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

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 September 30, 2014

¨	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

333-195066	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 September 30, 2014, the latest practicable date for determination, Dominion Resources, Inc. had 583,910,645 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.

DOMINION GAS HOLDINGS, LLC MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS FILING THIS FORM 10-Q UNDER THE REDUCED DISCLOSURE FORMAT.

COMBINED INDEX


		Page Number
	Glossary of Terms		1

	PART I. Financial Information

Item 1.	Financial Statements		4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		76
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		91
Item 4.	Controls and Procedures		93

	PART II. Other Information

Item 1.	Legal Proceedings		94
Item 1A.	Risk Factors		94
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		95
Item 5.	Other Information		95
Item 6.	Exhibits		96

GLOSSARY OF TERMS

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


Abbreviation or Acronym		Definition
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

Altavista		Altavista power station

AMR		Automated meter reading program deployed by East Ohio

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

Blue Racer		Blue Racer Midstream, LLC, a joint venture with Caiman

BOD		Board of Directors

BP		BP Wind Energy North America Inc.

Brayton Point		Brayton Point power station

BREDL		Blue Ridge Environmental Defense League

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

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

Corporate Unit		A stock purchase contract and 1/20 interest in a RSN issued by Dominion

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

DEI		Dominion Energy, Inc.

DOE		Department of Energy

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 Gas 2013 Senior Notes		The $400 million 2013 Series A 1.05% Senior Notes due 2016, $400 million 2013 Series B 3.55% Senior Notes due 2023 and $400 million 2013 Series C 4.80% Senior Notes due 2043

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


Abbreviation or Acronym		Definition

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

Elwood		Elwood power station

Enterprise		Enterprise Product Partners, L.P.

EPA		Environmental Protection Agency

EPC		Engineering, procurement and construction

EPCRA		Emergency Planning and Community Right-to-Know Act

EPS		Earnings per share

Fairless		Fairless power station

FERC		Federal Energy Regulatory Commission

Fitch		Fitch Ratings Ltd.

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

Illinois Gas Contracts		A Dominion Retail natural gas book of business consisting of residential and commercial customers in Illinois

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

June 2009 hybrids		2009 Series A Enhanced Junior Subordinated Notes due 2064, subject to extensions to no later than 2079

Juniper		Juniper Capital L.P.

Kewaunee		Kewaunee nuclear power station

Kincaid		Kincaid power station

LIBOR		London Interbank Offered Rate

Line TPL-2A		An approximately 11-mile, 30-inch gathering pipeline extending from Tuscarawas County, Ohio to Harrison County, Ohio

Line TL-388		A 37-mile, 24-inch gathering pipeline extending from Texas Eastern, LP in Noble County, Ohio to its terminus at Dominion’s Gilmore Station in Tuscarawas County, Ohio

Line TL-404		An approximately 26-mile, 24- and 30- inch gas gathering pipeline that extends from Wetzel County, West Virginia to Monroe County, Ohio

LNG		Liquefied natural gas

Maryland Commission		Public Service Commission of Maryland

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.

MLP		Master limited partnership

Moody’s		Moody’s Investors Service

MW		Megawatt

MWh		Megawatt hour


Abbreviation or Acronym		Definition
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

North Carolina Commission		North Carolina Utilities Commission

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

October 2014 hybrids		2014 Series A Enhanced Junior Subordinated Notes due 2054

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 program deployed by East Ohio

PIR		Pipeline Infrastructure Replacement program deployed by East Ohio

PJM		PJM Interconnection, L.L.C.

ppb		Parts-per-billion

PSD		Prevention of Significant Deterioration

RCC		Replacement Capital Covenant, associated with Dominion’s June 2009 hybrids

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

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

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

RSN		Remarketable subordinated note

RTO		Regional transmission organization

SEC		Securities and Exchange Commission

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

UEX Rider		Uncollectible Expense Rider deployed by East Ohio

VDEQ		Virginia Department of Environmental Quality

VEBA		Voluntary Employees’ Beneficiary Association

VIE		Variable interest entity

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

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2014		2013			2014		2013
(millions, except per share amounts)
Operating Revenue	$	3,050	$	3,432		$	9,493	$	9,935

Operating Expenses
Electric fuel and other energy-related purchases		743		1,107			2,710		2,933
Purchased electric capacity		86		91			261		267
Purchased gas		209		232			1,073		996
Other operations and maintenance		614		525			1,972		1,876
Depreciation, depletion and amortization		354		309			970		909
Other taxes		123		134			424		442

Total operating expenses		2,129		2,398			7,410		7,423

Income from operations		921		1,034			2,083		2,512

Other income		69		86			166		222
Interest and related charges		231		217			695		648

Income from continuing operations including noncontrolling interests before income tax expense		759		903			1,554		2,086
Income tax expense		228		305			477		709

Income from continuing operations including noncontrolling interests		531		598			1,077		1,377
Loss from discontinued operations⁽¹⁾		—		(23	)		—		(92	)

Net Income Including Noncontrolling Interests		531		575			1,077		1,285
Noncontrolling Interests		2		6			10		19

Net Income Attributable to Dominion	$	529	$	569		$	1,067	$	1,266

Amounts Attributable to Dominion:
Income from continuing operations, net of tax	$	529	$	592		$	1,067	$	1,358
Loss from discontinued operations, net of tax		—		(23	)		—		(92	)

Net income attributable to Dominion	$	529	$	569		$	1,067	$	1,266

Earnings Per Common Share-Basic
Income from continuing operations	$	0.91	$	1.02		$	1.83	$	2.35
Loss from discontinued operations		—		(0.04	)		—		(0.16	)

Net income attributable to Dominion	$	0.91	$	0.98		$	1.83	$	2.19

Earnings Per Common Share-Diluted
Income from continuing operations	$	0.90	$	1.02		$	1.83	$	2.35
Loss from discontinued operations		—		(0.04	)		—		(0.16	)

Net income attributable to Dominion	$	0.90	$	0.98		$	1.83	$	2.19

Dividends declared per common share	$	0.6000	$	0.5625		$	1.8000	$	1.6875

(1)	Includes income tax expense of $6 million for the three months ended September 30, 2013 and income tax benefit of $43 million for the nine months ended September 30, 2013.

