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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 8, 2023

 

 

Commission File Number

Exact name of registrants as specified in their charters

I.R.S. Employer

Identification Number

001-08489

DOMINION ENERGY, INC.

54-1229715

000-55337

VIRGINIA ELECTRIC AND POWER COMPANY

54-0418825

 

VIRGINIA

(State or other jurisdiction of incorporation or organization)

 

120 TREDEGAR STREET

RICHMOND, VIRGINIA

(Address of principal executive offices)

23219

(Zip Code)

 

(804) 819-2284

(Registrants’ telephone number)

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 


Title of each class

Trading
Symbol(s)


Name of each exchange on which registered

Common Stock, no par value

D

The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

 

Emerging growth company ☐

 

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. ☐

 

 

 

Item 8.01

Other Events.

Dominion Energy, Inc. (Dominion Energy) and Virginia Electric and Power Company (collectively the Companies) are filing this Current Report on Form 8-K to recast the consolidated financial statements and other financial information previously included in their combined Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the SEC) on February 21, 2023. As disclosed in the Companies' combined Quarterly Report on Form 10-Q for the three months ended September 30, 2023, in connection with the comprehensive business reviewed announced in November 2022, Dominion Energy entered into agreements in September 2023 to sell all of its regulated gas distribution operations, except for those of Dominion Energy South Carolina, Inc., to wholly-owned subsidiaries of Enbridge Inc. (Enbridge). In addition, Dominion Energy completed the sale in September 2023 of its remaining 50% noncontrolling partnership interest in Cove Point LNG, LP to a wholly-owned subsidiary of Berkshire Hathaway Energy Company under the agreement entered in July 2023. These operations are, effective September 2023, classified as discontinued operations and held for sale. Subsequently in September 2023, Dominion Energy revised its primary operating segments. Dominion Energy’s Consolidated Statements of Income for the three years ended December 31, 2022, 2021 and 2020, Consolidated Balance Sheets at December 31, 2022 and 2021 and accompanying notes have been recast to reflect these changes in presentation.

The following items of the combined Annual Report on Form 10-K of the Companies for the year ended December 31, 2022 have been recast to reflect the previously described classification of certain regulated gas distribution operations and investments as discontinued operations and held for sale as well as the revision of operating segments and are filed as exhibits to this Current Report on Form 8-K and incorporated herein by reference:

•

Exhibit 99.1

•

Item 8. Financial Statements and Supplementary Data

•

Exhibit 99.2

•

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

•

Exhibit 101

•

The following financial statements for the fiscal year ended December 31, 2022 from Dominion Energy, Inc.’s Current Report on Form 8-K, filed on November 8, 2023, 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 for the fiscal year ended December 31, 2022 from Virginia Electric and Power Company’s Current Report on Form 8-K, filed on November 8, 2023, 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.

The recast items of the Form 10-K described above have been updated only for the aforementioned classification of certain regulated gas distribution operations and investments as discontinued operations and held for sale as well as the revision of operating segments. The Companies have not otherwise updated for activities or events occurring after the date these items were originally presented. The information in this report should be read in conjunction with the other information included (but not replaced as described above) in the Companies’ combined Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and the Companies’ other filings with the SEC.

 

 

 

 

Item 9.01

Financial Statements and Exhibits.

 

 

 

(d) Exhibits.

 

 

 

Exhibit

No.

 

Description

 

 

 

23

 

Consent of Deloitte & Touche LLP

 

 

 

99.1

 

Item 8. Financial Statements and Supplementary Data of Dominion Energy, Inc. and Virginia Electric and Power Company's combined Annual Report on Form 10-K for year ended December 31, 2022.

 

 

 

99.2

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of Dominion Energy, Inc. and Virginia Electric and Power Company's combined Annual Report on Form 10-K for the year ended December 31, 2022.

 

 

 

101

 

The following financial statements for the fiscal year ended December 31, 2022 from Dominion Energy, Inc.’s Current Report on Form 8-K, filed on November 8, 2023, 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 for the fiscal year ended December 31, 2022 from Virginia Electric and Power Company’s Current Report on Form 8-K, filed on November 8, 2023, 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.

 

 

 

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DOMINION ENERGY, INC.

 

 

 

 

 

 

Registrant

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Michele L. Cardiff

 

 

 

 

Name:

 

Michele L. Cardiff

 

 

 

 

Title:

 

Senior Vice President, Controller and Chief

Accounting Officer

 

 

 

 

 

 

 

Date: November 8, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VIRGINIA ELECTRIC AND POWER COMPANY

 

 

 

 

 

 

Registrant

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Michele L. Cardiff

 

 

 

 

Name:

 

Michele L. Cardiff

 

 

 

 

Title:

 

Senior Vice President, Controller and Chief

Accounting Officer

 

 

 

 

 

 

 

Date: November 8, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

EX-23 2 d-ex23.htm EX-23 EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-269879, 333-269880 and 333-271838 on Form S-3, and Registration Statement Nos. 333-09167, 333-18391, 333-85094, 333-87529, 333-95795, 333-110332, 333-124257, 333-143916, 333-149989, 333-163805, 333-189578, 333-189579, 333-195768, 333-202364, 333-202366, 333-226039, 333-257414 and 333-257415 on Form S-8 of our reports dated February 21, 2023 (November 8, 2023, as to the effects of the matters discussed in Note 1 pertaining to the sales of certain regulated gas distribution operations and investments as well as revised operating segments), relating to the consolidated financial statements of Dominion Energy, Inc. and subsidiaries included in this Current Report on Form 8-K dated November 8, 2023.

We consent to the incorporation by reference in Registration Statement No. 333-269881 on Form S-3 of our report dated February 21, 2023, relating to the consolidated financial statements of Virginia Electric and Power Company (a wholly-owned subsidiary of Dominion Energy, Inc.) and subsidiaries included in this Current Report on Form 8-K dated November 8, 2023.

/s/ Deloitte & Touche LLP

Richmond, Virginia

November 8, 2023

 

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Exhibit 99.1

Glossary of Terms

The following abbreviations or acronyms used in this Form 10-K are defined below:

Abbreviation or Acronym

 

Definition

2017 Tax Reform Act

 

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

2019 Equity Units

 

Dominion Energy’s 2019 Series A Equity Units issued in June 2019, initially in the form of 2019 Series A Corporate Units, which consisted of a stock purchase contract and a 1/10 interest in a share of the Series A Preferred Stock

2021 Triennial Review

 

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

ABO

 

Accumulated benefit obligation

ACE Rule

 

Affordable Clean Energy Rule

AFUDC

 

Allowance for funds used during construction

Align RNG

 

Align RNG, LLC, a joint venture between Dominion Energy and Smithfield Foods, Inc.

Altavista

 

Altavista biomass power station

AMI

 

Advanced Metering Infrastructure

AOCI

 

Accumulated other comprehensive income (loss)

ARO

 

Asset retirement obligation

Atlantic Coast Pipeline

 

Atlantic Coast Pipeline, LLC, a limited liability company owned by Dominion Energy and Duke Energy

Atlantic Coast Pipeline Project

 

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

bcf

 

Billion cubic feet

Bear Garden

 

A 622 MW combined-cycle, natural gas-fired power station in Buckingham County, Virginia

BHE

 

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

Birdseye

 

Birdseye Renewable Energy, LLC

BP

 

BP Wind Energy North America Inc.

Brookfield

 

Brookfield Super-Core Infrastructure Partners, an infrastructure fund managed by Brookfield Asset Management Inc.

Brunswick County

 

A 1,376 MW combined-cycle, natural gas-fired power station in Brunswick County, Virginia

CAA

 

Clean Air Act

CCR

 

Coal combustion residual

CCRO

 

Customer credit reinvestment offset

CEP

 

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

CERCLA

 

Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as Superfund

CFIUS

 

The Committee on Foreign Investment in the U.S.

Clearway

 

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

CNG

 

Consolidated Natural Gas Company

CO2

 

Carbon dioxide

Colonial Trail West

 

A 142 MW utility-scale solar power station located in Surry County, Virginia

 

 

 

 

 

 

 

Abbreviation or Acronym

 

Definition

Companies

 

Dominion Energy and Virginia Power, collectively

Contracted Energy

 

Contracted Energy operating segment, formerly known as the Contracted Assets operating segment

Cove Point

 

Cove Point LNG, LP (formerly known as Dominion Energy Cove Point LNG, LP)

Cove Point LNG Facility

 

An LNG import/export and storage facility, including the Liquefaction Facility, located on the Chesapeake Bay in Lusby, Maryland

CPCN

 

Certificate of Public Convenience and Necessity

CVOW Commercial Project

 

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

CVOW Pilot Project

 

A 12 MW wind generation facility 27 miles off the coast of Virginia Beach, Virginia in federal waters

CWA

 

Clean Water Act

DCP

 

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

DECGS

 

Carolina Gas Services, Inc. (formerly known as Dominion Energy Carolina Gas Services, Inc.)

DECP Holdings

 

The legal entity DECP Holdings, Inc., which holds Dominion Energy’s noncontrolling interest in Cove Point

DEQPS

 

MountainWest Pipeline Services, Inc. (formerly known as Dominion Energy Questar Pipeline Services, Inc.)

DES

 

Dominion Energy Services, Inc.

DESC

 

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

DETI

 

Eastern Gas Transmission and Storage, Inc. (formerly known as Dominion Energy Transmission, Inc.)

DGI

 

Dominion Generation, Inc.

DGP

 

Eastern Gathering and Processing, Inc. (formerly known as Dominion Gathering and Processing, Inc.)

DMLPHCII

 

Eastern MLP Holding Company II, LLC (formerly known as Dominion MLP Holding Company II, LLC)

DOE

 

U.S. Department of Energy

Dominion Energy

 

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

Dominion Energy Direct®

 

A dividend reinvestment and open enrollment direct stock purchase plan

Dominion Energy Gas

 

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

Dominion Energy Midstream

 

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

Dominion Energy Questar Pipeline

 

The legal entity, MountainWest Pipeline, LLC (formerly known as 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

Dominion Energy South Carolina

 

Dominion Energy South Carolina operating segment

Dominion Energy Virginia

 

Dominion Energy Virginia operating segment

Dominion Iroquois

 

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

Dominion Privatization

 

Dominion Utility Privatization, LLC, a joint venture between Dominion Energy and Patriot

DSM

 

Demand-side management

 

2

 

Abbreviation or Acronym

 

Definition

DSM Riders

 

Rate adjustment clauses, designated Riders C1A, C2A, C3A and C4A, associated with the recovery of costs related to certain Virginia DSM programs in approved DSM cases

Dth

 

Dekatherm

Duke Energy

 

The legal entity, Duke Energy Corporation, one or more of its consolidated subsidiaries, or the entirety of Duke Energy Corporation and its consolidated subsidiaries

Eagle Solar

 

Eagle Solar, LLC, a wholly-owned subsidiary of DGI

East Ohio

 

The East Ohio Gas Company, doing business as Dominion Energy Ohio

East Ohio Transaction

 

The proposed sale by Dominion Energy to Enbridge of all issued and outstanding capital stock in Dominion Energy Questar Corporation and its consolidated subsidiaries, which following a proposed reorganization will include East Ohio and Dominion Energy Gas Distribution, LLC, pursuant to a purchase and sale agreement entered into on September 5, 2023

Enbridge

 

The legal entity, Enbridge Inc., one or more of its consolidated subsidiaries (including Enbridge Elephant Holdings, LLC, Enbridge Parrot Holdings, LLC, and Enbridge Quail Holdings, LLC), or the entirety of Enbridge Inc. and its consolidated subsidiaries

EnergySolutions

 

EnergySolutions, LLC

EPA

 

U.S. Environmental Protection Agency

EPS

 

Earnings per common share

ERISA

 

Employee Retirement Income Security Act of 1974

Excess Tax Benefits

 

Benefits of tax deductions in excess of the compensation cost recognized for stock-based compensation

FASB

 

Financial Accounting Standards Board

FCC

 

Federal Communications Commission

FERC

 

Federal Energy Regulatory Commission

FILOT

 

Fee in lieu of taxes

Four Brothers

 

Four Brothers Solar, LLC, a limited liability company owned by Dominion Energy (through December 2021) and Four Brothers Holdings, LLC, a subsidiary of Clearway

Fowler Ridge

 

Fowler I Holdings LLC, a wind-turbine facility in Benton County, Indiana

FTRs

 

Financial transmission rights

GAAP

 

U.S. generally accepted accounting principles

GENCO

 

South Carolina Generating Company, Inc.

GHG

 

Greenhouse gas

Granite Mountain

 

Granite Mountain Holdings, LLC, a limited liability company owned by Dominion Energy (through December 2021) and Granite Mountain Renewables, LLC, a subsidiary of Clearway

Green Mountain

 

Green Mountain Power Corporation

Greensville County

 

A 1,629 MW combined-cycle, natural gas-fired power station in Greensville County, Virginia

GT&S Transaction

 

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

GTSA

 

Virginia Grid Transformation and Security Act of 2018

GW

 

Gigawatt

Hope

 

Hope Gas, Inc., doing business as Dominion Energy West Virginia through August 2022

Hopewell

 

Polyester biomass power station

IRA

 

An Act to Provide for Reconciliation Pursuant to Title II of Senate Concurrent Resolution 14 of the 117th Congress (also known as the Inflation Reduction Act of 2022) enacted on August 16, 2022

Iron Springs

 

Iron Springs Holdings, LLC, a limited liability company owned by Dominion Energy (through December 2021) and Iron Springs Renewables, LLC, a subsidiary of Clearway

 

3

 

 

Abbreviation or Acronym

 

Definition

Iroquois

 

Iroquois Gas Transmission System, L.P.

IRS

 

Internal Revenue Service

JAX LNG

 

JAX LNG, LLC, an LNG supplier in Florida serving the marine and LNG markets

Jones Act

 

The Coastwise Merchandise Statute (commonly known as the Jones Act) 46 U.S.C. §55102 regulating U.S. maritime commerce

July 2016 hybrids

 

Dominion Energy’s 2016 Series A Enhanced Junior Subordinated Notes due 2076

Kewaunee

 

Kewaunee nuclear power station

kV

 

Kilovolt

LIBOR

 

London Interbank Offered Rate

LIFO

 

Last-in-first-out inventory method

Liquefaction Facility

 

A natural gas export/liquefaction facility at the Cove Point LNG Facility

LNG

 

Liquefied natural gas

LTIP

 

Long-term incentive program

Massachusetts Municipal

 

Massachusetts Municipal Wholesale Electric Company

mcfe

 

Thousand cubic feet equivalent

MGD

 

Million gallons per day

Millstone

 

Millstone nuclear power station

MW

 

Megawatt

MWh

 

Megawatt hour

Natural Gas Rate Stabilization Act

 

Legislation effective February 2005 designed to improve and maintain natural gas service infrastructure to meet the needs of customers in South Carolina

NAV

 

Net asset value

NEIL

 

Nuclear Electric Insurance Limited

NGL

 

Natural gas liquid

NND Project

 

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

North Anna

 

North Anna nuclear power station

North Carolina Commission

 

North Carolina Utilities Commission

NRC

 

U.S. Nuclear Regulatory Commission

NWP 12

 

A nationwide permit from the U.S. 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.

NYSE

 

New York Stock Exchange

October 2014 hybrids

 

Dominion Energy’s 2014 Series A Enhanced Junior Subordinated Notes due 2054

ODEC

 

Old Dominion Electric Cooperative

offshore wind turbine installation season

 

The period May 1st through October 31st for waters off the coast of the Mid-Atlantic and Northeast

 

 

4

 

 

Abbreviation or Acronym

 

Definition

Ohio Commission

 

Public Utilities Commission of Ohio

Patriot

 

Patriot Utility Privatizations, LLC, a joint venture between Foundation Infrastructure Partners, LLC and John Hancock Life Insurance Company (U.S.A.) and affiliates

PIPP

 

Percentage of Income Payment Plan deployed by East Ohio

PIR

 

Pipeline Infrastructure Replacement program deployed by East Ohio

PJM

 

PJM Interconnection, LLC

PSD

 

Prevention of significant deterioration

PSNC

 

Public Service Company of North Carolina, Incorporated, doing business as Dominion Energy North Carolina

PSNC Transaction

 

The proposed sale by Dominion Energy to Enbridge of all of its membership interests in Fall North Carolina Holdco LLC and its consolidated subsidiaries, which following a proposed reorganization will include PSNC, pursuant to a purchase and sale agreement entered into on September 5, 2023

Q-Pipe Group

 

Collectively, Dominion Energy Questar Pipeline, DEQPS and MountainWest Energy Holding Company, LLC (formerly known as QPC Holding Company, LLC and its subsidiary MountainWest Southern Trails Pipeline Company (formerly known as Questar Southern Trails Pipeline Company))

Q-Pipe Transaction

 

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

Questar Gas

 

Questar Gas Company, doing business as Dominion Energy Utah, Dominion Energy Wyoming and Dominion Energy Idaho

Questar Gas Transaction

 

The proposed sale by Dominion Energy to Enbridge of all of its membership interests in Fall West Holdco LLC and its consolidated subsidiaries, which following a proposed reorganization will include Questar Gas, Wexpro, Wexpro II Company, Wexpro Development Company, Dominion Energy Wexpro Services Company, Questar InfoComm Inc. and Dominion Gas Projects Company, LLC, pursuant to a purchase and sale agreement entered into on September 5, 2023

Regulation Act

 

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

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

 

A rate adjustment clause associated with the recovery of costs related to Brunswick County

Rider CCR

 

A rate adjustment clause associated with the recovery of costs related to the removal of CCR at certain power stations

Rider CE

 

A rate adjustment clause associated with the recovery of costs related to certain renewable generation, energy storage and related transmission facilities in Virginia as well as certain small-scale distributed generation projects and related transmission facilities

Rider D

 

A rate mechanism which allows PSNC to recover from customers all prudently incurred gas costs and the related portion of uncollectible expenses as well as losses on negotiated gas and transportation sales

Rider E

 

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

 

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

 

 

5

 

 

Abbreviation or Acronym

 

Definition

Rider GV

 

A rate adjustment clause associated with the recovery of costs related to Greensville County

Rider OSW

 

A rate adjustment clause associated with costs incurred to construct, own and operate the CVOW Commercial Project

Rider PPA

 

A rate adjustment clause associated with the recovery of costs associated with power purchase agreements for the energy, capacity, ancillary services and renewable energy credits owned by third parties

Rider R

 

A rate adjustment clause associated with the recovery of costs related to Bear Garden

Rider RGGI

 

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

Rider RPS

 

A rate adjustment clause associated with the recovery of costs related to the mandatory renewable portfolio standard program established by the VCEA

Rider S

 

A rate adjustment clause associated with the recovery of costs related to the Virginia City Hybrid Energy Center

Rider SNA

 

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

Rider T1

 

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

Rider U

 

A rate adjustment clause associated with the recovery of costs of new underground distribution facilities

Rider US-2

 

A rate adjustment clause associated with the recovery of costs related to Woodland Solar, Scott Solar and Whitehouse Solar

Rider US-3

 

A rate adjustment clause associated with the recovery of costs related to Colonial Trail West and Spring Grove 1

Rider US-4

 

A rate adjustment clause associated with the recovery of costs related to Sadler Solar

Rider W

 

A rate adjustment clause associated with the recovery of costs related to Warren County

ROE

 

Return on equity

ROIC

 

Return on invested capital

RTO

 

Regional transmission organization

Sadler Solar

 

A 100 MW utility-scale solar power station located in Greensville County, Virginia

Santee Cooper

 

South Carolina Public Service Authority

SBL Holdco

 

SBL Holdco, LLC, a wholly-owned subsidiary of DGI through December 2021

SCANA

 

The legal entity, SCANA Corporation, one or more of its consolidated subsidiaries, or the entirety of SCANA Corporation and its consolidated subsidiaries

SCANA Combination

 

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

SCANA Merger Approval Order

 

Final order issued by the South Carolina Commission on December 21, 2018 setting forth its approval of the SCANA Combination

SCDOR

 

South Carolina Department of Revenue

Scott Solar

 

A 17 MW utility-scale solar power station in Powhatan County, Virginia

SEC

 

U.S. Securities and Exchange Commission

Series A Preferred Stock

 

Dominion Energy’s Series A Cumulative Perpetual Convertible Preferred Stock, without par value, with a liquidation preference of $1,000 per share (previously designated the 1.75% Series A Cumulative Perpetual Convertible Preferred Stock)

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

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

SOFR

 

Secured Overnight Financing Rate

South Carolina Commission

 

Public Service Commission of South Carolina

Southampton

 

Southampton biomass power station

 

 

6

 

 

Abbreviation or Acronym

 

Definition

Southern

 

The legal entity, The Southern Company, one or more of its consolidated subsidiaries, or the entirety of The Southern Company and its consolidated subsidiaries

Southwest Gas

 

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

Spring Grove 1

 

A 98 MW utility-scale solar power station located in Surry County, Virginia

Summer

 

V.C. Summer nuclear power station

Supply Header Project

 

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

Surry

 

Surry nuclear power station

Terra Nova Renewable Partners

 

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

Three Cedars

 

Granite Mountain and Iron Springs, collectively

TSR

 

Total shareholder return

UEX

 

Uncollectible Expense Rider deployed by East Ohio

Ullico

 

The legal entity, Ullico Inc., one or more of its consolidated subsidiaries, or the entirety of Ullico Inc. and its consolidated subsidiaries

Utah Commission

 

Utah Public Service Commission

VCEA

 

Virginia Clean Economy Act of March 2020

VEBA

 

Voluntary Employees’ Beneficiary Association

VIE

 

Variable interest entity

Virginia City Hybrid Energy Center

 

A 610 MW baseload carbon-capture compatible, clean coal powered electric generation facility in Wise County, Virginia

Virginia Commission

 

Virginia State Corporation Commission

Virginia Facilities

 

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

Virginia Power

 

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

Warren County

 

A 1,349 MW combined-cycle, natural gas-fired power station in Warren County, Virginia

WECTEC

 

WECTEC Global Project Services, Inc., a wholly-owned subsidiary of Westinghouse

West Virginia Commission

 

Public Service Commission of West Virginia

Westinghouse

 

Westinghouse Electric Company LLC

Wexpro

 

The legal entity, Wexpro Company, one or more of its consolidated subsidiaries, or the entirety of Wexpro Company and its consolidated subsidiaries

Wexpro Agreement

 

An agreement which sets forth the rights of Questar Gas to receive certain benefits from Wexpro’s operations, including cost-of-service gas

Wexpro II Agreement

 

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

Wexpro Agreements

 

Collectively, the Wexpro Agreement, Wexpro II Agreement and two stipulation agreements approved by the Utah Commission allowing for the inclusion of certain property at Canyon Creek and the Trail Unit under the Wexpro II Agreement

Whitehouse Solar

 

A 20 MW utility-scale solar power station in Louisa County, Virginia

White River Hub

 

MountainWest White River Hub, LLC (formerly known as White River Hub, LLC)

Wisconsin Commission

 

Public Service Commission of Wisconsin

Woodland Solar

 

A 19 MW utility-scale solar power station in Isle of Wight County, Virginia

WP&L

 

Wisconsin Power and Light Company, a subsidiary of Alliant Energy Corporation

WPSC

 

Wisconsin Public Service Corporation, a subsidiary of WEC Energy Group

Wrangler

 

Wrangler Retail Gas Holdings, LLC, a partnership between Dominion Energy (through March 2022) and Interstate Gas Supply, Inc.

Wyoming Commission

 

Wyoming Public Service Commission

 

 

7

 

Item 8. Financial Statements and Supplementary Data

 

 

 

 

Page

Number

 

 

Dominion Energy, Inc.

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)

9

Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020

11

Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020

12

Consolidated Balance Sheets at December 31, 2022 and 2021

13

Consolidated Statements of Equity at December 31, 2022, 2021 and 2020 and for the years then ended

15

Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020

16

 

 

Virginia Electric and Power Company

 

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)

17

Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020

19

Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020

20

Consolidated Balance Sheets at December 31, 2022 and 2021

21

Consolidated Statements of Common Shareholder’s Equity at December 31, 2022, 2021 and 2020 and for the years then ended

23

Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020

24

 

 

Combined Notes to Consolidated Financial Statements

25

 

 

8

 

 

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, 2022 and 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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 21, 2023, 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; electric fuel and other energy-related purchases; purchased gas; 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 authorized ROE prospectively.

9

 

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/ Deloitte & Touche LLP

 

Richmond, Virginia

February 21, 2023 (November 8, 2023, as to the effects of the matters discussed in Note 1 pertaining to the sales of certain regulated gas distribution operations and investments as well as revised operating segments)

We have served as Dominion Energy’s auditor since 1988.

10

 

Dominion Energy, Inc.

Consolidated Statements of Income

 

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

(millions, except per share amounts)

 

 

 

 

 

 

 

 

 

Operating Revenue

 

$

13,945

 

 

$

11,420

 

 

$

11,919

 

Operating Expenses

 

 

 

 

 

 

 

 

 

Electric fuel and other energy-related purchases

 

 

3,711

 

 

 

2,368

 

 

 

2,243

 

Purchased electric capacity

 

 

59

 

 

 

70

 

 

 

53

 

Purchased gas

 

 

426

 

 

 

392

 

 

 

359

 

Other operations and maintenance

 

 

3,376

 

 

 

3,179

 

 

 

3,149

 

Depreciation, depletion and amortization

 

 

2,442

 

 

 

2,103

 

 

 

1,991

 

Other taxes

 

 

676

 

 

 

690

 

 

 

679

 

Impairment of assets and other charges

 

 

2,062

 

 

 

194

 

 

 

2,104

 

Losses (gains) on sales of assets

 

 

426

 

 

 

112

 

 

 

(60

)

Total operating expenses

 

 

13,178

 

 

 

9,108

 

 

 

10,518

 

Income from operations

 

 

767

 

 

 

2,312

 

 

 

1,401

 

Other income (expense)

 

 

109

 

 

 

1,139

 

 

 

663

 

Interest and related charges

 

 

1,002

 

 

 

1,255

 

 

 

1,339

 

Income (loss) from continuing operations including noncontrolling interests before
     income tax expense (benefit)

 

 

(126

)

 

 

2,196

 

 

 

725

 

Income tax expense (benefit)

 

 

(148

)

 

 

239

 

 

 

(59

)

Net Income From Continuing Operations Including Noncontrolling Interests

 

 

22

 

 

 

1,957

 

 

 

784

 

Net Income (Loss) From Discontinued Operations Including Noncontrolling
     Interests(1)(2)

 

 

972

 

 

 

1,357

 

 

 

(1,334

)

Net Income (Loss) Including Noncontrolling Interests

 

 

994

 

 

 

3,314

 

 

 

(550

)

Noncontrolling Interests

 

 

—

 

 

 

26

 

 

 

(149

)

Net Income (Loss) Attributable to Dominion Energy

 

$

994

 

 

$

3,288

 

 

$

(401

)

Amounts attributable to Dominion Energy

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

$

22

 

 

$

1,931

 

 

$

1,039

 

Net income (loss) from discontinued operations

 

 

972

 

 

 

1,357

 

 

 

(1,440

)

Net income (loss) attributable to Dominion Energy

 

$

994

 

 

$

3,288

 

 

$

(401

)

EPS - Basic

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(0.09

)

 

$

2.30

 

 

$

1.17

 

Net income (loss) discontinued operations

 

 

1.18

 

 

 

1.68

 

 

 

(1.73

)

Net income (loss) attributable to Dominion Energy

 

$

1.09

 

 

$

3.98

 

 

$

(0.56

)

EPS - Diluted

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(0.09

)

 

$

2.30

 

 

$

1.16

 

Net income (loss) discontinued operations

 

 

1.18

 

 

 

1.68

 

 

 

(1.73

)

Net income (loss) attributable to Dominion Energy

 

$

1.09

 

 

$

3.98

 

 

$

(0.57

)

 

(1)
See Note 9 for amounts attributable to related parties.
(2)
Includes income tax expense (benefit) of $225 million, $374 million and $(61) million for the years ended December 31, 2022, 2021 and 2020, respectively.

The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.

11

 

Dominion Energy, Inc.

Consolidated Statements of Comprehensive Income

 

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

Net income (loss) including noncontrolling interests

 

$

994

 

 

$

3,314

 

 

$

(550

)

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

 

 

 

Net deferred gains (losses) on derivatives-hedging activities, net of $(22),
     $(6) and $81 tax

 

 

67

 

 

 

15

 

 

 

(239

)

Changes in unrealized net gains (losses) on investment securities, net of
     $29, $7 and $(14) tax

 

 

(100

)

 

 

(7

)

 

 

43

 

Changes in net unrecognized pension and other postretirement benefit
     costs (credits), net of $76, $(54) and $(2) tax

 

 

(218

)

 

 

144

 

 

 

25

 

Amounts reclassified to net income (loss):

 

 

 

 

 

 

 

 

 

Net derivative (gains) losses-hedging activities, net of $(15), $(15) and
     $(75) tax

 

 

42

 

 

 

46

 

 

 

227

 

Net realized (gains) losses on investment securities, net of $(6), $5 and
     $6 tax

 

 

19

 

 

 

(18

)

 

 

(18

)

Net pension and other postretirement benefit costs, net of $(27), $(29)
     and $(13) tax

 

 

75

 

 

 

82

 

 

 

37

 

Changes in other comprehensive income from equity method investees,
     net of $—, $1 and $(1) tax

 

 

1

 

 

 

(3

)

 

 

1

 

Total other comprehensive income (loss)

 

 

(114

)

 

 

259

 

 

 

76

 

Comprehensive income (loss) including noncontrolling interests

 

 

880

 

 

 

3,573

 

 

 

(474

)

Comprehensive income (loss) attributable to noncontrolling interests

 

 

—

 

 

 

26

 

 

 

(149

)

Comprehensive income (loss) attributable to Dominion Energy

 

$

880

 

 

$

3,547

 

 

$

(325

)

The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.

12

 

Dominion Energy, Inc.

Consolidated Balance Sheets

 

At December 31,

 

2022

 

 

2021

 

(millions)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

120

 

 

$

249

 

Customer receivables (less allowance for doubtful accounts of $26 and $35)

 

 

2,157

 

 

 

1,643

 

Other receivables (less allowance for doubtful accounts of $2 at both dates)

 

 

383

 

 

 

334

 

Inventories:

 

 

 

 

 

 

Materials and supplies

 

 

1,132

 

 

 

1,113

 

Fossil fuel

 

 

358

 

 

 

320

 

Gas stored

 

 

38

 

 

 

36

 

Derivative assets

 

 

1,019

 

 

 

116

 

Margin deposit assets

 

 

480

 

 

 

678

 

Prepayments

 

 

294

 

 

 

237

 

Regulatory assets

 

 

1,883

 

 

 

1,223

 

Other

 

 

210

 

 

 

138

 

Current assets held for sale

 

 

1,776

 

 

 

1,182

 

Total current assets

 

 

9,850

 

 

 

7,269

 

Investments

 

 

 

 

 

 

Nuclear decommissioning trust funds

 

 

5,957

 

 

 

7,950

 

Investment in equity method affiliates

 

 

295

 

 

 

162

 

Other

 

 

325

 

 

 

335

 

Total investments

 

 

6,577

 

 

 

8,447

 

Property, Plant and Equipment

 

 

 

 

 

 

Property, plant and equipment

 

 

75,178

 

 

 

71,496

 

Accumulated depreciation, depletion and amortization

 

 

(23,352

)

 

 

(22,595

)

Total property, plant and equipment, net

 

 

51,826

 

 

 

48,901

 

Deferred Charges and Other Assets

 

 

 

 

 

 

Goodwill

 

 

4,143

 

 

 

4,253

 

Pension and other postretirement benefit assets

 

 

1,479

 

 

 

1,930

 

Intangible assets, net

 

 

796

 

 

 

712

 

Derivative assets

 

 

1,039

 

 

 

491

 

Regulatory assets

 

 

8,265

 

 

 

7,886

 

Other

 

 

1,466

 

 

 

1,604

 

Total deferred charges and other assets

 

 

17,188

 

 

 

16,876

 

Noncurrent Assets Held for Sale

 

 

18,802

 

 

 

18,097

 

Total assets

 

$

104,243

 

 

$

99,590

 

The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.

 

 

13

 

 

At December 31,

 

2022

 

 

2021

 

(millions)

 

 

 

 

 

 

LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Securities due within one year

 

$

3,337

 

 

$

838

 

Short-term debt

 

 

3,423

 

 

 

2,314

 

Accounts payable

 

 

1,165

 

 

 

832

 

Accrued interest, payroll and taxes

 

 

910

 

 

 

905

 

Derivative liabilities

 

 

772

 

 

 

356

 

Regulatory liabilities

 

 

748

 

 

 

889

 

Other(1)

 

 

1,697

 

 

 

1,585

 

Current liabilities held for sale

 

 

1,398

 

 

 

954

 

Total current liabilities

 

 

13,450

 

 

 

8,673

 

Long-Term Debt

 

 

 

 

 

 

Long-term debt

 

 

32,515

 

 

 

31,623

 

Junior subordinated notes

 

 

1,387

 

 

 

1,386

 

Supplemental credit facility borrowings

 

 

450

 

 

 

—

 

Other

 

 

232

 

 

 

838

 

Total long-term debt

 

 

34,584

 

 

 

33,847

 

Deferred Credits and Other Liabilities

 

 

 

 

 

 

Deferred income taxes and investment tax credits

 

 

5,397

 

 

 

5,466

 

Regulatory liabilities

 

 

8,417

 

 

 

9,024

 

Asset retirement obligations

 

 

5,062

 

 

 

5,137

 

Derivative liabilities

 

 

625

 

 

 

508

 

Other

 

 

1,276

 

 

 

1,308

 

Total deferred credits and other liabilities

 

 

20,777

 

 

 

21,443

 

Noncurrent Liabilities Held for Sale

 

 

7,551

 

 

 

6,709

 

Total liabilities

 

 

76,362

 

 

 

70,672

 

Commitments and Contingencies (see Note 23)

 

 

 

 

 

 

Mezzanine Equity

 

 

 

 

 

 

Preferred stock (See Note 19)

 

 

—

 

 

 

1,610

 

Shareholders' Equity

 

 

 

 

 

 

Preferred stock (See Note 19)

 

 

1,783

 

 

 

1,783

 

Common stock – no par(2)

 

 

23,605

 

 

 

21,610

 

Retained earnings

 

 

4,065

 

 

 

5,373

 

Accumulated other comprehensive loss

 

 

(1,572

)

 

 

(1,458

)

Shareholders' equity

 

 

27,881

 

 

 

27,308

 

Noncontrolling interests

 

 

—

 

 

 

—

 

Total shareholders' equity

 

 

27,881

 

 

 

27,308

 

Total liabilities, mezzanine equity and shareholders' equity

 

$

104,243

 

 

$

99,590

 
(1)
See Note 9 for amounts attributable to related parties.
(2)
1.8 billion shares authorized; 835 million shares and 810 million shares outstanding at December 31, 2022 and 2021, respectively.

The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.

14

 

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, 2019

 

2

 

$

2,387

 

 

838

 

$

23,824

 

$

7,576

 

$

(1,793

)

$

31,994

 

$

2,039

 

$

34,033

 

Cumulative-effect of changes in accounting
    principles

 

 

 

 

 

 

 

 

 

(48

)

 

 

 

(48

)

 

 

 

(48

)

Net loss including noncontrolling interests

 

 

 

 

 

 

 

 

 

(401

)

 

 

 

(401

)

 

(149

)

 

(550

)

Issuance of stock

 

 

 

 

 

7

 

 

481

 

 

 

 

 

 

481

 

 

 

 

481

 

Stock repurchases

 

 

 

 

 

(39

)

 

(3,080

)

 

 

 

 

 

(3,080

)

 

 

 

(3,080

)

Stock awards (net of change in unearned
     compensation)

 

 

 

 

 

 

 

29

 

 

 

 

 

 

29

 

 

 

 

29

 

Preferred stock dividends (See Note 19)

 

 

 

 

 

 

 

 

 

(65

)

 

 

 

(65

)

 

 

 

(65

)

Common dividends ($3.45 per common share)
     and distributions

 

 

 

 

 

 

 

 

 

(2,873

)

 

 

 

(2,873

)

 

(164

)

 

(3,037

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

76

 

 

76

 

 

 

 

76

 

GT&S Transaction closing

 

 

 

 

 

 

 

17

 

 

 

 

 

 

17

 

 

(1,384

)

 

(1,367

)

Other

 

 

 

 

 

 

 

(13

)

 

 

 

 

 

(13

)

 

2

 

 

(11

)

December 31, 2020

 

2

 

$

2,387

 

 

806

 

$

21,258

 

$

4,189

 

$

(1,717

)

$

26,117

 

$

344

 

$

26,461

 

Net income including noncontrolling interests

 

 

 

 

 

 

 

 

 

3,288

 

 

 

 

3,288

 

 

26

 

 

3,314

 

Issuance of stock

 

1

 

 

992

 

 

4

 

 

340

 

 

 

 

 

 

1,332

 

 

 

 

1,332

 

Stock awards (net of change in unearned
     compensation)

 

 

 

 

 

 

 

28

 

 

 

 

 

 

28

 

 

 

 

28

 

Preferred stock dividends (See Note 19)

 

 

 

 

 

 

 

 

 

(68

)

 

 

 

(68

)

 

 

 

(68

)

Common dividends ($2.52 per common share)
     and distributions

 

 

 

 

 

 

 

 

 

(2,036

)

 

 

 

(2,036

)

 

(47

)

 

(2,083

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

259

 

 

259

 

 

 

 

259

 

Reclassification of Series A Preferred Stock to
    Mezzanine Equity

 

(1

)

 

(1,596

)

 

 

 

(14

)

 

 

 

 

 

(1,610

)

 

 

 

(1,610

)

Sale of non-wholly-owned nonregulated solar
    facilities

 

 

 

 

 

 

 

 

 

 

 

 

 

—

 

 

(323

)

 

(323

)

Other

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

 

 

 

(2

)

December 31, 2021

 

2

 

$

1,783

 

 

810

 

$

21,610

 

$

5,373

 

$

(1,458

)

$

27,308

 

$

—

 

$

27,308

 

Net income including noncontrolling interests

 

 

 

 

 

 

 

 

 

994

 

 

 

 

994

 

 

 

 

994

 

Issuance of stock

 

 

 

 

 

25

 

 

1,969

 

 

 

 

 

 

1,969

 

 

 

 

1,969

 

Stock awards (net of change in unearned
     compensation)

 

 

 

 

 

 

 

26

 

 

 

 

 

 

26

 

 

 

 

26

 

Preferred stock dividends (See Note 19)

 

 

 

 

 

 

 

 

 

(93

)

 

 

 

(93

)

 

 

 

(93

)

Common dividends ($2.67 per common share)

 

 

 

 

 

 

 

 

 

(2,209

)

 

 

 

(2,209

)

 

 

 

(2,209

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

(114

)

 

(114

)

 

 

 

(114

)

December 31, 2022

 

2

 

$

1,783

 

 

835

 

$

23,605

 

$

4,065

 

$

(1,572

)

$

27,881

 

$

—

 

$

27,881

 

The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.

15

 

Dominion Energy, Inc.

Consolidated Statements of Cash Flows

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

 

 

 

 

Net income (loss) including noncontrolling interests

 

$

994

 

 

$

3,314

 

 

$

(550

)

Adjustments to reconcile net income (loss) including noncontrolling interests to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization (including nuclear fuel)

 

 

3,113

 

 

 

2,768

 

 

 

2,836

 

Deferred income taxes and investment tax credits

 

 

9

 

 

 

487

 

 

 

(324

)

Gain from sale of Q-Pipe Group and GT&S Transaction

 

 

(27

)

 

 

(685

)

 

 

(134

)

Contribution to pension plan

 

 

—

 

 

 

—

 

 

 

(250

)

Net loss on sale of interest in renewable generation facilities

 

 

—

 

 

 

211

 

 

 

—

 

Provision for refunds and rate credits to electric utility customers

 

 

—

 

 

 

356

 

 

 

—

 

Impairment of assets and other charges

 

 

1,996

 

 

 

182

 

 

 

2,345

 

Loss from investment in Atlantic Coast Pipeline

 

 

7

 

 

 

20

 

 

 

2,405

 

Losses (gains) on sales of assets and equity method investments

 

 

467

 

 

 

(97

)

 

 

(63

)

Net (gains) losses on nuclear decommissioning trusts funds and other investments

 

 

505

 

 

 

(639

)

 

 

(412

)

Other adjustments

 

 

(28

)

 

 

294

 

 

 

224

 

Changes in:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(985

)

 

 

(183

)

 

 

(292

)

Inventories

 

 

(216

)

 

 

(74

)

 

 

39

 

Deferred fuel and purchased gas costs, net

 

 

(2,021

)

 

 

(939

)

 

 

212

 

Prepayments

 

 

(68

)

 

 

(20

)

 

 

7

 

Accounts payable

 

 

556

 

 

 

156

 

 

 

35

 

Accrued interest, payroll and taxes

 

 

41

 

 

 

41

 

 

 

(53

)

Margin deposit assets and liabilities

 

 

198

 

 

 

(664

)

 

 

26

 

Net realized and unrealized changes related to derivative activities

 

 

(47

)

 

 

435

 

 

 

(36

)

Pension and other postretirement benefits

 

 

(461

)

 

 

(314

)

 

 

(319

)

Other operating assets and liabilities

 

 

(333

)

 

 

(612

)

 

 

(469

)

Net cash provided by operating activities

 

 

3,700

 

 

 

4,037

 

 

 

5,227

 

Investing Activities

 

 

 

 

 

 

 

 

 

Plant construction and other property additions (including nuclear fuel)

 

 

(7,591

)

 

 

(5,960

)

 

 

(6,020

)

Acquisition of solar development projects

 

 

(167

)

 

 

(101

)

 

 

(311

)

Proceeds from sale of Hope

 

 

727

 

 

 

—

 

 

 

—

 

Proceeds from GT&S Transaction and sale of Q-Pipe Group

 

 

19

 

 

 

1,522

 

 

 

3,687

 

Repayment of Q-Pipe Transaction deposit

 

 

—

 

 

 

(1,265

)

 

 

—

 

Proceeds from sale of non-wholly-owned nonregulated solar facilities

 

 

—

 

 

 

495

 

 

 

—

 

Proceeds from sales of securities

 

 

3,282

 

 

 

3,985

 

 

 

4,278

 

Purchases of securities

 

 

(3,067

)

 

 

(3,939

)

 

 

(4,379

)

Proceeds from sales of assets and equity method investments

 

 

252

 

 

 

159

 

 

 

143

 

Contributions to equity method affiliates

 

 

(43

)

 

 

(1,021

)

 

 

(148

)

Acquisition of equity method investments

 

 

—

 

 

 

—

 

 

 

(178

)

Short-term deposit

 

 

(2,000

)

 

 

—

 

 

 

—

 

Return of short-term deposit

 

 

2,000

 

 

 

—

 

 

 

—

 

Other

 

 

(158

)

 

 

(122

)

 

 

12

 

Net cash used in investing activities

 

 

(6,746

)

 

 

(6,247

)

 

 

(2,916

)

Financing Activities

 

 

 

 

 

 

 

 

 

Issuance (repayment) of short-term debt, net

 

 

1,109

 

 

 

1,419

 

 

 

(16

)

Issuance of short-term notes

 

 

—

 

 

 

1,265

 

 

 

1,125

 

Repayment and repurchase of short-term notes

 

 

—

 

 

 

(1,265

)

 

 

(1,125

)

Issuance of supplemental 364-day credit facility borrowings

 

 

—

 

 

 

—

 

 

 

225

 

Repayment of supplemental 364-day credit facility borrowings

 

 

—

 

 

 

(225

)

 

 

—

 

Issuance and remarketing of long-term debt

 

 

4,965

 

 

 

6,400

 

 

 

6,577

 

Repayment and repurchase of long-term debt (including redemption premiums)

 

 

(1,388

)

 

 

(3,750

)

 

 

(2,879

)

Supplemental credit facility borrowings

 

 

900

 

 

 

900

 

 

 

—

 

Supplemental credit facility repayments

 

 

(450

)

 

 

(900

)

 

 

—

 

Issuance of preferred stock

 

 

—

 

 

 

742

 

 

 

—

 

Series A Preferred Stock redemption

 

 

(1,610

)

 

 

—

 

 

 

—

 

Issuance of common stock

 

 

1,866

 

 

 

192

 

 

 

159

 

Repurchase of common stock

 

 

—

 

 

 

—

 

 

 

(3,080

)

Common dividend payments

 

 

(2,209

)

 

 

(2,036

)

 

 

(2,873

)

Other

 

 

(204

)

 

 

(371

)

 

 

(446

)

Net cash provided by (used in) financing activities

 

 

2,979

 

 

 

2,371

 

 

 

(2,333

)

Increase (decrease) in cash, restricted cash and equivalents

 

 

(67

)

 

 

161

 

 

 

(22

)

Cash, restricted cash and equivalents at beginning of period

 

 

408

 

 

 

247

 

 

 

269

 

Cash, restricted cash and equivalents at end of period

 

$

341

 

 

$

408

 

 

$

247

 

See Note 2 for disclosure of supplemental cash flow information.

The accompanying notes are an integral part of Dominion Energy’s Consolidated Financial Statements.

16

 

 

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, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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 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

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; electric fuel and other energy-related purchases; 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.

17

 

Further, Virginia Power’s 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 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 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 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/ Deloitte & Touche LLP

 

Richmond, Virginia

February 21, 2023

 

We have served as Virginia Power's auditor since 1988.

 

18

 

Virginia Electric and Power Company

Consolidated Statements of Income

 

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

Operating Revenue(1)

 

$

9,654

 

 

$

7,470

 

 

$

7,763

 

Operating Expenses

 

 

 

 

 

 

 

 

 

Electric fuel and other energy-related purchases(1)

 

 

2,913

 

 

 

1,735

 

 

 

1,636

 

Purchased (excess) capacity

 

 

46

 

 

 

24

 

 

 

(17

)

Other operations and maintenance:

 

 

 

 

 

 

 

 

 

Affiliated suppliers

 

 

342

 

 

 

333

 

 

 

314

 

Other

 

 

1,709

 

 

 

1,460

 

 

 

1,472

 

Depreciation and amortization

 

 

1,736

 

 

 

1,364

 

 

 

1,252

 

Other taxes

 

 

303

 

 

 

326

 

 

 

327

 

Impairment of assets and other charges (benefits)

 

 

557

 

 

 

(269

)

 

 

1,093

 

Total operating expenses

 

 

7,606

 

 

 

4,973

 

 

 

6,077

 

Income from operations

 

 

2,048

 

 

 

2,497

 

 

 

1,686

 

Other income

 

 

—

 

 

 

146

 

 

 

80

 

Interest and related charges(1)

 

 

642

 

 

 

534

 

 

 

516

 

Income before income tax expense

 

 

1,406

 

 

 

2,109

 

 

 

1,250

 

Income tax expense

 

 

191

 

 

 

397

 

 

 

229

 

Net Income

 

$

1,215

 

 

$

1,712

 

 

$

1,021

 

 

(1)
See Note 25 for amounts attributable to affiliates.

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

19

 

Virginia Electric and Power Company

Consolidated Statements of Comprehensive Income

 

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

Net income

 

$

1,215

 

 

$

1,712

 

 

$

1,021

 

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

 

 

 

Net deferred gains (losses) on derivatives-hedging activities, net of $(20), $(4) and $9 tax

 

 

60

 

 

 

13

 

 

 

(28

)

Changes in unrealized net gains (losses) on nuclear decommissioning trust funds, net of
     $4, $— and $(3) tax

 

 

(11

)

 

 

(2

)

 

 

6

 

Amounts reclassified to net income:

 

 

 

 

 

 

 

 

 

Net derivative (gains) losses-hedging activities, net of $(1), $(1) and $— tax

 

 

1

 

 

 

2

 

 

 

2

 

Net realized (gains) losses on nuclear decommissioning trust funds, net of $—, $1 
     and $1 tax

 

 

—

 

 

 

(2

)

 

 

(3

)

Other comprehensive income (loss)

 

 

50

 

 

 

11

 

 

 

(23

)

Comprehensive income

 

$

1,265

 

 

$

1,723

 

 

$

998

 

 

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

20

 

Virginia Electric and Power Company

Consolidated Balance Sheets

 

 

 

2022

 

 

2021

 

(millions)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

22

 

 

$

26

 

Customer receivables (less allowance for doubtful accounts of $21 and $28)

 

 

1,578

 

 

 

1,172

 

Other receivables (less allowance for doubtful accounts of $2 at both dates)

 

 

204

 

 

 

112

 

Affiliated receivables

 

 

7

 

 

 

37

 

Inventories (average cost method):

 

 

 

 

 

 

Materials and supplies

 

 

663

 

 

 

610

 

Fossil fuel

 

 

261

 

 

 

261

 

Derivative assets(1)

 

 

765

 

 

 

76

 

Margin deposit assets

 

 

310

 

 

 

167

 

Prepayments

 

 

43

 

 

 

37

 

Regulatory assets

 

 

1,140

 

 

 

850

 

Other

 

 

9

 

 

 

2

 

Total current assets

 

 

5,002

 

 

 

3,350

 

Investments

 

 

 

 

 

 

Nuclear decommissioning trust funds

 

 

3,202

 

 

 

3,734

 

Other

 

 

3

 

 

 

3

 

Total investments

 

 

3,205

 

 

 

3,737

 

Property, Plant and Equipment

 

 

 

 

 

 

Property, plant and equipment

 

 

54,697

 

 

 

49,890

 

Accumulated depreciation and amortization

 

 

(16,218

)

 

 

(15,234

)

Total property, plant and equipment, net

 

 

38,479

 

 

 

34,656

 

Deferred Charges and Other Assets

 

 

 

 

 

 

Pension and other postretirement benefit assets(1)

 

 

518

 

 

 

431

 

Intangible assets, net

 

 

536

 

 

 

395

 

Regulatory assets

 

 

4,247

 

 

 

4,130

 

Other(1)

 

 

1,207

 

 

 

1,233

 

Total deferred charges and other assets

 

 

6,508

 

 

 

6,189

 

Total assets

 

$

53,194

 

 

$

47,932

 

 

(1)
See Note 25 for amounts attributable to affiliates.

