Edgar Filing: VIRGINIA ELECTRIC & POWER CO

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended March 31, 2012

¨	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 RESOURCES, INC.	54-1229715

001-02255	VIRGINIA ELECTRIC AND POWER COMPANY	54-0418825
	120 Tredegar Street Richmond, Virginia 23219 (804) 819-2000

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

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 Resources, Inc. Yes x No ¨ Virginia Electric and Power Company Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Dominion Resources, Inc. Yes x No ¨ Virginia Electric and Power Company Yes x No ¨

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

Dominion Resources, Inc.

Virginia Electric and Power Company

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

Dominion Resources, Inc. Yes ¨ No x Virginia Electric and Power Company Yes ¨ No x

At March 31, 2012, the latest practicable date for determination, Dominion Resources, Inc. had 571,498,534 shares of common stock outstanding and Virginia Electric and Power Company had 274,723 shares of common stock outstanding. Dominion Resources, Inc. is the sole holder of Virginia Electric and Power Company’s common stock.

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

COMBINED INDEX


		Page Number

	Glossary of Terms		PAGE 3

	PART I. Financial Information

Item 1.	Financial Statements		PAGE 6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		PAGE 49
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		PAGE 63
Item 4.	Controls and Procedures		PAGE 64

	PART II. Other Information

Item 1.	Legal Proceedings		PAGE 64
Item 1A.	Risk Factors		PAGE 65
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		PAGE 65
Item 6.	Exhibits		PAGE 66

PAGE 2

GLOSSARY OF TERMS

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


Abbreviation or Acronym		Definition
2009 Base Rate Review		Order entered by the Virginia Commission in January 2009, pursuant to the Regulation Act, initiating reviews of the base rates and terms and conditions of all investor-owned utilities in Virginia
AFUDC		Allowance for funds used during construction
AOCI		Accumulated other comprehensive income (loss)
ARO		Asset retirement obligation
ARP		Acid Rain Program, a market-based initiative for emissions allowance trading, established pursuant to Title IV of the CAA
bcf		Billion cubic feet
Bear Garden		A 590 MW combined cycle, natural gas-fired power station in Buckingham County, Virginia
Biennial Review Order		Order issued by the Virginia Commission in November 2011 concluding the 2009 - 2010 biennial review of Virginia Power’s base rates, terms and conditions
Brayton Point		Brayton Point power station
CAA		Clean Air Act
CAIR		Clean Air Interstate Rule
CEO		Chief Executive Officer
CERCLA		Comprehensive Environmental Response, Compensation and Liability Act of 1980
CFO		Chief Financial Officer
CFTC		Commodity Futures Trading Commission
CO₂		Carbon dioxide
Companies		Dominion and Virginia Power, collectively
Cooling degree days		Units measuring the extent to which the average daily temperature is greater than 65 degrees Fahrenheit, calculated as the difference between 65 degrees and the average temperature for that day
Cove Point		Dominion Cove Point LNG, LP
CSAPR		Cross State Air Pollution Rule
CWA		Clean Water Act
DEI		Dominion Energy, Inc.
Dodd-Frank Act		The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
DOE		Department of Energy
Dominion		The legal entity, Dominion Resources, Inc., one or more of Dominion Resources, Inc.’s consolidated subsidiaries (other than Virginia Power) or operating segments or the entirety of Dominion Resources, Inc. and its consolidated subsidiaries
DRS		Dominion Resources Services, Inc.
Dth		Dekatherm
DVP		Dominion Virginia Power operating segment
East Ohio		The East Ohio Gas Company, doing business as Dominion East Ohio
EPA		Environmental Protection Agency
EPS		Earnings per share
ERM		Enterprise Risk Management
Fairless		Fairless power station
FCM		Futures Commission Merchant
FERC		Federal Energy Regulatory Commission
Fowler Ridge		A wind-turbine facility joint venture between Dominion and BP Alternative Energy, Inc. in Benton County, Indiana
FTRs		Financial transmission rights
GAAP		U.S. generally accepted accounting principles
Gal		Gallon
GHG		Greenhouse gas

PAGE 3


Abbreviation or Acronym		Definition
Heating degree days		Units measuring the extent to which the average daily temperature is less than 65 degrees Fahrenheit, calculated as the difference between 65 degrees and the average temperature for that day
INPO		Institute of Nuclear Power Operations
ISO		Independent system operator
Kewaunee		Kewaunee nuclear power station
Kincaid		Kincaid power station
LNG		Liquefied natural gas
Manchester Street		Manchester Street power station
MATS		Utility Mercury and Air Toxics Standard Rule
MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations
MF Global		MF Global Inc.
Millstone		Millstone nuclear power station
Moody’s		Moody’s Investors Service
MW		Megawatt
MWh		Megawatt hour
NCEMC		North Carolina Electric Membership Corporation
NedPower		A wind-turbine facility joint venture between Dominion and Shell WindEnergy Inc. in Grant County, West Virginia
NGLs		Natural gas liquids
North Anna		North Anna nuclear power station
North Carolina Commission		North Carolina Utilities Commission
NO_x		Nitrogen oxide
NPDES		National Pollutant Discharge Elimination System
NRC		Nuclear Regulatory Commission
NSPS		New Source Performance Standards
ODEC		Old Dominion Electric Cooperative
Ohio Commission		Public Utilities Commission of Ohio
OPEB		Other Postretirement Employee Benefits
PIR		Pipeline Infrastructure Replacement program deployed by East Ohio
PJM		PJM Interconnection, LLC
RCC		Replacement Capital Covenants
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
RGGI		Regional Greenhouse Gas Initiative
Rider B		A rate adjustment clause associated with the recovery of costs related to the proposed conversion of three of Virginia Power’s coal-fired power stations to biomass
Rider R		A rate adjustment clause associated with the recovery of costs related to Bear Garden
Rider S		A rate adjustment clause associated with the recovery of costs related to the Virginia City Hybrid Energy Center
ROE		Return on equity
RPS		Renewable Portfolio Standard
RTO		Regional transmission organization
Salem Harbor		Salem Harbor power station
SEC		Securities and Exchange Commission
September 2006 hybrids		2006 Series B Enhanced Junior Subordinated Notes due 2066
SO₂		Sulfur dioxide
Standard & Poor’s		Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc.
State Line		State Line power station

PAGE 4


Abbreviation or Acronym		Definition
U.S.		United States of America
UAO		Unilateral Administrative Order
VIE		Variable interest entity
Virginia City Hybrid Energy Center		A 585 MW baseload carbon-capture compatible, clean coal powered electric generation facility under construction 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 segments or the entirety of Virginia Power and its consolidated subsidiaries
Virginia Settlement Approval Order		Order issued by the Virginia Commission in March 2010 concluding Virginia Power’s 2009 Base Rate Review

PAGE 5

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended March 31,
	2012		2011
(millions, except per share amounts)
Operating Revenue	$	3,492	$	4,057

Operating Expenses
Electric fuel and other energy-related purchases		948		1,049
Purchased electric capacity		113		119
Purchased gas		412		642
Other operations and maintenance		647		861
Depreciation, depletion and amortization		287		262
Other taxes		170		161

Total operating expenses		2,577		3,094

Income from operations		915		963

Other income		74		57
Interest and related charges		228		227

Income from operations including noncontrolling interests before income tax expense		761		793
Income tax expense		260		310

Net Income Including Noncontrolling Interests		501		483
Noncontrolling Interests		7		4

Net Income Attributable to Dominion	$	494	$	479

Amounts Attributable to Dominion:
Earnings Per Common Share – Basic	$	0.87	$	0.83

Earnings Per Common Share – Diluted	$	0.86	$	0.82

Dividends declared per common share	$	0.5275	$	0.4925

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

PAGE 6

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
	2012			2011
(millions)
Net income including noncontrolling interests	$	501		$	483
Other comprehensive income (loss), net of taxes:
Net deferred gains (losses) on derivatives-hedging activities, net of $(80) and $58 tax		128			(85	)
Changes in unrealized net gains on investment securities, net of $(56) and $(25) tax		85			38
Changes in net unrecognized pension and other postretirement benefit costs, net of $— and $(15) tax		—			25
Amounts reclassified to net income:
Net derivative (gains) losses-hedging activities, net of $12 and $(5) tax		(16	)		13
Net realized gains on investment securities, net of $6 and $2 tax		(10	)		(2	)
Net pension and other postretirement benefit costs, net of $(9) and $(2) tax		12			14

Total other comprehensive income		199			3

Comprehensive income including noncontrolling interests		700			486
Comprehensive income attributable to noncontrolling interests		7			4

Comprehensive income attributable to Dominion	$	693		$	482

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

PAGE 7

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31, 2012			December 31, 2011⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	133		$	102
Customer receivables (less allowance for doubtful accounts of $29 at both dates)		1,539			1,780
Other receivables (less allowance for doubtful accounts of $5 and $8)		173			255
Inventories		1,249			1,348
Derivative assets		822			705
Other		1,103			1,240

Total current assets		5,019			5,430

Investments
Nuclear decommissioning trust funds		3,231			2,999
Investment in equity method affiliates		552			553
Restricted cash equivalents		104			141
Other		296			292

Total investments		4,183			3,985

Property, Plant and Equipment
Property, plant and equipment		42,895			42,033
Property, plant and equipment, VIE		957			957
Accumulated depreciation, depletion and amortization		(13,564	)		(13,320	)

Total property, plant and equipment, net		30,288			29,670

Deferred Charges and Other Assets
Goodwill		3,141			3,141
Regulatory assets		1,319			1,382
Other		2,143			2,006

Total deferred charges and other assets		6,603			6,529

Total assets	$	46,093		$	45,614

(1)	Dominion’s Consolidated Balance Sheet at December 31, 2011 has been derived from the audited Consolidated Financial Statements at that date.

