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Derivatives and Hedge Accounting Activities

9 Months Ended

Sep. 30, 2022

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, 2021. See Note 8 in this report for additional information about fair value measurements and associated valuation methods for derivatives.

Derivative assets and liabilities are presented gross on the Companies’ Consolidated Balance Sheets. The Companies’ 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. 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. In February 2022, Dominion Energy entered into contracts representing offsetting positions to certain existing exchange contracts with collateral requirements as well as new over-the-counter transactions that are not subject to collateral requirements. These contracts resulted in positions which limit the risk of increased cash collateral requirements. Certain accounts receivable and accounts payable recognized on the Companies’ Consolidated Balance Sheets, letters of credit and other forms of securities, as well as certain other long-term debt, 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 additional 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, 2022								December 31, 2021
	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	$	367	$	11	$	—	$	356	$	153	$	13	$	—	$	140
Exchange		292		287		—		5		9		7		—		2
Interest rate contracts:
Over-the-counter		1,593		410		—		1,183		323		49		—		274
Foreign currency exchange rate contracts:
Over-the-counter		6		6		—		—		8		—		—		8
Total derivatives, subject to a master netting or similar arrangement	$	2,258	$	714	$	—	$	1,544	$	493	$	69	$	—	$	424

(1)	Excludes $211 million and $120 million of derivative assets at September 30, 2022 and December 31, 2021, respectively, which are not subject to master netting or similar arrangements.

	September 30, 2022								December 31, 2021
	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	$	660	$	17	$	121	$	522	$	95	$	13	$	54	$	28
Exchange		849		287		562		—		374		7		367		—
Interest rate contracts:
Over-the-counter		475		257		3		215		399		49		11		339
Foreign currency exchange rate contracts:
Over-the-counter		387		153		—		234		—		—		—		—
Total derivatives, subject to a master netting or similar arrangement	$	2,371	$	714	$	686	$	971	$	868	$	69	$	432	$	367

(1)	There were no derivative liabilities that are not subject to master netting or similar arrangements at September 30, 2022 or December 31, 2021.

Volumes

The following table presents the volume of Dominion Energy’s derivative activity at September 30, 2022. 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		47		7
Basis⁽¹⁾		159		439
Electricity (MWh in millions):
Fixed price		16		31
FTRs		72		—
Oil (Gal in millions)		6		—
Interest rate⁽²⁾ (in millions)	$	358	$	12,581
Foreign currency exchange rate⁽²⁾(in millions):
Danish Krone	468 kr.		4,167 kr.
Euro	€351		€2,651

(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 Dominion Energy’s Consolidated Balance Sheet at September 30, 2022:

	AOCI After-Tax			Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax			Maximum Term
(millions)
Interest rate	$	(261	)	$	(33	)	387 months
Total	$	(261	)	$	(33	)

The amounts that will be reclassified from AOCI to earnings will generally be offset by the recognition of the hedged transactions (e.g., interest rate payments) 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 interest rates.

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 as fair value hedges during the three and nine months ended September 30, 2022 and 2021.

The following table presents the amounts recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges, all of which related to discontinued hedging relationships at both September 30, 2022 and December 31, 2021:

	Carrying Amount of the Hedged Asset (Liability)					Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Assets (Liabilities)
	September 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
(millions)
Long-term debt	$	—	$	(352	)	$	—	$	(2	)

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, 2022
ASSETS
Current Assets
Commodity	$	—	$	610	$	610
Interest rate		—		54		54
Foreign currency exchange rate		—		6		6
Total current derivative assets		—		670		670
Noncurrent Assets
Commodity		—		260		260
Interest rate		596		943		1,539
Total noncurrent derivative assets		596		1,203		1,799
Total derivative assets	$	596	$	1,873	$	2,469
LIABILITIES
Current Liabilities
Commodity	$	—	$	1,083	$	1,083
Interest rate		—		46		46
Foreign currency exchange rate		—		50		50
Total current derivative liabilities		—		1,179		1,179
Noncurrent Liabilities
Commodity		—		426		426
Interest rate		27		402		429
Foreign currency exchange rate		—		337		337
Total noncurrent derivative liabilities		27		1,165		1,192
Total derivative liabilities	$	27	$	2,344	$	2,371
December 31, 2021
ASSETS
Current Assets
Commodity	$	—	$	103	$	103
Interest rate		1		17		18
Foreign currency exchange rate		—		1		1
Total current derivative assets		1		121		122
Noncurrent Assets
Commodity		—		179		179
Interest rate		145		160		305
Foreign currency exchange rate		—		7		7
Total noncurrent derivative assets		145		346		491
Total derivative assets	$	146	$	467	$	613
LIABILITIES
Current Liabilities
Commodity	$	—	$	304	$	304
Interest rate		42		13		55
Total current derivative liabilities		42		317		359
Noncurrent Liabilities
Commodity		—		165		165
Interest rate		295		49		344
Total noncurrent derivative liabilities		295		214		509
Total derivative liabilities	$	337	$	531	$	868

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, 2022
Derivative type and location of gains (losses):
Interest rate⁽³⁾	$	14		$	(16	)	$	182
Total	$	14		$	(16	)	$	182
Three Months Ended September 30, 2021
Derivative type and location of gains (losses):
Interest rate⁽³⁾	$	(2	)	$	(14	)	$	9
Total	$	(2	)	$	(14	)	$	9
Nine Months Ended September 30, 2022
Derivative type and location of gains (losses):
Interest rate ⁽³⁾	$	86		$	(44	)	$	815
Total	$	86		$	(44	)	$	815
Nine Months Ended September 30, 2021
Derivative type and location of gains (losses):
Interest rate ⁽³⁾	$	29		$	(46	)	$	198
Commodity⁽⁴⁾		—			(1	)		—
Total	$	29		$	(47	)	$	198

(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 Statement of Income are classified in interest and related charges.

