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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

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

Fair Value Inputs, Assets and Liabilities, Quantitative Information

The following table presents Dominion Energy's quantitative information about Level 3 fair value measurements at September 30, 2017. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility.

	Fair Value (millions)		Valuation Techniques	Unobservable Input		Range	Weighted Average⁽¹⁾
Assets
Physical and financial forwards and futures:
Natural gas⁽²⁾	$	91	Discounted cash flow	Market price (per Dth)	⁽³⁾	(2) - 7		—
FTRs		19	Discounted cash flow	Market price (per MWh)	⁽³⁾	(3) - 7		1
Physical options:
Natural gas		2	Option model	Market price (per Dth)	⁽³⁾	2 - 7		4
				Price volatility	⁽⁴⁾	24% - 46%		32	%
Electricity		42	Option model	Market price (per MWh)	⁽³⁾	21 - 50		34
				Price volatility	⁽⁴⁾	0% - 78%		28	%
Total assets	$	154
Liabilities
Financial forwards:
FTRs	$	1	Discounted cash flow	Market price (per MWh)	⁽³⁾	(5) - 7		1
Total liabilities	$	1

(1)	Averages weighted by volume.

(2)	Includes basis.

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

(4)	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)

Recurring Fair Value Measurements

The following table presents Dominion Energy’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)
September 30, 2017
Assets
Derivatives:
Commodity	$	—	$	59	$	154	$	213
Interest rate		—		11		—		11
Foreign currency		—		25		—		25
Investments⁽¹⁾:
Equity securities:
U.S.		3,288		—		—		3,288
Fixed income:
Corporate debt instruments		—		452		—		452
Government securities		475		631		—		1,106
Cash equivalents and other		7		—		—		7
Total assets	$	3,770	$	1,178	$	154	$	5,102
Liabilities
Derivatives:
Commodity	$	—	$	41	$	1	$	42
Interest rate		—		72		—		72
Foreign currency		—		4		—		4
Total liabilities	$	—	$	117	$	1	$	118
December 31, 2016
Assets
Derivatives:
Commodity	$	—	$	115	$	147	$	262
Interest rate		—		17		—		17
Investments⁽¹⁾:
Equity securities:
U.S.		2,913		—		—		2,913
Fixed income:
Corporate debt instruments		—		487		—		487
Government securities		424		614		—		1,038
Cash equivalents and other		5		—		—		5
Total assets	$	3,342	$	1,233	$	147	$	4,722
Liabilities
Derivatives:
Commodity	$	—	$	88	$	8	$	96
Interest rate		—		53		—		53
Foreign currency		—		6		—		6
Total liabilities	$	—	$	147	$	8	$	155

(1)

Includes investments held in the nuclear decommissioning and rabbi trusts. Excludes $92 million and $89 million of assets at September 30, 2017 and December 31, 2016, respectively, measured at fair value using NAV (or its equivalent) as a practical expedient which are not required to be categorized in the fair value hierarchy.

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

The following table presents the net change in Dominion Energy'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,
	2017			2016			2017			2016
(millions)
Beginning balance	$	152		$	124		$	139		$	95
Total realized and unrealized gains (losses):
Included in earnings		(11	)		(7	)		(36	)		(23	)
Included in other comprehensive income		—			—			—			2
Included in regulatory assets/liabilities		11			(37	)		34			(5	)
Settlements		1			9			13			27
Transfers out of Level 3		—			—			3			(7	)
Ending balance	$	153		$	89		$	153		$	89
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		$	—

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

The following table presents Dominion Energy’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, 2017
Total gains (losses) included in earnings	$	1	$	(12	)	$	(11	)
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
Three Months Ended September 30, 2016
Total gains (losses) included in earnings	$	—	$	(7	)	$	(7	)
Nine Months Ended September 30, 2017
Total gains (losses) included in earnings	$	1	$	(37	)	$	(36	)
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
Nine Months Ended September 30, 2016
Total gains (losses) included in earnings	$	—	$	(23	)	$	(23	)

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:

	September 30, 2017				December 31, 2016
	Carrying Amount		Estimated Fair Value⁽¹⁾		Carrying Amount		Estimated Fair Value⁽¹⁾
(millions)
Dominion Energy
Long-term debt, including securities due within one year⁽²⁾	$	28,317	$	30,639	$	26,587	$	28,273
Junior subordinated notes⁽³⁾		3,980		4,128		2,980		2,893
Remarketable subordinated notes⁽³⁾		1,377		1,421		2,373		2,418
Virginia Power
Long-term debt, including securities due within one year⁽³⁾	$	11,346	$	12,686	$	10,530	$	11,584
Dominion Energy Gas
Long-term debt⁽⁴⁾	$	3,564	$	3,705	$	3,528	$	3,603

(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 or premium, and foreign currency remeasurement adjustments. At September 30, 2017 and December 31, 2016, includes the valuation of certain fair value hedges associated with fixed rate debt of $(4) million and $(1) million, respectively.

