Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]

Fair Value, Option, Quantitative Disclosures

The following table presents Dominion's and Virginia Power's quantitative information about Level 3 fair value measurements. The range and weighted average are presented in dollars for market price inputs, years for mean reversion speeds, and percentages for price volatility, price correlations, load shaping, and usage factors.



	Fair Value (millions)		Valuation Techniques	Unobservable Input		Range	Weighted Average⁽¹⁾

At September 30, 2013
Assets:
Physical and Financial Forwards and Futures:
Natural Gas⁽²⁾	$	10	Discounted Cash Flow	Market Price (per Dth)	⁽⁴⁾	(1) - 5	2
Electricity	9		Discounted Cash Flow	Market Price (per MWh)	⁽⁴⁾	31 - 77	44
FTRs⁽³⁾	1		Discounted Cash Flow	Market Price (per MWh)	⁽⁴⁾	(1) - 6	0
Liquids	12		Discounted Cash Flow	Market Price (per Gal)	⁽⁴⁾	0 - 3	1
Physical and Financial Options:
Natural Gas	7		Option Model	Market Price (per Dth)	⁽⁴⁾	3 - 5	4
				Price Volatility	⁽⁵⁾	19% - 30%	24	%
				Price Correlation	⁽⁶⁾	(9)% - 100%	36	%
				Mean Reversion	⁽⁷⁾	0 - 58	4
Full Requirements Contracts:
Electricity	13		Discounted Cash Flow	Market Price (per MWh)	⁽⁴⁾	10 - 403⁽¹⁰⁾	34
				Load Shaping	⁽⁸⁾	0% - 10%	7	%
				Usage Factor	⁽⁹⁾	11% - 15%	14	%
Total assets	$	52
Liabilities:
Physical and Financial Forwards and Futures:
Natural Gas⁽²⁾	$	16	Discounted Cash Flow	Market Price (per Dth)	⁽⁴⁾	(1) - 5	1
Electricity	6		Discounted Cash Flow	Market Price (per MWh)	⁽⁴⁾	23 - 86	50
FTRs⁽³⁾	16		Discounted Cash Flow	Market Price (per MWh)	⁽⁴⁾	(4) - 6	1
Liquids	8		Discounted Cash Flow	Market Price (per Gal)	⁽⁴⁾	1 - 3	2
Physical and Financial Options:
Natural Gas	10		Option Model	Market Price (per Dth)	⁽⁴⁾	3 - 10	5
				Price Volatility	⁽⁵⁾	19% - 30%	23	%
				Price Correlation	⁽⁶⁾	(9)% - 100%	36	%
				Mean Reversion	⁽⁷⁾	0 - 58	4
Total liabilities	$	56


(1)	Averages weighted by volume.


(2)	Includes basis.


(3)	Information represents Virginia Power's quantitative information about Level 3 fair value measurements.


(4)	Represents market prices beyond defined terms for Levels 1 & 2.


(5)	Represents volatilities unrepresented in published markets.


(6)	Represents intra-price correlations for which markets do not exist.


(7)	Represents mean-reverting property in price simulation modeling.


(8)	Converts block monthly loads to 24-hour load shapes.


(9)	Represents expected increase (decrease) in sales volumes compared to historical usage.


(10)	The range in market prices is the result of large variability in hourly power prices during peak and off-peak hours.

Significant unobservable inputs

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)
Price Correlation	Buy	Increase (decrease)	Loss (gain)
Price Correlation	Sell	Increase (decrease)	Gain (loss)
Mean Reversion	Buy	Increase (decrease)	Loss (gain)
Mean Reversion	Sell	Increase (decrease)	Gain (loss)
Load Shaping	Sell⁽¹⁾	Increase (decrease)	Loss (gain)
Usage Factor	Sell⁽²⁾	Increase (decrease)	Gain (loss)


(1)	Assumes the contract is in a gain position and load increases during peak hours.


(2)	Assumes the contract is in a gain position.

Fair Value, by Balance Sheet Grouping

The following table presents Dominion’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 September 30, 2013
Assets:
Derivatives:
Commodity	$	6	$	713	$	52	$	771
Interest rate	—		114		—		114
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap	2,211		—		—		2,211
Other	74		—		—		74
Non-U.S.:
Large cap	11		—		—		11
Fixed income:
Corporate debt instruments	—		352		—		352
U.S. Treasury securities and agency debentures	414		168		—		582
State and municipal	—		342		—		342
Other	—		4		—		4
Cash equivalents and other	9		80		—		89
Restricted cash equivalents	—		10		—		10
Total assets	$	2,725	$	1,783	$	52	$	4,560
Liabilities:
Derivatives:
Commodity	$	5	$	721	$	56	$	782
Interest rate	—		11		—		11
Total liabilities	$	5	$	732	$	56	$	793
At December 31, 2012
Assets:
Derivatives:
Commodity	$	12	$	639	$	84	$	735
Interest rate	—		93		—		93
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap	1,973		—		—		1,973
Other	59		—		—		59
Non-U.S.:
Large cap	12		—		—		12
Fixed income:
Corporate debt instruments	—		325		—		325
U.S. Treasury securities and agency debentures	391		152		—		543
State and municipal	—		315		—		315
Other	—		7		—		7



Cash equivalents and other	13		67		—		80
Restricted cash equivalents	—		33		—		33
Total assets	$	2,460	$	1,631	$	84	$	4,175
Liabilities:
Derivatives:
Commodity	$	8	$	528	$	59	$	595
Interest rate	—		66		—		66
Total liabilities	$	8	$	594	$	59	$	661


(1)	Includes investments held in the nuclear decommissioning and rabbi trusts.

Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
(millions)
Beginning balance	$	2		$	155		$	25		$	(71	)
Total realized and unrealized gains (losses):
Included in earnings	(1		)	(8		)	1			(31		)
Included in other comprehensive income (loss)	(25		)	(48		)	11			124
Included in regulatory assets/liabilities	10			2			(17		)	30
Settlements	3			3			(23		)	54
Transfers out of Level 3	7			(1		)	(1		)	(3		)
Ending balance	$	(4	)	$	103		$	(4	)	$	103
The amount of 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	$	2		$	(15	)	$	—		$	25

Fair Value, Unobservable Inputs, Gain (Loss) Included In Earnings

The following table presents Dominion's classification of gains and losses included in earnings in the Level 3 fair value category:



	Operating revenue			Electric fuel and other energy-related purchases			Total
(millions)
Three Months Ended September 30, 2013
Total gains (losses) included in earnings	$	5		$	(6	)	$	(1	)
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	2			—			2
Three Months Ended September 30, 2012
Total gains (losses) included in earnings	$	(10	)	$	2		$	(8	)
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	(15		)	—			(15		)
Nine Months Ended September 30, 2013
Total gains (losses) included in earnings	$	12		$	(11	)	$	1
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	—			—			—
Nine Months Ended September 30, 2012
Total gains (losses) included in earnings	$	13		$	(44	)	$	(31	)
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	25			—			25

Cost and Fair Value of Financial Instruments Disclosure

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



	September 30, 2013				December 31, 2012
	Carrying Amount		Estimated Fair Value⁽¹⁾		Carrying Amount		Estimated Fair Value⁽¹⁾
(millions)
Dominion
Long-term debt, including securities due within one year⁽²⁾	$	17,228	$	18,899	$	16,841	$	19,898
Securities due within one year, VIE⁽³⁾	—		—		860		864
Junior subordinated notes⁽³⁾	1,373		1,397		1,373		1,430
Remarketable subordinated notes⁽³⁾	1,079		1,175		—		—
Subsidiary preferred stock⁽⁴⁾	257		258		257		255
Virginia Power
Long-term debt, including securities due within one year⁽²⁾	$	8,039	$	8,975	$	6,669	$	8,270
Preferred stock⁽⁴⁾	257		258		257		255


(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 discount and premium. At September 30, 2013 and December 31, 2012, includes the valuation of certain fair value hedges associated with Dominion’s fixed rate debt of approximately $56 million and $93 million, respectively.


(3)	Carrying amount includes amounts which represent the unamortized discount or premium.


(4)	Carrying amount includes deferred issuance expenses of $2 million at September 30, 2013 and December 31, 2012.

Virginia Electric and Power Company

Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]

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 September 30, 2013
Assets:
Derivatives:
Commodity	$	—	$	1	$	1	$	2
Interest rate	—		33		—		33
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap	939		—		—		939
Other	33		—		—		33
Fixed income:
Corporate debt instruments	—		197		—		197
U.S. Treasury securities and agency debentures	146		63		—		209
State and municipal	—		160		—		160
Cash equivalents and other	—		24		—		24
Restricted cash equivalents	—		10		—		10
Total assets	$	1,118	$	488	$	1	$	1,607
Liabilities:
Derivatives:
Commodity	$	—	$	4	$	16	$	20
Total liabilities	$	—	$	4	$	16	$	20
At December 31, 2012
Assets:
Derivatives:
Commodity	$	—	$	1	$	5	$	6
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap	779		—		—		779
Other	27		—		—		27
Fixed income:
Corporate debt instruments	—		196		—		196
U.S. Treasury securities and agency debentures	168		66		—		234
State and municipal	—		118		—		118
Other	—		1		—		1
Cash equivalents and other	7		31		—		38
Restricted cash equivalents	—		10		—		10
Total assets	$	981	$	423	$	5	$	1,409
Liabilities:
Derivatives:
Commodity	$	—	$	6	$	3	$	9
Interest rate	—		25		—		25
Total liabilities	$	—	$	31	$	3	$	34


(1)	Includes investments held in the nuclear decommissioning and rabbi trusts.

Fair Value, Assets and Liabilities 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 September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
(millions)
Beginning balance	$	(25	)	$	1		$	2		$	(28	)
Total realized and unrealized gains (losses):
Included in earnings	(4		)	2			(9		)	(44		)
Included in regulatory assets/liabilities	10			2			(17		)	31
Settlements	4			(2		)	9			44
Ending balance	$	(15	)	$	3		$	(15	)	$	3

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References+ Details

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

+ References+ Details

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) the reasons for electing a fair value option for each eligible item or group of similar eligible items and (b) if the fair value option is elected for some but not all eligible items within a group of similar eligible items: (i) a description of those similar items and the reasons for partial election and (ii) information of how the group of similar items relates to individual balance sheet line items; (c) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, information of how each line item in the statement of financial position relates to major categories of assets and liabilities presented in accordance with other fair value disclosures; (2) for items included in the income statement: (a) a description of how interest and dividends are measured and where they are reported in the income statement; (b) how the gains or losses attributable to changes in instrument-specific credit risk were determined; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk: (i) qualitative information about the reasons for the changes and (ii) how the gains and losses attributable to changes in instrument-specific credit risk were determined; and (3) certain other disclosures as required or determined to be provided.

+ References+ Details

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

+ References+ Details