<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
___________
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
---
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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)
VIRGINIA 54-0418825
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
ONE JAMES RIVER PLAZA 23219
RICHMOND, VIRGINIA
(Address of principal executive offices) (Zip Code)
(804) 771-3000
(Registrant's telephone number)
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 __
-
At April 30, 2000, 171,484 shares of common stock, without par value, of the
registrant were outstanding.
<PAGE>
PAGE 2
VIRGINIA ELECTRIC AND POWER COMPANY
INDEX
-----
Page
Number
------
PART I. Financial Information
Item 1.
Consolidated Financial Statements
Consolidated Statements of Income - 3
Three Months Ended March 31, 2000 and 1999
Consolidated Balance Sheets - 4-5
March 31, 2000 and December 31, 1999
Consolidated Statements of Cash Flows - 6
Three Months Ended March 31, 2000 and 1999
Notes to Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of 11-18
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 19
Market Risk
PART II. Other Information
Item 1. Legal Proceedings 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 21
<PAGE>
PAGE 3
VIRGINIA ELECTRIC AND POWER COMPANY
PART I. Financial Information
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------ ------
<S> <C>
(Millions)
Revenue:
Electric service $1,098 $1,045
Other 28 44
------ ------
Total 1,126 1,089
------ ------
Expenses:
Fuel, net 250 218
Purchased power capacity, net 193 210
Restructuring costs 20
Operations and maintenance 213 202
Depreciation and amortization 135 141
Taxes other than income 56 72
------ ------
Total 867 843
------ ------
Income from operations 259 246
Other income 14 9
------ ------
Income before interest and income taxes 273 255
------ ------
Interest and related charges:
Interest expense, net 68 72
Distributions - Preferred securities of subsidiary trust 3 3
------ ------
Total 71 75
------ ------
Income before income taxes 202 180
Income tax expense 72 66
------ ------
Income before extraordinary item 130 114
Extraordinary item (net of income taxes of $197) (255)
------ ------
Net income (loss) 130 (141)
Preferred dividends 10 8
------ ------
Balance available for common stock $ 120 $ (149)
====== ======
</TABLE>
The Company had no other comprehensive income reportable in accordance with
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income.
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
PAGE 4
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED BALANCE SHEETS
Assets
(Uuaudited)
March 31, December 31,
2000 1999*
------- -------
(Millions)
CURRENT ASSETS:
Cash and cash equivalents $ 145 $ 62
Accounts receivable:
Customer accounts receivable, net 662 664
Other 63 67
Materials and supplies:
Plant and general 125 124
Fossil fuel 94 111
Commodity contract assets 282 362
Other 114 145
------- -------
Total current assets 1,485 1,535
------- -------
INVESTMENTS:
Nuclear decommissioning trust funds 811 818
Other 52 52
------- -------
Total investments 863 870
------- -------
DEFERRED DEBITS AND OTHER ASSETS:
Regulatory assets 217 221
Unamortized debt issuance costs 32 31
Other 27 29
------- -------
Total deferred debits and other assets 276 281
------- -------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment 15,808 15,688
Less accumulated depreciation 6,850 6,746
------- -------
8,958 8,942
Nuclear fuel, net 149 137
------- -------
Net property, plant and equipment 9,107 9,079
------- -------
Total assets $11,731 $11,765
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
* The consolidated balance sheet at December 31, 1999 has been derived from the
audited consolidated financial statements at that date.
<PAGE>
PAGE 5
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED BALANCE SHEETS
Liabilities and Stockholder's Equity
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999*
------- -------
<S> <C>
(Millions)
CURRENT LIABILITIES:
Securities due within one year $ 319 $ 375
Short-term debt 185 378
Accounts payable, trade 512 534
Payrolls accrued 54 88
Interest accrued 86 97
Taxes accrued 112 52
Commodity contract liabilities 274 347
Other 210 165
------- -------
Total current liabilities 1,752 2,036
------- -------
LONG-TERM DEBT 3,771 3,551
------- -------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 1,460 1,452
Deferred investment tax credits 142 146
Other 192 193
------- -------
Total deferred credits and other liabilities 1,794 1,791
------- -------
COMMITMENTS AND CONTINGENCIES (See Note D)
COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST** 135 135
------- -------
PREFERRED STOCK:
Preferred stock not subject to mandatory redemption 509 509
------- -------
COMMON STOCKHOLDER'S EQUITY:
Common stock 2,738 2,738
Other paid-in capital 17 17
Earnings reinvested in business 1,015 988
------- -------
Total common stockholder's equity 3,770 3,743
------- -------
Total liabilities and stockholder's equity $11,731 $11,765
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
*The consolidated balance sheet at December 31, 1999 has been derived from the
audited consolidated financial statements at that date.
** As described in Note E to CONSOLIDATED FINANCIAL STATEMENTS, the 8.05% Junior
Subordinated Notes totaling $139 million principal amount constitute 100% of the
Trust's assets.
