- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 1997
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 1-2255
VIRGINIA ELECTRIC AND POWER COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
VIRGINIA 54-0418825
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
701 East Cary Street
23219-3932
Richmond, Virginia (Zip Code)
(Address of principal executive offices)
(804) 771-3000
(Registrant's telephone number, including area code)
</TABLE>
---------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
- ------------------------------------------ ------------------------
<S> <C>
Preferred Stock (cumulative) New York Stock Exchange
$100 liquidation value:
$5.00 dividend
Trust Preferred Securities New York Stock Exchange
$25 liquidation value:
8.05% dividend
</TABLE>
---------------
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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 as of February 28, 1998, was zero.
As of February 28, 1998, there were issued and outstanding 171,484 shares
of the registrant's common stock, without par value, all of which were held,
beneficially and of record, by Dominion Resources, Inc.
DOCUMENTS INCORPORATED BY REFERENCE.
None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
VIRGINIA ELECTRIC AND POWER COMPANY
<TABLE>
<CAPTION>
Page
Item Number Number
- ------------------------------------------------------------------------------------------ -------
<S> <C>
PART I
1. Business .............................................................................. 1
The Company ........................................................................... 1
Company Management .................................................................... 1
Competition and Strategic Initiatives ................................................. 1
Regulation ............................................................................ 2
General .............................................................................. 2
Virginia ............................................................................. 2
FERC ................................................................................. 3
Environmental ........................................................................ 3
Nuclear .............................................................................. 3
Rates ................................................................................. 4
FERC ................................................................................. 4
Virginia ............................................................................. 5
North Carolina ....................................................................... 6
Capital Requirements and Financing Program ............................................ 6
Construction and Nuclear Fuel Expenditures ........................................... 6
Financing Program .................................................................... 6
Sources of Power ...................................................................... 7
Company Generating Units ............................................................. 7
Net Purchases ........................................................................ 7
Non-Utility Generation ............................................................... 7
Sources of Energy Used and Fuel Costs ................................................. 8
Nuclear Operations and Fuel Supply ................................................... 8
Fossil Operations and Fuel Supply .................................................... 8
Purchases and Sales of Energy ........................................................ 8
Future Sources of Power ............................................................... 9
Conservation and Load Management ...................................................... 9
Interconnections ...................................................................... 9
2. Properties ............................................................................ 10
3. Legal Proceedings ..................................................................... 11
4. Submission of Matters to a Vote of Security Holders ................................... 11
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters ............. 12
6. Selected Financial Data ............................................................... 12
7. Management's Discussion and Analysis of Financial Condition and Results of Operations . 12
Liquidity and Capital Resources ....................................................... 13
Capital Requirements .................................................................. 14
Results of Operations ................................................................. 15
Future Issues ......................................................................... 17
Market Risk Sensitive Instruments and Risk Management ................................. 22
8. Financial Statements and Supplementary Data ........................................... 24
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure .. 47
PART III
10. Directors and Executive Officers of the Registrant ................................... 48
11. Executive Compensation ............................................................... 51
12. Security Ownership of Certain Beneficial Owners and Management ....................... 55
13. Certain Relationships and Related Transactions ....................................... 55
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ..................... 56
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
Virginia Electric and Power Company is a Virginia Corporation. Our
principal office is at 701 East Cary Street, Richmond, Virginia 23219-3932,
telephone (804) 771-3000. We are a wholly owned subsidiary of Dominion
Resources, Inc. (Dominion Resources), a Virginia corporation. Dominion
Resources owns all of our common stock.
Virginia Electric and Power Company is a regulated public utility engaged
in the generation, transmission, distribution and sale of electric energy
within a 30,000 square-mile area in Virginia and northeastern North Carolina.
It transacts business under the name Virginia Power in Virginia and under the
name North Carolina Power in North Carolina. We have retail customers
(including governmental agencies) and wholesale customers such as rural
electric cooperatives, power marketers and municipalities. We serve more than
80 percent of Virginia's population. The Company has certificates of
convenience and necessity from the State Corporation Commission of Virginia
(the Virginia Commission) for service in all territories served at retail in
Virginia. The North Carolina Utilities Commission (the North Carolina
Commission) has assigned territory to the Company for substantially all of its
retail service outside certain municipalities in North Carolina.
The electric utility industry in the United States is undergoing an
evolutionary change toward less regulation and more competition. To meet the
challenges of this new competitive environment, Virginia Power has developed a
broad array of "non-traditional" product and service offerings from its
operating business units and subsidiaries:
o Energy Services -- offering electric energy and capacity in the emerging
wholesale market as well as natural gas and other energy-related products
and services;
o Fossil & Hydro -- targeting process type industries, such as chemical,
paper, plastics and petroleum to become a service provider of
instrumentation equipment;
o Nuclear Services -- offering management and operations services to other
electric utilities;
o Commercial Operations -- providing power distribution related services,
including transmission and distribution, engineering and metering services
to other gas, water and electric utilities; and
o Telecommunications -- offering telecommunications services through the
Company's existing fiber-optic network.
The Company and its subsidiaries had 9,043 full-time employees on December
31, 1997. A total of 3,452 of our employees are represented by the
International Brotherhood of Electrical Workers under a contract extending to
March 31, 1998. The Company and the union have tentatively agreed, subject to
ratification by the union membership, to a two year extension of the contract.
For a more thorough review of the changing utility industry and the
Company's strategy see COMPETITION AND STRATEGIC INITIATIVES below and Future
Issues -- Competition under MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (MD&A).
COMPANY MANAGEMENT
In April, Dr. James T. Rhodes, President and Chief Executive Officer since
1989, announced his retirement effective August 1, 1997. The Board of Directors
subsequently elected Mr. Norman Askew as the new President and Chief Executive
Officer, effective August 1, 1997. Mr. Askew was previously the Chief Executive
of East Midlands Electricity plc, a United Kingdom regional electricity company
acquired by Dominion Resources during the first quarter of 1997. Mr. Askew also
replaced Dr. Rhodes on the Board of Directors effective August 1, 1997.
COMPETITION AND STRATEGIC INITIATIVES
A number of developments in the United States are causing a trend toward
less regulation and more competition in the electric utility industry. This is
evidenced by legislative and regulatory action at both the federal and state
levels. To the extent that competition is either authorized or mandated and
regulation is eliminated or relaxed, electric utilities may no longer be
guaranteed an opportunity to recover all of their prudently incurred costs, and
utilities with costs that exceed the market prices established by the
competitive market will run the risk of suffering losses, which may be
substantial.
1
<PAGE>
Virginia Power has responded to these trends by undertaking cost-cutting
measures, engaging in re-engineering efforts, restructuring its core business
processes, and pursuing a strategic planning initiative to encourage innovative
approaches to serving traditional markets. The Company has established separate
business units, as discussed above, to fully execute these strategies.
The Company also is vigorously participating in the state and federal
legislative actions currently underway to bring about competition in the
electric utility industry, in an effort to ensure an orderly transition from a
regulated environment.
The Company's non-traditional businesses face competition from a variety
of utility and non-utility entities.
For a full discussion of the regulatory and legislative issues related to
competition, carefully read the Future Issues section of MD&A.
REGULATION
General
In a wide variety of matters in addition to rates, Virginia Power is
presently subject to regulation by the Virginia Commission and the North
Carolina Commission, the Environmental Protection Agency (EPA), Department of
Energy (DOE), Nuclear Regulatory Commission (NRC), the Federal Energy
Regulatory Commission (FERC), the Army Corps of Engineers, and other federal,
state and local authorities. Compliance with numerous laws and regulations
increases the Company's operating and capital costs by requiring, among other
things, changes in the design and operation of existing facilities and changes
or delays in the location, design, construction and operation of new
facilities. The commissions regulating the Company's rates have historically
permitted recovery of such costs.
Virginia Power 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
governmental agencies. Such approvals relate to, among other things, the
environmental impact of such activities, the relationship of such activities to
the need for providing adequate utility service and the design and operation of
proposed facilities.
Both federal and state legislative bodies have been studying competition
and restructuring in the electric utility industry. Please carefully read the
full discussion of this matter found in the Future Issues -- Competition --
Legislative Initiatives section of MD&A.
Virginia
In 1995, the Virginia Commission instituted an ongoing generic
investigation on electric industry restructuring, resulting in a number of
reports by its Staff covering such issues as retail wheeling experiments and
the status of wholesale power markets. The Staff also submitted a report to the
General Assembly calling for a cautious, two-phase, five-year period to address
restructuring issues. The report acknowledged the need for direction from the
Virginia legislature concerning policy issues surrounding competition in the
electric industry.
In November 1996, the Virginia Commission instituted a proceeding
concerning Virginia Power's cost of service and possible restructuring of the
electric utility industry as it might relate to Virginia Power. On March 24,
1997, Virginia Power filed in that proceeding a calculation of its cost of
service for 1996 and a proposed Alternative Regulatory Plan (ARP).
Subsequently, the Commission consolidated this proceeding with the proceeding
concerning the Company's 1995 Annual Informational Filing, in which the
Company's base rates were made interim and subject to refund as of March 1,
1997. Please carefully read the Future Issues -- Competition -- Legislative and
Regulatory Initiatives sections of MD&A and RATES-Virginia, below for details
concerning the ARP, its current status and related legislative developments.
In December 1995, Virginia Power applied to the Virginia Commission for
approval of arrangements with Chesapeake Paper Products Company (CPPC), under
which Virginia Power would facilitate the design, construction and financing of
a cogeneration plant to meet CPPC's energy requirements for its industrial
processes at its plant in West Point, Virginia. On August 13, 1997, the
Virginia Commission approved, in substantial part, the proposed transactions
between Virginia Power and CPPC's successor in ownership, St. Laurent Paper
Products Co. St. Laurent later determined that the current design of the
facility was no longer compatible with its long-term business strategies and
terminated its contractual arrangement with Virginia Power. The Virginia
Commission dismissed the proceeding on January 15, 1998.
In June 1997, the Virginia Commission granted the Company's request to
implement a monitoring program that requires certain non-utility generators to
provide certain information sufficient to determine continued compliance with
the "Qualifying Facility" (QF) requirements of the Public Utility Regulatory
Policies Act of 1978 (PURPA).
2
<PAGE>
On August 8, 1997, the Virginia Commission granted the Company's request
to provide interchange telecommunications services and approved the proposed
affiliate agreements between Virginia Power and our wholly-owned subsidiary,
VPS Communications, Inc. (VPSC). Under the authority granted, VPSC will provide
a range of telecommunications services, including private line and special
access services and high-capacity fiberoptic services.
On September 3, 1997, the Virginia Commission granted the Company's
request to provide services to our wholly-owned subsidiary, Virginia Power
Services, Inc. (VPS), which would enable Virginia Power Nuclear Services
Company (VPN), a VPS subsidiary, to furnish nuclear management and operation
services to electric utilities seeking assistance in the management and
operation of their nuclear generating facilities. VPN currently provides such
services to Northeast Utilities at its Millstone Unit 2 nuclear plant.
FERC
In April 1996, FERC issued final rules in Order Nos. 888 and 889
addressing open access transmission service, stranded costs, standards of
conduct and open access same-time information systems (OASIS). In July 1996,
Virginia Power filed an open access transmission service tariff in compliance
with FERC's Order No. 888. In compliance with FERC's directive, Virginia
Power's OASIS became operational on January 3, 1997. Also, on that date the
standards of conduct requiring separation of transmission
operations/reliability functions from wholesale merchant/marketing functions
became effective. The Company also made filings to comply with FERC's directive
that, effective January 1, 1997, utilities could no longer make bundled sales
of transmission and generation services in economy energy transactions. In
certain of those filings, Virginia Power canceled or committed not to use the
economy energy rate schedules contained in interconnection agreements with
neighboring utilities. On March 4, 1997, FERC issued Order Nos. 888-A and
889-A, which addressed requests for rehearing of Order Nos. 888 and 889. Orders
No. 888-A and 889-A essentially reaffirm the basic principles of 888 and 889
and clarify and make limited modifications to those orders. On December 17,
1997, FERC issued Order Nos. 888-B and 889-B. FERC rejected all requests for
rehearing filed with respect to Order Nos. 888-A and 889-A and clarified and
made limited modifications to those orders. Several parties have appealed the
888 orders to the United States Court of Appeals for the District of Columbia
Circuit.
For a discussion of the status of the Company's Open Access Transmission
Tariff filing, see RATES -- FERC below.
For additional discussion of open access issues see Future Issues --
Competition under MD&A.
LG&E Westmoreland Southampton owns a cogeneration facility in Franklin,
Virginia, and sells its output to Virginia Power. Southampton has sought a
waiver of FERC operating requirements for Qualifying Facilities (QF's) under
PURPA, however FERC refused to grant such a waiver. On March 31, 1997, the
United States Court of Appeals for the District of Columbia Circuit granted
FERC's motion to dismiss Southampton's Petition for Review.
Environmental
From time to time, Virginia Power may be designated by the EPA as a
potentially responsible party (PRP) with respect to a Superfund site. As a
result of that designation or other regulations regarding the remediation of
waste, we may become obligated to fund remedial investigations or actions. We
do not believe that any currently identified sites will result in significant
liabilities. For a discussion of the Company's site remediation efforts, see
Note Q to the CONSOLIDATED FINANCIAL STATEMENTS.
Permits under the Clean Water Act and state laws have been issued for all
of the Company's steam generating stations now in operation. These permits are
subject to reissuance and continuing review. The Clean Air Act, as amended in
1990, requires the Company to reduce its emissions of sulfur dioxide (SO2) and
nitrogen oxides (NOx). Beginning in 1995, the SO2 reduction program is based on
the issuance of a limited number of SO2 emission allowances, each of which may
be used as a permit to emit one ton of SO2 into the atmosphere or may be sold
to someone else. The program is administered by the EPA.
For additional information on Environmental Matters, Clean Air Act
compliance and related issues see the Future Issues section of MD&A.
Nuclear
All aspects of the operation and maintenance of the Company's nuclear
power stations 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.
3
<PAGE>
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 the Company's
nuclear generating units.
In July 1995, the Virginia Commission instituted an investigation
regarding spent nuclear fuel disposal. As directed, Virginia Power and others
filed comments on legal and public policy issues related to spent nuclear fuel
storage and disposal. In February 1996, the Commission Staff filed its Report
recommending that adoption of a definitive policy on spent nuclear fuel
disposal issues be delayed pending the outcome of litigation against the
Department of Energy concerning spent nuclear fuel acceptance, the outcome of
proposed federal legislation concerning development of an interim storage
facility, and development of a vision of the likely outcome of the electric
utility industry's restructuring efforts. The Virginia Commission consolidated
the proceeding with Virginia Power's pending fuel cost recovery proceeding in
October 1996. On March 20, 1997, the Virginia Commission returned the spent
nuclear fuel disposal issue to a separate proceeding.
On January 31, 1997, Virginia Power joined thirty-five other electric
utilities in filing a petition in the United States Court of Appeals for the
District of Columbia Circuit, seeking to compel DOE to comply with its
obligation to begin accepting the utilities' spent nuclear fuel for disposal by
January 31, 1998, the date imposed by the Nuclear Waste Policy Act. Additional
utilities have joined since the original filing. On November 14, 1997, the
Court issued an Order finding that DOE's obligation to begin accepting spent
nuclear fuel by the deadline is unconditional, and that DOE may not excuse its
delay on the grounds that it has not prepared a permanent repository or interim
storage facility. The Court found that DOE's spent fuel disposal contracts with
the utilities offer a potentially adequate remedy for DOE's failure to meet its
obligation. DOE filed a petition for rehearing on December 29, 1997.
RATES
The Company's electric services sales were subject to rate regulation in
1997 as follows:
<TABLE>
<CAPTION>
1997
-----------------------
Percent Percent
of of
Revenues Kwh Sales
---------- ----------
<S> <C> <C> <C>
Virginia retail:
Non-Governmental customers ........... Virginia Commission 81% 76%
Governmental customers ............... Negotiated Agreements 10 12
North Carolina retail ................. North Carolina Commission 5 5
Wholesale --Sales for Resale* ......... FERC 4 7
-- --
100% 100%
=== ===
</TABLE>
- ---------
* Excludes wholesale power marketing sales subject to FERC regulation.
Substantially all of the Company's electric service sales are subject to
recovery of changes in fuel costs either through fuel adjustment factors or
periodic adjustments to base rates, each of which requires prior regulatory
approval.
Each of these jurisdictions has the authority to disallow recovery of
costs it determines to be excessive or imprudently incurred. Various cost items
may be reviewed on occasion, including costs of constructing or modifying
facilities, on-going purchases of capacity or providing replacement power
during generating unit outages.
FERC
In compliance with FERC's Order No. 888, Virginia Power filed an open
access transmission service tariff, which became effective on July 9, 1996. In
October 1996, FERC issued a procedural order, scheduling a hearing for April
28, 1997. The Company and all parties reached a settlement of issues raised in
the proceeding, and on March 20, 1997, those parties jointly filed with FERC
the Settlement Agreement and Motion to Certify the Settlement Agreement. On
April 23, 1997 the presiding Administrative Law Judge certified the Settlement
Agreement to the FERC and on June 11, 1997, the FERC approved the settlement.
In compliance with FERC's Order No. 889, on January 3, 1997, the Company
filed its Procedures For Standards of Conduct for Unbundled Transmissions and
Wholesale Merchant Function (Standards of Conduct) effective on that date. On
July 1, 1997, the Company filed an amendment to the Standards of Conduct in
Compliance with FERC's Order No. 889-A.
4
<PAGE>
On July 16, 1997, the Company filed another amendment in response to a FERC
Staff request. The Company is awaiting FERC action on the filing.
On September 11, 1997, FERC authorized the Company to sell power at
market-based rates but set for hearing the issue of the impact of any
transmission constraints on Virginia Power's ability to exercise generation
market power in localized areas within its service territory. If FERC finds
that transmission constraints give Virginia Power generation dominance, it
could either revoke or limit the scope of the market-based rate authority. The
hearing is scheduled to commence June 2, 1998.
On October 31, 1997, Virginia Power filed at FERC three agreements with
Old Dominion Electric Cooperative (ODEC) to amend the parties' Interconnection
and Operating Agreement (I&O Agreement) and to unbundle transmission services
provided to ODEC under the I&O Agreement. On December 22, 1997, FERC issued a
deficiency letter with respect to the filing directing the Company to provide
additional information. On January 21, 1998, the Company provided the requested
information. FERC accepted the agreements on March 12, 1998.
Virginia
In March 1997, the Virginia Commission issued an order that Virginia
Power's base rates be made interim and subject to refund as of March 1, 1997.
This order was the result of the Commission Staff's report on its review of
Virginia Power's 1995 Annual Informational Filing, which concluded that
Virginia Power's present rates would cause Virginia Power to earn in excess of
its authorized return on equity. The Staff found that, for purposes of
establishing rates prospectively, a rate reduction of $95.6 million (including
a one-time adjustment of $29.7 million to Virginia Power's deferred capacity
balance at December 31, 1996) may be necessary in order to realign rates to the
authorized level. Virginia Power filed its Alternative Regulatory Plan in March
1997, based on 1996 financial information. Subsequently, the Commission
consolidated the proceeding concerned with the 1995 Annual Informational Filing
with the proceeding that includes the ARP proposed by the Company.
In December 1997, Virginia Power sought to withdraw its ARP, having
concluded that resolution of the cost recovery issues raised by the ARP was
unlikely without General Assembly action. The Commission has agreed that the
Company may withdraw its support of the ARP but has reserved the right to
continue consideration of the ARP as well as other regulatory alternatives. In
addition, the Commission will continue to consider the issues arising out of
the 1995 Annual Informational Filing. The Commission's Staff is scheduled to
file its testimony on March 24, 1998; Virginia Power's rebuttal is to be filed
by April 27, 1998; and the reply testimony is to be filed by May 11, 1998. A
public hearing is scheduled to commence on May 19, 1998.
Virginia Power's previous filings in this proceeding support maintaining
the Company's rates at current levels; however, opposing parties have made
filings recommending rate reductions in excess of $200 million. At this time,
management cannot predict the ultimate outcome of the proceeding and its impact
on the Company's results of operations, cash flows or financial position.
In July 1996, Virginia Power proposed to substantially reduce the rates
paid under Schedule 19 to cogenerators and small power producers of 100 kW or
less. The rates became effective on an interim basis on January 1, 1997. On
January 21, 1998, the Virginia Commission approved revised Schedule 19 rates.
The approved rates do not differ in any significant way from the rates
originally proposed by the Company.
In October 1996, Virginia Power filed an application with the Virginia
Commission to increase its fuel factor from 1.299 cents per kWh to 1.322 cents
per kWh, reflecting a fuel factor annual revenue increase of approximately
$48.2 million. The increase became effective on an interim basis on December 1,
1996. On June 11, 1997, the Commission entered an Order Establishing Fuel
Factor approving the requested increase.
On October 31, 1997, Virginia Power filed with the Virginia Commission its
application for a reduction of $45.6 million in its fuel cost recovery factor
for the period December 1, 1997 through November 30, 1998. The reduction became
effective on an interim basis on December 1, 1997. Subsequently, as a result of
amendments to two non-utility power purchase contracts, the Company proposed
two additional reductions of approximately $30.2 million and $18 million for
the same period, bringing the total proposed fuel factor reduction to $93.8
million. Both additional reductions were approved on an interim basis,
effective March 1, 1998. A hearing is scheduled for April 9, 1998.
5
<PAGE>
North Carolina
On November 4, 1996, the Company filed for approval of a new Schedule 19
which governs purchases from cogenerators and small power producers. The
Company proposed rates substantially lower than those previously specified. It
also proposed to reduce the applicability threshold to 100 kW and shorten the
maximum term of contracts under Schedule 19 to five years. On June 19, 1997,
the North Carolina Commission issued an Order requiring the Company to offer
long-term (5-,10- and 15-year) levelized capacity payments to hydroelectric and
certain landfill and waste facilities contracting for up to 5 MW; a 5-year
levelized rate option to other QFs contracting for up to 100 kW; and optional
long-term levelized energy payments for QFs rated at 100 kW or less capacity.
On October 10, 1997 the Company filed an application with the North
Carolina Commission for a $728,000 increase in fuel revenues. On December 29,
1997, the North Carolina Commission entered an Order Approving Fuel Charge
Adjustment. The Order approved an approximate $600,000 increase in the annual
rates and charges paid by the retail customers of North Carolina Power
effective on January 1, 1998.
CAPITAL REQUIREMENTS AND FINANCING PROGRAM
Construction and Nuclear Fuel Expenditures
Virginia Power's estimated construction and nuclear fuel expenditures for
the three-year period 1998-2000, total $1.5 billion. It has adopted a 1998
budget for construction and nuclear fuel expenditures as set forth below:
<TABLE>
<CAPTION>
Estimated 1998
Expenditures
(millions)
---------------
<S> <C>
Production .................................................... $ 60
Technology .................................................... 150
General Support Facilities .................................... 19
Transmission .................................................. 37
Distribution .................................................. 213
Nuclear Fuel .................................................. 86
----
Total Construction Requirements and Nuclear Fuel Expenditures $565
====
</TABLE>
In addition, the Company expects to incur approximately $23 million of
expenditures in 1998 in connection with the development of energy management
projects for customers. Contracts with such customers provide for the recovery
of these costs in future years.
Financing Program
The Company currently has three shelf registrations on file with the
Securities Exchange Commission (SEC) providing the Company with $915 million of
debt capital resources. The Company also has a Preferred Stock shelf registered
with the SEC for $100 million in aggregate principal amount, which has not been
utilized.
The Company intends to issue securities from time to time to meet its
capital requirements, which include $333.5 million of long-term debt maturities
in 1998.
Please see the Liquidity and Capital Resources section of MD&A for details
about our Financing Program.
6
<PAGE>
SOURCES OF POWER
Company Generating Units
<TABLE>
<CAPTION>
Type Summer
Years of Capability
Name of Station, Units and Location Installed Fuel MW
- ---------------------------------------------------------- ----------- ---------------- ------------
<S> <C> <C> <C>
Nuclear:
Surry Units 1 & 2, Surry, Va ........................... 1972-73 Nuclear 1,602
North Anna Units 1 & 2, Mineral, Va .................... 1978-80 Nuclear 1,790 (a)
Total nuclear stations ................................ 3,392
--------
Fossil Fuel:
Steam:
Bremo Units 3 & 4, Bremo Bluff, Va. ................... 1950-58 Coal 227
Chesterfield Units 3-6, Chester, Va. .................. 1952-69 Coal 1,250
Clover Units 1 & 2, Clover, Va. ....................... 1995-96 Coal 882 (b)
Mt. Storm Units 1-3, Mt. Storm, W. Va. ................ 1965-73 Coal 1,587
Chesapeake Units 1-4, Chesapeake, Va. ................. 1953-62 Coal 595
Possum Point Units 3 & 4, Dumfries, Va. ............... 1955-62 Coal 322
Yorktown Units 1 & 2, Yorktown, Va. ................... 1957-59 Coal 326
Possum Point Units 1, 2, & 5, Dumfries, Va. ........... 1948-75 Oil 929
Yorktown Unit 3, Yorktown, Va. ........................ 1974 Oil & Gas 818
North Branch Unit 1, Bayard, W. Va. ................... 1994 Waste Coal 74 (c)
Combustion Turbines:
35 units (8 locations) ................................. 1967-90 Oil & Gas 1,019
Combined Cycle:
Bellmeade, Richmond, Va. ............................... 1991 Oil & Gas 230
Chesterfield Units 7 & 8, Chester, Va. ................. 1990-92 Oil & Gas 397
Total fossil stations ................................. 8,656
--------
Hydroelectric:
Gaston Units 1-4, Roanoke Rapids, N.C. ................. 1963 Conventional 225
Roanoke Rapids Units 1-4, Roanoke Rapids, N.C. ......... 1955 Conventional 99
Other .................................................. 1930-87 Conventional 3
Bath County Units 1-6, Warm Springs, Va. ............... 1985 Pumped Storage 1,260 (d)
--------
Total hydro stations .................................. 1,587
--------
Total Company generating unit capability .............. 13,635
Net Purchases ........................................... 1,480
Non-Utility Generation .................................. 3,277
--------
Total Capability ...................................... 18,392
========
</TABLE>
- ---------
(a) Includes an undivided interest of 11.6 percent (208 MW) owned by ODEC.
(b) Includes an undivided interest of 50 percent (441 MW) owned by ODEC.
(c) Effective January 25, 1996, this unit was placed in a cold reserve
status.
(d) Reflects the Company's 60 percent undivided ownership interest in the
2,100 MW station. A 40 percent undivided interest in the facility is owned
by Allegheny Generating Company, a subsidiary of Allegheny Energy, Inc
(AE).
The Company's highest one-hour integrated service area summer peak demand
was 14,537 MW on July 28, 1997, and an all-time high one-hour integrated winter
peak demand of 14,910 MW was reached on February 5, 1996.
7
<PAGE>
SOURCES OF ENERGY USED AND FUEL COSTS
For information as to energy supply mix and the average fuel cost of
energy supply, see Results of Operations under MD&A.
Nuclear Operations and Fuel Supply
In 1997, the Company's four nuclear units achieved a combined capacity
factor of 91.1 percent.
The Company utilizes both long-term contracts and spot purchases to
support its needs for nuclear fuel. The Company continually evaluates worldwide
market conditions in order to ensure a range of supply options at reasonable
prices. Current agreements, inventories and spot market availability will
support the Company's current and planned fuel supply needs for fuel cycles
throughout the remainder of the 1990's and into the early 2000's. Beyond that
period, additional fuel will be purchased as required to ensure optimum cost
and inventory levels.
The DOE is not expected to begin the acceptance of spent fuel in 1998 as
specified in the Company's contract with the DOE. However, on-site spent
nuclear fuel storage at the Surry Power Station (spent fuel pool and dry cask
storage) is expected to be adequate for the Company's needs until the DOE
begins accepting spent fuel. The North Anna Power Station will require
additional spent fuel storage capacity in 1998. The Company submitted a license
application to the NRC in May 1995 for a dry cask facility at North Anna. The
Company anticipates that this application will be approved in mid-1998.
For details on the issues of decommissioning and nuclear insurance, see
Note C to the CONSOLIDATED FINANCIAL STATEMENTS.
Fossil Operations and Fuel Supply
The Company's fossil fuel mix consists of coal, oil and natural gas. In
1997, Virginia Power consumed approximately 13 million tons of coal. As with
nuclear fuel, the Company utilizes both long-term contracts and spot purchases
to support its needs. The Company presently anticipates that sufficient coal
supplies at reasonable prices will be available for the remainder of the
1990's. Current projections for an adequate supply of oil remain favorable,
barring unusual international events or extreme weather conditions which could
affect both price and supply.
The Company uses natural gas as needed throughout the year for two
combined cycle units and at several combustion turbine units. For winter usage
at the combined cycle sites, gas is purchased and stored during the summer and
fall and consumed during the colder months when gas supplies are not available
at favorable prices. The Company has firm transportation contracts for the
delivery of gas to the combined cycle units. Current projections indicate gas
supplies will be available for the next several years.
Purchases and Sales of Energy
Virginia Power relies on purchases of power to meet a portion of its
capacity requirements. The Company also makes economy purchases of power from
other utility systems when it is available at a cost lower than the Company's
own generation costs.
Under contracts effective January 1, 1985, Virginia Power agreed to
purchase 400 MW of electricity annually through 1999 from Hoosier Energy Rural
Electric Cooperative, Inc. (Hoosier), and agreed to purchase 500 MW of
electricity annually during 1987-99 from certain operating units of American
Electric Power Company, Inc. (AEP).
The Company has a diversity exchange agreement with AE under which AE
delivers 200 MW to Virginia Power in the summer and Virginia Power delivers 200
MW to AE in the winter.
Virginia Power also has 57 non-utility power purchase contracts with a
combined dependable summer capacity of 3,277 MW (for information on the
financial obligations under these agreements see Note Q to the CONSOLIDATED
FINANCIAL STATEMENTS). In a continuing effort to mitigate its exposure to
above-market long-term purchased power contracts, the Company is evaluating its
long-term purchased power contracts and negotiating modifications to their
terms, including cancellations, where it is determined to be economically
advantageous to do so.
The Company's wholesale power group actively participates in the purchase
and sale of wholesale electric power and natural gas in the open market. The
wholesale power group has expanded the Company's trading range beyond the
geographic limits of the Virginia Power service territory, and has developed
trading relationships with energy buyers and sellers on a nationwide basis.
8
<PAGE>
In July 1997, the Company executed three agreements with Old Dominion
Electric Cooperative (ODEC) which provide for the amendment of the parties'
Interconnection and Operating Agreement (I&O Agreement). The first agreement
provides for the transition from cost-based rates for capacity and energy
purchases by ODEC to market-based rates by 2002. The second two agreements are
the Service and Operating Agreements for Network Integration Transmission
Service, which unbundled the transmission services provided to ODEC under the
I&O Agreement.
FUTURE SOURCES OF POWER
As reported earlier, both the Hoosier 400 MW long-term purchase and the
AEP 500 MW long-term purchase will expire on December 31, 1999. The Company
presently anticipates adding peaking capacity beginning in the year 2000 to
meet its anticipated load growth. The Company has and will pursue capacity
acquisition plans to provide that capacity and maintain a high degree of
service reliability. This capacity may be owned and operated by others and sold
to the Company or may be built by the Company if it determines it can build
capacity at a lower overall cost. The Company also pursues conservation and
demand-side management (see CONSERVATION AND LOAD MANAGEMENT below). No
Company-owned generation is currently in the planning or construction stages.
For additional information, see Note Q to the CONSOLIDATED FINANCIAL
STATEMENTS.
CONSERVATION AND LOAD MANAGEMENT
The Company is committed to evaluating and selecting demand-side and
supply-side options on a consistent basis in order to provide reliable,
low-cost service to its customers. Conservation and load management programs
are evaluated annually at Virginia Power through a resource planning process
that directly compares the stream of costs and benefits from supply-side and
demand-side options. This process supports a conservation and load management
portfolio which contributes both to the selection of low-cost resources to meet
the future electricity needs of the Company's customers, as well as the
efficient use of current resources.
Events in the evolving electric power marketplace and its regulatory and
legislative environment continue to impact utility-sponsored conservation and
load management programs. In the future, the Company anticipates a greater
reliance on the use of price signals to convey information to our customers
regarding energy-related costs, resulting in more efficient purchase decisions.
INTERCONNECTIONS
The Company maintains major interconnections with Carolina Power and Light
Company, AEP, AE and the utilities in the Pennsylvania-New Jersey-Maryland
Power Pool. Through this major transmission network, the Company has
arrangements with these utilities for coordinated planning, operation,
emergency assistance and exchanges of capacity and energy.
In December 1996, the Company joined with Allegheny Power Service
Corporation, Cleveland Electric Illuminating Company, Toledo Edison Company,
Ohio Edison Company, Pennsylvania Power Company and Southern Company Services,
Inc. (the Transmission Alliance) to file a contract with the FERC entitled the
GAPP Experiment Participation Agreement (GAPP Agreement). The Transmission
Alliance and the GAPP Agreement were established to promote fair and equitable
use of the transmission systems based on the General Agreement on Parallel
Paths (GAPP) model for coordinating the flow of bulk supplies of electricity
among utilities. GAPP principles allow electric companies to determine where
electricity actually flows in bulk power transactions, as opposed to the
"contract" paths that are based on power purchase and transmission agreements
among buying, selling and transmitting utilities.
Compensation for transmission services has historically been based on
contract paths. The GAPP Agreement was designed to determine the physical path
electricity actually takes through the system and allocate open access
transmission revenues among the parties. The GAPP Agreement was designed as an
experiment to test the GAPP methods and procedures for a period of two years.
The FERC accepted the contract on March 25, 1997. The Company and the
Transmission Alliance implemented the GAPP Agreement on April 2, 1997.
On November 14, 1997, in accordance with the FERC order accepting the GAPP
Agreement, the Transmission Alliance issued a report detailing the results of
the first six months of the experiment. The preliminary results of the
experiment indicate that it is technically possible to monitor and predict the
physical flow of electricity over multiple systems and that transmission
revenues reallocated according to actual use of the system differ significantly
from collections under a contract
9
<PAGE>
path approach. In October 1997, Virginia Power gave notice to the Transmission
Alliance that, effective January 1, 1998, it was exercising its option under
the GAPP Agreement to terminate its involvement in the experiment.
On December 9, 1997, the Company, the Transmission Alliance and other
utilities agreed to study the creation of an independent regional transmission
entity. The memorandum of understanding to initiate this study was signed by
eleven investor-owned electric companies, including Virginia Power, Consumers
Energy, Detroit Edison, Duquesne Light Company, The Illuminating Company, Ohio
Edison Company, Pennsylvania Power Company, Toledo Edison Company, and the
Allegheny Energy Companies (Monongahela Power Company, The Potomac Edison
Company, and West Penn Power Company). This group is an outgrowth of the GAPP
Agreement and its key goals are to maintain the long-term reliability and
security of the utilities' interconnected transmission systems; ensure the most
efficient use of resources; eliminate pancaking of rates within and between
transmission entities; avoid duplication of costs and achieve transmission cost
savings; and, strike an appropriate balance among the diverse interests of
energy suppliers, customers, and shareholders. The group will also explore
cooperative agreements designed to achieve these goals while ensuring
nondiscriminatory and comparable access to all users of the group's
transmission system. The companies intend to be responsive to industry changes,
especially with the introduction of retail competition in some of the areas
served by the signatories and as some other industry participants consider
creation of independent transmission operating companies or separate
transmission companies. Further, the companies will have the flexibility to
continue to investigate and pursue other opportunities and arrangements that
could develop regarding independent system operators or independent
transmission companies.
Virginia Power and Appalachian Power Company (AEP-Virginia), an operating
unit of AEP, each sought approval from the SCC in 1991 to construct certain
interconnecting transmission facilities. These applications resulted from a
joint planning effort of Virginia Power and AEP to meet the requirements of
their customers. At the time of Virginia Power's application, particularly
during the summer of 1992, constraints were being experienced on transfers of
power into the Virginia Power service territory from the west. On November 7,
1997, the SCC issued an Order directing the Company to report to the Commission
on the continued need for certain new interconnected transmission facilities,
on the relationship between the Company's application to build the new
facilities and certain other pending proceedings, and on the Company's
construction plans, if the SCC grants the Company's application.
On December 15, 1997, the Company filed a report in compliance with the
SCC Order stating that since the filing of the Company's application, the
constraints have been less frequent, due in part to less severe summer weather,
and actual power requirements have been less than originally forecasted. In
addition, generating resources within the Virginia Power service area have been
increased by the higher performance level of the nuclear units, as well as the
completion of the Clover Station. Completion of the AEP project is a
prerequisite for the Virginia Power project to go forward. The proposed
Virginia Power project would not fulfill its intended purpose without the AEP
line being built. AEP has withdrawn its original application and has instituted
a new proceeding before the Commission in which different routing is proposed.
Virginia Power continues to monitor closely the progress of AEP in this
proceeding with respect to its new proposal, but until more is known about
these proceedings, Virginia Power cannot predict what its construction plans
will be.
ITEM 2. PROPERTIES
The Company owns its principal properties in fee (except as indicated
below), subject to defects and encumbrances that do not interfere materially
with their use. Substantially all of its property is subject to the lien of a
mortgage securing its First and Refunding Mortgage Bonds. Right-of-way grants
from the apparent owners of real estate have been obtained for most electric
lines, but underlying titles have not been examined except for transmission
lines of 69 Kv or more. Where rights of way have not been obtained, they could
be acquired from private owners by condemnation if necessary. Many electric
lines are on publicly owned property, as to which permission for use is
generally revocable. Portions of the Company's transmission lines cross
national parks and forests under permits entitling the federal government to
use, at specified charges, surplus capacity in the line if any exists.
The Company leases certain buildings and equipment. See Note G to the
CONSOLIDATED FINANCIAL STATEMENTS.
See Company Generating Units under SOURCES OF POWER under Item 1.
BUSINESS.
10
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is alleged to be in violation or in default
under orders, statutes, rules or regulations relating to the environment,
compliance plans imposed upon or agreed to by the Company, or permits issued by
various local, state and federal agencies for the construction or operation of
facilities. From time to time, there may be administrative proceedings on these
matters pending. In addition, in the normal course of business, the Company is
involved in various legal proceedings. Management believes that the ultimate
resolution of these proceedings will not have a material adverse effect on the
Company's financial position, liquidity or results of operations.
In December 1995, two civil actions were filed in the Virginia Circuit
Court of the City of Norfolk against the City of Norfolk and Virginia Power,
one for $15 million and one for $3 million, by property owners who each alleged
contamination of their respective properties by hazardous substances
originating on nearby property now owned by the city and formerly owned by the
Company. In reference to the $15 million action, the parties reached a
settlement prior to the scheduled August 18, 1997, trial date. The related
action by the other property owner seeking $3 million is still pending, but has
not yet been scheduled for trial.
On April 2, 1997, Doswell Limited Partnership (Doswell) filed a motion for
judgment against Virginia Power in the Circuit Court of the City of Richmond.
Doswell is an independent power producer that has entered into two power
purchase agreements with Virginia Power and claims the Company breached one of
those agreements. On the same date, Doswell also filed a complaint against
Virginia Power in the United States District Court for the Eastern District of
Virginia alleging certain claims relating to the two power purchase agreements.
In March 1998, the parties agreed that both proceedings should be stayed in
order to give the parties an opportunity to negotiate amendments to the power
purchase agreements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 17, 1997, by Consent of the Sole Shareholder, Dominion
Resources, Inc., the number of Virginia Power Directors was expanded to a
maximum of eighteen (18) and the following Directors were elected to serve for
terms expiring at the annual shareholder meetings for the years indicated
below:
<TABLE>
<S> <C>
John B. Bernhardt 2000
John W. Harris 1998
Kenneth A. Randall 1999
Frank S. Royal 1998
Judith B. Sack 1999
S. Dallas Simmons 2000
David A. Wollard 1999
</TABLE>
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
All of the Company's Common Stock is owned by Dominion Resources.
The Company paid quarterly cash dividends on its Common Stock as follows:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
---------- ---------- ---------- ----------
(Millions)
<S> <C> <C> <C> <C>
1997 ............. $ 95.9 $ 93.4 $ 94.7 $ 95.9
1996 ............. $ 95.3 $ 96.5 $ 96.1 $ 97.9
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1997 1996
------------- -------------
(Millions, except
percentages)
<S> <C> <C>
Revenues .................................................... $ 5,079.0 $ 4,420.9
Income from operations ...................................... 1,019.3 1,010.0
Net income .................................................. 469.1 457.3
Balance available for Common Stock .......................... 433.4 421.8
Total assets ................................................ 11,953.4 11,828.0
Total net utility plant ..................................... 9,219.2 9,433.8
Long-term debt, noncurrent capital lease obligations,
preferred stock subject to mandatory redemption and
preferred securities of subsidiary trust ................... 3,854.4 3,916.2
Utility plant expenditures (including nuclear fuel) ......... 481.8 484.0
Capitalization ratios (percent):
Debt ....................................................... 45.4 46.4
Preferred stock ............................................ 7.6 7.5
Preferred securities ....................................... 1.5 1.5
Common equity .............................................. 45.5 44.6
Embedded cost (percent):
Long-term debt ............................................. 7.60 7.68
Preferred stock ............................................ 5.25 5.14
Preferred securities ....................................... 8.72 8.72
Weighted average ........................................... 7.29 7.34
<CAPTION>
1995 1994 1993
------------- ------------- -------------
(Millions, except percentages)
<S> <C> <C> <C>
Revenues .................................................... $ 4,351.9 $ 4,170.8 $ 4,187.3
Income from operations ...................................... 971.9 957.1 1,070.6
Net income .................................................. 432.8 447.1 509.0
Balance available for Common Stock .......................... 388.7 404.9 466.9
Total assets ................................................ 11,827.7 11,647.9 11,520.5
Total net utility plant ..................................... 9,573.1 9,623.4 9,459.7
Long-term debt, noncurrent capital lease obligations,
preferred stock subject to mandatory redemption and
preferred securities of subsidiary trust ................... 4,228.0 4,157.5 4,151.1
Utility plant expenditures (including nuclear fuel) ......... 577.5 660.9 712.8
Capitalization ratios (percent):
Debt ....................................................... 47.2 46.7 46.4
Preferred stock ............................................ 7.5 9.0 9.2
Preferred securities ....................................... 1.5
Common equity .............................................. 43.8 44.3 44.4
Embedded cost (percent):
Long-term debt ............................................. 7.73 7.65 7.67
Preferred stock ............................................ 5.29 5.47 4.88
Preferred securities ....................................... 8.72
Weighted average ........................................... 7.41 7.29 7.18
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains "forward-looking statements" as defined by the
Private Securities Litigation Reform Act of 1995, including (without
limitation) discussions as to expectations, beliefs, plans, objectives and
future financial performance, or assumptions underlying or concerning matters
discussed in this document. These discussions, and any other discussions,
including certain contingency matters (and their respective cautionary
statements) discussed elsewhere in this report, that are not historical facts,
are forward-looking and, accordingly, involve estimates, projections, goals,
forecasts, assumptions and uncertainties that could cause actual results or
outcomes to differ materially from those expressed in the forward-looking
statements.
Some important factors that could cause actual results or outcomes to
differ materially from those discussed in the forward-looking statements
include current governmental policies and regulatory actions (including those
of FERC, the EPA, the DOE, the NRC, the Virginia Commission and the North
Carolina Commission), industry and rate structure, operation of nuclear power
facilities, acquisition and disposal of assets and facilities, operation and
storage facilities, recovery of the cost
12
<PAGE>
of purchased power, nuclear decommissioning costs, and present or prospective
wholesale and retail competition. The business and profitability of Virginia
Power also are influenced by economic and geographic factors including
political and economic risks, changes in and compliance with environmental laws
and policies, weather conditions and catastrophic weather-related damage,
competition for retail and wholesale customers, pricing and transportation of
commodities, market demand for energy, inflation, capital market conditions,
unanticipated changes in operating expenses and capital expenditures,
competition for new energy development opportunities and legal and
administrative proceedings. All such factors are difficult to predict, contain
uncertainties that may materially affect actual results, and may be beyond the
control of Virginia Power. New factors emerge from time to time and it is not
possible for management to predict all such factors, nor can it assess the
impact of each such factor on the business of the Company.
Any forward-looking statement speaks only as of the date on which such
statement is made, and Virginia Power undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances
after the date on which such statement is made.
Liquidity and Capital Resources
Operating activities continue to be a strong source of cash flow,
providing $1,091 million in 1997 compared to $1,115 million in 1996. The
decrease of $24 million (or 2 percent) from the previous year is attributable
to normal business fluctuations. Over the past three years, cash flow from
operating activities has, on average, covered 134 percent of our total
construction requirements and provided 81 percent of our total cash
requirements. Our remaining cash needs are met generally with proceeds from the
sale of securities and short-term borrowings.
Financing activities have represented a net outflow of cash in recent
years as strong cash flow from operations and the absence of major construction
programs have reduced the Company's reliance on debt financing.
Cash from (used in) financing activities was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ------------ -----------
(Millions)
<S> <C> <C> <C>
Issuance of long-term debt ................................... $ 270.0 $ 24.5 $ 240.0
Issuance of preferred securities of subsidiary trust ......... 135.0
Issuance (Repayment) of short-term debt ...................... ( 86.2) 143.4 169.0
Repayment of long-term debt and preferred stock .............. (311.3) (284.1) (439.0)
Dividend payments ............................................ (415.6) (421.4) (438.6)
Other ........................................................ ( 13.5) ( 13.2) ( 13.7)
-------- -------- --------
Total ....................................................... $ (556.6) $ (550.8) $ (347.3)
======== ======== ========
</TABLE>
We have taken advantage of declining interest rates by issuing new debt at
lower rates as higher-rate debt has matured. For example, in 1997, $311.3
million of the Company's long-term debt securities matured with an average
effective rate of 8.08 percent. As a partial replacement for this maturing
debt, we issued $270 million of long-term debt securities during the year with
an average effective rate of 6.84 percent.
We currently have three shelf registration statements effective with the
Securities and Exchange Commission from which we can obtain additional debt
capital: $400 million of Junior Subordinated Debentures; $375 million of Debt
Securities, including First and Refunding Mortgage Bonds, Senior Notes and
Senior Subordinated Notes filed in February 1998; and $200 million of
Medium-Term Notes, Series F. The remaining principal amount of debt that can be
issued under these registrations totals $915 million. An additional capital
resource of $100 million in preferred stock also is registered with the
Securities and Exchange Commission.
The Company has a commercial paper program that is supported by two credit
facilities totaling $500 million. Proceeds from the sale of commercial paper
are primarily used to provide working capital. Net borrowings under the program
were $226.2 million at December 31, 1997.
Investing activities in 1997 resulted in a net cash outflow of $546.1
million, primarily due to $397.0 million of construction expenditures and $84.8
million of nuclear fuel expenditures. The construction expenditures included
approximately $252.4 million for transmission and distribution projects, $52.1
million for production projects, $49.7 million for information technology
projects and $42.8 million for other projects.
13
<PAGE>
Cash used in investing activities was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
(Millions)
<S> <C> <C> <C>
Utility plant expenditures (excluding AFC -- other funds) ......... $ (397.0) $ (393.8) $ (519.9)
Nuclear fuel (excluding AFC -- other funds) ....................... ( 84.8) ( 90.2) ( 57.6)
Nuclear decommissioning contributions ............................. ( 36.2) ( 36.2) ( 28.5)
Sale of accounts receivable, net .................................. (160.0)
Purchase of assets ................................................ ( 19.8) ( 13.7)
Other ............................................................. ( 8.3) ( 12.5) ( 11.1)
-------- -------- --------
Total ............................................................ $ (546.1) $ (546.4) $ (777.1)
======== ======== ========
</TABLE>
Capital Requirements
Capacity -- The Company anticipates that kilowatt-hour sales will grow
approximately 2.36 percent a year through 2000. We will continue to pursue
capacity acquisition plans to meet the anticipated load growth and maintain a
high degree of service reliability. The additional capacity may be purchased
from others or built by the Company if we can build capacity at a lower overall
cost. We have long-term purchase agreements with Hoosier (400 MW) and AEP (500
MW) which will expire on December 31, 1999. We presently anticipate adding
peaking capacity beginning in the year 2000 to meet future load growth.
Fixed Assets -- The Company's construction and nuclear fuel expenditures
(excluding AFC), during 1998, 1999 and 2000 are expected to total $588.1
million, $476.2 million and $395.1 million, respectively. The Company presently
estimates that all of its 1998 construction and nuclear fuel expenditures will
be met through cash flow from operations.
Long-term Debt -- The Company will require $333.5 million to meet
maturities of long-term debt in 1998, which we expect to meet with cash flow
from operations and issuance of replacement debt securities. Other capital
requirements will be met through a combination of sales of securities and
short-term borrowings.
Customer Service -- The Company has adopted a plan to improve customer
service, requiring an investment in excess of $100 million. Our plan includes:
o installing automated electric meters in metropolitan and inaccessible
rural and urban locations,
o installing a new work management system,
o making technological changes to enhance the Company's ability to handle
customer calls during power outages,
o installing mobile data dispatch technology in the Company's service
fleet, accompanied by digitized mapping of our service territory, and
o initiating both local and regional distribution line improvement
projects.
Expenditures in 1997 for these projects were approximately $23 million; future
expenditures are expected to be approximately $68 million in 1998 and $15
million in 1999. We anticipate funding these projects with cash flow from
operations.
14
<PAGE>
Results of Operations
The following is a discussion of results of operations for the years ended
1997 as compared to 1996, and 1996 as compared to 1995.
1997 Compared to 1996
Revenue changed from the prior year primarily due to the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(Millions)
<S> <C> <C>
Revenue -- Electric Service
Customer growth ...................... $ 55.8 $ 45.1
Weather .............................. (111.1) 4.4
Base rate variance ................... ( 18.7) (35.5)
Fuel rate variance ................... 44.1 (89.6)
Other retail, net .................... 47.7 41.5
-------- -------
Total retail ....................... 17.8 (34.1)
Other electric service ............... 11.0 (49.8)
-------- -------
Total electric service ............. 28.8 (83.9)
-------- -------
Revenue -- Other
Wholesale -- power marketing ......... 363.4 96.6
Natural gas .......................... 232.6 33.2
Other, net ........................... 33.3 23.1
-------- -------
Total revenue -- other ............. 629.3 152.9
-------- -------
Total revenue ..................... $ 658.1 $ 69.0
======== =======
</TABLE>
Electric service revenue consists of sales to retail customers in our
service territory at rates authorized by the Virginia and North Carolina
Commissions and sales to cooperatives and municipalities at wholesale rates
authorized by FERC. The primary factors affecting this revenue in 1997 were
customer growth, weather, and fuel rates.
Customer growth -- There were 50,899 new customer connections to our system
in 1997, the largest number of new connections in any year since 1990. This
had the effect of increasing our sales by $55.8 million in 1997 over 1996.
Weather -- The mild weather in 1997 caused customers to use less
electricity for heating and cooling, which reduced revenue by approximately
$111.1 million from the previous year. Heating and cooling degree days were
as follows:
<TABLE>
<CAPTION>
1997 1996 Normal
------------ ------------- -------
<S> <C> <C> <C>
Cooling degree days ............................... 1,349 1,365 1,530
Percentage change compared to prior year .......... (1.2)% (18.1)%
Heating degree days ............................... 3,787 4,131 3,726
Percentage change compared to prior year .......... (8.3)% 9.0%
</TABLE>
Fuel rates -- The increase in fuel rate revenues is primarily attributable
to higher fuel rates which went into effect December 1, 1996, increasing
recovery of fuel costs by approximately $48.2 million. The regulatory
commissions having jurisdiction over the Company allow us to charge
customers for the cost of fuel used in generating electricity.
Other revenue includes sales of electricity beyond our service territory,
natural gas, nuclear consulting services, energy management services and other
revenue. The growth in power marketing and natural gas sales revenue is
primarily due to our success at marketing electricity and natural gas beyond
our service territory. The Company began pursuing these new lines of business
in 1996. We expect that revenue from such non-traditional business activities
will continue to grow in the near future.
15
<PAGE>
Kilowatt-hour sales changed as follows:
<TABLE>
<CAPTION>
Increase
(Decrease) From
Prior Year
------------------------
1997 1996
------------ ---------
<S> <C> <C>
Residential ............................ ( 1.8)% 2.3%
Commercial ............................. 0.6 2.3
Industrial ............................. 2.1 2.3
Public authorities ..................... ( 4.7) 2.6
Total retail sales ..................... ( 0.5) 2.4
Wholesale -- system .................... 2.5 (24.3)
Wholesale -- power marketing ........... 196.0 200.3
Total sales ............................ 17.2 6.3
</TABLE>
The decrease in retail kilowatt-hour sales in 1997 as compared to 1996 reflects
the impact of weather on our traditional electricity service business, despite
continued customer growth. The increase in wholesale kilowatt-hour sales was
primarily due to the Company's power marketing efforts.
Fuel, net increased as compared to 1996, primarily due to the cost of the
power marketing and natural gas sales which reflects increased purchases of
energy from other wholesale power suppliers and purchases of natural gas.
System energy output by energy source and the average fuel cost for each are
shown below. Fuel cost is presented in mills (one tenth of one cent) per
kilowatt hour.
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- -------------------- --------------------
Source Cost Source Cost Source Cost
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Nuclear (*) .................. 34% 4.52 32% 4.48 32% 4.92
Coal (**) .................... 40 13.54 38 14.32 39 14.44
Oil .......................... 1 26.32 1 27.75 1 25.11
Purchased power, net ......... 23 21.54 27 21.99 25 22.50
Other ........................ 2 30.65 2 26.98 3 23.82
-- -- --
Total ...................... 100% 100% 100%
=== === ===
Average fuel cost .......... 12.67 13.47 13.73
</TABLE>
- ---------
(*) Excludes ODEC's 11.6 percent ownership interest in the North Anna Power
Station.
(**) Excludes ODEC's 50 percent ownership interest in the Clover Power Station.
Other operations and maintenance increased as compared to 1996 as a result
of costs associated with the growth in sales by the Company's energy services
business unit. These higher costs were offset partially by a reduction in
expenses attributable to the Company's strategic initiatives. Expenses in 1996
include high storm damage costs resulting from destructive summer storms,
including Hurricane Fran.
Depreciation and amortization increased as compared to 1996 due to the
recognition of additional depreciation and nuclear decommissioning expense to
reflect adjustments in the Company's filing currently pending before the
Virginia Commission and higher depreciation expense related to Clover Unit 2,
which began operations in March 1996. See Future Issues -- Utility Rate
Regulation for additional information on current rate proceedings.
Restructuring expenses decreased as compared to 1996 as the Company nears
completion of its Vision 2000 strategic initiative. Charges for restructuring
primarily include employee severance costs, costs to restructure agreements to
purchase power from third parties and, when necessary, to negotiate settlement
and termination of these contracts, and other costs. The Company estimates that
staffing reductions will result in annual savings, in the range of $80 million
to $90 million. However, these savings are being offset by salary increases,
outsourcing costs and increased payroll costs associated with staffing for
growth opportunities. See also Note O to the CONSOLIDATED FINANCIAL STATEMENTS.
Accelerated cost recovery represents a reserve for potential adjustments
to regulatory assets. In this increasingly competitive environment, the Company
has concluded that it is appropriate to utilize available cost reductions, such
as those generated by the Vision 2000 program, to accelerate the write-off of
unamortized regulatory assets and potentially stranded costs (see Future Issues
- -- Competition).
16
<PAGE>
1996 Compared to 1995
Electric service revenues decreased as compared to 1995 due to the effect
of mild weather on the Company's summer retail rates, which are designed to
reflect normal weather conditions. These revenues also were affected by reduced
sales to Old Dominion Electric Cooperative (ODEC) due to the completion of
Clover Units 1 and 2, of which ODEC owns a fifty percent interest.
Other revenues increased as compared to 1995 due to growth in our power
marketing and energy services business, which was organized as a distinct
business unit in 1996.
Fuel, net increased as compared to 1995, primarily as a result of
increased energy purchases associated with our power marketing sales, offset in
part by a higher recovery of fuel expenses subject to deferral accounting in
1995.
Operations and maintenance decreased slightly as compared to 1995,
primarily as a result of a reduction in expenses attributable to the Company's
strategic initiatives, offset partly by the high storm damage costs incurred in
1996 from destructive summer storms, including Hurricane Fran.
Depreciation and amortization increased as compared to 1995, primarily as
a result of greater nuclear decommissioning expense and depreciation related to
Clover Units 1 and 2, which were placed in service in October 1995 and March
1996, respectively.
Restructuring decreased as compared to 1995 as the implementation phase of
the Vision 2000 initiative continued. Restructuring charges in 1996 included
severance costs, costs to restructure or settle certain contracts to purchase
power and other costs. In addition, 1995 restructuring costs included one-time
charges to cancel specific capital projects and adjustments to inventory and
certain real estate to reflect adoption of changes in business strategies and
processes.
Accelerated cost recovery represents a provision for management's estimate
of a reserve that may ultimately be used to accelerate the write-off of
unamortized regulatory assets and potentially stranded costs (see Future Issues
- -- Competition).
Future Issues
Competition in the Electric Industry -- General
For most of this century, the structure of the electric industry in
Virginia and throughout the United States has been relatively stable. We have
recently seen, however, federal and state developments toward increased
competition. Electric utilities have been required to open up their
transmission systems for use by potential wholesale competitors. In addition,
non-utility power producers now compete with electric utilities in the
wholesale generation market. At the federal level, retail competition is under
consideration. Some states have enacted legislation requiring retail
competition.
Today, Virginia Power faces competition in the wholesale market.
Currently, there is no general retail competition in Virginia Power's principal
service area. To the extent that competition is permitted, Virginia Power's
ability to sell power at prices that allow it to recover its prudently incurred
costs may be an issue. See Future Issues -- Competition -- Exposure to
Potentially Stranded Costs.
In response to competition, Virginia Power has successfully renegotiated
long term contracts with wholesale and large federal government customers. In
addition, the Company has obtained regulatory approval of innovative pricing
proposals for large industrial customers. Rate concessions resulting from these
contract negotiations and innovative pricing proposals are expected to reduce
the Company's 1998 revenue by approximately $40 million. To date, the Company
has not experienced any material loss of load.
Virginia Power is actively participating in the legislative and regulatory
processes relating to industry restructuring. The Company has also responded to
these trends toward competition by cutting its costs, re-engineering its core
business processes, and pursuing innovative approaches to serving traditional
markets and future markets. In addition, a significant part of the Company's
strategy relies on developing "non-traditional" businesses within the Company's
business units and subsidiaries designed to provide growth in future earnings,
including:
o Energy Services -- offering electric energy and capacity in the emerging
wholesale market as well as natural gas, and other energy related products
and services;
o Fossil & Hydro -- targeting process type industries, such as chemical,
paper, plastics and petroleum to become a service provider of
instrumentation equipment;
o Nuclear Services -- offering management and operations services to other
electric utilities;
17
<PAGE>
o Commercial Operations -- providing power distribution related services,
including transmission and distribution, engineering and metering services
to other gas, water and electric utilities; and
o Telecommunications -- offering telecommunications services through the
Company's existing fiber-optic network.
The Company's non-traditional businesses face competition from a variety
of utility and non-utility entities. In addition, Virginia Power may from time
to time identify and investigate opportunities to expand its markets through
strategic alliances with partners whose strengths, market position and
strategies complement those of the Company.
Competition -- Wholesale
During 1997, sales to wholesale customers represented approximately 17
percent of the Company's total revenues from electric sales. Approximately 73
percent of wholesale revenues resulted from the Company's power marketing
efforts.
In July 1997, Virginia Power filed amendments to its existing rate tariffs
with FERC so it could make wholesale sales at market-based rates. Under a FERC
order conditionally accepting the Company rates for filing, Virginia Power
began making market-based sales in 1997. FERC set for hearing in June 1998 the
issue of whether transmission constraints limiting the transfer of power into
the Company's service territory provide Virginia Power with generation
dominance in localized markets. If FERC finds transmission constraints give
Virginia Power generation dominance, it could revoke or limit the scope of the
Company's market-based rate authority.
Virginia Power has successfully negotiated a new power supply arrangement
with its largest wholesale customer. The new arrangement provides for a
transition from cost-based rates to market-based rates, subject to FERC
approval. Virginia Power estimates the reduced rates, offset in part by other
revenues which may be earned under the agreement, will decrease income before
taxes by approximately $38 million through 2005. Virginia Power anticipates
that additional contract negotiations with other wholesale customers will take
place in the future.
Competition -- Retail
Currently, Virginia Power has the exclusive right to provide electricity
at retail within its assigned service territories in Virginia and North
Carolina. As a result, Virginia Power now only faces competition for retail
sales if certain of its business customers move into another utility service
territory, use other energy sources instead of electric power, or generate
their own electricity. However, both Virginia and North Carolina are
considering implementing retail competition.
Competition -- Legislative Initiatives
Virginia: In the 1998 Session, the Virginia General Assembly passed House
Bill No. 1172 (HB1172) to establish a schedule for Virginia's transition to
retail competition in the electric utility industry. The Company actively
supported HB1172, which passed both houses of the General Assembly in amended
form and now awaits action by the Governor. HB1172 requires the following:
o establishment of one or more independent system operators (ISO) and one
or more regional power exchanges (RPX) for Virginia by January 1, 2001;
o deregulation of generating facilities beginning January 1, 2002;
o transition to retail competition to begin on January 1, 2002, with
retail competition to begin on January 1, 2004;
o recovery of just and reasonable net stranded costs; and
o appropriate consumer safeguards related to stranded costs and
consideration of stranded benefits.
If HB1172 becomes law, it will become effective July 1, 1998. While the
bill establishes a timeline for the transition to competition in Virginia, a
detailed plan to implement that transition must be developed through future
legislative and regulatory action. The Company is unable at this time to
predict its timing or details.
Federal: The U.S. Congress is expected to consider federal legislation in
the near future authorizing or requiring retail competition. Virginia Power
cannot predict what, if any, definitive actions the Congress may take.
North Carolina: The 1997 Session of the North Carolina General Assembly
created a Study Commission on the Future of Electric Service in North Carolina.
An interim report is expected in 1998 with final recommendations made to the
1999 session of the North Carolina General Assembly.
18
<PAGE>
Competition -- Regulatory Initiatives
The Virginia Commission also has been actively interested in industry
restructuring and competition, as shown in the following generic and
utility-specific proceedings.
In 1995, the Commission instituted an ongoing generic investigation on
restructuring, resulting in a number of reports by its Staff covering such
issues as retail wheeling experiments and the status of wholesale power
markets.
In November 1996, the Commission ordered Virginia Power to file studies
and reports on possible restructuring of the electric industry in Virginia. The
Commission also invited Virginia Power to submit a proposed alternative
regulation plan with its filing. A two-phase alternative regulatory plan (ARP)
was filed March 1997. During Phase I (1997 to December 2002), Virginia Power
proposed implementing a freeze of its current base rates and devoting a portion
of earnings above a 11.5% return-on-equity to accelerate the write-off of
generation-related regulatory assets and to mitigate the costs associated with
payments under power purchase contracts with non-utility generators that may be
above market if competition is authorized in Virginia. During Phase II (beyond
December 31, 2002), Virginia Power would seek Commission approval of stranded
cost recovery if retail competition is implemented in Virginia and a transition
cost charge mechanism by which stranded costs would be recovered. Virginia
Power presented illustrative estimates of stranded costs based on hypothetical
market prices as part of its Phase II filing. When the Company filed its ARP,
the Commission consolidated its consideration of the ARP with its consideration
of the Company's 1995 Annual Information Filing. For a discussion of the 1995
Annual Information Filing, See Future Issues -- Utility Rate Regulation.
In November 1997, the Commission Staff issued its report to the General
Assembly calling for a cautious, two-phase, five-year period to address
restructuring issues. The report acknowledged the need for direction from the
Virginia legislature concerning policy issues surrounding competition in the
electric industry. Virginia Power sought to withdraw its ARP in December 1997,
having concluded that resolution of the cost recovery issues raised by the ARP
was unlikely without General Assembly action. The Commission has agreed that
the Company may withdraw its support of the ARP, but has reserved the right to
continue consideration of the ARP as well as other regulatory alternatives. In
addition, the Commission will continue to consider the issues arising out of
the 1995 Annual Informational Filing (See Future Issues -- Utility Rate
Regulation).
Competition -- SFAS 71
Virginia Power's regulated rates are designed to recover its prudently
incurred costs of providing service, including the opportunity to earn a
reasonable return on its shareholder's investment. The Company's financial
statements reflect assets and costs under this cost-based rate regulation in
accordance with Statement of Financial Accounting Standards No. 71 (SFAS 71),
"Accounting for the Effects of Certain Types of Regulation." SFAS 71 provides
that certain expenses normally reflected in income are deferred on the balance
sheet as regulatory assets and are recognized as the related amounts are
included in rates and recovered from customers. Continued accounting under SFAS
71 requires that rates designed to recover the utility's specific costs of
providing service, are, and will continue to be, established by regulators. The
presence of increasing competition that limits the utility's ability to charge
rates that recover its costs, or a change in the method of regulation with the
same effect, could result in the discontinued applicability of SFAS 71.
Rate-regulated companies are required to write off regulatory assets
against earnings whenever those assets no longer meet the criteria for
recognition as defined by SFAS 71. In addition, SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires a review of long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Thus, events or changes in circumstances that cause the
discontinuance of SFAS 71, and write off of regulatory assets, may also require
a review of utility plant assets for possible impairment. If such review
indicates utility plant assets are impaired, the carrying amount of the
affected assets would be written down. This would result in a loss being
charged to earnings, unless recovery of the loss is provided through operations
that remain regulated.
Virginia Power's regulated operations currently satisfy the SFAS 71
criteria. However, if events or circumstances should change so that those
criteria are no longer satisfied, management believes that a material adverse
effect on the Company's results of operations and financial position may
result. The form of cost-based rate regulation under which Virginia Power
operates is likely to evolve as a result of various legislative or regulatory
initiatives. At this time, management can predict neither the ultimate outcome
of regulatory reform in the electric utility industry nor the impact such
changes would have on Virginia Power.
19
<PAGE>
Competition -- Exposure to Potentially Stranded Costs
Under traditional cost-based regulation, utilities have generally had an
obligation to serve supported by an implicit promise of the opportunity to
recover prudently incurred costs. The most significant potential adverse effect
of competition is "stranded costs." Stranded costs are those costs incurred or
commitments made by utilities under cost-based regulation that may not be
reasonably expected to be recovered in a competitive market.
The Company's potential exposure to stranded costs is comprised of the
following:
o long-term purchased power contracts that may be above market (see Note Q
to the CONSOLIDATED FINANCIAL STATEMENTS);
o costs pertaining to certain generating plants that may become uneconomic
in a deregulated environment;
o regulatory assets for items such as income tax benefits previously
flowed-through to customers, deferred losses on reacquired debt and other
costs; (see Note F to the CONSOLIDATED FINANCIAL STATEMENTS); and
o unfunded obligations for nuclear plant decommissioning and postretirement
benefits not yet recognized in the financial statements (see Notes C and N
to the CONSOLIDATED FINANCIAL STATEMENTS).
Any forecast of potentially stranded costs is extremely sensitive to the
various assumptions made. Such assumptions include:
o the timing and extent of customer choice in the market for electric
service;
o estimates of future competitive market prices;
o sales and load growth forecasts;
o power stations' future operating performance;
o rate revenues permitted during the transition;
o estimated costs of utility operations over time;
o mitigation opportunities;
o stranded cost recovery mechanisms and other factors.
Certain combinations of these assumptions as applied to Virginia Power
would produce little to no stranded costs; under other scenarios Virginia
Power's exposure to potentially stranded costs could be substantial.
Virginia Power has assessed the reasonableness of various possible
assumptions, but has not been able to settle on any particular combination
thereof. Thus, the Company's maximum exposure to potentially stranded costs is
uncertain. Management believes that recovery of any potentially stranded costs
is appropriate and will vigorously pursue such recovery with the regulatory
commissions having jurisdiction over its operations. However, Virginia Power
cannot predict the extent to which such costs, if any, will be recoverable from
customers. Also, in an effort to mitigate the amount at risk, the Company will
continue to implement cost reduction measures.
Utility Rate Regulation
In March 1997, the Virginia Commission issued an order that Virginia
Power's base rates be made interim and subject to refund as of March 1, 1997.
This order was the result of the Commission Staff's report on its review of
Virginia Power's 1995 Annual Informational Filing, which concluded that
Virginia Power's present rates would cause Virginia Power to earn in excess of
its authorized return on equity. The Staff found that, for purposes of
establishing rates prospectively, a rate reduction of $95.6 million (including
a one-time adjustment of $29.7 million to Virginia Power's deferred capacity
balance at December 31, 1996) may be necessary in order to realign rates to the
authorized level. Virginia Power filed its ARP in March 1997, based on 1996
financial information. Subsequently, the Commission consolidated the proceeding
concerned with the 1995 Annual Informational Filing with the proceeding that
includes the ARP proposed by the Company.
In December 1997, Virginia Power sought to withdraw its ARP, having
concluded that resolution of the cost recovery issues raised by the ARP was
unlikely without General Assembly action. The Commission has agreed that the
Company may withdraw its support of the ARP but has reserved the right to
continue consideration of the ARP as well as other regulatory alternatives. In
addition, the Commission will continue to consider the issues arising out of
the 1995 Annual Informational Filing. The Commission's Staff is scheduled to
file its testimony on March 24, 1998; Virginia Power's rebuttal is to be filed
by April 27, 1998; and the reply testimony is to be filed by May 11, 1998. A
public hearing is scheduled to commence on May 19, 1998.
Virginia Power's previous filings in this proceeding support maintaining
the Company's rates at current levels; however, opposing parties have made
filings recommending rate reductions in excess of $200 million. At this time,
management cannot predict the ultimate outcome of the proceeding and its impact
on the Company's results of operations, cash flows or financial position.
20
<PAGE>
Utility Operations
The Company strives to operate its generating facilities in accordance
with prudent utility industry practices and in conformity with applicable
statutes, rules and regulations. Like other electric utilities, the Company's
generating facilities are subject to unanticipated or extended outages for
repairs, replacements or modification of equipment or otherwise to comply with
regulatory requirements. Such outages may involve significant expenditures not
previously budgeted, including replacement energy costs.
On September 10, 1997, the NRC published a proposed rule for financial
assurance requirements related to nuclear decommissioning. If the NRC's
proposed rule were implemented without further clarification or modification,
the Company may have to either pre-fund or provide acceptable security for a
portion of its nuclear decommissioning obligation. See Note C to the
CONSOLIDATED FINANCIAL STATEMENTS.
Environmental Matters
The Company is subject to rising costs resulting from a steadily
increasing number of federal, state and local laws and regulations designed to
protect human health and the environment. These laws and regulations affect
future planning and existing operations. They can result in increased capital,
operating and other costs as a result of compliance, remediation, containment
and monitoring obligations of the Company. These costs have been historically
recovered from customers through utility rates. However, to the extent that the
regulatory environment departs from cost-based rates, the Company's results of
operations and financial condition could be adversely impacted.
Environmental Protection and Monitoring Expenditures
The Company incurred $70.4 million, $71.1 million and $68.3 million
(including depreciation) during 1997, 1996 and 1995, respectively, in
connection with the use of environmental protection facilities and expects
these expenses to be approximately $69.1 million in 1998. In addition, capital
expenditures to limit or monitor hazardous substances were $24.6 million, $22.4
million and $23.4 million for 1997, 1996 and 1995, respectively. The amount
estimated for 1998 for these expenditures is $10.0 million.
