NOTE 7. DERIVATIVES
AND HEDGE ACCOUNTING
ACTIVITIES
The Companies are exposed to the impact of market fluctuations in
the price of electricity, natural gas and other energy-related
products they market and purchase, as well as interest rate and
foreign currency exchange rate risks of their business operations.
The Companies use derivative instruments to manage exposure to
these risks, and designate certain derivative instruments as fair
value or cash flow hedges for accounting purposes. As discussed in
Note 2, for jurisdictions subject to cost-based rate regulation,
changes in the fair value of derivatives are deferred as regulatory
assets or regulatory liabilities until the related transactions
impact earnings. See Note 6 for further information about fair
value measurements and associated valuation methods for
derivatives.
Derivative assets and liabilities are presented gross on the
Companies’ Consolidated Balance Sheets. Dominion
Energy’s derivative contracts include both over-the-counter transactions
and those that are executed on an exchange or other trading
platform (exchange contracts) and centrally cleared. Virginia
Power’s and Dominion Energy Gas’ derivative contracts
include over-the-counter transactions.
Over-the-counter contracts are
bilateral contracts that are transacted directly with a third
party. Exchange contracts utilize a financial intermediary,
exchange, or clearinghouse to enter, execute, or clear the
transactions. Certain over-the-counter
and exchange contracts contain contractual rights of setoff through
master netting arrangements, derivative clearing agreements, and
contract default provisions. In addition, the contracts are subject
to conditional rights of setoff through counterparty
nonperformance, insolvency, or other conditions.
In general, most over-the-counter transactions
and all exchange contracts are subject to collateral requirements.
Types of collateral for over-the-counter and exchange
contracts include cash, letters of credit, and, in some cases,
other forms of security, none of which are subject to restrictions.
Cash collateral is used in the table below to offset derivative
assets and liabilities. Certain accounts receivable and accounts
payable recognized on the Companies’ Consolidated Balance
Sheets, as well as letters of credit and other forms of security,
all of which are not included in the tables below, are subject to
offset under master netting or similar arrangements and would
reduce the net exposure. See Note 23 for further information
regarding credit-related contingent features for the Companies
derivative instruments.
DOMINION ENERGY
Balance Sheet Presentation
The tables below present Dominion Energy’s derivative asset
and liability balances by type of financial instrument, before and
after the effects of offsetting:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017 |
|
|
December 31,
2016 |
|
|
|
Gross
Amounts of
Recognized
Assets
|
|
|
Gross Amounts
Offset in the
Consolidated
Balance Sheet
|
|
|
Net Amounts of
Assets
Presented in the
Consolidated
Balance Sheet
|
|
|
Gross
Amounts of
Recognized
Assets
|
|
|
Gross Amounts
Offset in the
Consolidated
Balance Sheet
|
|
|
Net Amounts of
Assets
Presented in the
Consolidated
Balance Sheet
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
$174 |
|
|
|
$— |
|
|
|
$174 |
|
|
|
$211 |
|
|
|
$— |
|
|
|
$211 |
|
Exchange
|
|
|
80 |
|
|
|
— |
|
|
|
80 |
|
|
|
44 |
|
|
|
— |
|
|
|
44 |
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
17 |
|
|
|
— |
|
|
|
17 |
|
|
|
17 |
|
|
|
— |
|
|
|
17 |
|
Foreign currency contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
32 |
|
|
|
— |
|
|
|
32 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total derivatives, subject to a master netting or similar
arrangement
|
|
|
303 |
|
|
|
— |
|
|
|
303 |
|
|
|
272 |
|
|
|
— |
|
|
|
272 |
|
Total derivatives, not subject to a master netting or similar
arrangement
|
|
|
4 |
|
|
|
— |
|
|
|
4 |
|
|
|
7 |
|
|
|
— |
|
|
|
7 |
|
Total
|
|
|
$307 |
|
|
|
$— |
|
|
|
$307 |
|
|
|
$279 |
|
|
|
$— |
|
|
|
$279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
|
|
|
|
|
December 31, 2016 |
|
|
|
|
|
|
Gross Amounts Not Offset
in the Consolidated
Balance Sheet
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset
in the Consolidated
Balance Sheet
|
|
|
|
|
|
|
Net Amounts of
Assets Presented
in the
Consolidated
Balance Sheet
|
|
|
Financial
Instruments
|
|
|
Cash
Collateral
Received
|
|
|
Net
Amounts
|
|
|
Net Amounts of
Assets Presented
in the Consolidated
Balance Sheet
|
|
|
Financial
Instruments
|
|
|
Cash
Collateral
Received
|
|
|
Net
Amounts
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
$174 |
|
|
|
$ 9 |
|
|
|
$— |
|
|
|
$165 |
|
|
|
$211 |
|
|
|
$14 |
|
|
|
$— |
|
|
|
$197 |
|
Exchange
|
|
|
80 |
|
|
|
80 |
|
|
|
— |
|
|
|
— |
|
|
|
44 |
|
|
|
44 |
|
|
|
— |
|
|
|
— |
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
17 |
|
|
|
8 |
|
|
|
— |
|
|
|
9 |
|
|
|
17 |
|
|
|
9 |
|
|
|
— |
|
|
|
8 |
|
Foreign currency contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
32 |