<PAGE>
PAGE 6
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
----- -----
<S> <C>
(Millions)
Cash flow from (to) operating activities:
Net income (loss) $ 130 $(141)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (includes amortization of nuclear fuel) 157 162
Deferred income taxes 9 13
Deferred investment tax credits, net (4) (4)
Deferred fuel expenses (7)
Restructuring costs 20
Extraordinary item, net of income taxes 255
Changes in:
Accounts receivable 6 133
Materials and supplies 16 (5)
Accounts payable (22) (103)
Accrued expenses 15 13
Commodity contract assets and liabilities 7 (13)
Other 63 17
----- -----
Net cash flow from operating activities 397 320
----- -----
Cash flow from (to) financing activities:
Issuance (repayment) of short-term debt, net (193) 10
Issuance of long-term debt 220
Retirement of long-term debt and preferred stock (57) (40)
Common stock dividend payments (93) (98)
Preferred stock dividend payments (10) (8)
Distribution-preferred securities of subsidiary trust (3) (3)
----- -----
Net cash flow to financing activities (136) (139)
----- -----
Cash flow to investing activities:
Plant expenditures (128) (137)
Nuclear fuel (34) (18)
Nuclear decommissioning contributions (9) (8)
Other (7)
----- -----
Net cash flow to investing activities (178) (163)
----- -----
Increase in cash and cash equivalents 83 18
Cash and cash equivalents at beginning of period 62 49
----- -----
Cash and cash equivalents at end of period $ 145 $ 67
===== =====
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
PAGE 7
VIRGINIA ELECTRIC AND POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 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 engages in off-system wholesale purchases and sales of
electricity and purchases and sales of natural gas, and is developing trading
relationships beyond the geographic limits of its 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.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, including normal recurring
accruals, necessary to present fairly the financial position as of March 31,
2000, the results of operations for the three months ended March 31, 2000 and
1999, and the cash flows for the three months ended March 31, 2000 and 1999.
Certain amounts in the 1999 consolidated financial statements have been
reclassified to conform to the 2000 presentation. The results of operations for
the interim period are not necessarily indicative of the results to be expected
for the full year.
The consolidated financial statements include the accounts of the Company and
its subsidiaries, with all significant intercompany transactions and accounts
being eliminated on consolidation.
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 and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
These financial statements should be read in conjunction with the consolidated
financial statements, and notes thereto, included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1999.
Note B. Extraordinary Item - Discontinuance of SFAS No. 71
In 1999, the Governor of Virginia signed into law legislation establishing a
detailed plan to restructure the electric utility industry in Virginia. Such
legislation will deregulate generation by 2002 with the phase-in of retail
customer choice beginning at that time. Under this legislation, the Company's
base rates will remain generally unchanged until July 2007 and recovery of
generation-related costs will continue to be provided through the capped rates.
The legislation's deregulation of generation required discontinuation of SFAS
No. 71, Accounting for the Effects of Certain Types of Regulation, for the
Company's generation operations in the quarter ended March 31, 1999.
Discontinuing SFAS No. 71 resulted in an after-tax charge of $255 million to
write-off expected unrecoverable generation-related assets and reversal of
previously deferred investment tax credits. The Company's transmission and
distribution operations continue to meet the criteria for recognition of
regulatory assets and liabilities as defined by SFAS No. 71 and fuel expense
continues to be subject to deferral accounting.
For further discussion of the impact of deregulation in Virginia on the
Company, see Management's Discussion and Analysis of Financial Condition and
Results of Operations and Notes B and R to the CONSOLIDATED FINANCIAL STATEMENTS
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999.
<PAGE>
PAGE 8
VIRGINIA ELECTRIC AND POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note C. Restructuring Costs
On January 28, 2000, Dominion Resources, Inc. (Dominion), Virginia Power's
parent company, acquired Consolidated Natural Gas Company (CNG). Subsequent to
the acquisition, Dominion and its subsidiaries developed and began the
implementation of a plan to restructure the operations of the combined
companies. The restructuring plan includes the following components:
o An involuntary severance program;
o A transition plan to implement operational changes to provide
efficiencies, including the consolidation of post-merger operations and
the integration of information technology systems;
o A voluntary early retirement program.
Dominion and its subsidiaries established a comprehensive involuntary
severance package for salaried employees whose positions will be eliminated.
Severance payments are based on the individual's base salary and years-of-
service at the time of termination. Under the restructuring plan, approximately
200 employee positions at Virginia Power have been identified for elimination.
Restructuring charges related to workforce reduction costs approximating $20
million were accrued in the first quarter of 2000, reflecting management's best
estimate of severance and related costs to be incurred under the plan. At March
31, 2000, a total of 75 positions had been eliminated, resulting in severance
payments totaling $696,000.
On January 28, 2000, Dominion announced an early retirement program (the
"ERP"). This program is a voluntary program for all salaried employees of
Dominion, excluding officers. The early retirement option will provide up to
three additional years of age and three additional years of employee service,
subject to age and service maximums under the companies' retirement plans, for
purposes of the benefit formula under the retirement plans. Employees who have
attained age 52 and completed at least five years of service as of July 1, 2000
are eligible under the ERP. To elect early retirement, salaried employees must
notify Dominion during the period from April 3 through May 17.
The expense and related liability associated with the ERP will be recognized
upon the Company's receipt of eligible employees' election to accept the ERP.
Employees who are involuntarily terminated are also eligible to elect early
retirement under the ERP. However, the amount of severance pay may be subject to
reduction as a result of coordination with the additional retirement plan
benefits provided by the ERP. Whether the ERP is made available to employees
covered by the collective bargaining agreement and the period for electing to
retire under the ERP are subject to discussion with union representatives.
Virginia Power is expected to incur additional charges relating to
restructuring and other merger-related activities as business operations are
consolidated and administrative functions are integrated.
Note D. Commitments and Contingencies
Environmental Matters
In 1987, the Environmental Protection Agency (EPA) identified the Company and
several other entities as Potentially Responsible Parties (PRPs) at two
Superfund sites located in Kentucky and Pennsylvania. Current cost studies
estimate total remediation costs for the sites to range from $106 million to
$156 million. The Company's proportionate share of the total cost is expected to
be in the range of $2 million to $3 million, based upon allocation formulas and
the volume of waste shipped to the sites. The Company has accrued a reserve of
$2 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 generally seeks to recover its costs associated with
environmental remediation from third party insurers. At March 31, 2000, any
pending or possible claims were not recognized as an asset or offset against
such obligations of the Company.
