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Derivatives and Hedge Accounting Activities

3 Months Ended

Mar. 31, 2022

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivatives and Hedge Accounting Activities

Note 9. Derivatives and Hedge Accounting Activities

The Companies’ accounting policies, objectives and strategies for using derivative instruments are discussed in Note 2 to the Consolidated Financial Statements in the Companies’ Annual Report on Form 10-K for the year ended December 31, 2021. See Note 8 in this report for additional information about fair value measurements and associated valuation methods for derivatives.

Derivative assets and liabilities are presented gross on the Companies’ Consolidated Balance Sheets. The Companies’ derivative contracts include both over-the-counter transactions and those that are executed on an exchange or other trading platform (exchange contracts) and centrally cleared. Over-the-counter contracts are bilateral contracts that are transacted directly with a third party. Exchange contracts utilize a financial intermediary, exchange, or clearinghouse to enter, execute or clear the transactions. Certain over-the-counter and exchange contracts contain contractual rights of setoff through master netting arrangements, derivative clearing agreements and contract default provisions. In addition, the contracts are subject to conditional rights of setoff through counterparty nonperformance, insolvency or other conditions.

In general, most over-the-counter transactions and all exchange contracts are subject to collateral requirements. Types of collateral for over-the-counter and exchange contracts include cash, letters of credit, and in some cases other forms of security, none of which are subject to restrictions. Cash collateral is used in the table below to offset derivative assets and liabilities. In February 2022, Dominion Energy entered into contracts representing offsetting positions to certain existing exchange contracts with collateral requirements as well as new over-the-counter transactions that are not subject to collateral requirements. These contracts resulted in positions which limit the risk of increased cash collateral requirements. Certain accounts receivable and accounts payable recognized on the Companies’ Consolidated Balance Sheets, letters of credit and other forms of securities, as well as certain other long-term debt, all of which are not included in the tables below, are subject to offset under master netting or similar arrangements and would reduce the net exposure. See Note 18 for additional information regarding credit-related contingent features for the Companies’ derivative instruments.

Dominion Energy

Balance Sheet Presentation

The tables below present Dominion Energy’s derivative asset and liability balances by type of financial instrument, if the gross amounts recognized in its Consolidated Balance Sheets were netted with derivative instruments and cash collateral received or paid:

	March 31, 2022								December 31, 2021
	Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
	Gross Assets Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Received		Net Amounts		Gross Assets Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Received		Net Amounts
(millions)
Commodity contracts:
Over-the-counter	$	125	$	37	$	—	$	88	$	153	$	13	$	—	$	140
Exchange		136		130		—		6		9		7		—		2
Interest rate contracts:
Over-the-counter		768		158		—		610		323		49		—		274
Foreign currency exchange rate contracts:
Over-the-counter		—		—		—		—		8		—		—		8
Total derivatives, subject to a master netting or similar arrangement	$	1,029	$	325	$	—	$	704	$	493	$	69	$	—	$	424

(1)	Excludes $180 million and $120 million of derivative assets at March 31, 2022 and December 31, 2021, respectively, which are not subject to master netting or similar arrangements.

	March 31, 2022								December 31, 2021
	Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
	Gross Liabilities Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Paid		Net Amounts		Gross Liabilities Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Paid		Net Amounts
(millions)
Commodity contracts:
Over-the-counter	$	326	$	37	$	124	$	165	$	95	$	13	$	54	$	28
Exchange		622		130		492		—		374		7		367		—
Interest rate contracts:
Over-the-counter		362		158		6		198		399		49		11		339
Foreign currency exchange rate contracts:
Over-the-counter		4		—		—		4		—		—		—		—
Total derivatives, subject to a master netting or similar arrangement	$	1,314	$	325	$	622	$	367	$	868	$	69	$	432	$	367

(1)	There were no derivative liabilities that are not subject to master netting or similar arrangements at March 31, 2022 or December 31, 2021.

Volumes

The following table presents the volume of Dominion Energy’s derivative activity at March 31, 2022. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of its long and short positions.

	Current		Noncurrent
Natural Gas (bcf):
Fixed price⁽¹⁾		29		—
Basis⁽¹⁾		155		465
Electricity (MWh in millions):
Fixed price		15		35
FTRs		18		—
Interest rate⁽²⁾ (in millions)	$	1,637	$	12,809
Foreign currency exchange rate⁽²⁾(in millions)	520 kr.		4,530 kr.

