Dominion, headquartered in Richmond, Virginia and incorporated in Virginia in 1983, is one of the nation’s largest producers and transporters of energy. Dominion’s strategy is to be a leading provider of electricity, natural gas and related services to customers primarily in the eastern region of the U.S. Dominion’s portfolio of assets includes approximately 27,500 MW of generation, 6,000 miles of electric transmission lines, 56,000 miles of electric distribution lines in Virginia and North Carolina, 12,000 miles of natural gas transmission, gathering and storage pipeline, 21,700 miles of gas distribution pipeline, exclusive of service lines of two inches in diameter or less, and 1.3 Tcfe of proved natural gas and oil reserves. Dominion also owns the nation’s largest underground natural gas storage system, operates approximately 942 bcf of storage capacity and serves retail energy customers in twelve states.
Dominion is focused on expanding its investment in regulated electric generation, and regulated electric and natural gas transmission infrastructure within and around its existing footprint. As a result, regulated capital projects will continue to receive priority treatment in its spending plans. Dominion expects this will increase its earnings contribution from regulated operations, while reducing the sensitivity of its earnings to commodity prices. Dominion’s nonregulated operations include merchant generation, energy marketing and price risk management activities, retail energy marketing operations and natural gas and oil exploration and production in the Appalachian basin of the U.S. Dominion’s operations are conducted through various subsidiaries, including Virginia Power.
Virginia Power, headquartered in Richmond, Virginia and incorporated in Virginia in 1909 as a Virginia public service corporation, is a regulated public utility that generates, transmits and distributes electricity for sale in Virginia and northeastern North Carolina. In Virginia, Virginia Power conducts business under the name “Dominion Virginia Power.” In North Carolina, it conducts business under the name “Dominion North Carolina Power” and serves retail customers located in the northeastern region of the state, excluding certain municipalities. In addition, Virginia Power sells electricity at wholesale prices to rural electric cooperatives, municipalities and into wholesale electricity markets. All of Virginia Power’s common stock is owned by Dominion.
The term “Dominion” is used throughout this report and, depending on the context of its use, may represent any of the following: the legal entity, Dominion Resources, Inc., one or more of Dominion Resources, Inc.’s consolidated subsidiaries (other than Virginia Power) or operating segments or the entirety of Dominion Resources, Inc. and its consolidated subsidiaries.
The term “Virginia Power” is used throughout this report and, depending on the context of its use, may represent any of the following: the legal entity, Virginia Electric and Power Company, one or more of its consolidated subsidiaries or operating segments or the entirety of Virginia Power and its consolidated subsidiaries.
As of December 31, 2009, Dominion had approximately 17,900 full-time employees, of which approximately 6,600 employees are subject to collective bargaining agreements. As of December 31, 2009, Virginia Power had approximately 7,400 full-time employees, of which approximately 3,300 employees are subject to collective bargaining agreements.
PRINCIPAL EXECUTIVE OFFICES
Dominion and Virginia Power’s principal executive offices are located at 120 Tredegar Street, Richmond, Virginia 23219 and their telephone number is (804) 819-2000.
ACQUISITIONS AND DISPOSITIONS
Following are significant acquisitions and divestitures by Dominion and Virginia Power during the last five years.
ACQUISITION OF KEWAUNEE NUCLEAR POWER STATION
In July 2005, Dominion completed the acquisition of Kewaunee, a 556 MW facility in northeastern Wisconsin for approximately $192 million in cash. The operations of Kewaunee are included in the Dominion Generation operating segment.
ACQUISITION OF USGEN NEW ENGLAND, INC. POWER STATIONS
In January 2005, Dominion completed the acquisition of three fossil-fuel fired generation facilities for $642 million in cash. The facilities include Brayton Point, a 1,551 MW facility in Somerset, Massachusetts; Salem Harbor, a 754 MW facility in Salem, Massachusetts; and Manchester Street, a 432 MW facility in Providence, Rhode Island. The operations of these facilities are included in the Dominion Generation operating segment.
ASSIGNMENT OF MARCELLUS ACREAGE
In 2008, Dominion completed a transaction with Antero to assign drilling rights to approximately 117,000 acres in the Marcellus Shale formation located in West Virginia and Pennsylvania. Dominion received proceeds of approximately $347 million. Under the agreement, Dominion receives a 7.5% overriding royalty interest on future natural gas production from the assigned acreage. Dominion retained the drilling rights in traditional formations both above and below the Marcellus Shale interval and continues its conventional drilling program on the acreage.
SALE OF E&P PROPERTIES
In 2007, Dominion completed the sale of its non-Appalachian natural gas and oil E&P operations and assets for approximately $13.9 billion. See Note 4 to the Consolidated Financial Statement for additional information.
