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, 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 September 30, 2015, the latest practicable date for determination, Dominion Resources, Inc. had 595,333,610 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		80
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		94
Item 4.	Controls and Procedures		96

	PART II. Other Information

Item 1.	Legal Proceedings		97
Item 1A.	Risk Factors		97
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		97
Item 6.	Exhibits		99

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

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

BOD		Board of Directors

BP		BP Wind Energy North America Inc.

BREDL		Blue Ridge Environmental Defense League

Bremo		Bremo power station

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

CAA		Clean Air Act

Caiman		Caiman Energy II, LLC

CAIR		Clean Air Interstate Rule

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

DCG		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% noncontrolling partnership interest in Iroquois

Dominion Midstream		The legal entity, Dominion Midstream Partners, LP, one or more of its consolidated subsidiaries, Cove Point Holdings, Iroquois GP Holding Company, LLC and DCG (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.

DSM		Demand-side management

Dth		Dekatherm

DTI		Dominion Transmission, Inc.

DVP		Dominion Virginia Power operating segment

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

Enterprise		Enterprise Product Partners, L.P.

EPA		Environmental Protection Agency

EPC		Engineering, procurement and construction

EPS		Earnings per share

FERC		Federal Energy Regulatory Commission

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

Granite Mountain		Granite Mountain Holdings, LLC, a limited liability company owned by Dominion and Granite Mountain Renewables, LLC, a wholly-owned subsidiary of SunEdison

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

Hope		Hope Gas, Inc., doing business as Dominion Hope

INPO		Institute of Nuclear Power Operations

IRCA		Intercompany revolving credit agreement

Iron Springs		Iron Springs Holdings, LLC, a limited liability company owned by Dominion and Iron Springs Renewables, LLC, a wholly-owned subsidiary of SunEdison

Iroquois		Iroquois Gas Transmission System L.P.

ISO		Independent system operator

ISO-NE		ISO New England

Kewaunee		Kewaunee nuclear power station

Keys Energy Project		Project to provide 107,000 Dths/day of firm transportation service from Cove Point’s interconnect with Transco in Fairfax County, Virginia to Keys Energy Center, LLC’s power generating facility in Prince George’s County, Maryland

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

Morgans Corner		Morgans Corner Solar Energy, LLC

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 Wind Energy, Inc. in Grant County, West Virginia

NG		Collectively, North East Transmission Co., Inc. and National Grid IGTS Corp.

NGLs		Natural gas liquids


Abbreviation or Acronym		Definition
NJNR		NJNR Pipeline Company

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

NRC		Nuclear Regulatory Commission

NSPS		New Source Performance Standards

NYSE		New York Stock Exchange

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

PREP		Pipeline Replacement and Expansion Program, a program of replacing, upgrading and expanding natural gas utility infrastructure to be deployed by Hope

PSD		Prevention of Significant Deterioration

PSMP		Pipeline Safety and Management Program to be deployed by East Ohio to ensure the continued safe and reliable operation of East Ohio’s system and compliance with pipeline safety laws

REIT		Real estate investment trust

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

Rider US-1		A rate adjustment clause associated with the recovery of costs related to Remington Solar Facility

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

ROE		Return on equity

RTO		Regional transmission organization

SEC		Securities and Exchange Commission

SELC		Southern Environmental Law Center

Shell		Shell WindEnergy, Inc.

SO₂		Sulfur dioxide

St. Charles Transportation Project		Project to provide 132,000 Dths/day of firm transportation service from Cove Point’s interconnect with Transco in Fairfax County, Virginia to Competitive Power Venture Maryland, LLC’s power generating facility in Charles County, Maryland

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, Granite Mountain Renewables, LLC and Iron Springs Renewables, LLC) or operating segments, or the entirety of SunEdison, Inc. and its consolidated subsidiaries

Three Cedars		Granite Mountain and Iron Springs, collectively

U.S.		United States of America

UAO		Unilateral Administrative Order

VDEQ		Virginia Department of Environmental Quality

VEBA		Voluntary Employees’ Beneficiary Association

VIE		Variable interest entity

Virginia 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

VOC		Volatile organic compounds

Yorktown		Yorktown power station

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,
	2015		2014		2015		2014
(millions, except per share amounts)
Operating Revenue	$	2,971	$	3,050	$	9,127	$	9,493

Operating Expenses
Electric fuel and other energy-related purchases		636		743		2,180		2,710
Purchased electric capacity		75		86		259		261
Purchased gas		85		209		446		1,073
Other operations and maintenance		564		614		1,875		1,972
Depreciation, depletion and amortization		355		354		1,037		970
Other taxes		133		123		432		424

Total operating expenses		1,848		2,129		6,229		7,410

Income from operations		1,123		921		2,898		2,083

Other income		11		69		127		166
Interest and related charges		230		231		674		695

Income from operations including noncontrolling interests before income tax expense		904		759		2,351		1,554
Income tax expense		305		228		794		477

Net Income Including Noncontrolling Interests		599		531		1,557		1,077
Noncontrolling Interests		6		2		15		10

Net Income Attributable to Dominion	$	593	$	529	$	1,542	$	1,067

Earnings Per Common Share
Net income attributable to Dominion - Basic	$	1.00	$	0.91	$	2.61	$	1.83
Net income attributable to Dominion - Diluted		1.00		0.90		2.60		1.83
Dividends declared per common share		0.6475		0.6000		1.9425		1.8000

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,
	2015			2014			2015			2014
(millions)
Net income including noncontrolling interests	$	599		$	531		$	1,557		$	1,077
Other comprehensive income (loss), net of taxes:
Net deferred gains (losses) on derivatives-hedging activities⁽¹⁾		(7	)		(58	)		25			(267	)
Changes in unrealized net gains (losses) on investment securities⁽²⁾		(59	)		2			(55	)		80
Changes in unrecognized pension and other postretirement benefit costs⁽³⁾		(9	)		—			(6	)		—
Amounts reclassified to net income:
Net derivative (gains) losses-hedging activities⁽⁴⁾		(53	)		(31	)		(53	)		113
Net realized gains on investment securities⁽⁵⁾		(2	)		(21	)		(35	)		(39	)
Net pension and other postretirement benefit costs⁽⁶⁾		14			8			39			25
Changes in other comprehensive income (loss) from equity method investees⁽⁷⁾		1			—			—			(5	)