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

PAGE 8

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)


	March 31, 2012			December 31, 2011⁽¹⁾
(millions)
LIABILITIES AND EQUITY
Current Liabilities
Securities due within one year	$	2,131		$	1,479
Short-term debt		1,057			1,814
Accounts payable		935			1,250
Derivative liabilities		871			951
Other		1,660			1,468

Total current liabilities		6,654			6,962

Long-Term Debt
Long-term debt		14,564			14,785
Long-term debt, VIE		882			890
Junior subordinated notes payable to affiliates		268			268
Enhanced junior subordinated notes		1,365			1,451

Total long-term debt		17,079			17,394

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		5,719			5,216
Asset retirement obligations		1,396			1,383
Regulatory liabilities		1,423			1,324
Other		1,596			1,575

Total deferred credits and other liabilities		10,134			9,498

Total liabilities		33,867			33,854

Commitments and Contingencies (see Note 12)

Subsidiary Preferred Stock Not Subject to Mandatory Redemption		257			257

Equity
Common stock – no par⁽²⁾		5,256			5,180
Other paid-in capital		173			179
Retained earnings		6,891			6,697
Accumulated other comprehensive loss		(411	)		(610	)

Total common shareholders’ equity		11,909			11,446

Noncontrolling interest		60			57

Total equity		11,969			11,503

Total liabilities and equity	$	46,093		$	45,614

(1)	Dominion’s Consolidated Balance Sheet at December 31, 2011 has been derived from the audited Consolidated Financial Statements at that date.

(2)	1 billion shares authorized; 571 million shares and 570 million shares outstanding at March 31, 2012 and December 31, 2011, respectively.

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

PAGE 9

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


Three Months Ended March 31,	2012			2011
(millions)
Operating Activities
Net income including noncontrolling interests	$	501		$	483
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
Depreciation, depletion and amortization (including nuclear fuel)		353			318
Deferred income taxes and investment tax credits		269			227
Rate refunds		(55	)		(29	)
Other adjustments		(72	)		(17	)
Changes in:
Accounts receivable		327			292
Inventories		99			119
Deferred fuel and purchased gas costs, net		162			(50	)
Prepayments		37			54
Accounts payable		(275	)		(299	)
Accrued interest, payroll and taxes		89			(129	)
Margin deposit assets and liabilities		97			(120	)
Other operating assets and liabilities		91			63

Net cash provided by operating activities		1,623			912

Investing Activities
Plant construction and other property additions (including nuclear fuel)		(981	)		(806	)
Proceeds from sales of securities		415			502
Purchases of securities		(420	)		(522	)
Restricted cash equivalents		37			56
Other		3			18

Net cash used in investing activities		(946	)		(752	)

Financing Activities
Repayment of short-term debt, net		(757	)		(538	)
Issuance and remarketing of long-term debt		450			1,060
Repayment and repurchase of long-term debt		(104	)		(2	)
Issuance of common stock		69			17
Repurchase of common stock		—			(274	)
Common dividend payments		(301	)		(285	)
Subsidiary preferred dividend payments		(4	)		(4	)
Other		1			(8	)

Net cash used in financing activities		(646	)		(34	)

Increase in cash and cash equivalents		31			126
Cash and cash equivalents at beginning of period		102			62

Cash and cash equivalents at end of period	$	133		$	188

Supplemental Cash Flow Information
Significant noncash investing activities:
Accrued capital expenditures	$	298		$	167

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

PAGE 10

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended March 31,
	2012		2011
(millions)
Operating Revenue	$	1,754	$	1,757

Operating Expenses
Electric fuel and other energy-related purchases		614		593
Purchased electric capacity		113		118
Other operations and maintenance:
Affiliated suppliers		83		73
Other		223		229
Depreciation and amortization		188		174
Other taxes		65		59

Total operating expenses		1,286		1,246

Income from operations		468		511

Other income		23		29
Interest and related charges		100		92

Income before income tax expense		391		448
Income tax expense		148		170

Net Income		243		278
Preferred dividends		4		4

Balance available for common stock	$	239	$	274

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

PAGE 11

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
	2012			2011
(millions)
Net income	$	243		$	278
Other comprehensive income (loss), net of taxes:
Net deferred losses on derivatives-hedging activities, net of $— tax at both dates		(1	)		—
Changes in unrealized net gains on nuclear decommissioning trust funds, net of $(5) and $(2) tax		9			3
Amounts reclassified to net income:
Net derivative (gains) losses-hedging activities, net of $(1) and $— tax		1			(1	)
Net realized gains on nuclear decommissioning trust funds, net of $1 and $— tax		(1	)		—

Other comprehensive income		8			2

Comprehensive income	$	251		$	280

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

PAGE 12

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31, 2012			December 31, 2011⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	28		$	29
Customer receivables (less allowance for doubtful accounts of $11 at both dates)		789			892
Other receivables (less allowance for doubtful accounts of $4 and $7)		127			145
Inventories (average cost method)		777			797
Prepayments		29			41
Other		373			532

Total current assets		2,123			2,436

Investments
Nuclear decommissioning trust funds		1,467			1,370
Other		32			36

Total investments		1,499			1,406

Property, Plant and Equipment
Property, plant and equipment		29,136			28,626
Accumulated depreciation and amortization		(9,758	)		(9,615	)

Total property, plant and equipment, net		19,378			19,011

Deferred Charges and Other Assets
Intangible assets		185			183
Regulatory assets		345			399
Other		86			109

Total deferred charges and other assets		616			691

Total assets	$	23,616		$	23,544

(1)	Virginia Power’s Consolidated Balance Sheet at December 31, 2011 has been derived from the audited Consolidated Financial Statements at that date.

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

PAGE 13

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)


	March 31, 2012		December 31, 2011⁽¹⁾
(millions)
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
Securities due within one year	$	1,016	$	616
Short-term debt		255		894
Accounts payable		395		405
Payables to affiliates		54		108
Affiliated current borrowings		187		187
Accrued interest, payroll and taxes		363		226
Other		520		685

Total current liabilities		2,790		3,121

Long-Term Debt		6,292		6,246

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		3,339		3,180
Asset retirement obligations		628		624
Regulatory liabilities		1,191		1,095
Other		270		271

Total deferred credits and other liabilities		5,428		5,170

Total liabilities		14,510		14,537

Commitments and Contingencies (see Note 12)

Preferred Stock Not Subject to Mandatory Redemption		257		257

Common Shareholder’s Equity
Common stock – no par⁽²⁾		5,738		5,738
Other paid-in capital		1,111		1,111
Retained earnings		1,973		1,882
Accumulated other comprehensive income		27		19

Total common shareholder’s equity		8,849		8,750

Total liabilities and shareholder’s equity	$	23,616	$	23,544

(1)	Virginia Power’s Consolidated Balance Sheet at December 31, 2011 has been derived from the audited Consolidated Financial Statements at that date.

(2)	500,000 shares authorized; 274,723 shares outstanding at March 31, 2012 and December 31, 2011.

