Fair Value Measurements (Tables)

Nov. 18, 2019

Fair Value Inputs, Assets, Quantitative Information

The following table presents Dominion Energy’s quantitative information about Level 3 fair value measurements at June 30, 2019. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility.

	Fair Value     (millions)		Valuation Techniques	Unobservable Input		Range	Weighted Average(1)
Assets
Physical and financial forwards and futures:
Natural gas(2)	$	76	Discounted cash flow		Market price (per Dth)(3)	(2) - 6		(1	)
FTRs		7	Discounted cash flow		Market price (per MWh)(3)	(1) - 4		1
Physical options:
Natural gas		1	Option model		Market price (per Dth)(3)	2 - 12		4
					Price volatility(4)	2% - 34%		19	%
Total assets	$	84
Liabilities
Financial forwards:
FTRs	$	3	Discounted cash flow		Market price (per MWh)(3)	(4) - 4		—
Physical options:
Natural gas		6	Option model		Market price (per Dth)(3)	1 - 8		3
					Price volatility(4)	2% - 71%		29	%
Total liabilities	$	9

(1) Averages weighted by volume.

(2) Includes basis.

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

(4) Represents volatilities unrepresented in published markets.    

Fair Value, Options, Qualitative Disclosures

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)

Fair Value, by Balance Sheet Grouping

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

	Level 1		Level 2		Level 3		Total
(millions)
At June 30, 2019
Assets
Derivatives:
Commodity	$	—	$	104	$	84	$	188
Interest rate		—		7		—		7
Foreign currency		—		14		—		14
Investments(1):
Equity securities:
U.S.		3,826		—		—		3,826
Fixed income securities:
Corporate debt instruments		—		500		—		500
Government securities		488		668		—		1,156
Cash equivalents and other		19		—		—		19
Total assets	$	4,333	$	1,293	$	84	$	5,710
Liabilities
Derivatives:
Commodity	$	6	$	54	$	9	$	69
Interest rate		—		557		—		557
Total liabilities	$	6	$	611	$	9	$	626
At December 31, 2018
Assets
Derivatives:
Commodity	$	—	$	180	$	70	$	250
Interest rate		—		18		—		18
Foreign currency		—		26		—		26
Investments(1):
Equity securities:
U.S.		3,277		—		—		3,277
Fixed income securities:
Corporate debt instruments		—		431		—		431
Government securities		455		688		—		1,143
Cash equivalents and other		11		—		—		11
Total assets	$	3,743	$	1,343	$	70	$	5,156
Liabilities
Derivatives:
Commodity	$	—	$	129	$	6	$	135
Interest rate		—		142		—		142
Foreign currency		—		2		—		2
Total liabilities	$	—	$	273	$	6	$	279

(1) Includes investments held in the nuclear decommissioning and rabbi trusts. Excludes $210 million and $220 million of assets at June 30, 2019 and December 31, 2018, respectively, measured at fair value using NAV (or its equivalent) as a practical expedient which are not required to​​​​​​​ be categorized in the fair value hierarchy.

Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation

The following table presents the net change in Dominion Energy’s assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
(millions)
Beginning balance	$	53		$	120		$	64		$	150
Total realized and unrealized gains (losses):
Included in earnings:
Operating revenue		3			—			2			(1	)
Purchased gas		1			—			1			—
Electric fuel and other energy-related purchases		(3	)		(2	)		(7	)		(19	)
Included in other comprehensive income		—			—			—			1
Included in regulatory assets/liabilities		18			11			25			(10	)
Settlements		3			(10	)		2			(3	)
Purchases		—			—			(10	)		—
Transfers out of Level 3		—			—			(2	)		1
Ending balance	$	75		$	119		$	75		$	119
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:
Operating revenue	$	2		$	—		$	2		$	—
Purchased gas		1			—			1			—
Total	$	3		$	—		$	3		$	—

Schedule of Carrying Values and Estimated Fair Values of Debt Instruments

For the Companies’ financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:

	June 30, 2019				December 31, 2018
	Carrying Amount		Estimated Fair Value(1)		Carrying Amount		Estimated Fair Value(1)
(millions)
Dominion Energy
Long-term debt, including securities due within one year(2)	$	34,217	$	37,631	$	29,952	$	31,045
Credit facility borrowings		—		—		73		73
Junior subordinated notes(3)		4,795		4,898		3,430		3,358
Remarketable subordinated notes(3)		—		—		1,386		1,340
Virginia Power
Long-term debt, including securities due within one year(3)	$	11,293	$	12,840	$	11,671	$	12,400
Dominion Energy Gas
Long-term debt, including securities due within one year(4)	$	7,481	$	7,693	$	7,770	$	7,803
Affiliated long-term debt		395		395		—		—
Credit facility borrowings		—		—		73		73

(1) Fair value is estimated using market prices, where available, and interest rates currently available for issuance of debt with similar terms and remaining maturities. All fair value measurements are classified as Level 2. The carrying amount of debt issues with short-term maturities and variable rates refinanced at current market rates is a reasonable estimate of their fair value.

