Edgar Filing: DOMINION RESOURCES INC /VA/

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

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, 2015

¨	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
000-55337	VIRGINIA ELECTRIC AND POWER COMPANY	54-0418825
000-55338	DOMINION GAS HOLDINGS, LLC	46-3639580

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 ¨
Dominion Gas Holdings, LLC 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 ¨
Dominion Gas Holdings, LLC 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

Dominion Gas Holdings, LLC

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
Dominion Gas Holdings, LLC Yes ¨ No x

At March 31, 2015, the latest practicable date for determination, Dominion Resources, Inc. had 589,330,633 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. Dominion Resources, Inc. holds all of the membership interests of Dominion Gas Holdings, LLC.

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

VIRGINIA ELECTRIC AND POWER COMPANY AND DOMINION GAS HOLDINGS, LLC MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND ARE FILING THIS FORM 10-Q UNDER THE REDUCED DISCLOSURE FORMAT.

COMBINED INDEX


		Page Number
	Glossary of Terms		3

	PART I. Financial Information

Item 1.	Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		70
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		80
Item 4.	Controls and Procedures		82

	PART II. Other Information

Item 1.	Legal Proceedings		83
Item 1A.	Risk Factors		83
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		83
Item 6.	Exhibits		84

GLOSSARY OF TERMS

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


Abbreviation or Acronym		Definition

2013 Biennial Review Order		Order issued by the Virginia Commission in November 2013 concluding the 2011-2012 biennial review of Virginia Power’s base rates, terms and conditions

2013 Equity Units		Dominion’s 2013 Series A Equity Units and 2013 Series B Equity Units issued in June 2013

2014 Equity Units		Dominion’s 2014 Series A Equity Units issued in July 2014

AFUDC		Allowance for funds used during construction

AOCI		Accumulated other comprehensive income (loss)

AROs		Asset retirement obligations

ARP		Acid Rain Program, a market-based initiative for emissions allowance trading, established pursuant to Title IV of the CAA

ATEX line		Appalachia to Texas Express ethane line

Atlantic Coast Pipeline		Atlantic Coast Pipeline, LLC, a limited liability company owned by Dominion, Duke Energy Corporation, Piedmont Natural Gas Company, Inc. and AGL Resources Inc.

BACT		Best available control technology

bcf		Billion cubic feet

Bear Garden		A 590 MW combined cycle, natural gas-fired power station in Buckingham County, Virginia

Blue Racer		Blue Racer Midstream, LLC, a joint venture between Dominion and Caiman

BOD		Board of Directors

BP		BP Wind Energy North America Inc.

BREDL		Blue Ridge Environmental Defense League

Bremo		Bremo power station

Brunswick County		A 1,358 MW combined cycle, natural gas-fired power station under construction in Brunswick County, Virginia

CAA		Clean Air Act

Caiman		Caiman Energy II, LLC

CAIR		Clean Air Interstate Rule

CCR		Coal combustion residual

CEO		Chief Executive Officer

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

CFO		Chief Financial Officer

Chesapeake		Chesapeake power station

CO₂		Carbon dioxide

COL		Combined Construction Permit and Operating License

Companies		Dominion, Virginia Power and Dominion Gas, 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

CPCN		Certificate of Public Convenience and Necessity

CSAPR		Cross State Air Pollution Rule

CWA		Clean Water Act

D.C.		District of Columbia

DCGT		Dominion Carolina Gas Transmission, LLC (successor by statutory conversion to and formerly known as Carolina Gas Transmission Corporation)

DEI		Dominion Energy, Inc.

Dominion		The legal entity, Dominion Resources, Inc., one or more of its consolidated subsidiaries (other than Virginia Power and Dominion Gas) or operating segments or the entirety of Dominion Resources, Inc. and its consolidated subsidiaries

Dominion Gas		The legal entity, Dominion Gas Holdings, LLC, one or more of its consolidated subsidiaries or operating segment, or the entirety of Dominion Gas Holdings, LLC and its consolidated subsidiaries

Dominion Iroquois		Dominion Iroquois, Inc., which holds a 24.72% general partnership interest in Iroquois


Abbreviation or Acronym		Definition

Dominion Midstream		The legal entity, Dominion Midstream Partners, LP, its consolidated subsidiary Cove Point Holdings, or the entirety of Dominion Midstream Partners, LP, and its consolidated subsidiary

Dominion NGL Pipelines, LLC		The initial owner of the 58-mile G-150 pipeline project, which is designed to transport approximately 27,000 barrels per day of NGLs from Natrium to an interconnect with the ATEX line of Enterprise near Follansbee, West Virginia

DRS		Dominion Resources Services, Inc.

DSM		Demand-side management

Dth		Dekatherm

DTI		Dominion Transmission, Inc.

DVP		Dominion Virginia Power operating segment

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

Enterprise		Enterprise Product Partners, L.P.

EPA		Environmental Protection Agency

EPC		Engineering, procurement and construction

EPS		Earnings per share

FERC		Federal Energy Regulatory Commission

Fowler Ridge		A wind-turbine facility joint venture between Dominion and BP in Benton County, Indiana

FTRs		Financial transmission rights

GAAP		U.S. generally accepted accounting principles

Gal		Gallon

GHG		Greenhouse gas

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

IRCA		Intercompany revolving credit agreement

Iroquois		Iroquois Gas Transmission System L.P.

ISO		Independent system operator

ISO-NE		ISO New England

Kewaunee		Kewaunee nuclear power station

kV		Kilovolt

Liquefaction Project		A natural gas export/liquefaction facility currently under development by Cove Point

LNG		Liquefied natural gas

Maryland Commission		Public Service Commission of Maryland

MATS		Utility Mercury and Air Toxics Standard Rule

MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations

MGD		Million gallons a day

Millstone		Millstone nuclear power station

MISO		Midcontinent Independent Transmission System Operator, Inc.

Moody’s		Moody’s Investors Service

MW		Megawatt

MWh		Megawatt hour

Natrium		A natural gas and fractionation facility located in Natrium, West Virginia, owned by Blue Racer

NCEMC		North Carolina Electric Membership Corporation

NedPower		A wind-turbine facility joint venture between Dominion and Shell in Grant County, West Virginia

NGLs		Natural gas liquids

North Anna		North Anna nuclear power station

Northern System		Collection of approximately 131 miles of various diameter natural gas pipelines in Ohio

NO_x		Nitrogen oxide

NPDES		National Pollutant Discharge Elimination System

NRC		Nuclear Regulatory Commission

NSPS		New Source Performance Standards

NYSE		New York Stock Exchange


Abbreviation or Acronym		Definition

ODEC		Old Dominion Electric Cooperative

Ohio Commission		Public Utilities Commission of Ohio

Order 1000		Order issued by FERC adopting new requirements for electric transmission planning, cost allocation and development

PIPP		Percentage of Income Payment Plan deployed by East Ohio

PIR		Pipeline Infrastructure Replacement Program deployed by East Ohio

PJM		PJM Interconnection, L.L.C.

Possum Point		Possum Point power station

ppb		Parts-per-billion

PSD		Prevention of Significant Deterioration

Rider B		A rate adjustment clause associated with the recovery of costs related to the conversion of three of Virginia Power’s coal-fired power stations to biomass

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

Rider 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

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

ROE		Return on equity

RTO		Regional transmission organization

SEC		Securities and Exchange Commission

SELC		Southern Environmental Law Center

Shell		Shell WindEnergy, Inc.

SO₂		Sulfur dioxide

Standard & Poor’s		Standard & Poor’s Ratings Services, a division of McGraw Hill Financial, Inc.

