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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K
(Mark One)
x |
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2001
OR
¨ |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-8489
DOMINION RESOURCES, INC.
(Exact name of registrant as specified in its charter)
| Virginia (State or other jurisdiction of incorporation or organization) 120 Tredegar Street Richmond, Virginia (Address of principal executive offices) |
|
54-1229715 (I.R.S. Employer Identification Number) 23219 (Zip Code) |
(804) 819-2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class
|
|
Name of Each Exchange on Which Registered
|
| Common Stock, no par value |
|
New York Stock Exchange |
| 9.5% Corporate Premium Income Equity Securities, $50 par |
|
New York Stock Exchange |
| 8.4% Trust Preferred Securities, $25 par |
|
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
The aggregate market value of the voting stock held by non-affiliates of the registrant was over $15.6 billion based
on the closing price of our Common Stock on March 1, 2002, as reported on the composite tape by the Wall Street Journal.
Indicate the number of shares outstanding of each registrant’s class of common stock, as of the latest practicable date.
| Class
|
|
Outstanding at March 1, 2002
|
| Common Stock, no par value |
|
265,355,254 |
DOCUMENTS INCORPORATED BY REFERENCE.
(a) |
|
Portions of the 2001 Annual Report to Shareholders for the fiscal year ended December 31, 2001 are incorporated by reference in Parts I, II and IV.
|
(b) |
|
Portions of the 2002 Proxy Statement, are incorporated by reference in Part III. |
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| PART I |
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| PART II |
| 5. |
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| 6. |
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| 7. |
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| 7A. |
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| 8. |
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| 9. |
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| PART III |
| 10. |
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| 11. |
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| 13. |
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| PART IV |
| 14. |
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1
PART I
Dominion Resources, Inc. is a fully integrated gas and electric holding company
headquartered in Richmond, Virginia. Incorporated in Virginia in 1983, Dominion is a registered public utility holding company under the Public Utility Holding Company Act of 1935 (the 1935 Act).
The term “Dominion” is used throughout this report and, depending on the context of its use, may represent any of the following: the legal entity, Dominion Resources,
Inc., one of Dominion Resources, Inc.’s consolidated subsidiaries or the entirety of Dominion Resources, Inc. and its consolidated subsidiaries.
With the completion of the acquisition of Consolidated Natural Gas Company (CNG)
in January 2000, Dominion evolved from an utility holding company principally engaged in the production and sale of electric power to a fully integrated electric and natural gas utility serving wholesale and retail markets in the Midwest, Northeast,
and Mid-Atlantic portions of the United States. This region is home to approximately 40% of the nation’s energy consumption. Dominion refers to this region as “MAIN to Maine.” MAIN is an acronym for the Mid-America Interconnected
Network, which comprises all or parts of the states of Missouri, Illinois, Wisconsin, Michigan, Iowa and Minnesota.
Dominion
made two significant acquisitions in 2001. In March 2001, Dominion acquired Millstone Power Station (Millstone), a nuclear power station located in Waterford, Connecticut, for $1.3 billion in cash. The acquisition includes a 100 percent ownership
interest in Unit 1 and Unit 2 and a 93.47 percent ownership interest in Unit 3 for a total of 1,954 Mw of generating capacity. Unit 1 is being decommissioned and is no longer in service. As part of the transaction, Dominion acquired the
decommissioning trusts for all three units. The trusts were fully funded to the regulatory minimum at closing.
In November
2001, Dominion acquired Louis Dreyfus Natural Gas Corp. (Louis Dreyfus) for $1.8 billion in cash and Dominion common stock. Louis Dreyfus is a natural gas and oil exploration and production company headquartered in Oklahoma City, Oklahoma. The
addition of Louis Drefyus increased Dominion’s proved gas and oil reserves by approximately 60 percent.
In February 2002,
Dominion reached an agreement to purchase Mirant State Line Ventures, Inc. (State Line), whose assets include a 515 Mw coal-fired generation facility located near Hammond, Indiana. Under terms of the agreement, Dominion will acquire 100 percent
ownership of State Line from Mirant Corporation for approximately $182 million. The transaction is subject to approval under the United States antitrust laws, by the Federal Energy Regulatory Commission, and other customary closing conditions.
Dominion expects the transaction to close during the second quarter of 2002.