(2) Carrying amount includes amounts which represent the unamortized debt issuance costs, discount or premium, and foreign currency remeasurement adjustments. At June 30, 2019 and December 31, 2018, includes the valuation of certain fair value hedges associated with fixed rate debt of $2 million and $(20) million, respectively.

(3) Carrying amount includes amounts which represent the unamortized debt issuance costs, discount or premium.

(4) Carrying amount includes amounts which represent the unamortized debt issuance costs, discount or premium, and foreign currency remeasurement adjustments.

Virginia Electric and Power Company

Fair Value Inputs, Assets, Quantitative Information

The following table presents Virginia Power’s quantitative information about Level 3 fair value measurements at June 30, 2019. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility.

	Fair Value     (millions)		Valuation Techniques	Unobservable Input		Range	Weighted   Average(1)
Assets
Physical and financial forwards and futures:
Natural gas(2)	$	74	Discounted cash flow		Market price (per Dth)(3)	(2) - 3		(1	)
FTRs		7	Discounted cash flow		Market price (per MWh)(3)	(1) - 4		1
Total assets	$	81
Liabilities
Financial forwards:
FTRs	$	3	Discounted cash flow		Market price (per MWh)(3)	(4) - 4		—
Physical options:
Natural gas		1	Option model		Market price (per Dth)(3)	1 - 7		3
					Price volatility(4)	20% - 71%		38	%
Total liabilities	$	4

(1) Averages weighted by volume.

(2) Includes basis.

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

(4) Represents volatilities unrepresented in published markets.

Fair Value, Options, Qualitative Disclosures

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)

Fair Value, by Balance Sheet Grouping

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

	Level 1		Level 2		Level 3		Total
(millions)
At June 30, 2019
Assets
Derivatives:
Commodity	$	—	$	2	$	81	$	83
Investments(1):
Equity securities:
U.S.		1,753		—		—		1,753
Fixed income securities:
Corporate debt instruments		—		257		—		257
Government securities		205		313		—		518
Total assets	$	1,958	$	572	$	81	$	2,611
Liabilities
Derivatives:
Commodity	$	—	$	22	$	4	$	26
Interest rate		—		332		—		332
Total liabilities	$	—	$	354	$	4	$	358
At December 31, 2018
Assets
Derivatives:
Commodity	$	—	$	24	$	66	$	90
Interest rate		—		3		—		3
Investments(1):
Equity securities:
U.S.		1,476		—		—		1,476
Fixed income securities:
Corporate debt instruments		—		221		—		221
Government securities		164		343		—		507
Total assets	$	1,640	$	591	$	66	$	2,297
Liabilities
Derivatives:
Commodity	$	—	$	9	$	6	$	15
Interest rate		—		88		—		88
Total liabilities	$	—	$	97	$	6	$	103

(1) Includes investments held in the nuclear decommissioning trusts. Excludes $153 million and $160 million of ​​​​​​​assets at June 30, 2019 and December 31, 2018, respectively, measured at fair value using NAV (or its equivalent) as a practical expedient which are not required to be categorized in the fair value hierarchy.

Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation

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						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
(millions)
Beginning balance	$	59		$	117		$	60		$	147
Total realized and unrealized gains (losses):
Included in earnings:
Electric fuel and other energy-related purchases		(3	)		(2	)		(7	)		(19	)
Included in regulatory assets/liabilities		18			8			26			(11	)
Settlements		3			(8	)		(2	)		(2	)
Ending balance	$	77		$	115		$	77		$	115

Dominion Energy Gas Holdings, LLC

Fair Value, by Balance Sheet Grouping

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

	Level 1		Level 2		Level 3		Total
(millions)
At June 30, 2019
Assets
Commodity	$	—	$	2	$	—	$	2
Foreign currency		—		14		—		14
Total assets	$	—	$	16	$	—	$	16
Liabilities
Interest rate	$	—	$	77	$	—	$	77
Total liabilities	$	—	$	77	$	—	$	77
At December 31, 2018
Assets
Commodity	$	—	$	3	$	—	$	3
Interest rate		—		2		—		2
Foreign currency		—		26		—		26
Total assets	$	—	$	31	$	—	$	31
Liabilities
Interest rate	$	—	$	17	$	—	$	17
Foreign currency		—		2		—		2
Total liabilities	$	—	$	19	$	—	$	19

Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation

The following table presents the net change in Dominion Energy Gas’ assets and liabilities for derivatives measured at fair value on a recurring basis and included in the Level 3 fair value category. There were no net changes in assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category for the three and six months ended June 30, 2019 and the three months ended June 30, 2018.

	Six Months Ended
	June 30,
	2018
(millions)
Beginning balance	$	(2	)
Total realized and unrealized gains:
Included in other comprehensive income		1
Transfers out of Level 3		1
Ending balance	$	—