FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. However, the use of a mid-market pricing convention (the mid-point between bid and ask prices) is permitted. Fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. This includes not only the credit standing of counterparties involved and the impact of credit enhancements but also the impact of Dominion's and Virginia Power's own nonperformance risk on their liabilities. Fair value measurements assume that the transaction occurs in the principal market for the asset or liability (the market with the most volume and activity for the asset or liability from the perspective of the reporting entity), or in the absence of a principal market, the most advantageous market for the asset or liability (the market in which the reporting entity would be able to maximize the amount received or minimize the amount paid). Dominion and Virginia Power apply fair value measurements to certain assets and liabilities including commodity and interest rate derivative instruments, and nuclear decommissioning trust and other investments including those held in Dominion's rabbi, pension and other postretirement benefit plan trusts, in accordance with the requirements described above. The Companies apply credit adjustments to their derivative fair values in accordance with the requirements described above. These credit adjustments are currently not material to the derivative fair values.

Inputs and Assumptions

The Companies maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is based on actively-quoted market prices, if available. In the absence of actively-quoted market prices, price information is sought from external sources, including broker quotes and industry publications. When evaluating pricing information provided by brokers and other pricing services, they consider whether the broker is willing and able to trade at the quoted price, if the broker quotes are based on an active market or an inactive market and the extent to which brokers are utilizing a particular model if pricing is not readily available. If pricing information from external sources is not available, or if the Companies believe that observable pricing is not indicative of fair value, judgment is required to develop the estimates of fair value. In those cases they must estimate prices based on available historical and near-term future price information and certain statistical methods, including regression analysis, that reflect their market assumptions.

Dominion's and Virginia Power's commodity derivative valuations are prepared by the ERM department. The ERM department reports directly to the Companies' CFO. The ERM department creates daily mark-to-market valuations for the Companies' derivative transactions using computer-based statistical models. The inputs that go into the market valuations are transactional information stored in the systems of record and market pricing information that resides in data warehouse databases. The majority of forward prices are automatically uploaded into the data warehouse databases from various third-party sources. Inputs obtained from third-party sources are evaluated for reliability considering the reputation, independence, market presence, and methodology used by the third-party. If forward prices are not available from third-party sources, then the ERM department models the forward prices based on other available market data. A team consisting of risk management and risk quantitative analysts meets each business day to assess the validity of market prices and mark-to-market valuations. During this meeting, the changes in mark-to-market valuations from period to period are examined and qualified against historical expectations. If any discrepancies are identified during this process, the mark-to-market valuations or the market pricing information is evaluated further and adjusted, if necessary.

For options and contracts with option-like characteristics where observable pricing information is not available from external sources, the Companies generally use a modified Black-Scholes Model that considers time value, the volatility of the underlying commodities and other relevant assumptions when estimating fair value. The Companies use other option models under special circumstances, including a Spread Approximation Model when contracts include different commodities or commodity locations and a Swing Option Model when contracts allow either the buyer or seller the ability to exercise within a range of quantities. For contracts with unique characteristics, the Companies may estimate fair value using a discounted cash flow approach deemed appropriate in the circumstances and applied consistently from period to period. For individual contracts, the use of different valuation models or assumptions could have a significant effect on the contract's estimated fair value.

The inputs and assumptions used in measuring fair value include the following:

For commodity and foreign currency derivative contracts:


•	Forward commodity prices


•	Forward foreign currency prices


•	Transaction prices


•	Price volatility


•	Price correlation


•	Mean reversion


•	Volumes


•	Commodity location


•	Load shaping


•	Usage factors


•	Interest rates


•	Credit quality of counterparties and Dominion and Virginia Power


•	Credit enhancements


•	Time value

For interest rate derivative contracts:


•	Interest rate curves


•	Credit quality of counterparties and Dominion and Virginia Power


•	Volumes


•	Credit enhancements


•	Time value

For investments:


•	Quoted securities prices and indices


•	Securities trading information including volume and restrictions


•	Maturity


•	Interest rates


•	Credit quality


•	NAV (for alternative investments and common/collective trust funds)

Dominion and Virginia Power regularly evaluate and validate the inputs used to estimate fair value by a number of methods, including review and verification of models, as well as various market price verification procedures such as the use of pricing services and multiple broker quotes to support the market price of the various commodities and investments in which the Companies transact.