Dominion became a registered public utility
holding company when it completed the CNG acquisition. The 1935 Act prohibits registered companies from owning businesses unrelated to utility operations or other energy related businesses. To comply, Dominion has divested the core operating
businesses of Dominion Capital, Inc. (DCI), its financial services subsidiary. To secure regulatory approval for the merger, Dominion and CNG also agreed to divest Virginia Natural Gas, Inc. (VNG), CNG’s gas distribution subsidiary located in
Norfolk, Virginia. In October 2000, Dominion sold VNG to AGL Resources Inc.
Because the Company is no longer investing in or
creating energy business overseas, Dominion divested all of its Latin American generation businesses and its 80 percent interest in the Corby Power Station in the United Kingdom in 1999 and 2000. Dominion continues to explore the sale of CNG’s
remaining international operations in Australia.
As part of the acquisition of CNG, Dominion created a subsidiary service
company, Dominion Resources Services, Inc. (Services). Services provides administrative, financial, legal, and other services to Dominion’s operating subsidiaries. During 2000, CNG also had a service company, Consolidated Natural Gas Service
Company, Inc. Effective January 1, 2001, the two service companies were combined into one service company.
Dominion’s
acquisitions and divestitures are described in more detail in Notes 5 and 6 to the Consolidated Financial Statements of the 2001 Annual Report.
2
Dominion manages its operations along three primary business lines that integrate
its electric and gas services, streamline operations and position it for long-term growth in the competitive marketplace.
| |
• |
|
Dominion Energy—Dominion Energy manages nearly 22,000-megawatts of generation, 7,600 miles of gas transmission pipeline, and a 959 billion cubic foot natural gas
storage network. It also manages Dominion’s generation growth strategy, energy trading, marketing, and risk management activities. Dominion Energy operates generation facilities in Virginia, West Virginia, North Carolina, Illinois and
Connecticut. |
| |
• |
|
Dominion Delivery—Dominion Delivery manages the local electric and gas distribution systems serving nearly 4 million customers, about 6,000 miles of electric
transmission lines and customer service operations. Dominion Delivery operates transmission and distribution systems in Virginia, West Virginia, North Carolina, Pennsylvania and Ohio. Dominion Delivery also includes our interest in Dominion Fiber
Ventures LLC, which owns Dominion Telecom with its 14,700 route-mile fiber optic network (including 4,600 route-miles of lit fiber) and related telecommunications and advanced data services. |
| |
• |
|
Dominion Exploration & Production—Dominion Exploration & Production (Dominion E&P) manages the onshore and offshore gas and oil exploration, development
and production activities, including the properties acquired from the acquisition of Louis Dreyfus. With approximately 4.9 trillion cubic feet equivalent of proved natural gas reserves and an annual production capacity exceeding 450 billion cubic
feet, Dominion E&P is one of the nation’s largest independent oil and gas operators. Dominion E&P operates on the outer continental shelf and deepwater areas of the Gulf of Mexico, western Canada, the Appalachian Basin, the Permian
Basin, the Mid-Continent Region and other selected regions in the continental United States. |
While Dominion
manages its daily operations as described above, its assets remain wholly-owned by its legal subsidiaries, which are described below. For additional financial information on business segments and geographic areas, see Note 30 to the Consolidated
Financial Statements of the 2001 Annual Report.
Dominion’s principal direct legal subsidiaries are Virginia Electric and
Power Company (Virginia Power), Consolidated Natural Gas Company (CNG), Dominion Energy, Inc. (DEI) and DCI. Virginia Power is a regulated public utility that generates, transmits and distributes power for sale in Virginia and northeastern North
Carolina. CNG is a producer, transporter, distributor and retail marketer of natural gas, serving customers in Pennsylvania, Ohio, West Virginia, and other states. DEI is an independent power and natural gas and exploration subsidiary. Dominion has
substantially completed its strategy to exit the core operating business of DCI. DCI’s primary business was financial services including loan administration, commercial lending and residential mortgage lending.
As of December 31, 2001, Dominion and its subsidiaries had approximately 17,100 full-time employees. Approximately, 6,500 employees are subject to
collective bargaining agreements. Contracts of certain employees represented by the International Brotherhood of Electrical Workers (IBEW) and Services Employees International Union (SEIU) expire at the end of the first quarter of 2002. Contract
negotiations between Dominion and both unions have commenced.