 

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

 

21

 

 

 

 

2022

 

 

2021

 

(millions)

 

 

 

 

 

 

LIABILITIES AND COMMON SHAREHOLDER’S EQUITY

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Securities due within one year

 

$

1,164

 

 

$

313

 

Short-term debt

 

 

941

 

 

 

745

 

Accounts payable

 

 

600

 

 

 

402

 

Payables to affiliates

 

 

255

 

 

 

121

 

Affiliated current borrowings

 

 

2,024

 

 

 

699

 

Accrued interest, payroll and taxes

 

 

270

 

 

 

274

 

Asset retirement obligations

 

 

350

 

 

 

191

 

Regulatory liabilities

 

 

506

 

 

 

647

 

Derivative liabilities (1)

 

 

298

 

 

 

134

 

Other current liabilities

 

 

826

 

 

 

567

 

Total current liabilities

 

 

7,234

 

 

 

4,093

 

Long-Term Debt

 

 

 

 

 

 

Long-term debt

 

 

14,916

 

 

 

13,453

 

Other

 

 

65

 

 

 

503

 

Total long-term debt

 

 

14,981

 

 

 

13,956

 

Deferred Credits and Other Liabilities

 

 

 

 

 

 

Deferred income taxes and investment tax credits

 

 

3,452

 

 

 

3,183

 

Asset retirement obligations

 

 

3,743

 

 

 

3,732

 

Regulatory liabilities

 

 

5,499

 

 

 

5,740

 

Other (1)

 

 

1,040

 

 

 

1,248

 

Total deferred credits and other liabilities

 

 

13,734

 

 

 

13,903

 

Total liabilities

 

 

35,949

 

 

 

31,952

 

Commitments and Contingencies (see Note 23)

 

 

 

 

 

 

Common Shareholder’s Equity

 

 

 

 

 

 

Common stock – no par(2)

 

 

5,738

 

 

 

5,738

 

Other paid-in capital

 

 

1,113

 

 

 

1,113

 

Retained earnings

 

 

10,385

 

 

 

9,170

 

Accumulated other comprehensive income (loss)

 

 

9

 

 

 

(41

)

Total common shareholder’s equity

 

 

17,245

 

 

 

15,980

 

Total liabilities and shareholder’s equity

 

$

53,194

 

 

$

47,932

 

 

(1)
See Note 25 for amounts attributable to affiliates.
(2)
500,000 shares authorized; 274,723 shares outstanding at December 31, 2022 and 2021.

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

22

 

Virginia Electric and Power Company

Consolidated Statements of Common Shareholder’s Equity

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Other Paid-In Capital

 

 

Retained Earnings

 

 

AOCI

 

 

Total

 

(millions, except for shares)

 

(thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

7,167

 

 

$

(29

)

 

$

13,989

 

Net income

 

 

 

 

 

 

 

 

 

 

 

1,021

 

 

 

 

 

 

1,021

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

(430

)

 

 

 

 

 

(430

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

(23

)

December 31, 2020

 

 

275

 

 

 

5,738

 

 

 

1,113

 

 

 

7,758

 

 

 

(52

)

 

 

14,557

 

Net income

 

 

 

 

 

 

 

 

 

 

 

1,712

 

 

 

 

 

 

1,712

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

(300

)

 

 

 

 

 

(300

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

11

 

December 31, 2021

 

 

275

 

 

 

5,738

 

 

 

1,113

 

 

 

9,170

 

 

 

(41

)

 

 

15,980

 

Net income

 

 

 

 

 

 

 

 

 

 

 

1,215

 

 

 

 

 

 

1,215

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50

 

 

 

50

 

December 31, 2022

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

10,385

 

 

$

9

 

 

$

17,245

 

 

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

23

 

Virginia Electric and Power Company

Consolidated Statements of Cash Flows

 

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

 

 

 

 

Net income

 

$

1,215

 

 

$

1,712

 

 

$

1,021

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization (including nuclear fuel)

 

 

1,892

 

 

 

1,521

 

 

 

1,421

 

Deferred income taxes and investment tax credits

 

 

191

 

 

 

343

 

 

 

(206

)

Impairment of assets and other charges (benefits)

 

 

493

 

 

 

(269

)

 

 

1,079

 

Provision for refunds to customers

 

 

—

 

 

 

356

 

 

 

—

 

Other adjustments

 

 

24

 

 

 

19

 

 

 

(50

)

Changes in:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(629

)

 

 

(112

)

 

 

(266

)

Affiliated receivables and payables

 

 

165

 

 

 

(175

)

 

 

78

 

Inventories

 

 

(71

)

 

 

(10

)

 

 

10

 

Prepayments

 

 

(7

)

 

 

(4

)

 

 

(5

)

Deferred fuel expenses, net

 

 

(1,393

)

 

 

(652

)

 

 

131

 

Accounts payable

 

 

145

 

 

 

19

 

 

 

6

 

Accrued interest, payroll and taxes

 

 

(4

)

 

 

21

 

 

 

(4

)

Margin deposit assets and liabilities

 

 

(143

)

 

 

(166

)

 

 

(1

)

Net realized and unrealized changes related to derivative activities

 

 

109

 

 

 

—

 

 

 

(6

)

Other operating assets and liabilities

 

 

(159

)

 

 

(106

)

 

 

(308

)

Net cash provided by operating activities

 

 

1,828

 

 

 

2,497

 

 

 

2,900

 

Investing Activities

 

 

 

 

 

 

 

 

 

Plant construction and other property additions

 

 

(4,909

)

 

 

(3,521

)

 

 

(3,138

)

Purchases of nuclear fuel

 

 

(201

)

 

 

(160

)

 

 

(199

)

Acquisition of solar development projects

 

 

(77

)

 

 

(75

)

 

 

(35

)

Proceeds from sales of securities

 

 

1,538

 

 

 

1,791

 

 

 

884

 

Purchases of securities

 

 

(1,580

)

 

 

(1,789

)

 

 

(936

)

Other

 

 

34

 

 

 

—

 

 

 

21

 

Net cash used in investing activities

 

 

(5,195

)

 

 

(3,754

)

 

 

(3,403

)

Financing Activities

 

 

 

 

 

 

 

 

 

Issuance (repayment) of short-term debt, net

 

 

196

 

 

 

700

 

 

 

(198

)

Issuance of affiliated current borrowings, net

 

 

1,325

 

 

 

319

 

 

 

273

 

Issuance and remarketing of long-term debt

 

 

2,338

 

 

 

1,000

 

 

 

1,327

 

Repayment and repurchase of long-term debt

 

 

(438

)

 

 

(450

)

 

 

(427

)

Common dividend payments to parent

 

 

—

 

 

 

(300

)

 

 

(430

)

Other

 

 

(56

)

 

 

(21

)

 

 

(31

)

Net cash provided by financing activities

 

 

3,365

 

 

 

1,248

 

 

 

514

 

Increase (decrease) in cash, restricted cash and equivalents

 

 

(2

)

 

 

(9

)

 

 

11

 

Cash, restricted cash and equivalents at beginning of year

 

 

26

 

 

 

35

 

 

 

24

 

Cash, restricted cash and equivalents at end of year

 

$

24

 

 

$

26

 

 

$

35

 

 

See Note 2 for disclosure of supplemental cash flow information.

 

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

 

 

24

 

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 in the eastern and Rocky Mountain regions of the U.S. and nonregulated electric generation. In addition, 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.

In connection with the comprehensive business review announced in November 2022, Dominion Energy entered into agreements in September 2023 to sell all of its regulated gas distribution operations, expect for DESC's, to Enbridge. In addition, Dominion Energy completed the sale in September 2023 of its remaining 50% noncontrolling partnership interest in Cove Point to BHE under the agreement entered into in July 2023. As discussed in Notes 3 and 9, these operations are classified as discontinued operations and held for sale in Dominion Energy's Consolidated Financial Statements.

Subsequently in September 2023, Dominion Energy revised its primary operating segments and manages its daily operations through three primary operating segments: Dominion Energy Virginia, Dominion Energy South Carolina and Contracted Energy. Dominion Energy also reports a Corporate and Other segment, which includes its corporate, service company and other functions (including unallocated debt) as well as its noncontrolling interest in Dominion Privatization, its noncontrolling interest in Wrangler (through March 2022) and Hope (through August 2022). 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 operating segments’ performance or in allocating resources as well as the net impact of the operations included in the East Ohio, PSNC and Questar Gas Transactions, its noncontrolling interest in Cove Point and gas transmission and storage operations, including its noncontrolling interest in Atlantic Coast Pipeline, reported as discontinued operations which are discussed in Notes 3 and 9.

Dominion Energy's Consolidated Financial Statements and Notes have been recast to reflect these changes in presentation.

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 one primary operating segment: Dominion Energy Virginia. It also reports a Corporate and Other segment that 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.

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’ Consolidated Financial Statements include, after eliminating intercompany transactions and balances, their accounts, those of their respective majority-owned subsidiaries and non-wholly-owned entities in which they have a controlling financial interest. For certain partnership structures, income is allocated based on the liquidation value of the underlying contractual arrangements. Clearway’s ownership interest in Four Brothers and Three Cedars (through December 2021), Terra Nova Renewable Partners’ 33% interest in certain Dominion Energy nonregulated solar projects (through December 2021) and Brookfield’s 25% interest in Cove Point (through November 2020) are reflected as noncontrolling interest in Dominion Energy’s Consolidated Financial Statements.

The Companies report certain contracts, instruments and investments at fair value. See below and 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.

25

 

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’ 2021 and 2020 Consolidated Financial Statements and Notes have been reclassified to conform to the 2022 presentation for comparative purposes; however, such reclassifications did not affect the Companies’ net income, total assets, liabilities, equity or cash flows. Effective in 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 was previously conformed to this presentation, which did not result in a change to net cash provided by operating activities.

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 and current assets held for sale at December 31, 2022 and 2021 included in aggregate $1.1 billion and $779 million, respectively, of accrued unbilled revenue based on estimated amounts of electricity and natural gas delivered but not yet billed to its utility customers. The balances presented within current assets held for sale were $324 million $232 million at December 31, 2022 and 2021, respectively. Virginia Power’s customer receivables at December 31, 2022 and 2021 included $620 million and $398 million, respectively, of accrued unbilled revenue based on estimated amounts of electricity delivered but not yet billed to its customers. See Note 25 for amounts attributable to related parties.

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 as well as 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;
•
Regulated gas transportation and storage sales consist of state-regulated sales of gathering services (through August 2022) 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 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 (through December 2022) 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 (through October 2022).

26

 

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 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.

Operating revenue for the gas distribution operations to be sold to Enbridge as part of the East Ohio, PSNC and Questar Gas Transactions primarily consists of state-regulated natural gas sales to residential, commercial and industrial customers and related distribution services, state regulated gas distribution charges to retail distribution service customers opting for alternate suppliers and sales of commodities related to nonregulated extraction activities. This revenue is included in discontinued operations in Dominion Energy's Consolidated Statements of Income.

Transportation and storage contracts associated with the operations to be sold to Enbridge as part of the East Ohio, PSNC and Questar Gas Transactions are primarily stand-ready service contracts that include fixed reservation and variable usage fees. Substantially all of the revenue associated with these local gas distribution companies is derived from performance obligations satisfied over time and month-to-month billings according to their respective tariffs.

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. 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.

27

 

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, 2022, approximately 86% is subject to Virginia Power’s deferred fuel accounting, while substantially all of the remaining amount is subject to recovery through similar mechanisms. Of the cost of fuel used in electric generation and energy purchases to serve South Carolina utility customers, at December 31, 2022, approximately 96% is subject to DESC’s deferred fuel accounting.

Virtually all of East Ohio, Questar Gas, 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.

Dominion Energy can earn certain cost saving sharing incentives under the Wexpro Agreements to the extent that the cost of gas supplied to Questar Gas is a certain amount lower than third-party market rates. In 2022, Dominion Energy recorded $27 million for such incentives, reflected in discontinued operations in Dominion Energy's Consolidated Statements of Income. No amounts were recorded for the years ended December 31, 2021 or 2020.

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 $21 million benefit from the reversal of interest expense and a $7 million benefit from the reversal of penalty expense on uncertain tax positions that were effectively settled.

28

 

At December 31, 2022, Virginia Power had a net income tax-related affiliated payable of $22 million, comprised of $25 million of federal income taxes payable to, and $3 million of state income taxes receivable from, Dominion Energy. Virginia Power’s net affiliated balances are expected to be paid to Dominion Energy.

At December 31, 2021, Virginia Power had an income tax-related affiliated receivable of $35 million, comprised of $33 million of federal income taxes and $2 million of state income taxes receivable from Dominion Energy. These affiliated balances were received from Dominion Energy.

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. The IRA allows the election of either the investment tax credit or production tax credit for certain technologies including solar and wind. Such election is made on a project-by-project basis and the choice of credit may vary based on a combination of factors including, but not limited to, capital expenditures and net capacity factors.

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. The following table illustrates the checks outstanding but not yet presented for payment and recorded in accounts payable for the Companies:

 

At December 31,

 

2022

 

 

2021

 

(millions)

 

 

 

 

 

 

Dominion Energy

 

$

35

 

 

$

54

 

Virginia Power

 

 

21

 

 

 

15

 

 

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, 2022, 2021, 2020 and 2019:

 

 

 

Cash, Restricted Cash and Equivalents at End/Beginning of Year

 

 

 

December 31, 2022

 

 

December 31, 2021

 

 

December 31, 2020

 

 

December 31, 2019

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Dominion Energy

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents(1)

 

$

153

 

 

$

283

 

 

$

179

 

 

$

166

 

Restricted cash and equivalents(2)

 

 

188

 

 

 

125

 

 

 

68

 

 

 

103

 

Cash, restricted cash and equivalents shown in the
   Consolidated Statements of Cash Flows

 

$

341

 

 

$

408

 

 

$

247

 

 

$

269

 

Virginia Power

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

22

 

 

$

26

 

 

$

35

 

 

$

17

 

Restricted cash and equivalents(3)

 

 

2

 

 

 

—

 

 

 

—

 

 

 

7

 

Cash, restricted cash and equivalents shown in the
   Consolidated Statements of Cash Flows

 

$

24

 

 

$

26

 

 

$

35

 

 

$

24

 
(1)
At December 31, 2022, 2021, 2020 and 2019, Dominion Energy had $34 million, $34 million, $21 million and $47 million, respectively, of cash and cash equivalents included in current assets held for sale.
(2)
At December 31, 2022, 2021, 2020 and 2019, Dominion Energy had $2 million, less than $1 million, $3 million and $12 million, respectively, of restricted cash and equivalents included in current assets held for sale with the remaining balances presented within other current assets in Dominion Energy's Consolidated Balance Sheets..
(3)
Restricted cash and equivalents balances are presented within other current assets in Virginia Power’s Consolidated Balance Sheets.

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Supplemental Cash Flow Information

The following table provides supplemental disclosure of cash flow information related to Dominion Energy:

 

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

 

Interest and related charges, excluding capitalized amounts

 

$

1,408

 

 

$

1,340

 

 

$

1,519

 

Income taxes

 

 

139

 

 

 

160

 

 

 

292

 

Significant noncash investing and financing activities:(1)(2)

 

 

 

 

 

 

 

 

 

Accrued capital expenditures

 

 

979

 

 

 

637

 

 

 

485

 

Leases(3)

 

 

144

 

 

 

96

 

 

 

173

 
(1)
See Note 9 for noncash investing activities related to the acquisition of a noncontrolling interest in Wrangler and Dominion Privatization.
(2)
See Notes 18, 19, 20 and 23 for noncash financing activities related to the contribution of stock to Dominion Energy’s defined benefit pension plan, remarketing of Series A Preferred Stock, derivative restructuring and the issuance of common stock and transfer of property associated with the settlement of litigation.
(3)
Includes $34 million of finance leases and $110 million of operating leases entered in 2022, $47 million of finance leases and $49 million of operating leases entered in 2021 and $46 million of finance leases and $127 million of operating leases entered in 2020.

 

The following table provides supplemental disclosure of cash flow information related to Virginia Power:

 

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

Cash paid (received) during the year for:

 

 

 

 

 

 

 

 

 

Interest and related charges, excluding capitalized amounts

 

$

599

 

 

$

501

 

 

$

491

 

Income taxes

 

 

(54

)

 

 

109

 

 

 

452

 

Significant noncash investing activities:(1)

 

 

 

 

 

 

 

 

 

Accrued capital expenditures

 

 

665

 

 

 

363

 

 

 

262

 

Leases(2)

 

 

116

 

 

 

79

 

 

 

32

 
(1)
See Note 18 for non-cash financing activities related to derivative restructuring.
(2)
Includes $26 million of finance leases and $90 million of operating leases entered in 2022, $37 million of finance leases and $42 million of operating leases entered in 2021 and $32 million of finance leases entered in 2020.

 

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.

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.

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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.

The inputs and assumptions used in measuring fair value include the following:

 

 

Derivative Contracts

 

 

Inputs and assumptions

 

Commodity

 

Interest Rate

 

Foreign Currency Exchange Rate

 

Investments

Forward commodity prices

 

X

 

 

 

 

 

 

Transaction prices

 

X

 

 

 

 

 

 

Price volatility

 

X

 

 

 

 

 

 

Price correlation

 

X

 

 

 

 

 

 

Volumes

 

X

 

 

 

 

 

 

Commodity location

 

X

 

 

 

 

 

 

Interest rate curves

 

 

 

X

 

 

 

 

Foreign currency forward exchange rates

 

 

 

 

 

X

 

 

Quoted securities prices and indices

 

 

 

 

 

 

 

X

Securities trading information including volume and restrictions

 

 

 

 

 

 

 

X

Maturity

 

 

 

 

 

 

 

X

Interest rates

 

X

 

 

 

X

 

X

Credit quality of counterparties and the Companies

 

X

 

X

 

X

 

X

Credit enhancements

 

X

 

X

 

 

 

 

Notional value

 

 

 

X

 

X

 

 

Time value

 

X

 

X

 

X

 

 

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.

31

 

•
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.

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.

Derivative assets and liabilities are presented gross on the Companies’ Consolidated Balance Sheets. 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. All derivatives, except those for which an exception applies, are required to be reported at fair value. 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 Fair Value Measurements above for additional information about fair value measurements and associated valuation methods for derivatives.

The Companies' 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 offset through master netting arrangements, derivative clearing agreements and contract default provisions. In addition, the contracts are subject to conditional rights of offset 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.

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 $480 million and $678 million associated with cash collateral at December 31, 2022 and 2021, respectively. Dominion Energy had no margin liabilities associated with cash collateral at December 31, 2022 and 2021. Virginia Power had margin assets of $310 million and $167 million associated with cash collateral at December 31, 2022 and 2021, respectively.

32

 

Virginia Power had no margin liabilities associated with cash collateral at December 31, 2022 and 2021. See Note 7 for further information about derivatives.

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 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 may also designate 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 2022, 2021 and 2020, Dominion Energy capitalized interest costs and AFUDC to property, plant and equipment of $84 million, $96 million and $85 million, respectively. In addition, Dominion Energy capitalized interest costs and AFUDC represented in discontinued operations to property, plant and equipment presented as held for sale of $28 million, $21 million and $18 million, respectively. In 2022, 2021 and 2020, Virginia Power capitalized AFUDC to property, plant and equipment of $66 million, $78 million and $60 million, respectively.

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 2022, 2021 and 2020, Virginia Power recorded $34 million, $35 million and $11 million of AFUDC related to these projects, respectively.

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.

33

 

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 be retired after they meet their capacity obligations to PJM in 2023. As a result, Virginia Power recorded a charge of $751 million ($559 million after-tax) in impairment of assets and other charges in its Consolidated Statements of Income (reflected in the Corporate and Other segment) for the year ended December 31, 2020. This charge was considered a component of Virginia Power’s base rates deemed recovered under the GTSA, subject to review as discussed in Note 13. In addition, see Note 13 for information on the settlement of the 2021 Triennial Review. In 2022 and 2020, Virginia Power recorded charges of $167 million ($124 million after-tax) and $54 million ($40 million after-tax), respectively, in impairment of assets and other charges in its Consolidated Statements of Income (reflected in the Corporate and Other segment) associated with dismantling certain of these electric generation facilities.

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. The Companies’ average composite depreciation rates on utility property, plant and equipment are as follows:

 

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

(percent)

 

 

 

 

 

 

 

 

 

Dominion Energy(1)

 

 

 

 

 

 

 

 

 

Generation

 

 

2.71

 

 

 

2.63

 

 

 

2.51

 

Transmission

 

 

2.32

 

 

 

2.52

 

 

 

2.52

 

Distribution

 

 

2.80

 

 

 

2.85

 

 

 

2.75

 

Storage

 

 

2.69

 

 

 

2.94

 

 

 

2.93

 

General and other

 

 

4.42

 

 

 

4.48

 

 

 

4.77

 

Virginia Power

 

 

 

 

 

 

 

 

 

Generation

 

 

2.84

 

 

 

2.69

 

 

 

2.52

 

Transmission

 

 

2.29

 

 

 

2.51

 

 

 

2.52

 

Distribution

 

 

2.76

 

 

 

3.18

 

 

 

3.19

 

General and other

 

 

4.78

 

 

 

5.08

 

 

 

5.09

 
(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 $31 million ($23 million after-tax) in depreciation expense in Virginia Power’s Consolidated Statements of Income and an increase to Dominion Energy’s EPS of $0.03 per share.

In January 2022, Dominion Energy revised the estimated useful life of its non-jurisdictional and certain nonregulated solar generation facilities to 35 years. This revision resulted in an annual decrease of depreciation expense of $16 million ($12 million after-tax), including $6 million ($4 million after-tax) at Virginia Power, and increased Dominion Energy’s EPS by approximately $0.02.

In the first quarter of 2022, Virginia Power revised the depreciation rates for its assets to reflect the results of a new depreciation study. The change resulted in a decrease in depreciation expense in Virginia Power’s Consolidated Statements of Income of $60 million ($45 million after-tax) and increased Dominion Energy’s EPS by $0.05.

Virginia Power’s non-jurisdictional solar generation property, plant and equipment is depreciated using the straight-line method over an estimated useful life of 35 years, effective January 2022.

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 $1.67 and $1.92 per mcfe in 2022 and 2021, respectively.

34

 

Dominion Energy’s nonutility property, plant and equipment is depreciated using the straight-line method over the following estimated useful lives:

 

Asset

 

Estimated Useful Lives

Nonregulated generation-nuclear

 

44 years

Nonregulated generation-other

 

15-35  years

General and other

 

5-59  years

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:

•
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.

 

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.

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 one to 70 years. The exercise of renewal options is solely at the Companies’ discretion and is included in the lease term if the option is reasonably certain to be exercised. A right-of-use asset and corresponding lease liability for leases with original lease terms of one year or less are not included in the Consolidated Balance Sheets, unless such leases contain renewal options that the Companies are reasonably certain will be exercised. Additionally, certain of the Companies’ leases contain escalation clauses whereby payments are adjusted for consumer price or other indices or contain fixed dollar or percentage increases.

35

 

The Companies also have leases with variable payments based upon usage of, or revenues associated with, the leased assets.

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 primarily over an estimated useful life of 35 years, effective January 2022.

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.

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.

36

 

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 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 and reflected in current assets held for sale in Dominion Energy's Consolidated Balance Sheets. Under the LIFO method, current stored gas inventory was valued at $14 million and $26 million at December 31, 2022 and December 31, 2021, respectively. Based on the average price of gas purchased during 2022 and 2021, the cost of replacing the current portion of stored gas inventory exceeded the amount stated on a LIFO basis by $129 million and $74 million, respectively.

37

 

In 2022, Dominion Energy wrote off certain inventory balances associated with certain nonrenewable electric generation facilities resulting in a $40 million charge ($30 million after-tax) recorded in impairments and other charges (reflected in the Corporate and Other segment) in its Consolidated Statements of Income, including $19 million ($14 million after-tax) at Virginia Power for inventory not expected to be utilized at such facilities prior to their planned retirement in the first half of 2023.

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 applied the guidance using a modified retrospective approach and continued 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.

NOTE 3. ACQUISITIONS AND DISPOSITIONS

Sales of Businesses Reflected as Discontinued Operations

Business Review Dispositions (as discussed in Note 1)

Sale of East Ohio

In September 2023, Dominion Energy entered into an agreement with Enbridge for the East Ohio Transaction, which includes the sale of East Ohio and is valued at approximately $6.6 billion, consisting of a purchase price of approximately $4.3 billion in cash and approximately $2.3 billion of assumed indebtedness. The purchase price will be subject to customary post-closing adjustments, including adjustments for cash, indebtedness, net working capital, capital expenditures and net regulatory assets and liabilities. Closing of the East Ohio Transaction is not conditioned upon the closing of the PSNC or Questar Gas Transactions. The sale will be treated as a stock sale for tax purposes and is expected to close in 2024, subject to clearance or approval under or by the Hart-Scott-Rodino Act, CFIUS and FCC as well as other customary closing and regulatory conditions. In November 2023, the waiting period under the Hart-Scott-Rodino Act expired. Also in November 2023, Dominion Energy submitted its initial filing request for approval by CFIUS. In October 2023, as required under the sale agreement, Dominion Energy filed a notice with the Ohio Commission. The proposed internal reorganization in connection with the East Ohio Transaction is subject to approval by the Utah and Wyoming Commissions. Dominion Energy filed for such approvals in September 2023 and received approval from the Utah Commission in November 2023.

Upon closing, Dominion Energy will retain the pension and other postretirement benefit plan assets and obligations, including related income tax and other deferred balances, associated with retiree participants in both East Ohio's union pension and other postretirement benefit plans and retiree participants of the sale entities in the Dominion Energy Pension Plan and the Dominion Energy Retiree Health and Welfare Plan. The East Ohio Transaction is subject to termination by either party if not completed by September 2024, subject to a potential three-month extension for receipt of regulatory approvals, with a termination fee of $155 million due to Dominion Energy under certain conditions. Based on the recorded balances at September 30, 2023, Dominion Energy expects to recognize a pre-tax gain of approximately $20 million ($20 million after-tax loss) upon closing, including the write-off of $1.5 billion of goodwill which is not deductible for tax purposes but excluding the effects of any closing adjustments.

At the closing of the East Ohio Transaction, Dominion Energy and Enbridge will enter into a transition services agreement pursuant to which Dominion Energy will continue to provide certain services to support the ongoing operations of East Ohio for up to approximately two years. Enbridge has also agreed to provide certain services to Dominion Energy.

Sale of PSNC

In September 2023, Dominion Energy entered into an agreement with Enbridge for the PSNC Transaction, which includes the sale of PSNC and is valued at approximately $3.1 billion, consisting of a purchase price of approximately $2.2 billion in cash and approximately $1.0 billion of assumed indebtedness. The purchase price will be subject to customary post-closing adjustments, including adjustments for cash, indebtedness, net working capital, capital expenditures and net regulatory assets and liabilities. Closing of the PSNC Transaction is not conditioned upon the closing of the East Ohio or Questar Gas Transactions. The sale will be treated as a stock sale for tax purposes and is expected to close in 2024, subject to clearance or approval under or by the Hart-Scott-Rodino Act, CFIUS, FCC and North Carolina Commission as well as other customary closing and regulatory conditions. In November 2023, the waiting period under the Hart-Scott-Rodino Act expired. Also in November 2023, Dominion Energy submitted its initial filing request for approval by CFIUS.

38

 

In October 2023, Dominion Energy filed for approval from the North Carolina Commission. The proposed internal reorganization in connection with the PSNC Transaction is subject to approval by the North Carolina Commission. Dominion Energy filed for such approval in September 2023.

Upon closing, Dominion Energy will retain the entirety of the assets and obligations, including related income tax and other deferred balances, of the pension and other postretirement employee benefit plans associated with the operations included in the transaction and relating to services provided through closing. The PSNC Transaction is subject to termination by either party if not completed by September 2024, subject to a potential three-month extension for receipt of regulatory approvals, with a termination fee of $78 million due to Dominion Energy under certain conditions. Based on the recorded balances at September 30, 2023, Dominion Energy expects to recognize a pre-tax gain of approximately $130 million ($290 million after-tax loss) upon closing, including the write-off of $0.7 billion of goodwill which is not deductible for tax purposes but excluding the effects of any closing adjustments.

At the closing of the PSNC Transaction, Dominion Energy and Enbridge will enter into a transition services agreement pursuant to which Dominion Energy will continue to provide certain services to support the ongoing operations of PSNC for up to approximately two years. Enbridge has also agreed to provide certain services to Dominion Energy.

Sale of Questar Gas and Wexpro

In September 2023, Dominion Energy entered into an agreement with Enbridge for the Questar Gas Transaction, which includes the sale of Questar Gas, Wexpro and related affiliates and is valued at approximately $4.3 billion, consisting of a purchase price of approximately $3.0 billion in cash and approximately $1.3 billion of assumed indebtedness. The purchase price will be subject to customary post-closing adjustments, including adjustments for cash, indebtedness, net working capital, capital expenditures and net regulatory assets and liabilities. Closing of the Questar Gas Transaction is not conditioned upon the closing of the East Ohio or PSNC Transactions. The sale will be treated as a stock sale for tax purposes and is expected to close in 2024, subject to clearance or approval under or by the Hart-Scott-Rodino Act, CFIUS, FCC and Utah and Wyoming Commissions as well as other customary closing and regulatory conditions. In November 2023, the waiting period under the Hart-Scott-Rodino Act expired. Also in November 2023, Dominion Energy submitted its initial filing request for approval by CFIUS. In October 2023, Dominion Energy filed for approvals from the Utah and Wyoming Commissions. In October 2023, Dominion Energy filed the notice with the Idaho Commission required for closing of the Questar Gas Transaction. The proposed internal reorganization in connection with the Questar Gas Transaction is subject to approval by the Utah and Wyoming Commissions. Dominion Energy filed for such approvals in September 2023 and received approval from the Utah Commission in November 2023.

Upon closing, Dominion Energy will retain the pension and other postretirement benefit plan assets and obligations, including related income tax and other deferred balances, associated with retiree participants of the sale entities in the Dominion Energy Pension Plan and the Dominion Energy Retiree Health and Welfare Plan. The Questar Gas Transaction is subject to termination by either party if not completed by September 2024, subject to a potential three-month extension for receipt of regulatory approvals, with a termination fee of $107 million due to Dominion Energy under certain conditions. Based on the recorded balances at September 30, 2023, Dominion Energy expects to recognize a pre-tax loss of approximately $10 million ($530 million after-tax loss) upon closing, including the write-off of $1.0 billion of goodwill which is not deductible for tax purposes but excluding the effects of any closing adjustments.

At the closing of the Questar Gas Transaction, Dominion Energy and Enbridge will enter into a transition services agreement pursuant to which Dominion Energy will continue to provide certain services to support the ongoing operations of Questar Gas and Wexpro for up to approximately two years. Enbridge has also agreed to provide certain services to Dominion Energy.

Other Sales

In August 2023, Dominion Energy entered into an agreement and completed the sale of Tredegar Solar Fund I, LLC to Spruce Power for cash consideration of $21 million.

Disposition of Gas Transmission & Storage Operations

In July 2020, Dominion Energy entered into an agreement with BHE with a total value of approximately $10 billion, comprised of approximately $4.0 billion of cash consideration (subject to customary closing adjustments) plus the assumption of long-term debt, to sell substantially all of its gas transmission and storage operations, including processing assets, as well as noncontrolling partnership interests in Iroquois, JAX LNG and White River Hub and a controlling interest in Cove Point (consisting of 100% of the general partner interest and 25% of the total limited partner interests). The agreement provides that Dominion Energy retains the assets and obligations of the pension and other postretirement employee benefit plans associated with the operations included in the transaction and relating to services provided through closing. In October 2020, pursuant to a provision in the agreement with BHE, Dominion Energy elected to exclude the Q-Pipe Group and certain other affiliated entities from the transaction as approval under the Hart-Scott-Rodino Act had not been obtained by mid-September 2020. Concurrently in October 2020, Dominion Energy and BHE entered into a separate agreement under which Dominion Energy would sell the Q-Pipe Group and certain other affiliated entities to BHE for cash consideration of $1.3 billion and the assumption of related long-term debt.

 

39

 

In November 2020, Dominion Energy completed the GT&S Transaction and received cash proceeds of $2.7 billion. This transaction was structured as an asset sale for tax purposes. Dominion Energy retained a 50% noncontrolling interest in Cove Point that is accounted for as an equity method investment upon closing of the GT&S Transaction as Dominion Energy has the ability to exercise significant influence over, but not control, Cove Point. The retained 50% noncontrolling interest in Cove Point was recognized at its initial fair value of $2.8 billion on the date of close estimated using an income approach and a market approach. The valuation is considered a Level 3 fair value measurement due to the use of significant judgment and unobservable inputs, including projected timing and amount of future cash flows and a discount rate reflecting risks inherent in the future cash flows and market prices. Upon closing the GT&S Transaction, Dominion Energy recognized a gain of $127 million (net of a $1.4 billion write-off of goodwill and a $222 million closing adjustment paid to BHE in December 2020) and an associated tax expense of $336 million, presented in net income (loss) from discontinued operations including noncontrolling interest in Dominion Energy’s Consolidated Statements of Income.

 

In connection with closing of the GT&S Transaction, Dominion Energy and BHE entered into a transition services agreement under which Dominion Energy will continue to provide specified administrative services to support the operations of the disposed business for up to 24 months after closing, subsequently extended through June 2023 for certain services. In addition, BHE provided certain administrative services to Dominion Energy through December 2022. Dominion Energy recorded $20 million, $21 million and $4 million associated with the transition services agreement in operating revenue in the Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020, respectively.

 

Also in November 2020, BHE provided a $1.3 billion deposit to Dominion Energy on the Q-Pipe Transaction. In July 2021, Dominion Energy and BHE mutually agreed to terminate the Q-Pipe Transaction as a result of uncertainty associated with receiving approval under the Hart-Scott-Rodino Act. Also in July 2021, Dominion Energy entered into an approximately $1.3 billion term loan credit agreement and borrowed the full amount available thereunder. The agreement matured in December 2021 and bore interest at a variable rate. The proceeds were utilized to repay the deposit received from BHE on the Q-Pipe Transaction. Upon completion of a sale of the Q-Pipe Group, Dominion Energy was required to utilize the net proceeds to repay any outstanding balances under the term loan agreement.

 

In October 2021, Dominion Energy entered into an agreement with Southwest Gas to sell the Q-Pipe Group. The total value of this transaction was approximately $2 billion, comprised of approximately $1.5 billion of cash consideration (subject to customary closing adjustments) plus the assumption of long-term debt. The agreement provided that Dominion Energy retain the assets and obligations of the pension and other postretirement employee benefit plans associated with the operations included in the transaction and relating to services provided through closing.

 

In December 2021, Dominion Energy completed the sale of the Q-Pipe Group and received cash proceeds of $1.5 billion. This transaction was structured as an asset sale for tax purposes. Upon closing, Dominion Energy recognized a gain of $666 million (net of a $191 million write-off of goodwill) and an associated tax expense of $173 million, presented in net income (loss) from discontinued operations including noncontrolling interest in Dominion Energy’s Consolidated Statements of Income. Also in December 2021, Dominion Energy used the net proceeds from the sale to repay all outstanding balances under the July 2021 term loan agreement and terminated the term loan agreement. In 2022, Dominion Energy recognized a gain of $27 million ($20 million after-tax) in discontinued operations in its Consolidated Statements of Income associated with the finalization of working capital adjustments.

 

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 Dominion Energy will continue to provide specified administrative services to support the operations of the disposed businesses for up to 12 months after closing, subsequently extended through July 2023 for certain services. Dominion Energy recorded $6 million associated with the transition services agreement in operating revenue in the Consolidated Statements of Income for the year ended December 31, 2022.

 

The operations included in both the GT&S Transaction and the Q-Pipe Group are presented in discontinued operations effective July 2020. As a result, 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 discontinued operations. See Note 9 for additional information regarding Dominion Energy’s equity method investment in Cove Point.

 

40

 

Financial Statement Information for Dispositions Presented as Discontinued Operations

 

The following table represents selected information regarding the results of operations, which were reported within discontinued operations in Dominion Energy’s Consolidated Statements of Income:

 

 

Business Review Dispositions

 

Year Ended December 31, 2022

 

East Ohio Transaction

 

 

PSNC Transaction

 

 

Questar Gas Transaction

 

 

Other

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

1,043

 

 

$

841

 

 

$

1,341

 

 

$

5

 

Operating expense

 

 

702

 

 

 

648

 

 

 

1,043

 

 

 

5

 

Other income (expense)

 

 

28

 

 

 

9

 

 

 

—

 

 

 

—

 

Interest and related charges

 

 

36

 

 

 

43

 

 

 

45

 

 

 

—

 

Income before income taxes

 

 

333

 

 

 

159

 

 

 

253

 

 

 

—

 

Income tax expense

 

 

45

 

 

 

34

 

 

 

50

 

 

 

—

 

Net income attributable to Dominion Energy(1)

 

$

288

 

 

$

125

 

 

$

203

 

 

$

—

 
(1)
Excludes $(3) million of income tax expense (benefit) attributable to consolidated state and interim period tax allocation adjustments for the year ended December 31, 2022.

 

 

 

Disposition of Gas Transportation & Storage Operations

 

 

Business Review Dispositions

 

Year Ended December 31, 2021

 

Q-Pipe Group(1)

 

 

East Ohio Transaction

 

 

PSNC Transaction

 

 

Questar Gas Transaction

 

 

Other

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

254

 

 

$

908

 

 

$

613

 

 

$

1,020

 

 

$

4

 

Operating expense

 

 

76

 

 

 

620

 

 

 

451

 

 

 

761

 

 

 

5

 

Other income (expense)(2)

 

 

28

 

 

 

25

 

 

 

11

 

 

 

(1

)

 

 

—

 

Interest and related charges

 

 

25

 

 

 

18

 

 

 

35

 

 

 

35

 

 

 

—

 

Income (loss) before income taxes

 

 

181

 

 

 

295

 

 

 

138

 

 

 

223

 

 

 

(1

)

Income tax expense (benefit)

 

 

36

 

 

 

38

 

 

 

27

 

 

 

42

 

 

 

—

 

Net income (loss) attributable to Dominion Energy(3)

 

$

145

 

 

$

257

 

 

$

111

 

 

$

181

 

 

$

(1

)
(1)
Operations associated with the Q-Pipe Group are through the December 31, 2021 closing date.
(2)
Q-Pipe Group includes a $25 million benefit associated with the termination of the Q-Pipe Transaction in 2021.
(3)
Excludes $19 million of income tax expense (benefit) attributable to consolidated state and interim period tax allocation adjustments for the year ended December 31, 2021.

 

 

 

Disposition of Gas Transportation & Storage Operations

 

 

Business Review Dispositions

 

Year Ended December 31, 2020

 

GT&S Transaction(1)

 

 

Q-Pipe Group

 

 

East Ohio Transaction

 

 

PSNC Transaction

 

 

Questar Gas Transaction

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

1,710

 

 

$

246

 

 

$

771

 

 

$

539

 

 

$

938

 

Operating expense(2)

 

 

1,289

 

 

 

96

 

 

 

540

 

 

 

376

 

 

 

676

 

Other income (expense)

 

 

88

 

 

 

1

 

 

 

20

 

 

 

12

 

 

 

(2

)

Interest and related charges (benefit)(3)

 

 

372

 

 

 

20

 

 

 

(32

)

 

 

38

 

 

 

32

 

Income before income taxes

 

 

137

 

 

 

131

 

 

 

283

 

 

 

137

 

 

 

228

 

Income tax expense (benefit)(4)

 

 

334

 

 

 

(9

)

 

 

35

 

 

 

30

 

 

 

45

 

Net income (loss) including noncontrolling interests

 

 

(197

)

 

 

140

 

 

 

248

 

 

 

107

 

 

 

183

 

Noncontrolling interests

 

 

106

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Net income (loss) attributable to Dominion Energy(5)

 

$

(303

)

 

$

140

 

 

$

248

 

 

$

107

 

 

$

183

 

 

(1)
Operations associated with the GT&S Transaction are through the November 1, 2020 close date.
(2)
GT&S Transaction includes a charge of $482 million ($359 million after-tax) recorded in 2020 associated with the probable abandonment of a significant portion of the Supply Header Project as well as the establishment of a $75 million ARO as a result of the cancellation of the Atlantic Coast Pipeline Project.
(3)
GT&S Transaction includes a loss of $237 million ($178 million after-tax) recorded in 2020 associated with cash flow hedges of debt-related items that were determined to be probable of not occurring.
(4)
Excludes $17 million income tax benefit recorded in 2021 associated with the GT&S Transaction.
(5)
Excludes $24 million of income tax expense (benefit) attributable to consolidated state and interim period tax allocation adjustments for the year ended December 31, 2020.

41

 

 

The carrying value of major classes of assets and liabilities relating to the disposal groups, which are reported as held for sale in Dominion Energy's Consolidated Balance Sheets were as follows:

 

At December 31, 2022

 

 

At December 31, 2021

 

 

Business Review Dispositions

 

 

Business Review Dispositions

 

 

East
Ohio
Transaction

 

PSNC Transaction

 

Questar
Gas
Transaction

 

Other

 

 

East
Ohio
Transaction

 

PSNC Transaction

 

Questar
Gas
Transaction

 

Other

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets(1)

$

544

 

$

381

 

$

803

 

$

1

 

 

$

439

 

$

296

 

$

422

 

$

1

 

Property, plant and equipment, net

 

5,012

 

 

2,591

 

 

3,984

 

 

47

 

 

 

4,636

 

 

2,506

 

 

3,677

 

 

52

 

Other deferred charges and other
   assets, including goodwill(2) and
   intangible assets

 

2,629

 

 

822

 

 

1,043

 

 

—

 

 

 

2,563

 

 

823

 

 

1,101

 

 

—

 

Current liabilities(3)

 

634

 

 

151

 

 

612

 

 

1

 

 

 

557

 

 

133

 

 

263

 

 

1

 

Long-term debt(4)

 

2,287

 

 

798

 

 

1,245

 

 

—

 

 

 

1,786

 

 

798

 

 

995

 

 

—

 

Other deferred credits and
   liabilities(5)

 

1,435

 

 

689

 

 

1,087

 

 

9

 

 

 

1,408

 

 

673

 

 

1,039

 

 

14

 
(1)
Includes cash and cash equivalents of $6 million and $3 million within the East Ohio Transaction, less than $1 million and $14 million within the PSNC Transaction and $28 million and $17 million within the Questar Gas Transaction at December 31, 2022 and 2021, respectively. Also includes regulatory assets of $90 million and $56 million within the East Ohio Transaction, $95 million and $88 million within the PSNC Transaction and $273 million and $125 million within the Questar Gas Transaction at December 31, 2022 and 2021, respectively
(2)
Includes goodwill of $1.5 billion, $673 million and $983 million at both December 31, 2022 and 2021 within the East Ohio, PSNC and Questar Gas Transactions, respectively. Also includes regulatory assets of $751 million and $607 million within the East Ohio Transaction, $93 million and $103 million within the PSNC Transaction and $(22) million and $47 million within the Questar Gas Transaction at December 31, 2022 and 2021, respectively.
(3)
Includes regulatory liabilities of $43 million and $51 million within the East Ohio Transaction, $11 million and $18 million within the PSNC Transaction and $144 million and $28 million within the Questar Gas Transaction at December 31, 2022 and 2021, respectively.
(4)
Includes East Ohio Unsecured Senior Notes due 2025 to 2052 at rates from 1.30% to 6.38% and with a weighted-average coupon rate for debt outstanding at December 31, 2022 of 3.13%; PSNC Unsecured Senior Notes due 2026 to 2051 at rates from 3.10% to 7.45% and with a weighted-average coupon rate for debt outstanding at December 31, 2022 of 4.34% and Questar Gas Unsecured Senior Notes due 2024 to 2052 at rates from 2.21% to 7.20% and with a weighted-average coupon rate for debt outstanding at December 31, 2022 of 3.99%.
(5)
Includes regulatory liabilities of $749 million and $754 million within the East Ohio Transaction, $436 million and $435 million within the PSNC Transaction and $506 million and $500 million within the Questar Gas Transaction at December 31, 2022 and 2021, respectively.

Capital expenditures and significant noncash items relating to the disposal groups included the following:

 

 

Business Review Dispositions

 

Year Ended December 31, 2022

 

East Ohio Transaction

 

 

PSNC Transaction

 

 

Questar Gas Transaction

 

 

Other

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

456

 

 

$

153

 

 

$

438

 

 

$

—

 

Significant noncash items

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

134

 

 

 

87

 

 

 

163

 

 

 

4

 

Accrued capital expenditures

 

 

53

 

 

 

16

 

 

 

31

 

 

 

—

 

 

 

 

Disposition of Gas Transportation & Storage Operations

 

 

Business Review Dispositions

 

Year Ended December 31, 2021

 

Q-Pipe Group(1)

 

 

East Ohio Transaction

 

 

PSNC Transaction

 

 

Questar Gas Transaction

 

 

Other

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures(2)

 

$

34

 

 

$

420

 

 

$

195

 

 

$

416

 

 

$

—

 

Significant noncash items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

—

 

 

 

122

 

 

 

81

 

 

 

168

 

 

 

4

 

Accrued capital expenditures

 

 

—

 

 

 

27

 

 

 

41

 

 

 

25

 

 

 

—

 
(1)
Operations associated with the Q-Pipe Group are through the December 31, 2021 closing date.

42

 

(2)
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 $41 million, included in the Questar Gas Transaction.

 

 

 

Disposition of Gas Transportation & Storage Operations

 

 

Business Review Dispositions

 

Year Ended December 31, 2020

 

GT&S Transaction(1)

 

 

Q-Pipe Group

 

 

East Ohio Transaction

 

 

PSNC Transaction

 

 

Questar Gas Transaction

 

 

Other

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

292

 

 

$

38

 

 

$

393

 

 

$

259

 

 

$

377

 

 

$

—

 

Significant noncash items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment of assets and other charges

 

 

469

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Depreciation, depletion and amortization

 

 

177

 

 

 

27

 

 

 

91

 

 

 

73

 

 

 

175

 

 

 

4

 

Accrued capital expenditures

 

 

—

 

 

 

1

 

 

 

19

 

 

 

19

 

 

 

21

 

 

 

—

 
(1)
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 $165 million.

Sale of Hope

In February 2022, Dominion Energy entered into an agreement to sell 100% of the equity interests in Hope to Ullico for $690 million of cash consideration, subject to customary closing adjustments, which closed in August 2022 after all customary closing and regulatory conditions were satisfied, including clearance under the Hart-Scott-Rodino Act and approval from the West Virginia Commission. The sale was treated as a stock sale for tax purposes.

In connection with closing, Dominion Energy recognized a pre-tax gain of $14 million, inclusive of customary closing adjustments, (net of $110 million write-off of goodwill which was not deductible for tax purposes) in losses (gains) on sales of assets in its Consolidated Statements of Income. The transaction resulted in an after-tax loss of $84 million. Upon meeting the classification as held for sale in the first quarter of 2022 and through the second quarter of 2022, Dominion Energy had recorded charges of $90 million in deferred income tax expense in its Consolidated Statements of Income to reflect the recognition of deferred taxes on the outside basis of Hope’s stock. This deferred income tax expense reversed upon closing of the sale and became a component of current income tax expense on the sale disclosed above. See Note 5 for additional information. In addition, a curtailment was recorded related to other postretirement benefit plans as discussed in Note 22.

All activity related to Hope is, effective September 2023, reflected in the Corporate and Other segment.

Sale of Kewaunee

In May 2021, Dominion Energy entered into an agreement to sell 100% of the equity interests in Dominion Energy Kewaunee, Inc. to EnergySolutions, including the transfer of all decommissioning obligations associated with Kewaunee, which ceased operations in 2013. The sale closed in June 2022 following approval from the Wisconsin Commission in May 2022 and NRC approval of a requested license transfer in March 2022. The sale was treated as an asset sale for tax purposes and Dominion Energy retained the assets and obligations of the pension and other postretirement employee benefit plans. EnergySolutions is subject to the Wisconsin regulatory conditions agreed to by Dominion Energy upon its acquisition of Kewaunee, including the return of any excess decommissioning funds to WPSC and WP&L customers following completion of all decommissioning activities.

In the second quarter of 2022, Dominion Energy recorded a loss of $649 million ($513 million after-tax), recorded in losses (gains) on sales of assets in its Consolidated Statements of Income, primarily related to the difference between the nuclear decommissioning trust and AROs. Prior to its receipt, there had been uncertainty as to the timing of or ability to obtain approval from the Wisconsin Commission. Prior to closing, Dominion Energy withdrew $80 million from the nuclear decommissioning trust to recover certain spent nuclear fuel and other permitted costs.

