-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AEmJuk2Gcc+P+Mht2ov2SHLtLBsBOuOsKM7oXUMwJkT7ddATwBULpNQCcEyMedIh mQMERprvyn56IqeUlciFcg== 0000715957-98-000052.txt : 19980610 0000715957-98-000052.hdr.sgml : 19980610 ACCESSION NUMBER: 0000715957-98-000052 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980608 ITEM INFORMATION: FILED AS OF DATE: 19980609 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOMINION RESOURCES INC /VA/ CENTRAL INDEX KEY: 0000715957 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 541229715 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08489 FILM NUMBER: 98644412 BUSINESS ADDRESS: STREET 1: 901 E BYRD ST, WEST TOWER STREET 2: P O BOX 26532 CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8047755700 MAIL ADDRESS: STREET 1: P O BOX 26532 STREET 2: 901 EAST BYRD STREET CITY: RICHMOND STATE: VA ZIP: 23261 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) June 8, 1998 Dominion Resources, Inc. _______________________________________________________________ (Exact name of registrant as specified in its charter) Virginia 1-8489 54-1229715 (State of other juris- (Commission (IRS Employer diction of Incorporation) File Number) Identification No.) 901 East Byrd Street, Richmond, Virginia 23219-6111 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (804) 775-5700 ___________________________________________________________________ (Former name or former address if changed since last report.) ITEM 5. OTHER EVENTS Dominion Resources, Inc.'s largest subsidiary, Virginia Electric and Power Company (Virginia Power) has reached a proposed settlement of the consolidated proceeding pending before the Virginia State Corporation Commission (the Virginia Commission) concerned with Virginia Power's 1995 Annual Informational Filing. The settlement defines a new regulatory framework for Virginia Power's transition to electric competition. The major provisions of the settlement are as follows: A two-phased base rate reduction: $100 million per annum beginning March 1, 1998 with one additional $50 million per annum reduction beginning March 1, 1999 A base rate freeze until March 1, 2002 unless a change is necessary to protect the legitimate interests of Virginia Power, its shareholders or ratepayers An immediate, one-time refund of $150 million for the period March 1, 1997 through February 28, 1998 A write-off of $220 million in regulatory assets An incentive mechanism until March 1, 2002 for earnings above the following return on equity (ROE) benchmarks: 1998 10.5% After 1998 30-Yr Treasury + 450 basis points All Virginia jurisdiction earnings up to the ROE benchmark flow to shareholders. Any earnings above the benchmark are allocated 1/3 to shareholders, 2/3 to accelerated amortization of regulatory assets; except that all earnings above the ROE benchmark plus 270 basis points (initially 13.2%) go to accelerated amortization of regulatory assets. For financial reporting purposes, Virginia Power plans to write- off $220 million of regulatory assets as a one-time impact to earnings in 1998 - a decrease of $101 million (after tax) in net income ($220 million net of $65 million accelerated cost recovery reserve balance). Other one-time items in 1998 are expected to include the rate refund impact which represents a $97 million (after-tax) reduction to net income, offset by an adjustment of $17 million (after-tax) related to depreciation and decommissioning expense. The proposed settlement, initiated by Virginia Power, was reached on June 8, 1998, with all major parties involved in the case, including the Staff of the Virginia State Corporation Commission, the office of the Virginia Attorney General, and the Virginia Committee for Fair Utility Rates . The full text of the proposed settlement is filed herewith as Exhibit 99 to this Form 8-K. A Public Hearing is currently scheduled for July 10, 1998. The parties to the settlement have requested the Virginia Commission to consider the proposed settlement at that time. Forward-Looking Information This report includes discussion of forward-looking information concerning Dominion Resources, Inc. and its subsidiaries and the effect of the settlement on our future financial performance. Statements based on management's expectations, beliefs, estimates and assumptions are included. Actual results or outcomes could differ materially from those expressed. Some important factors which could cause material differences include additional regulatory action, unanticipated changes in circumstances which require that the settlement terms be changed or further addressed and other matters detailed in our filings with the Securities and Exchange Commission, including our annual and quarterly reports. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of changes in actual results, changes in assumptions or any other factors. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Exhibits 99 - Motion For Consideration of Stipulation and Changes in Procedural Schedule and Stipulation, dated June 8, 1998 (filed herewith). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DOMINION RESOURCES, INC. Registrant J. L. TRUEHEART J. L. Trueheart Vice President and Controller (Principal Accounting Officer) Date: June 9, 1998 EX-99 2 Exhibit 99 COMMONWEALTH OF VIRGINIA STATE CORPORATION COMMISSION APPLICATION OF VIRGINIA ELECTRIC AND POWER CASE NO. PUE960036 COMPANY 1995 Annual Informational Filing COMMONWEALTH OF VIRGINIA At the relation of the STATE CORPORATION COMMISSION CASE NO. PUE960296 Ex Parte: Investigation of Electric Utility Industry Restructuring - Virginia Electric and Power Company Stipulation This Stipulation sets forth the agreement among Virginia Electric and Power Company ("Virginia Power" or "Company"), the Staff of the State Corporation Commission ("Staff"), the Division of Consumer Counsel of the Office of the Attorney General ("Attorney General"), the Virginia Committee for Fair Utility Rates ("VCFUR"), and the Apartment and Office Building Association of Metropolitan Washington ("AOBA"), collectively referred to as "Stipulating Participants", as to an appropriate resolution of certain rate issues in the above-captioned proceedings. As to Case No. PUE960036, these issues are included in Virginia Power's 1995 Annual Informational Filing ("AIF") dated June 13, 1996, and the Staff Report filed on March 28, 1997. As to Case No. PUE960296 ("1996 Rate Case"), the issues are included in the Company's Application, accompanying Schedules and direct testimony filed on March 24, 1997, the testimony filed on December 23, 1997, on behalf of the Attorney General, VCFUR and AOBA and the Staff's testimony filed on March 24, 1998. The Stipulating Participants believe that this Stipulation of these issues will result in a fair and reasonable resolution of certain rate issues in the 1995 AIF and the 1996 Rate Case (including all issues that would be raised in a 1996 AIF); will provide for an appropriate refund to Virginia jurisdictional customers and a just and reasonable level of rates on a going-forward basis; will allow the Stipulating Participants to re-direct their resources to the study and resolution of issues related to the transition to a competitive electric market as provided in recently enacted Virginia House Bill No. 1172, Senate Joint Resolution No. 91, and the Commission's Order Establishing Investigation in Case No. PUE980138; and will efficiently and expeditiously reduce significantly the scope of the above-captioned proceedings. The Stipulating Participants will, as soon as possible after execution of this Stipulation, file it with the Commission, together with a motion of the Staff requesting the Commission to (a) consider the Stipulation and such other matters as the Commission may determine at a hearing (presently scheduled for July 10, 1998 (the "Hearing")), subject to such changes in procedural dates and in the hearing date as the Commission may direct, (b) retain for further consideration in this docket or to transfer to a separate docket any issues that have been properly raised in this docket and that are not resolved by the Stipulation, and (c) enter an order prescribing appropriate procedures for other parties to comment and be heard upon the issues presented in the Stipulation and for the Commission's consideration of the Stipulation and such other issues as may be considered at the Hearing. The rate plan proposed herein shall be a five-year plan extending from March 1, 1997, through February 28, 2002 ("Rate Period"). A summary of the rate refund, rate reductions, and write-offs by Virginia Power is as follows: Refund: $150,000,000 for the 12 months ended February 28, 1998 (plus interest) Rate Reduction: $100,000,000, effective March 1, 1998 (and applicable refund plus interest) Additional Rate Reduction: $50,000,000, effective March 1, 1999 Write-offs: $220,000,000 minimum, with additional write-offs depending on earnings The stipulated agreements are as follows: 1. Virginia Power shall refund to its Virginia jurisdictional customers an amount consisting of (a) a one-time refund of excess revenues based on an annual jurisdictional base revenue reduction of $150 million for the period March 1, 1997, through February 28, 1998, (b) a one-time pro-rata refund associated with an annual base revenue reduction of $100 million for the period March 1, 1998, through February 28, 1999, and (c) interest on these amounts until paid as specified in Exhibit 1 to this Stipulation, incorporated herein by reference. Payment shall be completed 90 days from the date of the order approving this stipulation. The payment to each customer shall be based on that customer's billing history from March 1, 1997, through the effective date of the Commission's final order approving this Stipulation. 2. Virginia Power shall reduce its base rates to its Virginia jurisdictional customers by $150 million pursuant to the following schedule: first, for service rendered on and after March 1, 1998, rates will be reduced by $100 million on an annual basis (and appropriate refunds with interest shall be made); and second, for service rendered on and after March 1, 1999, rates will be reduced by an additional $50 million on an annual basis. The $150 refund and the $100 million and $50 million rate reductions shall be allocated among classes of customers as set forth on Exhibit 2 to this Stipulation, incorporated herein by reference. 