<PAGE>
PAGE 9
VIRGINIA ELECTRIC AND POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
In 1999, the Company was notified by the Department of Justice of alleged
noncompliance with the EPA's oil spill prevention, control and countermeasures
(SPCC) plans and facility response plan (FRP) requirements at one of the
Company's power stations. If, in a legal proceeding, such instances of
noncompliance are deemed to have occurred, the Company may be required to remedy
any alleged deficiencies and pay civil penalties. Settlement of this matter is
currently in negotiation and is not expected to be material to the Company's
financial condition or results of operations.
In 1999, the Company identified matters at certain other power stations that
the EPA might view as not in compliance with the SPCC and FRP requirements. The
Company reported these matters to the EPA and its plan for correction thereof.
Presently, the EPA has not assessed any penalties against the Company, pending
its review of the Company's disclosure information. Future resolution of these
matters is not expected to have a material impact on the Company's financial
condition or results of operations.
In 1999, the Company received notices from the Attorneys General of
Connecticut and New York, respectively, of their intention to file suit against
the Company for alleged violations of the Clean Air Act. The notices question
whether modifications at certain Virginia Power generating facilities were
properly permitted under the Clean Air Act and allege that emissions from these
facilities have contributed to damage to public health and the environment in
the Northeast. Management believes, based on newspaper reports and other
sources, that it is one of a number of companies with fossil fuel power
generating stations in the southeast and central United States to have received
such notifications. The Company believes that it has obtained the permits
necessary in connection with its generating facilities and that legal
proceedings, if pursed by the Attorneys General, would not have a material
adverse effect on it's financial condition or results of operations.
In a related development, in May 2000, the Company received a Notice of
Violation (NOV) from the EPA, alleging as had the Attorneys General's notices
that Virginia Power is operating its Mt. Storm Power Station in West Virginia in
violation of the Clean Air Act. The NOV alleges that the Company failed to
obtain New Source Review permits prior to undertaking specified construction
projects at the station. EPA alleges that each of these projects resulted in an
increase in the emission of air pollutants beyond levels that require a New
Source Review permit specified under the Clean Air Act. Violations of the Clean
Air Act may result in the imposition of substantial civil penalties and
injunctive relief. The Company believes that it has obtained the permits
necessary in connection with its generating facilities and will vigorously
defend against the allegations in the NOV.
For additional information regarding Contingencies, see Note R to CONSOLIDATED
FINANCIAL STATEMENTS included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
Note E. Company Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust
In 1995, the Company established Virginia Power Capital Trust I (VP Capital
Trust). VP Capital Trust sold 5.4 million shares of Preferred Securities for
$135 million, representing preferred beneficial interests and 97% beneficial
ownership in the assets held by VP Capital Trust.
Virginia Power issued $139 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 million of common securities of VP
Capital Trust. The common securities represent the remaining 3% beneficial
ownership interest in the assets held by VP Capital Trust. The Notes constitute
100% of VP Capital Trust's assets.
<PAGE>
PAGE 10
VIRGINIA ELECTRIC AND POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note F. Preferred Stock
As of March 31, 2000 the total number of authorized shares for all preferred
stock (whether or not subject to mandatory redemption) was 10 million shares.
There were 1.4 million and 5.1 million issued and outstanding shares of
preferred stock subject to mandatory redemption and preferred stock not subject
to mandatory redemption, respectively.
In March 2000, the Company redeemed 400,000 shares of preferred stock subject
to mandatory redemption. The remaining 1.4 million shares of preferred stock
subject to mandatory redemption are scheduled to be redeemed in September 2000.
Accordingly, the Company has classified the $140 million of preferred stock
subject to mandatory redemption in Securities due within one year at March 31,
2000.
Note G. Recently Issued Accounting Standards
The Financial Accounting Standards Board has issued an Exposure Draft
proposing amendments to SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. If adopted, the proposed new accounting standard will
become effective with the implementation of SFAS No. 133. The Exposure Draft
addresses various implementation issues including expanded availability of
exclusions of normal purchase and normal sale agreements from classification as
derivatives. The Company is in the process of assessing the impact and method of
adoption of SFAS No. 133 and has not estimated the financial impact of adoption.
To the extent that any of the contracts are subject to fair value accounting,
implementing appropriate hedging strategies could possibly mitigate the
potential impact on earnings volatility.
Note H. Business Segments
The Company manages its operations along two primary business lines, Energy
and Delivery. The Energy segment, formerly the Generation segment, encompasses
the Company's generation portfolio, trading and marketing activities, nuclear
consulting services and energy services activities. The Delivery segment
includes bulk power transmission, distribution and metering services, and
customer service and continues to be subject to cost-based regulation.
The majority of the Company's revenues are provided through bundled rate
tariffs. Such revenues generally are allocated between the two business lines
for management reporting based on prior cost of service studies. Amounts in
Other include: 1) transactions or events for which the segments are not held
accountable for internal reporting purposes (including the 2000 restructuring
charge and 1999 extraordinary item); 2) adjustments to reconcile internal
financial statement groupings to those used to prepare the externally reported
consolidated financial statements; 3) intercompany eliminations, where
applicable; and 4) assets of the Company's corporate operations that are not
allocated to our Energy and Delivery segments for internal reporting purposes.