|
|
|
2 |
|
|
|
— |
|
|
|
30 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total
|
|
|
$303 |
|
|
|
$99 |
|
|
|
$— |
|
|
|
$204 |
|
|
|
$272 |
|
|
|
$67 |
|
|
|
$— |
|
|
|
$205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017 |
|
|
December 31,
2016 |
|
|
|
Gross
Amounts of
Recognized
Liabilities
|
|
|
Gross Amounts
Offset in the
Consolidated
Balance Sheet
|
|
|
Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
|
|
|
Gross
Amounts of
Recognized
Liabilities
|
|
|
Gross Amounts
Offset in the
Consolidated
Balance Sheet
|
|
|
Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
$ 76 |
|
|
|
$— |
|
|
|
$ 76 |
|
|
|
$ 23 |
|
|
|
$— |
|
|
|
$ 23 |
|
Exchange
|
|
|
120 |
|
|
|
— |
|
|
|
120 |
|
|
|
71 |
|
|
|
— |
|
|
|
71 |
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
85 |
|
|
|
— |
|
|
|
85 |
|
|
|
53 |
|
|
|
— |
|
|
|
53 |
|
Foreign currency contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
6 |
|
|
|
— |
|
|
|
6 |
|
Total derivatives, subject to a master netting or similar
arrangement
|
|
|
283 |
|
|
|
— |
|
|
|
283 |
|
|
|
153 |
|
|
|
— |
|
|
|
153 |
|
Total derivatives, not subject to a master netting or similar
arrangement
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
Total
|
|
|
$284 |
|
|
|
$— |
|
|
|
$284 |
|
|
|
$155 |
|
|
|
$— |
|
|
|
$155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017 |
|
|
|
|
|
December 31,
2016 |
|
|
|
|
|
|
Gross Amounts Not
Offset in the
Consolidated
Balance Sheet
|
|
|
|
|
|
|
|
|
Gross Amounts Not
Offset in the
Consolidated
Balance Sheet
|
|
|
|
|
|
|
Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
|
|
|
Financial
Instruments
|
|
|
Cash
Collateral
Paid
|
|
|
Net
Amounts
|
|
|
Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
|
|
|
Financial
Instruments
|
|
|
Cash
Collateral
Paid
|
|
|
Net
Amounts
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
$ 76 |
|
|
|
$ 9 |
|
|
|
$ 6 |
|
|
|
$ 61 |
|
|
|
$ 23 |
|
|
|
$14 |
|
|
|
$— |
|
|
|
$ 9 |
|
Exchange
|
|
|
120 |
|
|
|
80 |
|
|
|
40 |
|
|
|
— |
|
|
|
71 |
|
|
|
44 |
|
|
|
27 |
|
|
|
— |
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
85 |
|
|
|
8 |
|
|
|
— |
|
|
|
77 |
|
|
|
53 |
|
|
|
9 |
|
|
|
— |
|
|
|
44 |
|
Foreign currency contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
2 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
Total
|
|
|
$283 |
|
|
|
$99 |
|
|
|
$46 |
|
|
|
$138 |
|
|
|
$153 |
|
|
|
$67 |
|
|
|
$27 |
|
|
|
$59 |
|
Volumes
The following table presents the volume of Dominion Energy’s
derivative activity as of December 31, 2017. These
volumes are based on open derivative positions and represent the
combined absolute value of their long and short positions, except
in the case of offsetting transactions, for which they represent
the absolute value of the net volume of their long and short
positions.
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
Noncurrent |
|
Natural Gas (bcf):
|
|
|
|
|
|
|
|
|
Fixed price(1)
|
|
|
77 |
|
|
|
19 |
|
Basis
|
|
|
163 |
|
|
|
600 |
|
Electricity (MWh):
|
|
|
|
|
|
|
|
|
Fixed price
|
|
|
10,552,363 |
|
|
|
364,990 |
|
FTRs
|
|
|
46,494,865 |
|
|
|
— |
|
Liquids (Gal)(2)
|
|
|
44,153,704 |
|
|
|
10,087,200 |
|
Interest rate(3)
|
|
$ |
1,950,000,000 |
|
|
$ |
4,192,517,177 |
|
Foreign currency(3)(4)
|
|
$ |
— |
|
|
$ |
280,000,000 |
|
(2) |
Includes NGLs and oil. |
(3) |
Maturity is determined based on
final settlement period. |
(4) |
Euro equivalent volumes are
€ 250,000,000. |
Ineffectiveness and AOCI
For the years ended December 31, 2017, 2016 and 2015, gains or
losses on hedging instruments determined to be ineffective and
amounts excluded from the assessment of effectiveness were not
material. Amounts excluded from the assessment of effectiveness
include gains or losses attributable to changes in the time value
of options and changes in the differences between spot prices and
forward prices.
The following table presents selected information related to gains
(losses) on cash flow hedges included in AOCI in Dominion
Energy’s Consolidated Balance Sheet at
December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOCI
After-Tax
|
|
|
Amounts Expected
to be Reclassified
to Earnings During
the Next 12 Months
After-Tax
|
|
|
Maximum
Term
|
|
(millions) |
|
|
|
|
|
|
|
|
|
Commodities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
$ (2 |
) |
|
|
$ (3 |
) |
|
|
34 months |
|
Electricity
|
|
|
(55 |
) |
|
|
(55 |
) |
|
|
12 months |
|
Other
|
|
|
(4 |
) |
|
|
(4 |
) |
|
|
15 months |
|
Interest rate
|
|
|
(246 |
) |
|
|
(10 |
) |
|
|
384 months |
|
Foreign currency
|
|
|
5 |
|
|
|
(1 |
) |
|
|
102 months |
|
Total
|
|
|
$(302 |
) |
|
|
$(73 |
) |
|
|
|
|
The amounts that will be reclassified from AOCI to earnings will
generally be offset by the recognition of the hedged transactions
(e.g., anticipated sales) in earnings, thereby achieving the
realization of prices contemplated by the underlying risk
management strategies and will vary from the expected amounts
presented above as a result of changes in market prices, interest
rates and foreign currency exchange rates.