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 September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
(millions)
Net income including noncontrolling interests	$	531		$	575		$	1,077		$	1,285
Other comprehensive income (loss), net of taxes:
Net deferred losses on derivatives-hedging activities⁽¹⁾		(58	)		(77	)		(267	)		(45	)
Changes in unrealized net gains on investment securities⁽²⁾		2			38			80			119
Changes in unrecognized pension and other postretirement benefit costs⁽³⁾		—			(12	)		—			216
Amounts reclassified to net income:
Net derivative (gains) losses-hedging activities⁽⁴⁾		(31	)		(6	)		113			53
Net realized gains on investment securities⁽⁵⁾		(21	)		(10	)		(39	)		(46	)
Net pension and other postretirement benefit costs⁽⁶⁾		8			14			25			44
Changes in other comprehensive loss from equity method investees⁽⁷⁾		—			—			(5	)		—

Total other comprehensive income (loss)		(100	)		(53	)		(93	)		341

Comprehensive income including noncontrolling interests		431			522			984			1,626
Comprehensive income attributable to noncontrolling interests		2			6			10			19

Comprehensive income attributable to Dominion	$	429		$	516		$	974		$	1,607

(1)	Net of $36 million and $43 million tax for the three months ended September 30, 2014 and 2013, respectively, and net of $163 million and $21 million for the nine months ended September 30, 2014 and 2013, respectively.

(2)	Net of $(2) million and $(29) million tax for the three months ended September 30, 2014 and 2013, respectively, and net of $(30) million and $(80) million for the nine months ended September 30, 2014 and 2013, respectively.

(3)	Net of $— million and $(12) million tax for the three months ended September 30, 2014 and 2013, respectively, and net of $— million and $(160) million for the nine months ended September 30, 2014 and 2013, respectively.

(4)	Net of $22 million and $4 million tax for the three months ended September 30, 2014 and 2013, respectively, and net of $(72) million and $(35) million for the nine months ended September 30, 2014 and 2013, respectively.

(5)	Net of $13 million and $5 million tax for the three months ended September 30, 2014 and 2013, respectively, and net of $24 million and $28 million for the nine months ended September 30, 2014 and 2013, respectively.

(6)	Net of $(6) million and $(9) million tax for the three months ended September 30, 2014 and 2013, respectively, and net of $(18) million and $(29) million for the nine months ended September 30, 2014 and 2013, respectively.

(7)	Net of $— million and $— million tax for the three months ended September 30, 2014 and 2013, respectively, and net of $3 million and $— million for the nine months ended September 30, 2014 and 2013, respectively.

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

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2014			December 31, 2013⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	218		$	316
Customer receivables (less allowance for doubtful accounts of $35 and $25)		1,339			1,695
Other receivables (less allowance for doubtful accounts of $3 and $4)		125			141
Inventories		1,385			1,176
Prepayments		176			192
Other		2,203			2,420

Total current assets		5,446			5,940

Investments
Nuclear decommissioning trust funds		4,125			3,903
Investment in equity method affiliates		1,075			916
Other		277			283

Total investments		5,477			5,102

Property, Plant and Equipment
Property, plant and equipment		49,932			46,969
Accumulated depreciation, depletion and amortization		(15,048	)		(14,341	)

Total property, plant and equipment, net		34,884			32,628

Deferred Charges and Other Assets
Goodwill		3,044			3,086
Regulatory assets		1,237			1,228
Other		2,191			2,112

Total deferred charges and other assets		6,472			6,426

Total assets	$	52,279		$	50,096

(1)	Dominion’s Consolidated Balance Sheet at December 31, 2013 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)


	September 30, 2014			December 31, 2013⁽¹⁾
(millions)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Securities due within one year	$	1,591		$	1,519
Short-term debt		2,629			1,927
Accounts payable		848			1,168
Derivative liabilities		996			828
Other		1,515			1,552

Total current liabilities		7,579			6,994

Long-Term Debt
Long-term debt		17,210			16,877
Junior subordinated notes		1,373			1,373
Remarketable subordinated notes		2,083			1,080

Total long-term debt		20,666			19,330

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		7,226			7,114
Asset retirement obligations		1,535			1,484
Regulatory liabilities		2,036			2,001
Other		1,530			1,274

Total deferred credits and other liabilities		12,327			11,873

Total liabilities		40,572			38,197

Commitments and Contingencies (see Note 15)

Subsidiary Preferred Stock Not Subject to Mandatory Redemption		134			257

Common Shareholders’ Equity
Common stock – no par⁽²⁾		5,788			5,783
Retained earnings		6,202			6,183
Accumulated other comprehensive loss		(417	)		(324	)

Total common shareholders’ equity		11,573			11,642

Total liabilities and shareholders’ equity	$	52,279		$	50,096

(1)	Dominion’s Consolidated Balance Sheet at December 31, 2013 has been derived from the audited Consolidated Financial Statements at that date.

(2)	1 billion shares authorized; 584 million shares and 581 million shares outstanding at September 30, 2014 and December 31, 2013, respectively.

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

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Nine Months Ended September 30,	2014			2013
(millions)
Operating Activities

Net income including noncontrolling interests	$	1,077		$	1,285
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
Depreciation, depletion and amortization (including nuclear fuel)		1,171			1,104
Deferred income taxes and investment tax credits		444			601
Impairment of merchant generation assets		—			48
Gains on the sale of assets and businesses		(160	)		(118	)
Charge associated with North Anna and offshore wind legislation		330			—
Other adjustments		(104	)		(84	)
Changes in:
Accounts receivable		300			98
Inventories		(39	)		(63	)
Deferred fuel and purchased gas costs, net		(252	)		85
Prepayments		14			46
Accounts payable		(291	)		(144	)
Accrued interest, payroll and taxes		(9	)		(38	)
Other operating assets and liabilities		(71	)		130

Net cash provided by operating activities		2,410			2,950

Investing Activities
Plant construction and other property additions (including nuclear fuel)		(3,742	)		(2,955	)
Acquisition of solar development projects		(66	)		(23	)
Proceeds from sales of securities		1,524			1,260
Purchases of securities		(1,562	)		(1,278	)
Proceeds from the sale of Brayton Point, Kincaid and equity method investment in Elwood		—			465
Proceeds from the sale of assets to Blue Racer		86			130
Proceeds from the sale of electric retail energy marketing business		187			—
Restricted cash equivalents		8			23
Other		32			30

Net cash used in investing activities		(3,533	)		(2,348	)

Financing Activities
Issuance (repayment) of short-term debt, net		702			(267	)
Issuance of long-term debt		2,150			2,935
Repayment of long-term debt, including redemption premiums		(725	)		(1,214	)
Repayment of junior subordinated notes		—			(258	)
Acquisition of Juniper noncontrolling interest in Fairless		—			(923	)
Subsidiary preferred stock redemption		(125	)		—
Issuance of common stock		138			206
Common dividend payments		(1,048	)		(976	)
Subsidiary preferred dividend payments		(9	)		(12	)
Other		(58	)		(54	)

Net cash provided by (used in) financing activities		1,025			(563	)