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

PAGE 14

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Three Months Ended March 31,	2012			2011
(millions)
Operating Activities
Net income	$	243		$	278
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including nuclear fuel)		222			205
Deferred income taxes and investment tax credits		85			150
Rate refunds		(55	)		(29	)
Other adjustments		(20	)		(32	)
Changes in:
Accounts receivable		125			127
Affiliated accounts receivable and payable		(15	)		(31	)
Inventories		20			(42	)
Deferred fuel expenses		156			(32	)
Accounts payable		(59	)		(69	)
Accrued interest, payroll and taxes		137			25
Other operating assets and liabilities		67			(26	)

Net cash provided by operating activities		906			524

Investing Activities
Plant construction and other property additions		(483	)		(408	)
Purchases of nuclear fuel		(67	)		(49	)
Purchases of securities		(193	)		(362	)
Proceeds from sales of securities		191			343
Restricted cash equivalents		3			56
Other		(9	)		9

Net cash used in investing activities		(558	)		(411	)

Financing Activities
Repayment of short-term debt, net		(639	)		(18	)
Repayment of affiliated current borrowings, net		—			(44	)
Issuance and remarketing of long-term debt		450			160
Common dividend payments		(149	)		(130	)
Preferred dividend payments		(4	)		(4	)
Other		(7	)		(2	)

Net cash used in financing activities		(349	)		(38	)

Increase (decrease) in cash and cash equivalents		(1	)		75
Cash and cash equivalents at beginning of period		29			5

Cash and cash equivalents at end of period	$	28		$	80

Supplemental Cash Flow Information
Significant noncash investing and financing activities:
Accrued capital expenditures	$	208		$	121

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

PAGE 15

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Nature of Operations

Dominion, headquartered in Richmond, Virginia, is one of the nation’s largest producers and transporters of energy. Dominion’s operations are conducted through various subsidiaries, including Virginia Power, a regulated public utility that generates, transmits and distributes electricity for sale in Virginia and northeastern North Carolina.

Note 2. Significant Accounting Policies

As permitted by the rules and regulations of the SEC, Dominion’s and Virginia Power’s 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 Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2011.

In Dominion’s and Virginia Power’s opinion, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly their financial position as of March 31, 2012 and their results of operations and cash flows for the three months ended March 31, 2012 and 2011. 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.

Dominion’s and Virginia Power’s accompanying unaudited Consolidated Financial Statements include, after eliminating intercompany transactions and balances, their accounts and those of their respective majority-owned subsidiaries and those VIEs where Dominion has been determined to be the primary beneficiary.

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 Dominion’s and Virginia Power’s 2011 Consolidated Financial Statements and Notes have been reclassified to conform to the 2012 presentation for comparative purposes. The reclassifications did not affect the Companies’ net income, total assets, liabilities, equity or cash flows.

Amounts disclosed for Dominion are inclusive of Virginia Power, where applicable.

PAGE 16

Note 3. Operating Revenue

The Companies’ operating revenue consists of the following:


	Three Months Ended March 31,
	2012		2011
(millions)
Dominion
Electric sales:
Regulated	$	1,724	$	1,730
Nonregulated		738		941
Gas sales:
Regulated		99		139
Nonregulated		398		602
Gas transportation and storage		405		538
Other		128		107

Total operating revenue	$	3,492	$	4,057


Virginia Power
Regulated electric sales	$	1,724	$	1,730
Other		30		27

Total operating revenue	$	1,754	$	1,757

Note 4. Income Taxes

For continuing operations, including noncontrolling interests, the statutory U.S. federal income tax rate reconciles to Dominion’s and Virginia Power’s effective income tax rate as follows:


	Dominion						Virginia Power
Three Months Ended March 31,	2012			2011			2012			2011
U.S. statutory rate		35.0	%		35.0	%		35.0	%		35.0	%
Increases (reductions) resulting from:
State taxes, net of federal benefit		3.8			3.7			3.9			3.9
Valuation allowances		(2.7	)		0.8			—			—
AFUDC - equity		(0.7	)		(0.7	)		(0.9	)		(1.1	)
Other, net		(1.3	)		0.3			(0.2	)		0.2

Effective tax rate		34.1	%		39.1	%		37.8	%		38.0	%

Dominion’s effective tax rate in 2012 reflects a $20 million reduction of a valuation allowance related to certain state operating loss carryforwards. As disclosed in Note 16 to the Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2011, Dominion expects to purchase Fairless in 2013. Dominion currently operates the facility under a lease and, as a result of a 2012 contract modification, the exercise price of Dominion’s option to purchase Fairless is fixed at approximately $923 million. After considering the results of Fairless’ operations in recent years and a forecast of future operating results reflecting the planned purchase of the facility, Dominion has concluded that it is more likely than not that the tax benefit of the operating losses will be realized. Significant assumptions include future commodity prices, in particular, those for electric energy produced by Fairless and those for natural gas, as compared to other fuels used for the generation of electricity, which will significantly influence the extent to which Fairless is dispatched by PJM. Realization of these tax benefits ultimately depends on whether or not the forecasted results are achieved. Dominion will continue to evaluate the likelihood of realizing these tax benefits on a quarterly basis.

As of March 31, 2012, there have been no material changes in Dominion’s and Virginia Power’s unrecognized tax benefits or possible changes that could reasonably be expected to occur during the next twelve months. See Note 6 to the Consolidated Financial Statements in Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2011 for a discussion of these unrecognized tax benefits.

PAGE 17

Note 5. Earnings Per Share

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


	Three Months Ended March 31,
	2012		2011
(millions, except EPS)
Net income attributable to Dominion	$	494	$	479

Average shares of common stock outstanding – Basic		570.5		579.8
Net effect of potentially dilutive securities⁽¹⁾		1.4		0.7

Average shares of common stock outstanding – Diluted		571.9		580.5

Earnings Per Common Share – Basic	$	0.87	$	0.83
Earnings Per Common Share – Diluted	$	0.86	$	0.82

(1)	Potentially dilutive securities consist of options, goal-based stock and contingently convertible senior notes.

There were no potentially dilutive securities excluded from the calculation of diluted EPS for the three months ended March 31, 2012 and 2011.

Note 6. Fair Value Measurements

Dominion’s and Virginia Power’s fair value measurements are made in accordance with the policies discussed in Note 7 to the Consolidated Financial Statements in their Annual Report on Form 10-K for the year ended December 31, 2011. See Note 7 in this report for further information about their derivatives and hedge accounting activities.

At March 31, 2012, Dominion’s and Virginia Power’s net balance of commodity derivatives categorized as Level 3 fair value measurements was a net liability of $61 million and $17 million, respectively.

Dominion’s and Virginia Power’s commodity derivative valuations are prepared by the ERM department. The ERM department reports directly to the Companies’ CFO. The ERM department creates a daily computer-generated file containing mark-to-market valuations for the Companies’ derivative transactions. Standard transactions are programmatically calculated using software. The inputs that go into the mark-to-market valuations are transactional information stored in the systems of record and market pricing information that resides in data warehouse databases. The majority of forward prices are automatically uploaded into the data warehouse databases from various third party sources. Inputs obtained from third party sources are evaluated for reliability considering the reputation, independence, market presence, and methodology used by the third party. If forward prices are not available from third party sources, then the ERM department models the forward prices based on other available market data. A team consisting of risk management and risk quantitative analysts meets each business day to assess the validity of market prices and mark-to-market valuations. During this meeting, the changes in mark-to-market valuations from period to period are examined and qualified against historical expectations. If any discrepancies are identified during this process, the mark-to-market valuations or the market pricing information is evaluated further and adjusted, if necessary.

Dominion and Virginia Power use the discounted cash flow method to value Level 3 physical and financial forwards and futures and an option model to value Level 3 physical and financial options. The discounted cash flow model 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, price correlations, the original sales prices, and volumes. For Level 3 fair value measurements, the forward market prices, the implied price volatilities, and price correlations are considered unobservable. The unobservable inputs are developed and substantiated using historical information, available market data, third party data, and statistical analysis. Periodically, inputs to valuation models are reviewed and revised as needed, based on historical information, updated market data, market liquidity and relationships, and changes in third party pricing sources.

PAGE 18

The following table presents Dominion’s quantitative information about Level 3 fair value measurements. Included are descriptions of the valuation techniques, the significant unobservable inputs, and the range of market price, price correlation and price volatility inputs used in the fair value measurements at March 31, 2012 for each category of transaction and commodity type. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility and correlations.