U.S.		United States of America

UAO		Unilateral Administrative Order

VDEQ		Virginia Department of Environmental Quality

VEBA		Voluntary Employees’ Beneficiary Association

VIE		Variable interest entity

Virginia City Hybrid Energy Center		A 600 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 segments or the entirety of Virginia Power and its consolidated subsidiaries

WVDEP		West Virginia Department of Environmental Protection

Yorktown		Yorktown power station

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended March 31,
	2015		2014
(millions, except per share amounts)
Operating Revenue	$	3,409	$	3,630

Operating Expenses
Electric fuel and other energy-related purchases		953		1,334
Purchased electric capacity		94		88
Purchased gas		250		540
Other operations and maintenance		602		425
Depreciation, depletion and amortization		343		308
Other taxes		165		167

Total operating expenses		2,407		2,862

Income from operations		1,002		768

Other income		60		40
Interest and related charges		223		237

Income from continuing operations including noncontrolling interests before income tax expense		839		571
Income tax expense		299		186

Net Income Including Noncontrolling Interests		540		385
Noncontrolling Interests		4		6

Net Income Attributable to Dominion	$	536	$	379

Earnings Per Common Share - Basic and Diluted
Net income attributable to Dominion	$	0.91	$	0.65

Dividends declared per common share	$	0.6475	$	0.6000

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

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
	2015			2014
(millions)
Net income including noncontrolling interests	$	540		$	385
Other comprehensive income (loss), net of taxes:
Net deferred losses on derivatives-hedging activities⁽¹⁾		(58	)		(150	)
Changes in unrealized net gains on investment securities⁽²⁾		15			29
Changes in unrecognized pension and other postretirement benefit costs⁽³⁾		—			(4	)
Amounts reclassified to net income:
Net derivative losses-hedging activities⁽⁴⁾		59			160
Net realized gains on investment securities⁽⁵⁾		(21	)		(11	)
Net pension and other postretirement benefit costs⁽⁶⁾		13			8
Changes in other comprehensive loss from equity method investees		(1	)		(7	)

Total other comprehensive income		7			25

Comprehensive income including noncontrolling interests		547			410
Comprehensive income attributable to noncontrolling interests		4			6

Comprehensive income attributable to Dominion	$	543		$	404

(1)	Net of $41 million and $80 million tax for the three months ended March 31, 2015 and 2014, respectively.

(2)	Net of $(11) million and $(1) million tax for the three months ended March 31, 2015 and 2014, respectively.

(3)	Net of $ million and $(4) million tax for the three months ended March 31, 2015 and 2014, respectively.

(4)	Net of $(39) million and $(100) million tax for the three months ended March 31, 2015 and 2014, respectively.

(5)	Net of $12 million and $7 million tax for the three months ended March 31, 2015 and 2014, respectively

(6)	Net of $(9) million and $(6) million tax for the three months ended March 31, 2015 and 2014, respectively.

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

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31, 2015			December 31, 2014⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	275		$	318
Customer receivables (less allowance for doubtful accounts of $34 at both dates)		1,589			1,514
Other receivables (less allowance for doubtful accounts of $2 and $3)		113			119
Inventories		1,227			1,410
Prepayments		163			167
Deferred income taxes		673			800
Other		1,013			1,287

Total current assets		5,053			5,615

Investments
Nuclear decommissioning trust funds		4,244			4,196
Investment in equity method affiliates		1,085			1,081
Other		288			284

Total investments		5,617			5,561

Property, Plant and Equipment
Property, plant and equipment		52,720			51,406
Accumulated depreciation, depletion and amortization		(15,494	)		(15,136	)

Total property, plant and equipment, net		37,226			36,270

Deferred Charges and Other Assets
Goodwill		3,294			3,044
Pension and other postretirement benefit assets		979			956
Regulatory assets		1,665			1,642
Other		1,322			1,239

Total deferred charges and other assets		7,260			6,881

Total assets	$	55,156		$	54,327

(1)	Dominion’s Consolidated Balance Sheet at December 31, 2014 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.

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)


	March 31, 2015			December 31, 2014⁽¹⁾
(millions)
LIABILITIES AND EQUITY
Current Liabilities
Securities due within one year	$	1,822		$	1,375
Short-term debt		3,200			2,775
Accounts payable		945			952
Derivative liabilities		600			591
Other		1,454			1,505

Total current liabilities		8,021			7,198

Long-Term Debt
Long-term debt		17,896			18,348
Junior subordinated notes		1,373			1,374
Remarketable subordinated notes		2,084			2,083

Total long-term debt		21,353			21,805

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		7,577			7,444
Asset retirement obligations		1,645			1,633
Regulatory liabilities		2,119			1,991
Other		2,025			2,299

Total deferred credits and other liabilities		13,366			13,367

Total liabilities		42,740			42,370

Commitments and Contingencies (see Note 15)

Equity
Common stock – no par⁽²⁾		6,170			5,876
Retained earnings		6,250			6,095
Accumulated other comprehensive loss		(409	)		(416	)

Total common shareholders’ equity		12,011			11,555

Noncontrolling interests		405			402

Total equity		12,416			11,957

Total liabilities and equity	$	55,156		$	54,327

(1)	Dominion’s Consolidated Balance Sheet at December 31, 2014 has been derived from the audited Consolidated Financial Statements at that date.

(2)	1 billion shares authorized; 589 million shares and 585 million shares outstanding at March 31, 2015 and December 31, 2014, respectively.

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

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Three Months Ended March 31,	2015			2014
(millions)
Operating Activities
Net income including noncontrolling interests	$	540		$	385
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
Depreciation, depletion and amortization (including nuclear fuel)		414			378
Deferred income taxes and investment tax credits		277			232
Gains on the sale of assets and businesses		(70	)		(159	)
Other adjustments		(40	)		(34	)
Changes in:
Accounts receivable		(65	)		(183	)
Inventories		148			163
Deferred fuel and purchased gas costs, net		(33	)		(304	)
Accounts payable		(85	)		53
Accrued interest, payroll and taxes		(15	)		(55	)
Margin deposit assets and liabilities		111			105
Other operating assets and liabilities		(51	)		172

Net cash provided by operating activities		1,131			753

Investing Activities
Plant construction and other property additions (including nuclear fuel)		(1,014	)		(1,120	)
Acquisition of solar development projects		—			(47	)
Acquisition of DCGT		(495	)		—
Proceeds from sales of securities		337			442
Purchases of securities		(304	)		(441	)
Proceeds from the sale of electric retail energy marketing business		—			187
Proceeds from the sale of assets to Blue Racer		—			84
Proceeds from assignments of Marcellus acreage		27			—
Other		(50	)		(24	)

Net cash used in investing activities		(1,499	)		(919	)

Financing Activities
Issuance of short-term debt, net		425			45
Issuance of long-term debt		—			1,150
Repayment and repurchase of long-term debt		(3	)		(608	)
Subsidiary preferred stock redemption		—			(125	)
Issuance of common stock		295			—
Common dividend payments		(381	)		(349	)
Distributions to Dominion Midstream public unitholders		(3	)		—
Subsidiary preferred dividend payments		—			(4	)
Other		(8	)		(31	)

Net cash provided by financing activities		325			78

Decrease in cash and cash equivalents		(43	)		(88	)
Cash and cash equivalents at beginning of period		318			316

Cash and cash equivalents at end of period	$	275		$	228

Supplemental Cash Flow Information
Significant noncash investing activities:
Accrued capital expenditures	$	353		$	261

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

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended March 31,
	2015		2014
(millions)
Operating Revenue⁽¹⁾	$	2,137	$	1,983
Operating Expenses
Electric fuel and other energy-related purchases⁽¹⁾		810		650
Purchased electric capacity		94		88
Other operations and maintenance:
Affiliated suppliers		75		71
Other		321		270
Depreciation and amortization		238		218
Other taxes		74		73

Total operating expenses		1,612		1,370

Income from operations		525		613

Other income		15		15
Interest and related charges		108		107

Income before income tax expense		432		521
Income tax expense		163		197

Net Income		269		324
Preferred dividends		—		6

Balance available for common stock	$	269	$	318

(1)	See Note 17 for amounts attributable to affiliates.