Total other comprehensive loss		(115	)		(100	)		(85	)		(93	)

Comprehensive income including noncontrolling interests		484			431			1,472			984
Comprehensive income attributable to noncontrolling interests		6			2			15			10

Comprehensive income attributable to Dominion	$	478		$	429		$	1,457		$	974

(1)	Net of $— million and $36 million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $(20) million and $163 million tax for the nine months ended September 30, 2015 and 2014, respectively.

(2)	Net of $55 million and $(2) million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $50 million and $(30) million tax for the nine months ended September 30, 2015 and 2014, respectively.

(3)	Net of $(9) million and $— million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $(6) million and $— million tax for the nine months ended September 30, 2015 and 2014, respectively.

(4)	Net of $30 million and $22 million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $34 million and $(72) million tax for the nine months ended September 30, 2015 and 2014, respectively.

(5)	Net of $— million and $13 million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $20 million and $24 million tax for the nine months ended September 30, 2015 and 2014, respectively.

(6)	Net of $(7) million and $(6) million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $(25) million and $(18) million tax for the nine months ended September 30, 2015 and 2014, respectively.

(7)	Net of $(1) million and $— million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $— million and $3 million tax for the nine months ended September 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)


	September 30, 2015			December 31, 2014⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	238		$	318
Customer receivables (less allowance for doubtful accounts of $36 and $34)		1,289			1,514
Other receivables (less allowance for doubtful accounts of $2 and $3)		144			119
Inventories		1,310			1,410
Prepayments		142			167
Derivative assets		243			536
Deferred income taxes		288			800
Other		469			751

Total current assets		4,123			5,615

Investments
Nuclear decommissioning trust funds		4,033			4,196
Investment in equity method affiliates		1,322			1,081
Other		269			284

Total investments		5,624			5,561

Property, Plant and Equipment
Property, plant and equipment		55,848			51,406
Accumulated depreciation, depletion and amortization		(16,067	)		(15,136	)

Total property, plant and equipment, net		39,781			36,270

Deferred Charges and Other Assets
Goodwill		3,294			3,044
Pension and other postretirement benefit assets		1,025			956
Regulatory assets		1,593			1,642
Other		1,159			1,239

Total deferred charges and other assets		7,071			6,881

Total assets	$	56,599		$	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)


	September 30, 2015			December 31, 2014⁽¹⁾
(millions)
LIABILITIES AND EQUITY
Current Liabilities
Securities due within one year	$	1,528		$	1,375
Short-term debt		2,555			2,775
Accounts payable		705			952
Accrued interest, payroll and taxes		553			566
Other⁽²⁾		1,405			1,530

Total current liabilities		6,746			7,198

Long-Term Debt
Long-term debt		19,790			18,348
Junior subordinated notes		1,370			1,374
Remarketable subordinated notes		2,085			2,083

Total long-term debt		23,245			21,805

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		7,551			7,444
Asset retirement obligations		1,824			1,633
Regulatory liabilities		2,173			1,991
Other		1,784			2,299

Total deferred credits and other liabilities		13,332			13,367

Total liabilities		43,323			42,370

Commitments and Contingencies (see Note 16)
Equity
Common stock – no par⁽³⁾		6,606			5,876
Retained earnings		6,487			6,095
Accumulated other comprehensive loss		(501	)		(416	)

Total common shareholders’ equity		12,592			11,555

Noncontrolling interests		684			402

Total equity		13,276			11,957

Total liabilities and equity	$	56,599		$	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; 595 million shares and 585 million shares outstanding at September 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)


Nine Months Ended September 30,	2015			2014
(millions)
Operating Activities
Net income including noncontrolling interests	$	1,557		$	1,077

Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
Depreciation, depletion and amortization (including nuclear fuel)		1,250			1,171
Deferred income taxes and investment tax credits		703			444
Gains on the sale of assets and businesses		(123	)		(160	)
Charges associated with North Anna and offshore wind legislation		—			330
Other adjustments		(1	)		(104	)
Changes in:
Accounts receivable		229			300
Inventories		(3	)		(39	)
Deferred fuel and purchased gas costs, net (including write-off)		70			(252	)
Prepayments		45			14
Accounts payable		(222	)		(291	)
Accrued interest, payroll and taxes		(13	)		(9	)
Margin deposit assets and liabilities		205			55
Other operating assets and liabilities		(244	)		(126	)

Net cash provided by operating activities		3,453			2,410

Investing Activities
Plant construction and other property additions (including nuclear fuel)		(3,632	)		(3,742	)
Acquisition of solar development projects		(278	)		(66	)
Acquisition of DCG		(497	)		—
Proceeds from sales of securities		937			1,524
Purchases of securities		(921	)		(1,562	)
Proceeds from the sale of electric retail energy marketing business		—			187
Proceeds from the sale of assets to Blue Racer		—			86
Proceeds from assignments of shale development rights		80			—
Other		(39	)		40

Net cash used in investing activities		(4,350	)		(3,533	)

Financing Activities
Issuance (repayment) of short-term debt, net		(220	)		702
Issuance of long-term debt		2,262			2,150
Repayment and repurchase of long-term debt		(675	)		(725	)
Subsidiary preferred stock redemption		—			(125	)
Issuance of common stock		717			138
Common dividend payments		(1,150	)		(1,048	)
Subsidiary preferred dividend payments		—			(9	)
Other		(117	)		(58	)

Net cash provided by financing activities		817			1,025

Decrease in cash and cash equivalents		(80	)		(98	)
Cash and cash equivalents at beginning of period		318			316

Cash and cash equivalents at end of period	$	238		$	218

Supplemental Cash Flow Information
Significant noncash investing activities:⁽¹⁾
Accrued capital expenditures	$	389		$	309
Dominion Midstream’s acquisition of a noncontrolling partnership interest in Iroquois in exchange for issuance of Dominion Midstream common units		216			—

(1)	See Note 3 for noncash activities related to the acquisitions of Four Brothers and Three Cedars.

