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Dominion Energy
D
#464
Rank
โ‚ฌ43.34 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
50,76ย โ‚ฌ
Share price
-1.08%
Change (1 day)
-2.03%
Change (1 year)
๐Ÿ”‹ Electricity๐Ÿšฐ Utility companies โšก Energy
Categories
  1. Dominion Energy
  2. Quarterly Reports (10-Q)
  3. Submitted on 2023-11-08

Dominion Energy - 10-Q quarterly report FY


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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark one)

 

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

or

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

 

Commission File

Number

 

Exact name of registrants as specified in their charters, address of

principal executive offices and registrants’ telephone number

 

I.R.S. Employer

Identification Number

 

 

 

 

 

001-08489

 

DOMINION ENERGY, INC.

 

54-1229715

 

 

 

 

 

000-55337

 

VIRGINIA ELECTRIC AND POWER COMPANY

 

54-0418825

 

 

 

 

 

 

 

120 Tredegar Street

Richmond, Virginia 23219

(804) 819-2284

 

 

 

State or other jurisdiction of incorporation or organization of the registrants: Virginia

 

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

 

Registrant

Trading Symbol

Title of Each Class

Name of Each Exchange

on Which Registered

DOMINION ENERGY, INC.

D

Common Stock, no par value

New York Stock Exchange

 

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Dominion Energy, Inc. Yes ☒ No ☐ Virginia Electric and Power Company Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Dominion Energy, Inc. Yes ☒ No ☐ Virginia Electric and Power Company Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Dominion Energy, Inc.

 

Large accelerated filer

☒

 

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

 

Smaller reporting 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. ☐

 

Virginia Electric and Power Company

 

Large accelerated filer

☐

 

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☒

 

Smaller reporting 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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Dominion Energy, Inc. Yes ☐ No ☒ Virginia Electric and Power Company Yes ☐ No ☒

At November 2, 2023, the latest practicable date for determination, Dominion Energy, Inc. had 836,796,771 shares of common stock outstanding and Virginia Electric and Power Company had 314,178 shares of common stock outstanding. Dominion Energy, Inc. is the sole holder of Virginia Electric and Power Company’s common stock.

This combined Form 10-Q represents separate filings by Dominion Energy, Inc. and Virginia Electric and Power Company. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Virginia Electric and Power Company makes no representation as to the information relating to Dominion Energy, Inc.’s other operations.

 

VIRGINIA ELECTRIC AND POWER COMPANY MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS FILING THIS FORM 10-Q UNDER THE REDUCED DISCLOSURE FORMAT.

 

 

1

COMBINED INDEX

 

 

 

Page

Number

 

Glossary of Terms

3

 

 

 

 

PART I. Financial Information

 

 

 

 

Item 1.

Financial Statements

9

Item 2.

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

71

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

89

Item 4.

Controls and Procedures

90

 

 

 

 

PART II. Other Information

 

 

 

 

Item 1.

Legal Proceedings

91

Item 1A.

Risk Factors

91

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

91

Item 5.

Other Information

92

Item 6.

Exhibits

93

 

 

 

 

2

 

GLOSSARY OF TERMS

The following abbreviations or acronyms used in this Form 10-Q 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

2023 Biennial Review

 

Virginia Commission review of Virginia Power’s earned return on base rate generation and distribution services for the two successive 12-month test periods beginning January 1, 2021 and ending December 31, 2022 and prospective rate base setting for the succeeding annual periods beginning January 1, 2024 and ending December 31, 2025

2025 Biennial Review

 

Future Virginia Commission review of Virginia Power’s earned return on base rate generation and distribution services for the two successive 12-month test periods beginning January 1, 2023 and ending December 31, 2024 and prospective rate base setting for the succeeding annual periods beginning January 1, 2026 and ending December 31, 2027

ACE Rule

 

Affordable Clean Energy Rule

AFUDC

 

Allowance for funds used during construction

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 Eastern Energy Gas Holdings, LLC, Northeast Midstream Partners, LP and Cove Point effective November 2020), or the entirety of Berkshire Hathaway Energy Company and its consolidated subsidiaries

CAA

 

Clean Air Act

CCR

 

Coal combustion residual

CCRO

 

Customer credit reinvestment offset

CEO

 

Chief Executive Officer

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.

CFO

 

Chief Financial Officer

CO2

 

Carbon dioxide

3

 

Colonial Trail West

 

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

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)

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

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

DGI

 

Dominion Generation, Inc.

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 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, LLC), 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 Privatization

 

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

DSM

 

Demand-side management

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

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

4

 

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

FCC

 

Federal Communications Commission

FERC

 

Federal Energy Regulatory Commission

FTRs

 

Financial transmission rights

GAAP

 

U.S. generally accepted accounting principles

Gas Distribution

 

Gas Distribution operating segment

GENCO

 

South Carolina Generating Company, Inc.

GHG

 

Greenhouse gas

Greensville County

 

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

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

ISO

 

Independent system operator

Jones Act

 

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

Kewaunee

 

Kewaunee nuclear power station

kV

 

Kilovolt

LNG

 

Liquefied natural gas

MD&A

 

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

MGD

 

Million gallons per day

Millstone

 

Millstone nuclear power station

MW

 

Megawatt

MWh

 

Megawatt hour

NAV

 

Net asset value

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

NOX

 

Nitrogen oxide

NRC

 

U.S. Nuclear Regulatory Commission

Ohio Commission

 

Public Utilities Commission of Ohio

5

 

Order 1000

 

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

ozone season

 

The period May 1st through September 30th, as determined on a federal level

Patriot

 

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

PFAS

 

Per- and polyfluorinated substances, a group of widely used chemicals that break down very slowly over time in the environment

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))

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, 2018 and 2023

RGGI

 

Regional Greenhouse Gas Initiative

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

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

6

 

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 RBB

 

A rate adjustment clause associated with the recovery of costs related to installation of broadband capacity in certain unserved rural areas

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-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

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

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

SEC

 

U.S. Securities and Exchange Commission

SEEM

 

Southeast Energy Exchange Market

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

South Carolina Commission

 

Public Service Commission of South Carolina

7

 

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

Spruce Power

 

The legal entity, Spruce Power Holding Corporation, one or more of its consolidated subsidiaries, or the entirety of Spruce Power Holding Corporation and its consolidated subsidiaries

Standard & Poor’s

 

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

Summer

 

V.C. Summer nuclear power station

Surry

 

Surry nuclear power station

UEX

 

Uncollectible Expense Rider deployed by East Ohio

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 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

Wexpro

 

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

Wisconsin Commission

 

Public Service Commission of Wisconsin

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.

8

 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DOMINION ENERGY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenue

 

$

3,810

 

 

$

3,963

 

 

$

10,859

 

 

$

10,135

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Electric fuel and other energy-related purchases

 

 

1,049

 

 

 

1,217

 

 

 

3,010

 

 

 

2,625

 

Purchased electric capacity

 

 

19

 

 

 

16

 

 

 

42

 

 

 

45

 

Purchased gas

 

 

40

 

 

 

91

 

 

 

212

 

 

 

331

 

Other operations and maintenance

 

 

848

 

 

 

849

 

 

 

2,365

 

 

 

2,589

 

Depreciation, depletion and amortization

 

 

663

 

 

 

630

 

 

 

1,884

 

 

 

1,832

 

Other taxes

 

 

162

 

 

 

172

 

 

 

517

 

 

 

531

 

Impairment of assets and other charges (benefits)

 

 

(6

)

 

 

20

 

 

 

136

 

 

 

425

 

Losses (gains) on sales of assets

 

 

—

 

 

 

(27

)

 

 

(23

)

 

 

581

 

Total operating expenses

 

 

2,775

 

 

 

2,968

 

 

 

8,143

 

 

 

8,959

 

Income from operations

 

 

1,035

 

 

 

995

 

 

 

2,716

 

 

 

1,176

 

Other income (expense)

 

 

56

 

 

 

61

 

 

 

646

 

 

 

(181

)

Interest and related charges

 

 

192

 

 

 

360

 

 

 

1,066

 

 

 

673

 

Income from continuing operations including noncontrolling
     interests before income tax expense

 

 

899

 

 

 

696

 

 

 

2,296

 

 

 

322

 

Income tax expense

 

 

182

 

 

 

70

 

 

 

432

 

 

 

61

 

Net Income From Continuing Operations

 

 

717

 

 

 

626

 

 

 

1,864

 

 

 

261

 

Net Income (Loss) From Discontinued Operations(1)

 

 

(554

)

 

 

152

 

 

 

(105

)

 

 

775

 

Net Income Including Noncontrolling Interests

 

 

163

 

 

 

778

 

 

 

1,759

 

 

 

1,036

 

Noncontrolling Interests

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Net Income Attributable to Dominion Energy

 

$

163

 

 

$

778

 

 

$

1,759

 

 

$

1,036

 

Amounts attributable to Dominion Energy

 

 

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

$

717

 

 

$

626

 

 

$

1,864

 

 

$

261

 

Net income (loss) from discontinued operations

 

 

(554

)

 

 

152

 

 

 

(105

)

 

 

775

 

Net income attributable to Dominion Energy

 

$

163

 

 

$

778

 

 

$

1,759

 

 

$

1,036

 

EPS - Basic

 

 

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

$

0.83

 

 

$

0.73

 

 

$

2.16

 

 

$

0.23

 

Net income (loss) from discontinued operations

 

 

(0.66

)

 

 

0.18

 

 

 

(0.13

)

 

 

0.95

 

Net income attributable to Dominion Energy

 

$

0.17

 

 

$

0.91

 

 

$

2.03

 

 

$

1.18

 

EPS - Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

$

0.83

 

 

$

0.73

 

 

$

2.16

 

 

$

0.23

 

Net income (loss) from discontinued operations

 

 

(0.66

)

 

 

0.18

 

 

 

(0.13

)

 

 

0.94

 

Net income attributable to Dominion Energy

 

$

0.17

 

 

$

0.91

 

 

$

2.03

 

 

$

1.17

 

 

(1)
Includes income tax expense of $1.2 billion and $53 million for the three months ended September 30, 2023 and 2022, respectively, and $1.3 billion and $185 million for the nine months ended September 30, 2023 and 2022, respectively.

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

9

 

DOMINION ENERGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Net income including noncontrolling interests

 

$

163

 

 

$

778

 

 

$

1,759

 

 

$

1,036

 

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

 

 

 

 

 

 

Net deferred gains (losses) on derivatives-hedging
    activities(1)

 

 

19

 

 

 

10

 

 

 

16

 

 

 

64

 

Changes in unrealized net gains (losses) on investment
    securities(2)

 

 

(22

)

 

 

(27

)

 

 

(6

)

 

 

(116

)

Changes in net unrecognized pension and other
    postretirement benefit costs(3)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

30

 

Amounts reclassified to net income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Net derivative (gains) losses-hedging activities(4)

 

 

8

 

 

 

12

 

 

 

24

 

 

 

33

 

Net realized (gains) losses on investment securities(5)

 

 

2

 

 

 

1

 

 

 

1

 

 

 

13

 

Net pension and other postretirement benefit costs
    (credits)(6)

 

 

(8

)

 

 

26

 

 

 

(31

)

 

 

59

 

Net earnings from equity method investees(7)

 

 

3

 

 

 

—

 

 

 

3

 

 

 

—

 

Changes in other comprehensive income from equity
    method investees(8)

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

1

 

Total other comprehensive income

 

 

1

 

 

 

22

 

 

 

7

 

 

 

84

 

Comprehensive income including noncontrolling interests

 

 

164

 

 

 

800

 

 

 

1,766

 

 

 

1,120

 

Comprehensive income attributable to noncontrolling
    interests

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Comprehensive income attributable to Dominion Energy

 

$

164

 

 

$

800

 

 

$

1,766

 

 

$

1,120

 

 

(1) Net of $(6) million and $(4) million tax for the three months ended September 30, 2023 and 2022, respectively, and net of $(5) million and $(22) million tax for the nine months ended September 30, 2023 and 2022, respectively.

(2) Net of $6 million and $9 million tax for the three months ended September 30, 2023 and 2022, respectively, and net of $2 million and $37 million tax for the nine months ended September 30, 2023 and 2022, respectively.

(3) Net of $— million and $— million tax for the three months ended September 30, 2023 and 2022, respectively, and net of $— million and $(8) million tax for the nine months ended September 30, 2023 and 2022, respectively.

(4) Net of $(3) million and $(4) million tax for the three months ended September 30, 2023 and 2022, respectively, and net of $(8) million and $(11) million tax for the nine months ended September 30, 2023 and 2022, respectively.

(5) Net of $— million and $(1) million tax for the three months ended September 30, 2023 and 2022, respectively, and net of $— million and $(5) million tax for the nine months ended September 30, 2023 and 2022, respectively.

(6) Net of $7 million and $(9) million tax for the three months ended September 30, 2023 and 2022, respectively, and net of $15 million and $(21) million tax for the nine months ended September 30, 2023 and 2022, respectively.

(7) Net of $(1) million and $— million tax for the three months ended September 30, 2023 and 2022, respectively, and net of $(1) million and $— million tax for the nine months ended September 30, 2023 and 2022, respectively.

(8) Net of $— million and $— million tax for the three months ended September 30, 2023 and 2022, respectively, and net of $— million and $— million tax for the nine months ended September 30, 2023 and 2022, respectively.

 

 

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

 

10

 

DOMINION ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

September 30, 2023

 

 

December 31, 2022(1)

 

(millions)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

137

 

 

$

120

 

Customer receivables (less allowance for doubtful accounts of $37 and $27)

 

 

2,266

 

 

 

2,157

 

Other receivables (less allowance for doubtful accounts of $1 and $2)

 

 

294

 

 

 

383

 

Inventories

 

 

1,633

 

 

 

1,528

 

Derivative assets

 

 

221

 

 

 

1,019

 

Margin deposit assets

 

 

161

 

 

 

480

 

Regulatory assets

 

 

1,484

 

 

 

1,883

 

Other

 

 

437

 

 

 

504

 

Current assets held for sale

 

 

18,046

 

 

 

1,776

 

Total current assets

 

 

24,679

 

 

 

9,850

 

Investments

 

 

 

 

 

 

Nuclear decommissioning trust funds

 

 

6,345

 

 

 

5,957

 

Investment in equity method affiliates

 

 

301

 

 

 

295

 

Other

 

 

326

 

 

 

325

 

Total investments

 

 

6,972

 

 

 

6,577

 

Property, Plant and Equipment

 

 

 

 

 

 

Property, plant and equipment

 

 

80,652

 

 

 

75,178

 

Accumulated depreciation, depletion and amortization

 

 

(24,491

)

 

 

(23,352

)

Total property, plant and equipment, net

 

 

56,161

 

 

 

51,826

 

Deferred Charges and Other Assets

 

 

 

 

 

 

Goodwill

 

 

4,143

 

 

 

4,143

 

Regulatory assets

 

 

8,266

 

 

 

8,265

 

Other

 

 

5,722

 

 

 

4,780

 

Total deferred charges and other assets

 

 

18,131

 

 

 

17,188

 

Noncurrent assets held for sale

 

 

—

 

 

 

18,802

 

Total assets

 

$

105,943

 

 

$

104,243

 

 

(1) Dominion Energy’s Consolidated Balance Sheet at December 31, 2022 has been derived from the audited Consolidated Balance Sheet at that date and recast for certain events as discussed in Note 1.

 

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

11

 

DOMINION ENERGY, INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

 

 

September 30, 2023

 

 

December 31, 2022(1)

 

(millions)

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Securities due within one year

 

$

4,147

 

 

$

3,337

 

Supplemental credit facility borrowings

 

 

900

 

 

 

—

 

Short-term debt

 

 

3,785

 

 

 

3,423

 

Accounts payable

 

 

756

 

 

 

1,165

 

Accrued interest, payroll and taxes

 

 

1,168

 

 

 

910

 

Derivative liabilities

 

 

457

 

 

 

772

 

Regulatory liabilities

 

 

434

 

 

 

748

 

Other(2)

 

 

1,655

 

 

 

1,697

 

Current liabilities held for sale

 

 

8,331

 

 

 

1,398

 

Total current liabilities

 

 

21,633

 

 

 

13,450

 

Long-Term Debt

 

 

 

 

 

 

Long-term debt

 

 

32,145

 

 

 

32,515

 

Junior subordinated notes

 

 

688

 

 

 

1,387

 

Supplemental credit facility borrowings

 

 

—

 

 

 

450

 

Other

 

 

224

 

 

 

232

 

Total long-term debt

 

 

33,057

 

 

 

34,584

 

Deferred Credits and Other Liabilities

 

 

 

 

 

 

Deferred income taxes and investment tax credits

 

 

6,834

 

 

 

5,397

 

Regulatory liabilities

 

 

8,736

 

 

 

8,417

 

Other

 

 

7,655

 

 

 

6,963

 

Total deferred credits and other liabilities

 

 

23,225

 

 

 

20,777

 

Noncurrent liabilities held for sale

 

 

—

 

 

 

7,551

 

Total liabilities

 

 

77,915

 

 

 

76,362

 

Commitments and Contingencies (see Note 17)

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

Preferred stock (see Note 16)

 

 

1,783

 

 

 

1,783

 

Common stock – no par(3)

 

 

23,720

 

 

 

23,605

 

Retained earnings

 

 

4,090

 

 

 

4,065

 

Accumulated other comprehensive loss

 

 

(1,565

)

 

 

(1,572

)

Shareholders' equity

 

 

28,028

 

 

 

27,881

 

Noncontrolling interests

 

 

—

 

 

 

—

 

Total shareholders' equity

 

 

28,028

 

 

 

27,881

 

Total liabilities and shareholders' equity

 

$

105,943

 

 

$

104,243

 

 

(1) Dominion Energy’s Consolidated Balance Sheet at December 31, 2022 has been derived from the audited Consolidated Balance Sheet at that date and recast for certain events as discussed in Note 1.

(2) See Note 10 for amounts attributable to related parties.

(3) 1.8 billion shares authorized; 837 million and 835 million shares outstanding at September 30, 2023 and December 31, 2022, respectively.

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

 

12

 

DOMINION ENERGY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

 

QUARTER-TO-DATE

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2022

 

2

 

$

1,783

 

 

832

 

$

23,427

 

$

4,483

 

$

(1,396

)

$

28,297

 

$

—

 

$

28,297

 

Net income including
   noncontrolling interests

 

 

 

 

 

 

 

 

 

778

 

 

 

 

778

 

 

—

 

 

778

 

Issuance of stock

 

 

 

 

 

1

 

 

44

 

 

 

 

 

 

44

 

 

 

 

44

 

Stock awards (net of change in
   unearned compensation)

 

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

 

 

 

9

 

Preferred stock dividends (see
   Note 16)

 

 

 

 

 

 

 

 

 

(20

)

 

 

 

(20

)

 

 

 

(20

)

Common stock dividends ($0.6675 
   per share) and distributions

 

 

 

 

 

 

 

 

 

(557

)

 

 

 

(557

)

 

—

 

 

(557

)

Other comprehensive income, net of
   tax

 

 

 

 

 

 

 

 

 

 

 

22

 

 

22

 

 

 

 

22

 

September 30, 2022

 

2

 

$

1,783

 

 

833

 

$

23,480

 

$

4,684

 

$

(1,374

)

$

28,573

 

$

—

 

$

28,573

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2023

 

2

 

$

1,783

 

 

837

 

$

23,704

 

$

4,507

 

$

(1,566

)

$

28,428

 

$

—

 

$

28,428

 

Net income including
   noncontrolling interests

 

 

 

 

 

 

 

 

 

163

 

 

 

 

163

 

 

—

 

 

163

 

Issuance of stock

 

 

 

 

 

—

 

 

6

 

 

 

 

 

 

6

 

 

 

 

6

 

Stock awards (net of change in
   unearned compensation)

 

 

 

 

 

 

 

10

 

 

 

 

 

 

10

 

 

 

 

10

 

Preferred stock dividends (see
   Note 16)

 

 

 

 

 

 

 

 

 

(20

)

 

 

 

(20

)

 

 

 

(20

)

Common stock dividends ($0.6675 
   per share) and distributions

 

 

 

 

 

 

 

 

 

(559

)

 

 

 

(559

)

 

—

 

 

(559

)

Other comprehensive income, net of
   tax

 

 

 

 

 

 

 

 

 

 

 

1

 

 

1

 

 

 

 

1

 

Other

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

(1

)

 

 

 

(1

)

September 30, 2023

 

2

 

$

1,783

 

 

837

 

$

23,720

 

$

4,090

 

$

(1,565

)

$

28,028

 

$

—

 

$

28,028

 

 

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

 

13

 

DOMINION ENERGY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

 

YEAR-TO-DATE

 

 

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, 2021

 

2

 

$

1,783

 

 

810

 

$

21,610

 

$

5,373

 

$

(1,458

)

$

27,308

 

$

—

 

$

27,308

 

Net income including
   noncontrolling interests

 

 

 

 

 

 

 

 

 

1,036

 

 

 

 

1,036

 

 

—

 

 

1,036

 

Issuance of stock

 

 

 

 

 

23

 

 

1,847

 

 

 

 

 

 

1,847

 

 

 

 

1,847

 

Stock awards (net of change in
   unearned compensation)

 

 

 

 

 

 

 

23

 

 

 

 

 

 

23

 

 

 

 

23

 

Preferred stock dividends (see
   Note 16)

 

 

 

 

 

 

 

 

 

(72

)

 

 

 

(72

)

 

 

 

(72

)

Common stock dividends ($2.0025 
   per common share) and
   distributions

 

 

 

 

 

 

 

 

 

(1,653

)

 

 

 

(1,653

)

 

—

 

 

(1,653

)

Other comprehensive income, net of
   tax

 

 

 

 

 

 

 

 

 

 

 

84

 

 

84

 

 

 

 

84

 

September 30, 2022

 

2

 

$

1,783

 

 

833

 

$

23,480

 

$

4,684

 

$

(1,374

)

$

28,573

 

$

—

 

$

28,573

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

2

 

$

1,783

 

 

835

 

$

23,605

 

$

4,065

 

$

(1,572

)

$

27,881

 

$

—

 

$

27,881

 

Net income including
   noncontrolling interests

 

 

 

 

 

 

 

 

 

1,759

 

 

 

 

1,759

 

 

—

 

 

1,759

 

Issuance of stock

 

 

 

 

 

2

 

 

91

 

 

 

 

 

 

91

 

 

 

 

91

 

Stock awards (net of change in
   unearned compensation)

 

 

 

 

 

 

 

24

 

 

 

 

 

 

24

 

 

 

 

24

 

Preferred stock dividends (see
   Note 16)

 

 

 

 

 

 

 

 

 

(60

)

 

 

 

(60

)

 

 

 

(60

)

Common stock dividends ($2.0025 
   per common share) and
   distributions

 

 

 

 

 

 

 

 

 

(1,674

)

 

 

 

(1,674

)

 

—

 

 

(1,674

)

Other comprehensive income, net of
   tax

 

 

 

 

 

 

 

 

 

 

 

7

 

 

7

 

 

 

 

7

 

September 30, 2023

 

2

 

$

1,783

 

 

837

 

$

23,720

 

$

4,090

 

$

(1,565

)

$

28,028

 

$

—

 

$

28,028

 

 

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

14

 

DOMINION ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Nine Months Ended September 30,

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

 

Net income including noncontrolling interests

 

$

1,759

 

 

$

1,036

 

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

 

 

 

 

 

 

Depreciation, depletion and amortization (including nuclear fuel)

 

 

2,360

 

 

 

2,334

 

Deferred income taxes and investment tax credits

 

 

1,379

 

 

 

269

 

Impairment of assets and other charges

 

 

169

 

 

 

394

 

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

 

 

(657

)

 

 

601

 

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

 

 

(228

)

 

 

658

 

Other adjustments

 

 

106

 

 

 

(85

)

Changes in:

 

 

 

 

 

 

Accounts receivable

 

 

516

 

 

 

(56

)

Inventories

 

 

(148

)

 

 

(206

)

Deferred fuel and purchased gas costs, net

 

 

635

 

 

 

(1,525

)

Prepayments

 

 

45

 

 

 

(103

)

Accounts payable

 

 

(812

)

 

 

(54

)

Accrued interest, payroll and taxes

 

 

208

 

 

 

28

 

Margin deposit assets and liabilities

 

 

318

 

 

 

(152

)

Net realized and unrealized changes related to derivative activities

 

 

180

 

 

 

114

 

Pension and other postretirement benefits

 

 

(357

)

 

 

(344

)

Other operating assets and liabilities

 

 

(287

)

 

 

(238

)

Net cash provided by operating activities

 

 

5,186

 

 

 

2,671

 

Investing Activities

 

 

 

 

 

 

Plant construction and other property additions (including nuclear fuel)

 

 

(7,166

)

 

 

(5,251

)

Acquisition of solar development projects

 

 

(14

)

 

 

(139

)

Proceeds from sale of noncontrolling interest in Cove Point

 

 

3,293

 

 

 

—

 

Proceeds from sale of Hope

 

 

—

 

 

 

722

 

Proceeds from sales of securities

 

 

2,007

 

 

 

2,686

 

Purchases of securities

 

 

(2,182

)

 

 

(2,479

)

Proceeds from sale of assets and equity method investments

 

 

32

 

 

 

146

 

Contributions to equity method affiliates

 

 

(79

)

 

 

(34

)

Short-term deposit

 

 

—

 

 

 

(2,000

)

Return of short-term deposit

 

 

—

 

 

 

2,000

 

Other

 

 

18

 

 

 

(170

)

Net cash used in investing activities

 

 

(4,091

)

 

 

(4,519

)

Financing Activities

 

 

 

 

 

 

Issuance of short-term debt, net

 

 

362

 

 

 

629

 

364-day term loan facility borrowings

 

 

3,475

 

 

 

—

 

Repayment of 364-day term loan facility borrowings

 

 

(750

)

 

 

—

 

Issuance and remarketing of long-term debt

 

 

2,660

 

 

 

3,588

 

Repayment and repurchase of long-term debt

 

 

(5,673

)

 

 

(1,213

)

Supplemental credit facility borrowings

 

 

900

 

 

 

900

 

Repayment of supplemental credit facility borrowings

 

 

(450

)

 

 

(450

)

Series A Preferred Stock redemption

 

 

—

 

 

 

(1,610

)

Issuance of common stock

 

 

91

 

 

 

1,744

 

Common dividend payments

 

 

(1,674

)

 

 

(1,653

)

Other

 

 

(130

)

 

 

(155

)

Net cash provided by (used in) financing activities

 

 

(1,189

)

 

 

1,780

 

Decrease in cash, restricted cash and equivalents

 

 

(94

)

 

 

(68

)

Cash, restricted cash and equivalents at beginning of period

 

 

341

 

 

 

408

 

Cash, restricted cash and equivalents at end of period

 

$

247

 

 

$

340

 

See Note 2 for disclosure of supplemental cash flow information.

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

15

 

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenue(1)

 

$

2,645

 

 

$

2,875

 

 

$

7,280

 

 

$

7,217

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Electric fuel and other energy-related purchases(1)

 

 

736

 

 

 

981

 

 

 

2,241

 

 

 

2,030

 

Purchased electric capacity

 

 

15

 

 

 

11

 

 

 

33

 

 

 

33

 

Other operations and maintenance:

 

 

 

 

 

 

 

 

 

 

 

 

Affiliated suppliers

 

 

98

 

 

 

81

 

 

 

290

 

 

 

256

 

Other

 

 

434

 

 

 

450

 

 

 

1,126

 

 

 

1,323

 

Depreciation and amortization

 

 

488

 

 

 

451

 

 

 

1,367

 

 

 

1,305

 

Other taxes

 

 

71

 

 

 

80

 

 

 

223

 

 

 

238

 

Impairment of assets and other charges (benefits)

 

 

(15

)

 

 

19

 

 

 

30

 

 

 

432

 

Total operating expenses

 

 

1,827

 

 

 

2,073

 

 

 

5,310

 

 

 

5,617

 

Income from operations

 

 

818

 

 

 

802

 

 

 

1,970

 

 

 

1,600

 

Other income (expense)

 

 

(1

)

 

 

3

 

 

 

83

 

 

 

(37

)

Interest and related charges(1)

 

 

215

 

 

 

168

 

 

 

578

 

 

 

461

 

Income before income tax expense

 

 

602

 

 

 

637

 

 

 

1,475

 

 

 

1,102

 

Income tax expense

 

 

129

 

 

 

66

 

 

 

317

 

 

 

127

 

Net Income

 

$

473

 

 

$

571

 

 

$

1,158

 

 

$

975

 

 

(1)
See Note 19 for amounts attributable to affiliates.