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

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
	2015			2014
(millions)
Net income	$	269		$	324
Other comprehensive income (loss), net of taxes:
Net deferred gains (losses) on derivatives-hedging activities⁽¹⁾		(4	)		2
Changes in unrealized net gains on nuclear decommissioning trust funds⁽²⁾		1			2
Amounts reclassified to net income:
Net derivative (gains) losses-hedging activities⁽³⁾		1			(3	)
Net realized gains on nuclear decommissioning trust funds⁽⁴⁾		(1	)		(2	)

Other comprehensive loss		(3	)		(1	)

Comprehensive income	$	266		$	323

(1)	Net of $2 million and $(1) million tax for the three months ended March 31, 2015 and 2014, respectively.

(2)	Net of $(1) million and $(2) million tax for the three months ended March 31, 2015 and 2014, respectively.

(3)	Net of $ million and $2 million tax for the three months ended March 31, 2015 and 2014, respectively.

(4)	Net of $ million and $1 million tax for the three months ended March 31, 2015 and 2014, respectively.

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

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31, 2015			December 31, 2014⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	16		$	15
Customer receivables (less allowance for doubtful accounts of $25 at both dates)		1,018			986
Other receivables (less allowance for doubtful accounts of $1 at both dates)		53			65
Inventories (average cost method)		768			853
Prepayments		38			252
Regulatory assets		339			298
Other⁽²⁾		32			82

Total current assets		2,264			2,551

Investments
Nuclear decommissioning trust funds		1,950			1,930
Other		4			4

Total investments		1,954			1,934

Property, Plant and Equipment
Property, plant and equipment		35,684			35,180
Accumulated depreciation and amortization		(11,255	)		(11,080	)

Total property, plant and equipment, net		24,429			24,100

Deferred Charges and Other Assets
Regulatory assets		464			439
Other⁽²⁾		525			485

Total deferred charges and other assets		989			924

Total assets	$	29,636		$	29,509

(1)	Virginia Power’s Consolidated Balance Sheet at December 31, 2014 has been derived from the audited Consolidated Financial Statements at that date.

(2)	See Note 17 for amounts attributable to affiliates.

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


	March 31, 2015		December 31, 2014⁽¹⁾
(millions)
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
Securities due within one year	$	661	$	211
Short-term debt		1,588		1,361
Accounts payable		456		458
Payables to affiliates		72		92
Affiliated current borrowings		10		427
Accrued interest, payroll and taxes		315		199
Other		505		528

Total current liabilities		3,607		3,276

Long-Term Debt		8,275		8,726

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		4,435		4,415
Asset retirement obligations		854		848
Regulatory liabilities		1,769		1,683
Other⁽²⁾		523		506

Total deferred credits and other liabilities		7,581		7,452

Total liabilities		19,463		19,454

Commitments and Contingencies (see Note 15)
Common Shareholder’s Equity
Common stock – no par⁽³⁾		5,738		5,738
Other paid-in capital		1,113		1,113
Retained earnings		3,275		3,154
Accumulated other comprehensive income		47		50

Total common shareholder’s equity		10,173		10,055

Total liabilities and shareholder’s equity	$	29,636	$	29,509

(1)	Virginia Power’s Consolidated Balance Sheet at December 31, 2014 has been derived from the audited Consolidated Financial Statements at that date.

(2)	See Note 17 for amounts attributable to affiliates.

(3)	500,000 shares authorized; 274,723 shares outstanding at March 31, 2015 and December 31, 2014.

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

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Three Months Ended March 31,	2015			2014
(millions)
Operating Activities
Net income	$	269		$	324
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including nuclear fuel)		281			263
Deferred income taxes and investment tax credits		67			203
Other adjustments		(7	)		(12	)
Changes in:
Accounts receivable		(20	)		(9	)
Inventories		85			91
Prepayments		214			(15	)
Deferred fuel expenses, net (including write-off)		(54	)		(328	)
Accounts payable		3			34
Accrued interest, payroll and taxes		116			10
Other operating assets and liabilities		7			39

Net cash provided by operating activities		961			600

Investing Activities
Plant construction and other property additions		(583	)		(691	)
Purchases of nuclear fuel		(23	)		(68	)
Purchases of securities		(138	)		(215	)
Proceeds from sales of securities		133			204
Other		(11	)		(6	)

Net cash used in investing activities		(622	)		(776	)

Financing Activities
Issuance (repayment) of short-term debt, net		227			(339	)
Issuance (repayment) of affiliated current borrowings, net		(417	)		62
Issuance of long-term debt		—			750
Preferred stock redemption		—			(125	)
Common dividend payments		(149	)		(149	)
Preferred dividend payments		—			(4	)
Other		1			(11	)

Net cash provided by (used in) financing activities		(338	)		184

Increase in cash and cash equivalents		1			8
Cash and cash equivalents at beginning of period		15			16

Cash and cash equivalents at end of period	$	16		$	24

Supplemental Cash Flow Information
Significant noncash investing activities:
Accrued capital expenditures	$	139		$	203

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

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended March 31,
	2015		2014
(millions)
Operating Revenue⁽¹⁾	$	531	$	569

Operating Expenses
Purchased gas⁽¹⁾		74		137
Other energy-related purchases		6		16
Other operations and maintenance:
Affiliated suppliers		21		21
Other⁽²⁾		53		32
Depreciation and amortization		51		47
Other taxes		55		51

Total operating expenses		260		304

Income from operations		271		265

Other income		9		8
Interest and related charges		17		6

Income from operations before income taxes		263		267
Income tax expense		102		103

Net Income	$	161	$	164

(1)	See Note 17 for amounts attributable to related parties.

(2)	Includes gains on the sales of assets to related parties of $59 million in 2014. See Note 10 for more information.

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

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31,
	2015			2014
(millions)
Net income	$	161		$	164
Other comprehensive income (loss), net of taxes:
Net deferred losses on derivatives-hedging activities⁽¹⁾		(4	)		(8	)
Amounts reclassified to net income:
Net derivative losses-hedging activities⁽²⁾		—			5
Net pension and other postretirement benefit costs⁽³⁾		1			1

Other comprehensive loss		(3	)		(2	)

Comprehensive income	$	158		$	162

(1)	Net of $2 million and $5 million tax for the three months ended March 31, 2015 and 2014, respectively.

(2)	Net of $ million and $(3) million tax for the three months ended March 31, 2015 and 2014, respectively.

(3)	Net of $(1) million tax for both the three months ended March 31, 2015 and 2014.

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

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31, 2015			December 31, 2014⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	19		$	9
Customer receivables (less allowance for doubtful accounts of $4 at both dates)⁽²⁾		350			322
Other receivables (less allowance for doubtful accounts of $1 at both dates)		15			19
Affiliated receivables		5			12
Inventories		67			65
Prepayments		64			166
Other⁽²⁾		198			217

Total current assets		718			810

Investments		104			108

Property, Plant and Equipment
Property, plant and equipment		8,993			8,902
Accumulated depreciation and amortization		(2,568	)		(2,538	)

Total property, plant and equipment, net		6,425			6,364

Deferred Charges and Other Assets
Goodwill		542			542
Intangible assets, net		83			79
Regulatory assets		390			379
Pension and other postretirement benefit assets⁽²⁾		1,516			1,486
Other⁽²⁾		81			80

Total deferred charges and other assets		2,612			2,566

Total assets	$	9,859		$	9,848

(1)	Dominion Gas’ Consolidated Balance Sheet at December 31, 2014 has been derived from the audited Consolidated Financial Statements at that date.

(2)	See Note 17 for amounts attributable to related parties.

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

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)


	March 31, 2015			December 31, 2014⁽¹⁾
(millions)
LIABILITIES AND EQUITY
Current Liabilities
Short-term debt	$	280		$	—
Accounts payable		209			247
Payables to affiliates		40			41
Affiliated current borrowings		39			384
Accrued interest, payroll and taxes		243			194
Other⁽²⁾		163			172

Total current liabilities		974			1,038

Long-Term Debt		2,594			2,594

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		2,197			2,158
Other⁽²⁾		465			492

Total deferred credits and other liabilities		2,662			2,650

Total liabilities		6,230			6,282

Commitments and Contingencies (see Note 15)
Equity
Membership interests		3,718			3,652
Accumulated other comprehensive loss⁽²⁾		(89	)		(86	)

Total equity		3,629			3,566

Total liabilities and equity	$	9,859		$	9,848

(1)	Dominion Gas’ Consolidated Balance Sheet at December 31, 2014 has been derived from the audited Consolidated Financial Statements at that date.