All activity related to Kewaunee prior to closing is included in Contracted Energy, with remaining activity reflected in the Corporate and Other segment.

Acquisition of Birdseye

In May 2021, Dominion Energy acquired 100% of the ownership interest in Birdseye from BRE Holdings, LLC for total consideration of $46 million, consisting of $28 million in cash and $18 million, measured at fair value at closing, of consideration contingent on the achievement of certain revenue targets and future development project sales. Birdseye is primarily engaged in the development of solar energy projects in southeastern states in the U.S. with 2.5 GW of solar generation projects under development at acquisition. The allocation of the purchase price resulted in $25 million of development project assets, primarily reflected in other deferred charges and other assets in Dominion Energy’s Consolidated Balance Sheets, and $24 million of goodwill, which is not deductible for tax purposes.

43

 

The goodwill reflects the value associated with enhancing Dominion Energy's development of regulated and long-term contracted solar generating and electric storage projects. The fair value measurements, including of the assets acquired, were determined using the income approach and 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. Birdseye is included in Contracted Energy.

 

NOTE 4. OPERATING REVENUE

The Companies’ operating revenue consists of the following:

 

 

Dominion Energy

 

 

Virginia Power

 

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulated electric sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

$

5,261

 

 

$

4,509

 

 

$

4,833

 

 

$

4,039

 

 

$

3,366

 

 

$

3,677

 

Commercial

 

 

4,480

 

 

 

3,194

 

 

 

3,102

 

 

 

3,647

 

 

 

2,417

 

 

 

2,342

 

Industrial

 

 

901

 

 

 

748

 

 

 

730

 

 

 

472

 

 

 

367

 

 

 

380

 

Government and other retail

 

 

1,235

 

 

 

921

 

 

 

868

 

 

 

1,172

 

 

 

862

 

 

 

804

 

Wholesale

 

 

234

 

 

 

175

 

 

 

128

 

 

 

132

 

 

 

107

 

 

 

90

 

Nonregulated electric sales

 

 

1,249

 

 

 

1,005

 

 

 

822

 

 

 

68

 

 

 

44

 

 

 

19

 

Regulated gas sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

331

 

 

 

322

 

 

 

271

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

188

 

 

 

160

 

 

 

129

 

 

 

 

 

 

 

 

 

 

Other

 

 

168

 

 

 

108

 

 

 

68

 

 

 

 

 

 

 

 

 

 

Regulated gas transportation and storage

 

 

38

 

 

 

35

 

 

 

23

 

 

 

 

 

 

 

 

 

 

Other regulated revenues

 

 

296

 

 

 

248

 

 

 

303

 

 

 

277

 

 

 

234

 

 

 

299

 

Other nonregulated revenues(1)(2)

 

 

178

 

 

 

237

 

 

 

274

 

 

 

61

 

 

 

73

 

 

 

50

 

Total operating revenue from
    contracts with customers

 

 

14,559

 

 

 

11,662

 

 

 

11,551

 

 

 

9,868

 

 

 

7,470

 

 

 

7,661

 

Other revenues(1)(3)

 

 

(614

)

 

 

(242

)

 

 

368

 

 

 

(214

)

 

 

—

 

 

 

102

 

Total operating revenue

 

$

13,945

 

 

$

11,420

 

 

$

11,919

 

 

$

9,654

 

 

$

7,470

 

 

$

7,763

 

 

(1)
See Note 25 for amounts attributable to related parties and affiliates.
(2)
Includes sales of renewable energy credits were $42 million, $33 million and $20 million for the years ended December 31, 2022, 2021 and 2020, respectively, at Dominion Energy and $18 million, $21 million and $11 million for the years ended December 31, 2022, 2021 and 2020, respectively, at Virginia Power.
(3)
Includes alternative revenue of $72 million, $44 million and $84 million at both Dominion Energy and Virginia Power for years ended December 31, 2022, 2021 and 2020, respectively.

 

Neither Dominion Energy nor Virginia Power have any amounts for revenue to be recognized in the future on multi-year contracts in place at December 31, 2022.

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, 2022 and 2021, Dominion Energy’s contract liability balances were $51 million and $47 million, respectively. At December 31, 2022 and 2021, Virginia Power’s contract liability balances were $39 million and $33 million, respectively. The Companies’ contract liabilities are recorded in other current liabilities and other deferred credits and other liabilities in the Consolidated Balance Sheets.

The Companies recognize revenue as they fulfill their obligations to provide service to their customers. During the years ended December 31, 2022 and 2021, Dominion Energy recognized revenue of $42 million and $50 million from the beginning contract liability balance. During the years ended December 31, 2022 and 2021, Virginia Power recognized revenue of $33 million and $36 million, respectively, from the beginning contract liability balance.

 

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.

 

44

 

In August 2022, the IRA was enacted which, among other things, extends the investment and production tax credits for clean energy technologies until at least 2032 and imposes a 15% alternative minimum tax on GAAP net income, as adjusted for certain items, of corporations greater than $1 billion for tax years beginning after December 31, 2022. The IRA did not impact the measurement of the Companies’ deferred income taxes or change the assessment of the realizability of deferred tax assets. The Companies continue to monitor and evaluate the impacts of the IRA, including changes in interpretations, if any, as guidance is issued and finalized.

 

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 30% of adjusted taxable income, which prior to 2022, was defined similarly to EBITDA (earnings before interest, taxes, depreciation and amortization). For tax years beginning after December 31, 2021, the calculation of adjusted taxable income is defined similarly to EBIT (earnings before interest and taxes). For consolidated groups such as Dominion Energy that have both regulated and nonregulated operations, these rules may result in a temporary disallowance of a portion of Dominion Energy’s interest deductions in the future, although any interest disallowed has an indefinite carryforward period.

 

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.

Continuing Operations

Details of income tax expense for continuing operations including noncontrolling interests were as follows:

Dominion Energy

 

Virginia Power

 

Year Ended December 31,

2022

 

2021

 

2020

 

2022

 

2021

 

2020

 

(millions)

 

 

 

 

 

 

Current:

 

 

 

 

 

 

Federal

$

(76

)

$

(301

)

$

(388

)

$

17

 

$

67

 

$

364

 

State

 

27

 

 

13

 

 

(91

)

 

(17

)

 

(13

)

 

71

 

Total current expense (benefit)

 

(49

)

 

(288

)

 

(479

)

 

—

 

 

54

 

 

435

 

Deferred:

 

 

 

 

 

 

Federal

 

 

 

 

 

 

Taxes before operating loss
   carryforwards and investment tax credits

 

(63

)

 

144

 

 

(16

)

 

212

 

 

145

 

 

(226

)

Tax utilization expense of operating
   loss carryforwards

 

35

 

 

42

 

 

42

 

 

—

 

 

—

 

 

—

 

Investment tax credits

 

(129

)

 

250

 

 

311

 

 

(148

)

 

(39

)

 

(27

)

State

 

44

 

 

(26

)

 

44

 

 

112

 

 

118

 

 

7

 

Total deferred expense (benefit)

 

(113

)

 

410

 

 

381

 

 

176

 

 

224

 

 

(246

)

Investment tax credit-gross deferral

 

18

 

 

121

 

 

42

 

 

18

 

 

121

 

 

42

 

Investment tax credit-amortization

 

(4

)

 

(4

)

 

(3

)

 

(3

)

 

(2

)

 

(2

)

Total income tax expense (benefit)

$

(148

)

$

239

 

$

(59

)

$

191

 

$

397

 

$

229

 

 

In 2022, Dominion Energy’s current income taxes reflect a benefit from continuing operations as the income tax expense associated with the East Ohio, PSNC and Questar Gas Transactions and Cove Point operations is reflected in discontinued operations.

 

In 2021, Dominion Energy’s current income taxes reflect a benefit from continuing operations as the income tax expense associated with the East Ohio, PSNC and Questar Gas Transactions, Cove Point and Q-Pipe 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 the East Ohio, PSNC and Questar Gas Transactions, Cove Point and 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 $18 million income tax benefit is reflected in common shareholders’ equity associated with state deferred taxes on assets and liabilities retained in connection with the GT&S Transaction.

 

45

 

Discontinued Operations

Income tax expense (benefit) reflected in discontinued operations is $225 million, $374 million, and $(61) million for the years ended December 31, 2022, 2021 and 2020, respectively. Income taxes reflect tax expense on pre-tax income attributable to East Ohio, PSNC, Questar Gas, Wexpro and equity method earnings from Cove Point of $257 million, $218 million and $175 million, partially offset by an income tax benefit of $38 million, $37 million and $34 million related to excess deferred income tax amortization for the years ended December 31, 2022, 2021 and 2020, respectively. 2021 income tax expense also includes a $14 million benefit related to finalizing income tax returns on the GT&S Transaction and the absence of a $36 million benefit on non-deductible goodwill written off in connection with the sale of the Q-Pipe Group. The 2020 income tax expense also reflects a charge of $81 million for the write-off of tax-related regulatory assets associated with the Atlantic Coast Pipeline Project and the absence of a $236 million benefit on non-deductible goodwill written off in connection with the GT&S Transaction.

 

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,

 

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

 

U.S. statutory rate

 

 

21.0

 

%

 

21.0

 

%

 

21.0

 

%

 

21.0

 

%

 

21.0

 

%

 

21.0

 

%

Increases (reductions) resulting from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recognition of taxes - sale of
   subsidiary stock

 

 

(74.7

)

 

 

—

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

Recognition of taxes - privatization
   intercompany gain

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2.4

 

 

 

—

 

 

 

—

 

 

State taxes, net of federal benefit

 

 

(28.3

)

 

 

1.8

 

 

 

(0.4

)

 

 

4.6

 

 

 

4.6

 

 

 

4.8

 

 

Investment tax credits

 

 

108.9

 

 

 

(4.5

)

 

 

(18.6

)

 

 

(9.1

)

 

 

(3.0

)

 

 

(4.5

)

 

Production tax credits

 

 

12.0

 

 

 

(0.6

)

 

 

(1.3

)

 

 

(1.0

)

 

 

(0.6

)

 

 

(0.7

)

 

Valuation allowances

 

 

—

 

 

 

0.2

 

 

 

1.7

 

 

 

—

 

 

 

—

 

 

 

—

 

 

Reversal of excess deferred income
    taxes

 

 

67.3

 

 

 

(2.8

)

 

 

(5.9

)

 

 

(3.8

)

 

 

(2.1

)

 

 

(2.2

)

 

State legislative change

 

 

0.3

 

 

 

(1.0

)

 

 

—

 

 

 

—

 

 

 

(0.7

)

 

 

—

 

 

Change in tax status

 

 

—

 

 

 

—

 

 

 

(3.3

)

 

 

—

 

 

 

—

 

 

 

—

 

 

AFUDC—equity

 

 

5.0

 

 

 

(0.5

)

 

 

(0.1

)

 

 

(0.4

)

 

 

(0.5

)

 

 

—

 

 

Changes in state deferred taxes
    associated with assets held for sale

 

 

(4.1

)

 

 

—

 

 

 

(6.3

)

 

 

 

 

 

 

 

 

 

 

Absence of tax on noncontrolling
    interest

 

 

—

 

 

 

(0.2

)

 

 

7.4

 

 

 

 

 

 

 

 

 

 

 

Settlements of uncertain tax positions

 

 

—

 

 

 

(1.7

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

Employee stock ownership plan
    deduction

 

 

6.8

 

 

 

(0.4

)

 

 

(1.7

)

 

 

 

 

 

 

 

 

 

 

Other, net

 

 

5.7

 

 

 

(0.4

)

 

 

(0.7

)

 

 

(0.1

)

 

 

0.1

 

 

 

(0.1

)

 

Effective tax rate

 

 

119.9

 

%

 

10.9

 

%

 

(8.2

)

%

 

13.6

 

%

 

18.8

 

%

 

18.3

 

%

 

As described in Note 3, Dominion Energy sold 100% of the equity interests in Hope in a stock sale for income tax purposes. Dominion Energy’s 2022 effective tax rate reflects the current income tax expense on the sale of Hope’s stock. As described in Note 9, Virginia Power transferred its existing privatization operations in Virginia to Dominion Energy, and Dominion Energy contributed these assets to Dominion Privatization. As the original owner of these privatization assets, Virginia Power is required to recognize the income tax expense on Dominion Energy’s transaction with Dominion Privatization. As such, Virginia Power’s effective tax rate reflects an income tax expense of $34 million on this transaction.

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 $38 million. In addition, the Companies’ effective tax rates reflect the benefit of a state legislative change enacted in April 2021 for tax years beginning January 1, 2022. Dominion Energy’s effective tax rate reflects a $21 million deferred tax benefit, inclusive of a $16 million deferred tax benefit at Virginia Power.

46

 

Dominion Energy’s 2020 effective tax rate reflects an income tax benefit of $45 million associated with the remeasurement of consolidated state deferred taxes with the classification of gas transmission and storage operations as held for sale. In addition, Dominion Energy’s effective tax rate reflects an income tax expense of $55 million attributable to the noncontrolling interest primarily associated with the impairment of non-wholly-owned nonregulated solar facilities held in partnerships discussed in Note 10.

The Companies’ deferred income taxes consist of the following:

Dominion Energy

 

Virginia Power

 

At December 31,

2022

 

2021

 

2022

 

2021

 

(millions)

 

 

 

 

Deferred income taxes:

 

 

 

 

Total deferred income tax assets

$

2,633

 

$

2,782

 

$

1,535

 

$

1,373

 

Total deferred income tax liabilities

 

7,730

 

 

7,961

 

 

4,701

 

 

4,286

 

Total net deferred income tax liabilities

$

5,097

 

$

5,179

 

$

3,166

 

$

2,913

 

Total deferred income taxes:

 

 

 

 

Plant and equipment, primarily depreciation method and basis differences

$

4,257

 

$

4,773

 

$

3,355

 

$

3,327

 

Excess deferred income taxes

 

(847

)

 

(884

)

 

(616

)

 

(629

)

Unrecovered NND Project costs

 

 

479

 

 

 

508

 

 

 

 

 

 

 

DESC rate refund

 

 

(89

)

 

 

(113

)

 

 

 

 

 

 

Toshiba Settlement

 

 

(162

)

 

 

(189

)

 

 

 

 

 

 

Nuclear decommissioning

 

1,001

 

 

1,114

 

 

311

 

 

324

 

Deferred state income taxes

 

803

 

 

777

 

 

566

 

 

420

 

Federal benefit of deferred state income taxes

 

(164

)

 

(163

)

 

(119

)

 

(88

)

Deferred fuel, purchased energy and gas costs

 

509

 

 

154

 

 

403

 

 

126

 

Pension benefits

 

330

 

 

282

 

 

(105

)

 

(119

)

Other postretirement benefits

 

58

 

 

68

 

 

111

 

 

93

 

Loss and credit carryforwards

 

(1,782

)

 

(1,566

)

 

(751

)

 

(537

)

Valuation allowances

 

137

 

 

138

 

 

7

 

 

6

 

Partnership basis differences

 

466

 

 

390

 

 

 

 

 

 

Other

 

101

 

 

(109

)

 

4

 

 

(10

)

Total net deferred income tax liabilities

$

5,097

 

$

5,180

 

$

3,166

 

$

2,913

 

Deferred Investment Tax Credits – Regulated Operations

 

300

 

 

286

 

 

286

 

 

270

 

Total Deferred Taxes and Deferred Investment Tax Credits

$

5,397

 

$

5,466

 

$

3,452

 

$

3,183

 

 

At December 31, 2022, Dominion Energy had the following deductible loss and credit carryforwards:

 

Deductible

 

 

Deferred

 

Valuation

 

Expiration

 

 

Amount

 

 

Tax Asset

 

 

Allowance

 

 

Period

(millions)

 

 

 

 

 

 

 

 

 

 

Federal losses

$

778

 

$

163

 

$

—

 

 

2037

Federal investment credits

—

 

 

 

874

 

—

 

 

2036-2042

Federal production and other credits

—

 

 

82

 

—

 

 

2036-2042

State losses

 

5,665

 

 

305

 

 

(51

)

 

2023-2042

State minimum tax credits

—

 

 

271

 

—

 

 

No expiration

State investment and other credits

—

 

 

127

 

 

(86

)

 

2023-2032

Total

$

6,443

 

$

1,822

 

$

(137

)

 

 

 

47

 

At December 31, 2022, 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

 

—

 

 

 

631

 

 

—

 

 

2036-2042

Federal production and other credits

 

—

 

 

 

80

 

 

—

 

 

2036-2042

State losses

 

 

513

 

 

 

31

 

 

—

 

 

2042

State investment and other credits

 

—

 

 

 

9

 

 

 

(7

)

 

2024

Total

 

$

513

 

 

$

751

 

 

$

(7

)

 

 

A reconciliation of changes in Dominion Energy’s unrecognized tax benefits follows. Virginia Power does not have any unrecognized tax benefits in the periods presented:

 

 

 

Dominion Energy

 

 

 

 

2022

 

 

2021

 

 

2020

 

 

(millions)

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

128

 

 

$

167

 

 

$

175

 

 

Increases-prior period positions

 

 

8

 

 

 

48

 

 

 

18

 

 

Decreases-prior period positions

 

 

(8

)

 

 

(59

)

 

 

(19

)

 

Increases-current period positions

 

 

2

 

 

 

2

 

 

 

1

 

 

Settlements with tax authorities

 

 

(3

)

 

 

(26

)

 

 

—

 

 

Expiration of statutes of limitations

 

 

(10

)

 

 

(4

)

 

 

(8

)

 

Ending balance

 

$

117

 

 

$

128

 

 

$

167

 

 

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 $64 million, $72 million and $140 million at December 31, 2022, 2021 and 2020, respectively. In discontinued operations, these unrecognized tax benefits were $33 million at both December 31, 2022 and 2021. For Dominion Energy, the change in these unrecognized tax benefits decreased income tax expense by $7 million, $34 million and $6 million in 2022, 2021 and 2020, respectively. For discontinued operations, the change in these unrecognized tax benefits increased income tax expense by $5 million in 2020.

 

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 2018. Although Dominion Energy has not received a final letter indicating no changes to its taxable income for tax years 2021 and 2020, no material adjustments are expected. The IRS examination of tax year 2022 is ongoing.

It is reasonably possible that settlement negotiations and expiration of statutes of limitations could result in a decrease in unrecognized tax benefits in 2023 by up to $39 million for Dominion Energy. If such changes were to occur, other than revisions of the accrual for interest on tax underpayments and overpayments, earnings could increase by up to $26 million for Dominion Energy. Otherwise, with regard to 2022 and prior years, the Companies cannot estimate the range of reasonably possible changes to unrecognized tax benefits that may occur in 2023.

For each of the major states in which Dominion Energy operates or previously operated, the earliest tax year remaining open for examination is as follows:

 

State

 

Earliest Open Tax Year

Pennsylvania(1)

 

2012

Connecticut

 

2019

Virginia(2)

 

2019

Utah(1)

 

2019

South Carolina

 

2019

 

(1)
Considered a major state for entities presented in discontinued operations.
(2)
Considered a major state for Virginia Power’s operations.

48

 

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

The Companies’ fair value measurements are made in accordance with the policies discussed in Note 2. See Note 7 for additional information about the Companies’ derivative and hedge accounting activities.

The Companies enter into certain physical and financial forwards, futures and options, 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 the Companies' quantitative information about Level 3 fair value measurements at December 31, 2022. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility.

 

 

 

 

 

 

 

 

 

Dominion Energy

 

 

Virginia Power

 

 

 

Valuation
Techniques

 

Unobservable
Input

 

 

Fair Value (millions)

 

Range

 

Weighted
Average(1)

 

 

Fair Value (millions)

 

 

Range

 

Weighted
Average(1)

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Physical and financial forwards:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FTRs

 

 

Discounted
   cash flow

 

Market price
   (per MWh)

(3)

 

$

214

 

2-24

 

6

 

 

$

214

 

 

2-24

 

6

Electricity

 

 

Discounted
   cash flow

 

Market price
   (per MWh)

(3)

 

 

201

 

27-110

 

51

 

 

 

—

 

 

—

 

—

Physical options:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas(2)

 

 

Option model

 

Market price
   (per Dth)

(3)

 

 

22

 

3-16

 

10

 

 

 

22

 

 

3-16

 

10

 

 

 

 

 

Price volatility

(4)

 

 

 

11%-63%

 

45%

 

 

 

 

 

11%-63%

 

45%

Total assets

 

 

 

 

 

 

 

$

437

 

 

 

 

 

 

$

236

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Physical and financial forwards:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas(2)

 

 

Discounted
   cash flow

 

Market price
   (per Dth)

(3)

 

$

10

 

(2)-4

 

(1)

 

 

$

10

 

 

(2)-4

 

(1)

FTRs

 

 

Discounted
   cash flow

 

Market price
   (per MWh)

(3)

 

 

5

 

2-12

 

5

 

 

 

5

 

 

2-12

 

5

Total
   liabilities

 

 

 

 

 

 

 

$

15

 

 

 

 

 

 

$

15

 

 

 

 

 
(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.

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)

 

49

 

Nonrecurring Fair Value Measurements

See Note 3 for information on the nonrecurring fair value measurement associated with Dominion Energy's acquisition of Birdseye and its retained noncontrolling interest in Cove Point. See Note 9 for information regarding nonrecurring fair value measurements associated with charges related to Fowler Ridge, Dominion Energy's noncontrolling interest in businesses and assets contributed to Wrangler and Dominion Energy's noncontrolling ownership interest in Dominion Privatization. See Note 10 for information regarding impairment charges recorded by Dominion Energy associated with nonregulated solar facilities and non-wholly-owned nonregulated solar facilities in partnerships.

In 2021, Dominion Energy recorded a charge of $20 million ($15 million after-tax) in impairment of assets and other charges in its Consolidated Statements of Income (reflected in the Corporate and Other segment) to write off substantially all of the long-lived assets of its nonregulated retail software development operations to their estimated fair value, using a market approach, of less than $1 million. The valuation is considered a Level 2 fair value measurement given that it is based on bids received.

In 2021, Dominion Energy recorded a charge of $16 million ($12 million after-tax) in impairment of assets and other charges in its Consolidated Statements of Income to adjust a corporate office building down to its estimated fair value, using both an income and market approach, of $26 million. The valuation is considered a Level 3 measurement due to the use of significant judgmental and unobservable inputs, including projected timing and amount of future cash flows and discount rates inherent in the future cash flows and market prices. The corporate office building is reflected in the Corporate and Other segment and presented as held for sale in Dominion Energy’s Consolidated Balance Sheets at both December 31, 2022 and 2021.

50

 

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 the Companies' pension and other postretirement benefit plans are presented in Note 22.

The following table presents the Companies' assets and liabilities that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions:

 

 

Dominion Energy

 

 

Virginia Power

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

—

 

 

$

332

 

 

$

437

 

 

$

769

 

 

$

—

 

 

$

32

 

 

$

236

 

 

$

268

 

Interest rate

 

 

—

 

 

 

1,407

 

 

 

—

 

 

 

1,407

 

 

 

—

 

 

 

614

 

 

 

—

 

 

 

614

 

Investments(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

3,810

 

 

 

—

 

 

 

—

 

 

 

3,810

 

 

 

2,028

 

 

 

—

 

 

 

—

 

 

 

2,028

 

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt instruments

 

 

—

 

 

 

576

 

 

 

—

 

 

 

576

 

 

 

—

 

 

 

360

 

 

 

—

 

 

 

360

 

Government securities

 

 

161

 

 

 

1,059

 

 

 

—

 

 

 

1,220

 

 

 

90

 

 

 

542

 

 

 

—

 

 

 

632

 

Total assets

 

$

3,971

 

 

$

3,374

 

 

$

437

 

 

$

7,782

 

 

$

2,118

 

 

$

1,548

 

 

$

236

 

 

$

3,902

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

—

 

 

$

911

 

 

$

15

 

 

$

926

 

 

$

—

 

 

$

333

 

 

$

15

 

 

$

348

 

Interest rate

 

 

—

 

 

 

377

 

 

 

—

 

 

 

377

 

 

 

—

 

 

 

7

 

 

 

—

 

 

 

7

 

Foreign currency exchange
   rate

 

 

—

 

 

 

101

 

 

 

—

 

 

 

101

 

 

 

—

 

 

 

101

 

 

 

—

 

 

 

101

 

Total liabilities

 

$

—

 

 

$

1,389

 

 

$

15

 

 

$

1,404

 

 

$

—

 

 

$

441

 

 

$

15

 

 

$

456

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

—

 

 

$

52

 

 

$

230

 

 

$

282

 

 

$

—

 

 

$

36

 

 

$

110

 

 

$

146

 

Interest rate

 

 

—

 

 

 

323

 

 

 

—

 

 

 

323

 

 

 

—

 

 

 

146

 

 

 

—

 

 

 

146

 

Foreign currency exchange
   rate

 

 

—

 

 

 

8

 

 

 

—

 

 

 

8

 

 

 

—

 

 

 

8

 

 

 

—

 

 

 

8

 

Investments(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

5,241

 

 

 

—

 

 

 

—

 

 

 

5,241

 

 

 

2,420

 

 

 

—

 

 

 

—

 

 

 

2,420

 

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt instruments

 

 

—

 

 

 

881

 

 

 

—

 

 

 

881

 

 

 

—

 

 

 

531

 

 

 

—

 

 

 

531

 

Government securities

 

 

199

 

 

 

1,256

 

 

 

—

 

 

 

1,455

 

 

 

93

 

 

 

506

 

 

 

—

 

 

 

599

 

Cash equivalents and other

 

 

(29

)

 

 

—

 

 

 

—

 

 

 

(29

)

 

 

(3

)

 

 

—

 

 

 

—

 

 

 

(3

)

Total assets

 

$

5,411

 

 

$

2,520

 

 

$

230

 

 

$

8,161

 

 

$

2,510

 

 

$

1,227

 

 

$

110

 

 

$

3,847

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

—

 

 

$

461

 

 

$

8

 

 

$

469

 

 

$

—

 

 

$

125

 

 

$

8

 

 

$

133

 

Interest rate

 

 

—

 

 

 

399

 

 

 

—

 

 

 

399

 

 

 

—

 

 

 

337

 

 

 

—

 

 

 

337

 

Total liabilities

 

$

—

 

 

$

860

 

 

$

8

 

 

$

868

 

 

$

—

 

 

$

462

 

 

$

8

 

 

$

470

 

 

(1)
Includes investments held in the nuclear decommissioning trusts and rabbi trusts. Excludes $404 million and $366 million of assets at Dominion Energy, inclusive of $161 million and $185 million at Virginia Power, at December 31, 2022 and 2021, respectively, measured at fair value using NAV (or its equivalent) as a practical expedient which are not required to be categorized in the fair value hierarchy.

51

 

The following table presents the net change in the Companies' assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category:

 

 

Dominion Energy

 

 

Virginia Power

 

 

 

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

222

 

 

$

103

 

 

$

(37

)

 

$

102

 

 

$

103

 

 

$

(37

)

Total realized and unrealized gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenue

 

 

2

 

 

 

(9

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Electric fuel and other energy-related purchases

 

 

444

 

 

 

10

 

 

 

(33

)

 

 

382

 

 

 

4

 

 

 

(33

)

Discontinued operations

 

 

—

 

 

 

—

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

—

 

Included in regulatory assets/liabilities

 

 

183

 

 

 

119

 

 

 

140

 

 

 

102

 

 

 

(1

)

 

 

140

 

Settlements

 

 

(455

)

 

 

(10

)

 

 

33

 

 

 

(393

)

 

 

(4

)

 

 

33

 

Purchases

 

 

28

 

 

 

—

 

 

 

—

 

 

 

28

 

 

 

—

 

 

 

—

 

Sales

 

 

—

 

 

 

—

 

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

—

 

Transfers out of Level 3

 

 

(2

)

 

 

9

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Ending balance

 

$

422

 

 

$

222

 

 

$

103

 

 

$

221

 

 

$

102

 

 

$

103

 

The Companies’ had no unrealized gains and losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the years ended December 31, 2022, 2021 and 2020.

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. For the Companies’ financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:

 

 

 

Dominion Energy

 

 

Virginia Power

 

 

 

Carrying
Amount

 

 

Estimated Fair Value(1)

 

 

Carrying
Amount

 

 

Estimated Fair Value(1)

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt(2)

 

$

39,680

 

 

$

36,426

 

 

$

15,616

 

 

$

14,067

 

Supplemental credit facility borrowings

 

 

450

 

 

 

450

 

 

 

 

 

 

 

Junior subordinated notes(2)

 

 

1,387

 

 

 

1,340

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt(2)

 

$

35,996

 

 

$

40,947

 

 

$

13,753

 

 

$

16,021

 

Junior subordinated notes(2)

 

 

1,386

 

 

 

1,470

 

 

 

 

 

 

 

(1)
Fair value is estimated using market prices, where available, and interest rates currently available for issuance of debt with similar terms and remaining maturities. All fair value measurements are classified as Level 2. The carrying amount of debt issuances with short-term maturities and variable rates refinanced at current market rates is a reasonable estimate of their fair value.
(2)
Carrying amount includes current portions included in securities due within one year and amounts which represent the unamortized debt issuance costs and discount or premium. At December 31, 2021, the carrying amount of Dominion Energy’s long-term debt included the valuation of certain fair value hedges associated with fixed-rate debt of $2 million. There were no fair value hedges associated with fixed-rate debt at December 31, 2022. Additionally, Dominion Energy carrying amounts include portions classified as current liabilities held for sale and noncurrent liabilities held for sale at both December 31, 2022 and 2021.

NOTE 7. DERIVATIVES AND HEDGE ACCOUNTING ACTIVITIES

See Note 2 for the Companies’ accounting policies, objectives, and strategies for using derivative instruments. See Notes 2 and 6 for further information about fair value measurements and associated valuation methods for derivatives.

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 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.

52

 

See Note 24 for further information regarding credit-related contingent features for the Companies derivative instruments.

Balance Sheet Presentation

The tables below present the Companies' 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:

 

 

Dominion Energy Gross Amounts Not Offset in the Consolidated Balance Sheet

 

 

Virginia Power 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

$

408

 

 

$

28

 

 

$

—

 

 

$

380

 

 

$

238

 

 

$

7

 

 

$

—

 

 

$

231

 

Exchange

 

 

160

 

 

 

159

 

 

 

—

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Interest rate contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

1,407

 

 

 

248

 

 

 

—

 

 

 

1,159

 

 

 

614

 

 

 

38

 

 

 

—

 

 

 

576

 

Total derivatives,
   subject to a
   master netting
   or similar
   arrangement

 

$

1,975

 

 

$

435

 

 

$

—

 

 

$

1,540

 

 

$

852

 

 

$

45

 

 

$

—

 

 

$

807

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

$

153

 

 

$

13

 

 

$

—

 

 

$

140

 

 

$

110

 

 

$

8

 

 

$

—

 

 

$

102

 

Exchange

 

 

9

 

 

 

7

 

 

 

—

 

 

 

2

 

 

 

7

 

 

 

7

 

 

 

—

 

 

 

—

 

Interest rate contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

323

 

 

 

49

 

 

 

—

 

 

 

274

 

 

 

146

 

 

 

20

 

 

 

—

 

 

 

126

 

Foreign currency exchange rate contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

8

 

 

 

—

 

 

 

—

 

 

 

8

 

 

 

8

 

 

 

—

 

 

 

—

 

 

 

8

 

Total derivatives,
   subject to a
   master netting
   or similar
   arrangement

 

$

493

 

 

$

69

 

 

$

—

 

 

$

424

 

 

$

271

 

 

$

35

 

 

$

—

 

 

$

236

 

 

(1)
Excludes derivative assets of $201 million and $120 million at Dominion Energy, and $30 million and $29 million at Virginia Power, at December 31, 2022 and 2021, respectively, which are not subject to master netting or similar arrangements.

 

53

 

 

 

Dominion Energy Gross Amounts Not Offset in the Consolidated Balance Sheet

 

 

Virginia Power 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

$

443

 

 

$

34

 

 

$

71

 

 

$

338

 

 

$

146

 

 

$

13

 

 

$

71

 

 

$

62

 

Exchange

 

 

483

 

 

 

159

 

 

 

324

 

 

 

—

 

 

 

176

 

 

 

—

 

 

 

176

 

 

 

—

 

Interest rate contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

377

 

 

 

210

 

 

 

1

 

 

 

166

 

 

 

7

 

 

 

—

 

 

 

—

 

 

 

7

 

Foreign currency exchange rate contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

101

 

 

 

32

 

 

 

—

 

 

 

69

 

 

 

101

 

 

 

32

 

 

 

—

 

 

 

69

 

Total derivatives,
   subject to a
   master netting
   or similar
   arrangement

 

$

1,404

 

 

$

435

 

 

$

396

 

 

$

573

 

 

$

430

 

 

$

45

 

 

$

247

 

 

$

138

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

$

95

 

 

$

13

 

 

$

54

 

 

$

28

 

 

$

84

 

 

$

8

 

 

$

54

 

 

$

22

 

Exchange

 

 

374

 

 

 

7

 

 

 

367

 

 

 

—

 

 

 

43

 

 

 

7

 

 

 

36

 

 

 

—

 

Interest rate contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

399

 

 

 

49

 

 

 

11

 

 

 

339

 

 

 

337

 

 

 

20

 

 

 

—

 

 

 

317

 

Total derivatives,
   subject to a
   master netting
   or similar
   arrangement

 

$

868

 

 

$

69

 

 

$

432

 

 

$

367

 

 

$

464

 

 

$

35

 

 

$

90

 

 

$

339

 

 

(1)
Excludes derivative liabilities of $26 million and $6 million at Virginia Power at December 31, 2022 and 2021, respectively, which are not subject to master netting or similar arrangements. Dominion Energy did not have any derivative liabilities at December 31, 2022 or 2021 which were not subject to master netting or similar arrangements.

Volumes

The following table presents the volume of the Companies' derivative activity as of December 31, 2022. 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.

 

 

Dominion Energy

 

 

Virginia Power

 

 

 

Current

 

 

Noncurrent

 

 

Current

 

 

Noncurrent

 

Natural Gas (bcf):

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price

 

 

50

 

 

 

2

 

 

 

41

 

 

 

2

 

Basis(1)

 

 

154

 

 

 

414

 

 

 

140

 

 

 

407

 

Electricity (MWh in millions):

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price

 

 

16

 

 

 

35

 

 

 

8

 

 

 

9

 

FTRs

 

 

45

 

 

 

—

 

 

 

45

 

 

 

—

 

Oil (Gal in millions)

 

 

6

 

 

 

—

 

 

 

6

 

 

 

—

 

Interest rate(2) (in millions)

 

$

2,003

 

 

$

10,707

 

 

$

1,600

 

 

$

1,950

 

Foreign currency exchange rate(2) (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

Danish Krone

 

394 kr.

 

 

4,167 kr.

 

 

394 kr.

 

 

4,167 kr.

 

Euro

 

€780

 

 

€2,131

 

 

€780

 

 

€2,131

 

 

54

 

 

(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 the Companies' Consolidated Balance Sheets at December 31, 2022:

 

 

 

Dominion Energy

 

Virginia Power

 

 

AOCI After-Tax

 

 

Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax

 

 

Maximum Term

 

AOCI After-Tax

 

 

Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax

 

 

Maximum Term

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate

 

$

(249

)

 

$

(33

)

 

396 months

 

$

16

 

 

$

(1

)

 

396 months

Total

 

$

(249

)

 

$

(33

)

 

 

 

$

16

 

 

$

(1

)

 

 

 

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 no derivative instruments designated as fair value hedges during the years ended December 31, 2022, 2021 and 2020.

The following table presents the amounts recorded on Dominion Energy's Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges all of which related to discontinued hedging relationships at both December 2022 and 2021, respectively:

 

 

 

Carrying Amount of the Hedged Assets
(Liabilities)

 

 

Cumulative Amount of Fair Value
Hedging Adjustments
Included in the Carrying Amount
of the Hedged Assets (Liabilities)

 

 

 

December 31, 2022

 

 

December 31, 2021

 

 

December 31, 2022

 

 

December 31, 2021

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

$

—

 

 

$

(352

)

 

$

—

 

 

$

(2

)

Virginia Power had no amounts recorded in its Consolidated Balance Sheets related to fair value hedges at December 31, 2022 or 2021.

55

 

Fair Value and Gains and Losses on Derivative Instruments

The following tables present the fair values of the Companies' derivatives and where they are presented in their Consolidated Balance Sheets:

 

 

Dominion Energy

 

 

Virginia Power

 

 

 

Fair Value –
Derivatives
under Hedge
Accounting

 

 

Fair Value –
Derivatives
not under
Hedge
Accounting

 

 

Total Fair
Value

 

 

Fair Value –
Derivatives
under Hedge
Accounting

 

 

Fair Value –
Derivatives
not under
Hedge
Accounting

 

 

Total Fair
Value

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

—

 

 

$

532

 

 

$

532

 

 

$

—

 

 

$

264

 

 

$

264

 

Interest rate

 

 

501

 

 

 

104

 

 

 

605

 

 

 

501

 

 

 

—

 

 

 

501

 

Total current derivative assets(1)

 

 

501

 

 

 

636

 

 

 

1,137

 

 

 

501

 

 

 

264

 

 

 

765

 

Noncurrent Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

 

—

 

 

 

237

 

 

 

237

 

 

 

—

 

 

 

4

 

 

 

4

 

Interest rate

 

 

113

 

 

 

689

 

 

 

802

 

 

 

113

 

 

 

—

 

 

 

113

 

Total noncurrent derivative assets(2)(3)

 

 

113

 

 

 

926

 

 

 

1,039

 

 

 

113

 

 

 

4

 

 

 

117

 

Total derivative assets

 

$

614

 

 

$

1,562

 

 

$

2,176

 

 

$

614

 

 

$

268

 

 

$

882

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

—

 

 

$

700

 

 

$

700

 

 

$

—

 

 

$

290

 

 

$

290

 

Interest rate

 

 

—

 

 

 

70

 

 

 

70

 

 

 

—

 

 

 

—

 

 

 

—

 

Foreign currency
   exchange rate

 

 

—

 

 

 

8

 

 

 

8

 

 

 

—

 

 

 

8

 

 

 

8

 

Total current derivative liabilities(4)

 

 

—

 

 

 

778

 

 

 

778

 

 

 

—

 

 

 

298

 

 

 

298

 

Noncurrent Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

 

—

 

 

 

226

 

 

 

226

 

 

 

—

 

 

 

58

 

 

 

58

 

Interest rate

 

 

7

 

 

 

300

 

 

 

307

 

 

 

7

 

 

 

—

 

 

 

7

 

Foreign currency
   exchange rate

 

 

—

 

 

 

93

 

 

 

93

 

 

 

—

 

 

 

93

 

 

 

93

 

Total noncurrent derivative liabilities(5)(6)

 

 

7

 

 

 

619

 

 

 

626

 

 

 

7

 

 

 

151

 

 

 

158

 

Total derivative liabilities

 

$

7

 

 

$

1,397

 

 

$

1,404

 

 

$

7

 

 

$

449

 

 

$

456

 

At December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

—

 

 

$

103

 

 

$

103

 

 

$

—

 

 

$

74

 

 

$

74

 

Interest rate

 

 

1

 

 

 

17

 

 

 

18

 

 

 

1

 

 

 

—

 

 

 

1

 

Foreign currency
   exchange rate

 

 

—

 

 

 

1

 

 

 

1

 

 

 

—

 

 

 

1

 

 

 

1

 

Total current derivative assets(1)

 

 

1

 

 

 

121

 

 

 

122

 

 

 

1

 

 

 

75

 

 

 

76

 

Noncurrent Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

 

—

 

 

 

179

 

 

 

179

 

 

 

—

 

 

 

72

 

 

 

72

 

Interest rate

 

 

145

 

 

 

160

 

 

 

305

 

 

 

145

 

 

 

—

 

 

 

145

 

Foreign currency
   exchange rate

 

 

—

 

 

 

7

 

 

 

7

 

 

 

—

 

 

 

7

 

 

 

7

 

Total noncurrent derivative assets(3)

 

 

145

 

 

 

346

 

 

 

491

 

 

 

145

 

 

 

79

 

 

 

224

 

Total derivative assets

 

$

146

 

 

$

467

 

 

$

613

 

 

$

146

 

 

$

154

 

 

$

300

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

—

 

 

$

304

 

 

$

304

 

 

$

—

 

 

$

92

 

 

$

92

 

Interest rate

 

 

42

 

 

 

13

 

 

 

55

 

 

 

42

 

 

 

—

 

 

 

42

 

Total current derivative liabilities(4)

 

 

42

 

 

 

317

 

 

 

359

 

 

 

42

 

 

 

92

 

 

 

134

 

Noncurrent Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

 

—

 

 

 

165

 

 

 

165

 

 

 

—

 

 

 

41

 

 

 

41

 

Interest rate

 

 

295

 

 

 

49

 

 

 

344

 

 

 

295

 

 

 

—

 

 

 

295

 

Total noncurrent derivative liabilities(5)(6)

 

 

295

 

 

 

214

 

 

 

509

 

 

 

295

 

 

 

41

 

 

 

336

 

Total derivative liabilities

 

$

337

 

 

$

531

 

 

$

868

 

 

$

337

 

 

$

133

 

 

$

470

 

 

(1)
Includes $118 million and $6 million reported in current assets held for sale in Dominion Energy's Consolidated Balance Sheets at December 31, 2022 and 2021, respectively.
(2)
Includes $1 million reported in noncurrent assets held for sale in Dominion Energy's Consolidated Balance Sheets at December 31, 2022.

56

 

(3)
Virginia Power’s noncurrent derivative assets are presented in other deferred charges and other assets in its Consolidated Balance Sheets.
(4)
Includes $6 million and $3 million reported in current liabilities held for sale in Dominion Energy's Consolidated Balance Sheets at December 31, 2022 and 2021, respectively.
(5)
Includes $1 million reported in noncurrent liabilities held for sale in Dominion Energy's Consolidated Balance Sheets at both December 31, 2022 and 2021.
(6)
Virginia Power’s noncurrent derivative liabilities are presented in other deferred credits and other liabilities in its Consolidated Balance Sheets.

The following tables present the gains and losses on the Companies' derivatives, as well as where the associated activity is presented in their Consolidated Balance Sheets and Statements of Income:

 

 

Dominion Energy

 

 

Virginia Power

 

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)

 

 

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, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative type and location of gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate(3)

 

$

89

 

 

$

(57

)

 

$

855

 

 

$

80

 

 

$

(2

)

 

$

854

 

Total

 

$

89

 

 

$

(57

)

 

$

855

 

 

$

80

 

 

$

(2

)

 

$

854

 

Year Ended December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative type and location of gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity(4)

 

 

 

 

$

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate(3)

 

$

21

 

 

 

(60

)

 

$

135

 

 

$

17

 

 

$

(3

)

 

$

130

 

Total

 

$

21

 

 

$

(61

)

 

$

135

 

 

$

17

 

 

$

(3

)

 

$

130

 

Year Ended December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative type and location of gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

 

 

 

$

25

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchased gas

 

 

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued
   operations

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Total commodity

 

$

—

 

 

$

23

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Interest rate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and
   related charges

 

 

 

 

$

(83

)

 

 

 

 

$

(37

)

 

$

(2

)

 

$

(338

)

Discontinued
   operations

 

 

 

 

 

(236

)

 

 

 

 

 

 

 

 

 

 

 

 

Total interest rate

 

$

(309

)

 

$

(319

)

 

$

(332

)

 

$

(37

)

 

$

(2

)

 

$

(338

)

Foreign currency
   exchange rate(5)

 

 

(11

)

 

 

(6

)

 

 

—

 

 

 

 

 

 

 

 

 

—

 

Total

 

$

(320

)

 

$

(302

)

 

$

(332

)

 

$

(37

)

 

$

(2

)

 

$

(338

)

 

(1)
Amounts deferred into AOCI have no associated effect in the Companies' Consolidated Statements of Income.
(2)
Represents net derivative activity deferred into and amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in the Companies' Consolidated Statements of Income.
(3)
Amounts recorded in the Companies' Consolidated Statements of Income are classified in interest and related charges.
(4)
Amounts recorded in Dominion Energy’s Consolidated Statements of Income are classified in purchased gas.
(5)
Amounts recorded in Dominion Energy’s Consolidated Statements of Income are classified in discontinued operations.

57

 

 

 

Amount of Gain (Loss) Recognized in Income on Derivatives(1)(2)

 

Derivatives not designated as hedging instruments

 

Dominion Energy

 

 

Virginia Power

 

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative type and location of gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

(729

)

 

$

(487

)

 

$

73

 

 

$

(303

)

 

$

(62

)

 

$

(104

)

Purchased gas

 

 

13

 

 

 

(1

)

 

 

(20

)

 

 

 

 

 

 

 

 

 

Electric fuel and other energy-related purchases

 

 

514

 

 

 

16

 

 

 

(104

)

 

 

453

 

 

 

9

 

 

 

—

 

Discontinued operations

 

 

8

 

 

 

—

 

 

 

(11

)

 

 

 

 

 

 

 

 

 

Interest rate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and related charges

 

 

406

 

 

 

89

 

 

 

87

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

244

 

 

 

8

 

 

 

5

 

 

 

 

 

 

 

 

 

 

Foreign currency exchange rate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

—

 

 

 

—

 

 

 

12

 

 

 

 

 

 

 

 

 

 

Total

 

$

456

 

 

$

(375

)

 

$

42

 

 

$

150

 

 

$

(53

)

 

$

(104

)

 

(1)
Includes derivative activity amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in the Companies' Consolidated Statements of Income.
(2)
Excludes amounts related to foreign currency exchange rate derivatives that are deferred to plant under construction within property, plant and equipment and regulatory assets/liabilities that will begin to amortize once the CVOW Commercial Project is placed in service.

NOTE 8. EARNINGS PER SHARE

The following table presents the calculation of Dominion Energy’s basic and diluted EPS:

 

 

 

2022

 

 

2021

 

 

2020

 

(millions, except EPS)

 

 

 

 

 

 

 

 

 

Net income attributable to Dominion Energy from continuing operations

 

$

22

 

 

$

1,931

 

 

$

1,039

 

Preferred stock dividends (see Note 19)

 

 

(93

)

 

 

(68

)

 

 

(65

)

Net income attributable to Dominion Energy from continuing operations - Basic

 

 

(71

)

 

 

1,863

 

 

 

974

 

Dilutive effect of 2019 Equity Units(1)

 

 

—

 

 

 

—

 

 

 

(11

)

Net income attributable to Dominion Energy from continuing operations - Diluted

 

$

(71

)

 

$

1,863

 

 

$

963

 

Net income (loss) attributable to Dominion Energy from discontinued operations -
    Basic & Diluted

 

$

972

 

 

$

1,357

 

 

$

(1,440

)

Average shares of common stock outstanding – Basic

 

 

823.9

 

 

 

807.8

 

 

 

831.0

 

Net effect of dilutive securities(2)

 

 

—

 

 

 

0.7

 

 

 

—

 

Average shares of common stock outstanding – Diluted

 

 

823.9

 

 

 

808.5

 

 

 

831.0

 

EPS from continuing operations - Basic

 

$

(0.09

)

 

$

2.30

 

 

$

1.17

 

EPS from discontinued operations - Basic

 

 

1.18

 

 

 

1.68

 

 

 

(1.73

)

EPS attributable to Dominion Energy - Basic

 

$

1.09

 

 

$

3.98

 

 

$

(0.56

)

EPS from continuing operations - Diluted

 

$

(0.09

)

 

$

2.30

 

 

$

1.16

 

EPS from discontinued operations - Diluted

 

 

1.18

 

 

 

1.68

 

 

 

(1.73

)

EPS attributable to Dominion Energy - Diluted

 

$

1.09

 

 

$

3.98

 

 

$

(0.57

)
(1)
As discussed in Note 19, effective in June 2022 through its redemption in September 2022, the Series A Preferred Stock was considered to be mandatorily redeemable and was classified in current liabilities. In accordance with revised accounting standards effective January 2022, a fair value adjustment, if dilutive, of the Series A Preferred Stock was no longer included in applying the if converted method to the 2019 Equity Units. In addition, diluted net income was no longer reduced by the Series A Preferred Stock dividends. No fair value adjustment was necessary for 2021.
(2)
Dilutive securities for 2021 consist primarily of stock potentially 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 and settled in December 2022 (applying the treasury stock method). See Notes 20 and 23 for additional information.

The 2019 Equity Units, prior to settlement in June 2022, and the Q-Pipe Transaction deposit, prior to being settled in cash in July 2021, were potentially dilutive instruments. See Notes 3 and 19 for additional information.

As a result of a net loss attributable to Dominion Energy from continuing operations for the year ended December 31, 2022, any adjustments to earnings or shares would be considered antidilutive and are therefore excluded from the calculation of diluted earnings per share from continuing operations.

For the years ended December 31, 2021 and 2020, the forward stock purchase contracts included within the 2019 Equity Units were excluded from the calculation of diluted EPS from continuing operations as the dilutive stock price threshold was not met.

58

 

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 year ended December 31, 2020, based upon the expectation that the conversion would 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 was payable in cash, and any amount in excess of $1,000 per share could have been 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.

 

59

 

NOTE 9. INVESTMENTS

Dominion Energy

Equity and Debt Securities

Short-Term Deposit

In May 2022, Dominion Energy entered into an agreement with a financial institution and committed to make a short-term deposit of at least $1.6 billion but not more than $2.0 billion to be posted as collateral to secure its $1.6 billion redemption obligation of the Series A Preferred Stock as described in Note 19. In May 2022, Dominion Energy funded the short-term deposit in the amount of $2.0 billion, which earned interest income at an annual rate of 1.75% through its maturity in September 2022.