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

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

Virginia Electric and Power Company

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

Fair Value Inputs, Assets and Liabilities, Quantitative Information

The following table presents Virginia Power's quantitative information about Level 3 fair value measurements at September 30, 2017. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility.

	Fair Value (millions)		Valuation Techniques	Unobservable Input		Range	Weighted Average⁽¹⁾
Assets
Physical and financial forwards and futures:
Natural gas⁽²⁾	$	91	Discounted cash flow	Market price (per Dth)	⁽³⁾	(2) - 7		(1	)
FTRs		19	Discounted cash flow	Market price (per MWh)	⁽³⁾	(1) - 7		1
Physical options:
Natural gas		1	Option model	Market price (per Dth)	⁽³⁾	2 - 7		4
				Price volatility	⁽⁴⁾	24% - 46%		32	%
Electricity		42	Option model	Market price (per MWh)	⁽³⁾	21 - 50		34
				Price volatility	⁽⁴⁾	0% - 78%		28	%
Total assets	$	153
Liabilities
Financial forwards:
FTRs	$	1	Discounted cash flow	Market price (per MWh)	⁽³⁾	(5) - 7		1
Total liabilities	$	1

(1)	Averages weighted by volume.

(2)	Includes basis.

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

(4)	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)

Recurring Fair Value Measurements

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)
September 30, 2017
Assets
Derivatives:
Commodity	$	—	$	15	$	153	$	168
Investments⁽¹⁾:
Equity securities:
U.S.		1,471		—		—		1,471
Fixed income:
Corporate debt instruments		—		234		—		234
Government securities		193		302		—		495
Total assets	$	1,664	$	551	$	153	$	2,368
Liabilities
Derivatives:
Commodity	$	—	$	5	$	1	$	6
Interest rate		—		55		—		55
Total liabilities	$	—	$	60	$	1	$	61
December 31, 2016
Assets
Derivatives:
Commodity	$	—	$	43	$	145	$	188
Interest rate		—		6		—		6
Investments⁽¹⁾:
Equity securities:
U.S.		1,302		—		—		1,302
Fixed income:
Corporate debt instruments		—		277		—		277
Government securities		136		291		—		427
Total assets	$	1,438	$	617	$	145	$	2,200
Liabilities
Derivatives:
Commodity	$	—	$	8	$	2	$	10
Interest rate		—		21		—		21
Total liabilities	$	—	$	29	$	2	$	31

(1)

Includes investments held in the nuclear decommissioning trusts. Excludes $29 million and $26 million of assets at September 30, 2017 and December 31, 2016, respectively, measured at fair value using NAV (or its equivalent) as a practical expedient which are not required to be categorized in the fair value hierarchy.

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,
	2017			2016			2017			2016
(millions)
Beginning balance	$	152		$	125		$	143		$	93
Total realized and unrealized gains (losses):
Included in earnings		(12	)		(7	)		(37	)		(24	)
Included in regulatory assets/liabilities		11			(37	)		34			(5	)
Settlements		1			7			12			24
Ending balance	$	152		$	88		$	152		$	88

Dominion Energy Gas Holdings, LLC

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

Recurring Fair Value Measurements

The following table presents Dominion Energy 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)
September 30, 2017
Assets
Commodity	$	—	$	1	$	—	$	1
Foreign currency		—		25		—		25
Total assets	$	—	$	26	$	—	$	26
Liabilities
Commodity	$	—	$	6	$	—	$	6
Foreign currency		—		4		—		4
Total liabilities	$	—	$	10	$	—	$	10
December 31, 2016
Liabilities
Commodity	$	—	$	3	$	2	$	5
Foreign currency		—		6		—		6
Total liabilities	$	—	$	9	$	2	$	11

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

The following table presents the net change in Dominion Energy Gas' assets and liabilities for derivatives measured at fair value on a recurring basis and included in the Level 3 fair value category. There were no net changes in assets and liabilities for derivatives measured at fair value on a recurring basis and included in the Level 3 fair value category for the three months ended September 30, 2017 and 2016.

	Nine Months Ended September 30,
	2017			2016
(millions)
Beginning balance	$	(2	)	$	6
Total realized and unrealized gains (losses):
Included in other comprehensive income (loss)		(1	)		2
Transfers out of Level 3		3			(8	)
Ending balance	$	—		$	—

- 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.

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