	Fair Value (millions)		Valuation Technique(s)	Unobservable Input			Range			Weighted Average⁽¹⁾

At March 31, 2012
Assets:
Physical and Financial Forwards and Futures:
Natural Gas⁽²⁾	$	31	Discounted Cash Flow		Market Price (per Dth	) ⁽³⁾		(1) - 6			3
Electricity		69	Discounted Cash Flow		Market Price (per MWh	) ⁽³⁾		21 - 61			43
FTRs		1	Discounted Cash Flow		Market Price (per MWh	) ⁽³⁾		(3) - 3			—
Capacity		9	Discounted Cash Flow		Market Price (per MW	) ⁽³⁾		95-120			101
Liquids		1	Discounted Cash Flow		Market Price (per Gal	) ⁽³⁾		1 - 2			1
Physical and Financial Options:
Natural Gas		6	Option Model		Market Price (per Dth	) ⁽³⁾		2 - 5			4
					Price Volatility	⁽⁴⁾		23% - 60	%		30	%
					Price Correlation	⁽⁵⁾		100% - 100	%		100	%

Total assets	$	117

Liabilities:
Physical and Financial Forwards and Futures:
Natural Gas⁽²⁾	$	21	Discounted Cash Flow		Market Price (per Dth	) ⁽³⁾		(1) - 6			3
Electricity		17	Discounted Cash Flow		Market Price (per MWh	) ⁽³⁾		12 - 61			41
FTRs		18	Discounted Cash Flow		Market Price (per MWh	) ⁽³⁾		(6) - 5			—
Liquids		108	Discounted Cash Flow		Market Price (per Gal	) ⁽³⁾		1 - 3			2
Physical and Financial Options:
Natural Gas⁽²⁾		14	Option Model		Market Price (per Dth	) ⁽³⁾		(1) - 5			2
					Price Volatility	⁽⁴⁾		23% - 59	%		36	%
					Price Correlation	⁽⁵⁾		70% - 100	%		90	%

Total liabilities	$	178

(1)	Averages weighted by volume.

(2)	Includes basis.

(3)	Represents market prices beyond defined terms for Levels 1 & 2.

(4)	Represents volatilities unrepresented in published markets.

(5)	Represents intra-price correlations for which markets do not exist.

The following table presents Virginia Power’s quantitative information about Level 3 fair value measurements. Included are descriptions of the valuation techniques, the significant unobservable inputs, and the range of market price inputs used in the fair value measurements at March 31, 2012 for each category of transaction and commodity type. The range and weighted average are presented in dollars for market price inputs.

PAGE 19

Fair Value
(millions)

Valuation Technique(s)

Unobservable Input

Range

Weighted
Average⁽¹⁾

At March 31, 2012

Assets:

Physical and Financial Forwards and Futures:

FTRs

Discounted Cash Flow

Market Price (per MWh

)⁽²⁾

(3) - 3

Total assets

Liabilities:

Physical and Financial Forwards and Futures:

FTRs

Discounted Cash Flow

Market Price (per MWh

)⁽²⁾

(6) - 3

Total liabilities

(1)	Averages weighted by volume.

(2)	Represents market prices beyond defined terms for Levels 1 & 2.

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)
Price Correlation	Buy	Increase (decrease)	Loss (gain)
Price Correlation	Sell	Increase (decrease)	Gain (loss)

Non-recurring Fair Value Measurements

During March 2011, Dominion determined that it was unlikely that State Line would participate in the May 2011 PJM capacity base residual auction that would commit State Line’s capacity from June 2014 through May 2015. This determination reflected an expectation that margins for coal-fired generation will remain compressed in the 2014 and 2015 period in combination with the expectation that State Line may be impacted during the same time period by environmental regulations that would likely require significant capital expenditures. As a result, Dominion evaluated State Line for impairment since it was more likely than not that State Line would be retired before the end of its previously estimated useful life. As a result of this evaluation, Dominion recorded an impairment charge of $55 million ($39 million after-tax) reflected in other operations and maintenance expense in its Consolidated Statement of Income, to write down State Line’s long-lived assets to their estimated fair value of less than $1 million. As management was not aware of any recent market transactions for comparable assets with sufficient transparency to develop a market approach to fair value, Dominion used the income approach (discounted cash flows) to estimate the fair value of State Line’s long-lived assets in the impairment test. This was considered a Level 3 fair value measurement due to the use of significant unobservable inputs including estimates of future power and other commodity prices. State Line was retired in March 2012.

PAGE 20

Recurring Fair Value Measurements

Dominion

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


	Level 1		Level 2		Level 3		Total
(millions)
At March 31, 2012
Assets:
Derivatives:
Commodity	$	54	$	1,007	$	117	$	1,178
Interest rate		—		94		—		94
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		1,933		—		—		1,933
Other		59		—		—		59
Non-U.S.:
Large cap		11		—		—		11
Fixed income:
Corporate debt instruments		—		317		—		317
U.S. Treasury securities and agency debentures		308		170		—		478
State and municipal		—		328		—		328
Other		—		20		—		20
Cash equivalents and other		—		82		—		82
Restricted cash equivalents		—		104		—		104

Total assets	$	2,365	$	2,122	$	117	$	4,604

Liabilities:
Derivatives:
Commodity	$	19	$	737	$	178	$	934
Interest rate		—		176		—		176

Total liabilities	$	19	$	913	$	178	$	1,110


At December 31, 2011
Assets:
Derivatives:
Commodity	$	44	$	828	$	93	$	965
Interest rate		—		105		—		105
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		1,718		—		—		1,718
Other		51		—		—		51
Non-U.S.:
Large cap		10		—		—		10
Fixed income:
Corporate debt instruments		—		332		—		332
U.S. Treasury securities and agency debentures		277		181		—		458
State and municipal		—		329		—		329
Other		—		23		—		23
Cash equivalents and other		—		60		—		60
Restricted cash equivalents		—		141		—		141

Total assets	$	2,100	$	1,999	$	93	$	4,192

Liabilities:
Derivatives:
Commodity	$	10	$	714	$	164	$	888
Interest rate		—		269		—		269

Total liabilities	$	10	$	983	$	164	$	1,157

(1)	Includes investments held in the nuclear decommissioning and rabbi trusts.

PAGE 21

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


	Three Months Ended March 31,
	2012			2011
(millions)
Beginning balance	$	(71	)	$	(50	)
Total realized and unrealized gains (losses):
Included in earnings		(35	)		14
Included in other comprehensive income (loss)		5			(94	)
Included in regulatory assets/liabilities		11			(21	)
Settlements		30			(16	)
Transfers out of Level 3		(1	)		4

Ending balance	$	(61	)	$	(163	)

The amount of gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets/liabilities still held at the reporting date	$	1		$	4

The following table presents Dominion’s gains and losses included in earnings in the Level 3 fair value category:


	Operating revenue			Electric fuel and other energy-related purchases			Total
(millions)
Three Months Ended March 31, 2012
Total gains (losses) included in earnings	$	(9	)	$	(26	)	$	(35	)
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets/liabilities still held at the reporting date		1			—			1

Three Months Ended March 31, 2011
Total gains (losses) included in earnings	$	(2	)	$	16		$	14
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets/liabilities still held at the reporting date		4			—			4

PAGE 22

Virginia Power

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


	Level 1		Level 2		Level 3		Total
(millions)
At March 31, 2012
Assets:
Derivatives:
Commodity	$	—	$	—	$	1	$	1
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		764		—		—		764
Other		27		—		—		27
Fixed income:
Corporate debt instruments		—		197		—		197
U.S. Treasury securities and agency debentures		123		65		—		188
State and municipal		—		129		—		129
Other		—		13		—		13
Cash equivalents and other		—		41		—		41
Restricted cash equivalents		—		29		—		29

Total assets	$	914	$	474	$	1	$	1,389

Liabilities:
Derivatives:
Commodity	$	—	$	21	$	18	$	39
Interest rate		—		38		—		38

Total liabilities	$	—	$	59	$	18	$	77


At December 31, 2011
Assets:
Derivatives:
Commodity	$	—	$	—	$	2	$	2
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		679		—		—		679
Other		23		—		—		23
Fixed income:
Corporate debt instruments		—		214		—		214
U.S. Treasury securities and agency debentures		107		63		—		170
State and municipal		—		125		—		125
Other		—		16		—		16
Cash equivalents and other		—		40		—		40
Restricted cash equivalents		—		32		—		32

Total assets	$	809	$	490	$	2	$	1,301

Liabilities:
Derivatives:
Commodity	$	—	$	17	$	30	$	47
Interest rate		—		100		—		100

Total liabilities	$	—	$	117	$	30	$	147

(1)	Includes investments held in the nuclear decommissioning and rabbi trusts.