<TABLE>
<CAPTION>
Consolidated
Description Energy Delivery Other Total
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
(Millions)
Three Months Ended March 31, 2000
Revenues $825 $297 $ 4 $1,126
Income before interest and income taxes 152 141 (20) 273
Net income (loss) 76 67 (13) 130
Three Months Ended March 31, 1999
Revenues $802 $281 $ 6 $1,089
Income before interest and income taxes 141 114 255
Net income (loss) 65 49 (255) (141)
</TABLE>
<PAGE>
PAGE 11
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. 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 (MD&A) 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.
The business and financial condition of Virginia Power are influenced by a
number of factors including political and economic risks, market demand for
energy, inflation, capital market conditions, governmental policies, legislative
and regulatory actions (including those of the Federal Energy Regulatory
Commission (FERC), the Environmental Protection Agency (EPA), the Department of
Energy, the Nuclear Regulatory Commission, the Virginia Commission and the North
Carolina Utilities Commission), industry and rate structure and legal and
administrative proceedings. Some other important factors that could cause actual
results or outcomes to differ materially from those discussed in the forward-
looking statements include changes in and compliance with environmental laws and
policies, weather conditions and catastrophic weather-related damage, present or
prospective wholesale and retail competition, competition for new energy
development opportunities, pricing and transportation of commodities, operation
of nuclear power facilities, acquisition and disposition of assets and
facilities, nuclear decommissioning costs, exposure to changes in the fair value
of commodity contracts, counter-party credit risk and unanticipated changes in
operating expenses and capital expenditures. 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 Virginia Power.
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.
Business Segments
We manage our operations in a manner that requires disclosure of two business
segments--Energy and Delivery. Our Energy segment, formerly the Generation
segment, includes our portfolio of generating facilities and purchased power
contracts, trading and marketing activities, nuclear consulting services, and
energy services activities. Our Delivery segment includes bulk power
transmission, distribution and metering services, and customer service and
continues to be subject to cost-based regulation.
The majority of our revenue is provided through bundled rate tariffs. Such
revenue is allocated between the Energy and Delivery segments for internal
reporting purposes and discussion herein. Certain activities discussed in
Liquidity and Capital Resources are not managed currently at the segment level;
however, specific references to segments are made as appropriate. Our discussion
of trends and variations generally applies to Virginia Power as a whole.
Liquidity and Capital Resources
Internal Sources of Liquidity
Cash flow from operating activities provided $397 million and $320 million
during the quarters ended March 31, 2000 and 1999, respectively. Operating cash
flow, after dividend payments, covered over 100 percent of our plant and nuclear
fuel expenditures during each of these quarters and, on average, covered over 80
percent of our total cash requirements. Cash requirements not met by the timing
or amount of cash flow from operations are generally satisfied with proceeds
from the sale of securities and short-term borrowings.
<PAGE>
PAGE 12
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
External Sources of Liquidity
In March 2000, we issued $220 million in aggregate principal of variable-rate
medium-term notes maturing in 2002. We also entered a swap agreement as a hedge
to synthetically convert these variable-rate notes to fixed rate debt. Under the
swap agreement, we will pay a 7.27% fixed rate. We issued the notes primarily to
satisfy the retirement during the first quarter of 2000 of approximately $57
million of outstanding debt and preferred stock and repayments in April 2000 of
$169 million of outstanding debt.
We have a commercial paper program that is supported by two credit facilities
totaling $500 million. Net borrowings under the program were $185 million at
March 31, 2000, a decrease of $193 million from amounts outstanding at December
31, 1999. Borrowings under these facilities are used to fund working capital
requirements and may vary significantly during the course of the year depending
upon the timing and amount of cash requirements not satisfied by current cash
provided from operations.
As of March 31, 2000, we have $520 million of remaining principal amount under
currently effective shelf registrations with the Securities and Exchange
Commission available to meet capital requirements.
Capital Expenditures
During the quarter ended March 31, 2000, our investing activities resulted in
net cash outflows of $178 million. These activities included plant and nuclear
fuel expenditures of $162 million. Generation-related projects totaled
approximately $87 million and included continued construction of four 150 MW
combustion turbines, expected to be completed by midyear 2000, environmental
upgrades, and routine capital improvements. We spent approximately $71 million
on transmission and distribution-related projects reflecting routine capital
improvements and expenditures associated with new connections. Remaining plant
and equipment expenditures of $4 million primarily reflects our continued
investment in information technology.
There have been no significant changes in the planned levels of spending for
capacity and other capital projects and maturities of securities as disclosed in
MD&A included in our Annual Report on Form 10-K for the year ended December 31,
1999. We expect to fund our capital requirements and maturities with cash flow
from operations and a combination of sales of securities and short-term
borrowings.
Results Of Operations
The following General discussion of the results of operations for Virginia
Power considers those aspects of the results of our operations that relate to
both our Energy and Delivery segments, and accordingly, are discussed on a
consolidated basis. In addition, we discuss separately the results of
operations specific to our Energy and Delivery segments.
General
Total Revenue for the quarters ended March 31, 2000 and 1999, respectively was
allocated to the Energy and Delivery segments as follows:
Quarter Ended March 31,
2000 1999
----------- ------------
(Millions)
Energy $ 825 $ 802
Delivery 297 281
Other* 4 6
------ ------
Total Revenue $1,126 $1,089
====== ======
*See Note H to CONSOLIDATED FINANCIAL STATEMENTS for discussion of the
nature of this line item.
