationships |
|
Amount of Gain (Loss) Recognized in AOCI on Derivatives(1) |
|
|
Amount of Gain (Loss) Reclassified From AOCI to Income |
|
|
Increase (Decrease) in Derivatives Subject to Regulatory Treatment(2) |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate(3) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Year Ended December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate(3) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Year Ended December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate(3) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
Derivatives not designated as hedging instruments |
|
Amount of Gain (Loss) Recognized in Income on Derivatives(1) |
|
|||||||||
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Electric fuel and other energy-related purchases |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
(1) |
|
136
NOTE 8. EARNINGS PER SHARE
The following table presents the calculation of Dominion Energy’s basic and diluted EPS:
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions, except EPS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Dominion Energy from continuing operations |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Preferred stock dividends (see Note 19) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net income attributable to Dominion Energy from continuing operations - Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of Series A Preferred Stock |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Net income attributable to Dominion Energy from continuing operations - Diluted |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Net income (loss) attributable to Dominion Energy from discontinued operations - Basic & Diluted |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares of common stock outstanding – Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of dilutive securities(1) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Average shares of common stock outstanding – Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS from continuing operations - Basic |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
EPS from discontinued operations - Basic |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
EPS attributable to Dominion Energy - Basic |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS from continuing operations - Diluted |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
EPS from discontinued operations - Diluted |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
EPS attributable to Dominion Energy - Diluted |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
(1) |
Dilutive securities for 2021 consist primarily of stock expected to be issued to satisfy the obligation under a settlement agreement with the SCDOR (applying the if converted method) as well as forward sales agreements entered into in November 2021 (applying the treasury stock method). See Notes 20 and 23 for additional information. |
The 2019 Equity Units, the Q-Pipe Transaction deposit, prior to being settled in cash in July 2021 and the 2016 Equity Units, prior to being settled via stock issuances in August 2019, are potentially dilutive instruments. See Notes 3, 18 and 19 for additional information.
The forward stock purchase contracts included within the 2019 Equity Units were excluded from the calculation of diluted EPS from continuing operations for the years ended December 31, 2021, 2020 and 2019 as the dilutive stock price threshold was not met. The Series A Preferred Stock included within the 2019 Equity Units is excluded from the effect of dilutive securities within diluted EPS from continuing operations, but a fair value adjustment is reflected within net income attributable to Dominion Energy from continuing operations for the calculation of diluted EPS from continuing operations for the years ended December 31, 2020 and 2019, based upon the expectation that the conversion will be settled in cash rather than through the issuance of Dominion Energy common stock. As described in Note 19, effective November 2021 any settlement of the conversion up to $1,000 per share is payable in cash, and any amount in excess of $1,000 per share may be settled in cash, common stock or a combination thereof. For the year ended December 31, 2021, a fair value adjustment related to the Series A Preferred Stock included within the 2019 Equity Units is excluded from the calculation of diluted EPS from continuing operations, as such fair value adjustment was not dilutive during the period.
The impact of settling the deposit associated with the Q-Pipe Transaction in shares is excluded from the calculation for the years ending December 31, 2021 and 2020 based upon the expectation Dominion Energy would settle in cash, which occurred in July 2021, rather than through the issuance of shares of Dominion Energy common stock.
The 2016 Equity Units were potentially dilutive securities but were excluded from the calculation of diluted EPS from continuing operations for year ended December 31, 2019 as the dilutive stock price threshold was not met.
137
NOTE 9. INVESTMENTS
Dominion Energy
Equity and Debt Securities
Rabbi Trust Securities
Equity and fixed income securities and cash equivalents in Dominion Energy’s rabbi trusts and classified as trading totaled $
Decommissioning Trust Securities
Dominion Energy holds equity and fixed income securities, insurance contracts and cash equivalents in nuclear decommissioning trust funds to fund future decommissioning costs for its nuclear plants.
|
|
|
Amortized Cost |
|
|
Total Unrealized Gains |
|
|
Total Unrealized Losses |
|
|
Allowance for Credit Losses |
|
|
Fair Value |
|
|||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
$ |
|
|
|
Fixed income securities:(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
$ |
— |
|
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
Common/collective trust funds |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Insurance contracts |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Cash equivalents and other(3) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
(4) |
$ |
— |
|
|
$ |
|
|
|
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
$ |
|
|
|
Fixed income securities:(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
$ |
— |
|
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
Common/collective trust funds |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Insurance contracts |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Cash equivalents and other(3) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
(4) |
$ |
— |
|
|
$ |
|
|
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
(4) |
|
The portion of unrealized gains and losses that relates to equity securities held within Dominion Energy’s nuclear decommissioning trusts is summarized below:
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) recognized during the period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Less: Net gains recognized during the period on securities sold during the period |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Unrealized gains (losses) recognized during the period on securities still held at period end(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Included in other income and the nuclear decommissioning trust regulatory liability as discussed in Note 2. |
The fair value of Dominion Energy’s fixed income securities with readily determinable fair values held in nuclear decommissioning trust funds at December 31, 2021 by contractual maturity is as follows:
138
|
|
|
Amount |
|
|
|
(millions) |
|
|
|
|
|
Due in one year or less |
|
$ |
|
|
|
Due after one year through five years |
|
|
|
|
|
Due after five years through ten years |
|
|
|
|
|
Due after ten years |
|
|
|
|
|
Total |
|
$ |
|
|
Presented below is selected information regarding Dominion Energy’s equity and fixed income securities with readily determinable fair values held in nuclear decommissioning trust funds.
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Realized gains(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized losses(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Virginia Power
Virginia Power holds equity and fixed income securities and cash equivalents in nuclear decommissioning trust funds to fund future decommissioning costs for its nuclear plants.
|
|
|
Amortized Cost |
|
|
Total Unrealized Gains |
|
|
Total Unrealized Losses |
|
|
Allowance for Credit Losses |
|
|
Fair Value |
|
|||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
$ |
|
|
|
Fixed income securities:(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
$ |
— |
|
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
Common/collective trust funds |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Cash equivalents and other(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
(4) |
$ |
|
|
|
$ |
|
|
|
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
$ |
|
|
|
Fixed income securities:(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt instruments |
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Common/collective trust funds |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Cash equivalents and other(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
(4) |
$ |
— |
|
|
$ |
|
|
|
(1) |
|
|
(2) |
Unrealized gains and losses on fixed income securities are included in AOCI and the nuclear decommissioning trust regulatory liability as discussed in Note 2. Changes in allowance for credit losses are included in other income. |
|
(3) |
|
|
(4) |
|
139
The portion of unrealized gains and losses that relates to equity securities held within Virginia Power’s nuclear decommissioning trusts is summarized below:
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) recognized during the period |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Less: Net gains recognized during the period on securities sold during the period |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Unrealized gains (losses) recognized during the period on securities still held at end of period (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
The fair value of Virginia Power’s fixed income securities with readily determinable fair values held in nuclear decommissioning trust funds at December 31, 2021, by contractual maturity is as follows:
|
|
|
Amount |
|
|
|
(millions) |
|
|
|
|
|
Due in one year or less |
|
$ |
|
|
|
Due after one year through five years |
|
|
|
|
|
Due after five years through ten years |
|
|
|
|
|
Due after ten years |
|
|
|
|
|
Total |
|
$ |
|
|
Presented below is selected information regarding Virginia Power’s equity and fixed income securities with readily determinable fair values held in nuclear decommissioning trust funds.
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Realized gains(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized losses(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes realized gains and losses recorded to the nuclear decommissioning trust regulatory liability as discussed in Note 2. |
EQUITY METHOD INVESTMENTS
Investments that Dominion Energy accounts for under the equity method of accounting are as follows:
|
|
|
|
|
|
|
Investment |
|
|
|
|||||
|
Company |
|
Ownership% |
|
|
Balance |
|
|
Description |
||||||
|
As of December 31, |
|
|
|
|
|
2021 |
|
|
2020 |
|
|
|
||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cove Point |
|
|
|
% |
|
$ |
|
|
|
$ |
|
|
|
|
|
Atlantic Coast Pipeline |
|
|
|
% |
|
|
|
|
(3) |
|
— |
|
(3) |
|
|
Wrangler |
|
|
|
% |
(2) |
|
|
|
|
|
|
|
|
|
|
Align RNG(1) |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
(1) |
Dominion Energy’s unfunded commitment to be made to Align RNG by the end of 2022 was $ |
|
(2) |
Dominion Energy’s ownership interest became |
|
(3) |
Dominion Energy’s Consolidated Balance Sheets include a liability associated with its investment in Atlantic Coast Pipeline of $ |
140
Dominion Energy recorded equity earnings on its investments of $
Cove Point
Prior to January 2019, Dominion Energy owned all of the common equity interest in Cove Point except for a preferred equity interest held by Dominion Energy Midstream (entitled to the first $
Income before income taxes recorded by Cove Point for 2021, 2020 and 2019 was $
Dominion Energy recorded distributions from Cove Point of $
All activity relating to Dominion Energy’s noncontrolling interest in Cove Point is recorded within Contracted Assets. See Note 3 for further information regarding the GT&S Transaction.
Atlantic Coast Pipeline
In September 2014, Dominion Energy, along with Duke Energy and Southern, announced the formation of Atlantic Coast Pipeline for the purpose of constructing an approximately
In March 2020, Dominion Energy completed the acquisition from Southern of its
Atlantic Coast Pipeline continues to be accounted for as an equity method investment as the power to direct the activities most significant to Atlantic Coast Pipeline is shared with Duke Energy. As a result, Dominion Energy has the ability to exercise significant influence, but not control, over the investee.
The Atlantic Coast Pipeline Project had been the subject of challenges in federal courts including, among others, challenges of the Atlantic Coast Pipeline Project’s biological opinion and incidental take statement, permits providing right of way crossings of certain federal lands, the Army Corps of Engineers 404 permit, the air permit for a compressor station at Buckingham, Virginia, and the FERC order approving the CPCN. Each of these challenges alleged non-compliance on the part of federal and state permitting authorities and adverse ecological consequences if the Atlantic Coast Pipeline Project was permitted to proceed. Since December 2018, notable developments in these challenges included a stay in December 2018 issued by the U.S. Court of Appeals for the Fourth Circuit and the same court’s July 2019 vacatur of the biological opinion and incidental take statement (which stay and subsequent vacatur halted most project construction activity), the U.S. Court of Appeals for the Fourth Circuit decisions vacating the permits to cross certain federal forests and the air permit for a compressor station at Buckingham, Virginia, the U.S. Court of Appeals for the Fourth Circuit’s remand to the Army Corps of Engineers of Atlantic Coast Pipeline’s Huntington District 404 verification and the U.S.
141
Court of Appeals for the Fourth Circuit’s remand to the National Park Service of Atlantic Coast Pipeline’s Blue Ridge Parkway right-of-way. In June 2019, the Solicitor General of the U.S. and Atlantic Coast Pipeline filed petitions requesting that the Supreme Court of the U.S. hear the case regarding the Appalachian Trail crossing and in June 2020, the Supreme Court of the U.S. ruled in favor of the Atlantic Coast Pipeline, reversing the lower court’s decision and remanding the case back to the U.S. Court of Appeals for the Fourth Circuit.
The project also faced new and serious challenges from uncertainty related to NWP 12, specifically, from the decision of the U.S. District Court for the District of Montana in April 2020 vacating an NWP 12 issued by the Army Corps of Engineers, including among other things gas pipelines, followed by a U.S. Court of Appeals for the Ninth Circuit ruling in May 2020 denying a stay of that decision. In July 2020, the Supreme Court of the U.S. issued an order allowing other new oil and gas pipeline projects to use the NWP 12 process pending appeal to the U.S. Court of Appeals for the Ninth Circuit; however, that did not decrease the uncertainty associated with an eventual ruling. The Montana district court decision was viewed as likely to prompt similar challenges in other federal circuit courts related to permits issued under NWP 12, including for the Atlantic Coast Pipeline Project.
In July 2020, as a result of ongoing permitting delays, growing legal uncertainties and the need to incur significant capital expenditures to maintain project timing before such uncertainties could be resolved, Dominion Energy and Duke Energy announced the cancellation of the Atlantic Coast Pipeline Project.
Dominion Energy recorded equity method earnings (losses) of $(
In October 2017, Dominion Energy entered into a guarantee agreement to support a portion of Atlantic Coast Pipeline’s obligation under a $
Dominion Energy recorded contributions of $
Dominion Energy expects to incur additional losses from Atlantic Coast Pipeline as it completes wind-down activities. While Dominion Energy is unable to precisely estimate the amounts to be incurred by Atlantic Coast Pipeline, the portion of such amounts attributable to Dominion Energy is not expected to be material to Dominion Energy’s results of operations, financial position or statement of cash flows.
DETI provided services to Atlantic Coast Pipeline which totaled $
All activity relating to Atlantic Coast Pipeline is recorded within the Corporate and Other segment.
Blue Racer
In December 2018, Dominion Energy sold its
All activity relating to Blue Racer is recorded within the Corporate and Other segment.
Fowler Ridge
142
In September 2020, Dominion Energy sold its
All activity relating to Fowler Ridge, unless otherwise specified, is recorded within Contracted Assets.
Wrangler
In September 2019, Dominion Energy entered into an agreement to form Wrangler, a partnership with Interstate Gas Supply, Inc. Wrangler will operate a nonregulated natural gas retail energy marketing business with Dominion Energy contributing its nonregulated retail energy marketing operations and Interstate Gas Supply, Inc. contributing cash. At December 31, 2021 Dominion Energy has a 15% noncontrolling ownership interest in Wrangler, which is accounted for as an equity method investment as Dominion Energy has the ability to exercise significant influence, but not control, over the investee.
The initial contribution, consisting of SEMI, closed in December 2019 for which Dominion Energy received $
The second contribution, consisting of certain nonregulated natural gas retail energy contracts, closed in November 2020 for which Dominion Energy received $
The final contribution, consisting of Dominion Energy’s remaining nonregulated natural gas retail energy marketing operations, closed in December 2021 for which Dominion Energy received $
Subsequently in December 2021, Dominion Energy sold
At December 31, 2020, $
All activity relating to Wrangler is recorded within the Corporate and Other segment.
143
Dominion Privatization
In
All activity relating to Dominion Privatization will be recorded within Dominion Energy Virginia.
144
NOTE 10. PROPERTY, PLANT AND EQUIPMENT
Major classes of property, plant and equipment and their respective balances for the Companies are as follows:
|
At December 31, |
|
2021 |
|
|
2020 |
|
||
|
(millions) |
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
Utility: |
|
|
|
|
|
|
|
|
|
Generation |
|
$ |
|
|
|
$ |
|
|
|
Transmission |
|
|
|
|
|
|
|
|
|
Distribution |
|
|
|
|
|
|
|
|
|
Storage |
|
|
|
|
|
|
|
|
|
Nuclear fuel |
|
|
|
|
|
|
|
|
|
General and other |
|
|
|
|
|
|
|
|
|
Plant under construction |
|
|
|
|
|
|
|
|
|
Total utility |
|
|
|
|
|
|
|
|
|
Non-jurisdictional - including plant under construction |
|
|
|
|
|
|
|
|
|
Nonutility: |
|
|
|
|
|
|
|
|
|
Nonregulated generation-nuclear |
|
|
|
|
|
|
|
|
|
Nonregulated generation-solar |
|
|
|
|
|
|
|
|
|
Nuclear fuel |
|
|
|
|
|
|
|
|
|
Other-including plant under construction |
|
|
|
|
|
|
|
|
|
Total nonutility |
|
|
|
|
|
|
|
|
|
Total property, plant and equipment |
|
$ |
|
|
|
$ |
|
|
|
Virginia Power |
|
|
|
|
|
|
|
|
|
Utility: |
|
|
|
|
|
|
|
|
|
Generation |
|
$ |
|
|
|
$ |
|
|
|
Transmission |
|
|
|
|
|
|
|
|
|
Distribution |
|
|
|
|
|
|
|
|
|
Nuclear fuel |
|
|
|
|
|
|
|
|
|
General and other |
|
|
|
|
|
|
|
|
|
Plant under construction |
|
|
|
|
|
|
|
|
|
Total utility |
|
|
|
|
|
|
|
|
|
Non-jurisdictional - including plant under construction |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total property, plant and equipment |
|
$ |
|
|
|
$ |
|
|
145
Jointly-Owned Power Stations
The Companies proportionate share of jointly-owned power stations at December 31, 2021 is as follows:
|
|
|
Bath County Pumped Storage Station(1) |
|
|
North Anna Units 1 and 2(1) |
|
|
Clover Power Station(1) |
|
|
Millstone Unit 3(2) |
|
|
Summer Unit 1 (2) |
|
|||||
|
(millions, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership interest |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Plant in service |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Nuclear fuel |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Accumulated amortization of nuclear fuel |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Plant under construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
(2) |
|
The co-owners are obligated to pay their share of all future construction expenditures and operating costs of the jointly-owned facilities in the same proportion as their respective ownership interest. The Companies report their share of operating costs in the appropriate operating expense (electric fuel and other energy-related purchases, other operations and maintenance, depreciation, depletion and amortization and other taxes, etc.) in the Consolidated Statements of Income.
Acquisition of Solar Projects
The following table presents acquisitions by Virginia Power of solar projects. Virginia Power has claimed or expects to claim federal investment tax credits on the projects.
|
Project Name |
|
Date Agreement Entered |
|
Date Agreement Closed |
|
Project Location |
|
Project Cost (millions(1)] |
|
|
Date of Commercial Operations |
|
MW Capacity |
|
||
|
Gutenberg |
|
|
|
|
|
North Carolina |
|
|
|
|
|
|
|
|
|
|
|
Gloucester |
|
|
|
|
|
Virginia |
|
|
|
|
|
|
|
|
|
|
|
Grasshopper(2) |
|
|
|
|
|
Virginia |
|
|
|
|
|
|
|
|
|
|
|
Chestnut |
|
|
|
|
|
North Carolina |
|
|
|
|
|
|
|
|
|
|
|
Ft. Powhatan |
|
|
|
|
|
Virginia |
|
|
|
|
|
|
|
|
|
|
|
Belcher(3) |
|
|
|
|
|
Virginia |
|
|
|
|
|
|
|
|
|
|
|
Bedford |
|
|
|
|
|
Virginia |
|
|
|
|
|
|
|
|
|
|
|
Maplewood |
|
|
|
|
|
Virginia |
|
|
|
|
|
|
|
|
|
|
|
Rochambeau |
|
|
|
|
|
Virginia |
|
|
|
|
|
|
|
|
|
|
|
Pumpkinseed |
|
|
|
|
|
Virginia |
|
|
|
|
|
|
|
|
|
|
|
Bookers Mill |
|
|
|
|
|
Virginia |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
(2) |
Referred to as Butcher Creek once placed in service. |
|
(3) |
Referred to as Desper once placed in service. |
146
The following table presents acquisitions by Dominion Energy of solar projects in addition to the Virginia Power solar projects presented above. Dominion Energy has claimed or expects to claim federal investment tax credits on the projects.
|
Project Name |
|
Date Agreement Entered |
|
Date Agreement Closed |
|
Project Location |
|
Project Cost (millions)(1) |
|
|
Date of Commercial Operations |
|
MW Capacity |
|
||
|
Greensville |
|
|
|
|
|
Virginia |
|
$ |
|
|
|
|
|
|
|
|
|
Myrtle |
|
|
|
|
|
Virginia |
|
|
|
|
|
|
|
|
|
|
|
Seabrook |
|
|
|
|
|
South Carolina |
|
|
|
|
|
|
|
|
|
|
|
Wilkinson |
|
|
|
|
|
North Carolina |
|
|
|
|
|
|
|
|
|
|
|
Blackville |
|
|
|
|
|
South Carolina |
|
|
|
|
|
|
|
|
|
|
|
Denmark |
|
|
|
|
|
South Carolina |
|
|
|
|
|
|
|
|
|
|
|
Yemassee |
|
|
|
|
|
South Carolina |
|
|
|
|
|
|
|
|
|
|
|
Trask |
|
|
|
|
|
South Carolina |
|
|
|
|
|
|
|
|
|
|
|
Hardin I |
|
|
|
|
|
Ohio |
|
|
|
|
|
(2) |
|
|
|
|
|
Madison |
|
|
|
|
|
Virginia |
|
|
|
|
|
|
|
|
|
|
|
Hardin II |
|
|
|
Expected 2022 |
|
Ohio |
|
|
|
|
|
|
|
|
|
|
(1) Includes acquisition costs.