Clean Air Act Compliance
The Clean Air Act, as amended in 1990, requires the Company to reduce its
emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx). The Clean Air Act
also requires the Company to obtain operating permits for all major emissions-
emitting facilities. Permit applications have been submitted for the Company's
power stations located in North Carolina and West Virginia. Applications for
the Company's power stations located in Virginia will be filed in 1998.
The Clean Air Act's SO2 reduction program is based on the issuance of a
limited number of SO2 emission allowances, each of which may be used as a
permit to emit one ton of SO2 into the atmosphere or may be sold to someone
else. The program is administered by the EPA. The Company's compliance plans
may include switching to lower sulfur coal, purchase of emission allowances and
installation of SO2 control equipment. Maximum flexibility and least-cost
compliance will be maintained through annual studies.
The Company began complying with Clean Air Act Phase I NOx limits at eight
of its units in Virginia in 1997, three years earlier than otherwise required.
As a result, the units will not be subject to more stringent Phase II limits
until 2008. Furthermore, in order to avoid the necessity of more stringent
regulations, the Company made voluntary commitments in 1996 to cap NOx
emissions at its Chesterfield and Yorktown Power Stations and the Chesapeake
Energy Center during the ozone season beginning in 2000.
From 1994 through 1997, the Company invested more than $160 million to
install and upgrade SO2 and NOx emission control equipment at its Mt. Storm and
Possum Point power stations. Capital expenditures related to Clean Air Act
compliance over the next five years are projected to be approximately $40
million. Changes in the regulatory environment, availability of allowances, and
emissions control technology could substantially impact the timing and
magnitude of compliance expenditures.
In November 1997, the EPA proposed new requirements for 22 states,
including North Carolina, Virginia and West Virginia, to reduce and cap
emissions of NOx. The EPA will issue a final rule by September 1998. Although
the proposal allows each state to determine how to achieve the required
reduction in emissions, the caps were calculated based on emission limits for
utility boilers. If the states in which Virginia Power operates choose to
impose this limit, major additional emission control equipment, with attendant
significant capital and operating costs, could be required.
21
<PAGE>
Global Climate Change
In 1993, the United Nation's Global Warming Treaty became effective. The
objective of the treaty is the stabilization of greenhouse gas concentrations
at a level that would prevent man-made emissions from interfering with the
climate system.
As a continuation of the effort to limit man-made greenhouse emissions, an
international Protocol was formulated on December 10, 1997, in Kyoto, Japan.
This Protocol calls for the United States to reduce greenhouse emissions by 7
percent from 1990 baseline levels by the period 2008-2012. The Protocol will
not constitute a binding commitment unless submitted to and approved by the
United States Senate. Emission reductions of the magnitude included in the
Protocol, if adopted, would likely result in a substantial financial impact on
companies that consume or produce fossil fuel-derived electric power, including
Virginia Power.
Recently Issued Accounting Standards
During 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." Each of these statements is effective for
fiscal years beginning after December 15, 1997. At this time, the Company does
not expect the implementation of these standards to have a material impact on
its results of operations or financial position.
Year 2000 Compliance
Virginia Power is taking an aggressive approach regarding computer issues
associated with the onset of the new millenium -- specifically, the impact of
the possible failure of computer systems and computer-driven equipment due to
the rollover to the year 2000. The year 2000 problem is pervasive and complex
as virtually every computer operation could be affected in some way by the
rollover of the two-digit year value from 99 to 00. The issue is whether
computer systems will properly recognize date-sensitive information when the
year changes to 2000. Systems that do not properly recognize such information
could generate erroneous data or fail.
If not properly addressed, the year 2000 computer problem could result in
failures in computer systems in the Company and the computer systems of third
parties with which the Company transacts business. Such failures of the
Company's or third parties' computer systems could have a material impact on
the Company's ability to conduct business.
Since January 1997, the Company has organized a formal year 2000 project
team to identify, correct or reprogram and test its systems for year 2000
compliance. At this time, the project team has completed its preliminary
assessment. Based on the team's evaluation, the costs of testing and conversion
of system applications are projected to be within the range of $30 million to
$50 million. The range is a function of our ongoing evaluation as to whether
certain systems and equipment will be corrected or replaced, which is dependent
on information yet to be obtained from suppliers and other external sources.
Maintenance or modification costs will be expensed as incurred, while the costs
of new software and hardware will be capitalized and amortized over the asset's
useful life.
At this time, Virginia Power is actively pursuing solutions to its year
2000-related computer problems in order to ensure that foreseeable situations
related to Company computer systems are effectively addressed. The Company
cannot estimate or predict the potential adverse consequences, if any, that
could result from a third party's failure to effectively address this issue.
Market Rate Sensitive Instruments and Risk Management
Virginia Power is subject to market risk as a result of its use of various
financial instruments and derivative commodity instruments. Interest rate risk
generally is associated with the Company's outstanding debt, preferred stock
and trust-issued securities. The Company also is exposed to interest rate risk
as well as equity price risk as a result of its nuclear decommissioning trust
investments in debt and equity securities.
The Company's wholesale power group is involved in trading activities
which use derivative commodity instruments. However, the fair value of such
instruments at December 31, 1997, is not material to the Company's financial
position. Also, the potential near term losses in future earnings, fair values,
or cash flows, resulting from reasonably possible near term changes in market
prices for such instruments are not anticipated to be material to the Company's
results of operations, financial position or cash flows.
22
<PAGE>
The following analysis does not include the price risks associated with
the nonfinancial assets and liabilities of utility operations, including
underlying fuel requirements.
Interest-rate risk
Virginia Power uses both fixed rate and variable rate debt and preferred
securities as sources of capital. The following table presents the financial
instruments that are held or issued by the Company at December 31, 1997, and
are sensitive to interest rate changes in some way. Weighted average variable
rates are based on implied forward rates derived from appropriate annual spot
rate observations as of December 31, 1997.
<TABLE>
<CAPTION>
Expected Maturity Date
--------------------------------------------------------------- Fair
1998 1999 2000 2001 2002 Thereafter Total Value
---------- --------- --------- --------- --------- ------------ ----------- -----------
(Millions of Dollars, Except Percentages)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Nuclear decommissioning
trust investments ............. $ 17.7 $ 5.3 $ 2.1 $ 7.1 $ 3.1 $ 165.0 $ 200.3 $ 190.7
Average interest rate (1) ..... 5.5% 5.5% 5.5% 5.5% 5.5% 5.5%
LIABILITIES -- Fixed rate
Mortgage bonds .................. 225.0 100.0 135.0 100.0 255.0 2,009.5 2,824.5 2,937.7
Average interest rate ......... 6.7% 8.9% 5.9% 6.0% 4.5% 7.6%
Medium term notes ............... 108.5 221.0 60.5 60.6 60.0 40.5 551.1 573.7
Average interest rate ......... 7.6% 8.5% 9.7% 8.4% 7.6% 9.0%
Tax-exempt financing ............ 10.0 10.0 10.4
Average interest rate ......... 5.2%
Short-term debt ................. 226.2 226.2 226.2
Average interest rate ......... 5.9%
Preferred stock, subject to
mandatory redemption ............ 180.0 180.0 186.6
Average dividend rate ......... 6.2%
Mandatorily redeemable
trust-issued preferred
securities ...................... 135.0 135.0 137.7
Average dividend rate ......... 8.1%
LIABILITIES -- Variable rate
Tax-exempt financing (2) ........ 488.6 488.6 488.6
Average interest rate ......... 4.1%
</TABLE>
- ---------
(1) Rates are based on average yield for entire portfolio at December 31, 1997.
(2) Interest rates on the tax-exempt bonds are based on short-term, tax-exempt
market rates and are reset for periods of one to 270 days in length. The
Company has the option to convert these bonds to fixed rate securities
upon 40 days written notice. See Note H to the CONSOLIDATED FINANCIAL
STATEMENTS.
Equity price risk
The following table presents a description of marketable equity securities
held by the Company at December 31, 1997. As prescribed by Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," these securities are reported on the balance sheet
at fair value.
<TABLE>
<CAPTION>
Fair
Cost Value
------------ ------------
(Millions of Dollars)
<S> <C> <C>
Nuclear decommissioning trust investments ......... $ 219.4 $ 360.4
</TABLE>
23
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
<TABLE>
<CAPTION>
Page
No.
-----
<S> <C>
Report of Management ......................................................... 25
Report of Independent Auditors ............................................... 26
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995 ............................................ 27
Consolidated Balance Sheets at December 31, 1997 and 1996 .................... 28
Consolidated Statements of Earnings Reinvested in Business for the years ended
December 31, 1997, 1996 and 1995 ............................................ 30
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 ............................................ 31
Notes to Consolidated Financial Statements ................................... 32
</TABLE>
24
<PAGE>
REPORT OF MANAGEMENT
The Company's management is responsible for all information and
representations contained in the Consolidated Financial Statements and other
sections of the Company's annual report on Form 10-K. The Consolidated
Financial Statements, which include amounts based on estimates and judgments of
management, have been prepared in conformity with generally accepted accounting
principles. Other financial information in the Form 10-K is consistent with
that in the Consolidated Financial Statements.
Management maintains a system of internal accounting controls designed to
provide reasonable assurance, at a reasonable cost, that the Company's assets
are safeguarded against loss from unauthorized use or disposition and that
transactions are executed and recorded in accordance with established
procedures. Management recognizes the inherent limitations of any system of
internal accounting control and, therefore, cannot provide absolute assurance
that the objectives of the established internal accounting controls will be
met. This system includes written policies, an organizational structure
designed to ensure appropriate segregation of responsibilities, careful
selection and training of qualified personnel and internal audits. Management
believes that during 1997 the system of internal control was adequate to
accomplish the intended objective.
The Consolidated Financial Statements have been audited by Deloitte &
Touche LLP, independent auditors, who have been engaged by the Board of
Directors. Their audits were conducted in accordance with generally accepted
auditing standards and included a review of the Company's accounting systems,
procedures and internal controls, and the performance of tests and other
auditing procedures sufficient to provide reasonable assurance that the
Consolidated Financial Statements are not materially misleading and do not
contain material errors.
The Audit Committee of the Board of Directors, composed entirely of
directors who are not officers or employees of the Company, meets periodically
with the independent auditors, the internal auditors and management to discuss
auditing, internal accounting control and financial reporting matters and to
ensure that each is properly discharging its responsibilities. Both the
independent auditors and the internal auditors periodically meet alone with the
Audit Committee and have free access to the Committee at any time.
Management recognizes its responsibility for fostering a strong ethical
climate so that the Company's affairs are conducted according to the highest
standards of personal and corporate conduct. This responsibility is
characterized and reflected in the Company's Code of Ethics, which is
distributed throughout the Company. The Code of Ethics addresses, among other
things, the importance of ensuring open communication within the Company;
potential conflicts of interest; compliance with all domestic and foreign laws,
including those relating to financial disclosure; the confidentiality of
proprietary information; and full disclosure of public information.
VIRGINIA ELECTRIC AND POWER COMPANY
<TABLE>
<S> <C>
Norman Askew M. S. Bolton, Jr.
President and Controller and
Chief Executive Principal Accounting
Officer Officer
</TABLE>
25
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of Virginia Electric and Power Company:
We have audited the accompanying consolidated balance sheets of Virginia
Electric and Power Company (a wholly owned subsidiary of Dominion Resources,
Inc.) and subsidiaries (the Company) as of December 31, 1997 and 1996, and the
related consolidated statements of income, earnings reinvested in business, and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1997 and 1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Richmond, Virginia
February 9, 1998
26
<PAGE>
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-----------------------------------------
1997 1996 1995
------------- ------------- -------------
(Millions)
<S> <C> <C> <C>
Revenues:
Electric service ......................................... $ 4,239.0 $ 4,210.2 $ 4,294.1
Other .................................................... 840.0 210.7 57.8
---------- ---------- ----------
Total ................................................... 5,079.0 4,420.9 4,351.9
---------- ---------- ----------
Expenses: ..................................................
Fuel, net ................................................ 1,620.7 1,016.6 1,009.7
Purchased power capacity, net ............................ 717.5 700.6 688.4
Operations and maintenance ............................... 812.7 803.1 805.6
Depreciation and amortization ............................ 549.9 502.0 469.1
Restructuring ............................................ 18.4 64.9 117.9
Accelerated cost recovery ................................ 38.4 26.7
Amortization of terminated construction project costs .... 34.4 34.4 34.4
Taxes other than income .................................. 267.7 262.6 254.9
---------- ---------- ----------
Total ................................................... 4,059.7 3,410.9 3,380.0
---------- ---------- ----------
Income from operations ..................................... 1,019.3 1,010.0 971.9
Other income ............................................... 14.2 6.8 10.0
---------- ---------- ----------
Income before interest and income taxes .................... 1,033.5 1,016.8 981.9
---------- ---------- ----------
Interest and related charges:
Interest expense, net .................................... 304.2 308.4 317.9
Distributions -- preferred securities of subsidiary trust 10.9 10.9 3.7
---------- ---------- ----------
Total ................................................... 315.1 319.3 321.6
---------- ---------- ----------
Income before income taxes ................................. 718.4 697.5 660.3
Income taxes ............................................... 249.3 240.2 227.5
---------- ---------- ----------
Net income ................................................. 469.1 457.3 432.8
Preferred dividends ........................................ 35.7 35.5 44.1
---------- ---------- ----------
Balance available for Common Stock ......................... $ 433.4 $ 421.8 $ 388.7
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED BALANCE SHEETS
Assets
<TABLE>
<CAPTION>
At December 31,
-------------------------
1997 1996
------------ ------------
<S> <C> <C>
(Millions of Dollars)
CURRENT ASSETS:
Cash and cash equivalents ........................................................ $ 36.0 $ 47.9
Accounts receivable:
Customers (less allowance for doubtful accounts of $2.4 in 1997 and 1996) ...... 462.4 354.8
Other .......................................................................... 108.0 80.4
Accrued unbilled revenues ........................................................ 245.2 180.3
Materials and supplies at average cost or less:
Plant and general .............................................................. 145.2 148.7
Fossil fuel .................................................................... 67.4 76.8
Other ............................................................................ 134.7 107.0
---------- ----------
Total current assets .......................................................... 1,198.9 995.9
---------- ----------
INVESTMENTS:
Nuclear decommissioning trust funds .............................................. 569.1 443.3
Other ............................................................................ 38.3 34.5
---------- ----------
Total net investments .......................................................... 607.4 477.8
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS:
Regulatory assets:
Deferred capacity expenses ..................................................... 47.3 6.1
Other .......................................................................... 729.3 767.8
Unamortized debt issuance costs .................................................. 24.2 24.7
Other ............................................................................ 127.1 121.9
---------- ----------
Total deferred debits and other assets ......................................... 927.9 920.5
---------- ----------
UTILITY PLANT:
Plant (includes plant under construction of $240.9 in 1997 and $180.1 in 1996) ... 14,794.2 14,506.8
Less accumulated depreciation .................................................... 5,724.3 5,218.3
---------- ----------
9,069.9 9,288.5
Nuclear fuel (less accumulated amortization of $705.0 in 1997 and $698.5 in 1996) 149.3 145.3
---------- ----------
Total net utility plant ........................................................ 9,219.2 9,433.8
---------- ----------
Total assets ................................................................... $ 11,953.4 $ 11,828.0
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED BALANCE SHEETS
Liabilities and Shareholders' Equity
<TABLE>
<CAPTION>
At December 31,
---------------------------
1997 1996
------------- -------------
<S> <C> <C>
(Millions of Dollars)
CURRENT LIABILITIES:
Securities due within one year .................................... $ 333.5 $ 311.3
Short-term debt ................................................... 226.2 312.4
Accounts payable, trade ........................................... 452.0 368.5
Customer deposits ................................................. 44.6 50.0
Payrolls accrued .................................................. 77.5 73.2
Severance costs accrued ........................................... 29.7 50.2
Interest accrued .................................................. 95.1 95.3
Other ............................................................. 161.6 126.1
---------- ----------
Total current liabilities ........................................ 1,420.2 1,387.0
---------- ----------
LONG-TERM DEBT ...................................................... 3,514.6 3,579.4
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes ................................. 1,607.0 1,565.2
Deferred investment tax credits ................................... 238.4 255.3
Deferred fuel expenses ............................................ 12.8 3.3
Other ............................................................. 220.3 151.1
---------- ----------
Total deferred credits and other liabilities .................... 2,078.5 1,974.9
---------- ----------
COMMITMENTS AND CONTINGENCIES (See Note Q)
COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARY TRUST* ................................... 135.0 135.0
---------- ----------
PREFERRED STOCK:
Preferred stock subject to mandatory redemption ................... 180.0 180.0
---------- ----------
Preferred stock not subject to mandatory redemption ............... 509.0 509.0
---------- ----------
COMMON STOCKHOLDER'S EQUITY:
Common Stock, no par, 300,000 shares authorized, 171,484 shares
outstanding at December 31, 1997 and 1996 ........................ 2,737.4 2,737.4
Other paid-in capital ............................................. 16.9 16.9
Earnings reinvested in business ................................... 1,361.8 1,308.4
---------- ----------
Total common stockholder's equity ................................ 4,116.1 4,062.7
---------- ----------
Total liabilities and shareholders' equity ....................... $ 11,953.4 $ 11,828.0
========== ==========
</TABLE>
(*) As described in Note I to CONSOLIDATED FINANCIAL STATEMENTS, the 8.05%
Junior Subordinated Notes totalling $139.2 million principal amount
constitute 100% of the Trust's assets.
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS REINVESTED IN BUSINESS
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------
1997 1996 1995
------------- ------------- -------------
(Millions)
<S> <C> <C> <C>
Balance at beginning of year ........................ $ 1,308.4 $ 1,272.5 $ 1,277.8
Net income .......................................... 469.1 457.3 432.8
---------- ---------- ----------
Total .............................................. 1,777.5 1,729.8 1,710.6
---------- ---------- ----------
Cash dividends:
Preferred stock subject to mandatory redemption .... 11.1 11.1 13.5
Preferred stock not subject to mandatory redemption 24.7 24.5 30.8
Common Stock ....................................... 379.9 385.8 394.3
---------- ---------- ----------
Total dividends ................................... 415.7 421.4 438.6
---------- ---------- ----------
Other additions (deductions), net ................... 0.5
----------
Balance at end of year .............................. $ 1,361.8 $ 1,308.4 $ 1,272.5
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------
1997 1996 1995
------------ ------------ -----------
(Millions)
<S> <C> <C> <C>
Cash Flow From Operating Activities:
Net income ........................................................................... $ 469.1 $ 457.3 $ 432.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ....................................................... 664.7 616.0 585.1
Deferred income taxes ............................................................... 36.1 69.1 11.8
Deferred investment tax credits ..................................................... ( 16.9) ( 16.9) ( 16.9)
Noncash return on terminated construction project costs -- pretax ................... ( 4.2) ( 6.4) ( 8.4)
Deferred fuel expenses, net ......................................................... 9.6 ( 54.4) 6.2
Deferred capacity expenses .......................................................... ( 41.2) ( 9.2) 6.4
Restructuring ....................................................................... 12.5 29.6 96.2
Accelerated cost recovery ........................................................... 38.4 26.7
Changes in:
Accounts receivable ................................................................ ( 135.2) ( 11.3) ( 54.3)
Accrued unbilled revenues .......................................................... ( 64.9) 17.6 ( 27.7)
Materials and supplies ............................................................. 12.9 6.0 61.1
Accounts payable, trade ............................................................ 82.8 57.8 ( 8.9)
Accrued expenses ................................................................... ( 13.9) ( 62.6) 44.7
Other ............................................................................... 41.0 ( 4.0) ( 2.7)
--------- --------- ---------
Net Cash Flow From Operating Activities ............................................... 1,090.8 1,115.3 1,125.4
Cash Flow From (To) Financing Activities:
Issuance of long-term debt ........................................................... 270.0 24.5 240.0
Issuance of preferred securities of subsidiary trust ................................. 135.0
Issuance (Repayment) of short-term debt .............................................. ( 86.2) 143.4 169.0
Repayment of long-term debt and preferred stock ...................................... ( 311.3) ( 284.1) ( 439.0)
Common Stock dividend payments ....................................................... ( 379.9) ( 385.8) ( 394.3)
Preferred stock dividend payments .................................................... ( 35.7) ( 35.6) ( 44.3)
Distribution-preferred securities of subsidiary trust ................................ ( 10.9) ( 10.9) ( 3.7)
Other ................................................................................ ( 2.6) ( 2.3) ( 10.0)
--------- --------- ---------
Net Cash Flow To Financing Activities ................................................. ( 556.6) ( 550.8) ( 347.3)
--------- --------- ---------
Cash Flow Used In Investing Activities:
Utility plant expenditures (excluding AFC -- other funds) ............................ ( 397.0) ( 393.8) ( 519.9)
Nuclear fuel (excluding AFC -- other funds) .......................................... ( 84.8) ( 90.2) ( 57.6)
Nuclear decommissioning contributions ................................................ ( 36.2) ( 36.2) ( 28.5)
Sale of accounts receivable, net ..................................................... ( 160.0)
Purchase of assets ................................................................... ( 19.8) ( 13.7)
Other ................................................................................ ( 8.3) ( 12.5) ( 11.1)
--------- --------- ---------
Net Cash Flow Used In Investing Activities ............................................ ( 546.1) ( 546.4) ( 777.1)
--------- --------- ---------
Increase in cash and cash equivalents ................................................. ( 11.9) 18.1 1.0
Cash and cash equivalents at beginning of year ........................................ 47.9 29.8 28.8
--------- --------- ---------
Cash and cash equivalents at end of year .............................................. $ 36.0 $ 47.9 $ 29.8
========= ========= =========
Cash paid during the year for:
Interest (reduced for the cost of borrowed funds capitalized as AFC) ................. $ 277.1 $ 295.4 $ 314.5
Income taxes ......................................................................... 230.0 216.1 215.8
</TABLE>
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
VIRGINIA ELECTRIC AND POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Significant Accounting Policies:
General
Virginia Electric and Power Company is a regulated public utility engaged
in the generation, transmission, distribution and sale of electric energy
within a 30,000 square-mile area in Virginia and northeastern North Carolina.
It sells electricity to retail customers (including governmental agencies) and
to wholesale customers such as rural electric cooperatives, municipalities,
power marketers and other utilities. The Virginia service area comprises about
65 percent of Virginia's total land area, but accounts for over 80 percent of
its population. The Company has organized a wholesale power group to engage in
off-system wholesale purchases and sales of electricity and purchases and sales
of natural gas, and that group is developing trading relationships beyond the
geographic limits of Virginia Power's retail service territory. Within this
document, the terms "Virginia Power" and the "Company" shall refer to the
entirety of Virginia Electric and Power Company, including, without limitation,
its Virginia and North Carolina operations, and all of its subsidiaries.
The Company's accounting practices are generally prescribed by the Uniform
System of Accounts promulgated by the regulatory commissions having
jurisdiction and are in accordance with generally accepted accounting
principles applicable to regulated enterprises. The financial statements
include the accounts of the Company and its subsidiaries, with all significant
intercompany transactions and accounts being eliminated on consolidation.
The Company is a wholly-owned subsidiary of Dominion Resources, Inc., a
Virginia corporation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent liabilities at the date of the financial statements
and revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Revenues
Revenues are recorded on the basis of services rendered, commodities
delivered or contracts settled.
Property, Plant and Equipment
Utility plant is recorded at original cost, which includes labor,
materials, services, AFC, where permitted by regulators, and other indirect
costs. The cost of maintenance and repairs is charged to the appropriate
operating expense and clearing accounts. The cost of additions and replacements
is charged to the appropriate utility plant account, except that the cost of
minor additions and replacements, as provided in the Uniform System of
Accounts, is charged to maintenance expense.
Depreciation and Amortization
Depreciation of utility plant (other than nuclear fuel) is computed on the
straight-line method based on projected useful service lives. The cost of
depreciable utility plant retired and the cost of removal, less salvage, are
charged to accumulated depreciation. The provision for depreciation provides
for the recovery of the cost of assets including the estimated cost of removal,
net of salvage, and is based on the weighted average depreciable plant using a
rate of 3.2 percent for 1997, 1996 and 1995.
Operating expenses include amortization of nuclear fuel, which is provided
on a unit of production basis sufficient to fully amortize, over the estimated
service life, the cost of the fuel plus permanent storage and disposal costs.
Federal Income Taxes
The Company files a consolidated federal income tax return with Dominion
Resources.
Deferred investment tax credits are being amortized over the service lives
of the property giving rise to such credits.
32
<PAGE>
Allowance for Funds Used During Construction
The applicable regulatory Uniform System of Accounts defines AFC as the
cost during the construction period of borrowed funds used for construction
purposes and a reasonable rate on other funds when so used.
The pretax AFC rates for 1997, 1996 and 1995 were 6.6 percent, 8.1 percent
and 8.9 percent, respectively. No AFC is accrued for approximately 83 percent
of the Company's construction work in progress, which is instead included in
rate base. A cash return is currently collected on the portion of construction
work in progress included in rate base.
Deferred Capacity and Deferred Fuel Expense
Approximately 80 percent of capacity expenses and 90 percent of fuel
expenses incurred as part of providing regulated electric service are subject
to deferral accounting. The difference between reasonably incurred actual
expenses and the level of expenses included in current rates is deferred and
matched against future revenues.
Amortization of Debt Issuance Costs
The Company defers and amortizes any expenses incurred in the issuance of
long-term debt, including premiums and discounts associated with such debt,
over the lives of the respective issues. Any gains or losses resulting from the
refinancing of debt are also deferred and amortized over the lives of the new
issues of long-term debt as permitted by the appropriate regulatory
jurisdictions. Gains or losses resulting from the redemption of debt without
refinancing are amortized over the remaining lives of the redeemed issues.
Cash and Cash Equivalents
Current banking arrangements generally do not require checks to be funded
until actually presented for payment. At December 31, 1997 and 1996, the
Company's accounts payable included the net effect of checks outstanding but
not yet presented for payment of $55.8 million and $64.8 million, respectively.
For purposes of the Consolidated Statements of Cash Flows, the Company
considers cash and cash equivalents to include cash on hand and temporary
investments purchased with an initial maturity of three months or less.
Commodity Contracts
The trading activities of Virginia Power's wholesale power group include
fixed-price forward contracts and the purchase and sale of over-the-counter
options that require physical delivery of the underlying commodity.
Furthermore, in order to manage price risk associated with natural gas sales
and fuel requirements for the utility operations, the Company uses
exchange-for-physical contracts, basis swaps, NYMEX natural gas futures
contracts, as well as options on natural gas futures contracts.
Options, exchange-for-physical contracts, basis swaps and futures
contracts are marked to market with resulting gains and losses reported in
earnings, unless such instruments are designated as hedges for accounting
purposes. Fixed price forward contracts, initiated for trading purposes, also
are marked to market with resulting gains and losses reported in earnings. For
exchange-for-physical contracts, basis swaps, fixed price forward contracts and
options which require physical delivery of the underlying commodity, market
value reflects management's best estimates considering over-the-counter
quotations, time value and volatility factors of the underlying commitments.
Futures contracts and options on futures contracts are marked to market based
on closing exchange prices. No contracts were designated as hedges during 1997.
Purchased options and options sold are reported in Deferred Debits and
Other Assets -- Other and in Deferred Credits and Other Liabilities -- Other,
respectively, until exercise or expiration. Gains and losses resulting from
marking positions to market are reported in Other Income. Net gains and losses
resulting from futures contracts and options on futures contracts and
settlement of basis swaps are included in Fuel, Net. Amortization of option
premiums associated with sales and purchases are included in Revenues -- Other
and Fuel, Net, respectively. Cash flows from trading activities are reported in
Net Cash Flow from Operating Activities.
Reclassification
Certain amounts in the 1996 and 1995 financial statements have been
reclassified to conform to the 1997 presentation.
33
<PAGE>
B. Income Taxes:
Details of income tax expense are as follows:
<TABLE>
<CAPTION>
Years
---------------------------------------
1997 1996 1995
----------- ----------- -----------
(Millions)
<S> <C> <C> <C>
Current expense:
Federal ................................................. $ 222.1 $ 185.6 $ 230.6
State ................................................... 8.6 2.4 2.1
-------- -------- --------
230.7 188.0 232.7
-------- -------- --------
Deferred expense:
Utility plant differences ............................... 41.3 65.4 48.9
Deferred fuel and capacity .............................. 11.0 22.3 ( 6.0)
Debt issuance costs ..................................... ( 2.1) ( 2.8) 1.3
Terminated construction project costs ................... ( 5.8) ( 5.1) ( 4.4)
Other ................................................... ( 8.9) ( 10.7) ( 28.1)
-------- -------- --------
35.5 69.1 11.7
-------- -------- --------
Net deferred investment tax credits-amortization ......... ( 16.9) ( 16.9) ( 16.9)
-------- -------- --------
Total income tax expense ................................. $ 249.3 $ 240.2 $ 227.5
======== ======== ========
</TABLE>
Total federal income tax expense differs from the amount computed by
applying the statutory federal income tax rate to pretax income for the
following reasons:
<TABLE>
<CAPTION>
Years
---------------------------------------
1997 1996 1995
----------- ----------- -----------
(Millions)
<S> <C> <C> <C>
Federal income tax expense at statutory rate of 35 percent ......... $ 251.4 $ 244.1 $ 231.1
------- ------- -------
Increases (decreases) resulting from:
Utility plant differences ......................................... 7.7 5.7 3.2
Ratable amortization of investment tax credits .................... ( 16.9) ( 16.9) ( 16.9)
Terminated construction project costs ............................. 5.0 5.0 5.0
State income tax, net of federal tax benefit ...................... 4.9 2.4 2.2
Other, net ........................................................ ( 2.8) ( 0.1) 2.9
-------- -------- --------
( 2.1) ( 3.9) ( 3.6)
-------- -------- --------
Total income tax expense ........................................... $ 249.3 $ 240.2 $ 227.5
======== ======== ========
Effective tax rate ................................................. 34.7% 34.4% 34.5%
</TABLE>
The Company's net accumulated deferred income taxes consist of the
following:
<TABLE>
<CAPTION>
Years
---------------------------
1997 1996
------------ ------------
(Millions)
<S> <C> <C>
Deferred income tax assets:
Investment tax credits ................................ $ 84.4 $ 90.3
--------- ---------
Deferred income tax liabilities:
Utility plant differences ............................. 1,479.8 1,440.5
Terminated construction project costs ................. 8.6 14.4
Income taxes recoverable through future rates ......... 169.5 168.8
Other ................................................. 33.5 31.8
--------- ---------
Total deferred income tax liabilities .................. 1,691.4 1,655.5
--------- ---------
Total net accumulated deferred income taxes ............ $ 1,607.0 $ 1,565.2
========= =========
</TABLE>
34
<PAGE>
C. Nuclear Operations:
Decommissioning
When the Company's nuclear units cease operations, we are obligated to
decontaminate or remove radioactive contaminants so that the property will not
require NRC oversight. This phase of a nuclear power plant's life cycle is
termed decommissioning. While the units are operating, we are collecting from
ratepayers amounts that, when combined with investment earnings, will be used
to fund this future obligation.
The amount being accrued for decommissioning is equal to the amount being
collected from ratepayers and is included in Depreciation and Amortization
Expense. The decommissioning collections were $45.8 million, $36.2 million and
$28.5 million in 1997, 1996 and 1995, respectively. These dollars are deposited
into external trusts through which the funds are invested.
Net earnings of the trusts' investments are included in Other Income in
the Company's Consolidated Statements of Income. In 1997, 1996 and 1995,
respectively, net earnings were $20.5 million, $16.0 million and $15.9 million.
The accretion of the decommissioning obligation is equal to the trusts' net
earnings and also is recorded in Other Income. Thus, the net impact of the
trusts on Other Income is zero.
The accumulated provision for decommissioning, which is included in
Utility Plant Accumulated Depreciation in the Company's Consolidated Balance
Sheets, includes the accrued expense and accretion described above and any
unrealized gains and losses on the trusts' investments. At December 31, 1997,
the net unrealized gains were $149.5 million, which is an increase of $69.0
over the December 31, 1996, amount of $80.5 million. The total accumulated
provision for decommissioning at December 31, 1997, was $578.7 million,
including $9.6 million accrued in 1997 and deposited to the trusts in January
1998. The provision was $443.3 million at December 31, 1996.
The total estimated cost to decommission the Company's four nuclear units
is $1 billion based upon a site-specific study that was completed in 1994. We
plan to update this estimate in 1998. The cost estimate assumes that the method
of completing decommissioning activities is prompt dismantlement. This method
assumes that dismantlement and other decommissioning activities will begin
shortly after cessation of operations, which under current operating licenses
will begin in 2012 as detailed in the table below.
<TABLE>
<CAPTION>
Surry North Anna
------------------------- ------------------------- Total
Unit 1 Unit 2 Unit 1 Unit 2 All Units
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
NRC license expiration year .................. 2012 2013 2018 2020
(Millions)
Current cost estimate (1994 dollars) ......... $ 272.4 $ 274.0 $ 247.0 $ 253.6 $ 1,047.0
Funds in external trusts at 12/31/97 ......... 156.5 151.8 134.2 126.6 569.1
1997 contribution to external trusts ......... 10.6 10.8 7.6 7.2 36.2
</TABLE>
The Financial Accounting Standards Board (FASB) is reviewing the
accounting for nuclear plant decommissioning. In 1996, the FASB tentatively
determined that the estimated cost of decommissioning should be reported as a
liability rather than as accumulated depreciation and that a substantial
portion of the decommissioning obligation should be recognized earlier in the
operating life of the nuclear unit. If the industry's accounting were changed
to reflect FASB's tentative proposal, then the annual provisions for nuclear
decommissioning would increase. During its deliberations, the FASB expanded the
scope of the project to include similar unavoidable obligations to perform
closure and post-closure activities for non-nuclear power plants. Therefore,
any forthcoming standard also may change industry plant depreciation practices.
Any impact related to other Company assets cannot be determined at this time.
Insurance
The Price-Anderson Act limits the public liability of an owner of a
nuclear power plant to $8.9 billion for a single nuclear incident. The
Price-Anderson Amendments Act of 1988 allows for an inflationary provision
adjustment every five years. The Company has purchased $200 million of coverage
from the commercial insurance pools with the remainder provided through a
mandatory industry risk sharing program. In the event of a nuclear incident at
any licensed nuclear reactor in the United States, the Company could be
assessed up to $81.7 million (including a 3 percent insurance premium tax for
Virginia) for each of its four licensed reactors not to exceed $10.3 million
(including a 3 percent insurance premium tax for Virginia) per year per
reactor. There is no limit to the number of incidents for which this
retrospective premium can be assessed.
35
<PAGE>
Nuclear liability coverage for claims made by nuclear workers first hired
on or after January 1, 1988, except those arising out of an extraordinary
nuclear occurrence, is provided under the Master Worker insurance program.
(Those first hired into the nuclear industry prior to January 1, 1988, are
covered by the policy discussed above.) The aggregate limit of coverage for the
industry is $400 million ($200 million policy limit with automatic
reinstatements of an additional $200 million). The Company's maximum
retrospective assessment is approximately $12.3 million (including a 3 percent
insurance premium tax for Virginia).
The Company's current level of property insurance coverage ($2.55 billion
for North Anna and $2.40 billion for Surry) exceeds the NRC's minimum
requirement for nuclear power plant licensees of $1.06 billion per reactor site
and includes coverage for premature decommissioning and functional total loss.
The NRC requires that the proceeds from this insurance be used first to return
the reactor to and maintain it in a safe and stable condition and second to
decontaminate the reactor and station site in accordance with a plan approved
by the NRC. The Company's nuclear property insurance is provided by Nuclear
Mutual Limited (NML) and Nuclear Electric Insurance Limited (NEIL), two mutual
insurance companies, and is subject to retrospective premium assessments, in
any policy year in which losses exceed the funds available to these insurance
companies. The maximum assessment for the current policy period is $37.0
million. Based on the severity of the incident, the Boards of Directors of the
Company's nuclear insurers have the discretion to lower the maximum
retrospective premium assessment or eliminate either or both completely. For
any losses that exceed the limits or for which insurance proceeds are not
available because they must first be used for stabilization and
decontamination, the Company has the financial responsibility for these losses.
The Company purchases insurance from NEIL to cover the cost of replacement
power during the prolonged outage of a nuclear unit due to direct physical
damage of the unit. Under this program, Virginia Power is subject to a
retrospective premium assessment for any policy year in which losses exceed
funds available to NEIL. The current policy period's maximum assessment is $8.7
million.
As part owner of the North Anna Power Station, ODEC is responsible for its
share of the nuclear decommissioning obligation and insurance premiums
applicable to that station, including any retrospective premium assessments and
any losses not covered by insurance.
D. Utility Plant:
Utility plant consisted of the following:
<TABLE>
<CAPTION>
At December 31,
-----------------------------
1997 1996
------------- -------------
(Millions)
<S> <C> <C>
Production ............................ $ 7,684.2 $ 7,691.9
Transmission .......................... 1,415.7 1,386.5
Distribution .......................... 4,559.2 4,385.4
Other ................................. 894.2 862.9
---------- ----------
14,553.3 14,326.7
Construction work in progress ......... 240.9 180.1
---------- ----------
Total ............................. $ 14,794.2 $ 14,506.8
========== ==========
</TABLE>
36
<PAGE>
E. Jointly Owned Plants:
The following information relates to the Company's proportionate share of
jointly owned plants at December 31, 1997:
<TABLE>
<CAPTION>
North
Bath County Anna Clover
Pumped Storage Power Power
Station Station Station
---------------- ------------ ----------
<S> <C> <C> <C>
Ownership interest ............................... 60.0% 88.4% 50.0%
(Millions)
Utility plant in service ......................... $ 1,072.9 $ 1,819.4 $ 533.3
Accumulated depreciation ......................... 229.1 819.2 26.3
Nuclear fuel ..................................... 403.6
Accumulated amortization of nuclear fuel ......... 383.4
Construction work in progress .................... .1 61.2 1.1
</TABLE>
The co-owners are obligated to pay their share of all future construction
expenditures and operating costs of the jointly owned facilities in the same
proportion as their respective ownership interest. The Company's share of
operating costs is classified in the appropriate operating expense (fuel,
operations and maintenance, depreciation, taxes, etc.) in the Consolidated
Statements of Income.
F. Regulatory Assets-Other
Certain expenses normally reflected in income are deferred on the balance
sheet as regulatory assets and are recognized in income as the related amounts
are included in rates and recovered from customers. The Company's regulatory
assets included the following:
<TABLE>
<CAPTION>
At December 31,
-------------------------
1997 1996
----------- -----------
(Millions)
<S> <C> <C>
Income taxes recoverable through future rates ..................... $ 478.9 $ 477.0
Cost of decommissioning DOE uranium enrichment facilities ......... 67.6 73.5
Deferred losses on reacquired debt, net ........................... 85.4 91.5
North Anna Unit 3 project termination costs ....................... 42.3 73.1
Other ............................................................. 55.1 52.7
-------- --------
Total ............................................................. $ 729.3 $ 767.8
======== ========
</TABLE>
Income taxes recoverable through future rates represent principally the
tax effect of depreciation differences not normalized in earlier years for
ratemaking purposes. These amounts are amortized as the related temporary
differences reverse.
The costs of decommissioning the Department of Energy's (DOE) uranium
enrichment facilities have been deferred and represent the unamortized portion
of Virginia Power's required contributions to a fund for decommissioning and
decontaminating the DOE's uranium enrichment facilities. Virginia Power is
making such contributions over a 15-year period with escalation for inflation.
These costs are being recovered in fuel rates.
Losses or gains on reacquired debt are deferred and amortized over the
lives of the new issues of long-term debt. Gains or losses resulting from the
redemption of debt without refinancing are amortized over the remaining lives
of the redeemed issues.
The construction of North Anna Unit 3 was terminated in November 1982. All
retail jurisdictions have permitted recovery of the incurred costs. For
Virginia and FERC jurisdictional customers, the amounts deferred are being
amortized from the date termination costs were first includible in rates.
The incurred costs underlying these regulatory assets may represent
expenditures by the Company or may represent the recognition of liabilities
that ultimately will be settled at some time in the future. For some of those
regulatory assets representing past expenditures that are not included in the
Company's rate base or used to adjust the Company's capital structure, the
Company is not allowed to earn a return on the unrecovered balance. Of the
$729.3 million of regulatory assets at December 31, 1997, approximately $57.7
million represent past expenditures that are effectively excluded from rate
base by the Virginia State Corporation Commission which has primary
jurisdiction over the Company's rates. However, of that amount $42.3 million
represent the present value of amounts to be recovered through future rates for
North Anna Unit 3
37
<PAGE>
project termination costs, and thus reflect a reduction in the actual dollars
to be recovered through future rates for the time value of money. The Company
does not earn a return on the remaining $15.4 million of regulatory assets,
effectively excluded from rate base, to be recovered over various recovery
periods up to 21 years, depending on the nature of the deferred costs.
G. Leases:
Plant and property under capital leases included the following:
<TABLE>
<CAPTION>
At December 31,
-----------------------
1997 1996
---------- ----------
(Millions)
<S> <C> <C>
Office buildings (*) ...................................... $ 34.4 $ 34.4
Data processing equipment ................................. 13.3 2.5
------- -------
Total plant and property under capital leases ......... 47.7 36.9
Less accumulated amortization ............................. 17.8 13.3
------- -------
Net plant and property under capital leases ............... $ 29.9 $ 23.6
======= =======
</TABLE>
- ---------
(*) The Company leases its principal office building from its parent, Dominion
Resources. The capitalized cost of the property under that lease, net of
accumulated amortization, represented $22 million and $23 million at December
31, 1997 and 1996, respectively. Rental payments for such lease were $3 million
for each of the three years ended December 31, 1997, 1996 and 1995.
The Company is responsible for expenses in connection with the leases
noted above, including maintenance.
Future minimum lease payments under noncancellable capital leases and for
operating leases that have initial or remaining lease terms in excess of one
year as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
--------- ----------
(Millions)
<S> <C> <C>
1998 ................................................... $ 7.1 $ 11.4
1999 ................................................... 6.4 9.9
2000 ................................................... 4.3 7.1
2001 ................................................... 3.2 3.9
2002 ................................................... 3.0 3.2
After 2002 ............................................. 16.7 22.9
------ -------
Total future minimum lease payments .................... $ 40.7 $ 58.4
=======
Less interest element included above ................... 10.8
------
Present value of future minimum lease payments ......... $ 29.9
======
</TABLE>
Rents on leases, which have been charged to operations expense, were $17.6
million, $16.5 million and $13.6 million for 1997, 1996 and 1995, respectively.
38
<PAGE>
H. Long-term Debt:
Long-term debt included the following:
<TABLE>
<CAPTION>
At December 31,
--------------------------
1997 1996
------------ -----------
(Millions)
<S> <C> <C>
First and Refunding Mortgage Bonds (1):
Series U, 5.125%, due 1997 ................................. $ 49.3
1992 Series B, 7.25%, due 1997 ............................. 250.0
1988 Series A, 9.375%, due 1998 ............................ $ 150.0 150.0
1992 Series F, 6.25%, due 1998 ............................. 75.0 75.0
1989 Series B, 8.875%, due 1999 ............................ 100.0 100.0
1993 Series C, 5.875%, due 2000 ............................ 135.0 135.0
Various series, 6.0-8%, due 2001-2004 ...................... 805.0 805.0
Various series 6.75%-7.625%, due 2007 ...................... 415.0 215.0
Various series, 5.45%-8.75%, due 2021-2025 ................. 1,144.5 1,144.5
--------- ---------
Total First and Refunding Mortgage Bonds ................ 2,824.5 2,923.8
--------- ---------
Other long-term debt:
Term notes:
Fixed interest rate, 6.15%-10.00%, due 1997-2003 ......... 551.1 503.1
Tax exempt financings (2):
Money Market Municipals, due 2007-2027(3) ................ 488.6 488.6
Convertible interest rate, due 2022 ...................... 10.0
---------
Total other long-term debt .............................. 1,049.7 991.7
--------- ---------
3,874.2 3,915.5
--------- ---------
Less amounts due within one year:
First and Refunding Mortgage Bonds ......................... 225.0 299.3
Term notes ................................................. 108.5 12.0
--------- ---------
Total amount due within one year ........................ 333.5 311.3
--------- ---------
Less unamortized discount, net of premium ................... 26.1 24.8
--------- ---------
Total long-term debt .................................... $ 3,514.6 $ 3,579.4
========= =========
</TABLE>
- ---------
(1) The First and Refunding Mortgage Bonds are secured by a mortgage lien
on substantially all of the Company's property.
(2) Certain pollution control facilities at the Company's generating
facilities have been pledged or conveyed to secure the financings.
(3) Interest rates vary based on short-term, tax-exempt market rates. For
1997 and 1996, the weighted average daily interest rates were 3.74 percent and
3.57 percent, respectively. Although these bonds are re-marketed within a one
year period, they are classified as long-term debt because the Company intends
to maintain the debt and they are supported by long-term bank commitments.
The following amounts of debt will mature during the next five years (in
millions): 1998 -- $333.5; 1999 -- $321.0; 2000 -- $195.5; 2001 -- $160.7; and
2002 -- $315.0.
I. Company Obligated Mandatorily Redeemable Preferred Securities of Subsidiary
Trust:
Virginia Power Capital Trust I (VP Capital Trust) was established as a
subsidiary of the Company for the sole purpose of selling $135 million of
Preferred Securities (5.4 million shares at $25 par) in 1995. The Company
concurrently issued $139.2 million of its 1995 Series A, 8.05% Junior
Subordinated Notes (the Notes) in exchange for the $135 million realized from
the sale of the Preferred Securities and $4.2 million of common securities of
VP Capital Trust. The Preferred Securities and the common securities represent
the total beneficial ownership interest in the assets held by VP Capital Trust.
The Notes are the sole assets of VP Capital Trust.
39
<PAGE>
The Preferred Securities are subject to mandatory redemption upon
repayment of the Notes at a liquidation amount of $25 plus accrued and unpaid
distributions, including interest. The Notes are due September 30, 2025.
However, that date may be extended up to an additional ten years if certain
conditions are satisfied.
J. Preferred Stock Subject to Mandatory Redemption:
The total number of authorized shares for all preferred stock (whether or
not subject to mandatory redemption) is 10,000,000 shares. Upon involuntary
liquidation, dissolution or winding-up of the Company, all presently
outstanding preferred stock is entitled to receive $100 per share plus accrued
dividends. Dividends are cumulative.
There are two series of preferred stock subject to mandatory redemption
outstanding as of December 31, 1997:
<TABLE>
<CAPTION>
Issued and
Outstanding
Dividend Shares
- ------------------- ------------
<S> <C> <C>
$5.58 ............. 400,000 Shares are non-callable prior to redemption at 3/1/2000
$6.35 ............. 1,400,000 Shares are non-callable prior to redemption at 9/1/2000
---------
Total ......... 1,800,000
=========
</TABLE>
There were no redemptions of preferred stock during 1997 or 1996. In 1995,
the Company redeemed 417,319 shares of its $7.30 dividend preferred stock
subject to mandatory redemption.
K. Preferred Stock Not Subject to Mandatory Redemption:
Shown below are the series of preferred stock not subject to mandatory
redemption that were outstanding as of December 31, 1997.
<TABLE>
<CAPTION>
Entitled per Share upon Liquidation
-------------------------------------------------
Issued and And Thereafter to
Outstanding Amounts Declining in
Dividend Shares Amount Through Steps to
- -------------------------------- ------------- ------------ --------- ----------------------
<S> <C> <C> <C> <C>
$5.00 .......................... 106,677 $ 112.50
4.04 .......................... 12,926 102.27
4.20 .......................... 14,797 102.50
4.12 .......................... 32,534 103.73
4.80 .......................... 73,206 101.00
7.05 .......................... 500,000 105.00 7/31/03 $100.00 after 7/31/13
6.98 .......................... 600,000 105.00 8/31/03 $100.00 after 8/31/13
MMP 1/87 (*) ................... 500,000 100.00
MMP 6/87 (*) ................... 750,000 100.00
MMP 10/88 (*) .................. 750,000 100.00
MMP 6/89 (*) ................... 750,000 100.00
MMP 9/92, Series A (*) ......... 500,000 100.00
MMP 9/92, Series B (*) ......... 500,000 100.00
-------
Total .......................... 5,090,140
=========
</TABLE>
- ---------
(*) Money Market Preferred (MMP) dividend rates are variable and are set every
49 days via an auction process. The combined weighted average rates for these
series in 1997, 1996 and 1995, including fees for broker/dealer agreements,
were 4.71 percent, 4.48 percent and 4.93 percent, respectively.
In 1995, the Company redeemed 400,000 shares of its $7.45 dividend
preferred stock not subject to mandatory redemption and 450,000 shares of its
$7.20 dividend preferred stock not subject to mandatory redemption.
L. Common Stock:
There were no changes in the number of authorized and outstanding shares
of the Company's Common Stock during the three years ended December 31, 1997.
40
<PAGE>
M. Short-term Debt:
The Company's commercial paper program has a maximum borrowing capacity of
$500 million. It is supported by two credit facilities. One is a $300 million,
five-year credit facility that was effective on June 7, 1996, and expires on
June 7, 2001. The other is a $200 million credit facility that originated on
June 7, 1996, with an initial term of 364 days and provisions for subsequent
364-day extensions. It was renewed on June 6, 1997, for 364 days.
The total amount of commercial paper outstanding as of December 31, 1997,
was $226.2 million with a weighted average interest rate of 5.88 percent. This
represents a decrease of $86.2 million from the December 31, 1996, balance of
$312.4 million and a weighted average interest rate of 5.51 percent.
N. Retirement Plan, Postretirement Benefits and Other Benefits:
Under the terms of its benefit plans, the Company reserves the right to
change, modify or terminate the plans. From time to time in the past, benefits
have changed, and some of these changes have reduced benefits.
Retirement Plan
The Company participates in the Dominion Resources, Inc. Retirement Plan
(the Retirement Plan), a defined benefit pension plan. The benefits are based
on years of service and average base compensation over the consecutive 60-month
period in which pay is highest.
The Company's pension plan expenses were $20.6 million, $24.8 million and
$20.3 million for 1997, 1996 and 1995, respectively, and the amounts funded by
the Company were $27.0 million, $28.4 million and $42.7 million in 1997, 1996
and 1995, respectively.
Postretirement Benefits
In addition to providing pension benefits, Dominion Resources and the
Company provide certain health care and life insurance benefits for retired
employees. Health care benefits are provided to retirees who have completed at
least 10 years of service after attaining age 45. These and similar benefits
for active employees are provided through insurance companies. Under the terms
of its benefit plans, the Company reserves the right to change, modify or
terminate the plans. From time to time in the past, benefits have changed, and
some of these changes have reduced benefits.
Net periodic postretirement benefit expense was as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
---------------------
1997 1996
---------- ----------
(Millions)
<S> <C> <C>
Service cost ..................................... $ 12.3 $ 12.1
Interest cost .................................... 25.1 23.9
Return on plan assets ............................ (25.3) (16.6)
Amortization of transition obligation ............ 12.1 12.1
Net amortization and deferral .................... 13.4 7.1
------- -------
Net periodic postretirement benefit expense ...... $ 37.6 $ 38.6
======= =======
</TABLE>
41
<PAGE>
The following table sets forth the funded status of the plan:
<TABLE>
<CAPTION>
At December 31,
-----------------------
1997 1996
----------- -----------
(Millions)
<S> <C> <C>
Fair value of plan assets .................................................... $ 176.6 $ 133.0
Accumulated postretirement benefit obligation:
Retirees .................................................................... $ 224.5 $ 201.7
Active plan participants .................................................... 136.3 122.2
-------- --------
Accumulated postretirement benefit obligation .............................. 360.8 323.9
-------- --------
Accumulated postretirement benefit obligation in excess of plan assets ..... (184.2) (190.9)
Unrecognized transition obligation ........................................... 180.8 192.8
Unrecognized net experience (gain)/loss ...................................... ( 1.8) ( 3.6)
-------- --------
Accrued postretirement benefit cost .......................................... $ (5.2) $ (1.7)
======== ========
</TABLE>
A one percent increase in the health care cost trend rate would result in
an increase of $5.0 million in the service and interest cost components and a
$39.5 million increase in the accumulated postretirement benefit obligation.
Significant assumptions used in determining the postretirement benefit
obligation were:
<TABLE>
<CAPTION>
1997 1996
----------------------- ----------------------
<S> <C> <C>
Discount rates .................... 7.75% 8%
Assumed return on plan assets ..... 9% 9%
Medical cost trend rate ........... 6% for 1st year 7% for 1st year
5% for 2nd year 6% for 2nd year
Scaling down to 4.75% Scaling down to 4.75%
beginning in the year beginning in the year
2000 2000
</TABLE>
The Company is recovering these costs in rates on an accrual basis in all
material respects, in all jurisdictions. The funds being collected for Other
Postretirement Benefits (OPEB) in rates, in excess of OPEB benefits actually
paid during the year, are contributed to external benefit trusts under the
Company's current funding policy (see Future Issues -- Competition -- Exposure
to Potentially Stranded Costs under MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS).
O. Restructuring:
The Company announced the implementation phase of its Vision 2000 program
in March 1995. During this phase, the Company began reviewing operations with
the objective of outsourcing services where economical and appropriate and
re-engineering the remaining functions to streamline operations. The
re-engineering process has resulted in outsourcing, decentralization,
reorganization and downsizing for portions of the Company's operations. As part
of this process, the Company has reevaluated its utilization of capital
resources in the operations of the Company to identify further opportunities
for operational efficiencies through outsourcing or re-engineering of its
processes.
Restructuring charges of $18.4 million, $64.9 million, and $117.9 million
in 1997, 1996 and 1995, respectively, included severance costs, purchased power
contract restructuring and negotiated settlement costs, capital project
cancellation costs, and other costs incurred directly as a result of the Vision
2000 initiatives. While the Company may incur additional charges for severance
in 1998, the amounts are not expected to be significant.
Employee Severance
In 1995, the Company established a comprehensive involuntary severance
package for salaried employees who may no longer be employed as a result of
these initiatives. The Company is recognizing the cost associated with employee
terminations in accordance with Emerging Issues Task Force Consensus No. 94-3
as management identifies the positions to be eliminated. Severance payments
will be made over a period not to exceed twenty months. Through December 31,
1997, management had identified 1,977 positions to be eliminated. The
recognition of severance costs resulted in charges to operations in 1997, 1996
and 1995 of $12.5 million, $49.2 million and $51.2 million, respectively. At
December 31, 1997, 1,619 employees had been terminated and severance payments
totaling $74 million had been paid. The Company estimates that
42
<PAGE>
these staffing reductions will result in annual savings, in the range of $80
million to $90 million. However, such savings are being offset by salary
increases, outsourcing costs and increased payroll costs associated with
staffing for growth opportunities.
Purchased Power Contracts
In an effort to minimize its exposure to potential stranded investment,
the Company is evaluating its long-term purchased power contracts and
negotiating modifications to their terms, including cancellations, where it is
determined to be economically advantageous to do so. The Company has also
negotiated settlements with several other parties to terminate their rights to
sell power to the Company. The cost of contract modifications, contract
cancellations and negotiated settlements was $3.8 million, $7.8 million and
$8.1 million in 1997, 1996 and 1995, respectively. Using contract terms,
estimated quantities of power that would have otherwise been delivered and
other relevant factors at the time of each transaction, the Company estimated
that its annual future purchased power costs, including energy payments, would
be reduced by up to $0.8 million, $5.8 million and $147.0 million for the 1997,
1996 and 1995 transactions, respectively. The cost of alternative sources of
power that might ultimately be required as a result of these settlements is
expected to be significantly less than the estimated reduction in purchased
power costs.
Construction Project
Restructuring charges reported in 1995 included $37.3 million for the
cancellation of a project to construct a facility to handle low level
radioactive waste at the Company's North Anna Power Station. As a result of
reevaluating the handling of low level radioactive waste, the Company concluded
that the facility should not be completed due to the additional capital
investment required, decreased Company volumes of low level radioactive waste
resulting from improvements in station procedures and the availability of more
economical offsite processing.
P. Accelerated Cost Recovery:
In this increasingly competitive environment, the Company also has
concluded that it is appropriate to utilize available cost reductions, such as
those generated by the Vision 2000 program (see Note O to the CONSOLIDATED
FINANCIAL STATEMENTS), to accelerate the write-off of existing unamortized
regulatory assets. Not only will this strategically position the Company in
anticipation of competition, but it also reflects the Company's commitment to
mitigate its exposure to potentially stranded costs (see Competition in
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS). The Company identified savings of $38.4 million in 1997 and $26.7
million in 1996 which were used to establish a reserve for expected adjustments
to regulatory assets.
Q. Commitments and Contingencies:
The Company is involved in legal, tax and regulatory proceedings before
various courts, regulatory commissions and governmental agencies regarding
matters arising in the ordinary course of business, some of which involve
substantial amounts. Management is of the opinion that the final disposition of
these proceedings will not have a material adverse effect on the results of
operations or the financial position of the Company.
Utility Rate Regulation
In March 1997, the Virginia Commission issued an order that Virginia
Power's base rates be made interim and subject to refund as of March 1, 1997.
This order was the result of the Commission Staff's report on its review of
Virginia Power's 1995 Annual Informational Filing, which concluded that
Virginia Power's present rates would cause Virginia Power to earn in excess of
its authorized return on equity. The Staff found that, for purposes of
establishing rates prospectively, a rate reduction of $95.6 million (including
a one-time adjustment of $29.7 million to Virginia Power's deferred capacity
balance at December 31, 1996) may be necessary in order to realign rates to the
authorized level. In March 1997, Virginia Power filed its Alternative
Regulatory Plan (ARP) based on 1996 financial information. Subsequently, the
Commission consolidated the proceeding concerned with the 1995 Annual
Informational Filing with the proceeding that includes the ARP proposed by the
Company.
In December 1997, Virginia Power sought to withdraw its ARP, having
concluded that resolution of the cost recovery issues raised by the ARP was
unlikely without General Assembly action. The Commission has agreed that the
Company may withdraw its support of the ARP but has reserved the right to
continue consideration of the ARP as well as other regulatory alternatives. In
addition, the Commission will continue to consider the issues arising out of
the 1995 Annual Informational
43
<PAGE>
Filing. The Commission's Staff is scheduled to file its testimony on March 24,
1998; Virginia Power's rebuttal is to be filed by April 27, 1998; and the reply
testimony is to be filed by May 11, 1998. A public hearing is scheduled to
commence on May 19, 1998.
Virginia Power's previous filings in this proceeding support maintaining
the Company's rates at current levels; however, opposing parties have made
filings recommending rate reductions in excess of $200 million. At this time,
management cannot predict the ultimate outcome of the proceeding and its impact
on the Company's results of operations, cash flows or financial position.
Retrospective Premium Assessments
Under several of the Company's nuclear insurance policies, the Company is
subject to retrospective premium assessments in any policy year in which losses
exceed the funds available to these insurance companies. For additional
information, see Note C to CONSOLIDATED FINANCIAL STATEMENTS.
Construction Program
The Company has made substantial commitments in connection with its
construction program and nuclear fuel expenditures. Those expenditures are
estimated to total $588.1 million (excluding AFC) for 1998. The Company
presently estimates that all of its 1998 construction expenditures, including
nuclear fuel, will be met through cash flow from operations.
Purchased Power Contracts
Since 1984, the Company has entered into contracts for the long-term
purchases of capacity and energy from other utilities, qualifying facilities
and independent power producers. The Company has 57 non-utility purchase
contracts with a combined dependable summer capacity of 3,277 MW.
The table below reflects the Company's minimum commitments as of December
31, 1997, for power purchases from utility and non-utility suppliers.
<TABLE>
<CAPTION>
Commitment
---------------------------
Year Capacity Other
- ---------------------------------------- ------------- -----------
(Millions)
<S> <C> <C>
1998 ............................... $ 813.5 $ 154.9
1999 ............................... 816.7 156.7
2000 ............................... 723.8 92.0
2001 ............................... 716.0 83.7
2002 ............................... 721.1 81.5
Later years ........................ 9,069.6 388.2
---------- --------
Total ............................ $ 12,860.7 $ 957.0
========== ========
Present value of the total ......... $ 5,878.0 $ 553.3
========== ========
</TABLE>
Payments made by Virginia Power in satisfaction of the minimum purchase
commitments shown in the above table are subject to reduction or partial refund
if (1) the non-utility suppliers fail to meet performance requirements or (2)
changes in federal or state law or administrative actions disallow or have the
effect of disallowing Virginia Power's recovery of such costs from its
customers. The amount of such payment reductions or refunds, if any, will be
determined and administered as provided in individual supply contracts,
although (1) the deferral of refund obligations, (2) disputes over the
applicability of such payment reductions or refund obligations and (3) the
ability of some non-utility suppliers to make refunds could limit Virginia
Power's ability to benefit from these contract provisions.
In addition to the minimum purchase commitments in the table above, under
some of these contracts, the Company may purchase, at its option, additional
power as needed. Actual payments for purchased power (including economy,
emergency, limited term, short-term and other purchases for utility operations,
as well as for trading purposes) for the years 1997, 1996 and 1995 were $1,381
million, $1,183 million and $1,093 million, respectively. For a discussion of
the Company's efforts to restructure certain purchased power contracts, see
Note O to CONSOLIDATED FINANCIAL STATEMENTS.
Fuel Purchase Commitments
The Company's estimated fuel purchase commitments for the next five years
for system generation are as follows (millions): 1998 -- $293; 1999 -- $233;
2000 -- $144; 2001 -- $144; and 2002 -- $127.
44
<PAGE>
Sale of Power
The Company enters into agreements with other utilities and with other
parties to purchase and sell capacity and energy. These agreements may cover
current and future periods ("forward positions"). The volume of these
transactions varies from day to day based on the market conditions, our current
and anticipated load, and other factors. The combined amounts of sales and
purchases range from 500 MW to 7,000 MW at various times during a given year.
These operations are closely monitored from a risk management perspective.
Environmental Matters
The Company is subject to rising costs resulting from a steadily
increasing number of federal, state and local laws and regulations designed to
protect human health and the environment. These laws and regulations affect
future planning and existing operations. These laws and regulations can result
in increased capital, operating and other costs as a result of compliance,
remediation, containment and monitoring obligations of the Company. These costs
have been historically recovered through the ratemaking process; however,
should material costs be incurred and not recovered through rates, the
Company's results of operations and financial condition could be adversely
impacted.
Site Remediation
The EPA has identified the Company and several other entities as
Potentially Responsible Parties (PRPs) at two Superfund sites located in
Kentucky and Pennsylvania. The estimated future remediation costs for the sites
are in the range of $61.5 million to $72.5 million. The Company's proportionate
share of the cost is expected to be in the range of $1.7 million to $2.5
million, based upon allocation formulas and the volume of waste shipped to the
sites. The Company has accrued a reserve of $1.7 million to meet its
obligations at these two sites. Based on a financial assessment of the PRPs
involved at these sites, the Company has determined that it is probable that
the PRPs will fully pay the costs apportioned to them.
The Company and Dominion Resources have remedial action responsibilities
remaining at two coal tar sites. The Company accrued a $2 million reserve to
meet its estimated liability based on site studies and investigations performed
at these sites. In addition, two civil actions have been instituted against the
City of Norfolk and Virginia Power by property owners who allege that their
property has been contaminated by toxic pollutants originating from one of the
coal tar sites now owned by the City of Norfolk and formerly owned by the
Company. The first civil action reached settlement without trial in September
1997. The remaining plaintiff is seeking compensatory damages of $2 million and
punitive damages of $1 million. It is too early in this case for the Company to
predict the outcome. The Company has filed answers denying liability. No trial
date has been set.
The Company generally seeks to recover its costs associated with
environmental remediation from third party insurers. At December 31, 1997, any
pending or possible claims were not recognized as an asset or offset against
recorded obligations of the Company.
R. Fair Value of Financial Instruments:
The Company used available market information and appropriate valuation
methodologies to estimate the fair value of each class of financial instrument
for which it is practicable to estimate fair value. These estimates are not
necessarily indicative of the amounts the Company could realize in a market
exchange. In addition, the use of different market assumptions may have a
material effect on the estimated fair value amounts.
45
<PAGE>
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------
1997 1996
----------------------- -----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(Millions)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents ............................... $ 36.0 $ 36.0 $ 47.9 $ 47.9
Nuclear decommissioning trust funds ..................... 569.1 569.1 443.3 443.3
Liabilities and capitalization:
Short-term debt ......................................... 226.2 226.2 312.4 312.4
Long-term debt:
First and Refunding Mortgage Bonds .................... 2,824.5 2,937.7 2,923.8 2,957.4
Medium-term notes ..................................... 551.1 573.7 503.1 531.3
Money Market Municipal tax-exempt securities .......... 488.6 488.6 488.6 488.6
Convertible interest rate tax-exempt bonds ............ 10.0 10.4
Preferred stock subject to mandatory redemption ......... 180.0 186.6 180.0 185.8
Preferred securities of subsidiary trust ................ 135.0 137.7 135.0 135.0
</TABLE>
Cash and cash equivalents and short-term debt: The carrying amount of
these items approximates fair value because of their short maturity.
Nuclear decommissioning trust funds: The fair value is based on available
market information and generally is the average of bid and asked price.
First and Refunding Mortgage Bonds: Fair value is based on market
quotations.
Medium-term notes: These notes were valued by discounting the remaining
cash flows at a rate estimated for each issue. A yield curve rate was estimated
to relate Treasury Bond rates for specific issues to the corresponding
maturities.
Money Market Municipal tax-exempt securities: The interest rates for these
notes vary so that fair value approximates carrying value.
Convertible interest rate tax-exempt bonds and preferred stock subject to
mandatory redemption: The fair value is based on market quotations or is
estimated by discounting the dividend and principal payments for a
representative issue of each series over the average remaining life of the
series.
Preferred securities of subsidiary trust: Fair value is based on market
quotations.
S. Quarterly Financial Data (unaudited):
The following amounts reflect all adjustments, consisting of only normal
recurring accruals (except as discussed below), necessary in the opinion of the
management for a fair statement of the results for the interim periods.
<TABLE>
<CAPTION>
Income from Net Balance Available
Quarter Revenues Operations Income for Common Stock
- ------------- ------------- ------------- ----------- ------------------
(Millions)
<S> <C> <C> <C> <C>
1997
- ----
1st ......... $ 1,174.8 $ 248.6 $ 110.3 $ 101.5
2nd ......... 1,051.5 184.6 72.3 63.3
3rd ......... 1,499.9 381.0 201.1 192.1
4th ......... 1,352.8 205.1 85.4 76.5
1996
- ----
1st ......... $ 1,169.7 $ 311.1 $ 152.8 $ 143.8
2nd ......... 1,032.1 224.0 96.6 87.8
3rd ......... 1,180.8 325.8 162.2 153.3
4th ......... 1,038.3 149.1 45.7 36.9
</TABLE>
Results for interim periods may fluctuate as a result of weather
conditions, rate relief and other factors.
46
<PAGE>
Certain accruals were recorded in 1997 and 1996 that are not ordinary,
recurring adjustments, consisting of restructuring (see Note O to CONSOLIDATED
FINANCIAL STATEMENTS) and accelerated cost recovery (see Note P to CONSOLIDATED
FINANCIAL STATEMENTS).
Restructuring -- The Company expensed $6.3 million, $1.4 million and $10.7
million during the second, third and fourth quarters of 1997, respectively, and
$5.4 million, $19.3 million, $4.6 million and $35.6 million during the first,
second, third and fourth quarters of 1996.
Accelerated cost recovery -- Amounts reserved for accelerated cost
recovery were $2.8 million, $28.3 million and $7.3 million during the second,
third and fourth quarters of 1997, respectively, and $26.7 million during the
fourth quarter of 1996.
Charges for restructuring and accelerated cost recovery reduced Balance
Available for Common Stock by $5.8 million, $19.3 million, and $11.7 million
for the second, third, and fourth quarters of 1997, respectively, and $3.5
million, $12.5 million, $3.0 million and $40.6 million for first, second, third
and fourth quarters of 1996.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
47
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
On September 12, 1997, the Board of Directors elected Thos. E. Capps as
Chairman, succeeding John B. Adams, Jr., who had held the position since 1994.
Mr. Capps also is Chairman of the Board of Directors of Dominion Resources,
Inc., the parent company of Virginia Power.
(a) Information concerning directors of Virginia Electric and Power
Company is as follows:
<TABLE>
<CAPTION>
Year First
Principal Occupation for Last 5 Years, Elected a Term
Name and Age Directorships in Public Corporations Director Expires
- ------------------------------- -------------------------------------------------------------- ----------- --------
<S> <C> <C> <C>
Thos. E. Capps (62) Chairman of the Board of Directors of Virginia Electric an d 1986 2000
Power Company from September 12, 1997 to date and
Chairman, President and Chief Executive Officer of
Dominion Resources from September 1, 1995 to date
(from August 15, 1994 to September 1, 1995, Chairman
and Chief Executive Officer; prior to August 15, 1994,
Chairman, President and Chief Executive Officer). He is a
Director of Bassett Furniture Industries, Inc. and
NationsBank Corporation.
Norman Askew (55) President and Chief Executive Officer of Virginia Electric 1997 1998
and Power Company and Executive Vice President of
Dominion Resources from August 1, 1997 to date;
Executive Vice President of Dominion Resources and
Chief Executive of East Midlands from February 21, 1997
to August 1, 1997; Chief Executive of East Midlands from
April 1, 1994 to February 21, 1997; Managing Director
prior to April 1, 1994.
John B. Adams, Jr. (53) President and Chief Executive Officer of The Bowman 1987 1998
Companies, Fredericksburg, Virginia, a manufacturer and
bottler of alcohol beverages and he is a Director of
Dominion Resources.
John B. Bernhardt (68) Managing Director, Bernhardt/Gibson Financial 1986 2000
Opportunities, financial services, Newport News, Virginia.
He is a Director of Resource Bank and Dominion
Resources.
James F. Betts (65) Former Chairman of the Board and President, The Life 1978 2000
Insurance Company of Virginia, Richmond, Virginia. He is
a Director of Wachovia Corporation.
Jean E. Clary (53) President and owner of Century 21 Clary and Associates, 1996 2000
Inc., South Hill, Virginia.
John W. Harris (50) President, The Harris Group, a real estate consulting firm, 1997 1998
Charlotte, North Carolina. He is a Director of Piedmont
Natural Gas Company, Inc. and US Airways Group, Inc.
Benjamin J. Lambert, III (61) Optometrist, Richmond, Virginia. He is a Director of 1992 1998
Consolidated Bank and Trust Company, Student Loan
Marketing Association (SallieMae) and Dominion
Resources.
Richard L. Leatherwood (58) Retired, Baltimore, Maryland. Former President and Chief 1994 1998
Executive Officer, CSX Equipment, an operating unit of
CSX Transportation, Inc.). He is a Director of Dominion
Resources and CACI International, Inc.
Harvey L. Lindsay, Jr. (68) Chairman and Chief Executive Officer of Harvey Lindsay 1986 1999
Commercial Real Estate, Norfolk, Virginia, a commercial
real estate firm. He is a Director of Dominion Resources.
Kenneth A. Randall (70) Corporate Director for various companies, Williamsburg, 1971 1999
Virginia. He is a Director of Oppenheimer Funds, Inc.,
Kemper Insurance Companies and Prime Retail, Inc. He is
a Director of Dominion Resources.
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Retired, Hampton, Virginia (prior to December 31, 1993,
President of Penn Luggage, Inc., retail specialty stores).