Increase (decrease) in cash and cash equivalents		(98	)		39
Cash and cash equivalents at beginning of period		316			248

Cash and cash equivalents at end of period	$	218		$	287

Supplemental Cash Flow Information
Significant noncash investing activities:
Accrued capital expenditures	$	309		$	271

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 September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
(millions)
Operating Revenue⁽¹⁾	$	2,053	$	2,059	$	5,765	$	5,550

Operating Expenses
Electric fuel and other energy-related purchases⁽¹⁾		649		651		1,817		1,749
Purchased electric capacity		86		91		261		267
Other operations and maintenance:
Affiliated suppliers		70		83		211		238
Other		331		273		1,164		792
Depreciation and amortization		260		218		695		636
Other taxes		63		64		205		196

Total operating expenses		1,459		1,380		4,353		3,878

Income from operations		594		679		1,412		1,672

Other income		24		19		60		71
Interest and related charges		101		93		311		270

Income before income tax expense		517		605		1,161		1,473
Income tax expense		203		218		454		534

Net Income		314		387		707		939
Preferred dividends		2		4		10		12

Balance available for common stock	$	312	$	383	$	697	$	927

(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 September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
(millions)
Net income	$	314		$	387		$	707		$	939
Other comprehensive income (loss), net of taxes:
Net deferred gains (losses) on derivatives-hedging activities⁽¹⁾		(1	)		1			—			4
Changes in unrealized net gains on nuclear decommissioning trust funds⁽²⁾		2			4			10			12
Amounts reclassified to net income:
Net derivative (gains) losses-hedging activities⁽³⁾		1			1			(3	)		—
Net realized gains on nuclear decommissioning trust funds⁽⁴⁾		(3	)		(2	)		(5	)		(2	)

Other comprehensive income (loss)		(1	)		4			2			14

Comprehensive income	$	313		$	391		$	709		$	953

(1)	Net of $— million and $(1) million tax for the three months ended September 30, 2014 and 2013, respectively, and net of $— million and $(3) million for the nine months ended September 30, 2014 and 2013, respectively.

(2)	Net of $(1) million and $(2) million tax for the three months ended September 30, 2014 and 2013, respectively, and net of $(6) million and $(7) million for the nine months ended September 30, 2014 and 2013, respectively.

(3)	Net of $— million tax for both the three months ended September 30, 2014 and 2013, and net of $2 million and $— million for the nine months ended September 30, 2014 and 2013, respectively.

(4)	Net of $2 million and $— million tax for the three months ended September 30, 2014 and 2013, respectively, and net of $3 million and $1 million for the nine months ended September 30, 2014 and 2013, respectively.

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

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2014			December 31, 2013⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	21		$	16
Customer receivables (less allowance for doubtful accounts of $25 and $11)		928			946
Other receivables (less allowance for doubtful accounts of $2 at both dates)		77			78
Inventories (average cost method)		841			808
Prepayments		21			32
Regulatory assets		373			128
Other⁽²⁾		77			155

Total current assets		2,338			2,163

Investments
Nuclear decommissioning trust funds		1,872			1,765
Other		3			12

Total investments		1,875			1,777

Property, Plant and Equipment
Property, plant and equipment		34,478			32,848
Accumulated depreciation and amortization		(11,050	)		(10,580	)

Total property, plant and equipment, net		23,428			22,268

Deferred Charges and Other Assets
Intangible assets, net		203			193
Regulatory assets		422			417
Other⁽²⁾		217			143

Total deferred charges and other assets		842			753

Total assets	$	28,483		$	26,961

(1)	Virginia Power’s Consolidated Balance Sheet at December 31, 2013 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.

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)


	September 30, 2014		December 31, 2013⁽¹⁾
(millions)
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
Securities due within one year	$	14	$	58
Short-term debt		1,403		842
Accounts payable		436		479
Payables to affiliates		70		69
Affiliated current borrowings		17		97
Accrued interest, payroll and taxes		278		218
Other⁽²⁾		463		454

Total current liabilities		2,681		2,217

Long-Term Debt		8,714		7,974

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		4,199		4,137
Asset retirement obligations		727		689
Regulatory liabilities		1,646		1,597
Other⁽²⁾		351		292

Total deferred credits and other liabilities		6,923		6,715

Total liabilities		18,318		16,906

Commitments and Contingencies (see Note 15)

Preferred Stock Not Subject to Mandatory Redemption		134		257

Common Shareholder’s Equity
Common stock – no par⁽³⁾		5,738		5,738
Other paid-in capital		1,113		1,113
Retained earnings		3,130		2,899
Accumulated other comprehensive income⁽²⁾		50		48

Total common shareholder’s equity		10,031		9,798

Total liabilities and shareholder’s equity	$	28,483	$	26,961

(1)	Virginia Power’s Consolidated Balance Sheet at December 31, 2013 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 September 30, 2014 and December 31, 2013.

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)


Nine Months Ended September 30,	2014			2013
(millions)
Operating Activities
Net income	$	707		$	939
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including nuclear fuel)		824			758
Deferred income taxes and investment tax credits		235			243
Charge associated with North Anna and offshore wind legislation		330			—
Other adjustments		(28	)		(54	)
Changes in:
Accounts receivable		20			(65	)
Inventories		(33	)		(15	)
Deferred fuel expenses		(284	)		47
Prepayments		11			(4	)
Accounts payable		(24	)		(10	)
Affiliated accounts payable		1			20
Accrued interest, payroll and taxes		60			150
Other operating assets and liabilities		(99	)		27

Net cash provided by operating activities		1,720			2,036

Investing Activities
Plant construction and other property additions		(2,120	)		(1,794	)
Purchases of nuclear fuel		(140	)		(108	)
Proceeds from sales of securities		415			464
Purchases of securities		(421	)		(501	)
Other		(18	)		(9	)

Net cash used in investing activities		(2,284	)		(1,948	)

Financing Activities
Issuance (repayment) of short-term debt, net		562			(507	)
Repayment of affiliated current borrowings, net		(80	)		(435	)
Issuance of long-term debt		750			1,835
Repayment of long-term debt		(52	)		(462	)
Preferred stock redemption		(125	)		—
Common dividend payments		(466	)		(463	)
Preferred dividend payments		(9	)		(12	)
Other		(11	)		(21	)

Net cash provided by (used in) financing activities		569			(65	)

Increase in cash and cash equivalents		5			23
Cash and cash equivalents at beginning of period		16			28

Cash and cash equivalents at end of period	$	21		$	51

Supplemental Cash Flow Information
Significant noncash investing activities:
Accrued capital expenditures	$	176		$	137