(2)
In addition to the facilities discussed above, Dominion Energy has also entered into various agreements to install solar facilities, primarily at schools in Virginia. As of December 31, 2021, Dominion Energy had placed in service solar facilities with an aggregate generation capacity of
Acquisition of Gathering and Processing Assets
In March 2020, Wexpro closed on an agreement with a natural gas gathering systems operator to purchase existing natural gas gathering systems including pipelines, compressors and dehydration equipment for total consideration of $
In November 2021, Wexpro closed on an agreement with a natural gas gathering systems operator to purchase an existing natural gas gathering system in Wyoming including pipelines, compressors and dehydration equipment for total consideration of $
Non-Wholly-Owned Nonregulated Solar Facilities
Sale to Terra Nova Renewable Partners
In August 2021, Dominion Energy entered into an agreement with Terra Nova Renewable Partners to sell SBL Holdco, which held Dominion Energy’s
Sale to Clearway
In August 2021, Dominion Energy entered an agreement with Clearway to sell its
Impairment
In the third quarter of 2020, Dominion Energy performed a strategic review of its long-term intentions for its contracted nonregulated solar generation assets in partnerships outside of its core electric service territories in consideration of the impact of the VCEA and Dominion Energy’s decision to sell substantially all of its gas transmission and storage operations. Based on an evaluation of
147
Dominion Energy’s interests in these long-lived assets for recoverability under a probability weighted approach, Dominion Energy determined the assets were impaired. As a result of this evaluation, Dominion Energy recorded a charge of $
Virginia Power CCRO Utilization
In 2021, Virginia Power wrote off $
NOTE 11. GOODWILL AND INTANGIBLE ASSETS
Goodwill
|
|
|
Dominion Energy Virginia |
|
|
Gas Distribution |
|
|
Dominion Energy South Carolina |
|
|
Contracted Assets |
|
|
Corporate and Other |
|
Total |
|
||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
Contribution to Wrangler(2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
( |
) |
|
Balance at December 31, 2020(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
$ |
|
|
|
Acquisition of Birdseye (3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
Balance at December 31, 2021(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
$ |
|
|
(1)
(2)
(3)
Other Intangible Assets
The Companies’ other intangible assets are subject to amortization over their estimated useful lives. Dominion Energy’s amortization expense for intangible assets was $
The components of intangible assets are as follows:
|
|
|
2021 |
|
|
2020 |
|
||||||||||
|
At December 31, |
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software, licenses and other(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Virginia Power |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software, licenses and other(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Includes $ |
Annual amortization expense for these intangible assets is estimated to be as follows:
148
|
|
|
2022 |
|
2023 |
|
2024 |
|
2025 |
|
2026 |
|
|||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Virginia Power |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
149
NOTE 12. REGULATORY ASSETS AND LIABILITIES
Regulatory assets and liabilities include the following:
|
At December 31, |
|
2021 |
|
|
2020 |
|
||
|
(millions) |
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
Regulatory assets: |
|
|
|
|
|
|
|
|
|
Deferred cost of fuel used in electric generation(1) |
|
$ |
|
|
|
$ |
— |
|
|
Deferred project costs and DSM programs for gas utilities(2) |
|
|
|
|
|
|
|
|
|
Unrecovered gas costs(3) |
|
|
|
|
|
|
|
|
|
Deferred rider costs for Virginia electric utility(4) |
|
|
|
|
|
|
|
|
|
Ashpond and landfill closure costs(5) |
|
|
|
|
|
|
— |
|
|
Deferred nuclear refueling outage costs(6) |
|
|
|
|
|
|
|
|
|
NND Project costs(7) |
|
|
|
|
|
|
|
|
|
PJM transmission rates(8) |
|
|
|
|
|
|
|
|
|
Deferred early plant retirement charges(9) |
|
|
|
|
|
|
— |
|
|
Derivatives(10) |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Regulatory assets-current |
|
|
|
|
|
|
|
|
|
Unrecognized pension and other postretirement benefit costs(11) |
|
|
|
|
|
|
|
|
|
Deferred rider costs for Virginia electric utility(4) |
|
|
|
|
|
|
|
|
|
Deferred project costs for gas utilities(2) |
|
|
|
|
|
|
|
|
|
Interest rate hedges(12) |
|
|
|
|
|
|
|
|
|
AROs and related funding(13) |
|
|
|
|
|
|
|
|
|
Cost of reacquired debt(14) |
|
|
|
|
|
|
|
|
|
NND Project costs(7) |
|
|
|
|
|
|
|
|
|
Ash pond and landfill closure costs(5) |
|
|
|
|
|
|
|
|
|
Deferred cost of fuel used in electric generation(1) |
|
|
|
|
|
|
— |
|
|
Deferred early plant retirement charges(9) |
|
|
|
|
|
|
— |
|
|
Other |
|
|
|
|
|
|
|
|
|
Regulatory assets-noncurrent |
|
|
|
|
|
|
|
|
|
Total regulatory assets |
|
$ |
|
|
|
$ |
|
|
|
Regulatory liabilities: |
|
|
|
|
|
|
|
|
|
Deferred cost of fuel used in electric generation(1) |
|
$ |
— |
|
|
$ |
|
|
|
Provision for future cost of removal and AROs(15) |
|
|
|
|
|
|
|
|
|
Reserve for refunds and rate credits to electric utility customers(16) |
|
|
|
|
|
|
|
|
|
Reserve for future credits to Virginia electric customers(17) |
|
|
— |
|
|
|
|
|
|
Income taxes refundable through future rates(18) |
|
|
|
|
|
|
|
|
|
Monetization of guarantee settlement(19) |
|
|
|
|
|
|
|
|
|
Commodity derivatives(10) |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Regulatory liabilities-current |
|
|
|
|
|
|
|
|
|
Income taxes refundable through future rates(18) |
|
|
|
|
|
|
|
|
|
Provision for future cost of removal and AROs(15) |
|
|
|
|
|
|
|
|
|
Nuclear decommissioning trust(20) |
|
|
|
|
|
|
|
|
|
Monetization of guarantee settlement(19) |
|
|
|
|
|
|
|
|
|
Reserve for refunds and rate credits to electric utility customers(16) |
|
|
|
|
|
|
|
|
|
Unrecognized pension and other postretirement benefit costs(11) |
|
|
|
|
|
|
|
|
|
Overrecovered other postretirement benefit costs(21) |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Regulatory liabilities-noncurrent |
|
|
|
|
|
|
|
|
|
Total regulatory liabilities |
|
$ |
|
|
|
$ |
|
|
|
|
(1) |
|
150
|
|
(2) |
|
|
|
(3) |
|
|
|
(4) |
|
|
|
(5) |
|
|
|
(6) |
Legislation enacted in Virginia in April 2014 requires Virginia Power to defer operation and maintenance costs incurred in connection with the refueling of any nuclear-powered generating plant. These deferred costs will be amortized over the refueling cycle, not to exceed |
|
|
(7) |
|
|
|
(8) |
Reflects current portion of amounts to be recovered through retail rates in Virginia for payments Virginia Power expects to make to PJM through 2026 under the terms of a FERC settlement agreement in May 2018 resolving a PJM cost allocation matter. |
|
|
(9) |
|
|
|
(10) |
|
|
|
(11) |
|
|
|
(12) |
|
|
|
(13) |
|
|
|
(14) |
|
|
|
(15) |
|
|
|
(16) |
|
|
|
(17) |
|
|
|
(18) |
|
|
|
(19) |
Reflects amounts to be refunded to DESC electric service customers over a |
|
|
(20) |
Primarily reflects a regulatory liability representing amounts collected from Virginia jurisdictional customers and placed in external trusts (including income, losses and changes in fair value thereon, as applicable) for the future decommissioning of Dominion Energy’s utility nuclear generation stations, in excess of the related AROs. |
|
|
(21) |
Reflects a regulatory liability for the collection of postretirement benefit costs allowed in rates in excess of expense incurred. |
151
|
At December 31, |
|
2021 |
|
|
2020 |
|
||
|
(millions) |
|
|
|
|
|
|
|
|
|
Virginia Power |
|
|
|
|
|
|
|
|
|
Regulatory assets: |
|
|
|
|
|
|
|
|
|
Deferred cost of fuel used in electric generation(1) |
|
$ |
|
|
|
$ |
— |
|
|
Deferred rider costs(2) |
|
|
|
|
|
|
|
|
|
Ash pond and landfill closure costs(3) |
|
|
|
|
|
|
— |
|
|
Deferred nuclear refueling outage costs(4) |
|
|
|
|
|
|
|
|
|
PJM transmission rates(5) |
|
|
|
|
|
|
|
|
|
Deferred early plant retirement charges(6) |
|
|
|
|
|
|
— |
|
|
Derivatives(7) |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Regulatory assets-current |
|
|
|
|
|
|
|
|
|
Deferred rider costs(2) |
|
|
|
|
|
|
|
|
|
Interest rate hedges(8) |
|
|
|
|
|
|
|
|
|
Ash pond and landfill closure costs(3) |
|
|
|
|
|
|
|
|
|
Deferred cost of fuel used in electric generation(1) |
|
|
|
|
|
|
— |
|
|
Deferred early plant retirement charges(6) |
|
|
|
|
|
|
— |
|
|
Other |
|
|
|
|
|
|
|
|
|
Regulatory assets-noncurrent |
|
|
|
|
|
|
|
|
|
Total regulatory assets |
|
$ |
|
|
|
$ |
|
|
|
Regulatory liabilities: |
|
|
|
|
|
|
|
|
|
Deferred cost of fuel used in electric generation(1) |
|
$ |
— |
|
|
$ |
|
|
|
Provision for future cost of removal(9) |
|
|
|
|
|
|
|
|
|
Reserve for refunds to Virginia electric customers(10) |
|
|
|
|
|
|
— |
|
|
Reserve for future credits to Virginia electric customers(11) |
|
|
— |
|
|
|
|
|
|
Income taxes refundable through future rates(12) |
|
|
|
|
|
|
|
|
|
Derivatives(7) |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Regulatory liabilities-current |
|
|
|
|
|
|
|
|
|
Income taxes refundable through future rates(12) |
|
|
|
|
|
|
|
|
|
Nuclear decommissioning trust(13) |
|
|
|
|
|
|
|
|
|
Provision for future cost of removal(9) |
|
|
|
|
|
|
|
|
|
Deferred cost of fuel used in electric generation(1) |
|
|
— |
|
|
|
|
|
|
Reserve for refunds to Virginia electric customers(10) |
|
|
|
|
|
|
— |
|
|
Other |
|
|
|
|
|
|
|
|
|
Regulatory liabilities-noncurrent |
|
|
|
|
|
|
|
|
|
Total regulatory liabilities |
|
$ |
|
|
|
$ |
|
|
|
|
(1) |
|
|
|
(2) |
Reflects deferrals under Virginia Power’s electric transmission FERC formula rate and the deferral of costs associated with certain current and prospective rider projects. See Note 13 for more information. |
|
|
(3) |
Primarily reflects legislation enacted in Virginia in 2019 which requires any CCR asset located at certain Virginia Power stations to be closed by removing the CCR to an approved landfill or through beneficial reuse. These deferred costs are expected to be collected over a period between 15 and |
|
|
(4) |
|
|
|
(5) |
|
|
|
(6) |
|
|
|
(7) |
For jurisdictions subject to cost-based rate regulation, changes in the fair value of derivative instruments result in the recognition of regulatory assets or regulatory liabilities as they are expected to be recovered from or refunded to customers. |
|
|
(8) |
|
|
|
(9) |
|
152
|
|
(10) |
|
|
|
(11) |
|
|
|
(12) |
|
|
|
(13) |
|
At December 31, 2021, Dominion Energy and Virginia Power regulatory assets include $
NOTE 13. REGULATORY MATTERS
Regulatory Matters Involving Potential Loss Contingencies
As a result of issues generated in the ordinary course of business, the Companies are involved in various regulatory matters. Certain regulatory matters may ultimately result in a loss; however, as such matters are in an initial procedural phase, involve uncertainty as to the outcome of pending reviews or orders, and/or involve significant factual issues that need to be resolved, it is not possible for the Companies to estimate a range of possible loss. For regulatory matters that the Companies cannot estimate, a statement to this effect is made in the description of the matter. Other matters may have progressed sufficiently through the regulatory process such that the Companies are able to estimate a range of possible loss. For regulatory matters that the Companies are able to reasonably estimate a range of possible losses, an estimated range of possible loss is provided, in excess of the accrued liability (if any) for such matters. Any estimated range is based on currently available information, involves elements of judgment and significant uncertainties and may not represent the Companies’ maximum possible loss exposure. The circumstances of such regulatory matters will change from time to time and actual results may vary significantly from the current estimate. For current matters not specifically reported below, management does not anticipate that the outcome from such matters would have a material effect on the Companies’ financial position, liquidity or results of operations.
Other Regulatory Matters
Virginia Regulation
Regulation Act and Grid Transformation and Security Act of 2018
The Regulation Act enacted in 2007 instituted a cost-of-service rate model, ending Virginia’s planned transition to retail competition for electric supply service to most classes of customers.
The Regulation Act authorizes stand-alone rate adjustment clauses for recovery of costs for new generation projects, FERC-approved transmission costs, underground distribution lines, environmental compliance, conservation and energy efficiency programs, renewable energy programs and nuclear license renewals, and also contains statutory provisions directing Virginia Power to file annual fuel cost recovery cases with the Virginia Commission.
If the Virginia Commission’s future rate decisions, including actions relating to Virginia Power’s rate adjustment clause filings, differ materially from Virginia Power’s expectations, it may adversely affect its results of operations, financial condition and cash flows.
The GTSA reinstated base rate reviews commencing with the 2021 Triennial Review. In the triennial review proceedings, earnings that are more than 70 basis points above the utility’s authorized ROE that might have been refunded to customers and served as the basis for a reduction in future rates, may be reduced by Virginia Commission-approved investment amounts in qualifying solar or wind generation facilities or electric distribution grid transformation projects that Virginia Power elects to include in a CCRO. The legislation declares that electric distribution grid transformation projects are in the public interest and provides that the costs of such projects may be recovered through a rate adjustment clause if not the subject of a CCRO. Any costs that are the subject of a CCRO are deemed recovered in base rates during the triennial period under review and may not be included in base rates in future triennial review proceedings. In any triennial review in which the Virginia Commission determines that the utility’s earnings are more than 70 basis points above its authorized ROE, base rates are subject to reduction prospectively and customer refunds would be due unless the total CCRO elected by the utility equals or exceeds the amount of earnings in excess of the 70 basis points. For the purposes of measuring any customer refunds or CCRO amounts utilized under the GTSA, associated income taxes are factored into the determination of such amounts. In the 2021 Triennial Review, any such rate reduction was limited to $
Virginia 2020 Legislation
In April 2020, the Governor of Virginia signed into law the VCEA, which along with related legislation forms a comprehensive framework affecting Virginia Power’s operations. The VCEA replaces Virginia’s voluntary renewable energy portfolio standard for
153
Virginia Power with a mandatory program setting annual renewable energy portfolio standard requirements based on the percentage of total electric energy sold by Virginia Power, excluding existing nuclear generation and certain new carbon-free resources, reaching
|
|
• |
Fossil Fuel Electric Generation: The legislation mandates Chesterfield Power Station Units 5 & 6 and Yorktown Power Station Unit 3 to be retired by the end of 2024, Altavista, Southampton and Hopewell to be retired by the end of 2028 and Virginia Power’s remaining fossil fuel units to be retired by the end of 2045, unless the retirement of such generating units will compromise grid reliability or security. The legislation also imposed a temporary moratorium on CPCNs for fossil fuel generation, unless the resources are needed for grid reliability. This temporary moratorium concluded in January 2022. In addition, the Virginia Commission shall determine the amortization period for recovery of any appropriate costs due to the early retirement of any electric generation facilities, which could result in the reversal of previous retirement costs deemed recovered during the review period ending 2020. As discussed in Note 2, Virginia Power had recorded charges for early retirement of certain coal- and oil-fired generating units in the first quarters of 2020 and 2019. Virginia Power also revised the depreciable lives of Altavista, Southampton and Hopewell for the mandated retirement to the end of 2028, which will not have a material impact to Virginia Power’s results of operations or cash flows given the existing regulatory framework. |
|
|
• |
Renewable Generation: The legislation provides a detailed renewable energy portfolio standard to achieve 100% zero-carbon generation by the end of 2045, excluding existing nuclear generation and certain new carbon-free resources. Components include requirements to petition the Virginia Commission for approval to construct or acquire new generating capacity to reach |
|
|
• |
Energy Efficiency: The legislation includes an energy efficiency target of |
|
|
• |
Carbon trading program: The legislation directs Virginia to participate in a market-based carbon trading program consistent with RGGI through 2050. In January 2022, the Governor of Virginia issued an executive order which puts directives in place to start the withdrawal of Virginia from RGGI. All costs of the carbon trading program are recoverable through an environmental rider. |
|
|
• |
Low-income customers: The legislation includes the establishment of a percentage of income payment program to be administered by the Virginia Department of Housing and Community Development and the Virginia Department of Social Services. To fund the program, Virginia Power will remit amounts collected from customers under a universal service fee established and set by the Virginia Commission. As such, this program will not affect Virginia Power’s results of operations, financial position or cash flows. In December 2020, the Virginia Commission issued a final order confirming a revenue requirement of $ |
Virginia Power is incurring and expects to incur significant costs, including capital expenditures, to comply with the legislative requirements discussed above. The legislation allows for cost recovery under the existing or modified regulatory framework through rate adjustment clauses, rates for generation and distribution services or Virginia Power’s fuel factor, as approved by the Virginia Commission. Costs allocated to the North Carolina jurisdiction will be recovered, subject to approval by the North Carolina Commission, in accordance with the existing regulatory framework.
