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Derivatives and Hedge Accounting Activities

9 Months Ended

Sep. 30, 2020

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivatives and Hedge Accounting Activities

Note 9. Derivatives and Hedge Accounting Activities

The Companies’ accounting policies, 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, 2019. 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 Energy’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. Virginia Power’s derivative contracts include over-the-counter transactions. Over-the-counter contracts are bilateral contracts that are transacted directly with a third party. 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. See Note 18 for further information regarding credit-related contingent features for the Companies’ derivative instruments.

Dominion Energy

Balance Sheet Presentation

The tables below present Dominion Energy’s derivative asset and liability balances by type of financial instrument, if the gross amounts recognized in its Consolidated Balance Sheets were netted with derivative instruments and cash collateral received or paid:

	September 30, 2020								December 31, 2019
	Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
	Gross Assets Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Received		Net Amounts		Gross Assets Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Received		Net Amounts
(millions)
Commodity contracts:
Over-the-counter	$	148	$	17	$	—	$	131	$	35	$	21	$	—	$	14
Exchange		36		31		—		5		37		21		—		16
Interest rate contracts:
Over-the-counter		60		9		—		51		11		3		—		8
Foreign currency contracts:
Over-the-counter		6		6		—		—		8		8		—		—
Total derivatives, subject to a master netting or similar arrangement	$	250	$	63	$	—	$	187	$	91	$	53	$	—	$	38

(1)	Excludes $2 million and $2 million of derivative assets at September 30, 2020 and December 31, 2019, respectively, which are not subject to master netting or similar arrangements.

	September 30, 2020								December 31, 2019
	Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
	Gross Liabilities Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Paid		Net Amounts		Gross Liabilities Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Paid		Net Amounts
(millions)
Commodity contracts:
Over-the-counter	$	19	$	17	$	—	$	2	$	105	$	21	$	—	$	84
Exchange		31		31		—		—		21		21		—		—
Interest rate contracts:
Over-the-counter		721		11		20		690		606		8		35		563
Foreign currency contracts:
Over-the-counter		4		4		—		—		3		3		—		—
Total derivatives, subject to a master netting or similar arrangement	$	775	$	63	$	20	$	692	$	735	$	53	$	35	$	647

(1)	Excludes $1 million and $5 million of derivative liabilities at September 30, 2020 and December 31, 2019, respectively, which are not subject to master netting or similar arrangements.

Volumes

The following table presents the volume of Dominion Energy’s derivative activity at September 30, 2020. 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 its long and short positions.

	Current		Noncurrent
Natural Gas (bcf):
Fixed price⁽¹⁾		74		13
Basis		240		517
Electricity (MWh):
Fixed price		6,380,180		3,128,300
FTRs		73,133,287		—
Liquids (Gal)⁽²⁾		11,004,000		—
Interest rate⁽³⁾	$	1,600,000,000	$	6,916,692,492
Foreign currency⁽³⁾	€	250,000,000	€	-

(1)	Includes options.

(2)	Includes NGLs.

(3)	Maturity is determined based on final settlement period.

AOCI

The following table presents selected information related to gains (losses) on cash flow hedges included in AOCI in Dominion Energy’s Consolidated Balance Sheet at September 30, 2020:

	AOCI After-Tax			Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax			Maximum Term
(millions)
Commodities:
Gas	$	(2	)	$	(2	)	15 months
Electricity		2			2		3 months
Interest rate		(446	)		(44	)	399 months
Total	$	(446	)	$	(44	)

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, interest rates and foreign currency exchange rates.

In connection with the agreement Dominion Energy entered in July 2020 for the disposition of substantially all of its gas transmission and storage operations, certain cash flow hedges of debt-related items became probable of not occurring. See Note 3 for further information.

Fair Value Hedges

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings and presented in the same line item. There were no derivative instruments designated in fair value hedges during the three and nine months ended September 30, 2020. Gains and losses on derivatives in fair value hedge relationships were immaterial for the three and nine months ended September 30, 2019.

The following table presents the amounts recorded on the balance sheet related to cumulative basis adjustments for fair value hedges:

	Carrying Amount of the Hedged Asset (Liability)⁽¹⁾						Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Assets (Liabilities)⁽²⁾
	September 30, 2020			December 31, 2019			September 30, 2020			December 31, 2019
(millions)
Long-term debt	$	(1,153	)	$	(1,154	)	$	(3	)	$	(4	)

(1)	Includes $(1.1) billion and $(397) million related to discontinued hedging relationships at September 30, 2020 and December 31, 2019, respectively.

(2)	Includes $(3) million and $3 million of hedging adjustments on discontinued hedging relationships at September 30, 2020 and December 31, 2019, respectively.