3. Subject to the conditions set forth in this paragraph, it is intended that the base rates approved herein shall remain in effect during the Rate Period except to effect the $50 million rate reduction on March 1, 1999. If, however, during the Rate Period developments, changes of circumstance or other factors make it necessary for the protection of the legitimate interests of the Company's customers or its shareholders, the Commission may, on its own motion or on motion of any of the Stipulating Participants or any other interested party, institute a proceeding to consider and to order such increases, decreases, or other changes in rates necessary for the protection of those interests. Nothing in this Stipulation shall impair the Commission's ability to exercise its lawful jurisdiction or carry out its lawful responsibilities or limit the Staff in the performance of its duties and responsibilities. Except as provided in the Stipulation, all regulatory requirements shall remain in effect. 4. By the end of the Rate Period, March 1, 2002, Virginia Power shall amortize against earnings $220 million of deferred expenses (consisting of $60 million of deferred capacity expenses and $160 million of previously approved generation-related (except as otherwise specified herein) deferred costs ("Regulatory Assets") regardless of actual earnings during the Rate Period. This amount is in addition to those amounts of Regulatory Assets now being amortized and collected in current rates. The schedule for recognition of the $220 million of write-offs of Regulatory Assets for ratemaking purposes shall be in accordance with an "earnings test" as described in paragraph 5. If, however, such earnings tests result in total Regulatory Asset write-offs of less than $220 million by the end of the Rate Period, then an additional amount of Regulatory Assets shall be written off in the final year of the Rate Period to assure that a total of $220 million shall be written off by the end of the Rate Period. If earnings pursuant to the earnings tests during the Rate Period are such that an amount greater than $220 million of Regulatory Assets can be written off, then such greater amount shall be written off. Subject to the earnings test for each year, the Virginia jurisdictional balances of Regulatory Assets are to be written off in the following order: the total such balances of (a) deferred capacity expenses, (b) unamortized losses on reacquired debt and preferred stock, and (c) the generation-related portions of the balances of (i) Surry and North Anna steam generator removal costs, (ii) asbestos removal costs, (iii) North Anna electric generator removal costs, (iv) 40 year versus 20 year amortization of Other Post Employment Benefit ("OPEB") transition obligations, (v) nuclear design basis documentation costs, (vi) depreciation reserve deficiency, and (vii) Department of Energy decontamination and decommissioning. The system balances of the aforesaid Regulatory Assets as of December 31, 1996 are set forth on Exhibit 3 to this Stipulation, incorporated herein by reference. If all book balances of Virginia jurisdictional generation- related Regulatory Assets are written off without exhausting the earnings available for such write-offs, the remaining earnings shall, with the concurrence of the Staff, be used to write off book balances of other Regulatory Assets. No new regulatory asset or other new deferred non-fuel costs shall be created during the Rate Period, except that, in the event the Financial Accounting Standards Board ("FASB") changes the accounting requirements related to obligations associated with the retirement of long-lived assets, including nuclear decommissioning (1), the Company reserves the right to seek approval from the Staff to create any regulatory asset that would be appropriate as part of adopting such new requirements. Except as provided in paragraph 6, the Stipulating Participants agree that nothing herein shall be deemed to limit any position regarding stranded costs or benefits issues. (1) This issue is currently under consideration in a FASB Agenda Project entitled "Obligations Associated with the Retirement of Long-Lived Assets". 5. The annual earnings test referred to in paragraph 4 shall be applied using the same methodology and comparable adjustments adopted by the Commission in Virginia Power's last base rate proceeding, Case No. PUE920041. The earnings test shall include only those regulated revenues and related expenses and investments incurred in furnishing electric utility service to Virginia jurisdictional customers. Beginning in 1999, Virginia Power shall submit by March 31 its calculation of such an earnings test for the preceding calendar year during the Rate Period. The calculation of the earnings test for calendar year 1997 shall be filed within 90 days from the date that the Commission approves this Stipulation. The benchmark earnings in the earnings test shall be a return on equity ("ROE") of 10.5%, and the earnings to be tested against that benchmark shall be the ROE actually earned in the preceding calendar year, after applying