2021 Triennial Review
In March 2021, Virginia Power filed its base rate case and accompanying schedules in support of the 2021 Triennial Review. In its filing, Virginia Power did not request an increase in base rates for generation and distribution services and proposed that base rates remain at their existing level. Virginia Power’s earnings test analysis, as filed, demonstrated it earned a combined ROE of
154
its generation and distribution services for the test period, before accounting for forgiven customer balances. Pursuant to Virginia legislation, forgiven customer balances were excluded from the cost of service in determining test period revenues as part of the 2021 Triennial Review. To the extent that the Virginia Commission determined total earnings for the test period to be above Virginia Power’s authorized earnings band, the forgiven balance amounts are offset against the available revenues in the determination of any customer bill credits, or utilization of a CCRO. Test period earnings may be further reduced by Virginia Commission approved investment amounts in qualifying solar or wind generation facilities or electric distribution grid transformation projects that Virginia Power elects to include as a CCRO under the GTSA. In its filing, Virginia Power elected to utilize $
In 2020, Virginia Power recorded a net charge of $
Subsequently, in October 2021, Virginia Power, the Virginia Commission staff and other parties filed a comprehensive settlement agreement with the Virginia Commission for approval. The comprehensive settlement agreement provides for $
In connection with the settlement agreement, Virginia Power recorded a $
Utility Disconnection Moratorium
In November 2020, legislation was enacted in Virginia relating to the moratorium on utility disconnections during the COVID-19 pandemic and resulted in Virginia Power forgiving Virginia jurisdictional retail electric customer balances that were more than 30 days past due as of September 30, 2020. As a result, Virginia Power recorded a charge of $
Virginia Fuel Expenses
In May 2021, Virginia Power filed its annual fuel factor with the Virginia Commission to recover an estimated $
GTSA Filing
155
In June 2021, Virginia Power filed a petition with the Virginia Commission for approval of a revised plan for electric distribution grid transformation projects as authorized by the GTSA. The plan includes
Renewable Generation Projects
In May 2020 and July 2020, Virginia Power entered into and closed on separate agreements to acquire Grassfield Solar, Norge Solar and Sycamore Solar. The projects are expected to cost approximately $
In September 2021, Virginia Power filed a petition with the Virginia Commission for CPCNs to construct and operate 13 utility-scale projects totaling approximately
In November 2021, Virginia Power filed an application with the Virginia Commission requesting approval and certification of the Virginia Facilities component of the CVOW Commercial Project. The onshore Virginia Facilities have an estimated cost of approximately $
Nuclear Life Extension Program
In October 2021, Virginia Power filed a petition with the Virginia Commission requesting a determination that it is reasonable and prudent for Virginia Power to pursue a nuclear life extension program to extend the operating licenses of Surry and North Anna and to carry out projects to upgrade or replace systems and equipment necessary to continue to safely and reliably operate these nuclear power stations. The nuclear life extension program is expected to cost approximately $
156
Riders
The significant riders associated with various Virginia Power projects are as follows:
|
Rider Name |
|
Application Date |
|
Approval Date |
|
Rate Year Beginning |
|
Total Revenue Requirement (millions) |
|
Increase (Decrease) Over Previous Year (millions) |
|
|
|
Rider B |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Rider B |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Rider BW |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rider BW |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rider BW |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Rider CCR |
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
Rider CE(1) |
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
Rider CE(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rider E |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Rider E |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rider GT |
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
Rider GV |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rider GV |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Rider GV |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Rider OSW |
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
Rider R |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rider R |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rider R |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Rider RGGI(3) |
|
December 2020 |
|
|
|
|
|
|
|
N/A |
|
|
|
Rider RGGI(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rider RPS |
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
Rider RPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rider S |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Rider S |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Rider S |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Rider SNA(5) |
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
Rider T1(6) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Rider U(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rider U(8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rider US-2 |
|
|
|
|
|
|
|
|
|
|
— |
|
|
Rider US-2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rider US-3 |
|
|
|
|
|
|
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|
|
|
|
Rider US-3 |
|
|
|
|
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|
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|
Rider US-4 |
|
|
|
|
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|
|
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|
|
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|
Rider US-4 |
|
|
|
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|
|
|
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|
|
|
|
|
Rider W |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rider W |
|
|
|
|
|
|
|
|
|
|
|
|
|
DSM Riders(9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
DSM Riders(10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Associated with Grassfield Solar, Norge Solar and Sycamore Solar. |
|
(2) |
Associated with solar generation and energy storage projects requested for approval in September 2021, solar generation projects approved in April 2021 and certain small-scale solar projects. |
|
(3) |
In August 2021, the Virginia Commission issued an order granting reconsideration and suspended its order approving the revenue requirement. In November 2021, the Virginia Commission lifted the suspension of the order. In February 2022, a party filed an appeal to the Supreme Court of Virginia challenging the Virginia Commission’s order. |
|
(4) |
In January 2022, Virginia Power filed a motion to withdraw its application as a result of the announcement by the Governor of Virginia that he intends to withdraw Virginia from RGGI. Virginia Power expects to file an updated application to recover its actual and projected RGGI compliance costs informed by these developments at the appropriate time. |
|
(5) |
Virginia Power also requested approval of cost recovery of approximately $ |
|
(6) |
Consists of $ |
|
(7) |
Consists of $ |
|
(8) |
Consists of $ |
|
(9) |
Associated with an additional |
|
(10) |
Associated with an additional |
157
Electric Transmission Projects
Significant Virginia Power electric transmission projects approved or applied for are as follows:
|
Description and Location of Project |
|
Application Date |
|
Approval Date |
|
Type of Line |
|
Miles of Lines |
|
Cost Estimate (millions) |
|
Bristers-Ladysmith Rebuild Project in the Counties of Fauquier, Stafford, Spotsylvania and Caroline, Virginia |
|
|
|
|
|
|
|
|
|
|
|
Relocate and replace a transmission line underground between the Tysons substation and the future Spring Hill substation |
|
|
|
|
|
|
|
< 1 |
|
|
|
Rebuild an existing transmission line and install new line adjacent thereto in the Counties of New Kent, King William, King and Queen, Essex and Richmond, Virginia |
|
|
|
|
|
|
|
|
|
|
|
Rebuild Clubhouse-Dry Bread Line and Dry Bread-Lakeview Line in Greensville County, Virginia |
|
|
|
|
|
|
|
|
|
|
|
Rebuild transmission lines and related projects in the Counties of York and James City and the City of Williamsburg, Virginia |
|
|
|
|
|
|
|
|
|
|
|
Elmont-Ladysmith rebuild and related projects in the Counties of Hanover and Caroline, Virginia |
|
|
|
|
|
|
|
|
|
|
|
Beaumeade-Belmont reconductor and rebuild projects in the County of Loudoun, Virginia |
|
|
|
|
|
|
|
|
|
|
|
Extension to Cloud Switching Station and Easters Switching Station in the County of Mecklenburg, Virginia |
|
|
|
|
|
|
|
|
|
|
|
Rebuild transmission lines and related projects in the City of Staunton and County of Augusta, Virginia |
|
|
|
|
|
|
|
|
|
|
|
Build new DTC substation and line loop in the County of Loudoun, Virginia |
|
|
|
|
|
|
|
|
|
|
|
Build new Aviator substation and line loop in the County of Loudoun, Virginia |
|
|
|
|
|
|
|
|
|
|
In November 2013, the Virginia Commission issued an order granting Virginia Power a CPCN to construct approximately
158
North Carolina Regulation
Virginia Power North Carolina Base Rate Case
In March 2019, Virginia Power filed its base rate case and schedules with the North Carolina Commission. Virginia Power proposed a non-fuel, base rate increase of $
Virginia Power North Carolina Fuel Filing
In August 2021, Virginia Power submitted its annual filing to the North Carolina Commission to adjust the fuel component of its electric rates. Virginia Power updated its filing in October 2021 to reflect the increased commodity cost of fuel and proposed a total $
PSNC Base Rate Case
In April 2021, PSNC filed its general rate case application and schedules with the North Carolina Commission. PSNC proposed a non-fuel, base rate increase of $
In October 2021, PSNC, the North Carolina Commission public staff and certain other parties of record filed a stipulation of settlement with the North Carolina Commission for approval. The stipulation of settlement provides for a non-fuel, base rate increase of $
Pipeline Integrity and Safety Program
The North Carolina Commission has authorized PSNC to use a tracker mechanism to recover the incurred capital investment and associated costs of complying with federal standards for pipeline integrity and safety requirements that are not in current base rates. In August 2021, the North Carolina Commission approved PSNC’s request to increase the integrity management annual revenue requirement to $
Rider D
Rider D allows PSNC to recover from customers all prudently incurred gas costs and certain related uncollectible expenses as well as losses on negotiated gas and transportation sales. In September 2021, PSNC submitted a filing with the North Carolina Commission for a $
159
South Carolina Regulation
South Carolina Electric Base Rate Case
In August 2020, DESC filed its retail electric base rate case and schedules with the South Carolina Commission. DESC proposed a non-fuel, base rate increase of $
In July 2021, DESC, the South Carolina Office of Regulatory Staff and other parties of record filed a comprehensive settlement agreement with the South Carolina Commission for approval. The comprehensive settlement agreement provides for a non-fuel, base rate increase of $
In connection with this matter, Dominion Energy recorded charges of $
DSM Programs
DESC has approval for a DSM rider through which it recovers expenditures related to its DSM programs
In
In January 2022, DESC filed an application with the South Carolina Commission seeking approval to recover $
Natural Gas Rates
In June 2021, DESC filed with the South Carolina Commission its monitoring report for the 12-month period ended March 31, 2021 with a total revenue requirement of $
Cost of Fuel
DESC’s retail electric rates include a cost of fuel component approved by the South Carolina Commission which may be adjusted periodically to reflect changes in the price of fuel purchased by DESC.
In
160
In
Ohio Regulation
PIR Program
In 2008, East Ohio began PIR, aimed at replacing approximately
In December 2020, East Ohio filed an application with the Ohio Commission requesting approval to extend the PIR program for an additional five years upon expiration of the current authorization at the end of 2021. East Ohio proposed continued capital investment increases of
In April 2021, the Ohio Commission approved East Ohio’s application to adjust the PIR cost recovery rates for 2020 costs. The filing reflects gross plant investment for 2020 of $
CEP Program
In 2011, East Ohio began CEP which enables East Ohio to defer depreciation expense, property tax expense and carrying costs at the debt rate of
In April 2021, East Ohio filed an application requesting approval to adjust the CEP cost recovery rates for 2019 and 2020 costs. The filing reflects gross plant investment for 2019 of $
UEX Rider
East Ohio has approval for a UEX Rider through which it recovers the bad debt expense of most customers not participating in the PIPP Plus Program. The UEX Rider is adjusted annually to achieve dollar for dollar recovery of East Ohio’s actual write-offs of uncollectible amounts. In July 2021, the Ohio Commission approved East Ohio’s application to adjust its UEX Rider to reflect an increased annual revenue requirement of $
West Virginia Regulation
West Virginia Base Rate Case
In September 2020, Hope filed its base rate case and schedules with the West Virginia Commission. Hope proposed a non-fuel, base rate increase of $
PREP
In
161
Utah Regulation
Purchased Gas
In May 2021, the Utah Commission approved Questar Gas’ request for a $
In October 2021, the Utah Commission approved Questar Gas’ request for an $
In December 2021, the Utah Commission approved Questar Gas’ request for a $
NOTE 14. ASSET RETIREMENT OBLIGATIONS
AROs represent obligations that result from laws, statutes, contracts and regulations related to the eventual retirement of certain of the Companies’ long-lived assets. The Companies AROs are primarily associated with the decommissioning of their nuclear generation facilities and ash pond and landfill closures.
The Companies have also identified, but not recognized, AROs related to the retirement of Dominion Energy’s storage wells in its underground natural gas storage network, certain Virginia Power electric transmission and distribution assets located on property with easements, rights of way, franchises and lease agreements, Virginia Power’s hydroelectric generation facilities and the abatement of certain asbestos not expected to be disturbed in the Companies’ generation facilities. The Companies currently do not have sufficient information to estimate a reasonable range of expected retirement dates for any of these assets since the economic lives of these assets can be extended indefinitely through regular repair and maintenance and they currently have no plans to retire or dispose of any of these assets. As a result, a settlement date is not determinable for these assets and AROs for these assets will not be reflected in the Consolidated Financial Statements until sufficient information becomes available to determine a reasonable estimate of the fair value of the activities to be performed. The Companies continue to monitor operational and strategic developments to identify if sufficient information exists to reasonably estimate a retirement date for these assets.
The changes to AROs during 2020 and 2021 were as follows:
|
|
Amount |
|
|
|
(millions) |
|
|
|
|
Dominion Energy |
|
|
|
|
AROs at December 31, 2019 |
$ |
|
|
|
Obligations incurred during the period |
|
|
|
|
Obligations settled during the period |
|
( |
) |
|
Revisions in estimated cash flows(1) |
|
|
|
|
Accretion |
|
|
|
|
AROs at December 31, 2020(2) |
$ |
|
|
|
Obligations incurred during the period |
|
|
|
|
Obligations settled during the period |
|
( |
) |
|
Revisions in estimated cash flows(3) |
|
( |
) |
|
Accretion |
|
|
|
|
Sale of non-wholly-owned nonregulated solar facilities |
|
( |
) |
|
AROs at December 31, 2021(2) |
$ |
|
|
|
Virginia Power |
|
|
|
|
AROs at December 31, 2019 |
$ |
|
|
|
Obligations incurred during the period |
|
|
|
|
Obligations settled during the period |
|
( |
) |
|
Revisions in estimated cash flows(4) |
|
|
|
|
Accretion |
|
|
|
|
AROs at December 31, 2020 |
$ |
|
|
|
Obligations incurred during the period |
|
|
|
|
Obligations settled during the period |
|
( |
) |
|
Revisions in estimated cash flows(5) |
|
|
|
|
Accretion |
|
|
|
|
AROs at December 31, 2021 |
$ |
|
|
|
(1) |
|
|
(2) |
|
162
|
(3) |
|
|
(4) |
|
|
(5) |
|
In addition, Virginia Power revised its estimated cash flows for the existing ARO related to future ash pond and landfill closure costs, which resulted in a $
Dominion Energy’s AROs at December 31, 2021 and 2020, include $
In addition, AROs at December 31, 2021 and 2020 include $
163
NOTE 15. LEASES
At December 31, 2021 and 2020, the Companies had the following lease assets and liabilities recorded in the Consolidated Balance Sheets:
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
(millions) |
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
Lease assets: |
|
|
|
|
|
|
|
|
Operating lease assets(1) |
$ |
|
|
|
$ |
|
|
|
Finance lease assets(2) |
|
|
|
|
|
|
|
|
Total lease assets |
$ |
|
|
|
$ |
|
|
|
Lease liabilities: |
|
|
|
|
|
|
|
|
Operating lease liabilities(3) |
$ |
|
|
|
$ |
|
|
|
Finance lease liabilities(4) |
|
|
|
|
|
|
|
|
Total lease liabilities - current |
|
|
|
|
|
|
|
|
Operating lease liabilities (5) |
|
|
|
|
|
|
|
|
Finance lease liabilities(6) |
|
|
|
|
|
|
|
|
Total lease liabilities - noncurrent |
|
|
|
|
|
|
|
|
Total lease liabilities |
$ |
|
|
|
$ |
|
|
|
Virginia Power |
|
|
|
|
|
|
|
|
Operating lease assets(1) |
$ |
|
|
|
$ |
|
|
|
Finance lease assets(2) |
|
|
|
|
|
|
|
|
Total lease assets |
$ |
|
|
|
$ |
|
|
|
Lease liabilities: |
|
|
|
|
|
|
|
|
Operating lease liabilities(3) |
$ |
|
|
|
$ |
|
|
|
Finance lease liabilities(4) |
|
|
|
|
|
|
|
|
Total lease liabilities - current |
|
|
|
|
|
|
|
|
Operating lease liabilities (5) |
|
|
|
|
|
|
|
|
Finance lease liabilities(6) |
|
|
|
|
|
|
|
|
Total lease liabilities - noncurrent |
|
|
|
|
|
|
|
|
Total lease liabilities |
$ |
|
|
|
$ |
|
|
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
(4) |
|
|
(5) |
|
|
(6) |
|
164
In addition to the amounts disclosed above, Dominion Energy’s Consolidated Balance Sheets at December 31, 2021 and 2020 includes property, plant and equipment of $
For the years ended December 31, 2021, 2020 and 2019, total lease cost associated with the Companies’ leasing arrangements consisted of the following:
|
|
Year Ended December 31, 2021 |
|
|
Year Ended December 31, 2020 |
|
|
Year Ended December 31, 2019 |
|
|
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
Interest |
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|
Operating lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease cost |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
Virginia Power |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
Interest |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
Operating lease cost |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
Short-term lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease cost |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
For the years ended December 31, 2021, 2020 and 2019, cash paid for amounts included in the measurement of the lease liabilities consisted of the following amounts, included in the Companies’ Consolidated Statements of Cash Flows:
|
|
Year Ended December 31, 2021 |
|
|
Year Ended December 31, 2020 |
|
|
Year Ended December 31, 2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows for finance leases |
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|
|
Operating cash flows for operating leases |
|
|
|
|
|
|
|
|
|
|
|
|
Financing cash flows for finance leases |
|
|
|
|
|
|
|
|
|
|
|
|
Virginia Power |
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows for finance leases |
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
Operating cash flows for operating leases |
|
|
|
|
|
|
|
|
|
|
|
|
Financing cash flows for finance leases |
|
|
|
|
|
|
|
|
|
|
|
In addition to the amounts disclosed above, Dominion Energy’s Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019, include $
At December 31, 2021 and 2020, the weighted average remaining lease term and weighted discount rate for the Companies’ finance and operating leases were as follows:
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Dominion Energy |
|
|
|
|
|
|
|
|
Weighted average remaining lease term - finance leases |
|
|
|
|
|
||
|
Weighted average remaining lease term - operating leases |
|
|
|
|
|
||
|
Weighted average discount rate - finance leases |
|
|
% |
|
|
|
% |
|
Weighted average discount rate - operating leases |
|
|
% |
|
|
|
% |
|
Virginia Power |
|
|
|
|
|
|
|
|
Weighted average remaining lease term - finance leases |
|
|
|
|
|
||
|
Weighted average remaining lease term - operating leases |
|
|
|
|
|
||
|
Weighted average discount rate - finance leases |
|
|
% |
|
|
|
% |
|
Weighted average discount rate - operating leases |
|
|
% |
|
|
|
% |
165
The Companies’ lease liabilities have the following maturities:
|
Maturity of Lease Liabilities |
|
Dominion Energy |
|
|
Virginia Power |
|
||||||||||
|
(millions) |
|
Operating |
|
|
Finance |
|
|
Operating |
|
|
Finance |
|
||||
|
2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total undiscounted lease payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value adjustment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Present value of lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Corporate Office Leasing Arrangement
In December 2019, Dominion Energy signed an agreement with a lessor, as amended in May 2020, to construct and lease a new corporate office property in Richmond, Virginia. The lessor provided equity and had obtained financing commitments from debt investors, totaling $
Offshore Wind Vessel Leasing Arrangement
In December 2020, Dominion Energy signed an agreement with a lessor to complete construction of and lease a Jones Act compliant offshore wind installation vessel. This vessel is designed to handle current turbine technologies as well as next generation turbines. The lessor is providing equity and has obtained financing commitments from debt investors, totaling $
The initial lease term will commence once construction is substantially complete and the vessel is delivered and will mature in
NOTE 16. VARIABLE INTEREST ENTITIES
The primary beneficiary of a VIE is required to consolidate the VIE and to disclose certain information about its significant variable interests in the VIE. The primary beneficiary of a VIE is the entity that has both 1) the power to direct the activities that most significantly impact the entity’s economic performance and 2) the obligation to absorb losses or receive benefits from the entity that could potentially be significant to the VIE.