Fair Value and Gains and Losses on Derivative Instruments

The following table presents the fair values of Dominion Energy’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)
September 30, 2020
ASSETS
Current Assets
Commodity	$	—	$	80	$	80
Interest rate		—		12		12
Foreign currency				6		6
Total current derivative assets⁽¹⁾		—		98		98
Noncurrent Assets
Commodity		—		106		106
Interest rate		—		48		48
Total noncurrent derivative assets⁽²⁾		—		154		154
Total derivative assets	$	—	$	252	$	252
LIABILITIES
Current Liabilities
Commodity	$	—	$	41	$	41
Interest rate		—		194		194
Foreign currency		—		4		4
Total current derivative liabilities⁽³⁾		—		239		239
Noncurrent Liabilities
Commodity		—		10		10
Interest rate		482		45		527
Total noncurrent derivative liabilities		482		55		537
Total derivative liabilities	$	482	$	294	$	776
December 31, 2019
ASSETS
Current Assets
Commodity	$	30	$	37	$	67
Interest rate		1		—		1
Total current derivative assets⁽¹⁾		31		37		68
Noncurrent Assets
Commodity		1		6		7
Interest rate		10		—		10
Foreign currency		8		—		8
Total noncurrent derivative assets⁽²⁾		19		6		25
Total derivative assets	$	50	$	43	$	93
LIABILITIES
Current Liabilities
Commodity	$	6	$	77	$	83
Interest rate		321		1		322
Foreign currency		3		—		3
Total current derivative liabilities⁽³⁾		330		78		408
Noncurrent Liabilities
Commodity		1		47		48
Interest rate		267		17		284
Total noncurrent derivative liabilities⁽⁴⁾		268		64		332
Total derivative liabilities	$	598	$	142	$	740

(1)

Current derivative assets include $87 million and $61 million in other current assets in Dominion Energy’s Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019, respectively. The remainder is recorded in current assets held for sale in Dominion Energy’s Consolidated Balance Sheets.

(2)

Noncurrent derivative assets include $154 million and $16 million in other deferred charges and other assets in Dominion Energy’s Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019, respectively. The remainder is recorded in noncurrent assets held for sale in Dominion Energy’s Consolidated Balance Sheets.

(3)	Current derivative liabilities include $16 million and $14 million at September 30, 2020 and December 31, 2019, respectively, presented in held for sale in Dominion Energy’s Consolidated Balance Sheets.

(4)	Noncurrent derivative liabilities include $3 million at December 31, 2019 presented in held for sale in Dominion Energy’s Consolidated Balance Sheets.

The following tables present the gains and losses on Dominion Energy’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⁽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, 2020
Derivative type and location of gains (losses):
Commodity:
Operating revenue				$	8
Total commodity	$	—		$	8		$	—
Interest rate:
Interest and related charges				$	(23	)
Discontinued operations					(230	)
Total interest rate	$	8		$	(253	)	$	62
Foreign currency ⁽³⁾		6			(6	)		—
Total	$	14		$	(251	)	$	62
Three Months Ended September 30, 2019
Derivative type and location of gains (losses):
Commodity:
Operating revenue				$	34
Purchased gas					(2	)
Discontinued operations					1
Total commodity	$	(5	)	$	33		$	—
Interest rate:
Interest and related charges				$	(12	)
Discontinued operations					(2	)
Total interest rate	$	(124	)	$	(14	)	$	(190	)
Foreign currency ⁽³⁾		(15	)		(12	)		—
Total	$	(144	)	$	7		$	(190	)
Nine Months Ended September 30, 2020
Derivative type and location of gains (losses):
Commodity:
Operating revenue				$	22
Purchased gas					(3	)
Discontinued operations					2
Total commodity	$	—		$	21		$	—
Interest rate:
Interest and related charges				$	(66	)
Discontinued operations					(236	)
Total interest rate	$	(328	)	$	(302	)	$	(488	)
Foreign currency ⁽³⁾		(11	)		(6	)		—
Total	$	(339	)	$	(287	)	$	(488	)
Nine Months Ended September 30, 2019
Derivative type and location of gains (losses):
Commodity:
Operating revenue				$	123
Purchased gas					1
Discontinued operations					4
Total commodity	$	96		$	128		$	—
Interest rate:
Interest and related charges				$	(35	)
Discontinued operations					(2	)

Total interest rate	$	(350	)	$	(37	)	$	(405	)
Foreign currency ⁽³⁾		(24	)		(14	)		—
Total	$	(278	)	$	77		$	(405	)

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

(3)	Amounts recorded in Dominion Energy’s Consolidated Statements of Income are classified in discontinued operations.

Derivatives not designated as hedging instruments	Amount of Gain (Loss) Recognized in Income on Derivatives⁽¹⁾
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
(millions)
Derivative type and location of gains (losses):
Commodity:
Operating revenue	$	(15	)	$	6		$	31		$	34
Purchased gas		4			(9	)		(6	)		(15	)
Electric fuel and other energy-related purchases		(6	)		(6	)		(79	)		(18	)
Discontinued operations		(1	)		—			4			—
Interest rate:
Interest and related charges		57			—			(21	)		—
Discontinued operations		5			—			(3	)		—
Foreign currency:
Discontinued operations		8			—			8			—
Total	$	52		$	(9	)	$	(66	)	$	1

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

Virginia Power

Balance Sheet Presentation

The tables below present Virginia Power’s derivative asset and liability balances by type of financial instrument, if the gross amounts recognized in its Consolidated Balance Sheets were netted with derivative instruments and cash collateral received or paid:

	September 30, 2020								December 31, 2019
	Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
	Gross Assets Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Received		Net Amounts		Gross Assets Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Received		Net Amounts
(millions)
Commodity contracts:
Over-the-counter	$	134	$	10	$	—	$	124	$	19	$	18	$	—	$	1
Interest rate contracts:
Over-the-counter		—		—		—		—		2		—		—		2
Total derivatives, subject to a master netting or similar arrangement	$	134	$	10	$	—	$	124	$	21	$	18	$	—	$	3

(1)	Excludes $11 million and $3 million of derivative assets at September 30, 2020 and December 31, 2019, respectively, which are not subject to master netting or similar arrangements.