William T. Roos (69) He is a Director of Dominion Resources. 1975 1999
<S> <C> <C> <C>
Frank S. Royal (58) Physician, Richmond, Virginia. He is a Director of 1997 1998
Columbia/HCA Healthcare Corporation, Crestar Financial
Corporation, Chesapeake Corporation, CSX Corporation
and Dominion Resources.
Judith B. Sack (49) Senior Advisor, Morgan Stanley & Co., Inc., an investment 1997 1999
banking firm, New York, New York, as of September 1,
1995 (prior to September 1, 1995, Advisor). She is a
Director of Dominion Resources.
S. Dallas Simmons (58) President of Virginia Union University, Richmond, Virginia. 1997 2000
He is a Director of Dominion Resources.
Robert H. Spilman (70) President, Spilman Properties, Basset, Virginia and Chairman 1994 2000
of the Board and a Director of Jefferson-Pilot Corp.,
Greensboro, North Carolina. Retired Chairman and Chief
Executive Officer of Bassett Furniture Industries, Inc. He
is a Director of International Home Furnishing Center,
The Pittston Company and Dominion Resources.
William G. Thomas (58) President of Hazel & Thomas, Alexandria, Virginia, a law 1987 1999
firm.
David A. Wollard (60) Retired President, Bank One Colorado, N.A., Denver, 1997 1999
Colorado.
</TABLE>
The Directors are divided into three classes, with staggered terms. Each
class consists, as nearly as possible, of one-third of the total number of
Directors. Each Director holds office until the annual meeting for the year in
which his class term expires, or until his successor is duly qualified and
elected as provided in the Company's Articles of Incorporation.
Mr. Thomas has entered into a Consent Decree with the Office of Thrift
Supervision in connection with the lending and credit granting activities of
Perpetual Savings Bank, FSB, which Mr. Thomas formerly served as a director.
The Consent Decree requires that Mr. Thomas obtain approval from the
appropriate federal banking agency before accepting certain positions involving
lending or credit activities with an insured depository institution.
(b) Information concerning the executive officers of Virginia Electric and
Power Company is as follows:
<TABLE>
<CAPTION>
Name and Age Business Experience past Five Years
- ---------------------------- ---------------------------------------------------------------------------------------
<S> <C>
Norman Askew (55) President and Chief Executive Officer of Virginia Electric and Power Company and
Executive Vice President of Dominion Resources from August 1, 1997 to date;
Executive Vice President of Dominion Resources and Chief Executive of East
Midlands from February 21, 1997 to August 1, 1997; Chief Executive of East
Midlands from April 1, 1994 to February 21, 1997; Managing Director prior to
April 1, 1994.
Thomas F. Farrell, II (43) Executive Vice President of Virginia Electric and Power Company and Senior Vice
President-Corporate Affairs of Dominion Resources, September 1, 1997 to date;
Senior Vice President-Corporate & General Counsel of Dominion Resources,
January 1, 1997 to September 1, 1997; Vice President and General Counsel of
Dominion Resources, July 1, 1995 to January 1, 1997; Partner in the law firm of
McGuire, Woods, Battle, & Boothe LLP prior to July 1, 1995.
Robert E. Rigsby (48) Executive Vice President, January 1, 1996 to date; Senior Vice President-Finance and
Controller, January 1, 1995 to January 1, 1996; Vice President-Human Resources
prior to January 1, 1995.
William R. Cartwright (55) Senior Vice President-Fossil and Hydro, July 1, 1995 to date; Vice President Fossil
and Hydro prior to July 1, 1995.
Lawrence E. De Simone (50) Senior Vice President-Energy Services, July 15, 1996 to date; vice president-strategic
planning for Central & South West Corp., a Dallas-based electric utility holding
company, prior to July 15, 1996.
Larry M. Girvin (54) Senior Vice President-Commercial Operations, January 1, 1996 to date; Vice
President-Human Resources, January 1, 1995 to January 1, 1996; Vice President-
Nuclear Services prior to January 1, 1995.
James P. O'Hanlon (54) Senior Vice President-Nuclear, June 1, 1994 to date; Vice President-Nuclear
Operations prior to June 1, 1994.
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Senior Vice President-Finance, March 16, 1998 to date; Vice President Financial
Service for ARCO Chemical Company, Philadelphia, Pennsylvania, prior to
March 16, 1998. During the past 5 years, he has also served as Treasurer and
John A. Shaw (49) Controller of ARCO Chemical.
<S> <C>
Eva S. Teig (53) Senior Vice President-External Affairs & Corporate Communications, September 1,
1997 to date; Vice President-External Affairs & Corporate Communications, June 1,
1997 to September 1, 1997; Vice President-Public Affairs prior to June 1, 1997.
Said Ziai (44) Senior Vice President-Corporate Strategy, October 1,1997 to date; Corporate Planning
Director, East Midlands Electricity plc, Nottingham, England prior to October 1,
1997.
Thomas L. Caviness, Jr. (52) Vice President-Retail Energy Services, July 1, 1995 to date;Vice President-Eastern
Division prior to July 1, 1995.
David A. Christian (43) Site Vice President-Surry, March 1, 1998 to date; Station Manager-Surry Power
Station, September 1, 1994 to March 1, 1998; Assistant Station Manager-Surry,
prior to September 1, 1994.
J. Kennerly Davis, Jr. (52) Vice President-Finance and Administrative Services, Treasurer and Corporate
Secretary, January 1, 1996 to date; Vice President, Treasurer and Corporate
Secretary, October 1, 1994 to January 1, 1996; Vice President and Corporate
Secretary of Dominion Resources prior to October 1, 1994.
James T. Earwood, Jr. (54) Vice President-Bulk Power Delivery, January 1, 1997 to date;Vice President-Energy
Efficiency and Division Services, January 1, 1996 to January 1, 1997; Vice
President-Division Services prior to January 1, 1996.
E. Paul Hilton (54) Vice President-Regulation, October 1, 1997 to date; Manager, Rates and Regulation,
February 20, 1996 to October 1, 1997; Manager, Rates prior to February 20, 1996.
Thomas A. Hyman, Jr. (46) Vice President-Distribution Operations and North Carolina Power, June 1, 1997 to
date;Vice President-Eastern Division and North Carolina Power, July 1, 1995 to
June 1, 1997; Vice President-Southern Division, June 1, 1994 to July 1, 1995;
Station Manager-Bremo Power Station prior to June 1, 1994.
Michael R. Kansler (43) Vice President-Nuclear Operations, January 1, 1997 to date;Vice President-Nuclear
Engineering and Services, October 1, 1995 to January 1, 1997; Vice President-
Nuclear Services, January 1, 1995 to October 1, 1995 ; Manager-Nuclear Operations
Support, September 1, 1994 to January 1, 1995; Station Manager-Surry Nuclear
Power Station prior to September 1, 1994.
William R. Matthews (51) Site Vice President-North Anna, March 1, 1998 to date; Station Manager-North Anna
Power Station, May 1, 1996 to March 1, 1998; Assistant Station Manager-North
Anna Power Station, December 1, 1993 to May 1, 1996; Superintendent-
Maintenance, prior to December 1, 1993.
Mark F. McGettrick (40) Vice President-Customer Service, January 1, 1997 to date; Corporate Restructuring
Project Manager, February 1, 1995 to January 1, 1997; Assistant Controller prior to
February 1, 1995.
William S. Mistr (50) Vice President-Information Technology, January 1, 1996 to date and Vice President of
Dominion Resources, February 20, 1997 to date; Vice President and Treasurer,
Dominion Energy, Inc., October 1, 1994 to January 1, 1996; Assistant Treasurer,
Dominion Resources prior to October 1, 1994.
Thomas J. O'Neil (55) Vice President-Human Resources, January 1, 1996 to date; Vice President-Energy
Efficiency prior to January 1, 1996.
Edward J. Rivas (53) Vice President-Fossil & Hydro Operations, January 1, 1998 to date; Manager-Clover
Power Station, March 16, 1994 to January 1, 1998; Manager-Fossil & Hydro
Training prior to March 16, 1994.
Robert F. Saunders (54) Vice President-Nuclear Engineering and Services, January 1, 1997 to date; Vice
President-Nuclear Operations, June 1, 1994 to January 1, 1997; Assistant Vice
President-Nuclear Operations, prior to June 1, 1994.
Johnny V. Shenal (52) Vice President-Distribution Construction, June 1, 1997 to date;Vice President-Northern
and Western Divisions, June 1, 1994 to June 1, 1997; Vice President-Western
Division, prior to June 1, 1994.
Richard T. Thatcher (48) Vice President-Wholesale Power Group, September 1, 1997 to date; Managing
Director, Wholesale Power, April 10, 1997 to September 1, 1997; Manager,
Wholesale Power Group, July 1, 1995 to April 10, 1997; Project Manager,
January 1, 1995 to July 1, 1995; Director-Generation and Interconnection Planning
prior to January 1, 1995.
</TABLE>
There is no family relationship between any of the persons named in
response to Item 10.
50
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Our Directors and Executive Officers report their ownership of our
preferred stock pursuant to Section 16(a) of the Exchange Act. Through
administrative oversight, the following individuals failed to file their initial
statements of beneficial ownership on Form 3 on a timely basis: Thos. E. Capps,
Norman Askew, John B. Bernhardt, John W. Harris, Kenneth A. Randall, Frank S.
Royal, Judith B. Sack, S. Dallas Simmons, David A. Wollard, Thomas F. Farrell,
II, Said Ziai, E. Paul Hilton, Richard T. Thatcher, David A. Christian and
William R. Matthews.
None of the individuals owned any of our preferred stock at the time their
initial reports should have been filed nor have they or any other Director or
Executive Officer have any reportable transactions in the preferred stock which
have not been reported. The required filings have now been made.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The Summary Table below includes compensation paid by the Company for
services rendered in 1997, 1996 and 1995 for the Chief Executive Officer and
the four other most highly compensated executive officers (as of December 31,
1997) as determined by total salary and incentive payments for 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------------------
Other Annual
Name & Principal Position Year Salary Incentive(1) Compensation(2)
- --------------------------- ------ ----------- ------------------ -----------------
<S> <C> <C> <C> <C>
James T. Rhodes 1997 $244,800 $ 159,250 (4) $ 0
President and CEO 1996 $410,575 $ 247,606 $ 0
(retired August 1, 1997) 1995 $406,075 $ 273,000 $ 0
Norman Askew 1997 $177,084 $ 85,833 $14,560
President and CEO
(effective August 1, 1997)
Robert E. Rigsby 1997 $254,850 $ 129,920 $ 0
Executive Vice President 1996 $226,469 $ 143,892 $ 0
1995 $171,456 $ 105,000 $ 0
James P. O'Hanlon 1997 $270,250 $ 110,240 $ 0
Senior Vice President -- 1996 $220,815 $ 128,511 $ 0
Nuclear 1995 $207,555 $ 136,400 $ 0
Lawrence E. DeSimone 1997 $212,751 $ 85,520 $ 0
Senior Vice President -- 1996 $ 94,419 $ 50,441 $ 0
Energy Services
Larry M. Girvin 1997 $187,050 $ 85,520 $ 0
Senior Vice President -- 1996 $164,600 $ 89,200 $ 0
Commercial Operations 1995 $139,650 $ 66,606 $ 0
<CAPTION>
Long Term
Compensation Awards
------------------------
Securities Payouts
Restricted Underlying ----------------------------------------
Stock Options/ LTIP All Other
Name & Principal Position Awards SAR Grants Pay out Compensation(3)
- --------------------------- ------------ ----------- ------------------- --------------------
<S> <C> <C> <C> <C>
James T. Rhodes $ 0 $0 $ 803,429(5) $ 7,977,039 (6)
President and CEO $ 0 $0 $ 75,684 $ 4,500
(retired August 1, 1997) $ 0 $0 $ 77,970 $ 4,500
Norman Askew $ 0(7) $0 $ 18,791(8) $ 120,000(9)
President and CEO
(effective August 1, 1997)
Robert E. Rigsby $0(10 ) $0 $ 83,171(11) $ 4,800
Executive Vice President $ 0 $0 $ 43,157 $ 4,500
$ 0 $0 $ 34,569 $ 4,500
James P. O'Hanlon $ 0(12) $0 $ 80,140(13) $ 4,800
Senior Vice President -- $ 0 $0 $ 56,152 $ 4,500
Nuclear $ 0 $0 $ 45,109 $ 4,500
Lawrence E. DeSimone $ 0(14) $0 $ 0 $ 3,180
Senior Vice President -- $ 0 $0 $ 0 $ 0
Energy Services
Larry M. Girvin $ 0(15) $0 $ 52,935 (16) $ 4,800
Senior Vice President -- $ 0 $0 $ 30,717 $ 4,500
Commercial Operations $ 0 $0 $ 24,685 $ 4,500
</TABLE>
- ---------
(1) The Company does not maintain "bonus" plans which are used by some
companies to supplement salaries based on the success of the company
without regard to individual performance. However, the Company has in
place various incentive plans that compensate officers and employees for
achieving specified performance goals.
(2) Unless noted, none of the executive officers above received perquisites or
other personal benefits in excess of either $50,000 or 10% of total salary
and incentive payment.
(3) Employer matching contribution of $4,800 on Employee Savings Plan
contributions, unless otherwise noted.
(4) Amount represents a lump sum settlement of his rights under the 1997 Annual
Incentive Plan.
(5) $158,025 was paid under the 1995-1997 Performance Achievement Plan. 7,326
shares of Dominion Resources, Inc. Common Stock (worth $269,231 @ $36.75
per share) were issued under the 1996-1998 Long Term Incentive Plan.
10,326 shares of Dominion Resources, Inc. Common Stock (worth $376,173 @
$36.75 per share) were issued under the 1997-1999 Long Term Incentive
Plan.
51
<PAGE>
(6) Upon his retirement, Dr. Rhodes received the following payments from the
Company: $51,078 for unused vacation; $1,023,271 as provided by his
employment contract; $4,184,220 lump sum settlement of pension benefits
not payable from the qualified retirement plan; $2,715,926 as a lump sum
settlement of his benefit under the Executive Supplemental Retirement
Plan, and $2,544 in employer match on Employee Savings Plan contributions.
(7) Mr. Askew held no restricted stock as of 12/31/97.
(8) Amount represents incentive plan pay outs from Virginia Power, on a
prorated basis, for performance cycles that ended in 1997: $7,550 in lieu
of dividends on restricted stock for partial participation in the
1996-1998 and the 1997-1999 performance cycles; and $11,241 for the
1995-1997 performance cycle.
(9) A one time payment related to his international transfer from the UK to the
US.
(10) Aggregate number of shares of restricted stock on December 31, 1997:
13,763 with an aggregate value of $585,788 (based on a closing price on
December 31, 1997 of $42.5625 per share).
(11) 2,085 shares of stock, with 50% of the value awarded in cash ($41,133) and
the remaining 1,042 shares being issued (valued at $42,038 or $40.3437 per
share as of 2/20/98).
(12) Aggregate number of shares of restricted stock on December 31, 1997: 9,773
with aggregate value of $415,963 (closing price on December 31, 1997 of
$42.5625 per share).
(13) 2,009 shares of stock, with 50% of the value awarded in cash ($39,635) and
the remaining 1,004 shares being issued (valued at $40,505 or $40.3437 per
share as of 2/20/98).
(14) Mr. DeSimone held no restricted stock as of 12/31/97.
(15) Aggregate number of shares of restricted stock on December 31, 1997: 7,528
with aggregate value of $320,411 (closing price on December 31, 1997 of
$42.5625 per share).
(16) 1,327 shares of stock, with 50% of the value awarded in cash ($26,187) and
the remaining 663 shares being issued (valued at $26,748 or $40.3437 per
share as of 2/20/98).
Long-term Incentive Compensation
Long-term incentive awards made during 1997 are shown in the following
table.
Long-term Incentive Plans -- Awards in the Last Fiscal Year
1997-1999 Long-term Incentive Plan
<TABLE>
<CAPTION>
Estimated Future Payouts
under Non-stock Price
Based
Performance or Plans
Number of Other Period -------------------------
Shares, Units until Maturation Threshold Target
Name or Other Rights(#) or Payout ($ or #) ($ or #)
- ----------------------- -------------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
J.T. Rhodes ........... $259,448 3 years $129,724 $259,448
N. Askew .............. $261,250 3 years $130,625 $261,250
J.P. O'Hanlon ......... $112,843 3 years $ 56,422 $112,843
R.E. Rigsby ........... $163,714 3 years $ 81,857 $163,714
L.E. DeSimone ......... 87,750 3 years $ 43,875 $ 87,750
L.M. Girvin ........... 87,750 3 years $ 43,875 $ 87,750
</TABLE>
52
<PAGE>
Retirement Plans
The table below sets forth the estimated annual straight life benefit that
would be paid following retirement under the benefit formula of the Dominion
Resources, Inc. Retirement Plan (the Retirement Plan).
Estimated Annual Benefits Payable upon Retirement
<TABLE>
<CAPTION>
Credited Years of Service
--------------------------------------------
Final Average Earnings 15 20 25 30
- ----------------------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
$ 185,000 $ 51,501 $ 68,668 $ 85,836 $103,003
200,000 56,069 74,758 93,448 112,138
225,000 63,681 84,908 106,136 127,363
250,000 71,294 95,058 118,823 142,588
300,000 86,519 115,358 144,198 173,038
350,000 101,744 135,658 169,573 203,488
400,000 116,969 155,958 194,948 233,938
450,000 132,194 176,258 220,323 264,388
500,000 147,419 196,558 245,698 294,838
550,000 162,644 216,858 271,073 325,288
600,000 177,869 237,158 296,448 355,738
650,000 193,094 257,458 321,823 386,188
750,000 223,544 298,058 372,573 447,088
</TABLE>
Benefits under the Retirement Plan are based on (i) average base
compensation over the consecutive 60-month period in which pay is highest, (ii)
years of credited service, (iii) age at retirement, and (iv) the offset of
Social Security Benefits.
Certain officers have entered into retirement agreements that give
additional credited years of service for retirement and retirement life
insurance purposes, and retirement medical benefit purposes contingent upon the
officer reaching a specified age and remaining in the employ of the Company or
an affiliate.
For purposes of the above table, based on 1997 compensation, credited
years of service (including any additional years earned in connection with the
retirement agreements) for each of the individuals named in the cash
compensation table would be as follows:
James T. Rhodes: 30; Norman Askew: 0; Robert E. Rigsby: 26; James P.
O'Hanlon: 8; Lawrence E. De Simone: 0; Larry M. Girvin: 31.
Virginia Power's executive compensation program has placed increased
emphasis on incentive compensation opportunities linked to financial and
operating performance. Base salaries have been held below the mean for
comparable positions at comparable companies. The Retirement Plan benefit
formula recognizes base salary, but not incentive compensation payments.
Therefore, each year the Organization and Compensation Committee approves a
market-based adjustment to executive base salaries for use in calculating the
retirement benefit under the Dominion Resources, Inc. Benefit Restoration Plan
(the Restoration Plan). In 1997, this adjustment was 11 percent. Also, the
Internal Revenue Code limits the annual retirement benefit that may be paid
from a qualified retirement plan and the amount of compensation that may be
recognized by the Retirement Plan. To the extent that benefits determined under
the Retirement Plan's benefit formula exceed the limitations imposed by the
Internal Revenue Code, they will be paid under the Dominion Resources, Inc.
Benefit Restoration Plan.
The Company also provides an Executive Supplemental Retirement Plan (the
Supplemental Plan) to its elected officers designated to participate by the
Board of Directors. The Supplemental Plan provides an annual retirement benefit
equal to 25 percent of a participant's final compensation (base pay plus annual
incentive plan payments). The normal form of benefit is monthly installments
for 120 months to a participant with 60 months of service, who (i) retires at
or after age 55 from the employ of the Company, (ii) has become permanently
disabled, or (iii) dies. The accrued benefit vests proportionately between the
time an officer is elected and when he or she reaches age 55 when the benefit
is fully vested If a participant dies while employed, the normal form of
benefit will be paid to a designated beneficiary. If a participant dies while
retired, but before receiving all benefit payments, the remaining installments
will be paid to a designated beneficiary. A lump sum payment is available under
certain conditions.
Based on 1997 compensation, the estimated annual retirement benefit for
each of the executive officers under the Supplemental Plan would be as follows:
N. Askew: $167,406; R.E. Rigsby: $104,345; J.P. O'Hanlon: $113,228; L.E. De
Simone: $79,139; L.M. Girvin: $73,764.
53
<PAGE>
Retirement Benefit Funding Plan
The Company maintains a Retirement Benefit Funding Plan to provide a means
to secure obligations under the Supplemental Plan, the Restoration Plan, and
retirement agreements. The Retirement Benefit Funding Plan does not provide any
additional benefits; it simply helps secure the funding for these benefit
obligations. The amount payable by Virginia Power under the Supplemental Plan,
the Restoration Plan and retirement agreements is reduced, on a
dollar-for-dollar basis, by the funds available under the Retirement Benefit
Funding Plan.
Employment Agreements
The Company has entered into employment continuity agreements (the
Agreements) with its key management executives, including, Norman Askew, Robert
E. Rigsby, James P. O'Hanlon, Lawrence E. De Simone, and Larry M. Girvin, which
provide benefits in the event of a change in control. Each Agreement has a
three-year term and thereafter is automatically extended on its anniversary
date for an additional year unless notified that the Agreement will not be
extended by the Company. If, following a change in control (as defined in the
Agreements) of Dominion Resources or the Company, an executive's employment is
terminated by the Company without cause, or voluntarily by the executive within
sixty days after a material reduction in the executive's compensation, benefits
or responsibilities, the Company will be obligated to pay to the executive
continued compensation equaling the average base salary and cash incentive
bonuses for the thirty-six full month period of employment preceding the change
in control or employment termination. In addition, the terminated executive
will continue to be entitled to any benefits due under any stock or benefit
plans. The Agreements do not alter the compensation and benefits available to
an executive whose employment with the Company continues for the full term of
the executive's Agreement. The amount of benefits provided under each
executive's Agreement will be reduced by any compensation earned by the
executive from comparable employment by another employer during the thirty-six
months following termination of employment with the Company. An executive shall
not be entitled to the above benefits in the event termination is for cause.
Compensation of Directors
The non-employee members of the Board receive an annual retainer of
$19,000 and a fee of $900 for each Board or committee meeting attended.
Committee chairmen receive an additional annual retainer of $3,000. Consistent
with the Company's philosophy concerning equity-based compensation for
officers, effective in 1998 non-employee directors will also receive an annual
retainer in Dominion Resources common stock valued at $19,000. These Directors
may elect to defer their annual retainer and/or their meeting fees under the
Deferred Compensation Plan until they retire from the Board or otherwise
direct. The deferred fees are credited, for bookkeeping purposes, with earnings
and losses as if they were invested in either an interest bearing account or
Dominion Resources Common Stock, depending on the Director's election.
Directors Charitable Contribution Program
Dominion Resources administers a Directors' Charitable Contribution
Program (the Program) that covers Directors of the Company, as part of its
overall program of charitable giving. Beginning at the death of a Director a
donation in an aggregate amount of $50,000 per year for 10 years will be made
to one or more qualifying charitable organizations recommended by the
individual Director. Life insurance policies have been purchased on the lives
of the Directors in connection with the Program. These policies are owned by
Dominion Resources, which is also the beneficiary. The Directors derive no
financial or tax benefits from the Program.
54
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth as of February 20, 1998, except as noted, the
number of shares of Common Stock of Dominion Resources owned by Directors and
four other more highly compensated executive officers of Virginia Electric and
Power Company.
<TABLE>
<CAPTION>
Shares of Common Stock Director Plan
Name Beneficially Owned Accounts(1)
- ----------------------------------------- ------------------------ --------------
<S> <C> <C>
John B. Adams, Jr. ...................... 3,891 9,091
John B. Bernhardt ....................... 1,500 9,091
James F. Betts .......................... 7,500 9,091
Thos. E. Capps .......................... 44,914(2)
Jean E. Clary ........................... 116 9,162
John W. Harris .......................... 500 9,091
Benjamin J. Lambert, III ................ 90 10,212
Richard L. Leatherwood .................. 1,000 17,616
Harvey L. Lindsay ....................... 400 9,091
Kenneth A. Randall ...................... 3,027 9,091
William T. Roos ......................... 14,603(3) 9,091
Frank S. Royal .......................... 10,430
Judith B. Sack .......................... 1,000 14,575
S. Dallas Simmons ....................... 650 13,370
Robert H. Spilman ....................... 1,187 9,091
William G. Thomas ....................... 1,000 13,257
David A. Wollard ........................ 9,879
Norman Askew ............................ 1,290(2)
Lawrence E. De Simone ................... 92
Larry M. Girvin ......................... 7,654
James P. O'Hanlon ....................... 11,100
Robert E. Rigsby ........................ 22,079
All Directors and Executive Officers as a
group -- 41 persons (4) ................ 397,599(2)(5)
</TABLE>
- ---------
(1) Amounts in this column represent share equivalents accumulated under the
non-employee director Stock Accumulation Plan. Balances of 9,091 shares
are the amounts accumulated thus far under the plan. Because of the plan's
vesting provisions, these amounts will not necessarily be distributed to a
director. Any balance in excess of 9,091 is an amount of shares
accumulated-at the director's election-under the Deferred Cash
Compensation plan. That excess amount will be distributed in actual shares
to the director.
(2) Amounts include restricted stock as follows: Mr. Capps -- 23,984 shares;
Mr. Askew -- 1,290; and all directors and executive officers as a group --
89,859.
(3) Mr. Roos disclaims beneficial ownership of 4,387 shares that are held in
trusts for family members.
(4) All current directors and executive officers as a group own less than one
percent of the number of shares outstanding as of February 20, 1998.
(5) Beneficial ownership is disclaimed for a total of 4,786 shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Hazel & Thomas, a professional corporation, from time to time acts as
counsel to the Company. Mr. Thomas, a Director of the Company, is a shareholder
of Hazel & Thomas.
55
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
1. Financial Statements
See Index on page 21.
2. Exhibits
<TABLE>
<S> <C> <C>
3.1 -- Restated Articles of Incorporation, as amended, as in effect on September 12, 1994
(Exhibit 3(i), Form 8-K, dated October 19, 1994, File No. 1-2255, incorporated by
reference).
3.2 -- Bylaws, as amended, as in effect on October 17, 1997 (Exhibit 3(ii), Form 10-Q for
the period ended September 30, 1997, File No. 1-2255, incorporated by reference).
4.1 -- See Exhibit 3 (i) above.
4.2 -- Indenture of Mortgage of the Company, dated November 1, 1935, as supplemented and
modified by fifty-eight Supplemental Indentures (Exhibit 4(ii), Form 10-K for the
fiscal year ended December 31, 1985, File No. 1-2255, incorporated by reference);
Fifty-Ninth Supplemental Indenture (Exhibit 4(ii), Form 10-Q for the quarter ended
March 31, 1986, File No. 1-2255, incorporated by reference); Sixtieth Supplemental
Indenture (Exhibit 4(ii), Form 10-Q for the quarter ended September 30, 1986, File
No. 1-2255, incorporated by reference); Sixty-First Supplemental Indenture (Exhibit
4(ii), Form 8-K, dated June 2, 1987, File No. 1-2255, incorporated by reference);
Sixty-Second Supplemental Indenture (Exhibit 4(i), Form 8-K, dated November 3,
1987, File No. 1-2255, incorporated by reference); Sixty-Third Supplemental Indenture
(Exhibit 4(i), Form 8-K, dated June 8, 1988, File No. 1-2255, incorporated by
reference); Sixty-Fourth Supplemental Indenture (Exhibit 4(i), Form 8-K, dated
February 8, 1989, File No. 1-2255, incorporated by reference); Sixty-Fifth
Supplemental Indenture (Exhibit 4(i), Form 8-K, dated June 22, 1989, File No. 1-2255,
incorporated by reference); Sixty-Sixth Supplemental Indenture (Exhibit 4(i), Form
8-K, dated February 27, 1990, File No. 1-2255, incorporated by reference);
Sixty-Seventh Supplemental Indenture (Exhibit 4(i), Form 8-K, dated April 2, 1991,
File No. 1-2255, incorporated by reference); Sixty-Eighth Supplemental Indenture
(Exhibit 4(i)), Sixty-Ninth Supplemental Indenture (Exhibit 4(ii)) and Seventieth
Supplemental Indenture (Exhibit 4(iii), Form 8-K, dated February 25, 1992, File No.
1-2255, incorporated by reference); Seventy-First Supplemental Indenture (Exhibit 4(i))
and Seventy-Second Supplemental Indenture (Exhibit 4(ii), Form 8-K, dated July 7,
1992, File No. 1-2255, incorporated by reference); Seventy-Third Supplemental
Indenture (Exhibit 4(i), Form 8-K, dated August 6, 1992, File No. 1-2255, incorporated
by reference); Seventy-Fourth Supplemental Indenture (Exhibit 4(i), Form 8-K, dated
February 10, 1993, File No. 1-2255, incorporated by reference); Seventy-Fifth
Supplemental Indenture (Exhibit 4(i), Form 8-K, dated April 6, 1993, File No. 1-2255,
incorporated by reference); Seventy-Sixth Supplemental Indenture (Exhibit 4(i), Form
8-K, dated April 21, 1993, File No. 1-2255, incorporated by reference); Seventy-
Seventh Supplemental Indenture (Exhibit 4(i), Form 8-K, dated June 8, 1993, File No.
1-2255, incorporated by reference); Seventy-Eighth Supplemental Indenture (Exhibit
4(i), Form 8-K, dated August 10, 1993, File No. 1-2255, incorporated by reference);
Seventy-Ninth Supplemental Indenture (Exhibit 4(i), Form 8-K, dated August 10, 1993,
File No. 1-2255, incorporated by reference); Eightieth Supplemental Indenture (Exhibit
4(i), Form 8-K, dated October 12, 1993, File No. 1-2255, incorporated by reference);
Eighty-First Supplemental Indenture (Exhibit 4(iii), Form 10-K for the fiscal year
ended December 31, 1993, File No. 1-2255, incorporated by reference); Eighty-Second
Supplemental Indenture (Exhibit 4(i), Form 8-K, dated January 18, 1994, File No.
1-2255, incorporated by reference); Eighty-Third Supplemental Indenture (Exhibit 4(i),
Form 8-K, dated October 19, 1994, File No. 1-2255, incorporated by reference);
Eighty-Fourth Supplemental Indenture (Exhibit 4(i), Form 8-K, dated March 22, 1995,
File No. 1-2255, incorporated by reference; and Eighty-Fifth Supplemental Indenture
(Exhibit 4(i), Form 8-K, dated February 20, 1997, File No. 1-2255, incorporated by
reference).
</TABLE>
56
<PAGE>
<TABLE>
<S> <C> <C>
4.3 -- Indenture, dated April 1, 1985, between Virginia Electric and Power Company and
Crestar Bank (formerly United Virginia Bank) (Exhibit 4(iv), Form 10-K for the fiscal
year ended December 31, 1993, File No. 1-2255, incorporated by reference).
4.4 -- Indenture, dated as of June 1, 1986, between Virginia Electric and Power Company
and The Chase Manhattan Bank (formerly Chemical Bank) (Exhibit 4(v), Form 10-K
for the fiscal year ended December 31, 1993, File No. 1-2255, incorporated by
reference).
4.5 -- Indenture, dated April 1, 1988, between Virginia Electric and Power Company and The
Chase Manhattan Bank (formerly Chemical Bank), as supplemented and modified by a
First Supplemental Indenture, dated August 1, 1989, (Exhibit 4(vi), Form 10-K for the
fiscal year ended December 31, 1993, File No. 1-2255, incorporated by reference).
4.6 -- Subordinated Note Indenture, dated as of August 1, 1995 between Virginia Electric and
Power Company and The Chase Manhattan Bank (formerly Chemical Bank), as
Trustee, as supplemented (Exhibit 4(a), Form S-3 Registration Statement File No.
333-20561 as filed on January 28, 1997, incorporated by reference).
4.7 -- Virginia Electric and Power Company agrees to furnish to the Commission upon
request any other instrument with respect to long-term debt as to which the total
amount of securities authorized thereunder does not exceed 10 percent of Virginia
Electric and Power Company's total assets.
10.1 -- Operating Agreement, dated June 17, 1981, between Virginia Electric and Power
Company and Monongahela Power Company, the Potomac Edison Company, West
Penn Power Company, and Allegheny Generating Company (Exhibit 10(vi), Form
10-K for the fiscal year ended December 31, 1983, File No. 1-8489, incorporated by
reference).
10.2 -- Purchase, Construction and Ownership Agreement, dated as of December 28, 1982 but
amended and restated on October 17, 1983, between Virginia Electric and Power
Company and Old Dominion Electric Cooperative (Exhibit 10(viii), Form 10-K for the
fiscal year ended December 31, 1983, File No. 1-8489, incorporated by reference).
10.3 -- Amended and Restated Interconnection and Operating Agreement, dated as of July 29,
1997 between Virginia Electric and Power Company and Old Dominion Electric
Cooperative (filed herewith).
10.4 -- Nuclear Fuel Agreement, dated as of December 28, 1982 as amended and restated on
October 17, 1983, between Virginia Electric and Power Company and Old Dominion
Electric Cooperative (Exhibit 10(x), Form 10-K for the fiscal year ended December 31,
1983, File No. 1-8489, incorporated by reference).
10.5 -- Credit Agreements dated June 7, 1996, between The Chase Manhattan Bank (formerly
Chemical Bank) and Virginia Electric and Power Company (Exhibits 10(i) and 10(ii),
Form 10-Q for the period ended June 30, 1996, File No. 1-2255, incorporated by
reference).
10.6 -- Credit Agreement, dated December 1, 1985, between Virginia Electric and Power
Company and Old Dominion Electric Cooperative (Exhibit 10(xix), Form 10-K for the
fiscal year ended December 31, 1985, File No. 1-8489, incorporated by reference).
10.7 -- Agreement for Northern Virginia Services, dated as of November 1, 1985, between
Potomac Electric Power Company and Virginia Electric and Power Company (Exhibit
10(xxi), Form 10-K for the fiscal year ended December 31, 1985, File No. 1-8489,
incorporated by reference).
10.8 -- Purchase, Construction and Ownership Agreement, dated May 31, 1990, between
Virginia Electric and Power Company and Old Dominion Electric Cooperative (Exhibit
10(xi), Form 10-K for the fiscal year ended December 31, 1990, File No. 1-2255,
incorporated by reference).
10.9 -- Operating Agreement, dated May 31, 1990, between Virginia Electric and Power
Company and Old Dominion Electric Cooperative (Exhibit 10(xii), Form 10-K for the
fiscal year ended December 31, 1990, File No. 1-2255, incorporated by reference).
10.10 -- Coal-Fired Unit Turnkey Contract (Volume 1), dated April 6, 1989, and the Unit 2
Amendment (Volume 1), dated May 31, 1990 between Virginia Electric and Power
Company and Old Dominion Electric Cooperative, Westinghouse, Black & Veatch,
Combustion Engineering and H. B. Zachry (Volumes 2-11 contain technical specifi-
cations) (Exhibit 10(xiii), Form 10-K for the fiscal year ended December 31, 1990,
File No. 1-2255, incorporated by reference).
10.11* -- Description of arrangements with certain officers regarding additional credited years of
service for retirement purposes (Exhibit 10(xii), Form 10-K for the fiscal year ended
December 31, 1992, File No. 1-2255, incorporated by reference).
</TABLE>
57
<PAGE>
<TABLE>
<S> <C> <C>
10.12* -- Dominion Resources, Inc. Directors' Deferred Compensation Plan effective July 1,
1986, as amended and restated on January 1, 1996 (Exhibit 10(xii), Form 10-K for the
fiscal year ended December 31, 1996, File No. 1-2255, incorporated by reference).
10.13* -- Dominion Resources, Inc. Performance Achievement Plan, effective January 1, 1986,
as amended and restated effective February 19, 1988 (Exhibit 10(xxiii), Form 10-K for
the fiscal year ended December 31, 1994, File No. 1-2255, incorporated by reference).
10.14* -- Dominion Resources, Inc. Executive Supplemental Retirement Plan, effective
January 1, 1981 as amended and restated September 1, 1996 with first amendment
dated June 20, 1997 and second amendment dated March 3, 1998 (filed herewith).
10.15* -- Dominion Resources, Inc.'s Cash Incentive Plan as adopted December 20, 1991
(Exhibit 10(xxv), Form 10-K for the fiscal year ended December 31, 1994, File
No. 1-2255, incorporated by reference).
10.16* -- Dominion Resources, Inc. Retirement Benefit Funding Plan, effective June 29, 1990 as
amended and restated September 1, 1996 (filed herewith).
10.17* -- Dominion Resources, Inc. Retirement Benefit Restoration Plan as adopted effective
January 1, 1991 as amended and restated September 1, 1996 (filed herewith).
10.18* -- Dominion Resources, Inc. Executives' Deferred Compensation Plan, effective
January 1, 1994, as amended and restated on January 1, 1997 (Exhibit 10(xix), Form
10-K for the fiscal year ended December 31, 1996, File No. 1-2255, incorporated by
reference).
10.19* -- Form of an Employment Agreement dated June 23, 1994 between Virginia Power and
certain executive officers (Exhibit 10(xxi), Form 10-K for the fiscal year ended
December 31, 1996, File No. 1-2255, incorporated by reference).
10.20* -- Employment Agreement dated September 15, 1995 between Virginia Power and
Robert E. Rigsby (Exhibit 10(xxii), Form 10-K for the fiscal year ended December 31,
1996, File No. 1-2255, incorporated by reference).
10.21* -- Employment Agreement dated February 21, 1997 between Dominion Resources and
Norman Askew (filed herewith).
10.22* -- Dominion Resources, Inc. Stock Accumulation Plan for Outside Directors, effective
April 23, 1996 (Exhibit 10(xxiv), Form 10-K for the fiscal year ended December 31,
1996, File No. 1-2255, incorporated by reference).
10.23* -- Dominion Resources, Inc. Incentive Compensation Plan, effective April 22, 1997 (filed
herewith)
23.1 -- Consent of Hunton & Williams (filed herewith).
23.2 -- Consent of Jackson & Kelly (filed herewith).
23.3 -- Consent of Deloitte & Touche LLP (filed herewith).
27 -- Financial Data Schedule (filed herewith).
</TABLE>
- ---------
* Indicates management contract or compensatory plan or arrangement
(b) Reports on Form 8-K
None
58
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
VIRGINIA ELECTRIC AND POWER COMPANY
Date: March 20, 1998
By THOS. E. CAPPS
-- ------------------------------------------------------
(Thos. E. Capps., Chairman of the
Board of Directors)
Pursuant to the requirements of the
Securities Exchange Act of 1934, this
report has been signed below by the
following persons on behalf of the
registrant and in the capacities
indicated on March 20, 1998.
<TABLE>
<CAPTION>
Signature Title
- ------------------------------------------ ----------------------------------------
<S> <C>
THOS E. CAPPS Chairman of the Board of Directors and
----------------------------------
Thos E. Capps Director
JOHN B. ADAMS, JR. Director
----------------------------------
John B. Adams, Jr.
NORMAN ASKEW President (Chief Executive Officer) and
----------------------------------
Norman Askew Director
JOHN B. BERNHARDT Director
----------------------------------
John B. Bernhardt
JAMES F. BETTS Director
----------------------------------
James F. Betts
JEAN E. CLARY Director
----------------------------------
Jean E. Clary
JOHN W. HARRIS Director
----------------------------------
John W. Harris
BENJAMIN J. LAMBERT, III Director
----------------------------------
Benjamin J. Lambert, III
RICHARD L. LEATHERWOOD Director
----------------------------------
Richard L. Leatherwood
HARVEY L. LINDSAY, JR. Director
----------------------------------
Harvey L. Lindsay, Jr.
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
Signature Title
- ------------------------------------------ ---------------------------------
<S> <C>
Director
----------------------------------
Kenneth A. Randall
WILLIAM T. ROOS Director
----------------------------------
William T. Roos
FRANK S. ROYAL Director
----------------------------------
Frank S. Royal
JUDITH B. SACK Director
----------------------------------
Judith B. Sack
S. DALLAS SIMMONS Director
----------------------------------
S. Dallas Simmons
ROBERT H. SPILMAN Director
----------------------------------
Robert H. Spilman
WILLIAM G. THOMAS Director
----------------------------------
William G. Thomas
Director
----------------------------------
David A. Wollard
M. S. BOLTON, JR. Controller (Principal Accounting
----------------------------------
M. S. Bolton, Jr. Officer)
</TABLE>
60
Exhibit 10.3
AMENDED AND RESTATED
INTERCONNECTION AND OPERATING
AGREEMENT
Between
VIRGINIA ELECTRIC AND POWER COMPANY
and
OLD DOMINION ELECTRIC COOPERATIVE
Dated: As of July 29, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS......................................................
1.01 Agreement............................................................
1.02 Alternate Power Source...............................................
1.03 Annual Fuel Adjustment Factor........................................
1.04 Capability...........................................................
1.05 Clover Agreements....................................................
1.06 Clover Facilities....................................................
1.07 Clover Operating Agreement...........................................
1.08 Clover Ownership Interest............................................
1.09 Clover Purchase, Construction and Ownership Agreement................
1.10 Combined Electric Systems............................................
1.11 Combined System Annual Peak Demand...................................
1.12 Combined System Loss Percentage......................................
1.13 Combined System Monthly Capability...................................
1.14 Combined System Monthly Peak Demand..................................
1.15 Common Facilities....................................................
1.16 Displacement Peaking Energy..........................................
1.17 Displacement Reserve Energy..........................................
1.18 Displacement Supplemental Energy.....................................
1.19 Effective Date.......................................................
1.20 Events of Default....................................................
1.21 Excluded Peaking Capacity............................................
1.22 Excluded Peaking Energy..............................................
1.23 Excluded Supplemental Capacity.......................................
1.24 Excluded Supplemental Energy.........................................
1.25 Executive Committee..................................................
1.26 FERC.................................................................
1.27 Fixed Monthly A&G Fee................................................
1.28 Holidays.............................................................
1.29 Interconnected Systems...............................................
1.30 Interconnection Points...............................................
1.31 Interest Rates.......................................................
1.32 Major Spare Parts....................................................
1.33 Market Price.........................................................
1.34 Monthly Peaking Energy Charge........................................
1.35 Monthly Reserve Energy Charge........................................
1.36 Monthly Supplemental Demand Charge...................................
1.37 Monthly Supplemental Energy Charge...................................
1.38 Network Operating Agreement..........................................
1.39 North Anna A&G Costs.................................................
1.40 North Anna Facilities................................................
1.41 North Anna Nuclear Power Station.....................................
1.42 North Anna Operating Committee.......................................
1.43 North Anna Unit 1....................................................
1.44 North Anna Unit 2....................................................
1.45 North Anna Unit(s)...................................................
1.46 Nuclear Fuel.........................................................
1.47 Nuclear Fuel Agreement...............................................
1.48 Off-Peak Hours.......................................................
1.49 Old Dominion.........................................................
1.50 Old Dominion Generation Resources....................................
1.51 Old Dominion Members.................................................
1.52 Old Dominion Monthly Accredited Firm Capacity........................
1.53 Old Dominion Monthly Accredited Firm Energy..........................
1.54 Old Dominion Monthly Accredited Non-firm Capacity....................
1.55 Old Dominion Monthly Accredited Non-firm Energy......................
1.56 Old Dominion Monthly Billing Demand..................................
1.57 Old Dominion Monthly Billing Energy..................................
1.58 Old Dominion Monthly Clover Capacity.................................
1.59 Old Dominion Monthly Delivered Demand................................
1.60 Old Dominion Monthly Delivered Energy................................
1.61 Old Dominion Monthly Delivered SEPA Capacity.........................
1.62 Old Dominion Monthly Delivered SEPA Energy...........................
1.63 Old Dominion Monthly Demand..........................................
1.64 Old Dominion Monthly Energy..........................................
1.65 Old Dominion Monthly Maximum Diversified Demand......................
1.66 Old Dominion Monthly North Anna Capacity.............................
1.67 Old Dominion Monthly North Anna Energy...............................
1.68 Old Dominion Monthly Reserve Energy..................................
1.69 Old Dominion Monthly Supplemental Demand.............................
1.70 Old Dominion Monthly Supplemental Energy.............................
1.71 Old Dominion's North Anna Percentage Ownership Interest..............
1.72 Old Dominion Reserve Capacity........................................
1.73 Old Dominion System..................................................
1.74 On-Peak Hours........................................................
1.75 Open Access Transmission Tariff......................................
1.76 Operating Inventory..................................................
1.77 Parties..............................................................
1.78 Peaking Capacity.....................................................
1.79 Peaking Capacity Charge..............................................
1.80 Peaking Energy.......................................................
1.81 Planning and Administration Committee................................
1.82 Prudent Utility Practices............................................
1.83 Purchase, Construction and Ownership Agreement.......................
1.84 Reserve Capacity Charge..............................................
1.85 RUS..................................................................
1.86 SEPA.................................................................
1.87 Support Facilities...................................................
1.88 System Reserve Margin................................................
1.89 Transmission Service Agreement.......................................
1.90 Virginia Power.......................................................
1.91 Virginia Power System................................................
1.92 Wholesale Power Contracts............................................
ARTICLE II - NORTH ANNA OPERATING COMMITTEE..................................
2.01 North Anna Operating Committee.......................................
2.02 Meetings and Voting Rights...........................................
2.03 Duties of Operating Committee........................................
2.04 Expenses of Operating Committee......................................
2.05 Resolution of Disputes...............................................
ARTICLE III - PLANNING AND ADMINISTRATION....................................
3.01 Planning and Administration Committee................................
3.02 Meetings.............................................................
3.03 Duties of the Planning and Administration Committee..................
3.04 Future Transmission Planning.........................................
3.05 Exchange of Information..............................................
3.06 Expenses of the Planning and Administration Committee................
3.07 Resolution of Disputes...............................................
3.08 SEPA Contract........................................................
ARTICLE IV - INTERCONNECTION AND PROTECTION OF SYSTEMS.......................
4.01 Obligation for Adequate Facilities...................................
4.02 Protection of Systems................................................
ARTICLE V - VIRGINIA POWER'S AUTHORITY AND RESPONSIBILITY WITH
RESPECT TO OLD DOMINION'S NORTH ANNA GENERATION..........................
5.01 Virginia Power as Agent of Old Dominion..............................
ARTICLE VI - TRANSMISSION SERVICES...........................................
6.01 Old Dominion Transmission Service....................................
6.02 Native Load Status...................................................
6.03 SEPA Capacity Transmission Service...................................
ARTICLE VII - ENTITLEMENTS TO CAPACITY AND ENERGY............................
7.01 Entitlements of the Parties to Capacity and Energy...................
ARTICLE VIII - SUPPLEMENTAL DEMAND AND ENERGY, PEAKING
CAPACITY AND ENERGY, AND RESERVE CAPACITY AND ENERGY.....................
8.01 Supplemental Demand and Energy.......................................
8.02 Charges for Purchases By Old Dominion Pursuant to Section 8.01.......
8.03 Peaking Capacity and Energy Purchases................................
8.04 Limitation on Virginia Power's Obligation to Serve
Supplemental Demand and Provide Supplemental Energy..................
8.05 Reserve Capacity and Energy and Charges Therefor Related
to the North Anna Facilities and Clover Facilities...................
8.06 Reserve Capacity and Reserve Capacity Charges for
Jointly Planned Generation Resources.................................
8.07 Exchange of Displacement Energy......................................
8.08 Limitations of Parties' Rights to Seek Regulatory Review.............
ARTICLE IX - FACILITIES CHARGES..............................................
9.01 Facilities Charges...................................................
ARTICLE X - BILLING..........................................................
10.01 Billing Methods.....................................................
10.02 Rendering Bill......................................................
10.03 Payment.............................................................
10.04 Methods of Payment..................................................
10.05 No Arbitration; Resolution of Disputes..............................
10.06 Billing Adjustments.................................................
ARTICLE XI - OPERATING COSTS.................................................
11.01 Operating Costs.....................................................
11.02 Nuclear Fuel Costs..................................................
ARTICLE XII - ACCOUNTING MATTERS AND ACCESS TO BOOKS
AND RECORDS..............................................................
12.01 Responsibility and Method of Accounting.............................
12.02 Right to Inspect Records, Etc.......................................
12.03 Confidentiality.....................................................
ARTICLE XIII - LIABILITY, SERVICE INTERRUPTIONS AND
FORCE MAJEURE...........................................................
13.01 Liability...........................................................
13.02 Responsibility on Either Side of Interconnection Point..............
13.03 Force Majeure.......................................................
13.04 Remedy..............................................................
ARTICLE XIV - REPRESENTATIONS AND WARRANTIES.................................
14.01 Representations and Warranties of Virginia Power....................
14.02 Representations and Warranties of Old Dominion......................
14.03 Conditions Precedent................................................
ARTICLE XV - TERM OF AGREEMENT...............................................
ARTICLE XVI - FILING WITH FERC...............................................
ARTICLE XVII - DEFAULT.......................................................
17.01 Events of Default...................................................
17.02 Virginia Power's Rights on Default of Old Dominion..................
17.03 Old Dominion's Rights on Default of Virginia Power..................
17.04 Disputes Concerning Default.........................................
17.05 Additional Obligations..............................................
17.06 Injunctive Relief...................................................
17.07 No Remedy Exclusive.................................................
17.08 Agreement to Pay All Costs to Cure Default..........................
17.09 General Covenant by the Parties.....................................
ARTICLE XVIII - MISCELLANEOUS................................................
18.01 No Delay............................................................
18.02 Further Documentation...............................................
18.03 Notice..............................................................
18.04 Headings Not to Affect Meaning......................................
18.05 No Association, Trust, Joint Venture or Partnership; Tax Matters....
18.06 Successors and Assigns..............................................
18.07 Counterparts........................................................
18.08 Severability........................................................
18.09 Applicable Law......................................................
18.10 No Waiver...........................................................
18.11 Computation of Time.................................................
18.12 Survivorship of Obligations.........................................
18.13 Executive Committee.................................................
18.14 Entire Agreement....................................................
18.15 Non-Exclusive Agreement.............................................
18.16 Relationship of the Parties.........................................
18.17 Singular and Plural.................................................
18.18 Equal Opportunity...................................................
18.19 Good Faith..........................................................
18.20 Merger of Documents.................................................
18.21 Environment.........................................................
18.22 Kick-backs..........................................................
18.23 Nonsegregated Facilities............................................
18.24 Historic Places.....................................................
18.25 Public Officials Not to Benefit.....................................
18.26 Flood Insurance Act.................................................
18.27 Safety..............................................................
18.28 Buy American........................................................
18.29 Regulatory Changes..................................................
ARTICLE XIX - AMENDMENT......................................................
APPENDIX A - COMMON FACILITIES
APPENDIX B - MAJOR SPARE PARTS
APPENDIX C - NORTH ANNA UNIT 1
APPENDIX D - NORTH ANNA UNIT 2
APPENDIX E - OLD DOMINION MEMBERS
APPENDIX F - SUPPORT FACILITIES
APPENDIX G - CHARGES FOR PURCHASES BY OLD DOMINION
APPENDIX H - DETERMINATION OF PURCHASE AMOUNTS BY OLD DOMINION
APPENDIX I - CHARGES FOR RESERVE CAPACITY
APPENDIX J - FACILITIES CHARGES
APPENDIX K - VIRGINIA ELECTRIC AND POWER COMPANY MONTHLY STATEMENT TO OLD
DOMINION
APPENDIX L - VIRGINIA POWER NORTH ANNA NUCLEAR STATION NUCLEAR PRODUCTION
AND MAINTENANCE EXPENSES
APPENDIX M - PEAKING CAPACITY AND ENERGY
<PAGE>
This AGREEMENT, dated as of July 29, 1997 and amending and restating
the Interconnection and Operating Agreement Between Virginia Electric and Power
Company and Old Dominion Electric Cooperative Dated: As of December 28, 1982,
Amended and Restated October 17, 1983, between VIRGINIA ELECTRIC AND POWER
COMPANY ("Virginia Power"), a Virginia public service corporation with its
principal office at One James River Plaza, Richmond, Virginia, and OLD DOMINION
ELECTRIC COOPERATIVE ("Old Dominion"), a Virginia generation and transmission
cooperative with its principal office at 4201 Dominion Boulevard, Glen Allen,
Virginia (individually, a "Party," together, the "Parties"), provides as
follows:
WHEREAS, Virginia Power is a public service corporation engaged in
furnishing electric utility service in portions of Virginia and North Carolina,
and as such owns and operates facilities for the generation, transmission and
distribution of electricity within those states; and
WHEREAS, Old Dominion, a generation and transmission cooperative
organized and existing under the laws of the Commonwealth of Virginia and
comprising, among others, the Old Dominion Members, is charged with the
responsibility of providing power and energy to its Old Dominion Members either
through generation facilities owned by it or by the purchase of power and energy
from others; and
WHEREAS, Virginia Power and Old Dominion entered into a Purchase,
Construction and Ownership Agreement, under which Virginia Power sold and Old
Dominion purchased an ownership interest in North Anna Unit 1, North Anna Unit
2, Common Facilities, Support Facilities, Major Spare Parts, Operating Inventory
and the Nuclear Fuel used or to be used for North Anna Units 1 and 2, all as set
forth in the Purchase, Construction and Ownership Agreement and Nuclear Fuel
Agreement; and
WHEREAS, pursuant to that Purchase, Construction and Ownership
Agreement, Virginia Power sold to Old Dominion a portion of its North Anna
generation facilities and, through the Interconnection and Operating Agreement
Between Virginia Power and Old Dominion Dated: December 28, 1982, Amended and
Restated October 17, 1983 ("Interconnection and Operating Agreement"), agreed to
operate Old Dominion's portion of such generation, supplying to it at the
Interconnection Points such electricity as is generated from Old Dominion's
portion of these facilities; and
WHEREAS, pursuant to this amended and restated Agreement, Virginia
Power will continue to operate Old Dominion's portion of the North Anna
generation facilities and supply such electricity as is generated from Old
Dominion's portion of these facilities to the Interconnection Points; and
WHEREAS, pursuant to the Clover Purchase, Construction and Ownership
Agreement and the Clover Operating Agreement, Virginia Power and Old Dominion
each hold a fifty-percent undivided interest in the two unit, coal-fired Clover
Power Station, and Virginia Power has agreed to operate and supply to Old
Dominion such electricity that is generated from Old Dominion's portion of that
facility in accordance with the terms and conditions of the Clover Operating
Agreement; and
WHEREAS, Old Dominion will require capacity and energy in an amount
exceeding that available from its portion of generation at North Anna and Clover
and may desire to purchase supplemental electric service from Virginia Power, or
from others, or to construct and operate additional generation facilities of its
own pursuant to the terms and conditions of this amended and restated Agreement;
and
WHEREAS, Virginia Power and Old Dominion entered into Amendment No. 1
to the Interconnection and Operating Agreement, dated as of the 12th day of
October 1994, which amendment provided for the purchase and sale of firm Peaking
Capacity and associated energy and Virginia Power and Old Dominion wish to
incorporate the terms of that Amendment No. 1, as modified herein, into this
amended and restated Agreement; and
WHEREAS, Virginia Power and Old Dominion desire to enter into this
Agreement which will include revised terms, conditions, and pricing under which
Virginia Power will provide, among other things, Old Dominion supplemental
demand and energy, reserve capacity and energy, peaking capacity and energy, and
transmission service.
NOW, THEREFORE, in consideration of the premises and the mutual
obligations hereafter stated, the Parties hereto agree as follows:
<PAGE>
ARTICLE I
Definitions
The following definitions shall be included as part of this Agreement.
Other terms used herein shall have the respective meanings set forth in the
Purchase, Construction and Ownership Agreement, the Nuclear Fuel Agreement, the
Clover Agreements and the Virginia Power Open Access Transmission Tariff.
1.01 Agreement . This amended and restated Interconnection and
Operating Agreement dated as of July 29, 1997, between Virginia Power and Old
Dominion.
1.02 Alternate Power Source . Any source of capacity or energy that
provides Excluded Supplemental Capacity, Excluded Supplemental Energy,
Displacement Supplemental Energy, Excluded Peaking Capacity, Excluded Peaking
Energy, Displacement Peaking Energy or Displacement Reserve Energy. Virginia
Power shall be an Alternate Power Source to the extent it supplies such
capacity or energy on terms and conditions other than those set forth in this
Agreement.
1.03 Annual Fuel Adjustment Factor. The annual fuel cost
adjustment factor described in Appendix G, Section VI. hereof.
1.04 Capability. The net summer or winter (as applicable) rating
of a generating unit or other power supply resource, measured in megawatts, as
determined by Virginia Power. Capability shall be established and modified in
accordance with Prudent Utility Practices following the same methodology
Virginia Power uses in establishing the capability of all generating units
on its system.
1.05 Clover Agreements. The Clover Operating Agreement and the
Clover Purchase, Construction and Ownership Agreement.
1.06 Clover Facilities . The coal-fired generating units located in
Halifax County, Virginia, ("Clover") designated as Clover Unit 1 and Clover
Unit 2, and the related real property, equipment and facilities, as more
specifically defined in the Clover Purchase, Construction and Ownership
Agreement, wherever located, that are properly chargeable to Clover Unit 1
or Clover Unit 2 under the Uniform System of Accounts.
1.07 Clover Operating Agreement. The Clover Operating Agreement
Between Virginia Electric and Power Company and Old Dominion Electric
Cooperative Dated as of May 31, 1990.
1.08 Clover Ownership Interest. The respective fee simple undivided
ownership interest, expressed as a percentage, in the Clover Facilities owned
by each Party, as may be modified from time to time pursuant to the Clover
Agreements.
1.09 Clover Purchase, Construction and Ownership Agreement . The
Clover Purchase, Construction and Ownership Agreement Between Old Dominion
Electric Cooperative and Virginia Electric and Power Company Dated as of May 31,
1990.
1.10 Combined Electric Systems . The combined electric generating,
transmission, and distribution facilities of the Virginia Power System and the
Old Dominion System.
1.11 Combined System Annual Peak Demand . The maximum 60-minute
integrated Combined System Monthly Peak Demand in a single clock hour at
generation level for the calendar year.
1.12 Combined System Loss Percentage. The losses, expressed as a
percentage, incurred by Virginia Power in delivering capacity and energy from
the generation level to the Interconnection Points, including transmission and
distribution energy losses pursuant to the Open Access Transmission Tariff.
1.13 Combined System Monthly Capability. The sum of North Anna
Unit 1 monthly Capability, North Anna Unit 2 monthly Capability, Clover Unit
1 monthly Capability, Clover Unit 2 monthly Capability, Old Dominion Monthly
Accredited Firm Capacity and Old Dominion Monthly Accredited Non-Firm
Capacity, plus the monthly Capability of all other Virginia Power owned or
leased generation.
1.14 Combined System Monthly Peak Demand. The maximum combined net
one-hour kilowatt demand at the generation level for that calendar month made
up of the combined individual demands for that hour of Virginia Power and Old
Dominion Members excluding those demands of the Old Dominion Members supplied
through arrangements with parties other than Virginia Power.
1.15 Common Facilities. All those facilities, including but not
limited to both real and personal property, exclusive of North Anna Unit 1,
North Anna Unit 2, Support Facilities, Nuclear Fuel, Operating Inventory and
Major Spare Parts which are purchased, leased or otherwise obtained only
in connection with the construction, operation and maintenance of more than
one nuclear unit located at North Anna Nuclear Power Station. Common
Facilities are more specifically described as of the date hereof in Appendix A.
1.16 Displacement Peaking Energy. The amount of energy, at generation
level, by which Old Dominion's purchase of Peaking Energy from Virginia Power
is reduced pursuant to Section 8.03(b)(ii).
1.17 Displacement Reserve Energy. The amount of energy, at
generation level, by which Old Dominion's purchase of Old Dominion Monthly
Reserve Energy from Virginia Power is reduced pursuant to Section 8.05(c).
1.18 Displacement Supplemental Energy. The amount of energy, at
generation level, by which Old Dominion's purchase of Old Dominion Monthly
Supplemental Energy from Virginia Power is reduced pursuant to Section
8.01(d)(ii).
1.19 Effective Date. The later of (1) January 1, 1998 or (2)
the date on which FERC permits this Agreement to become effective.
1.20 Events of Default. The events of default pursuant to Section
17.01 hereof.
1.21 Excluded Peaking Capacity. The amount of capacity, at
generation level, which Old Dominion obtains pursuant to Section
8.03(a)(iii), other than purchases from Virginia Power under this Agreement to
serve Peaking Capacity, and such capacity shall be treated as Old Dominion
Monthly Accredited Firm Capacity.
1.22 Excluded Peaking Energy. The amount of energy, at generation
level, associated with Excluded Peaking Capacity.
1.23 Excluded Supplemental Capacity. The amount of capacity, at
generation level, which Old Dominion obtains pursuant to Sections 8.01(a)(iii),
(iv) or (v), other than purchases from Virginia Power under this Agreement to
serve the Old Dominion Monthly Supplemental Demand and also the amount of
capacity, at generation level, described in Section 8.02 (c)(v). All such
capacity shall be treated as Old Dominion Monthly Accredited Firm Capacity.
1.24 Excluded Supplemental Energy. The amount of energy, at
generation level, associated with Old Dominion's Excluded Supplemental Capacity.
1.25 Executive Committee. The committee as provided in Section
18.13 hereof.
1.26 FERC. The Federal Energy Regulatory Commission, including any
successor governmental agency.
1.27 Fixed Monthly A&G Fee. The fixed amount of monthly North Anna
A&G Costs to be paid by Old Dominion for administration and general services
performed by Virginia Power on behalf of the North Anna plant and its
employees, as described in Section 11.01(b) and Appendix L.
1.28 Holidays. The days on which banking institutions in the City
of Richmond, Virginia, are authorized by law to close.
1.29 Interconnected Systems. The Virginia Power System and the Old
Dominion System.
1.30 Interconnection Points. The points at which the Virginia
Power System and the Old Dominion System are interconnected.
1.31 Interest Rates
(a) Special Interest Rate. A rate per annum equal to the prime
rate of The Chase Manhattan Bank, N.A., New York, New York, or its successor, in
effect from time to time plus three percentage points (3%).
(b) Regular Interest Rate. In the case of interest payments
owing to Virginia Power or Old Dominion pursuant to this Agreement, an interest
rate per annum equal to the prime rate of the Chase Manhattan Bank, N.A., or its
successor, as in effect from time to time.
1.32 Major Spare Parts. Those major items designated by the
Parties that the Parties keep in inventory for possible use in replacing similar
items in units located not only at the North Anna Nuclear Power Station but
also at other power stations. The parts that shall be designated as Major
Spare Parts for purposes of this Agreement shall be designated by the
Parties in Appendix B. Thereafter, Major Spare Parts shall be designated
by the North Anna Operating Committee established under Article II of
this Agreement. The Major Spare Parts are further described, and the
methods of calculating the percentage ownership and cost responsibilities of
the Parties in the Major Spare Parts are also included in Appendix B.
1.33 Market Price. The price for electric capacity as determined
by market forces and based on existing or projected market conditions for
wholesale power. Old Dominion and Virginia Power agree that on or before July
1, 2000, Old Dominion and Virginia Power shall begin negotiations that are
to be concluded no later than December 31, 2000, to select a methodology to
determine a benchmark of the Market Price.
1.34 Monthly Peaking Energy Charge. The monthly charge for peaking
energy as calculated pursuant to Appendix G, Sections V. and VI., hereof.
1.35 Monthly Reserve Energy Charge. The monthly charge for reserve
energy as calculated pursuant to Appendix G, Sections IV. and VI., hereof.
1.36 Monthly Supplemental Demand Charge. The monthly charge for
supplemental demand calculated pursuant to Appendix G, Section I., hereof.
1.37 Monthly Supplemental Energy Charge. The monthly charge for
supplemental energy as calculated pursuant to Appendix G , Sections III. and
VI., hereof.
1.38 Network Operating Agreement. The Network Operating Agreement
Between Virginia Electric and Power Company and Old Dominion Electric
Cooperative under Virginia Power's Open Access Transmission Tariff and any
amendments or supplements thereto entered into by Old Dominion and Virginia
Power for network service that have been accepted and permitted to go into
effect by FERC.
1.39 North Anna A&G Costs. Any administrative and general costs
directly attributable to North Anna pursuant to Article XI.
1.40 North Anna Facilities. North Anna Unit 1, North Anna Unit 2,
the Common Facilities, the Support Facilities, the Operating Inventory,
and the Major Spare Parts, but excluding Nuclear Fuel, which is the subject of
the Nuclear Fuel Agreement.
1.41 North Anna Nuclear Power Station. The nuclear generating
plant located in Louisa, Orange, and Spotsylvania Counties, Virginia ("North
Anna").
1.42 North Anna Operating Committee. The committee ("Operating
Committee") as provided in Article II hereof.
1.43 North Anna Unit 1. The nuclear generating unit located in
Louisa County, Virginia, designated as North Anna Unit 1 (more specifically
described in Appendix C hereto), representing the cost of all additions,
improvements, betterments and replacements thereto, but excluding the
Common Facilities, the Support Facilities, the Nuclear Fuel, the Operating
Inventory and the Major Spare Parts.
1.44 North Anna Unit 2. The nuclear generating unit located in
Louisa County, Virginia, designated as North Anna Unit 2 (more specifically
described in Appendix D hereto), representing the cost of all additions,
improvements, betterments and replacements thereto, but excluding the
Common Facilities, the Support Facilities, the Nuclear Fuel, the Operating
Inventory and the Major Spare Parts.
1.45 North Anna Unit(s). Either, or both, of North Anna Unit 1 or
North Anna Unit 2.
1.46 Nuclear Fuel. For the purpose of this Agreement, Nuclear
Fuel shall have the meaning as defined in the Nuclear Fuel Agreement.
1.47 Nuclear Fuel Agreement. The Nuclear Fuel Agreement Between
Virginia Electric and Power Company and Old Dominion Electric Cooperative Dated:
As of December 28, 1982, Amended and Restated October 17, 1983.
1.48 Off-Peak Hours. Off-Peak Hours are all hours other than those
described as On-Peak Hours.
1.49 Old Dominion. Old Dominion Electric Cooperative, a Virginia
generation and transmission cooperative, and its successors and assigns.
1.50 Old Dominion Generation Resources. Old Dominion Monthly
North Anna Capacity, Old Dominion Monthly Accredited Firm Capacity, Old
Dominion Monthly Accredited Non-firm Capacity, Old Dominion Monthly Delivered
SEPA Capacity and any additional generation resources obtained by Old Dominion
through joint planning with Virginia Power provided, however, any portion of
an Old Dominion generating resource that serves demands other than those of
the Old Dominion Members shall not be considered Old Dominion Generation
Resources.
1.51 Old Dominion Members. For purposes of this Agreement, those
rural electric distribution cooperatives, including their successors and
assigns, each of which distributes electricity in areas in which Virginia Power
provides requirements service at wholesale or retail as of the Effective Date.
For purposes of this Agreement, the Old Dominion Members shall mean those
cooperatives listed in Appendix E as of the Effective Date subject to the
deletion of members from time to time, together with their respective delivery
points, as such delivery points have been added or deleted from time to time.
1.52 Old Dominion Monthly Accredited Firm Capacity. Monthly firm
capacity owned or obtained by Old Dominion and that is determined by the
Planning and Administration Committee in accordance with Prudent Utility
Practice as not requiring reserves.
1.53 Old Dominion Monthly Accredited Firm Energy. The energy
associated with the Old Dominion Monthly Accredited Firm Capacity.
1.54 Old Dominion Monthly Accredited Non-firm Capacity. Monthly
non-firm capacity owned or obtained by Old Dominion and that is determined by
the Planning and Administration Committee in accordance with Prudent
Utility Practice as requiring reserves.
1.55 Old Dominion Monthly Accredited Non-firm Energy. The energy
associated with the Old Dominion Monthly Accredited Non-firm Capacity.
1.56 Old Dominion Monthly Billing Demand. The Old Dominion
Monthly Supplemental Demand less Excluded Supplemental Capacity plus, if
any, the kilowatts by which the most recent 12-month average Old Dominion
Monthly Maximum Diversified Demand exceeds 110% of the most recent 12-month
average Old Dominion Monthly Delivered Demand with such excess being adjusted
for losses to reflect load at the generation level by multiplying by the
factor of 100 divided by 100 minus the Combined System Loss Percentage.
1.57 Old Dominion Monthly Billing Energy. The Old Dominion Monthly
Supplemental Energy, less Excluded Supplemental Energy, less Displacement
Supplemental Energy.
1.58 Old Dominion Monthly Clover Capacity. For each Clover Unit,
the Capability of such unit multiplied by Old Dominion's Clover Ownership
Interest. The total Old Dominion Monthly Clover Capacity shall be the sum of
such capacity for Clover Units 1 and 2. Such capacity shall be considered
an Old Dominion Generation Resource and treated as Old Dominion Monthly
Accredited Non-Firm Capacity.
1.59 Old Dominion Monthly Delivered Demand. The combined Old
Dominion hourly demands measured at the Interconnection Points for the
clock-hour during which the Combined System Monthly Peak Demand occurs.
1.60 Old Dominion Monthly Delivered Energy. The combined Old
Dominion Members' energy requirements for that month measured at the
Interconnection Points.
1.61 Old Dominion Monthly Delivered SEPA Capacity. The total
megawatts of monthly capacity delivered at the Interconnection Points
in accordance with contract(s) between SEPA and Old Dominion Members.
1.62 Old Dominion Monthly Delivered SEPA Energy. The energy
associated with the Old Dominion Monthly Delivered SEPA Capacity.
1.63 Old Dominion Monthly Demand. The Old Dominion Monthly
Delivered Demand less Old Dominion Monthly Delivered SEPA Capacity with such
difference being adjusted for losses to reflect load at the generation level
by multiplying by the factor of 100 divided by 100 minus the Combined System
Loss Percentage.
1.64 Old Dominion Monthly Energy. Old Dominion Monthly Delivered
Energy less Old Dominion Monthly Delivered SEPA Energy, as such energy may be
available from time to time, with such difference being adjusted for losses
to reflect energy at the generation level by multiplying by the factor of 100
divided by 100 minus the Combined System Loss Percentage.
1.65 Old Dominion Monthly Maximum Diversified Demand. The combined
Old Dominion Members' monthly maximum coincident hourly demand measured at the
Interconnection Points during the On-Peak Hours.
1.66 Old Dominion Monthly North Anna Capacity. For each generating
unit at the North Anna Nuclear Power Station, the Capability of such unit
multiplied by Old Dominion's North Anna Percentage Ownership Interest. The
total Old Dominion Monthly North Anna Capacity shall be the sum of such capacity
for North Anna Units l and 2.
1.67 Old Dominion Monthly North Anna Energy. The energy associated
with Old Dominion Monthly North Anna Capacity at the North Anna Nuclear Power
Station.
1.68 Old Dominion Monthly Reserve Energy . The total amount of
energy at 100% capacity factor that could have been produced by Old Dominion
Monthly North Anna Capacity and any other Old Dominion Monthly Accredited
Nonfirm Capacity for which Virginia Power provides reserves when the resource
is subject to full or partial outage conditions (planned, unplanned, scheduled
or unscheduled outages and including any deration of generator units), less Old
Dominion Monthly Accredited Non-firm Energy that could have been produced but
was not produced for economic dispatch reasons, less Old Dominion Monthly
North Anna Energy, less Old Dominion Monthly Accredited Non-firm Energy,
less Displacement Reserve Energy.
1.69 Old Dominion Monthly Supplemental Demand. The Old Dominion
Monthly Demand, less the Old Dominion Monthly North Anna Capacity, less other
Old Dominion Monthly Accredited Firm Capacity, less Old Dominion Monthly
Accredited Non-firm Capacity, less Peaking Capacity and less Excluded Peaking
Capacity.