<PAGE>
PAGE 13
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Electric service revenue consists primarily of sales to retail customers in
our service territory at rates authorized by the Virginia and North Carolina
regulatory commissions and sales to cooperatives and municipalities at wholesale
rates authorized by FERC. The following analysis and discussion present the
primary factors affecting this revenue for the quarter ended March 31, 2000:
Three Months Ended
March 31,
2000 vs. 1999
-----------------------
(Millions)
Electric service revenue
Retail customer growth $19
Weather 1
Base rate reduction (8)
Fuel rate variance 10
Other retail, net 25
---
Total retail 47
---
Other electric service 6
---
Total electric service $53
===
Retail customer growth--Electric service revenue increased approximately $19
million due to higher levels of retail customers during the quarter ended March
31, 2000 compared to the comparable quarter of the prior year. On average, there
were approximately 38,000 more retail customers during the quarter ended March
31, 2000 versus the comparable quarter of 1999.
Weather--Weather typically has a significant impact on our electric service
revenue. However, for the comparative periods presented, weather did not have a
significant impact.
Base rate reduction--As part of our 1998 rate settlement, we agreed to a two-
phased rate reduction, $100 million effective March 1, 1998 and an additional
$50 million effective March 1, 1999. The impact of the second phase rate
reduction on the quarter ended March 31, 2000 was an $8 million reduction of
electric service revenue compared to the comparable period in 1999. As a result
of Virginia law enacted in 1999, our Virginia jurisdictional base rates will
remain unchanged until July 2007. See Note B to CONSOLIDATED FINANCIAL
STATEMENTS.
Fuel rates--Currently, we recover the cost of fuel used in generating
electricity through fuel rates approved by regulatory authorities. The increase
in fuel rate revenue reflects higher fuel rates approved during the quarter
ended March 31, 2000 as compared to the same quarter in 1999.
Other retail, net--The extra "leap-year" day in February 2000 favorably
impacted electric service revenue by approximately $12 million as compared to
the quarter ended March 31, 1999. Other factors affecting electric service
revenue for the quarter were individually insignificant.
Other electric service revenue--This revenue increased during the quarter
ended March 31, 2000, as compared to the comparable quarter in 1999, due to
increased revenue for electric transmission services.
Certain expenses, which are not allocated separately to the Energy and
Delivery segments, changed as follows when compared to the respective prior
quarter:
<PAGE>
PAGE 14
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Restructuring Costs -During the first quarter 2000, restructuring costs were
incurred in connection with the implementation of a plan to restructure the
operations of all Dominion subsidiaries following its acquisition with
Consolidated Natural Gas Company. We recorded a charge for approximately $20
million for costs associated with work-force reduction activities. See Note C.
to the CONSOLIDATED FINANCIAL STATEMENTS for more information regarding these
restructuring costs.
Extraordinary item--This extraordinary item was recorded in connection with
the passage of new legislation in 1999 establishing a detailed plan to
restructure the electric utility industry in Virginia. The legislation's
deregulation of generation was an event that required discontinuation of
Statement of Financial Accounting Standards (SFAS) No. 71, Accounting for the
Effects of Certain Types of Regulation, for our generation operations.
Generation-related assets and liabilities not expected to be recovered through
cost-based rates were written off in March 1999, resulting in an after-tax
charge of $255 million. See Note B to CONSOLIDATED FINANCIAL STATEMENTS.
Energy
Net income for our Energy segment increased for the quarter ended March 31,
2000 as compared to the same quarter of 1999. This growth in net income reflects
increased electric service revenue resulting from growth in our customer base
offset partially by lower revenues associated with our power and gas marketing
and trading activities. Expenses for the quarter, as compared to the prior year
quarter, increased reflecting higher fuel and operating expenses offset
partially by lower expenses associated with depreciation and amortization and
other taxes. Selected financial information relevant to the operations of our
Energy segment for the comparative quarters is as follows:
Three Months Ended
March 31,
2000 1999
-------- ------
(Millions)
Electric service revenue $ 809 $ 766
Other revenue 16 36
Fuel, net 250 218
Purchased power capacity, net 193 210
Operations and maintenance 111 100
Depreciation and amortization 66 76
Taxes other than income 5 17
Income before interest and income taxes 152 141
Net income 76 65
Other revenue includes sales of electricity beyond our service territory,
sales of natural gas, and other revenue. The decrease in other revenue during
the quarter ended March 31, 2000 as compared to the same quarter in 1999
reflects primarily lower revenues associated with power marketing and trading
activities and lower mark-to-market gains on our portfolio of commodity
contracts.
Fuel, net increased in the quarter ended March 31, 2000, as compared to the
same quarter of 1999, primarily due to increased energy purchases and the
inclusion of previously deferred fuel expenses being recovered in current fuel
rates.
Purchased power capacity, net decreased in the quarter ended March 31, 2000 as
compared to comparable quarter of 1999 reflecting the expiration of two major
long-term power purchase contracts as of December 31, 1999.
Operations and maintenance increased in the quarter ended March 31, 2000 as
compared to same quarter of 1999, primarily as a result of nuclear outage costs
in the current quarter with no similar level of costs in 1999.
<PAGE>
PAGE 15
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Depreciation and amortization decreased for the quarter ended March 31, 2000,
as compared to the comparable quarter of 1999, reflecting the amortization of
certain terminated construction projects in the prior year quarter with no such
expenses occurring in the current quarter.
Taxes other than income decreased during the quarter ended March 31, 2000 as
compared to the comparable quarter of 1999 due to the accrual for a tax refund
in the first quarter of 2000.
