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 June 30, 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 June 30, 2015, the latest practicable date for determination, Dominion Resources, Inc. had 594,321,909 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		78
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		90
Item 4.	Controls and Procedures		92

	PART II. Other Information

Item 1.	Legal Proceedings		93
Item 1A.	Risk Factors		93
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		93
Item 6.	Exhibits		94

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

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

CAA		Clean Air Act

Caiman		Caiman Energy II, LLC

CAIR		Clean Air Interstate Rule

CAISO		California independent system operator

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.

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

Dominion Midstream		The legal entity, Dominion Midstream Partners, LP, one or more of its consolidated subsidiaries, Cove Point Holdings and DCGT (beginning April 1, 2015), or the entirety of Dominion Midstream Partners, LP, and its consolidated subsidiaries


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.

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

Four Brothers		Four Brothers Solar, LLC, a limited liability company owned by Dominion and Four Brothers Holdings, LLC, a wholly-owned subsidiary of SunEdison

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

Greensville County		An approximately 1,588 MW proposed natural gas-fired combined-cycle power station in Greensville County, Virginia

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

LNG		Liquefied natural gas

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

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


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

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 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

Rider T1		A rate adjustment clause to recover the difference between revenues produced from transmission rates included in base rates, and the new total revenue requirement developed annually for the rate years effective September 1

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

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

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.

SunEdison		The legal entity, SunEdison, Inc., one or more of its consolidated subsidiaries (including Four Brothers Holdings, LLC) or operating segments, or the entirety of SunEdison, Inc. and its consolidated subsidiaries

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 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

Warren County		A 1,342 MW combined-cycle, natural gas-fired power station in Warren County, Virginia

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 June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
(millions, except per share amounts)
Operating Revenue	$	2,747	$	2,813	$	6,156	$	6,443

Operating Expenses
Electric fuel and other energy-related purchases		591		633		1,544		1,967
Purchased electric capacity		90		87		184		175
Purchased gas		111		324		361		864
Other operations and maintenance		709		933		1,311		1,358
Depreciation, depletion and amortization		339		308		682		616
Other taxes		134		134		299		301

Total operating expenses		1,974		2,419		4,381		5,281

Income from operations		773		394		1,775		1,162

Other income		56		57		116		97
Interest and related charges		221		227		444		464

Income from operations including noncontrolling interests before income tax expense		608		224		1,447		795
Income tax expense		190		63		489		249

Net Income Including Noncontrolling Interests		418		161		958		546
Noncontrolling Interests		5		2		9		8

Net Income Attributable to Dominion	$	413	$	159	$	949	$	538

Earnings Per Common Share
Net income attributable to Dominion - Basic	$	0.70	$	0.27	$	1.61	$	0.92
Net income attributable to Dominion - Diluted		0.70		0.27		1.60		0.92

Dividends declared per common share	$	0.6475	$	0.6000	$	1.2950	$	1.2000

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 June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
(millions)
Net income including noncontrolling interests	$	418		$	161		$	958		$	546
Other comprehensive income (loss), net of taxes:
Net deferred gains (losses) on derivatives-hedging activities⁽¹⁾		92			(59	)		34			(209	)
Changes in unrealized net gains (losses) on investment securities⁽²⁾		(11	)		49			4			78
Changes in unrecognized pension and other postretirement benefit costs⁽³⁾		3			4			3			—
Amounts reclassified to net income:
Net derivative (gains) losses-hedging activities⁽⁴⁾		(61	)		(16	)		(2	)		144
Net realized gains on investment securities⁽⁵⁾		(12	)		(7	)		(33	)		(18	)
Net pension and other postretirement benefit costs⁽⁶⁾		12			9			25			17
Changes in other comprehensive income (loss) from equity method investees⁽⁷⁾		—			2			(1	)		(5	)

Total other comprehensive income (loss)		23			(18	)		30			7

Comprehensive income including noncontrolling interests		441			143			988			553
Comprehensive income attributable to noncontrolling interests		5			2			9			8

Comprehensive income attributable to Dominion	$	436		$	141		$	979		$	545

(1)	Net of $(59) million and $47 million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $(19) million and $126 million for the six months ended June 30, 2015 and 2014, respectively.

(2)	Net of $6 million and $(27) million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $(5) million and $(28) million for the six months ended June 30, 2015 and 2014, respectively.

(3)	Net of $3 million and $4 million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $3 million and $— million for the six months ended June 30, 2015 and 2014, respectively.

(4)	Net of $41 million and $6 million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $2 million and $(94) million for the six months ended June 30, 2015 and 2014, respectively.

(5)	Net of $8 million and $4 million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $20 million and $11 million for the six months ended June 30, 2015 and 2014, respectively.

(6)	Net of $(9) million and $(6) million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $(18) million and $(12) million for the six months ended June 30, 2015 and 2014, respectively.

(7)	Net of $1 million and $3 million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $1 million and $3 million for the six months ended June 30, 2015 and 2014, respectively.