1.70 Old Dominion Monthly Supplemental Energy. The Old Dominion
Monthly Energy, less the Old Dominion Monthly North Anna Energy, less the Old
Dominion Monthly Accredited Firm Energy, less the Old Dominion Monthly
Accredited Non-firm Energy (less Clover Economy Sales to Virginia Power),
less the Old Dominion Monthly Reserve Energy, less Displacement Reserve
Energy, less the energy associated with Clover Economy Purchases from
Virginia Power, less Peaking Energy, less Displacement Peaking Energy and
less Excluded Peaking Energy.
1.71 Old Dominion's North Anna Percentage Ownership Interest.
Except as otherwise modified by the operation of Sections 15.03, 16.01 or
16.02 of the Purchase, Construction and Ownership Agreement, an undivided
ownership interest in the North Anna Facilities equal to 11.6 percent in each of
North Anna Unit 1, North Anna Unit 2, the Common Facilities, the Operating
Inventory and the Major Spare Parts, and a percentage in the Support Facilities
as determined in accordance with Appendix F.
1.72 Old Dominion Reserve Capacity. An amount in kilowatts
equal to: the sum of (a) the actual Old Dominion Monthly North Anna
Capacity and (b) the actual Old Dominion Monthly Accredited Non-firm Capacity,
such sum multiplied by the System Reserve Margin.
1.73 Old Dominion System. The generation, transmission,
distribution and other facilities owned or leased by Old Dominion or the Old
Dominion Members as shown on their books of account from time to time and
located in the area in which Virginia Power provides requirements service at
wholesale or retail as of the Effective Date.
1.74 On-Peak Hours. On-Peak Hours are the hours between 7:00 a.m.
and 10:00 p.m., Monday through Friday, for the months of October through May,
and the hours between 10:00 a.m. and 10:00 p.m., Monday through Friday, for the
months of June through September.
1.75 Open Access Transmission Tariff. Virginia Power's Open Access
Transmission Tariff, and any successors thereto, filed with, accepted, and
permitted to go into effect by FERC.
1.76 Operating Inventory. Equipment, spare parts, tools, goods and
supplies (excluding Nuclear Fuel and Major Spare Parts) to be used solely for
the operation, maintenance or modification of the North Anna Units and
recorded on Virginia Power's books of account in accordance with the Uniform
System of Accounts.
1.77 Parties. Virginia Power and Old Dominion.
1.78 Peaking Capacity. Firm peaking capacity supplied by Virginia
Power pursuant to Sections 8.03(a)(i) and (ii) and 8.03(e) hereof. Old
Dominion's purchase of such capacity shall be considered an additional Old
Dominion Generation Resource and treated as Old Dominion Monthly Accredited
Firm Capacity.
1.79 Peaking Capacity Charge. The monthly charge for Peaking
Capacity as calculated pursuant to Appendix G, Section II. hereof.
1.80 Peaking Energy. The energy associated with the Peaking
Capacity as determined pursuant to Sections 8.03(b)(i) and (ii).
1.81 Planning and Administration Committee. The committee as
provided in Article III hereof.
1.82 Prudent Utility Practices. Any of the practices, methods,
and acts engaged in or accepted by a significant portion of the electric
utility industry at the time the decision was made, or any of the practices,
methods, and acts that, in the exercise of reasonable judgment in light of
the facts known at the time the decision was made, would have been expected
to accomplish the desired result at a reasonable cost consistent with reasonable
reliability, safety, expedition and protection of the environment. Prudent
Utility Practices are not intended to be limited to the optimum practices,
methods, or acts to the exclusion of all others, but rather to a spectrum of
possible practices, methods, or acts engaged in or accepted by a significant
portion of the electric utility industry at the time the decision was made.
1.83 Purchase, Construction and Ownership Agreement. The Purchase,
Construction and Ownership Agreement Between Virginia Electric and Power Company
and Old Dominion Electric Cooperative Dated: As of December 28, 1982 Amended and
Restated October 17, 1983.
1.84 Reserve Capacity Charge. The monthly charge for Old Dominion
Reserve Capacity as determined pursuant to Section 8.05 and Appendix I, hereof.
1.85 RUS. The Rural Utilities Service, successor agency to the
Rural Electrification Administration, and any successor governmental agency.
1.86 SEPA. The Southeastern Power Administration, including any
successor governmental agency.
1.87 Support Facilities. All those facilities, wherever situated,
including, but not limited to, both real and personal property, exclusive of
Common Facilities, Nuclear Fuel, Operating Inventory and Major Spare Parts,
which are purchased, leased or otherwise obtained for the construction,
operation and maintenance of one or more nuclear unit(s) located at the North
Anna Nuclear Power Station and one or more nuclear unit(s) located at Virginia
Power's Surry Nuclear Power Station or at such other location as Virginia Power
may have an interest in any nuclear facility. Support Facilities, and investment
and cost responsibilities of the Parties therefor, are more specifically
described in Appendix F hereto.
1.88 System Reserve Margin . Shall be determined for the month of the
projected Combined System Annual Peak Demand as (1) the ratio of (a) the
projected Combined System Monthly Capability in that month plus projected
purchases from third parties in that month of the approximate reliability of the
Combined System Monthly Capability less projected sales to third parties in that
month of the approximate reliability of the Combined System Monthly Capability,
but in no event to include purchases or sales of economy energy, emergency
energy, or other such nondependable transactions, divided by (b) the projected
Combined System Annual Peak Demand, (2) less one. The System Reserve Margin
shall be calculated in accordance with the orders, directives or guidelines of
regulatory bodies or regional reliability councils.
1.89 Transmission Service Agreement . The Service Agreement For Network
Integration Transmission Service To Old Dominion Electric Cooperative under
Virginia Power's Open Access Transmission Tariff and any amendments or
supplements thereto entered into by Old Dominion and Virginia Power for
transmission service that have been accepted and permitted to go into effect by
FERC.
1.90 Virginia Power. Virginia Electric and Power Company, a
Virginia public service corporation, and its successors and assigns.
1.91 Virginia Power System. The generation, transmission,
distribution and other facilities owned by Virginia Power as shown on its books
of accounts from time to time or facilities leased by Virginia Power.
1.92 Wholesale Power Contracts. The several wholesale power
contracts between Old Dominion and the Old Dominion Members for the purchase of
electric energy and capacity by the Old Dominion Members from Old Dominion, as
in effect from time to time.
ARTICLE II
North Anna Operating Committee
2.01 North Anna Operating Committee. To coordinate operations in
carrying out the terms of this Agreement associated with the North Anna
Facilities, Virginia Power will appoint four members and Old Dominion will
appoint two members to the North Anna Operating Committee ("Operating
Committee"). Each member of the Operating Committee shall be fully authorized to
act on behalf of its Party with respect to all matters contemplated by this
Agreement but will not be authorized to alter or amend the Agreement. Each Party
shall notify the other in writing of the names of the persons who will serve as
the members of the Operating Committee and, if desired, the names of any persons
who may serve as alternates when the members are unable to act. Virginia Power's
members may be changed, in Virginia Power's sole discretion and from time to
time, by at least ten (10) days' prior written notice to Old Dominion. Old
Dominion's members may be changed, in Old Dominion's sole discretion and from
time to time, by at least ten (10) days' prior written notice to Virginia Power.
2.02 Meetings and Voting Rights. Meetings shall be held at the
discretion of the Operating Committee but at least shall be held quarterly.
Minutes of each meeting shall be kept and shall be approved by the Operating
Committee at its next meeting. Decisions of the Operating Committee shall be
made upon vote by the Operating Committee with the voting power of each Party
determined by its entitlement to the capability of North Anna Units 1 and 2 as
provided in Section 2.03 of the Purchase, Construction and Ownership Agreement.
2.03 Duties of Operating Committee. The Operating Committee shall,
subject to Virginia Power's authority and obligations under Article V and any
other limitations in this Agreement, act upon those matters relating to the
coordination of the operation of the North Anna Facilities necessary for the
implementation of this Agreement.
2.04 Expenses of Operating Committee. The expenses of each member
of the Operating Committee, and his alternate and associates, shall be borne by
the Party he represents. Other expenses of the Operating Committee will be
shared as agreed upon by the Operating Committee. Any expense not agreed to
unanimously by the Operating Committee shall be borne by the Party incurring it.
2.05 Resolution of Disputes. If any dispute should arise regarding
the operating function that cannot be resolved by the Operating Committee, the
dispute and the circumstances surrounding such dispute shall be presented to the
Executive Committee, which is empowered in Section 18.13 to resolve such
disputes.
ARTICLE III
Planning and Administration
3.01 Planning and Administration Committee. In order to carry out the
terms of this Agreement, Virginia Power will appoint four members and Old
Dominion will appoint two members to the Planning and Administration Committee.
Each member of the Planning and Administration Committee shall be fully
authorized to act on behalf of its Party with respect to all matters
contemplated by this Agreement but will not be authorized to alter or amend the
Agreement. Each Party shall notif the other in writing of the names of the
persons who will serve as the members of the Planning and Administration
Committee and, if desired, the names of any persons who may serve as alternate
when the members are unable to act. Virginia Power's members may be changed in
Virginia Power's sole discretion and from time to time, by at least ten (10)
days' prior written notice to Old Dominion. Old Dominion's members may be
changed, in Old Dominion's sole discretion and from time to time, by at least
ten (10) days' prior written notice to Virginia Power.
3.02 Meetings. Meetings shall be held at the discretion of the
Planning and Administration Committee but at least shall be held semi-annually.
3.03 Duties of the Planning and Administration Committee.
(a) The Planning and Administration Committee shall be
responsible for the general administration of this Agreement in accordance with
Prudent Utility Practices. In addition, the Planning and Administration
Committee may, but is not obligated to, consider joint planning of future
generation facilities. The Planning and Administration Committee will also
discuss new governmental regulations, issues and changes in the industry in
which the Parties have a mutual interest, establish committees required for the
orderly administration of the Agreement but not specifically provided for in the
Agreement, and address any other matter in which cooperation, coordination or
agreement is necessary.
(b) For the purposes of joint planning, Old Dominion
shall furnish Virginia Power annually, prior to January 1, a forecast of its
system loads for at least the succeeding ten (10) year period. Virginia Power
shall furnish Old Dominion annually, prior to January 1, a forecast of its
system loads for at least the succeeding ten (10) year period and its target
reserve level. If either Old Dominion or Virginia Power makes an official
revision to the forecasts during the year, notification of such revision shall
be given in writing to the other Party in a timely fashion. Each Party shall
provide an explanation of any significant deviation from historic trends in its
forecast.
3.04 Future Transmission Planning. Virginia Power shall continue
to plan and be responsible for its future transmission system pursuant to the
Virginia Power Open Access Transmission Tariff and the Network Operating
Agreement. Virginia Power and Old Dominion agree to consider in the future
joint ownership of transmission facilities where reasonable net benefits will
accrue to both Parties.
3.05 Exchange of Information. Each Party will make available, upon
request, information used in, or useful to, the administration of this
Agreement. Other specific rights for information are covered in other parts of
this Agreement.
3.06 Expenses of the Planning and Administration Committee. Each
Party shall pay all expenses of its representatives. Other expenses incurred by
the committee will be shared as agreed upon by the Planning and Administration
Committee. Any expense not agreed to unanimously by the Planning and
Administration Committee shall be borne by the Party incurring it.
3.07 Resolution of Disputes. If any disputes relating to the
duties of the Planning and Administration Committee should arise that cannot be
resolved by the Planning and Administration Committee, the dispute and the
circumstances surrounding such dispute shall be presented to the Executive
Committee, which is empowered in Section 18.13 to resolve such disputes.
3.08 SEPA Contract. The Parties agree that if and when Virginia
Power's contract with SEPA is changed from time to time, the Planning and
Administration Committee shall recommend to the Parties such modifications in
this Agreement as are necessary to conform with any such changes.
ARTICLE IV
Interconnection and Protection of Systems
4.01 Obligation for Adequate Facilities. Virginia Power and Old
Dominion are each obliged to provide, on its own system or through this
Agreement and other arrangements, generation or distribution facilities or
service adequate to serve expected loads and to maintain all such facilities in
a suitable condition of repair so that they may be operated in accordance with
Prudent Utility Practices and not impose a burden on any other system.
4.02 Protection of Systems. Old Dominion shall refrain from, and shall
require Old Dominion Members to refrain from, any acts, transactions, and uses
of equipment, appliances or devices which may have a significant adverse effect
upon the reliability or characteristics of the Virginia Power System. Virginia
Power shall refrain and shall require its customers to refrain from any acts,
transactions, and uses of equipment, appliances or devices which may have a
significant adverse effect upon the reliability or characteristics of the Old
Dominion System.
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ARTICLE V
Virginia Power's Authority and Responsibility
with Respect to Old Dominion's North Anna Generation
5.01 Virginia Power as Agent of Old Dominion .
(a) Old Dominion hereby appoints Virginia Power (such
appointment shall be irrevocable for the term of this Agreement and coupled with
an interest) its sole agent, subject, however, to Old Dominion's right of
reasonable inspection through authorized representatives, to act on its behalf
for the operation, maintenance, modifications and fueling (including the
procurement of nuclear fuel), of the North Anna Facilities and authorizes
Virginia Power in the name of and on behalf of Old Dominion to take all
reasonable actions which, in the discretion and judgment of Virginia Power, are
deemed necessary or advisable to effect the operation, maintenance,
modifications and fueling (including the procurement of nuclear fuel) of the
North Anna Facilities, including, without limitation, the following:
(i) the making of such agreements and modifications of
existing agreements and the taking of such other action as
Virginia Power deems necessary or appropriate, in its sole
discretion, or as may be required under the regulations or
directives of such governmental bodies and regulatory agencies
having jurisdiction, with respect to the operation,
maintenance, modifications and fueling (including the
procurement of nuclear fuel) of the North Anna Facilities;
(ii) the execution and filing with such governmental
bodies and regulatory agencies having jurisdiction of
applications, amendments, reports and other documents and
filings for or in connection with licensing, operation and
other regulatory matters with respect to the North Anna
Facilities; and
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(iii) the receipt on Old Dominion's behalf of any notice
or other communication from any governmental body or
regulatory agency having jurisdiction, as to any licensing,
operation or other regulatory matter with respect to the
North Anna Facilities.
(b) As relates to all third parties, this agency designation
shall be binding on Old Dominion, and such appointment shall be deemed in effect
by each third party until termination of this Agreement pursuant to the terms
hereof and until such third party receives written notification from Virginia
Power of any termination thereof.
(c) Virginia Power accepts such appointment. In discharging
all of its duties and responsibilities hereunder, Virginia Power will act in
good faith and in accordance with Prudent Utility Practices. Virginia Power's
duties and responsibilities shall include, but not be limited to, establishing
organizational structure and manpower requirements, maintaining an adequate work
force through Virginia Power's personnel administration policies, arranging and
procuring necessary or desirabl materials and services for operation of the
North Anna Facilities, determining scheduled outages for routine inspections,
refueling and general maintenance, scheduling, dispatching and loading of the
North Anna Facilities, preparing and filing applications, reports and other
documents relating to operation of the North Anna Facilities, establishing
reasonable rules for visits to the North Anna Facilities, and determining the
need for, and subsequently constructing, any capital additions or modifications
to the North Anna Facilities.
Virginia Power shall not, solely because of Old Dominion's ownership
interest in the North Anna Facilities make any adverse distinctions in
operation, maintenance, modifications, fueling, scheduling, or dispatching as
between the North Anna Facilities and any other generating
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unit or facilities in which Virginia Power has an ownership interest. Nothing
herein shall interfere with Virginia Power's authority and responsibility
for the operation of, maintenance of, modifications to, fueling of, and
improvements to all of its other generation facilities. Virginia Power shall
make available upon request by Old Dominion regularly prepared monthly
reports which contain specific information on all generating facilities
including, but not limited to, operating expenses, maintenance expenses,
fuel expenses, generating statistics, fuel reports, operating statistics and
other information reasonably available. Virginia Power will also have the right
to submit data relating to operation of the North Anna Facilities to any other
entity. Old Dominion will make available all information or data necessary
for Virginia Power to schedule and dispatch generation.
(d) Old Dominion agrees that it will take all necessary action
in a prompt manner to execute any agreements for the operation, maintenance,
modifications and fueling of the North Anna Facilities as and when requested by
Virginia Power to permit Virginia Power to carry out its authority and
responsibilities pursuant to this Section 5.01.
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ARTICLE VI
Transmission Services
6.01 Old Dominion Transmission Service. Except as provided for in
Section 6.03, Virginia Power will furnish transmission service and all related
ancillary services required by Old Dominion for the Old Dominion Members under
Virginia Power's Open Access Transmission Tariff, commencing on the Effective
Date. Due to the unique characteristics of network customers' systems and the
level of customer-specific information and arrangements required under a network
operating agreement, specific terms and conditions recognizing local or
system-specific factors affecting transmission service to Old Dominion will be
stated in the Transmission Service Agreement or Network Operating Agreement.
6.02 Native Load Status.
(a) Virginia Power will plan, construct, operate and maintain
the Virginia Power transmission system, in accordance with Prudent Utility
Practices, such that Virginia Power will be able to provide reliable
transmission service to Old Dominion over the Virginia Power transmission
system. Virginia Power shall include Old Dominion's network load in its
transmission system planning and shall, consistent with Prudent Utility
Practices, construct and place into service sufficient transmission capacity to
deliver Old Dominion's network resources to serve Old Dominion's network load on
a basis comparable to Virginia Power's delivery of its own generating and
purchased resources.
(b) Protecting and preserving Old Dominion's native load
status as defined under Order Nos. 888 and 888A is a fundamental principle of
this Agreement. Failure to meet the requirements of Section 6.02(a) shall
frustrate the intent of the Parties to this Agreement.
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6.03 SEPA Capacity Transmission Service. Old Dominion Monthly
Delivered SEPA Capacity and Old Dominion Monthly Delivered SEPA Energy will be
transmitted to the Interconnection Points by separate agreement between Virginia
Power and SEPA or pursuant to Virginia Power's Open Access Transmission Tariff.
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ARTICLE VII
Entitlements to Capacity and Energy
7.01 Entitlements of the Parties to Capacity and Energy. Subject
to the provisions of Sections 15.03, 16.01 and 16.02 of the Purchase,
Construction and Ownership Agreement, Old Dominion shall be entitled to 11.6% of
the capacity and energy from North Anna Units 1 and 2. Subject to the provisions
of Sections 15.03, 16.01 and 16.02 of the Purchase, Construction and Ownership
Agreement, Virginia Power shall be entitled to the balance of the capacity and
energy from each unit.
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ARTICLE VIII
Supplemental Demand and Energy, Peaking Capacity and Energy, and
Reserve Capacity and Energy
8.01 Supplemental Demand and Energy .
(a) Supplemental Demand.
(i) Virginia Power shall sell monthly to Old
Dominion, and Old Dominion shall purchase monthly from
Virginia Power, the Old Dominion Monthly Supplemental Demand
in the amounts necessary to supply the needs of the Old
Dominion Members not met from Old Dominion Generation
Resources, from the Effective Date through December 31, 2001,
and one-half of the Old Dominion Monthly Supplemental Demand
requirements for calendar year 2002.
(ii) Except as otherwise provided in this Article
VIII of the Agreement, effective January 1, 2002 through
December 31, 2002, Virginia Power shall also offer to sell
capacity equal to the remaining one-half of the Old Dominion
Monthly Supplemental Demand requirements and for January 1,
2003, through August 31, 2005, Virginia Power shall offer to
sell all of the Old Dominion Monthly Supplemental Demand
requirements, unless Virginia Power provides written notice to
Old Dominio prior to January 1, 2000, that it elects not to so
supply Old Dominion. Prior to October 1, 2000, Old Dominion
shall provide to Virginia Power a projection of the remaining
one-half of the Old Dominion Monthly Supplemental Demand for
each month of calendar year 2002. The Parties shall review Old
Dominion's projection, and the projection of the remaining
one-half of the Old Dominion Monthly Supplement Demand shall
be subject to the mutual
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acceptance of the Parties. The remaining one-half of the
Old Dominion Monthly Supplemental Demand shall be equivalent
to this mutually accepted projection and shall be considered
fixed and Virginia Power shall provide the balance of the
Old Dominion Monthly Supplemental Demand pursuant to
Section 8.01(a)(i) regardless of the actual Old Dominion
Monthly Supplemental Demand in calendar year 2002.
(iii) For calendar year 2002, if Virginia Power
has provided the notice described in Section 8.01(a)(ii),
Old Dominion shall purchase capacity from an Alternate
Power Source to serve the remaining one-half of the Old
Dominion Monthly Supplemental Demand for that year. Such
capacity shall be deemed Excluded Supplemental Capacity.
(iv) For calendar year 2002, if Virginia Power does
not provide the notice described in Section 8.01(a)(ii), Old
Dominion shall by January 1, 2001, provide Virginia Power with
written notice of whether Old Dominion will: (1) purchase the
remaining one-half of the Old Dominion Monthly Supplemental
Demand from Virginia Power at the Monthly Supplemental Demand
Charge rates applicable for that year under Appendix G,
Section I.A.; or (2) obtain the remaining one-half of the Old
Dominion Monthly Supplemental Demand from Virginia Power or an
Alternate Power Source pursuant to the terms of Section
8.02(b)(ii). Such capacity obtained from an Alternate Power
Source shall be deemed Excluded Supplemental Capacity.
(v) From January 1, 2003 through August 31, 2005, if
Virginia Power does not provide the notice described in
Section 8.01(a)(ii), Old Dominion will obtain all of the Old
Dominion Monthly Supplemental Demand from Virginia
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Power or an Alternate Power Source pursuant to the terms of
Section 8.02(b)(ii). Such capacity obtained from an Alternate
Power Source shall be deemed Excluded Supplemental Capacity.
(vi) After August 31, 2005, Virginia Power is not
obligated to sell to Old Dominion, and Old Dominion is not
obligated to purchase from Virginia Power, the Old Dominion
Monthly Supplemental Demand.
(vii) The calculation to determine the Old Dominion
Monthly Supplemental Demand shall be as set forth in Appendix
H, Section I.
(b) Increases in Supplemental Demand. Old Dominion may not
increase the Old Dominion Monthly Supplemental Demand requirements beyond that
occasioned by normally expected load growth unless Virginia Power shall agree.
Except as otherwise provided in this Article VIII of the Agreement, Virginia
Power agrees to provide the Old Dominion Monthly Supplemental Demand in the
amounts required by Old Dominion to serve its present and future demands except
for such increases in demands which may arise from an undertaking by Old
Dominion, or one or more of the Old Dominion Members, to serve (1) a source of
demand outside the area in which Virginia Power provides requirements service at
wholesale or retail as of the Effective Date or (2) any additional load which is
substantially different from the size and type of load included by Virginia
Power in its system planning and which, if served, (i) would compel an
enlargement of Virginia Power's generation facilities not otherwise included by
Virginia Power in its system planning or (ii) would impair Virginia Power's
ability to render reasonably adequate service to its other retail and wholesale
customers. However, a new customer imposing a load in excess of 100 megawatts
shall not be defined as normally expected load growth unless sufficient notice
shall have been provided to Virginia Power. Furthermore,
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increases in load occurring after the Effective Date resulting from mergers
between Old Dominion Members and entities that are not Old Dominion Members or
acquisitions of new wholesale customers by Old Dominion or Old Dominion Members
shall not be defined as normally expected load growth.
(c) Reductions in Supplemental Demand. Old Dominion's
purchases of supplemental demand shall be reduced by the amount of Old Dominion
Monthly Accredited Firm Capacity and Old Dominion Monthly Accredited Non-firm
Capacity obtained by Old Dominion, which for any period shall be equal to the
sum of: (1) the amount of capacity jointly owned or planned with Virginia
Power, other than North Anna, (2) the amount of Excluded Supplemental Capacity
obtained by Old Dominion, (3) the amount o Peaking Capacity obtained by Old
Dominion, (4) the amount of Excluded Peaking Capacity obtained by Old Dominion,
and (5) those amounts purchased pursuant to Section 8.02(c).
(d) Supplemental Energy.
(i) Except as otherwise provided in this Article VIII
of the Agreement, from the Effective Date through August 31,
2005, Virginia Power shall offer to sell to Old Dominion the
Old Dominion Monthly Supplemental Energy less any Excluded
Supplemental Energy, to the extent that Virginia Power
supplies supplemental capacity.
(ii) Old Dominion shall be entitled to displace up to
two-thirds of the annual Old Dominion Monthly Supplemental
Energy requirements for calendar year 1998 by obtaining such
energy from an Alternate Power Source. Effective January 1,
1999, Old Dominion shall be entitled to displace all or any
portion of its annual purchases of Old Dominion Monthly
Supplemental Energy requirements
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from Virginia Power by obtaining such energy from an Alternate
Power Source. Such displaced energy shall be deemed
Displacement Supplemental Energy.
(iii) From the Effective Date forward, delivery of
any Displacement Supplemental Energy will be in
accordance with the schedules provided by Old Dominion
or its power suppliers to Virginia Power and pursuant to
Sections 6.01 and 6.02 of this Agreement and the Transmission
Service Agreement.
(iv) From the Effective Date through August 31, 2005,
whenever Old Dominion obtains Excluded Supplemental Capacity,
it also shall be responsible for obtaining all of the
energy associated with such Excluded Supplemental
Capacity. Such energy shall be deemed Excluded
Supplemental Energy.
(v) Prior to October 1, 2000, Old Dominion shall
provide to Virginia Power a projection of the remaining
one-half of the Old Dominion Monthly Supplemental Energy for
each month of calendar year 2002. The Parties shall review
Old Dominion's projection, and the projection of the remaining
one-half of the Old Dominion Monthly Supplemental Energy shall
be subject to the mutual acceptance of the Parties. The
remaining one-half of the Old Dominion Monthly Supplemental
Energy shall be equivalent to this mutually accepted
projection and shall be considered fixed and Virginia Power
shall provide the balance of the Old Dominion Monthly
Supplemental Energy pursuant to 8.01(d)(i) regardless of the
actual Old Dominion Monthly Supplemental Energy in calendar
year 2002.
(vi) The calculation to determine Old Dominion
Monthly Supplemental Energy shall be as set forth in Appendix
H, Section V.
8.02 Charges for Purchases By Old Dominion Pursuant to
Section 8.01.
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(a) Supplemental Energy.
(i) Through December 31, 2000, for purchases by Old
Dominion of Old Dominion Monthly Supplemental Energy from
Virginia Power pursuant to Section 8.01(d), Old Dominion
shall pay Virginia Power a Monthly Supplemental Energy Charge
based on Virginia Power's average system energy cost, less
North Anna energy cost, as set forth initially in Appendix G,
Sections III.A. and VI.
(ii) Commencing January 1, 2001, for purchases by Old
Dominion of Old Dominion Monthly Supplemental Energy from
Virginia Power pursuant to Section 8.01(d), Old Dominion shall
pay Virginia Power at rates, set by Virginia Power, that are
based on the projected cost of energy from its combined cycle
and peaking units subject to an annual true-up as set forth in
Appendix G, Section III.B. The generating units to be
included in the determination of the Old Dominion Monthly
Supplemental Energy cost during this period shall be agreed to
by the Parties. Selection of the generating units and the
appropriate rate calculation will be finalized on or before
October 1 of each year for the following calendar year, as set
forth in Appendix G, Section III.B.
(b) Supplemental Demand.
(i) Old Dominion shall pay Virginia Power for Old
Dominion Monthly Supplemental Demand purchased, exclusive of
Excluded Supplemental Capacity, pursuant to Section 8.01(a) at
the rates set forth in Appendix G, Section I.
(ii) For the capacity defined in Section 8.01(a)(ii),
the maximum price Old Dominion shall pay to Virginia Power for
capacity to serve such Old Dominion Monthly Supplemental
Demand shall be the Market Price for wholesale
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capacity at that time. As an incentive for Virginia Power to
minimize the rate to Old Dominion, Old Dominion agrees to
share the savings between the Market Price and Virginia
Power's proposed price to supply such capacity if Old Dominion
purchases from Virginia Power. If however, Old Dominion
demonstrates to Virginia Power that Old Dominion can obtain
Excluded Supplemental Capacity at a lower cost under
comparable terms and conditions from an Alternate Power
Source, then Virginia Power will have the option to adjust its
price to match the lower cost from an Alternate Power Source
or Old Dominion may obtain the Excluded Supplemental Capacity
from the Alternate Power Source without any obligation to
Virginia Power under this Agreement. At such time as Virginia
Power has no obligation to serve any Old Dominion Monthly
Supplemental Demand, Old Dominion will have no obligation to
pay Virginia Power for any Old Dominion Monthly Billing Demand
as set forth in Appendix H, Section III.
(c) Alternative Power Supply and Rates.
(i) In the event that (1) any existing customer of
Old Dominion or any Old Dominion Member or (2) any future
customer located in an Old Dominion Member's service territory
obtains the right to receive electric service from an
"alternate power supplier" and receives a firm offer from such
"alternate power supplier", Old Dominion and its appropriate
Member shall use their best efforts to obtain or retain that
service to the customer. Such best efforts by Old Dominion and
its Member shall include, but shall not be limited to,
proposing to the
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customer reasonable options using economic
development or discounted rates, each of which may include a
reasonable margin over costs.
(ii) In order to assist Old Dominion or any Old
Dominion Member in attracting a new retail customer or
retaining the load of an existing Old Dominion Member retail
customer that is considered by Old Dominion to be at risk
("at-risk load"), Virginia Power, upon notification by Old
Dominion, shall make available to Old Dominion and Old
Dominion shall, through the Old Dominion Members, make
available to the "at-risk load" the most cost-effective
alternative tariff contained in Virginia Power's then-current
Virginia retail tariffs for which such "at-risk load" would
qualify pursuant to that tariff's applicability clause.
Verifiable billing determinants shall be made available to
Virginia Power each month, and Virginia Power shall calculate
the billing credit based on the difference in the "at-risk
load" billing determinants billed under this Agreement and
those billing determinants billed under the alternate
available Virginia Power rate schedule and credit Old Dominion
accordingly.
(iii) In the event that Old Dominion or the Old
Dominion Member is still at risk of losing a retail customer
after making all of the efforts as set forth herein, then Old
Dominion shall have the right to reduce its purchases from
Virginia Power accordingly and generate, purchase or otherwise
obtain an equivalent amount of power (i.e., demand and energy)
elsewhere in order to retain that customer.
(iv) In the event that, notwithstanding Old
Dominion's and the Old Dominion Member's best efforts as
defined above, a retail customer of Old
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Dominion or one of its Members has rejected in writing all of
the proposals set forth in this section and has purchased
electric service from an "alternate power supplier," then
Old Dominion may reduce its purchases of supplemental demand
and energy from Virginia Power to the extent of the
existing load lost to the "alternate power supplier" and
may purchase an equivalent amount of demand and energy
elsewhere.
(v) When Virginia Power's obligation to provide
Peaking Capacity ceases, the capacity and energy serving load
(1) under an alternative Virginia Power tariff pursuant to
Section 8.02(c)(ii), (2) with power purchased or obtained
elsewhere pursuant to Section 8.02 (c)(iii), or (3) lost to
the "alternate power supplier" pursuant to Section 8.02(c)(iv)
shall be deemed to be Old Dominion Excluded Supplemental
Capacity and Excluded Supplemental Energy.
(vi) This Section 8.02(c) shall not be applicable to
any new "at risk load" after December 31, 2002.
8.03 Peaking Capacity and Energy Purchases. Virginia Power shall
sell to Old Dominion and Old Dominion shall purchase Peaking
Capacity and associated energy as provided below:
(a) Peaking Capacity
(i) Except as provided otherwise in this Article VIII
of the Agreement, for each month from March 28, 1996, through
December 31, 2002, Virginia Power shall provide and sell to
Old Dominion firm Peaking Capacity as determined pursuant to
Appendix M, Section I., in an amount equal to four percent
(4%) of the maximum Old Dominion Monthly Delivered Demand in
each
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of the preceding calendar years beginning with January 1,
1995, and Old Dominion shall purchase suc capacity, which
shall be considered an additional Old Dominion Generation
Resource. The Old Dominion annual supplemental demand
reductions and the related Peaking Capacity supplied by
Virginia Power will be cumulative. The four percent (4%)
annual supplemental demand reduction will occur on January 1
of each subsequent year.
(ii) For calendar year 2003, Old Dominion will have
the option of continuing to purchase Peaking Capacity from
Virginia Power. Old Dominion must notify Virginia Power by
January 1, 2002, if Old Dominion will continue to purchase the
cumulative Peaking Capacity. If Old Dominion does not provide
such notice, Virginia Power's obligations to provide Peaking
Capacity shall cease on December 31, 2002 and the amount of
such Peaking Capacity shall be fixed at the capacity level in
effect for 2002 through August 31, 2005. If Old Dominion
provides such notice, Old Dominion will continue to purchase
Peaking Capacity from Virginia Power in 2003, which will
increase from the capacity level in effect for 2002 by the
four percent (4%) calculation. After December 31, 2003, the
amount of such Peaking Capacity shall be fixed at the capacity
level in effect for 2003 through August 31, 2005. Virginia
Power will not be obligated to provide Peaking Capacity after
December 31, 2003.
(iii) After Virginia Power's obligation to provide
Peaking Capacity ceases, Old Dominion shall obtain such
capacity from an Alternate Power Source and such capacity
shall be deemed Excluded Peaking Capacity.
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(iv) The amount of cumulative Peaking Capacity shall
be reduced by the amount of any load transfers after the
Effective Date either to other utility's(ies') control area(s)
or through the installation of diesel generators, by Old
Dominion or any of the Old Dominion Members for improvement in
operations or reliability. Furthermore, if for any reason
existing load is transferred from another utility's(ies')
control area(s) to Old Dominion or any Old Dominion Member's
service territory falling within Virginia Power's control
area, the cumulative Peaking Capacity shall be increased by
the amount of such load transfer.
(b) Peaking Energy Purchases.
(i) Virginia Power shall sell and Old Dominion
shall purchase Peaking Energy as determined pursuant to
Appendix M, Section II.
(ii) Old Dominion will have the right to displace up
to two-thirds of the accumulated Peaking Energy from January
1, 1998, through December 31, 1998, and all or any portion of
its accumulated Peaking Energy requirements beginning January
1, 1999 through December 31, 2002 by obtaining such energy
from an Alternate Power Source. Such displaced Peaking Energy
shall be deemed Displacement Peaking Energy. However, whether
or not Old Dominion obtains Displacemen Peaking Energy,
Virginia Power is obligated to plan for and be prepared to
supply Old Dominion's Peaking Energy requirements until
Virginia Power's obligation to provide Peaking Capacity
ceases. Thereafter, Virginia Power will not be obligated to
provide Old Dominion's Peaking Energy requirements and Old
Dominion shall obtain Peaking Energy from an Alternate
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Power Source to serve such energy requirements. Such energy
shall be deemed Excluded Peaking Energy.
(c) Peaking Capacity Charges. Old Dominion shall pay
Virginia Power for Peaking Capacity purchased pursuant to Section 8.03(a) at
the rates set forth in Appendix G, Section II.
(d) Peaking Energy Charges. Through December 31, 1999,
for purchases by Old Dominion of monthly Peaking Energy from Virginia Power
pursuant to Section 8.03(b), Old Dominion shall pay Virginia Power a
Monthly Peaking Energy Charge based on Virginia Power's average system energy
cost, less North Anna energy cost, as set forth in Appendix G, Sections
V.A. and VI. For the period commencing January 1, 2000, Virginia Power shall
charge Old Dominion a Monthly Peaking Energy Charge for Peaking Energy purchased
from Virginia Power based on the projected generation cost of Virginia Power's
owned and operated peaking units subject to an annual true-up as set forth in
Appendix G, Section V.B. The Virginia Power peaking units to be used in
determining a Monthly Peaking Energy Charge shall be mutually agreed to by the
Parties on or before each October 1 for the following calendar year.
(e) Supplemental Billing Demands. On a monthly basis,
if the Old Dominion Monthly Supplemental Demand, as determined in accordance
with Appendix H, Section I., prior to crediting the Peaking Capacity, is less
than the total Peaking Capacity provided by Virginia Power, then the Peaking
Capacity shall be equal to the Old Dominion Monthly Demand less the sum of
the Old Dominion Monthly North Anna Capacity and Old Dominion Monthly
Accredited Firm Capacity (other than Peaking Capacity) and Old Dominion
Monthly Accredited Non-Firm Capacity. Accordingly, the Old Dominion Monthly
Supplemental Demand component of the Old Dominion Monthly Billing Demand shall
be equal to zero for the month.
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8.04 Limitation on Virginia Power's Obligation to Serve
Supplemental Demand and Provide Supplemental Energy.
(a) Virginia Power shall not be required by this
Agreement to serve supplemental demand or provide energy outside the area in
which Virginia Power provides requirements service at wholesale or retail
as of the Effective Date, except for any minor boundary adjustments and minor
reallocations between Old Dominion Members and contiguous systems.
(b) If generating capacity or energy should become
inadequate to supply the full needs of both the Old Dominion Members' consumers
and Virginia Power customers, Old Dominion and Virginia Power shall share such
deficiency on a pro rata basis for Old Dominion purchases from Virginia Power.
(c) For any amount of the Old Dominion Monthly
Supplemental Demand with respect to which Old Dominion obtains Excluded
Supplemental Capacity, Old Dominion shall not be entitled to obtain from
Virginia Power and Virginia Power shall have no obligations to serve such
amount of Old Dominion Monthly Supplemental Demand or the associated Old
Dominion Monthly Supplemental Energy.
8.05 Reserve Capacity and Energy and Charges Therefor Related to
the North Anna Facilities and Clover Facilities.
(a) During the term of this Agreement, Old Dominion
will purchase and Virginia Power will provide Old Dominion Reserve Capacity for
Old Dominion's ownership interest in North Anna Unit 1 and Unit 2 and Clover
Unit 1 and Unit 2 until each of these units is retired or Old Dominion's
ownership interest in any of such units is reduced to zero. For the period
January 1, 1998, through December 31, 2001, for Old Dominion Monthly North
Anna
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Capacity and Old Dominion Monthly Clover Capacity Old Dominion shall carry
generation reserves equal to the annual projected System Reserve Margin, less
three and 23/100ths percent (3.23%). Beginning January 1, 2002, for Old
Dominion Monthly North Anna Capacity and Old Dominion Monthly Clover Capacity,
Old Dominion shall carry a percentage of generation reserves equal to the
annually projected System Reserve Margin. Virginia Power agrees to sell and
Old Dominion agrees to purchase Old Dominion Reserve Capacity at the rates
set forth in Appendix I. Prior to October 1, 2001, the Parties will negotiate a
Reserve Capacity Charge for 2002 and beyond. The Reserve Capacity Charge will
be calculated based on mutually acceptable, designated Virginia Power-owned
peaking units operating at that time.
(b) Subject to the provisions of Section 8.05(c), Old
Dominion Monthly Reserve Energy for the North Anna Facilities and Clover
Facilities shall be sold by Virginia Power and purchased by Old Dominion at the
Monthly Reserve Energy Charge based on Virginia Power average system energy
costs, less North Anna energy costs, as set forth initially in Appendix G,
Sections IV.A. and VI., through December 31, 2001. Effective January 1, 2002,
Virginia Power will charge Old Dominion the negotiated and agreed upon Monthly
Reserve Energy Charge based on the associated peaking energy costs from mutually
acceptable, designated Virginia Power-owned peaking units operating at that time
subject to an annual true-up pursuant to Appendix G, Section IV.B. Selection of
the generating units and the appropriate rate calculation will be finalized on
or before October 1 of each year for the following calendar year.
(c) Old Dominion may displace all or any portion of its
purchases of Old Dominion Monthly Reserve Energy from Virginia Power by
purchasing such energy from an Alternate Power Source as of the Effective Date.
Such energy shall be deemed Displacement
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Reserve Energy. Delivery of any Displacement Reserve Energy will be scheduled
in accordance with the schedules provided by Old Dominion or its reserve energy
suppliers to Virginia Power, pursuant to Sections 6.01 and 6.02 and the
Transmission Service Agreement.
8.06 Reserve Capacity and Reserve Capacity Charges for Jointly
Planned Generation Resources. For future generation resources jointly planned
between Virginia Power and Old Dominion, Old Dominion and Virginia Power shall
at all times carry a percentage of generation reserves equal to the annually
projected System Reserve Margin. If Virginia Power provides the necessary
reserves for the jointly planned generation resource to Old Dominion, the
Planning and Administrative Committee shall determine the price of such
reserves.
8.07 Exchange of Displacement Energy. For any overscheduling of
Displacement Supplemental Energy, Displacement Reserve Energy and Displacement
Peaking Energy, Old Dominion and Virginia Power will exchange like-kind energy.
8.08 Limitations of Parties' Rights to Seek Regulatory Review. The
terms and conditions of service specified in this Agreement, including the terms
regarding rates for service and the term of the Agreement itself shall remain in
effect for the term of the Agreement and shall not be subject to change through
application to FERC pursuant to the provisions of Section 205 or 206 of the
Federal Power Act absent the consent of both Parties hereto.
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ARTICLE IX
Facilities Charges
9.01 Facilities Charges. Old Dominion shall pay all facilities
charges related to the facilities listed on Appendix J and any additional excess
facilities requested by Old Dominion. Those charges shall be for facilities in
excess of those normally required and shall initially be at the levels shown on
Appendix J and shall be changed from time to time pursuant to the provisions of
Appendix J.
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ARTICLE X
Billing
10.01 Billing Methods. Billing for all payments due under this
Agreement shall be in the format provided in Appendix K.
10.02 Rendering Bill. Each Party shall render to the other Party
monthly a billing statement no later than the twentieth day of the month,
transmitted by wire or delivered by courier, covering the charges for rendering
services under the Agreement.
10.03 Payment.
(a) Payment for items 3 through 17 on Appendix K shall be
due upon presentation of the bill. If payment is not received within ten (10)
days from the date the invoice is transmitted or delivered, interest at the
Special Interest Rate will accrue from date of presentation until payment is
received. Date of presentation is the day the bill is wired or, if delivered by
courier, the date delivered.
(b) Payment for items 1 and 2 of Appendix K shall be due
upon presentation. If payment is not received by the fifteenth of the month
following presentation of the bill, interest at the Special Interest Rate will
accrue from date of presentation until payment is received. Date of presentation
is the day the bill is wired or, if delivered by courier, the date delivered.
10.04 Methods of Payment. All payments required to be made by either
Party under this Agreement in excess of $10,000 shall be paid on or before the
due date in immediately available funds by delivery (before 11:00 a.m., Richmond
time) of either a Federal Reserve check or evidence of bank wire to the other
Party's account, at a bank designated by such Party. If any such payment is to
be made by bank wire, the Party entitled to the payment shall advise the other
Party of the appropriate bank and account number at least one business day
before the payment is
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due. All other payments required to be made under this Agreement may be made
by check deposited in the United States mail, first-class postage prepaid, and
addressed to Treasurer, Virginia Electric and Power Company, P.O. Box
26666, Richmond, Virginia 23261, if payable to Virginia Power, and addressed to
Vice President - Finance and Accounting, Old Dominion Electric Cooperative, P.
O. Box 2310, Glen Allen, Virginia 23060, if payable to Old Dominion.
10.05 No Arbitration; Resolution of Disputes. No Party shall have the
right to arbitrate any dispute that might arise with respect to this Agreement.
Any disagreement between the Parties as to their rights or obligations under
this Agreement shall first be addressed by consultation between the Authorized
Virginia Power Representatives as determined in accordance with Section 19.03 of
the Purchase, Construction and Ownership Agreement and the Authorized Old
Dominion Representatives as determined in accordance with Section 19.02 of the
Purchase, Construction and Ownership Agreement. In the event such
representatives are unable to satisfactorily resolve their disagreement, they
shall refer the matter to the Executive Committee created pursuant to Section
18.13 of this Agreement. No dispute as to the payment of an invoice rendered by
either Party shall permit the other Party to delay payment of the disputed
invoice, in full, on its payment date. If the invoiced Party shall have paid any
such disputed invoice, in full, on or before its payment date and if the
Authorized Virginia Power Representatives and the Authorized Old Dominion
Representatives, or the Executive Committee created pursuant to Section 18.13,
or a court of competent jurisdiction, should later determine that a disputed
invoice was for an amount in excess of the correct amount due, then the
invoicing Party shall be obligated to refund the difference to the invoiced
Party within ten (10) days of such determination with interest, if any, upon
such amount as follows:
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(a) If such difference resulted from a deviation
from an estimate not caused by error or bad faith, interest shall be payable
at the Regular Interest Rate;
(b) If such difference resulted from an error, interest
shall be payable at the Regular Interest Rate; and (c) If such difference
resulted from bad faith, such interest shall be payable at the Special Interest
Rate.
10.06 Billing Adjustments. Billing errors or adjustments to estimates
of $5,000 per event or more discovered through (i) resolution of billing
disagreements pursuant to Section 10.05, (ii) audit or (iii) normal billing
procedures, will be adjusted and interest will accrue at the Regular Interest
Rate from the date of payment of the original bill through the date of payment
of the adjustment. Adjustments of less than $5,000 per event will be made, but
no interest will accrue. Adjustments including interest must be paid in
accordance with Section 10.03 hereof.
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ARTICLE XI
Operating Costs
11.01 Operating Costs.
(a) During the term of this Agreement, Old Dominion shall pay
to Virginia Power only its pro rata share of the direct costs of operating and
maintaining the North Anna Facilities, including any administrative and general
costs directly attributable to North Anna ("North Anna A&G Costs"). A billing
format is presented in Appendix L, Section I. hereto. The billing format is
subject to review in accordance with Section 11.01(e) and any proposed changes
to the format must be agreed to by both parties prior to any changes being
implemented. For purposes of this Section 11.01(a), Old Dominion's pro rata
share of the North Anna Facilities shall be 11.6%. This pro rata share shall be
subject to change from time to time in accordance with Sections 15.03, 16.01 and
16.02 of the Purchase, Construction and Ownership Agreement.
(b) As of the Effective Date, the Parties have been unable to
identify to their mutual satisfaction those administrative and general costs
that are to be allocated to Old Dominion under the "directly attributable"
standard of Section 11.01(a). In lieu of allocating costs under this standard,
the Parties agree that for the period January 1, 1996, through December 31,
2000, Old Dominion shall pay to Virginia Power a fixed monthly fee of $100,000,
inclusive of costs previously billed as Cooperative Billing Fees and Nuclear
Fuel Accounting Fees ("Fixed Monthly A&G Fee") as full and complete compensation
for administrative and general services on behalf of the North Anna plant and
its employees provided by Virginia Power. Virginia Power will not transfer costs
from current corporate center functions and activities to North Anna or nuclear
support O&M cost centers in order to recover costs from Old Dominion that are
not directly attributable to North Anna.
(c) "Administrative and general services" as used in this
Article XI includes all functions or activities properly chargeable to the
"Administrative and General Expenses" category of accounts as defined by FERC in
its Uniform System of Accounts (accounts 920-935). Without regard to whether
these are appropriate categories for inclusion in a future methodology for
determining North Anna A&G Costs, services covered by the Fixed Monthly A&G Fee
include, but are not limited to, the following Virginia Power corporate center
functions or activities:
Payroll Telecommunications
Purchasing Human Resources
Data Processing Auditing
Rates Public Affairs
Legal Governmental Affairs
Treasury Corporate Communications
Accounting General Administration and Supervision
Finance
The Parties agree that for the period January 1, 1996, through December 31,
2000, the Fixed Monthly A&G Fee expressly covers all administrative and
general services and that these services or functions shall not be directly
charged or allocated in any other fashion to Old Dominion except as follows:
(i) North Anna NRC fees will be billed to Old Dominion
as part of the North Anna operating costs based on Old Dominion's North
Anna Percentage Ownership Interest.
(ii) North Anna insurance premiums will be billed to Old
Dominion as part of the "new investment" section of the invoice based on
Old Dominion's North Anna Percentage Ownership Interest.
(iii) North Anna and nuclear support payroll benefits
(billed as payroll add-on) related to salaries included in the O&M FERC
accounts will be billed to Old Dominion as part of the O&M section of
the invoice. (The Fixed Monthly A&G Fee will cover payroll benefits
(billed as payroll add-on) related to North Anna A&G Costs.)
(d) In addition, Old Dominion shall pay a pro rata share of
only the specific expenses associated with involuntary severance of
employees arising out of Virginia Power's Vision 2000 program directly
attributable to North Anna for only the years 1996 through 1998. Those
payments shall be calculated as follows:
1996 - pro rata share of actual severance expenses, not to
exceed $400,000;
1997 - pro rata share of actual severance expenses, not
to exceed $200,000;
1998 - pro rata share of actual severance expenses, not
to exceed $20,000.
For purposes of this Section 11.01 (d), Old Dominion's pro rata share of actual
severance expenses shall be based on:
(i) 11.6% of severance expenses associated with employees
at North Anna, in accordance with Appendix L, Footnote (A);
(ii) 6.12% of severance expenses associated with employees
in nuclear support business units in accordance with Appendix L, Footnote
(B);
(iii) .881% of severance expenses associated with employees
in the corporate center.
(e) In the event Virginia Power institutes a cost savings
program after the Effective Date that is intended to benefit both Parties,
Virginia Power shall give Old Dominion prior notice of the program and
demonstrate the expected cost savings to Old Dominion from the program if it
expects Old Dominion to bear its reasonable proportion of the costs of such
program. Old Dominion shall pay its reasonable, proportionate share of the costs
of such program provided that the cost savings have been adequately
demonstrated.
(f) The Parties shall negotiate in good faith so that on or
before December 31, 2000, they (1) mutually agree to a new methodology to
calculate the North Anna A&G Costs, (2) mutually agree to use improved Virginia
Power accounting or billing systems which allow for the specific identification
and assignment of North Anna A&G Costs or; (3) mutually agree to adjust the
Fixed Monthly A&G Fee to reflect changes in the costs or benefits to either
Party. In the event the Parties are unable to agree on any of the foregoing,
Virginia Power shall bill Old Dominion based on Virginia Power's understanding
of the administrative and general costs directly attributable to North Anna for
Old Dominion's share of North Anna A&G Costs and Old Dominion reserves all of
its rights to take exception to and to object to such billings including making
payments to Virginia Power under protest, based on Old Dominion's understanding
of the administrative and general costs directly attributable to North Anna.
(g) Virginia Power will continue to be obligated to
provide all information provided to Old Dominion as of January 1, 1997,
including all information shown in Appendix L, Section II. Any changes or
improvements made by Virginia Power in its accounting system for North Anna
costs should also be incorporated into the information provided to Old Dominion.
11.02 Nuclear Fuel Costs. Old Dominion will pay its pro rata share
of the expenses associated with nuclear fuel as provided in the Nuclear Fuel
Agreement.
ARTICLE XII
Accounting Matters and Access to Books and Records
12.01 Responsibility and Method of Accounting. All accounting
related to the transactions contemplated by this Agreement shall utilize the
accrual method of accounting and shall be in accordance with Generally Accepted
Accounting Principles, FERC's Uniform System of Accounts or as prescribed by
other regulatory agencies having jurisdiction, all as in effect from time to
time.
12.02 Right to Inspect Records, Etc .
(a) During normal business hours and subject to conditions
consistent with the conduct by Virginia Power of its regular business affairs
and responsibilities, Virginia Power will provide Old Dominion, Old Dominion's
Authorized Representative(s) or any auditor utilized by Old Dominion reasonably
acceptable to Virginia Power or any nationally recognized auditing firm retained
by Old Dominion, access to Virginia Power's books, records, and other documents,
directly related to the performance of Virginia Power's obligations under this
Agreement (but excluding internal memoranda, records and documents relating to
such matters and minutes of the Board of Directors and committees thereof) and,
upon request, copies thereof, which set forth (i) all costs applicable to the
construction, operation, maintenance and retirement of the North Anna Facilities
to the extent necessary to enable Old Dominion to verify the costs for which Old
Dominion is billed pursuant to the provisions of this Agreement, and (ii)
matters relating to the design, construction, operation, and retirement of the
North Anna Facilities in proceedings before any regulatory body or governmental
agency having jurisdiction. Old Dominion will bear the cost of any copying,
review or audit of such books and records. Notwithstanding the foregoing,
however, Virginia Power shall not be required to make available to Old Dominion
any reports and information relating to personnel practices, staffing or labor
relations.
(b) During normal business hours and subject to conditions
consistent with the conduct by Old Dominion of its regular business affairs and
responsibilities, Old Dominion will provide Virginia Power, Virginia Power's
Authorized Representative(s), or any auditor utilized by Virginia Power
reasonably acceptable to Old Dominion or any nationally recognized auditing firm
retained by Virginia Power, access to Old Dominion's books, records, and other
documents (but excluding internal memoranda, records and documents relating to
such matters and minutes of the Board of Directors and committees thereof), and,
upon request, copies thereof, which relate to this Agreement. Virginia Power
will bear the cost of any copying, review or audit of such books and records.
Notwithstanding the foregoing, however, Old Dominion shall not be required to
make available to Virginia Power any reports and information relating to
personnel practices, staffing or labor relations.
12.03 Confidentiality. During the term of this Agreement, it may
become necessary or desirable, from time to time, for one Party to provide to
the other Party information which is either privileged, confidential or
proprietary (whether so designated by the Party providing it or at the time of
that Party's having obtained it from a third party, and if the latter, there
will be no obligation to disclose such information to the requesting Party
without the consent of such third party; provided, however, that the Party that
obtained such information will use its best efforts to obtain such consent). The
Party desiring to protect any such information (the labeling Party) may label
such information as either privileged, confidential or proprietary and
thereafter the other Party will not reproduce, copy, use or disclose (except
when required by governmental authorities or in connection with obtaining
requisite governmental licenses, permits or approvals) any such information in
whole or i part for any purpose without the written consent of the labeling
Party, which consent will not be unreasonably withheld. Each Party may use any
such copy, the information contained therein, or both, only in the exercise of
its respective rights and obligations pursuant to this Agreement and such
information will neither be sold nor used in connection with other generating
plants or for the benefit of any third party. Each Party will take all
reasonable steps to protect the other Party's proprietary, privileged, or
confidential information, including, but not limited to, by (a) restricting its
use internally on a "need-to-know" basis, (b) obtaining appropriate
confidentiality agreements from those employees, agents, and contractors to whom
such information may be otherwise disclosed under this Agreement, and (c)
ensuring the return of all copies of labeled information to the labeling party
when the need therefor to aid in performance of this Agreement no longer exists.
The respective mortgagees and security deed holders of the Parties will be
entitled to inspect (but not to copy) any information labeled by one of the
Parties that has not been designated as proprietary, privileged or confidential
by any other person or entity. In disclosing confidential or proprietary
information to governmental authorities, the disclosing Party shall cooperate
with the labeling Party in minimizing the amount of such information furnished
including the redaction of information appearing on specific documents as is
appropriate under the circumstances. At the specific request of the labeling
Party, the other Party will endeavor to secure the agreement of such
governmental authorities to maintain specified portions of such information in
confidence. Notwithstanding the foregoing, no Party will be liable to protect
the confidentiality of information as provided in this Section 12.03 if such
information is otherwise available to such Party or is in the public domain.
This Section 12.03 will not limit or restrict compliance by RUS or any
governmental authority with requests under the Freedom of Information Act for
any copies of, or the information contained in, anything in the possession of
RUS or other governmental authority obtained pursuant to this Agreement.
Compliance by RUS or other governmental authority with any such request will not
constitute a violation of this Agreement.
ARTICLE XIII
Liability, Service Interruptions and Force Majeure
13.01 Liability.
(a) In providing the services called for by this Agreement,
Virginia Power shall use reasonable diligence at all times to provide reasonably
adequate service. Virginia Power, however, does not guarantee continuous
service. The Parties acknowledge that, at the request of and for the convenience
of Old Dominion, Virginia Power is to have full responsibility for the
maintenance and operation of the North Anna Facilities. The judgment of Virginia
Power personnel shall be final in decisions concerning operation and maintenance
of the North Anna Facilities. With respect to claims of third parties, Old
Dominion agrees that Virginia Power does not by this Agreement assume any risks
or liabilities with respect to the operation and maintenance of Old Dominion's
share in the North Anna Facilities, and that the amounts payable to Virginia
Power for its performance under this Agreement are determined on the basis that
Virginia Power does not assume such risks or liabilities. Virginia Power's
obligation to Old Dominion with respect to the operation and maintenance of the
North Anna Facilities shall be as set forth in this Agreement, the Purchase,
Construction and Ownership Agreement and the Nuclear Fuel Agreement.
(b) In addition to all other limitations on liability
contained in this Agreement, neither Party hereto shall be liable to the other
Party to this Agreement for any damage or loss resulting from the interruption,
prevention, suspension or failure of service caused by:
(i) Force Majeure, as defined in Section 13.03 below;
or
(ii) An emergency action due to an adverse condition or
disturbance on a Party's system, or on any other system which
requires automatic or manual interruption of the supply of
electricity to some customers or areas in order to limit the
extent of, or damage caused by, the adverse condition or
disturbance, or to prevent damage to generating or
transmission facilities, or to expedite restoration of
service, or to effect a reduction in service to compensate for an
emergency condition on an interconnected system; or
(iii) The making of necessary inspections of,
adjustments to, changes in, or repairs to a Party's lines,
substations or other facilities and in cases where the
continuation of services would endanger persons or property.
(c) With respect to claims relating to the quality,
continuity, reliability or price of electric service,
(i) Virginia Power shall not be liable to Old Dominion
Members or the member-consumers of Old Dominion Members or any other
persons or entities claiming through or against Old Dominion or
Old Dominion Members for any expenses, damages, injuries or loss
arising out of or resulting from the maintenance or operation
of facilities, and Old Dominion shall indemnify Virginia Power
against such liability; and
(ii) Old Dominion shall not be liable to the
retail or wholesale customers of Virginia Power or any other
persons or entities claiming through or against Virginia Power for
any expenses, damages, injuries or loss arising out of or resulting
from the operation or maintenance of the North Anna Facilities,
and Virginia Power shall indemnify Old Dominion against such
liabilities.
With respect to all other claims, the Parties will share all expenses and
liabilities in the same proportion that they share ownership in the North Anna
Facilities.
13.02 Responsibility on Either Side of Interconnection Point. Neither
Party shall be responsible for the transmission, control, use or application of
electric power provided under this Agreement on the other Party's side of any
Interconnection Point. Electricity is supplied by Virginia Power to Old Dominion
upon the express condition that after it passes the Interconnection Point it
becomes the property of Old Dominion; and neither Party, unless and except to
the extent that such results from the negligence or misuse of the property on
the part of its employees or agents, subject to the limitations of Section
13.01, will be liable for loss or damage to any persons or property whatsoever,
resulting directly or indirectly from the use, misuse, or presence of the said
electricity, on the other Party's side of the Interconnection Point or for any
loss or damage resulting from the presence, character, or condition of the wires
or equipment of the other Party, nor shall it be responsible for the inspection
or repair of such wires or equipment.
13.03 Force Majeure. Virginia Power and Old Dominion shall not be
liable or responsible for any delay in the performance of, or the ability to
perform, any duties or obligations required by this Agreement when such delay in
performance or inability to perform results from a Force Majeure occurrence,
except that the obligation to pay money in a timely manner is absolute and shall
not be subject to the Force Majeure provisions. Force Majeure as used herein
shall mean without limitation, the following: Acts of God; strikes, lockouts or
other industrial disturbances; acts of public enemies; orders, or absence of
necessary orders and permits of any kind which have been properly applied for,
from the Government of the United States or from any State or Territory, or any
of their departments, agencies or officials, or from any civil or military
authority; extraordinary delay in transportation; inability to transport, store
or reprocess spent nuclear fuel; unforeseen soil conditions; equipment,
material, supplies, labor or machinery shortages; epidemics; landslides;
lightning; earthquakes; fire; hurricanes; tornadoes; storms; floods; washouts;
drought; war; civil disturbances; explosions; breakage or accident to machinery,
generation, transmission or distribution facilities, pipes or canals; partial or
entire failure of utilities; breach of contract by any supplier, contractor,
subcontractor, laborer or materialman; sabotage; injunction; blight; famine;
blockade; quarantine; or any other similar cause or event not reasonably within
the control of Virginia Power or Old Dominion.
13.04 Remedy. A Party suffering an occurrence of Force Majeure shall
remedy with all reasonable dispatch the cause or causes preventing such Party
from carrying out its duties and obligations as required in this Agreement;
provided, that the settlement of strikes, lockouts and other industrial
disturbances affecting Virginia Power or Old Dominion facilities shall be
entirely within the discretion of that Party, and it shall not be required to
make settlement of strikes, lockouts, or other industrial disturbances by
acceding to the demands of the opposing party or parties when such course is
unfavorable in the judgment of such employer.
ARTICLE XIV
Representations and Warranties
14.01 Representations and Warranties of Virginia Power. Virginia
Power represents and warrants as follows:
(a) Virginia Power is a corporation duly incorporated and
validly existing, in good standing, under the laws of Virginia, is duly
qualified and authorized to do business and is in good standing in each
jurisdiction where the character of its properties or the nature of its actions
makes such qualification necessary, and has the corporate power to carry on its
business as now being conducted and possesses all Federal and State authority
and local franchises necessary for the maintenance and operation of its
properties and business with such minor exceptions as will not materially
interfere with the operation and maintenance of the North Anna Facilities.
(b) Consummation of the transactions hereby contemplated and
performance of this Agreement by Virginia Power will not result in violation of
any laws, ordinance or governmental rules to which Virginia Power is subject.
Virginia Power either has obtained, or at the Effective Date shall have
obtained, all necessary governmental approvals and consents in connection with
the consummation by Virginia Power of the transactions hereby contemplated and
the performance by it of this Agreement.
(c) The consummation of the transactions hereby contemplated
and the performance by Virginia Power of this Agreement will not result in the
breach of, or constitute a default under, the Articles of Incorporation or
By-Laws of Virginia Power or any indenture (including the Indenture of
Mortgage), mortgage, deed of trust, bank loan or credit agreement, or other
agreement or instrument to which Virginia Power is a party or by which Virginia
Power or its properties may be bound or affected, or result in the creation of
any lien, charge, security interest or encumbrance upon any property of Virginia
Power, and Virginia Power is not in default under any term of any such agreement
or instrument.
(d) Virginia Power is not a "registered holding company," but
is a "subsidiary company" of an exempt registered holding company within the
meaning of the Public Utility holding Company Act of 1935; and Virginia Power is
not, and is not directly or indirectly controlled by, or acting on behalf of any
person which is, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(e) On the date hereof there exists, as to Virginia Power, no
Event of Default or event or condition which, with the giving of notice or the
lapse of time or both, would constitute an Event of Default.
14.02 Representations and Warranties of Old Dominion.
Old Dominion represents and warrants as follows:
(a) Old Dominion is a generation and transmission cooperative
duly incorporated and validly existing, in good standing, under the laws of
Virginia, is duly qualified and authorized to do business and is in good
standing in each jurisdiction where the character of its properties or the
nature of its actions makes such qualification necessary, and has the corporate
power to carry on its business as now being conducted and possesses
substantially all Federal and State authority and local franchises necessary for
the maintenance, operation of its properties and business with such minor
exceptions as will not materially interfere with the maintenance and operation
of the North Anna Facilities.
(b) Consummation of the transactions hereby contemplated and
performance of this Agreement by Old Dominion will not result in violation of
any laws, ordinances, or governmental rules to which it is subject. Old Dominion
either has obtained, or at the Effective Date shall have obtained, all necessary
governmental approvals and consents, including the approval of RUS, if needed,
in connection with the consummation by Old Dominion of the transactions hereby
contemplated and the performance by it of this Agreement.
(c) The consummation of the transactions hereby contemplated
and the performance by Old Dominion of this Agreement, the Purchase Construction
and Ownership Agreement and the Nuclear Fuel Agreement will not result in the
breach of, or constitute a default under, the Articles of Incorporation or
By-Laws of Old Dominion or any indenture, mortgage, deed of trust, bank loan or
credit agreement, or other agreement or instrument to which Old Dominion is a
party or by which Old Dominion or its properties may be bound or affected, or
result in the creation of any lien, charge, security interest or encumbrance
upon any property of Old Dominion (other than Permitted Encumbrances, as that
term is defined in the Purchase Construction and Ownership Agreement) and Old
Dominion is not in default under any term of any such agreement or instrument.
(d) On the date hereof there exists, as to Old Dominion, no
Event of Default or event or condition which, with the giving of notice or the
lapse of time or both, would constitute an Event of Default.
(e) Each of the Old Dominion Members has entered into and
will be bound by the Wholesale Power Contracts on the Effective Date.
(f) Old Dominion is authorized to act solely for each and
all of the Old Dominion Members in all communications, transactions and
relationships with Virginia Power pursuant to this Agreement.
14.03 Conditions Precedent. On or prior to the Effective Date, each
of the following conditions shall have been satisfied: (a) this Agreement shall
have been accepted for filing by the FERC, (b) all representations and
warranties in Sections 14.01 and 14.02 hereof shall be true with the same effect
as though such representations and warranties had been made on and as of such
date, and (c) each Party shall have performed all agreements on its part
required to be performed on or prior to such date.
ARTICLE XV
Term of Agreement
This Agreement shall become effective on the Effective Date. Unless
earlier terminated pursuant to the provisions of Article XVII, this Agreement
shall terminate upon the earlier of (1) the date on which the last of the North
Anna Facilities is retired (2) the date upon which Old Dominion's ownership
interest in the North Anna Facilities and Nuclear Fuel is reduced to zero, or
(3) or as otherwise agreed to by the Parties.
ARTICLE XVI
Filing with FERC
This Agreement shall be filed with FERC, with the request that it
become effective on the Effective Date. Old Dominion will join in Virginia
Power's request that this Agreement and the initial rates contained herein be
accepted for filing with a suspension of no longer than one day and will support
the other provisions of this Agreement. If FERC does not accept the provisions
of this Agreement for filing or allows the contract to become effective only
with changes or conditions which materially alter the Agreement (thereby
defeating the intent of the Parties), then, notwithstanding any other provisions
of this Agreement the Parties will make a good faith effort to re-negotiate this
Agreement to make mutually acceptable changes to remedy any issues cited by FERC
as reasons for its non-acceptance. In the event that the Parties are unable to
reach a mutually satisfactory re-negotiated Agreement, this Agreement shall be
null and void. In the event implementation of this Agreement is delayed beyond
January 1, 1998, because of required regulatory approvals, Virginia Power, with
the support of Old Dominion, will take such steps as are necessary and feasible
to provide Old Dominion with the economic benefit of the pricing agreed upon
herein.
ARTICLE XVII
Default
17.01 Events of Default. Each of the following shall be "Events of
Default" under this Agreement:
(a) The failure of either Party to make any payment then due
to the other Party as required by this Agreement within 30 days of the date when
such payment became due and payable; provided, however, that no Party shall be
in default for nonpayment of any amount due and payable hereunder to the other
Party that can be offset within 30 days after the date on which such amount
became due and payable.
(b) Willful failure by any Party to perform any other
obligation to the other Party, other than obligations for the payment of money,
provided that the defaulting party shall have been given not less than 60 days'
notice of such willful failure by the non-defaulting Party and such defaulting
Party shall have failed to correct such default or shall have failed to use its
reasonable best efforts to correct such default.
(c) Any of the following acts by any Party:
(i) the insolvency or bankruptcy of a Party or its
inability or admission in writing of its inability to pay its debts as
they mature, or the making of a general assignment for the benefit of,
or entry into any composition or arrangement with, its creditors other
than Old Dominion's or Virginia Power's mortgagee, as the case may be;
or
(ii) the application for, or consent (by admission of
material allegations of a petition or otherwise) to, the appointment
of a receiver, trustee or liquidator for any Party or for all or
substantially all of its assets, or its authorization of such
application or consent, or the commencement of any proceedings seeking
such appointment against it without such authorization, consent or
application, which proceedings continue undismissed or unstayed
for a period of 60 days; or
(iii) the authorization or filing by any Party of a
voluntary petition in bankruptcy or application for or consent (by
admission of material allegations of a petition or otherwise) to
the application of any bankruptcy, reorganization, readjustment
of debt, insolvency, dissolution, liquidation or other similar law
of any jurisdiction or the institution of such proceedings against
any Party without such authorization, application or
consent, which proceedings remain undismissed or unstayed for 60
days or which result in adjudication of bankruptcy or insolvency
within such time.
17.02 Virginia Power's Rights on Default of Old Dominion. Whenever
any Event of Default by Old Dominion shall have occurred and Virginia Power
intends to require that the default be remedied, Virginia Power shall give Old
Dominion written notice to remedy the default. If the default shall not have
been fully cured within 30 days from the date of the notice, Virginia Power
shall have the rights set forth herein, in addition to all other rights it may
have at law or in equity.
(a) Where the default is a failure to pay money when due:
(i) Subject to the limitations contained in the Federal
Power Act or regulations duly promulgated thereunder, Virginia Power
may, 30 days after delivery to Old Dominion and the Old Dominion
Members of written notice of termination, terminate all service
under this Agreement. Notwithstanding such termination,
Virginia Power shall be authorized to continue to operate, maintain
and fuel the North Anna Facilities and to schedule and dispatch
the capacity and energy from such North Anna Facilities. In the
event this provision is invoked Virginia Power shall maintain
an accurate record of all the benefits, including but not limited to
the capacity and energy from Old Dominion's ownership interest in
the North Anna Facilities, and costs of such continued operation,
maintenance and fueling to provide for a reasonable settlement
following removal of the default.
(ii) Failure of Old Dominion to make any payment on the
date required under this Agreement shall obligate Old Dominion to pay
to Virginia Power (a) the unpaid amount, (b) interest on the unpaid
amount at the Special Interest Rate from the date such payment was
due until the amount is paid and (c) the reasonable expenses incurred
by Virginia Power in collecting the unpaid amount.
(iii) Where a default under Article XV of the
Purchase, Construction and Ownership Agreement shall have otherwise
permitted Virginia Power to purchase all or a portion of Old
Dominion's ownership interest in the North Anna Facilities (as
those terms are defined in the Purchase, Construction and
Ownership Agreement) any amount in default hereunder shall be
offset against the purchase price to be paid to Old Dominion.
(b) Where the default is the willful failure by Old Dominion to perform
an obligation hereunder other than the obligation to pay money when due,
Virginia Power may take any lawful action that will remedy the default or
mitigate its effects, and Old Dominion shall, upon demand by Virginia Power, pay
reasonable losses or damages incurred by Virginia Power as a direct and
proximate result of the default and all expenses incurred by Virginia Power in
remedying the default or mitigating its effects, together with interest at the
Special Interest Rate on that amount until the total amount is paid. A failure
by Old Dominion to make payment hereunder shall constitute a default under
Section 17.01(a) and give rise to the remedies available under Section 17.02(a).
(c) Where the default is any of the acts set forth in Section 17.01(c),
Virginia Power shall have the right to take any lawful action, including
termination of this Agreement, that Virginia Power determines to be necessary to
minimize its losses or enhance its prospects of recovery of amounts due and to
become due to it.
17.03 Old Dominion's Rights on Default of Virginia Power. Whenever
any Event of Default by Virginia Power shall have occurred and Old Dominion
intends to require that the default be remedied, Old Dominion shall give
Virginia Power written notice to remedy the default. If the default shall not
have been fully cured within 30 days from the date of the notice, Old Dominion
shall have the rights set forth herein, in addition to all other rights it may
have at law or in equity.
(a) Where the default is a failure to pay money when due, Old
Dominion shall have the right to withhold from Virginia Power payment of
Old Dominion's obligations hereunder to the extent of the amount in
default plus interest at the Special Interest Rate thereon until the
amount is paid.