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

 

 

16

 

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

473

 

 

$

571

 

 

$

1,158

 

 

$

975

 

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

 

 

 

 

 

 

Net deferred gains (losses) on derivatives-hedging
    activities(1)

 

 

18

 

 

 

13

 

 

 

15

 

 

 

57

 

Changes in unrealized net gains (losses) on investment
    securities(2)

 

 

(3

)

 

 

(4

)

 

 

—

 

 

 

(14

)

Amounts reclassified to net income:

 

 

 

 

 

 

 

 

 

 

 

 

Net derivative (gains) losses-hedging activities(3)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Net realized (gains) losses on investment securities(4)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1

)

Total other comprehensive income (loss)

 

 

15

 

 

 

9

 

 

 

15

 

 

 

43

 

Comprehensive income

 

$

488

 

 

$

580

 

 

$

1,173

 

 

$

1,018

 

 

 

(1)
Net of $(7) million and $(5) million tax for the three months ended September 30, 2023 and 2022, respectively, and net of $(6) million and $(20) million tax for the nine months ended September 30, 2023 and 2022, respectively.
(2)
Net of $— million and $— million tax for the three months ended September 30, 2023 and 2022, respectively, and net of $— million and $4 million tax for the nine months ended September 30, 2023 and 2022, respectively.
(3)
Net of $(1) million and $(1) million tax for the three months ended September 30, 2023 and 2022, respectively, and net of $(1) million and $(1) million tax for the nine months ended September 30, 2023 and 2022, respectively.
(4)
Net of $— million and $— million tax for the three months ended September 30, 2023 and 2022, respectively, and net of $— million and $— million tax for the nine months ended September 30, 2023 and 2022, respectively.

 

 

 

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

 

17

 

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

September 30, 2023

 

 

December 31, 2022(1)

 

(millions)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

37

 

 

$

22

 

Customer receivables (less allowance for doubtful accounts of $30 and $21)

 

 

1,743

 

 

 

1,578

 

Other receivables (less allowance for doubtful accounts of $1 and $2)

 

 

169

 

 

 

204

 

Affiliated receivables

 

 

72

 

 

 

7

 

Inventories (average cost method)

 

 

1,019

 

 

 

924

 

Margin deposit assets

 

 

24

 

 

 

310

 

Derivative assets(2)

 

 

55

 

 

 

765

 

Regulatory assets

 

 

921

 

 

 

1,140

 

Other

 

 

109

 

 

 

52

 

Total current assets

 

 

4,149

 

 

 

5,002

 

Investments

 

 

 

 

 

 

Nuclear decommissioning trust funds

 

 

3,400

 

 

 

3,202

 

Other

 

 

3

 

 

 

3

 

Total investments

 

 

3,403

 

 

 

3,205

 

Property, Plant and Equipment

 

 

 

 

 

 

Property, plant and equipment

 

 

59,124

 

 

 

54,697

 

Accumulated depreciation and amortization

 

 

(17,079

)

 

 

(16,218

)

Total property, plant and equipment, net

 

 

42,045

 

 

 

38,479

 

Deferred Charges and Other Assets

 

 

 

 

 

 

Regulatory assets

 

 

4,369

 

 

 

4,247

 

Other(2)

 

 

2,896

 

 

 

2,261

 

Total deferred charges and other assets

 

 

7,265

 

 

 

6,508

 

Total assets

 

$

56,862

 

 

$

53,194

 

 

 

 

(1)
Virginia Power’s Consolidated Balance Sheet at December 31, 2022 has been derived from the audited Consolidated Balance Sheet at that date.
(2)
See Note 19 for amounts attributable to affiliates.

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

18

 

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)

 

 

 

 

September 30, 2023

 

 

December 31, 2022(1)

 

(millions)

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDER’S EQUITY

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Securities due within one year

 

$

380

 

 

$

1,164

 

Short-term debt

 

 

942

 

 

 

941

 

Accounts payable

 

 

508

 

 

 

600

 

Payables to affiliates

 

 

95

 

 

 

255

 

Affiliated current borrowings

 

 

1,794

 

 

 

2,024

 

Accrued interest, payroll and taxes

 

 

438

 

 

 

270

 

Regulatory liabilities

 

 

226

 

 

 

506

 

Derivative liabilities(2)

 

 

310

 

 

 

298

 

Other

 

 

1,213

 

 

 

1,176

 

Total current liabilities

 

 

5,906

 

 

 

7,234

 

Long-Term Debt

 

 

 

 

 

 

Long-term debt

 

 

17,041

 

 

 

14,916

 

Other

 

 

69

 

 

 

65

 

Total long-term debt

 

 

17,110

 

 

 

14,981

 

Deferred Credits and Other Liabilities

 

 

 

 

 

 

Deferred income taxes and investment tax credits

 

 

3,952

 

 

 

3,452

 

Regulatory liabilities

 

 

5,973

 

 

 

5,499

 

Other(2)

 

 

5,503

 

 

 

4,783

 

Total deferred credits and other liabilities

 

 

15,428

 

 

 

13,734

 

Total liabilities

 

 

38,444

 

 

 

35,949

 

Commitments and Contingencies (see Note 17)

 

 

 

 

 

 

Common Shareholder’s Equity

 

 

 

 

 

 

Common stock – no par(3)

 

 

5,738

 

 

 

5,738

 

Other paid-in capital

 

 

1,113

 

 

 

1,113

 

Retained earnings

 

 

11,543

 

 

 

10,385

 

Accumulated other comprehensive income

 

 

24

 

 

 

9

 

Total common shareholder’s equity

 

 

18,418

 

 

 

17,245

 

Total liabilities and shareholder’s equity

 

$

56,862

 

 

$

53,194

 

 

(1)
Virginia Power’s Consolidated Balance Sheet at December 31, 2022 has been derived from the audited Consolidated Balance Sheet at that date.
(2)
See Note 19 for amounts attributable to affiliates.
(3)
500,000 shares authorized; 274,723 shares outstanding at September 30, 2023 and December 31, 2022.

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

19

 

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER’S EQUITY

(Unaudited)

 

QUARTER-TO-DATE

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Other Paid-In Capital

 

 

Retained Earnings

 

 

AOCI

 

 

Total

 

(millions, except for shares)

 

(thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2022

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

9,574

 

 

$

(7

)

 

$

16,418

 

Net income

 

 

 

 

 

 

 

 

 

 

 

571

 

 

 

 

 

 

571

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

9

 

September 30, 2022

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

10,145

 

 

$

2

 

 

$

16,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2023

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

11,070

 

 

$

9

 

 

$

17,930

 

Net income

 

 

 

 

 

 

 

 

 

 

 

473

 

 

 

 

 

 

473

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

 

 

 

15

 

September 30, 2023

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

11,543

 

 

$

24

 

 

$

18,418

 

 

 

 

YEAR-TO-DATE

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Other Paid-In Capital

 

 

Retained Earnings

 

 

AOCI

 

 

Total

 

(millions, except for shares)

 

(thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

9,170

 

 

$

(41

)

 

$

15,980

 

Net income

 

 

 

 

 

 

 

 

 

 

 

975

 

 

 

 

 

 

975

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43

 

 

 

43

 

September 30, 2022

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

10,145

 

 

$

2

 

 

$

16,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

10,385

 

 

$

9

 

 

$

17,245

 

Net income

 

 

 

 

 

 

 

 

 

 

 

1,158

 

 

 

 

 

 

1,158

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

 

 

 

15

 

September 30, 2023

 

 

275

 

 

$

5,738

 

 

$

1,113

 

 

$

11,543

 

 

$

24

 

 

$

18,418

 

 

 

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

 

20

 

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Nine Months Ended September 30,

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

 

Net income

 

$

1,158

 

 

$

975

 

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

 

 

 

 

 

 

Depreciation and amortization (including nuclear fuel)

 

 

1,486

 

 

 

1,428

 

Deferred income taxes and investment tax credits

 

 

449

 

 

 

183

 

Impairment of assets and other charges

 

 

44

 

 

 

403

 

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

 

 

(31

)

 

 

89

 

Other adjustments

 

 

15

 

 

 

(46

)

Changes in:

 

 

 

 

 

 

Accounts receivable

 

 

(41

)

 

 

(351

)

Affiliated receivables and payables

 

 

(225

)

 

 

1

 

Inventories

 

 

(98

)

 

 

(34

)

Prepayments

 

 

(32

)

 

 

(4

)

Deferred fuel expenses, net

 

 

487

 

 

 

(1,207

)

Accounts payable

 

 

(80

)

 

 

90

 

Accrued interest, payroll and taxes

 

 

168

 

 

 

134

 

Margin deposit assets and liabilities

 

 

286

 

 

 

(331

)

Net realized and unrealized changes related to derivative activities

 

 

541

 

 

 

88

 

Other operating assets and liabilities

 

 

(87

)

 

 

(24

)

Net cash provided by operating activities

 

 

4,040

 

 

 

1,394

 

Investing Activities

 

 

 

 

 

 

Plant construction and other property additions

 

 

(4,871

)

 

 

(3,322

)

Purchases of nuclear fuel

 

 

(128

)

 

 

(169

)

Acquisition of solar development projects

 

 

(14

)

 

 

(51

)

Proceeds from sales of securities

 

 

1,254

 

 

 

1,289

 

Purchases of securities

 

 

(1,363

)

 

 

(1,334

)

Other

 

 

34

 

 

 

(10

)

Net cash used in investing activities

 

 

(5,088

)

 

 

(3,597

)

Financing Activities

 

 

 

 

 

 

Issuance of short-term debt, net

 

 

1

 

 

 

264

 

Issuance (repayment) of affiliated current borrowings, net

 

 

(230

)

 

 

85

 

Issuance and remarketing of long-term debt

 

 

2,660

 

 

 

2,338

 

Repayment and repurchase of long-term debt

 

 

(1,308

)

 

 

(438

)

Other

 

 

(62

)

 

 

(52

)

Net cash provided by financing activities

 

 

1,061

 

 

 

2,197

 

Increase (decrease) in cash, restricted cash and equivalents

 

 

13

 

 

 

(6

)

Cash, restricted cash and equivalents at beginning of period

 

 

24

 

 

 

26

 

Cash, restricted cash and equivalents at end of period

 

$

37

 

 

$

20

 

 

See Note 2 for disclosure of supplemental cash flow information.

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

 

21

 

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1. Nature of Operations

Dominion Energy, headquartered in Richmond, Virginia, is one of the nation’s largest producers and distributors of energy. Dominion Energy’s operations are conducted through various subsidiaries, including Virginia Power. Dominion Energy’s operations also include DESC, regulated gas distribution operations primarily in the eastern and Rocky Mountain regions of the U.S. and nonregulated electric generation.

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, except 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 in July 2023. As discussed in Notes 3 and 10, 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 as discussed in Note 21. Dominion Energy’s Consolidated Financial Statements and Notes have been recast to reflect these changes in presentation.

Note 2. Significant Accounting Policies

As permitted by the rules and regulations of the SEC, the Companies’ accompanying unaudited Consolidated Financial Statements contain certain condensed financial information and exclude certain footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with GAAP. These unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

In the Companies’ opinion, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly their financial position at September 30, 2023, their results of operations and changes in equity for the three and nine months ended September 30, 2023 and 2022 and their cash flows for the nine months ended September 30, 2023 and 2022. Such adjustments are normal and recurring in nature unless otherwise noted.

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 and expenses for the periods presented. Actual results may differ from those estimates.

The Companies’ accompanying unaudited 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.

The results of operations for interim periods are not necessarily indicative of the results expected for the full year. Information for quarterly periods is affected by seasonal variations in sales, rate changes, electric fuel and other energy-related purchases, purchased gas expenses and other factors.

Certain amounts in the Companies’ 2022 Consolidated Financial Statements and Notes have been reclassified to conform to the 2023 presentation for comparative purposes; however, such reclassifications did not affect the Companies’ net income, total assets, liabilities, equity or cash flows.

Amounts disclosed for Dominion Energy are inclusive of Virginia Power, where applicable. There have been no significant changes from Note 2 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022, with the exception of the items described below.

22

 

Cash, Restricted Cash and Equivalents

Restricted Cash and Equivalents

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 nine months ended September 30, 2023 and 2022:

 

 

 

Cash, Restricted Cash and Equivalents
at End of Period

 

 

Cash, Restricted Cash and Equivalents
at Beginning of Period

 

 

 

September 30, 2023

 

 

September 30, 2022

 

 

December 31, 2022

 

 

December 31, 2021

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Dominion Energy

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents(1)

 

$

176

 

 

$

163

 

 

$

153

 

 

$

283

 

Restricted cash and equivalents(2)

 

 

71

 

 

 

177

 

 

 

188

 

 

 

125

 

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

 

$

247

 

 

$

340

 

 

$

341

 

 

$

408

 

Virginia Power

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

37

 

 

$

18

 

 

$

22

 

 

$

26

 

Restricted cash and equivalents(3)

 

 

—

 

 

 

2

 

 

 

2

 

 

 

—

 

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

 

$

37

 

 

$

20

 

 

$

24

 

 

$

26

 

 

(1)
At September 30, 2023, September 30, 2022, December 31, 2022 and December 31, 2021, Dominion Energy had $39 million, $25 million, $34 million and $34 million, respectively, of cash and cash equivalents included in current assets held for sale.
(2)
At September 30, 2023, September 30, 2022, December 31, 2022 and December 31, 2021, Dominion Energy had $4 million, $2 million, $2 million and less than $1 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.

 

Supplemental Cash Flow Information

 

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

 

Nine Months Ended September 30,

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

Significant noncash investing and financing activities:(1)

 

 

 

 

 

 

Accrued capital expenditures

 

$

884

 

 

$

745

 

Leases(2)

 

 

294

 

 

 

129

 

(1)
See Note 10 for noncash investing activities related to the acquisition of a noncontrolling interest in Dominion Privatization, Note 16 for noncash financing activities related to the remarketing of Series A Preferred Stock and the issuance of common stock associated with the settlement of litigation and Note 17 for noncash financing activities related to the transfer of property associated with the settlement of litigation.
(2)
Includes $51 million and $29 million of financing leases at September 30, 2023 and 2022, respectively, and $243 million and $100 million of operating leases at September 30, 2023 and 2022, respectively.

 

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

 

Nine Months Ended September 30,

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

Significant noncash investing and financing activities:

 

 

 

 

 

 

Accrued capital expenditures

 

$

646

 

 

$

454

 

Leases(1)

 

 

253

 

 

 

113

 

 

(1)
Includes $44 million and $20 million of financing leases at September 30, 2023 and 2022, respectively, and $209 million and $93 million of operating leases at September 30, 2023 and 2022, respectively.

23

 

Asset Retirement Obligations

In the third quarter of 2023, Virginia Power revised its estimated cash flow projections associated with future landfill closure costs at certain utility generation facilities. As a result, Virginia Power recorded an increase to its AROs of $510 million with a corresponding increase of $444 million to regulatory assets for amounts recoverable through riders and $66 million to other deferred charges and other assets for amounts associated with nonjurisdictional customers.

 

Note 3. Acquisitions and Dispositions

Business Review Dispositions

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 final closing adjustments. In the third quarter of 2023, Dominion Energy recorded a charge of $30 million to reflect the recognition of deferred taxes on the outside basis of East Ohio’s stock upon meeting the classification as held for sale. These deferred taxes will reverse upon closing of the sale and become a component of current income tax expense on the gain on sale disclosed above. See Note 5 for additional information.

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. 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 final closing adjustments. In the third quarter

24

 

of 2023, Dominion Energy recorded a charge of $385 million to reflect the recognition of deferred taxes on the outside basis of PSNC’s stock upon meeting the classification as held for sale. These deferred taxes will reverse upon closing of the sale and become a component of current income tax expense on the gain on sale disclosed above. See Note 5 for additional information.

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 final closing adjustments. In the third quarter of 2023, Dominion Energy recorded a charge of $524 million to reflect the recognition of deferred taxes on the outside basis of Questar Gas, Wexpro and related affiliates’ stock upon meeting the classification as held for sale. These deferred taxes will reverse upon closing of the sale and become a component of current income tax expense on the gain on sale disclosed above. See Note 5 for additional information.

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. In connection with closing, Dominion Energy recorded a loss of $1 million ($1 million after-tax). Dominion Energy recorded an impairment associated with these operations in the second quarter of 2023 as discussed in Note 8.

Financial Statement Information

The operations included in each of the East Ohio, PSNC and Questar Gas Transactions are presented as held for sale and discontinued operations within the Corporate and Other segment effective September 2023. In addition, operations associated with the other sales related to the comprehensive business review are also presented as discontinued operations within the Corporate and Other segment

25

 

effective September 2023. As a result, the previously reported amounts have been recast to reflect this presentation and depreciation and amortization ceased on the applicable assets.

The following table represents selected information for each disposal group regarding the results of operations reported within discontinued operations in Dominion Energy's Consolidated Statements of Income:

 

Three Months Ended September 30, 2023

 

 

Nine Months Ended September 30, 2023

 

 

 

East Ohio Transaction

 

PSNC Transaction

 

Questar Gas Transaction

 

Other

 

 

East Ohio Transaction

 

PSNC Transaction

 

Questar Gas Transaction

 

Other

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

214

 

$

86

 

$

150

 

$

2

 

 

$

761

 

$

532

 

$

1,151

 

$

5

 

Operating expense(1)

 

 

128

 

 

80

 

 

127

 

 

7

 

 

 

497

 

 

386

 

 

939

 

 

29

 

Other income (expense)

 

 

7

 

 

3

 

 

3

 

 

—

 

 

 

22

 

 

8

 

 

6

 

 

—

 

Interest and related charges

 

 

19

 

 

13

 

 

17

 

 

—

 

 

 

51

 

 

38

 

 

50

 

 

1

 

Income (loss) before income
   taxes

 

 

74

 

 

(4

)

 

9

 

 

(5

)

 

 

235

 

 

116

 

 

168

 

 

(25

)

Income tax expense (benefit)(2)

 

 

39

 

 

383

 

 

525

 

 

(2

)

 

 

58

 

 

409

 

 

557

 

 

(7

)

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

 

$

35

 

$

(387

)

$

(516

)

$

(3

)

 

$

177

 

$

(293

)

$

(389

)

$

(18

)

(1)
Other includes a charge of $15 million ($11 million after-tax) recorded in the second quarter of 2023 associated with the impairment of certain nonregulated solar assets.
(2)
Includes amounts recorded in the third quarter of 2023 to reflect the recognition of deferred taxes on the outside basis of the applicable entities' stock upon meeting the classification as held for sale.
(3)
Excludes $6 million and $2 million of income tax expense attributable to consolidated state and interim period tax allocation adjustments for the three and nine months ended September 30, 2023, respectively.

 

 

Three Months Ended September 30, 2022

 

 

Nine Months Ended September 30, 2022

 

 

 

East Ohio Transaction

 

PSNC Transaction

 

Questar Gas Transaction

 

Other

 

 

East Ohio Transaction

 

PSNC Transaction

 

Questar Gas Transaction

 

Other

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

206

 

$

93

 

$

114

 

$

—

 

 

$

738

 

$

539

 

$

846

 

$

3

 

Operating expense

 

 

140

 

 

94

 

 

100

 

 

1

 

 

 

503

 

 

406

 

 

658

 

 

4

 

Other income (expense)

 

 

7

 

 

3

 

 

—

 

 

—

 

 

 

21

 

 

6

 

 

—

 

 

—

 

Interest and related charges

 

 

12

 

 

11

 

 

11

 

 

—

 

 

 

21

 

 

30

 

 

31

 

 

—

 

Income (loss) before income
   taxes

 

 

61

 

 

(9

)

 

3

 

 

(1

)

 

 

235

 

 

109

 

 

157

 

 

(1

)

Income tax expense
   (benefit)

 

 

5

 

 

(2

)

 

(2

)

 

—

 

 

 

29

 

 

23

 

 

29

 

 

—

 

Net income (loss) attributable
   to Dominion Energy(1)

 

$

56

 

$

(7

)

$

5

 

$

(1

)

 

$

206

 

$

86

 

$

128

 

$

(1

)

(1)
Excludes $20 million and $7 million of income tax expense attributable to consolidated state and interim period tax allocation adjustments for the three and nine months ended September 30, 2022, respectively.

The carrying amount 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 September 30, 2023(1)

 

 

At December 31, 2022

 

 

East Ohio Transaction

 

PSNC Transaction

 

Questar Gas Transaction

 

Other

 

 

East Ohio Transaction

 

PSNC Transaction

 

Questar Gas Transaction

 

Other

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets(2)

 

$

358

 

 

$

240

 

 

$

680

 

$

—

 

 

 

$

544

 

 

$

381

 

 

$

803

 

$

1

 

Property, plant and
   equipment, net

 

 

5,301

 

 

 

2,705

 

 

 

4,206

 

 

—

 

 

 

 

5,012

 

 

 

2,591

 

 

 

3,984

 

 

47

 

Other deferred charges
   and other assets,
   including goodwill(3) 
   and intangible assets

 

 

2,651

 

 

 

819

 

 

 

1,000

 

 

—

 

 

 

 

2,629

 

 

 

822

 

 

 

1,043

 

 

—

 

Current liabilities(4)

 

 

384

 

 

 

145

 

 

 

233

 

 

—

 

 

 

 

634

 

 

 

151

 

 

 

612

 

 

1

 

Long-term debt

 

 

2,286

 

 

 

798

 

 

 

1,245

 

 

—

 

 

 

 

2,287

 

 

 

798

 

 

 

1,245

 

 

—

 

Other deferred credits
   and liabilities(5)

 

 

1,427

 

 

 

692

 

 

 

1,120

 

 

—

 

 

 

 

1,435

 

 

 

689

 

 

 

1,087

 

 

9

 

(1)
All amounts at September 30, 2023 are classified as current in Dominion Energy's Consolidated Balance Sheets.

26

 

(2)
Includes cash and cash equivalents of $4 million and $6 million within the East Ohio Transaction, less than $1 million and less than $1 million within the PSNC Transaction and $35 million and $28 million within the Questar Gas Transaction at September 30, 2023 and December 31, 2022, respectively. Also includes regulatory assets of $83 million and $90 million within the East Ohio Transaction, $114 million and $95 million within the PSNC Transaction and $423 million and $273 million within the Questar Gas Transaction at September 30, 2023 and December 31, 2022, respectively.
(3)
Includes goodwill of $1.5 billion, $673 million and $983 million at both September 30, 2023 and December 31, 2022 within the East Ohio Transaction, PSNC Transaction and Questar Gas Transaction, respectively. Also includes regulatory assets of $725 million and $751 million within the East Ohio Transaction, $88 million and $93 million within the PSNC Transaction and $(34) million and $(22) million within the Questar Gas Transaction at September 30, 2023 and December 31, 2022, respectively.
(4)
Includes regulatory liabilities of $54 million and $43 million within the East Ohio Transaction, $42 million and $11 million within the PSNC Transaction and $48 million and $144 million within the Questar Gas Transaction at September 30, 2023 and December 31, 2022, respectively.
(5)
Includes regulatory liabilities of $725 million and $749 million within the East Ohio Transaction, $441 million and $436 million within the PSNC Transaction and $510 million and $506 million within the Questar Gas Transaction at September 30, 2023 and December 31, 2022, respectively.

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

 

Nine Months Ended September 30, 2023

 

 

Nine Months Ended September 30, 2022

 

 

 

East Ohio Transaction

 

PSNC Transaction

 

Questar Gas Transaction

 

Other

 

 

East Ohio Transaction

 

PSNC Transaction

 

Questar Gas Transaction

 

Other

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

355

 

$

153

 

$

290

 

$

—

 

 

$

299

 

$

113

 

$

324

 

$

—

 

Significant noncash items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion
   and amortization

 

 

109

 

 

67

 

 

130

 

 

2

 

 

 

99

 

 

65

 

 

121

 

 

3

 

Accrued capital expenditures

 

 

53

 

 

22

 

 

33

 

 

—

 

 

 

42

 

 

14

 

 

49

 

 

—

 

Disposition of Gas Transmission & Storage Operations

In December 2021, Dominion Energy completed the sale of the Q-Pipe Group to Southwest Gas, as discussed in Note 3 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. In the first quarter of 2022, Dominion Energy recognized a gain of $27 million ($20 million after-tax) in discontinued operations in its Consolidated Statements of Income associated with finalization of working capital adjustments.

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 is treated as a stock sale for tax purposes.

Upon closing, Dominion Energy recognized a pre-tax gain of $8 million, subject to 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 $89 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 20.

All activity related to Hope is, effective September 2023, included 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

27

 

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.

Note 4. Operating Revenue

The Companies’ operating revenue consists of the following:

 

 

Dominion Energy

 

 

Virginia Power

 

 

Quarter-to-Date

 

 

Year-to-Date

 

 

Quarter-to-Date

 

 

Year-to-Date

 

Period Ended September 30,

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulated electric sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

$

1,558

 

 

$

1,609

 

 

$

3,968

 

 

$

4,013

 

 

$

1,133

 

 

$

1,238

 

 

$

2,975

 

 

$

3,069

 

Commercial

 

1,236

 

 

 

1,349

 

 

 

3,453

 

 

 

3,336

 

 

 

962

 

 

 

1,105

 

 

 

2,745

 

 

 

2,696

 

Industrial

 

227

 

 

 

253

 

 

 

658

 

 

 

670

 

 

 

109

 

 

 

134

 

 

 

324

 

 

 

347

 

Government and other retail

 

288

 

 

 

353

 

 

 

764

 

 

 

922

 

 

 

269

 

 

 

335

 

 

 

711

 

 

 

874

 

Wholesale

 

53

 

 

 

66

 

 

 

133

 

 

 

181

 

 

 

37

 

 

 

38

 

 

 

88

 

 

 

101

 

Nonregulated electric sales

 

229

 

 

 

345

 

 

 

611

 

 

 

948

 

 

 

22

 

 

 

17

 

 

 

55

 

 

 

62

 

Regulated gas sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

28

 

 

 

32

 

 

 

207

 

 

 

247

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

25

 

 

 

36

 

 

 

106

 

 

 

141

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

19

 

 

 

55

 

 

 

58

 

 

 

132

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulated gas transportation and storage

 

4

 

 

 

11

 

 

 

13

 

 

 

35

 

 

 

 

 

 

 

 

 

 

 

 

 

Other regulated revenues

 

61

 

 

 

68

 

 

 

204

 

 

 

208

 

 

 

57

 

 

 

64

 

 

 

193

 

 

 

195

 

Other nonregulated revenues(1)(2)

 

30

 

 

 

59

 

 

 

115

 

 

 

134

 

 

 

9

 

 

 

28

 

 

 

42

 

 

 

50

 

Total operating revenue from contracts with customers

 

3,758

 

 

 

4,236

 

 

 

10,290

 

 

 

10,967

 

 

 

2,598

 

 

 

2,959

 

 

 

7,133

 

 

 

7,394

 

Other revenues(1)(3)

 

52

 

 

 

(273

)

 

 

569

 

 

 

(832

)

 

 

47

 

 

 

(84

)

 

 

147

 

 

 

(177

)

Total operating revenue

$

3,810

 

 

$

3,963

 

 

$

10,859

 

 

$

10,135

 

 

$

2,645

 

 

$

2,875

 

 

$

7,280

 

 

$

7,217

 

 

(1)
See Note 19 for amounts attributable to affiliates.
(2)
Includes sales of renewable energy credits were $7 million and $21 million for the three months ended September 30, 2023 and 2022, respectively, and $36 million and $32 million for the nine months ended September 30, 2023 and 2022, respectively, at Dominion Energy and $2 million and $13 million for the three months ended September 30, 2023 and 2022, respectively, and $24 million and $13 million for the nine months ended September 30, 2023 and 2022, respectively, at Virginia Power.
(3)
Includes alternative revenue of $34 million and $20 million for the three months ended September 30, 2023 and 2022, respectively, and $111 million and $47 million for the nine months ended September 30, 2023 and 2022, respectively, at both Dominion Energy and Virginia Power.

 

Neither Dominion Energy nor Virginia Power have any amounts for revenue to be recognized in the future on multi-year contracts in place at September 30, 2023.

At September 30, 2023 and December 31, 2022, Dominion Energy’s contract liability balances were $81 million and $51 million, respectively, and are recorded in other current liabilities and other deferred credits and other liabilities in its Consolidated Balance Sheets. At September 30, 2023 and December 31, 2022, Virginia Power’s contract liability balances were $74 million and $39 million, respectively, and are recorded in other current liabilities and other deferred credits and other liabilities in its Consolidated Balance Sheets.

The Companies recognize revenue as they fulfill their obligations to provide service to their customers. During the nine months ended September 30, 2023 and 2022, Dominion Energy recognized revenue of $48 million and $39 million, respectively, from the beginning contract liability balances. During the nine months ended September 30, 2023 and 2022, Virginia Power recognized $39 million and $33 million, respectively, from the beginning contract liability balances.