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,
	2015		2014		2015		2014
(millions)
Operating Revenue⁽¹⁾	$	2,058	$	2,053	$	6,008	$	5,765

Operating Expenses
Electric fuel and other energy-related purchases⁽¹⁾		554		649		1,861		1,817
Purchased electric capacity		75		86		259		261
Other operations and maintenance:
Affiliated suppliers		64		70		208		211
Other		311		331		1,008		1,164
Depreciation and amortization		244		260		713		695
Other taxes		69		63		212		205

Total operating expenses		1,317		1,459		4,261		4,353

Income from operations		741		594		1,747		1,412

Other income		13		24		49		60
Interest and related charges		116		101		332		311

Income before income tax expense		638		517		1,464		1,161
Income tax expense		253		203		564		454

Net Income		385		314		900		707
Preferred dividends		—		2		—		10

Balance available for common stock	$	385	$	312	$	900	$	697

(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 September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
(millions)
Net income	$	385		$	314		$	900		$	707
Other comprehensive income (loss), net of taxes:
Net deferred losses on derivatives-hedging activities⁽¹⁾		(6	)		(1	)		(3	)		—
Changes in unrealized net gains (losses) on nuclear decommissioning trust funds⁽²⁾		(11	)		2			(10	)		10
Amounts reclassified to net income:
Net derivative (gains) losses-hedging activities⁽³⁾		—			1			1			(3	)
Net realized gains on nuclear decommissioning trust funds⁽⁴⁾		(1	)		(3	)		(4	)		(5	)

Other comprehensive income (loss)		(18	)		(1	)		(16	)		2

Comprehensive income	$	367		$	313		$	884		$	709

(1)	Net of $3 million and $— million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $1 million and $— million tax for the nine months ended September 30, 2015 and 2014, respectively.

(2)	Net of $5 million and $(1) million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $5 million and $(6) million tax for the nine months ended September 30, 2015 and 2014, respectively.

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

(4)	Net of $2 million tax for both the three months ended September 30, 2015 and 2014, and net of $3 million tax for both the nine months ended September 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)


	September 30, 2015			December 31, 2014⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	39		$	15
Customer receivables (less allowance for doubtful accounts of $27 and $25)		955			986
Other receivables (less allowance for doubtful accounts of $1 at both dates)		96			65
Inventories (average cost method)		842			853
Prepayments		24			252
Regulatory assets		328			298
Other⁽²⁾		43			82

Total current assets		2,327			2,551

Investments
Nuclear decommissioning trust funds		1,875			1,930
Other		3			4

Total investments		1,878			1,934

Property, Plant and Equipment
Property, plant and equipment		37,016			35,180
Accumulated depreciation and amortization		(11,622	)		(11,080	)

Total property, plant and equipment, net		25,394			24,100

Deferred Charges and Other Assets
Regulatory assets		422			439
Other⁽²⁾		538			485

Total deferred charges and other assets		960			924

Total assets	$	30,559		$	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)


	September 30, 2015		December 31, 2014⁽¹⁾
(millions)
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
Securities due within one year	$	677	$	211
Short-term debt		1,362		1,361
Accounts payable		372		458
Payables to affiliates		59		92
Affiliated current borrowings		—		427
Accrued interest, payroll and taxes		336		199
Other⁽²⁾		666		528

Total current liabilities		3,472		3,276

Long-Term Debt		8,952		8,726

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		4,323		4,415
Asset retirement obligations		1,030		848
Regulatory liabilities		1,822		1,683
Other⁽²⁾		436		506

Total deferred credits and other liabilities		7,611		7,452

Total liabilities		20,035		19,454

Commitments and Contingencies (see Note 16)
Common Shareholder’s Equity
Common stock – no par⁽³⁾		5,738		5,738
Other paid-in capital		1,113		1,113
Retained earnings		3,639		3,154
Accumulated other comprehensive income		34		50

Total common shareholder’s equity		10,524		10,055

Total liabilities and shareholder’s equity	$	30,559	$	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 September 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)


Nine Months Ended September 30,	2015			2014
(millions)
Operating Activities
Net income	$	900		$	707
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including nuclear fuel)		844			824
Deferred income taxes and investment tax credits		9			235
Charges associated with North Anna and offshore wind legislation		—			330
Other adjustments		20			(28	)
Changes in:
Accounts receivable		10			20
Inventories		11			(33	)
Prepayments		228			11
Deferred fuel expenses, net (including write-off)		40			(284	)
Accounts payable		(62	)		(24	)
Accrued interest, payroll and taxes		137			60
Other operating assets and liabilities		37			(98	)

Net cash provided by operating activities		2,174			1,720

Investing Activities
Plant construction and other property additions		(1,840	)		(2,120	)
Purchases of nuclear fuel		(100	)		(140	)
Proceeds from sales of securities		407			415
Purchases of securities		(423	)		(421	)
Other		(38	)		(18	)

Net cash used in investing activities		(1,994	)		(2,284	)

Financing Activities
Issuance of short-term debt, net		1			562
Repayment of affiliated current borrowings, net		(427	)		(80	)
Issuance of long-term debt		1,112			750
Repayment of long-term debt		(421	)		(52	)
Preferred stock redemption		—			(125	)
Common dividend payments		(416	)		(466	)
Preferred dividend payments		—			(9	)
Other		(5	)		(11	)