Delivery
Overall, the net income of our Delivery segment increased for the quarter
ended March 31, 2000, as compared to the comparable quarter of 1999, reflecting
increased revenue for electric transmission services and lower costs associated
with storm-related service restoration activities. Selected financial
information relevant to the operations of our Delivery segment for the
comparative quarters is as follows:
Three Months Ended
March 31,
2000 1999
-------- -------
(Millions)
Electric service revenue $ 289 $ 279
Operations and maintenance 61 69
Income before interest and income taxes 141 114
Net income 67 49
Operations and maintenance for the quarter ended March 31, 2000 as compared to
the same period in 1999 was lower as the 1999 expenses reflected higher service
restoration costs associated with ice-storm damage.
Future Issues
The following discussion of future issues includes current developments of
previously disclosed matters and new issues arising during the period covered by
and subsequent to these financial statements. We recommend that this section be
read in connection with Future Issues in MD&A included in our Annual Report on
Form 10-K for the year ended December 31, 1999.
Competition-Legislative Initiatives
Virginia
In March 1999, the Governor of Virginia signed into law legislation
establishing a detailed plan to restructure the electric utility industry in
Virginia which will provide for customer choice beginning in 2002. For
additional information on the impact of this legislation and customer choice,
see Note B to CONSOLIDATED FINANCIAL STATEMENTS and MD&A included in our Annual
Report on Form 10-K for the year ended December 31, 1999. Since March 1999, we
have supported certain technical amendments which were passed by the 2000
General Assembly and were signed by the Governor in April 2000.
<PAGE>
PAGE 16
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
In March 1998, the Virginia Commission issued an Order Establishing
Investigation with regard to independent system operators, regional power
exchanges and retail access pilot programs. The Order instructed Virginia Power
and American Electric Power-Virginia (AEP) each to design and file a retail
access pilot program. In response, we filed a report describing the details,
objectives and characteristics of our proposed retail access pilot program and a
hearing was held. On April 28, 2000, the Virginia Commission entered a Final
Order adopting, with certain exceptions, the Hearing Examiner's recommendations,
including the Hearing Examiner's market price methodology. Pursuant to the
Final Order, the Company's pilot program will begin on September 1, 2000 and
will initially give approximately 35,000 customers the ability to choose their
electric supplier. The program will be expanded to include approximately 71,000
customers by January 2001. A final order from the Virginia Commission on the
interim rules governing electric and gas retail pilot programs in Virginia is
expected early in the second quarter of 2000.
In April 2000, the Virginia Commission entered an order proposing regulations
governing the functional separation of the generation, retail transmission, and
distribution of incumbent electric utilities under the Virginia Electric Utility
Restructuring Act (the Act). Pursuant to the Act, Virginia electric utilities
are required to file their functional separation plans with the Virginia
Commission by January 1, 2001. Comments on the Commission's proposed functional
separation rules are due by May 22, 2000.
North Carolina
In April 2000, a study commission, established by the North Carolina General
Assembly to explore the future of electric service in North Carolina, developed
a proposal to provide full retail competition to North Carolina by January 1,
2006, with a phase-in beginning on January 1, 2005 of up to 50% of each power
supplier's customer load. These recommendations will be part of a report to be
given to the General Assembly scheduled to begin in May 2000. The study
commission will recommend to the 2001 General Assembly specific legislative
language necessary to accomplish its recommendations including a proposal
regarding resolution of certain issues concerning municipal power agency debt.
Restructuring Charges
We expect to incur additional charges relating to restructuring and other
merger-related activities as business operations are consolidated and
administrative functions are integrated. The planned workforce reductions
should avoid future annualized operating costs of approximately $18 million
that would have otherwise been incurred. See Note C. to CONSOLIDATED FINANCIAL
STATEMENTS for further discussion of restructuring activities and related costs.
Clear Air Act Matters
The Virginia Department of Environmental Quality (DEQ) is proposing to impose
a plantwide ozone season NOx emission limit of 0.15 lb/mmBtu at the Possum Point
Power Station beginning in May 2003 as part of a State Implementation Plan to
address ozone levels in Northern Virginia, which is classified as a serious
ozone non-attainment area. Given the age of the existing units at Possum and
the high probability of additional control requirements in the future, we
evaluated various options to optimize the ability to continue to operate these
units in a cost-effective manner while providing the Northern Virginia area with
a reliable source of electricity. Based on this evaluation, we recently
announced the planned replacement of 465 MW of existing coal-fired generation at
Possum Point with a new, cleaner combined cycle gas unit at an estimated capital
cost of $280 million.
<PAGE>
PAGE 17
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
In May 2000, Virginia Power received a Notice of Violation (NOV) from the EPA,
alleging that Virginia Power is operating the Mt. Storm Power Station in West
Virginia in violation of the Clean Air Act. The NOV alleges that we failed to
obtain New Source Review permits prior to undertaking specified construction
projects at the station. EPA alleges that each of these projects resulted in an
increase in the emission of air pollutants beyond levels that require a New
Source Review permit specified under the Clean Air Act. As previously disclosed,
the Company has also received notices from the Attorneys General of Connecticut
and New York claiming similar violations of the Clean Air Act. Violations of the
Clean Air Act may result in the imposition of substantial civil penalties and
injunctive relief. We believe that we have obtained the permits necessary in
connection with our generating facilities and will vigorously defend against the
allegations in the NOV. See Note D. to CONSOLIDATED FINANCIAL STATEMENTS for
further discussion of this matter.