28

 

Note 5. Income Taxes

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

 

Nine Months Ended September 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

U.S. statutory rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

Increases (reductions) resulting from:

 

 

 

 

 

 

 

 

 

 

 

 

Recognition of taxes - sale of
   subsidiary stock

 

 

—

 

 

 

28.4

 

 

 

 

 

 

 

State taxes, net of federal benefit

 

 

3.9

 

 

 

13.1

 

 

 

4.6

 

 

 

4.4

 

Investment tax credits

 

 

(3.2

)

 

 

(23.6

)

 

 

(0.3

)

 

 

(8.9

)

Production tax credits

 

 

(0.6

)

 

 

(2.6

)

 

 

(0.9

)

 

 

(1.0

)

Reversal of excess deferred income
   taxes

 

 

(2.6

)

 

 

(15.6

)

 

 

(2.6

)

 

 

(3.7

)

Changes in state deferred taxes associated
   with assets held for sale

 

 

1.3

 

 

 

1.6

 

 

 

 

 

 

 

AFUDC - equity

 

 

(0.1

)

 

 

(1.6

)

 

 

—

 

 

 

(0.8

)

Other, net

 

 

(0.9

)

 

 

(1.6

)

 

 

(0.3

)

 

 

0.5

 

Effective tax rate

 

 

18.8

%

 

 

19.1

%

 

 

21.5

%

 

 

11.5

%

 

Dominion Energy’s effective tax rate for the nine months ended September 30, 2023 includes a net income tax expense of $29 million associated with the remeasurement of consolidated state deferred taxes as a result of the East Ohio, PSNC and Questar Gas Transactions and sale of Dominion Energy's 50% noncontrolling partnership interest in Cove Point as discussed in Notes 3 and 10, respectively.

 

In the first quarter of 2022, Dominion Energy entered into an agreement to sell 100% of the equity interests in Hope in a stock sale for income tax purposes. As of June 30, 2022, Dominion had established $90 million of deferred tax liabilities reflecting the excess of the financial reporting basis over the tax basis in Hope’s stock. These deferred taxes reversed upon closing of the sale in August 2022 and became a component of current income tax expense on the sale. See Note 3 to the Consolidated Financial Statements in Dominion Energy's Annual Report on Form 10-K for the year ended December 31, 2022 for additional information regarding the sale of Hope.

 

As discussed 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 of September 30, 2023, there have been no material changes in the Companies’ unrecognized tax benefits or possible changes that could reasonably be expected to occur during the next twelve months. See Note 5 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022, for a discussion of these unrecognized tax benefits.

Discontinued operations

Income tax expense reflected in discontinued operations is $1.3 billion and $185 million for the nine months ended September 30, 2023 and 2022, respectively. As discussed in Note 3, Dominion Energy entered into agreements for the East Ohio, PSNC and Questar Gas Transactions in September 2023, each of which will be treated as a stock sale for income tax purposes. In connection with the pending sales, Dominion Energy established $939 million of deferred tax liabilities reflecting the excess of the financial reporting basis over the tax basis in the tax basis in the stock of the entities anticipated to be sold. These deferred taxes will reverse upon closing of the respective sales, all of which are expected to occur in 2024. In addition, Dominion Energy recorded tax expense of $278 million associated with completing the sale in September 2023 of its remaining 50% noncontrolling partnership interest in Cove Point to BHE as discussed in Note 10.

 

29

 

Note 6. Earnings Per Share

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

 

 

 

Quarter-to-Date

 

 

Year-to-Date

 

Period Ended September 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(millions, except EPS)

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Dominion Energy from
   continuing operations

 

$

717

 

 

$

626

 

 

$

1,864

 

 

$

261

 

Preferred stock dividends (see Note 16)

 

 

(20

)

 

 

(20

)

 

 

(60

)

 

 

(72

)

Net income attributable to Dominion Energy from
   continuing operations – Basic

 

 

697

 

 

 

606

 

 

 

1,804

 

 

 

189

 

Dilutive effect of 2019 Equity Units(1)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Net income attributable to Dominion Energy from
   continuing operations - Diluted

 

$

697

 

 

$

606

 

 

$

1,804

 

 

$

189

 

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

 

$

(554

)

 

$

152

 

 

$

(105

)

 

$

775

 

Average shares of common stock outstanding – Basic

 

 

836.8

 

 

 

832.6

 

 

 

836.0

 

 

 

820.6

 

Net effect of dilutive securities(2)

 

 

—

 

 

 

0.6

 

 

 

0.2

 

 

 

1.1

 

Average shares of common stock outstanding – Diluted

 

 

836.8

 

 

 

833.2

 

 

 

836.2

 

 

 

821.7

 

EPS from continuing operations – Basic

 

$

0.83

 

 

$

0.73

 

 

$

2.16

 

 

$

0.23

 

EPS from discontinued operations – Basic

 

 

(0.66

)

 

 

0.18

 

 

$

(0.13

)

 

 

0.95

 

EPS attributable to Dominion Energy – Basic

 

$

0.17

 

 

$

0.91

 

 

$

2.03

 

 

$

1.18

 

EPS from continuing operations – Diluted

 

$

0.83

 

 

$

0.73

 

 

$

2.16

 

 

$

0.23

 

EPS from discontinued operations – Diluted

 

 

(0.66

)

 

 

0.18

 

 

$

(0.13

)

 

 

0.94

 

EPS attributable to Dominion Energy – Diluted

 

$

0.17

 

 

$

0.91

 

 

$

2.03

 

 

$

1.17

 

(1)
Effective January 2022, diluted net income was no longer reduced by the Series A Preferred Stock dividends.
(2)
Dilutive securities for the nine months ended September 30, 2023 and the three and nine months ended September 30, 2022 include stock potentially to be issued to satisfy the obligation under a settlement agreement with the SCDOR (applying the if converted method). See Note 17 for additional information. Additionally, dilutive securities for the nine months ended September 30, 2022 included forward sales agreements entered into in November 2021 (applying the treasury stock method). See Note 20 to the Consolidated Financial Statements in Dominion Energy’s Annual Report on Form 10-K for the year ended December 31, 2022 for additional information.

 

The 2019 Equity Units, prior to settlement in June 2022, were a potentially dilutive instrument. See Note 19 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022 and Note 16 in this report for additional information.

 

For the nine months ended September 30, 2022, the 2019 Equity Units, applying the if converted method for the period prior to settlement in June 2022, were excluded from the calculation of diluted EPS from continuing operations as the effects were anti-dilutive.

 

 

30

 

Note 7. 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:

 

 

 

Total Derivative-Hedging Activities(1)(2)

 

 

Investment
Securities(3)

 

 

Pension
and other
postretirement
benefit costs(4)

 

 

Equity Method Investees(5)

 

 

Total

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(236

)

 

$

(29

)

 

$

(1,299

)

 

$

(2

)

 

$

(1,566

)

Other comprehensive income (loss) before
    reclassifications: gains (losses)

 

 

19

 

 

 

(22

)

 

 

—

 

 

 

(1

)

 

 

(4

)

Amounts reclassified from AOCI: (gains) losses

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and related charges

 

 

11

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

11

 

Discontinued operations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4

 

 

 

4

 

Other income (expense)

 

 

—

 

 

 

2

 

 

 

(15

)

 

 

—

 

 

 

(13

)

Total

 

 

11

 

 

 

2

 

 

 

(15

)

 

 

4

 

 

 

2

 

Income tax expense (benefit)

 

 

(3

)

 

 

—

 

 

 

7

 

 

 

(1

)

 

 

3

 

Total, net of tax

 

 

8

 

 

 

2

 

 

 

(8

)

 

 

3

 

 

 

5

 

Net current period other comprehensive
    income (loss)

 

 

27

 

 

 

(20

)

 

 

(8

)

 

 

2

 

 

 

1

 

Ending balance

 

$

(209

)

 

$

(49

)

 

$

(1,307

)

 

$

—

 

 

$

(1,565

)

Three Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(283

)

 

$

(40

)

 

$

(1,070

)

 

$

(3

)

 

$

(1,396

)

Other comprehensive income (loss) before
    reclassifications: gains (losses)

 

 

10

 

 

 

(27

)

 

 

—

 

 

 

—

 

 

 

(17

)

Amounts reclassified from AOCI: (gains) losses

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and related charges

 

 

16

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16

 

Other income (expense)

 

 

—

 

 

 

2

 

 

 

35

 

 

 

—

 

 

 

37

 

Total

 

 

16

 

 

 

2

 

 

 

35

 

 

 

—

 

 

 

53

 

Income tax expense (benefit)

 

 

(4

)

 

 

(1

)

 

 

(9

)

 

 

—

 

 

 

(14

)

Total, net of tax

 

 

12

 

 

 

1

 

 

 

26

 

 

 

—

 

 

 

39

 

Net current period other comprehensive
    income (loss)

 

 

22

 

 

 

(26

)

 

 

26

 

 

 

—

 

 

 

22

 

Ending balance

 

$

(261

)

 

$

(66

)

 

$

(1,044

)

 

$

(3

)

 

$

(1,374

)

(1)
Comprised entirely of interest rate derivative hedging activities.
(2)
Net of $70 million, $79 million, $87 million and $94 million tax at September 30, 2023, June 30, 2023, September 30, 2022 and June 30, 2022, respectively.
(3)
Net of $16 million, $9 million, $23 million and $14 million tax at September 30, 2023, June 30, 2023, September 30, 2022 and June 30, 2022, respectively.
(4)
Net of $461 million, $453 million, $367 million and $376 million tax at September 30, 2023, June 30, 2023, September 30, 2022 and June 30, 2022, respectively.
(5)
Net of $— million, $— million, $1 million and $1 million tax at September 30, 2023, June 30, 2023, September 30, 2022 and June 30, 2022, respectively.

 

31

 

 

 

Total Derivative-Hedging Activities(1)(2)

 

 

Investment
Securities(3)

 

 

Pension
and other
postretirement
benefit costs(4)

 

 

Equity Method Investees(5)

 

 

Total

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(249

)

 

$

(44

)

 

$

(1,276

)

 

$

(3

)

 

$

(1,572

)

Other comprehensive income (loss) before
    reclassifications: gains (losses)

 

 

16

 

 

 

(6

)

 

 

—

 

 

 

—

 

 

 

10

 

Amounts reclassified from AOCI: (gains) losses

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and related charges

 

 

32

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

32

 

Discontinued operations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4

 

 

 

4

 

Other income (expense)

 

 

—

 

 

 

1

 

 

 

(46

)

 

 

—

 

 

 

(45

)

Total

 

 

32

 

 

 

1

 

 

 

(46

)

 

 

4

 

 

 

(9

)

Income tax expense (benefit)

 

 

(8

)

 

 

—

 

 

 

15

 

 

 

(1

)

 

 

6

 

Total, net of tax

 

 

24

 

 

 

1

 

 

 

(31

)

 

 

3

 

 

 

(3

)

Net current period other comprehensive
    income (loss)

 

 

40

 

 

 

(5

)

 

 

(31

)

 

 

3

 

 

 

7

 

Ending balance

 

$

(209

)

 

$

(49

)

 

$

(1,307

)

 

$

—

 

 

$

(1,565

)

Nine Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(358

)

 

$

37

 

 

$

(1,133

)

 

$

(4

)

 

$

(1,458

)

Other comprehensive income (loss) before
    reclassifications: gains (losses)

 

 

64

 

 

 

(116

)

 

 

30

 

 

 

1

 

 

 

(21

)

Amounts reclassified from AOCI: (gains) losses

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and related charges

 

 

44

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

44

 

Other income (expense)

 

 

—

 

 

 

18

 

 

 

80

 

 

 

—

 

 

 

98

 

Total

 

 

44

 

 

 

18

 

 

 

80

 

 

 

—

 

 

 

142

 

Income tax expense (benefit)

 

 

(11

)

 

 

(5

)

 

 

(21

)

 

 

—

 

 

 

(37

)

Total, net of tax

 

 

33

 

 

 

13

 

 

 

59

 

 

 

—

 

 

 

105

 

Net current period other comprehensive
    income (loss)

 

 

97

 

 

 

(103

)

 

 

89

 

 

 

1

 

 

 

84

 

Ending balance

 

$

(261

)

 

$

(66

)

 

$

(1,044

)

 

$

(3

)

 

$

(1,374

)

(1)
Comprised entirely of interest rate derivative hedging activities.
(2)
Net of $70 million, $83 million, $87 million and $119 million tax at September 30, 2023, December 31, 2022, September 30, 2022 and December 31, 2021, respectively.
(3)
Net of $16 million, $13 million, $23 million and $(10) million tax at September 30, 2023, December 31, 2022, September 30, 2022 and December 31, 2021, respectively.
(4)
Net of $461 million, $445 million, $367 million and $396 million tax at September 30, 2023, December 31, 2022, September 30, 2022 and December 31, 2021, respectively.
(5)
Net of $— million, $1 million, $1 million and $1 million tax at September 30, 2023, December 31, 2022, September 30, 2022 and December 31, 2021, respectively.

 

32

 

Virginia Power

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

 

 

 

Total Derivative-Hedging Activities(1)(2)

 

 

Investment
Securities(3)

 

 

Total

 

(millions)

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

13

 

 

$

(4

)

 

$

9

 

Other comprehensive income (loss) before
    reclassifications: gains (losses)

 

 

18

 

 

 

(3

)

 

 

15

 

Amounts reclassified from AOCI: (gains) losses

 

 

 

 

 

 

 

           Interest and related charges

 

 

1

 

 

 

—

 

 

 

1

 

           Other income (expense)

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

 

1

 

 

 

—

 

 

 

1

 

Income tax expense (benefit)

 

 

(1

)

 

 

—

 

 

 

(1

)

Total, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

Net current period other comprehensive income (loss)

 

 

18

 

 

 

(3

)

 

 

15

 

Ending balance

 

$

31

 

 

$

(7

)

 

$

24

 

Three Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

—

 

 

$

(7

)

 

$

(7

)

Other comprehensive income (loss) before
    reclassifications: gains (losses)

 

 

13

 

 

 

(4

)

 

 

9

 

Amounts reclassified from AOCI: (gains) losses

 

 

 

 

 

 

 

          Interest and related charges (benefit)

 

 

1

 

 

 

—

 

 

 

1

 

          Other income (expense)

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

 

1

 

 

 

—

 

 

 

1

 

Income tax expense (benefit)

 

 

(1

)

 

 

—

 

 

 

(1

)

Total, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

Net current period other comprehensive income (loss)

 

 

13

 

 

 

(4

)

 

 

9

 

Ending balance

 

$

13

 

 

$

(11

)

 

$

2

 

(1)
Comprised entirely of interest rate derivative hedging activities.
(2)
Net of $(11) million, $(4) million, $(4) million and $— million tax at September 30, 2023, June 30, 2023, September 30, 2022 and June 30, 2022, respectively.
(3)
Net of $3 million, $1 million, $4 million and $3 million tax at September 30, 2023, June 30, 2023, September 30, 2022 and June 30, 2022, respectively.

 

33

 

 

 

Total Derivative-Hedging Activities(1)(2)

 

 

Investment
Securities(3)

 

 

Total

 

(millions)

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

16

 

 

$

(7

)

 

$

9

 

Other comprehensive income (loss) before
    reclassifications: gains (losses)

 

 

15

 

 

 

—

 

 

 

15

 

Amounts reclassified from AOCI: (gains) losses

 

 

 

 

 

 

 

           Interest and related charges

 

 

1

 

 

 

—

 

 

 

1

 

           Other income (expense)

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

 

1

 

 

 

—

 

 

 

1

 

Income tax expense (benefit)

 

 

(1

)

 

 

—

 

 

 

(1

)

Total, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

Net current period other comprehensive income (loss)

 

 

15

 

 

 

—

 

 

 

15

 

Ending balance

 

$

31

 

 

$

(7

)

 

$

24

 

Nine Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

(45

)

 

$

4

 

 

$

(41

)

Other comprehensive income (loss) before
    reclassifications: gains (losses)

 

 

57

 

 

 

(14

)

 

 

43

 

Amounts reclassified from AOCI: (gains) losses

 

 

 

 

 

 

 

           Interest and related charges

 

 

2

 

 

 

—

 

 

 

2

 

           Other income (expense)

 

 

—

 

 

 

(1

)

 

 

(1

)

Total

 

 

2

 

 

 

(1

)

 

 

1

 

Income tax expense (benefit)

 

 

(1

)

 

 

—

 

 

 

(1

)

Total, net of tax

 

 

1

 

 

 

(1

)

 

 

—

 

Net current period other comprehensive income (loss)

 

 

58

 

 

 

(15

)

 

 

43

 

Ending balance

 

$

13

 

 

$

(11

)

 

$

2

 

(1)
Comprised entirely of interest rate derivative hedging activities.
(2)
Net of $(11) million, $(5) million, $(4) million and $16 million tax at September 30, 2023, December 31, 2022, September 30, 2022 and December 31, 2021, respectively.
(3)
Net of $3 million, $2 million, $4 million and $(2) million tax at September 30, 2023, December 31, 2022, September 30, 2022 and December 31, 2021, respectively.

Note 8. Fair Value Measurements

The Companies’ fair value measurements are made in accordance with the policies discussed in Note 2 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. See Note 9 in this report for additional information about the Companies’ derivatives 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.

34

 

The following table presents the Companies' quantitative information about Level 3 fair value measurements at September 30, 2023. 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:

 

 

 

 

 

 

 

 

 

 

 

Natural gas(2)

Discounted
   cash flow

Market price
   (per Dth)

(3)

$

1

 

(2)-3

(1)

 

$

1

 

(2)-3

(1)

FTRs

Discounted
   cash flow

Market price
   (per MWh)

(3)

 

5

 

(1)-11

2

 

 

5

 

(1)-11

2

Electricity

Discounted
   cash flow

Market price
   (per MWh)

(3)

 

143

 

25-136

48

 

 

 

 

 

Physical options:

 

 

 

 

 

 

 

 

 

 

 

Natural gas(2)

Option model

Market price
   (per Dth)

(3)

 

11

 

1-8

4

 

 

10

 

1-8

4

 

Price volatility

(4)

 

 

13%-72%

52%

 

 

 

13%-72%

54%

Total assets

 

 

 

$

160

 

 

 

 

$

16

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Physical and financial forwards:

 

 

 

 

 

 

 

 

 

 

 

Natural gas(2)

Discounted
   cash flow

Market price
   (per Dth)

(3)

$

14

 

(2)-0

(1)

 

$

14

 

(2)-0

(1)

FTRs

Discounted
   cash flow

Market price
   (per MWh)

(3)

 

181

 

(2)-11

3

 

 

181

 

(2)-11

3

Electricity

Discounted
   cash flow

Market price
   (per MWh)

(3)

 

14

 

34-149

69

 

 

 

 

 

Total
   liabilities

 

 

 

$

209

 

 

 

 

$

195

 

 

 

(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)

Nonrecurring Fair Value Measurements

See Note 10 for information regarding nonrecurring fair value measurements associated with Dominion Energy’s noncontrolling ownership interest in Dominion Privatization.

 

In the first quarter of 2023, Dominion Energy recorded a charge of $91 million ($68 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 a market approach, of $35 million. The valuation is considered a Level 3 fair value measurement as it is based on unobservable inputs due to limited comparable market activity. 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 September 30, 2023.

 

In the second quarter of 2023, Dominion Energy recorded a charge of $15 million ($11 million after-tax) presented within discontinued operations in its Consolidated Statements of Income to adjust certain nonregulated solar assets down to their estimated fair value, using a market approach, of $22 million. The valuation is considered a Level 2 fair value measurement given that it is based on bids received. As discussed in Note 3, these assets were sold in August 2023.

35

 

Recurring Fair Value Measurements

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

—

 

 

$

176

 

 

$

160

 

 

$

336

 

 

$

—

 

 

$

60

 

 

$

16

 

 

$

76

 

Interest rate

 

 

—

 

 

 

1,301

 

 

 

—

 

 

 

1,301

 

 

 

—

 

 

 

389

 

 

 

—

 

 

 

389

 

Foreign currency exchange rate

 

 

—

 

 

 

9

 

 

 

—

 

 

 

9

 

 

 

—

 

 

 

9

 

 

 

—

 

 

 

9

 

Investments(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

4,218

 

 

 

—

 

 

 

—

 

 

 

4,218

 

 

 

2,238

 

 

 

—

 

 

 

—

 

 

 

2,238

 

Fixed income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt instruments

 

 

—

 

 

 

501

 

 

 

—

 

 

 

501

 

 

 

—

 

 

 

285

 

 

 

—

 

 

 

285

 

Government securities

 

 

166

 

 

 

1,109

 

 

 

—

 

 

 

1,275

 

 

 

88

 

 

 

600

 

 

 

—

 

 

 

688

 

Cash equivalents and other

 

 

43

 

 

 

—

 

 

 

—

 

 

 

43

 

 

 

23

 

 

 

—

 

 

 

—

 

 

 

23

 

Total assets

 

$

4,427

 

 

$

3,096

 

 

$

160

 

 

$

7,683

 

 

$

2,349

 

 

$

1,343

 

 

$

16

 

 

$

3,708

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

—

 

 

$

279

 

 

$

209

 

 

$

488

 

 

$

—

 

 

$

113

 

 

$

195

 

 

$

308

 

Interest rate

 

 

—

 

 

 

428

 

 

 

—

 

 

 

428

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Foreign currency exchange rate

 

 

—

 

 

 

162

 

 

 

—

 

 

 

162

 

 

 

—

 

 

 

162

 

 

 

—

 

 

 

162

 

Total liabilities

 

$

—

 

 

$

869

 

 

$

209

 

 

$

1,078

 

 

$

—

 

 

$

275

 

 

$

195

 

 

$

470

 

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

 

(1)
Includes investments held in the nuclear decommissioning trusts and rabbi trusts. Excludes $370 million and $404 million of assets at Dominion Energy, inclusive of $147 million and $161 million at Virginia Power, at September 30, 2023 and December 31, 2022, 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.

36

 

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

 

 

 

Quarter-to-Date

 

 

Year-to-Date

 

 

Quarter-to-Date

 

 

Year-to-Date

 

Period Ended September 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

134

 

 

$

480

 

 

$

422

 

 

$

222

 

 

$

(3

)

 

$

245

 

 

$

221

 

 

$

102

 

Total realized and unrealized gains
    (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

 

(10

)

 

 

—

 

 

 

(8

)

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

Electric fuel and other energy-
related purchases

 

 

(103

)

 

 

181

 

 

 

(191

)

 

 

346

 

 

 

(107

)

 

 

142

 

 

 

(195

)

 

 

293

 

Discontinued operations

 

 

1

 

 

 

—

 

 

 

1

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

Included in regulatory assets/
    liabilities

 

 

(174

)

 

 

2

 

 

 

(463

)

 

 

243

 

 

 

(176

)

 

 

26

 

 

 

(400

)

 

 

152

 

Settlements

 

 

103

 

 

 

(181

)

 

 

174

 

 

 

(346

)

 

 

107

 

 

 

(142

)

 

 

179

 

 

 

(293

)

Purchases

 

 

—

 

 

 

—

 

 

 

16

 

 

 

17

 

 

 

—

 

 

 

—

 

 

 

16

 

 

 

17

 

Ending balance

 

$

(49

)

 

$

482

 

 

$

(49

)

 

$

482

 

 

$

(179

)

 

$

271

 

 

$

(179

)

 

$

271

 

Dominion Energy had $(10) million and $(8) million of unrealized losses included in earnings in the Level 3 fair value category related to assets/liabilities still held at the reporting date for the three and nine months ended September 30, 2023, respectively, and no unrealized gains or losses for the three and nine months ended September 30, 2022. Virginia Power had no unrealized gains or losses for the three and nine months ended September 30, 2023 and 2022.

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)

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt(2)

 

$

39,854

 

 

$

35,171

 

 

$

17,390

 

 

$

15,084

 

Supplemental credit facility borrowings

 

 

900

 

 

 

900

 

 

 

 

 

 

 

Junior subordinated notes(2)

 

 

1,388

 

 

 

1,361

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

(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 presented in securities due within one year and amounts which represent the unamortized debt issuance costs and discount or premium. Additionally, the Dominion Energy carrying amount includes portions classified as held for sale presented in current liabilities held for sale at September 30, 2023 and presented in current liabilities held for sale and noncurrent liabilities held for sale at December 31, 2022.

Note 9. Derivatives and Hedge Accounting Activities

The Companies’ accounting policies, objectives and strategies for using derivative instruments are discussed in Note 2 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. See Note 8 in this report for additional information about fair value measurements and associated valuation methods for derivatives.

37

 

 

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 additional 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 their 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

$

152

 

 

$

60

 

 

$

—

 

 

$

92

 

 

$

71

 

 

$

37

 

 

$

—

 

 

$

34

 

Exchange

 

 

47

 

 

 

46

 

 

 

—

 

 

 

1

 

 

 

3

 

 

 

3

 

 

 

—

 

 

 

—

 

Interest rate contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

1,301

 

 

 

322

 

 

 

—

 

 

 

979

 

 

 

389

 

 

 

54

 

 

 

—

 

 

 

335

 

Foreign currency exchange rate contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

9

 

 

 

9

 

 

 

—

 

 

 

—

 

 

 

9

 

 

 

9

 

 

 

—

 

 

 

—

 

Total derivatives,
   subject to a
   master netting
   or similar
   arrangement

 

$

1,509

 

 

$

437

 

 

$

—

 

 

$

1,072

 

 

$

472

 

 

$

103

 

 

$

—

 

 

$

369

 

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

 

 

(1)
Excludes derivative assets of $137 million and $201 million at Dominion Energy and $2 million and $30 million at Virginia Power at September 30, 2023 and December 31, 2022, respectively, which are not subject to master netting or other similar arrangements.

 

38

 

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

$

347

 

 

$

60

 

 

$

—

 

 

$

287

 

 

$

236

 

 

$

37

 

 

$

—

 

 

$

199

 

Exchange

 

 

141

 

 

 

46

 

 

 

95

 

 

 

—

 

 

 

17

 

 

 

3

 

 

 

14

 

 

 

—

 

Interest rate contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

428

 

 

 

268

 

 

 

1

 

 

 

159

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Foreign currency exchange rate contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-counter

 

 

162

 

 

 

63

 

 

 

—

 

 

 

99

 

 

 

162

 

 

 

63

 

 

 

—

 

 

 

99

 

Total derivatives,
   subject to a
   master netting
   or similar
   arrangement

 

$

1,078

 

 

$

437

 

 

$

96

 

 

$

545

 

 

$

415

 

 

$

103

 

 

$

14

 

 

$

298

 

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

 

 

(1)
Excludes derivative liabilities of $55 million and $26 million at Virginia Power at September 30, 2023 and December 31, 2022, respectively, which are not subject to master netting or similar arrangements. Dominion Energy did not have any derivative liabilities at September 30, 2023 and December 31, 2022 which were not subject to master netting or similar arrangements.

Volumes

The following table presents the volume of the Companies' derivative activity at September 30, 2023. 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 its long and short positions.

 

 

 

Dominion Energy

 

 

Virginia Power

 

 

 

Current

 

 

Noncurrent

 

 

Current

 

 

Noncurrent

 

Natural Gas (bcf):

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price(1)

 

 

45

 

 

 

20

 

 

 

35

 

 

 

20

 

Basis(2)

 

 

179

 

 

 

369

 

 

 

149

 

 

 

369

 

Electricity (MWh in millions):

 

 

 

 

 

 

 

 

 

 

 

 

Fixed price

 

 

17

 

 

 

41

 

 

 

8

 

 

 

11

 

FTRs

 

 

62

 

 

 

—

 

 

 

62

 

 

 

—

 

Interest rate(3) (in millions)

 

$

300

 

 

$

10,121

 

 

$

—

 

 

$

2,750

 

Foreign currency exchange rate(3) (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

Danish Krone

 

895 kr.

 

 

3,278 kr.

 

 

895 kr.

 

 

3,278 kr.

 

Euro

 

€806

 

 

€1,557

 

 

€806

 

 

€1,557

 

 

(1)
Includes options at Dominion Energy.
(2)
Includes options.
(3)
Maturity is determined based on final settlement period.

39

 

AOCI

The following table presents selected information related to gains and losses on cash flow hedges included in AOCI in the Companies' Consolidated Balance Sheets at September 30, 2023:

 

 

 

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

 

$

(209

)

 

$

(33

)

 

387 months

 

$

31

 

 

$

—

 

 

387 months

Total

 

$

(209

)

 

$

(33

)

 

 

 

$

31

 

 

$

—

 

 

 

 

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.