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

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2015			December 31, 2014⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	271		$	318
Customer receivables (less allowance for doubtful accounts of $37 and $34)		1,334			1,514
Other receivables (less allowance for doubtful accounts of $2 and $3)		106			119
Inventories		1,260			1,410
Prepayments		120			167
Deferred income taxes		517			800
Other		844			1,287

Total current assets		4,452			5,615

Investments
Nuclear decommissioning trust funds		4,208			4,196
Investment in equity method affiliates		1,103			1,081
Other		274			284

Total investments		5,585			5,561

Property, Plant and Equipment
Property, plant and equipment		54,448			51,406
Accumulated depreciation, depletion and amortization		(15,780	)		(15,136	)

Total property, plant and equipment, net		38,668			36,270

Deferred Charges and Other Assets
Goodwill		3,294			3,044
Pension and other postretirement benefit assets		1,002			956
Regulatory assets		1,625			1,642
Other		1,316			1,239

Total deferred charges and other assets		7,237			6,881

Total assets	$	55,942		$	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)


	June 30, 2015			December 31, 2014⁽¹⁾
(millions)
LIABILITIES AND EQUITY
Current Liabilities
Securities due within one year	$	1,310		$	1,375
Short-term debt		2,622			2,775
Accounts payable		842			952
Accrued interest, payroll and taxes		527			566
Other⁽²⁾		1,435			1,530

Total current liabilities		6,736			7,198

Long-Term Debt
Long-term debt		19,597			18,348
Junior subordinated notes		1,373			1,374
Remarketable subordinated notes		2,084			2,083

Total long-term debt		23,054			21,805

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		7,573			7,444
Asset retirement obligations		1,812			1,633
Regulatory liabilities		2,130			1,991
Other		1,782			2,299

Total deferred credits and other liabilities		13,297			13,367

Total liabilities		43,087			42,370

Commitments and Contingencies (see Note 16)
Equity
Common stock – no par⁽³⁾		6,530			5,876
Retained earnings		6,278			6,095
Accumulated other comprehensive loss		(386	)		(416	)

Total common shareholders’ equity		12,422			11,555

Noncontrolling interests		433			402

Total equity		12,855			11,957

Total liabilities and equity	$	55,942		$	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)	See Note 3 for amounts attributable to related parties.

(3)	1 billion shares authorized; 594 million shares and 585 million shares outstanding at June 30, 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)


Six Months Ended June 30,	2015			2014
(millions)
Operating Activities
Net income including noncontrolling interests	$	958		$	546
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
Depreciation, depletion and amortization (including nuclear fuel)		822			748
Deferred income taxes and investment tax credits		399			301
Gains on the sale of assets and businesses		(71	)		(159	)
Charge associated with North Anna and offshore wind legislation		—			287
Other adjustments		(18	)		(55	)
Changes in:
Accounts receivable		214			153
Inventories		47			2
Deferred fuel and purchased gas costs, net (including write-off)		28			(322	)
Prepayments		47			(34	)
Accounts payable		(173	)		(258	)
Accrued interest, payroll and taxes		(41	)		(50	)
Margin deposit assets and liabilities		186			204
Other operating assets and liabilities		(238	)		84

Net cash provided by operating activities		2,160			1,447

Investing Activities
Plant construction and other property additions (including nuclear fuel)		(2,370	)		(2,389	)
Acquisition of solar development projects		(230	)		(58	)
Acquisition of DCGT		(497	)		—
Proceeds from sales of securities		580			686
Purchases of securities		(553	)		(703	)
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		28			—
Other		(42	)		7

Net cash used in investing activities		(3,084	)		(2,186	)

Financing Activities
Issuance (repayment) of short-term debt, net		(153	)		1,152
Issuance of long-term debt		1,200			1,150
Repayment and repurchase of long-term debt		(8	)		(660	)
Subsidiary preferred stock redemption		—			(125	)
Issuance of common stock		647			71
Common dividend payments		(765	)		(698	)
Subsidiary preferred dividend payments		—			(6	)
Other		(44	)		(42	)

Net cash provided by financing activities		877			842

Increase (decrease) in cash and cash equivalents		(47	)		103
Cash and cash equivalents at beginning of period		318			316

Cash and cash equivalents at end of period	$	271		$	419

Supplemental Cash Flow Information
Significant noncash investing activities:
Accrued capital expenditures	$	319		$	309

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 June 30,				Six Months Ended June 30,
	2015		2014		2015		2014

(millions)
Operating Revenue⁽¹⁾	$	1,813	$	1,729	$	3,950	$	3,712

Operating Expenses
Electric fuel and other energy-related purchases⁽¹⁾		497		518		1,307		1,168
Purchased electric capacity		90		87		184		175
Other operations and maintenance:
Affiliated suppliers		69		70		144		141
Other		376		563		697		833
Depreciation and amortization		231		217		469		435
Other taxes		69		69		143		142

Total operating expenses		1,332		1,524		2,944		2,894

Income from operations		481		205		1,006		818

Other income		21		21		36		36
Interest and related charges		108		103		216		210

Income before income tax expense		394		123		826		644
Income tax expense		148		54		311		251

Net Income		246		69		515		393
Preferred dividends		—		2		—		8

Balance available for common stock	$	246	$	67	$	515	$	385

(1)	See Note 18 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 June 30,						Six Months Ended June 30,
	2015			2014			2015			2014

(millions)
Net income	$	246		$	69		$	515		$	393
Other comprehensive income (loss), net of taxes:
Net deferred gains (losses) on derivatives-hedging activities⁽¹⁾		7			(1	)		3			1
Changes in unrealized net gains on nuclear decommissioning trust funds⁽²⁾		—			6			1			8
Amounts reclassified to net income:
Net derivative (gains) losses-hedging activities⁽³⁾		—			(1	)		1			(4	)
Net realized gains on nuclear decommissioning trust funds⁽⁴⁾		(2	)		—			(3	)		(2	)

Other comprehensive income		5			4			2			3

Comprehensive income	$	251		$	73		$	517		$	396

(1)	Net of $(4) million and $— million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $(2) million and $— million for the six months ended June 30, 2015 and 2014, respectively.

(2)	Net of $1 million and $(3) million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $— million and $(5) million for the six months ended June 30, 2015 and 2014, respectively.

(3)	Net of $— million tax for both the three months ended June 30, 2015 and 2014, and net of $— million and $2 million for the six months ended June 30, 2015 and 2014, respectively.