Dominion Energy
Through December 2021, Dominion Energy owned the manager and
166
its disposition in December 2021, Dominion Energy was the primary beneficiary of SBL Holdco and the nonregulated solar facilities, as it had the power to direct the activities that most significantly impact their economic performance as well as the obligation to absorb losses and benefits which could be significant to them. At December 31, 2020, Dominion Energy’s securities due within one year and long-term debt include $
At December 31, 2021, Dominion Energy owns a
At December 31, 2021, Dominion Energy owns a
Dominion Energy and Virginia Power
The Companies’ nuclear decommissioning trust funds and Dominion Energy’s rabbi trusts hold investments in limited partnerships or similar type entities (see Note 9 for further details). Dominion Energy and Virginia Power concluded that these partnership investments are VIEs due to the limited partners lacking the characteristics of a controlling financial interest. Dominion Energy and Virginia Power have concluded neither is the primary beneficiary as they do not have the power to direct the activities that most significantly impact these VIEs’ economic performance. Dominion Energy and Virginia Power are obligated to provide capital contributions to the partnerships as required by each partnership agreement based on their ownership percentages. Dominion Energy and Virginia Power’s maximum exposure to loss is limited to their current and future investments.
Virginia Power
Virginia Power had a long-term power and capacity contract with
Virginia Power purchased shared services from DES, an affiliated VIE, of $
167
NOTE 17. SHORT-TERM DEBT AND CREDIT AGREEMENTS
The Companies use short-term debt to fund working capital requirements and as a bridge to long-term debt financings. The levels of borrowing may vary significantly during the course of the year, depending upon the timing and amount of cash requirements not satisfied by cash from operations. In addition, Dominion Energy utilizes cash and letters of credit to fund collateral requirements. Collateral requirements are impacted by commodity prices, hedging levels, Dominion Energy’s credit ratings and the credit quality of its counterparties.
Dominion Energy
In June 2021, Dominion Energy amended its $
Dominion Energy’s short-term financing is supported through its access to the joint revolving credit facility described below. Commercial paper and letters of credit outstanding, as well as capacity available under the credit facility were as follows:
|
|
|
Facility Limit |
|
|
Outstanding Commercial Paper(1) |
|
|
Outstanding Letters of Credit |
|
|
Facility Capacity Available |
|
||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint revolving credit facility(2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
At December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint revolving credit facility(2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
|
(2) |
|
DESC and Questar Gas’ short-term financings are supported through access as co-borrowers to the joint revolving credit facility discussed above with the Companies. At December 31, 2021, the sub-limits for DESC and Questar Gas were $
In January 2021, DESC and GENCO applied to FERC for a two-year short-term borrowing authorization. In March 2021, FERC granted DESC authority through
In addition to the joint revolving credit facility mentioned above, Dominion Energy also has a credit facility which allows Dominion Energy to issue up to $
In December 2021, in connection with the sale of certain non-wholly owned nonregulated solar facilities, as discussed in Note 10, SBL Holdco terminated $
In March 2020, Dominion Energy entered into a $
In July 2021, Dominion Energy entered into an approximately $
168
In December 2021, DECP Holdings entered into a credit facility, which allows it to issue up to $
Dominion Energy has an effective shelf registration statement with the SEC for the sale of up to $
Virginia Power
Virginia Power’s short-term financing is supported through its access as co-borrower to Dominion Energy’s $
Virginia Power’s share of commercial paper and letters of credit outstanding under the joint revolving credit facility with Dominion Energy, Questar Gas and DESC were as follows:
|
|
|
Facility Limit |
|
|
Outstanding Commercial Paper(1) |
|
|
Outstanding Letters of Credit |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint revolving credit facility(2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
At December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint revolving credit facility(2) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
|
(2) |
|
|
|
169
NOTE 18. LONG-TERM DEBT
|
At December 31, |
|
2021 Weighted- average Coupon(1) |
|
|
2021 |
|
|
2020 |
|
|||
|
(millions, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia Electric and Power Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Senior Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
$ |
|
|
|
$ |
|
|
|
Tax-Exempt Financings(2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
Virginia Electric and Power Company total principal |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Securities due within one year |
|
|
|
% |
|
|
( |
) |
|
|
— |
|
|
Unamortized discount, premium and debt issuances costs, net |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Derivative restructuring |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia Electric and Power Company total long-term debt |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Dominion Energy, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental 364-Day credit facility, variable rate, due 2021 |
|
|
|
|
|
$ |
— |
|
|
$ |
|
|
|
Sustainability Revolving Credit Agreement, variable rate, due 2024(3) |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Unsecured Senior Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate, due 2023 |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
Unsecured Junior Subordinated Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
Payable to Affiliated Trust, |
|
|
|
% |
|
|
|
|
|
|
|
|
|
Enhanced Junior Subordinated Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
DECP Holdings, Term Loan, variable rate, due 2024(6) |
|
|
|
% |
|
|
|
|
|
|
— |
|
|
Questar Gas, Unsecured Senior Notes, |
|
|
|
% |
|
|
|
|
|
|
|
|
|
East Ohio, Unsecured Senior Notes, |
|
|
|
% |
|
|
|
|
|
|
|
|
|
PSNC, Senior Debentures and Notes, |
|
|
|
% |
|
|
|
|
|
|
|
|
|
DESC: |
|
|
|
|
|
|
|
|
|
|
|
|
|
First Mortgage Bonds, |
|
|
|
% |
|
|
|
|
|
|
|
|
|
Tax-Exempt Financings(7): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate due 2038 |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
GENCO, variable rate due 2038 |
|
|
|
% |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
% |
|
|
|
|
|
|
|
|
|
Secured Senior Notes, |
|
|
|
% |
|
|
|
|
|
|
|
|
|
Term Loans, variable rates, due 2023 and 2024(9) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
Tax-Exempt Financing, |
|
|
|
% |
|
|
|
|
|
|
|
|
|
Virginia Electric and Power Company total principal (from above) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy, Inc. total principal(10) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Fair value hedge valuation(11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities due within one year(12) |
|
|
|
% |
|
|
( |
) |
|
|
( |
) |
|
Supplemental 364-Day credit facility borrowings |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
Unamortized discount, premium and debt issuance costs, net |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Derivative restructuring |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy, Inc. total long-term debt |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
|
|
(2) |
|
|
(3) |
This $ |
|
(4) |
|
|
(5) |
|
|
(6) |
|
|
(7) |
|
|
( |
170
|
8) |
|
|
(9) |
|
|
(10) |
|
|
(11) |
|
|
(12) |
|
Based on stated maturity dates rather than early redemption dates that could be elected by instrument holders, the scheduled principal payments of long-term debt at December 31, 2021, were as follows:
|
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
Thereafter |
|
|
Total |
|
|||||||
|
(millions, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia Power |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Senior Notes |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Tax-Exempt Financings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Weighted-average Coupon |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loans |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
First Mortgage Bonds |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Unsecured Senior Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Senior Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-Exempt Financings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Unsecured Junior Subordinated Notes Payable to Affiliated Trusts |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Unsecured Junior Subordinated Notes |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Enhanced Junior Subordinated Notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Weighted-average Coupon |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
|
The Companies’ short-term credit facility and long-term debt agreements contain customary covenants and default provisions. As of December 31, 2021, there were no events of default under these covenants.
Senior Note Issuances
In January 2022, Virginia Power issued $
Enhanced Junior Subordinated Notes
In June 2006 and September 2006, Dominion Energy issued $
In October 2014, Dominion Energy issued $
171
In July 2016, Dominion Energy issued $
Dominion Energy may defer interest payments on the hybrids on one or more occasions for up to 10 consecutive years. If the interest payments on the hybrids are deferred, Dominion Energy may not make distributions related to its capital stock, including dividends, redemptions, repurchases, liquidation payments or guarantee payments during the deferral period. Also, during the deferral period, Dominion Energy may not make any payments on or redeem or repurchase any debt securities that are equal in right of payment with, or subordinated to, the hybrids.
Remarketable Subordinated Notes
In June 2019, Dominion Energy successfully remarketed the $700 million 2016 Series A-1 2.0% RSNs due 2021 and $700 million 2016 Series A-2 2.0% RSNs due 2024 pursuant to the terms of the related 2016 Equity Units. In connection with the remarketing, the interest rates on the Series A-1 and Series A-2 notes were reset to 2.715% and 3.071%, respectively, payable on a semi-annual basis, and Dominion Energy ceased to have the ability to redeem the notes at its option or defer interest payments.
Dominion Energy did not receive any proceeds from the remarketing. Remarketing proceeds belonged to the investors holding the 2016 Equity Units and were temporarily used to purchase a portfolio of treasury securities. Upon maturity of the portfolio, the proceeds were applied on behalf of the investors on the related stock purchase contract settlement date to pay the purchase price to Dominion Energy for issuance of 18.5 million shares of its common stock in August 2019.
Derivative Restructuring
In June 2020, Dominion Energy amended a portfolio of interest rate swaps with a notional value of $
In August 2020, Virginia Power amended a portfolio of interest rate swaps with a notional value of $
NOTE 19. PREFERRED STOCK
Dominion Energy is authorized to issue up to
DESC is authorized to issue up to
Virginia Power is authorized to issue up to
2019 Corporate Units
In June 2019, Dominion Energy issued $
172
Each 2019 Series A Corporate Unit consists of a stock purchase contract and a 1/10, or
The stock purchase contracts obligate the holders to purchase shares of Dominion Energy common stock in June 2022. The purchase price to be paid under the stock purchase contracts is $
Dominion Energy pays cumulative dividends on the Series A Preferred Stock and quarterly contract adjustment payments on the stock purchase contracts, at the rates described below. Dominion Energy may elect to pay such dividends and/or payments in cash, shares of Dominion Energy common stock or a combination of cash and shares of Dominion Energy common stock. Dominion Energy may defer the contract adjustment payments for one or more consecutive periods but generally not beyond the purchase contract settlement date. If payments are deferred, Dominion Energy may not make any distributions related to its capital stock, including dividends, redemptions, repurchases or liquidation payments. Also, during the deferral period, Dominion Energy may not make any payments on or redeem, repay or repurchase any debt securities that are equal in right of payment with, or subordinated to, the contract adjustment payments or make any payment on any guarantee of a security of a subsidiary if the guarantee ranks equal or junior to the contract adjustment payments. Unless all accumulated and unpaid dividends on the Series A Preferred Stock have been declared and paid, Dominion Energy may not make any distributions on any of its capital stock ranking equal or junior to the Series A Preferred Stock as to dividends or upon liquidation, as applicable, including dividends, redemptions, repurchases or liquidation payments. In such circumstances, Dominion Energy also may not make any contract adjustment payments or other similar types of payments, subject to certain exceptions.
Pursuant to the terms of the 2019 Equity Units, Dominion Energy expects to remarket shares of Series A Preferred Stock during the first or second quarter of 2022. Following a successful remarketing, the dividend rate on the preferred stock will be reset and the conversion rate on the preferred stock may increase depending on the closing price of Dominion Energy’s common stock on the date of the remarketing. Dominion Energy will not directly receive any proceeds from the remarketing as the remarketing will be conducted on behalf of investors that, as of the remarketing, continue to hold corporate units or otherwise elect to participate in the remarketing. Proceeds from the remarketing attributable to investors that continue to hold corporate units will be used to purchase a treasury portfolio that upon maturity will be used in June 2022 to pay the purchase price to Dominion Energy for issuance of its common stock under the stock purchase contracts that are a component of such corporate units. Under the terms of the stock purchase contracts, assuming no anti-dilution or other adjustments, the maximum number of shares of common stock Dominion Energy will issue in June 2022 is
Selected information about Dominion Energy’s 2019 Equity Units is presented below:
|
Issuance Date |
|
Units Issued |
|
Total Net Proceeds(1) |
|
|
Total Preferred Stock(2) |
|
|
Cumulative Dividend Rate |
|
|
Stock Purchase Contract Annual Rate |
|
|
Stock Purchase Contract Liability(3) |
|
|
Stock Purchase Contract Settlement Date |
|||||
|
(millions except interest rates) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
6/14/2019 |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
|
|
|
% |
|
$ |
|
|
|
|
(1)
(2)
(3)
Series B Preferred Stock
In December 2019, Dominion Energy issued
173
the liquidation preference. Dividends are paid cumulatively on a semi-annual basis, commencing June 15, 2020. Dominion Energy recorded dividends of $
Dominion Energy may, at its option, redeem the Series B Preferred Stock in whole or in part on December 15, 2024 or on any subsequent fifth anniversary of such date at a price equal to $
Holders of the Series B Preferred Stock have no voting rights except in the limited circumstances provided for in the terms of the Series B Preferred Stock or as otherwise required by applicable law. The Series B Preferred Stock is not subject to any sinking fund or other obligation of ours to redeem, repurchase or retire the Series B Preferred Stock. The preferred stock contains no conversion rights.
Series C Preferred Stock
In December 2021, Dominion Energy issued
Dominion Energy may, at its option, redeem the Series C Preferred Stock in whole or in part anytime from and including January 15, 2027 through and including April 15, 2027 or during any subsequent fifth anniversary of such period at a price equal to $
Holders of the Series C Preferred Stock have no voting rights except in the limited circumstances provided for in the terms of the Series C Preferred Stock or as otherwise required by applicable law. The Series C Preferred Stock is not subject to any sinking fund or other obligation of ours to redeem, repurchase or retire the Series C Preferred Stock. The preferred stock contains no conversion rights.
NOTE 20. EQUITY
Common Stock
Dominion Energy
During 2021, 2020 and 2019, Dominion Energy recorded, net of fees and commissions, $
Acquisitions
During 2019, Dominion Energy issued
174
In January 2019, Dominion Energy and Dominion Energy Midstream closed on an agreement and plan of merger pursuant to which Dominion Energy acquired each outstanding common unit representing limited partner interests in Dominion Energy Midstream not already owned by Dominion Energy through the issuance of
Pension Plan Contribution
In December 2019, Dominion Energy contributed
Dominion Energy Direct® and Employee Savings Plans
Dominion Energy maintains Dominion Energy Direct® and a number of employee savings plans through which contributions may be invested in Dominion Energy’s common stock. These shares may either be newly issued or purchased on the open market with proceeds contributed to these plans. In August 2020, Dominion Energy began purchasing its common stock on the open market for these direct stock purchase plans. During 2020, Dominion Energy received cash of $
Stock Purchase Contracts
In August 2019, Dominion Energy issued
Other Issuances
In July 2021, Dominion Energy issued
In August 2021, Dominion Energy issued
In September 2020, Dominion Energy issued
At-the-Market Program
In February 2018, Dominion Energy entered into sales agency agreements to effect sales under an at-the-market program. In the fourth quarter of 2018, Dominion Energy issued
In March 2020, Dominion Energy entered into sales agency agreements to effect sales under a $
In August 2020, Dominion Energy entered into sales agency agreements to effect sales under a new at-the-market program. Under the sales agency agreements, Dominion Energy may, from time to time, offer and sell shares of its common stock through the sales agents
175
or enter into one or more forward sale agreements with respect to shares of its common stock. Sales by Dominion Energy through the sales agents or by forward sellers pursuant to a forward sale agreement cannot exceed $
Repurchase of Common Stock
Dominion Energy did
In July 2020, in contemplation of Dominion Energy entering the July 2020 agreement to sell substantially all of its gas transmission and storage operations to BHE, the Board of Directors authorized the repurchase of up to $
In August 2020, Dominion Energy began repurchasing shares under an open market agreement with a financial institution. During the third quarter of 2020, Dominion Energy repurchased
In September 2020, Dominion Energy repurchased
In September 2020, Dominion Energy entered into
In December 2020, Dominion Energy entered into a new prepaid accelerated share repurchase agreement with one financial institution as the counterparty. Dominion Energy paid $
Virginia Power
In 2021, 2020 and 2019, Virginia Power did not issue any shares of its common stock to Dominion Energy.