40

 

Fair Value and Gains and Losses on Derivative Instruments

The following table presents 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 September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

—

 

 

$

159

 

 

$

159

 

 

$

—

 

 

$

46

 

 

$

46

 

Interest rate

 

 

—

 

 

 

63

 

 

 

63

 

 

 

—

 

 

 

—

 

 

 

—

 

Foreign currency exchange rate

 

 

—

 

 

 

9

 

 

 

9

 

 

 

—

 

 

 

9

 

 

 

9

 

Total current derivative assets(1)

 

 

—

 

 

 

231

 

 

 

231

 

 

 

—

 

 

 

55

 

 

 

55

 

Noncurrent Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

 

—

 

 

 

177

 

 

 

177

 

 

 

—

 

 

 

30

 

 

 

30

 

Interest rate

 

 

389

 

 

 

849

 

 

 

1,238

 

 

 

389

 

 

 

—

 

 

 

389

 

Total noncurrent derivative assets(2)

 

 

389

 

 

 

1,026

 

 

 

1,415

 

 

 

389

 

 

 

30

 

 

 

419

 

Total derivative assets

 

$

389

 

 

$

1,257

 

 

$

1,646

 

 

$

389

 

 

$

85

 

 

$

474

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

$

—

 

 

$

350

 

 

$

350

 

 

$

—

 

 

$

256

 

 

$

256

 

Interest rate

 

 

—

 

 

 

65

 

 

 

65

 

 

 

—

 

 

 

—

 

 

 

—

 

Foreign currency exchange rate

 

 

—

 

 

 

54

 

 

 

54

 

 

 

—

 

 

 

54

 

 

 

54

 

Total current derivative liabilities(3)

 

 

—

 

 

 

469

 

 

 

469

 

 

 

—

 

 

 

310

 

 

 

310

 

Noncurrent Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity

 

 

—

 

 

 

138

 

 

 

138

 

 

 

—

 

 

 

52

 

 

 

52

 

Interest rate

 

 

—

 

 

 

363

 

 

 

363

 

 

 

—

 

 

 

—

 

 

 

—

 

Foreign currency exchange rate

 

 

—

 

 

 

108

 

 

 

108

 

 

 

—

 

 

 

108

 

 

 

108

 

Total noncurrent derivative liabilities(4)

 

 

—

 

 

 

609

 

 

 

609

 

 

 

—

 

 

 

160

 

 

 

160

 

Total derivative liabilities

 

$

—

 

 

$

1,078

 

 

$

1,078

 

 

$

—

 

 

$

470

 

 

$

470

 

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)

 

 

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(3)

 

 

—

 

 

 

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(4)

 

 

7

 

 

 

619

 

 

 

626

 

 

 

7

 

 

 

151

 

 

 

158

 

Total derivative liabilities

 

$

7

 

 

$

1,397

 

 

$

1,404

 

 

$

7

 

 

$

449

 

 

$

456

 

(1)
Includes $10 million and $118 million recorded in current assets held for sale in Dominion Energy's Consolidated Balance Sheets at September 30, 2023 and December 31, 2022, respectively.
(2)
Noncurrent derivative assets are presented in other deferred charges and other assets in the Companies’ Consolidated Balance Sheets with the exception of $1 million presented in noncurrent assets held for sale in Dominion Energy’s Consolidated Balance Sheets at December 31, 2022.
(3)
Includes $12 million and $6 million recorded in current liabilities held for sale in Dominion Energy's Consolidated Balance Sheets at September 30, 2023 and December 31, 2022, respectively.

41

 

(4)
Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in the Companies’ Consolidated Balance Sheets with the exception of $1 million presented in noncurrent liabilities held for sale in Dominion Energy’s Consolidated Balance Sheets at December 31, 2022.

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative type and location of gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate(3)

 

$

25

 

 

$

(11

)

 

$

268

 

 

$

25

 

 

$

(1

)

 

$

267

 

Total

 

$

25

 

 

$

(11

)

 

$

268

 

 

$

25

 

 

$

(1

)

 

$

267

 

Three Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative type and location of gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate(3)

 

$

14

 

 

 

(16

)

 

$

182

 

 

$

18

 

 

$

(1

)

 

$

182

 

Total

 

$

14

 

 

$

(16

)

 

$

182

 

 

$

18

 

 

$

(1

)

 

$

182

 

Nine Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative type and location of gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate(3)

 

$

21

 

 

$

(32

)

 

$

236

 

 

$

21

 

 

$

(1

)

 

$

235

 

Total

 

$

21

 

 

$

(32

)

 

$

236

 

 

$

21

 

 

$

(1

)

 

$

235

 

Nine Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative type and location of gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate(3)

 

$

86

 

 

$

(44

)

 

$

815

 

 

$

77

 

 

$

(2

)

 

$

814

 

Total

 

$

86

 

 

$

(44

)

 

$

815

 

 

$

77

 

 

$

(2

)

 

$

814

 

 

(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 Statement of Income are classified in interest and related charges.

 

 

 

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

 

Derivatives not designated as hedging instruments

 

Dominion Energy

 

 

Virginia Power

 

 

 

Quarter-to-Date

 

 

Year-to-Date

 

 

Quarter-to-Date

 

 

Year-to-Date

 

Period Ended September 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative type and location of gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

7

 

 

$

(306

)

 

$

428

 

 

$

(908

)

 

$

6

 

 

$

(108

)

 

$

25

 

 

$

(237

)

Purchased gas

 

 

—

 

 

 

1

 

 

 

—

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

Electric fuel and other energy-related
    purchases

 

 

(149

)

 

 

205

 

 

 

(267

)

 

 

401

 

 

 

(151

)

 

 

166

 

 

 

(270

)

 

 

348

 

Operations and maintenance

 

 

—

 

 

 

—

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

 

 

—

 

Discontinued operations

 

 

—

 

 

 

—

 

 

 

94

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and related charges

 

 

274

 

 

 

3

 

 

 

227

 

 

 

371

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

(7

)

 

 

89

 

 

 

17

 

 

 

257

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

125

 

 

$

(8

)

 

$

501

 

 

$

127

 

 

$

(145

)

 

$

58

 

 

$

(243

)

 

$

111

 

 

(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.

 

42

 

Note 10. 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 16. 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 $119 million and $111 million at September 30, 2023 and December 31, 2022, 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities:(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

$

1,399

 

$

2,860

 

$

(31

)

 

 

 

$

4,228

 

 

$

870

 

$

1,490

 

$

(28

)

 

 

 

$

2,332

 

Fixed income securities:(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt
   instruments

 

545

 

 

—

 

 

(53

)

 

$

—

 

 

492

 

 

 

324

 

 

—

 

 

(39

)

 

$

—

 

 

285

 

Government
   securities

 

1,340

 

 

—

 

 

(91

)

 

 

—

 

 

1,249

 

 

 

737

 

 

—

 

 

(49

)

 

 

—

 

 

688

 

Common/
   collective
   trust funds

 

66

 

 

—

 

 

—

 

 

 

—

 

 

66

 

 

 

52

 

 

—

 

 

—

 

 

 

—

 

 

52

 

Insurance
   contracts

 

228

 

 

—

 

 

—

 

 

 

 

 

228

 

 

 

—

 

 

 

 

 

 

 

 

 

 

Cash equivalents
   and other(3)

 

82

 

 

—

 

 

—

 

 

 

—

 

 

82

 

 

 

43

 

 

—

 

 

—

 

 

 

—

 

 

43

 

Total

$

3,660

 

$

2,860

 

$

(175

)

(4)

$

—

 

$

6,345

 

 

$

2,026

 

$

1,490

 

$

(116

)

(4)

$

—

 

$

3,400

 

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

 

 

43

 

 

(1)
Unrealized gains and losses on equity securities are included in other income (expense) and the nuclear decommissioning trust regulatory liability.
(2)
Unrealized gains and losses on fixed income securities are included in AOCI and the nuclear decommissioning trust regulatory liability. Changes in allowance for credit losses are included in other income (expense).
(3)
Dominion Energy includes pending sales of securities of $39 million and $42 million at September 30, 2023 and December 31, 2022, respectively. Virginia Power includes pending sales of securities of $20 million and $24 million at September 30, 2023, and December 31, 2022, respectively.
(4)
Dominion Energy's fair value of securities in an unrealized loss position was $1.9 billion and $1.6 billion at September 30, 2023 and December 31, 2022, respectively. Virginia Power's fair value of securities in an unrealized loss position was $1.1 billion and $946 million at September 30, 2023 and December 31, 2022, 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

 

 

 

Quarter-to-Date

 

 

Year-to-Date

 

 

Quarter-to-Date

 

 

Year-to-Date

 

Period Ended September 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gains (losses) recognized during
   the period

 

$

(150

)

 

$

(205

)

 

$

370

 

 

$

(1,123

)

 

$

(80

)

 

$

(118

)

 

$

189

 

 

$

(581

)

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

 

 

1

 

 

 

(2

)

 

 

4

 

 

 

3

 

 

 

(1

)

 

 

(4

)

 

 

2

 

 

 

(8

)

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

 

$

(149

)

 

$

(207

)

 

$

374

 

 

$

(1,120

)

 

$

(81

)

 

$

(122

)

 

$

191

 

 

$

(589

)

 

(1)
Included in other income (expense) and the nuclear decommissioning trust regulatory liability.

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 September 30, 2023 by contractual maturity is as follows:

 

 

Dominion Energy

 

 

Virginia Power

 

(millions)

 

 

 

 

 

 

Due in one year or less

 

$

89

 

 

$

62

 

Due after one year through five years

 

 

477

 

 

 

244

 

Due after five years through ten years

 

 

394

 

 

 

239

 

Due after ten years

 

 

847

 

 

 

480

 

Total

 

$

1,807

 

 

$

1,025

 

 

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

 

 

 

Quarter-to-Date

 

 

Year-to-Date

 

 

Quarter-to-Date

 

 

Year-to-Date

 

Period Ended September 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sales

 

$

869

 

 

$

605

 

 

$

2,007

 

 

$

2,686

 

 

$

535

 

 

$

425

 

 

$

1,254

 

 

$

1,289

 

Realized gains(1)

 

 

5

 

 

 

17

 

 

 

48

 

 

 

132

 

 

 

4

 

 

 

14

 

 

 

29

 

 

 

40

 

Realized losses(1)

 

 

33

 

 

 

50

 

 

 

110

 

 

 

247

 

 

 

16

 

 

 

33

 

 

 

61

 

 

 

85

 

 

(1)
Includes realized gains and losses recorded to the nuclear decommissioning trust regulatory liability.

Equity Method Investments

Dominion Energy recorded equity earnings on its investments of $7 million and $16 million for the nine months ended September 30, 2023 and 2022, respectively, in other income (expense) in its Consolidated Statements of Income. In addition, Dominion Energy recorded equity earnings of $235 million and $233 million for the nine months ended September 30, 2023 and 2022, respectively, in discontinued operations, including amounts related to its investments in Cove Point and Atlantic Coast Pipeline discussed below.

44

 

Dominion Energy received distributions of $241 million and $268 million for the nine months ended September 30, 2023 and 2022, respectively. Dominion Energy made contributions of $79 million and $93 million for the nine months ended September 30, 2023 and 2022, respectively. At September 30, 2023 and December 31, 2022, the net difference between the carrying amount of Dominion Energy’s investments and its share of underlying equity in net assets was $12 million and $223 million, respectively. At September 30, 2023, these differences are primarily comprised of $9 million of equity method goodwill that is not being amortized and $3 million attributable to capitalized interest. 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.

Cove Point

Prior to completion of the sale in September 2023, Dominion Energy held a 50% noncontrolling limited partnership interest in Cove Point which was accounted for as an equity method investment, as discussed in Note 9 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

Dominion Energy recorded distributions from Cove Point of $49 million and $98 million for the three months ended September 30, 2023 and 2022, respectively, and $227 million and $259 million for the nine months ended September 30, 2023 and 2022, respectively.

In June 2023, Dominion Energy entered into an agreement with Cove Point for transportation and storage services at market rates for a 20-year period commencing in August 2023.

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. See Note 16 for additional information on these facilities. Dominion Energy recorded a gain on the sale of its noncontrolling interest in Cove Point of $626 million ($348 million after-tax) within discontinued operations in its Consolidated Statements of Income.

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 within discontinued operations within Dominion Energy’s Consolidated Statements of Income for the three and nine months ended September 30, 2023 include $52 million and $218 million for earnings on equity method investees, $69 million and $120 million of interest expense and $7 million and $31 million of income tax expense, respectively, in addition to the gain on sale and associated tax expense disclosed above. Such amounts for the three and nine months ended September 30, 2022 were $91 million and $238 million for earnings on equity method investees, $(65) million and $(205) million of interest expense (benefit) and $32 million and $93 million of income tax expense, respectively. Dominion Energy’s Consolidated Balance Sheet at December 31, 2022 includes $2.7 billion within noncurrent assets held for sale for Dominion Energy’s 50% noncontrolling limited partnership interest in Cove Point.

Atlantic Coast Pipeline

A description of Dominion Energy’s investment in Atlantic Coast Pipeline, including events that led to the cancellation of the Atlantic Coast Pipeline Project in July 2020, is included in Note 9 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

At September 30, 2023 and December 31, 2022, Dominion Energy has recorded a liability of $25 million and $114 million, respectively, in other current liabilities in its Consolidated Balance Sheets as a result of its share of equity losses exceeding its investment which reflects Dominion Energy’s obligations on behalf of Atlantic Coast Pipeline related to its AROs.

Dominion Energy recorded equity earnings related to Atlantic Coast Pipeline of $16 million and equity losses of $6 million for the nine months ended September 30, 2023 and 2022, respectively, in discontinued operations.

Dominion Energy recorded $70 million of contributions to Atlantic Coast Pipeline during the nine months ended September 30, 2023. Dominion Energy made no contributions to Atlantic Coast Pipeline during the nine months ended September 30, 2022.

45

 

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.

Wrangler

A description of Dominion Energy’s investment in Wrangler (through March 2022) is included in Note 9 to the Consolidated Financial Statements in Dominion Energy’s Annual Report on Form 10-K for the year ended December 31, 2022.

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 (expense), in its Consolidated Statements of Income for the nine months ended September 30, 2022.

Dominion Privatization

Dominion Energy holds a 50% noncontrolling ownership interest in Dominion Privatization which is accounted for as an equity method investment, as discussed in Note 9 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

In March 2022, Dominion Energy completed its initial contribution of privatization operations in South Carolina (excluding contracts held by DESC), Texas and Pennsylvania to Dominion Privatization for 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 was considered a Level 2 fair value measurement given that it was 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.

Note 11. Property, Plant and Equipment

Acquisitions of Nonregulated Solar Projects

Other than the item discussed below, there have been no significant updates to acquisitions of solar projects by the Companies from those discussed in Note 10 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

 

In March 2023, Dominion Energy entered into an agreement to acquire the Foxhound solar development project in Virginia (reflected in Contracted Energy) with closing on the agreement expected in 2024. The project is expected to cost approximately $205 million, including the initial acquisition cost, and commence commercial operations in 2024 with a generating capacity of 83 MW. Dominion Energy expects to claim production tax credits on the energy generated and sold by the project. Dominion Energy anticipates that an impairment charge may be required upon closing given its expectation 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 as described in Note 10 to the Consolidated Financial Statements in Dominion Energy’s Annual Report on Form 10-K for the year ended December 31, 2022.

Sale of Utility Property

In June 2022, Dominion Energy completed the sale of certain utility property in South Carolina, as approved by the South Carolina Commission in May 2022, for total cash consideration of $16 million. In connection with the sale, Dominion Energy recognized a gain of $16 million ($12 million after-tax), recorded in losses (gains) on sales of assets, in its Consolidated Statements of Income for the nine months ended September 30, 2022.

Virginia Power Easement Agreement

In November 2023, Virginia Power entered into an agreement under which it paid $65 million for an easement related to the CVOW Commercial Project that it will not seek recovery of and therefore expects to record a charge of $65 million ($49 million after-tax) in the fourth quarter of 2023.

46

 

Note 12. Regulatory Assets and Liabilities

Regulatory assets and liabilities include the following:

 

 

 

Dominion Energy

 

 

Virginia Power

 

 

 

September 30,
2023

 

December 31,
2022

 

 

September 30,
2023

 

December 31,
2022

 

(millions)

 

 

 

 

 

 

 

 

 

 

Regulatory assets:

 

 

 

 

 

 

 

 

 

 

Deferred cost of fuel used in electric generation(1)

 

$

281

 

$

603

 

 

$

37

 

$

133

 

Deferred rider costs for Virginia electric utility(2)

 

 

340

 

 

152

 

 

 

340

 

 

152

 

Ash pond and landfill closure costs(3)

 

 

151

 

 

221

 

 

 

151

 

 

221

 

Deferred nuclear refueling outage costs(4)

 

 

77

 

 

83

 

 

 

77

 

 

83

 

NND Project costs(5)

 

 

138

 

 

138

 

 

 

 

 

 

Deferred early plant retirement charges(6)

 

 

56

 

 

226

 

 

 

56

 

 

226

 

Derivatives(7)

 

 

196

 

 

256

 

 

 

192

 

 

251

 

Other

 

 

245

 

 

204

 

 

 

68

 

 

74

 

Regulatory assets-current

 

 

1,484

 

 

1,883

 

 

 

921

 

 

1,140

 

Unrecognized pension and other postretirement benefit costs(8)

 

 

785

 

 

891

 

 

 

—

 

 

4

 

Deferred rider costs for Virginia electric utility(2)

 

 

411

 

 

363

 

 

 

411

 

 

363

 

Interest rate hedges(9)

 

 

168

 

 

169

 

 

 

—

 

 

—

 

AROs and related funding(10)

 

 

399

 

 

380

 

 

 

 

 

 

NND Project costs(5)

 

 

1,984

 

 

2,088

 

 

 

 

 

 

Ash pond and landfill closure costs(3)

 

 

2,448

 

 

2,051

 

 

 

2,445

 

 

2,049

 

Deferred cost of fuel used in electric generation(1)

 

 

1,226

 

 

1,551

 

 

 

1,226

 

 

1,551

 

Derivatives(7)

 

 

265

 

 

254

 

 

 

164

 

 

148

 

Other

 

 

580

 

 

518

 

 

 

123

 

 

132

 

Regulatory assets-noncurrent

 

 

8,266

 

 

8,265

 

 

 

4,369

 

 

4,247

 

Total regulatory assets

 

$

9,750

 

$

10,148

 

 

$

5,290

 

$

5,387

 

Regulatory liabilities:

 

 

 

 

 

 

 

 

 

 

Provision for future cost of removal and AROs(11)

 

 

111

 

 

111

 

 

 

111

 

 

111

 

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

 

 

94

 

 

125

 

 

 

7

 

 

25

 

Income taxes refundable through future rates(13)

 

 

101

 

 

100

 

 

 

65

 

 

65

 

Monetization of guarantee settlement(14)

 

 

67

 

 

67

 

 

 

 

 

 

Derivatives(7)

 

 

17

 

 

211

 

 

 

—

 

 

176

 

Other

 

 

44

 

 

134

 

 

 

43

 

 

129

 

Regulatory liabilities-current

 

 

434

 

 

748

 

 

 

226

 

 

506

 

Income taxes refundable through future rates(13)

 

 

3,072

 

 

3,169

 

 

 

2,226

 

 

2,272

 

Provision for future cost of removal and AROs(11)

 

 

1,824

 

 

1,731

 

 

 

1,179

 

 

1,135

 

Nuclear decommissioning trust(15)

 

 

1,843

 

 

1,685

 

 

 

1,843

 

 

1,685

 

Monetization of guarantee settlement(14)

 

 

652

 

 

702

 

 

 

 

 

 

Interest rate hedges(9)

 

 

463

 

 

240

 

 

 

463

 

 

240

 

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

 

 

261

 

 

325

 

 

 

—

 

 

—

 

Overrecovered other postretirement benefit costs(16)

 

 

149

 

 

140

 

 

 

 

 

 

Derivatives(7)

 

 

189

 

 

234

 

 

 

—

 

 

—

 

Other

 

 

283

 

 

191

 

 

 

262

 

 

167

 

Regulatory liabilities-noncurrent

 

 

8,736

 

 

8,417

 

 

 

5,973

 

 

5,499

 

Total regulatory liabilities

 

$

9,170

 

$

9,165

 

 

$

6,199

 

$

6,005

 

 

(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.
(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. In the second quarter of 2023, Virginia Power recorded a charge of $36 million ($27 million after-tax), included in impairment of assets and other charges in its Consolidated Statements of Income, for the write-off of certain previously deferred amounts related to Riders R, S and W in connection with the cessation of such riders effective July 2023. 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

47

 

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 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022 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 $295 million and $302 million of regulatory assets in aggregate at September 30, 2023 and December 31, 2022, 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 September 30, 2023.
(10)
Represents uncollected costs, including 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 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022 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 September 30, 2023, Dominion Energy and Virginia Power regulatory assets include $5.1 billion and $3.2 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.

Other Regulatory Matters

 

Other than the following matters, there have been no significant developments regarding the pending regulatory matters disclosed in Note 13 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

48

 

Virginia Regulation - Key Legislation Affecting Operations

Virginia 2023 Legislation

In April 2023, legislation was enacted that amended several key provisions of the Regulation Act, as previously amended by the GTSA, and revised portions of the existing regulatory framework affecting Virginia Power’s operations. See Note 13 to the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022, for additional information on the Regulation Act and GTSA.

The legislation resets the frequency of base rate reviews from a triennial period, as established under the GTSA, to a biennial period commencing with the 2023 Biennial Review. Such biennial reviews shall include the establishment of an authorized ROE to be utilized for base rates and riders, prospective base rates for the upcoming two-year period based on projected cost of service and a determination by the Virginia Commission as to Virginia Power’s base rate earned return for the most recently completed two-year period against the previously authorized ROE, including any potential credits to customers’ bills.

The legislation provides that the Virginia Commission will establish an authorized ROE of 9.70% for Virginia Power in the 2023 Biennial Review, reflecting the average authorized ROE of vertically integrated electric utilities by the applicable regulatory commissions in the peer group jurisdictions of Florida, Georgia, Texas, Tennessee, West Virginia, Kentucky and North Carolina. Subsequent to the 2023 Biennial Review, all provisions related to this peer group benchmarking expire and the Virginia Commission is authorized to utilize any methodology it deems to be consistent with the public interest to make future ROE determinations. In all future biennial reviews, if the Virginia Commission determines that Virginia Power’s existing base rates will, on a going-forward basis, produce revenues that are either in excess of or below its authorized rate of return, the Virginia Commission is authorized to reduce or increase such base rates, as applicable and necessary, to ensure that Virginia Power’s base rates are just and reasonable while still allowing Virginia Power to recover its costs and earn a fair rate of return. In addition, beginning with the biennial review to be filed in 2025, the Virginia Commission may, at its discretion, increase or decrease Virginia Power’s authorized ROE by up to 50 basis points based on factors that may include reliability, generating plant performance, customer service and operating efficiency, with the provisions applying to such adjustments to be determined in a future proceeding.

The legislation directs that if the Virginia Commission determines as part of the 2023 Biennial Review that Virginia Power has earned more than 70 basis points above its authorized ROE of 9.35% established in the 2021 Triennial Review that 85% of the amount of such earnings above this level be credited to customers’ bills. In future biennial reviews, beginning with the biennial review to be filed in 2025, 85% of any earnings determined by the Virginia Commission to be up to 150 basis points above Virginia Power’s authorized ROE shall be credited to customers’ bills as well as 100% of any earnings that are more than 150 basis points above Virginia Power’s authorized ROE. For the purposes of measuring any bill credits due to customers, associated income taxes are factored into the determination of such amounts. In addition, the legislation eliminates Virginia Power’s ability to utilize Virginia Commission-approved investment amounts in qualifying solar or wind generation facilities or electric distribution grid transformation projects as a CCRO to reduce or offset any earnings otherwise eligible for customer credits as previously permitted under the GTSA.

In addition to the biennial review mechanisms discussed above, the legislation also includes provisions related to other aspects of Virginia Power’s ratemaking framework.

•
Riders into base rates: Virginia Power is required to combine certain riders with an aggregate annual revenue requirement of at least $350 million with its base rates effective July 2023. After such riders are combined, they will be considered as part of base rates for the purposes of the biennial review proceedings. The inclusion of such riders cannot serve as the basis for an increase in base rates as part of the 2023 Biennial Review.
•
Rider consolidation: Upon determination by the Virginia Commission, certain riders, while remaining separate from base rates, may be consolidated for cost recovery and review purposes.
•
Capitalization ratio: The legislation establishes that Virginia Power is required to undertake reasonable efforts to maintain a common equity capitalization to total capitalization ratio through December 2024 of 52.10%.
•
Fuel cost securitization: Virginia Power is authorized, on or before July 2024, to petition the Virginia Commission for approval of a financing order for certain deferred fuel costs. Virginia Power is required to permit certain retail customers to opt out of any such deferred fuel cost securitization.
•
Electric generation plant retirements: The Virginia Commission shall provide to the Virginia General Assembly, on an annual basis, a report that includes information concerning the reliability impacts of generation unit additions and retirement determinations, along with the potential impact on the purchase of power from generation assets outside of the Virginia jurisdiction, the result of which could impact the depreciable lives of Virginia Power’s electric generation facilities in future periods.

49

 

In addition, in May 2023 legislation was enacted that amended certain portions of the VCEA to qualify generation produced by Virginia Power’s biomass electric generating stations as renewable energy and eliminate the mandated retirement of such facilities by the end of 2028.

Virginia Regulation - Recent Developments

2023 Biennial Review

In July 2023, Virginia Power filed its base rate case and accompanying schedules in support of the 2023 Biennial Review in accordance with legislation enacted in Virginia in April 2023 as discussed above. Virginia Power’s earnings test analysis, as filed, demonstrated it earned a combined ROE of 9.04% on its generation and distribution services for the test period, within 70 basis points of its authorized ROE of 9.35% established in the 2021 Triennial Review. Virginia Power did not request an increase in base rates for generation and distribution services and proposed that base rates remain at their existing level utilizing an ROE of 9.70% for the prospective test periods and a common equity capitalization to total capitalization ratio of 52.10%. Virginia Power noted that while its prospective test periods would result in a revenue deficiency, it did not request an increase to base rates given that the combination of certain riders with an aggregate annual revenue requirement of at least $350 million into base rates effective July 2023 cannot serve as the basis for an increase in base rates as part of the 2023 Biennial Review. The Virginia Commission will determine whether Virginia Power’s earnings for the test period, considered as a whole, were within 70 basis points above or below the authorized ROE of 9.35%. The Virginia Commission will also authorize an ROE of 9.70%, as directed by legislation enacted in Virginia in April 2023, for Virginia Power that will be applied to Virginia Power’s riders prospectively and that will also be utilized to measure base rate earnings for the 2025 Biennial Review. This matter is pending.

Virginia Fuel Expenses

In May 2023, 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, 2023 and a projected $1.3 billion under-recovered balance as of June 30, 2023. The projected under-recovered balance includes $578 million representing the remaining two years of under-recovered balance as of June 30, 2022 being collected over a three-year period in accordance with the Virginia Commission’s approval of Virginia Power’s 2022 annual fuel factor as described in Note 13 to the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. Virginia Power proposed two alternatives to recover these under-collected fuel costs. The first option reflects recovery of the total $3.3 billion fuel cost requirement over the July 2023 through June 2024 fuel period and results in an increase in Virginia Power’s fuel revenues of $631 million when applied to projected kilowatt-hour sales for the period. The second option proposed by Virginia Power incorporates its anticipated July 2023 application to the Virginia Commission for approval of a financing order to securitize up to the projected $1.3 billion under-recovered balance as of June 30, 2023 as permitted under legislation enacted in Virginia in April 2023. Under this option, Virginia Power proposed implementation of the current period fuel factor rate only effective July 2023 on an interim basis, while suspending implementation of the prior-period fuel factor rate pending the Virginia Commission’s consideration of the securitization petition. If approved by the Virginia Commission, the securitization option results in a net decrease in Virginia Power’s fuel revenues for the rate year of approximately $541 million. In addition, Virginia Power has proposed to alter the order in which revenue from certain customers who elect to pay market-based rates would be allocated between base rates and fuel, which if approved would result in a reduction to fuel revenue of $13 million. In May 2023, the Virginia Commission ordered that, in accordance with Virginia Power’s second proposed option, only the current period fuel factor rate be implemented effective July 2023 on an interim basis. This matter is pending.

In accordance with legislation enacted in Virginia in April 2023 discussed above, in July 2023, Virginia Power filed an application with the Virginia Commission for approval of a financing order to securitize the projected $1.3 billion under-recovered fuel balance as of June 30, 2023 through the issuance of one or more tranches of bonds with tenors up to approximately ten years. In November 2023, the Virginia Commission approved Virginia Power’s request for a financing order to securitize $1.3 billion of under-recovered fuel costs through the issuance by a special purpose entity of one or more tranches of bonds with tenors of up to approximately seven years.

Virginia Power Equity Application

In July 2023, Virginia Power requested approval from the Virginia Commission to issue and sell to Dominion Energy up to $3.25 billion of authorized but unissued shares of its common stock, no par value, through the end of 2023 in order to maintain a common equity capitalization to total capitalization ratio of 52.10% through December 2024 in accordance with legislation enacted in Virginia in April 2023 as discussed above. In August 2023, the Virginia Commission approved the application.

Virginia 2020 Legislation – Low-income customers

In October 2023, the Virginia Commission approved the collection by Virginia Power of a universal service fee of $71 million from customers during the rate year beginning November 2023.