(4)	Net of $1 million and $— million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $1 million for both the six months ended June 30, 2015 and 2014.

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

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2015			December 31, 2014⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	82		$	15
Customer receivables (less allowance for doubtful accounts of $28 and $25)		967			986
Other receivables (less allowance for doubtful accounts of $1 at both dates)		44			65
Inventories (average cost method)		828			853
Prepayments		23			252
Regulatory assets		317			298
Other⁽²⁾		33			82

Total current assets		2,294			2,551

Investments
Nuclear decommissioning trust funds		1,948			1,930
Other		4			4

Total investments		1,952			1,934

Property, Plant and Equipment
Property, plant and equipment		36,480			35,180
Accumulated depreciation and amortization		(11,431	)		(11,080	)

Total property, plant and equipment, net		25,049			24,100

Deferred Charges and Other Assets
Regulatory assets		447			439
Other⁽²⁾		551			485

Total deferred charges and other assets		998			924

Total assets	$	30,293		$	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 18 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)


	June 30, 2015		December 31, 2014⁽¹⁾
(millions)
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
Securities due within one year	$	660	$	211
Short-term debt		1,441		1,361
Accounts payable		409		458
Payables to affiliates		93		92
Affiliated current borrowings		—		427
Accrued interest, payroll and taxes		241		199
Other		620		528

Total current liabilities		3,464		3,276

Long-Term Debt		8,970		8,726

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		4,385		4,415
Asset retirement obligations		1,018		848
Regulatory liabilities		1,774		1,683
Other⁽²⁾		380		506

Total deferred credits and other liabilities		7,557		7,452

Total liabilities		19,991		19,454

Commitments and Contingencies (see Note 16)
Common Shareholder’s Equity
Common stock – no par⁽³⁾		5,737		5,738
Other paid-in capital		1,113		1,113
Retained earnings		3,400		3,154
Accumulated other comprehensive income		52		50

Total common shareholder’s equity		10,302		10,055

Total liabilities and shareholder’s equity	$	30,293	$	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 18 for amounts attributable to affiliates.

(3)	500,000 shares authorized; 274,723 shares outstanding at June 30, 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)


Six Months Ended June 30,	2015			2014
(millions)
Operating Activities
Net income	$	515		$	393
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including nuclear fuel)		555			521
Deferred income taxes and investment tax credits		13			246
Charge associated with North Anna and offshore wind legislation		—			287
Other adjustments		32			(17	)
Changes in:
Accounts receivable		40			26
Inventories		25			(31	)
Prepayments		229			(138	)
Deferred fuel expenses, net (including write-off)		(9	)		(359	)
Accounts payable		(8	)		18
Other operating assets and liabilities		2			(37	)

Net cash provided by operating activities		1,394			909

Investing Activities
Plant construction and other property additions		(1,292	)		(1,385	)
Purchases of nuclear fuel		(67	)		(131	)
Purchases of securities		(222	)		(311	)
Proceeds from sales of securities		209			299
Other		(27	)		(11	)

Net cash used in investing activities		(1,399	)		(1,539	)

Financing Activities
Issuance of short-term debt, net		80			481
Repayment of affiliated current borrowings, net		(427	)		(97	)
Issuance of long-term debt		700			750
Repayment of long-term debt		(6	)		(50	)
Preferred stock redemption		—			(125	)
Common dividend payments		(270	)		(270	)
Preferred dividend payments		—			(6	)
Other		(5	)		(11	)

Net cash provided by financing activities		72			672

Increase in cash and cash equivalents		67			42
Cash and cash equivalents at beginning of period		15			16

Cash and cash equivalents at end of period	$	82		$	58

Supplemental Cash Flow Information
Significant noncash investing activities:
Accrued capital expenditures	$	117		$	236

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 June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
(millions)
Operating Revenue⁽¹⁾	$	395	$	428	$	926	$	997

Operating Expenses
Purchased gas⁽¹⁾		21		76		95		213
Other energy-related purchases		7		5		13		21
Other operations and maintenance:
Affiliated suppliers		17		16		38		37
Other⁽²⁾		107		93		160		125
Depreciation and amortization		53		49		104		96
Other taxes		37		35		92		86

Total operating expenses		242		274		502		578

Income from operations		153		154		424		419

Other income		4		5		13		13
Interest and related charges		18		6		35		12

Income from operations before income taxes		139		153		402		420
Income tax expense		54		60		156		163

Net Income	$	85	$	93	$	246	$	257

(1)	See Note 18 for amounts attributable to related parties.

(2)	Includes gains on the sales of assets to related parties of $59 million for the six months ended June 30, 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 June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
(millions)
Net income	$	85		$	93		$	246		$	257
Other comprehensive income (loss), net of taxes:
Net deferred gains (losses) on derivatives-hedging activities⁽¹⁾		3			(19	)		(1	)		(27	)
Changes in net unrecognized pension and other postretirement benefit costs⁽²⁾		—			—			—			(1	)
Amounts reclassified to net income:
Net derivative (gains) losses-hedging activities⁽³⁾		(1	)		3			(1	)		8
Net pension and other postretirement benefit costs⁽⁴⁾		1			1			2			3

Other comprehensive income (loss)		3			(15	)		—			(17	)

Comprehensive income	$	88		$	78		$	246		$	240

(1)	Net of $(1) million and $12 million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $1 million and $17 million tax for the six months ended June 30, 2015 and 2014, respectively.

(2)	Net of $— million tax for both the three months ended June 30, 2015 and 2014, and net of $— million and $(1) million tax for the six months ended June 30, 2015 and 2014, respectively.

(3)	Net of $— million and $(2) million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $— million and $(4) million tax for the six months ended June 30, 2015 and 2014, respectively.