Recently Issued Accounting Standards
The Financial Accounting Standards Board has issued an Exposure Draft
proposing amendments to SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. If adopted, the proposed new accounting standard will become
effective with the implementation of SFAS No. 133. The Exposure Draft addresses
various implementation issues including expanded availability of exclusions of
normal purchase and normal sale agreements from classification as derivatives.
The Company is in the process of assessing the impact and method of adoption of
SFAS No. 133 and has not estimated the financial impact of adoption. To the
extent that any of the contracts are subject to fair value accounting,
implementing appropriate hedging strategies could possibly mitigate the
potential impact on earnings volatility.
Year 2000 Readiness
We experienced a successful transition to the Year 2000 and to February 29,
2000. Our transmission and distribution systems and our generating units
continued to operate smoothly through the transition periods. Our customers
have not lost power as a result of a Year 2000 problem. We expect no
significant Year 2000 problems in the future.
Actual Year 2000 costs of $27 million have been expended as of March 31, 2000.
Additional costs throughout the remainder of 2000 are not expected to be
significant.
We cannot estimate or predict the potential adverse consequences that could
result from a third party's failure to effectively address remaining Year 2000
issues, if any, but believe that any impact would be short-term in nature and
would not have a material adverse impact on results of operations.
Market Risk Sensitive Instruments and Risk Management
We are exposed to market risk because we utilize financial instruments,
derivative financial instruments and derivative commodity instruments. The
market risks inherent in these instruments are represented by the potential loss
due to adverse changes in commodity prices, interest rates and equity security
prices as described below. Commodity price risk is experienced in our power
generation and commodity marketing and trading business due to the exposure to
market shifts in the prices received and paid for natural gas and electricity.
Interest rate risk generally is related to our outstanding debt, preferred stock
and trust-issued securities. We are exposed to equity price risk primarily as a
result of equity securities held in nuclear decommissioning trusts.
On a quarterly basis, we present an updated sensitivity analysis to disclose
quantitative information about our exposure to commodity price risk as our
portfolio of derivative commodity contracts held for trading purposes may change
significantly each quarter. We do not present quarterly updates to the
quantitative information regarding interest rate and equity price risk disclosed
in Market Risk Sensitive Instruments and Risk Management under MD&A included in
our Annual Report on Form 10-K for the year ended December 31, 1999. Generally,
changes in our portfolio of securities subject to such risks do not give rise to
significant changes in the quantitative information reported on an annual basis.
<PAGE>
PAGE 18
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Commodity Price Risk
As part of our strategy to market energy from our generation capacity and to
manage related risks, we manage a portfolio of derivative commodity contracts
held for trading purposes. These contracts are sensitive to changes in the
prices of natural gas and electricity. We employ established policies and
procedures to manage the risks associated with these price fluctuations and use
various commodity instruments, such as futures, swaps and options, to reduce
risk by creating offsetting market positions. In addition, we seek to use our
generation capacity, when not needed to serve customers in our service
territory, to satisfy commitments to sell energy.
One of the techniques commonly used to measure risk in a commodity trading
portfolio is sensitivity analysis, which determines a hypothetical change in the
fair value of the portfolio which would result from an assumed change in the
market prices of the related commodities. The fair value of the portfolio is a
function of the underlying commodity, contract prices and market prices
represented by each derivative commodity contract. For swaps, forward contracts
and options, market value reflects our best estimates considering over-the-
counter quotations, time value and volatility factors of the underlying
commitments. Exchange-traded futures and options are marked to market based on
closing exchange prices.
We have determined a hypothetical loss by calculating a hypothetical fair
value for each contract assuming a 10% unfavorable change in the market prices
of the related commodity and comparing it to the fair value of the contracts
based on market prices at March 31, 2000 and December 31, 1999. This
hypothetical 10% change in commodity prices would have resulted in a
hypothetical loss of approximately $6 million and $5 million in the fair value
of our commodity contracts as of March 31, 2000 and December 31, 1999,
respectively.
The sensitivity analysis does not include the price risks associated with
utility operations, including those underlying utility fuel requirements. In the
normal course of business, we also face risks that are either nonfinancial or
nonquantifiable. Such risks principally include credit risk, which is not
reflected in the sensitivity analysis above.
<PAGE>
PAGE 19
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
See Market Risk Sensitive Instruments and Risk Management under MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
<PAGE>
PAGE 20
VIRGINIA ELECTRIC AND POWER COMPANY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
In May 2000, the Company received a Notice of Violation (NOV) from the
Environmental Protection Agency (EPA), alleging that Virginia Power is operating
the Mt. Storm Power Station in West Virginia in violation of the Clean Air Act.
The NOV alleges that we failed to obtain New Source Review permits prior to
undertaking specified construction projects at the station. EPA alleges that
each of these projects resulted in an increase in the emission of air pollutants
beyond levels that require a New Source Review permit specified under the Clean
Air Act. As previously reported, the Company has also received notices from the
Attorneys General of Connecticut and New York claiming similar violations of the
Clean Air Act. Violations of the Clean Air Act may result in the imposition of
substantial civil penalties and injunctive relief.
Item 4. Submission of Matters to a Vote of Security Holders.
- --------------------------------------------------------------
a) By consent in lieu of an Annual Meeting, Dominion Resources, Inc., the sole
holder of all the voting Common Stock of the Company, on April 28, 2000,
approved amendments to the Company's Bylaws to change the number of Directors
to be within a range of not less than three nor more than eighteen, and
b) elected the following persons to serve as Directors of the Company until
the next annual election of the Board:
Thos. E. Capps Thomas F. Farrell, II Edgar M. Roach, Jr.