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 September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
(millions)
Operating Revenue⁽¹⁾	$	391	$	388	$	1,388	$	1,404

Operating Expenses
Purchased gas⁽¹⁾		34		46		247		223
Other energy-related purchases		8		19		29		59
Other operations and maintenance:
Affiliated suppliers		12		17		49		56
Other⁽²⁾		79		12		204		281
Depreciation and amortization		50		49		146		148
Other taxes		31		28		117		108

Total operating expenses		214		171		792		875

Income from operations		177		217		596		529

Other income		5		5		18		19
Interest and related charges⁽¹⁾		7		7		19		20

Income from operations before income taxes		175		215		595		528
Income tax expense		68		85		231		207

Net Income	$	107	$	130	$	364	$	321

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

(2)	Includes gains on the sales of assets to related parties. 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 September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
(millions)
Net income	$	107		$	130		$	364		$	321
Other comprehensive income (loss), net of taxes:
Net deferred gains (losses) on derivatives-hedging activities⁽¹⁾		(7	)		(21	)		(33	)		45
Changes in net unrecognized pension and other postretirement benefit costs⁽²⁾		—			—			—			13
Amounts reclassified to net income:
Net derivative losses-hedging activities⁽³⁾		4			3			11			6
Net pension and other postretirement benefit costs⁽⁴⁾		1			1			3			4

Other comprehensive income (loss)		(2	)		(17	)		(19	)		68

Comprehensive income	$	105		$	113		$	345		$	389

(1)	Net of $4 million and $13 million tax for the three months ended September 30, 2014 and 2013, respectively, and net of $22 million and $(30) million for the nine months ended September 30, 2014 and 2013, respectively.

(2)	Net of $— million tax for both the three months ended September 30, 2014 and 2013, and net of $— million and $(9) million for the nine months ended September 30, 2014 and 2013, respectively.

(3)	Net of $(2) million tax for both the three months ended September 30, 2014 and 2013, and net of $(7) million and $(3) million for the nine months ended September 30, 2014 and 2013, respectively.

(4)	Net of $(1) million for both the three months ended September 30, 2014 and 2013, and net of $(2) million and $(3) million for the nine months ended September 30, 2014 and 2013, respectively.

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

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2014			December 31, 2013⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	16		$	8
Customer receivables (less allowance for doubtful accounts of $5 at both dates)⁽²⁾		241			311
Affiliated receivables		6			41
Inventories		91			63
Prepayments		38			67
Other⁽²⁾		191			311

Total current assets		583			801

Investments		113			106

Property, Plant and Equipment
Property, plant and equipment		8,700			8,240
Accumulated depreciation and amortization		(2,501	)		(2,421	)

Total property, plant and equipment, net		6,199			5,819

Deferred Charges and Other Assets
Goodwill		542			545
Intangible assets, net		79			82
Regulatory assets		313			285
Pension and other postretirement benefit assets⁽²⁾		1,503			1,436
Other⁽²⁾		66			68

Total deferred charges and other assets		2,503			2,416

Total assets	$	9,398		$	9,142

(1)	Dominion Gas’ Consolidated Balance Sheet at December 31, 2013 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)


	September 30, 2014			December 31, 2013⁽¹⁾
(millions)
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	170		$	277
Payables to affiliates		37			45
Affiliated current borrowings		1,563			1,342
Accrued interest, payroll and taxes		153			209
Other⁽²⁾		200			197

Total current liabilities		2,123			2,070

Long-Term Debt		1,199			1,198

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		2,036			1,977
Other⁽²⁾		469			470

Total deferred credits and other liabilities		2,505			2,447

Total liabilities		5,827			5,715

Commitments and Contingencies (see Note 15)

Equity
Membership interests		3,648			3,485
Accumulated other comprehensive loss⁽²⁾		(77	)		(58	)

Total equity		3,571			3,427

Total liabilities and equity	$	9,398		$	9,142

(1)	Dominion Gas’ Consolidated Balance Sheet at December 31, 2013 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)


Nine Months Ended September 30,	2014			2013
(millions)
Operating Activities
Net income	$	364		$	321
Adjustments to reconcile net income to net cash provided by operating activities:
Gains on sales of assets		(64	)		(100	)
Depreciation and amortization		146			148
Deferred income taxes and investment tax credits		80			70
Other adjustments		(12	)		(4	)
Changes in:
Accounts receivable		60			65
Affiliated receivable		6			8
Deferred purchased gas costs, net		33			40
Prepayments		29			43
Inventories		(28	)		(25	)
Accounts payable		(113	)		(61	)
Payables to affiliates		(8	)		(5	)
Accrued interest, payroll and taxes		(56	)		(3	)
Other operating assets and liabilities		(89	)		(6	)

Net cash provided by operating activities		348			491

Investing Activities
Plant construction and other property additions		(467	)		(457	)
Proceeds from sale of assets to an affiliate		47			113
Proceeds from sale of assets		5			78
Advances to affiliate, net		—			(5	)
Other		(6	)		(6	)

Net cash used in investing activities		(421	)		(277	)

Financing Activities
Issuance (repayment) of affiliated current borrowings, net		288			(208	)
Distribution payments		(206	)		—
Other		(1	)		(1	)

Net cash provided by (used in) financing activities		81			(209	)

Increase in cash and cash equivalents		8			5
Cash and cash equivalents at beginning of period		8			12

Cash and cash equivalents at end of period	$	16		$	17

Supplemental Cash Flow Information
Significant noncash investing and financing activities:
Accrued capital expenditures	$	63		$	47
Extinguishment of affiliated current borrowings 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.

In October 2014, Dominion Midstream Partners, LP launched its initial public offering of 17,500,000 common units representing limited partner interests at a price of $21 per unit. In addition, the underwriters exercised their option to purchase an additional 2,625,000 common units at the initial offering price. Dominion received an estimated $392 million in net proceeds from the sale of the units, after deducting underwriting discounts, structuring fees and estimated offering expenses. Dominion owns the general partner and 68.5% of the limited partner interests in Dominion Midstream Partners, LP, which owns a $50 million preferred equity interest and the general partner interest in Cove Point.

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 Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2013, Dominion’s and Virginia Power’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, Exhibits 99.11(b) and 99.11(c) to Dominion Gas’ Current Report on Form 8-K dated June 26, 2014, and the Companies’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.

In the Companies’ opinion, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly their financial position as of September 30, 2014, their results of operations for the three and nine months ended September 30, 2014 and 2013, and their cash flows for the nine months ended September 30, 2014 and 2013. 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 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 the Companies’ 2013 Consolidated Financial Statements and Notes have been reclassified to conform to the 2014 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 Development 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. The projects are expected to cost approximately $450 million once constructed, including the initial acquisition cost. Upon completion, the facilities are expected to generate approximately 139 MW and will provide Dominion with a large utility-scale solar presence in the California market and significantly increase its solar generation portfolio.