(4)	Net of $(1) million and $— million tax for the three months ended June 30, 2015 and 2014, respectively, and net of $(2) million and $(1) million tax for the six months ended June 30, 2015 and 2014, respectively.

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

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2015			December 31, 2014⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	11		$	9
Customer receivables (less allowance for doubtful accounts of $4 at both dates)⁽²⁾		222			322
Other receivables (less allowance for doubtful accounts of $1 at both dates)⁽²⁾		13			19
Affiliated receivables		7			12
Inventories		79			65
Prepayments		55			166
Other⁽²⁾		168			217

Total current assets		555			810

Investments		108			108

Property, Plant and Equipment
Property, plant and equipment		9,195			8,902
Accumulated depreciation and amortization		(2,609	)		(2,538	)

Total property, plant and equipment, net		6,586			6,364

Deferred Charges and Other Assets
Goodwill		542			542
Intangible assets, net		85			79
Regulatory assets		381			379
Pension and other postretirement benefit assets⁽²⁾		1,546			1,486
Other⁽²⁾		85			80

Total deferred charges and other assets		2,639			2,566

Total assets	$	9,888		$	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 18 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)


	June 30, 2015			December 31, 2014⁽¹⁾
(millions)
LIABILITIES AND EQUITY
Current Liabilities
Short-term debt	$	360		$	—
Accounts payable		118			247
Payables to affiliates		21			41
Affiliated current borrowings		168			384
Accrued interest, payroll and taxes		140			194
Other⁽²⁾		162			172

Total current liabilities		969			1,038

Long-Term Debt		2,594			2,594

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		2,211			2,158
Other⁽²⁾		465			492

Total deferred credits and other liabilities		2,676			2,650

Total liabilities		6,239			6,282

Commitments and Contingencies (see Note 16)
Equity
Membership interests		3,735			3,652
Accumulated other comprehensive loss⁽²⁾		(86	)		(86	)

Total equity		3,649			3,566

Total liabilities and equity	$	9,888		$	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 18 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)


Six Months Ended June 30,	2015			2014
(millions)
Operating Activities
Net income	$	246		$	257
Adjustments to reconcile net income to net cash provided by operating activities:
Gains on sales of assets		(71	)		(59	)
Depreciation and amortization		104			96
Deferred income taxes and investment tax credits		55			48
Other adjustments		—			(7	)
Changes in:
Accounts receivable		106			12
Deferred purchased gas costs, net		28			40
Prepayments		111			21
Inventories		(14	)		(18	)
Accounts payable		(132	)		(152	)
Payables to affiliates		(20	)		(32	)
Accrued interest, payroll and taxes		(54	)		(22	)
Other operating assets and liabilities		(66	)		(23	)

Net cash provided by operating activities		293			161

Investing Activities
Plant construction and other property additions		(292	)		(249	)
Proceeds from sale of assets to an affiliate		—			47
Proceeds from assignments of Marcellus acreage		28			—
Other		(6	)		(6	)

Net cash used in investing activities		(270	)		(208	)

Financing Activities
Issuance of short-term debt, net		360			—
Issuance (repayment) of affiliated current borrowings, net		(216	)		196
Distribution payments		(164	)		(145	)
Other		(1	)		(2	)

Net cash provided by (used in) financing activities		(21	)		49

Increase in cash and cash equivalents		2			2
Cash and cash equivalents at beginning of period		9			8

Cash and cash equivalents at end of period	$	11		$	10

Supplemental Cash Flow Information
Significant noncash investing and financing activities:
Accrued capital expenditures	$	37		$	40
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 June 30, 2015, their results of operations for the three and six months ended June 30, 2015 and 2014, and their cash flows for the six months ended June 30, 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, those of their respective majority-owned subsidiaries and non-wholly owned entities in which they have a controlling financial interest. For certain partnership structures, income is allocated based on the liquidation value of the underlying contractual arrangements. As of June 30, 2015, Dominion owns the general partner and 70.9% of the limited partner interests in Dominion Midstream. The public’s ownership interest in Dominion Midstream is reflected as noncontrolling interest in Dominion’s Consolidated Financial Statements. Also, as of June 30, 2015, Dominion owns 50% of the units in and consolidates Four Brothers. SunEdison’s ownership interest in Four Brothers is reflected as noncontrolling interest in Dominion’s Consolidated Financial Statements. See Note 3 for more details regarding the nature and purpose of Four Brothers.

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 Four Brothers

In June 2015, Dominion acquired 50% of the units in Four Brothers from SunEdison for approximately $64 million of consideration, consisting of $2 million in cash and a $62 million payable, which is included in other current liabilities in Dominion’s Consolidated Balance Sheets as of June 30, 2015. Four Brothers’ purpose is to develop and operate four solar projects located in Utah, which will produce and sell electricity and renewable energy credits. The projects are expected to cost approximately $730 million to construct, including the initial acquisition cost. Dominion is obligated to contribute $445 million of capital to fund the construction of the projects. The facilities are expected to begin commercial operations in the third quarter of 2016, generating approximately 320 MW. Long-term power purchase, interconnection and operation and maintenance agreements have been executed for each of the projects. Dominion expects to claim 99% of the federal investment tax credits on the projects.

Dominion owns 50% of the voting interests in Four Brothers and has a controlling financial interest over the entity through its rights to control operations.

The allocation of the purchase price resulted in approximately $89 million of property, plant and equipment, $25 million of noncontrolling interest and $64 million of acquired equity. The noncontrolling interest was measured at fair value using the discounted cash flow method, with the primary components of the valuation being future cash flows (both incoming and outgoing) and the discount rate. Dominion determined its discount rate based on the cost of capital a utility-scale investor would expect, as well as the cost of capital an individual project developer could achieve via a combination of non-recourse project financing and outside equity partners.