(b) Where the default is the willful failure by Virginia Power
to perform an obligation hereunder other than the obligation to pay
money when due, Old Dominion may take any lawful action that will remedy
the default or mitigate its effects, and Virginia Power shall, upon
demand by Old Dominion, pay reasonable losses or damages incurred by Old
Dominion as a direct and proximate result of the default and all
expenses incurred by Old Dominion in remedying the default or mitigating
its effects, together with interest at the Special Interest Rate on
that amount until the total amount is paid. A failure by Virginia
Power to make payment hereunder shall constitute a default under
Section 17.01(a) and give rise to the remedies available under Section
17.03(a).
(c) Where the default is any of the acts set forth in Section
17.01(c), Old Dominion shall have the right to take any lawful action,
including termination of this Agreement, that Old Dominion determines to
be necessary to minimize its losses or enhance its prospects of recovery
of amounts due and to become due to it.
17.04 Disputes Concerning Default . In the event that any Party shall
dispute an asserted default by it, such Party shall pay the disputed payment or
perform the disputed obligations, but may do so under protest. The protest shall
be in writing, shall precede or accompany the disputed payment or performance of
the disputed obligations, shall specify the reasons upon which the protest is
based and shall be delivered to the other Party hereunder. In the event it is
determined that the protesting Party is entitled to a refund of all or any
portion of a disputed payment or payments, or is entitled to reimbursement of
the cost of performing a disputed obligation theretofore made or performed, then
the protesting Party shall be reimbursed such amount with interest at the
Regular Interest Rate for the period involved.
17.05 Additional Obligations . With respect to any Party as to which an
Event of Default has occurred, such Party shall use its best efforts to take any
and all such further actions and shall execute and file, where appropriate, any
and all such further legal documents and papers as may be reasonable under the
circumstances in order to facilitate the carrying out of this Agreement or
otherwise effectuating its purpose, including but not limited to action to seek
any required governmental or regulatory approval and to obtain any other
required consent, release, amendment or other similar document.
17.06 Injunctive Relief . The Parties hereto agree and acknowledge that
the failure of a Party to perform any of its obligations under this Agreement,
including the execution of legal documents which may be reasonably requested as
set forth in this Article XVII, would cause irreparable injury to the other
Party and that the remedy at law for any violations or threatened violation
thereof would be inadequate, and agree that the other Party shall be entitled to
a temporary or permanent injunction or other equitable relief specifically to
enforce such obligation without the necessity of proving the inadequacy of its
legal remedies.
17.07 No Remedy Exclusive . No remedy conferred upon or reserved to the
Parties hereto in this Article XVII is intended to be exclusive of any other
remedy or remedies available hereunder or now or hereafter existing at law, in
equity, or by statute or otherwise, but each and every such remedy shall be
cumulative and shall be in addition to every other such remedy. The pursuit by
any Party of any specific remedy shall not be deemed to be an election of that
remedy to the exclusion of any other or others, whether provided hereunder or by
law, equity or statute.
17.08 Agreement to Pay All Costs to Cure Default .
(a) A late payment charge during periods of default shall
accrue on any amount in default at an annual rate equal to that of the Special
Interest Rate.
(b) If an Event of Default should occur and a Party not in
default should employ attorneys or incur other expenses for the collection of
any payment or the enforcement of performance or observation of any condition or
obligation on the part of a defaulting Party or for the exercise of any other
remedy hereunder, the defaulting Party agrees that it will on demand therefore
reimburse the other Party for its reasonable expenses of such attorneys and such
other expenses incurred. No default shall be deemed cured until all costs
payable under this Article, including any attorneys' fees incurred by the Party
not in default, and payments pursuant to this Agreement shall have been paid or
reimbursed.
17.09 General Covenant by the Parties. Each Party hereto covenants
and agrees that if any event shall occur or condition exist which constitutes,
or which after notice, lapse of time or both, would constitute an Event of
Default on its part pursuant to this Article, it shall immediately notify the
other Party thereof, specifying the nature thereof and any action taken or
proposed to be taken with respect thereto.
ARTICLE XVIII
Miscellaneous
18.01 No Delay. No disagreement or dispute of any kind between the
Parties to this Agreement or between a Party and any other entity, concerning
any matter, including, without limitation, the amount of any payment due from
said Party or the correctness of any billing made to the Party, shall permit
either Party to delay or withhold any payment or the performance of any other
obligation pursuant to this Agreement. Each Party shall promptly and diligently
undertake to resolve such disagreement or dispute without undue delay and in
good faith.
18.02 Further Documentation. From time to time after the execution of
this Agreement, the Parties hereto shall, within their legal authority, execute
other documents as may be necessary, helpful or appropriate to carry out the
terms of this Agreement.
18.03 Notice. Any notice, request, consent or other communication
permitted or required by this Agreement (other than payments as provided in
Section 10.04) shall be in writing and shall be deemed given when delivered by
hand or (unless otherwise required by the terms of this Agreement) when
deposited in the United States Mail, first class, postage prepaid, and if to
Virginia Power, addressed to:
Senior Vice President - Commercial Operations
Virginia Electric and Power Company
P.O. Box 26666
Richmond, Virginia 23261
and if to Old Dominion, addressed to:
President
Old Dominion Electric Cooperative
P. O. Box 2310
Glen Allen, Virginia 23060
unless a different officer or address shall have been designated by the
respective Party by notice in writing sent to the other Party hereto.
18.04 Headings Not to Affect Meaning. The descriptive headings of the
various articles and sections of this Agreement have been inserted for
convenience of reference only and shall in no way modify or restrict any of the
terms and provisions hereof.
18.05 No Association, Trust, Joint Venture or Partnership; Tax
Matters. Notwithstanding any provision of this Agreement, the Parties do not
intend to create hereby any association, trust, joint venture or partnership
under the law of Virginia, although the Parties acknowledge that the ownership
and operation of the North Anna Facilities may constitute a partnership for tax
purposes. If it should appear that one or more changes to this Agreement would
be required in order to avoid the creation or terminate the existence of any
such entity, the Parties agree to negotiate promptly and in good faith with
respect to such changes. Virginia Power and Old Dominion hereby agree that they
will both elect to exclude the arrangement created by this Agreement from the
application of Subchapter K of the Internal Revenue Code of 1954, as amended,
and execute all documents required by either Party to effect that result.
18.06 Successors and Assigns. This Agreement shall be binding upon,
and shall inure to the benefit of Virginia Power and Old Dominion, and their
respective successors and assigns, provided that no succession to or assignment
of any rights or obligations created hereunder, other than an assignment or
transfer to the U.S. Government or any agency thereof, the National Rural
Utilities Cooperative Finance Corporation, or any other domestic financing
institution solely as security for loans or advances, shall take place without
the prior written consent of the other Party.
18.07 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
18.08 Severability. In the event any of the terms, covenants or
conditions of this Agreement or amendments thereof or the application of any
such term, covenant or condition or amendment thereof shall be held invalid as
to a Party or circumstance by any court or governmental agency having
jurisdiction, all of the other terms, covenants and conditions of this Agreement
and amendments thereof shall not be affected thereby and shall remain in full
force and effect.
18.09 Applicable Law. This Agreement is made under and shall be
governed by the laws of the Commonwealth of Virginia.
18.10 No Waiver. The failure of either Party to enforce at any time
any of the provisions of this Agreement or to require at any time performance by
the other Party of any of the provisions hereof, shall in no way be construed to
be a waiver of such provisions, nor in any way to affect the validity of this
Agreement or any part hereof or the right of such Party thereafter to enforce
each and every such provision.
18.11 Computation of Time. In computing any period of time
prescribed or allowed under this Agreement, the day on which the act or event
occurs after which the designated period of time begins to run shall not be
included. The last day of the period so computed shall be included if it is a
business day; if it is not a business day, the period shall run until the end of
the next day which is a business day.
18.12 Survivorship of Obligations. The termination of this
Agreement shall not discharge either Party hereto from any obligation it owes to
the other Party under this Agreement by reason of any transaction, loss, cost,
damage, expense or liability which shall occur or arise (or the circumstances,
events or basis of which shall occur or arise) prior to such termination. It is
the intent of the Parties hereby that any such obligation owed (whether the same
shall be known or unknown at the termination of this Agreement or whether the
circumstances, events, or basis of the same shall be known or unknown at the
termination of this Agreement) shall survive the termination of this
Agreement.
18.13 Executive Committee. An Executive Committee, consisting of the
Chief Executive Officer and the Chief Operating Officer of Virginia Power, or
their designees, and the President of Old Dominion, or his designee, shall meet
from time to time for the purpose of resolving disputes arising from the
activities of the North Anna Operating Committee and the Planning and
Administration Committee established pursuant to Sections 2.01 and 3.01,
respectively, of this Agreement and for the purpose of resolving disputes
arising under the Purchase, Construction and Ownership Agreement pursuant to the
procedures established by Section 20.03 of the Purchase, Construction and
Ownership Agreement.
18.14 Entire Agreement. This Agreement, the Purchase, Construction and
Ownership Agreement and the Nuclear Fuel Agreement together with appendices and
exhibits incorporated by reference, shall constitute the entire understanding
between the Parties hereto, pertaining to the subject matter contained herein.
Neither Party hereto has relied, nor will rely, upon any oral or written
representation or oral or written information made or given to such Party by the
other Party hereto or any representative of or anyone on the behalf of the other
Party hereto.
18.15 Non-Exclusive Agreement. Subject to the limitations in this
Agreement, Virginia Power and Old Dominion shall have the right at all times to
hereunder.
18.16 Relationship of the Parties. The duties, obligations, and
liabilities of the Parties herein are intended to be several and not joint or
collective. The Parties shall be individually responsible for their own
obligations as provided herein. Neither of the Parties shall have the right or
power to bind the other Party except as expressly provided in this Agreement.
18.17 Singular and Plural. Throughout this Agreement, whenever any
word in the singular number is used, it should include the plural unless the
context otherwise requires; and whenever the plural number is used, it shall
include the singular, unless the context otherwise requires.
18.18 Equal Opportunity. During the performance of those parts of this
Agreement relating to the construction by Virginia Power of any additions,
betterments, improvements or replacements to the North Anna Facilities, Old
Dominion and Virginia Power agree as follows:
(a) The parties will not discriminate against any employee or
applicant for employment because of race, color, religion, sex, age or national
origin. The Parties will take affirmative action to ensure that applicants are
employed, and that employees are treated during employment without regard to
their race, color, religion, sex, or national origin. Such action shall include,
but not be limited to, the following: employment, upgrading, demotion or
transfer; recruitment or recruitmen advertising; layoff or termination; rates of
pay or other forms of compensation; and selection for training, including
apprenticeship. The Parties agree to post in conspicuous places, available to
employees and applicants for employment, notices to be provided setting forth
the provisions of this Equal Opportunity Clause.
(b) The Parties will, in all solicitations or advertisements
for employees placed by or on behalf of either party, state that all qualified
applicants will receive consideration for employment without regard to race,
color, sex, or national origin.
(c) The Parties will send to each labor union or
representative of workers with which it has a collective bargaining
agreement or other contract or understanding, a notice to be provided
advising the said labor union or workers' representatives of the Parties
commitments under this Section, and shall post copies of the notice in
conspicuous places available to employees and applicants for employment.
(d) The Parties will comply with all provisions of Executive
Order 11246, dated September 24, 1965, and of the rules, regulations and
relevant order of the Secretary of Labor.
(e) The Parties will furnish all information and reports
required by Executive Order 11246, dated September 24, 1965, and by rules,
regulations and relevant orders of the Secretary of Labor, or pursuant
thereto, and will permit access to their books, records and accounts by the
administering agency and the Secretary of Labor for purposes of
investigation to ascertain compliance with such rules, regulations and orders.
(f) In the event of either Party's noncompliance with the
nondiscrimination clauses of this Agreement or with any of the said rules,
regulations or orders, the Parties may be declared ineligible for further
Government procedures authorized in Executive Order 11246, dated September
24, 1965, and such other sanctions may be imposed and remedies invoked
as provided in said Executive Order or by rule, regulation or order of the
Secretary of Labor, or as otherwise provided by law.
(g) The Parties agree that, unless exempted by the rules,
regulations or orders of the Secretary of Labor issued pursuant to
Section 204 of Executive Order 11246, dated September 24, 1965, all
subcontracts and purchase orders will cite that such contract or purchase
orders are subject to Executive Order 11246 and such provisions will be binding
upon each subcontractor or vendor. The Parties will take such action with
respect to any subcontract or purchase order as the administering agency may
direct as a means of enforcing such provisions, including sanctions for
noncompliance; provided, however, that in the event either Party becomes
involved in, or is threatened with, litigation with a subcontractor or
vendor as a result of such direction by the administering agency, that
Party may request the United States to enter into such litigation to protect
the interests of the United States.
18.19 Good Faith. The Parties hereto expressly agree that every
obligation undertaken in this Agreement will be performed in good faith.
18.20 Merger of Documents. All understandings and agreements, written
or oral, among the Parties prior to the Effective Date, with respect to the
matters herein contained, including the Interconnection and Operating
Agreement, have been superseded in all respects by this Agreement, and all
such understandings and agreements prior to the Effective Date are null and
void and of no effect whatsoever.
18.21 Environment. The provisions of Section 20.17 of the Purchase,
Construction and Ownership Agreement are incorporated herein by reference and
shall apply as if set forth herein in full.
18.22 Kick-backs. The provisions of Section 20.18 of the Purchase,
Construction and Ownership Agreement are incorporated herein by reference and
shall apply as if set forth herein in full.
18.23 Nonsegregated Facilities. The provisions of Section 20.19 of the
Purchase, Construction and Ownership Agreement are incorporated herein by
reference and shall apply as if set forth herein in full.
18.24 Historic Places. The provisions of Section 20.21 of the
Purchase, Construction and Ownership Agreement are incorporated herein by
reference and shall apply as if set forth herein in full.
18.25 Public Officials Not to Benefit. The provisions of Section 20.22
of the Purchase, Construction and Ownership Agreement are incorporated herein by
reference and shall apply as if set forth herein in full.
18.26 Flood Insurance Act. The provision of Section 20.23 of the
Purchase, Construction and Ownership Agreement are incorporated herein by
reference and shall apply as if set forth herein in full.
18.27 Safety. The provisions of Section 20.24 of the Purchase,
Construction and Ownership Agreement are incorporated herein by reference and
shall apply as if set forth herein in full.
18.28 Buy American. The provisions of Section 20.25 of the Purchase,
Construction and Ownership Agreement are incorporated herein by reference and
shall apply as if set forth herein in full.
18.29 Regulatory Changes. Nothing contained in this Agreement shall be
construed as preventing either Party from pursuing its interests in independent
system operators, pools, poolcos, transmission arrangements and pricing,
ancillary services, or other issues that may be debated before regulatory or
other bodies.
ARTICLE XIX
Amendment
This Agreement may not be amended, modified, or terminated, nor may any
obligation hereunder be waived orally. Any amendment shall be in writing, and
shall be signed by the Chief Executive Officer or the President of Virginia
Power or the person either of them may designate in writing and by the President
of Old Dominion, or the person he may designate in writing, and must be approved
by the Board of Directors of Old Dominion and Virginia Power subject to any
required regulatory approval including the approval of RUS, as needed.
IN WITNESS WHEREOF, the Parties have caused this amended and restated
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
VIRGINIA ELECTRIC AND POWER COMPANY
By _________________________________________
Dr. James T. Rhodes
President and Chief Executive Officer
OLD DOMINION ELECTRIC COOPERATIVE
By _________________________________________
R. W. Watkins
President & Chief Executive Officer
STATE OF VIRGINIA:
COUNTY OF HENRICO to wit:
The foregoing instrument was acknowledged before me this _____ day of
__________, 1997, by Dr. James T. Rhodes, President and Chief Executive Officer
of Virginia Electric and Power Company, a Virginia corporation, on behalf of the
corporation and by R.W. Watkins, President and Chief Executive Officer of Old
Dominion Electric Cooperative, a Virginia cooperative, on behalf of the
cooperative.
---------------------------
Notary Public
My Commission expires:
Virginia Electric and Power Company
Secretary's Certificate
I, J. Kennerly Davis, Jr., do hereby certify that I am the
Secretary/Treasurer of Virginia Electric and Power Company (the "Company"), and
that, as such, I am authorized to execute this certificate on behalf of the
Company. I do hereby further certify that Dr. James T. Rhodes was duly elected
or appointed, qualified and acting as President and Chief Executive Officer of
the Company at the time of signing and delivery of the attached Amended and
Restated Interconnection and Operating Agreement an was duly authorized to
execute such Agreement on behalf of the Company, and that the signature
appearing in such Agreement is his genuine signature.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Company this ________ day of _______________, 1997.
-----------------------------
J. Kennerly Davis, Jr.
Secretary/Treasurer
STATE OF VIRGINIA:
CITY OF RICHMOND to wit:
The foregoing instrument was acknowledged before me this _____ day of
__________, 1997, by J. Kennerly Davis, Jr., Secretary and Treasurer, of
Virginia Electric and Power Company, a Virginia corporation, on behalf of the
corporation.
---------------------------
Notary Public
My Commission expires:
Old Dominion Electric Cooperative
Secretary's Certificate
I, Cecil E. Viverette, Jr., do hereby certify that I am the
Secretary/Treasurer of Old Dominion Electric Cooperative (the "Cooperative"),
and that, as such, I am authorized to execute this certificate on behalf of the
Cooperative. I do hereby further certify that R. W. Watkins was duly elected or
appointed, qualified and acting as President and Chief Executive Officer of the
Cooperative at the time of signing and delivery of the attached Amended and
Restated Interconnection and Operating Agreement and was duly authorized to
execute such Agreement on behalf of the Cooperative, and that the signature
appearing in such Agreement is his genuine signature.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Cooperative this ________ day of _______________, 1997.
-----------------------------
Cecil E. Viverette, Jr.
Secretary/Treasurer
STATE OF VIRGINIA:
COUNTY OF ___________________ to wit:
The foregoing instrument was acknowledged before me this _____ day of
__________, 1997, by Cecil E. Viverette, Secretary and Treasurer of Old Dominion
Electric Cooperative, a Virginia cooperative, on behalf of the cooperative.
---------------------------
Notary Public
My Commission expires:
<PAGE>
Appendix A
Page 1 of 3
APPENDIX A
COMMON FACILITIES
All property of Virginia Power in the following accounts on Virginia
Power's books of account that is within the definition of Common Facilities as
well as the Construction Work in Progress and the Completed Construction Not
Classified related thereto:
FERC
ACCOUNT DESCRIPTION
320 Land and Land Rights
321 Structures & Improvements
Clearing
Water System
Storm Sewers
Sanitary Sewers
Fire Protection
Fuel Oil Storage
RR Track
Yard
Yard Lighting
Boat Dock
Rifle Range
Gun Towers
Medical Classroom
Condensate Fill Pump Station
Auxiliary Building
Turbine Building
Turbine Outage Building
Office Building
Screenwell Structure
Vacuum Priming Pump House
Fuel Building
Fuel Oil Pump House
Yard Crane
Water Treatment Building
Service Building
Weather Towers
<PAGE>
FERC ACCOUNT DESCRIPTION
Meteorological Towers
Security Building
Security Control Center
Dam
Reservoirs
Spillways
Dikes
Service Water Pump House
Decontamination Building
Waste Disposal Building
Roadways
Walkways
Parking Lots
322 Reactor Plant Equipment
Boron Recovery System
Moving Platform Spent
Fuel Pit
Fuel Building Cranes
Decontamination Cranes
Fuel Receiving Equipment
Spent Fuel Racks
Reactor Cavity Purification
Radioactive Waste Treatment
and Disposal System
Liquid Waste Solidification System
Waste Disposal Evaporator
Radioactive Gaseous Waste
Radioactive Solid Waste
Decontamination System
Raw Water Supply System
Condensate Storage Tank
Auxiliary Boiler System
323 Turbo-Generator Equipment
Service Water Pump House Equipment
Bearing Cooling Water Tower
Turbine Room Crane
324 Accessory Electric Equipment
Screenwell Area Transformers
and Equipment
Reserve Station Transformer
Bearing Cooling Tower Switch Boards
325 Miscellaneous Power Plant Equipment
Compressed Air Systems
Miscellaneous Shop Equipment
Machine Shop Equipment
Laboratory Testing Equipment
Office Furniture and Equipment
Other General Station Equipment
Weather Station Equipment
Marine Equipment
Kitchen Equipment
Fire Protection Equipment
Plant Communications
Telephone System
Security Equipment
Radiation Monitoring Equipment
Gasoline Storage Equipment
352 Transmission Structures and
Improvements
353 Transmission Station Equipment
390 Structures and Improvements
Visitors Information Center
391 Office Furniture and Equipment
392 Transportation Equipment
COMPLETED CONSTRUCTION NOT CLASSIFIED
PROJECT NO. DESCRIPTION
CONSTRUCTION WORK IN PROGRESS
PROJECT NO. DESCRIPTION
<PAGE>
Appendix B
Page 1 of 6
APPENDIX B
MAJOR SPARE PARTS
B.01 Description of Major Spare Parts. Those major items, each costing more
than $100,000, as follows:
Quantity Item Serial Number
1 Motor Charging Pump 17528LN01
1 Motor Charging Pump 17528LN02
1 RCP Motor S/N 3S-81P355 3S-81P355
1 Low Head Safety INJ Pump Motor 17538LN01
1 2B LP Rotor TN12763
15 2B LP Rotor TN12763
2 LP Rotor Discs-Spare 23A3932
2 LP Rotor Discs Spare 23A3932
2 LP Rotor Discs Spare 23A3932
10 LP Rotor Blades Spare 23A3932
4 LP Rotor Discs Spare 23A3932
1 LP Rotor Shaft Spare 23A3932
4 LP Rotor Blades Spare 23A3932
2 Spare Blade Rows 1A Rotor 23A3932
10 2B LP Rotor Turbine Disc TN12763
Major Spare Parts shall also include any other major items that the Parties
agree (i) to keep in inventory and (ii) to designate as Major Spare Parts for
possible use in replacing similar items in units located not only at the North
Anna Nuclear Power Station but also at other power stations. Such designation
shall state the units that the Major Spare Part is designated to serve.
B.02 Old Dominion's Percentage Ownership Interest in Major Spare Parts.
(a) Except as otherwise modified by the operation of Sections
15.03, 16.01 or 16.02 of the Purchase, Construction and Ownership Agreement, Old
Dominion shall own its Old Dominion's Percentage Ownership Interest in any Major
Spare Part until such Major Spare Part is used in a unit other than the Units.
Upon use in any such unit, Virginia Power shall purchase such Major Spare Part
from Old Dominion in accordance with B.04 hereof.
(b) Virginia Power agrees to pay carrying charges, if any,
with respect to each Major Spare Part equal to (i) Old Dominion's Percentage
Ownership Interest, less (ii) the sum of Old Dominion's Percentage Ownership
Interest in any Unit that the Major Spare Part serves, divided by the total
number of units served by the Major Spare Part.
(c) It is the intention of the Parties that the formula be
reapplied at any time that the number of units served by any Major Spare Part or
Old Dominion's Percentage Ownership Interest changes for any reason. In any case
where ownership interest of the Parties are adjusted, the provisions of Section
16.04 of the Purchase, Construction and Ownership Agreement shall apply and
appropriate payment shall be made pursuant to Section B.04 hereof.
B.03 Ownership Responsibilities - Major Spare Parts. Virginia Power
may make use of any Major Spare Part in any of the units at the North Anna
Nuclear Power Station or other power stations for which such parts have been
designated to serve in accordance with Section B.01 hereof and in accordance
with the following conditions:
A. If at any time a unit at the North Anna Nuclear Power Station
or other power stations has need of a Major Spare Part to
replace any part of an equivalent item that has been damaged,
such Major Spare Part may be used in such unit; provided that
another unit (for which the part has been designated in
accordance with Section B.01 hereof) located at either station
had not been damaged earlier and made prior claim to use such
Major Spare Part.
B. When a Major Spare Part is used in any unit, Virginia Power
and Old Dominion shall have an obligation either to (i) repair
such damaged item or (ii) to acquire a new item in place of
the damaged item, as expeditiously as possible, and to return
it to the original location of the Major Spare Part that was
used. Payment therefor will be in accordance with Section B.04
hereof.
Any time that any Major Spare Part is used in any unit other than the Units,
Virginia Power shall be obliged to make payment to Old Dominion. The adjustment
of ownership interest at the time a Major Spare Part is used shall conform, in
all respects, to the provisions of Section 16.04 of the Purchase, Construction
and Ownership Agreement.
B.04 Cost Responsibilities - Major Spare Parts. Cost and payment
responsibilities of the Parties for the Major Spare Parts shall be determined in
accordance with the following:
A. Subject to the provisions of Section B.04 (D) hereof, the
responsibility of the Parties for any New Investment or costs
for any Major Spare Part will be shared in proportion to the
Parties then current ownership interest in that Major Spare
Part.
B. Virginia Power shall pay carrying charges on the interest
stated in Section B.02(b), based upon the same principles
under which carrying charges are paid pursuant to this
Appendix B. excluding cancellation costs, taxes payable at
closing and deferred taxes set forth in Exhibit N of the
Purchase Agreement and the 15 percent mark-up reflected
therein, while reflecting Old Dominion's actual cost of
capital used to finance such Major Spare Parts, rather than
11%.
C. Upon the use of any Major Spare Part in a non-North Anna unit,
Virginia Power shall pay Old Dominion the amount necessary so
that Old Dominion's net investment as reflected on Old
Dominion's books in that Major Spare Part is $0. Upon the use
of any Major Spare Part in a Unit, Virginia Power will cease
paying carrying charges pursuant to Section B.02(b) on that
Major Spare Part until a replacement Major Spare Part is
acquired. The provisions of Section 16.04 of the Purchase,
Construction and Ownership Agreement shall apply to any
adjustment under that Section.
D. The parties shall pay for any replacement Major Spare
Part, subject to the next sentence, in proportion to
their respective ownership interests in the unit in
which the Major Spare Part was used, but the investment
attributed to the replacement Major Spare Part when such
part is designated as a Major Spare Part shall be equal
to the dollar amount initially invested in the Major
Spare Part that was used in the Unit needing that part.
Accordingly, when the repaired or replacement part is
designated a Major Spare Part, a payment shall be made
to the appropriate Party so that the then resulting
investment of the Parties in the Major Spare Part shall
be equal to the investment of the Parties in the Major
Spare Part that was used in the Unit needing that part.
E. Upon any adjustment in Old Dominion's Percentage Ownership
Interest in any Major Spare Part pursuant to Section B.02(c),
payment shall be made to the Party whose ownership interest
decreased, so that the percentage investment (including all
cost components comprising New Investment, undepreciated) of
each Party shall be equal to that Party's percentage ownership
interest in the respective Major Spare Part.
B.05 Hypothetical Illustration.
Hypothetical Illustration of Cost Responsibility
Associated with Ownership, Use and Replacement
of Major Spare Parts Pursuant to Exhibit C
1. Major Spare Part - Net Investment $10,000,000
2. Ownership Responsibility Virginia Power 88.4% $ 8,840,000
Old Dominion 11.6% $ 1,160,000
<PAGE>
Case (1) Major Spare Part Utilized at the
Surry Nuclear Power Station
- Replacement Costs More
1. Payment to Old Dominion at the time Major Spare Part
is taken from its storage location $ 1,160,000
2. Cost of replacement (FOB) paid by Virginia Power (100%) $20,000,000
3. Payment by Old Dominion at the time Major Spare Part
is replaced in its original location $ 1,160,000
4. Net Investment in the Major Spare Part for
computation of cost responsibility when such
part is next utilized $ 10,000,000
Case (2) Major Spare Part Utilized at the
North Anna Nuclear Power Station
- Replacement Costs More
1. No payment at the time Major Spare Part
is taken from its storage location $
2. Cost of replacement (FOB) paid by:
Virginia Power (88.4% x $20,000,000) $17,680,000
Old Dominion (11.6% x $20,000,000) $ 2,320,000
3. Net Investment in the Major Spare Part for
computation of cost responsibility
when such part is next utilized $10,000,000
<PAGE>
Case (3) Major Spare Part Utilized at the
Surry Nuclear Power Station
- Replacement Costs Less
1. Payment to Old Dominion at the time Major Spare Part
is taken from its storage location $ 1,160,000
2. Cost of replacement (FOB) paid by Virginia Power (100%) $ 5,000,000
3. Payment by Old Dominion at the time Major Spare Part
is replaced in its original location $ 1,160,000
4. Net Investment in the Major Spare Part for
computation of cost responsibility when such
part is next utilized $10,000,000
Case (4) Major Spare Part Utilized at the
North Anna Nuclear Power Station
- Replacement Costs Less
1. No payment at the time Major Spare Part
is taken from its storage location $
2. Cost of replacement (FOB) paid by:
Virginia Power (88.4% x $5,000,000) $ 4,420,000
Old Dominion (11.6% x $5,000,000) $ 580,000
3. Net Investment in the Major Spare Part for
computation of cost responsibility
when such part is next utilized $10,000,000
<PAGE>
Appendix C
Page 1 of 1
APPENDIX C
NORTH ANNA UNIT 1
All property of Virginia Power appearing in the following accounts on
Virginia Power's books of account that is defined as North Anna Unit 1 in this
Agreement as well as the Construction Work in Progress and the Completed
Construction Not Classified related thereto:
FERC
ACCOUNT DESCRIPTION
------- -----------
321 Structures and Improvements
322 Reactor Plant Equipment
323 Turbogenerator Units
324 Accessory Electric Equipment
325 Miscellaneous Power Plant Equipment
<PAGE>
Appendix D
Page 1 of 1
APPENDIX D
NORTH ANNA UNIT 2
All property of Virginia Power appearing in the following accounts on
Virginia Power's books of account that is defined as North Anna Unit 2 in this
Agreement as well as the Construction Work in Progress and the Completed
Construction Not Classified related thereto:
FERC
ACCOUNT DESCRIPTION
------- -----------
321 Structures and Improvements
322 Reactor Plant Equipment
323 Turbogenerator Units
324 Accessory Electric Equipment
325 Miscellaneous Power Plant Equipment
<PAGE>
Appendix E
Page 1 of 1
APPENDIX E
OLD DOMINION MEMBERS
BARC Electric Cooperative
Millboro, VA
Community Electric Cooperative
Windsor, VA
Mecklenburg Electric Cooperative
Chase City, VA
Northern Neck Electric Cooperative
Warsaw, VA
Northern Virginia Electric Cooperative
Manassas, VA
Prince George Electric Cooperative
Waverly, VA
Rappahannock Electric Cooperative
Fredericksburg, VA
Shenandoah Valley Electric Cooperative
Mt. Crawford, VA
Southside Electric Cooperative
Crewe, VA
<PAGE>
Appendix F
Page 1 of 3
APPENDIX F
SUPPORT FACILITIES
F.01 Definition of Support Facilities. At the Effective Date, the
following shall be the Support Facilities:
ELECTRIC PLANT IN SERVICE
FERC
ACCOUNT DESCRIPTION
- ------- -----------
353 Transmission Station Equipment
Telemetering Equipment
COMPLETED CONSTRUCTION NOT CLASSIFIED
PROJECT NO. DESCRIPTION
- ----------- -----------
99-0182 Surry Nuclear Training Simulator
99-0313 Personnel Radiation Monitoring
Exposure System
99-2291 Nuclear Station Emergency Plan
Total Completed Construction Not Classified
CONSTRUCTION WORK IN PROGRESS
PROJECT NO. DESCRIPTION
- ----------- -----------
Thereafter, Support Facilities shall mean all those North Anna
Facilities, wherever situated, including, but not limited to, both real and
personal property, exclusive of Nuclear Fuel, Operating Inventory and Major
Spare Parts, which are purchased, leased or otherwise obtained for the
construction, operation and maintenance of one or more Unit(s) located at the
North Anna Nuclear Power Station and one or more nuclear Unit(s) located at
Virginia Power
<PAGE>
Appendix F
Page 2 of 3
Surry Nuclear Power Station or at such other location as Virginia
Power may have an interest in any nuclear facility and are listed in the
following accounts in accordance with the Uniform System of Accounts:
Plant In Service CCNC
Acct. 101 Acct. 106
321 - Structures and Improvements
325 - Miscellaneous Power Plant
Equipment
353 - Transmission Station
Equipment
397 - Communication Equipment
Construction Work in Progress
F.02 Old Dominion's Percentage Ownership Interest in Support
Facilities. (a) Except as otherwise modified by the operation of Sections 15.03,
16.01 or 16.02 of the Purchase, Construction and Ownership Agreement, Old
Dominion's Percentage Ownership Interest in any Support Facility shall be an
undivided ownership interest determined in accordance with the following
formula:
Sum of Old Dominion Percentage Ownership Interests
SFOI = in all Units that the Support Facility serves
_____________________________________________
Number of units served by Support Facility
(b) It is the intention of the Parties that the formula be reapplied
at any time that the number of units served by any Support Facility changes for
any reason. In any case where ownership interest of the Parties are adjusted,
the provisions of Section 16.04 of the Purchase, Construction and Operating
Agreement, shall apply and appropriate payment shall be made pursuant to Section
F.03 hereof.
F.03 Investment and Cost Responsibilities of the Parties for Support
Facilities. The investment and cost responsibilities of the Parties for any
Support Facility will be shared in
<PAGE>
Appendix F
Page 3 of 3
proportion to the Parties' then current ownership interest in that Support
Facility. Upon any adjustment in Old Dominion's Percentage Ownership Interest in
any Support Facility, payment shall be to the Party whose ownership decreased,
so that the percentage investment (including all cost components comprising New
Investment, undepreciated) of each Party shall be equal to that Party's
percentage ownership interest in the respective Support Facility.
<PAGE>
Appendix G
Page 1 of 12
APPENDIX G
CHARGES FOR PURCHASES BY OLD DOMINION
Charges for Old Dominion's purchases of demand and energy from Virginia
Power shall be calculated according to the following provisions, subject to
approval of these terms, conditions and charges by FERC:
I. Monthly Supplemental Demand Charge
A. The Monthly Supplemental Demand Charge, as set forth below,
shall be applicable to all Old Dominion Monthly Billing Demand
as determined for each calendar month in accordance with
Section 8.01(a)(i) and Appendix H, Section III. of this
Agreement:
For Calendar Year 1998 - $8.28413/kW-month
For Calendar Year 1999 - $6.82413/kW-month
For Calendar Year 2000 - $6.63413/kW-month
For Calendar Year 2001 - $6.08413/kW-month
For Calendar Year 2002 - $5.51413/kW-month
B. The Monthly Supplemental Demand Charge applicable to any Old
Dominion Monthly Billing Demand supplied by Virginia Power
pursuant to Section 8.01(a)(ii) and (iv) shall be as
determined pursuant to Section 8.02 (b) (ii) of this
Agreement.
C. The above Monthly Supplemental Demand Charges are exclusive of
transmission service and ancillary services charges which
shall be paid pursuant to the Transmission Service Agreement.
II. Peaking Capacity Charge
A. The Peaking Capacity Charge, as set forth below, shall be
applicable to all Peaking Capacity supplied by Virginia Power
as determined for each calendar month in accordance with
Section 8.03(a) and Appendix M, Section I. of this Agreement:
For the Period January 1, 1998 Through December 31, 1999 -
$4.66413/kW- month
For the Period January 1, 2000 Through December 31, 2003 -
$1.93413/kW-month
B. The above Peaking Capacity Charges are exclusive of
transmission service and ancillary services charges which
shall be paid pursuant to the Transmission Service Agreement.
<PAGE>
Appendix G
Page 2 of 12
III. Monthly Supplemental Energy Charge
A. For the period January 1, 1998 through December 31, 2000, the
Monthly Supplemental Energy Charge, as set forth below, shall
be applicable to all Old Dominion Monthly Billing Energy as
determined for each calendar month in accordance with Section
8.01(d) and Appendix H, Section VI. of this Agreement:
$0.02195/kWh for all On-peak kWh
$0.01985/kWh for all Off-peak kWh
B. Effective January 1, 2001, and pursuant to Section 8.02(a)(ii)
of this Agreement, the Monthly Supplemental Energy Charge
shall be determined annually based on the projected energy
costs of Virginia Power's combined cycle and peaking units
included in the production cost model used by Virginia Power
to develop its annual corporate budget, subject to an annual
true-up on fuel costs (including handling and analysis
("H&A")), in accordance with the provisions stated below. The
projected energy costs shall include fuel, H&A, and variable
operating and maintenance (O&M) expenses. The Monthly
Supplemental Energy Charge determined in this section shall be
applicable to all Old Dominion Monthly Billing Energy supplied
by Virginia Power.
The Monthly Supplemental Energy Charge will be determined
annually based on a forecast of Old Dominion projected hourly
loads excluding Old Dominion Monthly Delivered SEPA Capacity,
adjusted for losses, then excluding Old Dominion Monthly North
Anna Capacity, Old Dominion Monthly Accredited Firm Capacity,
Old Dominion Monthly Accredited Non-Firm Capacity, Excluded
Supplemental Capacity, Peaking Capacity, and Excluded Peaking
Capacity. The remaining hourly values will be sorted in
descending order. This shall be referred to as Old Dominion's
supplemental "Load Duration Curve." The area under the Load
Duration Curve shall be equal to Old Dominion's total
projected supplemental energy requirements for the year used
in the formula below.
The formula below is based on the sum of the cost of energy
from peaking units and combined cycle units as if the
supplemental demand requirements of Old Dominion were
purchased from Virginia Power as two thirds peaking capacity
and one third combined cycle capacity. Therefore, the Monthly
Supplemental Energy Charge shall be calculated as follows:
Re = [ Pe\e\ x Pe\c\ ] + [ Ce\e\ x Ce\c\ ] + VOM\S\
----- -----
Te\e\ Te\e\
<PAGE>
Appendix G
Page 3 of 12
<TABLE>
<S><C>
hT
Tee = (SIGMA) Old Dominion Monthly
h=0 Supplemental Demand
hx
Pee = (SIGMA) Old Dominion Monthly
h=0 Supplemental Demand -1/3D
</TABLE>
Cee = Te\e\ - Pe\e\
Where:
Re = Projected Monthly Supplemental Energy Charge
Te\e\ = Total estimated annual Old Dominion Monthly
Supplemental Energy
Pe\e\ = Estimated annual Old Dominion Monthly Supplemental
Energy related to peaking capacity
Ce\e\ = Estimated annual Old Dominion Monthly Supplemental
Energy related to combined cycle capacity
Pe\c\ = Weighted average projected fuel cost (including H&A)
for designated peaking units on a $/kWh basis
Ce\c\ = Weighted average projected fuel cost (including H&A)
for designated combined cycle units on a $/kWh basis
n
VOM\s\ = [Pe\e\ x [(SIGMA) [[projected year's peaking units'
Te\e\ Sdpu=1 total O&M cost - projected
year's peaking units' fuel and
H&A cost]
n
x 0.35] / (SIGMA) projected year's
Sdpu=1 peaking units' energy]] +
a
[Ce\e\ x [(SIGMA) [[projected year's combined
Te\e\ dccu=1 cycle units' total O&M cost
- projected year's combined
cycle units' fuel and H&A
cost]
a
x 0.35] / (SIGMA) projected year's combined
dccu=1 cycle units energy]]
<PAGE>
Appendix G
Page 4 of 12
Sdpu = designated peaking units index (for this Section III. B.)
n = total number of peaking units
dccu = designated combined cycle units index
a = total number of combined cycle units
D = Maximum Old Dominion Monthly Supplemental Demand for
the year
hT = The total number of hours during the year
hx = That hour where the supplemental demand equals 1/3 D
h = The hourly index
The attached Exhibit A to this Appendix G is an illustration of
the variables Pe\e\, Ce\e\ and Te\e\ for a sample year.
Pursuant to Section 8.02(a)(ii), the Monthly Supplemental Energy
Charge shall be subject to an annual true-up on fuel costs
(including H&A) based on the following formula. Virginia Power's
twelve month ending report entitled "Virginia Power - Fuels
Consumed Within Power Stations" for each respective year shall
be used to determine the "Weighted average actual fuel costs for
the designated peaking units" and the "Weighted average actual
fuel costs for the designated combined cycle units".
FR\e\ = [Pe\e\ x Pe\c\] + [Ce\e\ x Ce\c\]
----- -----
Te\e\ Te\e\
Where: FR\e\ = Projected Monthly Supplemental Energy Charge, less O&M
FR\a\ = [Pe\e\ x Pa\c\] + [Ce\e\ x Ca\c\]
----- -----
Te\e\ Te\e\
Where: FRa = Actual Monthly Supplemental Energy Charge, less O&M
Pa\c\ = Weighted average actual fuel cost (including H&A) for
designated peaking units on a $/kWh basis
Ca\c\ = Weighted average actual fuel cost (including H&A) for
designated combined cycle units on a $/kWh basis
The amount of refund or credit due to the respective Party
shall be determined as follows:
<PAGE>
Appendix G
Page 5 of 12
SECD = Ta\e\ x (FRe - FRa)
Where: SECD = Amount of Monthly Supplemental Energy Charge
adjustment
Ta\e\ = Actual annual Old Dominion Monthly Billing
Energy
IV. Monthly Reserve Energy Charge
A. For the period January 1, 1998 through December 31, 2001, the
Monthly Reserve Energy Charge shall be the Monthly
Supplemental Energy Charge stated in III.A. above and shall be
applicable to all Old Dominion Monthly Reserve Energy as
determined for each calendar month in accordance with Section
8.05(b) and Appendix H, Section IV. of this Agreement.
B. Effective January 1, 2002, and pursuant to Section 8.05(b) of
this Agreement, the Monthly Reserve Energy Charge shall be
determined annually based on the projected energy costs of
designated Virginia Power peaking units operating at the time
and included in the production cost model used by Virginia
Power to develop its annual corporate budget, subject to an
annual true-up on fuel costs (including H&A), in accordance
with the provisions stated below. The projected energy costs
shall include fuel, H&A, and variable O&M expenses. The
Monthly Reserve Energy Charge determined in this section shall
be applicable to all Old Dominion Monthly Reserve Energy
supplied by Virginia Power.
REC\e\ = RECRe + VOMr
Where: RECR\e\= Projected Monthly Reserve Energy Charge rate
based on projected fuel cost (including H&A)
for designated peaking units on a $/kWh
basis
REC\e\ = Projected Monthly Reserve Energy Charge
r
VOMr = (SIGMA) [[projected year's peaking units' total
Rdpu = 1 O&M cost - projected year's peaking
units' fuel and H&A cost]
r
x 0.35] /(SIGMA) Projected Year's Peaking Units' Energy
Rdpu
Rdpu = designated peaking units index (for this Section IV. B.)
r = total number of peaking units
For the Monthly Reserve Energy Charge annual true-up, Virginia
Power's twelve month ending report entitled "Virginia Power -
Fuels Consumed Within Power Stations" for each respective year
shall be used to determine the actual
<PAGE>
Appendix G
Page 6 of 12
fuel costs of the designated Virginia Power peaking units. The
amount of refund or credit due to the respective Party shall
be determined as follows:
RECD = RE\a\ x (RECRe - FRECa)
Where: RECD = Amount of Monthly Reserve Energy Charge adjustment
RE\a\ = Actual annual Old Dominion Monthly Reserve
Energy
FRECa = Monthly Reserve Energy Charge rate based
on actual fuel cost (including H&A) for
designated peaking units on a $/kWh basis
V. Monthly Peaking Energy Charge
A. For the period January 1, 1998 through December 31, 1999, the
Monthly Peaking Energy Charge shall be the Monthly
Supplemental Energy Charge stated in III. A. above and
applicable to all Peaking Energy supplied by Virginia Power as
determined for each calendar month in accordance with Section
8.03(b) and Appendix M, Section II, of this Agreement.
B. Effective January 1, 2000, and pursuant to Section 8.03(d) of
this Agreement, the Monthly Peaking Energy Charge shall be
determined annually based on the projected energy costs of
designated Virginia Power peaking units operating at the time
and included in the production cost model used by Virginia
Power to develop its annual corporate budget, subject to an
annual true-up on fuel costs (including H&A), in accordance
with the provisions stated below. The projected energy costs
shall include fuel, H&A, and variable O&M expenses. The
Monthly Peaking Energy Charge determined in this section shall
be applicable to all monthly Peaking Energy supplied by
Virginia Power.
PEC\e\ = PECR\e\ + VOM\p\
Where: PECR\e\ = Projected Monthly Peaking Energy Charge rate based on
projected fuel cost (including H&A) for designated
peaking units on a $/kWh basis
PEC\e\ = Projected Peaking Energy Charge
p
VOM\p\ = (SIGMA) [[projected year's peaking units' total O&M
Pdpu=1 cost - projected year's peaking units' fuel
and H&A cost]
p
x 0.35] / (SIGMA) projected year's peaking units'
Pdpu=1 energy
<PAGE>
Appendix G
Page 7 of 12
Pdpu = designated peaking units indexes (for this Section V.B.)
p= total number of peaking units
For the Monthly Peaking Energy Charge annual true-up, Virginia
Power's twelve month ending report entitled "Virginia Power -
Fuels Consumed Within Power Stations" for each respective year
will be used to determine the actual fuel costs (including H&A)
of the designated Virginia Power peaking units. The amount of
refund or credit due to the respective Party shall be
determined as follows:
PECD = PE x (PECRe - FPECa)
Where: PECD = Amount of Peaking Energy Charge adjustment
PE = Actual Peaking Energy
FPECa = Monthly Peaking Energy Charge rate based on actual
fuel cost (including H&A) for designated peaking units
on a $/kWh basis
VI. Annual Fuel Adjustment Factor
A. The Annual Fuel Adjustment Factor shall be applicable as
follows:
1. To all Old Dominion Monthly Billing Energy for the
period January 1, 1998 through December 31, 2000.
2. To all Old Dominion Monthly Reserve Energy for the
period January 1, 1998 through December 31, 2001.
3. To all Monthly Peaking Energy for the period January
1, 1998 through December 31, 1999.
B. For the above periods, Old Dominion Monthly Billing Energy,
Peaking Energy and Old Dominion Monthly Reserve Energy
(on-peak and off-peak kilowatt-hours, respectively) shall be
multiplied by the annual time-differentiated on-peak and
off-peak fuel adjustment factors which shall be equal to :
1. The sum of:
(a) the estimated current-period fuel adjustment
factor, and
(b) the prior-period deferral adjustment factor,
multiplied by
2. 1.04978 to determine the annual on-peak fuel
adjustment factor and 0.94922 to determine the
annual off-peak fuel adjustment factor.
<PAGE>
Appendix G
Page 8 of 12
C. The estimated current-period fuel adjustment factor to become
effective with the April billing month of each year shall be
based on the estimated fuel expenses allocable to Old
Dominion's estimated supplemental and peaking energy through
the year 1999 and supplemental energy through the year 2000
for the 12-month period beginning in April of each year, and
shall be calculated by the fuel adjustment factor formula
shown below rounded to the nearest thousandth of a cent.
D. The prior-period deferral adjustment factor to become
effective with the April billing month of each year shall be
based on the difference between the total fuel expenses (using
the criteria outlined in (1) through (3) of Paragraph VI.H.
below) allocable to Old Dominion and the total fuel recoveries
by Old Dominion for the 12 months prior to April of each year,
divided by Old Dominion's estimated supplemental and peaking
energy through the year 1999 and supplemental energy through
the year 2000 for the 12-month period beginning with April of
each year (6 months where a semi-annual change is made
pursuant to Paragraph F. below). The prior-period deferral
adjustment factor will be adjusted for taxes.
E. The intent of the annual fuel adjustment factor is to recover
all fuel expenses allocable to Old Dominion. To the extent
the amount recovered from Old Dominion through the annual fuel
adjustment factor and the fuel component of the base rate
exceeds the cost of fuel allocable to Old Dominion for the
same time period, this over-recovery shall be a credit in the
calculation of the prior-period deferral adjustment factor for
the 12-month period beginning with the next April. To the
extent the amount recovered from Old Dominion through the
annual fuel adjustment factor and the fuel component of the
base rate is less than the cost of fuel allocable to Old
Dominion for the same time period, this under-recovery shall
be a charge in the calculation of the prior-period deferral
adjustment factor for the 12-month period beginning with the
next April.
F. The annual fuel adjustment factor shall be reviewed on a
semi-annual basis to determine if any change is required. The
current and prior period portions of the fuel adjustment
factor will be reviewed individually, and a change to one or
both may be made. The adjustment may be deferred until the
end of the 12-month period, provided the net difference
between the Company's actual and estimated under-recovery at
the end of the 12-month period is no greater than seven and
one-half per centum of actual and estimated fuel expenses or
the net difference between the actual and estimated
over-recovery at the end of the 12-month period is no greater
than five per centum of actual and estimated fuel expenses.
G. Fuel Adjustment Factor Formula:
F = [ E - B] (T)
-
S
Where:
<PAGE>
Appendix G
Page 9 of 12
F = Estimated annual fuel adjustment factor in dollars
per kilowatthour.
E = Estimated total system fuel expenses as defined in
Paragraph VI.H. below allocated to Old Dominion. The
energy allocation factor for Old Dominion shall be
the ratio of: (a) Old Dominion supplemental and
peaking energy through the year 1999 and supplemental
energy through the year 2000 for the 12-month period
beginning with April of each year divided by; (b) the
total Company system energy excluding energy
generated from North Anna Units 1 and 2, for the
12-month period beginning with April of each year.
S = Estimated Old Dominion supplemental and peaking
energy through the year 1999 and supplemental energy
through the year 2000 at the generation level for the
12-month period beginning with April of each year.
B = The current base cost of fuel = $0.01386.
T = Adjustment for state and local taxes measured by
gross receipts determined separately for resale
customers in Virginia: 100% divided by (100% minus
applicable Gross Receipts Tax rate).
H. The estimated system fuel expenses allocable to Old Dominion
for the 12-month period beginning with April of each year
shall be determined as follows:
1. Fossil and nuclear fuel consumed in the Utility's
wholly owned plants, and the Utility's share of
fossil and nuclear fuel consumed in jointly owned or
leased plants excluding nuclear fuel consumed in
North Anna Units 1 and 2. The cost of fossil fuel
shall include no items other than those listed in
Account 151 of the Commission's Uniform System of
Accounts for Public Utilities and Licensees.
The cost of nuclear fuel shall be that as shown in
Account 518, excluding nuclear fuel consumed in North
Anna Units 1 and 2, except that if Account 518 also
contains any expense for fossil fuel, or another
utility's share of jointly owned nuclear fuel, it
shall be deducted from this account.
Plus
2. The following purchased power costs:
(a) The fuel cost component of any purchased
power transaction.
or
<PAGE>
Appendix G
Page 10 of 12
(b) The total energy charges associated with
economic purchases if the energy charges are
less than the Company's total avoided
variable costs during the purchase period.
or
(c) The total expense associated with purchased
power of less than twelve months duration if
the total cost of the purchase is less than
the Company's total avoided variable costs
and if the purpose of the purchase was
solely to displace higher cost generation.
Purchases made to solely displace higher
cost generation exclude reliability
purchases. A purchase shall be deemed for
reliability where the Company's system
reserve criterion is not met. Such criterion
is as follows:
Operating Reserve (consisting of largest
generating unit plus regulating margin plus
load forecast margin)
Minus
75% of Emergency Contract Capacity
Equals
Spinning Reserve Requirement
(d) Energy receipts that do not involve money
payments such as diversity energy and
pay-back of storage energy are not defined
as purchased or interchanged power relative
to the fuel clause.
Minus
3. (a) The cost of fossil and nuclear fuel
recovered through inter-system sales
including the fuel costs related to economy
energy sales and other energy sold on an
economic dispatch basis. (Energy deliveries
that do not involve billing transactions
such as diversity energy and pay-back of
storage energy are not defined as sales
relative to the fuel factor.), and;
(b) The fuel costs recovered through redispatch
charges pursuant to the Open Access
Transmission Tariff.
I. Virginia Power will determine the balance of any
under-recovery or over-recovery of fuel expense allocated to
Old Dominion under this Section VI. for Old Dominion Monthly
Billing Energy as of January 1, 2001. These amounts will be
recovered through twelve equal monthly payments in 2001.
<PAGE>
Appendix G
Page 11 of 12
For calendar year 2001, the Annual Fuel Adjustment Factor
applicable to Old Dominion Monthly Reserve Energy shall be
calculated based on the estimated annual system fuel expense
and sales (MWh), less North Anna fuel expense and sales (MWh).
Following calendar year 2001, Virginia Power shall determine
the annual system average fuel rate based on actual fuel
costs, exclusive of North Anna fuel expense and sales, for
2001. The difference between the estimated and the actual
annual system fuel rates shall be multiplied by the Old
Dominion Monthly Reserve Energy for 2001 to determine the
over-recovery or under-recovery for fuel expense for Old
Dominion Monthly Reserve Energy for the year 2001. Any
over-recovered fuel expense will be refunded to Old Dominion
within sixty (60) days as a credit to the monthly Charges For
Purchases By Old Dominion. Any under-recovered fuel expense
will be charged to Old Dominion within sixty (60) days as an
addition to the monthly Charges For Purchases By Old Dominion.
Effective January 1, 2002, this Annual Fuel Adjustment Factor
will no longer be applicable to any Old Dominion Monthly
Billing Energy, Peaking Energy or Old Dominion Monthly Reserve
Energy.
VII. Monthly Charges for Purchases by Old Dominion
The Monthly Charges for Purchases by Old Dominion shall be the sum of
Paragraphs I., II.,III.,IV.,V. and VI.
<PAGE>
[GRAPH]
Supplemental Hourly Load Duration Curve
*CUSTOMER PLEASE DEFINE GRAPH*
Appendix H
Page 1 of 3
APPENDIX H
DETERMINATION OF PURCHASE AMOUNTS BY OLD DOMINION
I. Old Dominion Monthly Supplemental Demand
(a) Old Dominion Monthly Delivered Demand (combined Old Dominion
hourly demand measured at the Interconnection Points for the
clock hour during which the Combined System Monthly Peak
Demand occurs),
Less (b) Old Dominion Monthly Delivered SEPA Capacity.
The resulting difference multiplied by
(c) the factor of 100 divided by 100 minus multiplied the Combined
System Loss Percentage (to reflect demand at the generation
level),
(Equal to Old Dominion Monthly Demand)
Less (d) Old Dominion Monthly North Anna Capacity,
Less (e) Old Dominion Monthly Accredited Firm Capacity (other than
capacity specifically accounted for in Sections I. or III.
of this Appendix H),
Less (f) Old Dominion Monthly Accredited Non-firm Capacity (other than
capacity specifically accounted for in Sections I. or III. of
this Appendix H),
Less (g) Peaking Capacity,
Less (h) Excluded Peaking Capacity.
II. Old Dominion Monthly Maximum Diversified Demand
(a) The combined Old Dominion Members monthly maximum coincident
hourly demand measured at the Interconnection Points during
the On-Peak hours.
III. Old Dominion Monthly Billing Demand
(a) Old Dominion Monthly Supplemental Demand
Less (b) Excluded Supplemental Capacity
<PAGE>
Appendix H
Page 2 of 3
Plus (c) The kW, if any, by which the most recent 12 month average Old
Dominion Monthly Maximum Diversified Demand exceeds 110% of
the most recent 12-month average Old Dominion Monthly
Delivered Demand with such excess multiplied by the factor of
100 divided by 100 minus the Combined System Loss Percentage.
IV. Old Dominion Monthly Reserve Energy
(a) Old Dominion Monthly North Anna Energy that would have been
produced for the month were the Old Dominion Monthly North
Anna Capacity fully available all month,
Plus (b) Old Dominion Monthly Accredited Non-firm Energy that would
have been produced for the month were the Old Dominion Monthly
Accredited Non-firm Capacity fully available all month,
Less (c) Old Dominion Monthly Accredited Non-firm Energy that could
have been produced but was not produced for economic dispatch
reasons,
Less (d) Old Dominion Monthly North Anna Energy,
Less (e) Old Dominion Monthly Accredited Non-Firm Energy,
Less (f) Displacement Reserve Energy.
V. Old Dominion Monthly Supplemental Energy
(a) Old Dominion Monthly Delivered Energy,
Less (b) Old Dominion Monthly Delivered SEPA Energy,
with the resulting difference multiplied by
(c) the factor of 100 divided by 100 minus the Combined
System Transmission Loss Percentage (to reflect
energy at the generation level),
(equal to Old Dominion Monthly Energy)
Less (d) Old Dominion Monthly North Anna Energy,
Less (e) Old Dominion Monthly Accredited Firm Energy (other
than energy specifically accounted for in Sections
IV., V. or VI. of this Appendix H),
<PAGE>
Appendix H
Page 3 of 3
Less (f) Old Dominion Monthly Accredited Non-Firm Energy, less
Clover Economy Sales to Virginia Power (other than
energy specifically accounted for in Sections IV., V.
or VI. of this Appendix H),
Less (g) Old Dominion Monthly Reserve Energy,
Less (h) Displacement Reserve Energy
Less (i) Energy associated with Clover Economy Purchases from
Virginia Power,
Less (j) Peaking Energy,
Less (k) Displacement Peaking Energy,
Less (l) Excluded Peaking Energy.
VI. Old Dominion Monthly Billing Energy
(a) Old Dominion Monthly Supplemental Energy,
Less (b) Excluded Supplemental Energy,
Less (c) Displacement Supplemental Energy.
<PAGE>
Appendix I
Page 1 of 1
APPENDIX I
CHARGES FOR RESERVE CAPACITY
Charges for Old Dominion's purchases of demand and energy from Virginia
Power shall be calculated according to the following provisions, subject to
approval of these terms, conditions and charges by FERC:
The Reserve Capacity Charge shall be determined in accordance with
Section 8.05 of this Agreement.
The Reserve Capacity Charge shall be as set forth below:
Old Dominion Reserve Capacity - North Anna (a) ________kW
Old Dominion Reserve Capacity - Clover (a) ________kW
Reserve Capacity Charge per kW:
For the Calendar Year 1998 - $6.97743/kW-month
For the Calendar Year 1999 - $6.48667/kW-month
For the Calendar Year 2000 - $5.97645/kW-month
For the Calendar Year 2001 - $5.40973/kW-month
For the year 2002 and beyond, the Reserve Capacity Charge
shall be determined pursuant to Section 8.05 (a) of this Agreement based on
designated Virginia Power-owned peaking units.
The above Reserve Capacity Charges are exclusive of ancillary
service charges which shall be paid pursuant to the Transmission Service
Agreement.
[Note(a): Old Dominion Reserve Capacity will be adjusted
annually, effective January 1, to reflect adjustments to the System Reserve
Margin, and from time to time to reflect the current rated capability of the
generator units.]
<PAGE>
Appendix J
Page 1 of 7
APPENDIX J
FACILITIES CHARGES
I. APPLICABILITY
This Appendix J covering the supply of Excess Facilities Service is
applicable to Old Dominion in the territory served by Virginia Power.
II. AVAILABILITY
Whenever Old Dominion requests Virginia Power to supply electricity in
a manner which will require facilities in excess of Normal Service Facilities as
defined in Paragraph IV. hereof, and Virginia Power finds it practicable, such
facilities will be provided in accordance with Paragraphs III. and V. hereof.
III. MONTHLY RATE
1. 1.73% of the estimated installed cost of all distribution
equipment and facilities (rated below 69 kV) required in
addition to Normal Service Facilities.
2. 1.44% of the estimated installed cost of all transmission
equipment and facilities (rated 69 kV and above) required in
addition to Normal Service Facilities.
IV. DETERMINATION OF NORMAL SERVICE FACILITIES
Virginia Power's Normal Service Facilities at an Interconnection Point
with Old Dominion shall be those Virginia Power is committed to provide for
service under this Agreement, as it may be amended from time to time, and agreed
to by the Planning and Administration Committee.
V. EXCESS FACILITIES SERVICE
Excess Facilities Service supplied shall be subject to the provisions
of this Agreement except as modified by the following:
1. Virginia Power's facilities will be installed in a place and manner
satisfactory to Virginia Power; and, upon request by Virginia Power, Old
Dominion will furnish the property on which any excess facilities may be
located.
2. Virginia Power may change facilities at its convenience so long as
equivalent service is rendered and the charge to Old Dominion is unaffected. In
Paragraphs 3., 4., and 5. below, a change in facilities shall mean one for which
an increase or decrease in the Monthly Charge for Excess Facilities Service
becomes appropriate.
<PAGE>
Appendix J
Page 2 of 7
3. If within ten years from the initial connection of Excess Facilities
Service at any Interconnection Point or from the last change made in Virginia
Power facilities at that point (1) Old Dominion wishes to discontinue Excess
Facilities Service; or (2) Old Dominion ceases to take electric service from
Virginia Power at that point; or (3) Virginia Power determines that, in
accordance with good engineering and operating practice, service to Old Dominion
at such Interconnection Point requires a further change in Virginia Power
facilities or in their classification as Normal or Excess Facilities, other than
a change provided for in Paragraph 4. below, Old Dominion will:
(a) Agree to the new Monthly Excess Facilities Charge; or
(b) Request that the Excess Facilities be removed and, in
such event, Old Dominion will reimburse Virginia
Power for the costs specified in Paragraph 5. below.
4. If the Excess Facilities serving an Interconnection Point are
changed by Virginia Power within five years from the initial connection or from
the last change made in Virginia Power facilities at that Interconnection Point,
not as a direct result of a change in Old Dominion's load or request by Old
Dominion, Old Dominion will:
(a) Agree to such change by Virginia Power before the
change is made, if service is still wanted by Old
Dominion, provided that:
(1) if the change causes an increase in the
Monthly Charge for Excess Facilities, the
increase will be effective only after the
end of said five years, or
(2) if the change causes a decrease in the
Monthly Charge for Excess Facilities, the
decrease will be effective from the date
Virginia Power changes its facilities; or
(b) Request Virginia Power to remove the Excess
Facilities at no cost to Old Dominion at the time
Virginia Power changes its facilities.
5. If facilities are removed or rearranged under Paragraph 3. above,
Old Dominion will reimburse Virginia Power as follows:
(a) When rights-of-way for such service are utilized for
a period of less than 10 years, Old Dominion will pay
Virginia Power the total cost of acquiring all
rights-of-way which are abandoned within twelve
months after any aforesaid event,
plus
(b) The original installed cost (for line facilities,
being the year's average
<PAGE>
Appendix J
Page 3 of 7
installed cost on units of property installed
throughout Virginia Power's system in each calendar
year) - plus - the estimated removal cost - less -
salvage on all Virginia Power facilities installed to
provide such service and removed as a result of any
such event,
and if applicable,
(c) The original installed cost (for line facilities,
being the year's average installed cost on units of
property installed throughout Virginia Power's system
in each calendar year) to rearrange and/or relocate
such facilities to serve such Interconnection Point
-plus- the estimated cost to return such facilities
to their condition prior to serving such
Interconnection Point if such facilities are changed
as a result of any such event,
less
(d) A credit of 1/120th of such reimbursement for each
full month Virginia Power facilities at such
Interconnection Point were utilized to serve Old
Dominion, or its predecessor, except that no credit
will apply if such facilities were utilized for a
period less than three years.
6. If at any time all or any part of the Excess Facilities become
Normal Service Facilities, the Monthly Charge for Excess Facilities Service will
cease or will be adjusted to reflect such change.
VI. EXISTING EXCESS FACILITIES SERVICE
The Old Dominion Members have certain existing Excess Facilities
Service for which Old Dominion will pay Virginia Power the Monthly Rate as
provided in Paragraph III. of this Appendix J. These Excess Facilities Services
are listed on Pages 4 through 7 of this Appendix J.
VII. CHANGES IN MONTHLY RATE
Virginia Power shall have the right to unilaterally file with FERC for
a change in rates contained in this Appendix J under Section 205 of the Federal
Power Act and pursuant to the Commission's Rules and Regulations promulgated
thereunder. In addition, nothing contained herein shall limit or modify in any
respect Old Dominion's legal rights to oppose, in whole or in part, Virginia
Power's filing for a change in the rates contained in this Appendix J or to
complain of these rates pursuant to Section 206 of the Federal Power Act.
<PAGE>
Appendix J
Page 4 of 7
Type
of Excess
Cooperative and Delivery Point Facilities
- ------------------------------ ----------
B-A-R-C Electric Cooperative
Bustleburg Delivery Point Data Pulse
Callaghan Delivery Point Data Pulse
Cornwall Delivery Point Data Pulse
Effinger Delivery Point Data Pulse
Fairfield Delivery Point Data Pulse
Fordwick Delivery Point Data Pulse
Goshen Delivery Point Data Pulse
Lexington Delivery Point Data Pulse
Mecklenburg Electric Cooperative
Barnes Junction Delivery Point Data Pulse
Beechwood Delivery Point Data Pulse
Belfield Delivery Point Data Pulse
Black Branch Delivery Point Data Pulse
Boydton Delivery Point Data Pulse
Brink Delivery Point Data Pulse
Clarksville Delivery Point Data Pulse
Climax Delivery Point Data Pulse
Crystal Hill 2 Delivery Point Data Pulse
Emporia Delivery Point Data Pulse
Freeman Delivery Point Data Pulse
Gasburg Delivery Point Data Pulse
Gretna Delivery Point Data Pulse
Grit Delivery Point Data Pulse
Hickory Grove Data Pulse
Huber Delivery Point Data Pulse
Hurt Delivery Point Data Pulse
Jones Store Delivery Point Data Pulse
Kerr Delivery Point Data Pulse
Mt. Airy Delivery Point Data Pulse
Northview Delivery Point Data Pulse
Omega Delivery Point Data Pulse
Shockoe Delivery Point Data Pulse
<PAGE>
Appendix J
Page 5 of 7
Type
of Excess
Cooperative and Delivery Point Facilities
- ------------------------------ ----------
Northern Neck Cooperative
Garner Delivery Point Data Pulse
Oak Grove Delivery Point Data Pulse
Office Hall Delivery Point Data Pulse
Passapatanzy Delivery Point Data Pulse
Sanders Data Pulse
Northern Virginia Electric Coop
Arcola Delivery Point Data Pulse
Bethel Delivery Point Data Pulse
Cardinal Totalized Metering
Catharpin Delivery Point Data Pulse
Country Club Delivery Point Data Pulse
Cub Run 2 Delivery Point Data Pulse
Godwin Delivery Point Alternate Circuits
Herndon Delivery Point Data Pulse
Hillsboro Delivery Point Data Pulse
Independent Hill Data Pulse
Johnson 3 Delivery Point Data Pulse
Lindendale Delivery Point Data Pulse
Middleton Delivery Point Data Pulse
Minnieville Delivery Point Data Pulse
Moore Delivery Point Data Pulse
Smoketown Delivery Point Data Pulse
Sowego 2 Delivery Point Data Pulse
Wellington Delivery Point Data Pulse
Prince George Electric Cooperative
Bakers Pond Delivery Point Data Pulse
Garysville Delivery Point Data Pulse
Prince George Delivery Point Data Pulse
Wakefield Delivery Point Data Pulse
Waverly Delivery Point Data Pulse
Waverly 2 Delivery Point Data Pulse
<PAGE>
Appendix J
Page 6 of 7
Type
of Excess
Cooperative and Delivery Point Facilities
- ------------------------------ ----------
Rappahannock Electric Coop
Bear Island Delivery Point Data Pulse
Brandy Delivery Point Data Pulse
Clancie Delivery Point Data Pulse
Cuckoo Delivery Point Data Pulse
Culpeper #1 Delivery Point Data Pulse
Decapolis Delivery Point Data Pulse
Greenwood Delivery Point Data Pulse
Goldmine Delivery Point Data Pulse
Kings Dominion Delivery Point Data Pulse
Locust Grove Data Pulse
Millers Tavern Delivery Point Data Pulse
Mitchell Delivery Point Data Pulse
North Doswell Delivery Point Data Pulse
Oak Shade Delivery Point Data Pulse
Orchid Delivery Point Data Pulse
Orleans Delivery Point Data Pulse
Paytes Delivery Point Data Pulse
Proffit Delivery Point Data Pulse
Slabtown Delivery Point Data Pulse
St. Johns Church 3 Delivery Point Data Pulse
Unionville Delivery Point Data Pulse
Warrenton Delivery Point Data Pulse
Wilderness Delivery point Data Pulse
Shenandoah Valley Electric Coop
Barterbrook Delivery Point Data Pulse
Brands Delivery Point Data Pulse
Cold Springs Delivery Point Data Pulse
Columbia Furnace Delivery Point Data Pulse
Crimora Delivery Point Data Pulse
Dayton Delivery Point Data Pulse
Gardner Springs Delivery Point Data Pulse
Mt. Jackson Delivery Point Data Pulse
North River Delivery Point Data Pulse
Timberville Delivery Point Data Pulse
Trimbles Mill Delivery Point Data Pulse
Woodstock Delivery Point Data Pulse
<PAGE>
Appendix J
Page 7 of 7
Type
of Excess
Cooperative and Delivery Point Facilities
- ------------------------------ ----------
Southside Electric Cooperative
Altavista Delivery Point Data Pulse
Amelia Delivery Point Data Pulse
Center Star Delivery Point Data Pulse
Cherry Hill Delivery Point Data Pulse
Danieltown Delivery Point Data Pulse
Drakes Branch Delivery Point Data Pulse
Evergreen Delivery Point Data Pulse
Fort Pickett Delivery Point Data Pulse
Gary Delivery Point Data Pulse
Gladys Delivery Point Data Pulse
Hooper Delivery Point Data Pulse
Madisonville Delivery Point Data Pulse
Martins Delivery Point Data Pulse
Moran Delivery Point Data Pulse
Nutbush Delivery Point Data Pulse
Pointon Delivery Point Data Pulse
Powhatan 2 Delivery Point Data Pulse
Reams 2 Delivery Point Data Pulse
Redhouse Delivery Point Data Pulse
Stoddert Delivery Point Data Pulse
Victoria Delivery Point Data Pulse
<PAGE>
Appendix K
Page 1 of 2
APPENDIX K
VIRGINIA ELECTRIC AND POWER COMPANY
MONTHLY STATEMENT TO OLD DOMINION
MONTH OF 19
(1) Total Operation and Maintenance Charges (A)
(2) New Investment including Nuclear Fuel
(3) Supplemental Demand Charges (Appendix G)
(4) Supplemental Energy Charges (Appendix G)
(5) Reserve Energy Charges (Appendix G)
(6) Reserve Capacity Charges (Appendix I)
(7) Transmission Service Charges
(8) Distribution Service Charges
(9) Rappahannock Wheeling Charge Credit
(10) Peaking Capacity Charges (Appendix G)
(11) Peaking Energy Charges (Appendix G)
(12) Cancellation Costs (ending December 1998)
(13) Facilities Charges (Appendix J)
(14) Clover Transmission Facilities Charge - 230 kV
(15) Clover Transmission Facilities Charge - 500 kV
(16) Economy Transactions
(17) Other (Specify)
TOTAL $ _______________
<PAGE>
Appendix K
Page 2 of 2
(A) Summary of Total Operation and Maintenance Charges from Appendix L:
<TABLE>
<CAPTION>
ESTIMATE ADJUSTMENT
(Month) (Year) (Month) (Year) TOTAL
-------------- --------------
<S><C>
North Anna Nuclear Station, Nuclear
Production Operation and
Maintenance Expenses
$ $ $
Other Nuclear Production Operation
and Maintenance Expenses
Administrative and General
Expenses
North Anna Switchyard
and Operation and Maintenance
Expenses
Interest
Revision ________
TOTAL $
________
</TABLE>
<PAGE>
Appendix L
Page 1 of 9
APPENDIX L
VIRGINIA POWER
NORTH ANNA NUCLEAR STATION
NUCLEAR PRODUCTION OPERATION AND MAINTENANCE EXPENSES
MONTH OF 19
(Month) Budget
I. BILLING FORMAT
<TABLE>
<CAPTION>
FERC ODEC's
ACCOUNT (Excludes Nuclear Fuel) Total Share(A)
- --------------------------------- ----- --------
<S><C>
Operation
(1) 517 Supervision and Engineering $ $
(2) 519 Coolants and Water
(3) 520 Steam Expenses
(4) 523 Electric Expenses
(5) 524 Miscellaneous Nuclear Power Expenses
(6) 525 Rents
(7) 928 Reg. Comm. - NRC
-------- --------
(8) Total Operation ________ ________
Maintenance
(9) 528 Supervision and Engineering
(10) 529 Structures
(12) 530 Reactor Plant Equip.