50

 

GTSA Filing

In March 2023, Virginia Power filed a petition with the Virginia Commission for approval of Phase III, covering 2024 through 2026, of its plan for electric distribution grid transformation projects as authorized by the GTSA. The plan includes 14 projects covering six components (i) AMI; (ii) customer information platform; (iii) grid improvement projects; (iv) physical and cyber security; (v) telecommunications infrastructure and (vi) customer education. For Phase III, the total proposed capital investment is $1.1 billion and the proposed operations and maintenance investment is $71 million. In September 2023, the Virginia Commission approved total proposed capital investment of $773 million and the requested operations and maintenance investment of $71 million. In addition, the Virginia Commission approved a pilot project to include up to five battery energy storage systems, to be installed over five years, at a proposed 2024 through 2028 capital cost of $50 million.

Renewable Generation Projects

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. In April 2023, the Virginia Commission approved the petition.

In October 2023, Virginia Power filed a petition with the Virginia Commission for CPCNs to construct or acquire and operate four utility-scale projects totaling approximately 329 MW of solar generation as part of its efforts to meet the renewable generation development targets under the VCEA. The projects, as of October 2023, are expected to cost approximately $850 million in the aggregate, excluding financing costs, and be placed into service between 2024 and 2026. This matter is pending.

Riders

Developments for 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 CCR

 

February 2023

 

October 2023

 

December 2023

 

$

194

 

 

$

(37

)

Rider CE(1)

 

October 2022

 

April 2023

 

May 2023

 

 

89

 

 

 

18

 

Rider CE(2)

 

October 2023

 

Pending

 

May 2024

 

 

137

 

 

 

48

 

Rider E

 

January 2023

 

September 2023

 

November 2023

 

 

109

 

 

 

8

 

Rider GT

 

August 2022

 

April 2023

 

June 2023

 

 

14

 

 

 

(42

)

Rider GT

 

August 2023

 

Pending

 

June 2024

 

 

145

 

 

 

131

 

Rider GV(3)

 

June 2023

 

Pending

 

April 2024

 

 

132

 

 

 

5

 

Rider GV(3)

 

June 2023

 

Pending

 

April 2025

 

 

135

 

 

 

3

 

Rider OSW

 

November 2022

 

July 2023

 

September 2023

 

 

271

 

 

 

192

 

Rider OSW

 

November 2023

 

Pending

 

September 2024

 

 

486

 

 

 

215

 

Rider PPA(4)

 

December 2022

 

July 2023

 

September 2023

 

 

(22

)

 

 

(17

)

Rider R

 

June 2021

 

March 2022

 

April 2023

 

 

55

 

(12)

 

(4

)

Rider RBB

 

October 2023

 

Pending

 

May 2024

 

 

18

 

 

 

11

 

Rider RGGI(5)

 

December 2022

 

July 2023

 

September 2023

 

 

356

 

 

N/A

 

Rider RPS

 

December 2022

 

July 2023

 

September 2023

 

 

96

 

 

 

(44

)

Rider S

 

June 2021

 

February 2022

 

April 2023

 

 

191

 

(12)

 

(1

)

Rider SNA(6)

 

October 2022

 

June 2023

 

September 2023

 

 

50

 

 

 

(57

)

Rider SNA

 

October 2023

 

Pending

 

September 2024

 

 

95

 

 

 

45

 

Rider T1(7)

 

May 2023

 

July 2023

 

September 2023

 

 

879

 

 

 

173

 

Rider U(8)

 

June 2022

 

February 2023

 

April 2023

 

 

74

 

 

 

(21

)

Rider U(9)

 

October 2023

 

Pending

 

August 2024

 

 

150

 

 

 

76

 

Rider US-3

 

August 2022

 

April 2023

 

June 2023

 

 

40

 

 

 

(10

)

Rider US-3

 

August 2023

 

Pending

 

June 2024

 

 

37

 

 

 

(3

)

Rider US-4

 

August 2022

 

April 2023

 

June 2023

 

 

16

 

 

 

1

 

Rider US-4

 

August 2023

 

Pending

 

June 2024

 

 

14

 

 

 

(2

)

Rider W(10)

 

June 2022

 

February 2023

 

April 2023

 

 

105

 

(12)

 

(16

)

DSM Riders(11)

 

December 2022

 

August 2023

 

September 2023

 

 

107

 

 

 

16

 

(1)
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.
(2)
Associated with five solar generation projects, one small-scale solar project and 13 power purchase agreements in addition to previously approved Rider CE projects. In addition, Virginia Power seeks Virginia Commission approval to consolidate Rider PPA with Rider CE and to end Rider PPA in April 2024.

51

 

(3)
The total revenue requirement requested is based on an estimated retirement of Greensville County in 2058, consistent with the current estimated useful life of the facility. Virginia Power also provided an alternative approach based on an estimated retirement of Greensville County in 2045, which if utilized would result in a revenue requirement of $144 million and $148 million for rate years beginning April 2024 and April 2025, respectively.
(4)
In connection with the October 2023 Rider CE application, Virginia Power seeks Virginia Commission approval to consolidate Rider PPA with Rider CE and to end Rider PPA in April 2024. This matter is pending.
(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 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.
(7)
Consists of $510 million for the transmission component of Virginia Power's base rates and $369 million for Rider T1.
(8)
Consists of previously approved phases of Rider U. In August 2023, the Virginia Commission approved Virginia Power's request to extend the rider for the rate year beginning April 2023 through June 2024.
(9)
Consists of $72 million for previously approved phases and $78 million for phase seven costs for Rider U. In connection with the October 2023 application, Virginia Power requests the Virginia Commission further extend existing rates for Rider U through July 2024.
(10)
In February 2023, the Virginia Commission also approved Virginia Power's requested revenue requirement for the rate year beginning April 2024. However, as Virginia Power provided notification in May 2023 to combine Rider W into base rates as discussed above, Rider W ceased to be separately collected effective July 2023.
(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%.
(12)
In May 2023, Virginia Power filed a notification with the Virginia Commission to combine Riders R, S and W, which have an aggregate revenue requirement of $351 million, into base rates effective July 2023 in accordance with legislation enacted in Virginia in April 2023.

Electric Transmission Projects

Developments for 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)

 

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

 

August 2022

 

April 2023

 

230 kV

 

15

 

$

40

 

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

 

October 2022

 

June 2023

 

230 kV

 

18

 

 

230

 

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

 

October 2022

 

May 2023

 

230 kV

 

26

 

 

215

 

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

 

October 2022

 

April 2023

 

500/230 kV

 

4

 

 

720

 

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

 

November 2022

 

June 2023

 

230 kV

 

2

 

 

50

 

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

 

November 2022

 

October 2023

 

230 kV

 

5

 

 

65

 

Rebuild of Lines #2019 and #2007 in the City of
  Virginia Beach, Virginia

 

February 2023

 

August 2023

 

230 kV

 

5

 

 

95

 

Install transformer at Possum Point substation,
  rebuild and construct transmission lines and
  related projects in Prince William County, Virginia

 

March 2023

 

Pending

 

230 kV

 

2

 

 

35

 

Partial rebuild of Line #2011 in the Cities of
  Manassas and Manassas Park, Virginia and
  Prince William and Fairfax Counties, Virginia

 

March 2023

 

October 2023

 

230 kV

 

7

 

 

35

 

Construct new transmission lines and convert Jeffress
  switching station in Mecklenburg County, Virginia

 

May 2023

 

Pending

 

230 kV

 

18

 

 

135

 

Construct new transmission lines and expand White
  Oak substation in Henrico County, Virginia

 

June 2023

 

Pending

 

230 kV

 

5

 

 

45

 

Rebuild Line #235 in Halifax, Mecklenburg and
  Charlotte Counties, Virginia

 

August 2023

 

Pending

 

230 kV

 

16

 

 

35

 

Partial rebuild Line #249 in Dinwiddie County and
  the City of Petersburg, Virginia

 

September 2023

 

Pending

 

230 kV

 

7

 

 

25

 

 

52

 

Virginia Regulation – Select Prior Year Events

The following items were disclosed in Note 13 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022 and are included in this report as they had an impact to the Companies’ Consolidated Statements of Income for the three and/or nine months ended September 30, 2022.

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. In July 2022, Virginia Power, the Virginia Commission staff and another party filed a comprehensive settlement agreement, approved by the Virginia Commission in September 2022, which provided for the collection of the requested under-recovered projected fuel expense over a three-year period beginning July 1, 2022 and required that Virginia Power exclude from recovery through base rates one half of the related financing costs over the three year period. In addition, the settlement agreement affirmed Virginia Power’s proposal regarding fuel cost recovery for market-based 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 Statements of Income. See Note 13 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022 for additional information.

Rider RGGI

In May 2022, Virginia Power filed a petition with the Virginia Commission requesting 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 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. See Note 13 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022 for additional information.

North Carolina Regulation

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 February 2023, PSNC submitted a filing with the North Carolina Commission for a $56 million gas cost decrease with rates effective March 2023. The North Carolina Commission approved the filing in March 2023.

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 March 2023, PSNC submitted a filing with the North Carolina Commission for a $23 million decrease relating to the customer usage tracker. The North Carolina Commission approved the filing in March 2023 with rates effective April 2023. In September 2023, PSNC submitted a filing with the North Carolina Commission for a $34 million increase relating to the customer usage tracker. The North Carolina Commission approved the filing in September 2023 with rates effective October 2023.

South Carolina Regulation

DSM Programs

DESC has approval for a DSM rider through which it recovers expenditures related to its DSM programs. 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. In April 2023, the South Carolina Commission approved the request, effective with the first billing cycle of May 2023.

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 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, along with a requested decrease to DESC's variable environmental and avoided capacity cost

53

 

component. The net effect of the proposal is an annual increase of $176 million. In March 2023, DESC, the South Carolina Office of Regulatory Staff and another party of record filed a stipulation with the South Carolina Commission for approval to reduce the base fuel cost component reflecting a subsequent decrease in current fuel prices, resulting in a net annual increase of $121 million. In April 2023, the South Carolina Commission voted to approve the stipulation, with rates effective May 2023.

Electric Transmission Project

In March 2023, DESC filed an application with the South Carolina Commission requesting approval to construct and operate 19 miles of 230 kV transmission lines, a substation and associated facilities in Jasper County, South Carolina estimated to cost approximately $55 million. In July 2023, the South Carolina Commission voted to approve the request and issued its order in September 2023.

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. In April 2023, the South Carolina Commission approved the request.

Natural Gas Base Rate Case

In March 2023, DESC filed its natural gas base rate case and schedules with the South Carolina Commission. DESC proposed a rate increase of $19 million effective October 2023. The base rate increase was proposed to recover significant investment in distribution infrastructure for the benefit of customers. The proposed rates would provide for an ROE of 10.38% compared to the currently authorized ROE of 10.25%. In addition, DESC elected to continue applicability of the Natural Gas Rate Stabilization Act, which allows for the adjustment of natural gas base rates annually, to its future rates and charges. In September 2023, DESC, the South Carolina Office of Regulatory Staff and other parties of record filed a stipulation agreement with the South Carolina Commission for approval. The stipulation agreement provides for a rate increase of $9 million commencing with bills rendered in October 2023, and an authorized ROE of 9.49%. Pursuant to the stipulation agreement, DESC would not file a natural gas base rate case prior to April 1, 2026, such that new rates would not be effective prior to October 1, 2026, absent unforeseen extraordinary economic or financial conditions that may include changes in corporate tax rates. In September 2023, the South Carolina Commission approved the stipulation agreement and issued its final order in October 2023.

Ohio Regulation

Base Rate Case

In October 2023, East Ohio filed its base rate case and schedules with the Ohio Commission. East Ohio proposed a non-fuel, base rate increase of $212 million, projected to be effective January 2025. The base rate increase was proposed to recover the significant investment in distribution infrastructure for the benefit of Ohio customers. The proposed rates would provide for an ROE of 10.40% compared to the currently authorized ROE of 10.38%. In addition, East Ohio requested approval for an alternative rate plan for the continuation and modification of certain programs, including PIR and CEP. This matter is pending.

PIR Program

In 2008, East Ohio began PIR, aimed at replacing approximately 25% of its pipeline system. The Ohio Commission has approved East Ohio’s PIR program for capital investments through 2026 with 3% increases of annual capital expenditures per year.

In April 2023, the Ohio Commission approved East Ohio's application to adjust the PIR recovery rates for 2022 costs. The filing reflects gross plant investment for 2022 of $225 million, cumulative gross plant investment of $2.4 billion and a revenue requirement of $305 million.

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 regulations. 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. In September 2023, the Supreme Court of Ohio affirmed the Ohio Commission's December 2020 order.

In September 2023, the Ohio Commission approved adjustments to CEP cost recovery rates for 2022 costs. The approved rates reflect gross plant investment for 2022 of $195 million, cumulative gross plant investment of $1.3 billion and a revenue requirement of $151 million.

54

 

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 2023, the Ohio Commission approved East Ohio's application to adjust its UEX rider to reflect an annual revenue requirement of $23 million to provide for recovery of an under-recovered accumulated bad debt expense of $9 million as of March 31, 2023, and recovery of net bad debt expense projected to total $14 million for the twelve-month period ending March 2024.

Utah Regulation

Purchased Gas

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. Subsequently in February 2023, the Utah Commission approved a $164 million gas cost increase reflecting additional undercollected gas costs incurred in January 2023.

 

Note 14. Leases

Other than the items discussed below, there have been no significant changes regarding the Companies’ leases as described in Note 15 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

Dominion Energy’s Consolidated Statements of Income include $7 million and $18 million for the three and nine months ended September 30, 2023, respectively, and $6 million and $17 million for the three and nine months ended September 30, 2022, respectively, of rental revenue included in operating revenue. Dominion Energy’s Consolidated Statements of Income include less than $1 million and $4 million for the three and nine months ended September 30, 2023, respectively, and $9 million and $26 million for the three and nine months ended September 30, 2022, 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.

Offshore Wind Vessel Leasing Arrangement

In December 2020, Dominion Energy signed an agreement (subsequently amended in December 2022 and May 2023) 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 $625 million, to fund the estimated project costs. The project is expected to be completed in late 2024 or early 2025. 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 $383 million as of September 30, 2023. 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.

Note 15. Variable Interest Entities

There have been no significant changes regarding the entities the Companies consider VIEs as described in Note 16 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. Following the completion of the sale of its 50% noncontrolling interest in Cove Point, as discussed in Note 10, Dominion Energy no longer has a variable interest in Cove Point, an entity which it had concluded was a VIE.

Virginia Power

Virginia Power purchased shared services from DES, an affiliated VIE, of $113 million and $96 million for the three months ended September 30, 2023 and 2022, respectively, and $339 million and $290 million for the nine months ended September 30, 2023 and

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2022, respectively. Virginia Power’s Consolidated Balance Sheets include amounts due to DES of $29 million and $28 million at September 30, 2023 and December 31, 2022, respectively, recorded in payables to affiliates.

Note 16. Significant Financing Transactions

Credit Facilities and Short-term Debt

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. Other than the items discussed below, there have been no significant changes regarding the Companies’ credit facilities and short-term debt as described in Note 17 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

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.

At September 30, 2023, Dominion Energy’s commercial paper and letters of credit outstanding, as well as its capacity available under the credit facility, were as follows:

 

 

 

Facility
Limit

 

 

Outstanding
Commercial
Paper

 

 

Outstanding
Letters of
Credit

 

 

Facility
Capacity
Available

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Joint revolving credit facility(1)

 

$

6,000

 

 

$

3,362

 

 

$

16

 

 

$

2,622

 

 

(1)
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 September 30, 2023, the sub-limits for DESC and Questar Gas were $500 million and $250 million, respectively.

In March 2023, FERC granted DESC authority through March 2025 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 2023, FERC granted GENCO authority through March 2025 to issue short-term indebtedness not to exceed $200 million outstanding with maturity dates of one year or less.

In addition to the credit facility mentioned above and Virginia Power's letter of credit facilities mentioned below, Dominion Energy also has a credit facility which allows Dominion Energy to issue up to approximately $30 million in letters of credit and will mature in June 2024. At both September 30, 2023 and December 31, 2022, Dominion Energy had $25 million in letters of credit outstanding under this facility.

In March 2023, Dominion Energy entered into an agreement with a financial institution which it expects to allow it to issue up to $100 million in letters of credit. At September 30, 2023, $57 million in letters of credit were issued and outstanding under this agreement.

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 as disclosed in Note 17 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. At September 30, 2023 and December 31, 2022, Dominion Energy’s Consolidated Balance Sheets include $423 million and $347 million, respectively, with respect to such notes presented within short-term debt. 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. In February and March 2023, Dominion Energy borrowed $500 million and $1.0 billion, respectively, with the proceeds used for general corporate purposes and to repay long-term debt. At September 30, 2023, Dominion Energy's Consolidated

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Balance Sheet includes $2.5 billion with respect to such facility presented within securities due within one year. 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.

In July 2023, Dominion Energy entered into two $600 million 364-day term loan facilities which bore interest at a variable rate and were scheduled to mature in July 2024 with the proceeds to be used to repay existing long-term debt and/or short-term debt upon maturity and for other general corporate purposes. Subsequently in July 2023, Dominion Energy borrowed an initial $750 million in the aggregate under these facilities with the proceeds used to repay short-term debt and for general corporate purposes. Dominion Energy was permitted to make up to three additional borrowings under each agreement through November 2023, at which point any unused capacity would cease to be available to Dominion Energy. The agreements contained certain mandatory early repayment provisions, including that any after-tax proceeds in connection with a sale of Dominion Energy’s noncontrolling interest in Cove Point, following the repayment of DECP Holding’s term loan secured by its noncontrolling interest in Cove Point, be applied to any outstanding borrowings under the facilities. In September 2023, Dominion Energy repaid the $750 million borrowing with after-tax proceeds from the sale of Dominion Energy’s noncontrolling interest in Cove Point, as discussed in Note 10. Subsequently in September 2023, Dominion Energy borrowed $225 million in the aggregate under these facilities with the proceeds used to repay short-term debt and for general corporate purposes. In October 2023, Dominion Energy repaid the $225 million borrowing and terminated the facilities along with any remaining unused commitments.

In connection with the sale of Dominion Energy's remaining noncontrolling interest in Cove Point, as discussed in Note 10, related credit facilities that allowed DECP Holdings to issue up to $110 million in letters of credit were cancelled in September 2023.

In October 2023, Dominion Energy entered into a $2.25 billion 364-Day term loan facility which bears interest at a variable rate and will mature in October 2024 with the proceeds to be used for general corporate purposes. Concurrently, Dominion Energy borrowed an initial $1.0 billion with the proceeds used for general corporate purposes, including to repay short-term and long-term debt. Dominion Energy is permitted to make up to three additional borrowings under the agreement through February 2024, at which point any unused capacity will cease to be available to Dominion Energy. Dominion Energy also has the ability through August 2024 to request an increase in the amount of this facility by up to an additional $500 million. The agreement contains certain mandatory early repayment provisions, including that any after-tax proceeds in connection with the East Ohio, PSNC and Questar Gas Transactions, following the repayment of the 364-day term loan facility entered into in January 2023, be applied to any outstanding borrowings under this facility. The maximum allowed total debt to total capital ratio under this facility is consistent with such allowed ratio under Dominion Energy’s joint revolving credit facility.

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.

At September 30, 2023, 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 was as follows:

 

 

 

Facility
Limit(1)

 

 

Outstanding
Commercial
Paper

 

 

Outstanding
Letters of
Credit

 

(millions)

 

 

 

 

 

 

 

 

 

Joint revolving credit facility(1)

 

$

6,000

 

 

$

942

 

 

$

10

 

 

(1)
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 September 30, 2023, 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. At September 30, 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.

In March 2023, Virginia Power entered into an agreement with a financial institution, which it expects to allow it to issue up to $200 million in letters of credit. At September 30, 2023, $70 million in letters of credit were issued and outstanding under this agreement.

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Long-term Debt

Unless otherwise noted, the proceeds of long-term debt issuances were used for general corporate purposes and/or to repay short-term debt.

In March 2023, Dominion Energy borrowed $450 million under its Sustainability Revolving Credit Agreement, which, as described in Note 18 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022, matures in 2024 and bears interest at a variable rate with the proceeds used for general corporate purposes. In April 2023 Dominion Energy repaid $450 million borrowed for general corporate purposes. In September 2023, Dominion Energy borrowed $450 million under this facility with the proceeds used for general corporate purposes. At September 30, 2023 and December 31, 2022, Dominion Energy’s Consolidated Balance Sheets include $900 million and $450 million, respectively, with respect to this facility. In October 2023, Dominion Energy repaid $450 million borrowed for general corporate purposes.

In March 2023, Virginia Power issued $750 million of 5.00% senior notes and $750 million of 5.45% senior notes that mature in 2033 and 2053, respectively.

In June 2023, Virginia Power remarketed three series of tax-exempt bonds, with an aggregate outstanding principal of $160 million to new investors. All three series of bonds will bear interest at a coupon of 3.65% until October 2027, after which they will bear interest at a market rate to be determined at that time.

In August 2023, Virginia Power issued $400 million of 5.30% senior notes and $600 million of 5.70% senior notes that mature in 2033 and 2053, respectively.

In connection with the sale of Dominion Energy's interest in Cove Point, described further in Note 10, DECP Holdings' outstanding term loan balance of $2.2 billion was repaid in September 2023. This term loan was scheduled to mature in December 2024.

In October 2023, DESC issued $500 million of 6.25% first mortgage bonds that mature in 2053.

In November 2023, PSNC completed pricing and expects to issue through private placement in November 2023 $75 million of 6.16% and $75 million of 6.73% senior notes that will mature in 2033 and 2053, respectively.

Derivative Restructuring

In August 2020, Virginia Power amended a portfolio of interest rate swaps with a notional value of $900 million, extending the mandatory termination dates, as discussed in Note 18 to the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. In March 2023, Virginia Power settled the remaining outstanding interest rate swaps which would have otherwise matured in December 2023, resulting in a $448 million reduction in securities due within one year.

Preferred Stock

Dominion Energy is authorized to issue up to 20 million shares of preferred stock, which may be designated into separate classes. At September 30, 2023 and December 31, 2022, Dominion Energy had issued and outstanding 1.8 million shares of 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.

Dominion Energy recorded dividends of $12 million ($7.292 per share) for the nine months ended September 30, 2022, on the Series A Preferred Stock. In addition, Dominion Energy recorded interest expense of $5 million and $7 million on the Series A Preferred Stock for the three and nine months ended September 30, 2022, following the reclassification of these shares to a mandatorily redeemable liability effective June 2022. Dominion Energy recorded dividends of $9 million ($11.625 per share) for both the three months ended September 30, 2023 and 2022 and $27 million ($34.875 per share) for both the nine months ended September 30, 2023 and 2022 on the Series B Preferred Stock. Dominion Energy recorded dividends of $11 million ($10.875 per share) for both the three months ended September 30, 2023 and 2022 and $33 million ($32.625 per share) for both the nine months ended September 30, 2023 and 2022 on the Series C Preferred Stock.

There have been no significant changes to Dominion Energy’s Series B Preferred Stock and Series C Preferred Stock as described in Note 19 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

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2019 Corporate Units

The 2019 Equity Units, initially issued in the form of 2019 Series A Corporate Units, are described in Note 19 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

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 10. 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.

Issuance of Common Stock

Dominion Energy recorded, net of fees and commissions, $91 million from the issuance of 2 million shares of common stock for the nine months ended September 30, 2023 and $134 million from the issuance of 2 million shares of common stock for the nine months ended September 30, 2022, through various programs including Dominion Energy Direct® and employee savings plans as described in Note 20 to the Consolidated Financial Statements to the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. In August 2023, Dominion Energy began purchasing its common stock on the open market for these direct stock purchase plans.

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 17.

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 17.

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.

 

In October and November 2023, Virginia Power issued 39,455 shares of its common stock to Dominion Energy for $2.6 billion with the proceeds utilized to repay substantially all of the outstanding borrowings under Virginia Power’s intercompany credit facility with Dominion Energy. Virginia Power issued the shares pursuant to a Virginia Commission order authorizing the issuance of up to $3.25 billion of common stock to Dominion Energy through the end of 2023 in order to maintain a common equity capitalization to total capitalization ratio of 52.10% through December 2024 in accordance with legislation enacted in Virginia in April 2023 as discussed in Note 13.

At-the-Market Program

In August 2020, Dominion Energy entered into sales agency agreements to effect sales under an at-the-market program as discussed in Note 20 to the Consolidated Financial Statements in the Companies’ Annual Report Form 10-K for the year ended December 31, 2022. Dominion Energy did not issue any shares or enter into any forward sale agreements under this program in 2023 prior to its expiration in June 2023.

Repurchase of Common Stock

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 $3.0 billion repurchase program authorized in July 2020 and completed in December 2020 as discussed in Note 20 to the Consolidated Financial Statements in the Companies’ Annual Report Form 10-K for the year ended December 31, 2022.

Dominion Energy did not repurchase any shares of common stock during the nine months ended September 30, 2023, except for shares tendered by employees to satisfy tax withholding obligations on vested restricted stock, which do not count against its stock repurchase authorization.

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Note 17. 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 standards 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. In March 2023, the EPA issued a final rule specifying an interstate federal implementation plan to comply with certain aspects of planning for the 2015 ozone standards which is applicable in August 2023 for certain states, including Virginia. The interstate federal implementation plan imposes tighter NOX emissions limits during the ozone season and includes provisions for the use of allowances to cover such emissions. Until implementation plans for the 2015 ozone standards are fully 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, financial condition and/or cash flows.

 

ACE Rule

In July 2019, the EPA published the final rule informally referred to as the ACE Rule, as a replacement for the Clean Power Plan. The ACE Rule regulated GHG emissions from existing coal-fired power plants pursuant to Section 111(d) of the CAA and required states to develop plans by July 2022 establishing unit-specific performance standards for existing coal-fired power plants. In January 2021, the U.S. Court of Appeals for the D.C. Circuit vacated the ACE Rule and remanded it to the EPA. This decision would take effect upon issuance of the court’s mandate. In March 2021, the court issued a partial mandate vacating and remanding all parts of the ACE Rule except for the portion of the ACE Rule that repealed the Clean Power Plan. In October 2021, the U.S. Supreme Court agreed to hear a challenge of the U.S. Court of Appeals for the D.C. Circuit’s decision on the ACE Rule. 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. In May 2023, the EPA proposed to repeal the ACE Rule as part of a package of proposed rules addressing CO2 emissions from new and existing fossil fuel-fired electric generating units. Until the EPA takes final action on this proposed rulemaking, the Companies cannot predict an impact to its operations, financial condition and/or cash flows.

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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.

 

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.

 

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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 2024 depending on receipt of final permits and approvals. At September 30, 2023 and December 31, 2022, Dominion Energy had $42 million and $47 million, respectively, and Virginia Power had $25 million at both periods, of reserves recorded. 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. In addition, certain legal matters which have been resolved are discussed in Note 23 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. No reference to, or disclosure of, any proceeding, item or matter described below shall be construed as an admission or indication that such proceeding, item or matter is material. For certain of these matters, and unless otherwise noted therein, Dominion Energy is unable to estimate a reasonable range of possible loss and the related financial statement impacts, but for any such matter there could be a material impact to its results of operations, financial condition and/or cash flows. For the matters for which Dominion Energy is able to reasonably estimate a probable loss, Dominion Energy’s Consolidated Balance Sheets at September 30, 2023 and December 31, 2022 include reserves of $3 million and $94 million, respectively, included in other current liabilities, and insurance receivables of $26 million and $68 million, respectively, included within other receivables. The balance at December 31, 2022 includes $68 million of offsetting reserves and insurance receivables related to personal injury or wrongful death cases which were pending. During both the three and nine months ended September 30, 2023 and 2022, charges included in Dominion Energy's Consolidated Statements of Income were inconsequential.

62

 

 

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. In December 2022, DESC transferred additional utility property with a fair value of $3 million to the SCDOR. In October 2022, DESC filed for approval to transfer the remaining real estate with FERC which was received in November 2022. In March 2023, DESC transferred utility property with a fair value of $10 million to the SCDOR resulting in a gain of $9 million ($7 million after-tax), recorded in losses (gains) on sales of assets in Dominion Energy’s Consolidated Statements of Income for the nine months ended September 30, 2023. In June 2023, DESC transferred the remaining utility property with a fair value of $11 million to the SCDOR resulting in a gain of $11 million ($8 million after-tax), recorded in losses (gains) on sales of assets in Dominion Energy's Consolidated Statements of Income for the nine months ended September 30, 2023. In July 2023, DESC made a less than $1 million cash payment to the SCDOR to fully satisfy its remaining obligation, including applicable interest, under the settlement agreement.

 

Nuclear Operations

Nuclear Insurance

There have been no significant changes regarding the Companies’ nuclear insurance as described in Note 23 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

 

Spent Nuclear Fuel

As discussed in Note 23 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022, 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.

 

Guarantees, Surety Bonds and Letters of Credit

At September 30, 2023, Dominion Energy had issued four guarantees related to Cove Point, previously 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 September 30, 2023, 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.