Fair Value and Gains and Losses on Derivative
Instruments
The following tables present the fair values of Dominion
Energy’s derivatives and where they are presented in its
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value –
Derivatives
under
Hedge
Accounting
|
|
|
Fair Value –
Derivatives
not under
Hedge
Accounting
|
|
|
Total
Fair
Value |
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
$ 5 |
|
|
|
$158 |
|
|
$ |
163 |
|
Interest rate
|
|
|
6 |
|
|
|
— |
|
|
|
6 |
|
Total current derivative assets(1)
|
|
|
11 |
|
|
|
158 |
|
|
|
169 |
|
Noncurrent Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
— |
|
|
|
95 |
|
|
|
95 |
|
Interest rate
|
|
|
11 |
|
|
|
— |
|
|
|
11 |
|
Foreign currency
|
|
|
32 |
|
|
|
— |
|
|
|
32 |
|
Total noncurrent derivative assets(2)
|
|
|
43 |
|
|
|
95 |
|
|
|
138 |
|
Total derivative assets
|
|
|
$ 54 |
|
|
|
$253 |
|
|
$ |
307 |
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
$103 |
|
|
|
$ 92 |
|
|
$ |
195 |
|
Interest rate
|
|
|
53 |
|
|
|
— |
|
|
|
53 |
|
Foreign currency
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
Total current derivative liabilities(3)
|
|
|
158 |
|
|
|
92 |
|
|
|
250 |
|
Noncurrent Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
Interest rate
|
|
|
32 |
|
|
|
— |
|
|
|
32 |
|
Total noncurrent derivative liabilities(4)
|
|
|
33 |
|
|
|
1 |
|
|
|
34 |
|
Total derivative liabilities
|
|
|
$191 |
|
|
|
$ 93 |
|
|
$ |
284 |
|
At December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
$ 29 |
|
|
|
$101 |
|
|
$ |
130 |
|
Interest rate
|
|
|
10 |
|
|
|
— |
|
|
|
10 |
|
Total current derivative assets(1)
|
|
|
39 |
|
|
|
101 |
|
|
|
140 |
|
Noncurrent Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
— |
|
|
|
132 |
|
|
|
132 |
|
Interest rate
|
|
|
7 |
|
|
|
— |
|
|
|
7 |
|
Total noncurrent derivative assets(2)
|
|
|
7 |
|
|
|
132 |
|
|
|
139 |
|
Total derivative assets
|
|
|
$ 46 |
|
|
|
$233 |
|
|
$ |
279 |
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
$ 51 |
|
|
|
$ 41 |
|
|
$ |
92 |
|
Interest rate
|
|
|
33 |
|
|
|
— |
|
|
|
33 |
|
Foreign currency
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
Total current derivative liabilities(3)
|
|
|
87 |
|
|
|
41 |
|
|
|
128 |
|
Noncurrent Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
1 |
|
|
|
3 |
|
|
|
4 |
|
Interest rate
|
|
|
20 |
|
|
|
— |
|
|
|
20 |
|
Foreign currency
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
Total noncurrent derivative liabilities(4)
|
|
|
24 |
|
|
|
3 |
|
|
|
27 |
|
Total derivative liabilities
|
|
|
$111 |
|
|
|
$ 44 |
|
|
$ |
155 |
|
(1) |
Current derivative assets are
presented in other current assets in Dominion Energy’s
Consolidated Balance Sheets. |
(2) |
Noncurrent derivative assets are
presented in other deferred charges and other assets in Dominion
Energy’s Consolidated Balance Sheets. |
(3) |
Current derivative liabilities are
presented in other current liabilities in Dominion Energy’s
Consolidated Balance Sheets. |
(4) |
Noncurrent derivative liabilities
are presented in other deferred credits and other liabilities in
Dominion Energy’s Consolidated Balance Sheets. |
The following table presents the gains and losses on Dominion
Energy’s derivatives, as well as where the associated
activity is presented in its Consolidated Balance Sheets and
Statements of Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in cash flow hedging relationships |
|
Amount of
Gain (Loss)
Recognized
in AOCI on
Derivatives
(Effective
Portion)(1)
|
|
|
Amount of
Gain (Loss)
Reclassified
From AOCI
to Income
|
|
|
Increase
(Decrease) in
Derivatives
Subject to
Regulatory
Treatment(2)
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
$ 81 |
|
|
|
|
|
Purchased gas
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
Total commodity
|
|
|
$ 1 |
|
|
|
$ 79 |
|
|
|
$ — |
|
Interest rate(3)
|
|
|
(8 |
) |
|
|
(52 |
) |
|
|
(58 |
) |
Foreign currency(4)
|
|
|
18 |
|
|
|
20 |
|
|
|
— |
|
Total
|
|
|
$ 11 |
|
|
|
$ 47 |
|
|
|
$(58 |
) |
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
$330 |
|
|
|
|
|
Purchased gas
|
|
|
|
|
|
|
(13 |
) |
|
|
|
|
Electric fuel and other energy-related purchases
|
|
|
|
|
|
|
(10 |
) |
|
|
|
|
Total commodity
|
|
|
$164 |
|
|
|
$307 |
|
|
|
$ — |
|
Interest rate(3)
|
|
|
(66 |
) |
|
|
(31 |
) |
|
|
(26 |
) |
Foreign currency(4)
|
|
|
(6 |
) |
|
|
(17 |
) |
|
|
— |
|
Total
|
|
|
$ 92 |
|
|
|
$259 |
|
|
|
$(26 |
) |
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
$203 |
|
|
|
|
|
Purchased gas
|
|
|
|
|
|
|
(15 |
) |
|
|
|
|
Electric fuel and other energy-related purchases
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
Total commodity
|
|
|
$230 |
|
|
|
$187 |
|
|
|
$ 4 |
|
Interest rate(3)
|
|
|
(46 |
) |
|
|
(11 |
) |
|
|
(13 |
) |
Total
|
|
|
$184 |
|
|
|
$176 |
|
|
|
$ (9 |
) |
(1) |
Amounts deferred into AOCI have no
associated effect in Dominion Energy’s Consolidated
Statements of Income. |
(2) |
Represents net derivative activity
deferred into and amortized out of regulatory assets/liabilities.