Rabbi Trust Securities

Equity and fixed income securities and cash equivalents in Dominion Energy’s rabbi trusts and classified as trading totaled $111 million and $122 million at December 31, 2022 and 2021, respectively.

Decommissioning Trust Securities

The Companies hold equity and fixed income securities and cash equivalents, and Dominion Energy also holds insurance contracts, in nuclear decommissioning trust funds to fund future decommissioning costs for its nuclear plants. The Companies' decommissioning trust funds are summarized below:

 

 

 

 

Dominion Energy

 

 

 

 

Virginia Power

 

 

Amortized
Cost

 

Total
Unrealized
Gains

 

Total
Unrealized
Losses

 

 

Allowance for Credit Losses

 

Fair
Value

 

 

Amortized
Cost

 

Total
Unrealized
Gains

 

Total
Unrealized
Losses

 

 

Allowance for Credit Losses

 

Fair
Value

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities:(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

$

1,378

 

$

2,501

 

$

(46

)

 

 

 

$

3,833

 

 

$

858

 

$

1,304

 

$

(35

)

 

 

 

$

2,127

 

Fixed income securities:(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt
   instruments

 

640

 

 

1

 

 

(65

)

 

$

—

 

 

576

 

 

 

406

 

 

1

 

 

(47

)

 

$

—

 

 

360

 

Government
   securities

 

1,252

 

 

4

 

 

(70

)

 

 

—

 

 

1,186

 

 

 

664

 

 

2

 

 

(35

)

 

 

—

 

 

631

 

Common/
   collective
   trust funds

 

98

 

 

—

 

 

—

 

 

 

—

 

 

98

 

 

 

61

 

 

—

 

 

—

 

 

 

—

 

 

61

 

Insurance contracts

 

221

 

 

—

 

 

—

 

 

 

 

 

221

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents
   and other(3)

 

43

 

 

—

 

 

—

 

 

 

—

 

 

43

 

 

 

23

 

 

—

 

 

—

 

 

 

—

 

 

23

 

Total

$

3,632

 

$

2,506

 

$

(181

)

(4)

$

—

 

$

5,957

 

 

$

2,012

 

$

1,307

 

$

(117

)

(4)

$

—

 

$

3,202

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities:(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

$

1,567

 

$

3,734

 

$

(13

)

 

 

 

$

5,288

 

 

$

841

 

$

1,720

 

$

(11

)

 

 

 

$

2,550

 

Fixed income securities:(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt
   instruments

 

854

 

 

32

 

 

(5

)

 

$

—

 

 

881

 

 

 

517

 

 

17

 

 

(3

)

 

$

—

 

 

531

 

Government
   securities

 

1,382

 

 

43

 

 

(7

)

 

 

—

 

 

1,418

 

 

 

584

 

 

16

 

 

(2

)

 

 

—

 

 

598

 

Common/
   collective
   trust funds

 

168

 

 

4

 

 

—

 

 

 

—

 

 

172

 

 

 

53

 

 

—

 

 

—

 

 

 

—

 

 

53

 

Insurance contracts

 

255

 

 

—

 

 

—

 

 

 

 

 

255

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents
   and other(3)

 

9

 

 

2

 

 

(75

)

 

 

—

 

 

(64

)

 

 

2

 

 

—

 

 

—

 

 

 

—

 

 

2

 

Total

$

4,235

 

$

3,815

 

$

(100

)

(4)

$

—

 

$

7,950

 

 

$

1,997

 

$

1,753

 

$

(16

)

(4)

$

—

 

$

3,734

 

 

(1)
Unrealized gains and losses on equity securities are included in other income and the nuclear decommissioning trust regulatory liability as discussed in Note 2.

60

 

(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)
Dominion Energy includes pending sales of securities of $42 million and pending purchases of securities of $35 million at December 31, 2022 and 2021, respectively. Virginia Power includes pending sales of securities of $24 million and $5 million at December 31, 2022 and 2021, respectively.
(4)
Dominion Energy's fair value of securities in an unrealized loss position was $1.6 billion and $883 million at December 31, 2022 and 2021, respectively. Virginia Power's fair value of securities in an unrealized loss position was $946 million and $425 million at December 31, 2022 and 2021, respectively.

 

The portion of unrealized gains and losses that relates to equity securities held within Dominion Energy and Virginia Power's nuclear decommissioning trusts is summarized below:

 

 

Dominion Energy

 

 

Virginia Power

 

Year Ended December 31,

 

2022

 

2021

 

2020

 

 

2022

 

2021

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gains (losses) recognized during the period

 

$

(848

)

$

1,072

 

$

512

 

 

$

(436

)

$

552

 

$

224

 

Less: Net (gains) losses recognized during the
   period on securities sold during the period

 

 

8

 

 

(346

)

 

(16

)

 

 

(7

)

 

(190

)

 

(6

)

Unrealized gains (losses) recognized during the
   period on securities still held at period end(1)

 

$

(840

)

$

726

 

$

496

 

 

$

(443

)

$

362

 

$

218

 
(1)
Included in other income and the nuclear decommissioning trust regulatory liability as discussed in Note 2.

 

The fair value of Dominion Energy and Virginia Power's fixed income securities with readily determinable fair values held in nuclear decommissioning trust funds at December 31, 2022 by contractual maturity is as follows:

 

 

 

Dominion Energy

 

 

Virginia Power

 

(millions)

 

 

 

 

 

 

Due in one year or less

 

$

146

 

 

$

80

 

Due after one year through five years

 

 

511

 

 

 

280

 

Due after five years through ten years

 

 

442

 

 

 

279

 

Due after ten years

 

 

761

 

 

 

413

 

Total

 

$

1,860

 

 

$

1,052

 

 

 

Presented below is selected information regarding Dominion Energy and Virginia Power's equity and fixed income securities with readily determinable fair values held in nuclear decommissioning trust funds.

 

 

 

Dominion Energy

 

 

Virginia Power

 

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sales

 

$

3,282

 

 

$

3,985

 

 

$

4,278

 

 

$

1,538

 

 

$

1,791

 

 

$

884

 

Realized gains(1)

 

 

143

 

 

 

441

 

 

 

340

 

 

 

48

 

 

 

228

 

 

 

88

 

Realized losses(1)

 

 

296

 

 

 

91

 

 

 

297

 

 

 

107

 

 

 

35

 

 

 

68

 
(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,

 

2022

 

2021

 

(millions)

 

 

 

Cove Point

 

50

%

 

$

2,673

 

(3)

$

2,738

 

(3)

LNG import/export and storage facility

Atlantic Coast Pipeline

 

 

53

%

 

 

—

 

(4)

 

—

 

(4)

Gas transmission system

Wrangler

 

15

%

(2)

 

—

 

 

68

 

Nonregulated retail energy marketing

Align RNG(1)

 

 

50

%

 

 

103

 

 

 

74

 

 

Renewable natural gas

Dominion Privatization

 

 

50

%

 

 

176

 

 

 

—

 

 

Military electric and gas

Other

various

 

 

 

60

 

(5)

 

52

 

(5)

Total

 

 

$

3,012

 

 

$

2,932

 

 

 

61

 

(1)
Dominion Energy’s unfunded commitment to be made to Align RNG by the end of 2022 was $8 million at December 31, 2021. The commitment was fully paid in January 2022.
(2)
Dominion Energy’s sold its remaining 15% ownership interest in March 2022, following a previous sale of 5% of its ownership interest in 2021. See discussion below.
(3)
Presented in noncurrent assets held for sale in Dominion Energy's Consolidated Balance Sheets at December 31, 2022 and 2021.
(4)
Dominion Energy’s Consolidated Balance Sheets include a liability associated with its investment in Atlantic Coast Pipeline of $114 million and $113 million at December 31, 2022 and 2021, respectively, presented in other current liabilities. See discussion below for additional information.
(5)
Includes balances presented in noncurrent assets held for sale in Dominion Energy's Consolidated Balance Sheets of $43 million and $32 million as of December 31, 2022 and 2021, respectively.

Dominion Energy recorded equity earnings (losses) on its investments of $21 million, $15 million and $(1) million for the years ended December 31, 2022, 2021 and 2020, respectively, in other income (expense) in its Consolidated Statements of Income. In addition, Dominion Energy recorded equity earnings (losses) of $271 million, $244 million and $(2.3) billion for the years ended December 31, 2022, 2021 and 2020, respectively, in discontinued operations including amounts related to its investments in Cove Point and Atlantic Coast Pipeline discussed below. Dominion Energy received distributions from these investments of $355 million, $332 million and $167 million for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022 and 2021, the net difference between the carrying amount of Dominion Energy’s investments and its share of underlying equity in net assets was $223 million and $244 million, respectively. At December 31, 2022, these differences are comprised of $9 million of equity method goodwill that is not being amortized, $215 million basis difference from Dominion Energy’s investment in Cove Point, which is being amortized over the useful lives of the underlying assets and a net $(1) million basis difference primarily attributable to capitalized interest. At December 31, 2021, these differences are comprised of $27 million of equity method goodwill that is not being amortized, $221 million basis difference from Dominion Energy’s investment in Cove Point, which is being amortized over the useful lives of the underlying assets and a net $(4) million basis difference primarily attributable to an unfunded commitment made to Align RNG.

Cove Point

In November 2020, in conjunction with the GT&S Transaction, Dominion Energy sold 100% of its general partner interest and 25% of the total limited partner interest in Cove Point. Dominion Energy retained a 50% noncontrolling limited partnership interest in Cove Point which is accounted for as an equity method investment as Dominion Energy has the ability to exercise significant influence over, but not control, Cove Point. See Note 3 for further information regarding the GT&S Transaction.

Income before income taxes recorded for 100% of Cove Point for the years ended December 31, 2022, 2021 and 2020 was $574 million, $528 million and $511 million, respectively. For the periods prior to closing of the GT&S Transaction, earnings attributable to Dominion Energy are presented in discontinued operations. Subsequent to the closing of the GT&S Transaction, earnings attributable to Dominion Energy are considered earnings on equity method investees. In 2020, earnings attributable to Dominion Energy of $40 million are considered earnings on equity method investees.

Dominion Energy recorded distributions from Cove Point of $344 million, $300 million and $70 million for the years ended December 31, 2022, 2021 and 2020 (after the date of disposal), respectively. Dominion Energy made no contributions to Cove Point for the years ended December 31, 2022, 2021 or 2020 (after the date of disposal).

In July 2023, Dominion Energy entered into an agreement to sell its 50% noncontrolling limited partnership interest in Cove Point to BHE for cash consideration of $3.3 billion which closed in September 2023 after all customary closing and regulatory conditions were satisfied, including clearance under the Hart-Scott-Rodino Act and approval from the DOE. The sale is treated as an asset sale for tax purposes. In addition, Dominion Energy received proceeds of $199 million from the settlement of related interest rate derivatives. In connection with closing, Dominion Energy utilized proceeds, as required, to repay DECP Holding's term loan secured by its noncontrolling interest in Cove Point, which had an outstanding balance of $2.2 billion, and $750 million of outstanding borrowings under Dominion Energy’s two $600 million 364-day term loan facilities entered in July 2023.

In September 2023, as a result of Dominion Energy entering agreements for the East Ohio, PSNC and Questar Gas Transactions, Dominion Energy’s 50% noncontrolling limited partnership interest in Cove Point also met the requirements to be presented as discontinued operations and held for sale as both disposition activities were executed in connection with Dominion Energy’s comprehensive business review announced in November 2022. In addition, interest expense associated with DECP Holding's term loan secured by its noncontrolling interest in Cove Point and related interest rate derivatives have been classified as discontinued operations. As a result, the previously reported amounts have been recast to reflect this presentation.

Amounts presented in discontinued operations within Dominion Energy's Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020 also include $277 million, $259 million and $40 million, respectively, for earnings on equity method investees and $(160) million and $12 million of interest expense (benefit) for the years ended December 31, 2022 and 2021, respectively. In addition, amounts presented in discontinued operations include $92 million, $60 million and $8 million, respectively, of income tax expense.

62

 

All activity relating to Dominion Energy’s noncontrolling interest in Cove Point is recorded, following the segment change discussed in Note 1, within the Corporate and Other segment. 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 600-mile natural gas pipeline running from West Virginia through Virginia to North Carolina. Subsidiaries and affiliates of Dominion Energy, Duke Energy and Southern had planned to be customers of the pipeline under 20-year contracts.

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, subject to certain purchase price adjustments. Pivotal LNG, Inc. includes a 50% noncontrolling interest in JAX LNG. Following completion of the acquisition, Dominion Energy owns a 53% noncontrolling membership interest in Atlantic Coast Pipeline with Duke Energy owning the remaining interest.

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 U.S. 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 U.S. Army Corps of Engineers of Atlantic Coast Pipeline’s Huntington District 404 verification and the U.S. 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 U.S. 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 losses of $2.3 billion ($1.8 billion after-tax) for the year ended December 31, 2020, as a result of the determination of the probable abandonment of the Atlantic Coast Pipeline Project in June 2020, and $7 million ($5 million after-tax) and $20 million ($14 million after-tax) for the years ended December 31, 2022 and 2021, respectively. In connection with Dominion Energy’s decision to sell substantially all of its gas transmission and storage operations, Dominion Energy has reflected the results of its equity method investment in Atlantic Coast Pipeline as discontinued operations in its Consolidated Statements of Income. As a result of its share of equity losses exceeding its investment, Dominion Energy’s Consolidated Balance Sheets at December 31, 2022 and 2021 include a liability of $114 million and $113 million, respectively, presented in other current liabilities and reflecting Dominion Energy’s obligations to Atlantic Coast Pipeline related to AROs.

In October 2017, Dominion Energy entered into a guarantee agreement to support a portion of Atlantic Coast Pipeline’s obligation under a $3.4 billion revolving credit facility with a stated maturity date of October 2021. In July 2020, the capacity of the revolving credit facility was reduced from $3.4 billion to $1.9 billion. In February 2021, Atlantic Coast Pipeline repaid the outstanding borrowed amounts and terminated its revolving credit facility. Concurrently, Dominion Energy’s related guarantee agreement to support its portion of the Atlantic Coast Pipeline’s borrowings was also terminated. In 2020, Dominion Energy recorded a $48 million adjustment related to this guarantee agreement, reflected within equity as a cumulative effect of a change in accounting principle upon adoption of a new credit loss standard in January 2020.

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Dominion Energy recorded contributions of $3 million, $965 million and $107 million during the years ended December 31, 2022, 2021 and 2020, respectively, to Atlantic Coast Pipeline.

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 $49 million during the year ended December 31, 2020 (prior to closing of the GT&S Transaction), included in discontinued operations in Dominion Energy’s Consolidated Statements of Income.

All activity relating to Atlantic Coast Pipeline is recorded within the Corporate and Other segment.

Fowler Ridge

In September 2020, Dominion Energy sold its 50% noncontrolling partnership interest in Fowler Ridge to BP and terminated an affiliate’s long-term power, capacity and renewable energy credit contract with Fowler Ridge for a net payment by Dominion Energy of $150 million. The $150 million payment was allocated between the contract termination and sale based on the relative fair value of each using an income approach. The fair value determinations for the payment allocations are considered Level 3 fair value measurements due to the use of significant judgmental and unobservable inputs, including the amount of future cash flows and discount rate reflecting risks inherent in the future cash flows and market prices. Dominion Energy recognized a loss of $221 million ($165 million after-tax) on the contract termination, included in impairment of assets and other charges in its Consolidated Statements of Income for the year ended December 31, 2020, reflected in the Corporate and Other segment.

All activity relating to Fowler Ridge, unless otherwise specified, is recorded within Contracted Energy.

Wrangler

In September 2019, Dominion Energy entered into an agreement to form Wrangler, a partnership with Interstate Gas Supply, Inc. Wrangler operated 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 had a 15% noncontrolling ownership interest in Wrangler, which was accounted for as an equity method investment as Dominion Energy had the ability to exercise significant influence, but not control, over the investee.

After an initial contribution of assets to Wrangler in 2019 for which Dominion Energy received cash and a 20% noncontrolling ownership interest in Wrangler, Dominion Energy completed a second contribution in November 2020, consisting of certain nonregulated natural gas retail energy contracts for which Dominion Energy received $74 million in cash proceeds and retained a 20% noncontrolling ownership interest through its ownership interest in Wrangler in the contracts valued at $13 million using the market approach. This valuation is considered a Level 2 fair value measurement given that it is based on the agreed-upon sales price. In connection with the transaction, Dominion Energy recorded a gain of $64 million presented in losses (gains) on sales of assets, and an associated tax expense of $19 million, in the Consolidated Statements of Income for the year ended December 31, 2020.

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 $127 million in cash proceeds and retained a 20% noncontrolling ownership interest in Wrangler with an initial fair value of $23 million estimated using the market approach. This valuation is considered a Level 2 fair value measurement given that it is based on the agreed-upon sales price. In connection with the transaction, Dominion Energy recorded a gain of $87 million, net of a $14 million write-off of goodwill, presented in losses (gains) on sales of assets, and an associated tax expense of $32 million, in the Consolidated Statements of Income for the year ended December 31, 2021.

Subsequently in December 2021, Dominion Energy sold 5% of its noncontrolling ownership interest in Wrangler to Interstate Gas Supply, Inc. for $33 million and recorded a gain of $10 million, presented in other income, and an associated tax expense of $3 million, in the Consolidated Statements of Income for the year ended December 31, 2021. In March 2022, Dominion Energy sold its remaining 15% noncontrolling partnership interest in Wrangler to Interstate Gas Supply, Inc. for cash consideration of $85 million. Dominion Energy recognized a gain of $11 million ($8 million after-tax), included in other income, in its Consolidated Statements of Income for the year ended December 31, 2022.

All activity relating to Wrangler is recorded within the Corporate and Other segment.

64

 

Dominion Privatization

In February 2022, Dominion Energy entered into an agreement to form Dominion Privatization, a partnership with Patriot. Dominion Privatization, through its wholly-owned subsidiaries, will maintain and operate electric and gas distribution infrastructure under service concession arrangements with certain U.S. military installations. Under the agreement, Dominion Energy would contribute its existing privatization operations, excluding contracts held by DESC, and Patriot would contribute cash.

The initial contribution, consisting of privatization operations in South Carolina, Texas and Pennsylvania, closed in March 2022 for which Dominion Energy received total consideration of $120 million, subject to customary closing adjustments, comprised of $60 million in cash proceeds and a 50% noncontrolling ownership interest in Dominion Privatization with an initial fair value of $60 million, estimated using the market approach. This is considered a Level 2 fair value measurement given that it is based on the agreed-upon sales price. In the first quarter of 2022, Dominion Energy recorded a gain of $23 million ($16 million after-tax), presented in losses (gains) on sales of assets in its Consolidated Statements of Income. Dominion Energy’s 50% noncontrolling ownership interest in Dominion Privatization 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 second contribution, consisting of privatization operations in Virginia, closed in December 2022 for which Dominion Energy received total consideration of $215 million, subject to customary closing adjustments, comprised of $108 million in cash proceeds and retention of its 50% noncontrolling ownership interest valued at $107 million using the market approach. This is considered a Level 2 fair value measurement given that it is based on the agreed-upon sales price. In the fourth quarter of 2022, Dominion Energy recorded a gain of $133 million ($99 million after-tax), presented in losses (gains) on sales of assets in its Consolidated Statements of Income.

All activity related to Dominion Privatization is reflected within the Corporate and Other segment.

 

 

NOTE 10. PROPERTY, PLANT AND EQUIPMENT

Major classes of property, plant and equipment and their respective balances for the Companies are as follows:

 

 

 

Dominion Energy

 

 

Virginia Power

 

At December 31,

2022

 

2021

 

2022

 

2021

 

(millions)

 

 

 

 

 

 

Dominion Energy

 

 

 

 

Utility:

 

 

 

 

Generation

$

23,720

 

$

23,378

 

 

$

17,611

 

$

17,325

 

Transmission

 

15,179

 

 

13,798

 

 

 

13,034

 

 

11,760

 

Distribution

 

20,154

 

 

19,370

 

 

 

14,681

 

 

13,621

 

Storage

 

76

 

 

76

 

 

 

—

 

 

—

 

Nuclear fuel

 

2,373

 

 

2,306

 

 

 

1,823

 

 

1,702

 

General and other

 

1,625

 

 

1,527

 

 

 

1,019

 

 

912

 

Plant under construction

 

5,308

 

 

3,393

 

 

 

4,685

 

 

2,865

 

Total utility

 

68,435

 

 

63,848

 

 

52,853

 

 

48,185

 

Non-jurisdictional - including plant under construction

 

 

1,834

 

 

 

1,694

 

 

 

1,834

 

 

 

1,694

 

Nonutility:

 

 

 

 

 

 

Nonregulated generation-nuclear

 

1,935

 

 

1,773

 

 

 

—

 

 

—

 

Nonregulated generation-solar

 

 

411

 

 

 

1,941

 

 

 

—

 

 

—

 

Nuclear fuel

 

 

954

 

 

 

1,056

 

 

 

—

 

 

 

—

 

Other-including plant under construction

 

 

1,609

 

 

 

1,184

 

 

 

10

 

 

11

 

Total nonutility

 

 

4,909

 

 

 

5,954

 

 

10

 

 

11

 

Total property, plant and equipment

 

$

75,178

 

 

$

71,496

 

$

54,697

 

$

49,890

 

 

65

 

 

Jointly-Owned Power Stations

The Companies proportionate share of jointly-owned power stations at December 31, 2022 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

 

 

60

%

 

 

88.4

%

 

 

50

%

 

 

93.5

%

 

 

66.7

%

Plant in service

 

 

1,066

 

 

 

2,540

 

 

 

611

 

 

 

1,487

 

 

 

1,532

 

Accumulated depreciation

 

 

(730

)

 

 

(1,402

)

 

 

(282

)

 

 

(563

)

 

 

(724

)

Nuclear fuel

 

 

—

 

 

 

792

 

 

 

—

 

 

 

551

 

 

 

550

 

Accumulated amortization of nuclear fuel

 

 

—

 

 

 

(602

)

 

 

—

 

 

 

(459

)

 

 

(347

)

Plant under construction

 

 

3

 

 

 

253

 

 

 

—

 

 

 

68

 

 

 

87

 

 

(1)
Units jointly owned by Virginia Power.
(2)
Unit jointly owned by Dominion Energy.

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.

Nonregulated Solar Projects

The following table presents acquisitions by Virginia Power of non-jurisdictional solar projects (reflected in Dominion Energy Virginia). Virginia Power has claimed or expects to claim federal investment tax credits on the projects, except as otherwise noted.

 

Project Name

 

Date Agreement
Entered

 

Date Agreement
Closed

 

Project Location

 

Project Cost
(millions)(1)

 

 

Date of Commercial
Operations

 

MW Capacity

 

Grasshopper(2)

 

August 2018

 

May 2019

 

Virginia

 

 

128

 

 

October 2020

 

 

80

 

Chestnut

 

August 2018

 

May 2019

 

North Carolina

 

 

127

 

 

January 2020

 

 

75

 

Ft. Powhatan

 

June 2019

 

June 2019

 

Virginia

 

 

267

 

 

January 2022

 

 

150

 

Belcher(3)

 

June 2019

 

August 2019

 

Virginia

 

 

164

 

 

June 2021

 

 

88

 

Bedford

 

August 2019

 

November 2019

 

Virginia

 

 

106

 

 

November 2021

 

 

70

 

Maplewood

 

October 2019

 

October 2019

 

Virginia

 

 

210

 

 

December 2022

 

 

120

 

Rochambeau

 

December 2019

 

January 2020

 

Virginia

 

 

35

 

 

December 2021

 

 

20

 

Pumpkinseed

 

May 2020

 

May 2020

 

Virginia

 

 

138

 

 

September 2022

 

 

60

 

Bookers Mill

 

February 2021

 

June 2021

 

Virginia

 

 

225

 

 

Expected 2023(4)

 

 

127

 
(1)
Includes acquisition costs.
(2)
Referred to as Butcher Creek once placed in service.
(3)
Referred to as Desper once placed in service.
(4)
Virginia Power expects to claim production tax credits on the energy generated and sold by project.

 

In addition, the following table presents acquisitions by Dominion Energy of solar projects (reflected in Contracted Energy). Dominion Energy has claimed or expects to claim federal investment tax credits on the projects, except as otherwise noted.

 

Project Name

 

Date Agreement
Entered

 

Date Agreement
Closed

 

Project Location

 

Project Cost
(millions)(1)

 

 

Date of Commercial
Operations

 

MW Capacity

 

Greensville

 

August 2019

 

August 2019

 

Virginia

 

$

127

 

 

December 2020

 

 

80

 

Myrtle

 

August 2019

 

August 2019

 

Virginia

 

 

32

 

 

June 2020

 

 

15

 

Blackville

 

May 2020

 

May 2020

 

South Carolina

 

 

12

 

 

December 2020

 

 

7

 

Denmark

 

May 2020

 

May 2020

 

South Carolina

 

 

14

 

 

December 2020

 

 

6

 

Yemassee

 

May 2020

 

August 2020

 

South Carolina

 

 

17

 

 

January 2021

 

 

10

 

Trask

 

May 2020

 

October 2020

 

South Carolina

 

 

22

 

 

March 2021

 

 

12

 

Hardin I

 

June 2020

 

June 2020

 

Ohio

 

 

240

 

 

Split(2)

 

 

150

 

Madison

 

July 2020

 

July 2020

 

Virginia

 

 

165

 

 

Expected 2024(3)

 

 

62

 

Hardin II

 

August 2020

 

Terminated(4)

 

 

 

 

 

 

 

 

 

 

Atlanta Farms

 

March 2022

 

May 2022

 

Ohio

 

 

390

 

 

Expected split(3)(5)

 

 

200

 

 

66

 

(1)
Includes acquisition costs.
(2)
In December 2020 and January 2021, 97 MW and 53 MW of the project commenced commercial operations, respectively.
(3)
Dominion Energy expects to claim production tax credits on the energy generated and sold by project.
(4)
In January 2023, Dominion Energy terminated its agreement, without penalty, to acquire Hardin II.
(5)
Expected to be split between 2023 and 2024.

In addition to the facilities discussed above, Dominion Energy has also entered into various agreements to install solar facilities (reflected in the Corporate and Other segment effective September 2023), primarily at schools in Virginia. As of December 31, 2022, Dominion Energy had placed in service solar facilities with an aggregate generation capacity of 23 MW at a cost of $48 million and anticipates placing additional facilities in service by the end of 2023 with an estimated total projected cost of approximately $39 million and an aggregate generation capacity of 17 MW. Dominion Energy has claimed or expects to claim federal investment tax credits on the projects.

Impairment

In the fourth quarter of 2022, Dominion Energy modified its intentions for the ongoing growth and development of its nonregulated solar generation assets as part of the preliminary stages of its comprehensive business review announced in November 2022. In connection with that determination, Dominion Energy expects that it is more likely than not that the nonregulated solar generation projects within Contracted Energy will be sold before the end of their useful lives and therefore evaluated the associated long-lived assets for recoverability. Given their strategic alignment with Virginia Power’s operations, the non-jurisdictional solar generation projects reflected in Dominion Energy Virginia were not further evaluated for recoverability. Using a probability-weighted approach, Dominion Energy determined Contracted Energy’s nonregulated solar generation assets were impaired and recorded a charge of $1.5 billion ($1.1 billion after-tax) in impairment of assets and other charges in its Consolidated Statements of Income (reflected in the Corporate and Other segment) for the year ended December 31, 2022 to adjust the property, plant and equipment, intangible assets and right-of-use lease assets down to an estimated fair value of $665 million in aggregate. The fair value was estimated using an income approach. The valuation is considered a Level 3 fair value measurement due to the use of significant judgmental and unobservable inputs, including projected timing and amount of future cash flows and discount rates reflecting risks inherent in the future cash flows and market prices.

Non-Wholly-Owned Nonregulated Solar Facilities

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 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 $665 million ($293 million after-tax attributable to Dominion Energy and $267 million attributable to noncontrolling interest) in impairment of assets and other charges in its Consolidated Statements of Income (reflected in the Corporate and Other segment) for the year ended December 31, 2020 to adjust the property, plant and equipment down to its estimated fair value of $1.4 billion. The fair value was estimated using an income approach. The valuation is considered a Level 3 fair value measurement due to the use of significant judgmental and unobservable inputs, including projected timing and amount of future cash flows and discount rates reflecting risks inherent in the future cash flows and market prices.

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 67% controlling interest in certain nonregulated solar projects for consideration of $456 million, subject to customary closing adjustments, with the amount of cash reduced by the amount of SBL Holdco’s debt outstanding at closing. The sale was contingent on clearance or approval under the Hart-Scott-Rodino Act and by FERC as well as other customary closing and regulatory conditions. In September 2021, the waiting period under the Hart-Scott-Rodino Act expired and in October 2021, FERC approved the proposed sale. In December 2021, the transaction closed and Dominion Energy recorded a gain of $19 million ($15 million after-tax) in losses (gains) on sales of assets in its Consolidated Statements of Income (reflected in the Corporate and Other segment). Except as specifically identified, all activity related to SBL Holdco is recorded within Contracted Energy.

Sale to Clearway

In August 2021, Dominion Energy entered an agreement with Clearway to sell its 50% controlling interest in Four Brothers and Three Cedars for $335 million in cash, subject to customary closing adjustments. The transaction was contingent on clearance or approval under the Hart-Scott-Rodino Act and by FERC as well as other customary closing and regulatory conditions. In October 2021, the waiting period under the Hart-Scott-Rodino Act expired. In December 2021, the transaction closed and Dominion Energy recorded a loss of $229 million ($176 million after-tax) in losses (gains) on sales of assets in its Consolidated Statements of Income (reflected in the Corporate and Other segment), primarily associated with the derecognition of noncontrolling interest.

67

 

Except as specifically identified, all activity related to Four Brothers and Three Cedars is recorded within Contracted Energy.

Virginia Power CCRO Utilization

In 2021, Virginia Power wrote off $318 million, primarily to accumulated depreciation, representing the utilization of a CCRO in accordance with the GTSA in connection with the settlement of the 2021 Triennial Review. See Note 13 for additional information.

Sale of Utility Property

In 2022, Dominion Energy completed the sales of certain utility property in South Carolina, as approved by the South Carolina Commission, for total cash consideration of $20 million. In connection with the sales, Dominion Energy recognized a gain of $20 million ($15 million after-tax), recorded in losses (gains) on sales of assets, in its Consolidated Statements of Income (reflected in Dominion Energy South Carolina) for the year ended December 31, 2022.

NOTE 11. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The changes in Dominion Energy’s carrying amount and segment allocation of goodwill are presented below:

 

 

 

Dominion Energy Virginia

 

 

Dominion Energy South Carolina

 

 

Contracted Energy

 

 

Corporate and Other

 

 

Total

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dominion Energy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020(1)

 

$

2,106

 

 

$

1,521

 

 

$

492

 

 

$

110

 

 

$

4,229

 

Acquisition of Birdseye(2)

 

 

—

 

 

 

—

 

 

 

24

 

 

 

—

 

 

 

24

 

Balance at December 31, 2021(1)

 

$

2,106

 

 

$

1,521

 

 

$

516

 

 

$

110

 

 

$

4,253

 

Sale of Hope(2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(110

)

 

 

(110

)

Balance at December 31, 2022(1)

 

$

2,106

 

 

$

1,521

 

 

$

516

 

 

$

—

 

 

$

4,143

 

 

(1)
Goodwill amounts do not contain any accumulated impairment losses.
(2)
See Note 3 for more information.

 

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 $103 million, $70 million and $63 million for the years ended December 31, 2022, 2021 and 2020, respectively. In 2022, Dominion Energy acquired $478 million of intangible assets, primarily representing RGGI allowances and software, with an estimated weighted-average amortization period of approximately 3 years. Amortization expense for Virginia Power’s intangible assets was $67 million, $31 million and $28 million for the years ended December 31, 2022, 2021 and 2020, respectively. In 2022, Virginia Power acquired $430 million of intangible assets, primarily representing RGGI allowances and software, with an estimated weighted-average amortization period of 2 years.

The components of intangible assets are as follows:

 

 

 

2022

 

 

2021

 

At December 31,

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Dominion Energy

 

 

 

 

 

 

 

 

 

 

 

 

Software, licenses and other(1)

 

$

1,723

 

 

$

927

 

 

$

1,324

 

 

$

612

 

Virginia Power

 

 

 

 

 

 

 

 

 

 

 

 

Software, licenses and other(1)

 

$

1,113

 

 

$

577

 

 

$

685

 

 

$

290

 
(1)
Includes $253 million and $158 million of RGGI allowances purchased and consumed in 2022 and 2021, respectively, with deferral to a regulatory asset.

Annual amortization expense for these intangible assets is estimated to be as follows:

 

 

 

2023

 

 

2024

 

 

2025

 

 

2026

 

 

2027

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

Dominion Energy

 

$

68

 

$

61

 

$

54

 

$

43

 

$

25

 

Virginia Power

 

$

33

 

$

30

 

$

26

 

$

20

 

$

10

 

 

68

 

 

NOTE 12. REGULATORY ASSETS AND LIABILITIES

Regulatory assets and liabilities include the following:

 

 

Dominion Energy

 

 

Virginia Power

 

At December 31,

 

2022

 

 

2021

 

 

2022

 

 

2021

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Dominion Energy

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory assets:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred cost of fuel used in electric generation(1)

 

$

603

 

 

$

251

 

 

$

133

 

 

$

131

 

Deferred rider costs for Virginia electric utility(2)

 

 

152

 

 

 

72

 

 

 

152

 

 

 

72

 

Ashpond and landfill closure costs(3)

 

 

221

 

 

 

193

 

 

 

221

 

 

 

193

 

Deferred nuclear refueling outage costs(4)

 

 

83

 

 

 

79

 

 

 

83

 

 

 

79

 

NND Project costs(5)

 

 

138

 

 

 

138

 

 

 

 

 

 

 

Deferred early plant retirement charges(6)

 

 

226

 

 

 

226

 

 

 

226

 

 

 

226

 

Derivatives(7)

 

 

256

 

 

 

112

 

 

 

251

 

 

 

105

 

Other

 

 

204

 

 

 

152

 

 

 

74

 

 

 

44

 

Regulatory assets-current

 

 

1,883

 

 

 

1,223

 

 

 

1,140

 

 

 

850

 

Unrecognized pension and other postretirement benefit costs(8)

 

 

891

 

 

 

488

 

 

 

4

 

 

 

3

 

Deferred rider costs for Virginia electric utility(2)

 

 

363

 

 

 

489

 

 

 

363

 

 

 

489

 

Interest rate hedges(9)

 

 

169

 

 

 

899

 

 

 

—

 

 

 

604

 

AROs and related funding(10)

 

 

380

 

 

 

311

 

 

 

 

 

 

 

NND Project costs(5)

 

 

2,088

 

 

 

2,226

 

 

 

 

 

 

 

Ash pond and landfill closure costs(3)

 

 

2,051

 

 

 

2,223

 

 

 

2,049

 

 

 

2,223

 

Deferred cost of fuel used in electric generation(1)

 

 

1,551

 

 

 

409

 

 

 

1,551

 

 

 

409

 

Deferred early plant retirement charges(6)

 

 

—

 

 

 

226

 

 

 

—

 

 

 

226

 

Derivatives(7)

 

 

254

 

 

 

34

 

 

 

148

 

 

 

34

 

Other

 

 

518

 

 

 

581

 

 

 

132

 

 

 

142

 

Regulatory assets-noncurrent

 

 

8,265

 

 

 

7,886

 

 

 

4,247

 

 

 

4,130

 

Total regulatory assets

 

$

10,148

 

 

$

9,109

 

 

$

5,387

 

 

$

4,980

 

Regulatory liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Provision for future cost of removal and AROs(11)

 

 

111

 

 

 

154

 

 

 

111

 

 

 

154

 

Reserve for refunds and rate credits to electric utility
   customers(12)

 

 

125

 

 

 

420

 

 

 

25

 

 

 

306

 

Income taxes refundable through future rates(13)

 

 

100

 

 

 

106

 

 

 

65

 

 

 

63

 

Monetization of guarantee settlement(14)

 

 

67

 

 

 

67

 

 

 

 

 

 

 

Derivatives(7)

 

 

211

 

 

 

65

 

 

 

176

 

 

 

51

 

Other

 

 

134

 

 

 

77

 

 

 

129

 

 

 

73

 

Regulatory liabilities-current

 

 

748

 

 

 

889

 

 

 

506

 

 

 

647

 

Income taxes refundable through future rates(13)

 

 

3,169

 

 

 

3,304

 

 

 

2,272

 

 

 

2,335

 

Provision for future cost of removal and AROs(11)

 

 

1,731

 

 

 

1,624

 

 

 

1,135

 

 

 

1,043

 

Nuclear decommissioning trust(15)

 

 

1,685

 

 

 

2,158

 

 

 

1,685

 

 

 

2,158

 

Monetization of guarantee settlement(14)

 

 

702

 

 

 

831

 

 

 

 

 

 

 

Interest rate hedges(9)

 

 

240

 

 

 

—

 

 

 

240

 

 

 

—

 

Reserve for refunds and rate credits to electric utility
   customers(12)

 

 

325

 

 

 

448

 

 

 

—

 

 

 

25

 

Unrecognized pension and other postretirement benefit costs(8)

 

 

10

 

 

 

189

 

 

 

 

 

 

 

Overrecovered other postretirement benefit costs(16)

 

 

140

 

 

 

105

 

 

 

 

 

 

 

Derivatives(7)

 

 

234

 

 

 

236

 

 

 

—

 

 

 

62

 

Other

 

 

181

 

 

 

129

 

 

 

167

 

 

 

117

 

Regulatory liabilities-noncurrent

 

 

8,417

 

 

 

9,024

 

 

 

5,499

 

 

 

5,740

 

Total regulatory liabilities

 

$

9,165

 

 

$

9,913

 

 

$

6,005

 

 

$

6,387

 

 

(1)
Reflects deferred fuel expenses for the Virginia and North Carolina jurisdictions of Virginia Power's electric generation operations and additionally for Dominion Energy, deferred fuel expenses for the South Carolina jurisdiction of its electric generation operations. Dominion Energy reflects a $66 million reduction recorded in 2022 from the application of a portion of the monetization of guarantee settlement previously reflected as regulatory liabilities associated with the approval of DESC’s cost of fuel proceedings. See Note 13 for additional information.

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(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 additional information.
(3)
Primarily reflects legislation in Virginia 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 18 years commencing December 2021 through Rider CCR. Virginia Power is entitled to collect carrying costs on uncollected expenditures once expenditures have been made.
(4)
Legislation in Virginia 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 18 months.
(5)
Reflects expenditures by DESC associated with the NND Project, which pursuant to the SCANA Merger Approval Order, will be recovered from DESC electric service customers over a 20-year period ending in 2039.
(6)
Reflects amounts from the early retirements of certain coal- and oil-fired generating units to be amortized through 2023 in accordance with the settlement of the 2021 Triennial Review. See Note 13 for additional information.
(7)
Represents changes in the fair value of derivatives, excluding separately presented interest rate hedges, that following settlement are expected to be recovered from or refunded to customers.
(8)
Represents unrecognized pension and other postretirement employee benefit costs expected to be recovered or refunded through future rates generally over the expected remaining service period of plan participants by certain of Dominion Energy's rate-regulated subsidiaries. Includes regulatory assets of $302 million and $25 million and regulatory liabilities of $6 million and $20 million in aggregate at December 31, 2022 and 2021, respectively, related to retained pension and other postretirement benefit plan assets and obligations for the East Ohio, PSNC and Questar Gas Transactions which will be reclassified to AOCI upon closing of each transaction.
(9)
Reflects interest rate hedges recoverable from or refundable to customers. Certain of these instruments are settled and any related payments are being amortized into interest expense over the life of the related debt, which has a weighted-average useful life of approximately 25 years and 24 years for Dominion Energy and Virginia Power, respectively, as of December 31, 2022.
(10)
Represents deferred depreciation and accretion expense related to legal obligations associated with the future retirement of generation, transmission and distribution properties. The AROs primarily relate to DESC’s electric generating facilities, including Summer, and are expected to be recovered over the related property lives and periods of decommissioning which may range up to approximately 105 years.
(11)
Rates charged to customers by Dominion Energy and Virginia Power's regulated businesses include a provision for the cost of future activities to remove assets that are expected to be incurred at the time of retirement.
(12)
Reflects amounts previously collected from retail electric customers of DESC for the NND Project to be credited over an estimated 11-year period effective February 2019, in connection with the SCANA Merger Approval Order. Also reflects amounts to be refunded to jurisdictional retail electric customers in Virginia associated with the settlement of the 2021 Triennial Review. See Note 13 for additional information.
(13)
Amounts recorded to pass the effect of reduced income taxes from the 2017 Tax Reform Act to customers in future periods, which will primarily reverse at the weighted average tax rate that was used to build the reserves over the remaining book life of the property, net of amounts to be recovered through future rates to pay income taxes that become payable when rate revenue is provided to recover AFUDC equity.
(14)
Reflects amounts to be refunded to DESC electric service customers over a 20-year period ending in 2039 associated with the monetization of a bankruptcy settlement agreement.
(15)
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 Virginia Power's utility nuclear generation stations, in excess of the related AROs.
(16)
Reflects a regulatory liability for the collection of postretirement benefit costs allowed in rates in excess of expense incurred.

At December 31, 2022, Dominion Energy and Virginia Power regulatory assets include $4.4 billion and $2.7 billion, respectively, on which they do not expect to earn a return during the applicable recovery period. With the exception of certain items discussed above, the majority of these expenditures are expected to be recovered within the next two years.

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.

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Other Regulatory Matters

Virginia Regulation – Key Legislation Affecting Operations

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 $50 million.

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 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 provides for cost recovery related to participation in a carbon trading program. While the legislation affects several portions of Virginia Power’s operations, key provisions of the GTSA remain in effect, including the triennial review structure and timing, the use of the CCRO and the $50 million cap on revenue reductions in the first triennial review proceeding. Key provisions of the VCEA and related legislation passed include the following:

•
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. 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 16.1 GW of installed solar and onshore wind 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 deems 2.7 GW of energy storage, including up to 800 MW for any one project which may include a pumped storage facility, by the end of 2035 to be in the public interest. The legislation also deems the construction or purchase of an offshore wind facility constructed off the Virginia coast with a capacity of up to 5.2 GW before 2035 to be in the public interest and provides certain presumptions facilitating cost recovery. The costs of such a facility constructed by the utility with a capacity between 2.5 and 3.0 GW will be presumed reasonably and prudently incurred if the Virginia Commission finds that the project meets competitive procurement requirements, the projected cost of the facility does not exceed a specified industry benchmark and the utility commences construction by the end of 2023 or has a plan for the facility to be in service by the end of 2027.

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Projects to meet these requirements are subject to approval by the Virginia Commission.
•
Energy Efficiency: The legislation includes an energy efficiency target of 5% energy savings, as measured from a 2019 baseline, through verifiable energy efficiency programs by the end of 2025 with future targets to be set by the Virginia Commission. Virginia Power has the opportunity to offset the lost revenues with margins on program spend if certain targets are achieved and can also seek recovery of the lost revenues associated with energy efficiency programs if such reductions are found to have caused Virginia Power to earn more than 50 basis points below a fair rate of return on its rates for generation and distribution services.
•
Carbon trading program: The legislation authorizes 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 $93 million related to this program. Implementation details and the effective date of the program will be established in future legislation prior to collection of fees from customers.

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.

 

Virginia Regulation – Recent Developments

2021 Triennial Review

In 2020, Virginia Power recorded a net charge of $130 million related to the use of a CCRO in accordance with the GTSA, included in impairment of assets and other charges (benefits) in its Consolidated Statements of Income (reflected in the Corporate and Other segment) for benefits expected to be provided to jurisdictional customers as a result of the 2021 Triennial Review as well as the impact on certain non-jurisdictional customers which follow Virginia Power’s jurisdictional customer rate methodology. In 2021, Virginia Power recorded a benefit of $130 million ($97 million after-tax) in impairment of assets and other charges (benefits) in its Consolidated Statements of Income (reflected in the Corporate and Other segment) to adjust its reserve related to the use of a CCRO in accordance with the GTSA.

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 $330 million in one-time refunds to customers made up of $255 million over a 6-month period and $75 million over three years, a $50 million going-forward base rate reduction and an authorized ROE of 9.35%. Additionally, Virginia Power has agreed to utilize $309 million of qualifying CCRO investments in the CVOW Pilot Project, deployment of AMI and a Customer Information Platform to offset available earnings and to amortize through 2023 the early retirement charges for coal- and oil-fired generation units recorded in 2019 and 2020. In November 2021, the Virginia Commission approved the comprehensive settlement agreement.

In connection with the settlement agreement, Virginia Power recorded a $356 million ($265 million after-tax) charge for refunds to be provided to customers in operating revenues in its Consolidated Statements of Income as well as a $549 million ($409 million after-tax) benefit primarily from the establishment of a regulatory asset associated with the early retirements of certain coal- and oil-fired generating units and a $318 million ($237 million after-tax) charge for CCRO benefits provided to customers in impairment of assets and other charges (benefits) in its Consolidated Statements of Income (reflected in the Corporate and Other segment). The amounts recorded reflect the impact related to jurisdictional customers as a result of the 2021 Triennial Review as well as the impact on certain non-jurisdictional customers which follow Virginia Power’s jurisdictional customer rate methodology.

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 $127 million ($94 million after-tax) in impairment of assets and other charges in its Consolidated Statements of Income (reflected in the Corporate and Other segment) in 2020. In connection with the Virginia 2021 budget process, in the first quarter of 2021 Virginia Power recorded a charge of $76 million ($56 million after-tax) in impairment of assets and other charges (benefits) in its Consolidated Statements of Income (reflected in the Corporate and Other segment) for Virginia jurisdictional retail electric customer balances that were more than 30 days past due as of December 31, 2020 that Virginia Power is required to forgive.

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Virginia Fuel Expenses

In May 2022, Virginia Power filed its annual fuel factor filing with the Virginia Commission to recover an estimated $2.3 billion in Virginia jurisdictional projected fuel expense for the rate year beginning July 1, 2022 and a projected $1.0 billion under-recovered balance as of June 30, 2022. Virginia Power’s proposed fuel rate represents a fuel revenue increase of $1.8 billion when applied to projected kilowatt-hour sales for that period. Virginia Power also proposed alternatives to recover this under-collected balance over a two- or three-year period. Under these alternatives, Virginia Power’s fuel revenues for the rate year would increase by $1.3 billion or $1.2 billion, respectively. In addition, Virginia Power proposed a change in the timing of fuel cost recovery for certain customers who elect market-based rates that would consider those customers’ portion of the projected under-recovered balance to have been recovered as of June 30, 2022. In July 2022, Virginia Power, the Virginia Commission staff and another party filed a comprehensive settlement agreement with the Virginia Commission for approval. The comprehensive settlement agreement provides for the collection of the requested under-recovered projected fuel expense over a three-year period beginning July 1, 2022 and that Virginia Power will exclude from recovery through base rates one half of the related financing costs over the three-year period. In addition, the proposed settlement agreement affirmed Virginia Power’s proposal regarding fuel cost recovery for market-based rate customers. As a result, Virginia Power recorded a $191 million ($142 million after-tax) charge in the second quarter of 2022 within impairment of assets and other charges in its Consolidated Statement of Income (reflected in the Corporate and Other segment). In September 2022, the Virginia Commission approved the comprehensive settlement agreement.

Renewable Generation Projects – Construction

In September 2021, Virginia Power filed a petition with the Virginia Commission for CPCNs to construct and operate 13 utility-scale projects totaling approximately 661 MW of solar generation and 70 MW of energy storage as part of its efforts to meet the renewable generation development requirements under the VCEA. The projects are expected to cost approximately $1.4 billion in the aggregate, excluding financing costs, and be placed into service between 2022 and 2023. In March 2022, the Virginia Commission approved the petition.

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 $1.1 billion, excluding financing costs, which is included within the overall cost of the CVOW Commercial Project. In addition, Virginia Power requested approval from the Virginia Commission to enter into financial hedges with U.S. financial institutions to mitigate the foreign currency exchange risk associated with certain supplier contracts associated with the CVOW Commercial Project. In August 2022, the Virginia Commission approved the application for certification of the Virginia Facilities component of the CVOW Commercial Project and noted that no further action was required with respect to Virginia Power’s foreign currency risk mitigation plan. Also in August 2022, Virginia Power filed a petition for limited reconsideration relating to the performance standard for operation of the CVOW Commercial Project included in the Virginia Commission’s August order. The Virginia Commission granted reconsideration and suspended in part the August order pending its reconsideration. In October 2022, Virginia Power, Office of the Attorney General of Virginia and other parties filed a settlement agreement with the Virginia Commission for approval. The settlement agreement provides for certain cost sharing mechanisms of total construction costs between $10.3 billion and $13.7 billion, as subject to potential adjustment to the extent construction costs are decreased by the IRA, and includes enhanced performance reporting provisions associated with operation of the CVOW Commercial Project in lieu of a performance guarantee. In December 2022, the Virginia Commission approved the settlement agreement.

In October 2022, Virginia Power filed a petition with the Virginia Commission for CPCNs to construct and operate eight utility-scale projects totaling approximately 474 MW of solar generation and 16 MW of energy storage as part of its efforts to meet the renewable generation development requirements under the VCEA. The projects, as of October 2022, are expected to cost approximately $1.2 billion in the aggregate, excluding financing costs, and be placed into service between 2024 through 2025. This matter is pending.

