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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Inputs, Assets, Quantitative Information

The following table presents Dominion Energy's quantitative information about Level 3 fair value measurements at March 31, 2018. 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⁾	$	83	Discounted cash flow	Market price (per Dth)	⁽³⁾	(2) - 6		—
FTRs		9	Discounted cash flow	Market price (per MWh)	⁽³⁾	(1) - 6		1
Physical options:
Natural gas		1	Option model	Market price (per Dth)	⁽³⁾	2 - 6		3
				Price volatility	⁽⁴⁾	14% - 29%		23	%
Electricity		29	Option model	Market price (per MWh)	⁽³⁾	23 - 49		35
				Price volatility	⁽⁴⁾	7% - 63%		27	%
Total assets	$	122
Liabilities
Financial forwards:
FTRs	$	2	Discounted cash flow	Market price (per MWh)	⁽³⁾	(5) - 6		—
Total liabilities	$	2

(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.

Fair Value, Option, Qualitative Disclosures

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)

Fair Value, by Balance Sheet Grouping

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)
At March 31, 2018
Assets
Derivatives:
Commodity	$	—	$	34	$	122	$	156
Interest rate		—		44		—		44
Foreign currency		—		44		—		44
Investments⁽¹⁾:
Equity securities:
U.S.		3,435		—		—		3,435
Fixed income securities:
Corporate debt instruments		—		445		—		445
Government securities		302		811		—		1,113
Cash equivalents and other		12		—		—		12
Total assets	$	3,749	$	1,378	$	122	$	5,249
Liabilities
Derivatives:
Commodity	$	—	$	29	$	2	$	31
Interest rate		—		58		—		58
Foreign currency		—		1		—		1
Total liabilities	$	—	$	88	$	2	$	90
At December 31, 2017
Assets
Derivatives:
Commodity	$	—	$	101	$	157	$	258
Interest rate		—		17		—		17
Foreign currency		—		32		—		32
Investments⁽¹⁾:
Equity securities:
U.S.		3,493		—		—		3,493
Fixed income securities:
Corporate debt instruments		—		444		—		444
Government securities		307		794		—		1,101
Cash equivalents and other		34		—		—		34
Total assets	$	3,834	$	1,388	$	157	$	5,379
Liabilities
Derivatives:
Commodity	$	—	$	190	$	7	$	197
Interest rate		—		85		—		85
Foreign currency		—		2		—		2
Total liabilities	$	—	$	277	$	7	$	284

(1)

Includes investments held in the nuclear decommissioning and rabbi trusts. Excludes $195 million and $88 million of assets at March 31, 2018 and December 31, 2017, 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, Net Derivative Asset (Liability) 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
	March 31,
	2018			2017
(millions)
Beginning balance	$	150		$	139
Total realized and unrealized gains (losses):
Included in earnings		(18	)		(15	)
Included in other comprehensive income		1			—
Included in regulatory assets/liabilities		(21	)		(9	)
Settlements		7			12
Transfers out of Level 3		1			3
Ending balance	$	120		$	130

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 March 31, 2018
Total gains (losses) included in earnings	$	(1	)	$	(17	)	$	(18	)
Three Months Ended March 31, 2017
Total gains (losses) included in earnings	$	—		$	(15	)	$	(15	)

Schedule of Carrying Values and Estimated Fair Values of Debt Instruments

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

	March 31, 2018				December 31, 2017
	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⁾	$	29,362	$	31,044	$	28,666	$	31,233
Junior subordinated notes⁽³⁾		3,980		4,017		3,981		4,102
Remarketable subordinated notes⁽³⁾		1,381		1,299		1,379		1,446
Virginia Power
Long-term debt, including securities due within one year⁽³⁾	$	11,690	$	12,702	$	11,346	$	12,842
Dominion Energy Gas
Long-term debt, including securities due within one year⁽⁴⁾	$	3,579	$	3,657	$	3,570	$	3,719