Amounts deferred into regulatory assets/liabilities have no
associated effect in Dominion Energy’s Consolidated
Statements of Income. |
(3) |
Amounts recorded in Dominion
Energy’s Consolidated Statements of Income are classified in
interest and related charges. |
(4) |
Amounts recorded in Dominion
Energy’s Consolidated Statements of Income are classified in
other income. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging
instruments
|
|
Amount of Gain (Loss) Recognized
in Income on Derivatives(1)
|
|
Year Ended December 31, |
|
2017 |
|
|
2016 |
|
|
2015 |
|
(millions) |
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
$ 18 |
|
|
|
$ 2 |
|
|
|
$ 24 |
|
Purchased gas
|
|
|
(3 |
) |
|
|
4 |
|
|
|
(14 |
) |
Electric fuel and other energy-related purchases
|
|
|
(59 |
) |
|
|
(70 |
) |
|
|
(14 |
) |
Other operations & maintenance
|
|
|
(1 |
) |
|
|
1 |
|
|
|
— |
|
Interest rate(2)
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
Total
|
|
|
$(45 |
) |
|
|
$(63 |
) |
|
|
$ (5 |
) |
(1) |
Includes derivative activity
amortized out of regulatory assets/liabilities. Amounts deferred
into regulatory assets/liabilities have no associated effect in
Dominion Energy’s Consolidated Statements of Income. |
(2) |
Amounts recorded in Dominion
Energy’s Consolidated Statements of Income are classified in
interest and related charges. |
VIRGINIA POWER
Balance Sheet Presentation
The tables below present Virginia Power’s derivative asset
and liability balances by type of financial instrument, before and
after the effects of offsetting:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
|
|
December 31, 2016 |
|
|
|
Gross
Amounts of
Recognized
Assets
|
|
|
Gross Amounts
Offset in the
Consolidated
Balance Sheet
|
|
|
Net Amounts of
Assets Presented
in the
Consolidated
Balance Sheet
|
|
|
Gross
Amounts of
Recognized Assets
|
|
|
Gross Amounts
Offset in the
Consolidated
Balance Sheet
|
|
|
Net Amounts of
Assets Presented
in the
Consolidated
Balance Sheet
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
$155 |
|
|
|
$— |
|
|
|
$155 |
|
|
|
$147 |
|
|
|
$— |
|
|
|
$147 |
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
6 |
|
Total derivatives, subject to a master netting or similar
arrangement
|
|
|
155 |
|
|
|
— |
|
|
|
155 |
|
|
|
153 |
|
|
|
— |
|
|
|
153 |
|
Total derivatives, not subject to a master netting or similar
arrangement
|
|
|
11 |
|
|
|
— |
|
|
|
11 |
|
|
|
41 |
|
|
|
— |
|
|
|
41 |
|
Total
|
|
|
$166 |
|
|
|
$— |
|
|
|
$166 |
|
|
|
$194 |
|
|
|
$— |
|
|
|
$194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
|
|
|
|
|
December 31, 2016 |
|
|
|
|
|
|
Gross Amounts Not Offset
in the Consolidated
Balance Sheet
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset
in the Consolidated
Balance Sheet
|
|
|
|
|
|
|
Net Amounts of
Assets Presented
in the
Consolidated
Balance Sheet
|
|
|
Financial
Instruments |
|
|
Cash
Collateral
Received
|
|
|
Net
Amounts
|
|
|
Net Amounts of
Assets Presented in
the Consolidated
Balance Sheet
|
|
|
Financial
Instruments
|
|
|
Cash Collateral
Received
|
|
|
Net
Amounts
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
$155 |
|
|
|
$ 4 |
|
|
|
$— |
|
|
|
$151 |
|
|
|
$147 |
|
|
|
$ 2 |
|
|
|
$— |
|
|
|
$145 |
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
Total
|
|
|
$155 |
|
|
|
$ 4 |
|
|
|
$— |
|
|
|
$151 |
|
|
|
$153 |
|
|
|
$ 2 |
|
|
|
$— |
|
|
|
$151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
|
|
December 31, 2016 |
|
|
|
Gross
Amounts of
Recognized
Liabilities
|
|
|
Gross Amounts
Offset in the
Consolidated
Balance Sheet