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 $3.9 billion, excluding financing costs. In July 2022, the Virginia Commission approved the petition.

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Riders

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

 

June 2022

 

January 2023

 

April 2023

 

 

34

 

 

$

18

 

Rider B

 

June 2022

 

January 2023

 

April 2024

 

 

34

 

 

 

—

 

Rider BW

 

October 2021

 

May 2022

 

September 2022

 

 

145

 

 

 

32

 

Rider BW

 

October 2021

 

May 2022

 

September 2023

 

 

120

 

 

 

(25

)

Rider CCR

 

February 2022

 

October 2022

 

December 2022

 

 

231

 

 

 

15

 

Rider CE(1)

 

September 2021

 

March 2022

 

May 2022

 

 

71

 

 

 

61

 

Rider CE(2)

 

October 2022

 

Pending

 

May 2023

 

 

89

 

 

 

18

 

Rider E

 

January 2022

 

September 2022

 

November 2022

 

 

101

 

 

 

34

 

Rider E

 

January 2023

 

Pending

 

November 2023

 

 

109

 

 

 

8

 

Rider GT

 

August 2021

 

May 2022

 

June 2022

 

 

56

 

 

N/A

 

Rider GT

 

August 2022

 

Pending

 

June 2023

 

 

16

 

 

 

(40

)

Rider GV

 

June 2021

 

December 2021

 

April 2023

 

 

127

 

 

 

(15

)

Rider OSW

 

November 2021

 

August 2022(3)

 

September 2022

 

 

79

 

 

N/A

 

Rider OSW

 

November 2022

 

Pending

 

September 2023

 

 

271

 

 

 

192

 

Rider PPA

 

December 2022

 

Pending

 

September 2023

 

 

(22

)

 

 

(17

)

Rider R

 

June 2021

 

March 2022

 

April 2022

 

 

59

 

 

 

1

 

Rider R

 

June 2021

 

March 2022

 

April 2023

 

 

55

 

 

 

(4

)

Rider RGGI(4)

 

December 2021

 

Withdrawn

 

 

 

 

 

 

 

 

Rider RGGI(5)

 

December 2022

 

Pending

 

September 2023

 

 

373

 

 

N/A

 

Rider RPS

 

December 2021

 

June 2022

 

September 2022

 

 

140

 

 

 

127

 

Rider RPS

 

December 2022

 

Pending

 

September 2023

 

 

111

 

 

 

(29

)

Rider S

 

June 2021

 

February 2022

 

April 2023

 

 

191

 

 

 

(1

)

Rider SNA(6)

 

October 2021

 

July 2022

 

September 2022

 

 

107

 

 

N/A

 

Rider SNA(6)

 

October 2022

 

Pending

 

September 2023

 

 

50

 

 

 

(57

)

Rider T1(7)

 

May 2022

 

July 2022

 

September 2022

 

 

706

 

 

 

(168

)

Rider U(8)

 

June 2021

 

March 2022

 

April 2022

 

 

95

 

 

 

15

 

Rider U(9)

 

June 2022

 

Pending

 

April 2023

 

 

74

 

 

 

(21

)

Rider US-2

 

October 2021

 

June 2022

 

September 2022

 

 

11

 

 

 

2

 

Rider US-3

 

August 2021

 

March 2022

 

June 2022

 

 

50

 

 

 

12

 

Rider US-3

 

August 2022

 

Pending

 

June 2023

 

 

40

 

 

 

(10

)

Rider US-4

 

August 2021

 

March 2022

 

June 2022

 

 

15

 

 

 

5

 

Rider US-4

 

August 2022

 

Pending

 

June 2023

 

 

17

 

 

 

2

 

Rider W

 

June 2022

 

Pending

 

April 2023

 

 

106

 

 

 

(15

)

Rider W

 

June 2022

 

Pending

 

April 2024

 

 

109

 

 

 

3

 

DSM Riders(10)

 

December 2021

 

August 2022

 

September 2022

 

 

91

 

 

 

17

 

DSM Riders(11)

 

December 2022

 

Pending

 

September 2023

 

 

107

 

 

 

16

 
(1)
Associated with solar generation and energy storage projects approved in March 2022, solar generation projects approved in April 2021 and certain small-scale solar projects.
(2)
Associated with solar generation and energy storage projects requested for approval in October 2022 and certain small-scale solar projects in addition to previously approved Rider CE projects.
(3)
In August 2022, Virginia Power filed a petition for limited reconsideration relating to a performance standard for operation of the CVOW Commercial Project included in the Virginia Commission’s August order. The Virginia Commission granted reconsideration and suspended in part the August order pending its reconsideration with Rider OSW approved on an interim basis. In December 2022, the Virginia Commission issued an order reinstating its August 2022 order granting approval of Rider OSW.
(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. The Virginia Commission granted Virginia Power’s motion in April 2022. In May 2022, Virginia Power filed a petition with the Virginia Commission requesting a suspension of Rider RGGI approved in August 2021. Virginia Power also requested that RGGI compliance costs incurred and unrecovered through July 2022 be recovered through existing base rates in effect during the period incurred. The Virginia Commission approved the request in June 2022. In the second quarter of 2022, Virginia Power recorded a charge of $180 million ($134 million after-tax) in impairment of assets and other charges (reflected in the Corporate and Other segment) for the amount deemed recovered through base rates through June 30, 2022, including the impact of certain non-jurisdictional customers which follow Virginia Power’s jurisdictional rate methodology. Virginia Power recorded $33 million ($25 million after-tax) in depreciation and amortization in the third quarter of 2022.
(5)
In December 2022, Virginia Power filed a petition to update and reinstate Rider RGGI to recover RGGI compliance costs incurred after July 2022 and those projected to occur through December 2023, with rate recovery from September 2023 through August 2024. For purposes of this proceeding, Virginia Power has assumed that Virginia will withdraw from RGGI on December 31, 2023, and accordingly did not project any RGGI compliance costs to be incurred after that date.
(6)
Virginia Power also requested approval of cost recovery of approximately $1.2 billion through Rider SNA for the first phase of nuclear life extension program which includes investments through 2024. In April 2022, Virginia Power, the Virginia Commission staff and certain interested parties filed a proposed stipulation recommending that costs incurred after February 2022 associated with the first phase of the nuclear life extension program for North Anna be deferred and requested for recovery in a subsequent Rider SNA filing.

74

 

(7)
Consists of $482 million for the transmission component of Virginia Power’s base rates and $224 million for Rider T1.
(8)
Consists of $60 million for previously approved phases and $35 million for phase six costs for Rider U.
(9)
As amended in June 2022, application consists of $74 million for previously approved phases of Rider U.
(10)
Associated with an additional nine new energy efficiency programs with a $140 million cost cap, with the ability to exceed the cost cap by no more than 15%.
(11)
Associated with an additional four new energy efficiency programs, one new demand response program and four new program bundles with a $150 million cost cap, with the ability to exceed the cost cap by no more than 15%.

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)

 

Elmont-Ladysmith rebuild and related projects in the
   Counties of Hanover and Caroline, Virginia

 

April 2021

 

April 2022

 

500 kV

 

26

 

$

95

 

Rebuild transmission lines and related projects in the
   City of Staunton and County of Augusta, Virginia

 

November 2021

 

August 2022

 

230 kV

 

21

 

 

45

 

Build new Dulles Towne Center substation and line
   loop in the County of Loudoun, Virginia

 

December 2021

 

July 2022

 

230 kV

 

1

 

 

105

 

Build new Aviator substation and line loop in the
   County of Loudoun, Virginia

 

February 2022

 

November 2022

 

230 kV

 

1

 

 

80

 

Nimbus line loop and substation and new 230 kV line
   in the County of Loudon, Virginia

 

February 2022

 

October 2022

 

230 kV

 

1

 

 

40

 

Partial rebuild of Bristers-Ox 115 kV line in Fauquier
   and Prince William Counties, Virginia

 

August 2022

 

Pending

 

115 kV

 

15

 

 

40

 

Construct new switching station, substations,
   transmission lines and related projects in Lunenberg
   and Mecklenburg Counties, Virginia

 

October 2022

 

Pending

 

230 kV

 

18

 

 

230

 

Construct new switching station, substation,
   transmission lines and related projects in Charlotte,
   Halifax and Mecklenburg Counties, Virginia

 

October 2022

 

Pending

 

230kV

 

26

 

 

215

 

Construct new Mars and Wishing Star substations,
   transmission lines and related projects in
   Loudoun County, Virginia

 

October 2022

 

Pending

 

500/230 kV

 

4

 

 

720

 

Construct new Altair switching station,
   transmission lines and related projects in
   Loudoun County, Virginia

 

November 2022

 

Pending

 

230 kV

 

2

 

 

50

 

Construct new Cirrus and Keyser switching stations,
   transmission lines and related projects in
   Culpeper, Virginia

 

November 2022

 

Pending

 

230 kV

 

5

 

 

65

 

In November 2013, the Virginia Commission issued an order granting Virginia Power a CPCN to construct approximately 7 miles of new overhead 500 kV transmission line from the existing Surry switching station in Surry County to a new Skiffes Creek switching station in James City County, and approximately 20 miles of new 230 kV transmission line in James City County, York County, and the City of Newport News from the proposed new Skiffes Creek switching station to Virginia Power’s existing Whealton substation in the City of Hampton. In February 2019, the transmission line project was placed into service. In March 2019, the U.S. Court of Appeals for the D.C. Circuit issued an order vacating the permit from the U.S. Army Corps of Engineers issued in July 2017 and ordered the U.S. Army Corps of Engineers to do a full environmental impact study of the project. In April 2019, Virginia Power and the U.S. Army Corps of Engineers filed petitions for rehearing with the U.S. Court of Appeals for the D.C. Circuit, asking that the permit from the U.S. Army Corps of Engineers remain in effect while an environmental impact study is performed. In May 2019, the U.S. Court of Appeals for the D.C. Circuit denied the request for rehearing and ordered the U.S. District Court for the D.C. Circuit to consider and issue a ruling on whether the permit should be vacated during the U.S. Army Corps of Engineers’ preparation of an environmental impact statement. In November 2019, the U.S. District Court for the D.C. Circuit issued an order allowing the permit to remain in effect while an environmental impact statement is prepared. In November 2020, the U.S. Army Corps of Engineers issued a draft environmental impact statement noting there is no better alternative. This matter is pending.

75

 

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. In January 2020, the North Carolina Commission approved a 9.75% ROE and disallowed certain costs associated with coal ash remediation at Chesterfield power station. In February 2020, the North Carolina Commission issued its final order relating to base rates. In July 2020, Virginia Power filed a notice of appeal and exceptions to the Supreme Court of North Carolina, arguing that the North Carolina Commission committed reversible error on certain issues relating to the ratemaking treatment of certain coal ash remediation costs. In June 2022, the Supreme Court of North Carolina affirmed the North Carolina Commission’s order.

Virginia Power North Carolina Fuel Filing

In August 2022, 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 2022 to reflect the increased commodity cost of fuel and proposed a total $107 million increase to the fuel component of its electric rates for the rate year beginning February 1, 2023. Virginia Power also submitted an alternative to recover the increase over a two-year period. Under this approach, Virginia Power proposed a total $80 million increase to the fuel component of its electric rates implemented on a staggered timeline for the rate year beginning February 1, 2023 with remaining unrecovered balances to be recovered in the rate year beginning February 1, 2024. In January 2023, the North Carolina Commission approved the filing for recovery over the two-year period.

PSNC Rider D

Rider D allows PSNC to recover from customers all prudently incurred gas costs and the related portion of uncollectible expenses as well as losses on negotiated gas and transportation sales. In May 2022, PSNC submitted a filing with, and received approval from, the North Carolina Commission for a $56 million gas cost increase with rates effective June 2022. In September 2022, PSNC submitted a filing with, and received approval from, the North Carolina Commission for a $126 million gas cost increase with rates effective October 2022. In November 2022, PSNC submitted a filing with, and received approval from, the North Carolina Commission for a net $41 million gas cost decrease with rates effective December 2022.

In January 2023, PSNC submitted a filing with, and received approval from, the North Carolina Commission for a $154 million gas cost decrease with rates effective February 2023. In February 2023, PSNC submitted a filing with the North Carolina Commission for a $56 million gas cost decrease with rates effective March 2023. This matter is pending.

PSNC Customer Usage Tracker

PSNC utilizes a customer usage tracker, a decoupling mechanism, which allows it to adjust its base rates semi-annually for residential and commercial customers based on average per customer consumption. In September 2022, PSNC submitted a filing with the North Carolina Commission for a $46 million increase relating to the customer usage tracker. The North Carolina Commission approved the filing in September 2022 with rates effective October 2022.

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. 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 provided for a non-fuel, base rate increase of $62 million (resulting in a net increase of $36 million after considering an accelerated amortization of certain excess deferred income taxes) commencing with bills issued on September 1, 2021 and an authorized earned ROE of 9.50%. Additionally, DESC agreed to commit up to $15 million to forgive retail electric customer balances that were more than 60 days past due as of May 31, 2021 and provide $15 million for energy efficiency upgrades and critical health and safety repairs to customer homes. Pursuant to the comprehensive settlement agreement, DESC would not file a retail electric base rate case prior to July 1, 2023, such that new rates would not be effective prior to January 1, 2024, absent unforeseen extraordinary economic or financial conditions that may include changes in corporate tax rates. In July 2021, the South Carolina Commission approved the comprehensive settlement agreement and issued its final order in August 2021.

In connection with this matter, Dominion Energy recorded charges of $249 million ($187 million after-tax) reflected within impairment of assets and other charges (benefits) (reflected in the Corporate and Other segment), including $237 million of regulatory assets associated with DESC’s purchases of its first mortgage bonds during 2019 that are no longer probable of recovery under the settlement agreement, and $18 million ($14 million after-tax) reflected within other income in its Consolidated Statements of Income for the year ended December 31, 2021.

DSM Programs

DESC has approval for a DSM rider through which it recovers expenditures related to its DSM programs.

76

 

In January 2022, DESC filed an application with the South Carolina Commission seeking approval to recover $60 million of costs and net lost revenues associated with these programs, along with an incentive to invest in such programs. In April 2022, the South Carolina Commission approved the request, effective with the first billing cycle of May 2022.

In January 2023, DESC filed an application with the South Carolina Commission seeking approval to recover $46 million of costs and net lost revenues associated with these programs, along with an incentive to invest in such programs. DESC requested that rates be effective with the first billing cycle of May 2023. This matter is pending.

Natural Gas Rates

In June 2022, DESC filed with the South Carolina Commission its monitoring report for the 12-month period ended March 31, 2022 with a total revenue requirement of $553 million. This represents a $129 million overall annual increase to its natural gas rates including a $16 million base rate increase under the terms of the Natural Gas Rate Stabilization Act effective with the first billing cycle of November 2022. In October 2022, the South Carolina Commission issued an order approving a total revenue requirement of $549 million effective with the first billing cycle of November 2022. This represents a $125 million overall annual increase to DESC’s natural gas rates including a $12 million base rate increase under the terms of the Natural Gas Rate Stabilization Act.

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 February 2022, DESC filed with the South Carolina Commission a proposal to increase the total fuel cost component of retail electric rates. DESC’s proposed adjustment is designed to recover DESC’s current base fuel costs, including its existing under-collected balance, over the 12-month period beginning with the first billing cycle of May 2022. DESC also proposed to apply approximately $66 million representing the net balance of funds associated with the monetization of the bankruptcy settlement with Toshiba Corporation following the satisfaction of liens against NND Project property recorded in regulatory liabilities, as a reduction to its under-collected base fuel cost balance. In addition, DESC proposed an increase to its variable environmental and avoided capacity cost component. The net effect is a proposed annual increase of $143 million. In April 2022, the South Carolina Commission approved the filing.

In August 2022, DESC filed an application with the South Carolina Commission seeking a mid-period adjustment to increase the base fuel component of retail electric rates for the recovery of electric fuel costs. The application requested an increase of the base fuel cost component of $399 million, with rates expected to be effective with the first billing cycle of January 2023. In November 2022, DESC, the South Carolina Office of Regulatory Staff and other parties of record filed a stipulation agreement with the South Carolina Commission for approval that reflects updated fuel cost experience and forecasts. The stipulation agreement proposes an increase of the base fuel cost component to be effective with the first billing cycle of January 2023, with an estimated annual increase of $168 million. In December 2022, the South Carolina Commission approved the stipulation agreement and issued a final order.

In February 2023, DESC filed with the South Carolina Commission a proposal to increase the total fuel cost component of retail electric rates. DESC’s proposed adjustment is designed to recover DESC’s current base fuel costs, including its existing under-collected balance, over the 12-month period beginning with the first billing cycle of May 2023. In addition, DESC proposed a decrease to its variable environmental and avoided capacity cost component. The net effect is a proposed annual increase of $176 million. This matter is pending.

Electric - Other

DESC utilizes a pension costs rider approved by the South Carolina Commission which is designed to allow recovery of projected pension costs, including under-collected balances or net of over-collected balances, as applicable. The rider is typically reviewed for adjustment every 12 months with any resulting increase or decrease going into effect beginning with the first billing cycle in May. In February 2023, DESC requested that the South Carolina Commission approve an adjustment to this rider to increase annual revenue by $24 million. This matter is pending.

Ohio Regulation

PIR Program

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, calendar years 2017 through 2021, and to permit East Ohio to increase its annual capital expenditures to $200 million by 2018 and 3% per year thereafter subject to the cost recovery rate increase caps proposed by East Ohio. In April 2022, the Ohio Commission approved an extension of East Ohio’s PIR program for capital investments through 2026 with continuation of 3% increases of annual capital expenditures per year.

In June 2022, the Ohio Commission approved East Ohio’s application to adjust the PIR cost recovery rates for 2021 costs. The filing reflects gross plant investment for 2021 of $225 million, cumulative gross plant investment of $2.2 billion and a revenue requirement of $273 million.

77

 

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 6.5% on capital investments not covered by its PIR program to expand, upgrade or replace its infrastructure and information technology systems as well as investments necessary to comply with the Ohio Commission or other government regulation. In April 2022, certain parties filed an appeal with the Supreme Court of Ohio appealing the Ohio Commission’s December 2020 order establishing the CEP rider, including the rate of return utilized in determining the revenue requirement. This matter is pending.

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 $137 million, gross plant investment for 2020 of $99 million, cumulative gross plant investment of $957 million and a revenue requirement of $119 million. In February 2022, the Ohio Commission approved adjustments to CEP cost recovery rates for 2019 and 2020 costs. The approved rates reflect gross plant investment for 2019 and 2020 of $231 million, cumulative gross plant investment of $952 million and a revenue requirement of $118 million. The Ohio Commission also ordered that East Ohio should file its next base rate case by October 2023.

In November 2022, the Ohio Commission approved adjustments to CEP cost recovery rates for 2021 costs. The approved rates reflect gross plant investment for 2021 of $146 million, cumulative gross plant investment of $1.1 billion and a revenue requirement of $131 million.

PIPP Plus Program

Under the Ohio PIPP Plus Program, eligible customers can make reduced payments based on their ability to pay their bill. The difference between the customer’s total bill and the PIPP amount is deferred and collected under the PIPP rider in accordance with the rules of the Ohio Commission. In July 2022, East Ohio’s annual update of the PIPP rider filed in May 2022 with the Ohio Commission was approved. The revised rider rate reflects recovery over the twelve-month period from July 2022 through June 2023 of projected deferred program costs of approximately $22 million from April 2022 through June 2023, net of over-recovery of accumulated arrearages of approximately $4 million as of March 31, 2022.

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 2022, the Ohio Commission approved East Ohio’s application to adjust its UEX Rider to reflect an annual revenue requirement of $20 million to provide for recovery of an under-recovered accumulated bad debt expense of $7 million as of March 31, 2022, and recovery of net bad debt expense projected to total $13 million for the twelve-month period ending March 2023.

Utah Regulation

Utah Base Rate Case

In May 2022, Questar Gas filed its base rate case and schedules with the Utah Commission. Questar Gas proposed a non-fuel, base rate increase of $71 million effective January 2023. The base rate increase was proposed to recover the significant investment in distribution infrastructure for the benefit of Utah customers. The proposed rates would provide for an ROE of 10.3% compared to the currently authorized ROE of 9.5%. In December 2022, the Utah Commission approved a non-fuel, base rate increase of $48 million for rates effective January 2023 with an ROE of 9.6%.

Purchased Gas

In July 2022, the Utah Commission approved Questar Gas’ request for a $94 million gas cost increase with rates effective August 2022. In October 2022, the Utah Commission approved Questar Gas’ request for a $128 million gas cost increase with rates effective November 2022.

In February 2023, Questar Gas filed an application with the Utah Commission seeking approval for a $92 million gas cost increase with rates effective March 2023. This matter is pending.

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.

78

 

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 2021 and 2022 were as follows:

(millions)

Dominion Energy

 

 

Virginia Power

 

AROs at December 31, 2020

$

5,221

 

 

$

3,820

 

Obligations incurred during the period

 

28

 

 

 

26

 

Obligations settled during the period

 

(155

)

 

 

(131

)

Revisions in estimated cash flows(1)

 

80

 

 

 

67

 

Accretion

 

208

 

 

 

141

 

Sale of non-wholly-owned nonregulated solar facilities

 

(49

)

 

 

 

AROs at December 31, 2021(2)

$

5,333

 

 

$

3,923

 

Obligations incurred during the period

 

138

 

 

 

132

 

Obligations settled during the period

 

(125

)

 

 

(155

)

Revisions in estimated cash flows(3)

 

46

 

 

 

48

 

Accretion

 

210

 

 

 

145

 

Sales of Kewaunee and Hope

 

(175

)

 

 

 

AROs at December 31, 2022(2)

$

5,427

 

 

$

4,093

 
(1)
Reflects revisions to future ash pond and landfill closure costs at certain utility generation facilities, and additionally for Dominion Energy estimated cash flow projections associated with the recovery of spent nuclear fuel costs for its AROs associated with the decommissioning of Kewaunee and estimated cash flow projections associated with DESC's gas distribution pipelines. For Dominion Energy, these revisions in 2021 resulted in a charge of $44 million ($35 million after-tax) within other operations and maintenance expense in the Consolidated Statements of Income as well as a $25 million decrease to property, plant and equipment, net.
(2)
Includes $196 million and $365 million reported in other current liabilities for Dominion Energy at December 31, 2021 and 2022, respectively.
(3)
Primarily reflects revisions to asbestos abatement costs associated with the early retirement of certain retired electric generation facilities.

Dominion Energy’s AROs at December 31, 2022 and 2021, include $1.9 billion and $2.0 billion, respectively, with $0.9 billion and $0.9 billion recorded by Virginia Power, related to the future decommissioning of their nuclear facilities. The Companies have established trusts dedicated to funding the future decommissioning activities. At December 31, 2022 and 2021, the aggregate fair value of Dominion Energy’s trusts, consisting primarily of equity and debt securities, totaled $6.0 billion and $8.0 billion, respectively. At December 31, 2022 and 2021, the aggregate fair value of Virginia Power’s trusts, consisting primarily of debt and equity securities, totaled $3.2 billion and $3.7 billion, respectively.

In addition, AROs at December 31, 2022 and 2021 include $2.8 billion and $2.9 billion, respectively, related to Virginia Power’s future ash pond and landfill closure costs. Regulatory mechanisms, primarily associated with legislation enacted in Virginia in 2019, provide for recovery of costs to be incurred. See Note 12 for additional information.

 

79

 

NOTE 15. LEASES

At December 31, 2022 and 2021, the Companies had the following lease assets and liabilities recorded in the Consolidated Balance Sheets:

 

Dominion Energy

 

 

Virginia Power

 

At December 31,

2022

 

 

2021

 

 

2022

 

 

2021

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

Lease assets:

 

 

 

 

 

 

 

 

 

 

 

Operating lease assets(1)

$

415

 

 

$

506

 

 

$

294

 

 

$

256

 

Finance lease assets(2)

 

144

 

 

 

144

 

 

 

82

 

 

 

71

 

Total lease assets

$

559

 

 

$

650

 

 

$

376

 

 

$

327

 

Lease liabilities:

 

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities(3)

$

39

 

 

$

44

 

 

$

21

 

 

$

25

 

Finance lease liabilities(4)

 

46

 

 

 

36

 

 

 

17

 

 

 

13

 

Total lease liabilities - current

 

85

 

 

 

80

 

 

 

38

 

 

 

38

 

Operating lease liabilities (5)

 

514

 

 

 

464

 

 

 

273

 

 

 

227

 

Finance lease liabilities(6)

 

104

 

 

 

112

 

 

 

65

 

 

 

57

 

Total lease liabilities - noncurrent

 

618

 

 

 

576

 

 

 

338

 

 

 

284

 

Total lease liabilities

$

703

 

 

$

656

 

 

$

376

 

 

$

322

 
(1)
Dominion Energy includes $394 million and $479 million at December 31, 2022 and 2021, respectively, in other deferred charges and other assets, with the remaining balance in noncurrent assets held for sale, in its Consolidated Balance Sheets. Virginia Power's balances are included in other deferred charges and other assets in its Consolidated Balance Sheets.
(2)
Dominion Energy includes $127 million and $129 million at December 31, 2022 and 2021, respectively, in property, plant and equipment in its Consolidated Balance Sheets, net of $106 million and $77 million at December 31, 2022 and 2021, respectively, of accumulated amortization, with the remaining balance in noncurrent assets held for sale. Virginia Power's balances are included in property, plant and equipment in its Consolidated Balance Sheets, net of $33 million and $18 million at December 31, 2022 and 2021, respectively, of accumulated amortization.
(3)
Dominion Energy includes $34 million and $38 million at December 31, 2022 and 2021, respectively, in other current liabilities, with the remaining balance in current liabilities held for sale, in its Consolidated Balance Sheets. Virginia Power's balances are in other current liabilities in its Consolidated Balance Sheets.
(4)
Dominion Energy includes $42 million and $33 million at December 31, 2022 and 2021, respectively, in securities due within one year, with the remaining balance in current liabilities held for sale, in its Consolidated Balance Sheets. Virginia Power's balances are included in securities due within one year in its Consolidated Balance Sheets.
(5)
Dominion Energy includes $494 million and $439 million at December 31, 2022 and 2021, respectively, in other deferred credits and other liabilities, with the remaining balance in noncurrent liabilities held for sale, in its Consolidated Balance Sheets. Virginia Power's balances are included in other deferred credits and other liabilities in its Consolidated Balance Sheets.
(6)
Dominion Energy includes $91 million and $100 million at December 31, 2022 and 2021, respectively, in other long-term debt, with the remaining balance in noncurrent liabilities held for sale, in its Consolidated Balance Sheets. Virginia Power's balances are included in other long-term debt in its Consolidated Balance Sheets.

80

 

In addition to the amounts disclosed above, Dominion Energy’s Consolidated Balance Sheets at December 31, 2022 and 2021 include property, plant and equipment of $183 million and $1.2 billion, respectively, related to facilities subject to power purchase agreements under which Dominion Energy is the lessor. Accumulated depreciation related to these facilities was $106 million at December 31, 2021. There was no accumulated depreciation related to these facilities recorded in Dominion Energy’s Consolidated Balance Sheets at December 31, 2022.

For the years ended December 31, 2022, 2021 and 2020, total lease cost associated with the Companies’ leasing arrangements consisted of the following:

 

Dominion Energy

 

 

Virginia Power

 

Year ended December 31,

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance lease cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization(1)

$

41

 

 

$

40

 

 

$

33

 

 

$

15

 

 

$

12

 

 

$

7

 

Interest(2)

 

3

 

 

 

(3

)

 

 

—

 

 

 

3

 

 

 

1

 

 

 

1

 

Operating lease cost(3)

 

53

 

 

 

66

 

 

 

68

 

 

 

32

 

 

$

30

 

 

$

36

 

Short-term lease cost(4)

 

31

 

 

 

32

 

 

 

20

 

 

 

21

 

 

 

19

 

 

 

12

 

Variable lease cost

 

4

 

 

 

5

 

 

 

8

 

 

 

1

 

 

 

1

 

 

 

4

 

Total lease cost

$

132

 

 

$

140

 

 

$

129

 

 

$

72

 

 

$

63

 

 

$

60

 

 

(1)
Dominion Energy includes $3 million, $3 million and $2 million for the years ended December 31, 2022, 2021 and 2020, respectively, in discontinued operations in its Consolidated Statements of Income.
(2)
Dominion Energy includes $1 million for the year ended December 31, 2022 and less than $1 million for the years ended December 31, 2021 and 2020, respectively, in discontinued operations in its Consolidated Statements of Income.
(3)
Dominion Energy includes $6 million, $8 million and $8 million for the years ended December 31, 2022, 2021 and 2020, respectively, in discontinued operations in its Consolidated Statements of Income.
(4)
Dominion Energy includes $2 million, $2 million and $1 million for the years ended December 31, 2022, 2021 and 2020, respectively, in discontinued operations in its Consolidated Statements of Income.

For the years ended December 31, 2022, 2021 and 2020, 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:

 

Dominion Energy

 

 

Virginia Power

 

Year ended December 31,

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows for
   finance leases

$

3

 

 

$

(3

)

 

$

—

 

 

$

3

 

 

$

1

 

 

$

1

 

Operating cash flows for
   operating leases

 

82

 

 

 

103

 

 

 

96

 

 

 

50

 

 

 

53

 

 

 

52

 

Financing cash flows for
   finance leases

 

32

 

 

 

40

 

 

 

33

 

 

 

12

 

 

 

12

 

 

 

7

 

In addition to the amounts disclosed above, Dominion Energy’s Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020, include $16 million, $168 million and $175 million, respectively, of rental revenue, included in operating revenue and $34 million, $110 million and $102 million, respectively, of depreciation expense, included in depreciation, depletion and amortization, related to facilities subject to power purchase agreements under which Dominion Energy is the lessor.

81

 

At December 31, 2022 and 2021, the weighted average remaining lease term and weighted discount rate for the Companies’ finance and operating leases were as follows:

 

Dominion Energy

 

 

Virginia Power

 

December 31,

2022

 

 

2021

 

 

2022

 

 

2021

 

Weighted average remaining lease term -
   finance leases

4 years

 

 

5 years

 

 

6 years

 

 

6 years

 

Weighted average remaining lease term -
   operating leases

29 years

 

 

27 years

 

 

30 years

 

 

25 years

 

Weighted average discount rate -
   finance leases

 

5.77

%

 

 

2.77

%

 

 

6.12

%

 

 

2.27

%

Weighted average discount rate -
   operating leases

 

3.91

%

 

 

3.96

%

 

 

3.90

%

 

 

4.00

%

The Companies’ lease liabilities have the following maturities:

 

Maturity of Lease Liabilities

 

Dominion Energy

 

 

Virginia Power

 

(millions)

 

Operating

 

 

Finance

 

 

Operating

 

 

Finance

 

2023

 

$

44

 

 

$

52

 

 

$

23

 

 

$

21

 

2024

 

 

36

 

 

 

45

 

 

 

19

 

 

 

20

 

2025

 

 

30

 

 

 

25

 

 

 

15

 

 

 

17

 

2026

 

 

27

 

 

 

20

 

 

 

12

 

 

 

14

 

2027

 

 

25

 

 

 

14

 

 

 

10

 

 

 

11

 

After 2027

 

 

642

 

 

 

15

 

 

 

314

 

 

 

13

 

Total undiscounted lease payments

 

 

804

 

 

 

171

 

 

 

393

 

 

 

96

 

Present value adjustment

 

 

(251

)

 

 

(21

)

 

 

(99

)

 

 

(14

)

Present value of lease liabilities

 

$

553

 

 

$

150

 

 

$

294

 

 

$

82

 

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 $465 million, to fund the estimated project costs. In March 2021, Dominion Energy notified the lessor of its intention to terminate the leasing arrangement effective April 2021. As a result, Dominion Energy recorded a charge of $62 million ($46 million after-tax) in 2021, included in impairment of assets and other charges (reflected in the Corporate and Other segment) in its Consolidated Statements of Income, primarily for amounts required to be repaid to the lessor.

Offshore Wind Vessel Leasing Arrangement

 

In December 2020, Dominion Energy signed an agreement (subsequently amended in December 2022) 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 ready for the 2024 offshore wind turbine installation season. Dominion Energy has been appointed to act as the construction agent for the lessor, during which time Dominion Energy will request cash draws from the lessor and debt investors to fund all project costs, which totaled $334 million as of December 31, 2022. If the project is terminated under certain events of default, Dominion Energy could be required to pay up to 100% of the then funded amount.

 

The initial lease term will commence once construction is substantially complete and the vessel is delivered and will mature in November 2027. At the end of the initial lease term, Dominion Energy can (i) extend the term of the lease for an additional term, subject to the approval of the participants, at current market terms, (ii) purchase the property for an amount equal to the outstanding project costs or, (iii) subject to certain terms and conditions, sell the property on behalf of the lessor to a third party using commercially reasonable efforts to obtain the highest cash purchase price for the property. If the project is sold and the proceeds from the sale are insufficient to repay the investors for the outstanding project costs, Dominion Energy may be required to make a payment to the lessor for the difference between the outstanding project costs and sale proceeds. Dominion Energy is not considered the owner during construction for financial accounting purposes and, therefore, will not reflect the construction activity in its consolidated financial statements. Dominion Energy expects to recognize a right-of-use asset and a corresponding finance lease liability at the commencement of the lease term. Dominion Energy will be considered the owner of the leased property for tax purposes, and as a result, will be entitled to tax deductions for depreciation and interest expense.

82

 

 

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

At December 31, 2022, Dominion Energy owns a 50% membership interest in Cove Point, as discussed in Notes 3 and 9. Dominion Energy concluded that Cove Point is a VIE due to the limited partners lacking the characteristics of a controlling financial interest. As a result of the GT&S Transaction, effective November 1, 2020, Dominion Energy is no longer the primary beneficiary of Cove Point as BHE retains the power to direct the activities that most significantly impact Cove Point’s economic performance. Dominion Energy’s maximum exposure to loss is limited to its current and future investment, as well as any obligations under guarantees provided. See Note 23 for additional information.

At December 31, 2022, Dominion Energy owns a 53% membership interest in Atlantic Coast Pipeline. Dominion Energy concluded that Atlantic Coast Pipeline is a VIE because it has insufficient equity to finance its activities without additional subordinated financial support. Dominion Energy has concluded that it is not the primary beneficiary of Atlantic Coast Pipeline as it does not have the power to direct the activities of Atlantic Coast Pipeline that most significantly impact its economic performance, as the power to direct is shared with Duke Energy. Dominion Energy is obligated to provide capital contributions based on its ownership percentage. Dominion Energy’s maximum exposure to loss is limited to any future investment. See Note 9 for additional details regarding the nature of this entity.

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 additional 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 purchased shared services from DES, an affiliated VIE, of $396 million, $380 million and $349 million for the years ended December 31, 2022, 2021 and 2020, respectively. Virginia Power’s Consolidated Balance Sheets included amounts due to DES of $28 million at December 31, 2022, and $20 million at December 31, 2021, respectively, recorded in payables to affiliates in the Consolidated Balance Sheets. Virginia Power determined that it is not the primary beneficiary of DES as it does not have power to direct the activities that most significantly impact its economic performance as well as the obligation to absorb losses and benefits which could be significant to it. DES provides accounting, legal, finance and certain administrative and technical services to all Dominion Energy subsidiaries, including Virginia Power. Virginia Power has no obligation to absorb more than its allocated share of DES costs.

83

 

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

Dominion Energy’s short-term financing is supported by its $6.0 billion joint revolving credit facility that 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. 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, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Joint revolving credit facility(2)

 

$

6,000

 

 

$

3,076

 

 

$

202

 

 

$

2,722

 

At December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Joint revolving credit facility(2)

 

$

6,000

 

 

$

1,883

 

 

$

131

 

 

$

3,986

 
(1)
The weighted-average interest rates of the outstanding commercial paper supported by Dominion Energy’s credit facility was 4.73% and 0.31% at December 31, 2022 and 2021, respectively.
(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.

 

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, 2022, the sub-limits for DESC and Questar Gas were $500 million and $250 million, respectively.

 

In March 2021, FERC granted DESC authority through March 2023 to issue short-term indebtedness (pursuant to Section 204 of the Federal Power Act) in amounts not to exceed $2.2 billion outstanding with maturity dates of one year or less. In addition, in March 2021, FERC granted GENCO authority through March 2023 to issue short-term indebtedness not to exceed $200 million outstanding with maturity dates of one year or less. In January 2023, DESC and GENCO applied to FERC for a two-year short-term borrowing authorization. The applications are pending.

 

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 approximately $30 million in letters of credit and was scheduled to mature in June 2022. In April 2022, Dominion Energy entered into an agreement to amend and restate this facility to extend the maturity date to June 2025. In May 2022, Dominion Energy further amended and restated this facility to have a maturity date of June 2024. At December 31, 2022 and 2021, Dominion Energy had $25 million and $29 million in letters of credit outstanding under this facility, respectively.

In December 2021, in connection with the sale of certain non-wholly owned nonregulated solar facilities, as discussed in Note 10, SBL Holdco terminated $30 million of credit facilities and Dominion Solar Projects III, Inc. terminated $25 million of credit facilities.

 

In July 2021, Dominion Energy entered into an approximately $1.3 billion term loan credit agreement following the termination of the Q-Pipe Transaction as discussed in Note 3 and borrowed the full amount available thereunder. The term loan was scheduled to mature in December 2021, with the ability to extend maturity at Dominion Energy’s option to June 2022 and bore interest at a variable rate. The proceeds were utilized to repay the deposit received from BHE on the Q-Pipe Transaction. In December 2021, Dominion Energy used the net proceeds from the completion of the sale of the Q-Pipe Group to Southwest Gas to repay the principal outstanding under the term loan plus accrued interest.

 

In December 2021, DECP Holdings entered into a credit facility, which allows it to issue up to $110 million in letters of credit with automatic one-year renewals through the maturity of the facility in December 2024. At both December 31, 2022 and 2021, $110 million in letters of credit were outstanding under this agreement with no amounts drawn under the letters of credit.

Dominion Energy has an effective shelf 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.

84

 

At December 31, 2022 and December 31, 2021, Dominion Energy’s Consolidated Balance Sheets include $347 million and $431 million, respectively, presented within short-term debt with weighted-average interest rates of 4.24% and 1.25%, respectively. The proceeds are used for general corporate purposes and to repay debt.

In January 2023, Dominion Energy entered into a $2.5 billion 364-Day term loan facility which bears interest at a variable rate and will mature in January 2024 with the proceeds to be used to repay existing long-term debt and short-term debt upon maturity and for other general corporate purposes. Concurrently, Dominion Energy borrowed an initial $1.0 billion with the proceeds used to repay long-term debt. The maximum allowed total debt to total capital ratio under the facility is consistent with such allowed ratio under Dominion Energy’s joint revolving credit facility. Dominion Energy may make up to two additional borrowings under this agreement through March 31, 2023, at which point any unused capacity will cease to be available to Dominion Energy.

Virginia Power

Virginia Power’s short-term financing is supported through its access as co-borrower to Dominion Energy’s $6.0 billion joint revolving credit facility. The credit facility can be used for working capital, as support for the combined commercial paper programs of the borrowers under the credit facility and for other general corporate purposes.

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, 2022

 

 

 

 

 

 

 

 

 

Joint revolving credit facility(2)

 

$

6,000

 

 

$

941

 

 

$

140

 

At December 31, 2021

 

 

 

 

 

 

 

 

 

Joint revolving credit facility(2)

 

$

6,000

 

 

$

745

 

 

$

40

 
(1)
The weighted-average interest rates of the outstanding commercial paper supported by the credit facility was 4.68% and 0.26% at December 31, 2022 and 2021, respectively.
(2)
The full amount of the facility is available to Virginia Power, less any amounts outstanding to co-borrowers Dominion Energy, Questar Gas and DESC. The sub-limit for Virginia Power is set pursuant to the terms of the facility but can be changed at the option of the borrowers multiple times per year. At December 31, 2022, the sub-limit for Virginia Power was $1.75 billion. If Virginia Power has liquidity needs in excess of its sub-limit, the sub-limit may be changed or such needs may be satisfied through short-term intercompany borrowings from Dominion Energy. This credit facility matures in June 2026, with the potential to be extended by the borrowers to June 2028. The credit facility can be used to support bank borrowings and the issuance of commercial paper, as well as to support up to $2.0 billion (or the sub-limit, whichever is less) of letters of credit.

In January 2023, Virginia Power entered into a letter of credit facility which allows Virginia Power to issue up to $125 million in letters of credit and matures in January 2026. Through February 2023, less than $1 million in letters of credit were issued and outstanding under this facility with no amounts drawn under the letters of credit.

85

 

 

NOTE 18. LONG-TERM DEBT

 

 

 

2022
Weighted-
average
Coupon(1)

 

 

 

Dominion Energy

 

 

Virginia Power

 

At December 31,

 

 

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

(millions, except percentages)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sustainability Revolving Credit Agreement, variable rate, due 2024(2)

 

 

5.24

%

 

 

$

450

 

 

$

—

 

 

 

 

 

 

 

Unsecured Senior Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable rate, due 2023

 

 

5.30

%

 

 

 

1,000

 

 

 

1,000

 

 

 

 

 

 

 

1.45% to 7.0%, due 2022 to 2052(3)(4)

 

 

4.01

%

 

 

 

12,476

 

 

 

11,238

 

 

 

 

 

 

 

Unsecured Junior Subordinated Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.071% due 2024

 

 

3.07

%

 

 

 

700

 

 

 

700

 

 

 

 

 

 

 

Payable to Affiliated Trust, 8.4%, due 2031

 

 

8.40

%

 

 

 

10

 

 

 

10

 

 

 

 

 

 

 

Enhanced Junior Subordinated Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5.75% due 2054

 

 

5.75

%

 

 

 

685

 

 

 

685

 

 

 

 

 

 

 

Virginia Electric and Power Company:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured Senior Notes, 2.30% to 8.875%, due 2022 to 2052

 

 

3.99

%

 

 

 

15,135

 

 

 

13,238

 

 

$

15,135

 

 

$

13,238

 

Tax-Exempt Financings, 0.75% to 1.90%, due 2032 to 2041(5)

 

 

1.32

%

 

 

 

625

 

 

 

625

 

 

 

625

 

 

 

625

 

DECP Holdings, Term Loan, variable rate, due 2024(6)

 

 

5.71

%

 

 

 

2,349

 

 

 

2,500

 

 

 

 

 

 

 

DESC:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Mortgage Bonds, 2.30% to 6.625%, due 2028 to 2065

 

 

5.09

%

 

 

 

3,634

 

 

 

3,634

 

 

 

 

 

 

 

Tax-Exempt Financings(7):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable rate due 2038

 

 

3.70

%

 

 

 

35

 

 

 

35

 

 

 

 

 

 

 

3.625% and 4.00%, due 2028 and 2033

 

 

3.90

%

 

 

 

54

 

 

 

54

 

 

 

 

 

 

 

GENCO, variable rate due 2038

 

 

3.70

%

 

 

 

33

 

 

 

33

 

 

 

 

 

 

 

Other

 

 

3.63

%

 

 

 

1

 

 

 

1

 

 

 

 

 

 

 

Secured Senior Notes, 4.82%, due 2042(8)

 

 

4.82

%

 

 

 

308

 

 

 

314

 

 

 

 

 

 

 

Tax-Exempt Financing, 3.8% due 2033

 

 

3.80

%

 

 

 

27

 

 

 

27

 

 

 

 

 

 

 

Total Principal

 

 

 

 

 

$

37,522

 

 

$

34,094

 

 

$

15,760

 

 

$

13,863

 

Fair value hedge valuation(9)

 

 

 

 

 

 

—

 

 

 

2

 

 

 

 

 

 

 

Securities due within one year(10)

 

 

 

 

 

 

(2,848

)

 

 

(805

)

 

 

(700

)

 

 

(300

)

Unamortized discount, premium and debt issuance costs, net

 

 

 

 

 

 

(322

)

 

 

(282

)

 

 

(144

)

 

 

(110

)

Derivative restructuring(11)

 

 

 

 

 

 

141

 

 

 

738

 

 

 

—

 

 

 

446

 

Finance leases

 

 

 

 

 

 

91

 

 

 

100

 

 

 

65

 

 

 

57

 

Total long-term debt

 

 

 

 

 

$

34,584

 

 

$

33,847

 

 

$

14,981

 

 

$

13,956

 

 

(1)
Represents weighted-average coupon rates for debt outstanding as of December 31, 2022.
(2)
This $900 million supplemental credit facility, entered in June 2021, 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 also may be used for general corporate purposes, but such proceeds are not eligible for a reduced interest rate margin. In June 2021 and August 2021, Dominion Energy borrowed $250 million and $650 million respectively. The proceeds from these borrowings were used to support environmental sustainability and social investment initiatives ($250 million) and for general corporate purposes ($650 million). In November 2021 and December 2021, Dominion Energy repaid $650 million and $250 million, respectively, borrowed under this arrangement. In May 2022, Dominion Energy borrowed $900 million. The proceeds from these borrowings were used to support environmental sustainability and social investment initiatives ($450 million) and for general corporate purposes ($450 million). In June 2022, Dominion Energy repaid $450 million borrowed for general corporate purposes.
(3)
Includes debt assumed by Dominion Energy from the merger of its former CNG subsidiary.
(4)
In 2022, Dominion Energy repurchased $263 million of senior notes with various interest rates and maturity dates. Gains related to the early redemption of the senior notes were $35 million ($26 million after-tax) reflected within interest and related charges in Dominion Energy’s Consolidated Statements of Income.
(5)
These financings relate to certain pollution control equipment at Virginia Power’s generating facilities.
(6)
The term loan amortizes over a 17-year period and matures in December 2024 with the potential to be extended to December 2026. The debt is secured by DECP Holdings’ noncontrolling interest in Cove Point.
(7)
Industrial revenue bonds totaling $68 million are secured by letters of credit that expire, subject to renewal, in the fourth quarter of 2023.
(8)
Represents debt associated with Eagle Solar. The debt is nonrecourse to Dominion Energy and is secured by Eagle Solar’s interest in certain solar facilities.
(9)
Represents the valuation of certain fair value hedges associated with Dominion Energy’s fixed rate debt.
(10)
Dominion Energy and Virginia Power's weighted-average rate for securities due within one year was 3.69% and 2.75%, respectively, as of December 31, 2022.
(11)
Excludes $447 million at December 31, 2022 for both Dominion Energy and Virginia Power, representing the current portion which is presented within securities due within one year in the Companies’ Consolidated Balance Sheets. The Companies did not have any current derivative restructuring balances at December 31, 2021.

86

 

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, 2022 were as follows:

 

 

2023

 

2024

 

2025

 

2026

 

2027

 

Thereafter

 

Total

 

(millions, except percentages)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dominion Energy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loans

$

134

 

$

2,215

 

$

—

 

$

—

 

$

—

 

$

—

 

$

2,349

 

Sustainability Revolving Credit
   Agreement

 

—

 

 

450

 

 

—

 

 

—

 

 

—

 

 

—

 

 

450

 

First Mortgage Bonds

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

3,634

 

 

3,634

 

Unsecured Senior Notes

 

2,700

 

 

650

 

 

1,500

 

 

2,120

 

 

1,783

 

 

19,859

 

 

28,612

 

Secured Senior Notes

 

17

 

 

31

 

 

19

 

 

20

 

 

21

 

 

200

 

 

308

 

Tax-Exempt Financings

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

774

 

 

774

 

Unsecured Junior Subordinated
   Notes Payable to Affiliated
   Trusts

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

10

 

 

10

 

Unsecured Junior Subordinated
   Notes

 

—

 

 

700

 

 

—

 

 

—

 

 

—

 

 

—

 

 

700

 

Enhanced Junior Subordinated
   Notes

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

685

 

 

685

 

Total

$

2,851

 

$

4,046

 

$

1,519

 

$

2,140

 

$

1,804

 

$

25,162

 

$

37,522

 

Weighted-average Coupon

 

3.69

%

 

4.81

%

 

3.01

%

 

2.84

%

 

3.74

%

 

4.34

%

 

 

Virginia Power

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured Senior Notes

$

700

 

$

350

 

$

350

 

$

1,150

 

$

1,350

 

$

11,235

 

$

15,135

 

Tax-Exempt Financings

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

625

 

 

625

 

Total

$

700

 

$

350

 

$

350

 

$

1,150

 

$

1,350

 

$

11,860

 

$

15,760

 

Weighted-average Coupon

 

2.75

%

 

3.45

%

 

3.10

%

 

3.08

%

 

3.61

%

 

4.10

%

 

 

 

The Companies’ credit facilities and debt agreements, both short-term and long-term, contain customary covenants and default provisions. As of December 31, 2022, there were no events of default under these covenants.

Enhanced Junior Subordinated Notes

In October 2014, Dominion Energy issued $685 million of October 2014 hybrids that will bear interest at 5.75% per year until October 1, 2024. Thereafter, assuming three-month LIBOR has been terminated and the October 2014 hybrids remain outstanding, interest will accrue at a SOFR-based rate selected by, and subject to any spread adjustment or other benchmark conforming changes implemented by, the Board of Governors of the Federal Reserve in accordance with the Adjustable Interest Rate (LIBOR) Act of 2022.