Dominion’s principal executive offices are located at 120
Tredegar Street, Richmond, Virginia 23219 and its telephone number is (804) 819-2000.
Ongoing deregulation and restructuring in the electric and gas industries are creating
issues that affect or will likely affect the markets where Dominion Energy and Dominion Delivery do business, and govern the way these business units and their competitors operate. The electric power and natural gas industries are in the process of
evolving into a competitive marketplace where energy companies will compete to provide energy and energy services to a broad range of customers.
3
The electric industry has come under increased scrutiny in the past year with the
California energy crisis as well as the Enron Corp. bankruptcy. Although progress varies, pro-competition electric legislation is still under consideration in many states.
Prior to 2002, competition for retail electric sales in Virginia was limited to the extent customers moved into another utility service territory, used other energy sources instead of
electric power, generated their own electricity or participated in a retail pilot program. The Virginia Electric Utility Restructuring Act (Virginia Restructuring Act) provides for a phased-in transition to a fully competitive retail electric market
during the period January 1, 2002 through January 1, 2004. The Virginia Commission has ordered that retail choice be fully implemented in Virginia by January 1, 2003.
Under the Virginia Restructuring Act, the generation portion of Dominion’s Virginia jurisdictional operations is no longer
subject to cost-based rate regulation effective January 1, 2002. Base rates (excluding fuel costs and certain other allowable adjustments) are capped and will remain unchanged until July 2007 unless terminated sooner as provided by the Virginia
Restructuring Act. Recovery of generation-related costs will continue to be provided through capped rates and a wires charge. A wires charge, where applicable, will be assessed to those customers opting for alternative suppliers. The Virginia
Restructuring Act also requires Dominion to join or establish a regional transmission entity, phase in retail choice beginning January 1, 2002, and functionally separate its electric generation from its electric transmission and distribution
operations. For additional information on electric deregulation in Virginia, see Regulated Electric Operations in Future Issues and Outlook of Management’s Discussion and Analysis (MD&A) of the 2001 Annual Report.
In North Carolina, regulators and legislators continue to explore the issues related to electric industry restructuring, the development of a
competitive, wholesale market and retail competition. However, there has been little recent activity.
Dominion plans to
continue to participate actively in both the legislative and regulatory processes to ensure an orderly transition from a regulated environment. Dominion has responded to the trends toward competition by cutting costs, re-engineering core business
processes, and pursuing innovative approaches to serving traditional and future markets.
Dominion Delivery
Deregulation is at varying stages in the three states in which Dominion’s gas distribution subsidiaries operate. In Pennsylvania, supplier choice is available for all residential
and small commercial customers. In Ohio, legislation has not been enacted to require supplier choice for residential and commercial natural gas consumers. However, Dominion offers Energy Choice to customers on its own initiative, in cooperation with
The Public Utilities Commission of Ohio. West Virginia legislation currently does not require customer choice in its retail natural gas markets nor has Dominion voluntarily initiated an Energy Choice program. However, the West Virginia Public
Service Commission recently issued regulations to govern pooling services. These services are one of the tools that natural gas suppliers may utilize to provide retail customer choice in the future.
See Regulated Gas Distribution Operations in Future Issues and Outlook of MD&A of the 2001 Annual Report for additional information.
Dominion Energy
Dominion’s large underground natural gas storage capacity and the location of its gridlike pipeline system are a significant link between the country’s major gas pipelines and large markets on the East Coast. The Company’s
pipelines are part of an interconnected gas transmission system which continues to provide retail end users the accessibility of supplies nationwide as gas utilities unbundle services at the retail level.
Dominion competes with domestic as well as Canadian pipeline companies and gas marketers seeking to provide or arrange transportation, storage and other
services for customers. Alternative energy sources, such as
4
fuel oil or coal, provide another level of competition. Although competition is based primarily on price, the array of services that can be provided to customers is also an important factor. The
combination of capacity rights held on certain longline pipelines, a large storage capability and the availability of numerous receipt and delivery points along its own pipeline system enables Dominion to tailor its services to meet the needs of
individual customers.
Dominion Exploration & Production
Dominion conducts exploration and production operations in several major gas and oil producing basins in the United States, both onshore and offshore, and in Canada. Competitors range
from major, international oil companies, to the smaller, independent producers.
Dominion faces significant competition in the
bidding for federal offshore leases and in obtaining leases and drilling rights for onshore properties. Since Dominion is the operator of a number of properties, it also faces competition in securing drilling equipment and supplies for exploration
and development.