Noncontrolling Interests
GT&S Transaction Closing
In November 2020, as part of the GT&S Transaction, Dominion Energy sold a
176
As a result, the $
Sale of Interest in Cove Point
In December 2019, Dominion Energy completed the sale of its
Non-Wholly-Owned Nonregulated Solar Facilities
In December 2021, Dominion Energy completed the sale of SBL Holdco, which held Dominion Energy’s
177
Accumulated Other Comprehensive Income (Loss)
Dominion Energy
The following table presents Dominion Energy’s changes in AOCI (net of tax) and reclassifications out of AOCI by component:
|
|
|
Commodity |
|
|
|
|
Interest Rate |
|
|
|
|
Foreign Currency |
|
|
|
|
Total Derivative-Hedging Activities(1) |
|
|
|
|
Investment Securities(2) |
|
|
|
|
Pension and other postretirement benefit costs(3) |
|
|
|
|
Equity Method Investees(4) |
|
|
|
|
Total |
|
||||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
|
|
$ |
— |
|
|
|
|
$ |
( |
) |
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
Other comprehensive income before reclassifications: gains (losses) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
Amounts reclassified from AOCI: (gains) losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased gas |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Interest and related charges |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Other income |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Income tax expense |
|
|
— |
|
|
|
|
|
( |
) |
|
|
|
|
— |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
— |
|
|
|
|
|
( |
) |
|
Total, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
Ending balance |
|
$ |
— |
|
|
|
|
$ |
( |
) |
|
|
|
$ |
— |
|
|
|
|
$ |
( |
) |
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
Year Ended December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
|
|
|
|
|
$ |
( |
) |
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
Other comprehensive income before reclassifications: gains (losses) |
|
|
— |
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Amounts reclassified from AOCI: (gains) losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
|
( |
) |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
( |
) |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
( |
) |
|
Purchased gas |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Interest and related charges |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Other income |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Total |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
— |
|
|
|
|
|
( |
) |
|
Total, net of tax |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
|
|
$ |
— |
|
|
|
|
$ |
( |
) |
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
(1) |
Net of $ |
|
(2) |
Net of $( |
|
(3) |
Net of $ |
|
(4) |
|
178
Virginia Power
|
|
|
Interest Rate |
|
|
|
|
Total Derivative-Hedging Activities(1) |
|
|
|
|
Investment Securities(2) |
|
|
|
|
Total |
|
||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
Other comprehensive income before reclassifications: gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
Amounts reclassified from AOCI: (gains) losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and related charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Other income |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
— |
|
|
Income tax expense |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
Total, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
— |
|
|
Net current period other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
Ending balance |
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
Year Ended December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
Other comprehensive income before reclassifications: gains (losses) |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Amounts reclassified from AOCI: (gains) losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and related charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Other income |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Income tax expense |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
( |
) |
|
Net current period other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Ending balance |
|
$ |
( |
) |
|
|
|
$ |
( |
) |
|
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
(1) |
Net of $ |
|
(2) |
Net of $( |
Stock-Based Awards
The 2014 Incentive Compensation Plan permits stock-based awards that include restricted stock, performance grants, goal-based stock, stock options and stock appreciation rights. The Non-Employee Directors Compensation Plan permits grants of restricted stock and stock options. Under provisions of these plans, employees and non-employee directors may be granted options to purchase common stock at a price not less than its fair market value at the date of grant with a maximum term of
Goal-based stock awards are granted in lieu of cash-based performance grants to certain officers who have not achieved a certain targeted level of share ownership. As of December 31, 2021, unrecognized compensation cost related to nonvested goal-based stock awards was immaterial.
Dominion Energy measures and recognizes compensation expense relating to share-based payment transactions over the vesting period based on the fair value of the equity or liability instruments issued. Dominion Energy’s results for the years ended December 31, 2021, 2020 and 2019 include $
179
Restricted Stock
Restricted stock grants are made to officers under Dominion Energy’s LTIP and may also be granted to certain key non-officer employees. The fair value of Dominion Energy’s restricted stock awards is equal to the closing price of Dominion Energy’s stock on the date of grant. New shares are issued for restricted stock awards on the date of grant and generally vest over a service period.
|
|
|
Shares |
|
|
Weighted - average Grant Date Fair Value |
|
||
|
|
|
(thousands) |
|
|
|
|
|
|
|
Nonvested at December 31, 2018 |
|
|
|
|
|
$ |
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
|
Cancelled and forfeited |
|
|
( |
) |
|
|
|
|
|
Nonvested at December 31, 2019 |
|
|
|
|
|
$ |
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
|
Cancelled and forfeited |
|
|
( |
) |
|
|
|
|
|
Nonvested at December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
|
Cancelled and forfeited |
|
|
( |
) |
|
|
|
|
|
Nonvested at December 31, 2021 |
|
|
|
|
|
$ |
|
|
As of December 31, 2021, unrecognized compensation cost related to nonvested restricted stock awards totaled $
Cash-Based Performance Grants
Cash-based performance grants are made to Dominion Energy’s officers under Dominion Energy’s LTIP. The actual payout of cash-based performance grants will vary between
In February 2019, a cash-based performance grant was made to officers. Payout of the performance grant occurred in January 2022 based on the achievement of two performance metrics during 2019, 2020 and 2021: TSR relative to that of companies that are members of Dominion Energy’s compensation peer group and ROIC with an additional payout based on Dominion Energy’s price-earnings ratio relative to that of the members of Dominion Energy’s peer compensation group. The total payout under the grant was $
In February 2020, a cash-based performance grant was made to officers. Payout of the performance grant is expected to occur by March 15, 2023 based on the achievement of two performance metrics during 2020, 2021 and 2022: TSR relative to that of companies that are members of Dominion Energy’s compensation peer group and ROIC. There are additional opportunities to earn a portion of the award based on Dominion Energy’s absolute TSR or relative price-earnings ratio performance. At December 31, 2021, the targeted amount of the three-year grant was $
In February 2021, a cash-based performance grant was made to officers. Payout of the performance grant is expected to occur by March 15, 2024 based on the achievement of two performance metrics during 2021, 2022 and 2023: TSR relative to that of companies that are members of Dominion Energy’s compensation peer group and ROIC. There is an additional opportunity to earn a portion of the award based on Dominion Energy’s relative price-earnings ratio performance. At December 31, 2021, the targeted amount of the three-year grant was $
180
NOTE 21. DIVIDEND RESTRICTIONS
The Virginia Commission may prohibit any public service company, including Virginia Power, from declaring or paying a dividend to an affiliate if found to be inconsistent with the public interest. At December 31, 2021, the Virginia Commission had not restricted the payment of dividends by Virginia Power.
The North Carolina Commission, in its order approving the SCANA Combination, limited cumulative dividends payable to Dominion Energy by Virginia Power and PSNC to (i) the amount of retained earnings the day prior to closing of the SCANA Combination plus (ii) any future earnings recorded by Virginia Power and PSNC after such closing.
The Ohio and Utah Commissions may prohibit any public service company, including East Ohio and Questar Gas, from declaring or paying a dividend to an affiliate if found to be detrimental to the public interest. At December 31, 2021, neither the Ohio Commission nor the Utah Commission had restricted the payment of dividends by East Ohio or Questar Gas, respectively.
There is no specific restriction from the South Carolina Commission on the payment of dividends paid by DESC. Pursuant to the SCANA Merger Approval Order, the amount of any DESC dividends paid must be reasonable and consistent with the long-term payout ratio of the electric utility industry and gas distribution industry.
At December 31, 2021, DESC’s retained earnings exceed the balance established by the Federal Power Act as a reserve on earnings attributable to hydroelectric generation plants. As a result, DESC is permitted to pay dividends without additional regulatory approval provided that such amounts would not bring the retained earnings balance below the threshold.
See Notes 18 and 19 for a description of potential restrictions on common stock dividend payments by Dominion Energy in connection with the deferral of interest payments on the enhanced junior subordinated notes, the deferral of contract adjustment payments on the 2019 Equity Units or a failure to pay dividends on the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock.
NOTE 22. EMPLOYEE BENEFIT PLANS
Dominion Energy—Defined Benefit Plans
Dominion Energy provides certain retirement benefits to eligible active employees, retirees and qualifying dependents. Under the terms of its benefit plans, Dominion Energy reserves 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.
Dominion Energy maintains qualified noncontributory defined benefit pension plans covering virtually all employees who commenced employment prior to July 2021. Retirement benefits are based primarily on years of service, age and the employee’s compensation. Dominion Energy’s funding policy is to contribute annually an amount that is in accordance with the provisions of ERISA. The pension programs also provide benefits to certain retired executives under company-sponsored nonqualified employee benefit plans. The nonqualified plans are funded through contributions to grantor trusts. Dominion Energy also provides retiree healthcare and life insurance benefits with annual employee premiums based on several factors such as age, retirement date and years of service.
Pension and other postretirement benefit costs are affected by employee demographics (including age, compensation levels and years of service), the level of contributions made to the plans and earnings on plan assets. These costs may also be affected by changes in key assumptions, including expected long-term rates of return on plan assets, discount rates, healthcare cost trend rates, mortality rates and the rate of compensation increases.
Dominion Energy uses December 31 as the measurement date for all of its employee benefit plans. Dominion Energy uses the market-related value of pension plan assets to determine the expected return on plan assets, a component of net periodic pension cost, for all pension plans. The market-related value recognizes changes in fair value on a straight-line basis over a four-year period, which reduces year-to-year volatility. Changes in fair value are measured as the difference between the expected and actual plan asset returns, including dividends, interest and realized and unrealized investment gains and losses. Since the market-related value recognizes changes in fair value over a four-year period, the future market-related value of pension plan assets will be impacted as previously unrecognized changes in fair value are recognized.
Dominion Energy’s pension and other postretirement benefit plans hold investments in trusts to fund employee benefit payments. Dominion Energy’s pension and other postretirement plan assets experienced aggregate actual returns (losses) of $
181
actual and expected returns on plan assets are accumulated and amortized during future periods. As such, any investment-related declines in these trusts will result in future increases in the net periodic cost recognized for such employee benefit plans and will be included in the determination of the amount of cash to be contributed to the employee benefit plans.
In the fourth quarter of 2021, Dominion Energy recognized the effects of a curtailment for certain pension plans resulting from an option that will provide certain active employees a one-time choice to transition to an enhanced defined contribution plan in lieu of accruing pension benefits for future services. The curtailment resulted in a decrease in the pension benefit obligation of $
In the third quarter of 2020, Dominion Energy remeasured certain pension plans due to a curtailment resulting from entering an agreement to sell substantially all of its gas transmission and storage operations to BHE. The remeasurement resulted in an increase in the pension benefit obligation of $
In the fourth quarter of 2020, Dominion Energy remeasured certain other postretirement benefit plans due to a curtailment and settlement resulting from Dominion Energy completing the GT&S Transaction. The remeasurement resulted in an increase in the accumulated postretirement benefit obligation of $
Voluntary Retirement Program
In March 2019, the Companies announced a voluntary retirement program to employees that meet certain age and service requirements. In 2019, upon the determinations made concerning the number of employees that elected to participate in the program, Dominion Energy recorded a charge of $
In the second quarter of 2019, Dominion Energy remeasured its pension and other postretirement benefit plans as a result of the voluntary retirement program. The remeasurement resulted in an increase in the pension benefit obligation of $
In the third quarter of 2019, Dominion Energy remeasured a pension plan as a result of a settlement from the voluntary retirement program at SCANA. The settlement and related remeasurement resulted in an increase in the pension benefit obligation of $
182
Funded Status
The following table summarizes the changes in pension plan and other postretirement benefit plan obligations and plan assets and includes a statement of the plans’ funded status for Dominion Energy:
|
|
|
Pension Benefits |
|
|
Other Postretirement Benefits |
|
||||||||||
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
(millions, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in benefit obligation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Service cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Actuarial (gains) losses during the year |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Plan amendments |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Settlements and curtailments(1) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Benefit obligation at end of year |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Changes in fair value of plan assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Actual return (loss) on plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Benefits paid |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Settlements(2) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
Fair value of plan assets at end of year |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Funded status at end of year |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Amounts recognized in the Consolidated Balance Sheets at December 31: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent pension and other postretirement benefit assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Other current liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Noncurrent pension and other postretirement benefit liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net amount recognized |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Significant assumptions used to determine benefit obligations as of December 31: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Weighted average rate of increase for compensation |
|
|
|
|
|
|
|
n/a |
|
|
n/a |
|
||||
|
Crediting interest rate for cash balance and similar plans |
|
|
|
|
|
|
|
n/a |
|
|
n/a |
|
||||
|
|
(1) |
|
|
|
(2) |
|
Actuarial gains recognized during 2021 in Dominion Energy’s pension benefit obligations were $
The ABO for all of Dominion Energy’s defined benefit pension plans was $
Under its funding policies, Dominion Energy evaluates plan funding requirements annually, usually in the fourth quarter after receiving updated plan information from its actuary. Based on the funded status of each plan and other factors, Dominion Energy determines the amount of contributions for the current year, if any, at that time. In December 2021, Dominion Energy issued
183
common and preferred stock. Dominion Energy is not required to make any contributions to its qualified defined benefit pension plans in 2022. Dominion Energy considers voluntary contributions from time to time, either in the form of cash or equity securities.
Certain of Dominion Energy’s subsidiaries fund other postretirement benefit costs through VEBAs. Dominion Energy’s remaining subsidiaries do not prefund other postretirement benefit costs but instead pay claims as presented. Dominion Energy did
The following table provides information on the benefit obligations and fair value of plan assets for plans with a benefit obligation in excess of plan assets for Dominion Energy:
|
|
|
Pension Benefits |
|
|
Other Postretirement Benefits |
|
||||||||||
|
As of December 31, |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Fair value of plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides information on the ABO and fair value of plan assets for Dominion Energy’s pension plans with an ABO in excess of plan assets:
|
As of December 31, |
|
2021 |
|
|
2020 |
|
||
|
(millions) |
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation |
|
$ |
|
|
|
$ |
|
|
|
Fair value of plan assets |
|
|
|
|
|
|
|
|
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid for Dominion Energy’s plans:
|
|
|
Estimated Future Benefit Payments |
|
|||||
|
|
|
Pension Benefits |
|
|
Other Postretirement Benefits |
|
||
|
(millions) |
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
2022 |
|
$ |
|
|
|
$ |
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
|
2026 |
|
|
|
|
|
|
|
|
|
2027-2031 |
|
|
|
|
|
|
|
|
Plan Assets
Dominion Energy’s overall objective for investing its pension and other postretirement plan assets is to achieve appropriate 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. The strategic target asset allocations for substantially all of Dominion Energy’s pension funds are
184
Dominion Energy also utilizes common/collective trust funds as an investment vehicle for its defined benefit plans. A common/collective trust fund is a pooled fund operated by a bank or trust company for investment of the assets of various organizations and individuals in a well-diversified portfolio. Common/collective trust funds are funds of grouped assets that follow various investment strategies.
Strategic investment policies are established for Dominion Energy’s prefunded benefit plans based upon periodic asset/liability studies. Factors considered in setting the investment policy include employee demographics, liability growth rates, future discount rates, the funded status of the plans and the expected long-term rate of return on plan assets. Deviations from the plans’ strategic allocation are a function of Dominion Energy’s assessments regarding short-term risk and reward opportunities in the capital markets and/or short-term market movements which result in the plans’ actual asset allocations varying from the strategic target asset allocations. Through periodic rebalancing, actual allocations are brought back in line with the target. Future asset/liability studies will focus on strategies to further reduce pension and other postretirement plan risk, while still achieving attractive levels of returns. Financial derivatives may be used to obtain or manage market exposures and to hedge assets and liabilities.
For fair value measurement policies and procedures related to pension and other postretirement benefit plan assets, see Note 6.
The fair values of Dominion Energy’s pension plan assets by asset category are as follows:
|
At December 31, |
|
2021 |
|
|
2020 |
|
||||||||||||||||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Common and preferred stocks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.(1) |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
International |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Insurance contracts |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Corporate debt instruments |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total recorded at fair value |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Assets recorded at NAV(2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common/collective trust funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private equity funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recorded at NAV |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Total investments(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
(1) |
|
|
(2) |
|
|
(3) |
|
185
The fair values of Dominion Energy’s other postretirement plan assets by asset category are as follows:
|
At December 31, |
|
2021 |
|
|
2020 |
|
||||||||||||||||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Common and preferred stocks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
International |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Insurance contracts |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Corporate debt instruments |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Government securities |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total recorded at fair value |
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Assets recorded at NAV(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common/collective trust funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private equity funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recorded at NAV |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Total investments(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
(1) |
These investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient are not required to be categorized in the fair value hierarchy. |
|
(2) |
|
The plan assets investments are determined based on the fair values of the investments and the underlying investments, which have been determined as follows:
|
|
• |
Cash and Cash Equivalents—Investments are held primarily in short-term notes and treasury bills, which are valued at cost plus accrued interest. |
|
|
• |
Common and Preferred Stocks—Investments are valued at the closing price reported on the active market on which the individual securities are traded. |
|
|
• |
Insurance Contracts—Investments in Group Annuity Contracts with John Hancock were entered into after 1992 and are stated at fair value based on the fair value of the underlying securities as provided by the managers and include investments in U.S. government securities, corporate debt instruments and state and municipal debt securities. |
|
|
• |
Corporate Debt Instruments—Investments are valued using pricing models maximizing the use of observable inputs for similar securities. This includes basing value on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar instruments, the instrument is valued under a discounted cash flows approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks or a broker quote, if available. |
|
|
• |
Government Securities—Investments are valued using pricing models maximizing the use of observable inputs for similar securities. |
|
|
• |
Common/Collective Trust Funds—Common/collective trust funds invest in debt and equity securities and other instruments with characteristics similar to those of the funds’ benchmarks. The primary objectives of the funds are to seek investment returns that approximate the overall performance of their benchmark indexes. These benchmarks are major equity indices, fixed income indices and money market indices that focus on growth, income and liquidity strategies, as applicable. Investments in common/collective trust funds are stated at the NAV as determined by the issuer of the common/collective trust funds and are based on the fair value of the underlying investments held by the fund less its liabilities. The NAV is used as a practical expedient to estimate fair value. The common/collective trust funds do not have any unfunded commitments, and do not have any applicable liquidation periods or defined terms/periods to be held. The majority of the common/collective trust funds have limited withdrawal or redemption rights during the term of the investment. |
186
|
|
• |
Alternative Investments—Investments in real estate funds, private equity funds, debt funds and hedge funds are stated at fair value based on the NAV of the plan’s proportionate share of the partnership, joint venture or other alternative investment’s fair value as determined by reference to audited financial statements or NAV statements provided by the investment manager. The NAV, which is used as a practical expedient to estimate fair value, is adjusted for contributions and distributions occurring between the investment manager’s and Dominion Energy’s measurement date. These valuations also involve assumptions and methods that are reviewed, evaluated, and adjusted, if necessary, by Dominion Energy. |
Net Periodic Benefit (Credit) Cost
The service cost component of net periodic benefit (credit) cost is reflected in other operations and maintenance expense in Dominion Energy’s Consolidated Statements of Income, except for $
|
|
|
Pension Benefits |
|
|
Other Postretirement Benefits |
|
||||||||||||||||||
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
||||||
|
(millions, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Amortization of prior service (credit) cost |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Amortization of net actuarial loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements, curtailments and special termination benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
Net periodic benefit (credit) cost |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Changes in plan assets and benefit obligations recognized in other comprehensive income and regulatory assets and liabilities: |
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|
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Current year net actuarial (gain) loss |
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$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Prior service (credit) cost |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
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|
|
|
|
Settlements and curtailments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
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|
Less amounts included in net periodic benefit cost: |
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Amortization of net actuarial loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Amortization of prior service credit (cost) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
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|
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Total recognized in other comprehensive income and regulatory assets and liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Significant assumptions used to determine periodic cost: |
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Discount rate |
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2.73%-3.29% |
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2.77%-3.63% |
|
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3.57%-4.43% |
|
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2.69%-2.80% |
|
|
3.07%-3.52% |
|
|
4.05% to 4.41% |
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||||||
|
Expected long-term rate of return on plan assets |
|
7.00%-8.45% |
|
|
7.00%-8.60% |
|
|
7.00% -8.65% |
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||||||
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Weighted average rate of increase for compensation |
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|
|
|
|
|
|
n/a |
|
|
n/a |
|
|
n/a |
|
||||||
|
Crediting interest rate for cash balance and similar plans |
|
1.93%-2.15% |
|
|
2.31-2.83% |
|
|
2.77-3.63% |
|
|
n/a |
|
|
n/a |
|
|
n/a |
|
||||||
|
Healthcare cost trend rate(1) |
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.50% to 6.60% |
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|||
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Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)(1) |
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|||
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Year that the rate reaches the ultimate trend rate(1) |
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|
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2026-2027 |
|
|
2025-2026 |
|
|
2023-2025 |
|
|||
|
(1) |
|
The components of AOCI and regulatory assets and liabilities for Dominion Energy’s plans that have not been recognized as components of net periodic benefit (credit) cost are as follows:
|
|
|
Pension Benefits |
|
|
Other Postretirement Benefits |
|
||||||||||
|
At December 31, |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
(millions) |
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|
Dominion Energy |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
Net actuarial loss |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Prior service (credit) cost |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
(1) |
|
187
|
of the $ |
The expected long-term rates of return on plan assets, discount rates, healthcare cost trend rates and mortality are critical assumptions in determining net periodic benefit (credit) cost. Dominion Energy develops non-investment related assumptions, which are then compared to the forecasts of an independent investment advisor to ensure reasonableness. An internal committee selects the final assumptions used for Dominion Energy’s pension and other postretirement plans including discount rates, expected long-term rates of return, healthcare cost trend rates and mortality rates.