Net cash provided by (used in) financing activities		(156	)		569

Increase in cash and cash equivalents		24			5
Cash and cash equivalents at beginning of period		15			16

Cash and cash equivalents at end of period	$	39		$	21

Supplemental Cash Flow Information
Significant noncash investing activities:
Accrued capital expenditures	$	139		$	176

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,
	2015		2014		2015		2014
(millions)
Operating Revenue⁽¹⁾	$	365	$	391	$	1,291	$	1,388

Operating Expenses
Purchased gas⁽¹⁾		8		34		103		247
Other energy-related purchases		4		8		17		29
Other operations and maintenance:
Affiliated suppliers		12		12		50		49
Other⁽²⁾		51		79		211		204
Depreciation and amortization		53		50		157		146
Other taxes		35		31		127		117

Total operating expenses		163		214		665		792

Income from operations		202		177		626		596

Other income		4		5		17		18
Interest and related charges		18		7		53		19

Income from operations before income taxes		188		175		590		595
Income tax expense		77		68		233		231

Net Income	$	111	$	107	$	357	$	364

(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 nine months ended September 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 September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
(millions)
Net income	$	111		$	107		$	357		$	364
Other comprehensive income (loss), net of taxes:
Net deferred gains (losses) on derivatives-hedging activities⁽¹⁾		3			(7	)		2			(33	)
Amounts reclassified to net income:
Net derivative (gains) losses-hedging activities⁽²⁾		(2	)		4			(3	)		11
Net pension and other postretirement benefit costs⁽³⁾		1			1			3			3

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

Comprehensive income	$	113		$	105		$	359		$	345

(1)	Net of $(1) million and $4 million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $— million and $22 million tax for the nine months ended September 30, 2015 and 2014, respectively.

(2)	Net of $1 million million and $(2) million tax for the three months ended September 30, 2015 and 2014, respectively, and net of $1 million and $(7) million tax for the nine months ended September 30, 2015 and 2014, respectively.

(3)	Net of $(1) million tax for both the three months ended September 30, 2015 and 2014, and net of $(3) million and $(2) million tax for the nine months ended September 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)


	September 30, 2015			December 31, 2014⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	18		$	9
Customer receivables (less allowance for doubtful accounts of $5 and $4)⁽²⁾		180			322
Other receivables (less allowance for doubtful accounts of $1 at both dates)⁽²⁾		11			19
Affiliated receivables		6			12
Inventories		80			65
Prepayments		42			166
Other⁽²⁾		141			217

Total current assets		478			810

Investments		100			108

Property, Plant and Equipment
Property, plant and equipment		9,429			8,902
Accumulated depreciation and amortization		(2,641	)		(2,538	)

Total property, plant and equipment, net		6,788			6,364

Deferred Charges and Other Assets
Goodwill		542			542
Pension and other postretirement benefit assets⁽²⁾		1,577			1,486
Other⁽²⁾		540			538

Total deferred charges and other assets		2,659			2,566

Total assets	$	10,025		$	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)


	September 30, 2015			December 31, 2014⁽¹⁾
(millions)
LIABILITIES AND EQUITY
Current Liabilities
Short-term debt	$	382		$	—
Accounts payable		139			247
Payables to affiliates		13			41
Affiliated current borrowings		198			384
Accrued interest, payroll and taxes		149			194
Other⁽²⁾		160			172

Total current liabilities		1,041			1,038

Long-Term Debt		2,595			2,594

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		2,222			2,158
Other⁽²⁾		486			492

Total deferred credits and other liabilities		2,708			2,650

Total liabilities		6,344			6,282

Commitments and Contingencies (see Note 16)
Equity
Membership interests		3,765			3,652
Accumulated other comprehensive loss⁽²⁾		(84	)		(86	)

Total equity		3,681			3,566

Total liabilities and equity	$	10,025		$	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)


Nine Months Ended September 30,	2015			2014
(millions)
Operating Activities
Net income	$	357		$	364
Adjustments to reconcile net income to net cash provided by operating activities:
Gains on sales of assets		(123	)		(64	)
Depreciation and amortization		157			146
Deferred income taxes and investment tax credits		75			80
Other adjustments		4			(12	)
Changes in:
Accounts receivable		150			60
Deferred purchased gas costs, net		19			33
Prepayments		145			29
Inventories		(15	)		(28	)
Accounts payable		(112	)		(113	)
Payables to affiliates		(28	)		(8	)
Accrued interest, payroll and taxes		(45	)		(56	)
Other operating assets and liabilities		(88	)		(83	)

Net cash provided by operating activities		496			348

Investing Activities
Plant construction and other property additions		(514	)		(467	)
Proceeds from sale of assets to an affiliate		—			47
Proceeds from assignments of shale development rights		80			—
Other		(5	)		(1	)

Net cash used in investing activities		(439	)		(421	)

Financing Activities
Issuance of short-term debt, net		382			—
Issuance (repayment) of affiliated current borrowings, net		(186	)		288
Distribution payments		(244	)		(206	)
Other		—			(1	)

Net cash provided by (used in) financing activities		(48	)		81

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

Cash and cash equivalents at end of period	$	18		$	16

Supplemental Cash Flow Information
Significant noncash investing and financing activities:
Accrued capital expenditures	$	46		$	63
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’ principal 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 September 30, 2015, their results of operations for the three and nine months ended September 30, 2015 and 2014, and their cash flows for the nine months ended September 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 September 30, 2015, Dominion owns the general partner and 63.1% 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 September 30, 2015, Dominion owns 50% of the units in and consolidates Four Brothers and Three Cedars. SunEdison’s ownership interest in these projects 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 and Three Cedars.

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

Wholly-Owned Merchant Solar Projects

Acquisitions

The following table presents significant completed acquisitions of wholly-owned merchant 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. These projects are included in the Dominion Generation operating segment.