(2)	See Note 17 for amounts attributable to related parties.

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

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Three Months Ended March 31,	2015			2014
(millions)
Operating Activities
Net income	$	161		$	164
Adjustments to reconcile net income to net cash provided by operating activities:
Gains on sales of assets		(70	)		(59	)
Depreciation and amortization		51			47
Deferred income taxes and investment tax credits		36			27
Other adjustments		3			(2	)
Changes in:
Accounts receivable		(24	)		(154	)
Deferred purchased gas costs, net		16			29
Prepayments		102			10
Accounts payable		(33	)		(16	)
Accrued interest, payroll and taxes		49			73
Other operating assets and liabilities		(18	)		(6	)

Net cash provided by operating activities		273			113

Investing Activities
Plant construction and other property additions		(128	)		(107	)
Proceeds from sale of assets to an affiliate		—			30
Proceeds from assignments of Marcellus acreage		27			—
Other		(1	)		(2	)

Net cash used in investing activities		(102	)		(79	)

Financing Activities
Issuance of short-term debt, net		280			—
Issuance (repayment) of affiliated current borrowings, net		(345	)		51
Distribution payments		(95	)		(78	)
Other		(1	)		(1	)

Net cash used in financing activities		(161	)		(28	)

Increase in cash and cash equivalents		10			6
Cash and cash equivalents at beginning of period		9			8

Cash and cash equivalents at end of period	$	19		$	14

Supplemental Cash Flow Information
Significant noncash investing and financing activities:
Accrued capital expenditures	$	22		$	24
Proceeds from sale of assets to affiliate not yet received		—			17
Extinguishment of affiliated long-term debt in exchange for assets sold to affiliate		—			67

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

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 and Dominion Gas. Virginia Power is a regulated public utility that generates, transmits and distributes electricity for sale in Virginia and northeastern North Carolina. Dominion Gas is a holding company that conducts business activities through a regulated interstate natural gas transmission pipeline and underground storage system in the Northeast, mid-Atlantic and Midwest states, regulated gas transportation and distribution operations in Ohio, and gas gathering and processing activities primarily in West Virginia, Ohio and Pennsylvania. Dominion Gas’ wholly-owned subsidiaries are DTI, East Ohio and Dominion Iroquois.

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, 2014.

In the Companies’ opinion, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly their financial position as of March 31, 2015 and their results of operations and cash flows for the three months ended March 31, 2015 and 2014. 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 and those of their respective majority-owned subsidiaries. As of March 31, 2015, Dominion owns the general partner and 68.5% of the limited partner interests in Dominion Midstream, which owns a preferred equity interest and the general partner interest in Cove Point. The public’s ownership interest in Dominion Midstream is reflected as non-controlling interest in Dominion’s Consolidated Financial Statements.

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’ 2014 Consolidated Financial Statements and Notes have been reclassified to conform to the 2015 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 and/or Dominion Gas, where applicable.

Note 3. Acquisitions and Dispositions

Dominion

Acquisition of Solar Projects

In March 2014, Dominion completed the acquisition of 100% of the equity interests of six solar development projects in California from Recurrent Energy Development Holdings, LLC for approximately $50 million in cash. The projects cost approximately $446 million to construct, including the initial acquisition cost. The facilities, which began commercial operations in the fourth quarter of 2014, generate approximately 139 MW.

The purchase price for this acquisition was allocated to Property, Plant and Equipment.

In April 2015, Dominion completed the acquisition of 100% of the equity interests of a solar project in California from EC&R NA Solar PV, LLC for approximately $66 million in cash. The project is expected to cost approximately $69 million once constructed, including the initial acquisition cost. Upon completion, the facility is expected to generate approximately 20 MW.

In April 2015, Dominion also completed the acquisition of 100% of the equity interests of a solar project in California from EDF Renewable Development, Inc. for approximately $106 million in cash. The projects owned by the acquired company are expected to cost approximately $111 million once constructed, including the initial acquisition cost. Upon completion, the facilities are expected to generate approximately 24 MW.

The allocation of the purchase price to individual assets for these investments is under evaluation by management and has not been finalized.

Long-term power purchase, interconnection and operation and maintenance agreements have been executed for each of the projects. Dominion expects to claim federal investment tax credits on the projects.

Acquisition of DCGT

In January 2015, Dominion completed the acquisition of 100% of the equity interests of DCGT from SCANA Corporation for approximately $495 million in cash, subject to final working capital adjustments. DCGT owns and operates nearly 1,500 miles of FERC-regulated interstate natural gas pipeline in South Carolina and southeastern Georgia. This acquisition supports Dominion’s natural gas expansion into the Southeast. The allocation of the purchase price is currently being evaluated and has preliminarily resulted in approximately $277 million of net property, plant and equipment, $250 million of goodwill, of which approximately $225 million is expected to be deductible for income tax purposes, and approximately $38 million of regulatory liabilities. The goodwill reflects the value associated with enhancing Dominion’s regulated gas position, economic value attributable to future expansion projects as well as increased opportunities for synergies. The acquired assets of DCGT are included in the Dominion Energy operating segment.

On March 24, 2015, DCGT converted to a limited liability company under the laws of South Carolina and changed its name from Carolina Gas Transmission Corporation to DCGT. On April 1, 2015, Dominion contributed 100% of the issued and outstanding membership interests of DCGT to Dominion Midstream in exchange for total consideration of $495 million, subject to final working capital adjustments. Total consideration to Dominion consisted of the issuance of a two-year, approximately $295 million senior unsecured promissory note payable by Dominion Midstream at an annual interest rate of 0.6%, and 5,112,139 common units, valued at $200 million, representing limited partner interests in Dominion Midstream. The amount of the promissory note is subject to change to correspond with any working capital adjustments. The number of units was based on the volume weighted average trading price of Dominion Midstream’s common units for the ten trading days prior to April 1, 2015, or $39.12 per unit. Since Dominion consolidates Dominion Midstream for financial reporting purposes, this transaction was eliminated upon consolidation and did not impact Dominion’s financial position or cash flow.

Sale of Electric Retail Energy Marketing Business

In March 2014, Dominion completed the sale of its electric retail energy marketing business. The proceeds were approximately $187 million, net of transaction costs. The sale resulted in a gain, subject to post-closing adjustments, of approximately $100 million ($57 million after-tax) net of a $31 million write-off of goodwill, and is included in other operations and maintenance expense in Dominion’s Consolidated Statements of Income. The sale of the electric retail energy marketing business did not qualify for discontinued operations classification.

Dominion Gas

Assignments of Marcellus Acreage

In December 2013, DTI closed an agreement with a natural gas producer to convey over time approximately 79,000 acres of Marcellus Shale development rights underneath one of its natural gas storage fields. The agreement provided for payments to DTI, subject to customary adjustments, of up to approximately $200 million over a period of nine years, and an overriding royalty interest in gas produced from the acreage. In 2013, DTI received approximately $82 million in cash proceeds. During the twelve months ended December 31, 2014, DTI received $16 million in additional cash proceeds resulting from post-closing adjustments. At December 31, 2014, deferred revenue totaled approximately $85 million. In March 2015, DTI and the natural gas producer closed on an amendment to the agreement, which included the immediate conveyance of approximately 9,000 acres of Marcellus Shale development rights and a two year extension of the term of the original agreement. The conveyance of development rights resulted in the recognition of $43 million ($27 million after-tax) of previously deferred revenue to operations and maintenance expense in Dominion Gas’ Consolidated Statements of Income. At March 31, 2015, deferred revenue totaled approximately $40 million, which is expected to be recognized over the remaining term of the agreement.