Four Brothers has entered into agreements with SunEdison to provide administrative and support services in connection with the construction of the project, operation and maintenance of the facilities, and administrative and technical management services of the solar facilities. In addition, Dominion has entered into a contract with SunEdison to provide services related to construction project management and oversight. There have been no costs related to services to be provided under these agreements for the six months ended June 30, 2015.

Acquisitions of Solar Projects

The following table presents other significant acquisitions of solar projects by Dominion in 2014 and 2015. Long-term power purchase, interconnection and operation and maintenance agreements have been executed for all of the projects. Dominion has claimed and/or expects to claim federal investment tax credits on the projects.

Completed Acquisition Date

Seller

Number
of
Projects

Project
Location

Project Name(s)

Initial
Acquisition
Cost
(millions)

Project
Cost
(millions)⁽¹⁾

Date of
Commercial
Operations

MW
Capacity

March 2014

Recurrent Energy
Development
Holdings, LLC

California

Camelot, Kansas,
Kent South, Old
River One,
Adams East,
Columbia 2

⁽²⁾

446

Fourth quarter
2014

139

November 2014

CSI Project
Holdco, LLC

California

West Antelope

⁽²⁾

November 2014

December 2014

EDF Renewable
Development,
Inc.

California

CID

⁽²⁾

January 2015

April 2015

EC&R NA Solar
PV, LLC

California

Alamo

⁽²⁾

May 2015

April 2015

EDF Renewable
Development,
Inc.

California

City of Corcoran,
Goose Lake,
Marin Carport⁽³⁾

106

⁽²⁾

108

May 2015

June 2015

EDF Renewable
Development,
Inc.

California

Catalina 2

⁽⁴⁾

July 2015

SunPeak Solar,
LLC

California

Imperial Valley 2

⁽⁴⁾

Third quarter
2015

(1)	Includes acquisition cost.

(2)	The purchase price was primarily allocated to Property, Plant and Equipment.

(3)	Marin Carport is expected to begin commercial operations in late 2015 or early 2016.

(4)	The allocation of the purchase price to individual assets is under evaluation by management and has not been finalized.

In June 2015, Dominion entered into an agreement to acquire 100% of the equity interests in the Maricopa West solar project in California from EC&R NA Solar PV, LLC for approximately $65 million in cash. The project is expected to close in the fourth quarter of 2015 and cost approximately $66 million once constructed, including the initial acquisition cost. Upon completion, the facility is expected to generate approximately 20 MW.

The acquired assets of Four Brothers and the other solar projects are included in the Dominion Generation operating segment.

Acquisition of DCGT

In January 2015, Dominion completed the acquisition of 100% of the equity interests of DCGT from SCANA Corporation for approximately $497 million in cash, as adjusted for working capital. 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 $501 million, as adjusted for working capital. Total consideration to Dominion consisted of the issuance of a two-year, approximately $301 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 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 flows.

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 and 2014, DTI received approximately $98 million in cash proceeds. 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 June 30, 2015, deferred revenue totaled approximately $38 million, which is expected to be recognized over the remaining term of the agreement.

In March 2015, DTI conveyed to a natural gas producer approximately 11,000 acres of Marcellus Shale development rights underneath one of its natural gas storage fields and received proceeds of approximately $27 million and an overriding royalty interest in gas produced from the acreage. This transaction resulted 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 June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
(millions)
Dominion
Electric sales:
Regulated	$	1,779	$	1,697	$	3,891	$	3,648
Nonregulated		351		320		757		1,174
Gas sales:
Regulated		31		70		147		217
Nonregulated		87		228		295		345
Gas transportation and storage		385		351		856		795
Other		114		147		210		264

Total operating revenue	$	2,747	$	2,813	$	6,156	$	6,443

Virginia Power
Regulated electric sales	$	1,779	$	1,697	$	3,891	$	3,648
Other		34		32		59		64

Total operating revenue	$	1,813	$	1,729	$	3,950	$	3,712

Dominion Gas
Gas sales:
Regulated	$	21	$	54	$	78	$	137
Nonregulated		1		4		4		13
Gas transportation and storage		321		304		733		700
NGL revenue		22		44		51		101
Other		30		22		60		46

Total operating revenue	$	395	$	428	$	926	$	997

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
Six Months Ended June 30,	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		3.3			1.5			3.8			3.8			3.9			3.7
Investment tax credits		(2.7	)		(4.9	)		—			—			—			—
Production tax credits		(0.8	)		(1.0	)		(0.5	)		(0.6	)		—			—
Valuation allowances		—			1.1			—			—			—			—
Other, net		(1.0	)		(0.4	)		(0.7	)		0.6			—			0.1

Effective tax rate		33.8	%		31.3	%		37.6	%		38.8	%		38.9	%		38.8	%

As of June 30, 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 June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
(millions, except EPS)
Net income attributable to Dominion	$	413	$	159	$	949	$	538

Average shares of common stock outstanding – Basic		591.5		581.9		589.7		581.7
Net effect of dilutive securities⁽¹⁾		1.0		2.0		1.5		1.7

Average shares of common stock outstanding – Diluted		592.5		583.9		591.2		583.4

Earnings Per Common Share – Basic	$	0.70	$	0.27	$	1.61	$	0.92
Earnings Per Common Share – Diluted	$	0.70	$	0.27	$	1.60	$	0.92

(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 15 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 and six months ended June 30, 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 and six months ended June 30, 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 June 30, 2015
Beginning balance	$	(177	)	$	542		$	(769	)	$	(5	)	$	(409	)
Other comprehensive income before reclassifications: gains (losses)		92			(11	)		3			—			84
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		(61	)		(12	)		12			—			(61	)