In July 2016, Dominion Energy issued $800 million of 5.25% July 2016 hybrids. In August 2021, Dominion Energy redeemed the remaining principal outstanding of $800 million of its July 2016 hybrids, which would have otherwise matured in 2076 and were listed on the NYSE under the symbol DRUA. Expenses related to the early redemption of the hybrids were $23 million reflected within interest and related charges in the Consolidated Statements of Income for the year ended December 31, 2021.

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.

Derivative Restructuring

 

In June 2020, Dominion Energy amended a portfolio of interest rate swaps with a notional value of $2.0 billion, extending the mandatory termination dates from 2020 and 2021 to December 2024. As a result of this noncash financing activity with an embedded interest rate swap, Dominion Energy recorded $326 million in other long-term debt representing the net present value of the initial fair value measurement of the new contract with an imputed interest rate of 1.19%, in its Consolidated Balance Sheets with an embedded interest rate derivative that had a fair value of zero at inception. In August 2021, Dominion Energy settled certain of the outstanding interest rate swaps which would have otherwise matured in December 2024, resulting in a $39 million reduction in other long-term debt.

87

 

In August 2022, Dominion Energy settled certain of the outstanding interest rate swaps which would have otherwise matured in December 2024, resulting in a $154 million reduction in other long-term debt.

 

In August 2020, Virginia Power amended a portfolio of interest rate swaps with a notional value of $900 million, extending the mandatory termination dates from 2020 to December 2023. As a result of this noncash financing activity with an embedded interest rate swap, Virginia Power recorded $443 million in other long-term debt representing the net present value of the initial fair value measurement of the new contract with an imputed interest rate of 0.34%, in its Consolidated Balance Sheets with an embedded interest rate derivative that had a fair value of zero at inception. The interest rate swaps were in a hedge relationship prior to the transaction. Virginia Power de-designated the hedge relationships prior to the transaction and then designated the new interest rate swap in a hedge relationship after the transaction.

 

NOTE 19. PREFERRED STOCK

Dominion Energy is authorized to issue up to 20 million shares of preferred stock, which may be designated into separate classes. At December 31, 2022, Dominion Energy had issued and outstanding 1.8 million shares preferred stock, 0.8 million and 1.0 million of which were designated as the Series B Preferred Stock and the Series C Preferred Stock, respectively. At December 31, 2021, Dominion Energy had issued and outstanding 3.4 million shares of preferred stock, 1.6 million, 0.8 million and 1.0 million of which were designated as the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock, respectively.

DESC is authorized to issue up to 20 million shares of preferred stock. At both December 31, 2022 and 2021, DESC had issued and outstanding 1,000 shares of preferred stock, all of which were held by SCANA and are eliminated in consolidation.

Virginia Power is authorized to issue up to 10 million shares of preferred stock, $100 liquidation preference; however, none were issued and outstanding at December 31, 2022 or 2021.

 

2019 Corporate Units

In June 2019, Dominion Energy issued $1.6 billion of 2019 Equity Units, initially in the form of 2019 Series A Corporate Units. The Corporate Units were listed on the NYSE under the symbol DCUE. The net proceeds were used for general corporate purposes and to repay short-term debt, including commercial paper.

Each 2019 Series A Corporate Unit consisted of a stock purchase contract and a 1/10, or 10%, undivided beneficial ownership interest in one share of Series A Preferred Stock. Beginning in June 2022, the Series A Preferred Stock was convertible at the option of the holder. Settlement of any conversion was initially payable in cash, common stock or a combination thereof, at Dominion Energy’s election. In November 2021, Dominion Energy’s Articles of Incorporation were amended to require that any conversion of its Series A Preferred Stock be settled, at Dominion Energy’s election, either entirely in cash or in cash up to the first $1,000 per share and in shares of Dominion Energy common stock, cash or any combination thereof for any amounts in excess of $1,000 per share. As a result of establishing a minimum amount to be settled in cash if the holders elect to convert the Series A Preferred Stock, $1.6 billion was reclassified from equity to mezzanine equity in 2021. The Series A Preferred Stock was redeemable in cash by Dominion Energy beginning September 2022 at the liquidation preference.

The stock purchase contracts obligated the holders to purchase shares of Dominion Energy common stock in June 2022. The purchase price paid under the stock purchase contracts was $100 per Corporate Unit and the number of shares purchased was determined under a formula based upon the average closing price of Dominion Energy common stock near the settlement date. See Note 20 for additional information. The Series A Preferred Stock had been pledged upon issuance as collateral to secure the purchase of common stock under the related stock purchase contracts. Dominion Energy paid cumulative dividends on the Series A Preferred Stock and quarterly contract adjustment payments on the stock purchase contracts, at the rates described below.

Pursuant to the terms of the 2019 Equity Units, Dominion Energy conducted a final remarketing of substantially all shares of Series A Preferred Stock in May 2022 which resulted in the dividend rate for all shares of Series A Preferred Stock being reset to 1.75% for the June 2022 through August 2022 dividend period and 6.75% effective September 2022. The conversion rate on the Series A Preferred Stock did not increase as a result of the remarketing. In May 2022, Dominion Energy received a commitment from a financial institution to purchase up to 1.6 million shares of the Series A Preferred Stock in the final remarketing. Accordingly, following the settlement of the successful remarketing and approval from its Board of Directors in June 2022, Dominion Energy became obligated to redeem all outstanding shares of Series A Preferred Stock in September 2022. As such, effective June 2022, the Series A Preferred Stock was considered to be mandatorily redeemable and was classified as a current liability. In addition, Dominion Energy made a short-term deposit at the financial institution as described further in Note 9. Proceeds from the final remarketing were used on behalf of holders of 2019 Series A Corporate Units at the time of the remarketing to pay the purchase price to Dominion Energy for the issuance of its common stock under the stock purchase contracts included in such corporate units in June 2022. In September 2022, Dominion Energy redeemed all outstanding shares of Series A Preferred Stock for $1.6 billion.

Selected information about Dominion Energy’s 2019 Equity Units is presented below:

 

88

 

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

 

16

 

$

1,582

 

 

$

1,610

 

 

 

1.75

%

 

 

5.5

%

 

$

250

 

 

6/1/2022

 

(1)
Issuance costs of $28 million were recorded as a reduction to preferred stock ($14 million) and common stock ($14 million). In connection with the reclassification of the Series A Preferred Stock to mezzanine equity in 2021, the issuance costs originally recognized as a reduction to preferred stock were reclassified to common stock.
(2)
Dominion Energy recorded dividends of $12 million ($7.292 per share), $28 million ($17.50 per share) and $28 million ($17.50 per share) for the years ended December 31, 2022, 2021 and 2020, respectively. In addition, Dominion Energy recorded interest expense of $7 million on the Series A Preferred Stock for the year ended December 31, 2022, following the reclassification of these shares to a mandatorily redeemable liability effective June 2022 as discussed above.
(3)
Payments of $44 million, $85 million and $83 million were made in 2022, 2021 and 2020, respectively. The stock purchase contract liability was $44 million at December 31, 2021.

 

 

Series B Preferred Stock

In December 2019, Dominion Energy issued 800,000 shares of Series B Preferred Stock for $791 million, net of $9 million of issuance costs. The preferred stock has a liquidation preference of $1,000 per share and currently pays a 4.65% dividend per share on the liquidation preference. Dividends are paid cumulatively on a semi-annual basis, commencing June 15, 2020. Dominion Energy recorded dividends of $37 million ($46.50 per share) for each of the years ended December 31, 2022, 2021 and 2020. The dividend rate for the Series B Preferred Stock will be reset every five years beginning on December 15, 2024 to equal the then-current five-year U.S. Treasury rate plus a spread of 2.993%. Unless all accumulated and unpaid dividends on the Series B 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 B Preferred Stock as to dividends or upon liquidation, including through dividends, redemptions, repurchases or otherwise.

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 $1,000 per share plus any accumulated and unpaid dividends. Dominion Energy may also, at its option, redeem the Series B Preferred Stock in whole but not in part at a price equal to $1,020 per share plus any accumulated and unpaid dividends at any time within a certain period of time following any change in the criteria ratings agencies use to assign equity credit to securities such as the Series B Preferred Stock that has certain adverse effects on the equity credit actually received by the Series B Preferred Stock.

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 750,000 shares of Series C Preferred Stock for $742 million, net of $8 million 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 benefit pension plans. See Note 22 for further information regarding activity surrounding pension plan contributions. The preferred stock has a liquidation preference of $1,000 per share and currently pays a 4.35% dividend per share on the liquidation preference. Dividends are paid cumulatively on a semi-annual basis, commencing April 15, 2022. Dominion Energy recorded dividends of $44 million ($43.50 per share) and $3 million ($2.6583 per share) and for the years ended December 31, 2022 and 2021, respectively. The dividend rate for the Series C Preferred Stock will be reset every five years beginning on April 15, 2027 to equal the then-current five-year U.S. Treasury rate plus a spread of 3.195%. Unless all accumulated and unpaid dividends on the Series C 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 C Preferred Stock as to dividends or upon liquidation, including through dividends, redemptions, repurchases or otherwise.

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 $1,000 per share plus any accumulated and unpaid dividends. Dominion Energy may also, at its option, redeem the Series C Preferred Stock in whole but not in part at a price equal to $1,020 per share plus any accumulated and unpaid dividends at any time within a certain period of time following any change in the criteria ratings agencies use to assign equity credit to securities such as the Series C Preferred Stock that has certain adverse effects on the equity credit actually received by the Series C Preferred Stock.

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.

89

 

NOTE 20. EQUITY

Common Stock

Dominion Energy

During 2022, 2021 and 2020, Dominion Energy recorded, net of fees and commissions, $2.0 billion, $340 million and $481 million from the issuance of approximately 25 million, 4 million and 7 million shares of common stock, respectively, as described below.

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 $159 million from the issuance of 2.1 million of such shares through Dominion Energy Direct® and employee savings plans. In January 2021, Dominion Energy began issuing new shares of common stock for these direct stock purchase plans. During 2022 and 2021, Dominion Energy issued 2.4 million and 2.6 million, respectively, of such shares and received proceeds of $179 million and $192 million, respectively.

At-the-Market Program

In March 2020, Dominion Energy entered into sales agency agreements to effect sales under a $500 million at-the-market common stock program. Dominion Energy did not issue any shares under this program which expired in June 2020.

 

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 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 initial forward price of $74.66 per share. Except in certain circumstances, Dominion Energy could have elected physical, cash or net settlement of the forward sale agreements. In November 2022, Dominion Energy provided notice to elect physical settlement of the forward sale agreements and in December 2022 received total proceeds of $78 million.

Other Issuances

In August 2021, Dominion Energy issued 0.6 million shares of its common stock, valued at $45 million, to satisfy DESC’s obligation for the initial payment under a settlement agreement with the SCDOR discussed in Note 23. In May 2022, Dominion Energy issued 0.9 million shares of its common stock, valued at $72 million, to partially satisfy DESC’s remaining obligation under the settlement agreement.

 

In June 2022, Dominion Energy issued 0.4 million shares of its common stock, valued at $30 million, to partially satisfy its obligation under a settlement agreement for the State Court Merger Case discussed in Note 23.

 

In June 2022, Dominion Energy issued 19.4 million shares of its common stock to settle the stock purchase contract component of the 2019 Equity Units, as discussed in Note 19, and received proceeds of $1.6 billion.

 

In July 2021, Dominion Energy issued 1.4 million shares of its common stock, valued at $104 million, to satisfy DESC’s obligation under a settlement agreement for the FILOT litigation discussed in Note 23.

 

In September 2020, Dominion Energy issued 4.1 million shares of its common stock to satisfy its obligation under a settlement agreement for the Santee Cooper Ratepayer Case discussed in Note 23. These shares were immediately repurchased as discussed below.

Repurchase of Common Stock
 

Dominion Energy did not repurchase any shares in 2022 or 2021, except for shares tendered by employees to satisfy tax withholding obligations on vested restricted stock, which do not count against its stock repurchase authorization. During 2020, Dominion Energy repurchased 38.9 million shares of Dominion Energy common stock for $3.1 billion through an open market agreement, a private transaction and accelerated share repurchase agreements as discussed below.

 

90

 

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 $3.0 billion of Dominion Energy’s common stock and rescinded its prior repurchase authorization approved in February 2005 and modified in June 2007. Dominion Energy completed repurchases under this authorization in December 2020. In November 2020, the Board of Directors authorized the repurchase of up to $1.0 billion of Dominion Energy’s common stock in addition to the repurchase program authorized in July 2020. 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.

 

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 7.2 million shares of Dominion Energy common stock for $562 million. During the fourth quarter of 2020, Dominion Energy repurchased 3.7 million shares of Dominion Energy common stock for $295 million.

 

In September 2020, Dominion Energy repurchased 4.1 million shares of Dominion Energy common stock in a private transaction for $323 million.

 

In September 2020, Dominion Energy entered into two prepaid accelerated share repurchase agreements with separate financial institutions as counterparties. Dominion Energy made payments totaling $1.5 billion to the counterparties in exchange for an aggregate of 17.2 million shares of Dominion Energy common stock, which represented approximately 90% of $1.5 billion worth of Dominion Energy shares based on the closing price of such shares on the date the agreements were executed. In November 2020, Dominion Energy received an additional 1.4 million shares upon completion of the respective purchase periods under the terms of the agreements. The number of additional shares delivered under each agreement was based on the average of the daily volume-weighted average stock prices of Dominion Energy’s common stock during the term of the applicable purchase period, less a discount. As a result, Dominion Energy recorded a reduction to common stock of $1.5 billion.


In December 2020, Dominion Energy entered into a new prepaid accelerated share repurchase agreement with one financial institution as the counterparty. Dominion Energy paid $400 million to the counterparty in exchange for an aggregate of 5.0 million shares of Dominion Energy common stock, which represented all $400 million worth of Dominion Energy shares based on the closing price of such shares on the date the agreement was executed. In December 2020, Dominion Energy received an additional 0.3 million shares upon completion of the purchase period under the terms of the agreement. The number of additional shares was based on the average of the daily volume-weighted average stock prices of Dominion Energy’s common stock during the term of the purchase period, less a discount. As a result, Dominion Energy recorded a reduction to common stock of $400 million.

Virginia Power

In 2022, 2021 and 2020, 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 25% controlling interest in Cove Point to BHE resulting in Dominion Energy’s remaining 50% noncontrolling interest accounted for as an equity method investment prospectively. As a result, the $1.4 billion of noncontrolling interest related to the 25% interest in Cove Point held by Brookfield was reversed. See Notes 3 and 9 for further information on the GT&S Transaction and Dominion Energy’s equity method investment in Cove Point.

Non-Wholly-Owned Nonregulated Solar Facilities

In December 2021, Dominion Energy completed the sale of SBL Holdco, which held Dominion Energy’s 67% controlling interest in certain nonregulated solar projects, and the sale of its 50% controlling interest in Four Brothers and Three Cedars. As a result of these sales, all balances recorded as noncontrolling interests associated with these entities were written off. See Note 10 for more information.

91

 

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

 

 

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, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

—

 

 

$

(358

)

 

$

(358

)

 

$

37

 

 

$

(1,133

)

 

$

(4

)

 

$

(1,458

)

Other
   comprehensive
   income before
   reclassifications:
   gains (losses)

 

 

—

 

 

 

67

 

 

 

67

 

 

 

(100

)

 

 

(218

)

 

 

1

 

 

 

(250

)

Amounts reclassified from AOCI (gains) losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and
   related
   charges

 

 

—

 

 

 

57

 

 

 

57

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

57

 

Other income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

25

 

 

 

102

 

 

 

—

 

 

 

127

 

Total

 

 

—

 

 

 

57

 

 

 

57

 

 

 

25

 

 

 

102

 

 

 

—

 

 

 

184

 

Income tax
   expense

 

 

—

 

 

 

(15

)

 

 

(15

)

 

 

(6

)

 

 

(27

)

 

 

—

 

 

 

(48

)

Total, net of tax

 

 

—

 

 

 

42

 

 

 

42

 

 

 

19

 

 

 

75

 

 

 

—

 

 

 

136

 

Net current
   period other
   comprehensive
   income (loss)

 

 

—

 

 

 

109

 

 

 

109

 

 

 

(81

)

 

 

(143

)

 

 

1

 

 

 

(114

)

Ending balance

 

$

—

 

 

$

(249

)

 

$

(249

)

 

$

(44

)

 

$

(1,276

)

 

$

(3

)

 

$

(1,572

)

Year Ended December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(1

)

 

$

(418

)

 

$

(419

)

 

$

62

 

 

$

(1,359

)

 

$

(1

)

 

$

(1,717

)

Other
   comprehensive
   income before
   reclassifications:
   gains (losses)

 

 

—

 

 

 

15

 

 

 

15

 

 

 

(7

)

 

 

144

 

 

 

(3

)

 

 

149

 

Amounts reclassified from AOCI (gains) losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchased gas

 

 

1

 

 

 

—

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Interest and
   related
   charges

 

 

—

 

 

 

60

 

 

 

60

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

60

 

Other income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(23

)

 

 

111

 

 

 

—

 

 

 

88

 

Total

 

 

1

 

 

 

60

 

 

 

61

 

 

 

(23

)

 

 

111

 

 

 

—

 

 

 

149

 

Income tax
   expense

 

 

—

 

 

 

(15

)

 

 

(15

)

 

 

5

 

 

 

(29

)

 

 

—

 

 

 

(39

)

Total, net of tax

 

 

1

 

 

 

45

 

 

 

46

 

 

 

(18

)

 

 

82

 

 

 

—

 

 

 

110

 

Net current
   period other
   comprehensive
   income (loss)

 

 

1

 

 

 

60

 

 

 

61

 

 

 

(25

)

 

 

226

 

 

 

(3

)

 

 

259

 

Ending balance

 

$

—

 

 

$

(358

)

 

$

(358

)

 

$

37

 

 

$

(1,133

)

 

$

(4

)

 

$

(1,458

)
(1)
Net of $83 million, $119 million and $141 million tax at December 31, 2022, 2021 and 2020, respectively.
(2)
Net of $13 million, $(10) million and $(21) million tax at December 31, 2022 and 2021 and 2020, respectively.
(3)
Net of $445 million, $396 million and $478 million tax at December 31, 2022 and 2021 and 2020, respectively.
(4)
Net of $1 million tax at both December 31, 2022 and 2021 and $— million tax at December 31, 2020.

92

 

Virginia Power

The following table presents Virginia Power’s changes in AOCI (net of tax) and reclassification out of AOCI by component:

 

 

Interest Rate

 

 

Total
Derivative-
Hedging
Activities(1)

 

 

Investment
Securities(2)

 

 

Total

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2022

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(45

)

 

$

(45

)

 

$

4

 

 

$

(41

)

Other
   comprehensive income before
   reclassifications: gains (losses)

 

 

60

 

 

 

60

 

 

 

(11

)

 

 

49

 

Amounts reclassified from AOCI (gains) losses:

 

Interest and related
   charges

 

 

2

 

 

 

2

 

 

 

—

 

 

 

2

 

Total

 

 

2

 

 

 

2

 

 

 

—

 

 

 

2

 

Income tax expense

 

 

(1

)

 

 

(1

)

 

 

—

 

 

 

(1

)

Total, net of tax

 

 

1

 

 

 

1

 

 

 

—

 

 

 

1

 

Net current period other
   comprehensive income (loss)

 

 

61

 

 

 

61

 

 

 

(11

)

 

 

50

 

Ending balance

 

$

16

 

 

$

16

 

 

$

(7

)

 

$

9

 

Year Ended December 31, 2021

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(60

)

 

$

(60

)

 

$

8

 

 

$

(52

)

Other
   comprehensive income before
   reclassifications: gains (losses)

 

 

13

 

 

 

13

 

 

 

(2

)

 

 

11

 

Amounts reclassified from AOCI (gains) losses:

 

Interest and related
   charges

 

 

3

 

 

 

3

 

 

 

—

 

 

 

3

 

Other income

 

 

—

 

 

 

—

 

 

 

(3

)

 

 

(3

)

Total

 

 

3

 

 

 

3

 

 

 

(3

)

 

 

—

 

Income tax expense

 

 

(1

)

 

 

(1

)

 

 

1

 

 

 

—

 

Total, net of tax

 

 

2

 

 

 

2

 

 

 

(2

)

 

 

—

 

Net current period other
   comprehensive income (loss)

 

 

15

 

 

 

15

 

 

 

(4

)

 

 

11

 

Ending balance

 

$

(45

)

 

$

(45

)

 

$

4

 

 

$

(41

)
(1)
Net of $(5) million, $16 million and $21 million tax at December 31, 2022, 2021 and 2020, respectively.
(2)
Net of $2 million, $(2) million and $(3) million tax at December 31, 2022, 2021 and 2020, respectively.

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 eight years. Option terms are set at the discretion of the Compensation and Talent Development Committee of the Board of Directors or the Board of Directors itself, as provided under each plan. No options are outstanding under either plan. At December 31, 2022, approximately 18 million shares were available for future grants under these plans.

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. At December 31, 2022 and December 31, 2021, unrecognized compensation cost related to nonvested goal-based stock awards was inconsequential.

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, 2022, 2021 and 2020 include $36 million, $42 million and $64 million, respectively, of compensation costs and $7 million, $9 million and $16 million, respectively, of income tax benefits related to Dominion Energy’s stock-based compensation arrangements. Stock-based compensation cost is reported in other operations and maintenance expense in Dominion Energy’s Consolidated Statements of Income. Excess Tax Benefits are classified as a financing cash flow.

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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 three-year service period. The following table provides a summary of restricted stock activity for the years ended December 31, 2022, 2021 and 2020:

 

 

 

Shares (millions)

 

 

Weighted - Average Grant Date Fair Value

 

Nonvested at December 31, 2019

 

 

1.4

 

 

$

74.77

 

Granted

 

 

0.5

 

 

 

81.74

 

Vested

 

 

(0.4

)

 

 

74.39

 

Cancelled and forfeited

 

 

(0.1

)

 

 

81.59

 

Nonvested at December 31, 2020

 

 

1.4

 

 

$

77.41

 

Granted

 

 

0.5

 

 

 

71.78

 

Vested

 

 

(0.5

)

 

 

73.54

 

Cancelled and forfeited

 

 

(0.1

)

 

 

75.57

 

Nonvested at December 31, 2021

 

 

1.3

 

 

$

76.65

 

Granted

 

 

0.6

 

 

 

75.08

 

Vested

 

 

(0.4

)

 

 

77.87

 

Cancelled and forfeited

 

 

(0.1

)

 

 

73.15

 

Nonvested at December 31, 2022

 

 

1.4

 

 

$

75.56

 

 

As of December 31, 2022, unrecognized compensation cost related to nonvested restricted stock awards totaled $58 million and is expected to be recognized over a weighted-average period of 2.0 years. The fair value of restricted stock awards that vested was $31 million, $37 million and $35 million in 2022, 2021 and 2020, respectively. Employees may elect to have shares of restricted stock withheld upon vesting to satisfy tax withholding obligations. The number of shares withheld will vary for each employee depending on the vesting date fair market value of Dominion Energy stock and the applicable federal, state and local tax withholding rates.

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 zero and 200% of the targeted amount based on the level of performance metrics achieved.

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 $6 million, all of which was accrued at December 31, 2021.

In February 2020, a cash-based performance grant was made to officers. Payout of the performance grant occurred in January 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 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 of the payout under the grant was $4 million, all of which was accrued on December 31, 2022.

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, 2022, the targeted amount of the three-year grant was $11 million and a liability of $4 million had been accrued for this award.

In February 2022, a cash-based performance grant was made to officers. Payout of the performance grant is expected to occur by March 15, 2025 based on the achievement of three performance metrics during 2022, 2023 and 2024: TSR relative to that of companies that are members of Dominion Energy’s compensation peer group, Cumulative Operating EPS, and Non-Carbon Emitting Generation Capacity Performance. At December 31, 2022, the targeted amount of the three-year grant was $17 million and a liability of $3 million had been accrued for this award.

 

94

 

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, 2022, 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. In addition, notice to the North Carolina Commission is required if payment of dividends causes the equity component of Virginia Power and PSNC’s capital structure to fall below 45%.

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, 2022, 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.

DESC’s bond indenture under which it issues first mortgage bonds contains provisions that could limit the payment of cash dividends on its common stock. DESC's bond indenture permits the payment of dividends on DESC's common stock only either (1) out of its Surplus (as defined in the bond indenture) or (2) in case there is no Surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. In addition, 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, 2022, 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 established 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 or a failure to pay dividends on the 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.

95

 

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 $(3.0) billion and $1.5 billion in 2022 and 2021, respectively, versus expected returns of $1.1 billion and $1.0 billion, 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.

In 2021, Dominion Energy recognized the effects of a curtailment for certain pension plans resulting from an option that provided 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 $26 million and an increase to net periodic pension cost of $2 million. The effects of the curtailment are included in the measurement of Dominion Energy’s pension plans as of December 31, 2021.

 

96

 

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,

 

2022

 

 

2021

 

 

2022

 

 

2021

 

(millions, except percentages)

 

 

 

 

 

 

 

 

 

 

 

 

Changes in benefit obligation:

 

 

 

 

 

 

 

 

 

 

 

 

Benefit obligation at beginning of year

 

$

10,890

 

 

$

11,363

 

 

$

1,537

 

 

$

1,746

 

Service cost

 

 

142

 

 

 

170

 

 

 

22

 

 

 

25

 

Interest cost

 

 

333

 

 

 

317

 

 

 

45

 

 

 

46

 

Benefits paid

 

 

(511

)

 

 

(488

)

 

 

(97

)

 

 

(105

)

Actuarial (gains) losses during the year

 

 

(2,716

)

 

 

(413

)

 

 

(361

)

 

 

(161

)

Plan amendments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(14

)

Sale of Hope

 

 

(64

)

 

 

—

 

 

 

(19

)

 

 

—

 

Settlements and curtailments(1)

 

 

(8

)

 

 

(59

)

 

 

—

 

 

 

—

 

Benefit obligation at end of year

 

$

8,066

 

 

$

10,890

 

 

$

1,127

 

 

$

1,537

 

Changes in fair value of plan assets:

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets at beginning of year

 

$

11,945

 

 

$

10,979

 

 

$

2,323

 

 

$

2,100

 

Actual return (loss) on plan assets

 

 

(2,556

)

 

 

1,202

 

 

 

(416

)

 

 

294

 

Employer contributions

 

 

9

 

 

 

284

 

 

 

—

 

 

 

—

 

Benefits paid

 

 

(511

)

 

 

(488

)

 

 

(62

)

 

 

(71

)

Sale of Hope

 

 

(188

)

 

 

—

 

 

 

—

 

 

 

—

 

Settlements(2)

 

 

(5

)

 

 

(32

)

 

 

—

 

 

 

—

 

Fair value of plan assets at end of year

 

$

8,694

 

 

$

11,945

 

 

$

1,845

 

 

$

2,323

 

Funded status at end of year

 

$

628

 

 

$

1,055

 

 

$

718

 

 

$

786

 

Amounts recognized in the Consolidated Balance Sheets
   at December 31:

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent pension and other postretirement benefit assets

 

$

580

 

 

$

878

 

 

$

899

 

 

$

1,052

 

Noncurrent assets held for sale

 

 

295

 

 

 

368

 

 

 

11

 

 

 

12

 

Other current liabilities

 

 

(12

)

 

 

(12

)

 

 

(13

)

 

 

(15

)

Noncurrent pension and other postretirement benefit liabilities

 

 

(196

)

 

 

(127

)

 

 

(179

)

 

 

(263

)

Noncurrent liabilities held for sale

 

 

(39

)

 

 

(52

)

 

 

—

 

 

 

—

 

Net amount recognized

 

$

628

 

 

$

1,055

 

 

$

718

 

 

$

786

 

Significant assumptions used to determine benefit
   obligations as of December 31:

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

5.65%-5.75%

 

 

3.06%-3.19%

 

 

5.69%-5.70%

 

 

3.04%-3.11%

 

Weighted average rate of increase for compensation

 

4.38%

 

 

4.51%

 

 

n/a

 

 

n/a

 

Crediting interest rate for cash balance and similar plans

 

4.40%-4.50%

 

 

1.81%-1.94%

 

 

n/a

 

 

n/a

 
(1)
2022 amounts include curtailment for Hope as well as settlements of nonqualified pension obligations. 2021 amounts include settlements of nonqualified pension obligations.
(2)
2022 and 2021 amounts relate to settlements of nonqualified pension obligations.

 

Actuarial gains recognized during 2022 in Dominion Energy’s pension benefit obligations were $2.7 billion primarily driven by an increase in the discount rate. Actuarial gains recognized during 2021 in Dominion Energy’s pension benefit obligations were $413 million primarily from an increase in discount rate. Actuarial gains recognized during 2022 in Dominion Energy’s other postretirement benefit obligations were $360 million primarily driven by an increase in the discount rate. Actuarial gains recognized during 2021 in Dominion Energy’s other postretirement benefit obligations were $161 million resulting from an increase in discount rates, better than expected per capita claims experience and changes in demographic and economic assumptions based on an experience study completed in 2021.

 

The ABO for all of Dominion Energy’s defined benefit pension plans was $7.7 billion and $10.2 billion at December 31, 2022 and 2021, respectively.

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 250,000 shares of its Series C Preferred Stock to its qualified defined benefit pension plans, valued at $250 million. In December 2020, Dominion Energy contributed $250 million to its qualified defined benefit pension plans. The shares of preferred stock were contributed though private placements exempt from registration requirements, with an independent fiduciary and investment manager to a separate account within the qualified defined benefit pension plans. Dominion Energy also entered into a registration rights agreement with the independent fiduciary and investment manager pursuant to which Dominion Energy agreed to provide registration rights on customary terms with respect to the shares of preferred stock. Dominion Energy is not required to make any contributions to its qualified defined benefit pension plans in 2023. Dominion Energy considers voluntary contributions from time to time, either in the form of cash or equity securities.

97

 

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 not make any contributions to VEBAs associated with its other postretirement plans in 2022 and 2021. Dominion Energy is not required to make any contributions to its VEBAs associated with its other postretirement plans in 2023. Dominion Energy considers voluntary contributions from time to time, either in the form of cash or equity securities.

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,

 

2022

 

 

2021

 

 

2022

 

 

2021

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Benefit obligation

 

$

7,655

 

 

$

9,420

 

 

$

197

 

 

$

261

 

Fair value of plan assets

 

 

7,410

 

 

 

9,229

 

 

 

5

 

 

 

7

 

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,

 

2022

 

 

2021

 

(millions)

 

 

 

 

 

 

Accumulated benefit obligation

 

$

776

 

 

$

127

 

Fair value of plan assets

 

 

623

 

 

 

53

 

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)

 

 

 

 

 

 

2023

 

$

518

 

 

$

99

 

2024

 

 

527

 

 

 

97

 

2025

 

 

542

 

 

 

96

 

2026

 

 

551

 

 

 

94

 

2027

 

 

560

 

 

 

93

 

2028-2032

 

 

2,925

 

 

 

433

 

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 long-term strategic target asset allocations for substantially all of Dominion Energy’s pension funds are 26% U.S. equity, 19% non-U.S. equity, 32% fixed income, 3% real assets and 20% other alternative investments. U.S. equity includes investments in large-cap, mid-cap and small-cap companies located in the U.S. Non-U.S. equity includes investments in large-cap, mid-cap and small-cap companies located outside of the U.S. including both developed and emerging markets. Fixed income includes corporate debt instruments of companies from diversified industries and U.S. Treasuries. The U.S. equity, non-U.S. equity and fixed income investments are in individual securities as well as mutual funds. Real assets include investments in real estate investment trusts and private partnerships. Other alternative investments include partnership investments in private equity, debt and hedge funds that follow several different strategies.

 

98

 

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 2.

The fair values of Dominion Energy’s pension plan assets by asset category are as follows:

 

At December 31,

 

2022

 

 

2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

14

 

 

$

11

 

 

$

—

 

 

$

25

 

 

$

25

 

 

$

5

 

 

$

—

 

 

$

30

 

Common and preferred stocks:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.(1)

 

 

1,653

 

 

 

170

 

 

 

—

 

 

 

1,823

 

 

 

2,592

 

 

 

244

 

 

 

—

 

 

 

2,836

 

International

 

 

1,034

 

 

 

5

 

 

 

—

 

 

 

1,039

 

 

 

1,773

 

 

 

19

 

 

 

—

 

 

 

1,792

 

Insurance contracts

 

 

—

 

 

 

166

 

 

 

—

 

 

 

166

 

 

 

—

 

 

 

279

 

 

 

—

 

 

 

279

 

Corporate debt instruments

 

 

65

 

 

 

805

 

 

 

—

 

 

 

870

 

 

 

81

 

 

 

1,439

 

 

 

—

 

 

 

1,520

 

Government securities

 

 

46

 

 

 

1,377

 

 

 

—

 

 

 

1,423

 

 

 

39

 

 

 

914

 

 

 

—

 

 

 

953

 

Total recorded at fair value

 

$

2,812

 

 

$

2,534

 

 

$

—

 

 

$

5,346

 

 

$

4,510

 

 

$

2,900

 

 

$

—

 

 

$

7,410

 

Assets recorded at NAV(2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common/collective trust funds

 

 

 

 

 

 

 

 

 

 

 

1,780

 

 

 

 

 

 

 

 

 

 

 

 

3,010

 

Alternative investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate funds

 

 

 

 

 

 

 

 

 

 

 

66

 

 

 

 

 

 

 

 

 

 

 

 

116

 

Private equity funds

 

 

 

 

 

 

 

 

 

 

 

1,284

 

 

 

 

 

 

 

 

 

 

 

 

1,233

 

Debt funds

 

 

 

 

 

 

 

 

 

 

 

192

 

 

 

 

 

 

 

 

 

 

 

 

162

 

Hedge funds

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

14

 

Total recorded at NAV

 

 

 

 

 

 

 

 

 

 

$

3,324

 

 

 

 

 

 

 

 

 

 

 

$

4,535

 

Total investments(3)

 

 

 

 

 

 

 

 

 

 

$

8,670

 

 

 

 

 

 

 

 

 

 

 

$

11,945

 

 

(1)
Includes $170 million and $258 million of Dominion Energy preferred stock at December 31, 2022 and 2021, respectively.
(2)
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.
(3)
Excludes net assets related to pending sales of securities and advanced subscription of $177 million, net accrued income of $27 million, and includes net assets related to pending purchases of securities of $180 million at December 31, 2022. Excludes net assets related to pending sales of securities of $35 million, net accrued income of $27 million, and includes net assets related to pending purchases of securities of $62 million at December 31, 2021.

99

 

The fair values of Dominion Energy’s other postretirement plan assets by asset category are as follows:

 

 

At December 31,

 

2022

 

 

2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3

 

 

$

1

 

 

$

—

 

 

$

4

 

 

$

3

 

 

$

1

 

 

$

—

 

 

$

4

 

Common and preferred stocks:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.(1)

 

 

685

 

 

 

10

 

 

 

—

 

 

 

695

 

 

 

898

 

 

 

14

 

 

 

—

 

 

 

912

 

International

 

 

181

 

 

 

—

 

 

 

—

 

 

 

181

 

 

 

256

 

 

 

1

 

 

 

—

 

 

 

257

 

Insurance contracts

 

 

—

 

 

 

10

 

 

 

—

 

 

 

10

 

 

 

—

 

 

 

16

 

 

 

—

 

 

 

16

 

Corporate debt instruments

 

 

4

 

 

 

38

 

 

 

—

 

 

 

42

 

 

 

5

 

 

 

61

 

 

 

—

 

 

 

66

 

Government securities

 

 

3

 

 

 

79

 

 

 

—

 

 

 

82

 

 

 

2

 

 

 

47

 

 

 

—

 

 

 

49

 

Total recorded at fair value

 

$

876

 

 

$

138

 

 

$

—

 

 

$

1,014

 

 

$

1,164

 

 

$

140

 

 

$

—

 

 

$

1,304

 

Assets recorded at NAV(2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common/collective trust funds

 

 

 

 

 

 

 

 

 

 

 

649

 

 

 

 

 

 

 

 

 

 

 

 

840

 

Alternative investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate funds

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

13

 

Private equity funds

 

 

 

 

 

 

 

 

 

 

 

158

 

 

 

 

 

 

 

 

 

 

 

 

152

 

Debt funds

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

9

 

Hedge funds

 

 

 

 

 

 

 

 

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Total recorded at NAV

 

 

 

 

 

 

 

 

 

 

$

829

 

 

 

 

 

 

 

 

 

 

 

$

1,015

 

Total investments(3)

 

 

 

 

 

 

 

 

 

 

$

1,843

 

 

 

 

 

 

 

 

 

 

 

$

2,319

 

 

 

(1)
Includes $10 million of Dominion Energy preferred stock at December 31, 2022.
(2)
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.
(3)
Excludes net assets related to pending sales of securities and advanced subscription of $10 million, net accrued income of $2 million, and includes net assets related to pending purchases of securities of $10 million at December 31, 2022. Excludes net assets related to pending sales of securities of $5 million, net accrued income of $2 million, and includes net assets related to pending purchases of securities of $3 million at December 31, 2021.

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—Represents interest-bearing cash, foreign cash, and money market fund. Interest bearing cash and money market fund are valued at cost plus accrued interest. The foreign cash balances are valued at the amount held and translated on the reporting date based on prevailing exchange rates. Foreign cash and money market funds are classified as Level 1. The interest bearing cash is held in variation margin and with various brokers, which are less liquid and therefore has been classified as Level 2. 2021 investments were held primarily in short-term notes and treasury bills, 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. Investments in preferred stocks are classified as Level 2 and 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.
•
Insurance Contracts—Investments in Group Annuity Contracts 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.

100

 

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 restrictions during the term of the investment.
•
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 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 $25 million, $28 million and $25 million for the years ended December 31, 2022, 2021 and 2020, respectively, presented in discontinued operations. The non-service cost components of net periodic benefit (credit) cost are reflected in other income in Dominion Energy’s Consolidated Statements of Income, except for $(43) million, $(34) million and $(26) million for the years ended December 31, 2022, 2021 and 2020, respectively, presented in discontinued operations. The components of the provision for net periodic benefit (credit) cost and amounts recognized in other comprehensive income and regulatory assets and liabilities for Dominion Energy plans are as follows:

 

 

 

Pension Benefits

 

 

Other Postretirement Benefits

 

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2020

 

(millions, except percentages)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

142

 

 

$

170

 

 

$

173

 

 

$

22

 

 

$

25

 

 

$

28

 

Interest cost

 

 

333

 

 

 

317

 

 

 

351

 

 

 

45

 

 

 

46

 

 

 

58

 

Expected return on plan assets

 

 

(886

)

 

 

(834

)

 

 

(777

)

 

 

(191

)

 

 

(173

)

 

 

(156

)

Amortization of prior service (credit) cost

 

 

—

 

 

 

—

 

 

 

1

 

 

 

(38

)

 

 

(42

)

 

 

(49

)

Amortization of net actuarial (gain) loss

 

 

159

 

 

 

193

 

 

 

206

 

 

 

(2

)

 

 

4

 

 

 

6

 

Settlements, curtailments and special termination
   benefits(1)

 

 

—

 

 

 

10

 

 

 

14

 

 

 

(8

)

 

 

—

 

 

 

(59

)

Net periodic benefit (credit) cost

 

$

(252

)

 

$

(144

)

 

$

(32

)

 

$

(172

)

 

$

(140

)

 

$

(172

)

Changes in plan assets and benefit obligations
   recognized in other comprehensive income
   and regulatory assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current year net actuarial (gain) loss

 

$

726

 

 

$

(782

)

 

$

166

 

 

$

246

 

 

$

(282

)

 

$

(110

)

Prior service (credit) cost

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(13

)

 

 

(6

)

Settlements and curtailments(1)

 

 

(3

)

 

 

(36

)

 

 

(81

)

 

 

10

 

 

 

—

 

 

 

59

 

Less amounts included in net periodic benefit
   cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of net actuarial gain (loss)

 

 

(159

)

 

 

(193

)

 

 

(206

)

 

 

2

 

 

 

(4

)

 

 

(6

)

Amortization of prior service credit (cost)

 

 

—

 

 

 

—

 

 

 

(1

)

 

 

38

 

 

 

42

 

 

 

49

 

Sale of Hope

 

 

(47

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total recognized in other comprehensive
   income and regulatory assets and liabilities

 

$

517

 

 

$

(1,011

)

 

$

(122

)

 

$

296

 

 

$

(257

)

 

$

(14

)

Significant assumptions used to determine
   periodic cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

3.06%-3.19%

 

 

2.73%-3.29%

 

 

2.77%-3.63%

 

 

3.04%-5.03%

 

 

2.69%-2.80%

 

 

3.07%-3.52%

 

Expected long-term rate of return on plan assets

 

7.00%-8.35%

 

 

7.00%-8.45%

 

 

7.00%-8.60%

 

 

8.35%

 

 

8.45%

 

 

8.50%

 

Weighted average rate of increase for
   compensation

 

4.51%

 

 

4.53%

 

 

4.23%

 

 

n/a

 

 

n/a

 

 

n/a

 

Crediting interest rate for cash balance and similar
   plans

 

1.81%-1.94%

 

 

1.93%-2.15%

 

 

2.31-2.83%

 

 

n/a

 

 

n/a

 

 

n/a

 

Healthcare cost trend rate(2)

 

 

 

 

 

 

 

 

 

 

6.25%

 

 

6.25%

 

 

6.25%

 

Rate to which the cost trend rate is assumed to
   decline (the ultimate trend rate)(2)

 

 

 

 

 

 

 

 

 

 

5.00%

 

 

5.00%

 

 

5.00%

 

Year that the rate reaches the ultimate trend rate(2)

 

 

 

 

 

 

 

 

 

 

2026-2027

 

 

2026-2027

 

 

2025-2026

 
(1)
2022 amounts relate primarily to Dominion Energy’s sale of Hope. 2021 amounts relate primarily to the Dominion Energy executive nonqualified pension plan. 2020 amounts primarily relate to the GT&S Transaction.
(2)
Assumptions used to determine net periodic cost for the following year.

101

 

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,

 

2022

 

 

2021

 

 

2022

 

 

2021

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Net actuarial loss

 

$

2,714

 

 

$

2,198

 

 

$

84

 

 

$

(166

)

Prior service (credit) cost

 

 

3

 

 

 

2

 

 

 

(157

)

 

 

(203

)

Total(1)

 

$

2,717

 

 

$

2,200

 

 

$

(73

)

 

$

(369

)
(1)
As of December 31, 2022, of the $2.7 billion and $(73) million related to pension benefits and other postretirement benefits, $1.7 billion and $14 million, respectively, are included in AOCI, with the remainder included in regulatory assets and liabilities, except for $170 million presented in assets and liabilities held for sale. As of December 31, 2021, of the $2.2 billion and $(369) million related to pension benefits and other postretirement benefits, $1.7 billion and $(155) million, respectively, are included in AOCI, with the remainder included in regulatory assets and liabilities, except for $108 million presented in assets and liabilities held for sale.

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
•
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 2022, 2021 and 2020, Virginia Power made payments to Dominion Energy of $172 million, $151 million and $313 million, respectively, related to its participation in the Dominion Energy Pension Plan. Virginia Power’s net periodic pension cost related to this plan was $72 million, $86 million and $118 million in 2022, 2021 and 2020, respectively. Net periodic benefit (credit) cost is reflected in other operations and maintenance expense in Virginia Power’s Consolidated Statements of Income. The funded status of various Dominion Energy subsidiary groups and employee compensation are the basis for determining the share of total pension costs for participating Dominion Energy subsidiaries. See Note 25 for Virginia Power amounts due to/from Dominion Energy related to this plan.

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 $(81) million, $(72) million and $(58) million in 2022, 2021 and 2020, respectively.

102

 

Net periodic benefit (credit) cost is reflected in other operations and maintenance expense in Virginia Power’s Consolidated Statements of Income. Employee headcount is the basis for determining the share of total other postretirement benefit costs for participating Dominion Energy subsidiaries. See Note 25 for Virginia Power amounts due to/from Dominion Energy related to this plan.

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.

Virginia Power funds other postretirement benefit costs through VEBAs. During 2022, 2021 and 2020, Virginia Power made no contributions to the VEBAs and does not expect to contribute to the VEBAs in 2023.

Defined Contribution Plans

Dominion Energy also sponsors defined contribution employee savings plans that cover substantially all employees. During 2022, 2021 and 2020, Dominion Energy recognized $75 million, $65 million and $67 million, respectively, as employer matching contributions to these plans, excluding discontinued operations. Virginia Power also participates in these employee savings plans. During 2022, 2021 and 2020, Virginia Power recognized $22 million, $20 million and $19 million, respectively, as employer matching contributions to these plans.

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.

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.

103

 

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. In June 2022, the U.S. Supreme Court reversed the D.C. Circuit’s decision on the ACE Rule and remanded the case back to the D.C. Circuit. Until the case is resolved by the D.C. Circuit and/or the EPA issues new rulemaking, the Companies cannot predict an impact to its 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 75,000 tons per year of CO2 equivalent emissions. 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.

 

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. 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 five mandatory facility-specific factors, including a social cost-benefit test, and six optional facility-specific factors. The rule governs all electric generating stations with water withdrawals above two MGD, with a heightened entrainment analysis for those facilities over 125 MGD. Dominion Energy and Virginia Power currently have 15 and nine facilities, respectively, that are subject to the final regulations. Dominion Energy is also working with the EPA and state regulatory agencies to assess the applicability of Section 316(b) to eight hydroelectric facilities, including three Virginia Power facilities. The Companies anticipate that they may have to install impingement control technologies at certain of these stations that have once-through cooling systems. The Companies are currently evaluating the need or potential for 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.

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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 two separate petitions for reconsideration of the Effluent Limitations Guidelines final rule and stayed future compliance dates in the rule. Also in April 2017, the U.S. Court of Appeals for the Fifth Circuit granted the EPA’s request for a stay of the pending consolidated litigation challenging the rule while the EPA addresses the petitions for reconsideration. In September 2017, the EPA signed a rule to postpone the earliest compliance dates for certain waste streams regulations in the Effluent Limitations Guidelines final rule from November 2018 to November 2020; however, the latest date for compliance for these regulations was December 2023. In October 2020, the EPA released the final rule that extends the latest dates for compliance. Individual facilities’ compliance dates will vary based on circumstances and the determination by state regulators and may range from 2021 to 2028. 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.

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 13 sites associated with Dominion Energy, remediation work has been substantially completed under federal or state oversight. Where required, the sites are following state-approved groundwater monitoring programs. Dominion Energy commenced remediation activities at one site in the second quarter of 2022. In addition, Dominion Energy has proposed remediation plans for one site at Virginia Power and expects to commence remediation activities in 2023 depending on receipt of final permits and approvals. At December 31, 2022 and 2021, Dominion Energy had $47 million and $45 million, respectively, of reserves recorded, of which $1 million in both periods is reflected in liabilities held for sale. Dominion Energy’s reserves include charges of $14 million ($11 million after-tax) recorded in 2020, in other operations and maintenance expense in the Consolidated Statements of Income, except for $4 million ($3 million after-tax) presented in discontinued operations. At both December 31, 2022 and 2021, Virginia Power had $25 million of reserves recorded. Virginia Power’s reserves include charges of $10 million ($7 million after-tax) recorded in 2020, in other operations and maintenance expense in the Consolidated Statements of Income. Dominion Energy is associated with 12 additional sites, including two associated with Virginia Power, which are not under investigation by any state or federal environmental agency nor the subject of any current or proposed plans to perform remediation activities. Due to the uncertainty surrounding such sites, the Companies are unable to make an estimate of the potential financial statement impacts.

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.

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.

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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, 2022 and 2021 include reserves of $94 million and $274 million, respectively, included in other current liabilities, and insurance receivables of $68 million and $118 million, respectively, included within other receivables. These balances at December 31, 2022 and 2021 include $68 million and $85 million, respectively, of offsetting reserves and insurance receivables related to personal injury or wrongful death cases which are currently pending. During the year ended December 31, 2022, charges included in Dominion Energy’s Consolidated Statements of Income were inconsequential. Dominion Energy’s Consolidated Statements of Income for the years ended December 31, 2021 and 2020 include charges of $100 million ($75 million after-tax) and $90 million ($68 million after-tax), respectively, within impairment of assets and other charges (reflected in the Corporate and Other segment). In addition, Dominion Energy’s Consolidated Statements of Income for the year ended December 31, 2020 include charges of $25 million ($25 million after-tax) within other income (reflected in the Corporate and Other segment).

SCANA Shareholder Litigation

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 $33 million to resolve this matter, subject to court approval. This settlement was reached in contemplation of and to be utilized to satisfy a portion of the Federal Court Merger Case and the State Court Merger Case discussed below. In November 2021, the parties executed a settlement agreement and filed with the State Court of Common Pleas in Richland County, South Carolina for approval. In June 2022, the State Court of Common Pleas in Richland County, South Carolina issued final approval of the settlement agreement with the funds utilized to satisfy a portion of the State Court Merger Case as discussed below.

 

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 $63 million to resolve this matter as well as the State Court Merger Case described below, subject to court approval. This settlement was reached in contemplation of and to be partially satisfied by the State Court Derivative Case settlement described above. 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 State Court Merger Case, and filed with the State Court of Common Pleas in Richland County, South Carolina for approval. In June 2022, this case was dismissed in connection with the final approval by the State Court of Common Pleas in Richland County, South Carolina of the settlement agreement.