In March 2015, DTI closed an agreement with a natural gas producer to convey approximately 11,000 acres of Marcellus Shale development rights underneath one of its natural gas storage fields. The agreement provided for a payment to DTI, subject to customary adjustments, of approximately $27 million, and an overriding royalty interest in gas produced from the acreage. In March 2015, DTI received proceeds of $27 million associated with the conveyance of the acreage, resulting in a $27 million ($16 million after-tax) gain, included in other operations and maintenance expense in Dominion Gas’ Consolidated Statements of Income.

Dominion and Dominion Gas

Blue Racer

See Note 10 for a discussion of transactions related to Blue Racer.

Note 4. Operating Revenue

The Companies’ operating revenue consists of the following:


	Three Months Ended March 31,
	2015		2014
(millions)
Dominion
Electric sales:
Regulated	$	2,112	$	1,951
Nonregulated		406		854
Gas sales:
Regulated		116		147
Nonregulated		208		117
Gas transportation and storage		471		444
Other		96		117

Total operating revenue	$	3,409	$	3,630

Virginia Power
Regulated electric sales	$	2,112	$	1,951
Other		25		32

Total operating revenue	$	2,137	$	1,983

Dominion Gas
Gas sales:
Regulated	$	57	$	83
Nonregulated		3		9
Gas transportation and storage		412		396
NGL revenue		29		57
Other		30		24

Total operating revenue	$	531	$	569

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						Virginia Power						Dominion Gas
Three Months Ended March 31,	2015			2014			2015			2014			2015			2014
U.S. statutory rate		35.0	%		35.0	%		35.0	%		35.0	%		35.0	%		35.0	%
Increases (reductions) resulting from:
State taxes, net of federal benefit		2.9			2.7			3.8			3.8			4.0			3.4
Investment tax credits		(0.8	)		(3.6	)		—			—			—			—
Production tax credits		(0.8	)		(0.6	)		(0.4	)		(0.8	)		—			—
Other, net		(0.6	)		(0.8	)		(0.7	)		(0.2	)		(0.1	)		0.3

Effective tax rate		35.7	%		32.7	%		37.7	%		37.8	%		38.9	%		38.7	%

As of March 31, 2015, 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, 2014 for a discussion of these unrecognized tax benefits.

Note 6. Earnings Per Share

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


	Three Months Ended March 31,
	2015		2014
(millions, except EPS)
Net income attributable to Dominion	$	536	$	379

Average shares of common stock outstanding – Basic		587.9		581.6
Net effect of dilutive securities⁽¹⁾		2.0		1.3

Average shares of common stock outstanding – Diluted		589.9		582.9

Earnings Per Common Share – Basic and Diluted	$	0.91	$	0.65

(1)

Dilutive securities consist primarily of the 2013 Equity Units for 2015 and contingently convertible senior notes and the 2013 Equity Units for 2014. See Note 14 in this report and Note 17 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2014 for more information.

The 2014 Equity Units are potentially dilutive securities but were excluded from the calculation of diluted EPS for the three months ended March 31, 2015, as the dilutive stock price threshold was not met. There were no potentially dilutive securities excluded from the calculation of diluted EPS for the three months ended March 31, 2014.

Note 7. Accumulated Other Comprehensive Income

Dominion

The following table presents Dominion’s changes in AOCI by component, net of tax:


	Deferred gains and losses on derivatives- hedging activities			Unrealized gains and losses on investment securities			Unrecognized pension and other postretirement benefit costs			Other comprehensive income (loss) from equity method investee			Total
(millions)
Three Months Ended March 31, 2015
Beginning balance	$	(178	)	$	548		$	(782	)	$	(4	)	$	(416	)
Other comprehensive income before reclassifications: gains (losses)		(58	)		15			—			(1	)		(44	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		59			(21	)		13			—			51

Net current-period other comprehensive income (loss)		1			(6	)		13			(1	)		7

Ending balance	$	(177	)	$	542		$	(769	)	$	(5	)	$	(409	)

Three Months Ended March 31, 2014
Beginning balance	$	(288	)	$	474		$	(510	)	$	—		$	(324	)
Other comprehensive income before reclassifications: gains (losses)		(150	)		29			(4	)		(7	)		(132	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		160			(11	)		8			—			157

Net current-period other comprehensive income (loss)		10			18			4			(7	)		25

Ending balance	$	(278	)	$	492		$	(506	)	$	(7	)	$	(299	)

(1)	See table below for details about these reclassifications.

The following table presents Dominion’s reclassifications out of AOCI by component:


Details about AOCI components	Amounts reclassified from AOCI			Affected line item in the Consolidated Statements of Income
(millions)
Three Months Ended March 31, 2015
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	92		Operating revenue
		5		Purchased gas
		(1	)	Electric fuel and other energy-related purchases
Interest rate contracts		2		Interest and related charges

		98
Tax		(39	)	Income tax expense

	$	59

Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(39	)	Other income
Impairment		6		Other income

		(33	)
Tax		12		Income tax expense

	$	(21	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(3	)	Other operations and maintenance
Actuarial (gains) losses		25		Other operations and maintenance

		22
Tax		(9	)	Income tax expense

	$	13

Three Months Ended March 31, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	269		Operating revenue
		1		Purchased gas
		(13	)	Electric fuel and other energy-related purchases
Interest rate contracts		3		Interest and related charges

		260
Tax		(100	)	Income tax expense

	$	160

Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(20	)	Other income
Impairment		2		Other income

		(18	)
Tax		7		Income tax expense

	$	(11	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(3	)	Other operations and maintenance
Actuarial (gains) losses		17		Other operations and maintenance

		14
Tax		(6	)	Income tax expense

	$	8

Dominion Gas

The following table presents Dominion Gas’ changes in AOCI by component, net of tax:


	Deferred gains and losses on derivatives- hedging activities			Unrecognized pension and other postretirement benefit costs			Total
(millions)
Three Months Ended March 31, 2015
Beginning balance	$	(20	)	$	(66	)	$	(86	)
Other comprehensive income before reclassifications: gains (losses)		(4	)		—			(4	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		—			1			1

Net current-period other comprehensive income (loss)		(4	)		1			(3	)

Ending balance	$	(24	)	$	(65	)	$	(89	)

Three Months Ended March 31, 2014
Beginning balance	$	3		$	(61	)	$	(58	)
Other comprehensive income before reclassifications: gains (losses)		(8	)		—			(8	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		5			1			6

Net current-period other comprehensive income (loss)		(3	)		1			(2	)

Ending balance	$	—		$	(60	)	$	(60	)

(1)	See table below for details about these reclassifications.

The following table presents Dominion Gas’ reclassifications out of AOCI by component:


Details about AOCI components	Amounts reclassified from AOCI			Affected line item in the Consolidated Statements of Income
(millions)
Three Months Ended March 31, 2015
Unrecognized pension and other postretirement benefit costs:
Actuarial (gains) losses	$	2		Other operations and maintenance

		2
Tax		(1	)	Income tax expense

	$	1

Three Months Ended March 31, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	6		Operating revenue
		2		Purchased gas

		8
Tax		(3	)	Income tax expense

	$	5

Unrecognized pension and other postretirement benefit costs:
Actuarial (gains) losses	$	2		Other operations and maintenance

		2
Tax		(1	)	Income tax expense

	$	1

Note 8. Fair Value Measurements

The Companies’ fair value measurements are made in accordance with the policies discussed in Note 6 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2014. See Note 9 in this report for further information about the Companies’ derivatives and hedge accounting activities.

The Companies enter into certain physical and financial forwards, futures, options and swaps, which are considered Level 3 as they have one or more inputs that are not observable and are significant to the valuation. The discounted cash flow method is used to value Level 3 physical and financial forwards and futures contracts. An option model is used to value Level 3 physical and financial 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, forward market prices, credit spreads and implied price volatilities 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.

The following table presents Dominion’s quantitative information about Level 3 fair value measurements at March 31, 2015. The range and weighted average are presented in dollars for market price inputs and percentages for credit spreads and price volatility.