Levels

The Companies also utilize the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

•Level 1-Quoted prices (unadjusted) in active markets for identical assets and liabilities that they have the ability to access at the measurement date. Instruments categorized in Level 1 primarily consist of financial instruments such as the majority of exchange-traded derivatives, and exchange-listed equities, mutual funds and certain Treasury securities held in nuclear decommissioning trust funds for Dominion and Virginia Power and rabbi and benefit plan trust funds for Dominion.

•Level 2-Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level 2 primarily include non-exchange traded derivatives such as over-the-counter commodity forwards and swaps, interest rate swaps, foreign currency forwards and options, restricted cash equivalents, and certain Treasury securities, money market funds, common/collective trust funds, and corporate, state and municipal debt securities held in nuclear decommissioning trust funds for Dominion and Virginia Power and rabbi and benefit plan trust funds for Dominion.

•Level 3-Unobservable inputs for the asset or liability, including situations where there is little, if any, market activity for the asset or liability. Instruments categorized in Level 3 for Dominion and Virginia Power consist of long-dated commodity derivatives, FTRs and other modeled commodity derivatives. Additional instruments categorized in Level 3 for Dominion include NGLs and natural gas peaking options and alternative investments, consisting of investments in partnerships, joint ventures and other alternative investments, held in benefit plan trust funds.

The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable data (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. In these cases, the lowest level input that is significant to a fair value measurement in its entirety determines the applicable level in the fair value hierarchy. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability.

For derivative contracts, Dominion and Virginia Power recognize transfers among Level 1, Level 2 and Level 3 based on fair values as of the first day of the month in which the transfer occurs. Transfers out of Level 3 represent assets and liabilities that were previously classified as Level 3 for which the inputs became observable for classification in either Level 1 or Level 2. Because the activity and liquidity of commodity markets vary substantially between regions and time periods, the availability of observable inputs for substantially the full term and value of the Companies' over-the-counter derivative contracts is subject to change.

Level 3 Valuations

Fair value measurements are categorized as Level 3 when a significant amount of price or other inputs that are considered to be unobservable are used in their valuations. Long-dated commodity derivatives are generally based on unobservable inputs due to the length of time to settlement and the absence of market activity and are therefore categorized as Level 3. For NGL derivatives, market illiquidity requires a valuation based on proxy markets that do not always correlate to the actual instrument, therefore they are categorized as Level 3. FTRs are categorized as Level 3 fair value measurements because the only relevant pricing available comes from ISO auctions, which are generally not considered to be liquid markets. Other modeled commodity derivatives have unobservable inputs in their valuation, mostly due to non-transparent and illiquid markets. Alternative investments are categorized as Level 3 due to the absence of quoted market prices, illiquidity and the long-term nature of these assets. These investments are generally valued using NAV based on the proportionate share of the fair value as determined by reference to the most recent audited fair value financial statements or fair value statements provided by the investment manager adjusted for any significant events occurring between the investment manager's and the Companies' measurement date.

Dominion and Virginia Power enter into certain physical and financial forwards and futures, options, and full requirements contracts, which are considered Level 3 as they have one or more inputs that are not observable and are significant to the valuation. The discounted cash flow method is used to value Level 3 physical and financial forwards, futures, and full requirements contracts. The discounted cash flow model for forwards and futures calculates mark-to-market valuations based on forward market prices, original transaction prices, volumes, risk-free rate of return, and credit spreads. Full requirements contracts add load shaping and usage factors in addition to the discounted cash flow model inputs. An option model is used to value Level 3 physical and financial options. The option model calculates mark-to-market valuations using variations of the Black-Scholes option model. The inputs into the models are the forward market prices, implied price volatilities, risk-free rate of return, the option expiration dates, the option strike prices, price correlations, mean reversion speeds, the original sales prices, and volumes. For Level 3 fair value measurements, the forward market prices, the implied price volatilities, price correlations, load shaping, mean reversion speeds, and usage factors are considered unobservable. The unobservable inputs are developed and substantiated using historical information, available market data, third-party data, and statistical analysis. Periodically, inputs to valuation models are reviewed and revised as needed, based on historical information, updated market data, market liquidity and relationships, and changes in third-party pricing sources.