Net current-period other comprehensive income (loss)		31			(23	)		15			—			23

Ending balance	$	(146	)	$	519		$	(754	)	$	(5	)	$	(386	)

Three Months Ended June 30, 2014
Beginning balance	$	(278	)	$	492		$	(506	)	$	(7	)	$	(299	)
Other comprehensive income before reclassifications: gains (losses)		(59	)		49			4			2			(4	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		(16	)		(7	)		9			—			(14	)

Net current-period other comprehensive income (loss)		(75	)		42			13			2			(18	)

Ending balance	$	(353	)	$	534		$	(493	)	$	(5	)	$	(317	)

Six Months Ended June 30, 2015
Beginning balance	$	(178	)	$	548		$	(782	)	$	(4	)	$	(416	)
Other comprehensive income before reclassifications: gains (losses)		34			4			3			(1	)		40
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		(2	)		(33	)		25			—			(10	)

Net current-period other comprehensive income (loss)		32			(29	)		28			(1	)		30

Ending balance	$	(146	)	$	519		$	(754	)	$	(5	)	$	(386	)

Six Months Ended June 30, 2014
Beginning balance	$	(288	)	$	474		$	(510	)	$	—		$	(324	)
Other comprehensive income before reclassifications: gains (losses)		(209	)		78			—			(5	)		(136	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		144			(18	)		17			—			143

Net current-period other comprehensive income (loss)		(65	)		60			17			(5	)		7

Ending balance	$	(353	)	$	534		$	(493	)	$	(5	)	$	(317	)

(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 June 30, 2015
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(107	)	Operating revenue
		2		Purchased gas

Interest rate contracts		3		Interest and related charges
		(102	)
Tax		41		Income tax expense

	$	(61	)

Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(25	)	Other income
Impairment		5		Other income

		(20	)
Tax		8		Income tax expense

	$	(12	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(3	)	Other operations and maintenance
Actuarial (gains) losses		24		Other operations and maintenance

		21
Tax		(9	)	Income tax expense

	$	12

Three Months Ended June 30, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(28	)	Operating revenue
		3		Purchased gas
Interest rate contracts		3		Interest and related charges

		(22	)
Tax		6		Income tax expense

	$	(16	)

Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(13	)	Other income
Impairment		2		Other income

		(11	)
Tax		4		Income tax expense

	$	(7	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(2	)	Other operations and maintenance
Actuarial (gains) losses		17		Other operations and maintenance

		15
Tax		(6	)	Income tax expense

	$	9


Six Months Ended June 30, 2015
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(15	)	Operating revenue
		7		Purchased gas
		(1	)	Electric fuel and other energy-related purchases
Interest rate contracts		5		Interest and related charges

		(4	)
Tax		2		Income tax expense

	$	(2	)

Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(64	)	Other income
Impairment		11		Other income

		(53	)
Tax		20		Income tax expense

	$	(33	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(6	)	Other operations and maintenance
Actuarial (gains) losses		49		Other operations and maintenance

		43
Tax		(18	)	Income tax expense

	$	25

Six Months Ended June 30, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	241		Operating revenue
		4		Purchased gas
		(13	)	Electric fuel and other energy-related purchases
Interest rate contracts		6		Interest and related charges

		238
Tax		(94	)	Income tax expense

	$	144

Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(33	)	Other income
Impairment		4		Other income

		(29	)
Tax		11		Income tax expense

	$	(18	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(5	)	Other operations and maintenance
Actuarial (gains) losses		34		Other operations and maintenance

		29
Tax		(12	)	Income tax expense

	$	17

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 June 30, 2015
Beginning balance	$	(24	)	$	(65	)	$	(89	)
Other comprehensive income before reclassifications: gains (losses)		3			—			3
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		(1	)		1			—

Net current-period other comprehensive income		2			1			3

Ending balance	$	(22	)	$	(64	)	$	(86	)

Three Months Ended June 30, 2014
Beginning balance	$	—		$	(60	)	$	(60	)
Other comprehensive income before reclassifications: gains (losses)		(19	)		—			(19	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		3			1			4

Net current-period other comprehensive income (loss)		(16	)		1			(15	)

Ending balance	$	(16	)	$	(59	)	$	(75	)

Six Months Ended June 30, 2015
Beginning balance	$	(20	)	$	(66	)	$	(86	)
Other comprehensive income before reclassifications: gains (losses)		(1	)		—			(1	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		(1	)		2			1

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

Ending balance	$	(22	)	$	(64	)	$	(86	)

Six Months Ended June 30, 2014
Beginning balance	$	3		$	(61	)	$	(58	)
Other comprehensive income before reclassifications: gains (losses)		(27	)		(1	)		(28	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		8			3			11

Net current-period other comprehensive income (loss)		(19	)		2			(17	)

Ending balance	$	(16	)	$	(59	)	$	(75	)

(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 June 30, 2015
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(1	)	Operating revenue

		(1	)
Tax		—		Income tax expense

	$	(1	)

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 June 30, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	2		Operating revenue
		3		Purchased gas

		5
Tax		(2	)	Income tax expense

	$	3

Unrecognized pension and other postretirement benefit costs:
Actuarial (gains) losses	$	1		Other operations and maintenance

		1
Tax		—		Income tax expense

	$	1

Six Months Ended June 30, 2015
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(1	)	Operating revenue

		(1	)
Tax		—		Income tax expense

	$	(1	)

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

		4
Tax		(2	)	Income tax expense

	$	2

Six Months Ended June 30, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	7		Operating revenue
		5		Purchased gas