	Fair Value (millions)		Valuation Techniques	Unobservable Input	Range		Weighted Average⁽¹⁾
Assets:
Physical and Financial Forwards and Futures:
Natural Gas⁽²⁾	$	85	Discounted Cash Flow	Market Price (per Dth)⁽³⁾		(2) - 6		(1	)
				Credit spread⁽⁴⁾		1% - 5%		2	%
FTRs		4	Discounted Cash Flow	Market Price (per MWh)⁽³⁾		(5) - 7		1
Physical and Financial Options:
Natural Gas		5	Option Model	Market Price (per Dth)⁽³⁾		2 - 4		3
				Price Volatility⁽⁵⁾		21% - 76%		32	%

Total assets	$	94

Liabilities:
Physical and Financial Forwards and Futures:
Natural Gas⁽²⁾	$	12	Discounted Cash Flow	Market Price (per Dth)⁽³⁾		(2) - 4		2
FTRs		4	Discounted Cash Flow	Market Price (per MWh)⁽³⁾		(2) - 5		1
Physical and Financial Options:
Natural Gas		2	Option Model	Market Price (per Dth)⁽³⁾		2 - 4		3
				Price Volatility⁽⁵⁾		21% - 76%		32	%

Total liabilities	$	18

(1)	Averages weighted by volume.

(2)	Includes basis.

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

(4)	Represents credit spreads unrepresented in published markets.

(5)	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)
Credit spread	Asset	Increase (decrease)	Loss (gain)

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, 2015
Assets:
Derivatives:
Commodity	$	3	$	564	$	94	$	661
Interest rate		—		18		—		18
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		2,647		—		—		2,647
Other		7		—		—		7
Non-U.S.:
Large cap		12		—		—		12
Fixed income:
Corporate debt instruments		—		462		—		462
U.S. Treasury securities and agency debentures		407		187		—		594
State and municipal		—		423		—		423
Other		—		130		—		130
Cash equivalents and other		1		4		—		5

Total assets	$	3,077	$	1,788	$	94	$	4,959

Liabilities:
Derivatives:
Commodity	$	3	$	437	$	18	$	458
Interest rate		—		307		—		307

Total liabilities	$	3	$	744	$	18	$	765

At December 31, 2014
Assets:
Derivatives:
Commodity	$	3	$	567	$	125	$	695
Interest rate		—		24		—		24
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		2,669		—		—		2,669
Other		6		—		—		6
Non-U.S.:
Large cap		12		—		—		12
Fixed income:
Corporate debt instruments		—		441		—		441
U.S. Treasury securities and agency debentures		419		190		—		609
State and municipal		—		395		—		395
Other		—		74		—		74
Cash equivalents and other		3		10		—		13

Total assets	$	3,112	$	1,701	$	125	$	4,938

Liabilities:
Derivatives:
Commodity	$	3	$	571	$	18	$	592
Interest rate		—		202		—		202

Total liabilities	$	3	$	773	$	18	$	794

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

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,
	2015			2014
(millions)
Beginning balance	$	107		$	(16	)
Total realized and unrealized gains (losses):
Included in earnings		15			110
Included in other comprehensive income (loss)		(11	)		4
Included in regulatory assets/liabilities		(24	)		17
Settlements		(14	)		(108	)
Transfers out of Level 3⁽¹⁾		3			1

Ending balance	$	76		$	8

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

(1)	In March 2015, Dominion changed the classification of NGL derivatives from Level 3 to Level 2 due to an increase in liquidity in financial forward markets. At March 31, 2015, $9 million of the transfers out of Level 3 relate to NGLs.

The following table presents Dominion’s classification of 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, 2015
Total gains (losses) included in earnings	$	2		$	13	$	15
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		—			—		—

Three Months Ended March 31, 2014
Total gains (losses) included in earnings	$	(10	)	$	120	$	110
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

Virginia Power

The following table presents Virginia Power’s quantitative information about Level 3 fair value measurements at March 31, 2015. The range and weighted average are presented in dollars for market price inputs and percentages for credit spreads.


	Fair Value (millions)		Valuation Techniques	Unobservable Input	Range			Weighted Average⁽¹⁾
Assets:
Physical and Financial Forwards and Futures:
FTRs	$	4	Discounted Cash Flow	Market Price (per MWh)⁽³⁾		(5) - 7			1
Natural Gas⁽²⁾		78	Discounted Cash Flow	Market Price (per Dth)⁽³⁾		(2) - 3			(1	)
				Credit spread⁽⁴⁾		1% - 5	%		2	%

Total assets	$	82

Liabilities:
Physical and Financial Forwards and Futures:
FTRs	$	4	Discounted Cash Flow	Market Price (per MWh)⁽³⁾		(2) - 5			1

Total liabilities	$	4

(1)	Averages weighted by volume.

(2)	Includes basis.

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

(4)	Represents credit spreads 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)
Credit spread	Asset	Increase (decrease)	Loss (gain)

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


	Level 1		Level 2		Level 3		Total
(millions)
At March 31, 2015
Assets:
Derivatives:
Commodity	$	—	$	24	$	82	$	106
Investments⁽¹⁾:
Equity securities:
U.S. large cap		1,166		—		—		1,166
Fixed income:
Corporate debt instruments		—		258		—		258
U.S. Treasury securities and agency debentures		129		63		—		192
State and municipal		—		224		—		224
Other		—		31		—		31

Total assets	$	1,295	$	600	$	82	$	1,977

Liabilities:
Derivatives:
Commodity	$	—	$	7	$	4	$	11
Interest rate		—		128		—		128

Total liabilities	$	—	$	135	$	4	$	139

At December 31, 2014
Assets:
Derivatives:
Commodity	$	—	$	7	$	106	$	113
Investments⁽¹⁾:
Equity securities:
U.S. large cap		1,157		—		—		1,157
Fixed income:
Corporate debt instruments		—		250		—		250
U.S. Treasury securities and agency debentures		137		61		—		198
State and municipal		—		211		—		211
Other		—		23		—		23

Total assets	$	1,294	$	552	$	106	$	1,952

Liabilities:
Derivatives:
Commodity	$	—	$	11	$	4	$	15
Interest rate		—		72		—		72

Total liabilities	$	—	$	83	$	4	$	87

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

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,
	2015			2014
(millions)
Beginning balance	$	102		$	(7	)
Total realized and unrealized gains (losses):
Included in earnings		14			120
Included in regulatory assets/liabilities		(24	)		17
Settlements		(14	)		(120	)

Ending balance	$	78		$	10

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, 2015 and 2014. There were no unrealized gains or 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, 2015 and 2014.

Dominion Gas

The following table presents Dominion Gas’ assets and liabilities for derivatives 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, 2015
Assets:
Commodity	$	—	$	3	$	—	$	3

Total Assets	$	—	$	3	$	—	$	3
Liabilities:
Commodity	$	—	$	3	$	—	$	3
Interest rate		—		13		—		13

Total liabilities	$	—	$	16	$	—	$	16

At December 31, 2014
Assets:
Commodity	$	—	$	—	$	2	$	2

Total Assets	$	—	$	—	$	2	$	2
Liabilities:
Interest rate	$	—	$	9	$	—	$	9

Total liabilities	$	—	$	9	$	—	$	9

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


	Three Months Ended March 31,
	2015			2014
(millions)
Beginning balance	$	2		$	(6	)
Total realized and unrealized gains (losses):
Included in earnings		1			(5	)
Included in other comprehensive income (loss)		(11	)		4
Settlements		(1	)		5
Transfers out of Level 3⁽¹⁾		9			—

Ending balance	$	—		$	(2	)

(1)	In March 2015, Dominion changed the classification of NGL derivatives from Level 3 to Level 2 due to an increase in liquidity in financial forward markets. At March 31, 2015, $9 million of the transfers out of Level 3 relate to NGLs.

The gains and losses included in earnings in the Level 3 fair value category were classified in operating revenue in Dominion Gas’ Consolidated Statements of Income for the three months ended March 31, 2015 and 2014. There were no unrealized gains or 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, 2015 and 2014.