In May 2014, Dominion completed the acquisition of 100% of the equity interests of two solar development projects in Tennessee from Strata Solar Development, LLC for $2 million. The projects are expected to cost approximately $70 million once constructed, including the initial acquisition cost. Upon completion, the facilities are expected to generate approximately 32 MW.

The purchase price for each of these acquisitions was allocated to Property, Plant and Equipment.

In May 2014, Dominion entered into an agreement to acquire 100% of the equity interests of a solar project in California from EDF Renewable Development, Inc. for approximately $70 million. The acquisition is expected to close later this year prior to the project commencing operations. The project is expected to cost approximately $75 million once constructed, including the initial acquisition cost. Upon completion, the facility is expected to generate approximately 20 MW.

Long-term power purchase, interconnection, EPC and operation and maintenance agreements have been executed for each of the acquired projects. Construction of the projects has commenced and all of the solar facilities are expected to enter commercial operations in 2014. Dominion expects to claim federal investment tax credits on the projects.

In September 2014, Dominion entered into agreements to acquire 100% of the equity interests in two additional solar projects in California from EDF Renewable Development, Inc. for approximately $175 million. The acquisitions are expected to close in the first half of 2015 prior to the projects commencing operations. The projects are expected to cost approximately $185 million once constructed, including the initial acquisition cost. Upon completion, the facilities are expected to generate approximately 42 MW.

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.

Sale of Illinois Gas Contracts

In June 2013, Dominion completed the sale of Illinois Gas Contracts. The sales price was approximately $32 million, subject to post-closing adjustments. The sale resulted in a gain of approximately $29 million ($18 million after-tax) net of a $3 million write-off of goodwill, and is included in other operations and maintenance expense in Dominion’s Consolidated Statements of Income. The sale of Illinois Gas Contracts did not qualify for discontinued operations classification.

Sale of Brayton Point, Kincaid and Equity Method Investment in Elwood

In March 2013, Dominion entered into an agreement with Energy Capital Partners to sell Brayton Point, Kincaid, and its equity method investment in Elwood. In August 2013, Dominion completed the sale and received proceeds of approximately $465 million, net of transaction costs.

In the first and second quarters of 2013, Brayton Point’s and Kincaid’s assets and liabilities to be disposed of were classified as held for sale and adjusted to their estimated fair value less cost to sell, resulting in impairment charges totaling $48 million ($28 million after-tax) for the six month period ended June 30, 2013, which are included in discontinued operations in Dominion’s Consolidated Statements of Income. Dominion used the market approach to estimate the fair value of Brayton Point’s and Kincaid’s long-lived assets. These were considered Level 2 fair value measurements given that they were based on the agreed-upon sales price.

Dominion’s 50% interest in Elwood was an equity method investment and therefore, in accordance with applicable accounting guidance, the carrying amount of this investment was not classified as held for sale nor were the equity earnings from this investment reported as discontinued operations.

The following table presents selected information regarding the results of operations of Brayton Point and Kincaid, which are reported as discontinued operations in Dominion’s Consolidated Statements of Income:


	Three Months Ended September 30,			Nine Months Ended September 30,
	2013			2013
(millions)
Operating revenue	$	87		$	304
Income before income taxes		(17	)		(135	)⁽¹⁾

(1)	Includes $64 million of charges related to the defeasance of Brayton Point debt and the early redemption of Kincaid debt. See Note 17 in Dominion’s Annual Report on Form 10-K for the year ended December 31, 2013 for more information.

Dominion Gas

Assignments of Marcellus Acreage

In December 2013, DTI closed on agreements with two natural gas producers to convey approximately 100,000 acres of Marcellus Shale development rights underneath several of its natural gas storage fields. The agreements provide for payments to DTI, subject to customary adjustments, of approximately $200 million over a period of nine years, and an overriding royalty interest in gas produced from the acreage. During the nine months ended September 30, 2014, DTI received $16 million in additional cash proceeds resulting from post-closing adjustments. At September 30, 2014, deferred revenue totaled approximately $88 million, which is expected to be recognized over a period of approximately nine years.

In September 2014, DTI signed an agreement with a natural gas producer to convey approximately 24,000 acres of Marcellus Shale development rights underneath one of its natural gas storage fields. The agreement provides for payments to DTI, subject to customary adjustments, of approximately $120 million over a period of four years, and an overriding royalty interest in gas produced from the acreage. DTI expects to close on the agreement in November 2014 and receive proceeds of approximately $60 million associated with an initial conveyance of approximately 12,000 acres.

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 September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
(millions)
Dominion
Electric sales:
Regulated	$	2,026	$	2,023	$	5,674	$	5,471
Nonregulated		353		704		1,527		1,907
Gas sales:
Regulated		25		32		242		213
Nonregulated		187		159		532		712
Gas transportation and storage		343		329		1,138		1,156
Other		116		185		380		476

Total operating revenue	$	3,050	$	3,432	$	9,493	$	9,935

Virginia Power
Regulated electric sales	$	2,026	$	2,023	$	5,674	$	5,471
Other		27		36		91		79

Total operating revenue	$	2,053	$	2,059	$	5,765	$	5,550

Dominion Gas
Gas sales:
Regulated	$	15	$	22	$	152	$	130
Nonregulated		3		3		16		10
Gas transportation and storage		296		280		996		1,011
NGL revenue		54		66		155		204
Other		23		17		69		49

Total operating revenue	$	391	$	388	$	1,388	$	1,404

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
Nine Months Ended September 30,	2014			2013			2014			2013			2014			2013
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		2.7			2.4			3.9			2.8			3.7			4.1
Investment tax credits		(6.0	)		(1.3	)		—			—			—			—
Production tax credits		(1.1	)		(0.5	)		(0.6	)		(0.2	)		—			—
Valuation allowances		0.6			—			—			—			—			—
AFUDC – equity		0.1			(0.7	)		0.1			(1.1	)		—			(0.1	)
Other, net		(0.6	)		(0.9	)		0.7			(0.3	)		0.1			0.2

Effective tax rate		30.7	%		34.0	%		39.1	%		36.2	%		38.8	%		39.2	%

As of September 30, 2014, 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 Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2013 and Note 5 in Exhibit 99.11(b) to Dominion Gas’ Current Report on Form 8-K dated June 26, 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 September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
(millions, except EPS)
Net income attributable to Dominion	$	529	$	569	$	1,067	$	1,266

Average shares of common stock outstanding – Basic		583.1		579.4		582.2		578.1
Net effect of dilutive securities⁽¹⁾		1.5		0.7		1.6		0.7

Average shares of common stock outstanding – Diluted		584.6		580.1		583.8		578.8

Earnings Per Common Share – Basic	$	0.91	$	0.98	$	1.83	$	2.19
Earnings Per Common Share – Diluted	$	0.90	$	0.98	$	1.83	$	2.19

(1)

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

The 2014 Equity Units are potentially dilutive securities but were excluded from the calculation of diluted EPS for the three and nine months ended September 30, 2014, as the dilutive stock price threshold was not met. The 2013 Equity Units are potentially dilutive securities but were excluded from the calculation of diluted EPS for the three and nine months ended September 30, 2013. See Note 17 to the Consolidated Financial Statements in Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2013 for more information.