In terms of its production activities, Dominion faces a diverse and active market with purchasers seeking to
balance the advantage of flexible spot market supplies with the security of longer-term contracts. The growth of energy marketing firms has introduced additional competition for Dominion. When the economics warrant, Dominion attempts to sell its gas
production under long-term contracts to customers such as electric power generators and others that require a secure source of supply. However, these arrangements represent only a portion of the Dominion’s gas production. The deliverability of
gas produced is influenced by competition for downstream pipeline transportation capacity. Dominion continues to develop marketing strategies, contracts and arrangements to address customer needs for intermediate and long-term gas supplies as well
as other energy services. Dominion also participates in price risk management activities to manage exposure to price volatility in connection with the production and sale of natural gas and oil.
Dominion is subject to regulation by various federal, state, and local governmental agencies.
These include the Securities and Exchange Commission (SEC), the Federal Energy Regulatory Commission (FERC), the Environmental Protection Agency (EPA), Department of Energy (DOE), the Nuclear Regulatory Commission (NRC), the Army Corps of Engineers,
and other federal, state and local authorities.
Electric
The Virginia State Corporation Commission (Virginia Commission) and the North Carolina Utilities Commission (North Carolina Commission) regulate rates for retail electric sales in those
states and FERC approves rates for electric sales to wholesale customers. The current Virginia fuel factor applied to Dominion’s regulated electric generation is 1.613 cents per kWh which will remain in effect through December 31, 2002. The
North Carolina Commission has approved a fuel adjustment factor of 1.285 cents per kWh, effective January 1, 2002.
Under the
Virginia Restructuring Act, the generation portion of Dominion’s Virginia jurisdictional operations is no longer subject to cost-based rate regulation. Base rates (excluding fuel costs and certain other allowable adjustments) will remain
unchanged until July 2007 unless terminated sooner as provided by the Virginia Restructuring Act. Recovery of generation-related costs will continue to be provided through capped rates and, where applicable, wires charges for those customers opting
for alternative suppliers of electricity. The Virginia Restructuring Act also requires Dominion to join or establish a regional transmission entity, phase in retail choice beginning January 1, 2002, and functionally separate its electric generation
from its
5
electric transmission and distribution operations.
In connection with the
North Carolina Commission approval of the CNG acquisition, Dominion agreed not to request an increase in North Carolina retail electric base rates for both the Dominion Energy and Dominion Delivery segments until 2006, except for certain events that
would have a significant financial impact on the Company. Fuel rates are still subject to change under the annual fuel cost adjustment proceedings.
Dominion’s electric utility subsidiary holds certificates of public convenience and necessity authorizing it to construct and operate its electric facilities now in operation and to sell electricity to customers.
However, it may not construct or incur financial commitments for construction of any substantial generating facilities or large capacity transmission lines without the prior approval of various state and federal government agencies.
For additional information on deregulation in the electric industry and current rate matters, see Electric Industry in COMPETITION and
Regulated Electric Operations in Future Issues and Outlook of MD&A of the 2001 Annual Report.
Gas
Dominion’s gas distribution business subsidiaries are subject to regulation of rates and other aspects of their businesses by the states
in which they operate—Pennsylvania, Ohio, and West Virginia. Dominion’s regulated gas subsidiaries continue to seek general rate increases with regard to their regulated gathering, transmission, storage and gas distribution services. Such
rate changes are requested on a timely basis to recover increased operating costs and to ensure that rates of return are compatible with the cost of raising capital. In addition to general rate increases, certain of Dominion’s gas distribution
subsidiaries make separate filings with their respective regulatory commissions to reflect changes in the costs of purchased gas.
For additional information on deregulation in the gas industry and current rate matters, see Gas Industry in COMPETITION and Regulated Gas Distribution Operations in Future Issues and Outlook of MD&A of the 2001 Annual Report.
Public Utility Holding Company Act of 1935 (1935 Act)
Dominion is a registered holding company under
the 1935 Act. The 1935 Act and related regulations issued by the SEC govern activities of Dominion and its subsidiaries with respect to the issuance and acquisition of securities, acquisition and sale of utility assets, certain transactions among
affiliaties, engaging in business activities not directly related to the utility or energy business, and other matters. Over the past few years, several bills have been introduced in Congress to repeal the 1935 Act, and repeal provisions are
currently again pending before Congress. The likelihood that such repeal will be enacted is highly uncertain.