regulatory adjustments similar in nature to those adjustments adopted in Case No. PUE920041. These adjustments should reflect differences between financial reporting and Virginia regulatory accounting, the removal of costs excluded from the cost of service for Virginia ratemaking purposes, and adjustments necessary to reflect revenues at the actual pro-rated approved revenue level for the earnings test period. There shall be two steps in the application of the earnings test: first, an actual ROE level shall be determined before any write-off of any portion (other than scheduled amortization) of the Regulatory Assets specified in paragraph 4, and second, if the actual ROE exceeds 10.5%, the difference between that actual ROE above 10.5% and a 10.5% ROE shall be allocated between the amortization of Regulatory Assets and shareholder return. Earnings between 10.5% and 13.2% shall be allocated two-thirds to amortization of Regulatory Assets as set forth in paragraph 4 and one-third to shareholder return, and earnings above 13.2% shall be applied 100% to amortization of Regulatory Assets. Examples of the effect of this formula on Virginia Power's ROE follow: If earnings test ROE is 10.50% No write-off; ROE remains 10.50% If earnings test ROE is 11.00% ROE after write-off is 10.67% If earnings test ROE is 11.50% ROE after write-off is 10.83% If earnings test ROE is 12.00% ROE after write-off is 11.00% If earnings test ROE is 12.50% ROE after write-off is 11.17% If earnings test ROE is 13.00% ROE after write-off is 11.33% If earnings test ROE is 13.20% or above ROE after write-off is 11.40% The benchmark ROEs of 10.5% and 13.2% used in the earnings test shall be adjusted each year (beginning for 1999) as follows: (a) The low-end benchmark (presently 10.5%) shall be changed to an ROE equal to the sum of (i) the average yield on 30-year Treasury securities for the most recent preceding September-November period, and (ii) 450 basis points; and (b) The high-end benchmark (presently 13.2%) shall be an ROE equal to the new low-end benchmark for each year plus 270 basis points. This formula is applicable only to the earnings test prescribed in this Stipulation, and it shall not necessarily constitute evidence or proof of what is a reasonable ROE at any time. 6. As of March 1, 2002, Virginia Power's Virginia jurisdictional costs for purposes of determining future rates and charges to customers shall have been reduced by the write-off of Regulatory Assets prescribed herein, which shall be at least $220 million. As a result, Virginia Power's future rates and charges shall not include any of the costs eliminated by such write- offs. The Commission shall ensure that jurisdictional customers in the future receive the benefit of such write-offs in future rates and charges. 7. Virginia Power shall terminate the deferral of capacity expenses effective as of March 1, 1998. Virginia Power's depreciation and nuclear decommissioning rates in effect as of February 28, 1997 shall remain in effect through the duration of the Rate Period. 8. Virginia Power shall maintain the overall reliability of its electric service at levels no less than the overall levels it has achieved in the past decade. Virginia Power will provide quarterly service reliability reports (annual data for an historical five year period) indicating its System Average Interruption Duration Index (SAIDI) and the System Average Interruption Frequency Index (SAIFI), and these indices shall be determined and reported both including and excluding major storm events. The Company also commits to provide such other data as required by the Staff, including information on transmission and generation reliability. Virginia Power will meet with the Commission every six months to review such reports and other operational information. If the Commission promulgates new reliability standards for electric utilities, they shall be applicable to Virginia Power. 9. The right to apply for new alternative rate designs or experiments, or special rates, contracts or incentives to individual customers or classes of customers, as allowed under law and implementing Commission regulations, shall continue during the Rate Period. 10. The Stipulating Participants recognize that this Stipulation, if adopted by the Commission, would represent a full and fair resolution of certain rate issues raised in Case Nos. PUE960036 and PUE960296. In recognition of that, all matters addressed in this Stipulation shall be deemed not to have been adopted or rejected by the Commission and shall have no precedential effect in subsequent proceedings. 