Completed Acquisition Date	Seller	Number of Projects	Project Location		Project Name(s)	Initial Acquisition Cost (millions)⁽¹⁾		Project Cost (millions)⁽²⁾		Date of Commercial Operations	MW Capacity
March 2014	Recurrent Energy Development Holdings, LLC	6		California	Camelot, Kansas, Kent South, Old River One, Adams East, Columbia 2	$	50	$	428	Fourth quarter 2014		139

November 2014	CSI Project Holdco, LLC	1		California	West Antelope		79		79	November 2014		20

December 2014	EDF Renewable Development, Inc.	1		California	CID		71		71	January 2015		20

April 2015	EC&R NA Solar PV, LLC	1		California	Alamo		66		66	May 2015		20

April 2015	EDF Renewable Development, Inc.	3		California	City of Corcoran, Goose Lake, Marin Carport⁽³⁾		106		109	May 2015		24

June 2015	EDF Renewable Development, Inc.	1		California	Catalina 2		68		68	July 2015		18

July 2015	SunPeak Solar, LLC	1		California	Imperial Valley 2		42		69	August 2015		20

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

(2)	Includes acquisition cost.

(3)	Marin Carport is expected to begin commercial operations in 2016.

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.

Expected Sale of Interest in Merchant Solar Projects

In September 2015, Dominion signed an agreement to sell a noncontrolling interest (consisting of 33% of the equity interests) in all of its currently wholly-owned merchant solar projects to SunEdison for approximately $300 million. The potential sale relates to a total of 24 solar projects totaling approximately 425 MW. The sales of these interests are expected to close by the end of the first quarter of 2016.

Non-Wholly-Owned Merchant Solar Projects

Acquisitions of Four Brothers and Three Cedars

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. As of September 30, 2015, a $56 million payable is included in other current liabilities in Dominion’s Consolidated Balance Sheets. 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. As of September 30, 2015, Dominion has contributed approximately $38 million. The facilities are expected to begin commercial operations in the third quarter of 2016, generating approximately 320 MW.

In September 2015, Dominion acquired 50% of the units in Three Cedars from SunEdison for approximately $43 million of consideration, consisting of $6 million in cash and a $37 million payable, which is included in other current liabilities in Dominion’s Consolidated Balance Sheets as of September 30, 2015. Three Cedars’ purpose is to develop and operate three solar projects located in Utah, which will produce and sell electricity and renewable energy credits. The projects are expected to cost approximately $425 million to construct. Dominion is obligated to contribute $276 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 210 MW.

Long-term power purchase, interconnection and operation and maintenance agreements have been executed for both Four Brothers and Three Cedars. 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 Three Cedars and has a controlling financial interest over the entities through its rights to control operations. The allocation of the $64 million purchase price for Four Brothers resulted in approximately $89 million of property, plant and equipment and $25 million of noncontrolling interest. The allocation of the $43 million purchase price for Three Cedars resulted in approximately $65 million of property, plant and equipment and $22 million of noncontrolling interest. The noncontrolling interest for each entity 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. The acquired assets of Four Brothers and Three Cedars are included in the Dominion Generation operating segment.

Four Brothers and Three Cedars have entered into agreements with SunEdison to provide administrative and support services in connection with the construction of the projects, operation and maintenance of the facilities, and administrative and technical management services of the solar facilities. In addition, Dominion has entered into contracts with SunEdison to provide services related to construction project management and oversight. Costs related to services to be provided under these agreements were immaterial for the nine months ended September 30, 2015.

Dominion Midstream Acquisition of Interest in Iroquois

In September 2015, Dominion Midstream acquired from NG and NJNR a 25.93% noncontrolling partnership interest in Iroquois, which owns and operates a 416-mile, FERC-regulated natural gas transmission pipeline in New York and Connecticut. In exchange for this partnership interest, Dominion Midstream issued approximately 8.6 million common units representing limited partnership interests in Dominion Midstream (approximately 6.8 million common units to NG for its 20.4% interest and approximately 1.8 million common units to NJNR for its 5.53% interest). The investment was recorded at approximately $216 million based on the value of Dominion Midstream’s common units at closing. These common units are reflected as noncontrolling interest in Dominion’s Consolidated Financial Statements. Dominion Midstream’s noncontrolling partnership interest is reflected in the Dominion Energy operating segment. In addition to this acquisition, Dominion Gas currently holds a 24.72% partnership interest in Iroquois. Dominion Midstream and Dominion Gas each account for their interest in Iroquois as an equity method investment. See Notes 10 and 14 for more information regarding Iroquois.

Acquisition of DCG

In January 2015, Dominion completed the acquisition of 100% of the equity interests of DCG from SCANA Corporation for approximately $497 million in cash, as adjusted for working capital. DCG 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 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 DCG are included in the Dominion Energy operating segment.

On March 24, 2015, DCG converted to a limited liability company under the laws of South Carolina and changed its name from Carolina Gas Transmission Corporation to DCG. On April 1, 2015, Dominion contributed 100% of the issued and outstanding membership interests of DCG 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.

Virginia Power

Acquisition of Solar Project

In September 2015, Virginia Power entered into an agreement to acquire 100% of a solar development project in North Carolina from Morgans Corner for approximately $47 million. The acquisition is expected to close in the fourth quarter of 2015. The project is expected to be placed into service by the end of the first quarter of 2016 and cost approximately $50 million once constructed, including the initial acquisition cost. Upon completion, the facility is expected to generate approximately 20 MW. The output generated by Morgans Corner will be used to meet a ten year non-jurisdictional supply agreement with the U.S. Navy, which has the unilateral option to extend for an additional ten years. In October 2015, the North Carolina Commission granted the transfer of the existing CPCN from Morgans Corner to Virginia Power. The acquired assets will be included in the Virginia Power Generation operating segment.

Dominion Gas

Assignments of Shale Development Rights

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 September 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.