|
|
|
Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
|
|
|
Gross
Amounts of
Recognized
Liabilities
|
|
|
Gross Amounts
Offset in the
Consolidated
Balance Sheet
|
|
|
Net Amounts of
Liabilities Presented
in the
Consolidated
Balance Sheet
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
$ 4 |
|
|
|
$— |
|
|
|
$ 4 |
|
|
|
$ 2 |
|
|
|
$— |
|
|
|
$ 2 |
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
57 |
|
|
|
— |
|
|
|
57 |
|
|
|
21 |
|
|
|
— |
|
|
|
21 |
|
Total derivatives, subject to a master netting or similar
arrangement
|
|
|
61 |
|
|
|
— |
|
|
|
61 |
|
|
|
23 |
|
|
|
— |
|
|
|
23 |
|
Total derivatives, not subject to a master netting or similar
arrangement
|
|
|
5 |
|
|
|
— |
|
|
|
5 |
|
|
|
8 |
|
|
|
— |
|
|
|
8 |
|
Total
|
|
|
$66 |
|
|
|
$— |
|
|
|
$66 |
|
|
|
$31 |
|
|
|
$— |
|
|
|
$31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017 |
|
|
|
|
|
December 31,
2016 |
|
|
|
|
|
|
Gross Amounts Not Offset in the
Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the
Consolidated Balance Sheet |
|
|
|
|
|
|
Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
|
|
|
Financial
Instruments
|
|
|
Cash
Collateral
Paid
|
|
|
Net
Amounts
|
|
|
Net Amounts of
Liabilities Presented
in the Consolidated
Balance Sheet
|
|
|
Financial
Instruments
|
|
|
Cash Collateral
Paid
|
|
|
Net
Amounts
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
$ 4 |
|
|
|
$ 4 |
|
|
|
$— |
|
|
|
$— |
|
|
|
$ 2 |
|
|
|
$ 2 |
|
|
|
$— |
|
|
|
$— |
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
57 |
|
|
|
— |
|
|
|
— |
|
|
|
57 |
|
|
|
21 |
|
|
|
— |
|
|
|
— |
|
|
|
21 |
|
Total
|
|
|
$61 |
|
|
|
$ 4 |
|
|
|
$— |
|
|
|
$57 |
|
|
|
$23 |
|
|
|
$ 2 |
|
|
|
$— |
|
|
|
$21 |
|
Volumes
The following table presents the volume of Virginia Power’s
derivative activity at December 31, 2017. These volumes
are based on open derivative positions and represent the combined
absolute value of their long and short positions, except in the
case of offsetting transactions, for which they represent the
absolute value of the net volume of their long and short
positions.
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
Noncurrent |
|
Natural Gas (bcf):
|
|
|
|
|
|
|
|
|
Fixed price(1)
|
|
|
33 |
|
|
|
5 |
|
Basis
|
|
|
79 |
|
|
|
540 |
|
Electricity (MWh):
|
|
|
|
|
|
|
|
|
Fixed price(1)
|
|
|
1,453,910 |
|
|
|
364,990 |
|
FTRs
|
|
|
42,582,981 |
|
|
|
— |
|
Interest rate(2)
|
|
$ |
1,150,000,000 |
|
|
$ |
300,000,000 |
|
(2) |
Maturity is determined based on
final settlement period. |
Ineffectiveness and AOCI
For the years ended December 31, 2017, 2016 and 2015,
gains or losses on hedging instruments determined to be ineffective
were not material.
The following table presents selected information related to losses
on cash flow hedges included in AOCI in Virginia Power’s
Consolidated Balance Sheet at December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOCI
After-Tax
|
|
|
Amounts Expected
to be Reclassified
to Earnings During
the Next 12
Months After-Tax |
|
|
Maximum
Term |
|
(millions) |
|
|
|
|
|
|
|
|
|
Interest rate
|
|
|
$(12 |
) |
|
|
$(1 |
) |
|
|
384 months |
|
Total
|
|
|
$(12 |
) |
|
|
$(1 |
) |
|
|
|
|
The amounts that will be reclassified from AOCI to earnings will
generally be offset by the recognition of the hedged transactions
(e.g., interest payments) in earnings, thereby achieving the
realization of interest rates contemplated by the underlying risk
management strategies and will vary from the expected amounts
presented above as a result of changes in interest rates.
