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Variable Interest Entities
12 Months Ended
Dec. 31, 2013
Variable Interest Entities [Abstract]  
Variable Interest Entities
VARIABLE INTEREST ENTITIES
The primary beneficiary of a VIE is required to consolidate the VIE and to disclose certain information about its significant variable interests in the VIE. The primary beneficiary of a VIE is the entity that has both 1) the power to direct the activities that most significantly impact the entity's economic performance and 2) the obligation to absorb losses or receive benefits from the entity that could potentially be significant to the VIE.
Virginia Power has long-term power and capacity contracts with four non-utility generators with an aggregate summer generation capacity of approximately 870 MW. These contracts contain certain variable pricing mechanisms in the form of partial fuel reimbursement that Virginia Power considers to be variable interests. After an evaluation of the information provided by these entities, Virginia Power was unable to determine whether they were VIEs. However, the information they provided, as well as Virginia Power's knowledge of generation facilities in Virginia, enabled Virginia Power to conclude that, if they were VIEs, it would not be the primary beneficiary. This conclusion reflects Virginia Power's determination that its variable interests do not convey the power to direct the most significant activities that impact the economic performance of the entities during the remaining terms of Virginia Power's contracts and for the years the entities are expected to operate after its contractual relationships expire. The contracts expire at various dates ranging from 2015 to 2021. Virginia Power is not subject to any risk of loss from these potential VIEs other than its remaining purchase commitments which totaled $864 million as of December 31, 2013. Virginia Power paid $217 million, $214 million, and $211 million for electric capacity and $98 million, $83 million, and $125 million for electric energy to these entities for the years ended December 31, 2013, 2012 and 2011, respectively.
Virginia Power purchased shared services from DRS, an affiliated VIE, of approximately $331 million, $328 million, and $389 million for the years ended December 31, 2013, 2012 and 2011, respectively. Virginia Power determined that it is not the most closely associated entity with DRS and therefore not the primary beneficiary. DRS provides accounting, legal, finance and certain administrative and technical services to all Dominion subsidiaries, including Virginia Power. Virginia Power has no obligation to absorb more than its allocated share of DRS costs.
Through August 2013, Dominion leased the Fairless generating facility in Pennsylvania from Juniper, the lessor, which began commercial operations in June 2004. Dominion made annual lease payments of approximately $53 million.
Juniper was formed in 2003 as a limited partnership and was organized for the purpose of acquiring and constructing a number of assets for lease. Such assets were financed with proceeds from the issuance of bank debt, privately placed long-term debt and partnership capital received from Juniper's general and limited partners. Dominion had no voting equity interest in Juniper. Because Juniper had been subject to the business scope exception, Dominion was not required to evaluate whether Juniper was a VIE prior to October 2011.
Through September 30, 2011, Juniper held various power plant leases, including Fairless. In October 2011, the last lease other than Fairless expired and the related asset was sold by Juniper. With Fairless being its sole remaining asset, Juniper no longer qualified as a business as of October 2011, which required that Dominion determine whether Juniper was a VIE. Dominion concluded Juniper was a VIE because the entity's capitalization was insufficient to support its operations, the power to direct the most significant activities of the entity was not held by the equity holders, and Dominion guaranteed a portion of the residual value of Fairless. The activities that most significantly impacted Juniper's economic performance related to the operation of Fairless. The decisions related to the operations of Fairless were made by Dominion and as such, Dominion was considered the primary beneficiary.
Accordingly, Dominion consolidated Juniper in October 2011 and recorded, at fair value, approximately $957 million of property, plant and equipment, $896 million of debt and $61 million of noncontrolling interests. The debt was non-recourse to Dominion and was secured by Juniper's assets. The annual lease payments made by Dominion to Juniper for Fairless were eliminated in the Consolidated Statements of Income and were excluded from the lease commitments table in Note 22 to the Consolidated Financial Statements in Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2012. Dominion did not provide any financial or other support to Juniper that it was not previously contractually required to provide.
In August 2013, the lease expired and Dominion purchased Fairless for $923 million from Juniper per the terms of the lease agreement. However, as Dominion had previously consolidated Juniper, the purchase was accounted for as an equity transaction to acquire the noncontrolling interests from Juniper for $923 million, while Dominion retained control of Fairless. The acquisition resulted in the removal of securities due within one year-VIE and noncontrolling interests from Dominion's Consolidated Balance Sheet during 2013.