In September 2015, DTI closed on an agreement with a natural gas producer to convey approximately 16,000 acres of Utica and Point Pleasant Shale development rights underneath one of its natural gas storage fields. The agreement provided for a payment to DTI, subject to customary adjustments, of approximately $52 million and an overriding royalty interest in gas produced from the acreage. In September 2015, DTI received proceeds of $52 million associated with the conveyance of the acreage, resulting in a $52 million ($29 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 September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
(millions)
Dominion
Electric sales:
Regulated	$	2,020	$	2,026	$	5,911	$	5,674
Nonregulated		388		353		1,145		1,527
Gas sales:
Regulated		21		25		168		242
Nonregulated		66		187		361		532
Gas transportation and storage		365		343		1,221		1,138
Other		111		116		321		380

Total operating revenue	$	2,971	$	3,050	$	9,127	$	9,493

Virginia Power
Regulated electric sales	$	2,020	$	2,026	$	5,911	$	5,674
Other		38		27		97		91

Total operating revenue	$	2,058	$	2,053	$	6,008	$	5,765

Dominion Gas
Gas sales:
Regulated	$	9	$	15	$	87	$	152
Nonregulated		1		3		5		16
Gas transportation and storage		302		296		1,035		996
NGL revenue		20		54		71		155
Other		33		23		93		69

Total operating revenue	$	365	$	391	$	1,291	$	1,388

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,	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		4.0			2.7			4.2			3.9			4.1			3.7
Investment tax credits		(3.5	)		(6.0	)		—			—			—			—
Production tax credits		(0.8	)		(1.1	)		(0.5	)		(0.6	)		—			—
Other, net		(0.9	)		0.1			(0.2	)		0.8			0.4			0.1

Effective tax rate		33.8	%		30.7	%		38.5	%		39.1	%		39.5	%		38.8	%

As of September 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 September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
(millions, except EPS)
Net income attributable to Dominion	$	593	$	529	$	1,542	$	1,067

Average shares of common stock outstanding – Basic		594.6		583.1		591.3		582.2
Net effect of dilutive securities⁽¹⁾		0.9		1.5		1.4		1.6

Average shares of common stock outstanding – Diluted		595.5		584.6		592.7		583.8

Earnings Per Common Share – Basic	$	1.00	$	0.91	$	2.61	$	1.83
Earnings Per Common Share – Diluted	$	1.00	$	0.90	$	2.60	$	1.83

(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 nine months ended September 30, 2015 and 2014, as the dilutive stock price threshold was not met.

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, 2015
Beginning balance	$	(146	)	$	519		$	(754	)	$	(5	)	$	(386	)
Other comprehensive income before reclassifications: gains (losses)		(7	)		(59	)		(9	)		1			(74	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		(53	)		(2	)		14			—			(41	)

Net current-period other comprehensive income (loss)		(60	)		(61	)		5			1			(115	)

Ending balance	$	(206	)	$	458		$	(749	)	$	(4	)	$	(501	)

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	)

Nine Months Ended September 30, 2015
Beginning balance	$	(178	)	$	548		$	(782	)	$	(4	)	$	(416	)
Other comprehensive income before reclassifications: gains (losses)		25			(55	)		(6	)		—			(36	)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		(53	)		(35	)		39			—			(49	)

Net current-period other comprehensive income (loss)		(28	)		(90	)		33			—			(85	)

Ending balance	$	(206	)	$	458		$	(749	)	$	(4	)	$	(501	)

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	)

(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, 2015
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(87	)	Operating revenue
		2		Purchased gas
Interest rate contracts		2		Interest and related charges

		(83	)
Tax		30		Income tax expense

	$	(53	)


Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(18	)	Other income
Impairment		16		Other income

		(2	)
Tax		—		Income tax expense

	$	(2	)

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		(7	)	Income tax expense

	$	14

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

Nine Months Ended September 30, 2015
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(103	)	Operating revenue
		9		Purchased gas
Interest rate contracts		7		Interest and related charges

		(87	)
Tax		34		Income tax expense

	$	(53	)

Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(82	)	Other income


Impairment		27		Other income

		(55	)
Tax		20		Income tax expense

	$	(35	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(9	)	Other operations and maintenance
Actuarial (gains) losses		73		Other operations and maintenance

		64
Tax		(25	)	Income tax expense

	$	39

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

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, 2015
Beginning balance	$	(22	)	$	(64	)	$	(86	)
Other comprehensive income before reclassifications: gains (losses)		3			—			3
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		(2	)		1			(1	)

Net current-period other comprehensive income		1			1			2

Ending balance	$	(21	)	$	(63	)	$	(84	)

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	)

Nine Months Ended September 30, 2015
Beginning balance	$	(20	)	$	(66	)	$	(86	)
Other comprehensive income before reclassifications: gains (losses)		2			—			2
Amounts reclassified from AOCI⁽¹⁾: (gains) losses		(3	)		3			—

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

Ending balance	$	(21	)	$	(63	)	$	(84	)

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	)

(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, 2015
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(3	)	Operating revenue

		(3	)
Tax		1		Income tax expense

	$	(2	)

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, 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

Nine Months Ended September 30, 2015
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(4	)	Operating revenue

		(4	)
Tax		1		Income tax expense

	$	(3	)

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

		6
Tax		(3	)	Income tax expense

	$	3

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

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 September 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⁾	$	99	Discounted Cash Flow		Market Price (per Dth)	⁽⁴⁾		(2) - 4			(1	)
					Credit spread	⁽⁵⁾		1% - 6	%		3	%
Liquids⁽³⁾		5	Discounted Cash Flow		Market Price (per Gal)	⁽⁴⁾		0 - 2			1
Electric		4	Discounted Cash Flow		Market Price (per MWh)	⁽⁴⁾		26 - 47			45
FTRs		23	Discounted Cash Flow		Market Price (per MWh)	⁽⁴⁾		(3) - 12			2
Physical and Financial Options:
Natural Gas		6	Option Model		Market Price (per Dth)	⁽⁴⁾		2 - 6			4
					Price Volatility	⁽⁶⁾		23% - 75	%		44	%

Total assets	$	137

Liabilities:
Physical and Financial Forwards and Futures:
Natural Gas⁽²⁾	$	10	Discounted Cash Flow		Market Price (per Dth)	⁽⁴⁾		(2) - 4			1
FTRs		2	Discounted Cash Flow		Market Price (per MWh)	⁽⁴⁾		(12) - 12			1
Physical and Financial Options:
Natural Gas		2	Option Model		Market Price (per Dth)	⁽⁴⁾		2 - 4			3
					Price Volatility	⁽⁶⁾		23% - 50	%		34	%

Total liabilities	$	14

(1)	Averages weighted by volume.