Dominion Energy determines the expected long-term rates of return on plan assets for its pension plans and other postretirement benefit plans by using a combination of:
|
|
• |
Expected inflation and risk-free interest rate assumptions; |
|
|
• |
Historical return analysis to determine long term historic returns as well as historic risk premiums for various asset classes; |
|
|
• |
Expected future risk premiums, asset classes’ volatilities and correlations; |
|
|
• |
Forward-looking return expectations derived from the yield on long-term bonds and the expected long-term returns of major capital market assumptions; and |
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|
• |
Investment allocation of plan assets. |
Dominion Energy determines discount rates from analyses of AA/Aa rated bonds with cash flows matching the expected payments to be made under its plans.
Mortality rates are developed from actual and projected plan experience for postretirement benefit plans. Dominion Energy’s actuary conducts an experience study periodically as part of the process to select its best estimate of mortality. Dominion Energy considers both standard mortality tables and improvement factors as well as the plans’ actual experience when selecting a best estimate.
Assumed healthcare cost trend rates have a significant effect on the amounts reported for Dominion Energy’s retiree healthcare plans. Dominion Energy establishes the healthcare cost trend rate assumption based on analyses of various factors including the specific provisions of its medical plans, actual cost trends experienced and projected and demographics of plan participants.
Virginia Power—Participation in Defined Benefit Plans
Virginia Power employees are covered by the Dominion Energy Pension Plan described above. As a participating employer, Virginia Power is subject to Dominion Energy’s funding policy, which is to contribute annually an amount that is in accordance with ERISA. During 2019, Virginia Power made
Retiree healthcare and life insurance benefits, for Virginia Power employees are covered by the Dominion Energy Retiree Health and Welfare Plan described above. Virginia Power’s net periodic benefit (credit) cost related to this plan was $(
Dominion Energy holds investments in trusts to fund employee benefit payments for the pension and other postretirement benefit plans in which Virginia Power’s employees participate. Any investment-related declines in these trusts will result in future increases in the net periodic cost recognized for such employee benefit plans and will be included in the determination of the amount of cash that Virginia Power will provide to Dominion Energy for its share of employee benefit plan contributions.
188
Virginia Power funds other postretirement benefit costs through VEBAs. During 2021, 2020 and 2019, Virginia Power made
Defined Contribution Plans
Dominion Energy also sponsors defined contribution employee savings plans that cover substantially all employees. During 2021, 2020 and 2019, Dominion Energy recognized $
NOTE 23. COMMITMENTS AND CONTINGENCIES
As a result of issues generated in the ordinary course of business, the Companies are involved in legal proceedings before various courts and are periodically subject to governmental examinations (including by regulatory authorities), inquiries and investigations. Certain legal proceedings and governmental examinations involve demands for unspecified amounts of damages, are in an initial procedural phase, involve uncertainty as to the outcome of pending appeals or motions, or involve significant factual issues that need to be resolved, such that it is not possible for the Companies to estimate a range of possible loss. For such matters that the Companies cannot estimate, a statement to this effect is made in the description of the matter. Other matters may have progressed sufficiently through the litigation or investigative processes such that the Companies are able to estimate a range of possible loss. For legal proceedings and governmental examinations that the Companies are able to reasonably estimate a range of possible losses, an estimated range of possible loss is provided, in excess of the accrued liability (if any) for such matters. The Companies maintain various insurance programs, including general liability insurance coverage which provides coverage for personal injury or wrongful death cases. Any accrued liability is recorded on a gross basis with a receivable also recorded for any probable insurance recoveries. Estimated ranges of loss are inclusive of legal fees and net of any anticipated insurance recoveries. Any estimated range is based on currently available information and involves elements of judgment and significant uncertainties. Any estimated range of possible loss may not represent the Companies’ maximum possible loss exposure. The circumstances of such legal proceedings and governmental examinations will change from time to time and actual results may vary significantly from the current estimate. For current proceedings not specifically reported below, management does not anticipate that the liabilities, if any, arising from such proceedings would have a material effect on the Companies’ financial position, liquidity or results of operations.
Environmental Matters
The Companies are subject to costs resulting from a number of federal, state and local laws and regulations designed to protect human health and the environment. These laws and regulations affect future planning and existing operations. They can result in increased capital, operating and other costs as a result of compliance, remediation, containment and monitoring obligations.
Air
The CAA, as amended, is a comprehensive program utilizing a broad range of regulatory tools to protect and preserve the nation’s air quality. At a minimum, states are required to establish regulatory programs to meet applicable requirements of the CAA. However, states may choose to develop regulatory programs that are more restrictive. Many of the Companies’ facilities are subject to the CAA’s permitting and other requirements.
189
Ozone Standards
The EPA published final non-attainment designations for the October 2015 ozone standard in June 2018 with states required to develop plans to address the new standard. Certain states in which the Companies operate have developed plans, and had such plans approved or partially approved by the EPA, which are not expected to have a material impact on the Companies’ results of operations or cash flows. However, until implementation plans for the standard are developed and approved for all states in which the Companies operate, the Companies are unable to predict whether or to what extent the new rules will ultimately require additional controls. The expenditures required to implement additional controls could have a material impact on the Companies’ results of operations and cash flows.
ACE Rule
In July 2019, the EPA published the final rule informally referred to as the ACE Rule, as a replacement for the Clean Power Plan. The ACE Rule regulated GHG emissions from existing coal-fired power plants pursuant to Section 111(d) of the CAA and required states to develop plans by July 2022 establishing unit-specific performance standards for existing coal-fired power plants. In January 2021, the U.S. Court of Appeals for the D.C. Circuit vacated the ACE Rule and remanded it to the EPA. This decision would take effect upon issuance of the court’s mandate. In March 2021, the court issued a partial mandate vacating and remanding all parts of the ACE Rule except for the portion of the ACE Rule that repealed the Clean Power Plan. In October 2021, the U.S. Supreme Court agreed to hear a challenge of the U.S. Court of Appeals for the D.C. Circuit’s decision on the ACE Rule. While the EPA has stated its intention to replace the ACE Rule, it is unknown at this time if or how the EPA will issue a replacement for the ACE Rule and how that replacement will affect the Companies’ operations, financial condition and/or cash flows.
Carbon Regulations
In August 2016, the EPA issued a draft rule proposing to reaffirm that a source’s obligation to obtain a PSD or Title V permit for GHGs is triggered only if such permitting requirements are first triggered by non-GHG, or conventional, pollutants that are regulated by the New Source Review program, and exceed a significant emissions rate of
In December 2018, the EPA proposed revised Standards of Performance for Greenhouse Gas Emissions from New, Modified, and Reconstructed Stationary Sources. The proposed rule would amend the previous determination that the best system of emission reduction for newly constructed coal-fired steam generating units is no longer partial carbon capture and storage. Instead, the proposed revised best system of emission reduction for this source category is the most efficient demonstrated steam cycle (e.g., supercritical steam conditions for large units and subcritical steam conditions for small units) in combination with best operating practices. In January 2021, the EPA published a final rule affirming that fossil fuel-fired electric generating units meet the requirement that a source category “significantly contribute” to endangering air pollution for the purposes of regulating GHG emissions from new, modified and reconstructed stationary sources. The January 2021 rule also established a threshold for the “significant contribution” threshold that would have meant that no other source category, such as oil and gas facilities, petroleum refineries, and boilers, would meet that requirement at this time. In April 2021, the U.S. Court of Appeals for the D.C. Circuit granted an unopposed motion by the EPA to vacate and remand the January 2021 rule. The proposed revision to the performance standards for coal-fired steam generating units remains pending. Until the EPA ultimately takes final action on this rulemaking, the Companies cannot predict the impact to their results of operations, financial condition and/or cash flows.
Water
The CWA, as amended, is a comprehensive program requiring a broad range of regulatory tools including a permit program to authorize and regulate discharges to surface waters with strong enforcement mechanisms. The Companies must comply with applicable aspects of the CWA programs at their operating facilities.
Regulation 316(b)
In October 2014, the final regulations under Section 316(b) of the CWA that govern existing facilities and new units at existing facilities that employ a cooling water intake structure and that have flow levels exceeding a minimum threshold became effective. The rule establishes a national standard for impingement based on seven compliance options, but forgoes the creation of a single technology standard for entrainment. Instead, the EPA has delegated entrainment technology decisions to state regulators. State regulators are to make case-by-case entrainment technology determinations after an examination of
190
entrainment controls under the final rule as these decisions will be made on a case-by-case basis after a thorough review of detailed biological, technological, and cost benefit studies. DESC is conducting studies and implementing plans as required by the rule to determine appropriate intake structure modifications at certain facilities to ensure compliance with this rule. While the impacts of this rule could be material to the Companies’ results of operations, financial condition and/or cash flows, the existing regulatory frameworks in South Carolina and Virginia provide rate recovery mechanisms that could substantially mitigate any such impacts for the regulated electric utilities.
Effluent Limitations Guidelines
In September 2015, the EPA released a final rule to revise the Effluent Limitations Guidelines for the Steam Electric Power Generating Category. The final rule established updated standards for wastewater discharges that apply primarily at coal and oil steam generating stations. Affected facilities are required to convert from wet to dry or closed cycle coal ash management, improve existing wastewater treatment systems and/or install new wastewater treatment technologies in order to meet the new discharge limits. In April 2017, the EPA granted
Waste Management and Remediation
The operations of the Companies are subject to a variety of state and federal laws and regulations governing the management and disposal of solid and hazardous waste, and release of hazardous substances associated with current and/or historical operations. The CERCLA, as amended, and similar state laws, may impose joint, several and strict liability for cleanup on potentially responsible parties who owned, operated or arranged for disposal at facilities affected by a release of hazardous substances. In addition, many states have created programs to incentivize voluntary remediation of sites where historical releases of hazardous substances are identified and property owners or responsible parties decide to initiate cleanups.
From time to time, the Companies may be identified as a potentially responsible party in connection with the alleged release of hazardous substances or wastes at a site. Under applicable federal and state laws, the Companies could be responsible for costs associated with the investigation or remediation of impacted sites, or subject to contribution claims by other responsible parties for their costs incurred at such sites. The Companies also may identify, evaluate and remediate other potentially impacted sites under voluntary state programs. Remediation costs may be subject to reimbursement under the Companies’ insurance policies, rate recovery mechanisms, or both. Except as described below, the Companies do not believe these matters will have a material effect on results of operations, financial condition and/or cash flows.
Dominion Energy has determined that it is associated with former manufactured gas plant sites, including certain sites associated with Virginia Power. At
Other Legal Matters
The Companies are defendants in a number of lawsuits and claims involving unrelated incidents of property damage and personal injury. Due to the uncertainty surrounding these matters, the Companies are unable to make an estimate of the potential financial statement impacts; however, they could have a material impact on results of operations, financial condition and/or cash flows.
191
SCANA Legal Proceedings
The following describes certain legal proceedings involving Dominion Energy, SCANA or DESC relating primarily to events occurring before closing of the SCANA Combination. No reference to, or disclosure of, any proceeding, item or matter described below shall be construed as an admission or indication that such proceeding, item or matter is material. For certain of these matters, and unless otherwise noted therein, Dominion Energy is unable to estimate a reasonable range of possible loss and the related financial statement impacts, but for any such matter there could be a material impact to its results of operations, financial condition and/or cash flows. For the matters for which Dominion Energy is able to reasonably estimate a probable loss, Dominion Energy’s Consolidated Balance Sheets at December 31, 2021 and 2020 include reserves of $
Ratepayer Class Actions
In May 2018, a consolidated complaint against DESC, SCANA and the State of South Carolina was filed in the State Court of Common Pleas in Hampton County, South Carolina (the DESC Ratepayer Case). The plaintiffs alleged, among other things, that DESC was negligent and unjustly enriched, breached alleged fiduciary and contractual duties and committed fraud and misrepresentation in failing to properly manage the NND Project, and that DESC committed unfair trade practices and violated state anti-trust laws. In December 2018, the State Court of Common Pleas in Hampton County entered an order granting preliminary approval of a class action settlement. The court entered an order granting final approval of the settlement in June 2019, which became effective in July 2019. The settlement agreement, contingent upon the closing of the SCANA Combination, provided that SCANA and DESC establish an escrow account and proceeds from the escrow account would be distributed to the plaintiffs, after payment of certain taxes, attorneys' fees and other expenses and administrative costs. The escrow account would include (1) up to $
In September 2017, a purported class action was filed by Santee Cooper ratepayers against Santee Cooper, DESC, Palmetto Electric Cooperative, Inc. and Central Electric Power Cooperative, Inc. in the State Court of Common Pleas in Hampton County, South Carolina (the Santee Cooper Ratepayer Case). The allegations were substantially similar to those in the DESC Ratepayer Case. In March 2020, the parties executed a settlement agreement relating to this matter as well as the Luquire Case and the Glibowski Case described below. The settlement agreement provided that Dominion Energy and Santee Cooper establish a fund for the benefit of class members in the amount of $
In July 2019, a similar purported class action was filed by certain Santee Cooper ratepayers against DESC, SCANA, Dominion Energy and former directors and officers of SCANA in the State Court of Common Pleas in Orangeburg, South Carolina (the Luquire Case). In August 2019, DESC, SCANA and Dominion Energy were voluntarily dismissed from the case. The claims were similar to the Santee Cooper Ratepayer Case. In March 2020, the parties executed a settlement agreement as described above relating to this matter as well as the Santee Cooper Ratepayer Case and the Glibowski Case. This case was dismissed as part of the Santee Cooper Ratepayer Case settlement described above.
RICO Class Action
192
In January 2018, a purported class action was filed, and subsequently amended, against SCANA, DESC and certain former executive officers in the U.S. District Court for the District of South Carolina (the Glibowski Case). The plaintiff alleged, among other things, that SCANA, DESC and the individual defendants participated in an unlawful racketeering enterprise in violation of RICO and conspired to violate RICO by fraudulently inflating utility bills to generate unlawful proceeds. In March 2020, the parties executed a settlement agreement as described above relating to this matter as well as the Santee Cooper Ratepayer Case and the Luquire Case. This case was dismissed as part of the Santee Cooper Ratepayer Case settlement described above.
SCANA Shareholder Litigation
In September 2017, a purported class action was filed against SCANA and certain former executive officers and directors in the U.S. District Court for the District of South Carolina. Subsequent additional purported class actions were separately filed against all or nearly all of these defendants (collectively the SCANA Securities Class Action). In January 2018, the U.S. District Court for the District of South Carolina consolidated these suits, and the plaintiffs filed a consolidated amended complaint in March 2018. The plaintiffs alleged, among other things, that the defendants violated §10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, and that the individually named defendants are liable under §20(a) of the same act. In December 2019, the parties executed a settlement agreement pursuant to which SCANA would pay $
In September 2017, a shareholder derivative action was filed against certain former executive officers and directors of SCANA in the State Court of Common Pleas in Richland County, South Carolina (the State Court Derivative Case). In September 2018, this action was consolidated with another action in the Business Court Pilot Program in Richland County. The plaintiffs allege, among other things, that the defendants breached their fiduciary duties to shareholders by their gross mismanagement of the NND Project, and that the defendants were unjustly enriched by bonuses they were paid in connection with the project. In January 2019, the defendants filed a motion to dismiss the consolidated action. In February 2019, one action was voluntarily dismissed. In March 2020, the court denied the defendants’ motion to dismiss. In April 2020, the defendants filed a notice of appeal with the South Carolina Court of Appeals and a petition with the Supreme Court of South Carolina seeking appellate review of the denial of the motion to dismiss. In June 2020, the plaintiffs filed a motion to dismiss the appeal with the South Carolina Court of Appeals, which was granted in July 2020. In August 2020, the Supreme Court of South Carolina denied the defendants’ petition seeking appellate review. Also in August 2020, the defendants filed a petition for rehearing with the South Carolina Court of Appeals relating to the July 2020 ruling by the court, which was denied in October 2020. In November 2020, SCANA filed a petition of certiorari with the Supreme Court of South Carolina seeking appellate review of the denial of SCANA’s motion to dismiss. This petition was denied in June 2021. Also in June 2021, the parties reached an agreement in principle in the amount of $
In January 2018, a purported class action was filed against SCANA, Dominion Energy and certain former executive officers and directors of SCANA in the State Court of Common Pleas in Lexington County, South Carolina (the City of Warren Lawsuit). The plaintiff alleges, among other things, that defendants violated their fiduciary duties to shareholders by executing a merger agreement that would unfairly deprive plaintiffs of the true value of their SCANA stock, and that Dominion Energy aided and abetted these actions. Among other remedies, the plaintiff seeks to enjoin and/or rescind the merger.
In February 2018, a purported class action was filed against Dominion Energy and certain former directors of SCANA and DESC in the State Court of Common Pleas in Richland County, South Carolina (the Metzler Lawsuit). The allegations made and the relief sought by the plaintiffs are substantially similar to that described for the City of Warren Lawsuit.
