Derivatives and Hedge Accounting Activities

3 Months Ended

Mar. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedge Accounting Activities

Derivatives and Hedge Accounting Activities

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

Dominion

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

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

(1) Includes options.

(2) Includes NGLs and oil.

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

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

	AOCI After-Tax			Amounts Expected to be Reclassified to Earnings during the next 12 Months After-Tax			Maximum Term
(millions)
Commodities:
Gas	$	(30	)	$	(16	)	33 months
Electricity	243			102			45 months
NGLs	(64		)	(27		)	33 months
Other	6			2			38 months
Interest rate	(97		)	(12		)	369 months
Total	$	58		$	49

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)
March 31, 2012
ASSETS
Current Assets
Commodity	$	312	$	472	$	784
Interest rate	38		—		38
Total current derivative assets	350		472		822
Noncurrent Assets
Commodity	295		99		394
Interest rate	56		—		56
Total noncurrent derivative assets(1)	351		99		450
Total derivative assets	$	701	$	571	$	1,272
LIABILITIES
Current Liabilities
Commodity	$	206	$	492	$	698
Interest rate	158		15		173
Total current derivative liabilities	364		507		871
Noncurrent Liabilities
Commodity	151		85		236
Interest rate	—		3		3
Total noncurrent derivative liabilities(2)	151		88		239
Total derivative liabilities	$	515	$	595	$	1,110
December 31, 2011
ASSETS
Current Assets
Commodity	$	176	$	495	$	671
Interest rate	34		—		34
Total current derivative assets	210		495		705
Noncurrent Assets
Commodity	198		96		294
Interest rate	71		—		71
Total noncurrent derivative assets(1)	269		96		365
Total derivative assets	$	479	$	591	$	1,070
LIABILITIES
Current Liabilities
Commodity	$	162	$	530	$	692
Interest rate	222		37		259
Total current derivative liabilities	384		567		951
Noncurrent Liabilities
Commodity	118		78		196
Interest rate	—		10		10
Total noncurrent derivative liabilities(2)	118		88		206
Total derivative liabilities	$	502	$	655	$	1,157

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

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

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

Derivatives in cash flow hedging relationships	Amount of Gain (Loss)  Recognized in AOCI  on Derivatives - Effective Portion(1)			Amount of Gain (Loss) Reclassified from AOCI to Income			Increase (Decrease) in Derivatives Subject to Regulatory Treatment(2)
(millions)
Three Months Ended March 31, 2012
Derivative Type and Location of Gains (Losses)
Commodity:
Operating revenue				$	64
Purchased gas				(30		)
Electric fuel and other energy-related purchases				(7		)
Total commodity	$	176		27			$	(1	)
Interest rate(3)	32			1			27
Total	$	208		$	28		$	26
Three Months Ended March 31, 2011
Derivative Type and Location of Gains (Losses)
Commodity:
Operating revenue				$	28
Purchased gas				(48		)
Electric fuel and other energy-related purchases				1
Purchased electric capacity				1
Total commodity	$	(142	)	(18		)	$	(5	)
Interest rate(3)	(1		)	—			(1		)
Total	$	(143	)	$	(18	)	$	(6	)

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

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

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

	Amount of Gain (Loss) Recognized in Income on Derivatives(1)
	Three Months Ended March 31,
Derivatives not designated as hedging instruments	2012			2011
(millions)
Derivative Type and Location of Gains (Losses)
Commodity
Operating revenue	$	69		$	19
Purchased gas	(10		)	(11		)
Electric fuel and other energy-related purchases	(27		)	16
Interest rate(2)	(2		)	—
Total	$	30		$	24

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

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

Virginia Power

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

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

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

Fair Value and Gains and Losses on Derivative Instruments

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

	Fair Value – Derivatives  under Hedge  Accounting		Fair Value – Derivatives not under Hedge  Accounting		Total Fair Value
(millions)
March 31, 2012
ASSETS
Current Assets
Commodity	$	—	$	1	$	1
Total current derivative assets(1)	—		1		1
Total derivative assets	$	—	$	1	$	1
LIABILITIES
Current Liabilities
Commodity	$	17	$	20	$	37
Interest rate	20		15		35
Total current derivative liabilities(2)	37		35		72
Noncurrent Liabilities
Commodity	2		—		2
Interest rate	—		3		3
Total noncurrent derivative liabilities(3)	2		3		5
Total derivative liabilities	$	39	$	38	$	77
December 31, 2011
ASSETS
Current Assets
Commodity	$	—	$	2	$	2
Total current derivative assets(1)	—		2		2
Total derivative assets	$	—	$	2	$	2
LIABILITIES
Current Liabilities
Commodity	$	14	$	31	$	45
Interest rate	53		37		90
Total current derivative liabilities(2)	67		68		135
Noncurrent Liabilities
Commodity	2		—		2
Interest rate	—		10		10
Total noncurrent derivative liabilities(3)	2		10		12
Total derivative liabilities	$	69	$	78	$	147

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

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

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

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

Derivatives in cash flow hedging relationships	Amount of Gain (Loss)  Recognized in AOCI  on Derivatives (Effective Portion)(1)			Amount of Gain (Loss)  Reclassified from AOCI to Income			Increase (Decrease) in Derivatives Subject to Regulatory Treatment(2)
(millions)
Three Months Ended March 31, 2012
Derivative Type and Location of Gains (Losses)
Commodity:
Electric fuel and other energy-related purchases				$	(2	)
Total commodity	$	(2	)	(2		)	$	(1	)
Interest rate(3)	1			—			27
Total	$	(1	)	$	(2	)	$	26
Three Months Ended March 31, 2011
Derivative Type and Location of Gains (Losses)
Commodity:
Purchased electric capacity				$	1
Total commodity	$	—		1			$	(5	)
Interest rate(3)	—			—			(1		)
Total	$	—		$	1		$	(6	)

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

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

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

	Amount of Gain (Loss) Recognized in Income on Derivatives(1)
	Three Months  Ended March 31,
Derivatives not designated as hedging instruments	2012			2011
(millions)
Derivative Type and Location of Gains (Losses)
Commodity(2)	$	(27	)	$	16
Interest rate(3)	(2		)	—
Total	$	(29	)	$	16

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

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

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