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 September 30, 2014
Beginning balance	$	(353	)	$	534		$	(493	)	$	(5	)	$	(317	)
Other comprehensive income before reclassifications: gains (losses)		(58	)		2			—			—			(56	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		(31	)		(21	)		8			—			(44	)

Net current-period other comprehensive income (loss)		(89	)		(19	)		8			—			(100	)

Ending balance	$	(442	)	$	515		$	(485	)	$	(5	)	$	(417	)

Three Months Ended September 30, 2013
Beginning balance	$	(31	)	$	371		$	(823	)	$	—		$	(483	)
Other comprehensive income before reclassifications: gains (losses)		(77	)		38			(12	)		—			(51	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		(6	)		(10	)		14			—			(2	)

Net current-period other comprehensive income (loss)		(83	)		28			2			—			(53	)

Ending balance	$	(114	)	$	399		$	(821	)	$	—		$	(536	)

Nine Months Ended September 30, 2014
Beginning balance	$	(288	)	$	474		$	(510	)	$	—		$	(324	)
Other comprehensive income before reclassifications: gains (losses)		(267	)		80			—			(5	)		(192	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		113			(39	)		25			—			99

Net current-period other comprehensive income (loss)		(154	)		41			25			(5	)		(93	)

Ending balance	$	(442	)	$	515		$	(485	)	$	(5	)	$	(417	)

Nine Months Ended September 30, 2013
Beginning balance	$	(122	)	$	326		$	(1,081	)	$	—		$	(877	)
Other comprehensive income before reclassifications: gains (losses)		(45	)		119			216			—			290
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		53			(46	)		44			—			51

Net current-period other comprehensive income (loss)		8			73			260			—			341

Ending balance	$	(114	)	$	399		$	(821	)	$	—		$	(536	)

(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 September 30, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(66	)	Operating revenue
		3		Purchased gas
		5		Electric fuel and other energy-related purchases
Interest rate contracts		5		Interest and related charges

		(53	)
Tax		22		Income tax expense

	$	(31	)

Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(38	)	Other income
Impairment		4		Other income

		(34	)
Tax		13		Income tax expense

	$	(21	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(4	)	Other operations and maintenance
Actuarial (gains) losses		18		Other operations and maintenance

		14
Tax		(6	)	Income tax expense

	$	8

Three Months Ended September 30, 2013
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(24	)	Operating revenue
		5		Purchased gas
		3		Electric fuel and other energy-related purchases
Interest rate contracts		6		Interest and related charges

		(10	)
Tax		4		Income tax expense

	$	(6	)

Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(16	)	Other income
Impairment		1		Other income

		(15	)
Tax		5		Income tax expense

	$	(10	)

Unrecognized pension and other postretirement benefit costs:
Actuarial (gains) losses	$	23		Other operations and maintenance

		23
Tax		(9	)	Income tax expense

	$	14

Nine Months Ended September 30, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	175		Operating revenue
		7		Purchased gas
		(8	)	Electric fuel and other energy-related purchases
Interest rate contracts		11		Interest and related charges

		185
Tax		(72	)	Income tax expense

	$	113


Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(71	)	Other income
Impairment		8		Other income

		(63	)
Tax		24		Income tax expense

	$	(39	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(9	)	Other operations and maintenance
Actuarial (gains) losses		52		Other operations and maintenance

		43
Tax		(18	)	Income tax expense

	$	25

Nine Months Ended September 30, 2013
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	31		Operating revenue
		39		Purchased gas
		6		Electric fuel and other energy-related purchases
Interest rate contracts		12		Interest and related charges

		88
Tax		(35	)	Income tax expense

	$	53

Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(80	)	Other income
Impairment		6		Other income

		(74	)
Tax		28		Income tax expense

	$	(46	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(6	)	Other operations and maintenance
Actuarial (gains) losses		79		Other operations and maintenance

		73
Tax		(29	)	Income tax expense

	$	44

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 September 30, 2014
Beginning balance	$	(16	)	$	(59	)	$	(75	)
Other comprehensive income before reclassifications: gains (losses)		(7	)		—			(7	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		4			1			5

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

Ending balance	$	(19	)	$	(58	)	$	(77	)

Three Months Ended September 30, 2013
Beginning balance	$	22		$	(77	)	$	(55	)
Other comprehensive income before reclassifications: gains (losses)		(21	)		—			(21	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		3			1			4

Net current-period other comprehensive income (loss)		(18	)		1			(17	)

Ending balance	$	4		$	(76	)	$	(72	)

Nine Months Ended September 30, 2014
Beginning balance	$	3		$	(61	)	$	(58	)
Other comprehensive income before reclassifications: gains (losses)		(33	)		—			(33	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		11			3			14

Net current-period other comprehensive income (loss)		(22	)		3			(19	)

Ending balance	$	(19	)	$	(58	)	$	(77	)

Nine Months Ended September 30, 2013
Beginning balance	$	(47	)	$	(93	)	$	(140	)
Other comprehensive income before reclassifications: gains (losses)		45			13			58
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		6			4			10

Net current-period other comprehensive income		51			17			68

Ending balance	$	4		$	(76	)	$	(72	)

(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 September 30, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	1		Operating revenue
		5		Purchased gas

		6
Tax		(2	)	Income tax expense

	$	4

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 September 30, 2013
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	1		Operating revenue
		4		Purchased gas

		5
Tax		(2	)	Income tax expense

	$	3

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

		2
Tax		(1	)	Income tax expense

	$	1

Nine Months Ended September 30, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	8		Operating revenue
		10		Purchased gas

		18
Tax		(7	)	Income tax expense

	$	11

Unrecognized pension and other postretirement benefit costs:
Actuarial (gains) losses	$	5		Other operations and maintenance

		5
Tax		(2	)	Income tax expense

	$	3

Nine Months Ended September 30, 2013
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(1	)	Operating revenue
		10		Purchased gas