PAGE 23

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


	Three Months Ended March 31,
	2012			2011
(millions)
Beginning balance	$	(28	)	$	14
Total realized and unrealized gains (losses):
Included in earnings		(27	)		16
Included in regulatory assets/liabilities		11			(21	)
Settlements		27			(16	)

Ending balance	$	(17	)	$	(7	)

The gains and losses included in earnings in the Level 3 fair value category were classified in electric fuel and other energy-related purchases in Virginia Power’s Consolidated Statements of Income for the three months ended March 31, 2012 and 2011. There were no unrealized gains and losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the three months ended March 31, 2012 and 2011.

Fair Value of Financial Instruments

Substantially all of Dominion’s and Virginia Power’s financial instruments are recorded at fair value, with the exception of the instruments described below that 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 and cash equivalents, customer and other receivables, short-term debt and accounts payable are representative of fair value because of the short-term nature of these instruments. For Dominion’s and Virginia Power’s financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:


	March 31, 2012				December 31, 2011
	Carrying Amount		Estimated Fair Value⁽¹⁾		Carrying Amount		Estimated Fair Value⁽¹⁾
(millions)
Dominion
Long-term debt, including securities due within one year⁽²⁾	$	16,695	$	19,256	$	16,264	$	18,936
Long-term debt, VIE⁽³⁾		882		889		890		892
Junior subordinated notes payable to affiliates		268		272		268		268
Enhanced junior subordinated notes		1,365		1,437		1,451		1,518
Subsidiary preferred stock⁽⁴⁾		257		259		257		256


Virginia Power
Long-term debt, including securities due within one year⁽²⁾	$	7,308	$	8,628	$	6,862	$	8,281
Preferred stock⁽⁴⁾		257		259		257		256

(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 issues with short-term maturities and variable rates refinanced at current market rates is a reasonable estimate of their fair value.

(2)	Includes amounts which represent the unamortized discount and premium. At March 31, 2012 and December 31, 2011, includes the valuation of certain fair value hedges associated with Dominion’s fixed rate debt of approximately $93 million and $105 million, respectively.

(3)	Includes amounts which represent the unamortized premium.

(4)	Includes deferred issuance expenses of $2 million at March 31, 2012 and December 31, 2011.

PAGE 24

Note 7. Derivatives and Hedge Accounting Activities

Dominion’s and Virginia Power’s accounting policies and objectives and strategies for using derivative instruments are discussed in Note 2 to the Consolidated Financial Statements in their Annual Report on Form 10-K for the year ended December 31, 2011. See Note 6 in this report for further information about fair value measurements and associated valuation methods for derivatives.

Dominion

The following table presents the volume of Dominion’s derivative activity as of March 31, 2012. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of their long and short positions.


	Current		Noncurrent
Natural Gas (bcf):
Fixed price⁽¹⁾		315		74
Basis⁽¹⁾		861		484
Electricity (MWh):
Fixed price⁽¹⁾		21,953,642		21,718,420
FTRs		21,805,241		810,816
Capacity (MW)		63,825		272,968
Liquids (gallons)⁽²⁾		137,508,000		221,214,000
Interest rate	$	2,000,000,000	$	1,940,000,000

(1)	Includes options.

(2)	Includes NGLs and oil.

For the three months ended March 31, 2012, gains or losses on hedging instruments determined to be ineffective and amounts excluded from the assessment of effectiveness were not material. Amounts excluded from the assessment of effectiveness include gains or losses attributable to changes in the time value of options and changes in the differences between spot prices and forward prices.

The following table presents selected information related to gains (losses) on cash flow hedges included in AOCI in Dominion’s Consolidated Balance Sheet at March 31, 2012:

AOCI
After-Tax

Amounts Expected to be
Reclassified to Earnings
during the
next 12 Months
After-Tax

Maximum Term

(millions)

Commodities:

Gas

(30

)

(16

)

33 months

Electricity

243

102

45 months

NGLs

(64

)

(27

)

33 months

Other

38 months

Interest rate

(97

)

(12

)

369 months

Total

The amounts that will be reclassified from AOCI to earnings will generally be offset by the recognition of the hedged transactions (e.g., anticipated sales) 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 market prices and interest rates.

PAGE 25

Fair Value and Gains and Losses on Derivative Instruments

The following table presents the fair values of Dominion’s derivatives and where they are presented in its Consolidated Balance Sheets:


	Fair Value – Derivatives under Hedge Accounting		Fair Value – Derivatives not under Hedge Accounting		Total Fair Value
(millions)
March 31, 2012
ASSETS
Current Assets
Commodity	$	312	$	472	$	784
Interest rate		38		—		38

Total current derivative assets		350		472		822

Noncurrent Assets
Commodity		295		99		394
Interest rate		56		—		56

Total noncurrent derivative assets⁽¹⁾		351		99		450

Total derivative assets	$	701	$	571	$	1,272

LIABILITIES
Current Liabilities
Commodity	$	206	$	492	$	698
Interest rate		158		15		173

Total current derivative liabilities		364		507		871

Noncurrent Liabilities
Commodity		151		85		236
Interest rate		—		3		3

Total noncurrent derivative liabilities⁽²⁾		151		88		239

Total derivative liabilities	$	515	$	595	$	1,110


December 31, 2011
ASSETS
Current Assets
Commodity	$	176	$	495	$	671
Interest rate		34		—		34

Total current derivative assets		210		495		705

Noncurrent Assets
Commodity		198		96		294
Interest rate		71		—		71

Total noncurrent derivative assets⁽¹⁾		269		96		365

Total derivative assets	$	479	$	591	$	1,070

LIABILITIES
Current Liabilities
Commodity	$	162	$	530	$	692
Interest rate		222		37		259

Total current derivative liabilities		384		567		951

Noncurrent Liabilities
Commodity		118		78		196
Interest rate		—		10		10

Total noncurrent derivative liabilities⁽²⁾		118		88		206

Total derivative liabilities	$	502	$	655	$	1,157

(1)	Noncurrent derivative assets are presented in other deferred charges and other assets in Dominion’s Consolidated Balance Sheets.

(2)	Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in Dominion’s Consolidated Balance Sheets.

PAGE 26

The following tables present the gains and losses on Dominion’s derivatives, as well as where the associated activity is presented in its Consolidated Balance Sheets and Statements of Income:


Derivatives in cash flow hedging relationships	Amount of Gain (Loss) Recognized in AOCI on Derivatives - Effective Portion⁽¹⁾			Amount of Gain (Loss) Reclassified from AOCI to Income			Increase (Decrease) in Derivatives Subject to Regulatory Treatment⁽²⁾
(millions)
Three Months Ended March 31, 2012
Derivative Type and Location of Gains (Losses)
Commodity:
Operating revenue				$	64
Purchased gas					(30	)
Electric fuel and other energy-related purchases					(7	)

Total commodity	$	176			27		$	(1	)

Interest rate⁽³⁾		32			1			27

Total	$	208		$	28		$	26

Three Months Ended March 31, 2011
Derivative Type and Location of Gains (Losses)
Commodity:
Operating revenue				$	28
Purchased gas					(48	)
Electric fuel and other energy-related purchases					1
Purchased electric capacity					1

Total commodity	$	(142	)		(18	)	$	(5	)

Interest rate⁽³⁾		(1	)		—			(1	)

Total	$	(143	)	$	(18	)	$	(6	)

(1)	Amounts deferred into AOCI have no associated effect in Dominion’s 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 Dominion’s Consolidated Statements of Income.

(3)	Amounts recorded in Dominion’s Consolidated Statements of Income are classified in interest and related charges.


	Amount of Gain (Loss) Recognized in Income on Derivatives⁽¹⁾
	Three Months Ended March 31,
Derivatives not designated as hedging instruments	2012			2011
(millions)
Derivative Type and Location of Gains (Losses)
Commodity
Operating revenue	$	69		$	19
Purchased gas		(10	)		(11	)
Electric fuel and other energy-related purchases		(27	)		16
Interest rate⁽²⁾		(2	)		—

Total	$	30		$	24

(1)	Includes derivative activity amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in Dominion’s Consolidated Statements of Income.

(2)	Amounts recorded in Dominion’s Consolidated Statements of Income are classified in interest and related charges.

PAGE 27

Virginia Power

The following table presents the volume of Virginia Power’s derivative activity as of March 31, 2012. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of their long and short positions.


	Current		Noncurrent
Natural Gas (bcf):
Fixed price		21		—
Basis		10		—
Electricity (MWh):
Fixed price		664,000		—
FTRs		20,365,031		195,840
Capacity (MW)		30,500		182,500
Interest rate	$	750,000,000	$	90,000,000

For the three months ended March 31, 2012 and 2011, gains or losses on hedging instruments determined to be ineffective and amounts excluded from the assessment of effectiveness were not material. Amounts excluded from the assessment of effectiveness include gains or losses attributable to changes in the time value of options and changes in the differences between spot prices and forward prices.

