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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

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

Fair Value, Option, Quantitative Disclosures

The following table presents Dominion's quantitative information about Level 3 fair value measurements at June 30, 2016. The range and weighted average are presented in dollars for market price inputs and percentages for credit spreads and price volatility.



	Fair Value (millions)		Valuation Techniques	Unobservable Input		Range	Weighted Average⁽¹⁾
Assets
Physical and financial forwards and futures:
Natural gas⁽²⁾	$	123	Discounted cash flow	Market price (per Dth)	⁽³⁾	(2) - 7	—
				Credit spread	⁽⁴⁾	1% - 6%	3	%
FTRs	6		Discounted cash flow	Market price (per MWh)	⁽³⁾	(8) - 3	1
Physical and financial options:
Natural gas	8		Option model	Market price (per Dth)	⁽³⁾	2 - 7	4
				Price volatility	⁽⁵⁾	20% - 42%	25	%
Total assets	$	137
Liabilities
Physical and financial forwards and futures:
Natural gas⁽²⁾	$	5	Discounted cash flow	Market price (per Dth)	⁽³⁾	(1) - 4	3
FTRs	7		Discounted cash flow	Market price (per MWh)	⁽³⁾	(2) - 5	1
Physical and financial options:
Natural gas	1		Option model	Market price (per Dth)	⁽³⁾	2 - 4	3
				Price volatility	⁽⁵⁾	29% - 42%	36	%
Total liabilities	$	13


(1)	Averages weighted by volume.


(2)	Includes basis.


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


(4)	Represents credit spreads unrepresented in published markets.


(5)	Represents volatilities unrepresented in published markets.

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)
Credit spread	Asset	Increase (decrease)	Loss (gain)

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 June 30, 2016
Assets
Derivatives:
Commodity	$	—	$	192	$	137	$	329
Interest rate	—		25		—		25
Investments⁽¹⁾:
Equity securities:
United States:
Large cap	2,617		—		—		2,617
Other	5		—		—		5
REIT	72		—		—		72
Non-United States:
Large cap	10		—		—		10
Fixed income:
Corporate debt instruments	—		498		—		498
United States Treasury securities and agency debentures	462		236		—		698
State and municipal	—		364		—		364
Other	—		112		—		112
Cash equivalents and other	5		—		—		5
Total assets	$	3,171	$	1,427	$	137	$	4,735
Liabilities
Derivatives:
Commodity	$	—	$	87	$	13	$	100
Interest rate	—		366		—		366
Foreign currency	—		7		—		7
Total liabilities	$	—	$	460	$	13	$	473
At December 31, 2015



Assets
Derivatives:
Commodity	$	1	$	249	$	114	$	364
Interest rate	—		24		—		24
Investments⁽¹⁾:
Equity securities:
United States:
Large cap	2,547		—		—		2,547
Other	5		—		—		5
REIT	63		—		—		63
Non-United States:
Large cap	10		—		—		10
Fixed income:
Corporate debt instruments	—		437		—		437
United States Treasury securities and agency debentures	458		201		—		659
State and municipal	—		376		—		376
Other	—		100		—		100
Cash equivalents and other	2		2		—		4
Total assets	$	3,086	$	1,389	$	114	$	4,589
Liabilities
Derivatives:
Commodity	$	—	$	141	$	19	$	160
Interest rate	—		183		—		183
Total liabilities	$	—	$	324	$	19	$	343


(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 June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
(millions)
Beginning balance	$	109		$	76		$	95		$	107
Total realized and unrealized gains (losses):
Included in earnings	(10		)	(5		)	(17		)	10
Included in other comprehensive income (loss)	—			(1		)	3			(12		)
Included in regulatory assets/liabilities	15			(5		)	32			(29		)
Settlements	10			6			18			(8		)
Transfers out of Level 3	—			—			(7		)	3
Ending balance	$	124		$	71		$	124		$	71

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. There were no unrealized gains or losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the three months ended June 30, 2016 and 2015.



	Operating Revenue		Electric Fuel and Other Energy-Related Purchases			Total
(millions)
Three Months Ended June 30, 2016
Total gains (losses) included in earnings	$	—	$	(10	)	$	(10	)
Three Months Ended June 30, 2015
Total gains (losses) included in earnings	$	—	$	(5	)	$	(5	)
Six Months Ended June 30, 2016
Total gains (losses) included in earnings	$	—	$	(17	)	$	(17	)
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	—		—			—
Six Months Ended June 30, 2015
Total gains (losses) included in earnings	$	2	$	8		$	10
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	1		(1		)	—

Cost and Fair Value of Financial Instruments Disclosure

For the Companies' financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:



	June 30, 2016				December 31, 2015
	Carrying Amount		Estimated Fair Value⁽¹⁾		Carrying Amount		Estimated Fair Value⁽¹⁾
(millions)
Dominion
Long-term debt, including securities due within one year⁽²⁾	$	22,754	$	25,400	$	21,873	$	23,210
Junior subordinated notes⁽³⁾	2,399		2,310		1,340		1,192
Remarketable subordinated notes⁽³⁾	982		1,037		2,080		2,129
Virginia Power
Long-term debt, including securities due within one year⁽³⁾	$	9,661	$	11,329	$	9,368	$	10,400
Dominion Gas
Long-term debt, including securities due within one year⁽⁴⁾	$	3,941	$	4,116	$	3,269	$	3,299


(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 debt issuance costs, discount and/or premium, and foreign currency remeasurement adjustments. At June 30, 2016 and December 31, 2015, includes the valuation of certain fair value hedges associated with fixed rate debt of $21 million and $7 million, respectively.