	September 30, 2020								December 31, 2019
	Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
	Gross Liabilities Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Paid		Net Amounts		Gross Liabilities Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Paid		Net Amounts
(millions)
Commodity contracts:
Over-the-counter	$	10	$	10	$	—	$	—	$	59	$	18	$	—	$	41
Interest rate contracts:
Over-the-counter		475		—		—		475		363		—		—		363
Total derivatives, subject to a master netting or similar arrangement	$	485	$	10	$	—	$	475	$	422	$	18	$	—	$	404

(1)	Excludes $6 million and $44 million of derivative liabilities at September 30, 2020 and December 31, 2019, respectively, which are not subject to master netting or similar arrangements.

Volumes

The following table presents the volume of Virginia Power’s derivative activity at September 30, 2020. 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 its long and short positions.

	Current		Noncurrent
Natural Gas (bcf):
Fixed price⁽¹⁾		38		—
Basis		140		498
Electricity (MWh):
FTRs		73,133,287		—
Interest rate⁽²⁾	$	—	$	2,050,000,000

(1)	Includes options.

(2)	Maturity is determined based on final settlement period.

AOCI

The following table presents selected information related to losses on cash flow hedges included in AOCI in Virginia Power’s Consolidated Balance Sheet at September 30, 2020:

	AOCI After-Tax			Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax			Maximum Term
(millions)
Interest rate	$	(72	)	$	(1	)	399 months
Total	$	(72	)	$	(1	)

The amounts that will be reclassified from AOCI to earnings will generally be offset by the recognition of the hedged transactions (e.g., interest payments) in earnings, thereby achieving the realization of interest rates contemplated by the underlying risk management strategies and will vary from the expected amounts presented above as a result of changes in interest rates.

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)
September 30, 2020
ASSETS
Current Assets
Commodity	$	—	$	48	$	48
Total current derivative assets⁽¹⁾		—		48		48
Noncurrent Assets
Commodity		—		97		97
Total noncurrent derivative assets⁽²⁾		—		97		97
Total derivative assets	$	—	$	145	$	145
LIABILITIES
Current Liabilities
Commodity	$	—	$	15	$	15
Total current derivative liabilities		—		15		15
Noncurrent Liabilities
Commodity		—	1			1
Interest rate		475		—		475
Total noncurrent derivative liabilities⁽³⁾		475		1		476
Total derivative liabilities	$	475	$	16	$	491
December 31, 2019
ASSETS
Current Assets
Commodity	$	—	$	20	$	20
Total current derivative assets⁽¹⁾		—		20		20
Noncurrent Assets
Commodity		—		2		2
Interest rate		2		—		2
Total noncurrent derivative assets⁽²⁾		2		2		4
Total derivative assets	$	2	$	22	$	24
LIABILITIES
Current Liabilities
Commodity	$	—	$	58	$	58
Interest rate		185		—		185
Total current derivative liabilities		185		58		243
Noncurrent Liabilities
Commodity		—		45		45
Interest rate		178		—		178
Total noncurrent derivative liabilities⁽³⁾		178		45		223
Total derivative liabilities	$	363	$	103	$	466

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

(2)	Noncurrent derivative assets are presented in other deferred charges and other assets 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⁽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, 2020
Derivative type and location of gains (losses):
Interest rate⁽³⁾	$	6		$	(1	)	$	60
Total	$	6		$	(1	)	$	60
Three Months Ended September 30, 2019
Derivative type and location of gains (losses):
Interest rate⁽³⁾	$	(21	)	$	—		$	(190	)
Total	$	(21	)	$	—		$	(190	)
Nine Months Ended September 30, 2020
Derivative type and location of gains (losses):
Interest rate⁽³⁾	$	(53	)	$	(2	)	$	(492	)
Total	$	(53	)	$	(2	)	$	(492	)
Nine Months Ended September 30, 2019
Derivative type and location of gains (losses):
Interest rate⁽³⁾	$	(45	)	$	(1	)	$	(408	)
Total	$	(45	)	$	(1	)	$	(408	)

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

Derivatives not designated as hedging instruments	Amount of Gain (Loss) Recognized in Income on Derivatives⁽¹⁾
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
(millions)
Derivative type and location of gains (losses):
Commodity⁽²⁾	$	(6	)	$	(6	)	$	(79	)	$	(18	)
Total	$	(6	)	$	(6	)	$	(79	)	$	(18	)

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