 

63

 

At September 30, 2023, Dominion Energy had issued the following subsidiary guarantees:

 

 

 

Maximum
Exposure

 

(millions)

 

 

 

Commodity transactions(1)

 

$

2,856

 

Nuclear obligations(2)

 

 

245

 

Solar(3)

 

 

217

 

Other(4)

 

 

1,199

 

Total(5)(6)

 

$

4,517

 

 

(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.
(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 14.
(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. 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 September 30, 2023, no amounts have been recorded related to this guarantee.

 

Additionally, at September 30, 2023, Dominion Energy had purchased $304 million of surety bonds, including $201 million at Virginia Power and $37 million related to entities held for sale, and authorized the issuance of letters of credit by financial institutions of $16 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.

Note 18. Credit Risk

The Companies’ accounting policies for credit risk are discussed in Note 24 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

At September 30, 2023, Dominion Energy’s credit exposure totaled $205 million, primarily related to price risk management activities. Of this amount, investment grade counterparties, including those internally rated, represented 86%. No single counterparty, whether investment grade or non-investment grade, exceeded $42 million of exposure. At September 30, 2023, Virginia Power’s exposure related to wholesale customers totaled $73 million. Of this amount, investment grade counterparties, including those internally rated, represented 67%. No single counterparty, whether investment grade or non-investment grade, exceeded $10 million of exposure.

64

 

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 $82 million and $38 million, respectively, as of September 30, 2023, and $140 million and $28 million, respectively, as of December 31, 2022. 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 had posted collateral of $1 million at September 30, 2023, and both Dominion Energy and Virginia Power had posted $72 million at December 31, 2022, related to derivatives with credit-related contingent provisions that are in a liability position and not fully collateralized with cash. Virginia Power had no such collateral posted at September 30, 2023. In addition, Dominion Energy and Virginia Power had both posted letters of credit as collateral with counterparties covering $4 million and $20 million of fair value of derivative instruments in a liability position at September 30, 2023 and December 31, 2022, respectively. 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 $83 million and $38 million, respectively, as of September 30, 2023 and $212 million and $99 million, respectively, as of December 31, 2022, which does not include the impact of any offsetting asset positions.

See Note 9 for additional information about derivative instruments.

Note 19. Related-Party Transactions

Dominion Energy’s transactions with equity method investments are described in Note 10. 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. 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. At September 30, 2023, Virginia Power’s derivative assets and liabilities with affiliates were $2 million and $56 million, respectively. At December 31, 2022, Virginia Power’s derivative assets and liabilities with affiliates were $33 million and $31 million, respectively. See Note 9 for additional information.

Virginia Power participates in certain Dominion Energy benefit plans described in Note 22 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. At September 30, 2023 and December 31, 2022, amounts due to Dominion Energy associated with the Dominion Energy Pension Plan and included in other deferred credits and other liabilities in the Consolidated Balance Sheets were $447 million and $422 million, respectively. At September 30, 2023 and December 31, 2022, Virginia Power's amounts due from Dominion Energy associated with the Dominion Energy Retiree Health and Welfare Plan and included in other deferred charges and other assets in the Consolidated Balance Sheets were $566 million and $518 million, respectively.

DES and other affiliates provide accounting, legal, finance and certain administrative and technical services and licenses to Virginia Power. In addition, Virginia Power provides certain services to affiliates, including charges for facilities and equipment usage.

The financial statements for all years presented include costs for certain general, administrative and corporate expenses assigned by DES to Virginia Power on the basis of direct and allocated methods in accordance with Virginia Power’s services agreements with DES. Where costs incurred cannot be determined by specific identification, the costs are allocated based on the proportional level of effort devoted by DES resources that is attributable to the entity, determined by reference to number of employees, salaries and wages and other similar measures for the relevant DES service. Management believes the assumptions and methodologies underlying the allocation of general corporate overhead expenses are reasonable.

65

 

Presented below are Virginia Power’s significant transactions with DES and other affiliates:

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter-to-Date

 

 

Year-to-Date

 

Period Ended September 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

Commodity purchases from affiliates

 

$

146

 

 

$

515

 

 

$

463

 

 

$

1,099

 

Services provided by affiliates(1)

 

 

149

 

 

 

125

 

 

 

441

 

 

 

378

 

Services provided to affiliates

 

 

7

 

 

 

4

 

 

 

15

 

 

 

13

 

 

(1)
Includes capitalized expenditures of $51 million and $44 million for the three months ended September 30, 2023 and 2022, respectively, and $151 million and $122 million for the nine months ended September 30, 2023 and 2022, respectively.

Virginia Power has borrowed funds from Dominion Energy under short-term borrowing arrangements. There were $1.8 billion and $2.0 billion in short-term demand note borrowings from Dominion Energy as of September 30, 2023 and December 31, 2022, respectively. Virginia Power had no outstanding borrowings, net of repayments, under the Dominion Energy money pool for its nonregulated subsidiaries as of September 30, 2023 and December 31, 2022. Interest charges related to Virginia Power’s borrowings from Dominion Energy were $27 million and $72 million for the three and nine months ended September 30, 2023, respectively, and inconsequential for the three and nine months ended September 30, 2022.

There were no issuances of Virginia Power’s common stock to Dominion Energy for the three and nine months ended September 30, 2023 and 2022. In October and November 2023, Virginia Power issued common stock to Dominion Energy as discussed in Note 16.

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 20. Employee Benefit Plans

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 $4 million and $12 million for the three and nine months ended September 30, 2023, respectively, and $7 million and $19 million for the three and nine months ended September 30, 2022, respectively, presented in discontinued operations. The non-service cost components of net periodic benefit (credit) cost are reflected in other income (expense) in Dominion Energy's Consolidated Statements of Income, except for $(11) million and $(34) million for the three and nine months ended September 30, 2023, respectively, and $(11) million and $(32) million for the three and nine months ended September 30, 2022, respectively, presented in discontinued operations. The components of Dominion Energy’s provision for net periodic benefit cost (credit) are as follows:

 

 

Pension Benefits

 

 

Other Postretirement Benefits

 

 

 

Quarter-to-Date

 

 

Year-to-Date

 

 

Quarter-to-Date

 

 

Year-to-Date

 

Period Ended September 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

24

 

 

$

35

 

 

$

72

 

 

$

106

 

 

$

3

 

 

$

5

 

 

$

10

 

 

$

16

 

Interest cost

 

 

111

 

 

 

83

 

 

 

332

 

 

 

250

 

 

 

15

 

 

 

11

 

 

 

46

 

 

 

34

 

Expected return on plan assets

 

 

(216

)

 

 

(221

)

 

 

(648

)

 

 

(667

)

 

 

(37

)

 

 

(47

)

 

 

(113

)

 

 

(143

)

Amortization of prior service
   cost (credit)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(10

)

 

 

(10

)

 

 

(28

)

 

 

(29

)

Amortization of net actuarial
   (gain) loss

 

 

—

 

 

 

39

 

 

 

—

 

 

 

119

 

 

 

(1

)

 

 

—

 

 

 

(4

)

 

 

(1

)

Curtailment(1)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8

)

 

 

—

 

 

 

(8

)

Net periodic benefit
   (credit) cost

 

$

(81

)

 

$

(64

)

 

$

(244

)

 

$

(192

)

 

$

(30

)

 

$

(49

)

 

$

(89

)

 

$

(131

)

(1) 2022 amounts relate primarily to Dominion Energy's sale of Hope.

Employer Contributions

During the three and nine months ended September 30, 2023, Dominion Energy made no contributions to its qualified defined benefit pension plans or other postretirement benefit plans. Dominion Energy is not required to make any contributions to its qualified defined

66

 

benefit pension plans or to 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.

Note 21. 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 effective September 2023 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 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 10 as well as Notes 3 and 9 to the Consolidated Financial Statements in Dominion Energy’s Annual Report on Form 10-K for the year ended December 31, 2022.

 

In the nine months ended September 30, 2023, Dominion Energy reported after-tax net income of $26 million in the Corporate and Other segment, including $231 million of after-tax net income for specific items with $245 million of after-tax net income attributable to its operating segments. In the nine months ended September 30, 2022, Dominion Energy reported after-tax net expenses of $1.0 billion in the Corporate and Other segment, including $1.0 billion of after-tax net expenses for specific items with $1.9 billion of after-tax net expenses attributable to its operating segments.

 

The net income for specific items attributable to Dominion Energy’s operating segments in 2023 primarily related to the impact of the following items:

•
A $335 million ($255 million after-tax) gain related to economic hedging activities, attributable to Contracted Energy;
•
A $183 million ($142 million after-tax) gain related to investments in nuclear decommissioning trust funds, attributable to:
•
Contracted Energy ($124 million after-tax); and
•
Dominion Energy Virginia ($18 million after-tax);
•
A $183 million ($136 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 $36 million ($27 million after-tax) charge for the write-off of certain previously deferred amounts related to the cessation of certain riders effective July 2023, attributable to Dominion Energy Virginia; and
•
A $31 million ($23 million after-tax) benefit related to real estate transactions, including gains on the transfer of property to satisfy litigation associated with the NND Project, attributable to Dominion Energy South Carolina.

67

 

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 $691 million ($536 million after-tax) loss related to investments in nuclear decommissioning trust funds, attributable to:

 

•
Contracted Energy ($465 million after-tax); and
•
Dominion Energy Virginia ($71 million after-tax);
•
A $649 million ($513 million after-tax) loss associated with the sale of Kewaunee, attributable to Contracted Energy;
•
A $391 million ($296 million after-tax) loss related to economic hedging activities, attributable to Contracted Energy;
•
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;
•
A $183 million ($136 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 $94 million ($70 million after-tax) charge associated with storm damage and service restoration in Virginia Power’s service territory, attributable to Dominion Energy Virginia; and
•
A $60 million ($45 million after-tax) charge for dismantling costs associated with certain retired electric generation facilities, attributable to Dominion Energy Virginia.

68

 

 

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

 

 

 

Dominion
Energy
Virginia

 

 

Dominion
Energy
South
Carolina

 

 

Contracted
Energy

 

 

Corporate
and Other

 

 

Adjustments
& Eliminations

 

 

Consolidated
Total

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue from external
      customers

 

$

2,649

 

 

$

944

 

 

$

226

 

 

$

(9

)

 

$

—

 

 

$

3,810

 

Intersegment revenue

 

 

(4

)

 

 

1

 

 

 

6

 

 

 

231

 

 

 

(234

)

 

 

—

 

Total operating revenue

 

 

2,645

 

 

 

945

 

 

 

232

 

 

 

222

 

 

 

(234

)

 

 

3,810

 

Net loss from discontinued
      operations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(554

)

 

 

—

 

 

 

(554

)

Net income (loss) attributable to
      Dominion Energy

 

 

532

 

 

 

143

 

 

 

54

 

 

 

(566

)

 

 

—

 

 

 

163

 

Three Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue from external
      customers

 

$

2,870

 

 

$

915

 

 

$

240

 

 

$

(62

)

 

$

—

 

 

$

3,963

 

Intersegment revenue

 

 

(5

)

 

 

2

 

 

 

5

 

 

 

206

 

 

 

(208

)

 

 

—

 

Total operating revenue

 

 

2,865

 

 

 

917

 

 

 

245

 

 

 

144

 

 

 

(208

)

 

 

3,963

 

Net income from discontinued
      operations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

152

 

 

 

—

 

 

 

152

 

Net income (loss) attributable to
      Dominion Energy

 

 

618

 

 

 

175

 

 

 

65

 

 

 

(80

)

 

 

—

 

 

 

778

 

Nine Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue from external
     customers

 

$

7,285

 

 

$

2,559

 

 

$

660

 

 

$

355

 

 

$

—

 

 

$

10,859

 

Intersegment revenue

 

 

(5

)

 

 

4

 

 

 

14

 

 

 

691

 

 

 

(704

)

 

 

—

 

Total operating revenue

 

 

7,280

 

 

 

2,563

 

 

 

674

 

 

 

1,046

 

 

 

(704

)

 

 

10,859

 

Net loss from discontinued
     operations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(105

)

 

 

—

 

 

 

(105

)

Net income attributable to
     Dominion Energy

 

 

1,308

 

 

 

302

 

 

 

123

 

 

 

26

 

 

 

—

 

 

 

1,759

 

Nine Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue from external
     customers

 

$

7,212

 

 

$

2,525

 

 

$

645

 

 

$

(247

)

 

$

—

 

 

$

10,135

 

Intersegment revenue

 

 

(12

)

 

 

6

 

 

 

15

 

 

 

625

 

 

 

(634

)

 

 

—

 

Total operating revenue

 

 

7,200

 

 

 

2,531

 

 

 

660

 

 

 

378

 

 

 

(634

)

 

 

10,135

 

Net income from discontinued
     operations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

775

 

 

 

—

 

 

 

775

 

Net income (loss) attributable to
     Dominion Energy

 

 

1,576

 

 

 

408

 

 

 

95

 

 

 

(1,043

)

 

 

—

 

 

 

1,036

 

 

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.

69

 

 

In the nine months ended September 30, 2023, Virginia Power reported after-tax net expenses of $150 million in the Corporate and Other segment, including $156 million of after-tax net expenses for specific items with $154 million of after-tax net expenses attributable to its operating segment. In the nine months ended September 30, 2022, Virginia Power reported after-tax net expenses of $601 million in the Corporate and Other segment, including $641 million of after-tax net expenses for specific items with $635 million of after-tax net expenses attributable to its operating segment.

 

The net expenses for specific items attributable to Virginia Power’s operating segment in 2023 primarily related to the impact of the following items:

•
A $183 million ($136 million after-tax) charge for amortization of a regulatory asset established in connection with the settlement of the 2021 Triennial Review;
•
A $36 million ($27 million after-tax) charge for the write-off of certain previously deferred amounts related to the cessation of certain riders effective July 2023; and
•
A $24 million ($18 million after-tax) gain related to investments in nuclear decommissioning trust funds.

The net expenses for specific items attributable to Virginia Power’s operating segment in 2022 primarily related to the impact of the following items:

•
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;
•
A $183 million ($136 million after-tax) charge for amortization of a regulatory asset established in connection with the settlement of the 2021 Triennial Review;
•
A $96 million ($71 million after-tax) loss related to investments in nuclear decommissioning trust funds;
•
A $94 million ($70 million after-tax) charge associated with storm damage and service restoration in its service territory; and
•
A $60 million ($45 million after-tax) charge for dismantling costs associated with certain retired electric generation facilities.

 

The following table presents segment information pertaining to Virginia Power’s operations:

 

 

 

Dominion
Energy
Virginia

 

 

Corporate
and Other

 

 

Consolidated
Total

 

(millions)

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

2,645

 

 

$

—

 

 

$

2,645

 

Net income (loss)

 

 

532

 

 

 

(59

)

 

 

473

 

Three Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

2,865

 

 

$

10

 

 

$

2,875

 

Net income (loss)

 

 

618

 

 

 

(47

)

 

 

571

 

Nine Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

7,280

 

 

$

—

 

 

$

7,280

 

Net income (loss)

 

 

1,308

 

 

 

(150

)

 

 

1,158

 

Nine Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

7,200

 

 

$

17

 

 

$

7,217

 

Net income (loss)

 

 

1,576

 

 

 

(601

)

 

 

975

 

 

 

70

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MD&A discusses Dominion Energy’s results of operations and general financial condition and Virginia Power’s results of operations. MD&A should be read in conjunction with the Companies’ Consolidated Financial Statements. 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;

71

 

•
Changes in future levels of domestic and international natural gas production, supply or consumption;
•
Timing and receipt of regulatory approvals necessary for planned construction or growth projects and compliance with conditions associated with such regulatory approvals;
•
The inability to complete planned construction, conversion or growth projects at all, or with the outcomes or within the terms and time frames initially anticipated, including as a result of increased public involvement, intervention or litigation in such projects;
•
Risks and uncertainties that may impact the Companies’ ability to develop and construct the CVOW Commercial Project within the currently proposed timeline, or at all, and consistent with current cost estimates along with the ability to recover such costs from customers;
•
Changes to federal, state and local environmental laws and regulations, including those related to climate change, the tightening of emission or discharge limits for GHGs and other substances, more extensive permitting requirements and the regulation of additional substances;
•
Cost of environmental strategy and compliance, including those costs related to climate change;
•
Changes in implementation and enforcement practices of regulators relating to environmental standards and litigation exposure for remedial activities;
•
Difficulty in anticipating mitigation requirements associated with environmental and other regulatory approvals or related appeals;
•
Unplanned outages at facilities in which the Companies have an ownership interest;
•
The impact of operational hazards, including adverse developments with respect to pipeline and plant safety or integrity, equipment loss, malfunction or failure, operator error and other catastrophic events;
•
Risks associated with the operation of nuclear facilities, including costs associated with the disposal of spent nuclear fuel, decommissioning, plant maintenance and changes in existing regulations governing such facilities;
•
Changes in operating, maintenance and construction costs;
•
Domestic terrorism and other threats to the Companies’ physical and intangible assets, as well as threats to cybersecurity;
•
Additional competition in industries in which the Companies operate, including in electric markets in which Dominion Energy’s nonregulated generation facilities operate and potential competition from the development and deployment of alternative energy sources, such as self-generation and distributed generation technologies, and availability of market alternatives to large commercial and industrial customers;
•
Competition in the development, construction and ownership of certain electric transmission facilities in the Companies’ service territory in connection with Order 1000;
•
Changes in technology, particularly with respect to new, developing or alternative sources of generation and smart grid technologies;
•
Changes in demand for the Companies’ services, including industrial, commercial and residential growth or decline in the Companies’ service areas, changes in supplies of natural gas delivered to Dominion Energy’s pipeline system, failure to maintain or replace customer contracts on favorable terms, changes in customer growth or usage patterns, including as a result of energy conservation programs, the availability of energy efficient devices and the use of distributed generation methods;
•
Receipt of approvals for, and timing of, closing dates for acquisitions and divestitures;
•
Impacts of acquisitions, divestitures, transfers of assets to joint ventures and retirements of assets based on asset portfolio reviews;
•
The expected timing and likelihood of the completion of any or all of the East Ohio, PSNC and Questar Gas Transactions, including the ability to obtain the requisite regulatory approvals and the terms and conditions of such approvals;
•
Adverse outcomes in litigation matters or regulatory proceedings;
•
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;

72

 

•
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 Part I. Item 1A. Risk Factors in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022 and Part II. Item 1A. Risk Factors in this report.

 

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

As of September 30, 2023, there have been no significant changes with regard to the critical accounting policies and estimates disclosed in MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. The policies disclosed included the accounting for regulated operations, AROs, income taxes, accounting for derivative contracts and financial instruments at fair value, use of estimates in goodwill impairment testing, use of estimates in long-lived asset and equity method investment impairment testing, held for sale classification and employee benefit plans.

Results of Operations—Dominion Energy

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

 

 

2023

 

 

2022

 

 

$ Change

 

(millions, except EPS)

 

 

 

 

 

 

 

 

 

Third Quarter

 

 

 

 

 

 

 

 

 

Net income attributable to Dominion Energy

 

$

163

 

 

$

778

 

 

$

(615

)

Diluted EPS

 

 

0.17

 

 

 

0.91

 

 

 

(0.74

)

Year-To-Date

 

 

 

 

 

 

 

 

 

Net income attributable to Dominion Energy

 

$

1,759

 

 

$

1,036

 

 

$

723

 

Diluted EPS

 

 

2.03

 

 

 

1.17

 

 

 

0.86

 

Overview

Third Quarter 2023 vs. 2022

Net income attributable to Dominion Energy decreased 79%, primarily due to a charge to reflect the recognition of deferred taxes on the outside basis of stock associated with East Ohio, PSNC, Questar Gas and Wexpro meeting the classification as held for sale and a decrease from the impact of 2023 Virginia legislation, partially offset by a gain on the sale of Dominion Energy's remaining noncontrolling interest in Cove Point and increased unrealized gains on economic hedging activities.

Year-To-Date 2023 vs. 2022

Net income attributable to Dominion Energy increased 70%, primarily due to the absences of a loss associated with the sale of Kewaunee, a charge for RGGI compliance costs deemed recovered through base rates and a charge in connection with a comprehensive settlement agreement for Virginia fuel expenses. In addition, there was an increase in net investment earnings on nuclear decommissioning trust funds, a gain on the sale of Dominion Energy's remaining noncontrolling interest in Cove Point, increased unrealized gains on economic hedging activities and a decrease in storm damage and service restoration costs. These increases were partially offset by a charge to reflect the recognition of deferred taxes on the outside basis of stock associated with East Ohio, PSNC, Questar Gas and Wexpro meeting the classification as held for sale, a charge associated with the impairment of a

73

 

corporate office building, a decrease in sales to electric utility customers attributable to weather and a decrease from the impact of 2023 Virginia legislation.

Analysis of Consolidated Operations

Presented below are selected amounts related to Dominion Energy’s results of operations:

 

 

 

Third Quarter

 

 

Year-To-Date

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

2023

 

 

2022

 

 

$ Change

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

3,810

 

 

$

3,963

 

 

$

(153

)

 

$

10,859

 

 

$

10,135

 

 

$

724

 

Electric fuel and other energy-related purchases

 

 

1,049

 

 

 

1,217

 

 

 

(168

)

 

 

3,010

 

 

 

2,625

 

 

 

385

 

Purchased electric capacity

 

 

19

 

 

 

16

 

 

 

3

 

 

 

42

 

 

 

45

 

 

 

(3

)

Purchased gas

 

 

40

 

 

 

91

 

 

 

(51

)

 

 

212

 

 

 

331

 

 

 

(119

)

Other operations and maintenance

 

 

848

 

 

 

849

 

 

 

(1

)

 

 

2,365

 

 

 

2,589

 

 

 

(224

)

Depreciation, depletion and amortization

 

 

663

 

 

 

630

 

 

 

33

 

 

 

1,884

 

 

 

1,832

 

 

 

52

 

Other taxes

 

 

162

 

 

 

172

 

 

 

(10

)

 

 

517

 

 

 

531

 

 

 

(14

)

Impairment of assets and other charges (benefits)

 

 

(6

)

 

 

20

 

 

 

(26

)

 

 

136

 

 

 

425

 

 

 

(289

)

Losses (gains) on sales of assets

 

 

—

 

 

 

(27

)

 

 

27

 

 

 

(23

)

 

 

581

 

 

 

(604

)

Other income (expense)

 

 

56

 

 

 

61

 

 

 

(5

)

 

 

646

 

 

 

(181

)

 

 

827

 

Interest and related charges

 

 

192

 

 

 

360

 

 

 

(168

)

 

 

1,066

 

 

 

673

 

 

 

393

 

Income tax expense

 

 

182

 

 

 

70

 

 

 

112

 

 

 

432

 

 

 

61

 

 

 

371

 

Net income (loss) from discontinued operations
   including noncontrolling interests

 

 

(554

)

 

 

152

 

 

 

(706

)

 

 

(105

)

 

 

775

 

 

 

(880

)

 

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

Third Quarter 2023 vs. 2022

Operating revenue decreased 4%, primarily reflecting:

•
A $213 million decrease in fuel-related revenue as a result of a decrease in commodity costs associated with sales to electric utility retail customers ($168 million) and a decrease in commodity costs associated with sales to gas utility customers ($45 million);
•
A $110 million decrease from the combination of certain riders into base rates at Virginia Power as a result of 2023 Virginia legislation; and
•
A $14 million decrease from the sale of Hope.

These decreases were partially offset by:

•
A $107 million net increase associated with market prices affecting Millstone, including economic hedging impacts of net realized and unrealized gains on freestanding derivatives ($199 million);
•
A $103 million increase to recover the costs and an authorized return, as applicable, associated with Virginia Power non-fuel riders;
•
A $25 million increase in sales to electric utility retail customers, primarily due to an increase in cooling degree days; and
•
A $18 million increase in sales to electric utility retail customers associated with growth.

Electric fuel and other energy-related purchases decreased 14%, primarily due to lower commodity costs for electric utilities, which are offset in operating revenue and do not impact net income.

Purchased gas decreased 56%, primarily due to a decrease in commodity costs for gas utility operations, which are offset in operating revenue and do not impact net income.

 

Other operations and maintenance remained substantially consistent, primarily due to a decrease in certain Virginia Power expenditures which are primarily recovered through state- and FERC-regulated rates and do not impact net income ($60 million), partially offset by an increase in storm damage and restoration costs in Virginia Power’s service territory ($27 million) and an increase from the combination of certain riders into base rates at Virginia Power as a result of 2023 Virginia legislation ($15 million).

 

74

 

Impairment of assets and other charges decreased $26 million, primarily due to a net decrease in dismantling costs and other activities associated with certain retired electric generation facilities at Virginia Power.

Gains on sales of assets decreased $27 million, primarily due to the absence of a gain on the transfer of certain non-utility property in South Carolina.

 

Interest and related charges decreased 47%, primarily due to unrealized gains in 2023 compared to unrealized losses in 2022 associated with freestanding derivatives ($308 million), partially offset by increased commercial paper and long-term debt borrowings ($53 million), higher interest rates on commercial paper and long-term debt ($47 million), higher interest rates on variable rate debt and cash flow interest rate swaps ($33 million) and the absence of benefits associated with the early redemption of certain securities in the third quarter of 2022 ($17 million).

 

Income tax expense increased $112 million, primarily due to higher pre-tax income ($35 million), an increase in consolidated state deferred income taxes associated with the East Ohio, PSNC and Questar Gas Transactions and the sale of Dominion Energy’s 50% noncontrolling interest in Cove Point ($29 million), lower interim period allocation of investment tax credits ($29 million) and increased consolidated state deferred income taxes on pre-tax gains from nuclear decommissioning trusts and economic hedges ($15 million).

 

Net income from discontinued operations including noncontrolling interests decreased $706 million, primarily due to charges reflecting the recognition of deferred taxes on the outside basis of stock associated with East Ohio, PSNC, Questar Gas and Wexpro meeting the classification as held for sale that will reverse when the sale is completed ($939 million), unrealized losses in 2023 compared to unrealized gains in 2022 on interest rate derivatives for economic hedging of debt secured by Dominion Energy's interest in Cove Point ($72 million) and a decrease in equity method earnings from the sale of Dominion Energy's noncontrolling interest in Cove Point ($29 million), partially offset by the gain on the sale of Dominion Energy's remaining noncontrolling interest in Cove Point ($348 million).

Year-To-Date 2023 vs. 2022

Operating revenue increased 7%, primarily reflecting:

•
An $862 million net increase associated with market prices affecting Millstone, including economic hedging impacts of net realized and unrealized gains on freestanding derivatives ($1.1 billion);
•
A $277 million net increase in fuel-related revenue as a result of an increase in commodity costs associated with sales to electric utility retail customers ($354 million) and a decrease in commodity costs associated with sales to gas utility customers ($77 million);
•
A $158 million increase to recover the costs and an authorized return, as applicable, associated with Virginia Power non-fuel riders;
•
A $90 million increase in sales to electric utility retail customers associated with economic and other usage factors; and
•
A $42 million increase in sales to electric utility retail customers associated with growth.

These increases were partially offset by:

•
A $181 million decrease in sales to electric utility retail customers, primarily due to a decrease in heating degree days during the heating season ($117 million) and a decrease in cooling degree days during the cooling season ($64 million);
•
A $128 million net decrease from electric utility customers who elect to pay market based or other negotiated rates, including settlements of economic hedges at Virginia Power;
•
A $110 million decrease from the combination of certain riders into base rates at Virginia Power as a result of 2023 Virginia legislation;
•
A $109 million decrease from the sale of Hope; and
•
A $74 million decrease from unplanned outages ($61 million) and planned outages ($13 million) at Millstone.

Electric fuel and other energy-related purchases increased 15%, primarily due to higher commodity costs for electric utilities ($354 million) and an increase in the use of purchased renewable energy credits at Virginia Power ($63 million), which are offset in operating revenue and do not impact net income.

75

 

Purchased gas decreased 36%, primarily due to a decrease in commodity costs for gas utility operations ($77 million), which are offset in operating revenue and do not impact net income and a decrease from the sale of Hope ($43 million).

 

Other operations and maintenance decreased 9%, primarily due to a decrease in certain Virginia Power expenditures which are primarily recovered through state- and FERC-regulated rates and do not impact net income ($163 million), a decrease in storm damage and restoration costs in Virginia Power’s service territory ($84 million) and a decrease from the sale of Hope ($25 million), partially offset by an increase in outside services ($38 million), an increase in salaries, wages and benefits ($16 million) and an increase from the combination of certain riders into base rates at Virginia Power as a result of 2023 Virginia legislation ($15 million).

 

Depreciation, depletion and amortization increased 3%, primarily due to various projects being placed into service ($80 million), partially offset by a decrease due to the impairment of certain nonregulated solar generation facilities in 2022 ($26 million).

 

Impairment of assets and other charges decreased 68%, primarily due to the absence of a charge in connection with a comprehensive settlement agreement for Virginia fuel expenses ($191 million), the absence of a charge for RGGI compliance costs deemed recovered through base rates ($180 million) and a net decrease in dismantling costs and other activities associated with certain retired electric generation facilities at Virginia Power ($70 million), partially offset by the impairment of a corporate office building ($96 million) and a charge for the write-off of certain previously deferred amounts related to the cessation of certain riders effective July 2023 ($36 million).