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 December 31, 2013
Assets:
Physical and Financial Forwards and Futures:
Natural Gas⁽²⁾	$	14	Discounted Cash Flow	Market Price (per Dth)	⁽⁵⁾	(2) - 5		2
FTRs ⁽³⁾	2		Discounted Cash Flow	Market Price (per MWh)	⁽⁵⁾	(1) - 5		—
Liquids⁽⁴⁾	6		Discounted Cash Flow	Market Price (per Gal)	⁽⁵⁾	1 - 3		1
Physical and Financial Options:
Natural Gas⁽²⁾	4		Option Model	Market Price (per Dth)	⁽⁵⁾	3 - 5		4
				Price Volatility	⁽⁶⁾	14% - 36%		20	%
				Price Correlation	⁽⁷⁾	(9%) - 100%		36	%
				Mean Reversion	⁽⁸⁾	.01 - 1		.53
Full Requirements Contracts:
Electricity	6		Discounted Cash Flow	Market Price (per MWh)	⁽⁵⁾	10 - 406	⁽¹¹⁾	42
				Load Shaping	⁽⁹⁾	0% - 10%		7	%
				Usage Factor	⁽¹⁰⁾	11% - 29%		16	%
Total assets	$	32
Liabilities:
Physical and Financial Forwards and Futures:
Natural Gas⁽²⁾	$	19	Discounted Cash Flow	Market Price (per Dth)	⁽⁵⁾	(2) - 30		1
Electricity	1		Discounted Cash Flow	Market Price (per MWh)	⁽⁵⁾	28 - 240	⁽¹¹⁾	39
FTRs⁽³⁾	9		Discounted Cash Flow	Market Price (per MWh)	⁽⁵⁾	(1) - 5		1
Liquids⁽⁴⁾	11		Discounted Cash Flow	Market Price (per Gal)	⁽⁵⁾	1 - 3		1
Physical and Financial Options:
Natural Gas⁽²⁾	8		Option Model	Market Price (per Dth)	⁽⁵⁾	3 - 11		7
				Price Volatility	⁽⁶⁾	14% - 36%		20	%
				Price Correlation	⁽⁷⁾	(9%) - 100%		36	%
				Mean Reversion	⁽⁸⁾	.01-1		.53
Total liabilities	$	48


(1)	Averages weighted by volume.


(2)	Includes basis.


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


(4)	Includes NGLs.


(5)	Represents market prices beyond defined terms for Levels 1 and 2.


(6)	Represents volatilities unrepresented in published markets.


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


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


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


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


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

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

Nonrecurring Fair Value Measurements

Natural Gas Facilities

In June 2013, Dominion purchased certain natural gas infrastructure facilities that were previously leased from third parties. The purchase price was based on terms in the lease, which exceeded current market pricing. As a result of the purchase price and expected losses, Dominion recorded an impairment charge of $49 million ($29 million after-tax) in other operations and maintenance expense in its Consolidated Statements of Income, to write down the long-lived assets to their estimated fair values of less than $1 million. As management was not aware of any recent market transactions for comparable assets with sufficient transparency to develop a market approach to fair value, Dominion used the income approach (discounted cash flows) to estimate the fair value of the assets in this impairment test. This was considered a Level 3 fair value measurement due to the use of significant unobservable inputs, including estimates of future production and other commodity prices.

MERCHANT POWER STATIONS

In the third quarter of 2012, Dominion decided to pursue the sale of Brayton Point and Kincaid, as well as its 50% interest in Elwood, which is an equity method investment. Since Dominion was unlikely to operate the Brayton Point and Kincaid facilities through their estimated useful lives, Dominion evaluated these power stations for recoverability under a probability weighted approach and concluded that the carrying values of these facilities were not impaired as of September 30, 2012.

At December 31, 2012, Dominion updated its recoverability analysis for Brayton Point and Kincaid to reflect bids received and an updated probability weighting. As a result of this updated evaluation, Dominion recorded an impairment charge of approximately $1.6 billion ($1.0 billion after-tax), which is included in loss from discontinued operations in its Consolidated Statement of Income, to write down Brayton Point’s and Kincaid's long-lived assets to their estimated fair value of approximately $216 million. Dominion used a market approach to estimate the fair value of Brayton Point’s and Kincaid's long-lived assets. This was considered a Level 2 fair value measurement given it was based on bids received.

See Note 3 for information regarding the sale of Brayton Point, Kincaid and Dominion's equity method investment in Elwood, including an additional impairment.

In April 2011, Dominion announced it would pursue a sale of Kewaunee since it was not able to move forward with its original plan to grow its nuclear fleet in the Midwest to take advantage of economies of scale. Dominion was unable to find a buyer for the facility. In addition, the power purchase agreements for the two utilities that contracted to buy Kewaunee's generation expired in December 2013 at a time of low wholesale electricity prices in the region. At September 30, 2012, Dominion expected that it would permanently cease generation operations at Kewaunee in 2013 and commence decommissioning of the facility. As a result, Dominion evaluated Kewaunee for impairment since it was more likely than not that Kewaunee would be retired before the end of its previously estimated useful life. As management was not aware of any recent market transactions for comparable assets with sufficient transparency to develop a market approach to fair value, Dominion used the income approach (discounted cash flows) to estimate the fair value of Kewaunee's long-lived assets. This was considered a Level 3 fair value measurement due to the use of significant unobservable inputs including estimates of future power and other commodity prices.