PAGE 28

Fair Value and Gains and Losses on Derivative Instruments

The following table presents the fair values of Virginia Power’s derivatives and where they are presented in its Consolidated Balance Sheets:


	Fair Value – Derivatives under Hedge Accounting		Fair Value – Derivatives not under Hedge Accounting		Total Fair Value
(millions)
March 31, 2012
ASSETS
Current Assets
Commodity	$	—	$	1	$	1

Total current derivative assets⁽¹⁾		—		1		1

Total derivative assets	$	—	$	1	$	1

LIABILITIES
Current Liabilities
Commodity	$	17	$	20	$	37
Interest rate		20		15		35

Total current derivative liabilities⁽²⁾		37		35		72

Noncurrent Liabilities
Commodity		2		—		2
Interest rate		—		3		3

Total noncurrent derivative liabilities⁽³⁾		2		3		5

Total derivative liabilities	$	39	$	38	$	77

December 31, 2011
ASSETS
Current Assets
Commodity	$	—	$	2	$	2

Total current derivative assets⁽¹⁾		—		2		2

Total derivative assets	$	—	$	2	$	2

LIABILITIES
Current Liabilities
Commodity	$	14	$	31	$	45
Interest rate		53		37		90

Total current derivative liabilities⁽²⁾		67		68		135

Noncurrent Liabilities
Commodity		2		—		2
Interest rate		—		10		10

Total noncurrent derivative liabilities⁽³⁾		2		10		12

Total derivative liabilities	$	69	$	78	$	147

(1)	Current derivative assets are presented in other current assets in Virginia Power’s Consolidated Balance Sheets.

(2)	Current derivative liabilities are presented in other current liabilities in Virginia Power’s Consolidated Balance Sheets.

(3)	Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in Virginia Power’s Consolidated Balance Sheets.

PAGE 29

The following tables present the gains and losses on Virginia Power’s derivatives, as well as where the associated activity is presented in its Consolidated Balance Sheets and Statements of Income:


Derivatives in cash flow hedging relationships	Amount of Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)⁽¹⁾			Amount of Gain (Loss) Reclassified from AOCI to Income			Increase (Decrease) in Derivatives Subject to Regulatory Treatment⁽²⁾
(millions)
Three Months Ended March 31, 2012
Derivative Type and Location of Gains (Losses)
Commodity:
Electric fuel and other energy-related purchases				$	(2	)

Total commodity	$	(2	)		(2	)	$	(1	)

Interest rate⁽³⁾		1			—			27

Total	$	(1	)	$	(2	)	$	26

Three Months Ended March 31, 2011
Derivative Type and Location of Gains (Losses)
Commodity:
Purchased electric capacity				$	1

Total commodity	$	—			1		$	(5	)

Interest rate⁽³⁾		—			—			(1	)

Total	$	—		$	1		$	(6	)

(1)	Amounts deferred into AOCI have no associated effect in Virginia Power’s 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 Virginia Power’s Consolidated Statements of Income.

(3)	Amounts are recorded in interest and related charges in Virginia Power’s Consolidated Statements of Income.


	Amount of Gain (Loss) Recognized in Income on Derivatives⁽¹⁾
	Three Months Ended March 31,
Derivatives not designated as hedging instruments	2012			2011
(millions)
Derivative Type and Location of Gains (Losses)
Commodity⁽²⁾	$	(27	)	$	16
Interest rate⁽³⁾		(2	)		—

Total	$	(29	)	$	16

(1)	Includes derivative activity amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in Virginia Power’s Consolidated Statements of Income.

(2)	Amounts are recorded in electric fuel and other energy-related purchases in Virginia Power’s Consolidated Statements of Income.

(3)	Amounts are recorded in interest and related charges in Virginia Power’s Consolidated Statements of Income.

PAGE 30

Note 8. Investments

Dominion

Equity and Debt Securities

Rabbi Trust Securities

Marketable equity and debt securities and cash equivalents held in Dominion’s rabbi trusts and classified as trading totaled $95 million and $90 million at March 31, 2012 and December 31, 2011, respectively. Net unrealized gains on trading securities totaled $4 million and $3 million for the three months ended March 31, 2012 and 2011, respectively. Cost method investments held in Dominion’s rabbi trusts totaled $16 million and $17 million at March 31, 2012 and December 31, 2011, respectively.

PAGE 31

Decommissioning Trust Securities

Dominion holds marketable equity and debt securities (classified as available-for-sale), cash equivalents and cost method investments in nuclear decommissioning trust funds to fund future decommissioning costs for its nuclear plants. Dominion’s decommissioning trust funds are summarized below.


	Amortized Cost		Total Unrealized Gains⁽¹⁾		Total Unrealized Losses ⁽¹⁾			Fair Value
(millions)
March 31, 2012
Marketable equity securities
U.S.:
Large Cap	$	1,178	$	724	$	—		$	1,902
Other		38		15		—			53
Marketable debt securities:
Corporate bonds		296		22		(1	)		317
U.S. Treasury securities and agency debentures		459		18		(1	)		476
State and municipal		267		21		—			288
Other		19		1		—			20
Cost method investments		117		—		—			117
Cash equivalents and other⁽²⁾		58		—		—			58

Total	$	2,432	$	801	$	(2	)⁽³⁾	$	3,231

December 31, 2011
Marketable equity securities:
U.S.:
Large Cap	$	1,152	$	537	$	—		$	1,689
Other		36		10		—			46
Marketable debt securities:
Corporate bonds		314		19		(1	)		332
U.S. Treasury securities and agency debentures		437		20		(1	)		456
State and municipal		264		24		—			288
Other		23		1		—			24
Cost method investments		118		—		—			118
Cash equivalents and other⁽²⁾		46		—		—			46

Total	$	2,390	$	611	$	(2	)⁽³⁾	$	2,999

(1)	Included in AOCI and the decommissioning trust regulatory liability.

(2)	Includes pending purchases of securities of $20 million and $11 million at March 31, 2012 and December 31, 2011, respectively.

(3)	The fair value of securities in an unrealized loss position was $192 million and $164 million at March 31, 2012 and December 31, 2011, respectively.

PAGE 32

The fair value of Dominion’s marketable debt securities held in nuclear decommissioning trust funds at March 31, 2012 by contractual maturity is as follows:


	Amount
(millions)
Due in one year or less	$	62
Due after one year through five years		324
Due after five years through ten years		338
Due after ten years		377

Total	$	1,101

Presented below is selected information regarding Dominion’s marketable equity and debt securities held in nuclear decommissioning trust funds.


	Three Months Ended March 31,
	2012		2011
(millions)
Proceeds from sales	$	415	$	502
Realized gains⁽¹⁾		28		14
Realized losses⁽¹⁾		4		8

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

Other-than-temporary impairment losses on investments held in nuclear decommissioning trust funds for Dominion were not material for the three months ended March 31, 2012 and 2011.

PAGE 33

Virginia Power

Decommissioning Trust Securities

Virginia Power holds marketable equity and debt securities (classified as available-for-sale), cash equivalents and cost method investments in nuclear decommissioning trust funds to fund future decommissioning costs for its nuclear plants. Virginia Power’s decommissioning trust funds are summarized below.


	Amortized Cost		Total Unrealized Gains⁽¹⁾		Total Unrealized Losses⁽¹⁾			Fair Value
(millions)
March 31, 2012
Marketable equity securities:
U.S.:
Large Cap	$	469	$	294	$	—		$	763
Other		19		8		—			27
Marketable debt securities:
Corporate bonds		185		13		(1	)		197
U.S. Treasury securities and agency debentures		185		4		(1	)		188
State and municipal		121		8		—			129
Other		12		1		—			13
Cost method investments		117		—		—			117
Cash equivalents and other⁽²⁾		33		—		—			33

Total	$	1,141	$	328	$	(2	)⁽³⁾	$	1,467

December 31, 2011
Marketable equity securities
U.S.:
Large Cap	$	460	$	218	$	—		$	678
Other		18		5		—			23
Marketable debt securities:
Corporate bonds		204		11		(1	)		214
U.S. Treasury securities and agency debentures		166		4		—			170
State and municipal		114		10		—			124
Other		16		1		(1	)		16
Cost method investments		118		—		—			118
Cash equivalents and other⁽²⁾		27		—		—			27

Total	$	1,123	$	249	$	(2	)⁽³⁾	$	1,370

(1)	Included in AOCI and the decommissioning trust regulatory liability.

