Note 20. Operating Segments

The Companies are organized primarily on the basis of products and services sold in the U.S. A description of the operations included in the Companies’ primary operating segments is as follows:

Primary Operating Segment	Description of Operations	Dominion Energy	Virginia Power	Dominion Energy Gas
Power Delivery	Regulated electric distribution	X	X
	Regulated electric transmission	X	X
Power Generation	Regulated electric fleet	X	X
	Merchant electric fleet	X
Gas Infrastructure	Gas transmission and storage	X		X
	Gas distribution and storage	X		X
	Gas gathering and processing	X		X
	LNG terminalling and storage	X
	Nonregulated retail energy marketing	X

In addition to the operating segments above, the Companies also report a Corporate and Other segment.

Dominion Energy

The Corporate and Other Segment of Dominion Energy includes its corporate, service company and other functions (including unallocated debt). In addition, Corporate and Other includes specific items attributable to Dominion Energy’s operating segments that are not included in profit measures evaluated by executive management in assessing the segments’ performance or in allocating resources.

In the six months ended June 30, 2018, Dominion Energy reported after-tax net expenses of $349 million for specific items in the Corporate and Other segment, with $310 million of net expenses attributable to its operating segments. In the six months ended June 30, 2017, Dominion Energy reported after-tax net expenses of $10 million for specific items in the Corporate and Other segment, with $1 million of net expenses attributable to its operating segments.

The net expense for specific items attributable to Dominion Energy’s operating segments in 2018 primarily related to the impact of the following items:

•

A $215 million ($160 million after-tax) charge associated with Virginia legislation enacted in March 2018 that requires one-time rate credits of certain amounts to utility customers, attributable to:

•

Power Generation ($109 million after-tax); and

•

Power Delivery ($51 million after-tax).

•

A $122 million ($89 million after tax) charge for disallowance of FERC-regulated plant attributable to Gas Infrastructure.

•

An $81 million ($60 million after-tax) charge associated primarily with the asset retirement obligations for ash ponds and landfills at certain utility generation facilities in connection with the enactment of Virginia legislation in April 2018 attributable to Power Generation.

The following table presents segment information pertaining to Dominion Energy’s operations:

	Power Delivery		Power Generation		Gas Infrastructure		Corporate and Other			Adjustments/ Eliminations			Consolidated Total
(millions)
Three Months Ended June 30, 2018
Total revenue from external customers	$	528	$	1,635	$	914	$	(3	)	$	14		$	3,088
Intersegment revenue		6		3		8		170			(187	)		—
Total operating revenue		534		1,638		922		167			(173	)		3,088
Net income (loss) attributable to Dominion Energy		145		276		249		(221	)		—			449
Three Months Ended June 30, 2017
Total revenue from external customers	$	530	$	1,507	$	589	$	6		$	181		$	2,813
Intersegment revenue		7		2		175		149			(333	)		—
Total operating revenue		537		1,509		764		155			(152	)		2,813
Net income (loss) attributable to Dominion Energy		127		240		163		(140	)		—			390
Six Months Ended June 30, 2018
Total revenue from external customers	$	1,091	$	3,495	$	2,136	$	(210	)	$	42		$	6,554
Intersegment revenue		12		5		14		345			(376	)		—
Total operating revenue		1,103		3,500		2,150		135			(334	)		6,554
Net income (loss) attributable to Dominion Energy		301		624		576		(549	)		—			952
Six Months Ended June 30, 2017
Total revenue from external customers	$	1,084	$	3,160	$	1,490	$	9		$	454		$	6,197
Intersegment revenue		12		5		441		301			(759	)		—
Total operating revenue		1,096		3,165		1,931		310			(305	)		6,197
Net income (loss) attributable to Dominion Energy		252		501		426		(157	)		—			1,022

Intersegment sales and transfers for Dominion Energy are based on contractual arrangements and may result in intersegment profit or loss that is eliminated in consolidation.

Virginia Power

The Corporate and Other Segment of Virginia Power primarily includes specific items attributable to its operating segments that are not included in profit measures evaluated by executive management in assessing the segments' performance or in allocating resources.

In the six months ended June 30, 2018, Virginia Power reported after-tax net expenses of $237 million for specific items in the Corporate and Other segment, with $230 million of net expenses attributable to its operating segments. In the six months ended June 30, 2017, Virginia Power reported after-tax net expenses of $7 million for specific items in the Corporate and Other segment, all of which was attributable to its operating segments.

The net expense for specific items attributable to Virginia Power’s operating segments in 2018 primarily related to the impact of the following items:

•

A $215 million ($160 million after-tax) charge associated with Virginia legislation enacted in March 2018 that requires one-time rate credits of certain amounts to utility customers, attributable to:

•

Power Generation ($109 million after-tax); and

•

Power Delivery ($51 million after-tax).

•

The net expense for specific items attributable to Virginia Power’s operating segments in 2017 primarily related to the impact of the following item which was attributable to Power Delivery:

•

A $16 million ($10 million after-tax) charge arising from a proposed customer settlement.

The following table presents segment information pertaining to Virginia Power’s operations:

	Power Delivery		Power Generation		Corporate and Other			Consolidated Total
(millions)
Three Months Ended June 30, 2018
Operating revenue	$	528	$	1,301	$	—		$	1,829
Net income (loss)		145		227		(33	)		339
Three Months Ended June 30, 2017
Operating revenue	$	533	$	1,214	$	—		$	1,747
Net income (loss)		125		198		(5	)		318
Six Months Ended June 30, 2018
Operating revenue	$	1,091	$	2,701	$	(215	)	$	3,577
Net income (loss)		299		449		(225	)		523
Six Months Ended June 30, 2017
Operating revenue	$	1,090	$	2,488	$	—		$	3,578
Net income		250		421		3			674

Dominion Energy Gas

The Corporate and Other Segment of Dominion Energy Gas primarily includes specific items attributable to Dominion Energy Gas’ operating segment that are not included in profit measures evaluated by executive management in assessing the segment’s performance or in allocating resources and the effect of certain items recorded at Dominion Energy Gas as a result of Dominion Energy’s basis in the net assets contributed.

In the six months ended June 30, 2018, Dominion Energy Gas reported after-tax net expenses of $91 million for specific items in the Corporate and Other segment, with $89 million of net expenses attributable to its operating segment. In the six months ended June 30, 2017, Dominion Energy Gas reported after-tax net expenses of $9 million for specific items in the Corporate and Other segment, all of which was attributable to its operating segment.

The net expense for specific items in 2018 was due to a $122 million ($89 million after-tax) charge for disallowance of FERC-regulated plant.

The net expense for specific items in 2017 was due to a $15 million ($9 million after-tax) charge to write-off the balance of a regulatory asset no longer considered probable of recovery at June 30, 2017.

The following table presents segment information pertaining to Dominion Energy Gas’ operations:

	Gas Infrastructure		Corporate and Other			Consolidated Total
(millions)
Three Months Ended June 30, 2018
Operating revenue	$	459	$	—		$	459
Net income (loss)		108		(93	)		15
Three Months Ended June 30, 2017
Operating revenue	$	422	$	—		$	422
Net income (loss)		88		(11	)		77
Six Months Ended June 30, 2018
Operating revenue	$	985	$	—		$	985
Net income (loss)		275		(94	)		181
Six Months Ended June 30, 2017
Operating revenue	$	912	$	—		$	912
Net income (loss)		197		(12	)		185