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 and cash equivalents, restricted cash (which is recorded in other current assets) customer and other 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:


	March 31, 2015				December 31, 2014
	Carrying Amount		Estimated Fair Value⁽¹⁾		Carrying Amount		Estimated Fair Value⁽¹⁾
(millions)
Dominion
Long-term debt, including securities due within one year⁽²⁾⁽³⁾	$	19,718	$	22,197	$	19,723	$	21,881
Junior subordinated notes⁽³⁾		1,373		1,405		1,374		1,396
Remarketable subordinated notes⁽³⁾		2,084		2,206		2,083		2,362

Virginia Power
Long-term debt, including securities due within one year⁽³⁾	$	8,936	$	10,441	$	8,937	$	10,293

Dominion Gas
Long-term debt⁽³⁾	$	2,594	$	2,720	$	2,594	$	2,672

(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)	At March 31, 2015 and December 31, 2014, includes the valuation of certain fair value hedges associated with fixed rate debt of approximately $15 million and $19 million, respectively.

(3)	Carrying amount includes amounts which represent the unamortized discount and/or premium.

Note 9. Derivatives and Hedge Accounting Activities

The Companies’ accounting policies and 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, 2014. See Note 8 in this report for further information about fair value measurements and associated valuation methods for derivatives.

Derivative assets and liabilities are presented gross on the Companies’ Consolidated Balance Sheets. Dominion’s derivative contracts include both over-the-counter transactions and those that are executed on an exchange or other trading platform (exchange contracts) and centrally cleared. Dominion Gas’ and Virginia Power’s derivative contracts consist of over-the-counter transactions. Over-the-counter contracts are bilateral contracts that are transacted directly with a counterparty. Exchange contracts utilize a financial intermediary, exchange, or clearinghouse to enter, execute, or clear the transactions. Certain over-the-counter and exchange contracts contain contractual rights of setoff through master netting arrangements, derivative clearing agreements, and contract default provisions. In addition, the contracts are subject to conditional rights of setoff through counterparty nonperformance, insolvency, or other conditions.

In general, most over-the-counter transactions and all exchange contracts are subject to collateral requirements. Types of collateral for over-the-counter and exchange contracts include cash, letters of credit, and in some cases other forms of security, none of which are subject to restrictions. Cash collateral is used in the table below to offset derivative assets and liabilities. Certain accounts receivable and accounts payable recognized on the Companies’ Consolidated Balance Sheets, as well as letters of credit and other forms of security, 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.

Dominion

Balance Sheet Presentation

The tables below present Dominion’s derivative asset and liability balances by type of financial instrument, before and after the effects of offsetting:


	March 31, 2015						December 31, 2014
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets Presented in the Consolidated Balance Sheet		Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets Presented in the Consolidated Balance Sheet
(millions)
Interest rate contracts:
Over-the-counter	$	18	$	—	$	18	$	24	$	—	$	24
Commodity contracts:
Over-the-counter		323		—		323		382		—		382
Exchange		326		—		326		298		—		298

Total derivatives, subject to a master netting or similar arrangement		667		—		667		704		—		704
Total derivatives, not subject to a master netting or similar arrangement		12		—		12		15		—		15

Total	$	679	$	—	$	679	$	719	$	—	$	719


	Net Amounts of Assets Presented in the Consolidated Balance Sheet		March 31, 2015						Net Amounts of Assets Presented in the Consolidated Balance Sheet		December 31, 2014
			Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
			Financial Instruments		Cash Collateral Received		Net Amounts				Financial Instruments		Cash Collateral Received		Net Amounts
(millions)
Interest rate contracts:
Over-the-counter	$	18	$	18	$	—	$	—	$	24	$	16	$	—	$	8
Commodity contracts:
Over-the-counter		323		45		—		278		382		34		34		314
Exchange		326		326		—		—		298		298		—		—

Total	$	667	$	389	$	—	$	278	$	704	$	348	$	34	$	322


	March 31, 2015						December 31, 2014
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet
(millions)
Interest rate contracts:
Over-the-counter	$	307	$	—	$	307	$	202	$	—	$	202
Commodity contracts:
Over-the-counter		83		—		83		87		—		87
Exchange		364		—		364		493		—		493

Total derivatives, subject to a master netting or similar arrangement		754		—		754		782		—		782
Total derivatives, not subject to a master netting or similar arrangement		11		—		11		12		—		12

Total	$	765	$	—	$	765	$	794	$	—	$	794


	Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		March 31, 2015						Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		December 31, 2014
			Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
			Financial Instruments		Cash Collateral Paid		Net Amounts				Financial Instruments		Cash Collateral Paid		Net Amounts
(millions)
Interest rate contracts:
Over-the-counter	$	307	$	18	$	—	$	289	$	202	$	16	$	—	$	186
Commodity contracts:
Over-the-counter		83		45		—		38		87		34		1		52
Exchange		364		326		38		—		493		298		195		—

Total	$	754	$	389	$	38	$	327	$	782	$	348	$	196	$	238

Volumes

The following table presents the volume of Dominion’s derivative activity as of March 31, 2015. 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⁾		55		10
Basis		224		558
Electricity (MWh):
Fixed price		13,610,507		7,505,325
FTRs		14,994,541		—
Capacity (MW)		15,250		3,050
Liquids (Gal)⁽²⁾		77,280,000		2,016,000
Interest rate	$	2,550,000,000	$	4,000,000,000

(1)	Includes options.

(2)	Includes NGLs and oil.

Ineffectiveness and AOCI

For the three months ended March 31, 2015 and 2014, 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, 2015:


	AOCI After- Tax			Amounts Expected to be Reclassified to Earnings during the next 12 Months After- Tax			Maximum Term
(millions)
Commodities:
Gas	$	(5	)	$	(5	)		25 months
Electricity		89			32			21 months
Other		—			(1	)		14 months
Interest rate		(261	)		(6	)		393 months

Total	$	(177	)	$	20

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.

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)
At March 31, 2015
ASSETS
Current Assets
Commodity	$	298	$	109	$	407
Interest rate		13		—		13

Total current derivative assets⁽¹⁾		311		109		420

Noncurrent Assets
Commodity		140		114		254
Interest rate		5		—		5

Total noncurrent derivative assets⁽²⁾		145		114		259

Total derivative assets	$	456	$	223	$	679

LIABILITIES
Current Liabilities
Commodity	$	253	$	118	$	371
Interest rate		229		—		229

Total current derivative liabilities		482		118		600

Noncurrent Liabilities
Commodity		48		39		87
Interest Rate		78		—		78

Total noncurrent derivative liabilities⁽³⁾		126		39		165

Total derivative liabilities	$	608	$	157	$	765

At December 31, 2014
ASSETS
Current Assets
Commodity	$	281	$	242	$	523
Interest rate		13		—		13

Total current derivative assets⁽¹⁾		294		242		536

Noncurrent Assets
Commodity		71		101		172
Interest rate		11		—		11

Total noncurrent derivative assets⁽²⁾		82		101		183

Total derivative assets	$	376	$	343	$	719

LIABILITIES
Current Liabilities
Commodity	$	224	$	267	$	491
Interest rate		100		—		100

Total current derivative liabilities		324		267		591

Noncurrent Liabilities
Commodity		55		46		101
Interest rate		102		—		102

Total noncurrent derivative liabilities⁽³⁾		157		46		203

Total derivative liabilities	$	481	$	313	$	794

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

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

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

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, 2015
Derivative Type and Location of Gains (Losses)
Commodity:
Operating revenue				$	(92	)
Purchased gas					(5	)
Electric fuel and other energy-related purchases					1

Total commodity	$	(41	)	$	(96	)	$	3

Interest rate⁽³⁾		(58	)		(2	)		(49	)

Total	$	(99	)	$	(98	)	$	(46	)

Three Months Ended March 31, 2014
Derivative Type and Location of Gains (Losses)
Commodity:
Operating revenue				$	(269	)
Purchased gas					(1	)
Electric fuel and other energy-related purchases					13

Total commodity	$	(183	)	$	(257	)	$	2

Interest rate⁽³⁾		(47	)		(3	)		(23	)

Total	$	(230	)	$	(260	)	$	(21	)

(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	2015			2014
(millions)
Derivative Type and Location of Gains (Losses)
Commodity
Operating revenue	$	3		$	(361	)
Purchased gas		(2	)		7
Electric fuel and other energy-related purchases		6			133

Total	$	7		$	(221	)

(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.