Gains on sales of assets increased $604 million, primarily due to the absence of a loss associated with the sale of Kewaunee ($649 million), partially offset by the absence of a gain on the contribution of certain privatization operations to Dominion Privatization ($23 million).

Other income increased $827 million, primarily due to net investment gains in 2023 compared to net investment losses in 2022 on nuclear decommissioning trust funds.

 

Interest and related charges increased 58%, primarily due to higher interest rates on commercial paper and long-term debt ($148 million), increased commercial paper and long-term debt borrowings ($133 million), higher interest rates on variable rate debt and cash flow interest rate swaps ($110 million), lower premiums received on interest rate derivatives ($39 million), lower unrealized gains in 2023 compared to 2022 associated with freestanding derivatives ($28 million) and the absence of benefits associated with the early redemption of certain securities in the third quarter of 2022 ($17 million), partially offset by decreased interest expense associated with rider deferrals ($30 million).

 

Income tax expense increased $371 million, primarily due to higher pre-tax income ($480 million) and an increase in consolidated state deferred income taxes associated with the East Ohio, PSNC and Questar Gas Transactions and the sale of Dominion Energy’s 50% noncontrolling interest in Cove Point ($29 million), partially offset by the absence of a charge on the sale of Hope’s stock ($90 million) and decreased consolidated state deferred income taxes on pre-tax gains from nuclear decommissioning trusts and economic hedges ($16 million).

 

Net income from discontinued operations including noncontrolling interests decreased $880 million, primarily due to charges reflecting the recognition of deferred taxes on the outside basis of stock associated with East Ohio, PSNC, Questar Gas and Wexpro meeting the classification as held for sale that will reverse when the sale is completed ($939 million), lower unrealized gains in 2023 compared to 2022 on interest rate derivatives for economic hedging of debt secured by Dominion Energy's interest in Cove Point ($179 million), higher interest rates on variable rate debt secured by Dominion Energy's interest in Cove Point ($39 million), an increase in interest expense primarily associated with debt issuances in 2022 ($27 million), the absence of a gain associated with the Q-Pipe Group for the finalization of the working capital adjustment in the first quarter of 2022 ($20 million) and an impairment charge of certain nonregulated solar assets ($11 million), partially offset by the gain on the sale of Dominion Energy's remaining noncontrolling interest in Cove Point ($348 million) and an increase following the approved base rate case for Questar Gas ($29 million).

Results of Operations—Virginia Power

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

 

 

 

Third Quarter

 

 

Year-To-Date

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

2023

 

 

2022

 

 

$ Change

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

473

 

 

$

571

 

 

$

(98

)

 

$

1,158

 

 

$

975

 

 

$

183

 

 

76

 

 

Overview

Third Quarter 2023 vs. 2022

Net income decreased 17%, primarily due to the impact of 2023 Virginia legislation.

Year-To-Date 2023 vs. 2022

Net income increased 19%, primarily due to the absences of a charge for RGGI compliance costs deemed recovered through base rates and a charge in connection with a comprehensive settlement agreement for Virginia fuel expenses as well as an increase in net investment earnings on nuclear decommissioning trust funds and a decrease in storm damage and service restoration costs, partially offset by a decrease in sales to electric utility customers attributable to weather and the impact of 2023 Virginia legislation.

 

Analysis of Consolidated Operations

Presented below are selected amounts related to Virginia Power’s results of operations:

 

 

 

Third Quarter

 

 

Year-To-Date

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

2023

 

 

2022

 

 

$ Change

 

(millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

2,645

 

 

$

2,875

 

 

$

(230

)

 

$

7,280

 

 

$

7,217

 

 

$

63

 

Electric fuel and other energy-related purchases

 

 

736

 

 

 

981

 

 

 

(245

)

 

 

2,241

 

 

 

2,030

 

 

 

211

 

Purchased electric capacity

 

 

15

 

 

 

11

 

 

 

4

 

 

 

33

 

 

 

33

 

 

 

—

 

Other operations and maintenance

 

 

532

 

 

 

531

 

 

 

1

 

 

 

1,416

 

 

 

1,579

 

 

 

(163

)

Depreciation and amortization

 

 

488

 

 

 

451

 

 

 

37

 

 

 

1,367

 

 

 

1,305

 

 

 

62

 

Other taxes

 

 

71

 

 

 

80

 

 

 

(9

)

 

 

223

 

 

 

238

 

 

 

(15

)

Impairment of assets and other charges (benefits)

 

 

(15

)

 

 

19

 

 

 

(34

)

 

 

30

 

 

 

432

 

 

 

(402

)

Other income (expense)

 

 

(1

)

 

 

3

 

 

 

(4

)

 

 

83

 

 

 

(37

)

 

 

120

 

Interest and related charges

 

 

215

 

 

 

168

 

 

 

47

 

 

 

578

 

 

 

461

 

 

 

117

 

Income tax expense

 

 

129

 

 

 

66

 

 

 

63

 

 

 

317

 

 

 

127

 

 

 

190

 

 

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

Third Quarter 2023 vs. 2022

Operating revenue decreased 8%, primarily reflecting:

•
A $243 million decrease in fuel-related revenue as a result of a decrease in commodity costs associated with sales to electric utility retail customers;
•
A $110 million decrease from the combination of certain riders into base rates as a result of 2023 Virginia legislation; partially offset by
•
A $103 million increase to recover the costs and an authorized return, as applicable, associated with non-fuel riders;
•
A $16 million net increase from electric utility customers who elect to pay market based or other negotiated rates, including settlements of economic hedges; and
•
A $14 million increase in sales to electric utility retail customers associated with economic and other usage factors.

Electric fuel and other energy-related purchases decreased 25%, primarily due to lower commodity costs for electric utilities, which are offset in operating revenue and do not impact net income.

 

Other operations and maintenance remained substantially consistent, primarily due to a decrease in certain expenditures which are primarily recovered through state- and FERC-regulated rates and do not impact net income ($60 million), partially offset by an increase in storm damage and restoration costs ($27 million), an increase in salaries, wages and benefits and administrative costs ($26 million), an increase from the combination of certain riders into base rates as a result of 2023 Virginia legislation ($15 million) and an increase in bad debt expense ($10 million).

 

Impairment of assets and other charges decreased $34 million, primarily due to a net decrease in dismantling costs and other activities associated with certain retired electric generation facilities.

 

77

 

Interest and related charges increased 28%, primarily due to increased commercial paper, long-term debt and intercompany borrowings with Dominion Energy ($42 million) and higher interest rates on commercial paper, long-term debt and intercompany borrowings with Dominion Energy ($11 million), partially offset by decreased interest expense associated with rider deferrals ($11 million).

 

Income tax expense increased 95%, primarily due to lower interim period allocation of investment tax credits.

Year-To-Date 2023 vs. 2022

Operating revenue increased 1%, primarily reflecting:

•
A $175 million increase in fuel-related revenue as a result of an increase in commodity costs associated with sales to electric utility retail customers;
•
A $158 million increase to recover the costs and an authorized return, as applicable, associated with non-fuel riders;
•
A $103 million increase in sales to electric utility retail customers associated with economic and other usage factors; and
•
A $19 million increase in sales to electric utility retail customers associated with growth.

These increases were partially offset by:

•
A $140 million decrease in sales to electric utility retail customers from a decrease in heating degree days during the heating season ($91 million) and a decrease in cooling degree days during the cooling season ($49 million);
•
A $110 million decrease from the combination of certain riders into base rates as a result of 2023 Virginia legislation;
•
An $89 million net decrease from electric utility customers who elect to pay market based or other negotiated rates, including settlements of economic hedges; and
•
A $13 million decrease in PJM off-system sales.

Electric fuel and other energy-related purchases increased 10%, primarily due to higher commodity costs for electric utilities ($175 million) and an increase in the use of purchased renewable energy credits ($63 million), partially offset by a $13 million decrease in PJM off-system sales, which are offset in operating revenue and do not impact net income.

 

Other operations and maintenance decreased 10%, primarily due to a decrease in certain expenditures which are primarily recovered through state- and FERC-regulated rates and do not impact net income ($163 million) and a decrease in storm damage and restoration costs ($84 million), partially offset by an increase in salaries, wages and benefits and administrative costs ($43 million), an increase in outside services ($34 million) and an increase from the combination of certain riders into base rates as a result of 2023 Virginia legislation ($15 million).

 

Impairment of assets and other charges decreased 93%, primarily due to the absence of a charge in connection with a comprehensive settlement agreement for Virginia fuel expenses ($191 million), the absence of a charge for RGGI compliance costs deemed recovered through base rates ($180 million) and a net decrease in dismantling costs and other activities associated with certain retired electric generation facilities ($70 million), partially offset by a charge for the write-off of certain previously deferred amounts related to the cessation of certain riders effective July 2023 ($36 million).

 

Other income increased $120 million, primarily due to net investment gains in 2023 compared to net investment losses in 2022 on nuclear decommissioning trust funds.

 

Interest and related charges increased 25%, primarily due to increased commercial paper, long-term debt and intercompany borrowings with Dominion Energy ($114 million) and higher interest rates on commercial paper, long-term debt and intercompany borrowings with Dominion Energy ($33 million), partially offset by decreased interest expense associated with rider deferrals ($30 million).

 

Income tax expense increased $190 million, primarily due to higher pre-tax income ($100 million) and lower interim period allocation of investment tax credits ($97 million).

78

 

Segment Results of Operations

Segment results include the impact of intersegment revenues and expenses, which may result in intersegment profit and 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 21 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:

 

 

 

Net Income (Loss) Attributable to
Dominion Energy

 

 

EPS(1)

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

2023

 

 

2022

 

 

$ Change

 

(millions, except EPS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dominion Energy Virginia

 

$

532

 

 

$

618

 

 

$

(86

)

 

$

0.64

 

 

$

0.74

 

 

$

(0.10

)

Dominion Energy South Carolina

 

 

143

 

 

 

175

 

 

 

(32

)

 

 

0.17

 

 

 

0.21

 

 

 

(0.04

)

Contracted Energy

 

 

54

 

 

 

65

 

 

 

(11

)

 

 

0.06

 

 

 

0.08

 

 

 

(0.02

)

Corporate and Other

 

 

(566

)

 

 

(80

)

 

 

(486

)

 

 

(0.70

)

 

 

(0.12

)

 

 

(0.58

)

Consolidated

 

$

163

 

 

$

778

 

 

$

(615

)

 

$

0.17

 

 

$

0.91

 

 

$

(0.74

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-To-Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dominion Energy Virginia

 

$

1,308

 

 

$

1,576

 

 

$

(268

)

 

$

1.56

 

 

$

1.92

 

 

$

(0.36

)

Dominion Energy South Carolina

 

 

302

 

 

 

408

 

 

 

(106

)

 

 

0.36

 

 

 

0.50

 

 

 

(0.14

)

Contracted Energy

 

 

123

 

 

 

95

 

 

 

28

 

 

 

0.15

 

 

 

0.12

 

 

 

0.03

 

Corporate and Other

 

 

26

 

 

 

(1,043

)

 

 

1,069

 

 

 

(0.04

)

 

 

(1.37

)

 

 

1.33

 

Consolidated

 

$

1,759

 

 

$

1,036

 

 

$

723

 

 

$

2.03

 

 

$

1.17

 

 

$

0.86

 

(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 selected operating statistics related to Dominion Energy Virginia’s operations:

 

 

 

Third Quarter

 

 

Year-To-Date

 

 

 

 

2023

 

 

2022

 

 

% Change

 

 

2023

 

 

2022

 

 

% Change

 

 

Electricity delivered (million MWh)

 

 

24.7

 

 

 

24.9

 

 

 

(1

)%

 

 

68.2

 

 

 

67.9

 

 

 

—

 

%

Electricity supplied (million MWh):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Utility

 

 

25.8

 

 

 

25.0

 

 

 

3

 

 

 

68.3

 

 

 

68.1

 

 

 

—

 

 

Non-Jurisdictional

 

 

0.5

 

 

 

0.5

 

 

 

—

 

 

 

1.4

 

 

 

1.3

 

 

 

8

 

 

Degree days (electric distribution and utility service area):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cooling

 

 

1,224

 

 

 

1,222

 

 

 

—

 

 

 

1,585

 

 

 

1,735

 

 

 

(9

)

 

Heating

 

 

2

 

 

 

17

 

 

 

(88

)

 

 

1,677

 

 

 

2,209

 

 

 

(24

)

 

Average electric distribution customer accounts
   (thousands)

 

 

2,756

 

 

 

2,727

 

 

 

1

 

 

 

2,748

 

 

 

2,721

 

 

 

1

 

 

 

79

 

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

 

 

 

Third Quarter
2023 vs. 2022
Increase (Decrease)

 

 

Year-To-Date
2023 vs. 2022
Increase (Decrease)

 

 

 

Amount

 

 

EPS

 

 

Amount

 

 

EPS

 

(millions, except EPS)

 

 

 

 

 

 

 

 

 

 

 

 

Weather

 

$

3

 

 

$

—

 

 

$

(106

)

 

$

(0.13

)

Customer usage and other factors

 

 

17

 

 

 

0.02

 

 

 

92

 

 

 

0.11

 

Customer-elected rate impacts

 

 

12

 

 

 

0.01

 

 

 

(66

)

 

 

(0.08

)

Impact of 2023 Virginia legislation

 

 

(76

)

 

 

(0.09

)

 

 

(86

)

 

 

(0.10

)

Rider equity return

 

 

34

 

 

 

0.04

 

 

 

83

 

 

 

0.10

 

Storm damage and restoration costs

 

 

(11

)

 

 

(0.01

)

 

 

2

 

 

 

—

 

Depreciation and amortization

 

 

(8

)

 

 

(0.01

)

 

 

(20

)

 

 

(0.02

)

Renewable energy investment tax credits

 

 

(24

)

 

 

(0.03

)

 

 

(77

)

 

 

(0.09

)

Interest expense, net

 

 

(17

)

 

 

(0.02

)

 

 

(40

)

 

 

(0.05

)

Other

 

 

(16

)

 

 

(0.01

)

 

 

(50

)

 

 

(0.07

)

Share dilution

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(0.03

)

Change in net income contribution

 

$

(86

)

 

$

(0.10

)

 

$

(268

)

 

$

(0.36

)

 

Dominion Energy South Carolina

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

 

 

 

Third Quarter

 

 

Year-To-Date

 

 

 

2023

 

 

2022

 

 

% Change

 

 

2023

 

 

2022

 

 

% Change

 

Electricity delivered (million MWh)

 

 

6.6

 

 

 

6.6

 

 

 

—

 

%

 

16.8

 

 

 

17.7

 

 

 

(5

%)

Electricity supplied (million MWh)

 

 

6.9

 

 

 

6.9

 

 

 

—

 

 

 

17.6

 

 

 

18.6

 

 

 

(5

)

Degree days (electric distribution service areas):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cooling

 

 

609

 

 

 

514

 

 

 

18

 

 

 

723

 

 

 

767

 

 

 

(6

)

Heating

 

 

—

 

 

 

—

 

 

 

—

 

 

 

484

 

 

 

783

 

 

 

(38

)

Gas distribution throughput (bcf):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

15

 

 

 

15

 

 

 

—

 

 

 

48

 

 

 

50

 

 

 

(4

)

Average distribution customer accounts (thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Electric

 

 

796

 

 

 

779

 

 

 

2

 

 

 

789

 

 

 

776

 

 

 

2

 

Gas

 

 

446

 

 

 

428

 

 

 

4

 

 

 

441

 

 

 

425

 

 

 

4

 

 

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

 

 

Third Quarter
2023 vs. 2022
Increase (Decrease)

 

 

Year-To-Date
2023 vs. 2022
Increase (Decrease)

 

 

 

Amount

 

 

EPS

 

 

Amount

 

 

EPS

 

(millions, except EPS)

 

 

 

 

 

 

 

 

 

 

 

 

Weather

 

$

14

 

 

$

0.02

 

 

$

(31

)

 

$

(0.04

)

Customer usage and other factors

 

 

(2

)

 

 

—

 

 

 

8

 

 

 

0.01

 

Customer-elected rate impacts

 

 

(11

)

 

 

(0.01

)

 

 

(29

)

 

 

(0.04

)

Base rate case & Natural Gas Rate Stabilization Act impacts

 

 

1

 

 

 

—

 

 

 

7

 

 

 

0.01

 

Capital cost rider

 

 

(2

)

 

 

—

 

 

 

(6

)

 

 

(0.01

)

Gains on sales of property

 

 

(15

)

 

 

(0.02

)

 

 

(27

)

 

 

(0.03

)

Depreciation and amortization

 

 

(6

)

 

 

(0.01

)

 

 

(13

)

 

 

(0.02

)

Interest expense, net

 

 

(6

)

 

 

(0.01

)

 

 

(20

)

 

 

(0.02

)

Other

 

 

(5

)

 

 

(0.01

)

 

 

5

 

 

 

0.01

 

Share dilution

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(0.01

)

Change in net income contribution

 

$

(32

)

 

$

(0.04

)

 

$

(106

)

 

$

(0.14

)

 

80

 

Contracted Energy

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

 

 

 

Third Quarter

 

 

Year-To-Date

 

 

 

 

2023

 

 

2022

 

 

% Change

 

 

2023

 

 

2022

 

 

% Change

 

 

Electricity supplied (million MWh)

 

 

4.6

 

 

 

5.0

 

 

 

(8

%)

 

 

11.6

 

 

 

13.0

 

 

 

(11

)

%

 

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

 

 

 

Third Quarter
2023 vs. 2022
Increase (Decrease)

 

 

Year-To-Date
2023 vs. 2022
Increase (Decrease)

 

 

 

Amount

 

 

EPS

 

 

Amount

 

 

EPS

 

(millions, except EPS)

 

 

 

 

 

 

 

 

 

 

 

 

Margin

 

$

(9

)

 

$

(0.01

)

 

$

13

 

 

$

0.02

 

Planned outage costs(1)

 

 

(3

)

 

 

—

 

 

 

3

 

 

 

—

 

Unplanned outage costs(1)

 

 

—

 

 

 

—

 

 

 

(2

)

 

 

—

 

Depreciation and amortization

 

 

6

 

 

 

0.01

 

 

 

17

 

 

 

0.02

 

Other

 

 

(5

)

 

 

(0.02

)

 

 

(3

)

 

 

(0.01

)

Share dilution

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Change in net income contribution

 

$

(11

)

 

$

(0.02

)

 

$

28

 

 

$

0.03

 

 

(1)
Excludes earnings impact from lower energy margins associated with a Millstone outage.

Corporate and Other

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

 

 

 

Third Quarter

 

 

Year-To-Date

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

2023

 

 

2022

 

 

$ Change

 

(millions, except EPS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Specific items attributable to operating
   segments

 

$

(125

)

 

$

(251

)

 

$

126

 

 

$

245

 

 

$

(1,909

)

 

$

2,154

 

Specific items attributable to Corporate and
   Other segment

 

 

(379

)

 

 

182

 

 

 

(561

)

 

 

(14

)

 

 

896

 

 

 

(910

)

Total specific items

 

 

(504

)

 

 

(69

)

 

 

(435

)

 

 

231

 

 

 

(1,013

)

 

 

1,244

 

Other corporate and other operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(140

)

 

 

(77

)

 

 

(63

)

 

 

(390

)

 

 

(239

)

 

 

(151

)

Other

 

 

78

 

 

 

66

 

 

 

12

 

 

 

185

 

 

 

209

 

 

 

(24

)

Total other corporate and other operations

 

 

(62

)

 

 

(11

)

 

 

(51

)

 

 

(205

)

 

 

(30

)

 

 

(175

)

Total net income (expense)

 

$

(566

)

 

$

(80

)

 

$

(486

)

 

$

26

 

 

$

(1,043

)

 

$

1,069

 

EPS impact

 

$

(0.70

)

 

$

(0.12

)

 

$

(0.58

)

 

$

(0.04

)

 

$

(1.37

)

 

$

1.33

 

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 21 to the Consolidated Financial Statements in this report for discussion of these items in more detail. Corporate and Other also includes items attributable to the Corporate and Other segment. For the three months ended September 30, 2023, other than the effects of required interim period provision for income taxes, this primarily included a $939 million charge to reflect the recognition of deferred taxes on the outside basis of stock associated with East Ohio, PSNC, Questar Gas and Wexpro meeting the classification as held for sale that will reverse when the sale is completed, $385 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, including the gain on sale, and a $218 million after-tax benefit for derivative mark-to-market changes. For the nine months ended September 30, 2023, other than the effects of required interim period provision for income taxes, this primarily included a $939 million charge to reflect the recognition of deferred taxes on the outside basis of stock associated with East Ohio, PSNC, Questar Gas and Wexpro meeting the classification as held for sale that will reverse when the sale is completed, $834 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, including the gain on sale, a $209 million after-tax benefit for derivative mark-to-market changes and a $71 million after-tax charge associated with the impairment of a corporate office building.

 

81

 

For the three months ended September 30, 2022, other than the effects of required interim period provision for income taxes, this primarily included $152 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. For the nine months ended September 30, 2022, other than the effects of required interim period provision for income taxes, this primarily included $775 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 $228 million after-tax benefit for derivative mark-to-market changes and an $82 million loss associated with the sale of Hope.

 

Outlook

As of September 30, 2023, other than the following matters there have been no material changes to Dominion Energy’s 2023 outlook as described in Item 7. MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. As discussed in Future Issues and Other Matters, legislation enacted in Virginia in April 2023 is expected to decrease Dominion Energy’s 2023 net income for riders combined into base rates effective July 2023. In addition, Dominion Energy's 2023 net income increased for the gain on sale of its noncontrolling interest in Cove Point completed in September 2023 which will be partially offset by the absence of future earnings from Cove Point.

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. This section should be read in conjunction with Item 7. MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

 

Analysis of Cash Flows

Presented below are selected amounts related to Dominion Energy’s cash flows:

 

 

 

2023

 

 

2022

 

(millions)

 

 

 

 

 

 

Cash, restricted cash and equivalents at January 1

 

$

341

 

 

$

408

 

Cash flows provided by (used in):

 

 

 

 

 

 

Operating activities

 

 

5,186

 

 

 

2,671

 

Investing activities

 

 

(4,091

)

 

 

(4,519

)

Financing activities

 

 

(1,189

)

 

 

1,780

 

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

 

 

(94

)

 

 

(68

)

Cash, restricted cash and equivalents at September 30

 

$

247

 

 

$

340

 

Operating Cash Flows

Net cash provided by Dominion Energy's operating activities increased $2.5 billion, inclusive of a $377 million decrease from discontinued operations. Net cash provided by continuing operations increased $2.9 billion primarily due to higher deferred fuel and purchased gas cost recoveries ($2.3 billion), lower margin deposits ($470 million), a decrease in refund payments to Virginia electric customers associated with the settlement of the 2021 Triennial Review ($296 million) and a $247 million increase primarily due to lower income tax payments, partially offset by an increase in interest payments driven by higher interest rates and borrowings ($377 million).

Investing Cash Flows

Net cash used in Dominion Energy’s investing activities decreased $428 million, primarily due to net proceeds from the sale of the remaining noncontrolling interest in Cove Point ($3.3 billion) and lower acquisitions of solar development projects ($125 million), substantially offset by an increase in plant construction and other property additions ($1.9 billion), the absence of net proceeds from the sale of Hope ($722 million), a decrease in proceeds from the sale of assets and equity method investments ($114 million), the absence of withdrawals from Kewaunee's nuclear decommissioning trust ($80 million) and increased contributions to equity method affiliates ($45 million).

Financing Cash Flows

Net cash used in Dominion Energy’s financing activities was $1.2 billion for the nine months ended September 30, 2023, compared to net cash provided by financing activities of $1.8 billion for the nine months ended September 30, 2022. This change is primarily due to a $5.4 billion decrease due to net repayments of long-term debt in 2023 versus net issuances in 2022, the absence of the settlement of the stock purchase contract component of the 2019 Equity Units in 2022 ($1.6 billion) and lower net issuances of short-term debt ($267 million), partially offset by the net borrowings on the 364-day term loan facility ($2.7 billion) and the absence of the redemption of Series A Preferred Stock in 2022 ($1.6 billion).

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Credit Facilities and Short-Term Debt

As discussed in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022, 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. There have been no significant changes to Dominion Energy’s use of credit facilities and/or short-term debt during the nine months ended September 30, 2023.

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. At September 30, 2023, Dominion Energy had $2.6 billion of unused capacity under its joint revolving credit facility. See Note 16 to the Consolidated Financial Statements in this report for the balances of commercial paper and letters of credit outstanding.

Dominion Energy Reliability InvestmentSM Program

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. At September 30, 2023, Dominion Energy’s Consolidated Balance Sheets include $423 million with respect to such notes presented within short-term debt. The proceeds are used for general corporate purposes and to repay debt.

Other Facilities

In addition to the primary sources of short-term liquidity discussed above, from time to time Dominion Energy enters into separate supplementary credit facilities or term loans as discussed in Note 16 to the Consolidated Financial Statements in this report.

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. In February and March 2023, Dominion Energy borrowed $500 million and $1.0 billion, respectively, with the proceeds used for general corporate purposes and to repay long-term debt.

In July 2023, Dominion Energy entered into two $600 million 364-day term loan facilities which bore interest at a variable rate and were scheduled to mature in July 2024 with the proceeds to be used to repay existing long-term debt and/or short-term debt upon maturity and for other general corporate purposes. Subsequently in July 2023, Dominion Energy borrowed an initial $750 million in the aggregate under these facilities with the proceeds used to repay short-term debt and for general corporate purposes. Dominion Energy was permitted to make up to three additional borrowings under each agreement through November 2023, at which point any unused capacity would cease to be available to Dominion Energy. The agreements contained certain mandatory early repayment provisions, including that any after-tax proceeds in connection with a sale of Dominion Energy’s noncontrolling interest in Cove Point, following the repayment of DECP Holding’s term loan secured by its noncontrolling interest in Cove Point, be applied to any outstanding borrowings under the facilities. In September 2023, Dominion Energy repaid the $750 million borrowing with after-tax proceeds from the sale of Dominion Energy’s noncontrolling interest in Cove Point, as discussed in Note 10. Subsequently in September 2023, Dominion Energy borrowed $225 million in the aggregate under these facilities with the proceeds used to repay short-term debt and for general corporate purposes. In October 2023, Dominion Energy repaid the $225 million borrowing and terminated the facilities along with any remaining unused commitments.

In October 2023, Dominion Energy entered into a $2.25 billion 364-Day term loan facility which bears interest at a variable rate and will mature in October 2024 with the proceeds to be used for general corporate purposes. Concurrently, Dominion Energy borrowed an initial $1.0 billion with the proceeds used for general corporate purposes, including to repay short-term and long-term debt. Dominion Energy is permitted to make up to three additional borrowings under the agreement through February 2024, at which point any unused capacity will cease to be available to Dominion Energy. Dominion Energy also has the ability through August 2024 to request an increase in the amount of this facility by up to an additional $500 million. The agreement contains certain mandatory early repayment provisions, including that any after-tax proceeds in connection with the East Ohio, PSNC and Questar Gas Transactions, following the repayment of the 364-day term loan facility entered into in January 2023, be applied to any outstanding borrowings under this facility. The maximum allowed total debt to total capital ratio under this facility is consistent with such allowed ratio under Dominion Energy’s joint revolving credit facility.

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Long-Term Debt

Sustainability Revolving Credit Agreement

Dominion Energy maintains a $900 million Sustainability Revolving Credit Agreement 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 March 2023, Dominion Energy borrowed $450 million with the proceeds used for general corporate purposes. In April 2023, Dominion Energy repaid $450 million borrowed for general corporate purposes. In September 2023, Dominion Energy borrowed $450 million under this facility with the proceeds used for general corporate purposes. At September 30, 2023, Dominion Energy had $900 million borrowed, $450 million to support environmental sustainability and social investment initiatives and $450 million for general corporate purposes. In October 2023, Dominion Energy repaid $450 million borrowed for general corporate purposes.

Issuances and Borrowings of Long-Term Debt

During the nine months ended September 30, 2023, Dominion Energy issued or borrowed the following long-term debt. Unless otherwise noted, the proceeds were used for the repayment of existing indebtedness and for general corporate purposes.

Month

Type

Public / Private

Entity

Principal

 

Rate

 

Stated Maturity

 

 

 

 

(millions)

 

 

 

 

 

 

March

Senior notes

Public

Virginia Power

$

750

 

 

5.000

 

%

2033

March

Senior notes

Public

Virginia Power

 

750

 

 

5.450

 

%

2053

August

 

Senior notes

Public

Virginia Power

 

400

 

 

5.300

 

%

2033

August

Senior notes

Public

Virginia Power

 

600

 

 

5.700

 

%

2053

Total issuances and borrowings

$

2,500

 

 

In October 2023, DESC issued $500 million of 6.25% first mortgage bonds that mature in 2053.