Federal Energy Regulatory Commission (FERC)
Electric
Under the Federal Powers Act, FERC regulates wholesale sales of electricity and transmission of electricity in interstate commerce by public utilities.
Dominion’s electric utility subsidiary sells electricity in the wholesale market under its market-based sales tariff authorized by FERC but has agreed not to make wholesale power sales under this tariff to loads located within its service
territory. In January 2002, Dominion filed for FERC approval of a tariff to sell wholesale power within or outside its service territory at capped rates based on Dominion’s embedded cost of generation. For additional discussion on this matter,
see Regulated Electric Operations—Wholesale Competition in Future Issues and Outlook of MD&A of the 2001 Annual Report.
FERC Order No. 2000 requires that each public utility that owns, operates, or controls facilities for the transmission of electric energy in interstate commerce make certain filings with respect to forming and participating in a regional
transmission organization (RTO). To meet the requirements of Order No. 2000,
6
Dominion and eight other member companies (Alliance Companies), filed with FERC for approval of a proposed “Alliance RTO”. In December 2001, FERC concluded the Alliance Companies lack
sufficient scope as an RTO and also ordered the Alliance Companies to determine how they could fit within the Midwest Independent System Operator. Dominion will examine the possibility of joining RTOs other than those representing Midwest utilities,
as directed by FERC. For discussion on the current status of the Alliance RTO, see Regulated Electric Operations—Alliance RTO in Future Issues and Outlook of MD&A of the 2001 Annual Report.
Gas
FERC regulates the
transportation and sale for resale of natural gas in interstate commerce under the Natural Gas Act of 1938 and the Natural Gas Policy Act of 1978, as amended. FERC also has jurisdiction over the construction of pipeline and related facilities used
in transportation and storage of natural gas in interstate commerce.
Dominion’s interstate gas transportation and storage
activities are regulated under the Natural Gas Act of 1938 and are conducted in accordance with certificates, tariffs and service agreements on file with FERC. Dominion is also subject to the Natural Gas Pipeline Safety Act of 1968, which authorizes
the establishment and enforcement of federal pipeline safety standards and places jurisdiction of these standards with the Department of Transportation.
Competition in the natural gas industry was significantly increased by FERC Order 636, issued in 1992. FERC Order 636 requires transmission pipelines to operate as open-access transporters and provide transportation
and storage services on an equal basis for all gas supplies, whether purchased from Dominion or from another gas supplier.
FERC
has also issued a Notice of Proposed Rulemaking on modifying code of conduct regulations. FERC proposes to eliminate the separate code of conduct regulations for natural gas pipelines and electric transmission utilities and replace these
requirements with uniform standards applicable to interstate “Transmission Providers” of both natural gas and electricity. For additional discussion on this matter, see Regulated Gas Operations—FERC Policy Developments in Future
Issues and Outlook of MD&A of the 2001 Annual Report.
Each segment of our business faces substantial regulation and compliance costs
with respect to environmental matters. For discussion of significant aspects of these matters, including current and planned capital expenditures relating to environmental compliance, see Environmental Matters in Future Issues and Outlook of
MD&A of the 2001 Annual Report. Additional information can also be found in Item 3. LEGAL PROCEEDINGS and Note 27 to the Consolidated Financial Statements of the 2001 Annual Report.
From time to time Dominion may be identified as a potentially responsible party to a superfund site. The EPA (or a state) can either (a) allow such a party to conduct and pay for a
remedial investigation, feasibility study and remedial action or (b) conduct the remedial investigation and action and then seek reimbursement from the parties. Each party can be held jointly, severally and strictly liable for all costs. These
parties can also bring contribution actions against each other and seek reimbursement from their insurance companies. As a result, Dominion may be responsible for the costs of remedial investigation and actions under the Superfund Act or other laws
or regulations regarding the remediation of waste. Dominion does not believe that any currently identified sites will result in significant liabilities.
Dominion has determined that it is associated with 20 former manufactured gas plant sites. Studies conducted by other utilities at their former manufactured gas plants have indicated that their sites contain coal tar
and other potentially harmful materials. None of the 20 former sites with which Dominion is associated is under investigation by any state or federal environmental agency, and no investigation or action is currently
7
anticipated. At this time it is not known to what degree these sites may contain environmental contamination. Dominion is not able to estimate the cost, if any, that may be required for the
possible remediation of these sites.