(2)	Includes pending purchases of securities of $8 million and $13 million at March 31, 2012 and December 31, 2011, respectively.

(3)	The fair value of securities in an unrealized loss position was $115 million and $99 million at March 31, 2012 and December 31, 2011, respectively.

The fair value of Virginia Power’s debt securities at March 31, 2012 by contractual maturity is as follows:


	Amount
(millions)
Due in one year or less	$	2
Due after one year through five years		162
Due after five years through ten years		199
Due after ten years		164

Total	$	527

PAGE 34

Presented below is selected information regarding Virginia Power’s marketable equity and debt securities.


	Three Months Ended March 31,
	2012		2011
(millions)
Proceeds from sales	$	191	$	343
Realized gains⁽¹⁾		11		5
Realized losses⁽¹⁾		2		4

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

Other-than-temporary impairment losses on investments for Virginia Power were not material for the three months ended March 31, 2012 and 2011.

Note 9. Regulatory Matters

Regulatory Matters Involving Potential Loss Contingencies

As a result of issues generated in the ordinary course of business, Dominion and Virginia Power 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 matters for which the Companies cannot estimate a range of possible loss, 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 for which 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. This estimated range is based on currently available information and involves elements of judgment and significant uncertainties. This estimated range of possible loss does 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 Dominion’s or Virginia Power’s financial position, liquidity or results of operations.

FERC - Electric

Under the Federal Power Act, FERC regulates wholesale sales and transmission of electricity in interstate commerce by public utilities. Virginia Power purchases and sells electricity in the PJM wholesale market and Dominion’s merchant generators sell electricity in the PJM, MISO and ISO-NE wholesale markets under Dominion’s market-based sales tariffs authorized by FERC. In addition, Virginia Power has FERC approval of a tariff to sell wholesale power at capped rates based on its embedded cost of generation. This cost-based sales tariff could be used to sell to loads within or outside Virginia Power’s service territory. Any such sales would be voluntary.

Rates

In April 2008, FERC granted an application for Virginia Power’s electric transmission operations to establish a forward-looking formula rate mechanism that updates transmission rates on an annual basis and approved an ROE of 11.4%, effective as of January 1, 2008. The formula rate is designed to recover the expected revenue requirement for each calendar year and is updated based on actual costs. The FERC-approved formula method, which is based on projected costs, allows Virginia Power to earn a current return on its growing investment in electric transmission infrastructure.

In July 2008, Virginia Power filed an application with FERC requesting a revision to its revenue requirement to reflect an additional ROE incentive adder for eleven electric transmission enhancement projects. Under the proposal, the cost of transmission service would increase to include an ROE incentive adder for each of the eleven projects, beginning the date each project enters commercial operation (but not before January 1, 2009). Virginia Power proposed an incentive of 1.5% for four of the projects and an incentive of 1.25% for the other seven projects. In August 2008, FERC approved the proposal, effective September 1, 2008. All eleven projects are currently expected to be completed by the end of 2012. Numerous parties sought rehearing of the FERC order in August 2008, and rehearing is pending. Although Virginia Power cannot predict the outcome of the rehearing, it is not expected to have a material effect on results of operations.

In March 2010, ODEC and NCEMC filed a complaint with FERC against Virginia Power claiming that approximately $223 million in transmission costs related to specific projects were unjust, unreasonable and unduly discriminatory or preferential and should be excluded from Virginia Power’s transmission formula rate. ODEC and NCEMC requested that FERC establish procedures to determine the amount of costs for each applicable project that should be excluded from Virginia Power’s rates. In October 2010, FERC issued an order dismissing the complaint in part and established hearings and settlement procedures on the

PAGE 35

remaining part of the complaint. In February 2012, Virginia Power submitted to FERC a settlement agreement to resolve all issues set for hearing. All transmission customer parties to the proceeding joined the settlement. The Virginia Commission, North Carolina Commission and Public Staff of the North Carolina Commission, while not parties to the settlement, have agreed to not oppose the settlement. If accepted by FERC, the settlement provides for payment by Virginia Power to the transmission customer parties collectively of $250,000 per year for ten years and resolves all matters other than the incremental cost of certain underground transmission facilities, which will be set for briefing. While Virginia Power cannot predict the outcome of the briefing, it is not expected to have a material effect on results of operations.

PJM

In November 2011, PJM issued a formal notification that it would recalculate certain ancillary service revenues that had previously been paid during 2009, 2010 and 2011. Also in November 2011, PJM requested FERC permission to suspend its rebilling and repayment obligations associated with the recalculation of such revenues and petitioned FERC to establish a proceeding to determine the appropriate recalculations for the revenues during this period. In December 2011, FERC permitted the suspension of rebilling and repayment by PJM, subject to the outcome of FERC’s proceedings to determine the appropriate revenue recalculation. In April 2012, FERC issued an Order Establishing Hearing and Settlement Judge Procedures to address the appropriate recalculation of the ancillary service credits PJM will be required to collect from Virginia Power. Virginia Power has accrued a liability of $36 million as of March 31, 2012 for estimated future billing adjustments from PJM related to the ancillary service revenues.

Other Regulatory Matters

Other than the following matters, there have been no significant developments regarding the pending regulatory matters disclosed in Note 14 to the Consolidated Financial Statements in Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2011.

Virginia Regulation

Biennial Review

In November 2011, the Virginia Commission issued the Biennial Review Order, which included a determination that Virginia Power’s new authorized ROE is 10.9%, inclusive of a performance incentive of 50 basis points for meeting certain RPS targets. In December 2011, Virginia Power filed a petition with the Virginia Commission seeking rehearing or reconsideration of the Biennial Review Order, to confirm the effective date of the newly authorized 10.9% base ROE. Virginia Power’s petition requested the Virginia Commission to confirm that the 10.9% ROE authorized in the Biennial Review Order would apply prospectively, effective following the date of the Biennial Review Order on November 30, 2011, and that Virginia Power’s previously-approved 11.9% base ROE authorized in the Virginia Settlement Approval Order would be used to measure base rate earnings for the period January 1, 2011 through November 30, 2011. In March 2012, the Virginia Commission issued an order denying Virginia Power’s petition seeking rehearing or reconsideration. Contrary to Virginia Power’s position, the Virginia Commission ruled that the new 10.9% ROE will be used to measure earnings for the entire 2011-2012 test period in the next biennial review in 2013. Also in March 2012, Virginia Power filed Petitions for Appeal with the Supreme Court of Virginia regarding the Biennial Review Order and the March 2012 order.

In the Biennial Review Order, the Virginia Commission declined to award a performance incentive for generating plant performance, customer service or operating efficiency in connection with the 2009-2010 biennial review. Instead, in March 2012, the Virginia Commission issued an order initiating a rulemaking proceeding to develop specific performance metrics and nationally recognized standards for determining positive or negative performance incentives for electric utilities. Such incentive criteria would be applied in future biennial review proceedings. Virginia Power expects the Staff of the Virginia Commission to file proposed rules and regulations for performance incentives in September 2012.

Generation Riders R and S

In March 2012, the Virginia Commission approved annual updates for Riders R and S for the April 1, 2012 to March 31, 2013 rate year, utilizing an 11.4% ROE (inclusive of a 100 basis point statutory enhancement) consistent with the base ROE authorized in the Biennial Review Order. The Virginia Commission’s approvals authorized an approximately $74 million revenue requirement for Rider R, and an approximately $226 million revenue requirement for Rider S, comprised of approximately $52 million for the pre-commercial operation period and approximately $174 million for the commercial operation period.

Generation Rider B

In March 2012, the Virginia Commission approved the conversion of the Altavista, Hopewell, and Southampton power stations to biomass. The conversions will increase Dominion’s renewable generation by more than 150 MW. The conversions are expected to be completed by the end of 2013.

PAGE 36

As part of its approval, the Virginia Commission also approved Rider B. The approved revenue requirement for Rider B is approximately $6 million for the April 1, 2012 to March 31, 2013 rate year, utilizing a 12.4% ROE (inclusive of a 200 basis point statutory enhancement) consistent with the base ROE authorized in the Biennial Review Order. The renewable generating unit statutory enhancement of 200 basis points will apply during construction and the first five years of the service lives of the converted facilities.

North Carolina Regulation

In March 2012, Virginia Power filed an application with the North Carolina Commission to increase base non-fuel revenues by approximately $64 million, with January 1, 2013 as the proposed effective date for the permanent rate revision. Virginia Power plans to file an application in August 2012 to decrease its fuel rates. The net effect of the proposed change in base rates and current estimate of fuel charges would be a net revenue increase of approximately $37 million. Virginia Power intends to implement rates on a temporary basis, subject to refund, on November 1, 2012, as permitted by North Carolina law. Virginia Power expects to receive an order from the North Carolina Commission in December 2012.