(1)	Includes options.

(2)	Maturity is determined based on final settlement period.

AOCI

The following table presents selected information related to losses on cash flow hedges included in AOCI in Dominion Energy’s Consolidated Balance Sheet at March 31, 2022:

	AOCI After-Tax			Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax			Maximum Term
(millions)
Interest rate	$	(323	)	$	(38	)	393 months
Total	$	(323	)	$	(38	)

The amounts that will be reclassified from AOCI to earnings will generally be offset by the recognition of the hedged transactions (e.g., interest rate payments) in earnings, thereby achieving the realization of prices contemplated by the underlying risk management strategies and will vary from the expected amounts presented above as a result of changes in interest rates.

Fair Value Hedges

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings and presented in the same line item. There were no derivative instruments designated as fair value hedges during the three months ended March 31, 2022 and 2021.

The following table presents the amounts recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges, all of which related to discontinued hedging relationships at both March 31, 2022 and December 31, 2021:

	Carrying Amount of the Hedged Asset (Liability)						Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Assets (Liabilities)
	March 31, 2022			December 31, 2021			March 31, 2022			December 31, 2021
(millions)
Long-term debt	$	(351	)	$	(352	)	$	(1	)	$	(2	)

Fair Value and Gains and Losses on Derivative Instruments

The following table presents the fair values of Dominion Energy’s derivatives and where they are presented in its Consolidated Balance Sheets:

	Fair Value – Derivatives under Hedge Accounting		Fair Value – Derivatives not under Hedge Accounting		Total Fair Value
(millions)
March 31, 2022
ASSETS
Current Assets
Commodity	$	—	$	227	$	227
Interest rate		40		13		53
Total current derivative assets⁽¹⁾		40		240		280
Noncurrent Assets
Commodity		—		214		214
Interest rate		266		449		715
Total noncurrent derivative assets⁽²⁾		266		663		929
Total derivative assets	$	306	$	903	$	1,209
LIABILITIES
Current Liabilities
Commodity	$	—	$	725	$	725
Interest rate		—		1		1
Foreign currency exchange rate		—		1		1
Total current derivative liabilities		—		727		727
Noncurrent Liabilities
Commodity		—		223		223
Interest rate		200		161		361
Foreign currency exchange rate		—		3		3
Total noncurrent derivative liabilities⁽³⁾		200		387		587
Total derivative liabilities	$	200	$	1,114	$	1,314
December 31, 2021
ASSETS
Current Assets
Commodity	$	—	$	103	$	103
Interest rate		1		17		18
Foreign currency exchange rate		—		1		1
Total current derivative assets⁽¹⁾		1		121		122
Noncurrent Assets
Commodity		—		179		179
Interest rate		145		160		305
Foreign currency exchange rate		—		7		7
Total noncurrent derivative assets⁽²⁾		145		346		491
Total derivative assets	$	146	$	467	$	613
LIABILITIES
Current Liabilities
Commodity	$	—	$	304	$	304
Interest rate		42		13		55
Total current derivative liabilities		42		317		359
Noncurrent Liabilities
Commodity		—		165		165
Interest rate		295		49		344
Total noncurrent derivative liabilities⁽³⁾		295		214		509
Total derivative liabilities	$	337	$	531	$	868

(1)	Current derivative assets are presented in other current assets in Dominion Energy’s Consolidated Balance Sheets.

(2)	Noncurrent derivative assets are presented in other deferred charges and other assets in Dominion Energy’s Consolidated Balance Sheets.

(3)	Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in Dominion Energy’s Consolidated Balance Sheets.

The following tables present the gains and losses on Dominion Energy’s derivatives, as well as where the associated activity is presented in its Consolidated Balance Sheets and Statements of Income.

Derivatives in cash flow hedging relationships	Amount of Gain (Loss) Recognized in AOCI on Derivatives⁽¹⁾		Amount of Gain (Loss) Reclassified From AOCI to Income			Increase (Decrease) in Derivatives Subject to Regulatory Treatment⁽²⁾
(millions)
Three Months Ended March 31, 2022
Derivative type and location of gains (losses):
Interest rate⁽³⁾	$	33	$	(14	)	$	279
Total	$	33	$	(14	)	$	279

Three Months Ended March 31, 2021
Derivative type and location of gains (losses):
Commodity⁽⁴⁾	$	—	$	(1	)	$	—
Interest rate⁽³⁾		52		(16	)		408
Total	$	52	$	(17	)	$	408

(1)	Amounts deferred into AOCI have no associated effect in Dominion Energy’s Consolidated Statements of Income.