Fair Value and Gains and Losses on Derivative
Instruments
The following tables present the fair values of Virginia
Power’s derivatives and where they are presented in its
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value -
Derivatives
under
Hedge
Accounting
|
|
|
Fair Value -
Derivatives
not under
Hedge
Accounting
|
|
|
Total
Fair
Value
|
|
(millions) |
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
$— |
|
|
|
$ 75 |
|
|
|
$ 75 |
|
Total current derivative assets(1)
|
|
|
— |
|
|
|
75 |
|
|
|
75 |
|
Noncurrent Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
— |
|
|
|
91 |
|
|
|
91 |
|
Total noncurrent derivative assets
|
|
|
— |
|
|
|
91 |
|
|
|
91 |
|
Total derivative assets
|
|
|
$— |
|
|
|
$166 |
|
|
|
$166 |
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
$— |
|
|
|
$ 9 |
|
|
|
$ 9 |
|
Interest rate
|
|
|
44 |
|
|
|
— |
|
|
|
44 |
|
Total current derivative liabilities(2)
|
|
|
44 |
|
|
|
9 |
|
|
|
53 |
|
Noncurrent Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate
|
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
Total noncurrent derivatives liabilities(3)
|
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
Total derivative liabilities
|
|
|
$57 |
|
|
|
$ 9 |
|
|
|
$ 66 |
|
At December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
$— |
|
|
|
$ 60 |
|
|
|
$ 60 |
|
Interest rate
|
|
|
6 |
|
|
|
— |
|
|
|
6 |
|
Total current derivative assets(1)
|
|
|
6 |
|
|
|
60 |
|
|
|
66 |
|
Noncurrent Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
— |
|
|
|
128 |
|
|
|
128 |
|
Total noncurrent derivative assets
|
|
|
— |
|
|
|
128 |
|
|
|
128 |
|
Total derivative assets
|
|
|
$6 |
|
|
|
$188 |
|
|
|
$194 |
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
$— |
|
|
|
$ 10 |
|
|
|
$ 10 |
|
Interest rate
|
|
|
8 |
|
|
|
— |
|
|
|
8 |
|
Total current derivative liabilities(2)
|
|
|
8 |
|
|
|
10 |
|
|
|
18 |
|
Noncurrent Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate
|
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
Total noncurrent derivative liabilities(3)
|
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
Total derivative liabilities
|
|
|
$21 |
|
|
|
$ 10 |
|
|
|
$ 31 |
|
(1) |
Current derivative assets are
presented in other current assets in Virginia Power’s
Consolidated Balance Sheets. |
(2) |
Current derivative liabilities are
presented in other current liabilities in Virginia Power’s
Consolidated Balance Sheets. |
(3) |
Noncurrent derivative liabilities
are presented in other deferred credits and other liabilities in
Virginia Power’s Consolidated Balance Sheets. |
The following tables present the gains and losses on Virginia
Power’s derivatives, as well as where the associated activity
is presented in its Consolidated Balance Sheets and Statements of
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in cash flow hedging
relationships |
|
Amount of
Gain (Loss)
Recognized
in AOCI on
Derivatives
(Effective
Portion)(1)
|
|
|
Amount of
Gain (Loss)
Reclassified
From AOCI to
Income
|
|
|
Increase
(Decrease) in
Derivatives
Subject to
Regulatory
Treatment(2) |
|
(millions) |
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate(3)
|
|
|
$(8 |
) |
|
|
$(1 |
) |
|
|
$(58 |
) |
Total
|
|
|
$(8 |
) |
|
|
$(1 |
) |
|
|
$(58 |
) |
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate(3)
|
|
|
$(3 |
) |
|
|
$(1 |
) |
|
|
$(26 |
) |
Total
|
|
|
$(3 |
) |
|
|
$(1 |
) |
|
|
$(26 |
) |
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric fuel and other energy-related purchases
|
|
|
|
|
|
|
$(1 |
) |
|
|
|
|
Total commodity
|
|
|
$— |
|
|
|
$(1 |
) |
|
|
$ 4 |
|
Interest rate(3)
|
|
|
(3 |
) |
|
|
— |
|
|
|
(13 |
) |
Total
|
|
|
$(3 |
) |
|
|
$(1 |
) |
|
|
$ (9 |
) |
(1) |
Amounts deferred into AOCI have no
associated effect in Virginia Power’s Consolidated Statements
of Income. |
(2) |
Represents net derivative activity
deferred into and amortized out of regulatory assets/liabilities.