In September 2019, the U.S. District Court for the District of South Carolina granted the plaintiffs’ motion to consolidate the City of Warren Lawsuit and the Metzler Lawsuit (the Federal Court Merger Case). In October 2019, the plaintiffs filed an amended complaint against certain former directors and executive officers of SCANA and DESC, which stated substantially similar allegations to those in the City of Warren Lawsuit and the Metzler Lawsuit as well as an inseparable fraud claim. In November 2019, the defendants filed a motion to dismiss. In April 2020, the U.S. District Court for the District of South Carolina denied the motion to dismiss. In May 2020, SCANA filed a motion to intervene, which was denied in August 2020. In September 2020, SCANA filed a notice of appeal with the U.S. Court of Appeals for the Fourth Circuit. In June 2021, the parties reached an agreement in principle in the amount of $
193
In May 2019, a case was filed against certain former executive officers and directors of SCANA in the State Court of Common Pleas in Richland County, South Carolina (the State Court Merger Case). The plaintiff alleges, among other things, that the defendants breached their fiduciary duties to shareholders by their gross mismanagement of the NND Project, were unjustly enriched by the bonuses they were paid in connection with the project and breached their fiduciary duties to secure and obtain the best price for the sale of SCANA. Also in May 2019, the case was removed to the U.S. District Court of South Carolina by the non-South Carolina defendants. In June 2019, the plaintiffs filed a motion to remand the case to state court. In January 2020, the case was remanded to state court. In February 2020, the defendants filed a motion to dismiss. In June 2021, the parties reached an agreement in principle as described above relating to this matter as well as the Federal Court Merger Case and the State Court Derivative Case. In November 2021, the parties executed a settlement agreement, as described above relating to this matter as well as the State Court Derivative Case and the Federal Court Merger Case, and filed with the State Court of Common Pleas in Richland County, South Carolina for approval.
Employment Class Actions and Indemnification
In August 2017, a case was filed in the U.S. District Court for the District of South Carolina on behalf of persons who were formerly employed at the NND Project. In July 2018, the court certified this case as a class action. In February 2019, certain of these plaintiffs filed an additional case, which case has been dismissed and the plaintiffs have joined the case filed August 2017. The plaintiffs allege, among other things, that SCANA, DESC, Fluor Corporation and Fluor Enterprises, Inc. violated the Worker Adjustment and Retraining Notification Act in connection with the decision to stop construction at the NND Project. The plaintiffs allege that the defendants failed to provide adequate advance written notice of their terminations of employment and are seeking damages, which could be as much as $
In September 2018, a case was filed in the State Court of Common Pleas in Fairfield County, South Carolina by Fluor Enterprises, Inc. and Fluor Daniel Maintenance Services, Inc. against DESC and Santee Cooper. The plaintiffs make claims for indemnification, breach of contract and promissory estoppel arising from, among other things, the defendants' alleged failure and refusal to defend and indemnify the Fluor defendants in the aforementioned case. This case is pending.
FILOT Litigation and Related Matters
In November 2017, Fairfield County filed a complaint and a motion for temporary injunction against DESC in the State Court of Common Pleas in Fairfield County, South Carolina, making allegations of breach of contract, fraud, negligent misrepresentation, breach of fiduciary duty, breach of implied duty of good faith and fair dealing and unfair trade practices related to DESC’s termination of the FILOT agreement between DESC and Fairfield County related to the NND Project. The plaintiff sought a temporary and permanent injunction to prevent DESC from terminating the FILOT agreement. The plaintiff withdrew the motion for temporary injunction in December 2017. In July 2021, the parties executed a settlement agreement requiring DESC to pay $
Governmental Proceedings and Investigations
In June 2018, DESC received a notice of proposed assessment of approximately $
In September and October 2017, SCANA was served with subpoenas issued by the U.S. Attorney’s Office for the District of South Carolina and the Staff of the SEC’s Division of Enforcement seeking documents related to the NND Project. In February 2020, the SEC filed a complaint against SCANA, two of its former executive officers and DESC in the U.S. District Court for the District of South Carolina alleging that the defendants violated federal securities laws by making false and misleading statements about the NND Project. In April 2020, SCANA and DESC reached an agreement in principle with the Staff of the SEC’s Division of Enforcement to settle, without admitting or denying the allegations in the complaint. In December 2020, the U.S. District Court for the District of South Carolina issued an order approving the settlement which required SCANA to pay a civil monetary penalty totaling $
194
SCANA paid the civil penalty in December 2020. The SEC civil action against two former executive officers of SCANA remains pending and is currently subject to a stay granted by the court in June 2020 at the request of the U.S. Attorney’s Office for the District of South Carolina.
In addition, the South Carolina Law Enforcement Division is conducting a criminal investigation into the handling of the NND Project by SCANA and DESC. Dominion Energy is cooperating fully with the investigations by the U.S. Attorney’s Office and the South Carolina Law Enforcement Division, including responding to additional subpoenas and document requests. Dominion Energy has also entered into a cooperation agreement with the U.S. Attorney’s Office and the South Carolina Attorney General’s Office. The cooperation agreement provides that in consideration of its full cooperation with these investigations to the satisfaction of both agencies, neither such agency will criminally prosecute or bring any civil action against Dominion Energy or any of its current, previous, or future direct or indirect subsidiaries related to the NND Project. A former executive officer of SCANA entered a plea agreement with the U.S. Attorney’s Office and the South Carolina Attorney General’s Office in June 2020 and entered a guilty plea with the U.S. District Court for the District of South Carolina in July 2020. Another former executive officer of SCANA entered a plea agreement with the U.S. Attorney's Office and the South Carolina Attorney General's Office in November 2020 and entered guilty pleas in the U.S. District Court for the District of South Carolina and in South Carolina state court in February 2021. As a result of the pleas, Dominion Energy has terminated indemnity for these former executive officers related to these two cases.
Abandoned NND Project
DESC, for itself and as agent for Santee Cooper, entered into an engineering, construction and procurement contract with Westinghouse and WECTEC in 2008 for the design and construction of the NND Project, of which DESC’s ownership share is
Based on the results of SCANA’s analysis, and in light of Santee Cooper's decision to suspend construction on the NND Project, in July 2017, SCANA determined to stop the construction of the units and to pursue recovery of costs incurred in connection with the construction under the abandonment provisions of the Base Load Review Act or through other means. This decision by SCANA became the focus of numerous legislative, regulatory and legal proceedings. Some of these proceedings are described above.
In September 2017, DESC, for itself and as agent for Santee Cooper, filed with the U.S. Bankruptcy Court for the Southern District of New York Proofs of Claim for unliquidated damages against each of Westinghouse and WECTEC. These Proofs of Claim were based upon the anticipatory repudiation and material breach by Westinghouse and WECTEC of the contract, and assert against Westinghouse and WECTEC any and all claims that are based thereon or that may be related thereto.
Westinghouse’s reorganization plan was confirmed by the U.S. Bankruptcy Court for the Southern District of New York and became effective in August 2018. In connection with the effectiveness of the reorganization plan, the contract associated with the NND Project was deemed rejected. DESC contested approximately $
DESC and Santee Cooper were responsible for amounts owed to Westinghouse for valid work performed by Westinghouse subcontractors on the NND Project after the Westinghouse bankruptcy filing until termination of the interim assessment agreement. In December 2019, DESC and Santee Cooper entered into a confidential settlement agreement with W Wind Down Co LLC resolving claims relating to the interim assessment agreement.
195
Further, some Westinghouse subcontractors that made claims against Westinghouse in the bankruptcy proceeding also filed claims against DESC and Santee Cooper in South Carolina state court for damages. Many of these claimants asserted construction liens against the NND Project site. In December 2021, settlements were reached to resolve all remaining claims made by Westinghouse subcontractors. All amounts for which Dominion Energy was ultimately responsible were funded utilizing, and did not exceed, the portion of the Toshiba Settlement allocated for such balances within the SCANA Merger Approval Order recorded in regulatory liabilities on Dominion Energy’s Consolidated Balance Sheets.
Nuclear Operations
Nuclear Decommissioning – Minimum Financial Assurance
The NRC requires nuclear power plant owners to annually update minimum financial assurance amounts for the future decommissioning of their nuclear facilities. Decommissioning involves the decontamination and removal of radioactive contaminants from a nuclear power station once operations have ceased, in accordance with standards established by the NRC. The 2021 calculation for the NRC minimum financial assurance amount, aggregated for Dominion Energy and Virginia Power’s nuclear units, excluding joint owners’ assurance amounts and Millstone Unit 1 and Kewaunee, as those units are in a decommissioning state, was $
Nuclear Insurance
The Price-Anderson Amendments Act of 1988 provides the public up to $
|
|
|
Coverage |
|
|
|
(billions) |
|
|
|
|
|
Dominion Energy |
|
|
|
|
|
Millstone |
|
$ |
|
|
|
Kewaunee |
|
|
|
|
|
Summer |
|
|
|
|
|
Virginia Power |
|
|
|
|
|
Surry |
|
$ |
|
|
|
North Anna |
|
|
|
|
The Companies’ nuclear property insurance coverage for Millstone, Summer, Surry and North Anna meets or exceeds the NRC minimum requirement for nuclear power plant licensees of $
196
2018, following the removal and storage of the spent nuclear fuel from the spent fuel pool. This includes coverage for premature decommissioning and functional total loss. The NRC requires that the proceeds from this insurance be used first, to return the reactor to and maintain it in a safe and stable condition and second, to decontaminate the reactor and station site in accordance with a plan approved by the NRC. Nuclear property insurance is provided by NEIL, a mutual insurance company, and is subject to retrospective premium assessments in any policy year in which losses exceed the funds available to the insurance company. Dominion Energy and Virginia Power's maximum retrospective premium assessment for the current policy period is $
Millstone, Virginia Power and Summer also purchase accidental outage insurance from NEIL to mitigate certain expenses, including replacement power costs, associated with the prolonged outage of a nuclear unit due to direct physical damage. Under this program, the Companies are subject to a retrospective premium assessment for any policy year in which losses exceed funds available to NEIL. Dominion Energy and Virginia Power's maximum retrospective premium assessment for the current policy period is $
ODEC, a part owner of North Anna, Santee Cooper, a part owner of Summer and Massachusetts Municipal and Green Mountain, part owners of Millstone’s Unit 3, are responsible to the Companies for their share of the nuclear decommissioning obligation and insurance premiums on applicable units, including any retrospective premium assessments and any losses not covered by insurance.
Spent Nuclear Fuel
The Companies entered into contracts with the DOE for the disposal of spent nuclear fuel under provisions of the Nuclear Waste Policy Act of 1982. The DOE failed to begin accepting the spent fuel on January 31, 1998, the date provided by the Nuclear Waste Policy Act and by the Companies’ contracts with the DOE. The Companies have previously received damages award payments and settlement payments related to these contracts.
By mutual agreement of the parties, the settlement agreements are extendable to provide for resolution of damages incurred after 2013. The settlement agreements for the Surry, North Anna and Millstone nuclear power stations have been extended to provide for periodic payments for damages incurred through December 31, 2022, and additional extensions are contemplated by the settlement agreements. A similar agreement for Summer extends until the DOE has accepted the same amount of spent fuel from the facility as if it has fully performed its contractual obligations.
In June 2018, a lawsuit for Kewaunee was filed in the U.S. Court of Federal Claims for recovery of spent nuclear fuel storage costs incurred after 2013. In March 2019, Dominion Energy amended its filing for recovery of spent nuclear fuel storage to include costs incurred for the year ended December 31, 2018. In January 2022, a settlement agreement was entered into for $
In 2021, Virginia Power received payments of $
In 2020, Virginia Power received payments of $
In 2019, Virginia Power received payments of $
The Companies continue to recognize receivables for certain spent nuclear fuel-related costs that they believe are probable of recovery from the DOE. Dominion Energy’s receivables for spent nuclear fuel-related costs totaled $
197
December 31, 2021 and 2020, respectively. Virginia Power’s receivables for spent nuclear fuel-related costs totaled $
The Companies will continue to manage their spent fuel until it is accepted by the DOE.
Long-Term Purchase Agreements
At December 31, 2021, Dominion Energy had the following long-term commitments that are noncancelable or are cancelable only under certain conditions, and that a third party has used to secure financing for the facility that will provide the contracted goods or services:
|
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
Thereafter |
|
|
Total |
|
|||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased electric capacity(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
Commitments represent estimated amounts payable for energy under power purchase contracts with qualifying facilities which expire at various dates through 2046. Energy payments are generally based on fixed dollar amounts per month and totaled $ |
Guarantees, Surety Bonds and Letters of Credit
Upon the closing of the GT&S Transaction, Dominion Energy retained its
Dominion Energy also enters into guarantee arrangements on behalf of its consolidated subsidiaries, primarily to facilitate their commercial transactions with third parties. If any of these subsidiaries fail to perform or pay under the contracts and the counterparties seek performance or payment, Dominion Energy would be obligated to satisfy such obligation. To the extent that a liability subject to a guarantee has been incurred by one of Dominion Energy’s consolidated subsidiaries, that liability is included in the Consolidated Financial Statements. Dominion Energy is not required to recognize liabilities for guarantees issued on behalf of its subsidiaries unless it becomes probable that it will have to perform under the guarantees. Terms of the guarantees typically end once obligations have been paid. Dominion Energy currently believes it is unlikely that it would be required to perform or otherwise incur any losses associated with guarantees of its subsidiaries’ obligations.
At December 31, 2021, Dominion Energy had issued the following subsidiary guarantees:
|
|
|
Maximum Exposure |
|
|
|
(millions) |
|
|
|
|
|
Commodity transactions(1) |
|
$ |
|
|
|
Nuclear obligations(2) |
|
|
|
|
|
Solar(3) |
|
|
|
|
|
Other(4) |
|
|
|
|
|
Total(5) |
|
$ |
|
|
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
(4) |
|
|
(5) |
|
198
Additionally, at December 31, 2021, Dominion Energy had purchased $
Indemnifications
As part of commercial contract negotiations in the normal course of business, the Companies may sometimes agree to make payments to compensate or indemnify other parties for possible future unfavorable financial consequences resulting from specified events. The specified events may involve an adverse judgment in a lawsuit or the imposition of additional taxes due to a change in tax law or interpretation of the tax law. The Companies are unable to develop an estimate of the maximum potential amount of any other future payments under these contracts because events that would obligate them have not yet occurred or, if any such event has occurred, they have not been notified of its occurrence. However, at December 31, 2021, the Companies believe any other future payments, if any, that could ultimately become payable under these contract provisions, would not have a material impact on their results of operations, cash flows or financial position.
Charitable Commitments
In 2020, Dominion Energy made unconditional promises to several charitable organizations, including to support its commitment to diversity and social justice through scholarship programs and donations to historically black colleges and universities. As a result, Dominion Energy recorded charges totaling $
NOTE 24. CREDIT RISK
Dominion Energy
As a diversified energy company, Dominion Energy transacts primarily with major companies in the energy industry and with commercial and residential energy consumers. These transactions principally occur in the Northeast, mid-Atlantic, Midwest and Rocky Mountain and Southeast regions of the U.S. Dominion Energy does not believe that this geographic concentration contributes significantly to its overall exposure to credit risk. In addition, as a result of its large and diverse customer base, Dominion Energy is not exposed to a significant concentration of credit risk for receivables arising from electric and gas utility operations.
Dominion Energy’s exposure to credit risk is concentrated primarily within its energy marketing and price risk management activities, as Dominion Energy transacts with a smaller, less diverse group of counterparties and transactions may involve large notional volumes and potentially volatile commodity prices. Energy marketing and price risk management activities include marketing of nonregulated generation output, structured transactions and the use of financial contracts for enterprise-wide hedging purposes. Gross credit exposure for each counterparty is calculated as outstanding receivables plus any unrealized on- or off-balance sheet exposure, taking into account contractual netting rights. Gross credit exposure is calculated prior to the application of any collateral. At December 31, 2021, Dominion Energy’s credit exposure totaled $
199
Virginia Power
Virginia Power sells electricity and provides distribution and transmission services to customers in Virginia and northeastern North Carolina. Management believes that this geographic concentration risk is mitigated by the diversity of Virginia Power’s customer base, which includes residential, commercial and industrial customers, as well as rural electric cooperatives and municipalities. Credit risk associated with trade accounts receivable from energy consumers is limited due to the large number of customers. Virginia Power’s exposure to potential concentrations of credit risk results primarily from sales to wholesale customers. Virginia Power’s gross credit exposure for each counterparty is calculated as outstanding receivables plus any unrealized on- or off-balance sheet exposure, taking into account contractual netting rights. Gross credit exposure is calculated prior to the application of collateral. At December 31, 2021, Virginia Power’s credit exposure totaled $
Credit-Related Contingent Provisions
Certain of Dominion Energy’s derivative instruments contain credit-related contingent provisions. These provisions require Dominion Energy to provide collateral upon the occurrence of specific events, primarily a credit rating downgrade. If the credit-related contingent features underlying these instruments that are in a liability position and not fully collateralized with cash were fully triggered, as of December 31, 2021 and 2020 Dominion Energy would have been required to post $
Certain of Virginia Power’s derivative instruments contain credit-related contingent provisions. These provisions require Virginia Power to provide collateral upon the occurrence of specific events, primarily a credit rating downgrade. If the credit-related contingent features underlying these instruments that are in a liability position and not fully collateralized with cash were fully triggered as of December 31, 2021 and 2020, Virginia Power would have been required to post an additional $
See Note 7 for further information about derivative instruments.
NOTE 25. RELATED-PARTY TRANSACTIONS
Virginia Power engages in related party transactions primarily with other Dominion Energy subsidiaries (affiliates). Virginia Power’s receivable and payable balances with affiliates are settled based on contractual terms or on a monthly basis, depending on the nature of the underlying transactions. Virginia Power is included in Dominion Energy’s consolidated federal income tax return and, where applicable, combined income tax returns for Dominion Energy are filed in various states. See Note 2 for further information. Dominion Energy’s transactions with equity method investments are described in Note 9. A discussion of significant related party transactions follows.
Virginia Power
Transactions with Affiliates
Virginia Power transacts with affiliates for certain quantities of natural gas and other commodities in the ordinary course of business. Virginia Power also enters into certain commodity derivative contracts with affiliates. Virginia Power uses these contracts, which are principally comprised of forward commodity purchases, to manage commodity price risks associated with purchases of natural gas. See Notes 7 and 20 for more information. At December 31, 2021, Virginia Power’s derivative assets and liabilities with affiliates were $
200
Virginia Power participates in certain Dominion Energy benefit plans as described in Note 22. At December 31, 2021 and 2020, Virginia Power’s amounts due to Dominion Energy associated with the Dominion Energy Pension Plan and reflected in noncurrent pension and other postretirement benefit liabilities in the Consolidated Balance Sheets were $
DES and other affiliates provide accounting, legal, finance and certain administrative and technical services to Virginia Power. In addition, Virginia Power provides certain services to affiliates, including charges for facilities and equipment usage.
The financial statements for all years presented include costs for certain general, administrative and corporate expenses assigned by DES to Virginia Power on the basis of direct and allocated methods in accordance with Virginia Power’s services agreements with DES. Where costs incurred cannot be determined by specific identification, the costs are allocated based on the proportional level of effort devoted by DES resources that is attributable to the entity, determined by reference to number of employees, salaries and wages and other similar measures for the relevant DES service. Management believes the assumptions and methodologies underlying the allocation of general corporate overhead expenses are reasonable.