Ohio Regulation

In February 2012, East Ohio submitted an application with the Ohio Commission to adjust the cost recovery charge for costs associated with PIR investments for the six months ended December 31, 2011. The filing was made in accordance with changes to the PIR program approved by the Ohio Commission in August 2011 and effects a transition from a fiscal year ending June 30 to a calendar year for annual filings thereafter. The application includes total gross plant investment for the six-month July 1-December 31, 2011 transition period of $73 million, cumulative gross plant investment of $362 million, and a revenue requirement of $47 million. A stipulation was submitted by East Ohio, the Staff of the Ohio Commission and the Ohio Consumers’ Counsel that supports the rates filed by East Ohio. The Ohio Commission issued an order approving the stipulation in April 2012.

FERC Gas - Cove Point Rate Case

In May 2011, Cove Point filed a general rate case for its FERC-jurisdictional services, with proposed rates to be effective July 1, 2011. In June 2011, FERC accepted a July 1, 2011 effective date for all proposed rates but two, for which the effective date was suspended from July 1 to December 1, 2011. In December 2011, Cove Point, FERC trial staff and the other active parties in the rate case reached a settlement in principle on all issues set for hearing by FERC, as well as on all outstanding proposed tariff changes filed in May 2011. In April 2012, Cove Point filed a stipulation and agreement resolving all outstanding issues in the rate case and establishing the mechanism for operational purchases of LNG. The settlement is subject to FERC approval. Settlement rates and tariff changes will be effective retroactive to April 1, 2012, once the FERC order approving the settlement is no longer subject to rehearing or appeal. Cove Point and settling customers will be subject to a rate moratorium through December 31, 2016. Cove Point is required to file its next rate case with rates to be effective January 1, 2017.

PAGE 37

Note 10. Variable Interest Entities

As discussed in Note 16 to the Consolidated Financial Statements in Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2011, certain variable pricing terms in some of the Companies’ long-term power and capacity contracts cause them to be considered variable interests in the counterparties.

Virginia Power has long-term power and capacity contracts with four non-utility generators with an aggregate summer generation capacity of approximately 870 MW. These contracts contain certain variable pricing mechanisms in the form of partial fuel reimbursement that Virginia Power considers to be variable interests. After an evaluation of the information provided by these entities, Virginia Power was unable to determine whether they were VIEs. However, the information they provided, as well as Virginia Power’s knowledge of generation facilities in Virginia, enabled Virginia Power to conclude that, if they were VIEs, it would not be the primary beneficiary. This conclusion reflects Virginia Power’s determination that its variable interests do not convey the power to direct the most significant activities that impact the economic performance of the entities during the remaining terms of Virginia Power’s contracts and for the years the entities are expected to operate after its contractual relationships expire. The contracts expire at various dates ranging from 2015 to 2021. Virginia Power is not subject to any risk of loss from these potential VIEs other than its remaining purchase commitments which totaled $1.2 billion as of March 31, 2012. Virginia Power paid $55 million and $53 million for electric capacity and $19 million and $39 million for electric energy to these entities in the three months ended March 31, 2012 and 2011, respectively.

Virginia Power purchased shared services from DRS, an affiliated VIE, of approximately $96 million and $93 million for the three months ended March 31, 2012 and 2011, respectively. Virginia Power determined that it is not the most closely associated entity with DRS and therefore not the primary beneficiary. DRS provides accounting, legal, finance and certain administrative and technical services to all Dominion subsidiaries, including Virginia Power. Virginia Power has no obligation to absorb more than its allocated share of DRS costs.

See Note 16 to the Consolidated Financial Statements in Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2011 for additional information about consolidated VIEs.

PAGE 38

Note 11. Significant Financing Transactions

Credit Facilities and Short-term Debt

Dominion and Virginia Power 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 utilizes cash and letters of credit to fund collateral requirements. Collateral requirements are impacted by commodity prices, hedging levels, Dominion’s credit ratings and the credit quality of its counterparties.

At March 31, 2012, Dominion’s commercial paper and letters of credit outstanding, as well as capacity available under credit facilities, were as follows:


	Facility Limit		Outstanding Commercial Paper		Outstanding Letters of Credit		Facility Capacity Available
(millions)
Joint revolving credit facility⁽¹⁾	$	3,000	$	1,057	$	—	$	1,943
Joint revolving credit facility⁽²⁾		500		—		36		464

Total	$	3,500	$	1,057	$	36	$	2,407

(1)	This credit facility has a maturity date of September 2016, and can be used to support bank borrowings and the issuance of commercial paper, as well as to support up to $1.5 billion of letters of credit.

(2)	This credit facility has a maturity date of September 2016, and can be used to support bank borrowings, commercial paper and letter of credit issuances.

Virginia Power’s short-term financing is supported by two joint revolving credit facilities with Dominion. These credit facilities are being used for working capital, as support for the combined commercial paper programs of Dominion and Virginia Power and for other general corporate purposes.

At March 31, 2012, Virginia Power’s share of commercial paper and letters of credit outstanding, as well as its capacity available under its joint credit facilities with Dominion were as follows:


	Facility Sub-limit		Outstanding Commercial Paper		Outstanding Letters of Credit		Facility Capacity Available
(millions)
Joint revolving credit facility⁽¹⁾	$	1,000	$	255	$	—	$	745
Joint revolving credit facility⁽²⁾		250		—		15		235

Total	$	1,250	$	255	$	15	$	980

(1)

This credit facility has a maturity date of September 2016, and can be used to support bank borrowings and the issuance of commercial paper, as well as to support up to $1.5 billion (or the sub-limit, whichever is less) of letters of credit. Virginia Power’s current sub-limit under this credit facility can be increased or decreased multiple times per year.

(2)	This credit facility has a maturity date of September 2016, and can be used to support bank borrowings, commercial paper and letter of credit issuances. Virginia Power’s current sub-limit under this credit facility can be increased or decreased multiple times per year.

In addition to the credit facility commitments mentioned above, Virginia Power also has a $120 million credit facility with a maturity date of September 2016. This facility supports certain tax-exempt financings of Virginia Power.

Long-term Debt

In January 2012, Virginia Power issued $450 million of 2.95% senior notes that mature in 2022.

Convertible Securities

At March 31, 2012, Dominion had $137 million of outstanding contingent convertible senior notes that are convertible by holders into a combination of cash and shares of Dominion’s common stock under certain circumstances. The conversion feature requires that the principal amount of each note be repaid in cash, while amounts payable in excess of the principal amount will be paid in common stock. The conversion rate is subject to adjustment upon certain events such as subdivisions, splits, combinations of common stock or the issuance to all common stock holders of certain common stock rights, warrants or options and certain dividend increases. As of March 31, 2012, the conversion rate has been adjusted, primarily due to individual dividend payments above the level paid at issuance, to 29.0360 shares of common stock per $1,000 principal amount of senior notes, which represents a conversion price of $34.44.

PAGE 39

The senior notes are eligible for conversion during any calendar quarter when the closing price of Dominion’s common stock was equal to or higher than 120% of the conversion price for at least 20 out of the last 30 consecutive trading days of the preceding quarter. During the three months ended March 31, 2012, the senior notes were eligible for conversion and approximately $6 million of the notes were converted by holders. The senior notes are eligible for conversion during the second quarter of 2012.

Enhanced Junior Subordinated Notes

In February 2012, Dominion launched a tender offer to purchase up to $150 million of the September 2006 hybrids, which amount could be increased or decreased at Dominion’s sole discretion. In the first quarter of 2012, Dominion purchased and canceled approximately $86 million of the September 2006 hybrids primarily as a result of this tender offer, which expired on March 23, 2012. All purchases were conducted in compliance with the RCC. From time to time, Dominion may reduce its outstanding debt and level of interest expense through redemption of debt securities prior to maturity and repurchases in the open market, in privately negotiated transactions, through additional tender offers or otherwise.

PAGE 40

Note 12. Commitments and Contingencies

As a result of issues generated in the ordinary course of business, Dominion and Virginia Power 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, and/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 matters for which the Companies cannot estimate a range of possible loss, 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 for which 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. Estimated ranges of loss are inclusive of legal fees and net of any anticipated insurance recoveries. This estimated range is based on currently available information and involves elements of judgment and significant uncertainties. This estimated range of possible loss does 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 Dominion’s or Virginia Power’s financial position, liquidity or results of operations.

Environmental Matters