(13) 531 Electric Plant
________ ________
(14) Total Maintenance
________ ________
(15) Payroll Base
Payroll Add - On (C) Budget
(16) 926 Pensions
(17) 926 Benefits
(18) 408.1 Taxes
(19) 920 Success Share
(20) 926 OPEB
________ ________
(21) TotalPayroll Add - On ________ ________
(22) Total North Anna Direct O&M and Payroll Add - On $ $
________ ________
</TABLE>
See Footnotes of Appendix L, Page 9 of 9
<PAGE>
Appendix L
Page 2 of 9
VIRGINIA POWER
OTHER NUCLEAR PRODUCTION OPERATION AND MAINTENANCE EXPENSES
MONTH OF 19
(Month) Budget
<TABLE>
<CAPTION>
Va. Power
FERC Nuclear ODEC's
ACCOUNT (Excludes Nuclear Fuel) Support Share(B)
- ------------------------------- ------- --------
<S><C>
Operation
(1) 517 Supervision and Engineering $ $
(2) 519 Coolants and Water
(3) 520 Steam Expenses
(4) 523 Electric Expenses
(5) 524 Miscellaneous Nuclear Power Expenses
(6) 525 Rents
(7) 556 System nuclear control and load dispatching
(based on ratio of nuclear capacity to total Va. Power
owned capacity) ________ ________
(8) Total Operation ________ ________
Maintenance
(9) 528 Supervision and Engineering
(10) 529 Structures
(11) 530 Reactor Plant Equipment
(12) 531 Electric Plant
(13) 532 Miscellaneous Nuclear Plant ________ ________
(14) Total Maintenance ________ ________
(15) Payroll Base
Payroll Add - On (C) Budget
(16) 926 Pensions
(17) 926 Benefits
(18) 408.1 Taxes
(19) 920 Success Share
(20) 926 OPEB
-------- --------
(21) Total Payroll Add-On ________ ________
(22) Total Nuclear Production Support and Payroll Add-On $ $
-------- --------
</TABLE>
See Footnotes of Appendix L, Page 9 of 9
<PAGE>
Appendix L
Page 3 of 9
VIRGINIA POWER
ADMINISTRATIVE AND GENERAL EXPENSES
MONTH OF 19
Fixed Monthly A&G Fee for administrative
and general services as described in
Section 11.01(a), (b) and (c) $100,000.00
See Footnotes of Appendix L, Page 9 of 9
<PAGE>
Appendix L
Page 4 of 9
VIRGINIA POWER
NORTH ANNA NUCLEAR STATION
NUCLEAR PRODUCTION OPERATION AND MAINTENANCE EXPENSES
MONTH OF 19
ADJUSTMENT - ACTUAL vs. BUDGET
<TABLE>
<CAPTION>
Va. Power Va. Power ODEC's ODEC's
FERC (Month, Yr) (Month, Yr) Share of Share of
ACCOUNT (Excludes Nuclear Fuel) Actual Budget Actual (A) Budget (A) Adjustment
- ------- ----------------------- ------ ------ ---------- ---------- ----------
<S><C>
Operation
(1) 517 Supervision and Engineering $ $ $ $ $
(2) 519 Coolants and Water
(3) 520 Steam Expenses
(4) 523 Electric Expenses
(5) 524 Misc. Nuclear Power Expenses
(6) 525 Rents
(7) 928 Reg. Comm. - NRC _______ __________ _________ _______ _______
(8) Total Operation _______ __________ _________ _______ _______
Maintenance
(9) 528 Supervision and Engineering
(10) 529 Structures
(11) 530 Reactor Plant Equip.
(12) 531 Electric Plant
(13) 532 Miscellaneous Nuclear Plant _______ __________ _________ _______ _______
(14) Total Maintenance _______ __________ _________ _______ _______
(15) Payroll Base
Payroll Add - On (C) Actual Budget
(16) 926 Pensions
(17) 926 Benefits
(18) 408.1 Taxes
(19) 920 Success Share
(20) 926 OPEB _______ __________ _________ _______ _______
(21) Total Payroll Add-On _______ __________ _________ _______ _______
(22) Total North Anna Direct O&M
and Payroll Add-On $ $ $ $ $
_______ __________ _________ _______ _______
</TABLE>
See Footnotes of Appendix L, Page 9 of 9
<PAGE>
Appendix L
Page 5 of 9
VIRGINIA POWER
OTHER NUCLEAR PRODUCTION OPERATION
AND MAINTENANCE EXPENSES
MONTH OF 19
ADJUSTMENT - ACTUAL vs. BUDGET
<TABLE>
<CAPTION>
Va. Power Va. Power ODEC's ODEC's
FERC (Month, Yr) (Month, Yr) Share of Share of
ACCOUNT (Excludes Nuclear Fuel) Actual Budget Actual (B) Budget (B) Adjustment
- ------- ----------------------- ------ ------ ---------- ---------- ----------
<S><C>
Operation
(1) 517 Supervision and Eng. $ $ $ $ $
(2) 519 Coolants and Water
(3) 520 Steam Expenses
(4) 523 Electric Expenses
(5) 524 Misc. Nuclear Pwr. Exp.
(6) 525 Rents
(7) 556 System Nuclear Control
and Load Dispatching (Based
on ratio of nuclear capacity to
total Va. Power owned
capacity) _______ __________ _________ _______ _______
(8) Total Operation _______ __________ _________ _______ _______
Maintenance
(9) 528 Supervision and Engineering
(10) 529 Structures
(11) 530 Reactor Plant Equipment
(12) 531 Electric Plant
(13) 532 Misc. Nuclear Plant _______ __________ _________ _______ _______
(14) Total Maintenance _______ __________ _________ _______ _______
(15) Payroll Base
Payroll Add - On (C) Actual Budget
(16) 926 Pensions
(17) 926 Benefits
(18) 408.1 Taxes
(19) 920 Success Share
(20) 926 OPEB_________ _______ __________ _________ _______ _______
(21) Total Payroll Add-On _______ __________ _________ _______ _______
(22) Total Nuclear Production
Support and payroll add-on $ $ $ $ $
_______ __________ _________ _______ _______
</TABLE>
See Footnotes of Appendix L, Page 9 of 9
<PAGE>
Appendix L
Page 6 of 9
VIRGINIA POWER
NORTH ANNA SWITCHYARD
OPERATION AND MAINTENANCE EXPENSES
MONTH OF 19
<TABLE>
<CAPTION>
FERC
ACCOUNT (Month, Year) ODEC's
- ------- Actual Share (D)
-------------- ---------
<S><C>
Operation
(1) 560 Supervision and Engineering
(2) 562 Station Expenses
(3) 563 Overhead Line Expenses
(4) 566 Miscellaneous Trans. Expenses
(5) 567 Rents ______________ ____________
(6) Total Operation ______________ ____________
Maintenance
(7) 568 Supervision and Engineering
(8) 569 Structures
(9) 570 Station Equipment
(10) 571 Overhead lines
(11) 573 Miscellaneous Trans. Plant ______________ ____________
(12) Total Maintenance ______________ ____________
(13) Payroll Base
Payroll Add-On Actual
(14) 926 Pensions
(15) 926 Benefits
(16) 408.1 Taxes
(17) 920 Success Share
(18) 926 OPEB ______________ ____________
(19) Total Payroll Add-On ______________ ____________
(20) Total O&M and Payroll Add-On $ $
______________ ____________
</TABLE>
See Footnotes of Appendix L, Page 9 of 9
<PAGE>
Appendix L
Page 7 of 9
VIRGINIA POWER
INTEREST RATE CALCULATION
FOR BILLINGS TO OLD DOMINION
For the period (Month, Day, Year) through (Month, Day, Year) the per annum
interest rate equal to the weighted cost of short-term financing was _______%.
This was based on the prime rate at Chase Manhattan Bank. The rate was
calculated as follows:
Time Period Days Interest Rate Factor
- ----------- ---- ------------- ------
---- ---------- ------
Total ____ __________ ______
Interest Rate (Factor)/Days = _____%
<TABLE>
<S><C>
NORTH ANNA True-Up Amount x Interest Rate x Proration = Interest Amount
-------------- ------------- --------- ---------------
</TABLE>
Operation and Maintenance
New Investment
See Footnotes of Appendix L, Page 9 of 9
<PAGE>
Appendix L
Page 8 of 9
VIRGINIA POWER
ADMINISTRATIVE AND GENERAL EXPENSES
MONTH OF 19
ACTUAL
II. A&G INFORMATION FORMAT
<TABLE>
<CAPTION>
FERC
ACCOUNT
- -------
Virginia
Operation Power
--------- --------
<S><C>
(1) 920 Administrative and General Salaries $
(2) 921 Office Supplies and Expense
(3) 922 Administrative Expense and Transferred Credit
(4) 923 Outside Services
(5) 924 Property Insurance
(6) 925 Injuries and Damages
(7) 927 Franchise Requirement
(8) 928 Regulatory Commission Expenses
(9) 929 Duplicate Charges - Credit
(10) 930.1 Misc. - Gen. Advertising Expenses
930.2 Misc. General Expense
(11) 931 Rents _______
(12) Total Operation _______
Maintenance
(13) 935 Maintenance of Gen. Plant _______
(14) Payroll Base _______
Payroll Add-On (C) Actual
(15) 926 Pensions
(16) 926 Benefits
(17) 408.1 Taxes
(18) 920 Success Share
(19) 926 OPEB
-------
(20) Total Payroll Add - On _______
(21) Total A&G and Payroll Add-On $
_______
</TABLE>
See Footnotes of Appendix L, Page 9 of 9
<PAGE>
Appendix L
Page 9 of 9
FOOTNOTES
(A) Costs of the North Anna Power Station will be allocated to Old Dominion
based on its ownership percentage. Costs will be determined in
accordance with Section 11.01 of the I&O Agreement.
(B) Costs of the nuclear support function will be allocated to Old Dominion
based on the ratio of Old Dominion's entitlement to nuclear capacity,
to total nuclear capacity in commercial operation.
(C) Old Dominion will pay its pro rata share of employee pensions and
benefits which are charged to administrative and general expenses,
based on the ratio of pension and benefit cost to total payroll. The
aforementioned ratio will be applied to salaries and wages included in
the various operation and maintenance expense accounts. Also, Old
Dominion will pay its pro rata share of payroll taxes based on the
ratio of payroll taxes to total payroll.
(D) Costs of the North Anna switchyard will be allocated to Old Dominion
based on Old Dominion's sixty percent (60%) ownership allocation of
certain switchyard facilities times Old Dominion's ownership
percentage.
<PAGE>
Appendix M
Page 1 of 3
APPENDIX M
PEAKING CAPACITY AND ENERGY
I. Peaking Capacity
Peaking Capacity shall be calculated in accordance with Section
8.03(a) and (e) and the following
PC(y) = MODMDD(y-1) x 0.04 + PC(y-1)
Where y is equal to the year's index,
PC(y) = Peaking Capacity in year y
PC(y-1) = Peaking Capacity in year prior to year y
MODMDD (y-1) = Maximum Old Dominion Monthly Delivered Demand in
year prior to year y
This equation begins with year (y) = 1996
II. Peaking Energy
Peaking Energy will be determined based upon a forecast of Old
Dominion projected hourly delivered loads excluding SEPA and adjusted for
losses. These loads will be sorted in descending order and shall be referred to
as the Old Dominion "Load Duration Curve." The Peaking Energy shall be
calculated based upon the following equation:
hp
PCe = (SIGMA) ODMD - P + P\c\
h = 0
Where,
PC\e\ = Peaking Energy
ODMD = Old Dominion Monthly Demand for each hour
P = The maximum 60 minute Old Dominion Monthly Demand for the
year
PC = Peaking Capacity for the year
<PAGE>
Appendix M
Page 2 of 3
h = The hourly index
hT = The total number of hours during the year.
hp = That hour where ODMD equals the maximum 60 minute Old Dominion
Monthly Demand for the year less the Peaking Capacity for the
year.
An illustration of the peaking energy for a sample year follows.
<PAGE>
Appendix O
Page 3 of 3
OLD DOMINION LOAD DURATION CURVE
ANNUAL BASIS
[GRAPH APPEARS HERE - PLOT POINTS NEEDED]
<PAGE>
Specifications for Service for
Network Integration Transmission Service
to Old Dominion Electric Cooperative
The Specifications for the provision of Network Integration
Transmission Service by Virginia Electric and Power Company to Old Dominion
Electric Cooperative are as follows:
VIRGINIA POWER UNITS:
<TABLE>
<CAPTION>
Dependable Capacity Dependable Capacity
Generation Resource Resource Location Summer MW Winter MW
------------------- ----------------- -------- ---------
<S> <C>
Nuclear:
North Anna 1 Mineral VA 893 893
North Anna 2 Mineral VA 897 897
Surry 1 Surry VA 801 801
Surry 2 Surry VA 801 801
Coal:
Bremo 3 Bremo Bluff VA 71 74
Bremo 4 Bremo Bluff VA 156 160
Chesapeake 1 Chesapeake VA 111 111
Chesapeake 2 Chesapeake VA 111 111
Chesapeake 3 Chesapeake VA 156 162
Chesapeake 4 Chesapeake VA 217 221
Chesterfield 3 Chester VA 100 105
Chesterfield 4 Chester VA 166 171
Chesterfield 5 Chester VA 326 333
Chesterfield 6 Chester VA 658 671
Clover 1 Clover VA 441 441
Clover 2 Clover VA 441 441
Mt. Storm 1 Mt. Storm WV 533 545
</TABLE>
<PAGE>
-2-
<TABLE>
<CAPTION>
Dependable Capacity Dependable Capacity
Generation Resource Resource Location Summer MW Winter MW
------------------- ----------------- ---------- ---------
<S> <C>
Mt. Storm 2 Mt. Storm WV 533 545
Mt. Storm 3 Mt. Storm WV 521 536
Possum Pt. 3 Dumfries VA 101 105
Possum Pt. 4 Dumfries VA 221 221
Yorktown 1 Yorktown VA 159 163
Yorktown 2 Yorktown VA 167 172
North Branch (R/S) Bayard WV 74 77
Heavy Oil:
Possum Pt. 1 Dumfries VA 74 74
Possum Pt. 2 Dumfries VA 69 71
Possum Pt. 5 Dumfries VA 786 801
Yorktown 3 Yorktown VA 818 820
Hydro:
Conventional 324 324
Bath County Warm Springs VA 1,260 1,260
Combustion Turbine:
Bellemeade (R/S) 230 250
Chesterfield 7 Chester VA 197 232
Chesterfield 8 Chester VA 200 235
</TABLE>
<PAGE>
-3-
NON-UTILITY GENERATORS:
<TABLE>
<CAPTION>
Dependable Capacity Dependable Capacity Contract
Generation Resource Resource Location Summer kW Winter kW Expiration
------------------- ----------------- --------- --------- ----------
<S> <C>
Stone Container Hopewell VA 38,362 38,362 10/25/2004
Westvaco Convington VA 55,000 55,000 06/17/2001
Merck & Company Elkton VA 1,901 1,901 06/13/2003
Chapman Dam Woodstock VA 72 72 10/16/2004
Coiners Mill Dooms VA 10 10 12/29/2013
Chesapeake West Point VA 35,000 35,000 11/09/2000
Norfolk Naval Shipyard Portsmouth VA 0 0 04/26/2003
Emporia Hydro Emporia VA 1,100 1,100 03/20/2006
Park 500 Hopewell VA 10,000 10,000 12/30/2003
Columbia Mills Buena Vista VA 259 259 02/06/2015
Alexandria MSW Alexandria VA 19,500 01/28/2023
Cogentrix - Hopewell Hopewell VA 88,500 88,500 01/09/2008
Scott Energy Amelia VA 2,500 2,500 12/28/2015
Cogentrix - Portsmouth Portsmouth VA 11,500 115,000 06/08/2008
Union Camp Franklin VA 14,000 14,000 08/26/2006
Banister Halifax VA 100 100 09/27/2008
Harvell Petersburg VA 100 100 06/29/2012
Lakeview Hydro Colonial Heights VA 100 100 12/21/2008
Richmond Power Enterprises Richmond VA 230,256 250,000 03/12/2016
Hopewell Cogen, LP Hopewell VA 335,200 398,690 07/30/2015
Doswell #1 Doswell VA 302,500 363,000 05/09/2017
Doswell #2 Doswell VA 302,500 363,000 05/02/2017
Ogden-Martin Fairfax Fairfax VA 57,000 57,000 05/24/2015
Rivanna Water & Sewer Charlottesville VA 100 100 04/28/1998
Battersea Dam Ettrick VA 100 100 12/31/2015
Weyerhaeuser Plymouth NC 0 0 07/26/1997
Fries Hydro Fries VA 2,400 2,400 05/19/1999
LG&E-Westmoreland Altavista Altavista VA 62,700 62,700 02/21/2017
LG&E-Westmoreland Hopewell Hopewell VA 62,700 62,700 06/30/2017
</TABLE>
<PAGE>
-4-
<TABLE>
<CAPTION>
Dependable Capacity Dependable Capacity Contract
Generation Resource Resource Location Summer kW Winter kW Expiration
------------------- ----------------- --------- --------- ----------
<S> <C>
LG&E-Westmoreland Southhampton Southampton VA 62,700 62,700 03/06/2017
Brasfield Dam Petersburg VA 2,500 2,500 10/11/2013
Schoolfield Dam Danville VA 3,000 3,000 11/30/2015
Roanoke Valley Project Halifax Co. NC 165,000 167,200 05/28/2019
Cogentrix - Rocky Mount Rocky Mount NC 115,500 115,500 10/14/2015
Cogentrix of Richmond - Unit 1 Richmond VA 115,500 115,500 07/31/2017
Cogentrix of Richmond - Unit 2 Richmond VA 93,500 93,024 07/31/2017
Commonwealth Atlantic LP Chesapeake VA 312,004 375,001 06/04/2017
Gordonsville Energy L.P. I Louisa Co. VA 108,702 143,902 05/31/2024
Gordonsville Energy L.P. II Louisa Co. VA 108,702 143,902 05/31/2024
Mecklenburg Clarksville VA 132,000 132,000 11/05/2017
Multitrade of Pittsylvania Co., LP Pittsylvania Co. VA 75,312 79,500 06/14/2019
Panda-Rosemary Roanoke Rapids NC 165,000 198,000 12/26/2015
Boydton Plank Road Dinwiddie Co. VA 3,000 3,000 12/29/2017
Wythe Park Power #2 Petersburg VA 3,000 3,000 12/31/2004
Wythe Park Power #3 Richmond VA 3,000 3,000 07/28/2006
Core-Chesterfield Chesterfield Co. VA 3,000 3,000 06/12/1997
Dale Chesterfield Co. VA 3,000 3,000 03/28/1998
I-95 Landfill Lorton VA 3,000 3,000 12/31/2011
Roanoke Valley II Halifax Co. NC 44,000 45,100 05/31/2020
SEI Birchwood King George Co. VA 217,800 222,200 11/14/2021
WE GEN Inc. Halifax Co. VA 2,900 2,900 06/28/2022
Baker Cogeneration Richmond VA 3,000 3,000 02/08/2022
Suffolk Landfill #1 Suffolk VA 3,000 3,000 11/03/2014
Handcraft Richmond VA 3,000 3,000 02/23/2022
Wiccacon Hertford Co. NC 5,000 5,000 12/30/2009
I-95 Phase II Lorton VA 3,000 3,000 02/09/2013
Johnston Willis Chesterfield Co. VA 3,000 3,000 03/15/2022
William Byrd Henrico Co. VA 3,000 3,000 12/01/2022
Carver Heights Chesterfield Co. VA 1,500 1,500 12/30/2008
</TABLE>
<PAGE>
-5-
<TABLE>
<CAPTION>
Dependable Capacity Dependable Capacity Contract
Generation Resource Resource Location Summer kW Winter kW Expiration
------------------- -------------------- --------- --------- ----------
<S> <C>
Richmond Electric Generation Henrico Co. VA 2,900 2,900 08/26/2013
Kirk Lumber Suffolk VA 0 0 08/05/1997
Lanier Road Goochland Co. VA 3,000 3,000 12/30/2022
Lewiston NUG Lewiston NC 5,000 5,000 12/30/2013
Woodville NUG Woodville NC 5,000 5,000 12/30/2013
Robersonville NUG Robersonville NC 5,000 5,000 12/30/2013
</TABLE>
<PAGE>
-6-
PURCHASES:
<TABLE>
<CAPTION>
Dependable Capacity Dependable Capacity Contract
Generation Resource Resources Location Summer KW Winter KW Expiration
------------------- --------------------- --------- --------- ----------
<S> <C>
AEP/Rockport Spencer County IN 455 455 12/31/1999
AEP System Capacity 45 45 12/31/1999
Hoosier/Merom Bloomington ID 400 400 12/31/1999
</TABLE>
<PAGE>
-7-
POINTS OF DELIVERY
B-A-R-C EC
<TABLE>
<CAPTION>
Name/Description Delivered Voltage (kV) 1996 Summer NCP (kW) 1996-97 Winter NCP (kW)
- ---------------- ---------------------- -------------------- -----------------------
<S> <C>
BUSTLEBURG 115.0 3,007 4,956
CALLAGHAN 46.0 9,075 15,251
GOSHEN 46.0 8,963 12,522
LEXINGTON 12.5 1,363 1,733
CORNWALL 46.0 2,376 3,069
FORDWICK 23.0 1,932 2,572
FAIRFIELD 23.0 1,195 1,890
EFFINGER 115.0 N/A 3,370
COMMUNITY EC
BLACK CREEK 13.2 1,847 2,335
COURTLAND 13.2 2,397 3,027
HANDSOM 115.0 1,978 3,043
HOLLAND 115.0 5,023 6,661
LUMMIS 12.5 2,413 2,954
PAGAN 13.2 6,143 8,058
SADLERS 12.5 2,417 2,789
WINDSOR 115.0 6,528 7,469
HARRELLS 13.2 1,387 1,459
NOTTOWAY 34.5 2,835 2,520
MECKLENBURG EC
BEECHWOOD 115.0 9,206 11,309
BLACK BRANCH 69.0 4,113 3,993
BRINKS 115.0 2,063 4,673
CLARKSVILLE 115.0 3,701 3,763
</TABLE>
<PAGE>
-8-
<TABLE>
<CAPTION>
Name/Description Delivered Voltage (kV) 1996 Summer NCP (kW) 1996-97 Winter NCP (kW)
- ---------------- ---------------------- --------------------- ------------------------
<S> <C>
MECKLENBURG EC
(continued)
CLIMAX 69.0 4,770 4,907
EMPORIA 115.0 2,000 1,823
FREEMAN 115.0 4,934 4,522
GASBURG 69.0 7,272 7,930
GRETNA 69.0 5,566 5,897
GRIT 115.0 2,927 2,818
HICKORY GROVE 115.0 4,267 5,054
JONES STONE 69.0 3,358 3,422
MT. AIRY 69.0 2,789 2,837
NORTHVIEW 115.0 2,265 2,126
OMEGA 115.0 6,077 6,374
BOYDTON 115.0 3,461 3,307
BARNES JUNCTION 115.0 3,547 3,792
SHOCKOE 69.0 3,811 3,250
KERR 115.0 1,656 1,310
MECKGEN 115.0 3,456 3,514
MECKGEN 2 115.0 922 634
CRYSTAL HILL 2 115.0 7,910 8,842
BELFIELD 115.0 7,868 8,876
HURT #1 115.0 N/A N/A
HURT #2 115.0 N/A N/A
HUBER 115.0 7,248 7,344
NORTHERN NECK EC
CROSS HILL 12.5 883 1,275
FOLLY 34.5 3,283 4,802
GARNER 115.0 12,877 16,590
OAK GROVE 34.5 8,669 8,316
</TABLE>
<PAGE>
-9-
<TABLE>
<CAPTION>
Name/Description Delivered Voltage (kV) 1996 Summer NCP (kW) 1996-97 Winter NCP (kW)
- ---------------- ---------------------- ----------- -------- ------------------------
<S> <C>
NORTHERN NECK EC
(continued)
OFFICE HALL 13.2 3,038 4,500
PASSAPATANZY 13.2 3,314 4,289
SANDERS 230.0 10,234 14,966
NORTHERN VIRGINIA EC
INDEPENDENT HILL 115.0 15,391 22,281
ARCOLA 115.0 4,162 4,824
BETHEL 115.0 13,571 9,222
CATHARPIN 115.0 5,126 5,789
COUNTRY CLUB 115.0 16,358 22,886
HARRISION 115.0 78,480 109,440
HERNDON 34.5 4,200 3,850
HILLSBORO 34.5 5,683 8,379
LINDENDALE 115.0 22,598 22,560
MIDDLETON 13.2 1,646 2,649
MINNIEVILLE 115.0 7,963 8,400
MOORE 34.5 8,749 15,210
MT. WEATHER 34.5 2,948 3,133
SMOKETOWN 115.0 25,998 18,619
WELLINGTON 115.0 8,010 9,048
GODWIN 115.0 950 317
SOWEGO 2 115.0 14,962 25,848
CARDINAL 115.0 17,271 23,613
CUB RUN 2 230.0 33,670 31,416
INDEPENDENT HILL 2 115.0 4,946 7,482
CEDAR GROVE 115.0 9,573 13,630
GAINESVILLE 2 115.0 79,315 80,179
JOHNSON 3 230.0 17,069 12,835
</TABLE>
<PAGE>
-10-
<TABLE>
<CAPTION>
Name/Description Delivered Voltage (kV) 1996 Summer NCP (kW) 1996-97 Winter NCP (kW)
- ---------------- ----------------------- --------------------- -----------------------
<S> <C>
NORTHERN VIRGINIA EC
(continued)
JOHNSON 4 230.0 16,710 14,090
CLARKS GAP 34.5 3,276 5,733
GODWIN #2 (REC) 115.0 2,920 2,746
PRINCE GEORGE EC
BEECHLAND 34.5 2,779 3,934
PRINCE GEORGE 13.2 5,388 7,209
SPRING GROVE 13.2 2,147 2,143
WAKEFIELD 13.2 1,933 2,601
WILKERSONS CORNER 13.2 594 824
BACONS CASTLE 13.2 932 1,432
BOOKER 13.2 511 582
ROWANTA 13.2 1,231 1,382
GARYSVILLE 13.2 3,980 4,389
BAKERS POND 115.0 13,430 17,645
WAVERLY #2 115.0 3,648 3,871
RAPPAHANNOCK EC
BEAR ISLAND FIRM 230.0 98,112 100,170
BRANDY 115.0 2,952 3,250
CUCKOO 13.2 4,315 5,626
CULPEPER NO.1 13.2 13,209 14,285
CULPEPER NO.2 12.5 2,324 4,599
DECAPOLIS 34.5 4,975 6,070
GOLDMINE 13.2 5,698 8,813
GREENWOOD 115.0 49,040 81,216
KINGS DOMIINION 115.0 24,192 27,360
</TABLE>
<PAGE>
-11-
<TABLE>
<CAPTION>
Name/Description
- ----------------
Delivered Voltage (kV) 1996 Summer NCP (kW) 1996-97 Winter NCP (kW)
----------------------- --------------------- ----------------------
<S> <C>
RAPPAHANNOCK EC
(continued)
LOCUST GROVE 115.0 18,266 26,777
MILLERS TAVERN 34.5 2,593 3,388
NORTH DOSWELL 115.0 8,554 8,026
OAK SHADE 34.5 4,774 7,099
ORANGE 12.5 1,690 1,970
ORCHID 13.2 3,655 5,999
ORLEANS 34.5 4,200 6,174
PAYTES 34.5 14,386 15,042
SLABTOWN 115.0 11,846 12,653
ST. JOHNS CHURCH #1 115.0 37,557 49,099
UNIONVILLE 13.2 2,998 3,568
WARRENTON 34.5 4,356 5,353
WHITE SHOP 13.2 1,150 1,813
WILDERNESS 12.5 11,128 23,597
WOODPECKER 115.0 2,323 2,338
NORTH ANNA 115.0 N/A N/A
FOUR RIVERS 230.0 2,400 3,200
FOUR RIVERS 2 230.0 3,000 2,400
ELK RUN 115.0 934 947
CLANCIE 34.5 746 1,044
PROFFIT 230.0 20,880 31,104
MITCHELL 115.0 3,128 3,115
</TABLE>
<PAGE>
-12-
<TABLE>
<CAPTION>
Name/Description Delivered Voltage (kV) 1996 Summer NCP (kW) 1996-97 Winter NCP (kW)
- ---------------- ----------------------- --------------------- ----------------------
<S> <C>
SHENANDOAH VALLEY EC
BRANDS 115.0 9,274 12,624
COLD SPRING 23.0 2,525 2,671
CRIMORA 23.0 4,748 7,304
DAYTON 115.0 16,534 18,134
GARDNER SPRINGS 23.0 3,586 4,545
MT. JACKSON 34.5 5,385 6,439
NORTH RIVER 115.0 8,996 7,181
TIMBERVILLE 115.0 23,846 25,229
TRIMBLES MILL 115.0 6,086 8,534
COLUMBIA FURNACE 23.0 2,442 3,198
WOODSTOCK 34.5 3,291 4,392
ELKTON (COORS) 115.0 6,350 6,451
STUARTS DRAFTS 115.0 14,112 17,251
BARTERBROOK 115.0 5,731 5,347
SOUTHSIDE EC
ALTAVISTA 12.5 3,422 3,614
AMELIA 34.5 7,373 10,454
FORT PICKETT 115.0 11,701 11,050
CENTER STAR 34.5 5,361 8,030
CHERRY HILL 34.5 2,541 3,049
DANIELTOWN 69.0 4,992 6,106
DRAKES BRANCH 12.5 3,186 3,701
EVERGREEN 34.5 2,345 2,880
GARY 115.0 3,168 3,395
GLADYS 69.0 4,399 5,386
HOOPER 115.0 3,845 4,651
MADISONVILLE 34.5 3,763 4,973
</TABLE>
<PAGE>
-13-
<TABLE>
<CAPTION>
Name/Description Delivered Voltage (kV) 1996 Summer NCP (kW) 1996-97 Winter NCP (kW)
- ---------------- ----------------------- --------------------- ----------------------
<S> <C>
SOUTHSIDE EC
(continued)
MARTINS 115.0 2,634 2,666
MORAN 115.0 6,398 8,371
NUTBUSH 115.0 5,389 4,786
POINTON 34.5 2,667 2,995
REDHOUSE-NEW 115.0 9,024 11,688
STODDERT 34.5 2,506 3,043
REAMS 2 115.0 14,933 20,966
VICTORIA 115.0 2,112 5,386
POWHATAN #2 34.5 10,146 17,444
</TABLE>
<PAGE>
Service Agreement For
Network Integration Transmission Service
To Old Dominion Electric Cooperative
THIS AGREEMENT is made as of this 29th day of July, 1997, by and between
Virginia Electric and Power Company (hereinafter called "Transmission
Provider"), and Old Dominion Electric Cooperative (hereinafter called
"Transmission Customer").
In consideration of the mutual covenants and agreements herein
contained, the Parties hereto agree as follows:
1. Transmission Provider agrees to furnish, and Transmission Customer
agrees to take and pay for, Network Integration Transmission Service
pursuant to Transmission Provider's FERC Transmission Tariff Volume No.
5, as modified from time to time. The terms and conditions of the Tariff
are incorporated herein and made a part hereof. Nothing contained herein
shall be construed as affecting in any way Transmission Provider's right
to unilaterally make application to the Federal Energy Regulatory
Commission, or other regulatory agency having jurisdiction, for any
change in the Tariff or this Service Agreement under Section 205 of the
Federal Power Act, or other applicable statute, and any rules and
regulations promulgated thereunder; or Transmission Customer's rights
under the Federal Power Act and rules and regulations promulgated
thereunder.
<PAGE>
-2-
2. The specifications of service shall be agreed to from time to time by
Transmission Provider and Transmission Customer. Changes in the
specifications do not require amendment of the Service Agreement that
is filed with the FERC unless the changes in specifications result in
changes in the charges to Transmission Customer for Network Integration
Transmission Service or related Ancillary Services.
3. The charge for Network Integration Transmission Service over
Transmission Provider's Transmission System to Transmission Customer
shall be the rate set out in Schedule 9 of the Tariff, applied to the
difference between Transmission Customer's Network Load and any SEPA
capacity for which the Transmission Provider receives payment for
transmission service pursuant to another contract. In addition,
Transmission Customer shall pay a proportional share of Redispatch Costs
based on the ratio of its Network Load to the sum of all Network Loads
and Transmission Provider's Native Load. In the event that Transmission
Customer requests service from Network Resources or to delivery points
that are not listed in the specifications for service commencing January
1, 1998, and Transmission Provider must construct additional
transmission facilities or redispatch generation in order to provide
such service, Transmission Provider may seek to amend this Service
Agreement to provide for Transmission Customer to pay for such
transmission service on an incremental basis pursuant to the policies of
the Commission. Any fuel costs that Transmission Customer pays as a
result of
<PAGE>
-3-
redispatch charges pursuant to this section that would otherwise be
included in fuel adjustment clause charges under the Interconnection and
Operating Agreement Between Virginia Electric and Power Company and Old
Dominion Electric Cooperative ("the I&O Agreement") will be excluded
from Transmission Customer's fuel adjustment clause charges under that
Agreement.
4. The charge for Distribution Service to Transmission Customer's
Distribution-level points of delivery is $.8193/kW month, multiplied by
Transmission Customer's maximum hourly demand coincident at all delivery
points served at distribution voltages, less capacity supplied to such
delivery points by SEPA, at production level. The charge for
Distribution Service includes the cost of delivery point meters provided
by Transmission Provider for service to Transmission Customer. The loss
factor for such Distribution Service is 0.6924%.
5. Transmission Customer's arrangements for Ancillary Services are
as follows:
Scheduling, System Control and Dispatch Service: For the period
January 1, 1998 through December 31, 2001, the rate shall be $.01133/kW
month, applied to the difference between Transmission Customer's Network
Load and any SEPA capacity for which Transmission Provider receives
payment for this service pursuant to another contract. Beginning January
1, 2002, Schedule 1 of the Tariff, as modified from time to time, shall
apply.
Reactive Supply and Voltage Control from Generation Sources
Service: For the period January 1, 1998 through December 31, 2001, the
rate shall be
<PAGE>
-4-
$.11000/kW month, applied to the difference between Transmission
Customer's Network Load and any SEPA capacity for which Transmission
Provider receives payment for this service pursuant to another contract,
less Transmission Customer's ownership entitlement in the North Anna and
Clover generating stations, for which Transmission Customer
self-supplies this service. Beginning January 1, 2002, Schedule 2 of the
Tariff, as modified from time to time, shall apply.
Regulation and Frequency Response Service: For the period January 1,
1998 through December 31, 2001, Transmission Customer shall purchase
this service from Transmission Provider at a rate of $6.72/kW month
applied to .71% of the difference between Transmission Customer's
Network Load and any SEPA capacity for which Transmission Provider
receives payment for this service pursuant to another contract.
Beginning January 1, 2002, Schedule 3 of the Tariff, as modified from
time to time, shall apply.
Energy Imbalance Service: For the period in which the dispatch of
all of Transmission Customer's Network Resources is controlled by
Transmission Provider, there is no charge for energy imbalance
service because those Network Resources are automatically
dispatched to meet Transmission Customer's entire Network Load.
Schedule 4, as modified from time to time, shall apply to any
Network Load served by Excluded Supplemental Capacity or Excluded
Peaking Capacity under the I&O Agreement.
<PAGE>
-5-
Operating Reserve -- Spinning Reserve Service: For the period
January 1, 1998 through December 31, 2001, Transmission Customer shall
purchase this service from Transmission Provider at a rate of
$8.59000/kW month, applied to 1.26% of difference between Transmission
Customer's Network Load and any SEPA capacity for which Transmission
Provider receives payment for this service pursuant to another contract.
Beginning January 1, 2002, Schedule 5 of the Tariff, as modified from
time to time, shall apply.
Operating Reserve -- Supplemental Reserve Service: For the period
January 1, 1998 through December 31, 2001, Transmission Customer shall
purchase this service from Transmission Provider at a rate of
$5.55000/kW month, applied to 1.26% of the difference between
Transmission Customer's Network Load and any SEPA capacity for which
Transmission Provider receives payment for this service pursuant to
another contract. Beginning January 1, 2002, Schedule 6 of the Tariff,
as modified from time to time, shall apply.
6. Transmission Customer shall maintain a minimum power factor of 97.3%
(lagging) at transmission-level delivery points and 99.0% (lagging) at
distribution level delivery points. Power factors shall be determined
based on the sums of the kW and rkva, respectively, for all of
Transmission Customer's transmission level or distribution level
delivery points within each of Transmission Provider's districts. If
Transmission Customer fails to maintain these power factors Transmission
Provider shall charge Transmission Customer for its historical
<PAGE>
-6-
reactive requirements at embedded cost rates and for its reactive
requirements in excess of historical levels on an incremental basis.
7. Transmission Customer may not assign the Service Agreement to any other
entity; provided that Transmission Customer may assign or transfer its
rights under this Agreement to the U.S. Government or any agency
thereof, the National Rural Utilities Cooperative Finance Corporation,
or any other financing institution solely as security for loans or
advances without the prior written consent of Transmission Provider.
8. This Service Agreement is subject to any present and future state and
federal laws, regulations, orders or other duly promulgated
requirements.
9. This Service Agreement shall become effective on January 1, 1998 and
shall have an initial term of four years. After the initial term, this
Service Agreement shall continue in effect until terminated by
Transmission Provider or Transmission Customer; provided that the
terminating Party must provide not less than one year's written notice
of termination.
<PAGE>
-7-
IN WITNESS HEREOF, the Parties have caused this Service Agreement to be
executed by their respective authorized officials.
VIRGINIA ELECTRIC AND POWER COMPANY
By: /s/J.T. Rhodes
--------------
Name: Dr. James T. Rhodes
Title: President and Chief Executive Officer
Date: July 29, 1997
OLD DOMINION ELECTRIC COOPERATIVE
By: /s/R.W. Watkins
---------------
Name: R. W. Watkins
Title: President and Chief Executive Officer
Date: July 29, 1997
<PAGE>
Network Operating Agreement
Between
Virginia Electric and Power Company
and
Old Dominion Electric Cooperative
Preamble
Virginia Electric and Power Company ("Transmission Provider") and Old
Dominion Electric Cooperative ("Transmission Customer") agree that the
provisions of this Network Operating Agreement ("Network Operating Agreement")
and the Service Agreement govern Transmission Provider's provision of Network
Integration Transmission Service to Transmission Customer in accordance with
Part III of the Open Access Transmission Tariff ("Tariff"), as it may be amended
from time to time. Unless specified herein, capitalized terms shall refer to
terms defined in the Tariff. 1. Control Area Requirements
1. Control Area Requirements
Transmission Provider shall be the Control Area Operator for the Network
Loads of Transmission Customer.
Transmission Provider and Transmission Customer shall plan, construct,
operate, and maintain their facilities and systems in accordance with Good
Utility Practice, which shall include, but not be limited to, all applicable
guidelines of NERC and SERC, as they may be modified from time to time, and any
generally accepted practices in the region that are consistently adhered to by
Transmission Provider.
<PAGE>
-2-
2. Redispatch Procedures
(a) If Transmission Provider determines that redispatching resources
(including reductions in off-system purchases and sales) to
relieve an existing or potential transmission constraint is the
most effective way to ensure the reliable operation of the
Transmission System, Transmission Provider will redispatch
Transmission Provider's and Transmission Customer's resources on
a least-cost basis, without regard to the ownership of such
resources. Transmission Provider will apprise Transmission
Customer of its redispatch practices and procedures, as they may
be modified from time to time.
(b) Transmission Customer shall submit to Transmission Provider
verifiable cost data for any Network Resources that Transmission
Provider does not dispatch, which estimate the cost to
Transmission Customer of changing the generation output of each
of its Network Resources. This cost data will be used, along with
similar data for Transmission Provider's resources, as the basis
for least-cost redispatch. Transmission Provider's bulk power
operations personnel will keep this data confidential, and will
not disclose it to Transmission Provider's marketing personnel.
If Transmission Customer experiences changes to the costs for
such Network Resources, Transmission Customer will submit those
changes to Transmission Provider's system operation center.
Transmission Provider will implement least-cost redispatch
consistent with its current practices and procedures for its own
<PAGE>
-3-
resources and its contract obligations with respect to any
purchased resources. Transmission Customer shall respond within
ten (l0) minutes to requests from Transmission Provider's
system operation center for redispatch of such Network
Resources that Transmission Provider does not dispatch.
(c) In addition to the rights that Transmission Customer may have
pursuant to other contracts with Transmission Provider,
Transmission Customer may audit, at its own expense, redispatch
events (such as the cause or necessity of the redispatch)
during normal business hours following reasonable notice to
Transmission Provider. Either Transmission Customer or
Transmission Provider may request an audit of the other Party's
cost data. Any audit of cost data shall be performed by an
independent agent at the requesting Party's cost. Such
independent agent shall be required to keep all cost data
confidential and not disclose such information to Transmission
Customer's marketing personnel or Transmission Provider's
marketing personnel.
(d) Once redispatch has been implemented, Transmission Provider
shall book in a separate account the redispatch costs incurred
by Transmission Provider and Transmission Customer based on the
submitted cost data.
3. Metering
(a) Unless otherwise agreed, Transmission Provider shall be
responsible for the purchase, installation, operation,
maintenance, repair and replacement of all
<PAGE>
-4-
metering equipment necessary to enable Transmission Provider to
provide Network Integration Transmission Service. Transmission
Customer shall reimburse Transmission Provider for the cost of
such meters through monthly charges as provided in the Service
Agreement. If Transmission Customer obtains energy from any
generator that is not owned or controlled by Transmission
Provider, Transmission Customer must either provide a non-
dynamic schedule between Control Areas or ensure that there is
sufficient metering to measure the amount of energy provided to
Transmission Provider's Control Area by that generator. All
metering equipment shall conform to Good Utility Practice and
the standards and practices of Transmission Provider's Control
Area. If Transmission Customer is responsible for metering,
then, prior to its installation, Transmission Provider shall
approve the type of metering equipment to ensure conformance
with such standards or practices, and such approval shall not be
unreasonably withheld.
(b) Electric capacity and energy received by Transmission Provider
from Transmission Customer shall be measured by meters installed
at Transmission Customer's Network Resources if such Network
Resources are electronically located within Transmission
Provider's Control Area. When measurement is made at any
location other than a Point of Receipt, suitable adjustment for
losses between the point of measurement and the
<PAGE>
-5-
Point of Receipt shall be agreed upon in writing between the
parties hereto and will be applied to all measurements so made.
Metered receipts used in billing and accounting hereunder shall
in all cases include adjustments for such losses.
(c) Electric capacity and energy delivered to Transmission
Customer's Network Load by Transmission Provider shall be
measured by meters installed at the Point(s) of Delivery to such
Network Loads. When measurement is made at any location other
than Point(s) of Delivery, suitable adjustment for losses
between the point of measurement and the Point(s) of Delivery
will be agreed upon in writing between the parties hereto and
will be applied to all measurements so made. Metering equipment
shall normally be installed on Transmission Customer's side of
the delivery point. Metered receipts used in billing and
accounting hereunder shall in all cases include adjustments for
such losses.
(d) Meters at Transmission Customer's Network Resources and Network
Loads shall be tested at least once every year. At the request
of either Party, a special test of any meter will be performed.
All costs of such a test will be paid by the Party requesting
the test, unless metering inaccuracy as defined in paragraph
3(e) is discovered, in which case costs will be borne by the
Party that owns the meter. Representatives of both parties shall
be afforded an opportunity to be present at all routine or
special tests. All meters will
<PAGE>
-6-
be sealed and seals will be broken only by the owning Party and
only when meters are to be tested or adjusted.
(e) In the event any metering equipment used to measure capacity and
energy is found to be inaccurate by more than one (l) percent or
is inoperable, the meter will be promptly replaced, repaired or
readjusted by the owner of the meter. Adjustments made for
metering inaccuracy or other meter malfunctions will be made for
the period the inaccuracy or malfunction is known, or for a
mutually agreed upon period, if not known. If agreement on the
period of adjustment cannot be reached, a period of three months
from the date of discovery of the inaccuracy or malfunction
shall be utilized.
(f) Either Party shall have the right to install check metering at
any Point(s) of Receipt or Delivery, as herein provided without
charge by the Party owning the metering equipment for the
purpose of checking the meters installed by the other Party.
(g) Each Party shall read any meters owned by it, except as may be
mutually agreed, and shall furnish to the other Party all meter
readings and other information required for operations and for
billing purposes. Such information shall remain available to the
other Party for three (3) years.
<PAGE>
-7-
4. Operating Data and Equipment Requirements
(a) Supervisory Control and Data Acquisition (SCADA) telemetry to
Transmission Provider is required for: (i) Transmission
Customer's aggregate Network Load; (ii) each Network Resource
that is designated by Transmission Customer after the date of
this Agreement; and (iii) each transmission-voltage delivery
point that is established after the date of this Agreement for
which such telemetry is determined by the Network Operating
Committee to be necessary to support the reliability of the
transmission system. Transmission Provider shall establish the
requirements for SCADA telemetry, the data to be received at its
system operations center and the protocol for communications
between Transmission Provider and Transmission Customer based on
Good Utility Practice and the reliability and security of the
system. Transmission Provider shall coordinate its decisions
concerning SCADA telemetry, data and communications protocols
with Transmission Customer to the extent it can reasonably do
so.
(b) Transmission Customer shall be responsible for the purchase,
installation, operation, repair and replacement of SCADA
telemetry equipment and protection equipment and any related
equipment and hardware that is required by this Agreement.
Transmission Customer also shall be responsible for implementing
any modifications to the SCADA software
<PAGE>
-8-
and communications protocols necessary to communicate
effectively with Transmission Provider.
5. Operating Requirements
(a) Transmission Customer shall operate its generating resources
inside Transmission Provider's Control Area (other than
resources operated by Transmission Provider) in a manner
consistent with that of Transmission Provider, following voltage
schedules, free governor response, meeting power factor
requirements at the points of interconnection with Transmission
Provider's system, and other such criteria required by NERC and
SERC and consistently adhered to by Transmission Provider.
(b) Transmission Customer shall develop a load curtailment plan that
provides for voltage reductions, voluntary load curtailments,
manual load shedding and automatic load shedding that is
comparable to the load curtailment plan that Transmission
Provider has for its Native Load Customers. Transmission
Provider and Transmission Customer shall work together to ensure
the integrity of the interconnected systems, with Transmission
Provider charged with the responsibility of initiating and
coordinating any load curtailments and the subsequent
restoration of these loads. Should Transmission Customer
willfully fail, in the absence of good cause, to reduce voltage
or shed load as required by Transmission Provider, it shall pay
a charge equal to $25.77/kW-month (as amended from time to time)
<PAGE>
-9-
multiplied by the amount of load that Transmission Customer
fails to curtail. Insofar as practicable, Transmission Provider
and Transmission Customer shall protect, operate, and maintain
their respective systems so as to avoid or minimize the
likelihood of disturbances which might cause impairment of
service on the system(s) of the other.
(c) In the event a temporary voltage reduction is required because
of any condition, Transmission Provider will notify Transmission
Customer as far in advance as practicable of its plan to reduce
voltage and the period for which such voltage reduction is
believed to be required and Transmission Customer will, upon
such notification, effect a similar true voltage reduction on
its system during the same period. Transmission Customer will be
notified immediately when a voltage reduction is planned to be
terminated.
(d) Transmission Customer shall maintain the capability to manually
shed its Network Load that is comparable to the capability of
Transmission Provider to manually shed the loads of its Native
Load Customers. When manual load shedding is necessary,
Transmission Provider shall notify Transmission Customer of the
required action and Transmission Customer shall comply within
ten (10) minutes. Transmission Provider shall require, on a non-
discriminatory basis, manual load shedding for Transmission
<PAGE>
-10-
Customer's Network Load unless otherwise required by
circumstances beyond the control of the Transmission Provider or
Transmission Customer.
(e) Prior to the date on which Transmission Customer serves any
portion of its Network Load using Excluded Supplemental Capacity
or Excluded Peaking Capacity under the I&O Agreement, the
Parties shall agree on load shedding capabilities and procedures
for that portion of Transmission Customer's Network Load.
(f) Transmission Customer shall provide, operate and maintain
in service automatic high-speed digital underfrequency load
shedding equipment that has the capability, together with
equipment installed by Transmission Provider, to disconnect
Transmission Customer's Network Load in a manner that is
comparable to Transmission Provider's automatic load shedding
capability for its Native Load. Such automatic load shedding
capability shall be established at frequency set points of 59.3
Hertz, 59.0 Hertz, and 58.5 Hertz, with no intentional time
delay. The requirement to maintain automatic load shedding
capability shall be phased in as agreed upon by Transmission
Provider and Transmission Customer and shall be fully
implemented by not later than January 1, 2002.
(g) In the event Transmission Provider modifies the load shedding
system, Transmission Customer shall, at its expense, make
corresponding changes to its equipment and the setting of such
equipment, as required.
<PAGE>
- 11 -
(h) Transmission Customer shall test and inspect its load shedding
equipment not less than thirty (30) days prior to the occurrence
of an event that requires modification of its load shedding
capability as set out in this Article and thereafter shall
conduct additional tests in accordance with Good Utility
Practice. Transmission Provider may request other tests of the
load shedding equipment upon reasonable notice. Transmission
Customer shall provide Transmission Provider written reports of
all load shedding tests.
6. Operational Information
Transmission Customer shall provide data needed for the safe and
reliable operation of Transmission Customer's and Transmission Provider's
Control Areas and to implement the provisions of the Tariff. Transmission
Provider shall treat this information as confidential and shall not divulge it
to its marketing personnel.
(a) Transmission Customer shall provide by September 1st of each
year Transmission Customer's Network Resource availability
forecast (e.g., all planned resource outages, including off-line
and on-line dates) for the following year for all Network
Resources that are not dispatched by Transmission Provider. Such
forecast shall be made in accordance with Good Utility Practice.
Transmission Customer shall inform Transmission Provider, in a
timely manner, of any changes to Transmission Customer's Network
Resource availability forecast. In the event that Transmission
<PAGE>
-12-
Provider determines that such forecast cannot be accommodated
due to a transmission constraint on its Transmission System, and
such constraint may jeopardize the security of the Transmission
System or adversely affect the economic operation of either
Transmission Provider or a Firm Point-to-Point or Network
Integration Transmission Customer, the provisions of Section 32
of the Tariff shall be implemented.
(b) Transmission Customer shall provide, at least 36 hours in
advance of every calendar day, Transmission Customer's best
forecast of any planned outages of Transmission Customer's
non-radial transmission facilities and outages of Network
Resources other than those dispatched by Transmission Provider
and other operating information that the Network Operating
Committee deems appropriate. In the event that such planned
outages cannot be accommodated due to a transmission constraint
on Transmission Provider's Transmission System, the provisions
of Section 33 of the Tariff shall be implemented.
7. Network Planning
In order for Transmission Provider to plan, on an ongoing basis, to meet
Transmission Customer's requirements for Network Integration Transmission
Service, Transmission Customer shall provide, by September 1st of each year,
updated information (current year and 10-year projection) for Network Loads and
Network Resources that are not dispatched by Transmission Provider, as well as
any other
<PAGE>
-13-
information reasonably necessary to plan for Network Integration Service. This
type of information is consistent with Transmission Provider's information
requirements for planning to serve its Native Load Customers. The data will be
provided in a format consistent with that used by Transmission Provider.
8. Delivery Points
8.1 Delivery Points. Transmission Provider and Transmission Customer,
during the term of this Agreement, shall remain interconnected. Unless otherwise
mutually agreed upon, Transmission Customer or its Members shall own, operate
and maintain all facilities, except interconnection metering, on Transmission
Customer's side of the delivery points and these facilities shall be operated
and maintained in accordance with Good Utility Practice. Unless otherwise
mutually agreed upon, Transmission Provider shall own, operate and maintain all
facilities on Transmission Provider's side of the delivery points and all
interconnection metering no matter where located. These facilities shall be
operated and maintained in accordance with Good Utility Practice.
8.2 Existing Delivery points. The Network Operating Committee shall from
time to time modify the specifications to the Service Agreement to reflect the
delivery points in service. All existing delivery points are defined as those
points where electric power and energy are transferred as of the effective date
of this Agreement from Transmission Provider's system to facilities owned by
Transmission Customer or one of its members.
<PAGE>
-14-
8.3 Modifications to Delivery Points. Where modifications are suggested
for delivery points the Network Operating Committee shall review the suggested
modifications, allocate the costs of the changes between the Parties and, if
necessary, establish a new point in the physical arrangement as the delivery
point. If the change is mutually agreed upon or if the change is reasonably
required for the giving or receiving of adequate service hereunder, the change
will be made with each Party bearing its own costs. Otherwise, the Party
requesting the change shall be fully responsible for the change and shall pay
all costs incurred as the result of such change. Where a delivery point is
discontinued, the costs of removal shall be paid for by the Party initiating the
discontinuance.
8.4 Future Delivery Points. The Network Operating Committee shall
coordinate planning of future delivery points through the following procedure:
Transmission Customer shall determine its needs for future delivery points and
shall give Transmission Provider as much advance notice of its needs as
practicable. The Network Operating Committee shall review Transmission
Customer's plans for reasonableness and consistency with Good Utility Practice.
Transmission Provider may propose appropriate modifications to Transmission
Customer's plans; however, Transmission Provider will not require unreasonable
modifications to Transmission Customer's plans. It is the intent of the Parties
that the number, capacity, and location of future delivery points will result
from a planning process using Good Utility Practice and neither Party shall
request changes or additions which would not be in accordance with this concept.
<PAGE>
-15-
In establishing all future delivery points Transmission Customer shall
construct and bear the costs of those facilities necessary to effect
interconnection at the point where Transmission Provider facilities exist or
will exist at the time of the need for the interconnection. Future delivery
points will be established at 115 kV or higher, except in those cases where the
Network Operating Committee, consistent with Good Utility Practice, determines
that service at lower voltage levels is appropriate and Transmission Provider
shall not unreasonably withhold service at such lower voltage levels. The
delivery point will be defined and established by the Network Operating
Committee so that Transmission Provider will, except as noted below, provide and
bear the costs of those facilities on the supply side of the delivery point
including the necessary switching and protective equipment, and Transmission
Customer will provide and bear the costs of those facilities on the load side of
the delivery point including the necessary isolation switching devices and
protective equipment, transformers and lines.
When the need for the future delivery point described by Transmission
Customer could, through Good Utility Practice, be satisfied through the
modification and/or upgrading of Transmission Customer's existing facilities,
but Transmission Customer still desires the future delivery point and
Transmission Provider agrees to supply it, Transmission Customer shall bear the
cost of whatever facilities may be required, including those facilities on the
supply side of the delivery point.
The Parties interpret the Tariff as not requiring System Impact Studies
or Facilities Studies for new delivery points that result from normal load
growth. If the Commission
<PAGE>
-16-
requires Transmission Provider to charge itself for studies in conjunction with
new delivery points needed to accommodate Transmission Provider's normal load
growth, Transmission Customer shall pay for studies in comparable circumstances
in conjunction with its own requests for new delivery points.
8.5 Characteristics of Electricity. Except as provided in Section 8.4,
Transmission Provider will furnish at future delivery points three phase, 60
Hertz alternating current electricity at 115 kV or higher or at the nominal
voltage level determined to be appropriate by the Network Operating Committee.
Transmission Provider will continue to furnish at all existing delivery points
three phase, 60 Hertz alternating current electricity at Transmission Provider's
nominal voltage now being furnished as listed in Specifications to the Service
Agreement. Transmission Provider shall operate its system so that Transmission
Customer's voltage at each delivery point is within the range Transmission
Provider would maintain for its own purpose.
8.6 Access at Delivery Points. Transmission Customer and Transmission
Provider will have the right of access at all delivery points and at all remote
delivery point metering locations at reasonable times for the purposes of
reading meters or installing, maintaining, changing or removing any property
they own or for any other proper purpose. The handling of tape cartridges
associated with tape metering at delivery points will be done only by the owner
of the tape meters.
8.7 Notification of System Changes. Transmission Customer shall notify
Transmission Provider in advance, and Transmission Provider shall notify
Transmission
<PAGE>
-17-
Customer in advance, of any changes to be made in their respective systems which
will affect the proper coordination of protective devices on the two systems.
Transmission Customer and Transmission Provider shall each be responsible for
selection, installation, adjustment and setting, and maintenance of their own
control and protective equipment. In no case shall operation of this equipment
by either Transmission Provider or Transmission Customer place a burden upon or
cause avoidable interruptions to the other's system.
9. Transfer of Power and Energy Through Other Systems
In accord with regional practices, NERC requirements and the
requirements of the Tariff, to the extent Transmission Provider and Transmission
Customer's use of the Transmission System impacts other electric systems,
Transmission Provider and Transmission Customer shall take actions to relieve
constraints on third party systems as deemed necessary to the reliability and
security of the third party system or the region.
10. Notice
Any notice or request made to or by either Party regarding this Network
Operating Agreement shall be made to the representative of the other Party as
follows:
<TABLE>
<CAPTION>
Virginia Electric and Power Company Old Dominion Electric Cooperative
<S> <C>
Manager Power Supply Dispatch Supervisor
Virginia Electric and Power Company Old Dominion Electric Cooperative
5000 Dominion Boulevard 4201 Dominion Boulevard
Glen Allen, Virginia 23060 Glen Allen, Virginia 23060
</TABLE>
<PAGE>
-18-
1 1. Amendment
Nothing contained herein shall be construed as affecting in any way
Transmission Provider's right to unilaterally make application to the Federal
Energy Regulatory Commission, or other regulatory agency having jurisdiction,
for any change in this Network Operating Agreement and the Tariff under Section
205 of the Federal Power Act, or other applicable statute, and any rules and
regulations promulgated thereunder; or Transmission Customer's right under the
Federal Power Act and rules and regulations promulgated thereunder.
12. Incorporation
The Tariff and Service Agreement are incorporated herein and made a part
hereof.
13. Term
The term of this Network Operating Agreement shall be concurrent with
the term of the Service Agreement between the Parties.
14. Network Operating Committee
The Network Operating Committee shall be responsible for the
coordination of the operating criteria established by this Network Operating
Agreement including (i) operation and maintenance of equipment necessary for
integrating Transmission Customer within Transmission Provider's Transmission
System (including, but not limited to, remote terminal units, metering,
communications and relaying equipment), (ii) transfer of data between
Transmission Provider and Transmission Customer (including, but not limited to,
operational characteristics of Network Resources not dispatched by
<PAGE>
-19-
Transmission Provider, generation schedules for units outside Transmission
Provider's Control Area, interchange schedules, unit output for redispatch
required under Section 33 of the Tariff and voltage schedules), (iii) exchange
of data on forecasted loads and resources necessary for long-term planning, (iv)
coordination and implementation of modifications to delivery points and
coordination of and planning for future delivery points in accordance with Good
Utility Practice, and (v) resolution of any other technical and operational
issues necessary for implementation of this Network Operating Agreement. Each
member of the Network Operating Committee shall be fully authorized to act on
behalf of its Party with respect to all matters contemplated in the Network
Operating Agreement but will not be authorized to amend the Agreement.
Transmission Provider's representative to the Network Operating Committee is the
Manager Power Supply. Transmission Customer's representative to the Network
Operating Committee is the Vice President Engineering and Operations.
<PAGE>
-20-
IN WITNESS WHEREOF, the Parties have caused this Network Operating
Agreement to be executed by their respective authorized officials.
VIRGINIA ELECTRIC AND POWER COMPANY:
By: /s/J.T. Rhodes
--------------
Name: Dr. James T. Rhodes
Title: President and Chief Executive Officer
Date: July 29, 1997
OLD DOMINION ELECTRIC COOPERATIVE:
By: /s/R. W. Watkins
----------------
Name: R. W. Watkins
Title: President and Chief Executive Officer
Date: July 29, 1997
Exhibit 10.14
DOMINION RESOURCES, INC.
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
As Amended and Restated
September 1, 1996
<PAGE>
DOMINION RESOURCES, INC.
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
Purpose
The Board of Directors of Virginia Electric and Power Company determined
that adoption of the Executive Supplemental Retirement Plan would assist it in
attracting and retaining those employees whose judgment, abilities and
experience will contribute to its continued progress. On May 19, 1983, Virginia
Electric and Power Company became a wholly-owned subsidiary of Dominion
Resources, Inc. The Plan was amended to reflect the reorganization of Virginia
Electric and Power Company and the Plan was adopted by Dominion Resources, Inc.
The Plan was amended further, effective as of October 21, 1983, to require sixty
(60) months of service to be eligible for retirement benefits and to assure
Participants who have attained age fifty-five (55) and who have sixty (60)
months of service with the Company, or who die or become Totally and Permanently
Disabled, of their benefits, so long as they remain elected officers at the time
of their separation from service. The Plan was amended further, effective as of
September 1, 1996, to add a vesting schedule for Participants under age 55, to
change the form and timing of benefit payments, and to coordinate payments with
changes in the Funding Plan.
Article I
Definitions
As defined herein, the following phrases or terms shall have the indicated
meanings:
1.1. "Administrative Benefit Committee" means the Administrative Benefit
Committee appointed to manage and administer the Plan in accordance with the
provisions of Article X hereof.
1.2. "Affiliate" means any entity that is (i) a member of a controlled
group of corporations as defined in Section 1563(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), determined without regard to Code Sections
1563(a)(4) and 1563(e)(3)(c), of which Dominion Resources, Inc. is a member
according to Code Section 414(b); (ii) an unincorporated trade or business that
is under common control with Dominion Resources, Inc., as determined according
to Code Section 414(c); or (iii) a member of an affiliated service group of
which Dominion Resources, Inc. is a member according to Code Section 414(m).
1.3. "Beneficiary" means the person, persons, entity, entities or the
estate of a Participant which, in accordance with the provisions of Article V,
is entitled to receive benefits, if any, upon the Participant's death.
1.4. "Cash Incentive Plan" means the Dominion Resources, Inc. Cash
Incentive Plan as in effect from time to time and any successor thereto.
1.5. "Change in Control" means the occurrence of any of the following
events: (i) any person, including a "group" as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934 becomes the owner or beneficial owner of
Dominion Resources, Inc. securities having 20% or more of the combined voting
power of the then outstanding Dominion Resources, Inc. securities that may be
cast for the election of Dominion Resources, Inc.'s directors (other than as a
result of an issuance of securities initiated by Dominion Resources, Inc., or
open market purchases approved by Dominion Resources, Inc.'s Board of Directors,
as long as the majority of Dominion Resources, Inc.'s Board of Directors
approving the purchases is also the majority at the time the purchases are
made); (ii) as the direct or indirect result of, or in connection with, a cash
tender or exchange offer, a merger or other business combination, a sale of
assets, a contested election, or any combination of theses transactions, the
persons who were directors of Dominion Resources, Inc. before such transactions
cease to constitute a majority of Dominion Resources, Inc.'s Board of Directors,
or any successor's board, within two years of the last of such transactions; or
(iii) with respect to a particular Participant, an event occurs with respect to
the Company that employs that Participant such that, after the event, the
employing Company is no longer an Affiliate of Dominion Resources, Inc.
1.6. "Company" means Dominion Resources, Inc., its predecessor, a
subsidiary or an Affiliate.
1.7. "Control Change Date" means the date on which a Change in Control
event occurs. If a Change in Control occurs on account of a series of
transactions, the Control Change Date is the date of the last of such
transactions.
1.8. "DRI Participant" means a Participant who is an elected officer of
Dominion Resources, Inc., Dominion Capital, Inc., Dominion Energy, Inc.,
Dominion Lands, Inc. and any other corporation (i) in which Dominion Resources,
Inc. or an Affiliate owns stock possessing at least 50 percent of the combined
voting power of all classes of stock, (ii) which is not subject to regulation as
a public service corporation by the State Corporation Commission of Virginia,
and (iii) which is not a subsidiary of Virginia Power.
1.9. "ESRP Account" means the ESRP Account established under the Funding
Plan on behalf of a Participant who also participates in the Funding Plan.
1.10 "Final Compensation", with respect to a Participant, means, as of any
date, the sum of (i) the Participant's annual base salary and (ii) the
Participant's Incentive Compensation Amount. For purposes of this section, all
components of Final Compensation are calculated without regard to any elections
by the Participant to defer any amount that otherwise would have been paid to
the Participant for the relevant period.
1.11 "Funding Plan" means the Dominion Resources, Inc. Retirement
Benefit Funding Plan.
1.12. "Incentive Compensation Amount" means the amount that may be paid
under the Success Sharing Plan, the Cash Incentive Plan or any other incentive
compensation plan designated by the appropriate O&C Committee and that the
appropriate O&C Committee (at the time each year that the goals and other
criteria for such plans are established), determines should be taken into
account under the Plan. If a Participant participates in more than one incentive
compensation plan during a year, his "Incentive Compensation Amount" is the
greatest of the amounts designated by the appropriate O&C Committee under any
plan for that year.
1.13. "O&C Committee" means (i) the Organization and Compensation
Committee of Dominion Resources, Inc. with respect to DRI Participants and
(ii) the Organization and Compensation Committee of Virginia Power with
respect to Virginia Power Participants.
1.14. "Participant" means an elected officer of Dominion Resources, Inc.,
Virginia Power, and such other subsidiaries or Affiliates of Dominion Resources,
Inc. that are designated by the Board of Directors of Dominion Resources, Inc.
or the Board of Directors of Virginia Power. An individual shall remain a
Participant only so long as the individual remains an elected officer of one or
more of such designated entities.
1.15. "Plan" means the Dominion Resources, Inc. Executive Supplemental
Retirement Plan.
1.16. "Retirement" and "Retire" mean severance from employment with the
Company at or after the attainment of fifty-one (51) years of age and the
completion of sixty (60) months of service with the Company.
1.17. "Success Sharing Plan" means the Success Sharing Plan of Virginia
Electric and Power Company as in effect from time to time and any successor
thereto.
1.18. "Totally and Permanently Disabled" means a condition, determined on
the basis of medical evidence satisfactory to a physician designated by the
Administrative Benefit Committee, rendering a Participant, due to bodily injury
or disease, unable to perform services as follows: (i) during the first two
years of such disability (measured from the commencement of such disability
rather than the commencement of benefit payments) such Participant is unable to
perform any and every duty pertaining to his employment with the Company; and
(ii) thereafter, such Participant is unable to engage in any occupation or
perform any work for compensation or profit for which he is or may become
reasonably fitted by education, training or experience. In no event shall such
condition be deemed to exist during any period that the Participant is not under
the regular care and attendance of a legally qualified physician during any
period that he engages in any occupation or performs any work for compensation
or profit.
1.19 "Virginia Power" means Virginia Electric and Power Company.
1.20. "Virginia Power Participant" means a Participant who is an
elected officer of Virginia Power or of any designated subsidiary of Virginia
Power.
Article II
Participation
All elected officers of Dominion Resources, Inc., Virginia Power, and such
other subsidiaries and Affiliates of Dominion Resources, Inc. or Virginia Power
as may be designated by the Board of Directors of Dominion Resources, Inc. or
Virginia Power on, and subsequent to, January 1, 1981, will become Participants
in the Plan. An individual shall remain a Participant only so long as the
individual remains an elected officer of one or more of such designated
entities. The appropriate Board may change its designation of any such
subsidiary or Affiliate at any time.
Article III
Benefits
Except as provided in Article IV and subject to the limitations set forth
in Articles VII and VIII, the benefits of a Participant and his Beneficiary
shall be as follows:
3.1. (a) If a Participant continues in the employ of the Company beyond age
fifty-five (55) and after completing sixty (60) months of service, upon
Retirement, he shall be entitled to an annual Retirement benefit equal to
Twenty-five percent (25%) of his Final Compensation, payable in equal monthly
installments for a period of one hundred twenty (120) months.
(b) In the event a Participant becomes Totally and Permanently
Disabled prior to Retirement, regardless of his age or months of service, he
shall be entitled to receive a benefit equal to the amount described in
Subsection 3.1(a).
(c) If a Participant dies prior to the commencement of his Retirement
benefit, regardless of his age or months of service, his Beneficiary will
receive a benefit equal to the amount described in Subsection 3.1(a). If a
Participant dies after Retirement or disability benefits have commenced under
Subsection 3.1(a) or 3.1(b) but before he has received one hundred twenty (120)
payments, the remainder of such payments will be made monthly to the
Participant's Beneficiary in accordance with Article V.
(d) If a Participant has completed sixty (60) months of service, upon
his severance from employment with the Company at or after the attainment of
fifty-one (51) years of age but before the attainment of fifty-five (55) years
of age, the Participant shall be entitled to a percentage of the benefits
provided under Subsection 3.1(a) in accordance with the following schedule:
Age Percentage
51 20%
52 40%
53 60%
54 80%
The actuarial equivalent of the benefit under this Subsection 3.1(d)
shall be paid in a single lump sum payment. The actuarial equivalent shall be
determined as provided in Section 3.2. Payment shall be made on the first day of
the month following the severance from employment with the Company of the
Participant or as soon thereafter as administratively possible.
3.2. (a) In lieu of the benefits described in Subsections 3.1(a) and
3.1(b), a Participant may elect to receive an actuarial equivalent of said
benefit (i) over a period certain which is not less than ten (10) years nor
greater than sixteen (16) years, or (ii) as a single lump sum payment. The
actuarial equivalent of the benefit provided under Subsection 3.1(a) or 3.1(b)
shall be computed using an interest rate equal to the yield of that certain
nondiscount, noncall U.S. Treasury obligations which on the date benefits are to
commence have a maturity date closest to the date such payments are scheduled to
cease. A Participant who participates in the Funding Plan may not make an
election under this Subsection unless he elects to have his Funding Plan benefit
paid in the same manner as his election under this Subsection. In the event a
Participant makes the election provided for in this Section and if the
Participant dies prior to receiving the total actuarial equivalent of the
benefits described in Subsection 3.1(a) or 3.1(b), the balance of such actuarial
equivalent shall be paid monthly to the Participant's Beneficiary in accordance
with Article V.
(b) The Participant must make the election under Subsection 3.2(a)
either (i) at least six (6) months prior to the commencement of the receipt of
benefits or (ii) at least one (1) month prior to the commencement of the receipt
of benefits if the election is approved by the Administrative Benefit Committee
or the appropriate O&C Committee in its absolute discretion. Upon the denial of
a Participant's election, the Participant shall receive the benefits provided
under the Plan in the form that is otherwise payable absent the election.
3.3. A Beneficiary receiving benefits described in Section 3.1 or Section
3.2 may designate a beneficiary who will be entitled to receive the remaining
benefits due the Beneficiary after his death; provided, however, that if the
Beneficiary is entitled to receive any benefits under the Funding Plan, the
beneficiary designated by the Beneficiary must be the same person or entity
appointed by the Beneficiary under the Funding Plan. Such designation shall be
in accordance with Article V of the Plan.
