Note 10. Investments

Dominion Energy

Equity and Debt Securities

Rabbi Trust Securities

Equity and debt securities and cash equivalents in Dominion Energy’s rabbi trusts and classified as trading totaled $114 million and $112 million at September 30, 2018 and December 31, 2017, respectively.

Decommissioning Trust Securities

Dominion Energy holds equity and debt securities, cash equivalents and cost method investments in nuclear decommissioning trust funds to fund future decommissioning costs for its nuclear plants. Dominion Energy’s decommissioning trust funds are summarized below:

	Amortized Cost		Total Unrealized Gains		Total Unrealized Losses				Fair Value
(millions)
September 30, 2018
Equity securities:⁽¹⁾
U.S.	$	1,710	$	2,128	$	(10	)		$	3,828
Fixed income securities:⁽²⁾
Corporate debt instruments		438		6		(7	)			437
Government securities		1,079		10		(19	)			1,070
Common/collective trust funds		82		—		—				82
Cash equivalents and other⁽³⁾		7		—		—				7
Total	$	3,316	$	2,144	$	(36	)	⁽⁴⁾	$	5,424
December 31, 2017
Equity securities:⁽²⁾
U.S.	$	1,569	$	1,857	$	—			$	3,426
Fixed income securities:⁽²⁾
Corporate debt instruments		430		15		(1	)			444
Government securities		1,039		27		(5	)			1,061
Common/collective trust funds		60		—		—				60
Cost method investments		68		—		—				68
Cash equivalents and other⁽³⁾		34		—		—				34
Total	$	3,200	$	1,899	$	(6	)	⁽⁴⁾	$	5,093

(1)

Effective January 2018, unrealized gains and losses on equity securities, including those previously classified as cost method investments, are included in other income and the nuclear decommissioning trust regulatory liability as discussed in Note 2.

(2)

Unrealized gains and losses on equity securities (for 2017) and fixed income securities are included in AOCI and the nuclear decommissioning trust regulatory liability as discussed in Note 2.

(3)

Includes pending sales of securities of $ — million and $5 million at September 30, 2018 and December 31, 2017, respectively.

(4)

The fair value of securities in an unrealized loss position was $1.1 billion and $565 million at September 30, 2018 and December 31, 2017, respectively.

The portion of unrealized gains and losses that relates to equity securities held within Dominion Energy’s nuclear decommissioning trusts is summarized below:

(millions)	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Net gains recognized during the period	$	243		$	267
Less: Net gains recognized during the period on securities sold during the period		(7	)		(42	)
Unrealized gains recognized during the period on securities still held at September 30, 2018⁽¹⁾	$	236		$	225

(1)	Included in other income and the nuclear decommissioning trust regulatory liability as discussed in Note 2.

The fair value of Dominion Energy’s debt securities with readily determinable fair values held in nuclear decommissioning trust funds at September 30, 2018 by contractual maturity is as follows:

	Amount
(millions)
Due in one year or less	$	199
Due after one year through five years		344
Due after five years through ten years		389
Due after ten years		657
Total	$	1,589

Presented below is selected information regarding Dominion Energy’s equity and debt securities with readily determinable fair values held in nuclear decommissioning trust funds.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
(millions)
Proceeds from sales	$	457	$	377	$	1,301	$	1,496
Realized gains⁽¹⁾		24		25		96		142
Realized losses⁽¹⁾		18		16		60		52

(1)	Includes realized gains and losses recorded to the nuclear decommissioning trust regulatory liability.

Dominion Energy recorded other-than-temporary impairment losses on investments held in nuclear decommissioning trust funds as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
(millions)
Total other-than-temporary impairment losses⁽¹⁾	$	8		$	7		$	25		$	33
Losses recorded to the nuclear decommissioning trust regulatory liability		—			(2	)		—			(13	)
Losses recognized in other comprehensive income (before taxes)		(8	)		(1	)		(25	)		(2	)
Net impairment losses recognized in earnings	$	—		$	4		$	—		$	18

(1)	Amounts include other-than-temporary impairment losses for debt securities of less than $1 million and $2 million for the three and nine months ended September 30, 2017, respectively.

Virginia Power

Virginia Power holds equity and debt securities, cash equivalents and cost method investments in nuclear decommissioning trust funds to fund future decommissioning costs for its nuclear plants. Virginia Power’s decommissioning trust funds are summarized below:

	Amortized Cost		Total Unrealized Gains		Total Unrealized Losses				Fair Value
(millions)
September 30, 2018
Equity securities:⁽¹⁾
U.S.	$	842	$	965	$	(6	)		$	1,801
Fixed income securities:⁽²⁾
Corporate debt instruments		220		2		(4	)			218
Government securities		509		4		(8	)			505
Common/collective trust funds		48		—		—				48
Cash equivalents and other⁽³⁾		1		—		—				1
Total	$	1,620	$	971	$	(18	)	⁽⁴⁾	$	2,573
December 31, 2017
Equity securities:⁽²⁾
U.S.	$	734	$	831	$	—			$	1,565
Fixed income securities:⁽²⁾
Corporate debt instruments		216		8		—				224
Government securities		482		13		(2	)			493
Common/collective trust funds		27		—		—				27
Cost method investments		68		—		—				68
Cash equivalents and other⁽³⁾		22		—		—				22
Total	$	1,549	$	852	$	(2	)	⁽⁴⁾	$	2,399

(1)

(2)

Unrealized gains and losses on equity securities (for 2017) and fixed income securities are included in AOCI and the nuclear decommissioning trust regulatory liability as discussed in Note 2.

