Income Taxes

3 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

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 Energy						Virginia Power
Three Months Ended March 31,	2021			2020			2021			2020
U.S. statutory rate		21.0	%		21.0	%		21.0	%		21.0	%
Increases (reductions) resulting from:
State taxes, net of federal benefit		3.5			3.3			4.5			4.8
Investment tax credits		(3.8	)		(7.0	)		(6.6	)		(6.4	)
Production tax credits		(0.3	)		(0.8	)		(0.6	)		(0.8	)
Reversal of excess deferred income    taxes		(2.2	)		(7.8	)		(2.2	)		(8.1	)
AFUDC - equity		(0.4	)		(0.7	)		(0.7	)		(0.7	)
Other, net		—			1.7			0.3			0.3
Effective tax rate		17.8	%		9.7	%		15.7	%		10.1	%

For the Companies’ rate-regulated entities, deferred taxes will reverse at the weighted average rate used to originate the deferred tax liability, which in some cases will be 35%. The Companies have recorded an estimate of excess deferred income tax amortization in 2021. The reversal of these excess deferred income taxes will impact the effective tax rate and rates charged to customers. See Note 13 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2020 for more information.

As of March 31, 2021, 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, 2020, for a discussion of these unrecognized tax benefits.

In April 2021, a state legislative change was enacted for tax years beginning January 1, 2022. Dominion Energy expects to record an approximate $20 million deferred tax benefit, inclusive of an approximate $15 million benefit at Virginia Power, in the second quarter of 2021.

Discontinued operations

Income tax expense reflected in discontinued operations is $7 million and $31 million for the three months ended March 31, 2021 and 2020, respectively.