3.4. Payment of the benefits described in Sections 3.1 and 3.2 shall
commence on the first day of the month next following the Retirement or death of
the Participant, whichever is applicable; provided, however, that payment of the
benefit described in Subsection 3.1(b) shall commence on the first day of the
month next following the Administrative Benefit Committee's determination of the
Participant's Total and Permanent Disability.
Article IV
Coordination of Benefits
The amount payable in any month to a Participant, a Beneficiary, or the
beneficiary of a Beneficiary under the Plan shall be reduced, but not below
zero, by the Pre-Tax Value of the amount payable for the month in question from
the Participant's ESRP Account in the Funding Plan. The Pre-Tax Value of the
payments from the Participant's ESRP Account shall be the amount that, after
payment of any applicable federal, state, and local income and employment taxes,
would yield the amount of the payment from the ESRP Account, taking into
consideration the extent to which, if any, that the payment from the ESRP
Account is taxable to the Participant. The determination of the Pre- Tax Value
shall be made on the basis of a policy or guidelines adopted by the appropriate
O&C Committee using the maximum rates of federal, state, and local income and
employment taxes that are applicable to the Participant, Beneficiary, or
beneficiary of a Beneficiary. Benefits payable under the Plan shall not be
reduced by any payment to a Participant under Section 6.05 of the Funding Plan.
Article V
Designation of Beneficiary
5.1. (a) The Beneficiary of a Participant who participates in the Funding
Plan shall be the person or entity that is entitled to receive the benefit, if
any, payable under the Funding Plan following the Participant's death.
(b) A Participant who is not a participant in the Funding Plan may
designate a Beneficiary to receive benefits due under the Plan, if any, upon the
Participant's death. Designation of a Beneficiary may be made by execution of a
form approved or accepted by the Administrative Benefit Committee which must be
witnessed by a member of the Administrative Benefit Committee or its designee.
In the absence of an effective Beneficiary designation, a Participant's
surviving spouse, if any, his descendants, per stirpes, and if none, the
Participant's estate, will be the Beneficiary.
5.2. A Participant may change a prior Beneficiary designation under
Subsection 5.1(b) by a subsequent execution of a Beneficiary designation form.
The change in Beneficiary will be effective if, and at such time as, it is
witnessed by a member of the Administrative Benefit Committee or its designee.
5.3. A beneficiary designation or a change in beneficiary designation by a
Beneficiary pursuant to Section 3.3 shall be governed by Sections 5.1 and 5.2 as
if "Beneficiary" was substituted for "Participant" and "beneficiary" was
substituted for "Beneficiary" therein.
Article VI
Guarantees
Dominion Resources, Inc. and Virginia Power have only a contractual
obligation to make payments of the benefits described in Article III. All
benefits are to be satisfied solely out of the general corporate assets of
Dominion Resources, Inc. or Virginia Power which shall remain subject to the
claims of its creditors. No assets of Dominion Resources, Inc. or Virginia Power
will be segregated or committed to the satisfaction of its obligations to any
Participant or Beneficiary under this Plan. If Dominion Resources, Inc., in its
sole discretion, or Virginia Power, in its sole discretion, elects to purchase
life insurance on the life of a Participant in connection with the Plan, the
Participant must submit to a physical examination, if required by the insurer,
and otherwise cooperate in the issuance of such policy or his rights under the
Plan will be forfeited.
Article VII
Termination of Employment
7.1. The Plan does not in any way limit the right of the Company at any
time and for any reason to terminate the Participant's employment or such
Participant' status as an officer of the Company. In no event shall the Plan, by
its terms or by implication, constitute an employment contract of any nature
whatsoever between the Company and a Participant.
7.2. A Participant who is removed or not reelected as an officer or whose
employment with the Company is terminated either with or without cause, for
reasons other than death, Retirement or Total and Permanent Disability shall
immediately cease to be a Participant under this Plan and shall forfeit all
rights under this Plan. Further, in no event shall an individual who was a
Participant but is not an officer of a designated employer at the time of such
individual's death, Retirement or Total and Permanent Disability, be entitled to
any benefit under the Plan. A Participant on authorized leave of absence from
the Company shall not be deemed to have terminated employment for the duration
of such leave of absence.
7.3. Notwithstanding any contrary Plan provision, in the event the
employment of a Participant who is in the employ of a Company on a Control
Change Date relating to that Company is terminated (for reasons other than
death, Retirement, Total and Permanent Disability, or as a result of acts of
theft, embezzlement, fraud, or moral turpitude) before the end of the period
commencing on the Control Change Date and ending on the earlier of the third
anniversary of such date or the Participant's attainment of age fifty-five (55)
and completion of sixty (60) months of service and whether or not he is an
elected officer of the Company at such time, he shall be fully vested in a
benefit payable at age fifty-five (55) based on his Final Compensation as of his
date of termination and assuming he had attained age fifty-five(55) and
completed sixty (60) months of service as of the date his employment is
terminated. During this same period, a Participant who voluntarily terminates
employment within sixty (60) days after (i) he does not receive salary
increases, bonuses, and incentive awards comparable to the increases, bonuses
and awards that he received in prior years or that other executives in
comparable positions receive in the current year; or (ii) his compensation or
employment-related benefits are reduced; or (iii) his status, title(s), offices,
places of employment, working conditions, or management responsibilities are
diminished (other than changes in reporting or management responsibilities to
reflect sound practices commonly followed by enterprises comparable to the
Company employing Participant or required by applicable federal or state law) or
within sixty days after the last in a series of such events will be deemed to
have terminated under circumstances requiring full vesting under this Section
7.3.
Article VIII
Termination, Amendment or Modification of Plan
8.1. Except as otherwise specifically provided, Dominion Resources, Inc.
reserves the right to terminate, amend or modify this Plan, wholly or partially,
at any time and from time to time as to DRI Participants. Such right to
terminate, amend or modify the Plan shall be exercised for Dominion Resources,
Inc. by its Board of Directors. Except as otherwise specifically provided,
Virginia Power reserves the right to terminate, amend or modify this Plan,
wholly or partially, at any time and from time to time as to Virginia Power
Participants. Such right to terminate, amend or modify the Plan shall be
exercised for Virginia Power by its Board of Directors. Notwithstanding the
preceding, with respect to an affected Participant, the Plan and Section 7.3 may
not be amended, modified or terminated after a Control Change Date before the
end of the period specified in that section unless the affected Participant
agrees to such amendment, modification or termination in writing.
8.2. Section 8.1 notwithstanding, no action to terminate the Plan shall be
taken except upon written notice to each Participant to be affected thereby,
which notice shall be given not less than thirty (30) days prior to such action.
8.3. Any notice which shall be or may be given under the Plan shall be in
writing and shall be mailed by United States mail, postage prepared. If notice
is to be given to Dominion Resources, Inc. or Virginia Power, such notice shall
be addressed to their respective corporate office; addressed to the attention of
the Corporate Secretary. If notice is to be given to a Participant, such notice
shall be addressed to the Participant's last known address.
8.4. The rights of Dominion Resources, Inc. and Virginia Power set forth in
Section 8.1 are subject to the condition that its Board of Directors shall take
no action to terminate the Plan or decrease the benefit that would become
payable or is payable, as the case may be, with respect to a Participant who has
attained age fifty-one (51) and completed sixty (60) months of service with the
Company, so long as such individual remains an elected officer of a designated
employer or a Participant or Beneficiary following the date such Participant or
Beneficiary commences receiving benefits described in Article III.
8.5. Except as provided in Sections 7.3, 8.1, and 8.4, upon the termination
of this Plan as to Dominion Resources, Inc. by its Board of Directors, the Plan
shall no longer be of any further force or effect as to DRI Participants, and
neither Dominion Resources, Inc. nor any DRI Participant shall have any further
obligation or right under this Plan. Except as provided in Sections 7.3, 8.1,
and 8.4, upon the termination of this Plan as to Virginia Power by its Board of
Directors, the Plan shall no longer be of any further force or effect as to
Virginia Power Participants, and neither Virginia Power nor any Virginia Power
Participant shall have any further obligation or right under this Plan.
Likewise, the rights of any individual who was a Participant and who is removed
or not reelected as an officer of a designated employer shall cease upon such
action.
Article IX
Other Benefits and Agreements
Except as provided in Article IV, the benefits provided for a Participant
and his Beneficiary under the Plan are in addition to any other benefits
available to such Participant under any other plan or program of the Company for
its employees, and, except as may otherwise be expressly provided for, the Plan
shall supplement and shall not supersede, modify or amend any other plan or
program of the Company in which a Participant is participating.
Article X
Administration of the Plan
10.1. The Plan shall be administered by the Administrative Benefit
Committee. Subject to the provisions of the Plan, the Administrative Benefit
Committee may adopt such rules and regulations as may be necessary to carry out
the purposes hereof. The Administrative Benefit Committee's interpretation and
construction of any provision of the Plan shall be final and conclusive.
10.2. Dominion Resources, Inc. and Virginia Power shall indemnify and save
harmless each member of the Administrative Benefit Committee and each member of
its own O&C Committee against any and all expenses and liabilities arising out
of his membership on such committee, excepting only expenses and liabilities
arising out of his own willful misconduct. Expenses against which a member of
the Administrative Benefit Committee or an O&C Committee shall be indemnified
hereunder shall include without limitation, the amount of any settlement or
judgment, costs, counsel fees, and related charges reasonably incurred in
connection with a claim asserted, or a proceeding brought or settlement thereof.
The foregoing right of indemnification shall be addition to any other rights to
which any such member may be entitled.
10.3. In addition to the powers hereinabove specified, the Administrative
Benefit Committee shall have the power to compute and certify the amount and
kind of benefits from time to time payable to Participants and their
Beneficiaries under the Plan, to authorize all disbursements for such purposes,
and to determine whether a Participant is entitled to the benefit provided in
Subsection 3.1(b).
10.4. To enable the Administrative Benefit Committee to perform its
functions, the Company shall supply full and timely information to the
Administrative Benefit Committee on all matters relating to the compensation of
all Participants, their retirement, death or other cause for termination of
employment, and such other pertinent facts as the Administrative Benefit
Committee may require.
Article XI
Miscellaneous
11.1. The Plan shall be binding upon Dominion Resources, Inc., Virginia
Power, their successors and assigns; subject to the powers set forth in Article
VIII, and upon a Participant, his Beneficiary, and either of their assigns,
heirs, executors and administrators.
11.2. To the extent not preempted by federal law, the Plan shall be
governed and construed under the laws of the Commonwealth of Virginia as in
effect at the time of their adoption and execution, respectively.
11.3. Masculine pronouns wherever used shall include feminine pronouns and
the use of the singular shall include the plural.
IN WITNESS WHEREOF, this instrument has been executed this 12th day of May,
1997.
DOMINION RESOURCES, INC.
By /s/LINWOOD R. ROBERTSON
Linwood R. Robertson
Executive Vice President and Chief
Financial Officer
VIRGINIA ELECTRIC AND POWER COMPANY
By /s/T. J. O'NEIL
T. J. O'Neil
Vice President, Human Resources
<PAGE>
First Amendment to
Dominion Resources, Inc.
Executive Supplemental Retirement Plan
RESOLVED, that the Dominion Resources, Inc. Executive Supplemental
Retirement Plan (the "Plan") as amended and restated September 1, 1996 is
amended, pursuant to the authority in Section 8.1 of the Plan. This Amendment is
effective as of June 20, 1997 only with respect to Dominion Resources, Inc.
Participants in the Plan. This Amendment is not effective with respect to
Virginia Power Participants in the Plan.
I. With respect to DRI Participants only, Section 3.1(d) is amended to read as
follows:
"(d) If a Participant has completed sixty (60) months of
service with the Company, upon his severance from employment
with the Company before the attainment of fifty-five (55)
years of age, the Participant shall be entitled to the
benefits provided under the Subsection 3.1(a) multiplied by
the following fraction (not greater than one):
Participant's completed months of service since becoming a Participant
----------------------------------------------------------------------
Total months from the date on which the individual became a
Participant to the Participant's attainment of fifty-five (55)
years of age
In calculating months and months of service, partial months
shall be disregarded. The actuarial equivalent of the benefit under this
Subsection 3.1(d) shall be paid in a single lump sum payment. The actuarial
equivalent shall be determined as provided in Section 3.2. Payment shall be made
on the first day of the month following the severance from employment with the
Company of the Participant or as soon thereafter as adininistratively possible."
II. The second sentence of Section 3.2 (a) is amended to read as follows:
"The actuarial equivalent of the benefit provided under Subsection 3.1(a) or 3.1
(1,) shall be computed using actuarial factors, including interest rates, as
determined by the Administrative Benefit Committee."
IN WITNESS WHEREOF, Dominion Resources, Inc. caused this First
Amendment to be executed by its duly authorized officer as of the date indicated
above.
DOMINION RESOURCES, INC.
BY: /s/ Linwood R. Robertson
----------------------------
Linwood R. Robertson
Executive Vice President and
Chief Financial Officer
6-20/97
----------------------------
Date
<PAGE>
SECOND AMENDMENT TO
DOMINION RESOURCES, INC.
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
RESOLVED, that the Dominion Resources, Inc. Executive Supplemental
Retirement Plan (the "Plan") as amended and restated September 1, 1996 is
amended, pursuant to the authority in Section 8.1 of the Plan. This Amendment is
effective as of February 20, 1998.
1. Section 1.14 is amended to read as follows:
"Participant" means an elected officer of Dominion Resources, Inc.,
Virginia Power, or a subsidiary or Affiliate of Dominion Resources,
Inc. who is eligible to participate in the Plan under Article II.
2. Article II is amended to read as follows:
An elected officer of Dominion Resources, Inc., Virginia
Power, or a subsidiary and Affiliate of Dominion Resources, Inc. or
Virginia Power will become a Participant in the Plan upon his or her
designation as a Participant by the O&C Committee of Dominion
Resources, Inc. or Virginia Power. An individual shall remain a
Participant only so long as the individual remains an elected officer.
The appropriate O&C Committee may change its designation of any
individual officer as a Participant at any time. The employer of a
Participant will be a designated employer under the Plan.
IN WITNESS WHEREOF, Dominion Resources, Inc. caused this Second
Amendment to be executed by its duly authorized officer as of the date indicated
above.
DOMINON RESOURCES, INC.
By: /s/ Thomas F. Farrell, II Sr.
-----------------------------
Thomas F. Farrell, II Sr.
Vice President - Corporate
March 3, 1998
-----------------------------
Date
Exhibit 10.16
DOMINION RESOURCES, INC.
RETIREMENT BENEFIT FUNDING PLAN
Effective June 29, 1990
and
Amended and Restated
September 1, 1996<PAGE>
TABLE OF CONTENTS
Article Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . .2
1.1 Account . . . . . . . . . . . . . . . . . . . . .2
1.2 Administrative Benefit Committee. . . . . . . . .2
1.3 Administrative and Investment Benefit Committee .2
1.4 Affiliate . . . . . . . . . . . . . . . . . . . .2
1.5 After-Tax Value . . . . . . . . . . . . . . . . .2
1.6 Alternate Payee . . . . . . . . . . . . . . . . .2
1.7 Beneficiary . . . . . . . . . . . . . . . . . . .2
1.8 Benefit Restoration Plan. . . . . . . . . . . . .3
1.9 Code. . . . . . . . . . . . . . . . . . . . . . .3
1.10 DRI . . . . . . . . . . . . . . . . . . . . . . .3
1.11 DRI Board . . . . . . . . . . . . . . . . . . . .3
1.12 DRI O&C Committee . . . . . . . . . . . . . . . .3
1.13 DRI Participant . . . . . . . . . . . . . . . . .3
1.14 Employer. . . . . . . . . . . . . . . . . . . . .3
1.15 ERISA . . . . . . . . . . . . . . . . . . . . . .3
1.16 ESRP. . . . . . . . . . . . . . . . . . . . . . .3
1.17 Investment Manager. . . . . . . . . . . . . . . .3
1.18 Nonregulated Subsidiary . . . . . . . . . . . . .3
1.19 Participant . . . . . . . . . . . . . . . . . . .3
1.20 Plan. . . . . . . . . . . . . . . . . . . . . . .3
1.21 Plan Year . . . . . . . . . . . . . . . . . . . .3
1.22 Qualified Domestic Relations Order. . . . . . . .3
1.23 Special Trust . . . . . . . . . . . . . . . . . .4
1.24 Trust . . . . . . . . . . . . . . . . . . . . . .4
1.25 Trustee . . . . . . . . . . . . . . . . . . . . .4
1.26 Trust Fund. . . . . . . . . . . . . . . . . . . .4
1.27 Valuation Date. . . . . . . . . . . . . . . . . .4
1.28 Virginia Power. . . . . . . . . . . . . . . . . .4
1.29 Virginia Power Board. . . . . . . . . . . . . . .4
1.30 Virginia Power O&C Committee. . . . . . . . . . .4
1.31 Virginia Power Participant. . . . . . . . . . . .4
ARTICLE II - PARTICIPATION . . . . . . . . . . . . . . . . . . .4
ARTICLE III - CONTRIBUTIONS. . . . . . . . . . . . . . . . . . .4
3.1 Employer Contributions. . . . . . . . . . . . . .4
3.2 Transfer Contributions. . . . . . . . . . . . . .5
3.3 General Provisions on Contributions . . . . . . .5
3.4 Contributions For Income Taxes. . . . . . . . . .5
ARTICLE IV - ALLOCATIONS . . . . . . . . . . . . . . . . . . . .5
4.1 Participants' Accounts. . . . . . . . . . . . . .5
4.2 Allocation of Contributions and Transfers . . . .5
4.3 Schedule of Contributions . . . . . . . . . . . .6
4.4 Other Allocations . . . . . . . . . . . . . . . .6
4.5 Subaccount Recordkeeping. . . . . . . . . . . . .6
ARTICLE V - VESTING. . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE VI - DISTRIBUTIONS . . . . . . . . . . . . . . . . . . .7
6.1 Periodic Distributions. . . . . . . . . . . . . .7
6.2 Separation from Service . . . . . . . . . . . . .7
6.3 Participants in Pay Status. . . . . . . . . . . .8
6.4 Death Benefits. . . . . . . . . . . . . . . . . .9
6.5 Special Distribution. . . . . . . . . . . . . . .9
ARTICLE VII - APPOINTMENTS AND ALLOCATIONOF FIDUCIARY RESPONSIBILITY9
7.1 Sponsor, Named Fiduciary. . . . . . . . . . . . .9
7.2 Accountant. . . . . . . . . . . . . . . . . . . .9
7.3 Insurer . . . . . . . . . . . . . . . . . . . . 10
7.4 Investment Manager. . . . . . . . . . . . . . . 10
7.5 Trustee . . . . . . . . . . . . . . . . . . . . 10
7.6 Allocation of Responsibility. . . . . . . . . . 10
7.7 General . . . . . . . . . . . . . . . . . . . . 10
7.8 Fiduciary Discretion. . . . . . . . . . . . . . 11
ARTICLE VIII - COMMITTEES. . . . . . . . . . . . . . . . . . . 11
8.1 General . . . . . . . . . . . . . . . . . . . . 11
8.2 Duties. . . . . . . . . . . . . . . . . . . . . 12
8.3 Agents. . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IX - ADMINISTRATIVE OF THE PLAN. . . . . . . . . . . . 12
9.1 Duties of Participants and Beneficiaries. . . . 12
9.2 General . . . . . . . . . . . . . . . . . . . . 12
9.3 Disclosure. . . . . . . . . . . . . . . . . . . 13
9.4 Annual Accountings. . . . . . . . . . . . . . . 13
9.5 Expenses - Compensation . . . . . . . . . . . . 13
9.6 Directions to Trustee, Insurers and
Investment Managers . . . . . . . . . . . . . . 14
9.7 Claims Procedure. . . . . . . . . . . . . . . . 14
ARTICLE X - OBLIGATIONS OF EMPLOYER. . . . . . . . . . . . . . 15
10.1 No Contract or Inducement . . . . . . . . . . . 15
10.2 No right to Employment. . . . . . . . . . . . . 15
10.3 Obligation for Benefits . . . . . . . . . . . . 15
ARTICLE XI - AMENDMENT AND TERMINATION OF PLAN . . . . . . . . 15
11.1 Amendment of the Plan . . . . . . . . . . . . . 15
11.2 Termination of the Plan . . . . . . . . . . . . 16
ARTICLE XII - GENERAL PROVISIONS . . . . . . . . . . . . . . . 16
12.1 Interpretation. . . . . . . . . . . . . . . . . 16
12.2 Merger, Consolidation and Transfers of
Assets or Liabilities . . . . . . . . . . . . . 16
12.3 Limitation on Assignment. . . . . . . . . . . . 16
12.4 Discharge of Liability. . . . . . . . . . . . . 17
12.5 Payments to Minors and Incompetents . . . . . . 17
12.6 Unclaimed Benefits. . . . . . . . . . . . . . . 17
12.7 Headings and Subheadings. . . . . . . . . . . . 17
12.8 Use of Masculine and Feminine,
Singular and Plural . . . . . . . . . . . . . . 17
12.9 Governing Law . . . . . . . . . . . . . . . . . 17
12.10 Errors and Omissions . . . . . . . . . . . 17
EXECUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
INTRODUCTION
Dominion Resources, Inc., Virginia Electric and Power Company, the
Affiliates, and the Nonregulated Subsidiaries have made various benefit promises
and commitments to certain of their current and former elected officers. The
Board of Directors of Dominion Resources, Inc. and the Board of Directors of
Virginia Electric and Power Company determined that the adoption of the Dominion
Resources, Inc. Retirement Benefit Funding Plan, which is designed to permit the
funding of certain benefits promised to Participants, would assist them in
attracting and retaining those employees whose judgment, abilities, and
experience will contribute to the continued success of Dominion Resources, Inc.
and Virginia Electric and Power Company.
The Plan is intended to be an employee pension benefit plan within the
meaning of Section 3(2) of ERISA. The Plan and Trust shall be administered and
interpreted in accordance with these intentions.
Due to changes in the Federal income tax laws and for other reasons,
Dominion Resources, Inc. and Virginia Electric and Power Company have determined
to cease contributions to the Plan to provide additional benefits to
Participants and to cease making new Participants in the Plan effective in 1996.
The Plan and Trust shall be administered and interpreted in accordance with all
current tax laws and regulations until all funds have been paid from the Plan in
accordance with its terms.
<PAGE>
ARTICLE I - DEFINITIONS
1.1 Account means the separate account that is established for each
Participant. A Participant's Account is comprised of three subaccounts: the ESRP
Account, the Benefit Restoration Account and the Credited Service Account.
1.2 Administrative Benefit Committee means the committee comprised of the
individuals appointed by the Administrative and Investment Benefit Committee in
accordance with Section 8.1.
1.3 Administrative and Investment Benefit Committee means the committee
comprised of the individuals appointed by the DRI Board and the Virginia Power
Board in accordance with Section 8.1.
1.4 Affiliate means an employer, whether or not incorporated, which with
Virginia Power is treated as a single employer under Code section 414(b),
414(c), 414(m) or 414(n) as determined before the application of the provisions
of Code section 414(r), excluding DRI and the Nonregulated Subsidiaries.
1.5 After-Tax Value means the amount that, after payment of any applicable
federal, state, and local income and employment taxes, would yield the amount of
the payment in question, taking into consideration the extent to which, if any,
that the payment from the Funding Plan is taxable to the Participant. The
determination of the After-Tax Value shall be made on the basis of a policy or
guidelines adopted by the DRI O&C Committee with respect to DRI Participants or
the Virginia Power O&C Committee with respect to Virginia Power Participants,
using the maximum rates of federal, state, and local income and employment taxes
that are applicable to the Participant, Beneficiary, or beneficiary of a
Beneficiary.
1.6 Alternate Payee means a Participant's spouse, former spouse, child or
other dependent who is recognized in a Qualified Domestic Relations Order as
having, or who is assigned, a right to receive all or a portion of the benefit
payable to a Participant under the Plan.
1.7 Beneficiary means an individual or entity that is entitled to receive
any benefits that may be payable under the Plan on or after a Participant's
death. The Participant's Beneficiary shall be determined in accordance with the
following subsections.
(a) The Beneficiary shall be the Participant's surviving spouse unless
such spouse has consented in writing to the Participant's designation of a
different Beneficiary. The surviving spouse's consent must be in writing, must
acknowledge the effect of the Participant's election, and must be witnessed by a
Plan representative or notary public. With the consent of the surviving spouse,
the provisions in subsection (b) are effective for that Participant. The
provisions of subsection (b) also shall be effective with respect to a
Participant if the Administrative Benefit Committee is satisfied that the
consent of the surviving spouse cannot be obtained because the Participant has
no spouse, because the spouse cannot be located, or because such other
circumstances are applicable regulations may provide.
(b) Except as provided in subsections (a) and (c), the Beneficiary
shall be the individual or entity designated by the Participant. In the absence
of an effective designation and if subsections (a) and (c) are not applicable,
the Beneficiary shall be the surviving spouse, if any, then the Participant's
descendants, per stirpes, and if none, the Participant's estate.
(c) To the extent provided in a Qualified Domestic Relations Order,
the Beneficiary shall be the Alternate Payee recognized by the order as having a
right to receive all or a portion of the benefits payable under the Plan on
behalf of the Participant following the Participant's death.
1.8 Benefit Restoration Plan means the Dominion Resources, Inc.
Retirement Benefit Restoration Plan.
1.9 Code means the Internal Revenue Code of 1986, as amended.
1.10 DRI means Dominion Resources, Inc.
1.11 DRI Board means the Board of Directors of DRI.
1.12 DRI O&C Committee means the Organization and Compensation Committee of
the DRI Board.
1.13 DRI Participant means an individual who is or was an elected officer
of DRI or a Nonregulated Subsidiary and who has been designated to participate
in the Plan in accordance with Article II.
1.14 Employer means DRI, Virginia Power, each Affiliate that, with the
approval of the Virginia Power Board, and each Nonregulated Subsidiary that,
with the approval of the DRI Board, has elected to contribute to the Plan on
behalf of one or more employees.
1.15 ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
1.16 ESRP means the Dominion Resources, Inc. Executive Supplemental
Retirement Plan.
1.17 Investment Manager means a fiduciary who satisfies the requirements of
ERISA section 3(38) and who is appointed by the Administrative Benefits
Committee to manage, acquire, or dispose of Trust Fund assets.
1.18 Nonregulated Subsidiary means Dominion Capital, Inc., Dominion Energy,
Inc., Dominion Lands, Inc. or another corporation (i) in which DRI owns stock
possessing at least 50 percent of the combined voting power of all classes of
stock, (ii) which is not subject to regulation as a public service corporation
by the State Corporation Commission of Virginia and (iii) which is not an
Affiliate.
1.19 Participant means an individual who satisfies the requirements of
Article II and includes the DRI Participants and the Virginia Power
Participants.
1.20 Plan means the Dominion Resources, Inc. Retirement Benefit Funding
Plan.
1.21 Plan Year means the calendar year.
1.22 Qualified Domestic Relations Order means a judgment, decree, order, or
approval of a property settlement that satisfies the requirements of ERISA
section 206(d)(3)(B).
1.23 Special Trust means the Dominion Resources, Inc. Special Trust
Agreement between DRI and Mellon Bank, N.A. and effective as of December 1,
1986.
1.24 Trust means the entity created pursuant to the agreement among DRI,
Virginia Power and the Trustee relating to the Plan.
1.25 Trustee means Mellon Bank, N.A.
1.26 Trust Fund means the assets of the Plan that are held in the Trust.
1.27 Valuation Date means the last business day of each calendar quarter.
1.28 Virginia Power means Virginia Electric and Power Company.
1.29 Virginia Power Board means the Board of Directors of Virginia
Power.
1.30 Virginia Power O&C Committee means the Organization and Compensation
Committee of the Virginia Power Board.
1.31 Virginia Power Participant means an individual who is or was an
elected officer of Virginia Power and who has been designated to participate in
the Plan in accordance with Article II.
ARTICLE II - PARTICIPATION
An individual who is or was an elected officer of Virginia Power or an
Affiliate and who is designated by the Virginia Power Board to participate in
the Plan shall be a Participant. An individual who is or was an elected officer
of DRI or a Nonregulated Subsidiary and who is designated by the DRI Board to
participate in the Plan shall be a Participant. The Administrative Benefit
Committee shall notify each individual upon his qualification to become a
Participant in the Plan. Participation in the Plan ceases when a Participant's
entire Account in the Plan has been distributed. No individual shall become a
Participant after December 31, 1996.
ARTICLE III - CONTRIBUTIONS
3.1 Employer Contributions.
In each Plan Year, each Employer shall contribute to the Trust Fund
the amount, if any, that the Employer determines in its discretion to be its
contribution for the Plan Year. An Employer's contribution shall be made only
from its current or accumulated profits, as determined on the basis of its
financial statements and in accordance with its standard and customary
accounting practices for financial reporting. If an Employer is prevented from
making a contribution for any Plan Year because it lacks sufficient current or
accumulated profits, that Employer's contribution may be made, but is not
required to be made, by one or more other Employers. Notwithstanding the
foregoing, all Employer contributions on behalf of Virginia Power Participants
are subject to the approval of the Virginia Power Board and all contributions on
behalf of DRI Participants are subject to the approval of the DRI Board.
Contributions to the Trust Fund for allocation to Participants' Accounts shall
cease as of December 31, 1996, except to the extent contributions are made to
the Trust Fund pursuant to Section 3.4.
3.2 Transfer Contributions.
In lieu of or in addition to a contribution pursuant to Section 3.1,
an Employer may direct that an amount be transferred to the Trust from the
Special Trust. All such transfers on behalf of Virginia Power Participants shall
be subject to the approval of the Virginia Power Board and all such transfers on
behalf of DRI Participants shall be subject to the approval of the DRI Board. In
addition, all such transfers shall be in accordance with the terms of the
Special Trust.
3.3 General Provisions on Contributions.
(a) The Trustee is not required to collect Employer contributions or
transfer contributions pursuant to Section 3.2 and is responsible only for
assets received in its capacity as Trustee. Subject to the approval of the
Virginia Power O&C Committee (with respect to Virginia Power Participants) or
the DRI O&C Committee (in the case of DRI Participants), an Employer may cause
each Plan Year's Employer contributions or transfers pursuant to Section 3.2 to
be paid to the Trust in installments and on the dates that it selects.
(b) Unless allocated as of an earlier date, any contributions made to
the Plan by an Employer or transferred pursuant to Section 3.2 after the first
day of a Plan Year may be held by the Trustee and invested as a segregated
account, commingled with the Trust Fund, and allocated to Participants' Accounts
as of the last day of the Plan Year. The Trustee shall maintain such records as
may be necessary to assure that such contributions and amounts attributable to
such contributions are allocated to the proper Participants' Accounts as
otherwise provided by the Plan.
3.4 Contributions For Income Taxes.
For each Plan Year beginning after December 31, 1996, DRI in its
discretion may contribute to the Trust Fund the amount, if any, that the Trustee
informs DRI is the allocable portion of any income taxes imposed on the Trust
Fund with respect to Accounts of DRI Participants. For each Plan Year beginning
after December 31, 1996, Virginia Power in its discretion may contribute to the
Trust Fund the amount, if any, that the Trustee informs Virginia Power is the
allocable portion of any income taxes imposed on the Trust Fund with respect to
Accounts of Virginia Power Participants.
ARTICLE IV - ALLOCATIONS
4.1 Participants' Accounts.
The Administrative Benefit Committee shall cause an Account to be
established and maintained in the name of each Participant. Each Participant's
Account shall be comprised of up to three subaccounts: an ESRP Account, a
Benefit Restoration Account, and a Credited Service Account. Each Participant's
Accounts shall be credited with the Participant's share of amounts contributed
or transferred to the Trust pursuant to Article III, as well as a proportionate
share of the net earnings, gains, or losses of the Trust Fund and any
distributions from the Account.
4.2 Allocation of Contributions and Transfers.
Amounts contributed or transferred to the Trust pursuant to Article
III, if any, shall be allocated among Participants' Accounts as of the date
specified by the Virginia Power O&C Committee (in the case of Virginia Power
Participants) or the DRI O&C Committee (in the case of DRI Participants) or, if
no date is specified, the last day of the Plan Year. Amounts contributed to the
Trust pursuant to Section 3.4 shall be allocated among Participants' Accounts as
of the date received by the Trustee.
4.3 Schedule of Contributions.
At least annually, the Administrative Benefit Committee shall furnish
the Trustee a schedule showing as to each Participant the amount, if any, of
contributions or transfers pursuant to Article III to be allocated to each
Participant's Account. The Administrative Benefit Committee also shall provide
to the Trustee a schedule showing the amount of any such contribution or
transfer that is to be allocated to the ESRP Account, the Benefit Restoration
Account, and the Credited Service Account of each Participant. For amounts
contributed to the Trust pursuant to Section 3.4, the Administrative Benefit
Committee shall furnish the Trustee a schedule showing the amount to be
allocated to each Participant's Account and, within such Account, to such
Participant's ESRP Account, Benefit Restoration Account and Credited Service
Account.
4.4 Other Allocations.
(a) As of each Valuation Date, before crediting any amounts allocated
to a Participant's Account under Section 4.2, the Trustee shall revalue the net
assets of the Trust Fund at their then current market value to reflect any
increase or decrease in the value of the investments of the Trust Fund as of
that date as compared with the total value of the Trust Fund on the last
preceding Valuation Date.
(b) As of each Valuation Date, after revaluing the assets of the Trust
Fund as provided in subsection (a) and before crediting any amounts allocated to
a Participant's Account under Section 4.2, the Trustee shall apportion among the
separate Accounts of all Participants the net income or loss earned by the Trust
Fund during the period following the preceding Valuation Date. Such income or
loss shall be apportioned on the basis of the Account balances of the
Participants as of the beginning of such Plan Year.
(c) If any interim contributions or transfers have been held in a
segregated account as provided in Section 3.3(b), any income attributable to
such contributions shall be allocated to the appropriate Account of each
Participant to whom such contributions or transfers are allocated.
4.5 Subaccount Recordkeeping.
Allocations to a Participant's Account pursuant to Sections 4.2 and
4.4 shall be further allocated between each Participant's ESRP Account, Benefit
Restoration Account, and Credited Service Account. The further allocation of
amounts allocated pursuant to Section 4.2 shall be made on the basis of the
Employer's direction, as approved by the Virginia Power O&C Committee (in the
case of Virginia Power Participants) or the DRI O&C Committee (in the case of
DRI Participants), and as reflected in the schedule described in Section 4.3.
The further allocation of amounts allocated pursuant to Section 4.4 shall be
made on the basis of the relative value of the Participant's ESRP Account, the
Benefit Restoration Account, and the Credited Service Account as of the
immediately preceding Valuation Date.
<PAGE>
ARTICLE V - VESTING
Each Participant shall at all times have a fully vested and nonforfeitable
interest in his Account.
ARTICLE VI - DISTRIBUTIONS
6.1 Periodic Distributions.
As soon as practicable after an amount is allocated to a Participant's
Account under Section 4.2, but in any event before the April 15 of the Plan Year
following the Plan Year in which the allocation was made, a distribution shall
be made from the Account of each Participant as provided in the following
sentences. The amount to be distributed shall be the amount that the Virginia
Power O&C Committee (in the case of Virginia Power Participants) or the DRI O&C
Committee (in the case of DRI Participants) determines is required by the
Participant to satisfy the federal, state, and local income tax liability
attributable to the allocation. The amount distributed pursuant to this Section
shall be charged to the Participant's ESRP Account, Benefit Restoration Account,
and Credited Service Account in proportion to the contributions or transfers
allocated to such subaccounts for the Plan Year. No distribution shall be made
from an Account to a Participant with respect to any amount contributed pursuant
to Section 3.4 that is allocated to a Participant's Account.
6.2 Separation from Service.
(a) A Participant who separates from the service of DRI, Virginia
Power, any Affiliate or any Nonregulated Subsidiary after June 29, 1990, shall
be entitled to the benefits that may be provided by his Account balance as of
the Valuation Date coincident with or immediately preceding such date, plus any
amounts that are subsequently allocated to his Account pursuant to Article IV.
Benefits shall be distributed to the Participant in accordance with the
following subsection (b) or (c).
(b) The Participant's ESRP Account shall be paid in the same form as
the Participant elects for his benefit payments under the ESRP. The amount
distributable from the Participant's ESRP Account shall be the After-Tax Value
of the amount required to satisfy fully the obligation of DRI and Virginia Power
to the Participant under the ESRP. The Participant's Credited Service Account
shall be paid in the form and at the times provided in any contractual agreement
related to the Participant's years of credited service for employee benefit plan
purposes. The amount distributable from the Participant's Credited Service
Account shall be the After-Tax Value of the amount required to satisfy fully the
obligation of DRI and Virginia Power to the Participant under any contractual
agreement related to the Participant's years of credited service for employee
benefit plan purposes. The Participant's Benefit Restoration Account shall be
paid in the same form as provided for the Participant in the Benefit Restoration
Plan. The amount distributable from the Participant's Benefit Restoration
Account shall be the After-Tax Value of the amount required to satisfy fully the
obligation of DRI and Virginia Power to the Participant under the Benefit
Restoration Plan.
(c) Distributions under Section 6.2(b) shall begin on the first day of
the month next following the day that the Participant separates from the service
of DRI, Virginia Power, an Affiliate, or a Nonregulated Subsidiary. The payments
to the Participant shall end when the entire value of his Account has been
distributed and the final payment to the Participant shall equal his remaining
balance in his Account. If there is any balance in the Participant's Account
when the Participant is no longer entitled to payments under the ESRP, the
Benefit Restoration Plan, or any contractual agreement related to the
Participant's years of credited service for employee benefit plan purposes, the
remaining balance in the Participant's Account shall be paid to the Participant
in a single lump sum.
6.3 Participants in Pay Status.
(a) A Participant who separated from the service of DRI, Virginia
Power, an Affiliate, or a Nonregulated Subsidiary on or before June 29, 1990,
shall be entitled to receive his benefits as provided in the following
sentences. The value of the Account of a Participant described in the preceding
sentence may be segregated and, by way of example and not of limitation, may be
invested in a savings account, money market fund, or other interest-bearing
investment medium. The Administrative Benefit Committee shall determine the
projected Trust Fund earnings allocable to the Participant's Account (based on
the value of the Account as of the applicable Valuation Date) during the period
beginning with the Participant's selection as a Participant and ending with the
last month for which a benefit is payable to the Participant under Dominion
Resources, Inc. Executive Supplemental Retirement Plan. The amount payable to
the Participant each month shall be the amount that, based on the Administrative
Benefit Committee's determination of projected earnings, will provide equal
monthly payments to the Participant during the period described in the preceding
sentence. Notwithstanding the foregoing, the amount distributable from the
Participant's ESRP Account shall not be greater than the amount required to
fully satisfy the obligation of Virginia Power and DRI to the Participant under
the Dominion Resources, Inc. Executive Supplemental Retirement Plan and the
amount distributable from the Participant's Credited Service Account shall not
be greater than the amount required to fully satisfy the obligation of Virginia
Power and DRI to the Participant under any contractual agreement related to the
Participant's years of credited service for employee benefit plan purposes. The
payments to the Participant shall end when the entire value of his Account has
been distributed and the final payment to the Participant shall equal his
remaining balance in his Account. The payments under this Section shall begin on
the first day of the month next following the day that the Participant is
selected to participate in the Plan.
(b) A Participant who is receiving payments from the Plan as of
January 1, 1997 shall be subject to the provisions of this Section 6.3(b).
Effective January 1, 1997, the amount distributable from the Participant's ESRP
Account shall be the After-Tax Value of the amount required to satisfy fully the
obligation of DRI and Virginia Power to the Participant under the ESRP.
Effective January 1, 1997, the amount distributable from the Participant's
Credited Service Account shall be the After-Tax Value of the amount required to
satisfy fully the obligation of DRI and Virginia Power to the Participant under
any contractual agreement related to the Participant's years of credited service
for employee benefit plan purposes. Effective January 1, 1997, the amount
distributable from the Participant's Benefit Restoration Account shall be the
After-Tax Value of the amount required to satisfy fully the obligation of DRI
and Virginia Power to the Participant under the Benefit Restoration Plan. The
payments to the Participant shall end when the entire value of his Account has
been distributed and the final payment to the Participant shall equal his
remaining balance in his Account. If there is any balance in the Participant's
Account when the Participant is no longer entitled to payments under the ESRP,
the Benefit Restoration Plan, or any contractual agreement related to the
Participant's years of credited service for employee benefit plan purposes, the
remaining balance in the Participant's Account shall be paid to the Participant
in a single lump sum.
6.4 Death Benefits.
(a) If a Participant dies after the commencement of benefit payments
under Section 6.2 or 6.3 but before he has received his entire interest in his
Account, the remainder of the Participant's interest in his Account shall be
paid to the Participant's Beneficiary in the same manner that the Participant
was receiving benefits before his death.
(b) If a Participant dies before the commencement of benefit payments
under Section 6.2 or 6.3, the value of his Account shall be paid to his
Beneficiary in the manner described in Section 6.2(b) or 6.3, as applicable.
(c) A Beneficiary who is receiving benefits under this Section may
designate a beneficiary who will be entitled to receive any benefits that remain
to be paid to the Beneficiary after the Beneficiary's death. Such designation
shall be made in the same manner as the Participant's designation of a
Beneficiary.
6.5 Special Distribution
As of January 1, 1997, the Administrative Benefit Committee shall determine
which Participants have Accounts that are valued at $10,000 or less. For such
Participants, the Administrative Benefit Committee shall distribute the entire
value of each such Participant's Account to the Participant in a single lump sum
as of January 1, 1997. Any Participant who receives a distribution under this
Section 6.5 shall not be entitled to any further benefits under the Plan. A
distribution under this Section 6.5 shall not reduce the amount which any
Participant is entitled to under the ESRP, the Benefit Restoration Plan, or any
contractual agreement related to the Participant's years of credited service for
employee benefit plan purposes.
ARTICLE VII - APPOINTMENTS AND ALLOCATION
OF FIDUCIARY RESPONSIBILITY
7.1 Sponsor, Named Fiduciary.
DRI is hereby designated and appointed the sponsor and named fiduciary
of the Plan as to DRI Participants and Virginia Power is hereby designated and
appointed the sponsor and named fiduciary of the Plan as to Virginia Power
Participants.
7.2 Accountant.
To the extent required by law, the Administrative Benefit Committee
shall designate as accountant for the Plan a person recognized by the Secretary
of Labor as an independent qualified public accountant or a firm which maintains
on its staff at least one such person. Such entity shall be engaged by the
Administrative Benefit Committee to perform (to the extent required by law) in
accordance with generally accepted accounting principles the examination of the
financial statements and other books and records of the Plan that are necessary
to enable it to form and render an opinion as to whether the financial
statements and schedules required by law to be included in the annual report of
the Plan are presented fairly and in conformity with generally accepted
accounting principles applied on a basis consistent with that of the preceding
year and to render such other opinions and perform such other services with
regard to the Plan as may be necessary or desirable.
<PAGE>
7.3 Insurer.
The Administrative Benefit Committee may designate one or more
insurance companies licensed to do business in Virginia to invest or insure part
or all of the assets of the Plan.
7.4 Investment Manager.
The Administrative Benefit Committee, acting as a named fiduciary for
this purpose, may appoint an Investment Manager to manage all or a designated
part of the assets of the Trust Fund. An Investment Manager shall have complete
control and authority over all matters concerning the investment of assets under
its direction and control, including brokerage transactions. When an Investment
Manager has been appointed and has accepted its fiduciary responsibility to the
Plan in writing, the Trustee shall be under no obligation to invest the portion
of the Trust Fund under the control of the Investment Manager and shall not
incur any liability with respect to that portion of the Trust Fund unless it
shall knowingly participate in or knowingly conceal another party's breach of
its fiduciary responsibilities with respect to that portion of the Trust Fund.
Nothing herein, however, shall relieve the Trustee of responsibility for its
acts or omissions as Trustee.
7.5 Trustee.
The DRI Board and the Virginia Power Board must jointly appoint a
Trustee. A Trustee may resign at any time upon 60 days' written notice to DRI
and Virginia Power or such other period as may be agreed upon in writing by DRI
and Virginia Power and the Trustee. The DRI Board and the Virginia Power Board
may jointly act to remove a Trustee at any time upon like notice to the Trustee.
In either event, the DRI Board and the Virginia Power Board may jointly appoint
a successor Trustee or Trustees. Any successor Trustee shall become vested with
all the estate, rights, powers, discretion and duties of a Trustee hereunder.
7.6 Allocation of Responsibility.
The DRI Board and the Virginia Power Board, through this document,
have delegated certain fiduciary responsibilities to the DRI O&C Committee, the
Virginia Power O&C Committee, the Administrative and Investment Benefit
Committee and the Administrative Benefit Committee. The DRI Board and the
Virginia Power Board (or any committee to which either has delegated a function
hereunder) shall have the power to further allocate fiduciary responsibilities
among other fiduciaries and to designate fiduciaries and nonfiduciaries to carry
out other responsibilities in order to provide for the orderly operation and
administration of the Plan. Any allocation, delegation, or other assignment of
duties with regard to the Plan shall continue until it is revoked, modified, or
altered. To the extent allowed by law, each fiduciary's responsibility is
limited to the duties allocated or assigned to the fiduciary. Fiduciaries
serving under the Plan may serve in more than one fiduciary capacity.
7.7 General.
A person or entity serving in a fiduciary capacity to the Plan may
employ one or more persons to render advice as to his or its responsibilities
hereunder. Any person employed by DRI who is serving under the Plan without
compensation may, with the approval of the DRI O&C Committee, have his
reasonable expenses incurred in serving hereunder reimbursed from the Trust
Fund. Any person employed by Virginia Power who is serving under the Plan
without compensation may, with the approval of the Virginia Power O&C Committee,
have his reasonable expenses incurred in serving hereunder reimbursed from the
Trust Fund.
7.8 Fiduciary Discretion.
In discharging the duties assigned to it under the Plan, each
fiduciary has the discretion to interpret the Plan; adopt, amend, and rescind
rules and regulations pertaining to his or its duties under the Plan; and to
make all other determinations necessary or advisable for the discharge of his or
its duties under the Plan. Each fiduciary's discretionary authority is absolute
and exclusive if exercised in a uniform and nondiscriminatory manner with
respect to all similarly situated individuals. The express grant in the Plan of
any specific power to a fiduciary with respect to any duty assigned to him or it
under the Plan must not be construed as limiting any power or authority of the
fiduciary to discharge him or its duties.
ARTICLE VIII - COMMITTEES
8.1 General.
One or more committees may be established to carry out various
functions relating to the Plan. The committees currently constituted, how they
are appointed and their specific responsibilities are as follows:
(a) Virginia Power O&C Committee. The Virginia Power O&C Committee is
a committee of and appointed by the Virginia Power Board. It is responsible for
recommending to the Virginia Power Board: contributions or transfers pursuant to
Article III on behalf of Virginia Power Participants, allocations to Virginia
Power Participants' Accounts, and amendments to the Plan or the Trust as to
Virginia Power Participants. The Virginia Power O&C Committee is also
responsible for establishing a funding policy for the Plan with respect to
Virginia Power Participants.
(b) DRI O&C Committee. The DRI O&C Committee is a committee of and
appointed by the DRI Board. It is responsible for recommending to the DRI Board:
contributions or transfers pursuant to Article III on behalf of DRI
Participants, allocations to DRI Participants' Accounts, and amendments to the
Plan or the Trust as to DRI Participants. The DRI O&C Committee is also
responsible for establishing a funding policy for the Plan with respect to DRI
Participants.
(c) Administrative and Investment Benefit Committee. The
Administrative and Investment Benefit Committee is appointed by the DRI Board
and the Virginia Power Board. This committee is responsible for establishing an
investment policy for the Plan. This committee also appoints the Administrative
Benefit Committee.
(d) Administrative Benefit Committee. This committee is responsible
for: selecting an accountant and Investment Managers; communicating the Plan's
investment policy (established by the Administrative and Investment Benefit
Committee) to the Trustee and any Investment Manager; the review of the Trust
Fund's investment performance; assuring that established investment policies are
carried out; supervising administration; determining benefits; and maintaining
records.
<PAGE>
8.2 Duties.
Each committee shall have control of the duties set out in Section 8.1
or specifically allocated to it under Article VII or which are delegated to it
by the Virginia Power Board or the DRI Board, as practicable, and shall have all
necessary powers to carry out its duties. Any delegation of authority by the
Virginia Power Board or the DRI Board to a committee shall be made in writing
and specify the nature and scope of such delegation. In exercising its duties
hereunder, each committee shall at all times act in a uniform, equitable and
nondiscriminatory manner. Notwithstanding its powers granted hereunder, no
committee shall have the power to modify any provision of the Plan in any way.
8.3 Agents.
Each committee may engage agents to assist it in its duties, and may
consult with counsel, who may be counsel for DRI or Virginia Power, with respect
to the meaning or construction of this document and its obligations hereunder,
or with respect to any action, proceeding, or question of law related thereto.
ARTICLE IX - ADMINISTRATION OF THE PLAN
9.1 Duties of Participants and Beneficiaries.
Each Participant and Beneficiary shall furnish to the Administrative
Benefit Committee any information or proof requested of him and reasonably
required to administer the Plan.
9.2 General.
(a) The Administrative Benefit Committee, or such persons as it may
designate, shall be responsible for the operation and administration of the
Plan, except to the extent its duties are allocated to or assumed by other
persons or entities hereunder.
(b) The Administrative Benefit Committee shall establish rules and
procedures to be followed by the Participants and Beneficiaries in filing
applications for benefits and for furnishing and verifying proofs necessary to
establish any matters required in order to establish their rights to benefits
under the terms of the Plan.
(c) The Administrative Benefit Committee shall supply such full and
timely information on all matters relating to the Plan as (1) the Trustee, (2)
the accountant, (3) any insurance company and (4) any Investment Manager may
require for the effective discharge of their respective duties and
responsibilities.
(d) It shall be the duty of the Administrative Benefit Committee to
handle the day-to-day operations of the Plan, including distributing booklets,
notices and other information regarding the Plan; maintaining Beneficiary
designation forms; explaining the optional form of benefit payout which may be
elected by a Participant under the Plan; and communicating all other matters
relating to participation and entitlement to benefits to (1) the Trustee and (2)
the accountant as may be necessary to enable them to discharge their duties and
responsibilities. The Administrative Benefit Committee shall carry out these
duties in a uniform, equitable and nondiscriminatory manner with regard to all
Participants and Beneficiaries under similar circumstances.
9.3 Disclosure.
(a) The Administrative Benefit Committee shall see that descriptions
of the Plan are prepared as necessary for filing with the Department of Labor
and shall make available to Participants and Beneficiaries receiving benefits
under the Plan a summary of the Plan at such place and at such times as may be
required by federal statutes and regulations issued thereunder.
(b) The Administrative Benefit Committee shall arrange for the
preparation and filing of such annual reports, including financial statements of
the Plan's assets and liabilities, schedules, receipts and disbursements and
changes in financial position in such form, at such place and at such times as
may be required by federal statutes and regulations. The Administrative Benefit
Committee shall furnish annually as required by law to all Participants and
Beneficiaries receiving benefits under the Plan a copy of a summary of the
financial statements of the Plan's assets and liabilities and schedules of
receipts and disbursements and such other material as is necessary to fairly
summarize the latest annual report at such times as may be required by federal
statutes and regulations.
(c) The Administrative Benefit Committee shall make available copies
of the Plan, copies of any contracts relating to the Plan, descriptions of the
Plan, and annual reports at its principal office for examination by any
Participant and any Beneficiary receiving benefits under the Plan.
(d) Upon written request of any Participant or any Beneficiary
receiving benefits under the Plan, the Administrative Benefit Committee shall
furnish him a copy of the latest updated summary plan description, plan
description, latest annual report and a copy of the Plan. The Administrative
Benefit Committee may make a reasonable charge for the costs of furnishing such
copies.
9.4 Annual Accountings.
To the extent required by law, the Administrative Benefit Committee
shall select and engage, on behalf of all Participants, an independent qualified
public accountant to certify and render an opinion that the financial statements
and schedules prepared in conjunction with the Plan are presented fairly and are
in conformity with generally accepted accounting principles consistently
applied; provided, however, that where assets are held under a contract with an
insurance company or in trust by a bank supervised and subject to periodic
examination by a state or federal agency and such insurance company or bank
prepares statements concerning such assets and certifies that such statements
are accurate and the statements are made a part of the annual report, the
accountant may rely on such statements as accurate.
9.5 Expenses - Compensation.
As permitted by ERISA, the reasonable expenses incurred in the
administration of the Plan may be paid by the Trustee or an insurance company
out of the Trust Fund. By way of example and not of limitation, the following
expenses may be paid out of the Trust Fund: the compensation of the Trustee and
any Investment Manager, fees for actuarial and accounting services, and
financial statement preparation and benefit processing fees. Any expenses that
are paid out of the Trust Fund shall be charged to the Account of each
Participant in the same proportion that the value of each Account bears to the
total value of the Trust Fund. To the extent that such expenses are not paid by
the Trustee or an insurance company, they shall be paid by Virginia Power (to
the extent that the expenses are attributable or allocable to Virginia Power
Participants) and DRI (to the extent that the expenses are attributable or
allocable to DRI Participants). Notwithstanding the foregoing, no employee of
DRI, Virginia Power, an Affiliate, or a Nonregulated Subsidiary shall be
entitled to compensation from the Trust Fund for services rendered to the Plan.
9.6 Directions to Trustee, Insurers and Investment Managers.
All directions from DRI, Virginia Power or a committee to the Trustee,
an insurer or an Investment Manager shall be in writing from the chief executive
officer, the secretary or chairman of a committee, or such person or persons as
such individuals may designate in writing. Any Trustee, insurer or Investment
Manager may rely on directions from such persons and shall act in accordance
therewith, unless it knows or should know that the directions constitute a
breach of such person's or its own obligations under the Plan.
9.7 Claims Procedure.
(a) All claims for benefits under the Plan shall be submitted to the
Administrative Benefit Committee, who shall have the initial responsibility for
determining the eligibility of any Participant or Beneficiary for benefits. All
claims for benefits shall be made in writing and shall set forth the facts which
such Participant or Beneficiary believes to be sufficient to entitle him to the
benefit claimed.
If a claim for benefits is denied in whole or in part, the
Administrative Benefit Committee shall give the claimant written notice of the
decision within 90 days of the date the claim was submitted. Such written notice
shall set forth in a manner calculated to be understood by the claimant (1) the
specific reason or reasons for the denial; (2) specific reference to pertinent
Plan provisions on which the denial is based; (3) a description of any
additional material or information necessary for the claimant to perfect the
claim, along with an explanation of why such material or information is
necessary; and (4) appropriate information about the steps to be taken if the
claimant wishes to submit the claim for review of the denial. If special
circumstances require an extension of time for processing the initial claim, a
written notice of the extension and the reason therefor shall be furnished to
the claimant before the end of the initial ninety-day period. In no event shall
such extension exceed 90 days.
(b) If the initial claim for benefits is denied in whole or in part,
or if the claimant has had no response to such claim within 90 days of its
submission (in which case the claim for benefits shall be deemed to be denied),
the claimant or his duly authorized representative, at the claimant's sole
expense, may appeal the denial to the Virginia Power O&C Committee (if the claim
is related to the participation of a Virginia Power Participant) or the DRI O&C
Committee (if the claim is related to the participation of a DRI Participant).
Notice of the appeal must be received by the appropriate committee within 60
days of receipt of written notice of the denial of the claim or 60 days from the
date such claim is deemed to be denied. In pursuing his appeal, the claimant or
his duly authorized representative:
(1) may request in writing that the appropriate O&C
Committee review the denial;
(2) may review pertinent documents; and
(3) may submit issues and comments in writing.
The decision on review shall be made within 60 days of receipt of the
request for review, unless special circumstances require an extension of time
for processing, in which case a decision shall be rendered as soon as possible,
but not later than 120 days after receipt of the request for review. If such an
extension of time is required, written notice of the extension shall be
furnished to the claimant before the end of the original 60-day period. The
decision on review shall be made in writing, shall be written in a manner
calculated to be understood by the claimant, and shall include specific
references to the provisions of the Plan on which the denial is based. If the
decision on review is not furnished within the time specified above, the claim
shall be deemed denied on review.
ARTICLE X - OBLIGATIONS OF EMPLOYER
10.1 No Contract or Inducement.
The Plan shall not be deemed to be a contract between DRI, Virginia
Power, any Affiliate or any Nonregulated Subsidiary and any Participant or
Beneficiary or to be a consideration or an inducement for the employment of any
Participant.
10.2 No right to Employment.
Nothing contained in the Plan shall be deemed to give any Participant
the right to be retained in employment by DRI, Virginia Power, any Affiliate or
any Nonregulated Subsidiary or to interfere with the right of DRI, Virginia
Power, any Affiliate or any Nonregulated Subsidiary to discharge, layoff, or
suspend any Participant at any time without regard to the effect which such
discharge, layoff, or suspension shall have upon his rights or the rights of any
Beneficiary under this Plan.
10.3 Obligation for Benefits.
The Trust Fund shall be the sole source of benefits under this Plan,
and each Participant and Beneficiary shall be entitled to look only to the Trust
Fund for payment of benefits. None of DRI, Virginia Power, any Affiliate or any
Nonregulated Subsidiary shall have any liability to make or continue from its
own funds the payment of any benefit under the Plan.
ARTICLE XI - AMENDMENT AND TERMINATION OF PLAN
11.1 Amendment of the Plan.
Virginia Power shall have the right by action of the Virginia Power
Board to modify, alter or amend the Plan in whole or in part as to Virginia
Power Participants and DRI shall have the right by action of the DRI Board to
modify, alter or amend the Plan in whole or in part as to DRI Participants;
provided that the duties, powers and liabilities of a Trustee, insurance company
or Investment Manager shall not be increased without its written consent; and
provided further that any such action shall not, in any way, affect adversely
the rights of Participants with respect to amounts credited to their Accounts as
of the date the Plan is amended. No amendment, modification or alteration shall
have the effect of revesting in DRI, Virginia Power, any Affiliate or any
Nonregulated Subsidiary any part of the principal or income of the Trust Fund.
Notwithstanding the above, nothing herein shall prevent the Virginia Power Board
or the DRI Board from modifying or eliminating any form of benefit, subsidy, or
payment option to the extent allowed by law so long as the benefit provided as a
result of such amendment or alteration is an actuarial equivalent of the benefit
otherwise payable to the Participant or Beneficiary determined as of the
effective date of such amendment or alteration.
11.2 Termination of the Plan.
While Virginia Power and DRI expect to continue the Plan indefinitely,
the continuance of the Plan is not assumed as a contractual obligation. Virginia
Power reserves the right to discontinue its contributions and to terminate the
Plan at any time as to Virginia Power Participants by action of the Virginia
Power Board. DRI reserves the right to discontinue its contributions and to
terminate the Plan at any time as to DRI Participants by action of the DRI
Board. In the event of a termination of the Plan, no further contributions may
be made to the Plan for the participants of the party which has terminated the
Plan.
ARTICLE XII - GENERAL PROVISIONS
12.1 Interpretation.
This Plan has been created for the exclusive purpose of providing
benefits to Participants and their Beneficiaries and defraying reasonable
expenses of administering the Plan. The Plan shall be interpreted in a manner
consistent with applicable provisions of ERISA and as in effect from time to
time. Under no circumstances shall any funds contributed or transferred to this
Plan, any assets attributable to this Plan or income relating to such assets,
revert to DRI, Virginia Power, any Affiliate or any Nonregulated Subsidiary, nor
shall any such funds, assets or income ever be used or diverted to purposes
other than the exclusive benefit of the Participants and their Beneficiaries.
12.2 Merger, Consolidation and Transfers of Assets or Liabilities.
No merger or consolidation with, or transfer of assets or liabilities
to this Plan or from this Plan to any other plan shall be made, unless each
Participant would receive immediately after such event a benefit which is equal
to or greater than the benefit he would have been entitled to receive under the
Plan immediately before such event had the Plan terminated at that time.
12.3 Limitation on Assignment.
Except as allowed by ERISA section 206 with respect to Qualified
Domestic Relations Orders, Plan benefits may not be anticipated, assigned
(either at law or in equity), alienated, or be subject to attachment,
garnishment, levy, execution, or other legal or equitable process. If a
Participant dies before the date that a Qualified Domestic Relations Order
directs that payments begin to an Alternate Payee, the Alternate Payee shall be
entitled to a payment from the Plan only if the Qualified Domestic Relations
Order requires the payment of such benefits. The Administrative Benefit
Committee shall establish reasonable written procedures for determining the
qualified status of a domestic relations order and for administering
distributions to an Alternate Payee. The Administrative Benefit Committee must
promptly notify the Participant and each Alternative Payee of the receipt of a
domestic relations order and of the procedures for determining its qualified
status.
12.4 Discharge of Liability.
Any payment to a person or entity entitled to payment under the Plan,
or to the representative of such person or entity, shall be, to the extent of
the payment, in full satisfaction of all claims under the Plan against the
Trustee, the Administrative Benefit Committee, and the Employers. As a
prerequisite to the receipt of any such payment, the Trustee, the Administrative
Benefit Committee, and any Employer may require that such person execute a
receipt and release in such form as shall be determined by the Trustee, the
Administrative Benefit Committee, or an Employer, as the case may be.
12.5 Payments to Minors and Incompetents.
If any Plan benefit is payable to a Participant or Beneficiary who is
a minor or who, in the opinion of the Administrative Benefit Committee, is not
legally capable of giving valid receipt and discharge for such payments, that
payment may be made for the benefit of the Participant or Beneficiary to such
person as the Administrative Benefit Committee, in its discretion, designates.
Such payments, to the extent made, shall be deemed a complete discharge of any
liability for such payment under the Plan, and the Trustee may make the payment
without obligation to require bond or to see to the further application of the
payments.
12.6 Unclaimed Benefits.
If the Trustee cannot make payments of any amount to a Participant or
Beneficiary within seven years after the amount becomes payable because the
person's identity or whereabouts cannot be determined by the end of the seven
year period, all amounts that would have been payable to that Participant or
Beneficiary must be segregated and dealt with by the Trustee in accordance with
the applicable state law pertaining to abandoned intangible personal property
held in a fiduciary capacity.
12.7 Headings and Subheadings.
The headings and subheadings in this Plan have been inserted for
convenience of reference only and are to be ignored in any construction of the
provisions hereof.
12.8 Use of Masculine and Feminine, Singular and Plural.
In the construction of the Plan, the masculine shall include the
feminine and the singular the plural in all cases where such meanings are
indicated by the context.
12.9 Governing Law.
Except as otherwise may be required by the controlling law of the
United States, the Plan shall be construed, administered, and enforced in
accordance with the laws of the Commonwealth of Virginia.
12.10 Errors and Omissions.
It shall be the responsibility of those individuals and entities
charged with the administration of the Plan to see that it is administered in
accordance with its terms so long as it is not in conflict with ERISA. If an
innocent error or omission is discovered in the Plan's operation or
administration which is not correctable under normal administrative procedures,
and the Administrative Benefit Committee determines that (i) it would cost more
to correct the error than is warranted and (ii) the error did not cause an
excise tax problem, then the Administrative Benefit Committee may authorize any
equitable adjustment it deems necessary or desirable to correct the error or
omission, including but not limited to the authorization (with the approval of
the Virginia Power Board or the DRI Board, as appropriate), of additional
Employer contributions designed, in a manner consistent with the goodwill
intended to be engendered by the Plan, to put Participants or their
Beneficiaries in the same relative position they would have been in but for such
error or omission. Any contribution made pursuant to this section is an
additional discretionary contribution.
EXECUTION
IN WITNESS WHEREOF, this instrument has been executed this 12th day of May,
1997.
DOMINION RESOURCES, INC.
By /s/LINWOOD R. ROBERTSON
Linwood R. Robertson
Executive Vice President and
Chief Financial Officer
VIRGINIA ELECTRIC AND POWER COMPANY
By /s/T. J. O'NEIL
T. J. O'Neil
Vice President, Human Resources
Exhibit 10.17
DOMINION RESOURCES, INC.
RETIREMENT BENEFIT RESTORATION PLAN
As Adopted Effective
January 1, 1991
and
Amended and Restated
September 1, 1996
<PAGE>
DOMINION RESOURCES, INC.
RETIREMENT BENEFIT RESTORATION PLAN
Purpose
The Board of Directors of Dominion Resources, Inc. and the Board of
Directors of Virginia Electric and Power Company ("Virginia Power") determined
that the adoption of the Retirement Benefit Restoration Plan will assist it in
attracting and retaining those employees whose judgment, abilities and
experience will contribute to its continued progress. The Plan is intended to be
a plan that is unfunded and maintained primarily for the purpose of providing
deferred compensation for a "select group of management or highly compensated
employees" (as such phrase is used in the Employee Retirement Income Security
Act of 1974). The Plan must be administered and construed in a manner that is
consistent with that intent. The Plan was amended, as of September 1, 1996, to
coordinate payments with changes in the Funding Plan.
Article I
Definitions
As defined herein, the following phrases or terms shall have the indicated
meanings:
1.1. "Administrative Benefit Committee" means the Administrative Benefit
Committee, as appointed under the Funding Plan, which shall manage and
administer the Plan in accordance with the provisions of Article X.
1.2. "Affiliate" means any entity that is (i) a member of a controlled
group of corporations as defined in Section 1563(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), determined without regard to Code Sections
1563(a)(4) and 1563(e)(3)(C), of which Dominion Resources, Inc. is a member
according to Code Section 414(b); (ii) an unincorporated trade or business that
is under common control with Dominion Resources, Inc., as determined according
to Code Section 414(c); or (iii) a member of an affiliated service group of
which Dominion Resources, Inc. is a member according to Code Section 414(m).
1.3. "Beneficiary" means the person, persons, entity, entities or the
estate of a Participant which, in accordance with the provisions of the
Retirement Plan, is entitled to receive a benefit under the Retirement Plan on
account of the Participant's death. If no person is entitled to receive a
benefit under the Retirement Plan on account of the Participant's death, the
Participant may designate another person, persons, entity, entities or his
estate as Beneficiary under the Plan.
1.4. "Benefit Restoration Account" means the Benefit Restoration Account
established under the Funding Plan on behalf of a Participant who also
participates in the Funding Plan.
1.5. "Change in Control" means the occurrence of any of the following
events: (i) any person, including a "group" as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934 becomes the owner or beneficial owner of
Dominion Resources, Inc. securities having 20% or more of the combined voting
power of the then outstanding Dominion Resources, Inc. securities that may be
cast for the election of Dominion Resources, Inc.'s directors (other than as a
result of an issuance of securities initiated by Dominion Resources, Inc., or
open market purchases approved by Dominion Resources, Inc.'s Board of Directors,
as long as the majority of Dominion Resources, Inc.'s Board of Directors
approving the purchases is also the majority at the time the purchases are
made); (ii) as the direct or indirect result of, or in connection with, a cash
tender or exchange offer, a merger or other business combination, a sale of
assets, a contested election, or any combination of these transactions, the
persons who were directors of Dominion Resources, Inc. before such transactions
cease to constitute a majority of Dominion Resources, Inc.'s Board of Directors,
or any successor's board, within two years of the last of such transactions; or
(iii) with respect to a particular Participant, an event occurs with respect to
the Company that employs that Participant such that, after the event, the
employing Company is no longer an Affiliate of the Dominion Resources, Inc.
1.6. "Code" means the Internal Revenue Code of 1986, as amended.
1.7. "Company" means Dominion Resources, Inc., its predecessor, a
subsidiary or an Affiliate.
1.8. "Control Change Date" means the date on which a Change in Control
event occurs. If a Change in Control occurs on account of a series of
transactions, the Control Change Date is the date of the last of such
transactions.
1.9. "Eligible Employee" means an individual (i) who is employed by
Dominion Resources, Inc. or an Affiliate, (ii) who is a member of management or
a highly compensated employee, and (iii) whose Retirement Plan benefit is
reduced or limited by Code Section 401(a)(17), Code Section 415, or both.
1.10. "Funding Plan" means the Dominion Resources, Inc. Retirement
Benefit Funding Plan.
1.11 "O&C Committee" means (i) the Organization and Compensation Committee
of the Board of Directors of Dominion Resources, Inc. with respect to an
Eligible Employee who is employed by Dominion Resources, Inc., Dominion Capital,
Inc., Dominion Lands, Inc. or Dominion Energy, Inc. or any other Affiliate which
is not subject to regulation as a public service corporation by the State
Corporation Commission of Virginia ("DRI O&C Committee"); and (ii) the
Organization and Compensation Committee of the Board of Directors of Virginia
Electric and Power Company with respect to an Eligible Employee who is employed
by Virginia Electric and Power Company or any of its subsidiaries ("Virginia
Power O&C Committee").
1.12. "Participant" means an Eligible Employee who is designated by the
appropriate O&C Committee. A "DRI Participant" is an Eligible Employee
designated by the DRI O&C Committee. A "Virginia Power Participant" is an
Eligible Employee designated by the Virginia Power O&C Committee. An individual
shall remain a Participant only so long as the individual remains an Eligible
Employee and his designation as a Participant has not been revoked or rescinded.
1.13. "Plan" means the Dominion Resources, Inc. Retirement Benefit
Restoration Plan.
1.14. "Retirement" and "Retire" mean severance from employment with the
Company on or after attaining a vested or nonforfeitable interest in the portion
of his Retirement Plan benefit attributable to Company contributions; except as
provided in Article VI of the Plan.
1.15. "Retirement Plan" means the Dominion Resources, Inc. Retirement
Plan.
1.16. "Totally and Permanently Disabled" means a condition, determined on
the basis of medical evidence satisfactory to a physician designated by the
Administrative Benefit Committee, rendering a Participant, due to bodily injury
or disease, unable to perform services as follows: (i) during the first two
years of such disability (measured from the commencement of such disability
rather than the commencement of benefit payments) such Participant is unable to
perform any and every duty pertaining to his employment with the Company; and
(ii) thereafter, such Participant is unable to engage in any occupation or
perform any work for compensation or profit for which he is or may become
reasonably fitted by education, training or experience. In no event shall such
condition be deemed to exist during any period that the Participant is not under
the regular care and attendance of a legally qualified physician during any
period that he engages in any occupation or performs any work for compensation
or profit.
Article II
Participation
An Eligible Employee who is designated to participate in the Plan by the
appropriate O&C Committee shall become a Participant in the Plan as of the date
specified by the appropriate O&C Committee. A Participant shall continue to
participate in the Plan until such date as the appropriate O&C Committee may
declare that he is no longer a Participant or until the date that he is no
longer an Eligible Employee.
Article III
Benefits
Except as provided in Article IV and subject to the limitations set forth
in Articles VI and VII, the benefits of a Participant and his Beneficiary shall
be as follows:
3.1. Upon Retirement a Participant shall be entitled to a monthly
Retirement benefit equal to the difference between (a) and (b) below where:
(a) = the monthly benefit that would have been payable to the
Participant under the Retirement Plan but for the
application of the limits set forth in Code Sections
401(a)(17) and 415; and
(b) = the monthly benefit that the Participant is entitled to
receive under the Retirement Plan.
The payment of the benefit under this Section 3.1 shall begin as of the same
date that the Participant's retirement benefit under the Retirement Plan is
scheduled to commence. The benefit payable under this Section 3.1 also shall be
determined as of the date that the Participant's retirement benefit under the
Retirement Plan is scheduled to commence.