Dominion has applied for or obtained the necessary environmental permits material to the
operation of its electric generating stations. Many of these permits are subject to re-issuance and continuing review.
Nuclear Regulatory Commission (NRC)
All aspects of the operation and maintenance of Dominion’s
nuclear power stations, which are part of the Dominion Energy segment, are regulated by the NRC. Operating licenses issued by the NRC are subject to revocation, suspension or modification, and operation of a nuclear unit may be suspended if the NRC
determines that the public interest, health or safety so requires.
Dominion filed applications for 20 year life-extension for
the North Anna and Surry units in May 2001. The NRC has accepted and is reviewing the applications. Dominion has also initiated preparations to apply for a 20 year extension of the licenses for both of its operating Millstone units. For more
information on this matter, see Nuclear Relicensing in Future Issues and Outlook of MD&A of the 2001Annual Report.
From
time to time, the NRC adopts new requirements for the operation and maintenance of nuclear facilities. In many cases, these new regulations require changes in the design, operation and maintenance of existing nuclear facilities. If the NRC adopts
such requirements in the future, it could result in substantial increases in the cost of operating and maintaining Dominion’s nuclear generating units.
Disposal of spent nuclear fuel (SNF) is a significant issue associated with the operation and decommissioning of nuclear facilities. The Nuclear Waste Policy Act (NWPA) of 1982 requires the federal government to make
available by January 31, 1998 a permanent repository for high-level radioactive waste and SNF. In February 2002, the Secretary of Energy recommended that Yucca Mountain located in the state of Nevada be developed as the permanent repository. The
plan may be appealed by the state of Nevada and is subject to various congressional approvals and NRC licensing.
Dominion and
other utilities have petitioned for review in the U.S. Court of Appeals for the 11th Circuit, a matter involving the DOE and PECO Energy Company (PECO). The petitioners are challenging the DOE’s action in allowing PECO to take credits against
payments PECO would have been making into the Nuclear Waste Fund (NWF). The credits are part of a DOE settlement agreement with PECO for potential claims arising out of DOE’s breach of its SNF storage obligation. The petition asserts that DOE
violated the NWPA by improperly depleting the NWF and releasing PECO from a portion of its NWF obligation. The petition also seeks a declaration that credits against NWF payments violate the NWPA, an injunction against DOE implementing the credit
and fee reduction provisions of the settlement agreement, and an injunction against DOE entering into similar agreements. The case was argued in December 2001, and is pending before the court.
The NRC also requires Dominion to decontaminate nuclear facilities once operations cease. This process is referred to as decommissioning, and Dominion is required by the NRC to
prepare for it financially. For information on compliance with the NRC financial assurance requirements, see Note 16 to Consolidated Financial Statements of the 2001 Annual Report.
Sources of Energy—Electricity
Dominion Energy provides electricity for use on a wholesale and a
retail level. Dominion Energy can supply electricity demand either from its generation facilities in Virginia, West Virginia, North Carolina, Illinois and Connecticut or through purchased power contracts when needed. The following table outlines
Dominion’s generating units and capability.