 

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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. In June 2022, the State Court of Common Pleas in Richland County, South Carolina issued final approval of the settlement agreement. Also in June 2022, Dominion Energy utilized the $33 million of insurance proceeds from the State Court Derivative Case settlement, the issuance of 0.4 million shares of its common stock and the payment of $2 million in cash to satisfy its obligations under the settlement agreement.

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 $100 million for 100% of the NND Project. In January 2021, the U.S. District Court for the District of South Carolina granted summary judgment in favor of SCANA, DESC, Fluor Corporation and Fluor Enterprises, Inc. In February 2021, the plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Fourth Circuit. In November 2021, the U.S Court of Appeals for the Fourth Circuit affirmed the lower court ruling. In March 2022, the deadline to file an appeal to the Supreme Court of the United States expired.

 

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. As a result of the ruling in favor of the defendants in the aforementioned case, DESC was able to resolve Fluor’s claims for an inconsequential amount.

Governmental Proceedings and Investigations

In June 2018, DESC received a notice of proposed assessment of approximately $410 million, excluding interest, from the SCDOR following its audit of DESC’s sales and use tax returns for the periods September 1, 2008 through December 31, 2017. The proposed assessment, which includes 100% of the NND Project, is based on the SCDOR’s position that DESC’s sales and use tax exemption for the NND Project does not apply because the facility will not become operational. In December 2020, the parties reached an agreement in principle in the amount of $165 million to resolve this matter. In June 2021, the parties executed a settlement agreement which allows DESC to fund the settlement amount through a combination of cash, shares of Dominion Energy common stock or real estate with an initial payment of at least $43 million in shares of Dominion Energy common stock. In August 2021, Dominion Energy issued 0.6 million shares of its common stock to satisfy DESC’s obligation for the initial payment under the settlement agreement. In May 2022, Dominion Energy issued an additional 0.9 million shares of its common stock to partially satisfy DESC’s remaining obligation under the settlement agreement. In June 2022, DESC requested approval from the South Carolina Commission to transfer certain real estate with a total settlement value of $51 million to satisfy its remaining obligation under the settlement agreement. In July 2022, the South Carolina Commission voted to approve the request and issued its final order in August 2022. In September 2022, DESC transferred certain non-utility property with a fair value of $28 million to the SCDOR under the settlement agreement, resulting in a gain of $18 million ($14 million after-tax) recorded in losses (gains) on sales of assets (reflected in Dominion Energy South Carolina) in Dominion Energy’s Consolidated Statements of Income for the year ended December 31, 2022. In December 2022, DESC transferred additional utility property with a fair value of $3 million to the SCDOR, resulting in an inconsequential gain. In October 2022, DESC filed for approval to transfer the remaining real estate with FERC which was received in November 2022. The transfers of such utility properties are expected to be completed by early 2024 and to result in a gain of approximately $20 million upon completion.

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Matters Fully Resolved Prior to 2022

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 $2.0 billion, net of a credit of up to $2.0 billion in future electric bill relief, which would inure to the benefit of the escrow account in favor of class members over a period of time established by the South Carolina Commission in its order related to matters before the South Carolina Commission related to the NND Project, (2) a cash payment of $115 million and (3) the transfer of certain DESC-owned real estate or sales proceeds from the sale of such properties, which counsel for the plaintiffs estimated to have an aggregate value between $60 million and $85 million. At the closing of the SCANA Combination, SCANA and DESC funded the cash payment portion of the escrow account. In July 2019, DESC transferred $117 million representing the cash payment, plus accrued interest, to the plaintiffs. Through August 2020, property, plant and equipment with a net recorded value of $27 million had been transferred to the plaintiffs in coordination with the court-appointed real estate trustee to satisfy the settlement agreement. In September 2020, the court entered an order approving a final resolution of the transfer of real estate or sales proceeds with a cash contribution of $38.5 million by DESC and the conveyance of property, plant and equipment with a net recorded value of $3 million, which was completed by DESC in October 2020. In December 2021, the court approved a motion for and DESC completed the repurchase of $8 million of property, plant and equipment previously transferred to the plaintiffs.

 

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 $520 million, of which Dominion Energy’s portion was $320 million of shares of Dominion Energy common stock. In July 2020, the court issued a final approval of the settlement agreement. In September 2020, Dominion Energy issued $322 million of shares of Dominion Energy common stock to satisfy its obligation under the settlement agreement, including interest charges.

 

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

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 $192.5 million, up to $32.5 million of which could be satisfied through the issuance of shares of Dominion Energy common stock, subject to court approval.

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In February 2020, the U.S. District Court for the District of South Carolina granted preliminary approval of the settlement agreement, pending a fairness hearing, and granted final approval in July 2020. In March 2020, SCANA funded an escrow account with $160 million in cash and paid the balance of $32.5 million in cash in August 2020 to satisfy the settlement.

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 $99 million, which could be satisfied in either cash or shares of Dominion Energy common stock. Also in July 2021, the State Court of Common Pleas in Fairfield County, South Carolina approved the settlement. In July 2021, Dominion Energy issued 1.4 million shares of Dominion Energy common stock to satisfy DESC’s obligation under the settlement agreement.

Governmental Proceedings and Investigations

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 $25 million, and SCANA and DESC to pay disgorgement and prejudgment interest totaling $112.5 million, which disgorgement and prejudgment interest amount were deemed satisfied by the settlements in the SCANA Securities Class Action and the DESC Ratepayer Case. 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 55%. Various difficulties were encountered in connection with the project. The ability of Westinghouse and WECTEC to adhere to established budgets and construction schedules was affected by many variables, including unanticipated difficulties encountered in connection with project engineering and the construction of project components, constrained financial resources of the contractors, regulatory, legal, training and construction processes associated with securing approvals, permits and licenses and necessary amendments to them within projected time frames, the availability of labor and materials at estimated costs and the efficiency of project labor. There were also contractor and supplier performance issues, difficulties in timely meeting critical regulatory requirements, contract disputes, and changes in key contractors or subcontractors. These matters preceded the filing for bankruptcy protection by Westinghouse and WECTEC in March 2017, and were the subject of comprehensive analyses performed by SCANA and Santee Cooper.

 

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.

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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 $285 million of filed liens in Fairfield County, South Carolina. Most of these asserted liens were claims that relate to work performed by Westinghouse subcontractors before the Westinghouse bankruptcy, although some of them were claims arising from work performed after the Westinghouse bankruptcy.

 

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.

 

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 2022 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, as this unit is in a decommissioning state, was $3.6 billion and $2.1 billion, respectively, and has been satisfied by a combination of the funds being collected and deposited in the nuclear decommissioning trusts and the real annual rate of return growth of the funds allowed by the NRC. The 2022 NRC minimum financial assurance amounts above were calculated using preliminary December 31, 2022 U.S. Bureau of Labor Statistics indices. Dominion Energy believes that decommissioning funds and their expected earnings will be sufficient to cover expected decommissioning costs for the Millstone units. In addition, Dominion Energy believes that the decommissioning funds and their expected earnings will be sufficient to cover expected decommissioning costs for the Summer unit, particularly when combined with future ratepayer collections and contributions. The Companies believe the decommissioning funds and their expected earnings for the Surry and North Anna units will be sufficient to cover 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 a positive long-term outlook for trust fund investment returns as the decommissioning of the units will not be complete for decades. The Companies will continue to monitor these trusts to ensure they meet the NRC minimum financial assurance requirement, which may include, if needed, the use of parent company guarantees, surety bonding or other financial instruments recognized by the NRC. See Note 9 for additional information on nuclear decommissioning trust investments.

Nuclear Insurance

The Price-Anderson Amendments Act of 1988 provides the public up to $13.7 billion of liability protection on a per site, per nuclear incident basis, via obligations required of owners of nuclear power plants, and allows for an inflationary provision adjustment every five years. During the third quarter of 2022, the total liability protection per nuclear incident available to all participants in the Secondary Financial Protection Program increased from $13.5 billion to $13.7 billion. This increase does not impact Dominion Energy’s responsibility per active unit under the Price-Anderson Amendments Act of 1988. The Companies have purchased $450 million of coverage from commercial insurance pools for Millstone, Summer, Surry and North Anna with the remainder provided through the mandatory industry retrospective rating plan. In the event of a nuclear incident at any licensed nuclear reactor in the U.S., the Companies could be assessed up to $138 million for each of their licensed reactors not to exceed $20 million per year per reactor. There is no limit to the number of incidents for which this retrospective premium can be assessed. The current levels of nuclear property insurance coverage for Millstone, Summer, Surry and North Anna are all $1.06 billion.

110

 

 

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 $1.06 billion per reactor site. 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 $65 million and $33 million, respectively. Based on the severity of the incident, the Board of Directors of the nuclear insurer has the discretion to lower or eliminate the maximum retrospective premium assessment. The Companies have the financial responsibility for any losses that exceed the limits or for which insurance proceeds are not available because they must first be used for stabilization and decontamination. Additionally, DESC maintains an excess property insurance policy with the European Mutual Association for Nuclear Insurance. The policy provides coverage to Summer for property damage and outage costs up to $1 million resulting from an event of a non-nuclear origin. The European Mutual Association for Nuclear Insurance policy permits retrospective assessments under certain conditions to cover insurer's losses. Based on the current annual premium, DESC's share of the retrospective premium assessment would not exceed an inconsequential amount.

 

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 $32 million and $9 million, respectively.

 

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 and provided for periodic payments for damages incurred through December 31, 2022. In November 2022, the DOE notified the Companies that it intends to extend these agreements through December 31, 2025 and future 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 $48 million. Dominion Energy received the settlement funds in February 2022.

 

In 2022, Virginia Power received payments of $17 million for resolution of claims incurred at North Anna and Surry for the period of January 1, 2020 through December 31, 2020. In addition, Dominion Energy received payments of $7 million for resolution of claims incurred at Millstone for the period of July 1, 2020 through June 30, 2021 and $1 million for resolution of its share of claims incurred at Summer for the period of January 1, 2021 through December 31, 2021.

 

In 2021, Virginia Power received payments of $25 million for resolution of claims incurred at North Anna and Surry for the period of January 1, 2019 through December 31, 2019. In addition, Dominion Energy received payments of $9 million for resolution of claims incurred at Millstone for the period of July 1, 2019 through June 30, 2020 and $1 million for resolution of its share of claims incurred at Summer for the period of January 1, 2020 through December 31, 2020.

 

In 2020, Virginia Power received payments of $24 million for resolution of claims incurred at North Anna and Surry for the period of January 1, 2018 through December 31, 2018. In addition, Dominion Energy received payments of $11 million for resolution of claims incurred at Millstone for the period of July 1, 2018 through June 30, 2019 and $4 million for resolution of its share of claims incurred at Summer for the period of January 1, 2019 through December 31, 2019.

 

111

 

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 $56 million and $52 million at December 31, 2022 and 2021, respectively. Virginia Power’s receivables for spent nuclear fuel-related costs totaled $37 million and $39 million at December 31, 2022 and 2021, respectively.

 

The Companies will continue to manage their spent fuel until it is accepted by the DOE.

Long-Term Purchase Agreements

At December 31, 2022, 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:

 

 

 

2023

 

 

2024

 

 

2025

 

 

2026

 

 

2027

 

 

Thereafter

 

 

Total

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchased electric capacity(1)

 

$

71

 

 

$

70

 

 

$

70

 

 

$

73

 

 

$

73

 

 

$

630

 

 

$

987

 
(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 $61 million and $59 million for the years ended December 31, 2022 and 2021, respectively.

Guarantees, Surety Bonds and Letters of Credit

At December 31, 2022, Dominion Energy had issued four guarantees related to Cove Point, an equity method investment, in support of terminal services, transportation and construction. Two of the Cove Point guarantees have a cumulative maximum exposure of $1.9 billion while the other two guarantees have no maximum limit. No amounts related to these guarantees have been recorded.

 

In addition, at December 31, 2022, Dominion Energy had issued an additional $20 million of guarantees, primarily to support third parties. No amounts related to these guarantees have been recorded.

 

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, 2022, Dominion Energy had issued the following subsidiary guarantees:

 

 

 

Maximum
Exposure

 

(millions)

 

 

 

Commodity transactions(1)

 

$

2,567

 

Nuclear obligations(2)

 

 

243

 

Solar(3)

 

 

304

 

Other(4)

 

 

1,229

 

Total(5)(6)

 

$

4,343

 

 

(1)
Guarantees related to commodity commitments of certain subsidiaries. These guarantees were provided to counterparties in order to facilitate physical and financial transaction related commodities and services.
(2)
Guarantees primarily related to certain DGI subsidiaries regarding all aspects of running a nuclear facility.
(3)
Includes guarantees to facilitate the development of solar projects. Includes $90 million of guarantees related to entities held for sale.
(4)
Guarantees related to other miscellaneous contractual obligations such as leases, environmental obligations, construction projects and insurance programs. Also includes guarantees entered into by Dominion Energy RNG Holdings, II, Inc. on behalf of a subsidiary to facilitate construction of renewable natural gas facilities. Due to the uncertainty of workers’ compensation claims, the parental guarantee has no stated limit.
(5)
Excludes Dominion Energy’s guarantee of an offshore wind installation vessel discussed in Note 15.
(6)
In July 2016, Dominion Energy signed an agreement with a lessor to construct and lease a new corporate office property in Richmond, Virginia. The lessor provided equity and obtained financing commitments from debt investors, totaling $365 million, which funded total project costs. The project became substantially complete in August 2019 at which point the facility was available for Dominion Energy’s use and the five-year lease term commenced.

112

 

At the end of the initial lease term, Dominion Energy can (i) extend the term of the lease for an additional five years, subject to the approval of the participants, at current market terms, (ii) purchase the property for an amount equal to the project costs or, (iii) subject to certain terms and conditions, sell the property on behalf of the lessor to a third party using commercially reasonable efforts to obtain the highest cash purchase price for the property. If the project is sold and the proceeds from the sale are insufficient to repay the investors for the project costs, Dominion Energy may be required to make a payment to the lessor, up to 87% of project costs, for the difference between the project costs and sale proceeds. At December 31, 2022, no amounts have been recorded related to this guarantee.

Additionally, at December 31, 2022, Dominion Energy had purchased $249 million of surety bonds, including $172 million at Virginia Power and $39 million related to entities held for sale, and authorized the issuance of letters of credit by financial institutions of $202 million to facilitate commercial transactions by its subsidiaries with third parties. Under the terms of surety bonds, the Companies are obligated to indemnify the respective surety bond company for any amounts paid.

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, 2022, 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 $80 million in other income in its Consolidated Statements of Income for the year ended December 31, 2020. These commitments are to be funded at various intervals through 2028. Dominion Energy’s Consolidated Balance Sheets include $32 million and $43 million in other deferred credits and other liabilities at December 31, 2022 and 2021, respectively and $11 million and $26 million in other current liabilities at December 31, 2022 and 2021, respectively.

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, 2022, Dominion Energy’s credit exposure totaled $281 million. Of this amount, investment grade counterparties, including those internally rated, represented 89%, and no single counterparty, whether investment grade or non-investment grade, exceeded $77 million of exposure.

113

 

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, 2022, Virginia Power’s credit exposure totaled $25 million. Of this amount, investment grade counterparties, including those internally rated, represented 76%, and no single counterparty exceeded $8 million of exposure.

Credit-Related Contingent Provisions

Certain of Dominion Energy and Virginia Power's derivative instruments contain credit-related contingent provisions. These provisions require Dominion Energy and 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, Dominion Energy and Virginia Power would have been required to post additional collateral to its counterparties of $140 million and $28 million, respectively, as of December 31, 2022, and $31 million and $22 million, respectively, as of December 31, 2021. The collateral that would be required to be posted includes the impacts of any offsetting asset positions and any amounts already posted for derivatives, non-derivative contracts and derivatives elected under the normal purchases and normal sales exception, per contractual terms. Dominion Energy and Virginia Power had both posted collateral of $72 million at December 31, 2022, and $66 million and $54 million, respectively, at December 31, 2021, related to derivatives with credit-related contingent provisions that are in a liability position and not fully collateralized with cash. In addition, Dominion Energy and Virginia Power had both posted letters of credit as collateral with counterparties covering $20 million of fair value of derivative instruments in a liability position at December 31, 2022. The aggregate fair value of all derivative instruments with credit-related contingent provisions that are in a liability position and not fully collateralized with cash for Dominion Energy and Virginia Power was $212 million and $99 million, respectively, as of December 31, 2022 and $97 million and $76 million, respectively, as of December 31, 2021, which does not include the impact of any offsetting asset positions.

See Note 7 for further information about derivative instruments.

NOTE 25. RELATED-PARTY TRANSACTIONS

Dominion Energy’s transactions with equity method investments are described in Note 9. 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. A discussion of Virginia Power's significant related party transactions follows.

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, 2022, Virginia Power’s derivative assets and liabilities with affiliates were $33 million and $31 million, respectively. At December 31, 2021, Virginia Power’s derivative assets and liabilities with affiliates were $29 million and $6 million, respectively.

Virginia Power participates in certain Dominion Energy benefit plans as described in Note 22. At December 31, 2022 and 2021, 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 $422 million and $522 million, respectively. At December 31, 2022 and 2021, Virginia Power’s amounts due from Dominion Energy associated with the Dominion Energy Retiree Health and Welfare Plan and reflected in noncurrent pension and other postretirement benefit assets in the Consolidated Balance Sheets were $518 million and $431 million, respectively.

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.

114

 

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,

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

Commodity purchases from affiliates

 

$

1,423

 

 

$

742

 

 

$

569

 

Services provided by affiliates(1)

 

 

519

 

 

 

494

 

 

 

455

 

Services provided to affiliates

 

 

18

 

 

 

18

 

 

 

18

 
(1)
Includes capitalized expenditures of $177 million, $161 million and $141 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Virginia Power has borrowed funds from Dominion Energy under short-term borrowing arrangements. In November 2022, Virginia Power amended its intercompany credit facility with Dominion Energy to increase the maximum capacity to $3.0 billion. There were $2.0 billion and $699 million in short-term demand note borrowings from Dominion Energy as of December 31, 2022 and 2021, respectively. The weighted-average interest rate of these borrowings was 4.68% and 0.26% at December 31, 2022 and 2021, respectively. Virginia Power had no outstanding borrowings, net of repayments under the Dominion Energy money pool for its nonregulated subsidiaries as of December 31, 2022 and 2021. Interest charges related to Virginia Power’s borrowings from Dominion Energy were $15 million for the year ended December 31, 2022 and $1 million for both the years ended December 31, 2021 and 2020.

There were no issuances of Virginia Power’s common stock to Dominion Energy in 2022, 2021 or 2020.

In January 2023, Virginia Power entered into a lease contract with an affiliated entity for the use of a Jones Act compliant offshore wind installation vessel currently under development with commencement of the 20-month lease term in August 2025 at a total cost of approximately $240 million plus ancillary services.

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 effective September 2023 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

Dominion Energy South Carolina

 

Regulated electric distribution

 

X

 

 

 

 

Regulated electric transmission

 

X

 

 

 

 

Regulated electric generation fleet

 

X

 

 

 

 

Regulated gas distribution and storage

 

X

 

 

Contracted Energy(2)

 

Nonregulated electric generation fleet(3)

 

X

 

 
(1)
Includes Virginia Power’s non-jurisdictional solar generation operations.
(2)
Includes renewable natural gas 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

The Corporate and Other Segment of Dominion Energy includes, effective September 2023, its corporate, service company and other functions (including unallocated debt) as well as its noncontrolling interest in Dominion Privatization and its nonregulated retail energy marketing operations (prior to December 2021), including its noncontrolling interest in Wrangler (through March 2022) and Hope (through August 2022). 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 operations included in the East Ohio, PSNC and Questar Gas Transactions, its noncontrolling interest in Cove Point and gas transmission and storage operations, including its noncontrolling interest in Atlantic Coast Pipeline, reported as discontinued operations which are discussed in Notes 3 and 9.

 

115

 

In 2022, Dominion Energy reported after-tax net expenses of $1.7 billion in the Corporate and Other segment, including $1.7 billion of after-tax net expenses for specific items with $2.9 billion of after tax-net expenses attributable to its operating segments.

 

The net expenses for specific items attributable to Dominion Energy’s operating segments in 2022 primarily related to the impact of the following items:

•
A $1.5 billion ($1.1 billion after-tax) charge associated with the impairment of certain nonregulated solar generation facilities, attributable to Contracted Energy;
•
A $649 million ($513 million after-tax) loss associated with the sale of Kewaunee, attributable to Contracted Energy;
•
A $559 million ($451 million after-tax) loss related to investments in nuclear decommissioning trust funds, attributable to:
•
Contracted Energy ($393 million after-tax); and
•
Dominion Energy Virginia ($58 million after-tax);
•
A $243 million ($181 million after-tax) charge for amortization of a regulatory asset established in connection with the settlement of the 2021 Triennial Review, attributable to Dominion Energy Virginia;
•
A $213 million ($159 million after-tax) charge for RGGI compliance costs deemed recovered through base rates, attributable to Dominion Energy Virginia;
•
A $191 million ($142 million after-tax) charge in connection with a comprehensive settlement agreement for Virginia fuel expenses, attributable to Dominion Energy Virginia;
•
$167 million ($124 million after-tax) of charges for dismantling costs associated with the early retirement of certain electric generation facilities, attributable to Dominion Energy Virginia;
•
$125 million ($93 million after-tax) of charges associated with storm damage and service restoration, attributable to:
•
Dominion Energy Virginia ($87 million after-tax); and
•
Contracted Energy ($6 million after-tax);
•
A $40 million ($30 million after-tax) charge associated with the write-off of inventory, attributable to:
•
Contracted Energy ($16 million after-tax); and
•
Dominion Energy Virginia ($14 million after-tax); partially offset by
•
A $67 million ($49 million after-tax) gain related to economic hedging activities, attributable to Contracted Energy.

In 2021, Dominion Energy reported after-tax net income of $705 million in the Corporate and Other segment, including $821 million of after-tax net benefit for specific items with $485 million of after tax-net expenses attributable to its operating segments.

 

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 $337 million ($254 million after-tax) loss related to economic hedging activities, attributable to Contracted Energy;
•
$266 million ($199 million after-tax) of charges associated with the settlement of the South Carolina electric base rate case, attributable to Dominion Energy South Carolina;
•
A $211 million ($161 million after-tax) net loss on the sale of non-wholly-owned nonregulated solar facilities, attributable to Contracted Energy;
•
A $151 million ($112 million after-tax) loss from an unbilled revenue reduction at Virginia Power, attributable to Dominion Energy Virginia;
•
A $125 million ($93 million after-tax) net charge associated with the settlement of the 2021 Triennial Review, attributable to Dominion Energy Virginia;
•
A $77 million ($57 million after-tax) charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to Virginia’s 2021 budget process, attributable to Dominion Energy Virginia;
•
A $70 million ($53 million after-tax) charge associated with litigation acquired in the SCANA Combination, attributable to Dominion Energy South Carolina; A $68 million ($50 million after-tax) charge associated with storm damage and service restoration in Virginia Power’s service territory, attributable to Dominion Energy Virginia;

116

 

•
•
A $61 million ($45 million after-tax) charge for amortization of a regulatory asset established in connection with the settlement of the 2021 Triennial Review, attributable to Dominion Energy Virginia; and
•
A $44 million ($35 million after-tax) charge related to a revision in estimated recovery of spent nuclear fuel costs associated with the decommissioning of Kewaunee, attributable to Contracted Energy; partially offset by
•
A $568 million ($445 million after-tax) gain related to investments in nuclear decommissioning trust funds, attributable to:
•
Contracted Energy ($390 million after-tax); and
•
Dominion Energy Virginia ($55 million after-tax); and
•
A $130 million ($97 million after-tax) benefit for a change in the expected CCRO to be provided to Virginia retail electric customers under the GTSA, attributable to Dominion Energy Virginia.

In 2020, Dominion Energy reported after-tax net expenses of $2.9 billion in the Corporate and Other segment, including $2.7 billion of after-tax net expenses for specific items with $1.2 billion of after-tax net expenses attributable to its operating segments.

 

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 $751 million ($564 million after-tax) charge primarily related to the planned early retirement of certain Virginia Power electric generation facilities, attributable to Dominion Energy Virginia;
•
A $405 million ($325 million after-tax) charge associated with certain nonregulated solar generation facilities, attributable to Contracted Energy;
•
A $221 million ($171 million after-tax) charge associated with the sale of Fowler Ridge, attributable to Contracted Energy; and
•
A $130 million ($97 million after-tax) charge for the expected CCRO to be provided to Virginia retail electric customers under the GTSA, attributable to Dominion Energy Virginia;
•
A $127 million ($94 million after-tax) charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to legislation enacted in November 2020, attributable to Dominion Energy Virginia; and
•
A $117 million ($93 million after-tax) of charges associated with litigation acquired in the SCANA Combination, attributable to Dominion Energy South Carolina; partially offset by
•
A $335 million ($264 million after-tax) net gain related to investments in nuclear decommissioning trust funds attributable to:
•
Dominion Energy Virginia ($27 million after-tax); and
•
Contracted Energy ($237 million after-tax).

117

 

The following table presents segment information pertaining to Dominion Energy’s operations:

Year Ended December 31,

 

Dominion Energy Virginia

 

 

Dominion Energy South Carolina

 

 

Contracted Energy

 

 

Corporate
and Other

 

 

Adjustments &
Eliminations

 

 

Consolidated
Total

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue from external customers

 

$

9,658

 

 

$

3,323

 

 

$

890

 

 

$

74

 

 

$

—

 

 

$

13,945

 

Intersegment revenue

 

 

(15

)

 

 

7

 

 

 

18

 

 

 

846

 

 

 

(856

)

 

 

—

 

Total operating revenue

 

 

9,643

 

 

 

3,330

 

 

 

908

 

 

 

920

 

 

 

(856

)

 

 

13,945

 

Depreciation, depletion and
   amortization

 

 

1,452

 

 

 

507

 

 

 

123

 

 

 

360

 

 

 

—

 

 

 

2,442

 

Equity in earnings of equity method
   investees

 

 

—

 

 

 

—

 

 

 

2

 

 

 

19

 

 

 

—

 

 

 

21

 

Interest income (expense)

 

 

17

 

 

 

6

 

 

 

75

 

 

 

61

 

 

 

(50

)

 

 

109

 

Interest and related charges (benefit)

 

 

645

 

 

 

220

 

 

 

18

 

 

 

169

 

 

 

(50

)

 

 

1,002

 

Income tax expense (benefit)

 

 

411

 

 

 

132

 

 

 

64

 

 

 

(755

)

 

 

—

 

 

 

(148

)

Net income from discontinued
   operations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

972

 

 

 

—

 

 

 

972

 

Net income (loss) attributable to
   Dominion Energy

 

 

2,007

 

 

 

505

 

 

 

173

 

 

 

(1,691

)

 

 

—

 

 

 

994

 

Investment in equity method
   investees(1)

 

 

—

 

 

 

—

 

 

 

103

 

 

 

192

 

 

 

—

 

 

 

295

 

Capital expenditures

 

 

5,187

 

 

 

708

 

 

 

683

 

 

 

1,180

 

 

 

—

 

 

 

7,758

 

Total assets (billions)

 

 

55.3

 

 

 

17.2

 

 

 

7.7

 

 

 

29.5

 

 

 

(5.5

)

 

 

104.2

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue from external customers

 

$

7,990

 

 

$

2,968

 

 

$

1,018

 

 

$

(616

)

 

$

60

 

 

$

11,420

 

Intersegment revenue

 

 

(14

)

 

 

7

 

 

 

67

 

 

 

837

 

 

 

(897

)

 

 

—

 

Total operating revenue

 

 

7,976

 

 

 

2,975

 

 

 

1,085

 

 

 

221

 

 

 

(837

)

 

 

11,420

 

Depreciation, depletion and
   amortization

 

 

1,296

 

 

 

486

 

 

 

162

 

 

 

159

 

 

 

—

 

 

 

2,103

 

Equity in earnings of equity method
   investees

 

 

—

 

 

 

(3

)

 

 

(2

)

 

 

20

 

 

 

—

 

 

 

15

 

Interest income (expense)

 

 

11

 

 

 

10

 

 

 

81

 

 

 

12

 

 

 

(19

)

 

 

95

 

Interest and related charges (benefit)

 

 

535

 

 

 

206

 

 

 

42

 

 

 

491

 

 

 

(19

)

 

 

1,255

 

Income tax expense (benefit)

 

 

467

 

 

 

125

 

 

 

49

 

 

 

(402

)

 

 

—

 

 

 

239

 

Net income from discontinued
   operations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,357

 

 

 

—

 

 

 

1,357

 

Net income attributable to
   Dominion Energy

 

 

1,914

 

 

 

437

 

 

 

232

 

 

 

705

 

 

 

—

 

 

 

3,288

 

Investment in equity method
   investees(1)

 

 

—

 

 

 

—

 

 

 

74

 

 

 

88

 

 

 

—

 

 

 

162

 

Capital expenditures

 

 

3,756

 

 

 

694

 

 

 

420

 

 

 

1,191

 

 

 

—

 

 

 

6,061

 

Total assets (billions)

 

 

50.0

 

 

 

16.4

 

 

 

10.2

 

 

 

26.5

 

 

 

(3.5

)

 

 

99.6

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue from external customers

 

$

7,779

 

 

$

2,782

 

 

$

1,019

 

 

$

322

 

 

$

49

 

 

$

11,951

 

Intersegment revenue

 

 

(16

)

 

 

5

 

 

 

52

 

 

 

869

 

 

 

(942

)

 

 

(32

)

Total operating revenue

 

 

7,763

 

 

 

2,787

 

 

 

1,071

 

 

 

1,191

 

 

 

(893

)

 

 

11,919

 

Depreciation, depletion and
   amortization

 

 

1,245

 

 

 

474

 

 

 

182

 

 

 

90

 

 

 

—

 

 

 

1,991

 

Equity in earnings of equity method
   investees

 

 

—

 

 

 

(1

)

 

 

(5

)

 

 

5

 

 

 

—

 

 

 

(1

)

Interest income (expense)

 

 

11

 

 

 

12

 

 

 

91

 

 

 

34

 

 

 

(47

)

 

 

101

 

Interest and related charges (benefit)

 

 

524

 

 

 

219

 

 

 

75

 

 

 

568

 

 

 

(47

)

 

 

1,339

 

Income tax expense (benefit)

 

 

500

 

 

 

107

 

 

 

(24

)

 

 

(642

)

 

 

—

 

 

 

(59

)

Net loss from discontinued
   operations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,334

)

 

 

—

 

 

 

(1,334

)

Net income (loss) attributable to
   Dominion Energy

 

 

1,884

 

 

 

419

 

 

 

202

 

 

 

(2,906

)

 

 

—

 

 

 

(401

)

Capital expenditures

 

 

3,372

 

 

 

700

 

 

 

730

 

 

 

1,529

 

 

 

—

 

 

 

6,331

 

 

(1)
Excludes liability to Atlantic Coast Pipeline.

118

 

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.

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 2022, Virginia Power reported after-tax net expenses of $792 million in the Corporate and Other segment, including $773 million of after-tax net expenses for specific items all of which were attributable to its operating segment.

 

The net expenses for specific items attributable to its operating segment in 2022 primarily related to the impact of the following items:

•
A $243 million ($181 million after-tax) charge for amortization of a regulatory asset established in connection with the settlement of the 2021 Triennial Review;
•
A $213 million ($159 million after-tax) charge for RGGI compliance costs deemed recovered through base rates;
•
A $191 million ($142 million after-tax) charge in connection with a comprehensive settlement agreement for Virginia fuel expenses;
•
$167 million ($124 million after-tax) of charges for dismantling costs associated with the early retirement of certain electric generation facilities;
•
$117 million ($87 million after-tax) of charges associated with storm damage and service restoration in its service territory; and
•
A $78 million ($58 million after-tax) loss related to investments in nuclear decommissioning trust funds.

 

In 2021, Virginia Power reported after-tax net expenses of $202 million in the Corporate and Other segment, including $202 million of after-tax net expenses for specific items all of which were attributable to its operating segment.

 

The net expenses for specific items attributable to its operating segment in 2021 primarily related to the impact of the following items:

•
A $151 million ($112 million after-tax) loss from an unbilled revenue reduction;
•
A $125 million ($93 million after-tax) net charge associated with the settlement of the 2021 Triennial Review;
•
A $77 million ($57 million after-tax) charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to Virginia’s 2021 budget process;
•
A $68 million ($50 million after-tax) charge associated with storm damage and service restoration in its service territory; and
•
A $61 million ($45 million after-tax) charge for amortization of a regulatory asset established in connection with the settlement of the 2021 Triennial Review; partially offset by
•
A $130 million ($97 million after-tax) benefit for a change in the expected CCRO to be provided to Virginia retail electric customers under the GTSA.

In 2020, Virginia Power reported after-tax net expenses of $863 million in the Corporate and Other segment, including $915 million of after-tax net expenses for specific items all of which were attributable to its operating segment.

 

The net expenses for specific items attributable to its operating segment in 2020 primarily related to a $751 million ($559 million after-tax) charge related to the planned early retirement of certain electric generation facilities, a $130 million ($97 million after-tax) charge for the expected CCRO to be provided to Virginia retail electric customers under the GTSA and a $127 million ($94 million after-tax) charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to legislation enacted in November 2020.

 

119

 

 

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)

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

9,643

 

 

$

11

 

 

$

9,654

 

Depreciation and amortization

 

 

1,452

 

 

 

284

 

 

 

1,736

 

Interest income

 

 

17

 

 

 

—

 

 

 

17

 

Interest and related charges (benefit)

 

 

645

 

 

 

(3

)

 

 

642

 

Income tax expense (benefit)

 

 

411

 

 

 

(220

)

 

 

191

 

Net income (loss)

 

 

2,007

 

 

 

(792

)

 

 

1,215

 

Capital expenditures

 

 

5,187

 

 

 

—

 

 

 

5,187

 

Total assets (billions)

 

 

53.2

 

 

 

—

 

 

 

53.2

 

2021

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

7,976

 

 

$

(506

)

 

$

7,470

 

Depreciation and amortization

 

 

1,296

 

 

 

68

 

 

 

1,364

 

Interest income

 

 

11

 

 

 

—

 

 

 

11

 

Interest and related charges (benefit)

 

 

535

 

 

 

(1

)

 

 

534

 

Income tax expense (benefit)

 

 

467

 

 

 

(70

)

 

 

397

 

Net income (loss)

 

 

1,914

 

 

 

(202

)

 

 

1,712

 

Capital expenditures

 

 

3,756

 

 

 

—

 

 

 

3,756

 

Total assets (billions)

 

 

47.9

 

 

 

—

 

 

 

47.9

 

2020

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

7,763

 

 

$

—

 

 

$

7,763

 

Depreciation and amortization

 

 

1,245

 

 

 

7

 

 

 

1,252

 

Interest income

 

 

11

 

 

 

—

 

 

 

11

 

Interest and related charges (benefit)

 

 

524

 

 

 

(8

)

 

 

516

 

Income tax expense (benefit)

 

 

500

 

 

 

(271

)

 

 

229

 

Net income (loss)

 

 

1,884

 

 

 

(863

)

 

 

1,021

 

Capital expenditures

 

 

3,372

 

 

 

—

 

 

 

3,372

 

 

NOTE 27. QUARTERLY FINANCIAL DATA (UNAUDITED)

 

A summary of the Companies’ quarterly results of operations for the years ended December 31, 2022 and 2021 follows. Amounts reflect all adjustments necessary in the opinion of management for a fair statement of the results for the interim periods. Results for interim periods may fluctuate as a result of weather conditions, changes in rates and other factors. In addition, Dominion Energy’s results have been recast reflecting the presentation of operations included as discontinued operations. See Notes 3 and 9 for more information.

 

120

 

Dominion Energy

 

 

First Quarter

 

 

Second Quarter

 

 

Third Quarter

 

 

Fourth Quarter

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

3,113

 

 

$

3,059

 

 

$

3,963

 

 

$

3,810

 

Income (loss) from continuing operations

 

 

642

 

 

 

(461

)

 

 

995

 

 

 

(409

)

Net income (loss) from continuing operations including
    noncontrolling interests

 

 

300

 

 

 

(665

)

 

 

626

 

 

 

(239

)

Net income from discontinued operations including
   noncontrolling interest

 

 

411

 

 

 

212

 

 

 

152

 

 

 

197

 

Net income (loss) including noncontrolling interests

 

 

711

 

 

 

(453

)

 

 

778

 

 

 

(42

)

Net income (loss) attributable to Dominion Energy

 

 

711

 

 

 

(453

)

 

 

778

 

 

 

(42

)

Basic EPS:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

 

0.34

 

 

 

(0.84

)

 

 

0.73

 

 

 

(0.31

)

Net income from discontinued operations

 

 

0.50

 

 

 

0.26

 

 

 

0.18

 

 

 

0.24

 

Net income (loss) attributable to Dominion Energy

 

 

0.84

 

 

 

(0.58

)

 

 

0.91

 

 

 

(0.07

)

Diluted EPS:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

 

0.34

 

 

 

(0.84

)

 

 

0.73

 

 

 

(0.31

)

Net income from discontinued operations

 

 

0.50

 

 

 

0.26

 

 

 

0.18

 

 

 

0.24

 

Net income (loss) attributable to Dominion Energy

 

 

0.84

 

 

 

(0.58

)

 

 

0.91

 

 

 

(0.07

)

Dividends declared per preferred share (Series A)

 

 

4.375

 

 

 

2.917

 

 

 

—

 

 

 

—

 

Dividends declared per preferred share (Series B)

 

 

11.625

 

 

 

11.625

 

 

 

11.625

 

 

 

11.625

 

Dividends declared per preferred share (Series C)

 

 

10.875

 

 

 

10.875

 

 

 

10.875

 

 

 

10.875

 

Dividends declared per common share

 

 

0.6300

 

 

 

0.6300

 

 

 

0.6300

 

 

 

0.6300

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

2,943

 

 

$

2,601

 

 

$

2,815

 

 

$

3,061

 

Income from continuing operations

 

 

589

 

 

 

259

 

 

 

766

 

 

 

697

 

Net income from continuing operations including
    noncontrolling interests

 

 

693

 

 

 

140

 

 

 

496

 

 

 

628

 

Net income from discontinued operations including
   noncontrolling interest

 

 

315

 

 

 

155

 

 

 

170

 

 

 

717

 

Net income including noncontrolling interests

 

 

1,008

 

 

 

295

 

 

 

666

 

 

 

1,345

 

Net income attributable to Dominion Energy

 

 

1,008

 

 

 

285

 

 

 

654

 

 

 

1,341

 

Basic EPS:

 

 

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

 

0.84

 

 

 

0.14

 

 

 

0.58

 

 

 

0.75

 

Net income from discontinued operations

 

 

0.39

 

 

 

0.19

 

 

 

0.21

 

 

 

0.88

 

Net income attributable to Dominion Energy

 

 

1.23

 

 

 

0.33

 

 

 

0.79

 

 

 

1.63

 

Diluted EPS:

 

 

 

 

 

 

 

 

 

 

 

 

Net income continuing operations

 

 

0.84

 

 

 

0.14

 

 

 

0.58

 

 

 

0.75

 

Net income from discontinued operations

 

 

0.39

 

 

 

0.19

 

 

 

0.21

 

 

 

0.88

 

Net income attributable to Dominion Energy

 

 

1.23

 

 

 

0.33

 

 

 

0.79

 

 

 

1.63

 

Dividends per share (Series A Preferred Stock)

 

 

4.375

 

 

 

4.375

 

 

 

4.375

 

 

 

4.375

 

Dividends per share (Series B Preferred Stock)

 

 

11.625

 

 

 

11.625

 

 

 

11.625

 

 

 

11.625

 

Dividends per share (Series C Preferred Stock)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2.6583

 

Dividends declared per common share

 

 

0.6675

 

 

 

0.6675

 

 

 

0.6675

 

 

 

0.6675

 

 

Dominion Energy’s 2022 results include the impact of the following significant items:

•
Fourth quarter results include a $1.1 billion after-tax charge associated with the impairment of certain nonregulated solar generation facilities.
•
Second quarter results include a $513 million after-tax loss associated with the sale of Kewaunee, a $142 million after-tax charge in connection with a proposed comprehensive settlement agreement for Virginia fuel expenses and a $134 million after-tax charge for RGGI compliance costs deemed recovered through base rates.

121

 

 

Dominion Energy’s 2021 results include the impact of the following significant items:

•
Second quarter results include $199 million of after-tax charges associated with the settlement of the South Carolina electric base rate case.
•
First quarter results include a $112 million after-tax charge from an unbilled revenue reduction and a $97 million after-tax benefit for a change in the CCRO reserve associated with the 2021 Triennial Review.

 

Virginia Power

 

 

First Quarter

 

 

Second Quarter

 

 

Third Quarter

 

 

Fourth Quarter

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

2,167

 

 

$

2,175

 

 

$

2,875

 

 

$

2,437

 

Income from operations

 

 

562

 

 

 

236

 

 

 

802

 

 

 

448

 

Net income

 

 

357

 

 

 

47

 

 

 

571

 

 

 

240

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

1,830

 

 

$

1,741

 

 

$

1,976

 

 

$

1,923

 

Income (loss) from operations

 

 

548

 

 

 

571

 

 

 

777

 

 

 

601

 

Net income (loss)

 

 

374

 

 

 

414

 

 

 

556

 

 

 

368

 

Virginia Power’s 2022 results include the impact of the following significant items:

•
Second quarter results include a $142 million after-tax charge in connection with a proposed comprehensive settlement agreement for Virginia fuel expenses and a $134 million after-tax charge for RGGI compliance costs deemed recovered through base rates.

 

Virginia Power’s 2021 results include the impact of the following significant items:

•
First quarter results include a $112 million after-tax charge from an unbilled revenue reduction and a $97 million after-tax benefit for a change in the CCRO reserve associated with the 2021 Triennial Review.

 

122

EX-99.2 4 d-ex99_2.htm EX-99.2 EX-99.2

Exhibit 99.2

Glossary of Terms

The following abbreviations or acronyms used in this Form 10-K are defined below:

Abbreviation or Acronym

 

Definition

2019 Equity Units

 

Dominion Energy’s 2019 Series A Equity Units issued in June 2019, initially in the form of 2019 Series A Corporate Units, which consisted of a stock purchase contract and a 1/10 interest in a share of the Series A Preferred Stock

2021 Triennial Review

 

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

AOCI

 

Accumulated other comprehensive income (loss)

ARO

 

Asset retirement obligation

Atlantic Coast Pipeline

 

Atlantic Coast Pipeline, LLC, a limited liability company owned by Dominion Energy and Duke Energy

Atlantic Coast Pipeline Project

 

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

bcf

 

Billion cubic feet

BHE

 

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

CCRO

 

Customer credit reinvestment offset

CEA

 

Commodity Exchange Act

CO2

 

Carbon dioxide

Companies

 

Dominion Energy and Virginia Power, collectively

Contracted Energy

 

Contracted Energy operating segment, formerly known as the Contracted Assets operating segment

Cooling degree days

 

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

Cove Point

 

Cove Point LNG, LP (formerly known as Dominion Energy Cove Point LNG, LP)

CVOW Commercial Project

 

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

CVOW Pilot Project

 

A 12 MW wind generation facility 27 miles off the coast of Virginia Beach, Virginia in federal waters

DCP

 

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

DECGS

 

Carolina Gas Services, Inc. (formerly known as Dominion Energy Carolina Gas Services, Inc.)

DEQPS

 

MountainWest Pipeline Services, Inc. (formerly known as Dominion Energy Questar Pipeline Services, Inc.)

DESC

 

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

DETI

 

Eastern Gas Transmission and Storage, Inc. (formerly known as Dominion Energy Transmission, Inc.)

DGP

 

Eastern Gathering and Processing, Inc. (formerly known as Dominion Gathering and Processing, Inc.)

DMLPHCII

 

Eastern MLP Holding Company II, LLC (formerly known as Dominion MLP Holding Company II, LLC)

Dodd-Frank Act

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

Dominion Energy

 

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

Dominion Energy Direct®

 

A dividend reinvestment and open enrollment direct stock purchase plan

 

 

 

 

Abbreviation or Acronym

 

Definition

Dominion Energy Gas

 

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

Dominion Energy Midstream

 

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

Dominion Energy Questar Pipeline

 

The legal entity, MountainWest Pipeline, LLC (formerly known as 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

Dominion Energy South Carolina

 

Dominion Energy South Carolina operating segment

Dominion Energy Virginia

 

Dominion Energy Virginia operating segment

Dominion Iroquois

 

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

Dominion Privatization

 

Dominion Utility Privatization, LLC, a joint venture between Dominion Energy and Patriot

Duke Energy

 

The legal entity, Duke Energy Corporation, one or more of its consolidated subsidiaries, or the entirety of Duke Energy Corporation and its consolidated subsidiaries

East Ohio

 

The East Ohio Gas Company, doing business as Dominion Energy Ohio

East Ohio Transaction

 

The proposed sale by Dominion Energy to Enbridge of all issued and outstanding capital stock in Dominion Energy Questar Corporation and its consolidated subsidiaries, which following a proposed reorganization will include East Ohio and Dominion Energy Gas Distribution, LLC, pursuant to a purchase and sale agreement entered into on September 5, 2023

Enbridge

 

The legal entity, Enbridge Inc., one or more of its consolidated subsidiaries (including Enbridge Elephant Holdings, LLC, Enbridge Parrot Holdings, LLC, and Enbridge Quail Holdings, LLC), or the entirety of Enbridge Inc. and its consolidated subsidiaries

EPA

 

U.S. Environmental Protection Agency

EPS

 

Earnings per common share

FERC

 

Federal Energy Regulatory Commission

Fitch

 

Fitch Ratings Ltd.

Fowler Ridge

 

Fowler I Holdings LLC, a wind-turbine facility in Benton County, Indiana

FTRs

 

Financial transmission rights

GAAP

 

U.S. generally accepted accounting principles

Gas Distribution

 

Gas Distribution operating segment

GHG

 

Greenhouse gas

GT&S Transaction

 

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

GTSA

 

Virginia Grid Transformation and Security Act of 2018

GW

 

Gigawatt

Heating degree days

 

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

Hope

 

Hope Gas, Inc., doing business as Dominion Energy West Virginia through August 2022

IRA

 

An Act to Provide for Reconciliation Pursuant to Title II of Senate Concurrent Resolution 14 of the 117th Congress (also known as the Inflation Reduction Act of 2022) enacted on August 16, 2022

Iroquois

 

Iroquois Gas Transmission System, L.P.

ISO

 

Independent system operator

JAX LNG

 

JAX LNG, LLC, an LNG supplier in Florida serving the marine and LNG markets

Kewaunee

 

Kewaunee nuclear power station

LNG

 

Liquefied natural gas

MD&A

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Millstone

 

Millstone nuclear power station

Moody’s

 

Moody’s Investors Service

 

2

 

Abbreviation or Acronym

 

Definition

MW

 

Megawatt

MWh

 

Megawatt hour

Natural Gas Rate Stabilization Act

 

Legislation effective February 2005 designed to improve and maintain natural gas service infrastructure to meet the needs of customers in South Carolina

North Anna

 

North Anna nuclear power station

NOX

 

Nitrogen oxide

NRC

 

U.S. Nuclear Regulatory Commission

Order 1000

 

Order issued by FERC adopting requirements for electric transmission planning, cost allocation and development

Patriot

 

Patriot Utility Privatizations, LLC, a joint venture between Foundation Infrastructure Partners, LLC and John Hancock Life Insurance Company (U.S.A.) and affiliates

PHMSA

 

Pipeline and Hazardous Materials Safety Administration

PJM

 

PJM Interconnection, LLC

PSNC

 

Public Service Company of North Carolina, Incorporated, doing business as Dominion Energy North Carolina

PSNC Transaction

 

The proposed sale by Dominion Energy to Enbridge of all of its membership interests in Fall North Carolina Holdco LLC and its consolidated subsidiaries, which following a proposed reorganization will include PSNC, pursuant to a purchase and sale agreement entered into on September 5, 2023

Q-Pipe Group

 

Collectively, Dominion Energy Questar Pipeline, DEQPS and MountainWest Energy Holding Company, LLC (formerly known as QPC Holding Company, LLC and its subsidiary MountainWest Southern Trails Pipeline Company (formerly known as Questar Southern Trails Pipeline Company))

Q-Pipe Transaction

 

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

Questar Gas

 

Questar Gas Company, doing business as Dominion Energy Utah, Dominion Energy Wyoming and Dominion Energy Idaho

Questar Gas Transaction

 

The proposed sale by Dominion Energy to Enbridge of all of its membership interests in Fall West Holdco LLC and its consolidated subsidiaries, which following a proposed reorganization will include Questar Gas, Wexpro, Wexpro II Company, Wexpro Development Company, Dominion Energy Wexpro Services Company, Questar InfoComm Inc. and Dominion Gas Projects Company, LLC, pursuant to a purchase and sale agreement entered into on September 5, 2023

RGGI

 

Regional Greenhouse Gas Initiative

Rider RGGI

 

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

ROE

 

Return on equity

RTO

 

Regional transmission organization

SCANA

 

The legal entity, SCANA Corporation, one or more of its consolidated subsidiaries, or the entirety of SCANA Corporation and its consolidated subsidiaries

SCANA Combination

 

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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Abbreviation or Acronym

 

Definition

SCDOR

 

South Carolina Department of Revenue

SEC

 

U.S. Securities and Exchange Commission

Series A Preferred Stock

 

Dominion Energy’s Series A Cumulative Perpetual Convertible Preferred Stock, without par value, with a liquidation preference of $1,000 per share (previously designated the 1.75% Series A Cumulative Perpetual Convertible Preferred Stock)

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

Standard & Poor’s

 

Standard & Poor’s Ratings Services, a division of S&P Global Inc.