(2)	Includes basis.

(3)	Includes NGLs and oil.

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

(5)	Represents credit spreads unrepresented in published markets.

(6)	Represents volatilities unrepresented in published markets.

Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:


Significant Unobservable Inputs	Position	Change to Input	Impact on Fair Value Measurement
Market Price	Buy	Increase (decrease)	Gain (loss)
Market Price	Sell	Increase (decrease)	Loss (gain)
Price Volatility	Buy	Increase (decrease)	Gain (loss)
Price Volatility	Sell	Increase (decrease)	Loss (gain)
Credit spread	Asset	Increase (decrease)	Loss (gain)

Recurring Fair Value Measurements

Dominion

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


	Level 1		Level 2		Level 3		Total
(millions)
At September 30, 2015
Assets:
Derivatives:
Commodity	$	1	$	237	$	137	$	375
Interest rate		—		31		—		31
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		2,401		—		—		2,401
Other		5		—		—		5
REIT		59		—		—		59
Non-U.S.:
Large cap		10		—		—		10
Fixed income:
Corporate debt instruments		—		463		—		463
U.S. Treasury securities and agency debentures		431		184		—		615
State and municipal		—		395		—		395
Other		—		97		—		97
Cash equivalents and other		6		1		—		7

Total assets	$	2,913	$	1,408	$	137	$	4,458

Liabilities:
Derivatives:
Commodity	$	1	$	117	$	14	$	132
Interest rate		—		214		—		214

Total liabilities	$	1	$	331	$	14	$	346

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 September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
(millions)
Beginning balance	$	71		$	3		$	107		$	(16	)
Total realized and unrealized gains (losses):
Included in earnings		(9	)		(2	)		1			98
Included in other comprehensive income (loss)		5			4			(7	)		7
Included in regulatory assets/liabilities		47			39			18			53
Settlements		10			5			1			(94	)
Transfers out of Level 3⁽¹⁾		(1	)		(2	)		3			(1	)

Ending balance	$	123		$	47		$	123		$	47

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		$	1		$	2

(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 nine months ended September 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 September 30, 2015
Total gains (losses) included in earnings	$	—		$	—		$	(9	)	$	(9	)
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets/liabilities still held at the reporting date		—			—			1			1

Three Months Ended 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

Nine Months Ended September 30, 2015
Total gains (losses) included in earnings	$	2		$	—		$	(1	)	$	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		1			—			—			1

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

Virginia Power

The following table presents Virginia Power’s quantitative information about Level 3 fair value measurements at September 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:
FTRs	$	23		Discounted Cash Flow		Market Price (per MWh)	⁽³⁾		(3) - 12			2
Natural Gas⁽²⁾		93		Discounted Cash Flow		Market Price (per Dth)	⁽³⁾		(2) - 3			(1	)
						Credit spread	⁽⁴⁾		1% - 6	%		3	%
Electric		4		Discounted Cash Flow		Market Price (per MWh)	⁽³⁾		44 - 47			45
Physical and Financial Options:
Natural Gas		2		Discounted Cash Flow		Market Price (per Dth)	⁽³⁾		2 - 6			5
						Price Volatility	⁽⁵⁾		50% - 75	%		66	%

Total assets	$	122

Liabilities:
Physical and Financial Forwards and Futures:
FTRs	$	2		Discounted Cash Flow		Market Price (per MWh)	⁽³⁾		(12) - 12			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.

(5)	Represents volatilities unrepresented in published markets.

Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:


Significant Unobservable Inputs	Position	Change to Input	Impact on Fair Value Measurement
Market Price	Buy	Increase (decrease)	Gain (loss)
Market Price	Sell	Increase (decrease)	Loss (gain)
Credit spread	Asset	Increase (decrease)	Loss (gain)
Price Volatility	Buy	Increase (decrease)	Gain (loss)
Price Volatility	Sell	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 September 30, 2015
Assets:
Derivatives:
Commodity	$	—	$	20	$	122	$	142
Interest rate		—		8		—		8
Investments⁽¹⁾:
Equity securities:
U.S. large cap		1,037		—		—		1,037
REIT		59		—				59
Fixed income:
Corporate debt instruments		—		252		—		252
U.S. Treasury securities and agency debentures		164		61		—		225
State and municipal		—		199		—		199
Other		—		30		—		30

Total assets	$	1,260	$	570	$	122	$	1,952

Liabilities:
Derivatives:
Commodity	$	—	$	4	$	2	$	6
Interest rate		—		67		—		67

Total liabilities	$	—	$	71	$	2	$	73

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 September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
(millions)
Beginning balance	$	73		$	7		$	102		$	(7	)
Total realized and unrealized gains (losses):
Included in earnings		(10	)		(2	)		(1	)		109
Included in regulatory assets/liabilities		47			39			18			53
Settlements		10			2			1			(109	)

Ending balance	$	120		$	46		$	120		$	46

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, 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 nine months ended September 30, 2015 and 2014.

Dominion Gas

The following table presents Dominion Gas’ quantitative information about Level 3 fair value measurements at September 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:

NGLs

Discounted Cash Flow

Market Price (per Gal)

⁽²⁾

0 - 2

Total assets

(1)	Averages weighted by volume.