		9
Tax		(3	)	Income tax expense

	$	6

Unrecognized pension and other postretirement benefit costs:
Actuarial (gains) losses	$	7		Other operations and maintenance

		7
Tax		(3	)	Income tax expense

	$	4

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 Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2013 and Note 6 in Exhibit 99.11(b) to Dominion Gas’ Current Report on Form 8-K dated June 26, 2014. See Note 9 in this report for further information about their 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 the Companies’ quantitative information about Level 3 fair value measurements at September 30, 2014. 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⁾	$	27	Discounted Cash Flow		Market Price (per Dth)⁽⁴⁾		(2) - 5		(1	)
					Credit spread⁽⁶⁾		1% - 3%		2	%
FTRs		37	Discounted Cash Flow		Market Price (per MWh)⁽⁴⁾		(1) - 16		2
NGLs⁽³⁾		3	Discounted Cash Flow		Market Price (per Gal)⁽⁴⁾		1 - 2		1
Physical and Financial Options:
Natural Gas		3	Option Model		Market Price (per Dth)⁽⁴⁾		3 - 5		4
					Price Volatility	⁽⁵⁾	17% - 51%		33	%

Total assets	$	70

Liabilities:
Physical and Financial Forwards and Futures:
Natural Gas⁽²⁾	$	15	Discounted Cash Flow		Market Price (per Dth)⁽⁴⁾		(2) - 5		2
FTRs		4	Discounted Cash Flow		Market Price (per MWh)⁽⁴⁾		(16) - 16		(1	)
NGLs⁽³⁾		1	Discounted Cash Flow		Market Price (per Gal)⁽⁴⁾		1 - 2		2
Physical and Financial Options:
Natural Gas		3	Option Model		Market Price (per Dth)⁽⁴⁾		2 - 5		4
					Price Volatility⁽⁵⁾		17% - 51%		37	%

Total liabilities	$	23

(1)	Averages weighted by volume.

(2)	Includes basis.

(3)	Information represents Dominion Gas’ quantitative information about Level 3 fair value measurements.

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

(5)	Represents volatilities unrepresented in published markets.

(6)	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)
Price Volatility	Buy	Increase (decrease)	Gain (loss)
Price Volatility	Sell	Increase (decrease)	Loss (gain)
Credit spread	Asset	Increase (decrease)	Loss (gain)
Credit spread	Liability	Increase (decrease)	Gain (loss)

Non-recurring Fair Value Measurements

Dominion

See Note 3 for non-recurring fair value measurements related to Brayton Point and Kincaid.

Dominion Gas

In June 2013, Dominion Gas purchased certain natural gas infrastructure facilities that were previously leased from third parties. The purchase price was based on terms in the lease, which exceeded current market pricing. As a result of the purchase price and expected losses, Dominion Gas recorded an impairment charge of $49 million ($29 million after-tax) in other operations and maintenance expense in its Consolidated Statements of Income, to write down the long-lived assets to their estimated fair values 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 Gas used the income approach (discounted cash flows) to estimate the fair value of the assets in this impairment test. This was considered a Level 3 fair value measurement due to the use of significant unobservable inputs, including estimates of future production and other commodity prices.

Also in June 2013, Dominion Gas recorded an impairment charge of $6 million ($4 million after-tax) in other operations and maintenance expense in its Consolidated Statements of Income, to write off previously capitalized costs following the cancellation of two development projects.

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 September 30, 2014
Assets:
Derivatives:
Commodity	$	—	$	612	$	70	$	682
Interest rate		—		50		—		50
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		2,570		—		—		2,570
Other		6		—		—		6
Non-U.S.:
Large cap		12		—		—		12
Fixed income:
Corporate debt instruments		—		419		—		419
U.S. Treasury securities and agency debentures		444		181		—		625
State and municipal		—		366		—		366
Other		—		6		—		6
Cash equivalents and other		1		135		—		136

Total assets	$	3,033	$	1,769	$	70	$	4,872

Liabilities:
Derivatives:
Commodity	$	1	$	1,200	$	23	$	1,224
Interest rate		—		100		—		100

Total liabilities	$	1	$	1,300	$	23	$	1,324

At December 31, 2013
Assets:
Derivatives:
Commodity	$	3	$	718	$	32	$	753
Interest rate		—		137		—		137
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		2,417		—		—		2,417
Other		79		—		—		79
Non-U.S.:
Large cap		13		—		—		13
Fixed income:
Corporate debt instruments		—		345		—		345
U.S. Treasury securities and agency debentures		415		175		—		590
State and municipal		—		343		—		343
Other		—		3		—		3
Cash equivalents and other		—		103		—		103
Restricted cash equivalents		—		8		—		8

Total assets	$	2,927	$	1,832	$	32	$	4,791

Liabilities:
Derivatives:
Commodity	$	3	$	1,051	$	48	$	1,102

Total liabilities	$	3	$	1,051	$	48	$	1,102

(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 September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
(millions)
Beginning balance	$	3		$	2		$	(16	)	$	25
Total realized and unrealized gains (losses):
Included in earnings		(2	)		(1	)		98			1
Included in other comprehensive income (loss)		4			(25	)		7			11
Included in regulatory assets/liabilities		39			10			53			(17	)
Settlements		5			3			(94	)		(23	)
Transfers out of Level 3		(2	)		7			(1	)		(1	)

Ending balance	$	47		$	(4	)	$	47		$	(4	)

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		$	2		$	2		$	—

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


	Operating revenue			Purchased Gas			Electric fuel and other energy- related purchases			Total
(millions)
Three Months Ended September 30, 2014
Total gains (losses) included in earnings	$	3		$	(3	)	$	(2	)	$	(2	)

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		3			(2	)		—			1

Three Months Ended September 30, 2013
Total gains (losses) included in earnings	$	5		$	—		$	(6	)	$	(1	)

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		2			—			—			2

Nine Months Ended September 30, 2014
Total gains (losses) included in earnings	$	(7	)	$	(4	)	$	109		$	98

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			(2	)		—			2

Nine Months Ended September 30, 2013
Total gains (losses) included in earnings	$	12		$	—		$	(11	)	$	1

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		—			—			—			—

Virginia Power

The following table presents Virginia Power’s quantitative information about Level 3 fair value measurements at September 30, 2014. 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	$	37	Discounted Cash Flow		Market Price (per MWh)⁽³⁾	(1) - 16		2
Natural Gas⁽²⁾		13	Discounted Cash Flow		Market Price (per Dth)⁽³⁾	(2) - 5		(1	)
					Credit spread⁽⁴⁾	1% - 3%		2	%