(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 March 31, 2018 and December 31, 2017, includes the valuation of certain fair value hedges associated with fixed rate debt of $(54) million and $(22) 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 Inputs, Assets, Quantitative Information

The following table presents Virginia Power's quantitative information about Level 3 fair value measurements at March 31, 2018. 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⁾	$	81	Discounted cash flow	Market price (per Dth)	⁽³⁾	(2) - 6		(1	)
FTRs		8	Discounted cash flow	Market price (per MWh)	⁽³⁾	(1) - 6		1
Physical options:
Natural gas		1	Option model	Market price (per Dth)	⁽³⁾	2 - 6		3
				Price volatility	⁽⁴⁾	14% - 29%		23	%
Electricity		29	Option model	Market price (per MWh)	⁽³⁾	23 - 49		35
				Price volatility	⁽⁴⁾	7% - 63%		27	%
Total assets	$	119
Liabilities
Financial forwards:
FTRs	$	2	Discounted cash flow	Market price (per MWh)	⁽³⁾	(5) - 6		—
Total liabilities	$	2

(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.

Fair Value, Option, Qualitative Disclosures

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)

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 March 31, 2018
Assets
Derivatives:
Commodity	$	—	$	4	$	119	$	123
Interest rate		—		6		—		6
Investments⁽¹⁾:
Equity securities:
U.S.		1,539		—		—		1,539
Fixed income securities:
Corporate debt instruments		—		221		—		221
Government securities		173		327		—		500
Cash equivalents and other		3		—		—		3
Total assets	$	1,715	$	558	$	119	$	2,392
Liabilities
Derivatives:
Commodity	$	—	$	7	$	2	$	9
Interest rate		—		14		—		14
Total liabilities	$	—	$	21	$	2	$	23
At December 31, 2017
Assets
Derivatives:
Commodity	$	—	$	14	$	152	$	166
Investments⁽¹⁾:
Equity securities:
U.S.		1,566		—		—		1,566
Fixed income securities:
Corporate debt instruments		—		224		—		224
Government securities		168		326		—		494
Cash equivalents and other		16		—		—		16
Total assets	$	1,750	$	564	$	152	$	2,466
Liabilities
Derivatives:
Commodity	$	—	$	4	$	5	$	9
Interest rate		—		57		—		57
Total liabilities	$	—	$	61	$	5	$	66

(1)

Includes investments held in the nuclear decommissioning trusts. Excludes $135 million and $27 million of assets at March 31, 2018 and December 31, 2017, 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, Net Derivative Asset (Liability) 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
	March 31,
	2018			2017
(millions)
Beginning balance	$	147		$	143
Total realized and unrealized losses:
Included in earnings		(17	)		(15	)
Included in regulatory assets/liabilities		(19	)		(8	)
Settlements		6			12
Ending balance	$	117		$	132

Dominion Energy Gas Holdings, LLC

Fair Value, by Balance Sheet Grouping

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)
At March 31, 2018
Assets
Foreign currency	$	—	$	44	$	—	$	44
Total assets	$	—	$	44	$	—	$	44
Liabilities
Foreign currency	$	—	$	1	$	—	$	1
Total liabilities	$	—	$	1	$	—	$	1
At December 31, 2017
Assets
Foreign currency	$	—	$	32	$	—	$	32
Total assets	$	—	$	32	$	—	$	32
Liabilities
Commodity	$	—	$	4	$	2	$	6
Foreign currency		—		2		—		2
Total liabilities	$	—	$	6	$	2	$	8

Fair Value, Net Derivative Asset (Liability) 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.

	Three Months Ended
	March 31,
	2018			2017
(millions)
Beginning balance	$	(2	)	$	(2	)
Total realized and unrealized gains (losses):
Included in other comprehensive income (loss)		1			(1	)
Transfers out of Level 3		1			3
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.

+ References + Details