		12
Tax		(4	)	Income tax expense

	$	8

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

		4
Tax		(1	)	Income tax expense

	$	3

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 June 30, 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⁾	$	57	Discounted Cash Flow		Market Price (per Dth)	⁽³⁾	(2) - 4		(1	)
					Credit spread	⁽⁴⁾	1% - 5%		3	%
FTRs		25	Discounted Cash Flow		Market Price (per MWh)	⁽³⁾	(2) - 10		2
Physical and Financial Options:
Natural Gas		4	Option Model		Market Price (per Dth)	⁽³⁾	2 - 4		3
					Price Volatility	⁽⁵⁾	22% - 69%		33	%

Total assets	$	86

Liabilities:
Physical and Financial Forwards and Futures:
Natural Gas⁽²⁾	$	10	Discounted Cash Flow		Market Price (per Dth)	⁽³⁾	(2) - 4		2
NGLs⁽⁶⁾		1	Discounted Cash Flow		Market Price (per Gal)	⁽³⁾	1 - 2		1
FTRs		2	Discounted Cash Flow		Market Price (per MWh)	⁽³⁾	(10) - 10		1
Physical and Financial Options:
Natural Gas		2	Option Model		Market Price (per Dth)	⁽³⁾	2 - 4		3
					Price Volatility	⁽⁵⁾	22% - 69%		33	%

Total liabilities	$	15

(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.

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

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 June 30, 2015
Assets:
Derivatives:
Commodity	$	1	$	452	$	86	$	539
Interest rate		—		58		—		58
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		2,640		—		—		2,640
Other		7		—		—		7
Non-U.S.:
Large cap		13		—		—		13
Fixed income:
Corporate debt instruments		—		464		—		464
U.S. Treasury securities and agency debentures		399		179		—		578
State and municipal		—		412		—		412
Other		—		109		—		109
Cash equivalents and other		1		6		—		7

Total assets	$	3,061	$	1,680	$	86	$	4,827

Liabilities:
Derivatives:
Commodity	$	1	$	329	$	15	$	345
Interest rate		—		108		—		108

Total liabilities	$	1	$	437	$	15	$	453

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 June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
(millions)
Beginning balance	$	76		$	8		$	107		$	(16	)
Total realized and unrealized gains (losses):
Included in earnings		(5	)		(10	)		10			100
Included in other comprehensive income (loss)		(1	)		(1	)		(12	)		3
Included in regulatory assets/liabilities		(5	)		(3	)		(29	)		14
Settlements		6			9			(8	)		(99	)
Transfers out of Level 3⁽¹⁾		—			—			3			1

Ending balance	$	71		$	3		$	71		$	3

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 certain short term NGL derivatives from Level 3 to Level 2 due to an increase in liquidity in financial forward markets. The transfers out of Level 3 that relate to NGLs for the three and six months ended June 30, 2015 are $— million and $9 million, respectively.

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 June 30, 2015
Total gains (losses) included in earnings	$	—		$	—		$	(5	)	$	(5	)
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 June 30, 2014
Total gains (losses) included in earnings	$	(1	)	$	(1	)	$	(8	)	$	(10	)
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	)		—			—

Six Months Ended June 30, 2015
Total gains (losses) included in earnings	$	2		$	—		$	8		$	10
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	)		—

Six Months Ended June 30, 2014
Total gains (losses) included in earnings	$	(11	)	$	(1	)	$	112		$	100
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			(1	)		—			1

Virginia Power

The following table presents Virginia Power’s quantitative information about Level 3 fair value measurements at June 30, 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	$	25	Discounted Cash Flow		Market Price (per MWh)	⁽³⁾	(2) - 10		2
Natural Gas⁽²⁾		50	Discounted Cash Flow		Market Price (per Dth)	⁽³⁾	(2) - 3		(1	)
					Credit spread	⁽⁴⁾	1% - 5%		3	%

Total assets	$	75

Liabilities:
Physical and Financial Forwards and Futures:
FTRs	$	2	Discounted Cash Flow		Market Price (per MWh)	⁽³⁾	(10) - 10		1

Total liabilities	$	2

(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 June 30, 2015
Assets:
Derivatives:
Commodity	$	—	$	5	$	75	$	80
Interest rate		—		37		—		37
Investments⁽¹⁾:
Equity securities:
U.S. large cap		1,170		—		—		1,170
Fixed income:
Corporate debt instruments		—		255		—		255
U.S. Treasury securities and agency debentures		140		60		—		200
State and municipal		—		217		—		217
Other		—		28		—		28

Total assets	$	1,310	$	602	$	75	$	1,987

Liabilities:
Derivatives:
Commodity	$	—	$	3	$	2	$	5
Interest rate		—		16		—		16

Total liabilities	$	—	$	19	$	2	$	21

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 June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
(millions)
Beginning balance	$	78		$	10		$	102		$	(7	)
Total realized and unrealized gains (losses):
Included in earnings		(5	)		(9	)		8			111
Included in regulatory assets/liabilities		(5	)		(3	)		(29	)		14
Settlements		5			9			(8	)		(111	)

Ending balance	$	73		$	7		$	73		$	7

The gains and losses included in earnings in the Level 3 fair value category were classified in electric fuel and other energy-related purchases in Virginia Power’s Consolidated Statements of Income for the three and six months ended June 30, 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 and six months ended June 30, 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 June 30, 2015
Assets:
Commodity	$	—	$	6	$	—	$	6

Total Assets	$	—	$	6	$	—	$	6
Liabilities:
Commodity	$	—	$	5	$	1	$	6
Interest rate		—		9		—		9

Total liabilities	$	—	$	14	$	1	$	15

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 June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
(millions)
Beginning balance	$	—		$	(2	)	$	2		$	(6	)
Total realized and unrealized gains (losses):
Included in earnings		(1	)		(2	)		1			(7	)
Included in other comprehensive income (loss)		—			(1	)		(12	)		3
Settlements		—			2			(1	)		7
Transfers out of Level 3⁽¹⁾		—			—			9			—