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

Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:


Significant Unobservable Inputs	Position	Change to Input	Impact on Fair Value Measurement
Market Price	Buy	Increase (decrease)	Gain (loss)
Market Price	Sell	Increase (decrease)	Loss (gain)

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, 2015
Assets:
Commodity	$	—	$	5	$	4	$	9

Total Assets	$	—	$	5	$	4	$	9
Liabilities:
Commodity	$	—	$	1	$	—	$	1
Interest rate		—		17		—		17

Total liabilities	$	—	$	18	$	—	$	18

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 September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
(millions)
Beginning balance	$	(1	)	$	(3	)	$	2		$	(6	)
Total realized and unrealized gains (losses):
Included in earnings		—			(1	)		1			(8	)
Included in other comprehensive income (loss)		5			5			(7	)		8
Settlements		—			—			(1	)		7
Transfers out of Level 3⁽¹⁾		—			—			9			—

Ending balance	$	4		$	1		$	4		$	1

(1)

In March 2015, Dominion Gas 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 nine months ended September 30, 2015 are $— million and $9 million, respectively.

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, 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 nine months ended September 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:


	September 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⁾	$	21,318	$	22,923	$	19,723	$	21,881
Junior subordinated notes⁽³⁾		1,370		1,290		1,374		1,396
Remarketable subordinated notes⁽³⁾		2,085		2,214		2,083		2,362

Virginia Power
Long-term debt, including securities due within one year⁽³⁾	$	9,629	$	10,764	$	8,937	$	10,293

Dominion Gas
Long-term debt⁽³⁾	$	2,595	$	2,618	$	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 both September 30, 2015 and December 31, 2014, includes the valuation of certain fair value hedges associated with fixed rate debt of approximately $19 million.

(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:


	September 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	$	31	$	—	$	31	$	24	$	—	$	24
Commodity contracts:
Over-the-counter		270		—		270		382		—		382
Exchange		95		—		95		298		—		298

Total derivatives, subject to a master netting or similar arrangement		396		—		396		704		—		704
Total derivatives, not subject to a master netting or similar arrangement		10		—		10		15		—		15

Total	$	406	$	—	$	406	$	719	$	—	$	719


			September 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	$	31	$	29	$	—	$	2	$	24	$	16	$	—	$	8
Commodity contracts:
Over-the-counter		270		16		23		231		382		34		34		314
Exchange		95		74		—		21		298		298		—		—

Total	$	396	$	119	$	23	$	254	$	704	$	348	$	34	$	322


	September 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	$	214	$	—	$	214	$	202	$	—	$	202
Commodity contracts:
Over-the-counter		39		—		39		87		—		87
Exchange		84		—		84		493		—		493

Total derivatives, subject to a master netting or similar arrangement		337		—		337		782		—		782
Total derivatives, not subject to a master netting or similar arrangement		9		—		9		12		—		12

Total	$	346	$	—	$	346	$	794	$	—	$	794


			September 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	$	214	$	29	$	—	$	185	$	202	$	16	$	—	$	186
Commodity contracts:
Over-the-counter		39		16		—		23		87		34		1		52
Exchange		84		74		10		—		493		298		195		—

Total	$	337	$	119	$	10	$	208	$	782	$	348	$	196	$	238

Volumes

The following table presents the volume of Dominion’s derivative activity as of September 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⁾		57		14
Basis		267		605
Electricity (MWh):
Fixed price		13,869,299		3,399,889
FTRs		49,967,941		—
Capacity (MW)		12,200		—
Liquids (Gal)⁽²⁾		65,772,000		18,774,000
Interest rate	$	2,250,000,000	$	3,000,000,000

(1)	Includes options.

(2)	Includes NGLs and oil.

Ineffectiveness and AOCI

For the three and nine months ended September 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 September 30, 2015:


	AOCI After-Tax			Amounts Expected to be Reclassified to Earnings during the next 12 Months After- Tax			Maximum Term
(millions)
Commodities:
Gas	$	(8	)	$	(7	)		25 months
Electricity		67			50			15 months
Other		5			4			18 months
Interest rate		(270	)		(9	)		387 months

Total	$	(206	)	$	38

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 September 30, 2015
ASSETS
Current Assets
Commodity	$	63	$	169	$	232
Interest rate		11		—		11

Total current derivative assets		74		169		243

Noncurrent Assets
Commodity		10		133		143
Interest rate		20		—		20

Total noncurrent derivative assets⁽¹⁾		30		133		163

Total derivative assets	$	104	$	302	$	406

LIABILITIES
Current Liabilities
Commodity	$	20	$	90	$	110
Interest rate		144		—		144

Total current derivative liabilities⁽²⁾		164		90		254

Noncurrent Liabilities
Commodity		6		16		22
Interest Rate		70		—		70

Total noncurrent derivative liabilities⁽³⁾		76		16		92

Total derivative liabilities	$	240	$	106	$	346

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

Total current derivative assets		294		242		536

Noncurrent Assets
Commodity		71		101		172
Interest rate		11		—		11

Total noncurrent derivative assets⁽¹⁾		82		101		183

Total derivative assets	$	376	$	343	$	719

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

Total current derivative liabilities⁽²⁾		324		267		591

Noncurrent Liabilities
Commodity		55		46		101
Interest rate		102		—		102

Total noncurrent derivative liabilities⁽³⁾		157		46		203

Total derivative liabilities	$	481	$	313	$	794

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

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

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

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

Derivatives in cash flow hedging relationships

Amount of Gain
(Loss)
Recognized
in AOCI on
Derivatives
(Effective
Portion)⁽¹⁾

Amount of Gain
(Loss) Reclassified
from AOCI to
Income

Increase
(Decrease) in
Derivatives
Subject to
Regulatory
Treatment⁽²⁾

(millions)

Three Months Ended September 30, 2015

Derivative Type and Location of Gains (Losses)

Commodity:

Operating revenue