8
Dominion’s Power Generation
| Plant
|
|
Location
|
|
Type of Fuel
|
|
Net Owned Summer Capability (Mw)
|
|
| Owned Utility Generation |
|
|
|
|
|
|
|
| Surry |
|
Surry, VA |
|
Nuclear |
|
1,625 |
|
| North Anna |
|
Mineral, VA |
|
Nuclear |
|
1,628 |
(a) |
| Bremo |
|
Bremo Bluff, VA |
|
Coal |
|
227 |
|
| Chesterfield |
|
Chester, VA |
|
Coal |
|
1,229 |
|
| Clover |
|
Clover, VA |
|
Coal |
|
441 |
(b) |
| Mt. Storm |
|
Mt. Storm, WV |
|
Coal |
|
1,587 |
|
| Chesapeake |
|
Chesapeake, VA |
|
Coal |
|
595 |
|
| Possum Point |
|
Dumfries, VA |
|
Coal |
|
322 |
|
| Yorktown |
|
Yorktown, VA |
|
Coal |
|
326 |
|
| Possum Point |
|
Dumfries, VA |
|
Oil |
|
929 |
|
| Yorktown |
|
Yorktown, VA |
|
Gas/Oil |
|
818 |
|
| North Branch |
|
Bayard, WV |
|
Waste Coal |
|
74 |
|
| Altavista |
|
Altavista, VA |
|
Coal |
|
63 |
|
| Hopewell |
|
Hopewell, VA |
|
Coal |
|
63 |
|
| Southampton |
|
Southampton, VA |
|
Coal |
|
63 |
|
| Remington (CT) |
|
Remington, VA |
|
Gas/Oil |
|
576 |
|
| Gravel Neck (CT) |
|
Surry, VA |
|
Gas/Oil |
|
329 |
|
| Darbytown (CT) |
|
Richmond, VA |
|
Gas/Oil |
|
288 |
|
| Ladysmith (CT) |
|
Ladysmith, VA |
|
Gas/Oil |
|
296 |
|
| Chesapeake (CT) |
|
Chesapeake, VA |
|
Gas/Oil |
|
144 |
|
| Possum Point (CT) |
|
Dumfries, VA |
|
Gas/Oil |
|
78 |
|
| Northern Neck (CT) |
|
Lively, VA |
|
Gas/Oil |
|
64 |
|
| Low Moor (CT) |
|
Covington, VA |
|
Gas/Oil |
|
60 |
|
| Kitty Hawk (CT) |
|
Kitty Hawk, NC |
|
Gas/Oil |
|
44 |
|
| Mt. Storm (CT) |
|
Mt. Storm, WV |
|
Gas/Oil |
|
12 |
|
| Bellmeade (CC) |
|
Richmond, VA |
|
Gas/Oil |
|
230 |
|
| Chesterfield (CC) |
|
Chester, VA |
|
Gas/Oil |
|
397 |
|
| Gaston |
|
Roanoke Rapids, NC |
|
Hydro |
|
225 |
|
| Roanoke Rapids |
|
Roanoke Rapids, NC |
|
Hydro |
|
99 |
|
| Bath County |
|
Warm Springs, VA |
|
Hydro |
|
1,260 |
(c) |
| Other |
|
Various |
|
Various |
|
2 |
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
14,094 |
|
| |
|
|
|
|
|
|
|
| Owned Non-utility Generation |
|
|
|
|
|
|
|
| Millstone |
|
Waterford, CT |
|
Nuclear |
|
1,954 |
(d) |
| Kincaid |
|
Springfield, IL |
|
Coal |
|
1,158 |
|
| Elwood |
|
Elwood, IL |
|
Gas |
|
682 |
(e) |
| Morgantown |
|
Morgantown, WV |
|
Coal |
|
33 |
(f) |
| Others |
|
Various |
|
Various |
|
31 |
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
3,858 |
|
| |
|
|
|
|
|
|
|
| |
| Purchased Capacity |
|
|
|
|
|
3,770 |
|
| Net Purchases |
|
|
|
|
|
145 |
|
| |
|
|
|
|
|
|
|
| |
|
|
|
Total Capacity |
|
21,867 |
|
| |
|
|
|
|
|
|
|
Note: |
|
(CT) denotes combustion turbine and (CC) denotes combined cycle |
(a) |
|
Excludes 11.6 percent undivided interest owned by Old Dominion Electric Cooperative (ODEC). |
(b) |
|
Excludes 50 percent undivided interest owned by ODEC. |
(c) |
|
Excludes 40 percent undivided interest owned by Allegheny Generating Company, a subsidiary of Allegheny Energy, Inc. |
(d) |
|
Excludes 6.53 percent undivided interest in Unit 3 owned by Massachusetts Municipal Wholesale Electric Company and Central Vermont Public Service
Company. |
(e) |
|
Excludes 50 percent undivided interest owned by Peoples Energy. |
(f) |
|
Excludes 50 percent undivided interest owned by Cogen Technologies Morgantown, Ltd. and Hickory Power Corporation.
|
9
Power Purchase Contracts
Dominion Energy purchases electricity under contracts with other suppliers to meet a portion of its system capacity requirements. As of December 31, 2001, Dominion has 43 power purchase
contracts with a combined dependable summer capacity of 3,770 Mw. For information on the financial obligations under these agreements, see Note 27 to the Consolidated Financial Statements of the 2001 Annual Report.