(4)	Amounts recorded in Dominion Energy’s Consolidated Statement of Income are classified in purchased gas.

Derivatives not designated as hedging instruments	Amount of Gain (Loss) Recognized in Income on Derivatives⁽¹⁾⁽²⁾
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
(millions)
Derivative type and location of gains (losses):
Commodity:
Operating revenue	$	(306	)	$	(334	)	$	(908	)	$	(521	)
Purchased gas		1			25			6			32
Electric fuel and other energy-related purchases		205			44			401			7
Interest rate:
Interest and related charges		92			(20	)		628			142
Total	$	(8	)	$	(285	)	$	127		$	(340	)

(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.

(2)	Excludes amounts related to foreign currency exchange rate derivatives that are deferred to plant under construction within property, plant and equipment and regulatory assets/liabilities that will begin to amortize once the CVOW Commercial Project is placed in service.

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, 2022								December 31, 2021
	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	$	297	$	7	$	—	$	290	$	110	$	8	$	—	$	102
Exchange		—		—		—		—		7		7		—		—
Interest rate contracts:
Over-the-counter		596		163		—		433		146		20		—		126
Foreign currency exchange rate contracts:
Over-the-counter		6		6		—		—		8		—		—		8
Total derivatives, subject to a master netting or similar arrangement	$	899	$	176	$	—	$	723	$	271	$	35	$	—	$	236

(1)	Excludes $62 million and $29 million of derivative assets at September 30, 2022 and December 31, 2021, respectively, which are not subject to master netting or similar arrangements.

	September 30, 2022								December 31, 2021
	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	$	233	$	13	$	121	$	99	$	84	$	8	$	54	$	22
Exchange		268		—		268		—		43		7		36		—
Interest rate contracts:
Over-the-counter		27		10		—		17		337		20		—		317
Foreign currency exchange rate contracts:
Over-the-counter		387		153		—		234		—		—		—		—
Total derivatives, subject to a master netting or similar arrangement	$	915	$	176	$	389	$	350	$	464	$	35	$	90	$	339

(1)	Excludes $2 million and $6 million of derivative liabilities at September 30, 2022 and December 31, 2021, 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, 2022. 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		34		7
Basis⁽¹⁾		145		428
Electricity (MWh in millions):
Fixed price		8		5
FTRs		72		—
Oil (Gal in millions)		6		—
Interest rate⁽²⁾ (in millions)	$	250	$	3,050
Foreign currency exchange rate⁽²⁾(in millions):
Danish Krone	468 kr.		4,167 kr.
Euro	€351		€2,651

(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, 2022:

	AOCI After-Tax		Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax			Maximum Term
(millions)
Interest rate	$	13	$	(1	)	387 months
Total	$	13	$	(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, 2022
ASSETS
Current Assets
Commodity	$	—	$	357	$	357
Foreign currency exchange rate		—		6		6
Total current derivative assets		—		363		363
Noncurrent Assets
Commodity		—		2		2
Interest rate		596		—		596
Total noncurrent derivative assets⁽¹⁾		596		2		598
Total derivative assets	$	596	$	365	$	961
LIABILITIES
Current Liabilities
Commodity	$	—	$	392	$	392
Foreign currency exchange rate		—		50		50
Total current derivative liabilities		—		442		442
Noncurrent Liabilities
Commodity		—		111		111
Interest rate		27		—		27
Foreign currency exchange rate		—		337		337
Total noncurrent derivative liabilities⁽²⁾		27		448		475
Total derivative liabilities	$	27	$	890	$	917
December 31, 2021
ASSETS
Current Assets
Commodity	$	—	$	74	$	74
Interest rate		1		—		1
Foreign currency exchange rate		—		1		1
Total current derivative assets		1		75		76
Noncurrent Assets
Commodity		—		72		72
Interest rate		145		—		145
Foreign currency exchange rate		—		7		7
Total noncurrent derivative assets⁽¹⁾		145		79		224
Total derivative assets	$	146	$	154	$	300
LIABILITIES
Current Liabilities
Commodity	$	—	$	92	$	92
Interest rate		42		—		42
Total current derivative liabilities		42		92		134
Noncurrent Liabilities
Commodity		—		41		41
Interest rate		295		—		295
Total noncurrent derivative liabilities⁽²⁾		295		41		336
Total derivative liabilities	$	337	$	133	$	470

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

(2)	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, 2022
Derivative type and location of gains (losses):
Interest rate⁽³⁾	$	18		$	(1	)	$	182
Total	$	18		$	(1	)	$	182
Three Months Ended September 30, 2021
Derivative type and location of gains (losses):
Interest rate⁽³⁾	$	(2	)	$	(1	)	$	8
Total	$	(2	)	$	(1	)	$	8
Nine Months Ended September 30, 2022
Derivative type and location of gains (losses):
Interest rate⁽³⁾	$	77		$	(2	)	$	814
Total	$	77		$	(2	)	$	814
Nine Months Ended September 30, 2021
Derivative type and location of gains (losses):
Interest rate⁽³⁾	$	24		$	(2	)	$	194
Total	$	24		$	(2	)	$	194

(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⁾⁽²⁾
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
(millions)
Derivative type and location of gains (losses):
Commodity:
Operating Revenue	$	(108	)	$	(19	)	$	(237	)	$	(25	)
Electric fuel and other energy-related purchases		166			42			348			5
Total	$	58		$	23		$	111		$	(20	)

(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) Excludes amounts related to foreign currency exchange rate derivatives that are deferred to plant under construction within property, plant and equipment and regulatory assets/liabilities that will begin to amortize once the CVOW Commercial Project is placed in service.