Dominion Energy currently meets the definition of a well-known seasoned issuer under SEC rules governing the registration, communication 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 during the nine months ended September 30, 2023:

Month

Type

 

Entity

Principal (1)

 

 

Rate

Stated Maturity

 

(millions)

 

Debt scheduled to mature in 2023

Multiple

 

$

2,818

 

 

various

Early redemptions

 

 

 

 

 

 

 

 

 

September

 

Term loan

 

DECP Holdings

 

$

2,247

 

 

variable

 

2024

Total repayments, repurchases and redemptions

 

$

5,065

 

 

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

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See Note 18 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022 for additional information regarding scheduled maturities of Dominion Energy’s long-term debt, including related average interest rates.

As discussed in Note 10 to the Consolidated Financial Statements in this report, DECP Holding's term loan secured by its noncontrolling interest in Cove Point was repaid in connection with Dominion Energy's sale of its 50% noncontrolling limited partnership interest in Cove Point to BHE in September 2023.

Remarketing of Long-Term Debt

In June 2023, Virginia Power remarketed three series of tax-exempt bonds, with an aggregate outstanding principal of $160 million to new investors. All three series of bonds will bear interest at a coupon of 3.65% until October 2027, after which they will bear interest at a market rate to be determined at that time. Dominion Energy does not expect to remarket any other long-term debt in 2023.

Credit Ratings

As discussed in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022, 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 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 ratings agencies and event risk, if applicable, such as major acquisitions or dispositions. A credit rating is not a recommendation to buy, sell or hold securities and should be evaluated independently of any other rating. In April 2023, Standard & Poor’s affirmed its credit ratings but revised its outlook for Dominion Energy from stable to negative. Dominion Energy cannot predict the potential impact the negative outlook at Standard & Poor’s could have on 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 debt securities. There have been no other changes in Dominion Energy’s credit ratings from those described in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

Financial Covenants

As discussed in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022, Dominion Energy is subject to various covenants present in the enabling agreements underlying Dominion Energy’s debt. As of September 30, 2023, there have been no material changes to covenants, nor any events of default under Dominion Energy’s covenants.

Common Stock, Preferred Stock and Other Equity Securities

In the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022, there is a discussion of Dominion Energy’s existing equity financing programs, including an at-the-market program and Dominion Energy Direct®. During the nine months ended September 30, 2023, Dominion Energy issued $91 million of stock through these programs. Dominion Energy's at-the-market program expired in June 2023. See Note 16 to the Consolidated Financial Statements in this report 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. 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.

As of September 30, 2023, there have been no material changes to the Board of Directors authorization to repurchase Dominion Energy stock, or the remaining available capacity under this authorization, disclosed in the Repurchases of Equity Securities section of MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. Dominion Energy has not repurchased through September 30, 2023 and does not plan to repurchase in the remainder of 2023 any shares of its common stock, except for shares tendered by employees to satisfy tax withholding obligations on vested restricted stock.

Capital Expenditures

As of September 30, 2023, there have been no material changes to Dominion Energy’s expectation for planned capital expenditures as disclosed in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

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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. See Note 16 to the Consolidated Financial Statements in this report for additional information regarding Dominion Energy’s outstanding preferred stock and associated dividend rates.

Subsidiary Dividend Restrictions

As of September 30, 2023, there have been no material changes to the subsidiary dividend restrictions disclosed in the Dividends section of MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

Collateral and Credit Risk

As of September 30, 2023, there have been no material changes to the collateral requirements disclosed in the Collateral and Credit Risk section of MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

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 at September 30, 2023 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)

 

$

145

 

 

$

—

 

 

$

145

 

Non-investment grade(2)

 

 

10

 

 

 

—

 

 

 

10

 

No external ratings:

 

 

 

 

 

 

 

 

 

Internally rated—investment grade(3)

 

 

37

 

 

 

6

 

 

 

31

 

Internally rated—non-investment grade(4)

 

 

19

 

 

 

—

 

 

 

19

 

Total(5)

 

$

211

 

 

$

6

 

 

$

205

 

 

(1)
Designations as investment grade are based upon minimum credit ratings assigned by Moody’s Investors Service and Standard & Poor’s. The five largest counterparty exposures, combined, for this category represented approximately 45% of the total net credit exposure.
(2)
The five largest counterparty exposures, combined, for this category represented approximately 5% of the total net credit exposure.
(3)
The five largest counterparty exposures, combined, for this category represented approximately 15% of the total net credit exposure.
(4)
The five largest counterparty exposures, combined, for this category represented approximately 6% of the total net credit exposure.
(5)
Excludes long-term purchase power agreements entered to satisfy legislative or state regulatory commission requirements.

Fuel and Other Purchase Commitments

There have been no material changes outside of the ordinary course of business to Dominion Energy’s fuel and other purchase commitments included in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.

Other Material Cash Requirements

As of September 30, 2023, there have been no material changes outside of the ordinary course of business to Dominion Energy’s other material cash requirements included in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. Such obligations include:

•
Operating and finance lease obligations – See Note 14 to the Consolidated Financial Statements in this report;
•
Regulatory liabilities – See Note 12 to the Consolidated Financial Statements in this report;
•
AROs – See Note 14 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022;
•
Employee benefit plan obligations – See Note 22 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022;
•
Charitable commitments – See Note 23 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022;

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•
Off-balance sheet leasing arrangements – See Note 15 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022; and
•
Guarantees – See Note 17 to the Consolidated Financial Statements in this report.

Future Issues and Other Matters

See Item 1. Business, Future Issues and Other Matters in MD&A and Notes 13 and 23 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022 and Notes 13 and 17 to the Consolidated Financial Statements in this report 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. In April 2023, the legislative process in Virginia was substantially completed resulting in new legislation which shifts $350 million of annual revenue requirement for costs recovered through riders into base rates effective July 2023, eliminates the ability of Virginia Power to utilize CCROs and adjusts the parameters for determining an authorized ROE and revenue sharing. In addition, new legislation allows Virginia Power to apply for the securitization of certain deferred fuel costs as well as seek approval for a noncontrolling equity financing partner for the CVOW Commercial Project. In September 2023, Dominion Energy entered agreements to sell East Ohio, PSNC, Questar Gas and Wexpro to Enbridge and completed the sale of its 50% noncontrolling limited partner interest in Cove Point to BHE under the agreement signed in July 2023 as discussed in Notes 3 and 10 to the Consolidated Financial Statements in this report. Dominion Energy is evaluating a potential divestiture of a noncontrolling equity interest in the CVOW Commercial Project as the final strategic component of the on-going business review. While the ultimate impacts cannot be estimated until the review is completed, which is expected to occur by the end of 2023 or early 2024, 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.

 

Virginia Legislation

The 2023 General Assembly session in Virginia included several proposals, including those ultimately enacted into law, related to Virginia Power’s retail base rates and other cost recovery mechanisms. In April 2023, legislation was enacted that amended several key provisions of the Regulation Act, as previously amended by the GTSA. The new legislation will shift $350 million of annual revenue requirement for costs currently recovered under riders into base rates effective July 2023, eliminate the ability of Virginia Power to utilize CCROs and adjust the parameters for determining an authorized ROE and revenue sharing. In addition, this legislation reestablishes biennial base rate reviews, sets a target capitalization ratio and permits Virginia Power to apply for the securitization of certain deferred fuel costs. See Note 13 to the Consolidated Financial Statements for additional information. In March 2023, legislation was enacted that permits Virginia Power to seek approval for a noncontrolling equity financing partner for the CVOW Commercial Project. In addition, in May 2023 legislation was enacted that amended certain portions of the VCEA, which qualifies generation produced by Virginia Power’s biomass electric generating stations as renewable energy and eliminates the mandated retirement by the end of 2028 of such facilities. While Dominion Energy is unable to estimate the ultimate financial statement impacts related to the newly enacted legislation, it expects there could be a material impact to its results of operations, financial condition and/or cash flows.

 

Dominion Energy Virginia – CVOW Commercial Project

In October 2023, Virginia Power received a record of decision from the Bureau of Ocean Management for construction of the CVOW Commercial Project. As a result, Virginia Power commenced major onshore construction activities in November 2023 and anticipates commencing major offshore construction activities in the first half of 2024. The project is expected to be placed in service by the end of 2026 at a total cost of approximately $10 billion, excluding financing costs. Virginia Power’s estimate for the 2.6 GW project’s projected levelized cost of energy is approximately $75-85/MWh.

 

Future Environmental Regulations

In March 2023, the EPA released a proposed rule to further revise the Effluent Limitations Guidelines for the Steam Electric Power Generating Category, which apply primarily to wastewater discharges at coal and oil steam generating stations. Also in March 2023, the EPA released its first proposed rule to establish national drinking water standards for PFAS. Dominion Energy anticipates that the EPA will release additional rulemakings as part of an overall strategy to identify and mitigate PFAS exposure. In April 2023, the EPA released a proposal to tighten aspects of the Mercury and Air Toxics Standards, including the reduction of emissions limits for filterable particulate matter, and requiring the use of continuous emissions monitoring systems to demonstrate compliance. In May

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2023, the EPA proposed a package of rules designed to reduce CO2 emissions from certain fossil fuel-fired electric generating units. The proposal sets standards of performance and emission guidelines for CO2 emissions from new gas-fired combustion turbines and modified coal-fired steam generating units. The proposed rulemaking package also proposes emission guidelines, including presumptive emission limits, for existing coal, oil and gas-fired steam generating units and certain gas-fired combustion turbines. Also in May 2023, the EPA released a proposed rule to regulate inactive surface impoundments located at retired generating stations that contained CCR and liquids after October 2015, and certain other inactive or previously closed surface impoundments, landfills or other areas that contain accumulations of CCR. Until the EPA ultimately takes final action on these rulemakings, Dominion Energy is 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 Dominion Energy’s financial condition and cash flows.

 

Federal Income Tax Laws

In April 2023, the IRS issued safe harbor guidance to taxpayers on the treatment of amounts paid to repair, maintain, replace, or improve natural gas distribution property, including whether expenditures should be deducted as repairs or capitalized and depreciated on tax returns. The guidance includes safe harbor tax accounting methods which a taxpayer may choose to elect and provides special transition rules and incentives that vary depending on which tax year is the year of change. Dominion Energy is evaluating this new guidance and while it cannot currently estimate the potential financial statement impacts, it does not expect a material impact to its results of operations, financial condition and/or cash flows based on its expectation that the East Ohio, PSNC and Questar Gas Transactions will close in 2024.

 

Offshore Wind Vessel Leasing Arrangement

In December 2020, Dominion Energy signed an agreement (subsequently amended in December 2022 and May 2023) 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 $625 million, to fund the estimated project costs. The project is expected to be completed in late 2024 or early 2025. The initial lease term will commence once construction is substantially complete and the vessel is delivered and will mature in November 2027. See Note 14 to the Consolidated Financial Statements in this report for additional information.

 

Southeast Energy Exchange Market

In July 2023, the U.S. Court of Appeals for the District of Columbia Circuit vacated certain of FERC’s previous orders authorizing the SEEM market, including the tariff amendments to provide transmission service for transactions in SEEM. Until FERC takes further action, Dominion Energy is unable to estimate the potential financial statement impacts.

 

Dominion Energy South Carolina - Nuclear Operating License

In August 2023, DESC filed an application with the NRC to renew the operating license for Unit 1 at Summer for an additional 20 years. Under its current license, the nuclear unit is allowed to generate electricity through 2042. A relicensing would extend its life through 2062. The existing regulatory framework in South Carolina provides a rate recovery mechanism for costs incurred on the relicensing process.

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ITEM 3.

QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

The matters discussed in this Item may contain “forward-looking statements” as described in the introductory paragraphs under Part I., Item 2. MD&A in this report. The reader’s attention is directed to those paragraphs for discussion of various risks and uncertainties that may impact the Companies.

Market Risk Sensitive Instruments and Risk Management

The Companies’ financial instruments, commodity contracts and related financial derivative instruments are exposed to potential losses due to adverse changes in commodity prices, interest rates, foreign currency exchange rates and equity securities prices as described below. Commodity price risk is present in the Companies’ electric operations and Dominion Energy’s natural gas procurement and marketing operations due to the exposure to market shifts in prices received and paid for electricity, natural gas and other commodities. The Companies use commodity derivative contracts to manage price risk exposures for these operations. Interest rate risk is generally related to their outstanding debt and future issuances of debt. In addition, the Companies are exposed to investment price risk through various portfolios of equity and debt securities. The Companies’ exposure to foreign currency exchange rate risk is related to certain fixed price contracts associated with the CVOW Commercial Project which it manages through foreign currency exchange rate derivatives. The contracts include services denominated in currencies other than the U.S. dollar for approximately €2.6 billion and 5.1 billion kr. In addition, certain of the fixed price contracts, approximately €0.7 billion, contain commodity indexing provisions linked to steel.

The following sensitivity analysis estimates the potential loss of future earnings or fair value from market risk sensitive instruments over a selected time period due to a 10% change in commodity prices, interest rates or foreign currency exchange rates.

Commodity Price Risk

To manage price risk, the Companies hold commodity-based derivative instruments held for non-trading purposes associated with purchases and sales of electricity, natural gas and other energy-related products.

The derivatives used to manage commodity price risk are executed within established policies and procedures and may include instruments such as futures, forwards, swaps, options and FTRs that are sensitive to changes in the related commodity prices. For sensitivity analysis purposes, the hypothetical change in market prices of commodity-based derivative instruments is determined based on models that consider the market prices of commodities in future periods, the volatility of the market prices in each period, as well as the time value factors of the derivative instruments. Prices and volatility are principally determined based on observable market prices.

A hypothetical 10% increase in commodity prices would have resulted in a decrease of $77 million and $52 million in the fair value of Dominion Energy’s commodity-based derivative instruments as of September 30, 2023 and December 31, 2022, respectively.

A hypothetical 10% increase in commodity prices would have resulted in a decrease of $25 million in the fair value of Virginia Power’s commodity-based derivative instruments as of both September 30, 2023 and December 31, 2022.

The impact of a change in energy commodity prices on the Companies' commodity-based derivative instruments at a point in time is not necessarily representative of the results that will be realized when the contracts are ultimately settled. Net losses from commodity-based financial derivative instruments used for hedging purposes, to the extent realized, will generally be offset by recognition of the hedged transaction, such as revenue from physical sales of the commodity.

Interest Rate Risk

The Companies manage their interest rate risk exposure predominantly by maintaining a balance of fixed and variable rate debt. For variable rate debt outstanding for Dominion Energy, a hypothetical 10% increase in market interest rates would result in a $44 million and $37 million decrease in earnings at September 30, 2023 and December 31, 2022, respectively. For variable rate debt outstanding for Virginia Power, a hypothetical 10% increase in market interest rates would result in a $15 million and $14 million decrease in earnings at September 30, 2023 or December 31, 2022, respectively.

The Companies also use interest rate derivatives, including forward-starting swaps, interest rate swaps and interest rate lock agreements to manage interest rate risk. As of September 30, 2023, Dominion Energy and Virginia Power had $10.4 billion and $2.8 billion, respectively, in aggregate notional amounts of these interest rate derivatives outstanding. A hypothetical 10% decrease in market interest rates would have resulted in a decrease of $242 million and $118 million, respectively, in the fair value of Dominion Energy and Virginia Power’s interest rate derivatives at September 30, 2023. As of December 31, 2022, Dominion Energy and Virginia Power had $12.7 billion and $3.6 billion, respectively, in aggregate notional amounts of these interest rate derivatives

89

 

outstanding. A hypothetical 10% decrease in market interest rates would have resulted in a decrease of $274 million and $156 million, respectively, in the fair value of Dominion Energy and Virginia Power’s interest rate derivatives at December 31, 2022.

The impact of a change in interest rates on the Companies’ interest rate-based financial derivative instruments at a point in time is not necessarily representative of the results that will be realized when the contracts are ultimately settled. Net gains and/or losses from interest rate derivative instruments used for hedging purposes, to the extent realized, will generally be offset by recognition of the hedged transaction.

Foreign Currency Exchange Rate Risk

The Companies utilize foreign currency swaps to economically hedge the foreign currency exchange risk associated with fixed price contracts related to the CVOW Commercial Project denominated in foreign currencies. As of September 30, 2023 and December 31, 2022, Dominion Energy had €2.4 billion and €2.9 billion, respectively, in aggregate notional amounts of these foreign currency forward purchase agreements outstanding. A hypothetical 10% increase in exchange rates would have resulted in a decrease of $239 million and $284 million in the fair value of Dominion Energy’s foreign currency swaps at September 30, 2023 and December 31, 2022, respectively.

The impact of a change in exchange rates on the Companies’ foreign currency-based financial derivative instruments at a point in time is not necessarily representative of the results that will be realized when the contracts are ultimately settled. Net gains and/or losses from foreign exchange derivative instruments used for hedging purposes, to the extent realized, will generally be offset by recognition of the hedged transaction.

Investment Price Risk

The Companies are subject to investment price risk due to securities held as investments in nuclear decommissioning and rabbi trust funds that are managed by third-party investment managers. These trust funds primarily hold marketable securities that are reported in the Companies’ Consolidated Balance Sheets at fair value.

 

Dominion Energy recognized net investment gains (including investment income) on nuclear decommissioning and rabbi trust investments of $409 million for the nine months ended September 30, 2023, and net investment losses (including investment income) on nuclear decommissioning and rabbi trust investments of $1.2 billion and $888 million for the nine months ended September 30, 2022 and the year ended December 31, 2022, respectively. Net realized gains and losses include gains and losses from the sale of investments as well as any other-than-temporary declines in fair value. Dominion Energy recorded in AOCI and regulatory liabilities, a net decrease in unrealized gains on debt investments of $14 million, $253 million and $196 million for the nine months ended September 30, 2023, nine months ended September 30, 2022 and the year ended December 31, 2022, respectively.

 

Virginia Power recognized net investment gains (including investment income) on nuclear decommissioning trust investments of $206 million for the nine months ended September 30, 2023, and net investment losses (including investment income) on nuclear decommissioning trust investments of $593 million and $426 million for the nine months ended September 30, 2022 and the year ended December 31, 2022, respectively. Net realized gains and losses include gains and losses from the sale of investments as well as any other-than-temporary declines in fair value. Virginia Power recorded in AOCI and regulatory liabilities, a net decrease in unrealized gains on debt investments of $8 million, $137 million and $106 million for the nine months ended September 30, 2023, nine months ended September 30, 2022 and the year ended December 31, 2022, respectively.

Dominion Energy sponsors pension and other postretirement employee benefit plans that hold investments in trusts to fund employee benefit payments. Virginia Power employees participate in these plans. 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 employee benefit plans and will be included in the determination of the amount of cash to be contributed to the employee benefit plans.

ITEM 4. CONTROLS AND PROCEDURES

Senior management of both Dominion Energy and Virginia Power, including Dominion Energy and Virginia Power’s CEO and CFO, evaluated the effectiveness of each company’s disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation process, each of Dominion Energy and Virginia Power’s CEO and CFO have concluded that each company’s disclosure controls and procedures are effective.

 

There were no changes that occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, Dominion Energy or Virginia Power’s internal control over financial reporting.

90

 

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Companies are parties to various legal, environmental or other regulatory proceedings, including in the ordinary course of business. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Companies reasonably believe will exceed a specified threshold. Pursuant to the SEC regulations, the Companies use a threshold of $1 million for such proceedings.

See the following for discussions on various legal, environmental and other regulatory proceedings to which the Companies are a party, which information is incorporated herein by reference:

•
Notes 13 and 23 to the Consolidated Financial Statements and Future Issues and Other Matters in MD&A in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022.
•
Notes 13 and 17 to the Consolidated Financial Statements and Future Issues and Other Matters in MD&A in this report.

ITEM 1A. RISK FACTORS

The Companies’ businesses are influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond the Companies’ control. A number of these risk factors have been identified in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022, which should be taken into consideration when reviewing the information contained in this report. Other than the risk factor discussed below, there have been no material changes with regard to the risk factors previously disclosed in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2022. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement or projection contained in this report, see Forward-Looking Statements in MD&A in this report.

 

Dominion Energy may be unable to complete one or all the proposed sales of certain regulated gas distribution operations to Enbridge under the current terms and/or expected timing. The ability of Dominion Energy to complete the East Ohio, PSNC and Questar Gas Transactions, each of which are not conditioned upon the completion of the others, is dependent upon receiving clearance or approval under or by the Hart-Scott-Rodino Act, CFIUS, FCC and applicable state utility commissions, including the North Carolina, Utah and Wyoming Commissions, as well as other customary closing and regulatory conditions. The ability to obtain the requisite regulatory approvals for each sale as well as the timing of such approvals is outside of Dominion Energy’s control. In addition, the terms and conditions associated with such approvals may result in additional requirements or obligations which may be burdensome or potentially result in the inability to complete one or all of the proposed sales under the current terms and/or expected timing. Such events could negatively impact Dominion Energy’s ability to implement certain of the recommendations in connection with the comprehensive business review announced in November 2022 as well as have a material adverse effect on Dominion Energy’s reputation, its financial condition, results of operations or cash flows.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Dominion Energy

Purchases of Equity Securities

 

Period

 

Total Number of
Shares (or Units)
Purchased(1)

 

 

Average
Price Paid
per Share
(or Unit)(2)

 

Total Number of Shares (or
Units) Purchased as Part of
Publicly Announced Plans
or Programs

 

Maximum Number (or Approximate Dollar Value)
 of Shares (or Units that
May Yet Be Purchased under
the Plans or Programs(3)

7/1/23 - 7/31/23

 

 

1,059

 

 

$

51.79

 

 

—

 

$ 0.92 billion

8/1/23 - 8/31/23

 

 

6,594

 

 

 

52.30

 

 

—

 

0.92 billion

9/1/23 - 9/30/23

 

 

95

 

 

 

47.88

 

 

—

 

0.92 billion

Total

 

 

7,748

 

 

$

52.18

 

 

—

 

$ 0.92 billion

 

(1)
Represents shares of common stock that were tendered by employees to satisfy tax withholding obligations on vested restricted stock.
(2)
Represents the weighted-average price paid per share.
(3)
In November 2020, the Dominion Energy Board of Directors authorized the repurchase of up to $1.0 billion of shares of common stock. This repurchase program has no expiration date or price or volume targets and may be modified, suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions or otherwise at the discretion of management subject to prevailing market conditions, applicable securities laws and other factors.

91

 

ITEM 5. OTHER INFORMATION

During the last fiscal quarter, none of the Companies’ directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

On November 2, 2023, Virginia Power issued 8,256 shares of its common stock to Dominion Energy, the sole holder of Virginia Power’s common stock, for an aggregate purchase price of approximately $539 million in a transaction exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. Virginia Power used the proceeds from the sale of the shares to reduce the aggregate amount outstanding under its intercompany credit facility with Dominion Energy. Virginia Power issued the shares pursuant to a Virginia Commission order authorizing Virginia Power to issue up to $3.25 billion of common stock to Dominion Energy through the end of 2023 in order to maintain a common equity capitalization to total capitalization ratio of 52.10% in accordance with legislation enacted in Virginia in April 2023.

92

 

ITEM 6. EXHIBITS

 

Exhibit

Number

Description

Dominion Energy

Virginia Power

2.1

 

Purchase and Sale Agreement, dated as of September 5, 2023, by and between Dominion Energy, Inc. and Enbridge Elephant Holdings, LLC (Exhibit 2.1, Form 8-K filed September 5, 2023, File No. 1-8489).

 

X

 

 

 

 

 

 

 

 

 

2.2

 

Purchase and Sale Agreement, dated as of September 5, 2023, by and between Dominion Energy, Inc. and Enbridge Parrot Holdings, LLC (Exhibit 2.2, Form 8-K filed September 5, 2023, File No. 1-8489).

 

X

 

 

 

 

 

 

 

 

 

2.3

 

Purchase and Sale Agreement, dated as of September 5, 2023, by and between Dominion Energy, Inc. and Enbridge Quail Holdings, LLC (Exhibit 2.3, Form 8-K filed September 5, 2023, File No. 1-8489).

 

X

 

 

 

 

 

 

 

 

 

3.1.a

Dominion Energy, Inc. Amended and Restated Articles of Incorporation, dated as of September 2, 2022 (Exhibit 3.1, Form 8-K filed September 2, 2022, File No.1-8489).

X

3.1.b

Virginia Electric and Power Company Amended and Restated Articles of Incorporation, as in effect on October 30, 2014 (Exhibit 3.1.b, Form 10-Q filed November 3, 2014, File No. 1-2255).

X

3.2.a

Dominion Energy, Inc. Bylaws, as amended and restated, effective May 10, 2023 (Exhibit 3.1, Form 8-K filed May 11, 2023, File No. 1-8489).

X

3.2.b

Virginia Electric and Power Company Amended and Restated Bylaws, effective June 1, 2009 (Exhibit 3.1, Form 8-K filed June 3, 2009, File No. 1-2255).

X

4

Dominion Energy, Inc. and Virginia Electric and Power Company agree to furnish to the Securities and Exchange Commission upon request any other instrument with respect to long-term debt as to which the total amount of securities authorized does not exceed 10% of any of their total consolidated assets.

X

X

4.1

 

Senior Indenture, dated as of September 1, 2017, between Virginia Electric and Power Company and U.S. Bank National Association, as Trustee (Exhibit 4.1, Form 8-K filed September 13, 2017, File No.000-55337); First Supplemental Indenture, dated as of September 1, 2017 (Exhibit 4.2, Form 8-K filed September 13, 2017, File No.000-55337); Second Supplemental Indenture, dated as of March 1, 2018 (Exhibit 4.2, Form 8-K filed March 22, 2018, File No. 000-55337); Third Supplemental Indenture, dated as of November 1, 2018 (Exhibit 4.2, Form 8-K filed November 28, 2018, File No. 000-55337); Fourth Supplemental Indenture, dated as of July 1, 2019 (Exhibit 4.2, Form 8-K filed July 10, 2019, File No. 00-55337); Fifth Supplemental Indenture, dated as of December 1, 2019 (Exhibit 4.2, Form 8-K filed December 5, 2019, File No. 000-55337); Sixth Supplemental Indenture, dated as of December 1, 2020 (Exhibit 4.2, Form 8-K filed December 15, 2020, File No. 00-55337); Seventh Supplemental Indenture, dated as of November 1, 2021 (Exhibit 4.2, Form 8-K filed November 22, 2021, File No.000-55337); Eighth Supplemental Indenture, dated as of November 1, 2021 (Exhibit 4.3, Form 8-K filed November 22, 2021, File No.000-55337); Ninth Supplemental Indenture, dated as of January 1, 2022 (Exhibit 4.3, Form 8-K filed January 13, 2022, File No.000-55337); Tenth Supplemental Indenture, dated as of May 1, 2022, (Exhibit 4.2, Form 8-K filed May 31, 2022, File No. 000-55337); Eleventh Supplemental Indenture, dated as of May 1, 2022, (Exhibit 4.3, Form 8-K filed May 31, 2022, File No. 000-55337); Twelfth Supplemental Indenture, dated March 1, 2023 (Exhibit 4.2, Form 8-K filed March 30, 2023, File No. 000-55337); Thirteenth Supplemental Indenture, dated March 1, 2023 (Exhibit 4.3, Form 8-K filed March 30, 2023, File No. 000-55337); Fourteenth Supplemental Indenture, dated August 1, 2023 (Exhibit 4.2, Form 8-K filed August 10, 2023, File No. 000-55337); Fifteenth Supplemental Indenture, dated August 1, 2023 (Exhibit 4.3, Form 8-K filed August 10, 2023, File No. 000-55337).

 

X

 

X

31.a

Certification by Chief Executive Officer of Dominion Energy, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

X

93

 

Exhibit

Number

Description

Dominion Energy

Virginia Power

31.b

Certification by Chief Financial Officer of Dominion Energy, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

X

31.c

Certification by Chief Executive Officer of Virginia Electric and Power Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

X

31.d

Certification by Chief Financial Officer of Virginia Electric and Power Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

X

32.a

Certification to the Securities and Exchange Commission by Chief Executive Officer and Chief Financial Officer of Dominion Energy, Inc. as required by Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

X

32.b

Certification to the Securities and Exchange Commission by Chief Executive Officer and Chief Financial Officer of Virginia Electric and Power Company as required by Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

X

99

Condensed consolidated earnings statements (filed herewith).

X

X

101

The following financial statements from Dominion Energy, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, 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 from Virginia Electric and Power Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, 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.

X

X

104

Cover Page Interactive Data File formatted in iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101.

X

X

94

 

SIGNATURE

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

 

 

DOMINION ENERGY, INC.

Registrant

 

 

November 8, 2023

/s/ Michele L. Cardiff

 

Michele L. Cardiff

Senior Vice President, Controller and

Chief Accounting Officer

 

 

 

VIRGINIA ELECTRIC AND POWER COMPANY

Registrant

 

 

November 8, 2023

/s/ Michele L. Cardiff

 

Michele L. Cardiff

Senior Vice President, Controller and

Chief Accounting Officer

 

 

 

 

95

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