As a result of this evaluation in September 2012, Dominion recorded impairment and other charges of $435 million ($281 million after-tax) largely reflected in other operations and maintenance expense in its Consolidated Statement of Income. This primarily reflects a $378 million ($244 million after-tax) charge for the full impairment of Kewaunee's long-lived assets, a write down of materials and supplies inventories of $33 million ($21 million after-tax), and a $24 million ($16 million after-tax) charge related to severance costs.

The decision to decommission Kewaunee was approved by Dominion's Board of Directors in October 2012 after consideration of the factors discussed above, which made it uneconomic for Kewaunee to continue operations. Kewaunee ceased operations and decommissioning activities commenced in May 2013.

During March 2011, Dominion determined that it was unlikely that State Line would participate in the May 2011 PJM capacity base residual auction that would commit State Line's capacity from June 2014 through May 2015. This determination reflected an expectation that margins for coal-fired generation will remain compressed in the 2014 and 2015 period in combination with the expectation that State Line may be impacted during the same time period by environmental regulations that would likely require significant capital expenditures. As a result, Dominion evaluated State Line for impairment since it was more likely than not that State Line would be retired before the end of its previously estimated useful life. As a result of this evaluation, Dominion recorded an impairment charge of $55 million ($39 million after-tax), which is now reflected in loss from discontinued operations in its Consolidated Statement of Income, to write down State Line's long-lived assets to their estimated fair value of less than $1 million. State Line was retired in March 2012 and sold in the second quarter of 2012.

As management was not aware of any recent market transactions for comparable assets with sufficient transparency to develop a market approach to fair value, Dominion used the income approach (discounted cash flows) to estimate the fair value of State Line's long-lived assets. This was considered a Level 3 fair value measurement due to the use of significant unobservable inputs including estimates of future power and other commodity prices.

In the second quarter of 2012, an agreement was reached to sell Salem Harbor and the assets and liabilities to be disposed were classified as held for sale and adjusted to their estimated fair value less cost to sell. This resulted in a pre-tax charge of $27 million ($16 million after-tax), which is included in loss from discontinued operations in Dominion's Consolidated Statement of Income. This was considered a Level 2 fair value measurement as it was based on the negotiated sales price. Salem Harbor was sold in the third quarter of 2012.

EMISSIONS ALLOWANCES

In the third quarter of 2011, Dominion and Virginia Power evaluated their SO₂ emissions allowances not expected to be consumed by generating units for potential impairment due to the EPA's issuance of CSAPR as discussed in Note 22. Prior to the issuance of CSAPR, Dominion and Virginia Power held $57 million and $43 million, respectively, of SO₂ emissions allowances obtained for ARP and CAIR compliance. Due to CSAPR's establishment of a new allowance program and the elimination of CAIR, Dominion and Virginia Power had more SO2 emissions allowances than needed for ARP compliance. As a result of this evaluation, Dominion and Virginia Power recorded an impairment charge to write down these emissions allowances to their estimated fair value of less than $1 million. For Dominion, the $57 million ($34 million after-tax) charge was recorded partially in other operations and maintenance expense ($43 million, $26 million after-tax) and partially in loss from discontinued operations ($14 million, $8 million after-tax) in its Consolidated Statement of Income. For Virginia Power, the $43 million ($26 million after-tax) charge was recorded in other operations and maintenance expense in its Consolidated Statement of Income.

To estimate the value of these emissions allowances, Dominion utilized a market approach by obtaining broker quotes to validate CSAPR's impact on emissions allowance prices. However, due to limited market activity for future SO₂ vintage year allowances, this was considered a Level 3 fair value measurement.

Recurring Fair Value Measurements

Fair value measurements are separately disclosed by level within the fair value hierarchy with a separate reconciliation of fair value measurements categorized as Level 3. Fair value disclosures for assets held in Dominion's pension and other postretirement benefit plans are presented in Note 21.