In 2006, Dominion received approximately $393 million of proceeds from sales of certain gas and oil properties, primarily resulting from the sale of certain properties located in Texas and New Mexico.
The historical results of these operations are included in the Corporate and Other segment.
SALE OF MERCHANT FACILITIES
In March 2007, Dominion sold three Peaker facilities for net cash proceeds of $254 million. The Peaker facilities included the 625 MW Armstrong facility in Shelocta, Pennsylvania; the 600 MW Troy facility in Luckey, Ohio; and the 313 MW Pleasants facility in St. Mary’s, West Virginia. Following the decision to sell these assets in December 2006, the results of these operations were reclassified to discontinued operations and are presented in the Corporate and Other segment.
SALE OF DRESDEN
In September 2007, Dominion completed the sale of Dresden to AEP Generating Company for $85 million.
SALE OF CERTAIN DCI OPERATIONS
In August 2007, Dominion completed the sale of Gichner, LLC, all of the issued and outstanding shares of the capital stock of Gichner, Inc. (an affiliate of Gichner, LLC) and Dallastown for approximately $30 million.
In March 2008, Dominion reached an agreement to sell its remaining interest in the subordinated notes of a third-party CDO entity held as an investment by DCI and in April 2008 received proceeds of $54 million, including accrued interest. As discussed in Note 25 to the Consolidated Financial Statements, Dominion deconsolidated the CDO entity as of March 31, 2008.
TRANSFER OF VIRGINIA POWER ENERGY MARKETING, INC. TO DOMINION
On December 31, 2005, Virginia Power completed a transfer of its indirect wholly-owned subsidiary, VPEM, to Dominion through a series of dividend distributions, in exchange for a capital contribution of $633 million. VPEM provides fuel, gas supply management and price risk management services to other Dominion affiliates and engages in energy trading and marketing activities. As a result of the transfer, VPEM’s results of operations were reclassified to discontinued operations in Virginia Power’s Consolidated Statements of Income and presented in its Corporate and Other segment.
SALE OF PEOPLES
In March 2006, Dominion entered into an agreement with Equitable to sell two of its wholly-owned regulated gas distribution subsidiaries, Peoples and Hope. Peoples serves approximately 358,000 customer accounts in Pennsylvania and Hope serves approximately 114,000 customer accounts in West Virginia. This sale was subject to regulatory approvals in the states in which the companies operate, as well as antitrust clearance under the HSR Act. In January 2008, Dominion and Equitable announced the termination of that agreement, primarily due to the continued delays in achieving final regulatory approvals. Dominion continued to seek other offers for the purchase of these utilities.
In July 2008, Dominion entered into an agreement with an indirect subsidiary of BBIFNA to sell Peoples and Hope. In May 2009, following a change in ownership of the general partner of BBIFNA and other related transactions, BBIFNA was renamed “SteelRiver Infrastructure Fund North America LP”. The sale of Peoples and Hope to the SteelRiver Buyer, an indirect subsidiary of the SteelRiver Fund, was expected to close in 2009, subject to state regulatory approvals in Pennsylvania and West Virginia. In November 2009, the Pennsylvania Commission approved the settlement entered into among Dominion, Peoples, the SteelRiver Buyer and two of the active intervenors in the Peoples sale proceeding, thereby approving the sale of Peoples to the SteelRiver Buyer. In December 2009, the West Virginia Commission denied the application for the sale of Hope. Dominion decided to retain Hope, but continue with the sale of Peoples. The sales price for Peoples was approximately $780 million, subject to changes in working capital, capital expenditures and affiliated borrowings. In February 2010, Dominion completed the sale of Peoples and netted after-tax proceeds of approximately $542 million. A more detailed description of the sale can be found in Note 4 to the Consolidated Financial Statements
Dominion manages its daily operations through three primary operating segments: DVP, Dominion Generation and Dominion Energy. Dominion also reports a Corporate and Other segment that includes its corporate, service company and other functions and the net impact of certain operations disposed of or to be disposed of. Corporate and Other also includes specific items attributable to Dominion’s operating segments that are not included in profit measures evaluated by executive management in assessing the segments’ performance or allocating resources among the segments. Prior to the fourth quarter of 2009, Hope was included in Dominion’s Corporate and Other segment and its assets and liabilities were classified as held for sale. During the fourth quarter of 2009, following Dominion’s decision to retain this subsidiary, Hope was transferred to the Dominion Energy operating segment and its assets and liabilities were reclassified from held for sale.
Virginia Power manages its daily operations through two primary operating segments: DVP and Dominion Generation. 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 segments’ performance or allocating resources among the segments.
While daily operations are managed through the operating segments previously discussed, assets remain wholly-owned by Dominion and Virginia Power and their respective legal subsidiaries.