In 2001, Dominion completed the purchase of three generating facilities and the termination of seven long-term power purchase contracts with non-utility
generators. Dominion recorded a charge of approximately $136 million, after taxes, in connection with these transactions.
Fuel for Electric Generation
Dominion uses a variety of fuels to power its electric generation. These include a
mix of both nuclear fuel and fossil fuel as described further below.
Nuclear Fuel Supply
Dominion utilizes both long-term contracts and spot purchases to support the Company’s nuclear fuel requirements. Worldwide market conditions are
continuously evaluated to ensure a range of supply options at reasonable prices. Current agreements, inventories and spot market availability are expected to support current and planned fuel supply needs. Additional fuel is purchased as required to
ensure optimum cost and inventory levels.
The DOE did not begin accepting SNF in 1998 as specified in the DOE contract.
However, on-site SNF pool and dry container storage at the Surry and North Anna Power Stations are expected to be adequate for Dominion’s needs until the DOE begins accepting SNF. See Nuclear Regulatory Commission (NRC) in REGULATION for
additional information regarding SNF.
Fossil Fuel Supply
Dominion Energy utilizes coal, oil, and natural gas in its fossil fuel operations. Dominion Energy’s coal supply is obtained through long-term contracts and spot purchases. Dominion
anticipates sufficient supplies of coal will continue to be available at reasonable prices.
Oil and oil-fired generation are
used primarily to support heavier system generation loads during very cold or very hot weather periods. System requirements are purchased under both short-term spot agreements and longer term contracts. A sufficient supply of oil is expected to be
available over the next five to ten year period.
Dominion Energy uses natural gas as needed throughout the year for
Dominion’s jurisdictional and non-jurisdictional generation facilities. The Company’s gas supply is obtained from various sources including: purchases from major and independent producers in the Southwest and Midwest regions; purchases
from local producers in the Appalachian area; purchases from gas marketers; production from Company-owned wells in the Appalachian area, the Southwest, Midwest and offshore; and withdrawals from the Company’s and third party underground storage
fields. Dominion has the capability to buy and store natural gas at summer prices, which will then be consumed at the facilities during the winter.
Firm natural gas transportation contracts (capacity) exist that allow delivery of gas to our facilities. Dominion’s capacity portfolio allows flexible natural gas deliveries to its gas turbine fleet, while
minimizing costs. With natural gas being the preferred energy source for new electric generation, competition for existing gas capacity has increased. In order to ensure reliable delivery of natural gas, Dominion has acquired additional natural gas
capacity and has a capacity plan in place designed to protect its fleet from any perceived or real capacity shortage in the market.
10
Interconnections
Dominion maintains major interconnections with Carolina Power and Light Company, American Electric Power Company, Inc., Allegheny Energy, Inc. and the utilities in the Pennsylvania-New
Jersey-Maryland Power Pool. Through this major transmission network, Dominion has arrangements with these utilities for coordinated planning, operation, emergency assistance and exchanges of capacity and energy.
Gas Supply
Dominion Energy is engaged in the sale and storage of natural gas through its operating subsidiaries. Sources of gas supplies for sale to customers are the same as those described
in Fossil Fuel Supply above.
Dominion continues to purchase volumes from the array of accessible producing basins using its
firm capacity resources. These purchased supplies include Appalachian resources in Ohio, Pennsylvania and West Virginia, and production from the Gulf Coast, Mid-Continent and offshore areas. Upon FERC’s restructuring of the interstate pipeline
business in 1992 and 1993, pipelines no longer sell the delivered natural gas commodity; rather, customers provide their own gas supply for wholesale storage and/or delivery by the pipelines. Much of the supply is purchased by local distributors,
energy marketing companies or end users, under seasonal or spot purchase agreements. While the average term of Dominion’s gas purchase agreements has decreased, the reliability of supply continues to be adequate. The availability of supplies
and heightened competition has forged a viable market, which has proven capable of satisfying the firm delivery requirement for supplies to Dominion’s markets in a highly reliable manner.
Considering the large storage capacity, the volumes obtainable under its firm interstate pipeline capacity and gas supply contracts, Dominion-owned proved natural gas reserves, and
assuming the future availability of spot market gas, management believes that supplies will be available to meet sales requirements for at least the next several years.
Gas Storage—Transmission
Dominion Energy’s
underground storage facilities play an important part in balancing gas supply with sales demand and are es