Ending balance	$	(1	)	$	(3	)	$	(1	)	$	(3	)

(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 six months ended June 30, 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 and six months ended June 30, 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:


	June 30, 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⁾	$	20,907	$	22,251	$	19,723	$	21,881
Junior subordinated notes⁽³⁾		1,373		1,348		1,374		1,396
Remarketable subordinated notes⁽³⁾		2,084		2,116		2,083		2,362

Virginia Power
Long-term debt, including securities due within one year⁽³⁾	$	9,630	$	10,541	$	8,937	$	10,293

Dominion Gas
Long-term debt⁽³⁾	$	2,594	$	2,614	$	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 June 30, 2015 and December 31, 2014, includes the valuation of certain fair value hedges associated with fixed rate debt of approximately $8 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:


	June 30, 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	$	58	$	—	$	58	$	24	$	—	$	24
Commodity contracts:
Over-the-counter		276		—		276		382		—		382
Exchange		253		—		253		298		—		298

Total derivatives, subject to a master netting or similar arrangement		587		—		587		704		—		704
Total derivatives, not subject to a master netting or similar arrangement		10		—		10		15		—		15

Total	$	597	$	—	$	597	$	719	$	—	$	719


			June 30, 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)
Interest rate contracts:
Over-the-counter	$	58	$	25	$	—	$	33	$	24	$	16	$	—	$	8
Commodity contracts:
Over-the-counter		276		30		17		229		382		34		34		314
Exchange		253		247		—		6		298		298		—		—

Total	$	587	$	302	$	17	$	268	$	704	$	348	$	34	$	322


	June 30, 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	$	108	$	—	$	108	$	202	$	—	$	202
Commodity contracts:
Over-the-counter		65		—		65		87		—		87
Exchange		272		—		272		493		—		493

Total derivatives, subject to a master netting or similar arrangement		445		—		445		782		—		782
Total derivatives, not subject to a master netting or similar arrangement		8		—		8		12		—		12

Total	$	453	$	—	$	453	$	794	$	—	$	794


			June 30, 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	$	108	$	25	$	—	$	83	$	202	$	16	$	—	$	186
Commodity contracts:
Over-the-counter		65		30		—		35		87		34		1		52
Exchange		272		247		25		—		493		298		195		—

Total	$	445	$	302	$	25	$	118	$	782	$	348	$	196	$	238

Volumes

The following table presents the volume of Dominion’s derivative activity as of June 30, 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⁾		50		13
Basis		217		570
Electricity (MWh):
Fixed price		12,920,765		5,146,901
FTRs		69,152,521		—
Capacity (MW)		16,800		—
Liquids (Gal)⁽²⁾		77,616,000		14,616,000
Interest rate	$	2,050,000,000	$	3,450,000,000

(1)	Includes options.

(2)	Includes NGLs and oil.

Ineffectiveness and AOCI

For the three and six months ended June 30, 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 June 30, 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	)		28 months
Electricity		84			39			18 months
Other		(1	)		—			21 months
Interest rate		(224	)		(7	)		390 months

Total	$	(146	)	$	27

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 June 30, 2015
ASSETS
Current Assets
Commodity	$	245	$	112	$	357
Interest rate		—		1		1

Total current derivative assets⁽¹⁾		245		113		358

Noncurrent Assets
Commodity		107		75		182
Interest rate		57		—		57

Total noncurrent derivative assets⁽²⁾		164		75		239

Total derivative assets	$	409	$	188	$	597

LIABILITIES
Current Liabilities
Commodity	$	191	$	94	$	285
Interest rate		90		—		90

Total current derivative liabilities⁽³⁾		281		94		375

Noncurrent Liabilities
Commodity		37		23		60
Interest Rate		18		—		18

Total noncurrent derivative liabilities⁽⁴⁾		55		23		78

Total derivative liabilities	$	336	$	117	$	453

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⁽³⁾		324		267		591

Noncurrent Liabilities
Commodity		55		46		101
Interest rate		102		—		102

Total noncurrent derivative liabilities⁽⁴⁾		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)	Current derivative liabilities are presented in other current liabilities in Dominion’s Consolidated Balance Sheets.

(4)	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 June 30, 2015
Derivative Type and Location of Gains (Losses)
Commodity:
Operating revenue				$	107
Purchased gas					(2	)

Total commodity	$	94		$	105		$	—

Interest rate⁽³⁾		57			(3	)		91

Total	$	151		$	102		$	91

Three Months Ended June 30, 2014
Derivative Type and Location of Gains (Losses)
Commodity:
Operating revenue				$	28
Purchased gas					(3	)

Total commodity	$	(33	)	$	25		$	(4	)

Interest rate⁽³⁾		(73	)		(3	)		(8	)

Total	$	(106	)	$	22		$	(12	)

Six Months Ended June 30, 2015
Derivative Type and Location of Gains (Losses)
Commodity:
Operating revenue				$	15
Purchased gas					(7	)
Electric fuel and other energy-related purchases					1

Total commodity	$	54		$	9		$	3

Interest rate⁽³⁾		(1	)		(5	)		42

Total	$	53		$	4		$	45

Six Months Ended June 30, 2014
Derivative Type and Location of Gains (Losses)
Commodity:
Operating revenue				$	(241	)
Purchased gas					(4	)
Electric fuel and other energy-related purchases					13

Total commodity	$	(216	)	$	(232	)	$	(2	)

Interest rate⁽³⁾		(119	)		(6	)		(31	)

Total	$	(335	)	$	(238	)	$	(33	)

(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

June 30,

Six Months Ended

June 30,

Derivatives not designated as hedging instruments

2015

2014

2015

2014

(millions)

Derivative Type and Location of Gains (Losses)