(2)	Represents net derivative activity deferred into and amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in Dominion Energy’s Consolidated Statements of Income.

(3)	Amounts recorded in Dominion Energy’s Consolidated Statement of Income are classified in interest and related charges.

(4)	Amounts recorded in Dominion Energy’s Consolidated Statement of Income are classified in purchased gas.

Derivatives not designated as hedging instruments	Amount of Gain (Loss) Recognized in Income on Derivatives⁽¹⁾⁽²⁾
	Three Months Ended
	March 31,
	2022			2021
(millions)
Derivative type and location of gains (losses):
Commodity:
Operating revenue	$	(330	)	$	(41	)
Purchased gas		2			—
Electric fuel and other energy-related purchases		59			(44	)
Interest rate:
Interest and related charges		196			319
Total	$	(73	)	$	234

(1)	Includes derivative activity amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in Dominion Energy’s Consolidated Statements of Income.

(2)	Excludes amounts related to foreign currency exchange rate derivatives that are deferred to plant under construction within property, plant and equipment that will begin to amortize once the CVOW Commercial Project is placed in service.

Virginia Power

Balance Sheet Presentation

The tables below present Virginia Power’s derivative asset and liability balances by type of financial instrument, if the gross amounts recognized in its Consolidated Balance Sheets were netted with derivative instruments and cash collateral received or paid:

	March 31, 2022								December 31, 2021
	Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
	Gross Assets Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Received		Net Amounts		Gross Assets Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Received		Net Amounts
(millions)
Commodity contracts:
Over-the-counter	$	32	$	10	$	—	$	22	$	110	$	8	$	—	$	102
Exchange		9		9		—		—		7		7		—		—
Interest rate contracts:
Over-the-counter		300		36		—		264		146		20		—		126
Foreign currency exchange rate contracts:
Over-the-counter		—		—		—		—		8		—		—		8
Total derivatives, subject to a master netting or similar arrangement	$	341	$	55	$	—	$	286	$	271	$	35	$	—	$	236

(1)	Excludes $63 million and $29 million of derivative assets at March 31, 2022 and December 31, 2021, respectively, which are not subject to master netting or similar arrangements.

	March 31, 2022								December 31, 2021
	Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
	Gross Liabilities Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Paid		Net Amounts		Gross Liabilities Presented in the Consolidated Balance Sheet⁽¹⁾		Financial Instruments		Cash Collateral Paid		Net Amounts
(millions)
Commodity contracts:
Over-the-counter	$	167	$	10	$	124	$	33	$	84	$	8	$	54	$	22
Exchange		136		9		127		—		43		7		36		—
Interest rate contracts:
Over-the-counter		200		36		—		164		337		20		—		317
Foreign currency exchange rate contracts:
Over-the-counter		4		—		—		4		—		—		—		—
Total derivatives, subject to a master netting or similar arrangement	$	507	$	55	$	251	$	201	$	464	$	35	$	90	$	339

(1)	Excludes $1 million and $6 million of derivative liabilities at March 31, 2022 and December 31, 2021, respectively, which are not subject to master netting or similar arrangements.

Volumes

The following table presents the volume of Virginia Power’s derivative activity at March 31, 2022. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of its long and short positions.

	Current		Noncurrent
Natural Gas (bcf):
Fixed price⁽¹⁾		21		—
Basis⁽¹⁾		146		463
Electricity (MWh in millions):
Fixed price		7		9
FTRs		18		—
Interest rate⁽²⁾ (in millions)	$	1,100	$	2,800
Foreign currency exchange rate⁽²⁾(in millions)	520 kr.		4,530 kr.

(1)	Includes options.

(2)	Maturity is determined based on final settlement period.

AOCI

The following table presents selected information related to losses on cash flow hedges included in AOCI in Virginia Power’s Consolidated Balance Sheet at March 31, 2022:

	AOCI After-Tax			Amounts Expected to be Reclassified to Earnings During the Next 12 Months After-Tax			Maximum Term
(millions)
Interest rate	$	(25	)	$	(2	)	393 months
Total	$	(25	)	$	(2	)

The amounts that will be reclassified from AOCI to earnings will generally be offset by the recognition of the hedged transactions (e.g., interest payments) in earnings, thereby achieving the realization of interest rates contemplated by the underlying risk management strategies and will vary from the expected amounts presented above as a result of changes in interest rates.