Utah Commission

 

Utah Public Service Commission

VCEA

 

Virginia Clean Economy Act of March 2020

Virginia Commission

 

Virginia State Corporation Commission

Virginia Power

 

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

Wexpro

 

The legal entity, Wexpro Company, one or more of its consolidated subsidiaries, or the entirety of Wexpro Company and its consolidated subsidiaries

Wexpro Agreement

 

An agreement which sets forth the rights of Questar Gas to receive certain benefits from Wexpro’s operations, including cost-of-service gas

Wexpro II Agreement

 

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

Wexpro Agreements

 

Collectively, the Wexpro Agreement, Wexpro II Agreement and two stipulation agreements approved by the Utah Commission allowing for the inclusion of certain property at Canyon Creek and the Trail Unit under the Wexpro II Agreement

White River Hub

 

MountainWest White River Hub, LLC (formerly known as White River Hub, LLC)

Wisconsin Commission

 

Public Service Commission of Wisconsin

Wrangler

 

Wrangler Retail Gas Holdings, LLC, a partnership between Dominion Energy (through March 2022) and Interstate Gas Supply, Inc.

 

 

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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. 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—Dominion Energy and Virginia Power
•
Accounting Matters—Dominion Energy
•
Results of Operations—Dominion Energy and Virginia Power
•
Segment Results of Operations—Dominion Energy
•
Outlook—Dominion Energy
•
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;
•
The direct and indirect impacts of implementing recommendations resulting from the business review announced in November 2022;
•
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;
•
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;

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•
•
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;
•
Adverse outcomes in litigation matters or regulatory proceedings, including matters acquired in the SCANA Combination;
•
Counterparty credit and performance risk;
•
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;

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•
•
Fluctuations in interest rates;
•
The effectiveness to which existing economic hedging instruments mitigate fluctuations in currency exchange rates of the Euro and Danish Krone associated with certain fixed price contracts for the major offshore construction and equipment components of 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.

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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 Energy. At December 31, 2022 and 2021, Dominion Energy’s nuclear decommissioning AROs totaled $1.9 billion and $2.0 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, 2022, a 0.25% increase in cost escalation rates would have resulted in an approximate $370 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, 2022 and 2021, Dominion Energy had $117 million and $128 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, 2022 and 2021, Dominion Energy had established $137 million and $139 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.

8

 

See Notes 6 and 22 to the Consolidated Financial Statements for further information on these fair value measurements.

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 2022, 2021 and 2020 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. In 2022, Dominion Energy determined that its nonregulated solar generation assets within Contracted Energy were impaired. The estimates of future cash flows and selection of a discount rate are considered to be critical assumptions. A 10% decrease in projected future pre-tax cash flows would have resulted in a $69 million increase to the impairment charge recorded. A 0.25% increase in the discount rate would have resulted in a $13 million increase to the impairment charge recorded. See Note 10 to the Consolidated Financial Statements for further information concerning the impairment related to certain of Dominion Energy’s nonregulated solar generation assets.

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There were no other tests performed in 2022 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. 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 2022, Dominion Energy completed the sale of Kewaunee following the receipt of approval for sale from the Wisconsin Commission; which prior to its receipt there had been uncertainty as to the timing of or ability to obtain such approval. Dominion Energy recorded a loss of $649 million primarily related to the difference between the nuclear decommissioning trust and AROs.

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 long-term strategic target asset allocation for Dominion Energy’s pension funds is 26% U.S. equity, 19% non-U.S. equity, 32% fixed income, 3% real assets 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.

10

 

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 its critical assumptions, which are then compared to the forecasts of an independent investment advisor or an independent actuary, as applicable, 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 8.35% for 2022, 7.00% to 8.45% for 2021 and 7.00% to 8.60% for 2020. For 2023, 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, 2022. Dominion Energy calculated its other postretirement benefit cost using an expected long-term rate of return on plan assets assumption of 8.35% for 2022, 8.45% for 2021 and 8.50% for 2020. For 2023, 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 3.06% to 3.19% for pension plans and 3.04% to 5.03% for other postretirement benefit plans in 2022, ranged from 2.73% to 3.29% for pension plans and 2.69% to 2.80% for other postretirement benefit plans in 2021 and ranged from 2.77% to 3.63% for pension plans and 3.07% to 3.52% for other postretirement benefit plans in 2020. Dominion Energy selected a discount rate ranging from 5.65% to 5.75% for pension plans and 5.69% to 5.70% for other postretirement benefit plans for determining its December 31, 2022 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, 2022 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 2022 Net Periodic Cost

 

 

Change in Actuarial Assumptions

 

Pension Benefits

 

 

Other Postretirement Benefits

 

(millions, except percentages)

 

 

 

 

 

 

 

Discount rate

(0.25)%

 

$

17

 

 

$

—

 

Long-term rate of return on plan assets

(0.25)%

 

 

27

 

 

 

6

 

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, 2022 by $215 million and its accumulated postretirement benefit obligation at December 31, 2022 by $26 million, while a 1.00% increase in the healthcare cost trend rate would increase its accumulated postretirement benefit obligation at December 31, 2022 by $75 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.

RESULTS OF OPERATIONS

Dominion Energy

Presented below is a summary of Dominion Energy’s consolidated results:

 

Year Ended December 31,

 

2022

 

 

$ Change

 

 

2021

 

 

$ Change

 

 

2020

 

(millions, except EPS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Dominion Energy

 

$

994

 

 

$

(2,294

)

 

$

3,288

 

 

$

3,689

 

 

$

(401

)

Diluted EPS

 

 

1.09

 

 

 

(2.89

)

 

 

3.98

 

 

 

4.55

 

 

 

(0.57

)

 

11

 

Overview

2022 VS. 2021

Net income attributable to Dominion Energy decreased 70%, primarily due to a charge associated with the impairment of certain nonregulated solar generation facilities, a loss associated with the sale of Kewaunee, a decrease in net investment earnings on nuclear decommissioning trust funds, a net decrease associated with the impacts of Virginia Power’s 2021 Triennial Review, a charge for RGGI compliance costs deemed recovered through base rates, a charge in connection with a comprehensive settlement agreement for Virginia fuel expenses and dismantling costs associated with the early retirement of certain electric generation facilities at Virginia Power. These decreases were partially offset by the absence of charges associated with the settlement of the South Carolina electric base rate case, increased unrealized gains on economic hedging activities and the absence of a net loss on the sales of non-wholly-owned nonregulated solar facilities.

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 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,

 

2022

 

 

$ Change

 

 

2021

 

 

$ Change

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

13,945

 

 

$

2,525

 

 

$

11,420

 

 

$

(499

)

 

$

11,919

 

Electric fuel and other energy-related purchases

 

 

3,711

 

 

 

1,343

 

 

 

2,368

 

 

 

125

 

 

 

2,243

 

Purchased electric capacity

 

 

59

 

 

 

(11

)

 

 

70

 

 

 

17

 

 

 

53

 

Purchased gas

 

 

426

 

 

 

34

 

 

 

392

 

 

 

33

 

 

 

359

 

Other operations and maintenance

 

 

3,376

 

 

 

197

 

 

 

3,179

 

 

 

30

 

 

 

3,149

 

Depreciation, depletion and amortization

 

 

2,442

 

 

 

339

 

 

 

2,103

 

 

 

112

 

 

 

1,991

 

Other taxes

 

 

676

 

 

 

(14

)

 

 

690

 

 

 

11

 

 

 

679

 

Impairment of assets and other charges

 

 

2,062

 

 

 

1,868

 

 

 

194

 

 

 

(1,910

)

 

 

2,104

 

Losses (gains) on sales of assets

 

 

426

 

 

 

314

 

 

 

112

 

 

 

172

 

 

 

(60

)

Other income

 

 

109

 

 

 

(1,030

)

 

 

1,139

 

 

 

476

 

 

 

663

 

Interest and related charges

 

 

1,002

 

 

 

(253

)

 

 

1,255

 

 

 

(84

)

 

 

1,339

 

Income tax expense (benefit)

 

 

(148

)

 

 

(387

)

 

 

239

 

 

 

298

 

 

 

(59

)

Net income (loss) from discontinued operations including
   noncontrolling interests

 

 

972

 

 

 

(385

)

 

 

1,357

 

 

 

2,691

 

 

 

(1,334

)

Noncontrolling interests

 

 

—

 

 

 

(26

)

 

 

26

 

 

 

175

 

 

 

(149

)

 

An analysis of Dominion Energy’s results of operations follows:

2022 VS. 2021

Operating revenue increased 22%, primarily reflecting:

•
A $1.3 billion increase in fuel-related revenue as a result of an increase in commodity costs associated with sales to electric utility retail customers ($1.2 billion) and gas utility customers ($99 million);
•
A $505 million increase to recover the costs and an authorized return, as applicable, associated with Virginia Power non-fuel riders;
•
The absence of a $356 million decrease for refunds provided to retail electric customers in Virginia associated with the settlement of the 2021 Triennial Review;
•
A $290 million net increase associated with market prices affecting Millstone, including economic hedging impacts of net realized and unrealized losses on freestanding derivatives ($6 million); The absence of a $151 million decrease from an unbilled revenue reduction at Virginia Power;

12

 

•
•
A $57 million increase in sales to electric utility retail customers from an increase in heating degree days during the heating season ($52 million) and a net increase in cooling degree days during the cooling season ($5 million);
•
A $54 million increase in sales to utility retail customers associated with growth at electric ($46 million) and gas ($8 million) utilities;
•
A $38 million net increase from electric utility customers who elect to pay market-based or other negotiated rates, including settlements of economic hedges at Virginia Power;
•
A $30 million increase in sales to electric utility retail customers associated with economic and other usage factors;
•
A $24 million increase in sales to customers from non-jurisdictional solar generation facilities at Virginia Power; and
•
A $20 million increase in non-fuel base rates associated with the settlement in 2021 of the South Carolina electric base rate case.

These increases were partially offset by:

•
A $155 million decrease from the sale of non-wholly-owned nonregulated solar facilities;
•
A $80 million decrease as a result of the contribution of certain nonregulated gas retail energy contracts to Wrangler;
•
A $55 million decrease reflecting a reduction in base rates associated with the settlement of the 2021 Triennial Review;
•
A $49 million decrease from the sale of Hope;
•
A $26 million decrease from a planned outage at Millstone; and
•
A $20 million decrease associated with storm damage primarily from winter storms in Virginia.

Electric fuel and other energy-related purchases increased 57%, primarily due to higher commodity costs for electric utilities ($1.2 billion) and an increase in the use of purchased renewable energy credits at Virginia Power ($58 million), which are offset in operating revenue and do not impact net income.

 

Other operations and maintenance increased 6%, primarily reflecting:

•
A $84 million increase in certain Virginia Power expenditures which are primarily recovered through state- and FERC-regulated rates and do not impact net income;
•
A $51 million increase in storm damage and restoration costs primarily from winter storms in Virginia Power’s service territory;
•
A $42 million increase in outage costs at Millstone ($26 million) and Virginia Power ($16 million);
•
A $36 million increase in materials and supplies expense primarily as a result of higher prices;
•
A $33 million increase in bad debt expense; and
•
A $18 million increase in outside services.

These increases were partially offset by:

•
The absence of a $44 million charge related to a revision in estimated recovery of spent nuclear fuel costs associated with the decommissioning of Kewaunee; and
•
A $31 million decrease in merger and integration-related costs associated with the SCANA Combination.

 

Depreciation, depletion and amortization increased 16%, primarily due to various projects being placed into service ($183 million), an increase for amortization of a regulatory asset established in the settlement of the 2021 Triennial Review ($183 million), and an increase in RGGI-related amortization ($128 million), which except for the suspended period of Rider RGGI is offset in operating revenue and does not impact net income, partially offset by depreciation rates revised in the first quarter of 2022 at Virginia Power ($82 million) and a decrease from the sale of non-wholly-owned nonregulated solar facilities ($45 million).

 

13

 

Impairment of assets and other charges increased $1.9 billion, primarily reflecting:

•
A charge associated with the impairment of certain nonregulated solar generation facilities ($1.5 billion);
•
The absence of a benefit from the establishment of a regulatory asset associated with the early retirement of certain coal- and oil-fired generating units associated with the settlement of the 2021 Triennial Review ($549 million);
•
A charge in connection with a comprehensive settlement agreement for Virginia fuel expenses ($191 million);
•
A charge for RGGI compliance costs deemed recovered through base rates at Virginia Power ($180 million);
•
Dismantling costs associated with the early retirement of certain electric generation facilities at Virginia Power ($167 million); and
•
A charge for the write-off of inventory ($40 million); partially offset by
•
The absence of charges associated with the settlement of the South Carolina electric base rate case ($249 million);
•
The absence of charges for CCRO benefits provided to retail electric customers in Virginia associated with Virginia Power’s 2021 Triennial Review ($188 million);
•
A decrease in charges associated with litigation acquired in the SCANA Combination ($97 million);
•
The absence of a charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to Virginia’s 2021 budget process ($77 million);
•
The absence of a charge for corporate office lease termination ($62 million); and
•
The absence of a write-off of nonregulated retail software development assets ($20 million).

 

Losses on sales of assets increased $314 million, primarily due to a loss associated with the sale of Kewaunee ($649 million) and the absence of gains on the sale of nonregulated retail energy marketing assets ($87 million), partially offset by the absence of a net loss on the sales of non-wholly-owned nonregulated solar facilities ($211 million), a gain on the contribution of certain privatization operations to Dominion Privatization ($155 million), a gain on the transfer of certain non-utility and utility property in South Carolina ($20 million) and a gain on the sale of certain utility property in South Carolina ($20 million).

Other income decreased 90%, primarily due to net investment losses in 2022 compared to net investment gains in 2021 on nuclear decommissioning trust funds ($1.1 billion), partially offset by an increase in non-service components of pension and other postretirement employee benefit plan credits ($100 million) and the absence of charges associated with the settlement of the South Carolina electric base rate case ($18 million).

 

Interest and related charges decreased 20%, primarily due to higher unrealized gains associated with freestanding derivatives ($270 million), higher premiums received on interest rate derivatives ($60 million), a decrease due to junior subordinated note repayments in 2021 ($52 million), benefits associated with the early redemption of certain securities in the third and fourth quarters of 2022 ($35 million) and the absence of charges associated with the early redemption of certain securities in the third quarter of 2021 ($23 million), partially offset by an increase from net debt issuances ($90 million), higher interest rates on commercial paper borrowings ($51 million), higher interest rates on variable rate debt and cash flow interest rate swaps ($41 million) and the absence of a benefit associated with the effective settlement of uncertain tax positions ($21 million).

 

Income tax expense decreased $387 million, primarily due to lower pre-tax income including lower state income tax benefits on pre-tax losses from nuclear decommissioning trusts and economic hedges ($486 million) and higher investment tax credits ($36 million), partially offset by tax expense on the sale of Hope’s stock ($90 million) and the absence of benefits from the effective settlement of uncertain tax positions ($38 million) and a state legislative change ($21 million).

 

Net income from discontinued operations including noncontrolling interests decreased 28%, primarily due to the completion of the sale of the Q-Pipe Group in December 2021 ($638 million) and higher interest rates on variable rate debt secured by Dominion Energy's interest 50% noncontrolling interest in Cove Point ($54 million), partially offset by unrealized gains in 2022 compared to unrealized losses in 2021 on interest rate derivatives for economic hedging of debt secured by Dominion Energy's 50% noncontrolling interest in Cove Point ($188 million), an increase from gas utility capital cost riders ($25 million) and cost saving incentive earned under the Wexpro Agreements ($21 million).

Noncontrolling interests decreased $26 million, primarily due to the absence of operations in connection with the sale of certain nonregulated solar generating projects held in partnerships.

14

 

2021 VS. 2020

Operating revenue decreased 4%, 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 $253 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 ($102 million) and electric utility retail customers ($151 million);
•
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 $8 million increase in sales to gas utility customers associated with growth.

 

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).

 

Other operations and maintenance increased 1%, primarily reflecting:

•
A $117 million increase in salaries, wages and benefits, including $19 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; substantially 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 ($92 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);

15

 

•
•
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).

 

Loss on sales of assets increased $172 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).

 

Other income increased 72%, 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 ($69 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 6%, 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 charges associated with the early redemption of certain securities in the third quarter of 2021 ($23 million).

Income tax expense increased $298 million, primarily due to higher pre-tax income ($320 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 $2.7 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), a gain on the sale of Q-Pipe ($493 million), an increase in equity method earnings 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 ($161 million) and an increase from gas utility capital cost riders ($40 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).

16

 

Virginia Power

Presented below is a summary of Virginia Power’s consolidated results:

 

Year Ended December 31,

 

2022

 

 

$ Change

 

 

2021

 

 

$ Change

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

1,215

 

 

$

(497

)

 

$

1,712

 

 

$

691

 

 

$

1,021

 

 

Overview

2022 VS. 2021

Net income decreased 29%, primarily due to a decrease in net investment earnings on nuclear decommissioning trust funds, a net decrease associated with the impacts of the 2021 Triennial Review, a charge for RGGI compliance costs deemed recovered through base rates, a charge in connection with a comprehensive settlement agreement for Virginia fuel expenses and dismantling costs associated with the early retirement of certain electric generation facilities.

 

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,

 

2022

 

 

$ Change

 

 

2021

 

 

$ Change

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

9,654

 

 

$

2,184

 

 

$

7,470

 

 

$

(293

)

 

$

7,763

 

Electric fuel and other energy-related purchases

 

 

2,913

 

 

 

1,178

 

 

 

1,735

 

 

 

99

 

 

 

1,636

 

Purchased (excess) electric capacity

 

 

46

 

 

 

22

 

 

 

24

 

 

 

41

 

 

 

(17

)

Other operations and maintenance

 

 

2,051

 

 

 

258

 

 

 

1,793

 

 

 

7

 

 

 

1,786

 

Depreciation and amortization

 

 

1,736

 

 

 

372

 

 

 

1,364

 

 

 

112

 

 

 

1,252

 

Other taxes

 

 

303

 

 

 

(23

)

 

 

326

 

 

 

(1

)

 

 

327

 

Impairment of assets and other charges (benefits)

 

 

557

 

 

 

826

 

 

 

(269

)

 

 

(1,362

)

 

 

1,093

 

Other income

 

 

—

 

 

 

(146

)

 

 

146

 

 

 

66

 

 

 

80

 

Interest and related charges

 

 

642

 

 

 

108

 

 

 

534

 

 

 

18

 

 

 

516

 

Income tax expense

 

 

191

 

 

 

(206

)

 

 

397

 

 

 

168

 

 

 

229

 

 

An analysis of Virginia Power’s results of operations follows:

2022 VS. 2021

Operating revenue increased 29%, primarily reflecting:

•
A $1.1 billion increase in fuel-related revenue as a result of a net increase in commodity costs associated with sales to electric utility retail customers;
•
A $505 million increase to recover the costs and an authorized return, as applicable, associated with non-fuel riders;
•
The absence of a $356 million decrease for refunds provided to retail electric customers in Virginia associated with the settlement of the 2021 Triennial Review;
•
The absence of a $151 million decrease from an unbilled revenue reduction;
•
A $29 million net increase in sales to retail customers from an increase in heating degree days during the heating season ($47 million), partially offset by a decrease in cooling degree days during the cooling season ($18 million);
•
A $26 million increase in sales to electric utility retail customers associated with growth;
•
A $24 million increase in sales to customers from non-jurisdictional solar generation facilities; and
•
A $19 million net increase from electric utility customers who elect to pay market-based or other negotiated rates, including settlements of economic hedges.

17

 

These increases were partially offset by:

•
A $55 million decrease reflecting a reduction in base rates associated with the settlement of the 2021 Triennial Review.

Electric fuel and other energy-related purchases increased 68%, primarily due to higher commodity costs for electric utilities ($1.1 billion) and an increase in the use of purchased renewable energy credits ($58 million), which are offset in operating revenue and do not impact net income.

Purchased electric capacity increased 92%, primarily due to an increase in expense related to the annual PJM capacity performance market effective June 2021.

Other operations and maintenance increased 14%, primarily reflecting:

•
A $84 million increase in certain expenses which are primarily recovered through state- and FERC-regulated rates and do not impact net income;
•
A $51 million increase in storm damage and service restoration costs primarily from winter storms;
•
A $28 million increase in bad debt expense;
•
A $26 million increase in materials and supplies expense primarily as a result of higher prices;
•
A $19 million increase in outside services;
•
A $17 million increase in nuclear insurance costs; and
•
A $16 million increase in planned outage costs.

 

Depreciation and amortization increased 27%, primarily due to an increase for amortization of a regulatory asset established in the settlement of the 2021 Triennial Review ($183 million), an increase due to various projects being placed into service ($144 million) and an increase in RGGI-related amortization ($128 million), which except for the suspended period of Rider RGGI is offset in operating revenue and does not impact net income, partially offset by depreciation rates revised in the first quarter of 2022 ($82 million).

 

Impairment of assets and other charges (benefits) increased $826 million, primarily reflecting:

•
The absence of a benefit from the establishment of a regulatory asset associated with the early retirement of certain coal- and oil-fired generating units associated with the settlement of the 2021 Triennial Review ($549 million);
•
A charge in connection with a comprehensive settlement agreement for Virginia fuel expenses ($191 million);
•
A charge for RGGI compliance costs deemed recovered through base rates ($180 million);
•
Dismantling costs associated with the early retirement of certain electric generation facilities ($167 million); and
•
A charge for the write-off of inventory ($19 million); partially offset by
•
The absence of charges for CCRO benefits provided to retail electric customers in Virginia associated with Virginia Power’s 2021 Triennial Review ($188 million); and
•
The absence of a charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to Virginia’s 2021 budget process ($77 million).

Other income decreased $146 million, primarily due to net investment losses in 2022 compared to net investment gains in 2021 on nuclear decommissioning trust funds.

Interest and related charges increased 20%, primarily due to an increase from net debt issuances in 2022 and 2021 ($60 million), higher interest rates on commercial paper borrowings ($17 million) and an increase in principal and interest rates on intercompany borrowings with Dominion Energy ($14 million).

Income tax expense decreased 52%, primarily due to lower pre-tax income ($182 million) and higher investment tax credits ($66 million), partially offset by the recognition of an intercompany gain related to the transfer and subsequent contribution of existing privatization operations in Virginia to Dominion Privatization ($34 million) and the absence of the benefit from a state legislative change ($16 million).

18

 

 

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
•
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); The absence of charges for dismantling costs associated with certain electric generation facilities ($54 million); partially offset by

19

 

•
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
•
•
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).

 

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).

SEGMENT RESULTS OF OPERATIONS

Segment results include the impact of intersegment revenues and expenses, which may result in intersegment profit or loss. In September 2023, Dominion Energy revised its operating segments subsequent to entering agreements for the East Ohio, PSNC and Questar Gas Transactions as well as completing the sale of its noncontrolling interest in Cove Point. See Notes 1 and 26 to the Consolidated Financial Statements for more information. The historical information presented herein has been recast to reflect the current segment presentation. 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,

 

2022

 

 

2021

 

 

2020

 

 

 

Net income
(loss)
attributable to
Dominion
Energy

 

 

EPS(1)

 

 

Net income
(loss)
attributable to
Dominion
Energy

 

 

EPS(1)

 

 

Net income
(loss)
attributable to
Dominion
Energy

 

 

EPS(1)

 

(millions, except EPS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dominion Energy Virginia

 

$

2,007

 

 

$

2.44

 

 

$

1,914

 

 

$

2.37

 

 

$

1,884

 

 

$

2.27

 

Dominion Energy South Carolina

 

 

505

 

 

 

0.61

 

 

 

437

 

 

 

0.54

 

 

 

419

 

 

 

0.51

 

Contracted Energy

 

 

173

 

 

 

0.21

 

 

 

232

 

 

 

0.29

 

 

 

202

 

 

 

0.24

 

Corporate and Other

 

 

(1,691

)

 

 

(2.17

)

 

 

705

 

 

 

0.78

 

 

 

(2,906

)

 

 

(3.59

)

Consolidated

 

$

994

 

 

$

1.09

 

 

$

3,288

 

 

$

3.98

 

 

$

(401

)

 

$

(0.57

)

 

(1)
Consolidated results are presented on a diluted EPS basis. The dilutive impacts, primarily consisting of potential shares which had not yet been issued, are included within the results of the Corporate and Other segment. EPS contributions for Dominion Energy’s operating segments are presented utilizing basic average shares outstanding for the period.

Dominion Energy Virginia

Presented below are operating statistics related to Dominion Energy Virginia’s operations:

 

Year Ended December 31,

 

2022

 

 

% Change

 

 

2021

 

 

% Change

 

 

2020

 

Electricity delivered (million MWh)

 

 

90.0

 

 

 

6

 

%

 

85.2

 

 

 

2

 

%

 

83.3

 

Electricity supplied (million MWh):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Utility

 

 

90.2

 

 

 

5

 

 

 

85.7

 

 

 

(1

)

 

 

87.0

 

Non-Jurisdictional

 

 

1.5

 

 

 

50

 

 

 

1.0

 

 

 

43

 

 

 

0.7

 

Degree days (electric distribution and utility service area):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cooling

 

 

1,765

 

 

 

(1

)

 

 

1,783

 

 

 

1

 

 

 

1,759

 

Heating

 

 

3,555

 

 

 

11

 

 

 

3,210

 

 

 

8

 

 

 

2,970

 

Average electric distribution customer accounts
   (thousands)

 

 

2,724

 

 

 

1

 

 

 

2,697

 

 

 

1

 

 

 

2,661

 

 

20

 

Presented below, on an after-tax basis, are the key factors impacting Dominion Energy Virginia’s net income contribution:

2022 VS. 2021

 

 

Increase (Decrease)

 

 

 

Amount

 

 

EPS

 

(millions, except EPS)

 

 

 

 

 

 

Weather

 

$

21

 

 

$

0.03

 

Customer usage and other factors

 

 

25

 

 

 

0.03

 

Customer-elected rate impacts

 

 

13

 

 

 

0.02

 

Base rate case impacts

 

 

(41

)

 

 

(0.05

)

Rider equity return

 

 

64

 

 

 

0.08

 

Storm damage and service restoration

 

 

(17

)

 

 

(0.02

)

Planned outage costs

 

 

(12

)

 

 

(0.01

)

Depreciation and amortization

 

 

19

 

 

 

0.02

 

Renewable energy investment tax credits

 

 

65

 

 

 

0.08

 

Salaries, wages and benefits & administrative costs

 

 

26

 

 

 

0.03

 

Interest expense, net

 

 

(13

)

 

 

(0.02

)

Other

 

 

(57

)

 

 

(0.07

)

Share dilution

 

 

—

 

 

 

(0.05

)

Change in net income contribution

 

$

93

 

 

$

0.07

 

2021 VS. 2020

 

 

Increase (Decrease)

 

 

 

Amount

 

 

EPS

 

(millions, except EPS)

 

 

 

 

 

 

Weather

 

$

44

 

 

$

0.05

 

Customer usage and other factors

 

 

(26

)

 

 

(0.03

)

Customer-elected rate impacts

 

 

46

 

 

 

0.06

 

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

 

 

—

 

 

 

(0.01

)

Share accretion

 

 

—

 

 

 

0.07

 

Change in net income contribution

 

$

30

 

 

$

0.10

 

Dominion Energy South Carolina

Presented below are selected operating statistics related to Dominion Energy South Carolina’s operations:

 

Year Ended December 31,

 

2022

 

 

% Change

 

 

2021

 

 

% Change

 

 

2020

 

Electricity delivered (million MWh)

 

 

23.0

 

 

 

3

 

%

 

22.4

 

 

 

1

 

%

 

22.1

 

Electricity supplied (million MWh)

 

 

24.1

 

 

 

3

 

 

 

23.5

 

 

 

2

 

 

 

23.0

 

Degree days (electric and gas distribution service areas):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cooling

 

 

767

 

 

 

(11

)

 

 

859

 

 

 

8

 

 

 

794

 

Heating

 

 

1,294

 

 

 

1

 

 

 

1,280

 

 

 

19

 

 

 

1,074

 

Average electric distribution customer accounts
   (thousands)

 

 

777

 

 

 

1

 

 

 

766

 

 

 

2

 

 

 

753

 

Gas distribution throughput (bcf):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

68

 

 

 

(6

)

 

 

72

 

 

 

9

 

 

 

66

 

Average gas distribution customer accounts
   (thousands)

 

 

427

 

 

 

4

 

 

 

412

 

 

 

3

 

 

 

399

 

 

21

 

Presented below, on an after-tax basis, are the key factors impacting Dominion Energy South Carolina’s net income contribution:

2022 VS. 2021

 

 

Increase (Decrease)

 

 

 

Amount

 

 

EPS

 

(millions, except EPS)

 

 

 

 

 

 

Weather

 

$

21

 

 

$

0.03

 

Customer usage and other factors

 

 

38

 

 

 

0.05

 

Customer-elected rate impacts

 

 

14

 

 

 

0.02

 

Base rate case & Natural Gas Rate Stabilization Act impacts

 

 

22

 

 

 

0.03

 

Capital cost rider

 

 

(8

)

 

 

(0.01

)

Gains on sales of property

 

 

17

 

 

 

0.02

 

Depreciation and amortization

 

 

(15

)

 

 

(0.02

)

Interest expense, net

 

 

(16

)

 

 

(0.02

)

Other

 

 

(5

)

 

 

(0.02

)

Share dilution

 

 

—

 

 

 

(0.01

)

Change in net income contribution

 

$

68

 

 

$

0.07

 

2021 VS. 2020

 

 

Increase (Decrease)

 

 

 

Amount

 

 

EPS

 

(millions, except EPS)

 

 

 

 

 

 

Weather

 

$

(6

)

 

$

(0.01

)

Customer usage and other factors

 

 

34

 

 

 

0.04

 

Customer-elected rate impacts

 

 

10

 

 

 

0.01

 

Base rate case & Natural Gas Rate Stabilization Act impacts

 

 

13

 

 

 

0.02

 

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

 

 

 

0.03

 

Share accretion

 

 

—

 

 

 

0.01

 

Change in net income contribution

 

$

18

 

 

$

0.03

 

Contracted Energy

Presented below are selected operating statistics related to Contracted Energy's operations:

 

Year Ended December 31,

 

2022

 

 

% Change

 

 

2021

 

 

% Change

 

 

2020

 

Electricity supplied (million MWh)

 

 

17.8

 

 

 

(14

)

%

 

20.8

 

 

 

8

 

%

 

19.3

 

Presented below, on an after-tax basis, are the key factors impacting Contracted Energy's net income contribution:

2022 VS. 2021

 

 

Increase (Decrease)

 

 

 

Amount

 

 

EPS

 

(millions, except EPS)

 

 

 

 

 

 

Margin

 

$

(1

)

 

$

—

 

Sale of non-wholly-owned nonregulated solar facilities

 

 

(20

)

 

 

(0.02

)

Planned outage costs

 

 

(19

)

 

 

(0.02

)

Renewable energy investment tax credits

 

 

(29

)

 

 

(0.04

)

Other

 

 

10

 

 

 

—

 

Share dilution

 

 

—

 

 

 

—

 

Change in net income contribution

 

$

(59

)

 

$

(0.08

)

 

22

 

 

2021 VS. 2020

 

 

Increase (Decrease)

 

 

 

Amount

 

 

EPS

 

(millions, except EPS)

 

 

 

 

 

 

Margin

 

$

22

 

 

$

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

 

 

4

 

 

 

—

 

Share accretion

 

 

—

 

 

 

0.01

 

Change in net income contribution

 

$

30

 

 

$

0.05

 

 

Corporate and Other

Presented below are the Corporate and Other segment’s after-tax results:

Year Ended December 31,

 

2022

 

 

2021

 

 

2020

 

(millions, except EPS)

 

 

 

 

 

 

 

 

 

Specific items attributable to operating segments

 

$

(2,881

)

 

$

(485

)

 

$

(1,232

)

Specific items attributable to Corporate and Other segment

 

 

1,151

 

 

 

1,306

 

 

 

(1,457

)

Total specific items

 

 

(1,730

)

 

 

821

 

 

 

(2,689

)

Other corporate and other operations:

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(328

)

 

 

(413

)

 

 

(403

)

Other

 

 

367

 

 

 

297

 

 

 

186

 

Total other corporate and other operations

 

 

39

 

 

 

(116

)

 

 

(217

)

Total net income (expense)

 

 

(1,691

)

 

 

705

 

 

 

(2,906

)

EPS impact

 

$

(2.17

)

 

$

0.78

 

 

$

(3.59

)

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 2022, this primarily included $972 million net income from discontinued operations, primarily associated with operations included in the East Ohio, PSNC and Questar Gas Transactions and Dominion Energy's noncontrolling interest in Cove Point, a $254 million after-tax benefit for derivative mark-to-market changes and a $78 million loss associated with the sale of Hope. In 2021, this primarily included $1.4 billion net income from discontinued operations, primarily associated with the Q-Pipe Group, operations included in the East Ohio, PSNC and Questar Gas Transactions and Dominion Energy's noncontrolling interest in Cove Point, 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 $1.4 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, operations included in the East Ohio, PSNC and Questar Gas Transactions and Dominion Energy's noncontrolling interest in Cove Point, 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.

 

OUTLOOK

Dominion Energy’s 2023 net income is expected to increase on a per share basis as compared to 2022 primarily from the following:

•
The absence of a charge associated with the impairment of certain nonregulated solar generation facilities;
•
The absence of losses associated with the sale of Kewaunee;
•
The absence of charges for certain Virginia Power RGGI compliance costs deemed recovered through base rates;
•
The absence of a charge in connection with a comprehensive settlement agreement associated with Virginia fuel expenses; and
•
Construction and operation of growth projects in electric utility and gas distribution operations.

23

 

These increases are expected to be partially offset by the following:

•
A decrease in investment tax credits associated with nonregulated solar generation facilities;
•
An increase in interest expense;
•
An increase in planned outage days at Millstone; and
•
An increase in depreciation and amortization expense.

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,

 

2022

 

 

2021

 

 

2020

 

(millions)

 

 

 

 

 

 

 

 

 

Cash, restricted cash and equivalents at beginning of year

 

$

408

 

 

$

247

 

 

$

269

 

Cash flows provided by (used in):

 

 

 

 

 

 

 

 

 

Operating activities

 

 

3,700

 

 

 

4,037

 

 

 

5,227

 

Investing activities

 

 

(6,746

)

 

 

(6,247

)

 

 

(2,916

)

Financing activities

 

 

2,979

 

 

 

2,371

 

 

 

(2,333

)

Net increase (decrease) in cash, restricted cash and equivalents

 

 

(67

)

 

 

161

 

 

 

(22

)

Cash, restricted cash and equivalents at end of year

 

$

341

 

 

$

408

 

 

$

247

 

 

Operating Cash Flows

Net cash provided by Dominion Energy's operating activities decreased $337 million, inclusive of a $162 million decrease from discontinued operations. Net cash provided by continuing operations decreased $175 million, primarily due to lower deferred fuel cost recoveries ($1.0 billion), current year refund payments to Virginia electric customers associated with the settlement of the 2021 Triennial Review ($319 million) and changes in working capital ($491 million), partially offset by lower margin deposits ($862 million) and an increase of $781 million primarily as the result of higher operating cash flows from electric utility operations driven by weather, riders, customer usage and other factors.

Investing Cash Flows

Net cash used in Dominion Energy’s investing activities increased $499 million, primarily due to an increase in plant construction and other property additions ($1.6 billion) and the absence of proceeds from the sale of Q-Pipe Group ($1.5 billion) and the sale of non-wholly-owned nonregulated solar facilities ($495 million), partially offset by the absence of the repayment of the Q-Pipe Transaction deposit ($1.3 billion), a decrease in contributions to equity method affiliates including Atlantic Coast Pipeline ($978 million) and net proceeds from the sale of Hope ($727 million).
 

Financing Cash Flows

Net cash provided by Dominion Energy's financing activities increased $608 million primarily due to settlement of the stock purchase contract component of the 2019 Equity Units ($1.6 billion), higher net issuances of long-term debt ($927 million) and higher net supplemental credit facility borrowings ($450 million), partially offset by the redemption of the Series A Preferred Stock ($1.6 billion) in 2022 and the absence of the issuance of Series C Preferred Stock ($742 million) in 2021.
 

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.

24

 

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, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Joint revolving credit facility(2)

 

$

6,000

 

 

$

3,076

 

 

$

202

 

 

$

2,722

 
(1)
The weighted-average interest rate of the outstanding commercial paper supported by Dominion Energy’s credit facility was 4.73% at December 31, 2022.
(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, 2022, Dominion Energy’s Consolidated Balance Sheets include $347 million presented within short-term debt, with a weighted-average interest rate of 4.24%. 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.

In January 2023, Dominion Energy entered into a $2.5 billion 364-Day term loan facility which bears interest at a variable rate and will mature in January 2024 with the proceeds to be used to repay existing long-term debt and short-term debt upon maturity and for other general corporate purposes. Concurrently, Dominion Energy borrowed an initial $1.0 billion with the proceeds used to repay long-term debt. Dominion Energy may make up to two additional borrowings under this agreement through March 31, 2023, at which point any unused capacity will cease to be available to Dominion Energy.

Long-Term Debt

Sustainability Revolving Credit Facility

Dominion Energy maintains a $900 million Sustainability Revolving Credit Facility which matures in 2024 and bears interest at a variable rate. The facility offers a reduced interest rate margin with respect to borrowed amounts allocated to certain environmental sustainability or social investment initiatives. In May 2022, Dominion Energy borrowed $900 million with the proceeds used to support environmental sustainability and social investment initiatives ($450 million) and for general corporate purposes ($450 million). In June 2022, Dominion Energy repaid $450 million borrowed for general corporate purposes. At December 31, 2022, Dominion Energy had $450 million outstanding under this supplemental credit facility.

Issuances and Borrowings of Long-Term Debt

During 2022, 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.

25

 

Month

 

Type

 

Public / Private

 

Entity

 

Principal

 

 

Rate

 

 

Stated Maturity

 

 

 

 

 

 

 

 

(millions)

 

 

 

 

 

 

January

 

Senior notes

 

Public

 

Virginia Power

 

$

600

 

 

 

2.400

%

 

2032

January

 

Senior notes

 

Public

 

Virginia Power

 

 

400

 

 

 

2.950

%

 

2051

May

 

Senior notes

 

Public

 

Virginia Power

 

 

600

 

 

 

3.750

%

 

2027

May

 

Senior notes

 

Public

 

Virginia Power

 

 

600

 

 

 

4.625

%

 

2052

August

 

Senior notes

 

Public

 

Dominion Energy

 

 

400

 

 

 

4.350

%

 

2032

August

 

Senior notes

 

Public

 

Dominion Energy

 

 

600

 

 

 

4.850

%

 

2052

August

 

Senior notes

 

Private

 

Questar Gas

 

 

125

 

 

 

4.390

%

 

2032

August

 

Senior notes

 

Private

 

Questar Gas

 

 

125

 

 

 

4.700

%

 

2052

November

 

Senior notes

 

Public

 

Dominion Energy

 

 

850

 

 

 

5.375

%

 

2032

December

 

Senior notes

 

Private

 

East Ohio

 

 

250

 

 

 

6.190

%

 

2032

December

 

Senior notes

 

Private

 

East Ohio

 

 

250

 

 

 

6.380

%

 

2052

Total issuances and borrowings

 

 

 

 

 

$

4,800

 

 

 

 

 

 

 

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.

As the comprehensive business review announced in November 2022 is still in progress, Dominion Energy is uncertain as to the amount of long-term debt it anticipates issuing in 2023. Dominion Energy expects to issue long-term debt to satisfy cash needs for capital expenditures and maturing long-term debt to the extent such amounts are not satisfied from cash available from operations following the payment of dividends and any borrowings made from unused capacity of Dominion Energy’s credit facilities discussed above. The raising of external capital is subject to certain regulatory requirements, including registration with the SEC for certain issuances.

Repayments, 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 2022:

 

Month

 

Type

 

Entity

 

Principal

 

(1)

Rate

 

 

Stated Maturity

 

 

 

 

 

 

(millions)

 

 

 

 

 

 

Debt scheduled to mature in 2022

 

 

 

$

806

 

 

various

 

 

 

Early repurchases & redemptions

 

 

 

 

 

 

 

 

 

 

July

 

Senior notes

 

Dominion Energy

 

 

5

 

 

 

4.250

%

 

2028

Multiple

 

Senior notes

 

Dominion Energy

 

 

147

 

 

 

2.250

%

 

2031

Multiple

 

Senior notes

 

Dominion Energy

 

 

35

 

 

 

3.300

%

 

2041

Multiple

 

Senior notes

 

Dominion Energy

 

 

37

 

 

 

1.450

%

 

2026

Multiple

 

Senior notes

 

Dominion Energy

 

 

9

 

 

 

4.700

%

 

2044

Multiple

 

Senior notes

 

Dominion Energy

 

 

30

 

 

 

4.600

%

 

2049

Total repayments, repurchases and redemptions

 

 

 

$

1,069

 

 

 

 

 

 

 

(1)
Total amount redeemed prior to maturity includes remaining outstanding principal plus accrued interest.

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 April 2022, Virginia Power remarketed two series of tax-exempt bonds, with an aggregate outstanding principal of approximately $138 million to new investors. Both bonds will bear interest at a coupon of 1.65% until May 2024, after which they will bear interest at a market rate to be determined at that time.

26

 

In October 2022, Dominion Energy remarketed its $27 million Peninsula Ports Authority of Virginia Coal Terminal Revenue Refunding Bonds, Series 2003 due in 2033 to new investors. The bonds will bear interest at a coupon rate of 3.80% until October 2024, after which they will bear interest at a market rate to be determined at that time.

In 2023, Dominion Energy expects to remarket approximately $160 million of its 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 17, 2023 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

 

Stable

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 364-Day term loan facility entered into in January 2023, and cross-default provisions.

As of December 31, 2022, 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

%

 

 

59.7

%
(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.

 

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, 2022, there have been no events of default under Dominion Energy’s covenants.

27

 

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 2021, Dominion Energy began issuing new shares of common stock for these direct stock purchase plans. During 2022, Dominion Energy issued 2.4 million of such shares and received proceeds of $179 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 initial forward price of $74.66 per share. Except in certain circumstances, Dominion Energy could have elected physical, cash or net settlement of the forward sale agreements. In November 2022, Dominion Energy provided notice to elect physical settlement of the forward sale agreements and in December 2022 received total proceeds of $78 million.

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 May 2022, Dominion Energy issued 0.9 million shares of its common stock, valued at $72 million, to partially satisfy DESC’s remaining obligation under a settlement agreement with the SCDOR discussed in Note 23 to the Consolidated Financial Statements.
•
In June 2022, Dominion Energy issued 0.4 million shares of its common stock, valued at $30 million, to partially satisfy its obligation under a settlement agreement for the State Court Merger Case discussed in Note 23 to the Consolidated Financial Statements.
•
In June 2022, Dominion Energy issued 19.4 million shares to settle the stock purchase contract component of the 2019 Equity Units and received proceeds of $1.6 billion. See Note 19 to the Consolidated Financial Statements for additional information.

As the comprehensive business review announced in November 2022 is still in progress, Dominion Energy is uncertain as to the amount of common stock that it anticipates issuing in 2023, including through its at-the-market program. However, Dominion Energy anticipates raising similar amounts of capital through Dominion Energy Direct® in 2023 compared to 2022 and 2021. The raising of external capital is subject to certain regulatory requirements, including registration with the SEC for certain issuances.

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. At December 31, 2022, Dominion Energy had $920 million of available capacity under this authorization.

Dominion Energy does not plan to repurchase shares of common stock in 2023, 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.

In September 2022, Dominion Energy redeemed all outstanding shares of Series A Preferred Stock for $1.6 billion.

Capital Expenditures

See Note 26 to the Consolidated Financial Statements for Dominion Energy’s historical capital expenditures by segment. Dominion Energy included its total annual planned capital expenditures by each segment for 2022 through 2026 in Item 7. MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 24, 2022. As disclosed therein, Dominion Energy’s total planned capital expenditures were $10.3 billion for 2023, $10.7 billion for 2024, $10.6 billion for 2025 and $7.7 billion for 2026 based on a capital expenditures plan reviewed and endorsed by Dominion Energy’s Board of Directors in December 2021. As a result of the comprehensive business review announced in November 2022, Dominion Energy has not completed an update to its previous plan and, as discussed in Future Issues and Other Matters, the implementation of the recommendations could result in a material adjustment to capital allocations.

28

 

Currently, Dominion Energy expects the total planned capital expenditures for 2023 to be substantially consistent with the previously disclosed amount. In addition, Dominion Energy expects its next capital expenditures plan to reflect an acceleration of electric transmission projects within Dominion Energy Virginia to serve the rapidly growing data center customer demand and a decreased investment in new nonregulated solar generation facilities within Contracted Energy.

 

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 Energy in Item 1. Business for additional discussion of various significant capital projects currently under development. The estimates disclosed above 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 2022, Dominion Energy’s Board of Directors established an annual dividend rate for 2023 of $2.67 per share of common stock, consistent with the 2022 rate. Dividends are subject to declaration by the Board of Directors. In February 2023, Dominion Energy’s Board of Directors declared dividends payable in March 2023 of 66.75 cents per share of common stock.

See Note 19 to the Consolidated Financial Statements 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, 2022, 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, 2022 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.

 

 

 

Gross Credit
Exposure

 

 

Credit
Collateral

 

 

Net Credit
Exposure

 

(millions)

 

 

 

 

 

 

 

 

 

Investment grade(1)

 

$

191

 

 

$

—

 

 

$

191

 

Non-Investment grade(2)

 

 

37

 

 

 

20

 

 

 

17

 

No external ratings:

 

 

 

 

 

 

 

 

 

Internally rated—investment grade(3)

 

 

58

 

 

 

—

 

 

 

58

 

Internally rated—non-investment grade(4)

 

 

28

 

 

 

13

 

 

 

15

 

Total

 

$

314

 

 

$

33

 

 

$

281

 

 

29

 

 

(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 51% of the total net credit exposure.
(2)
The five largest counterparty exposures, combined, for this category represented approximately 6% of the total net credit exposure.
(3)
The five largest counterparty exposures, combined, for this category represented approximately 21% of the total net credit exposure.
(4)
The five largest counterparty exposures, combined, for this category represented approximately 3% 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, 2022 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

2024

 

 

2025

 

 

2026

 

 

2027

 

 

Total

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchased electric capacity for utility operations

$

71

 

 

$

70

 

 

$

70

 

 

$

72

 

 

$

73

 

$

356

 

Fuel commitments for utility operations

 

1,669

 

 

 

995

 

 

 

599

 

 

 

185

 

 

 

184

 

 

3,632

 

Fuel commitments for nonregulated operations

 

198

 

 

 

133

 

 

 

46

 

 

 

37

 

 

 

50

 

 

 

464

 

Pipeline transportation and storage

 

 

668

 

 

 

587

 

 

 

489

 

 

 

427

 

 

 

376

 

 

 

2,547

 

Total

$

2,606

 

 

$

1,785

 

 

$

1,204

 

 

$

721

 

 

$

683

 

 

$

6,999

 

 

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, 2022. 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; and
•
Guarantees – See Note 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.

Business Review

In November 2022, Dominion Energy announced the commencement of a business review of value-maximizing strategic business actions, alternatives to its current business mix and capital allocation and regulatory options which may assist customers to manage costs and provide greater predictability to its long-term, state-regulated utility value proposition. While the ultimate impacts cannot be estimated until the review is completed, which is expected in 2023, implementation of recommendations resulting from the business review could have a material impact on Dominion Energy's future results of operations, financial condition and/or cash flows.

Potential Virginia Legislation

The 2023 General Assembly session in Virginia has included several proposals which, if ultimately enacted into law, could have a material impact on Virginia Power’s retail base rates and other cost-recovery mechanisms. Items under consideration include the frequency of base rate reviews, eliminating CCROs, shifting recovery of certain costs currently recovered through riders into base rates and adjusting the parameters for determining an acceptable ROE and revenue sharing.

30

 

Other topics include securitization of deferred fuel costs, offshore wind financing and small modular reactors. As the legislative process remains underway, Dominion Energy is unable to estimate the potential financial statement impacts related to matters currently under consideration by the Virginia General Assembly, but there could be a material impact to its results of operations, financial condition and/or cash flows.

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.

 

Inflation Reduction Act

The IRA includes provisions which impose an annual fee for waste methane emissions from the oil and natural gas industry beginning with emissions reported in calendar year 2024 to the extent that an entity’s emissions exceed a stated threshold, with implementation to be addressed by future rulemaking by the EPA. Pending the completion of such rulemaking, Dominion Energy currently does not expect these provisions to materially affect its future results of operations, 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.

 

31

 

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

Inflation Reduction Act

The IRA imposes a 15% alternative minimum tax on GAAP net income, as adjusted for certain items, of corporations in excess of $1 billion, for tax years beginning after December 31, 2022. Entities that are subject to the alternative minimum tax may use tax credits to reduce the liability by up to 75% and will receive a tax credit carryforward with an indefinite life that can be claimed against the regular tax in future years. Pending additional guidance, the alternative minimum tax is not expected to have an effect on the assessment of the realizability of Dominion Energy’s deferred tax assets or a material impact on Dominion Energy’s future results of operations or cash flows.

32