11. This Stipulation reflects a balancing of many important interests put forward in these proceedings by the Stipulating Participants. If the Commission does not intend to approve all aspects of this Stipulation, then the Stipulating Participants respectfully request that the Commission (a) notify them of such intention and (b) allow them [10] days to attempt to reach a modified stipulation that addresses the Commission's concerns. If no such modified stipulation is reached after [10] days, then the Stipulating Participants, or any of them, may withdraw their support of this Stipulation and request a hearing on any issues raised in the above- captioned proceedings. Respectfully submitted, STAFF OF STATE CORPORATION COMMISSION OF VIRGINIA JAMES C. DIMITRI Title General Counsel DIVISION OF CONSUMER COUNSEL OF THE OFFICE OF THE ATTORNEY GENERAL JUDITH WILLIAMS JAGDMANN Title Deputy Attorney General VIRGINIA COMMITTEE FOR FAIR UTILITY RATES EDWARD L. PETRINI Title Vice President & General Counsel APARTMENT AND OFFICE BUILDING ASSOCIATION OF METROPOLITAN WASHINGTON FRANN G. FRANCIS Title V.P. & General Counsel VIRGINIA ELECTRIC AND POWER COMPANY THOMAS F. FARRELL Title Executive Vice President & General Counsel June 8, 1998 James C. Dimitri William H. Chambliss State Corporation Commission Tyler Building 1300 East Main Street Richmond, VA 23219 Judith Williams Jagdmann Thomas B. Nicholson Office of the Attorney General Division of Consumer Counsel 900 E. Main Street, 2nd Floor Richmond, VA 23219 Louis R. Monacell Edward L. Petrini John F. Dudley Christian & Barton, L.L.P. Suite 1200 909 East Main Street Richmond, VA 23219-3095 Frann G. Francis Margaret O. Jeffers Apartment and Office Building Association of Metropolitan Washington 1050 17th Street, NW, Suite 300 Washington, DC 20036 Pamela Johnson Virginia Electric and Power Company P. O. Box 26666 Richmond, VA 23261-6666 Evans B. Brasfield Richard D. Gary Hunton & Williams 951 E. Byrd Street Riverfront Plaza, East Tower Richmond, VA 23219-4074 James C. Roberts Edward L. Flippen Mays & Valentine, L.L.P. 1111 E. Main Street Richmond, VA 23219 Exhibit 1 Provisions Governing Payment of Interest (1) Interest upon the refunds specified in the Stipulation of which this Exhibit is a part shall be computed from the date payment of each monthly bill was due during the periods covered by the refunds until the date refunds are made, at an average prime rate for each calendar quarter. The applicable average prime rate for each calendar quarter shall be the arithmetic mean, to the nearest one hundredth of one percent, of the prime rate values published in the Federal Reserve Bulletin or in the Federal Reserve's Selected Interest Rates ("Selected Rates") (Statistical Release G.13), for the three months of the preceding calendar quarter. (2) The interest required to be paid shall be compounded quarterly. (3) The refunds may be accomplished by credit to the appropriate customer's account for current customers (each such refund category being shown separately on each customer's bill). Refunds to former customers shall be made by a check to the last known address of such customers when the refund amount is $1 or more. Virginia Power may offset the credit or refund to the extent no dispute exists regarding the outstanding balances of its past or current customers. To the extent that outstanding balances of such customers are disputed, no offset shall be permitted for the disputed portion. Virginia Power may retain refunds owed to former customers when such refund amount is less than $1; however, Virginia Power will prepare and maintain a list detailing each of the former accounts for which refunds are less than $1 and in the event such former customers contact Virginia Power and request refunds, such refunds shall be made promptly. All unclaimed refunds shall be handled in accordance with Va. Code 55-210.6:2. Exhibit 2 Allocation of Refunds and Rate Reductions The $150 million refund shall be allocated among classes of customers as follows: Residential $ 75,507,907 GS-1 $ 19,004,879 GS-2 $ 23,476,002 GS-3 $ 21,180,649 GS-4 $ 9,150,000 Churches $ 597,403 Lighting $ 1,083,160 TOTAL $ 150,000,000 The $100 million rate reduction effective March 1, 1998 shall be allocated among classes of customers as follows: Residential $ 50,338,604 GS-1 $ 12,669,919 GS-2 $ 15,650,668 GS-3 $ 14,120,433 GS-4 $ 6,100,000 Churches $ 398,269 Lighting $ 722,107 TOTAL $ 100,000,000 The $50 million rate reduction effective March 1, 1999 shall be allocated among classes of customers as follows: Residential $ 25,169,303 GS-1 $ 6,334,960 GS-2 $ 7,825,334 GS-3 $ 7,060,216 GS-4 $ 3,050,000 Churches $ 199,134 Lighting $ 361,053 TOTAL $ 50,000,000 Exhibit 3 Regulatory Assets System (millions) Regulatory Assets Balance Total Balances: Deferred Capacity Expense (balance @ 3/1/98) $ 61.1 Unamortized Losses on Reacquired Debt and $ 93.4 Preferred Stock (balance @ 12/31/96) Generation-related Balances @ 12/31/96 Surry & North Anna Steam Generators $ 62.7 Asbestos Removal $ 12.3 North Anna Electric Generator $ 3.3 OPEB 20 year versus 40 year recovery $ 7.7 Nuclear Design Basis Documentation $ 44.3 Depreciation Reserve Deficiency $142.6 DOE Decontamination and Decommissioning $ 73.5 TOTAL $500.9 The foregoing amounts of regulatory assets as of December 31, 1996 do not represent the amounts to be written off pursuant to the Stipulation of which this Exhibit is a part. The amounts to be written off will be determined by the results of the earnings tests prescribed by the Stipulation, the Virginia jurisdictional allocation factors at the time of the write-offs, and the extent to which the December 31, 1996 balances shall have been previously amortized. -----END PRIVACY-ENHANCED MESSAGE-----