Total assets	$	50

Liabilities:
Physical and Financial Forwards and Futures:
FTRs	$	4	Discounted Cash Flow		Market Price (per MWh)⁽³⁾	(16) - 16		(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)
Credit spread	Liability	Increase (decrease)	Gain (loss)

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 September 30, 2014
Assets:
Derivatives:
Commodity	$	—	$	3	$	50	$	53
Investments⁽¹⁾:
Equity securities:
U.S. Large cap		1,101		—		—		1,101
Fixed income:
Corporate debt instruments		—		229		—		229
U.S. Treasury securities and agency debentures		166		61		—		227
State and municipal		—		185		—		185
Cash equivalents and other		—		43		—		43

Total assets	$	1,267	$	521	$	50	$	1,838

Liabilities:
Derivatives:
Commodity	$	—	$	3	$	4	$	7
Interest rate		—		23		—		23

Total liabilities	$	—	$	26	$	4	$	30

At December 31, 2013
Assets:
Derivatives:
Commodity	$	—	$	3	$	2	$	5
Interest rate		—		48		—		48
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		1,021		—		—		1,021
Other		36		—		—		36
Fixed income:
Corporate debt instruments		—		191		—		191
U.S. Treasury securities and agency debentures		146		66		—		212
State and municipal		—		164		—		164
Cash equivalents and other		—		31		—		31
Restricted cash equivalents		—		8		—		8

Total assets	$	1,203	$	511	$	2	$	1,716

Liabilities:
Derivatives:
Commodity	$	—	$	3	$	9	$	12

Total liabilities	$	—	$	3	$	9	$	12

(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 September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
(millions)
Beginning balance	$	7		$	(25	)	$	(7	)	$	2
Total realized and unrealized gains (losses):
Included in earnings		(2	)		(4	)		109			(9	)
Included in regulatory assets/liabilities		39			10			53			(17	)
Settlements		2			4			(109	)		9

Ending balance	$	46		$	(15	)	$	46		$	(15	)

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 and nine months ended September 30, 2014 and 2013. 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 and nine months ended September 30, 2014 and 2013.

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 September 30, 2014
Assets:
Commodity	$	—	$	—	$	2	$	2

Liabilities:
Commodity	$	—	$	4	$	1	$	5
Interest rate		—		3		—		3

Total liabilities	$	—	$	7	$	1	$	8

At December 31, 2013
Assets:
Commodity	$	—	$	—	$	6	$	6
Interest rate		—		34		—		34

Total Assets	$	—	$	34	$	6	$	40
Liabilities:
Commodity	$	—	$	13	$	12	$	25

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 September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
(millions)
Beginning balance	$	(3	)	$	23		$	(6	)	$	(12	)
Total realized and unrealized gains (losses):
Included in earnings		(1	)		—			(8	)		2
Included in other comprehensive income (loss)		5			(23	)		8			11
Settlements		—			—			7			(1	)

Ending balance	$	1		$	—		$	1		$	—

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 and nine months ended September 30, 2014 and 2013. 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 and nine months ended September 30, 2014 and 2013.

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, 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:


	September 30, 2014				December 31, 2013
	Carrying Amount		Estimated Fair Value⁽¹⁾		Carrying Amount		Estimated Fair Value⁽¹⁾
(millions)
Dominion
Long-term debt, including securities due within one year⁽²⁾	$	18,801	$	20,853	$	18,396	$	19,887
Junior subordinated notes⁽³⁾		1,373		1,379		1,373		1,394
Remarketable subordinated notes⁽³⁾		2,083		2,233		1,080		1,192
Subsidiary preferred stock⁽⁴⁾		134		140		257		261

Virginia Power
Long-term debt, including securities due within one year⁽³⁾	$	8,728	$	9,858	$	8,032	$	8,897
Preferred stock⁽⁴⁾		134		140		257		261

Dominion Gas
Long-term debt⁽³⁾	$	1,199	$	1,237	$	1,198	$	1,169

(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)	Carrying amount includes amounts which represent the unamortized discount and/or premium. At September 30, 2014 and December 31, 2013, includes the valuation of certain fair value hedges associated with fixed rate debt of approximately $34 million and $55 million, respectively.

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

(4)	Carrying amount includes deferred issuance expenses of $2 million at December 31, 2013.

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 Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2013 and Note 2 in Exhibit 99.11(b) to Dominion Gas’ Current Report on Form 8-K dated June 26, 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 and Virginia Power’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’ 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:


	September 30, 2014						December 31, 2013
	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	$	50	$	—	$	50	$	137	$	—	$	137
Commodity contracts:
Over-the-counter		195		—		195		240		—		240
Exchange		483		—		483		506		—		506

Total derivatives, subject to a master netting or similar arrangement		728		—		728		883		—		883
Total derivatives, not subject to a master netting or similar arrangement		4		—		4		7		—		7

Total	$	732	$	—	$	732	$	890	$	—	$	890


			September 30, 2014								December 31, 2013
			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)
Interest rate contracts:
Over-the-counter	$	50	$	28	$	—	$	22	$	137	$	—	$	—	$	137
Commodity contracts:
Over-the-counter		195		73		—		122		240		63		—		177
Exchange		483		483		—		—		506		505		—		1

Total	$	728	$	584	$	—	$	144	$	883	$	568	$	—	$	315


	September 30, 2014						December 31, 2013
	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	$	100	$	—	$	100	$	—	$	—	$	—
Commodity contracts:
Over-the-counter		394		—		394		262		—		262
Exchange		825		—		825		838		—		838

Total derivatives, subject to a master netting or similar arrangement		1,319		—		1,319		1,100		—		1,100
Total derivatives, not subject to a master netting or similar arrangement		5		—		5		2		—		2

Total	$	1,324	$	—	$	1,324	$	1,102	$	—	$	1,102


			September 30, 2014								December 31, 2013
			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	$	100	$	28	$	—	$	72	$	—	$	—	$	—	$	—
Commodity contracts:
Over-the-counter		394		73		110		211		262		63		69		130
Exchange		825		483		342		—		838		505		333		—

Total	$	1,319	$	584	$	452	$	283	$	1,100	$	568	$	402	$	130

Volumes

The following table presents the volume of Dominion’s derivative activity as of September 30, 2014. 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⁾		57		12
Basis		298		606
Electricity (MWh):
Fixed price		15,326,454		9,127,500
FTRs		54,017,119		—
Capacity (MW)		6,100		12,200
Liquids (Gal)⁽²⁾		37,170,000		—
Interest rate	$	1,650,000,000	$	4,400,000,000

(1)	Includes options.

(2)	Includes NGLs and oil.

Ineffectiveness and AOCI

For the three and nine months ended September 30, 2014 and 2013, 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 September 30, 2014:

AOCI
After-Tax