Amounts deferred into regulatory assets/liabilities have no
associated effect in Virginia Power’s Consolidated Statements
of Income. |
(3) |
Amounts recorded in Virginia
Power’s Consolidated Statements of Income are classified in
interest and related charges. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging
instruments |
|
Amount of Gain (Loss) Recognized
in Income on Derivatives(1)
|
|
Year Ended December 31, |
|
2017 |
|
|
2016 |
|
|
2015 |
|
(millions) |
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity(2)
|
|
|
$(57 |
) |
|
|
$(70 |
) |
|
|
$(13 |
) |
Total
|
|
|
$(57 |
) |
|
|
$(70 |
) |
|
|
$(13 |
) |
(1) |
Includes derivative activity
amortized out of regulatory assets/liabilities. Amounts deferred
into regulatory assets/liabilities have no associated effect in
Virginia Power’s Consolidated Statements of Income. |
(2) |
Amounts recorded in Virginia
Power’s Consolidated Statements of Income are classified in
electric fuel and other energy-related purchases. |
DOMINION ENERGY
GAS
Balance Sheet Presentation
The tables below present Dominion Energy Gas’ derivative
asset and liability balances by type of financial instrument,
before and after the effects of offsetting:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017 |
|
|
December 31,
2016 |
|
|
|
Gross
Amounts of
Recognized
Assets
|
|
|
Gross Amounts
Offset in the
Consolidated
Balance Sheet
|
|
|
Net Amounts of
Assets Presented
in the
Consolidated
Balance Sheet |
|
|
Gross
Amounts of
Recognized
Assets
|
|
|
Gross Amounts
Offset in the
Consolidated
Balance Sheet
|
|
|
Net Amounts of
Assets
Presented in the
Consolidated
Balance Sheet
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
$32 |
|
|
|
$— |
|
|
|
$32 |
|
|
|
$— |
|
|
|
$— |
|
|
|
$— |
|
Total derivatives, subject to a master netting or similar
arrangement
|
|
|
$32 |
|
|
|
$— |
|
|
|
$32 |
|
|
|
$— |
|
|
|
$— |
|
|
|
$— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017 |
|
|
|
|
|
December 31,
2016 |
|
|
|
|
|
|
Gross Amounts Not Offset
in the Consolidated
Balance Sheet
|
|
|
|
|
|
|
|
|
Gross Amounts Not
Offset in the Consolidated
Balance Sheet
|
|
|
|
|
|
|
Net Amounts of
Assets Presented
in the Consolidated
Balance Sheet
|
|
|
Financial
Instruments
|
|
|
Cash
Collateral
Received
|
|
|
Net
Amounts
|
|
|
Net Amounts of
Assets Presented
in the Consolidated
Balance Sheet
|
|
|
Financial
Instruments
|
|
|
Cash
Collateral
Received
|
|
|
Net
Amounts
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
$32 |
|
|
|
$2 |
|
|
|
$— |
|
|
|
$30 |
|
|
|
$— |
|
|
|
$— |
|
|
|
$— |
|
|
|
$— |
|
Total
|
|
|
$32 |
|
|
|
$2 |
|
|
|
$— |
|
|
|
$30 |
|
|
|
$— |
|
|
|
$— |
|
|
|
$— |
|
|
|
$— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017 |
|
|
December 31,
2016 |
|
|
|
Gross
Amounts of
Recognized
Liabilities
|
|
|
Gross Amounts
Offset in the
Consolidated
Balance Sheet
|
|
|
Net Amounts of
Liabilities Presented
in the
Consolidated
Balance Sheet
|
|
|
Gross
Amounts of
Recognized
Liabilities
|
|
|
Gross Amounts
Offset in the
Consolidated
Balance Sheet
|
|
|
Net Amounts of
Liabilities
Presented in the
Consolidated
Balance Sheet
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
$6 |
|
|
|
$— |
|
|
|
$6 |
|
|
|
$ 5 |
|
|
|
$— |
|
|
|
$ 5 |
|
Foreign currency contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
6 |
|
|
|
— |
|
|
|
6 |
|
Total derivatives, subject to a master netting or similar
arrangement
|
|
|
$8 |
|
|
|
$— |
|
|
|
$8 |
|
|
|
$11 |
|
|
|
$— |
|
|
|
$11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017 |
|
|
|
|
|
December 31,
2016 |
|
|
|
|
|
|
Gross Amounts Not Offset
in the Consolidated
Balance Sheet |
|
|
|
|
|
|
|
|
Gross Amounts Not
Offset in the Consolidated
Balance Sheet
|
|
|
|
|
|
|
Net Amounts of
Liabilities Presented
in the Consolidated
Balance Sheet |
|
|
Financial
Instruments |
|
|
Cash
Collateral
Paid
|
|
|
Net
Amounts
|
|
|
Net Amounts of
Liabilities Presented
in the Consolidated
Balance Sheet |
|
|
Financial
Instruments |
|
|
Cash
Collateral
Paid
|
|
|
Net
Amounts
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
$6 |
|
|
|
$— |
|
|
|
$— |
|
|
|
$ 6 |
|
|
|
$ 5 |
|
|
|
$— |
|
|
|
$— |
|
|
|
$ 5 |
|
Foreign currency contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over-the-counter
|
|
|
2 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
Total
|
|
|
$8 |
|
|
|
$ 2 |
|
|
|
$— |
|
|
|
$ 6 |
|
|
|
$11 |
|
|
|
$— |
|
|
|
$— |
|
|
|
$11 |
|
Volumes
The following table presents the volume of Dominion Energy
Gas’ derivative activity at December 31, 2017.
These volumes are based on open derivative positions and represent
the combined absolute value of their long and short positions,
except in the case of offsetting transactions, for which they
represent the absolute value of the net volume of their long and
short positions.
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
Noncurrent |
|
Natural Gas (bcf):
|
|
|
|
|
|
|
|
|
Basis
|
|
|
1 |
|
|
|
— |
|
NGLs (Gal)
|
|
|
40,961,704 |
|
|
|
8,491,200 |
|
Foreign currency(1)
|
|
$ |
— |
|
|
$ |
280,000,000 |
|
(1) |
Maturity is determined based on
final settlement period. Euro equivalent volumes are
€250,000,000. |
Ineffectiveness and AOCI
For the years ended December 31, 2017, 2016 and 2015,
gains or losses on hedging instruments determined to be ineffective
were not material.