Virginia Power

Balance Sheet Presentation

The tables below present Virginia Power’s derivative asset and liability balances by type of financial instrument, before and after the effects of offsetting:


	March 31, 2015						December 31, 2014
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets Presented in the Consolidated Balance Sheet		Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets Presented in the Consolidated Balance Sheet
(millions)
Commodity contracts:
Over-the-counter	$	82	$	—	$	82	$	106	$	—	$	106

Total derivatives, subject to a master netting or similar arrangement		82		—		82		106		—		106
Total derivatives, not subject to a master netting or similar arrangement		24		—		24		7		—		7

Total	$	106	$	—	$	106	$	113	$	—	$	113


	March 31, 2015								December 31, 2014
			Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
	Net Amounts of Assets Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amounts		Net Amounts of Assets Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amounts
(millions)
Commodity contracts:
Over-the-counter	$	82	$	4	$	—	$	78	$	106	$	4	$	—	$	102

Total	$	82	$	4	$	—	$	78	$	106	$	4	$	—	$	102


	March 31, 2015						December 31, 2014
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet
(millions)
Interest rate contracts:
Over-the-counter	$	128	$	—	$	128	$	72	$	—	$	72
Commodity contracts:
Over-the-counter		5		—		5		8		—		8

Total derivatives, subject to a master netting or similar arrangement		133		—		133		80		—		80
Total derivatives, not subject to a master netting or similar arrangement		6		—		6		7		—		7

Total	$	139	$	—	$	139	$	87	$	—	$	87


			March 31, 2015 Gross Amounts Not Offset in the Consolidated Balance Sheet								December 31, 2014 Gross Amounts Not Offset in the Consolidated Balance Sheet
	Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Paid		Net Amounts		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Paid		Net Amounts
(millions)
Interest rate contracts:
Over-the-counter	$	128	$	—	$	—	$	128	$	72	$	—	$	—	$	72
Commodity contracts:
Over-the-counter		5		4		—		1		8		4		—		4

Total	$	133	$	4	$	—	$	129	$	80	$	4	$	—	$	76

Volumes

The following table presents the volume of Virginia Power’s derivative activity as of March 31, 2015. 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⁾		12		—
Basis		84		493
Electricity (MWh):
FTRs		13,486,569		—
Capacity (MW)		15,250		3,050
Interest rate	$	1,000,000,000	$	750,000,000

(1)	Includes options.

Ineffectiveness

For the three months ended March 31, 2015 and 2014, gains or losses on hedging instruments determined to be ineffective were not material.

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)
At March 31, 2015
ASSETS
Current Assets
Commodity	$	—	$	28	$	28

Total current derivative assets⁽¹⁾		—		28		28

Noncurrent Assets
Commodity		—		78		78

Total noncurrent derivative assets⁽²⁾		—		78		78

Total derivative assets	$	—	$	106	$	106

LIABILITIES
Current Liabilities
Commodity	$	1	$	10	$	11
Interest rate		96		—		96

Total current derivative liabilities⁽³⁾		97		10		107

Noncurrent Liabilities
Interest rate		32		—		32

Total noncurrent derivatives liabilities⁽⁴⁾		32		—		32

Total derivative liabilities	$	129	$	10	$	139

December 31, 2014
ASSETS
Current Assets
Commodity	$	—	$	51	$	51

Total current derivative assets⁽¹⁾		—		51		51

Noncurrent Assets
Commodity		—		62		62

Total noncurrent derivative assets⁽²⁾		—		62		62

Total derivative assets	$	—	$	113	$	113

LIABILITIES
Current Liabilities
Commodity	$	3	$	12	$	15
Interest rate		45		—		45

Total current derivative liabilities⁽³⁾		48		12		60

Noncurrent Liabilities
Interest rate		27		—		27

Total noncurrent derivative liabilities⁽⁴⁾		27		—		27

Total derivative liabilities	$	75	$	12	$	87

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

(2)	Noncurrent derivative assets are presented in other deferred charges and other assets in Virginia Power’s Consolidated Balance Sheets.

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

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

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, 2015
Derivative Type and Location of Gains (Losses)
Commodity:
Electric fuel and other energy-related purchases				$	(1	)

Total commodity	$	—		$	(1	)	$	3

Interest rate⁽³⁾		(6	)		—			(49	)

Total	$	(6	)	$	(1	)	$	(46	)

Three Months Ended March 31, 2014
Derivative Type and Location of Gains (Losses)
Commodity:
Electric fuel and other energy-related purchases				$	5

Total commodity	$	6		$	5		$	2

Interest rate⁽³⁾		(3	)		—			(23	)

Total	$	3		$	5		$	(21	)

(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 recorded in Virginia Power’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	2015		2014
(millions)
Derivative Type and Location of Gains (Losses)
Commodity⁽²⁾	$	7	$	119

Total	$	7	$	119

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

Dominion Gas

Balance Sheet Presentation

The tables below present Dominion Gas’ derivative asset and liability balances by type of financial instrument, before and after the effects of offsetting.


	March 31, 2015						December 31, 2014
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets Presented in the Consolidated Balance Sheet		Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets Presented in the Consolidated Balance Sheet
(millions)
Commodity contracts:
Over-the-counter	$	3	$	—	$	3	$	2	$	—	$	2

Total derivatives, subject to a master netting or similar arrangement	$	3	$	—	$	3	$	2	$	—	$	2


			March 31, 2015								December 31, 2014
			Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
	Net Amounts of Assets Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amounts		Net Amounts of Assets Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amounts
(millions)
Commodity contracts:
Over-the-counter	$	3	$	3	$	—	$	—	$	2	$	—	$	—	$	2

Total	$	3	$	3	$	—	$	—	$	2	$	—	$	—	$	2


	March 31, 2015						December 31, 2014
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet
(millions)
Interest rate contracts:
Over-the-counter	$	13	$	—	$	13	$	9	$	—	$	9
Commodity contracts:
Over-the-counter		3		—		3		—		—		—

Total derivatives, subject to a master netting or similar arrangement	$	16	$	—	$	16	$	9	$	—	$	9


			March 31, 2015								December 31, 2014
			Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
	Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Paid		Net Amounts		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Paid		Net Amounts
(millions)
Interest rate contracts:
Over-the-counter	$	13	$	—	$	—	$	13	$	9	$	—	$	—	$	9
Commodity contracts:
Over-the-counter		3		3		—		—		—		—		—		—

Total	$	16	$	3	$	—	$	13	$	9	$	—	$	—	$	9

Volumes

The following table presents the volume of Dominion Gas’ derivative activity as of March 31, 2015. 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		7		—
Basis		8		—
NGLs (Gal)		72,912,000		—
Interest rate	$	—	$	250,000,000

Ineffectiveness and AOCI

For the three months ended March 31, 2015 and 2014, gains or losses on hedging instruments determined to be ineffective were not material.

The following table presents selected information related to losses on cash flow hedges included in AOCI in Dominion Gas’ Consolidated Balance Sheet at March 31, 2015:


	AOCI After-Tax			Amounts Expected to be Reclassified to Earnings during the next 12 Months After-Tax		Maximum Term
(millions)
Commodities:
NGLs	$	(1	)	$	—		12 months
Interest rate		(23	)		—		357 months

Total	$	(24	)	$	—

Fair Value and Gains and Losses on Derivative Instruments

The following tables present the fair values of Dominion Gas’ commodity and interest rate derivatives and where they are presented in its Consolidated Balance Sheets:


	Fair Value - Derivatives under Hedge Accounting		Fair Value - Derivatives not under Hedge Accounting		Total Fair Value
(millions)
At March 31, 2015
ASSETS
Current Assets
Commodity	$	2	$	1	$	3

Total current derivative assets⁽¹⁾		2		1		3

Total derivative assets	$	2	$	1	$	3

LIABILITIES
Current Liabilities
Commodity	$	3	$	—	$	3