(3)

Includes pending sales of securities of $1 million and $6 million at September 30, 2018 and December 31, 2017, respectively.

(4)

The fair value of securities in an unrealized loss position was $539 million and $234 million at September 30, 2018 and December 31, 2017, respectively.

The portion of unrealized gains and losses that relates to equity securities held within Virginia Power’s nuclear decommissioning trusts is summarized below:

	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
(millions)
Net gains recognized during the period	$	106		$	118
Less: Net gains recognized during the period on securities sold during the period		(3	)		(26	)
Unrealized gains recognized during the period on securities still held at September 30, 2018⁽¹⁾	$	103		$	92

(1)

Included in other income and the nuclear decommissioning trust regulatory liability as discussed in Note 2.

The fair value of Virginia Power’s debt securities with readily determinable fair values held in nuclear decommissioning trust funds at September 30, 2018 by contractual maturity is as follows:

	Amount
(millions)
Due in one year or less	$	64
Due after one year through five years		139
Due after five years through ten years		221
Due after ten years		347
Total	$	771

Presented below is selected information regarding Virginia Power’s equity and debt securities with readily determinable fair values held in nuclear decommissioning trust funds.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
(millions)
Proceeds from sales	$	237	$	156	$	651	$	654
Realized gains⁽¹⁾		11		9		44		64
Realized losses⁽¹⁾		5		6		17		24

(1)	Includes realized gains and losses recorded to the nuclear decommissioning trust regulatory liability.

Other-than-temporary impairment losses on investments held in nuclear decommissioning trust funds recognized in earnings for Virginia Power were not material for the three and nine months ended September 30, 2018 and 2017.

Equity Method Investments

Dominion Energy

Blue Racer

In October 2018, Dominion Energy entered into an agreement to sell its 50% limited partnership interest in Blue Racer. The transaction is expected to close in the fourth quarter of 2018, subject to clearance from the Federal Trade Commission under the Hart-Scott-Rodino Act and the satisfaction of customary closing conditions, for up-front cash consideration of $1.05 billion. As a result, Dominion Energy expects to recognize a gain of approximately $380 million ($230 million after-tax) in the fourth quarter of 2018. In addition, the agreement contains additional deferred consideration of $150 million, subject to increase for interest costs effective March 2019, payable upon the purchaser’s availability of cash. This will result in a gain when realizable. Also, the purchaser agreed to pay additional consideration contingent upon the achievement of certain financial performance milestones of Blue Racer from 2019 through 2021. Pursuant to the purchase agreement, the aggregate will not exceed $300 million, which represents a gain contingency, and, as a result, Dominion Energy will not recognize any additional gain unless such consideration is realizable.

Atlantic Coast Pipeline

Dominion Energy recorded contributions of $147 million and $84 million during the three months ended September 30, 2018 and 2017, respectively, and $306 million and $286 million during the nine months ended September 30, 2018 and 2017, respectively, to Atlantic Coast Pipeline. At September 30, 2018, Dominion Energy had $37 million of contributions payable to Atlantic Coast Pipeline included within other current liabilities in the Consolidated Balance Sheets.

DETI provides services to Atlantic Coast Pipeline which totaled $50 million and $32 million for the three months ended September 30, 2018 and 2017, respectively, and $156 million and $93 million for the nine months ended September 30, 2018 and 2017, respectively, included in operating revenue in Dominion Energy and Dominion Energy Gas’ Consolidated Statements of Income. Amounts receivable related to these services were $15 million and $12 million at September 30, 2018 and December 31, 2017, respectively, composed entirely of accrued unbilled revenue, included in other receivables in Dominion Energy and Dominion Energy Gas’ Consolidated Balance Sheets.

In October 2017, Dominion Energy entered into a guarantee agreement to support a portion of Atlantic Coast Pipeline’s obligation under its credit facility. See Note 16 for more information.

NedPower

At December 31, 2017, Dominion Energy had a liability of $17 million recorded to other deferred credits and other liabilities on the Consolidated Balance Sheets relating to its commitment to provide further financial support for NedPower. At September 30, 2018, Dominion Energy had no remaining liability.

Other – Catalyst Old River Hydroelectric Limited Partnership

In September 2018, Dominion Energy completed the sale of its 25% limited partnership interest in Catalyst Old River Hydroelectric Limited Partnership and received proceeds of $91 million. The sale resulted in a gain of $87 million ($63 million after-tax), which is included in other income in Dominion Energy’s Consolidated Statement of Income.

Dominion Energy Gas

Iroquois

Dominion Energy Gas’ equity earnings totaled $18 million and $15 million for the nine months ended September 30, 2018 and 2017, respectively. Dominion Energy Gas received distributions of $20 million and $17 million for the nine months ended September 30, 2018 and 2017, respectively. At September 30, 2018 and December 31, 2017, the carrying amount of Dominion Energy Gas’ investment of $93 million and $95 million, respectively exceeded its share of underlying equity in net assets by $8 million. The difference reflects equity method goodwill and is not being amortized.