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 nine months ended September 30, 2018, Dominion Energy reported after-tax net expenses of $253 million for specific items in the Corporate and Other segment, with $188 million of net expenses attributable to its operating segments. In the nine months ended September 30, 2017, Dominion Energy reported after-tax net expenses of $17 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 $156 million ($121 million after-tax) increased net investment earnings on nuclear decommissioning trust funds attributable to Power Generation.

•

A $124 million ($88 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 September 30, 2018
Total revenue from external customers	$	596	$	2,021	$	836	$	—		$	(2	)	$	3,451
Intersegment revenue		5		3		7		160			(175	)		—
Total operating revenue		601		2,024		843		160			(177	)		3,451
Net income attributable to Dominion Energy		163		414		264		13			—			854
Three Months Ended September 30, 2017
Total revenue from external customers	$	580	$	1,931	$	459	$	3		$	206		$	3,179
Intersegment revenue		4		3		204		150			(361	)		—
Total operating revenue		584		1,934		663		153			(155	)		3,179
Net income (loss) attributable to Dominion Energy		138		369		187		(29	)		—			665
Nine Months Ended September 30, 2018
Total revenue from external customers	$	1,687	$	5,516	$	2,972	$	(210	)	$	40		$	10,005
Intersegment revenue		17		8		21		505			(551	)		—
Total operating revenue		1,704		5,524		2,993		295			(511	)		10,005
Net income (loss) attributable to Dominion Energy		464		1,038		840		(536	)		—			1,806
Nine Months Ended September 30, 2017
Total revenue from external customers	$	1,664	$	5,091	$	1,949	$	12		$	660		$	9,376
Intersegment revenue		16		8		645		451			(1,120	)		—
Total operating revenue		1,680		5,099		2,594		463			(460	)		9,376
Net income (loss) attributable to Dominion Energy		390		870		613		(186	)		—			1,687

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 nine months ended September 30, 2018, Virginia Power reported after-tax net expenses of $229 million for specific items in the Corporate and Other segment, with $226 million of net expenses attributable to its operating segments. In the nine months ended September 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 September 30, 2018
Operating revenue	$	595	$	1,637	$	—		$	2,232
Net income		163		347		10			520
Three Months Ended September 30, 2017
Operating revenue	$	580	$	1,574	$	—		$	2,154
Net income		137		314		8			459
Nine Months Ended September 30, 2018
Operating revenue	$	1,686	$	4,338	$	(215	)	$	5,809
Net income (loss)		462		796		(215	)		1,043
Nine Months Ended September 30, 2017
Operating revenue	$	1,670	$	4,062	$	—		$	5,732
Net income		387		735		11			1,133

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 nine months ended September 30, 2018, Dominion Energy Gas reported after-tax net expenses of $100 million for specific items in the Corporate and Other segment, with $99 million of net expenses attributable to its operating segment. In the nine months ended September 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 $124 million ($88 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.

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

	Gas Infrastructure		Corporate and Other			Consolidated Total
(millions)
Three Months Ended September 30, 2018
Operating revenue	$	423	$	—		$	423
Net income (loss)		146		(10	)		136
Three Months Ended September 30, 2017
Operating revenue	$	401	$	—		$	401
Net income (loss)		121		(4	)		117
Nine Months Ended September 30, 2018
Operating revenue	$	1,408	$	—		$	1,408
Net income (loss)		421		(104	)		317
Nine Months Ended September 30, 2017
Operating revenue	$	1,313	$	—		$	1,313
Net income (loss)		318		(16	)		302