Except as provided below, the benefit payable under this Section 3.1 shall
be computed and paid in the same form as the Participant's retirement benefit
under the Retirement Plan; provided, however, that upon the Participant's death
no further benefit shall be payable under this Plan except as provided in
Section 3.3. In lieu of receiving the same form of retirement benefit as under
the Retirement Plan, a Participant may elect to receive an actuarial equivalent
of said benefit as a single lump sum payment. The Participant must make the
election at least six (6) months prior to the commencement of the receipt of
benefits. The Participant must make the election of a single lump sum payment
either (i) at least six (6) months prior to the commencement of the receipt of
benefits or (ii) at least one (1) month prior to the commencement of the receipt
of benefits if the election is approved by the Administrative Benefit Committee
or the appropriate O&C Committee in its absolute discretion. Upon the denial of
a Participant's election, the Participant shall receive the benefits provided
under the Plan in the form that is otherwise payable absent the election. The
actuarial equivalent of the benefit payable under this Section 3.1 shall be
computed using the actuarial factors used for calculation of lump sum benefit
payments under the Retirement Plan as of the date that the Participant's
retirement benefit under the Retirement Plan is scheduled to commence. In lieu
of receiving the same form of retirement benefit as under the Retirement Plan, a
Participant who is not eligible to elect a survivor benefit form of payment
under the Retirement Plan also may elect to receive an actuarial equivalent of
said benefit in any form of survivor benefit otherwise provided under the
Retirement Plan with the survivor benefit payable to the Participant's
Beneficiary under the Plan.
3.2. If the Participant becomes Totally and Permanently Disabled prior to
his Retirement and during his employment with the Company, he shall be entitled
to receive a benefit calculated and paid in the manner set forth in Section 3.1.
3.3. (a) Upon the Participant's death if the Beneficiary is entitled to a
benefit under the Retirement Plan, the Beneficiary shall be entitled to a
monthly benefit under this Plan equal to the difference between (x) and (y)
where:
(x) = the monthly benefit that would have been payable to the
Beneficiary but for the application of Code Sections 401(a)
17 and 415 in the calculation of the Participant's accrued
benefit under the Retirement Plan; and
(y) = the monthly benefit that the Beneficiary is entitled to
receive under the Retirement Plan.
The payment of the benefit under this Section 3.3(a) shall begin as of the same
date that the Beneficiary's benefit under the Retirement Plan is scheduled to
commence. The amount payable under this Section 3.3 also shall be determined as
of the date that the Beneficiary's benefit under the Retirement Plan is
scheduled to commence. The benefit payable under this Section 3.3(a) shall be
computed and paid in the same form as the benefit payable to the Beneficiary
under the Retirement Plan.
(b) Upon the Participant's death before the commencement of benefits to the
Participant, if the Beneficiary is not entitled to a benefit under the
Retirement Plan, the Beneficiary shall be entitled to a monthly benefit under
this Plan equal to fifty percent (50%) of the actuarial present value of the
Participant's benefit payable under Section 3.1 (determined under the actuarial
factors used for calculation of lump sum benefit payments under the Retirement
Plan). The payment of the benefit under this Section 3.3(b) shall be made as
soon as administratively possible after the Participant's death. The amount
payable under this Section 3.3(b) shall be determined as of the date of the
Participant's death. The benefit payable under this Section 3.3(b) shall be
computed and paid in the form of a lump sum payment.
(c) Upon the Participant's death after the commencement of benefits to the
Participant, if the Beneficiary is not entitled to a benefit under the
Retirement Plan, the Beneficiary shall be entitled to the continuation of the
form of benefit elected by the Participant under Section 3.1, if the form of
benefit provides for payment of a benefit after the Participant's death. The
payment of the benefit under this Section 3.3(c) shall begin as of the date of
the Participant's death.
Article IV
Coordination of Benefits
The amount payable in any month to a Participant or a Beneficiary under the
Plan shall be reduced, but not below zero, by the Pre-Tax Value of the amount
payable for the month in question from the Participant's Benefit Restoration
Account in the Funding Plan. The Pre-Tax Value of the payments from the
Participant's Benefit Restoration Account shall be the amount that, after
payment of any applicable federal, state, and local income and employment taxes,
would yield the amount of the payment from the Benefit Restoration Account,
taking into consideration the extent to which, if any, that the payment from the
Benefit Restoration Account is taxable to the Participant. The determination of
the Pre-Tax Value shall be made on the basis of a policy or guidelines adopted
by the appropriate O&C Committee using the maximum rates of federal, state, and
local income and employment taxes that are applicable to the Participant or
Beneficiary. Benefits payable under the Plan shall not be reduced by any payment
to a Participant under Section 6.05 of the Funding Plan.
Article V
Guarantees
Dominion Resources, Inc. and Virginia Power have only a contractual
obligation to make payments of the benefits described in Article III. All
benefits are to be satisfied solely out of the general corporate assets of
Dominion Resources, Inc. or Virginia Power which shall remain subject to the
claims of its creditors. No assets of Dominion Resources, Inc. or Virginia Power
will be segregated or committed to the satisfaction of its obligations to any
Participant or Beneficiary under this Plan. If Dominion Resources, Inc., in its
sole discretion, or Virginia Power, in its sole discretion, elects to purchase
life insurance on the life of a Participant in connection with the Plan, the
Participant must submit to a physical examination, if required by the insurer,
and otherwise cooperate in the issuance of such policy or his rights under the
Plan will be forfeited.
Article VI
Termination of Employment
6.1. The Plan does not in any way limit the right of the Company at any
time and for any reason to terminate the Participant's employment or such
Participant's status as an Eligible Employee. In no event shall the Plan, by its
terms or by implication, constitute an employment contract of any nature
whatsoever between the Company and a Participant.
6.2. A Participant who ceases to be an Eligible Employee or whose
employment with the Company is terminated either with or without cause, for
reasons other than death, Retirement or Total and Permanent Disability shall
immediately cease to be a Participant under this Plan and shall forfeit all
rights under this Plan. Further, in no event shall an individual who was a
Participant but is not a Participant at the time of such individual's death,
Retirement or Total and Permanent Disability, be entitled to any benefit under
the Plan. A Participant on authorized leave of absence from the Company shall
not be deemed to have terminated employment or lost his status as an Eligible
Employee for the duration of such leave of absence.
6.3. Notwithstanding any contrary Plan provision, in the event the
employment of a Participant who is in the employ of a Company on a Control
Change Date relating to that Company is terminated (for reasons other than
death, Retirement, Total and Permanent Disability, or as a result of acts of
theft, embezzlement, fraud, or moral turpitude) before the end of the period
commencing on the Control Change Date and ending on the third anniversary of
such date, and whether or not he is a Participant at such time, he shall be
fully vested in a benefit payable under Article III as of the date his
employment is terminated. During this same period, a Participant who voluntarily
terminates employment within sixty (60) days after (i) he does not receive
salary increases, bonuses, and incentive awards comparable to the increases,
bonuses and awards that he received in prior years or that other executives in
comparable positions receive in the current year; or (ii) his compensation or
employment-related benefits are reduced; or (iii) his status, title(s), or
management responsibilities are diminished (other than changes in reporting or
management responsibilities to reflect sound practices commonly followed by
enterprises comparable to the Company employing Participant or required by
applicable federal or state law) or within sixty days after the last in a series
of such events will be deemed to have terminated under circumstances requiring
full vesting under this Section 6.3.
6.4. A Participant who ceases to be an employee of the Company and who is
subsequently reemployed by the Company shall not accrue any additional benefits
on account of such later service for periods in which he is not a Participant.
Article VII
Termination, Amendment or Modification of Plan
7.1. Except as otherwise specifically provided, Dominion Resources, Inc.
reserves the right to terminate, amend or modify this Plan, wholly or partially,
at any time and from time to time as to DRI Participants. Such right to
terminate, amend or modify the Plan shall be exercised for Dominion Resources,
Inc. by its Board of Directors. Except as otherwise specifically provided,
Virginia Power reserves the right to terminate, amend or modify this Plan,
wholly or partially, at any time and from time to time as to Virginia Power
Participants. Such right to terminate, amend or modify the Plan shall be
exercised for Virginia Power by its Board of Directors. Notwithstanding the
preceding, with respect to an affected Participant, the Plan and Section 6.3 may
not be amended, modified or terminated after a Control Change Date before the
end of the period specified in that section unless the affected Participant
agrees to such amendment, modification or termination in writing.
7.2. Section 7.1 notwithstanding, no action to terminate the Plan shall be
taken except upon written notice to each Participant to be affected thereby,
which notice shall be given not less than thirty (30) days prior to such action.
7.3. Any notice which shall be or may be given under the Plan shall be in
writing and shall be mailed by United States mail, postage prepaid. If notice is
to be given to Dominion Resources, Inc. or Virginia Power, such notice shall be
addressed to their respective corporate offices; addressed to the attention of
the Corporate Secretary. If notice is to be given to a Participant, such notice
shall be addressed to the Participant's last known address.
7.4. The rights of Dominion Resources, Inc. and Virginia Power set forth in
Section 7.1 are subject to the condition that its Board of Directors shall take
no action to terminate the Plan or decrease the benefit that would become
payable or is payable, as the case may be, with respect to a Participant who has
earned a vested or nonforfeitable interest in the portion of his Retirement Plan
benefit attributable to Company contributions.
7.5. Except as provided in Section 6.3, 7.1, and 7.4, upon the termination
of this Plan as to Dominion Resources, Inc. by its Board of Directors, the Plan
shall no longer be of any further force or effect as to DRI Participants, and
neither Dominion Resources, Inc. nor any DRI Participant shall have any further
obligation or right under this Plan. Except as provided in Section 6.3, 7.1, and
7.4, upon the termination of this Plan as to Virginia Power by its Board of
Directors, the Plan shall no longer be of any further force or effect as to
Virginia Power Participants, and neither Virginia Power nor any Virginia Power
Participant shall have any further obligation or right under this Plan.
Likewise, the rights of any individual who was a Participant and whose
designation as a Participant is revoked or rescinded by the appropriate O&C
Committee shall cease upon such action.
Article VIII
Other Benefits and Agreements
Except as provided in Article IV, the benefits provided for a Participant
and his Beneficiary under the Plan are in addition to any other benefits
available to such Participant under any other plan or program of the Company for
its employees, and, except as may otherwise be expressly provided for, the Plan
shall supplement and shall not supersede, modify or amend any other plan or
program of the Company in which a Participant is participating.
Article IX
Restrictions on Transfer of Benefits
No right or benefit under the Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to
do so shall be void. No right or benefit hereunder shall in any manner be liable
for or subject to the debts, contracts, liabilities, or torts of the person
entitled to such benefit. If any Participant or Beneficiary under the Plan
should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge,
encumber or charge any right to a benefit hereunder, then such right or benefit,
in the discretion of the appropriate O&C Committee, shall cease and terminate,
and, in such event, the appropriate O&C Committee may hold or apply the same or
any part thereof for the benefit of such Participant or Beneficiary, his or her
spouse, children, or other dependents, or any of them, in such manner and in
such portion as the appropriate O&C Committee may deem proper.
Article X
Administration of the Plan
10.1. The Plan shall be administered by the Administrative Benefit
Committee. Subject to the provisions of the Plan, the Administrative Benefit
Committee may adopt such rules and regulations as may be necessary to carry out
the purposes hereof. The Administrative Benefit Committee's interpretation and
construction of any provision of the Plan shall be final and conclusive.
10.2. Dominion Resources, Inc. and Virginia Power shall indemnify and save
harmless each member of the Administrative Benefit Committee and each member of
its own O&C Committee against any and all expenses and liabilities arising out
of his membership on such Committee, excepting only expenses and liabilities
arising out of his own willful misconduct. Expenses against which a member of an
O&C Committee or the Administrative Benefit Committee shall be indemnified
hereunder shall include without limitation, the amount of any settlement or
judgment, costs, counsel fees, and related charges reasonably incurred in
connection with a claim asserted, or a proceeding brought or settlement thereof.
The foregoing right of indemnification shall be in addition to any other rights
to which any such member may be entitled.
10.3. In addition to the powers hereinabove specified, the Administrative
Benefit Committee shall have the power to compute and certify the amount and
kind of benefits from time to time payable to Participants and their
Beneficiaries under the Plan, to authorize all disbursements for such purposes,
and to determine whether a Participant is entitled to a benefit under Section
3.2.
10.4. To enable the Administrative Benefit Committee to perform its
functions, the Company shall supply full and timely information to the
Administrative Benefit Committee on all matters relating to the compensation of
all Participants, their retirement, death or other cause for termination of
employment, and such other pertinent facts as the appropriate O&C Committee may
require.
Article XI
Miscellaneous
11.1. The Plan shall be binding upon Dominion Resources, Inc. and its
successors and assigns and Virginia Power and its successors and assigns;
subject to the powers set forth in Article VII, and upon a Participant, his
Beneficiary, and either of their assigns, heirs, executors and administrators.
11.2. To the extent not preempted by federal law, the Plan shall be
governed and construed under the laws of the Commonwealth of Virginia as in
effect at the time of their adoption and execution, respectively.
11.3. Masculine pronouns wherever used shall include feminine pronouns and
the use of the singular shall include the plural.
IN WITNESS WHEREOF, this instrument has been executed this 12th day of May,
1997.
DOMINION RESOURCES, INC.
By /s/LINWOOD R. ROBERTSON
Linwood R. Robertson
Executive Vice President and Chief
Financial Officer
VIRGINIA ELECTRIC AND POWER COMPANY
By /s/T. J. O'NEIL
T. J. O'Neil
Vice President, Human Resources
Exhibit 10.21
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made as of February 1,
1997, between DOMINION RESOURCES, INC. (the "Company") and Norman Askew.
RECITALS:
The Board of Directors of Dominion Resources, Inc. (the "Board of
Directors") recognizes that outstanding management of the company is essential
to advancing the best interest of the Company, its shareholders and its
subsidiaries. The Board of Directors believes that it is particularly important
to have stable, excellent management at the present time. The Board of Directors
believes that this objective may be achieved by giving key management employees
assurances of financial security for a period of time, so that they will not be
distracted by personal risks and will continue to devote their full time and
best efforts to the performance of their duties.
The Organization and Compensation Committee of the Board of Directors
(the "Committee") has recommended, and the Board of Directors has approved,
entering into employment agreements with the Company's key management executives
in order to achieve the foregoing objectives. The Executive is a key management
executive of the Company, and is a valuable member of the Company's management
team. The Company acknowledges that the Executive's contributions to the growth
and success of the Company will be substantial. The Company and the Executive
are entering into this Agreement to induce the Executive to become an employee
of the Company and to devote his full energy to the Company's affairs. The
Executive has agreed to be employed by the Company under the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the mutual
undertakings contained in this Agreement, the parties agree as follows:
1. Employment. The Company will employ the Executive, and the
Executive will continue in the employment of the Company as an
executive of the Company, for the period beginning March 1, 1997
and ending November 1, 2002 (the "Term of this Agreement"),
according to the terms of this Agreement.
2. Duties. The Company and the Executive agree that, during the Term
of this Agreement, the Executive will serve in a senior management
position with the Company. The Executive (i) will devote his
knowledge, skill and best efforts on a full-time basis to
performing his duties and obligations to the Company (with the
exceptions of absences on the account of illness or vacation in
accordance with the Company's policies and civic and charitable
commitments not involving a conflict with the Company's business),
and (ii) will comply with the lawful and nonarbitrary directions
and orders of the Board of Directors and Chief Executive Officer
of the Company with respect to the performance of his duties.
3. Effect on Other Agreements.
(a) The Board of Directors recognizes that the Executive has
entered or will enter into an Employment Continuity
Agreement with the Company, which provides benefits under
certain circumstances in the event of a change in control
of the Company. Notwithstanding anything in this Agreement
to the contrary, if the Executive's employment terminates
for any reason after a change in control and payments are
to be made to the Executive under the Executive's
Employment Continuity Agreement: (i) the Executive will
not receive payments under this Agreement as a result of
his termination of employment for any reason, (ii) after
payment of any amounts otherwise due the Executive under
this Agreement, this Agreement will terminate without
liability on the part of the Company, and (iii) if and to
the extent that any payments made under this Agreement are
considered "parachute payments" for purposes of Section
280G of the U.S. Internal Revenue Code of 1986, as amended
(the "Code"), the payments will be taken into account in
determining the amount to be paid to the Executive under
the Employment Continuity Agreement according to the Terms
of the Employment Continuity Agreement. If a change of
control occurs, and the Executive is not entitled to
receive payments under the Executive's Employment
Continuity Agreement, this Agreement will continue in
effect according to its terms.
(b) Except as provided above, this Agreement sets forth the
entire understanding of the parties with respect to the
Executive's employment with the Company. The Executive and
the Company agree that, effective as of the execution of
this Agreement, any prior employment agreements between
the Executive and East Midlands Electricity plc ("EME")
(other than the Executive's Employment Continuity
Agreement) are null and void. The term "employment
agreement" as used in the preceding sentence does not
include any retirement, incentive or benefit plan or
program in which the Executive participates.
4. Affiliates. Employment by an Affiliate of the Company or a
successor to the Company will be considered employment by the
Company for purposes of this Agreement, and termination of
employment with the Company means termination of employment with
the Company and all its Affiliates and successors. The term
"Company" as used in this Agreement will be deemed to included
Affiliates and successors. For purposes of this Agreement, the
term "Affiliate" means the subsidiaries of Dominion Resources,
Inc. and other entities under common control with Dominion
Resources, Inc.
5. Compensation and Benefits.
(a) During the Term of this Agreement, while the Executive is
employed by the Company, the Company will pay to the
Executive the following salary and incentive awards for
services rendered to the Company:
(i) The Company will pay to the Executive an annual
salary in an amount not less than the base salary
paid by EME in effect for the Executive as of the
date on which this Agreement is executed. The
Board of Directors will evaluate the Executive's
performance at least annually and will consider
annual increases in the Executive's salary based
on the Executive's performance.
(ii) The Executive will be entitled to receive
incentive awards if and to the extent that the
Board of Directors determines that the
Executive's performance merits payment of an
award. The Board of Directors will make its
determination consistent with the methodology
used by the Company for compensating its senior
management employees.
(b) During the Term of this Agreement, while the Executive is
employed by the Company, the Executive will be eligible to
participate in a similar manner as other senior executives
in the Company's Benefit Restoration Plan, Executive
Supplemental Retirement Plan ("ESRP"), cash and stock
incentive plans, and such other fringe benefit and
employee benefit plans and programs that the Company makes
available to the Executive from time to time.
(c) If the Executive attains age 60 while employed by the
Company, the Executive's retirement benefits under the
Company's Benefit Restoration Plan will be computed based
on the greater of (A) the Executive's years of credited
service (determined as if the Executive was a participant
in the Company's Retirement Plan and pursuant to the terms
of the Retirement Plan), or (B) thirty (30) years of
credited service, and will be reduced by the amount of
benefits payable to the Executive under the EME Pension
Plan and Amending Deed for the Pension and Death Benefits
Arrangement for N B M Askew. Any benefit to be provided
under this subsection (c) will be provided as a
supplemental benefit under this Agreement and will not be
provided from the Retirement Plan. The provisions of this
subsection (c) shall survive the termination of this
Agreement.
(d) The Executive will be entitled to a fully vested benefit
under the ESRP if the Executive attains age 58 while
employed by the Company. The Executive's benefit under the
ESRP will be funded in the Dominion Resources, Inc.
Executive Retirement Plan Trust in equal installments so
that at age 60 the Executive's benefit under the Plan is
100% funded. The provisions of this subsection (d) shall
survive the termination of this Agreement.
(e) A proforma payout schedule is attached as Appendix A
which is based on certain assumptions that may or may not
be applicable. This Appendix is attached for interpretive
purposes only and is not a binding payout schedule.
6. Termination of Employment.
(a) If the Company terminates the Executive's employment,
other than for Cause (as defined in Section 8 below),
during the Term of this Agreement, the Company will pay
the Executive a lump sum payment equal to the present
value of the Executive's annual base salary for the
balance of the Term of this Agreement. The lump sum
payment will be computed as follows:
(i) For purposes of this calculation, the
Executive's annual base salary for the balance of
the Term of the Agreement will be calculated at
the highest annual base salary rate in effect for
the Executive during the three-year period
preceding his termination of employment. Salary
that the Executive elected to defer will be taken
into account for purposes of this Agreement
without regard to the deferral.
(ii) The salary for any partial year in the Term of
this Agreement will be a pro-rated portion of the
annual amount.
(iii) Present value will be computed by the Company as
of the date of the Executive's termination of
employment, based on a discount rate equal to the
applicable, U.S. Federal short-term rate, as
determined under Section 1274 (d) of the Code,
compounded monthly, in effect on the date as of
which the present value is determined.
(iv) The lump sum payment will be paid within 30 days
after the Executive's termination of employment.
(b) If the Company terminates the Executive's employment,
other than for Cause, during the Term of this Agreement,
the Executive will be entitled to receive the following
additional benefits determined as of the date of his
termination of employment:
(i) Any outstanding restricted stock or stock
options that would become vested (that is,
transferable and nonforfeitable, or excercisable)
if the Executive remained an employee through the
Term of this Agreement will become vested as of
the date of the Executive's termination of
employment (or as of the date described in the
next sentence, if applicable). In addition, if
the Company has agreed to award the Executive
performance shares or restricted stock at the end
of a performance period, subject to the Company's
achievement of performance goals, and the date as
of which the performance shares are to be
awarded, or the restricted stock is to become
vested, falls within the Term of this Agreement,
the stock will be awarded and become vested at
the end of the performance period if and to the
extent that performance goals are met. The
Executive must satisfy the tax withholding
requirements described in Section 10 with respect
to the performance shares and restricted stock.
(ii) The Executive will be credited with age and
service credit through the end of the Term of
this Agreement for purposes of computing benefits
under any Company pension, medical and other
benefit plan, including ESRP, in which the
Executive was participating as of the date of his
termination of employment. Service credited to
the Executive for purposes of this subsection
(ii) shall be in addition to any service credited
to the Executive pursuant to Section 5 (c). The
Company will pay the Executive a lump sum cash
amount that reasonably approximates the after-tax
value to the Executive of such age and service
credit and continued coverage through the end of
the Term of this Agreement, in lieu of continuing
coverage under the Company's benefit plans.
(c) If the Executive voluntarily terminates employment with
the Company during the Term of this Agreement under
circumstances described in this subsection (c) , the
Executive will be entitled to receive the benefits
described in subsections (a) and (b) above as if the
Company had terminated the Executive's employment other
than for Cause. Subject to the provisions of this
subsection (c) , these benefits will only be provided if
the Executive voluntarily terminates employment after (i)
the Company reduces the Executive's base salary, (ii) the
Executive is not in good faith considered for incentive
awards as described in Section 5 (a) (ii), (iii) the
Company fails to provide benefits as required by Section 5
(b) and 5 (c), (iv) the Company relocates the Executive's
place of employment to a location further than 50 miles
from Nottingham, U.K. (other than in connection with a
temporary assignment to the United States of no more than
3 months), or (v) the Company demotes the Executive to a
position that is not a senior management position (other
than on account of the Executive's disability, as defined
in Section 7 below). For this purpose, a "senior
management position" means the position of Chief Executive
Officer or Chief Operating Officer of Dominion Resources,
Inc. ("DRI"), the position of President or Chief Executive
Officer of a subsidiary of DRI, or a position that reports
directly to the Chief Executive Officer, Chief Operating
Officer, or Senior Vice President of DRI. In order for
this subsection (c) to be effective: (1) the Executive
must give written notice to the Company indicating that
the Executive intends to terminate employment under this
subsection (c), (2) the Executive's voluntary termination
under this subsection must occur within 60 days after the
Executive knows or reasonably should know of an event
described in clause (i), (ii), (iii), (iv) or (v) above,
or within 60 days after the last in a series of such
events, and (3) the Company must have failed to remedy the
event described in clause (i), (ii), (iii), (iv) or (v),
as the case may be, within 30 days after receiving the
Executive's written notice. If the Company remedies the
event described in clause (i), (ii), (iii), (iv) or (v),
as the case may be, within 30 days after receiving the
Executive's written notice, the Executive may not
terminate employment under this subsection (c) on account
of the event specified in the Executive's notice.
(d) The amounts under this Agreement will be paid in lieu of
severance benefits under any severance plan or program
maintained by the Company in which the Executive
participates (subject to Section 3 above). The amounts
payable under this Agreement will not be reduced by any
amounts earned by the Executive from a subsequent employer
or otherwise. If the Executive's employment is terminated
by the Company for Cause this Agreement will immediately
terminate without liability on the part of the Company.
(e) If the Executive (i) voluntarily terminates employment for
a reason not described in subsection (c) above or Section
7 below, and (ii) gives the Company no less than 6 months
prior notice of termination in accordance with the
provisions of Section 15 below, the Company will pay to
the Executive an amount equal to the additional benefits
the Executive would have accrued under the EME Pension
Plan and the Amending Deed for the Pension and Death
Benefits Arrangement for N B M Askew, had he remained a
participant in such plans through the Term of the
Agreement. The amount paid under this subsection (e) will
be paid as a supplemental benefit under this Agreement and
will not be provided from the EME Pension Plan or the
Amending Deed for the Pension and Death Benefits
Arrangement for N B M Askew. This amount will be paid in
lieu of any other benefits payable under this Agreement,
which will immediately terminate without liability on the
part of the Company.
7. Disability or Death. If the Executive becomes disabled (as defined
below) during the Term of this Agreement while he is employed by
the Company, the Executive shall be entitled to receive the
benefits described in Section 6 (b) (i) of this Agreement as of
the date on which he is determined by the Company to be disabled.
If the Executive dies during the Term of this Agreement while he
is employed by the Company, the benefits described in Section 6
(b) (i) will be provided to the personal representative of the
Executive's estate. The foregoing benefits will be provided in
addition to any death, disability and other benefits provided
under Company benefit plans in which the Executive participates.
Upon the Executive's death or disability, the provisions of
Sections 1, 2, 5, and 6 of this Agreement will terminate. The term
"disability" means a condition, resulting from bodily injury or
disease, that renders, and for a six consecutive month period has
rendered, the Executive unable to perform substantially the duties
pertaining to his employment with the Company. A return to work of
less than 14 consecutive days will not be considered an
interruption in the Executive's six consecutive months of
disability. Disability will be determined by the Company on the
basis of medical evidence satisfactory to the Company.
8. Cause. For purposes of this Agreement, the term "Cause" means (i)
fraud or material misappropriation with respect to the business or
assets of the Company, (ii) persistent refusal or wilful failure
of the Executive to perform substantially his duties or
responsibilities to the Company, including any failure to comply
with the directions or orders of the Board of Directors or the
Chief Executive Officer of the Company with respect to the
performance of his duties or responsibilities, (iii) conduct that
constitutes disloyalty to the Company, and that materially harms,
or has the potential to cause material harm to the Company, (iv)
conviction of a felony or crime involving moral turpitude, or (v)
the use of drugs or alcohol that interferes materially with the
Executive's performance of his duties.
9. Post Termination.
(a) The Executive undertakes to the Company that the Executive
shall not during the period of 12 months from Executive's
date of termination of employment be directly or
indirectly interested or concerned (whether as
shareholder, director, employee, partner, consultant,
proprietor, agent or in any other capacity) in any
business firm or company which
(i) holds a public electricity supply license for the
supply of electricity anywhere within the United
Kingdom; or
(ii) carries on anywhere within the United Kingdom any
other business competing with any business
carried on by the Company at the date of the
Executive's termination of employment in which
the Executive has been engaged or interested
during the 12 months prior to the date of his
termination of employment ("other relevant
business")
but nothing in this Section 9 shall prevent the Executive
holding or being interested in listed securities not
representing more than 5% in nominal amount of the issued
securities of any class of any company which are listed on
any recognized stock exchange anywhere in the world.
(b) The Executive undertakes to the Company that the Executive
shall not during the period of 12 months from the date of
the Executive's termination of employment whether as
principal agent or employee and whether directly or
indirectly supply to any person, firm or company whom the
Executive dealt with as a customer or potential customer
of the Company in the last 12 months of the Executive's
employment either electricity or any goods or services
which are the same or substantially the same as the type
of goods or services provided by any other relevant
business of the Company at the date of termination of the
Executive's employment whether or not the Executive has
approached the customer or vice versa.
(c) The Executive undertakes to the Company that the Executive
shall not during the period of 12 months from the date of
the Executive's termination of employment whether as
principal agent or employee and whether directly or
indirectly approach any person firm or company whom the
Executive dealt with as a customer or potential customer
of the Company in the last 12 months of the Executive's
employment with the Company with an offer to supply them
with electricity or any goods or services which are the
same or substantially the same as the type of goods or
services provided by any other relevant business of the
Company at the date of termination of the Executive's
employment with the Company.
(d) The Executive undertakes to the Company that the Executive
shall not during the period of 12 months from the date of
termination of employment whether as principal agent or
employer and whether directly or indirectly recruit or try
to recruit any person as an employee or consultant or in
some other capacity if that person was at any time during
the last 12 months of the Executive's employment employed
by the Company as a director or senior employee and the
Executive had regular contact with such person through
that person's work for the Company.
(e) The Executive undertakes to the Company that the Executive
shall also perform and observe the undertakings set out in
Section 9 (a) to 9 (d) in relation to any Affiliates whose
business or affairs the Executive has been engaged or
interested in at any time during the last 12 months of the
Executive's employment with the Company as if a reference
to each such Affiliate was substituted for a reference to
the Company in each case. This undertaking shall be
construed and enforceable as a separate convenant in
relation to each Affiliate and the Company shall be deemed
to have the benefit of this covenant as trustee for any
Affiliates.
(f) It is agreed that each of the covenants contained on the
part of the Executive in each of Section 9(a) to 9(c)
inclusive is and shall be construed and enforceable as a
separate covenant.
(g) In this Section 9 references to acting directly or
indirectly include (without prejudice to the generality of
that expression) references to acting alone or jointly
with or through any other person.
(h) The Executive undertakes and covenants with the Company
that he shall not at any time after the Executive's
termination of employment hold himself out or permit
himself to be held out as being in any way interested in
or connected with the Company or any Affiliate and shall
use his best endeavors to prevent himself being so held
out, save that if and for so long as he remains a director
or an employee of an Affiliate he may hold himself out or
be held out as being so connected with that Company.
10. Indemnification. The Company will pay all reasonable fees and
expenses, if any, (including, without limitation, legal fees and
expenses) that are incurred by the Executive to enforce this
Agreement and that result from a breach of this Agreement by the
Company.
In Executive's capacity as a member of the Board of Directors of
East Midlands Electricity, plc, Executive is entitled to
indemnification provided by the Articles of Incorporation of
Dominion Resources, Inc.
11. Payment of Compensation and Taxes. All amounts payable under this
Agreement (other than stock, which will be paid according to the
terms of the Company's Incentive Compensation Plan) will be paid
in cash, subject to income and payroll tax withholdings. No shares
of stock will be issued to the Executive until the Executive has
paid to the Company the amount that must be withheld for
applicable income and employment taxes or the Executive has made
provisions satisfactory to the Company for the payment of such
taxes.
12. Administration. The Committee will be responsible for the
administration and interpretation of this Agreement on behalf of
the Company. If for any reason a benefit under this Agreement is
not paid when due, the Executive may file a written claim with the
Committee. If the claim is denied or no response is received,
within 90 days after the filing (in which case the claim is deemed
to be denied), the Executive may appeal the denial to the Board of
Directors within 60 days of the denial. The Executive may request
that the Board of Directors review the denial, the Executive may
review pertinent documents, and the Executive may submit issues
and comments in writing. A decision on appeal will be made within
60 days after the appeal is made, unless special circumstances
require that the Board of Directors extend the period for another
60 days. If the Company defaults in an obligation under this
Agreement, the Executive makes a written claim pursuant to the
claims procedure described above, and the Company fails to remedy
the default within the claims procedure period, then all amounts
payable to the Executive under this Agreement will become
immediately due and owing.
13. Assignment. The rights and obligations of the Company under this
Agreement will inure to the benefit of and will be binding upon
the successors and assigns of the Company. If the Company is
consolidated or merged with or into another corporation, or if
another entity purchases all or substantially all of the Company's
assets, the surviving or acquiring corporation will succeed to the
Company's rights and obligations under this Agreement. The
Executive's rights under this Agreement may not be assigned or
transferred in whole or in part, except that the personal
representative of the Executive's estate will receive any amounts
payable under this Agreement after the death of the Executive.
14. Rights Under the Agreement. The right to receive benefits under
the Agreement will not give the Executive any proprietary interest
in the Company or any of its assets. Benefits under the Agreement
will be payable from the general assets of the Company, and there
will be no required funding of amounts that may become payable
under the Agreement [except to the extent required pursuant to
Section 5 (d)]. The Executive will for all purposes be a general
creditor of the Company. The interest of the Executive under the
Agreement cannot be assigned, anticipated, sold, encumbered or
pledged and will not be subject to the claims of the Executive's
creditors.
15. Notice. For purposes of this Agreement, notices and all other
communications must be in writing and are effective when delivered
or mailed by United States registered mail, return receipt
requested, postage prepaid, addresses to the Executive or his
personal representative at his last known address. All notices to
the Company must be directed to the attention of the Chairman of
the Committee. Such other addresses may be used as either party
may have furnished to the other in writing. Notices of change of
address are effective only upon receipt.
16. Miscellaneous. This instrument contains the entire agreement of
the parties. To the extent not governed by U.S. federal law, the
parties contemplate and agree that this Agreement will be
construed in accordance with the laws of the Commonwealth of
Virginia, U.S.A., without reference to its conflict of laws rules.
Any action to enforce the terms of this Agreement shall be brought
in any court of competent jurisdiction in the Commonwealth of
Virginia, and each party hereby irrevocably consents to the
jurisdiction of such courts over its person and hereby waives any
defense based upon improper venue, inconvenient forum or lack of
jurisdiction. No provisions of this Agreement may be modified ,
waived or discharged unless such a waiver, modification or
discharge is agreed to in writing and the writing is signed by the
Executive and the Company. A waiver of any breach of our
compliance with any provision or condition of this Agreement is
not a waiver of similar or dissimilar provisions or conditions.
The invalidity or enforceability of any provision of this
Agreement will not affect the validity or enforceability of any
other provision of this Agreement, which will remain in full force
and effect. This Agreement may be executed in one more
counterparts, all of which will be considered one and the same
agreement.
WITNESS the following signatures.
DOMINION RESOURCES, INC.
By: /s/ THOS. E. CAPPS
________________________________
Thos. E. Capps
Chief Executive Officer
Dated: 2/21/97
_______________
/s/ NORMAN ASKEW
--------------------------------
Norman Brian Montague Askew
2-18-97
Appendix A
Norman B.M. Askew
Retirement Benefits at Specified Ages
Under Terms of Employment Agreement
<TABLE>
<CAPTION>
Additional
Years of Service Years of Credited Service Percent
Under EME ------------------------- Vested Estimated
Date of Age at Pension & DRI Qualified DRI Under DRI Monthly
Termination Termination Amending Deed Pension Plan BRP(1) ESRP(2) Payout(3)
- - ----------- ----------- ---------------- ------------- ------ --------- ---------
<S> <C>
11-1-97 55 1 0 0 0 (Pounds) 3,700
11-1-98 56 2 0 0 0 (Pounds) 4,400
11-1-99 57 3 0 0 0 (Pounds) 5,200
11-1-00 58 4 0 0 100% (Pounds) 14,000
11-1-01 59 5 0 0 100% (Pounds) 15,200
11-1-02 60 6 5 30 100% (Pounds) 21,300
</TABLE>
Notes
1. Benefit Restoration Plan
2. Executive Supplemental Retirement plan
3. Estimated payout based on the following assumptions:
o DOB: October 4, 1942 (age 54)
o Retires November 1, 2002 (age 60)
o 1997 Base Pay = (Pounds)230,000
o Exchange rate: $1.60 = (Pounds)1.00
o Target bonus = 45% x base pay
o 5% salary increases each year
o 1997 EME Pension = (Pounds)44,000/year; + (Pounds)9,374
for each additional year
Exhibit 10.23
DOMINION RESOURCES, INC.
INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this Dominion Resources, Inc. Incentive
Compensation Plan is to further the long term stability and financial success of
Dominion Resources, Inc., Virginia Electric and Power Company, the Affiliates,
and the Dominion Companies by attracting and retaining employees through the use
of cash and stock incentives. It is believed that ownership of Company Stock and
the use of cash incentives will stimulate the efforts of those employees upon
whose judgment and interests the Employers are and will be largely dependent for
the successful conduct of its business. It is also believed that Incentive
Awards granted to such employees under this Plan will strengthen their desire to
remain employed with the Employers and will further the identification of those
employees' interests with those of the Dominion Resources, Inc. shareholders.
The Plan is intended to operate in compliance with the provisions of Securities
and Exchange Commission Rule 16b-3.
2. Definitions. As used in the Plan, the following terms have the meanings
indicated:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Affiliate" means another corporation in which Virginia Power owns stock
possessing at least 50 percent of the combined voting power of all classes of
stock.
(c) "Applicable Withholding Taxes" means the aggregate amount of federal,
state and local income and payroll taxes that an Employer is required to with-
holdin connection with any Performance Grant, any lapse of restrictions on
Restricted Stock, any grant of Goal-Based Stock, or any exercise of a
Nonstatutory Stock Option or Stock Appreciation Right.
(d) "Change of Control" means the occurrence of any of the following events:
(i) any person, including a "group" as defined in Section 13(d)(3) of the Act
becomes the owner or beneficial owner of DRI securities having 20% or more of
the combined voting power of the then outstanding DRI securities that may be
cast for the election of DRI's directors (other than as a result of an issuance
of securities initiated by DRI, or open market purchases approved by the DRI
Board, as long as the majority of the DRI Board approving the purchases is also
the majority at the time the purchases are made);
(ii) as the direct or indirect result of, or in connection with, a cash tender
or exchange offer, a merger or other business combination, a sale of assets, a
contested election, or any combination of these transactions, the persons who
were directors of DRI before such transactions cease to constitute <PAGE>
a majority of the DRI Board, or any successor's board, within two years of the
last of such transactions; or
(iii) with respect to a particular Participant, an event occurs with respect
to the Employer that employs that Participant such that, after the event, the
Employer is no longer a Dominion Company or an Affiliate.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Company Stock" means common stock of DRI. In the event of a change in the
capital structure of DRI (as provided in Section 15), the shares resulting from
such a change shall be deemed to be Company Stock within the meaning of the
Plan.
(g) "Date of Grant" means the date on which an Incentive Award is granted by
the DRI Committee or Virginia Power Committee.
(h) "Disability" or "Disabled" means, as to an Incentive Stock Option, a
Disability within the meaning of Code section 22(e)(3). As to all other
Incentive Awards, the DRI Committee for DRI Participants and the Virginia Power
Committee for Virginia Power Participants shall determine whether a Disability
exists and such determination shall be conclusive.
(i) "Dominion Company" means Dominion Capital, Inc., Dominion Energy, Inc., or
another corporation (i) in which DRI owns stock possessing at least 50 percent
of the combined voting power of all classes of stock or which is in a chain of
corporations with DRI in which stock possessing at least 50% of the combined
voting power of all classes of stock is owned by one or more other corporations
in the chain and (ii) which is not Virginia Power or an Affiliate.
(j) "DRI" means Dominion Resources, Inc.
(k) "DRI Board" means the Board of Directors of Dominion Resources, Inc.
(l) "DRI Committee" means the Organization and Compensation Committee of the
DRI Board, provided that, if any member of the Organization and Compensation
Committee does not qualify as both an outside director for purposes of Code
section 162(m) and a non-employee director for purposes of Rule 16b-3, the
remaining members of the committee (but not less than two members) shall be
constituted as a subcommittee of the Organization and Compensation Committee to
act as the DRI Committee for purposes of the Plan.
(m) "DRI Participant" means any employee of DRI or a Dominion Company who
receives an Incentive Award under the Plan.
(n) "Employer" means DRI, Virginia Power, and each Dominion Company or
Affiliate that employs one or more Participants.
(o) "Fair Market Value" means the closing trading price of a share of Company
Stock, as reported in The Wall Street Journal, as of the last day on which
Company Stock is traded preceding the Date of Grant or preceding any other date
for which the value of Company Stock must be determined under the Plan.
(p) "Goal-Based Stock" means Company Stock awarded when performance goals are
achieved pursuant to an award as provided in Section 8.
(q) "Incentive Award" means, collectively, a Performance Grant or the award of
Restricted Stock, Goal-Based Stock, an Option, or a Stock Appreciation Right
under the Plan.
(r) "Incentive Stock Option" means an Option intended to meet the requirements
of, and qualify for favorable federal income tax treatment under, Code section
422.
(s) "Mature Shares" means shares of Company Stock for which the holder thereof
has good title, free and clear of all liens and encumbrances and which such
holder either (i) has held for at least six months or (ii) has purchased on the
open market.
(t) "Nonstatutory Stock Option" means an Option that does not meet the
requirements of Code section 422, or, even if meeting the requirements of Code
section 422, is not intended to be an Incentive Stock Option and is so
designated.
(u) "Option" means a right to purchase Company Stock granted under the Plan,
at a price determined in accordance with the Plan.
(v) "Performance Criteria" means any of the following areas of performance of
DRI, Virginia Power, any Dominion Company or any Affiliate: asset growth;
utility earnings; generating unit efficiency; combined net worth; debt to equity
ratio; earnings per share; revenues; operating income; operating cash flow; net
income, before or after taxes; return on total capital, equity, revenue or
assets; nonutility generation cost exposure; power generation costs; safety
measured in fatalities, lost time, injuries and vehicle accidents; environmental
protection measured in reportable violations, notices of violations, and
environmental agency required corrective actions or enforcement actions; or
economic value added (net operating profit after tax less a charge for use of
capital as determined under a methodology approved by the DRI Committee or
Virginia Power Committee).
(w) "Performance Goal" means an objectively determinable performance goal
established by the DRI Committee or Virginia Power Committee with respect to a
given Performance Grant or grant of Restricted Stock that relates to one or more
Performance Criteria.
(x) "Performance Grant" means an Incentive Award made pursuant to Section 6.
(y) "Plan Year" means January 1 to December 31.
(z) "Restricted Stock" means Company Stock awarded upon the terms and subject
to the restrictions set forth in Section 7.
(aa) "Rule 16b-3" means Rule 16b-3 of the Securities and Exchange Commission
promulgated under the Act. A reference in the Plan to Rule 16b-3 shall include a
reference to any corresponding rule (or number redesignation) of any amendments
to Rule 16b-3 enacted after the effective date of the Plan's adoption.
(bb) "Stock Appreciation Right" means a right to receive amounts from the
Employer granted under Section 10.
(cc) "Taxable Year" means the fiscal period used by DRI for reporting taxes on
income under the Code.
(dd) "Virginia Power" means Virginia Electric and Power Company.
(ee) "Virginia Power Board" means the Board of Directors of Virginia Power.
(ff) "Virginia Power Committee" means the Organization and Compensation
Committee of the Virginia Power Board, provided that, if any member of the
Organization and Compensation Committee does not qualify as both an outside
director for purposes of Code section 162(m) and a non-employee director for
purposes of Rule 16b-3, the remaining members of the committee (but not be less
than two members) shall be constituted as a subcommittee of the Organization and
Compensation Committee to act as the Virginia Power Committee for purposes of
the Plan.
(gg) "Virginia Power Participant" means any employee of Virginia Power or an
Affiliate who receives an Incentive Award under the Plan.
3. General. The following types of Incentive Awards may be granted under
the Plan: Performance Grants, Restricted Stock, Goal-Based Stock, Options, or
Stock Appreciation Rights. Options granted under the Plan may be Incentive Stock
Options or Nonstatutory Stock Options.
4. Stock. Subject to Section 15 of the Plan, there shall be reserved for
issuance under the Plan an aggregate of three million (3,000,000) shares of
Company Stock, which shall be authorized, but unissued shares. Shares allocable
to Options, Restricted Stock or portions thereof granted under the Plan that
expire, are forfeited, or otherwise terminate unexercised may again be subjected
to an Incentive Award under the Plan. The DRI Committee or Virginia Power
Committee is expressly authorized to make an Incentive Award to a Participant
conditioned upon the surrender for cancellation of an option granted under an
existing Incentive Award. However, without prior shareholder approval, the
Committees are expressly prohibited from making a new Incentive Award in the
form of an Option if the exercise price of the new Option is less than the
exercise price of the Option under the existing Incentive Award surrendered for
cancellation. No more than two hundred thousand (200,000) shares may be
allocated to the Incentive Awards, including the maximum amounts payable under a
Performance Grant, that are granted to any individual Participant during any
single Taxable Year.
5. Eligibility.
(a) All present and future employees of DRI or a Dominion Company (whether now
existing or hereafter created or acquired) whom the DRI Committee determines to
have contributed or who can be expected to contribute significantly to DRI or a
Dominion Company shall be eligible to receive Incentive Awards under the Plan.
All present and future employees of Virginia Power or an Affiliate (whether now
existing or hereafter created or acquired) whom the Virginia Power Committee
determines to have contributed or who can be expected to contribute
significantly to Virginia Power or an Affiliate shall be eligible to receive
Incentive Awards under the Plan. The Committees shall have the power and
complete discretion, as provided in Section 16, to select eligible employees to
receive Incentive Awards and to determine for each employee the nature of the
award and the terms and conditions of each Incentive Award.
(b) The grant of an Incentive Award shall not obligate an Employer to pay an
employee any particular amount of remuneration, to continue the employment of
the employee after the grant or to make further grants to the employee at any
time thereafter.
6. Performance Grants.
(a) Each Performance Grant shall be evidenced by an agreement (a "Grant
Agreement") setting forth the Performance Goals for the award, including the
Performance Criteria, the target and maximum amounts payable and such other
terms and conditions as are applicable to the Performance Grant. Each
Performance Grant shall be granted and administered to comply with the
requirements of Code section 162(m). The aggregate maximum cash amount payable
under the Plan to any Participant in any Plan Year shall not exceed 0.5% of
DRI's consolidated operating income, before taxes and interest, as reported on
its annual financial statements for the prior Plan Year. In the event of any
conflict between a Grant Agreement and the Plan, the terms of the Plan shall
govern.
(b) The DRI Committee shall establish the Performance Goals for Performance
Grants to DRI Participants. The Virginia Power Committee shall establish the
Performance Goals for Performance Grants to Virginia Power Participants. The
appropriate Committee shall determine the extent to which any Performance
Criteria shall be used and weighted in determining Performance Grants. The
Committee may vary the Performance Criteria, Performance Goals and weightings
from Participant to Participant, Performance Grant to Performance Grant and Plan
Year to Plan Year. The Committee may increase, but not decrease, any Performance
Goal during a Plan Year.
(c) The appropriate Committee shall establish for each Performance Grant the
amount of cash or Company Stock payable at specified levels of performance,
based on the Performance Goal for each Performance Criteria. Any Performance
Grant shall be made not later than 90 days after the start of the period for
which the Performance Grant relates and shall be made prior to the completion of
25% of such period. All determinations regarding the achievement of any
Performance Goals will be made by the appropriate Committee. A Committee may not
increase during a Plan Year the amount of cash or Common Stock that would
otherwise be payable upon achievement of the Performance Goal or Goals but may
reduce or eliminate the payments as provided in a Performance Grant.
(d) The actual payments to a Participant under a Performance Grant will be
calculated by applying the achievement of a Performance Criteria to the
Performance Goal as established in the Grant Agreement. All calculations of
actual payments shall be made by the appropriate Committee and the DRI Committee
shall certify in writing the extent, if any, to which the Performance Goals have
been met.
(e) Performance Grants will be paid in cash, Company Stock or both, at such
time or times as are provided in the Grant Agreement. The appropriate Committee
may provide in the Grant Agreement that the Participant may make a prior
election to defer the payment under a Performance Grant subject to such terms
and conditions as the Committee may determine.
(f) Nothing contained in the Plan will be deemed in any way to limit or
restrict any Employer or either Committee from making any award or payment to
any person under any other plan, arrangement or understanding, whether now
existing or hereafter in effect.
(g) A Participant who receives a Performance Grant payable in Company Stock
shall have no rights as a shareholder until the Company Stock is issued pursuant
to the terms of the Performance Grant. The Company Stock may be issued without
cash consideration.
(h) A Participant's interest in a Performance Grant may not be sold, assigned,
transferred, pledged, hypothecated, or otherwise encumbered.
(i) Whenever payments under a Performance Grant are to be made in cash, the
Employer will withhold therefrom an amount sufficient to satisfy any Applicable
Withholding Taxes. Each Participant shall agree as a condition of receiving a
Performance Grant payable in the form of Company Stock, to pay to the Employer,
or make arrangements satisfactory to the Employer regarding the payment to the
Employer of, Applicable Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Employer have been made, no stock certificate
shall be issued to such Participant. As an alternative to making a cash payment
to the Employer to satisfy Applicable Withholding Taxes, if the Grant Agreement
so provides, the Participant may elect to (i) to deliver Mature Shares (valued
at their Fair Market Value) or (ii) to have the Employer retain that number of
shares of Company Stock (valued at their Fair Market Value) that would satisfy
all or a specified portion of the Applicable Withholding Taxes.
7. Restricted Stock Awards.
(a) The DRI Committee may make grants of Restricted Stock to DRI Participants.
The Virginia Power Committee may make grants of Restricted Stock to Virginia
Power Participants. Whenever a Committee deems it appropriate to grant
Restricted Stock, notice shall be given to the Participant stating the number of
shares of Restricted Stock granted and the terms and conditions to which the
Restricted Stock is subject. This notice, when accepted in writing by the
Participant shall become an Grant Agreement between the Employer and the
Participant. Restricted Stock may be awarded by a Committee in its discretion
without cash consideration.
(b) No shares of Restricted Stock may be sold, assigned, transferred, pledged,
hypothecated, or otherwise encumbered or disposed of until the <PAGE>
restrictions on such shares as set forth in the Participant's Grant Agreement
have lapsed or been removed pursuant to paragraph (d) or (e) below.
(c) Upon the acceptance by a Participant of an award of Restricted Stock, such
Participant shall, subject to the restrictions set forth in paragraph (b) above,
have all the rights of a shareholder with respect to such shares of Restricted
Stock, including, but not limited to, the right to vote such shares of
Restricted Stock and the right to receive all dividends and other distributions
paid thereon. Certificates representing Restricted Stock shall be held by DRI
until the restrictions lapse and the Participant shall provide DRI with
appropriate stock powers endorsed in blank.
(d) The appropriate Committee shall establish as to each award of Restricted
Stock the terms and conditions upon which the restrictions set forth in
paragraph (b) above shall lapse. The terms and conditions may include the
achievement of a Performance Goal which shall be governed by the provisions of
Section 6 to the extent that the award is intended to comply with the
requirements of Code section 162(m). Such terms and conditions may also include,
without limitation, the lapsing of such restrictions as a result of the
Disability, death or retirement of the Participant or the occurrence of a Change
of Control.
(e) Notwithstanding the provisions of paragraph (b) above, the appropriate
Committee may at any time, in its sole discretion, accelerate the time at which
any or all restrictions will lapse or remove any and all such restrictions,
subject to the restrictions of Section 6 as to any Performance Goal if the award
is intended to comply with the requirements of Code section 162(m).
(f) Each Participant shall agree at the time his or her Restricted Stock is
granted, and as a condition thereof, to pay to the Employer, or make
arrangements satisfactory to the Employer regarding the payment to the Employer
of, Applicable Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Employer have been made, no stock certificate
free of a legend reflecting the restrictions set forth in paragraph (b) above
shall be issued to such Participant. As an alternative to making a cash payment
to the Employer to satisfy Applicable Withholding Taxes, if the grant so
provides, the Participant may elect to (i) to deliver Mature Shares (valued at
their Fair Market Value) or (ii) to have the Employer retain that number of
shares of Company Stock (valued at their Fair Market Value) that would satisfy
all or a specified portion of the Applicable Withholding Taxes.
8. Goal-Based Stock Awards.
(a) The DRI Committee may make grants of Goal-Based Stock to DRI Participants.
The Virginia Power Committee may make grants of Goal-Based Stock to Virginia
Power Participants. Whenever a Committee deems it appropriate to grant
Goal-Based Stock, notice shall be given to the Participant stating the number of
shares of Goal-Based Stock granted and the terms and conditions to which the
Goal-Based Stock is subject. This notice, when accepted in writing by the
Participant shall become a grant agreement between the Employer and the
Participant.
<PAGE>
(b) Goal-Based Stock may be issued pursuant to the Plan from time to time by a
Committee when performance criteria established by the Committee have been
achieved and certified by the Committee.
(c) Whenever a Committee deems it appropriate, the Committee may establish a
performance criteria for an award of Goal-Based Stock and notify Participants of
their receipt of an award of Goal-Based Stock. More than one award of Goal-Based
Stock may be established by the Committee for a Participant and the awards may
operate concurrently or for varied periods of time. Goal-Based Stock will be
issued only subject to the award and the Plan and consistent with meeting the
goal or goals set by the Committee in the award. A Participant shall have no
rights as a shareholder until the Committee has certified that the performance
objectives of the Goal-Based Stock award have been met and the Goal-Based Stock
is issued. Goal-Based Stock may be issued without cash consideration.
(d) A Participant's interest in a Goal-Based Stock award may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered.
(e) The appropriate Committee may at any time, in its sole discretion, remove
or revise any and all performance criteria for an award of Goal-Based Stock.
(f) Each Participant shall agree at the time of receiving an award of Goal-
Based Stock, and as a condition thereof, to pay to the Employer, or make
arrangements satisfactory to the Employer regarding the payment to the Employer
of, Applicable Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Employer have been made, no stock certificate
shall be issued to such Participant. As an alternative to making a cash payment
to the Employer to satisfy Applicable Withholding Taxes, if the grant so
provides, the Participant may elect to (i) to deliver Mature Shares (valued at
their Fair Market Value) or (ii) to have the Employer retain that number of
shares of Company Stock (valued at their Fair Market Value) that would satisfy
all or a specified portion of the Applicable Withholding Taxes.
9. Stock Options.
(a) The DRI Committee may make grants of Options to DRI Participants. The
Virginia Power Committee may make grants of Options to Virginia Power
Participants. Whenever a Committee deems it appropriate to grant Options, notice
shall be given to the Participant stating the number of shares for which Options
are granted, the Option price per share, whether the Options are Incentive Stock
Options or Nonstatutory Stock Options, the extent to which Stock Appreciation
Rights are granted (as provided in Section 10), and the conditions to which the
grant and exercise of the Options are subject. This notice, when duly accepted
in writing by the Participant, shall become a stock option agreement.
(b) The exercise price of shares of Company Stock covered by an Option shall
be not less than 100% of the Fair Market Value of such shares on the Date of
Grant.
(c) Options may be exercised in whole or in part at such times as may be
specified by the Committee in the Participant's stock option agreement; provided
that, the exercise provisions for Incentive Stock Options shall in all events
not be more liberal than the following provisions:
(i) No Incentive Stock Option may be exercised after the first to occur of (x)
ten years from the Date of Grant, (y) three months following the date of the
Participant's retirement or termination of employment with all Employers for
reasons other than Disability or death, or (z) one year following the date of
the Participant's termination of employment on account of Disability or death.
(ii) An Incentive Stock Option by its terms, shall be exercisable in any
calendar year only to the extent that the aggregate Fair Market Value
(determined at the Date of Grant) of the Company Stock with respect to which
Incentive Stock Options are exercisable for the first time during the calendar
year does not exceed $100,000 (the "Limitation Amount"). Incentive Stock Options
granted under the Plan and all other plans of any Employer shall be aggregated
for purposes of determining whether the Limitation Amount has been exceeded. The
Committee granting the Option may impose such conditions as it deems appropriate
on an Incentive Stock Option to ensure that the foregoing requirement is met. If
Incentive Stock Options that first become exercisable in a calendar year exceed
the Limitation Amount, the excess Options will be treated as Nonstatutory Stock
Options to the extent permitted by law.
10. Stock Appreciation Rights.
(a) Whenever the DRI Committee deems it appropriate, Stock Appreciation Rights
may be granted in connection with all or any part of an Option to a DRI
Participant or in a separate Incentive Award. Whenever the Virginia Power
Committee deems it appropriate, Stock Appreciation Rights may be granted in
connection with all or any part of an Option to a Virginia Power Participant or
in a separate Incentive Award.
(b) The following provisions apply to all Stock Appreciation Rights that are
granted in connection with Options:
(i) Stock Appreciation Rights shall entitle the Participant, upon exercise of
all or any part of the Stock Appreciation Rights, to surrender to the Employer
unexercised that portion of the underlying Option relating to the same number of
shares of Company Stock as is covered by the Stock Appreciation Rights (or the
portion of the Stock Appreciation Rights so exercised) and to receive in
exchange from the Employer an amount equal to the excess of (x) the Fair Market
Value on the date of exercise of the Company Stock covered by the surrendered
portion of the underlying Option over (y) the exercise price of the Company
Stock covered by the surrendered portion of the underlying Option. The
appropriate Committee may limit the amount that the Participant will be entitled
to receive upon exercise of Stock Appreciation Rights.
(ii) Upon the exercise of a Stock Appreciation Right and surrender of the
related portion of the underlying Option, the Option, to the extent surrendered,
shall not thereafter be exercisable.
(iii) Subject to any further conditions upon exercise imposed by the Board, a
Stock Appreciation Right shall be exercisable only to the extent that the
related Option is exercisable and a Stock Appreciation Right shall expire no
later than the date on which the related Option expires.
(iv) A Stock Appreciation Right may only be exercised at a time when the Fair
Market Value of the Company Stock covered by the Stock Appreciation Right
exceeds the exercise price of the Company Stock covered by the underlying
Option.
(c) The following provisions apply to all Stock Appreciation Rights that are
not granted in connection with Options:
(i) Stock Appreciation Rights shall entitle the Participant, upon exercise of
all or any part of the Stock Appreciation Rights, to receive in exchange from
the Employer an amount equal to the excess of (x) the Fair Market Value on the
date of exercise of the Company Stock covered by the surrendered Stock
Appreciation Right over (y) the price of the Company Stock on the Date of Grant
of the Stock Appreciation Right. The appropriate Committee may limit the amount
that the Participant will be entitled to receive upon exercise of Stock
Appreciation Rights.
(ii) A Stock Appreciation Right may only be exercised at a time when the Fair
Market Value of the Company Stock covered by the Stock Appreciation Right
exceeds the Fair Market Value of the Company Stock on the Date of Grant of the
Stock Appreciation Right.
(d) The manner in which the Employer's obligation arising upon the exercise of
a Stock Appreciation Right shall be paid shall be determined by the appropriate
Committee and shall be set forth in the Incentive Award. The Incentive Award may
provide for payment in Company Stock or cash, or a fixed combination of Company
Stock or cash, or the appropriate Committee may reserve the right to determine
the manner of payment at the time the Stock Appreciation Right is exercised.
Shares of Company Stock issued upon the exercise of a Stock Appreciation Right
shall be valued at their Fair Market Value on the date of exercise.
11. Method of Exercise of Options and Stock Appreciation Rights.
(a) Options and Stock Appreciation Rights may be exercised by the Participant
giving written notice of the exercise to the Employer, stating the number of
shares the Participant has elected to purchase under the Option or the number of
Stock Appreciation Rights the Participant has elected to exercise. In the case
of the purchase of shares under an Option, such notice shall be effective only
if accompanied by the exercise price in full in cash; provided, however, that if
the terms of an Option so permit, the Participant may (i) deliver Mature Shares
(valued at their Fair Market Value) in satisfaction of all or any part of the
exercise price, (ii) cause to be withheld from the Option shares, shares of
Company Stock (valued at their Fair Market Value) in satisfaction of all or any
part of the exercise price, or (iii) deliver a properly executed exercise notice
together with irrevocable instructions to a broker to deliver promptly to the
Employer, from the sale or loan proceeds with respect to the sale of Company
Stock or a loan secured by Company Stock, the amount necessary to pay the
exercise price and, if required by the terms of the Option, Applicable
Withholding Taxes.
(b) DRI may place on any certificate representing Company Stock issued upon
the exercise of an Option or a Stock Appreciation Right any legend deemed
desirable by the DRI's counsel to comply with federal or state securities laws,
and DRI may require a customary written indication of the Participant's
investment intent. Until the Participant has made any required payment,
including any Applicable Withholding Taxes, and has had issued a certificate for
the shares of Company Stock acquired, he or she shall possess no shareholder
rights with respect to the shares.
(c) Each Participant shall agree as a condition of the exercise of an Option
or a Stock Appreciation Right, to pay to the Employer, or make arrangements
satisfactory to the Employer regarding the payment to the Employer of,
Applicable Withholding Taxes. Until such amount has been paid or arrangements
satisfactory to the Employer have been made, no stock certificate shall be
issued upon the exercise of an Option or cash paid upon the exercise of a Stock
Appreciation Right.
(d) As an alternative to making a cash payment to the Employer to satisfy
Applicable Withholding Taxes, if the Option or Stock Appreciation Rights
agreement so provides, the Participant may elect to (i) to deliver Mature Shares
(valued at their Fair Market Value) or (ii) to have the Employer retain that
number of shares of Company Stock (valued at their Fair Market Value) that would
satisfy all or a specified portion of the Applicable Withholding Taxes.
12. Transferability of Options and Stock Appreciation Rights. Nonstatutory
Stock Options and Stock Appreciation Rights may be transferable by a Participant
and exercisable by a person other than the Participant, but only to the extent
specifically provided in the Incentive Award. Incentive Stock Options, by their
terms, shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable, during the Participant's lifetime, only
by the Participant.
13. Effective Date of the Plan. The effective date of the Plan is January 1,
1997. The Plan shall be submitted to the shareholders of the DRI for approval.
Until (i) the Plan has been approved by DRI's shareholders, and (ii) the
requirements of any applicable Federal or State securities laws have been met,
no Restricted Stock or Goal-Based Stock shall be awarded that is not contingent
on these events and no Option or Stock Appreciation Right granted shall be
exercisable.
14. Termination, Modification, Change. If not sooner terminated by the DRI
Board, this Plan shall terminate at the close of business on December 31, 2006.
No Incentive Awards shall be made under the Plan after its termination. The DRI
Board may amend or terminate the Plan with respect to DRI Participants in such
respects as it shall deem advisable and the Virginia Power Board may amend or
terminate the Plan with respect to Virginia Power Participants in such respects
as it shall deem advisable; provided that, if and to the extent required by the
Code, no change shall be made that increases the total number of shares of
Company Stock reserved for issuance pursuant to Incentive Awards granted under
the Plan (except pursuant to Section 15), materially modifies the requirements
as to eligibility for participation in the Plan, or materially increases the
benefits accruing to Participants under the Plan, unless such change is
authorized by the shareholders of DRI. Notwithstanding the foregoing, the DRI
Board may unilaterally amend the Plan and Incentive Awards with respect to DRI
Participants as it deems appropriate to ensure compliance with Rule 16b-3 and to
cause Incentive Stock Options to meet the requirements of the Code and
regulations thereunder. Notwithstanding the foregoing, the Virginia Power Board
may unilaterally amend the Plan and Incentive Awards with respect to Virginia
Power Participants as it deems appropriate to ensure compliance with Rule 16b-3
and to cause Incentive Stock Options to meet the requirements of the Code and
regulations thereunder. Except as provided in the preceding two sentences, a
termination or amendment of the Plan shall not, without the consent of the
Participant, adversely affect a Participant's rights under an Incentive Award
previously granted to him or her.
15. Change in Capital Structure.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or merger in which DRI is the surviving corporation or other
change in DRI's capital stock (including, but not limited to, the creation or
issuance to shareholders generally of rights, options or warrants for the
purchase of common stock or preferred stock of DRI), the number and kind of
shares of stock or securities of DRI to be subject to the Plan and to Options
then outstanding or to be granted thereunder, the maximum number of shares or
securities which may be delivered under the Plan, the maximum number of shares
or securities that can be granted to an individual Participant under Section 4,
the exercise price, the terms of Incentive Awards and other relevant provisions
shall be appropriately adjusted by either the Virginia Power Committee with
respect to Virginia Power Participants or by the DRI Committee with respect to
DRI Participants, whose determination shall be binding on all persons. If the
adjustment would produce fractional shares with respect to any unexercised
Option, either the Virginia Power Committee with respect to Virginia Power
Participants or the DRI Committee with respect to DRI Participants may adjust
appropriately the number of shares covered by the Option so as to eliminate the
fractional shares.
(b) If DRI is a party to a consolidation or a merger in which DRI is not the
surviving corporation, a transaction that results in the acquisition of
substantially all of DRI's outstanding stock by a single person or entity, or a
sale or transfer of substantially all of DRI's assets, the DRI Committee may
take such actions with respect to outstanding Incentive Awards as the DRI
Committee deems appropriate.
(c) Notwithstanding anything in the Plan to the contrary, either the Virginia
Power Committee or the DRI Committee may take the foregoing actions without the
consent of any Participant, and either the Virginia Power Committee or the DRI
Committee's determination shall be conclusive and binding on all persons for all
purposes.
16. Administration of the Plan.
(a) Subject to the provisions of Section 16(b), the Plan shall be administered
by the DRI Committee as to DRI Participants and by the Virginia Power Committee
as to Virginia Power Participants. Any reference in the Plan to a Committee
shall be deemed to refer to the DRI Committee with respect to DRI Participants
and to the Virginia Power Committee with respect to Virginia Power Participants.
The Committees shall have general authority to impose any limitation or
condition upon an Incentive Award the Committees deem appropriate to achieve the
objectives of the Incentive Award and the Plan and, without limitation and in
addition to powers set forth elsewhere in the Plan, shall have the power and
complete discretion to determine:
(i) which eligible employees shall receive Incentive Awards and the nature of
each Incentive Award, (ii) the terms and conditions of any Performance Grant,
(iii) whether all or any part of an Incentive Award shall be accelerated upon a
Change of Control, (iv) the number of shares of Company Stock to be covered by
each Incentive Award, (v) whether Options shall be Incentive Stock Options or
Nonstatutory Stock Options, (vi) when, whether and to what extent Stock
Appreciation Rights shall be granted, (vii) the time or times when an Incentive
Award shall be granted, (viii) whether an Incentive Award shall become vested
over a period of time and when it shall be fully vested, (ix) when Options and
Stock Appreciation Rights may be exercised, (x) whether a Disability exists,
(xi) the manner in which payment will be made upon the exercise of Options or
Stock Appreciation Rights, (xii) conditions relating to the length of time
before disposition of Company Stock received upon the exercise of Options or
Stock Appreciation Rights is permitted, (xiii) whether to authorize a
Participant (A) to deliver Mature Shares to satisfy Applicable Withholding Taxes
or (B) to have the Employer withhold from the shares to be issued upon the
exercise of a Nonstatutory Stock Option or Stock Appreciation Right the number
of shares necessary to satisfy Applicable Withholding Taxes, (xiv) the terms and
conditions applicable to Restricted Stock awards, (xv) the terms and conditions
on which restrictions upon Restricted Stock shall lapse, (xvi) whether to
accelerate the time at which any or all restrictions with respect to Restricted
Stock will lapse or be removed, (xvii) the terms and conditions applicable to
Goal-Based Stock awards, (xviii) notice provisions relating to the sale of
Company Stock acquired under the Plan, (xix) the extent to which information
shall be provided to Participants about available tax elections, and (xx) any
additional requirements relating to Incentive Awards that the Committee deems
appropriate. Notwithstanding the foregoing, no "tandem stock options" (where two
stock options are issued together and the exercise of one option affects the
right to exercise the other option) may be issued in connection with Incentive
Stock Options. Each Committee shall have the power to amend the terms of
previously granted Incentive Awards that were granted by that Committee so long
as the terms as amended are consistent with the terms of the Plan and provided
that the consent of the Participant is obtained with respect to any amendment
that would be detrimental to him or her, except that such consent will not be
required if such amendment is for the purpose of complying with Rule 16b-3 or
any requirement of the Code applicable to the Incentive Award.
(b) Not withstanding anything in the Plan to the contrary, all grants of
Incentive Awards and the terms and conditions of such Incentive Awards, and any
adjustments due to a change in capital structure as set forth in Section 15 by
the Virginia Power Committee shall be subject to the review and approval of the
DRI Committee and no such Incentive Awards shall become effective without the
approval of the DRI Committee. All grants of Incentive Awards made or approved
<PAGE> by the DRI Committee shall be submitted to the DRI Board for such
consideration as the DRI Board deems appropriate.
(c) The DRI Committee may adopt rules and regulations for carrying out the
Plan with respect to DRI Participants. The interpretation and construction of
any provision of the Plan by the DRI Committee shall be final and conclusive as
to any DRI Participant. The Virginia Power Committee may adopt rules and
regulations for carrying out the Plan with respect to Virginia Power
Participants. The interpretation and construction of any provision of the Plan
by the Virginia Power Committee shall be final and conclusive as to any Virginia
Power Participant. A Committee may consult with counsel, who may be counsel to
the Employer, and shall not incur any liability for any action taken in good
faith in reliance upon the advice of counsel.
(d) A majority of the members of a Committee shall constitute a quorum, and
all actions of a Committee shall be taken by a majority of the members present.
Any action may be taken by a written instrument signed by all of the members,
and any action so taken shall be fully effective as if it had been taken at a
meeting.
17. Notice. All notices and other communications required or permitted to be
given under this Plan shall be in writing and shall be deemed to have been duly
given if delivered personally or mailed first class, postage prepaid, as follows
(a) if to DRI at the principal business address of DRI to the attention of the
Corporate Secretary of DRI; (b) if to Virginia Power at the principal business
address of Virginia Power to the attention of the Corporate Secretary of
Virginia Power; and if to any Participant at the last address of the Participant
known to the sender at the time the notice or other communication is sent.
18. Interpretation. The terms of this Plan are subject to all present and
future regulations and rulings of the Secretary of the Treasury of the United
States or his or her delegate relating to the qualification of Incentive Stock
Options under the Code. If any provision of the Plan conflicts with any such
regulation or ruling, then that provision of the Plan shall be void and of no
effect. The terms of this Plan shall be governed by the laws of the Commonwealth
of Virginia.
Exhibit 23.1
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
March 20, 1998
Virginia Electric and
Power Company
Richmond, Virginia 23261
Virginia Electric and Power Company
Form 10-K
Gentlemen:
We consent to the incorporation by reference into the Registration
Statements of Virginia Electric and and Power Company on Form S-3 (File Nos.
33-50425, 33-59581, 33-60271, 333- 20561, and 333-47119) of the statements,
included in this Annual Report on Form 10-K, made in regard to our firm that
relate to franchises, title to properties, and limitations upon the issuance of
bonds and preferred stocks.
Sincrely,
/s/ Hunton & Williams
HUNTON & WILLIAMS
Exhibit 23.2
Jackson & Kelly
1600 Laidley Tower
Charleston, West Virginia 25322
March 20, 1998
Virginia Electric and Power Company
Richmond, Virginia 23261
Re: Virginia Electric and Power Company
Form 10-K
Gentlemen:
We consent to the incorporation by reference into the registration
statements of Virginia Electric and Power Company on Form S-3 (File No.
33-59581, File No. 33- 60271 and File No. 333-47119) of the statements, included
in this Annual Report on Form 10-K, made in regard to our firm that are governed
by the laws of West Virginia and that relate to franchises, title to properties,
limitations upon the issuance of bonds and preferred stock, rate and other
regulatory matters, and litigation.
Sincerely yours,
/s/ Jackson & Kelly
JACKSON & KELLY
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated February 9,
1998, appearing in the Annual Report on Form 10-K of Virginia Electric and Power
Company for the year ended December 31, 1997, in the following Registration
Statements:
S-3 33-50425
S-3 33-59581
S-3 33-60271
S-3 333-20561
S-3 33-50423
S-3 333-47119
DELOITTE & TOUCHE LLP
Richmond, Virginia
March 18, 1998
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