(3)	Carrying amount includes amounts which represent the unamortized debt issuance costs, discount and/or premium.


(4)	Carrying amount includes amounts which represent the unamortized debt issuance costs, discount and/or premium, and foreign currency remeasurement adjustments.

Virginia Electric and Power Company

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

Fair Value, Option, Quantitative Disclosures

The following table presents Virginia Power's quantitative information about Level 3 fair value measurements at June 30, 2016. The range and weighted average are presented in dollars for market price inputs and percentages for credit spreads and price volatility.



	Fair Value (millions)		Valuation Techniques	Unobservable Input		Range	Weighted Average⁽¹⁾
Assets
Physical and financial forwards and futures:
Natural gas⁽²⁾	$	121	Discounted cash flow	Market price (per Dth)	⁽³⁾	(2) - 7	—
				Credit spread	⁽⁴⁾	1% - 6%	3	%
FTRs	6		Discounted cash flow	Market price (per MWh)	⁽³⁾	(8) - 3	1
Physical and financial options:
Natural gas	5		Option model	Market price (per Dth)	⁽³⁾	2 - 7	4
				Price volatility	⁽⁵⁾	20% - 33%	24	%
Total assets	$	132
Liabilities
Physical and financial forwards and futures:
FTRs	$	7	Discounted cash flow	Market price (per MWh)	⁽³⁾	(2) - 5	1
Total liabilities	$	7


(1)	Averages weighted by volume.


(2)	Includes basis.


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


(4)	Represents credit spreads unrepresented in published markets.


(5)	Represents volatilities unrepresented in published markets.

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)
Credit spread	Asset	Increase (decrease)	Loss (gain)
Price volatility	Buy	Increase (decrease)	Gain (loss)
Price volatility	Sell	Increase (decrease)	Loss (gain)

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 June 30, 2016
Assets
Derivatives:
Commodity	$	—	$	31	$	132	$	163
Investments⁽¹⁾:
Equity securities:
United States large cap	1,137		—		—		1,137
REIT	72		—		—		72
Fixed income:
Corporate debt instruments	—		283		—		283
United States Treasury securities and agency debentures	166		111		—		277
State and municipal	—		159		—		159
Other	—		48		—		48
Total assets	$	1,375	$	632	$	132	$	2,139
Liabilities
Derivatives:
Commodity	$	—	$	10	$	7	$	17
Interest rate	—		257		—		257
Total liabilities	$	—	$	267	$	7	$	274
At December 31, 2015
Assets
Derivatives:
Commodity	$	—	$	13	$	101	$	114
Interest rate	—		13		—		13
Investments⁽¹⁾:
Equity securities:
United States large cap	1,100		—		—		1,100
REIT	63		—		—		63
Fixed income:
Corporate debt instruments	—		238		—		238
United States Treasury securities and agency debentures	180		79		—		259
State and municipal	—		175		—		175
Other	—		34		—		34
Total assets	$	1,343	$	552	$	101	$	1,996
Liabilities
Derivatives:
Commodity	$	—	$	19	$	8	$	27
Interest rate	—		59		—		59
Total liabilities	$	—	$	78	$	8	$	86


(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 June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
(millions)
Beginning balance	$	110		$	78		$	93		$	102
Total realized and unrealized gains (losses):
Included in earnings	(9		)	(5		)	(17		)	8
Included in regulatory assets/liabilities	15			(5		)	32			(29		)
Settlements	9			5			17			(8		)
Ending balance	$	125		$	73		$	125		$	73

Dominion Gas Holdings, LLC

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

Fair Value, by Balance Sheet Grouping

The following table presents Dominion Gas' assets and liabilities for derivatives 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 June 30, 2016
Assets
Commodity	$	—	$	3	$	—	$	3
Total Assets	$	—	$	3	$	—	$	3
Liabilities
Commodity	$	—	$	5	$	—	$	5
Foreign currency	—		7		—		7
Total liabilities	$	—	$	12	$	—	$	12
At December 31, 2015
Assets
Commodity	$	—	$	5	$	6	$	11
Total Assets	$	—	$	5	$	6	$	11
Liabilities
Interest rate	$	—	$	14	$	—	$	14
Total liabilities	$	—	$	14	$	—	$	14

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

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



	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016			2015
(millions)
Beginning balance	$	—	$	—		$	6		$	2
Total realized and unrealized gains (losses):
Included in earnings	—		(1		)	—			1
Included in other comprehensive income (loss)	—		—			2			(12		)
Settlements	—		—			—			(1		)
Transfers out of Level 3	—		—			(8		)	9
Ending balance	$	—	$	(1	)	$	—		$	(1	)

- 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