DOMINION

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 December 31, 2013
Assets:
Derivatives:
Commodity	$	3	$	718	$	32	$	753
Interest rate	—		137		—		137
Investments⁽¹⁾:
Equity securities:
U.S.:
Large Cap	2,417		—		—		2,417
Other	79		—		—		79
Non-U.S.:
Large Cap	13		—		—		13
Fixed Income:
Corporate debt instruments	—		345		—		345
U.S. Treasury securities and agency debentures	415		175		—		590
State and municipal	—		343		—		343
Other	—		3		—		3
Cash equivalents and other	—		103		—		103
Restricted cash equivalents	—		8		—		8
Total assets	$	2,927	$	1,832	$	32	$	4,791
Liabilities:
Derivatives:
Commodity	$	3	$	1,051	$	48	$	1,102
Total liabilities	$	3	$	1,051	$	48	$	1,102
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.

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:



	2013			2012			2011
(millions)
Balance at January 1,	$	25		$	(71	)	$	(50	)
Total realized and unrealized gains (losses):
Included in earnings	(9		)	(15		)	(77		)
Included in other comprehensive income (loss)	1			101			14
Included in regulatory assets/liabilities	(9		)	30			(42		)
Settlements	(23		)	47			88
Transfers out of Level 3	(1		)	(67		)	(4		)
Balance at December 31,	$	(16	)	$	25		$	(71	)
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at the reporting date	$	—		$	42		$	22

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



	Operating Revenue			Electric Fuel and Energy Purchases			Purchased Gas			Total
(millions)
Year Ended December 31, 2013
Total gains (losses) included in earnings	$	11		$	(19	)	$	(1	)	$	(9	)
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at the reporting date	1			—			(1		)	—
Year Ended December 31, 2012
Total gains (losses) included in earnings	$	35		$	(50	)	$	—		$	(15	)
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at the reporting date	42			—			—			42
Year Ended December 31, 2011
Total gains (losses) included in earnings	$	(32	)	$	(45	)	$	—		$	(77	)
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at the reporting date	22			—			—			22

VIRGINIA POWER

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 December 31, 2013
Assets:
Derivatives:
Commodity	$	—	$	3	$	2	$	5
Interest rate	—		48		—		48
Investments⁽¹⁾:
Equity securities:
U.S.:
Large Cap	1,021		—		—		1,021
Other	36		—		—		36
Fixed Income:
Corporate debt instruments	—		191		—		191
U.S. Treasury securities and agency debentures	146		66		—		212
State and municipal	—		164		—		164
Cash equivalents and other	—		31		—		31
Restricted cash equivalents	—		8		—		8
Total assets	$	1,203	$	511	$	2	$	1,716
Liabilities:
Derivatives:
Commodity	$	—	$	3	$	9	$	12
Total Liabilities	$	—	$	3	$	9	$	12
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.

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:



	2013			2012			2011
(millions)
Balance at January 1,	$	2		$	(28	)	$	14
Total realized and unrealized gains (losses):
Included in earnings	(17		)	(50		)	(45		)
Included in regulatory assets/liabilities	(9		)	30			(42		)
Settlements	17			50			45
Balance at December 31,	$	(7	)	$	2		$	(28	)

The gains and losses included in earnings in the Level 3 fair value category, including any attributable to the change in unrealized gains and losses relating to assets still held at the reporting date, were classified in electric fuel and other energy-related purchases expense in Virginia Power's Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011. There were no unrealized gains and losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the years ended December 31, 2013, 2012 and 2011.

Fair Value of Financial Instruments

Substantially all of Dominion's and Virginia Power's financial instruments are recorded at fair value, with the exception of the instruments described below that are reported at historical cost. Estimated fair values have been determined using available market information and valuation methodologies considered appropriate by management. The carrying amount of cash and cash equivalents, customer and other receivables, short-term debt and accounts payable are representative of fair value because of the short-term nature of these instruments. For Dominion's and Virginia Power's financial instruments that are not recorded at fair value, the carrying amounts and fair values are as follows:



At December 31,	2013				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⁾	$	18,396	$	19,887	$	16,841	$	19,898
Long-term debt, including securities due within one year - VIE⁽³⁾	—		—		860		864
Junior subordinated notes⁽³⁾	1,373		1,394		1,373		1,430
Remarketable subordinated notes⁽³⁾	1,080		1,192		—		—
Subsidiary preferred stock⁽⁴⁾	257		261		257		255
Virginia Power
Long-term debt, including securities due within one year⁽²⁾	$	8,032	$	8,897	$	6,669	$	8,270
Preferred stock⁽⁴⁾	257		261		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 December 31, 2013, and 2012, includes the valuation of certain fair value hedges associated with Dominion's fixed rate debt, of approximately $55 million and $93 million, respectively.


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


(4)	Includes deferred issuance expenses of $2 million at December 31, 2013 and 2012.