The following table presents selected information related to gains
(losses) on cash flow hedges included in AOCI in Dominion Energy
Gas’ Consolidated Balance Sheet at
December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOCI
After-Tax
|
|
|
Amounts Expected
to be Reclassified
to Earnings During
the Next 12
Months After-Tax |
|
|
Maximum
Term |
|
(millions) |
|
|
|
|
|
|
|
|
|
Commodities:
|
|
|
|
|
|
|
|
|
|
|
|
|
NGLs
|
|
|
$ (4 |
) |
|
|
$(4 |
) |
|
|
15 months |
|
Interest rate
|
|
|
(25 |
) |
|
|
(3 |
) |
|
|
324 months |
|
Foreign currency
|
|
|
6 |
|
|
|
(1 |
) |
|
|
102 months |
|
Total
|
|
|
$(23 |
) |
|
|
$(8 |
) |
|
|
|
|
The amounts that will be reclassified from AOCI to earnings will
generally be offset by the recognition of the hedged transactions
(e.g., anticipated sales) in earnings, thereby achieving the
realization of prices contemplated by the underlying risk
management strategies and will vary from the expected amounts
presented above as a result of changes in market prices, interest
rates, and foreign currency exchange rates.
Fair Value and Gains and Losses on Derivative
Instruments
The following tables present the fair values of Dominion Energy
Gas’ derivatives and where they are presented in its
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value-
Derivatives
Under
Hedge
Accounting
|
|
|
Fair Value-
Derivatives
Not Under
Hedge
Accounting
|
|
|
Total
Fair
Value
|
|
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
|
|
|
$32 |
|
|
|
$— |
|
|
|
$32 |
|
Total noncurrent derivative assets(1)
|
|
|
32 |
|
|
|
— |
|
|
|
32 |
|
Total derivative assets
|
|
|
$32 |
|
|
|
$— |
|
|
|
$32 |
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
$ 6 |
|
|
|
$— |
|
|
|
$ 6 |
|
Foreign currency
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
Total current derivative liabilities(2)
|
|
|
8 |
|
|
|
— |
|
|
|
8 |
|
Total derivative liabilities
|
|
|
$ 8 |
|
|
|
$— |
|
|
|
$ 8 |
|
At December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
$ 4 |
|
|
|
$— |
|
|
|
$ 4 |
|
Foreign currency
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
Total current derivative liabilities(2)
|
|
|
7 |
|
|
|
— |
|
|
|
7 |
|
Noncurrent Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
Foreign currency
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
Total noncurrent derivative liabilities(3)
|
|
|
4 |
|
|
|
— |
|
|
|
4 |
|
Total derivative liabilities
|
|
|
$11 |
|
|
|
$— |
|
|
|
$11 |
|
(1) |
Noncurrent derivative assets are
presented in other deferred charges and other assets in Dominion
Energy Gas’ Consolidated Balance Sheets. |
(2) |
Current derivative liabilities are
presented in other current liabilities in Dominion Energy
Gas’ Consolidated Balance Sheets. |
(3) |
Noncurrent derivative liabilities
are presented in other deferred credits and other liabilities in
Dominion Energy Gas’ Consolidated Balance Sheets. |
Combined Notes to Consolidated Financial Statements, Continued
The following tables present the gains and losses on Dominion
Energy Gas’ derivatives, as well as where the associated
activity is presented in its Consolidated Balance Sheets and
Statements of Income:
|
|
|
|
|
|
|
|
|
Derivatives in cash flow hedging
relationships
|
|
Amount of Gain
(Loss)
Recognized in
AOCI on
Derivatives
(Effective
Portion)(1)
|
|
|
Amount of
Gain (Loss)
Reclassified
From AOCI to
Income |
|
(millions) |
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
Derivative Type and Location of Gains (Losses):
|
|
|
|
|
|
|
|
|
Commodity:
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
$ (8 |
) |
Total commodity
|
|
|
$(10 |
) |
|
|
$ (8 |
) |
Interest rate(2)
|
|
|
— |
|
|
|
(5 |
) |
Foreign currency(3)
|
|
|
18 |
|
|
|
20 |
|
Total
|
|
|
$ 8 |
|
|
|
$ 7 |
|
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
Derivative Type and Location of Gains (Losses):
|
|
|
|
|
|
|
|
|
Commodity:
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
$ 4 |
|
Total commodity
|
|
|
$(12 |
) |
|
|
$ 4 |
|
Interest rate(2)
|
|
|
(8 |
) |
|
|
(2 |
) |
Foreign currency(3)
|
|
|
(6 |
) |
|
|
(17 |
) |
Total
|
|
|
$(26 |
) |
|
|
$(15 |
) |
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
Derivative Type and Location of Gains (Losses):
|
|
|
|
|
|
|
|
|
Commodity:
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
$ 6 |
|
Total commodity
|
|
|
$ 16 |
|
|
|
$ 6 |
|
Interest rate(2)
|
|
|
(6) |
|
|
|
— |
|
Total
|
|
|
$ 10 |
|
|
|
$ 6 |
|
(1) |
Amounts deferred into AOCI have no
associated effect in Dominion Energy Gas’ Consolidated
Statements of Income. |
(2) |
Amounts recorded in Dominion
Energy Gas’ Consolidated Statements of Income are classified
in interest and related charges. |
(3) |
Amounts recorded in Dominion
Energy Gas’ Consolidated Statements of Income are classified
in other income. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging
instruments |
|
Amount of Gain (Loss) Recognized
in Income on Derivatives
|
|
Year Ended December 31, |
|
2017 |
|
|
2016 |
|
|
2015 |
|
(millions) |
|
|
|
|
|
|
|
|
|
Derivative type and location of gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
$— |
|
|
|
$1 |
|
|
|
$6 |
|
Total
|
|
|
$— |
|
|
|
$1 |
|
|
|
$6 |
|