Presented below are Virginia Power’s significant transactions with DES and other affiliates:
|
Year Ended December 31, |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity purchases from affiliates |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Services provided by affiliates(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Services provided to affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Virginia Power has borrowed funds from Dominion Energy under short-term borrowing arrangements. There were $
There were
NOTE 26. OPERATING SEGMENTS
The Companies are organized primarily on the basis of products and services sold in the U.S. A description of the operations included in the Companies’ primary operating segments is as follows:
|
Primary Operating Segment |
|
Description of Operations |
|
Dominion Energy |
|
Virginia Power |
|
Dominion Energy Virginia |
|
Regulated electric distribution |
|
X |
|
X |
|
|
|
Regulated electric transmission |
|
X |
|
X |
|
|
|
Regulated electric generation fleet(1) |
|
X |
|
X |
|
Gas Distribution |
|
Regulated gas distribution and storage(2) |
|
X |
|
|
|
Dominion Energy South Carolina |
|
Regulated electric distribution |
|
X |
|
|
|
|
|
Regulated electric transmission |
|
X |
|
|
|
|
|
Regulated electric generation fleet |
|
X |
|
|
|
|
|
Regulated gas distribution and storage |
|
X |
|
|
|
Contracted Assets |
|
Nonregulated electric generation fleet(3) |
|
X |
|
|
|
|
|
Noncontrolling interest in Cove Point |
|
X |
|
|
(1) Includes Virginia Power’s non-jurisdictional generation operations.
(2) Includes renewable natural gas operations as well as Wexpro’s natural gas development and production operations.
(3) Includes solar generation facility development operations.
In addition to the operating segments above, the Companies also report a Corporate and Other segment.
Dominion Energy
201
The Corporate and Other Segment of Dominion Energy includes its corporate, service companies and other functions (including unallocated debt) as well as nonregulated retail energy marketing operations (prior to December 1, 2021), including Dominion Energy’s noncontrolling interest in Wrangler. In addition, Corporate and Other includes specific items attributable to Dominion Energy’s operating segments that are not included in profit measures evaluated by executive management in assessing the segments’ performance or in allocating resources, as well as the net impact of the gas transmission and storage operations held in discontinued operations which are discussed in Note 3.
In 2021, Dominion Energy reported after-tax net expenses of $
The net expenses for specific items attributable to Dominion Energy’s operating segments in 2021 primarily related to the impact of the following items:
|
• |
A $ |
|
• |
$ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
|
• |
Contracted Assets ($ |
|
|
• |
Dominion Energy Virginia ($ |
|
• |
A $ |
In 2020, Dominion Energy reported after-tax net expenses of $
The net expenses for specific items attributable to Dominion Energy’s operating segments in 2020 primarily related to the impact of the following items:
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
202
|
• |
A $ |
|
• |
A $ |
|
|
• |
Dominion Energy Virginia ($ |
|
|
• |
Contracted Assets ($ |
In 2019, Dominion Energy reported after-tax net expenses of $
The net expenses for specific items attributable to Dominion Energy’s operating segments in 2019 primarily related to the impact of the following items:
|
• |
A $ |
|
• |
$ |
|
• |
$ |
|
|
• |
Dominion Energy Virginia ($ |
|
|
• |
Gas Distribution ($ |
|
|
• |
Dominion Energy South Carolina ($ |
|
|
• |
Contracted Assets ($ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
|
• |
Dominion Energy Virginia ($ |
|
|
• |
Contracted Assets ($ |
|
• |
A $ |
203
The following table presents segment information pertaining to Dominion Energy’s operations:
|
Year Ended December 31, |
|
Dominion Energy Virginia |
|
|
Gas Distribution |
|
|
Dominion Energy South Carolina |
|
|
Contracted Assets |
|
|
Corporate and Other |
|
|
Adjustments & Eliminations |
|
|
Consolidated Total |
|
|||||||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from external customers |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Intersegment revenue |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Total operating revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of equity method investees |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Interest and related charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Net income from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Investment in equity method investees(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (billions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from external customers |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Intersegment revenue |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total operating revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of equity method investees |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Interest and related charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Net income (loss) attributable to Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Investment in equity method investees(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (billions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from external customers |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Intersegment revenue |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total operating revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of equity method investees |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Interest and related charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Net income from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Dominion Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Intersegment sales and transfers for Dominion Energy are based on contractual arrangements and may result in intersegment profit or loss that is eliminated in consolidation, including amounts related to entities presented within discontinued operations.
204
Virginia Power
The Corporate and Other Segment of Virginia Power primarily includes specific items attributable to its operating segment that are not included in profit measures evaluated by executive management in assessing the segment’s performance or in allocating resources.
In 2021, Virginia Power reported after-tax net expenses of $
The net expenses for specific items attributable to its operating segment in 2021 primarily related to the impact of the following items:
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
In 2020, Virginia Power reported after-tax net expenses of $
The net expenses for specific items attributable to its operating segment in 2020 primarily related to a $
In 2019, Virginia Power reported after-tax net expenses of $
The net expenses for specific items attributable to its operating segment in 2019 primarily related to the impact of the following items:
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
• |
A $ |
|
|
205
The following table presents segment information pertaining to Virginia Power’s operations:
|
Year Ended December 31, |
|
Dominion Energy Virginia |
|
|
Corporate and Other |
|
|
Consolidated Total |
|
|||
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (benefit) and related charges |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Income tax expense (benefit) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (billions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (benefit) and related charges |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Income tax expense (benefit) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (billions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (benefit) and related charges |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Income tax expense (benefit) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
206
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Dominion Energy
Senior management of Dominion Energy, including Dominion Energy’s CEO and CFO, evaluated the effectiveness of Dominion Energy’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation process, Dominion Energy’s CEO and CFO have concluded that Dominion Energy’s disclosure controls and procedures are effective. There were no changes that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, Dominion Energy’s internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Management of Dominion Energy understands and accepts responsibility for Dominion Energy's financial statements and related disclosures and the effectiveness of internal control over financial reporting (internal control). Dominion Energy continuously strives to identify opportunities to enhance the effectiveness and efficiency of internal control, just as Dominion Energy does throughout all aspects of its business.
Dominion Energy maintains a system of internal control designed to provide reasonable assurance, at a reasonable cost, that its assets are safeguarded against loss from unauthorized use or disposition and that transactions are executed and recorded in accordance with established procedures. This system includes written policies, an organizational structure designed to ensure appropriate segregation of responsibilities, careful selection and training of qualified personnel and internal audits.
The Audit Committee of the Board of Directors of Dominion Energy, composed entirely of independent directors, meets periodically with the independent registered public accounting firm, the internal auditors and management to discuss auditing, internal control, and financial reporting matters of Dominion Energy and to ensure that each is properly discharging its responsibilities. Both the independent registered public accounting firm and the internal auditors periodically meet alone with the Audit Committee and have free access to the Audit Committee at any time.
SEC rules implementing Section 404 of the Sarbanes-Oxley Act of 2002 require Dominion Energy’s 2021 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 the report, Dominion Energy tested and evaluated the design and operating effectiveness of internal controls. Based on its assessment as of December 31, 2021, Dominion Energy makes the following assertions:
Management is responsible for establishing and maintaining effective internal control over financial reporting of Dominion Energy.
There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.
Management evaluated Dominion Energy’s internal control over financial reporting as of December 31, 2021. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that Dominion Energy maintained effective internal control over financial reporting as of December 31, 2021.
Dominion Energy’s independent registered public accounting firm is engaged to express an opinion on Dominion Energy’s internal control over financial reporting, as stated in their report which is included herein.
February 24, 2022
207
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Dominion Energy, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Dominion Energy, Inc. and subsidiaries (“Dominion Energy”) at December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, Dominion Energy maintained, in all material respects, effective internal control over financial reporting at December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements at and for the year ended December 31, 2021, of Dominion Energy and our report dated February 24, 2022, expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
Dominion Energy’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Dominion Energy’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Dominion Energy in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Richmond, Virginia
February 24, 2022
208
Virginia Power
Senior management of Virginia Power, including Virginia Power’s CEO and CFO, evaluated the effectiveness of Virginia Power’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation process, Virginia Power’s CEO and CFO have concluded that Virginia Power’s disclosure controls and procedures are effective. There were no changes that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, Virginia Power’s internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Management of Virginia Power understands and accepts responsibility for Virginia Power's financial statements and related disclosures and the effectiveness of internal control over financial reporting (internal control). Virginia Power continuously strives to identify opportunities to enhance the effectiveness and efficiency of internal control, just as it does throughout all aspects of its business.
Virginia Power maintains a system of internal control designed to provide reasonable assurance, at a reasonable cost, that its assets are safeguarded against loss from unauthorized use or disposition and that transactions are executed and recorded in accordance with established procedures. This system includes written policies, an organizational structure designed to ensure appropriate segregation of responsibilities, careful selection and training of qualified personnel and internal audits.
The Board of Directors also serves as Virginia Power's Audit Committee and meets periodically with the independent registered public accounting firm, the internal auditors and management to discuss Virginia Power's auditing, internal accounting control and financial reporting matters and to ensure that each is properly discharging its responsibilities.
SEC rules implementing Section 404 of the Sarbanes-Oxley Act require Virginia Power's 2021 Annual Report to contain a management's report regarding the effectiveness of internal control. As a basis for the report, Virginia Power tested and evaluated the design and operating effectiveness of internal controls. Based on the assessment as of December 31, 2021, Virginia Power makes the following assertions:
Management is responsible for establishing and maintaining effective internal control over financial reporting of Virginia Power.
There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.
Management evaluated Virginia Power's internal control over financial reporting as of December 31, 2021. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that Virginia Power maintained effective internal control over financial reporting as of December 31, 2021.
This annual report does not include an attestation report of Virginia Power's registered public accounting firm regarding internal control over financial reporting. Management's report is not subject to attestation by Virginia Power's independent registered public accounting firm pursuant to a permanent exemption under the Dodd-Frank Act.
February 24, 2022
209
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
210
Part III
Item 10. Directors, Executive Officers and Corporate Governance
DOMINION ENERGY
The information required by this item is incorporated by reference to the sections entitled Item 1—Election of Directors, Corporate Governance—The Committees of the Board and Corporate Governance—Other Governance Policies and Practices—Code of Ethics and Business Conduct in the Dominion Energy 2022 Proxy Statement.
The information concerning the executive officers of Dominion Energy required by this item is included in Part I of this Form 10-K under the caption Information about our Executive Officers. Each executive officer of Dominion Energy is elected annually.
Item 11. Executive Compensation
DOMINION ENERGY
The information required by this item is incorporated by reference to the sections entitled Executive Compensation, Compensation of Non-Employee Directors and Corporate Governance—The Committees of the Board—Compensation Committee Interlocks and Insider Participation in the 2022 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
DOMINION ENERGY
The information required by this item is incorporated by reference to the sections entitled Security Ownership of Certain Beneficial Owners and Management and Executive Compensation—Equity Compensation Plans in the 2022 Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
DOMINION ENERGY
The information required by this item is incorporated by reference to the sections entitled Corporate Governance—Other Governance Policies and Practices —Certain Relationships and Related Party Transactions and Corporate Governance —Director Independence in the 2022 Proxy Statement.
Item 14. Principal Accountant Fees and Services
DOMINION ENERGY
The information required by this item is incorporated by reference to the section entitled Audit-Related Matters—Auditor Fees and Pre-Approval Policy in the 2022 Proxy Statement.
211
VIRGINIA POWER
The following table presents fees paid to Deloitte & Touche LLP for services related to Virginia Power for the fiscal years ended December 31, 2021 and 2020.
|
Type of Fees |
|
2021 |
|
|
2020 |
|
||
|
(millions) |
|
|
|
|
|
|
|
|
|
Virginia Power |
|
|
|
|
|
|
|
|
|
Audit fees |
|
$ |
2.37 |
|
|
$ |
2.30 |
|
|
Audit-related fees |
|
|
— |
|
|
— |
|
|
|
Tax fees |
|
|
0.04 |
|
|
— |
|
|
|
All other fees |
|
|
— |
|
|
— |
|
|
|
Total Fees |
|
$ |
2.41 |
|
|
$ |
2.30 |
|
Audit fees represent fees of Deloitte & Touche LLP for the audit of Virginia Power’s annual consolidated financial statements, the review of financial statements included in Virginia Power’s quarterly Form 10-Q reports, and the services that an independent auditor would customarily provide in connection with subsidiary audits, statutory requirements, regulatory filings and similar engagements for the fiscal year, such as comfort letters, attest services, consents and assistance with review of documents filed with the SEC.
Audit-related fees consist of assurance and related services that are reasonably related to the performance of the audit or review of Virginia Power’s consolidated financial statements or internal control over financial reporting. This category may include fees related to the performance of audits and attest services not required by statute or regulations, due diligence related to mergers, acquisitions and investments, and accounting consultations about the application of GAAP to proposed transactions.
Virginia Power’s Board of Directors has adopted the Dominion Energy Audit Committee pre-approval policy for their independent auditor’s services and fees and have delegated the execution of this policy to the Dominion Energy Audit Committee. In accordance with this delegation, each year the Dominion Energy Audit Committee pre-approves a schedule that details the services to be provided for the following year and an estimated charge for such services. At its December 2021 meeting, the Dominion Energy Audit Committee approved schedules of services and fees for 2022 inclusive of Virginia Power. In accordance with the pre-approval policy, any changes to the pre-approved schedule may be pre-approved by the Dominion Energy Audit Committee or a delegated member of the Dominion Energy Audit Committee.
212
Part IV
Item 15. Exhibits and Financial Statement Schedules
(a) Certain documents are filed as part of this Form 10-K and are incorporated by reference and found on the pages noted.
1. Financial Statements
See Index on page 80.
2. All schedules are omitted because they are not applicable, or the required information is either not material or is shown in the financial statements or the related notes.
3. Exhibits (incorporated by reference unless otherwise noted)
|
Exhibit Number |
|
Description |
|
Dominion Energy |
|
Virginia Power |
|
|
|
|
|
|
|
|
|
2.1.a |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
2.1.b |
|
|
X |
|
|
|
|
3.1.a |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
3.1.b |
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
3.2.a |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
3.2.b |
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
4 |
|
Dominion Energy, Inc. and Virginia Electric and Power Company agree to furnish to the Securities and Exchange Commission upon request any other instrument with respect to long-term debt as to which the total amount of securities authorized does not exceed 10% of any of their total consolidated assets. |
|
X |
|
X |
|
|
|
|
|
|
|
|
|
4.1.a |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
4.1.b |
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
4.2 |
|
Indenture of Mortgage of Virginia Electric and Power Company, dated November 1, 1935, as supplemented and modified by Fifty-Eighth Supplemental Indenture (Exhibit 4(ii), Form 10-K for the fiscal year ended December 31, 1985, File No. 1-2255); Ninety-Second Supplemental Indenture, dated as of July 1, 2012 (Exhibit 4.1, Form 10-Q for the quarter ended June 30, 2012 filed August 1, 2012, File No. 1-2255). |
|
X |
|
X |
213
214
215
216
217
|
Exhibit Number |
|
Description |
|
Dominion Energy |
|
Virginia Power |
|
10.14* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
10.15* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
10.16* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
10.17* |
|
Letter agreement between Dominion Resources, Inc. and Thomas F. Farrell, II, dated February 27, 2003 (Exhibit 10.24, Form 10-K for the fiscal year ended December 31, 2002 filed March 20, 2003, File No. 1-8489), as amended December 16, 2005 (Exhibit 10.1, Form 8-K filed December 16, 2005, File No. 1-8489). |
|
X |
|
|
|
|
|
|
|
|
|
|
|
10.18* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
10.19* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
10.20* |
|
Dominion Energy, Inc. Deferred Compensation Plan, effective July 1, 2021 (Exhibit 10.18, Form 10-K for the fiscal year ended December 31, 2020, filed February 25, 2021, File No. 1-8489), as amended September 23, 2021 (Exhibit 10.1, Form 10-Q filed November 5, 2021, File No. 1-8489). |
|
X |
|
|
|
|
|
|
|
|
|
|
|
10.21* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
10.22* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
10.23* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
10.24* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
10.25* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
10.26* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
10.27* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
10.28* |
|
|
X |
|
|
218
|
Exhibit Number |
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Description |
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Dominion Energy |
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Virginia Power |
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10.29* |
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X |
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10.30* |
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X |
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21 |
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X |
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23 |
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X |
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X |
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31.a |
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X |
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31.b |
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X |
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31.c |
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X |
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31.d |
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X |
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32.a |
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X |
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32.b |
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X |
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101 |
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The following financial statements from Dominion Energy, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on February 24, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements. The following financial statements from Virginia Electric and Power Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on February 24, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Common Shareholder’s Equity (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements. |
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X |
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X |
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104 |
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Cover Page Interactive Data File formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101. |
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X |
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X |
*Indicates management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary
None.
219
Signatures
DOMINION ENERGY
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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DOMINION ENERGY, INC. |
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By: |
/s/ Robert M. Blue |
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(Robert M. Blue, President and Chief Executive Officer) |
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Date: February 24, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 24th day of February, 2022.
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Signature |
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Title |
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/s/ Robert M. Blue
Robert M. Blue |
Chair of the Board of Directors, President and Chief Executive Officer |
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/s/ James A. Bennett
James A. Bennett |
Director |
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/s/ Helen E. Dragas
Helen E. Dragas |
Director |
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/s/ James O. Ellis, Jr.
James O. Ellis, Jr. |
Director |
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/s/ D. Maybank Hagood
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Director |
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D. Maybank Hagood |
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/s/ Ronald W. Jibson
Ronald W. Jibson |
Director |
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/s/ Mark J. Kington
Mark J. Kington |
Director |
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/s/ Joseph M. Rigby
Joseph M. Rigby |
Director |
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/s/ Pamela J. Royal
Pamela J. Royal |
Director |
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/s/ Robert H. Spilman, Jr.
Robert H. Spilman, Jr. |
Director |
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/s/ Susan N. Story
Susan N. Story |
Director |
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/s/ Michael E. Szymanczyk
Michael E. Szymanczyk |
Director |
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/s/ James R. Chapman
James R. Chapman |
Executive Vice President, Chief Financial Officer and Treasurer |
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/s/ Michele L. Cardiff
Michele L. Cardiff |
Senior Vice President, Controller and Chief Accounting Officer |
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220
Virginia Power
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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VIRGINIA ELECTRIC AND POWER COMPANY |
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By: |
/s/ Robert M. Blue |
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(Robert M. Blue, Chief Executive Officer) |
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Date: February 24, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 24th day of February, 2022.
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Signature |
Title |
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/s/ Edward H. Baine
Edward H. Baine |
Director |
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/s/ Robert M. Blue
Robert M. Blue |
Director and Chief Executive Officer |
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/s/ Diane Leopold
Diane Leopold |
Director |
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/s/ James R. Chapman
James R. Chapman |
Executive Vice President, Chief Financial Officer and Treasurer |
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/s/ Michele L. Cardiff
Michele L. Cardiff |
Senior Vice President, Controller and Chief Accounting Officer |
221