Fair Value and Gains and Losses on Derivative Instruments

The following table presents the fair values of Virginia Power’s derivatives and where they are presented in its Consolidated Balance Sheets:

	Fair Value – Derivatives under Hedge Accounting		Fair Value – Derivatives not under Hedge Accounting		Total Fair Value
(millions)
March 31, 2022
ASSETS
Current Assets
Commodity	$	—	$	80	$	80
Interest rate		34		—		34
Total current derivative assets⁽¹⁾		34		80		114
Noncurrent Assets
Commodity		—		24		24
Interest rate		266		—		266
Total noncurrent derivative assets⁽²⁾		266		24		290
Total derivative assets	$	300	$	104	$	404
LIABILITIES
Current Liabilities
Commodity	$	—	$	240	$	240
Foreign currency exchange rate		—		1		1
Total current derivative liabilities		—		241		241
Noncurrent Liabilities
Commodity		—		64		64
Interest rate		200		—		200
Foreign currency exchange rate		—		3		3
Total noncurrent derivative liabilities⁽³⁾		200		67		267
Total derivative liabilities	$	200	$	308	$	508
December 31, 2021
ASSETS
Current Assets
Commodity	$	—	$	74	$	74
Interest rate		1		—		1
Foreign currency exchange rate		—		1		1
Total current derivative assets⁽¹⁾		1		75		76
Noncurrent Assets
Commodity		—		72		72
Interest rate		145		—		145
Foreign currency exchange rate		—		7		7
Total noncurrent derivative assets⁽²⁾		145		79		224
Total derivative assets	$	146	$	154	$	300
LIABILITIES
Current Liabilities
Commodity	$	—	$	92	$	92
Interest rate		42		—		42
Total current derivative liabilities		42		92		134
Noncurrent Liabilities
Commodity		—		41		41
Interest rate		295		—		295
Total noncurrent derivative liabilities⁽³⁾		295		41		336
Total derivative liabilities	$	337	$	133	$	470

(1)	Current derivative assets are presented in other current assets in Virginia Power’s Consolidated Balance Sheets.

(2)	Noncurrent derivative assets are presented in other deferred charges and other assets in Virginia Power’s Consolidated Balance Sheets.

(3)	Noncurrent derivative liabilities are presented in other deferred credits and other liabilities in Virginia Power’s Consolidated Balance Sheets.

The following tables present the gains and losses on Virginia Power’s derivatives, as well as where the associated activity is presented in its Consolidated Balance Sheets and Statements of Income:

Derivatives in cash flow hedging relationships	Amount of Gain (Loss) Recognized in AOCI on Derivatives⁽¹⁾		Amount of Gain (Loss) Reclassified From AOCI to Income			Increase (Decrease) in Derivatives Subject to Regulatory Treatment⁽²⁾
(millions)
Three Months Ended March 31, 2022
Derivative type and location of gains (losses):
Interest rate⁽³⁾	$	26	$	(1	)	$	279
Total	$	26	$	(1	)	$	279
Three Months Ended March 31, 2021
Derivative type and location of gains (losses):
Interest rate⁽³⁾	$	43	$	(1	)	$	407
Total	$	43	$	(1	)	$	407

(1)	Amounts deferred into AOCI have no associated effect in Virginia Power’s Consolidated Statements of Income.

(2)	Represents net derivative activity deferred into and amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in Virginia Power’s Consolidated Statements of Income.

(3) Amounts recorded in Virginia Power’s Consolidated Statements of Income are classified in interest and related charges.

Derivatives not designated as hedging instruments	Amount of Gain (Loss) Recognized in Income on Derivatives⁽¹⁾⁽²⁾
	Three Months Ended
	March 31,
	2022			2021
(millions)
Derivative type and location of gains (losses):
Commodity:
Operating Revenue	$	(41	)	$	(2	)
Electric fuel and other energy-related purchases		57			(44	)
Total	$	16		$	(46	)

(1)	Includes derivative activity amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in Virginia Power’s Consolidated Statements of Income.

(2) Excludes amounts related to foreign currency exchange rate derivatives that are deferred to plant under construction within property, plant and equipment that will begin to amortize once the CVOW Commercial Project is placed in service.