Item 5. Other Information
- --------------------------
Regulation
Virginia
--------
In March 1998, the Virginia Commission issued an Order Establishing
Investigation with regard to independent system operators, regional power
exchanges and retail access pilot programs. The Order instructed Virginia Power
and American Electric Power-Virginia (AEP) each to design and file a retail
access pilot program. In response, we filed a report describing the details,
objectives and characteristics of our proposed retail access pilot program and a
hearing was held. On April 28, 2000, the Virginia Commission entered a Final
Order adopting, with certain exceptions, the Hearing Examiner's recommendations,
including the Hearing Examiner's market price methodology. Pursuant to the
Final Order, the Company's pilot program will begin on September 1, 2000 and
will initially give approximately 35,000 customers the ability to choose their
electric supplier. The program will be expanded to include approximately 71,000
customers by January 2001. A final order from the Virginia Commission on the
interim rules governing electric and gas retail pilot programs in Virginia is
expected early in the second quarter of 2000.
In April 2000, the Virginia Commission entered an order proposing regulations
governing the functional separation of the generation, retail transmission, and
distribution of incumbent electric utilities under the Virginia Electric Utility
Restructuring Act (the Act). Pursuant to the Act, Virginia electric utilities
are required to file their functional separation plans with the Virginia
Commission by January 1, 2001. Comments on the Commission's proposed functional
separation rules are due by May 22, 2000.
North Carolina
--------------
In April 2000, a study commission, established by the North Carolina General
Assembly to explore the future of electric service in North Carolina, developed
a proposal to provide full retail competition to North Carolina by January 1,
2006, with a phase-in beginning on January 1, 2005 of up to 50% of each power
supplier's customer load. These recommendations will be part of a report to be
given to the General Assembly scheduled to begin in May 2000.
Environmental Matters
The Virginia Department of Environmental Quality is proposing to impose a
plantwide ozone season NOx emission limit of 0.15 lb/mmBtu at the Possum Point
Power Station beginning in May 2003, as part of a State Implementation Plan to
address ozone levels in Northern Virginia. For more details, see Future Issues
under MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
<PAGE>
PAGE 21
VIRGINIA ELECTRIC AND POWER COMPANY
PART II - OTHER INFORMATION
(Continued)
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
3 Bylaws, as amended and effective April 28, 2000 (filed herewith).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K;
None
<PAGE>
PAGE 22
SIGNATURE
Pursuant to the requirements 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
Registrant
May 12, 2000
/S/J.L. Trueheart
------------------------------------------
J.L. Trueheart
Group Vice President and Controller
(Principal Accounting Officer)
<PAGE>
Exhibit 3
BYLAWS
OF
VIRGINIA ELECTRIC AND POWER COMPANY
As amended and in effect on April 28, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
<S> <C>
I Name ............................................................. 1
II Shareholders' Meetings ........................................... 1
III Annual Meeting ................................................... 1
IV Special Meetings ................................................. 1
V Notice of Shareholders' Meetings and Voting Lists................. 2
VI Waiver of Notice.................................................. 3
VII Quorum............................................................ 3
VIII Proxy and Voting.................................................. 4
IX Board of Directors................................................ 4
X Powers of Directors............................................... 4
XI Executive and Other Committees.................................... 5
XII Meetings of Directors and Quorum.................................. 5
XIII Action Without a Meeting.......................................... 7
XIV Officers.......................................................... 7
XV Eligibility of Officers........................................... 7
XVI Chairman of the Board of Directors and President.................. 8
XVII Vice Presidents................................................... 8
XVIII Corporate Secretary............................................... 9
XIX Treasurer......................................................... 9
XX Controller........................................................ 10
XXI Resignations and Removals......................................... 10
XXII Vacancies......................................................... 10
XXIII Certificates for Shares........................................... 11
XXIV Transfer of Shares................................................ 11
XXV Record Date....................................................... 12
XXVI Voting of Shares Held............................................. 12
XXVII Bonds, Debentures and Notes Issued Under an Indenture............. 13
XXVIII Amendments........................................................ 13
XXIX Emergency Bylaws.................................................. 13
</TABLE>
<PAGE>
BYLAWS
OF
VIRGINIA ELECTRIC AND POWER COMPANY
ARTICLE I.
Name.
The name of the Corporation is Virginia Electric and Power Company.
ARTICLE II.
Shareholders' Meetings.
All meetings of the Shareholders shall be held at such place, within or
without of the Commonwealth, as provided in the notice of the meeting given
pursuant to Article V. If the Chairman of the Board of Directors determines
that the holding of any meeting at the place named in the notice might be
hazardous, he may cause it to be held at some other place deemed by him
suitable and convenient, upon arranging notice to Shareholders who attend at
the first place and reasonable opportunity for them to proceed to the new
place.
ARTICLE III.
Annual Meeting.
The Annual Meeting of the Shareholders shall be held on the fourth Friday
in April in each year if not a legal holiday, and if a legal holiday then on
the next business day not a legal holiday. In the event that such Annual
Meeting is omitted by oversight or otherwise on the date herein provided for,
the Board of Directors shall cause a meeting in lieu thereof to be held as
soon thereafter as conveniently may be, and any business transacted or
elections held at such meeting shall be as valid as if transacted or held at
the Annual Meeting. Such subsequent meeting shall be called in the same
manner as provided for Special Shareholders' Meetings.
ARTICLE IV.
Special Meetings.
Special Meetings of the Shareholders shall be held whenever called by the
Chairman of the Board of Directors, any Chief Executive Officer, or a majority
of the Directors or in accordance with the provisions of Article III of the
Articles of Incorporation. Special Meetings of the Shareholders shall also be
held following the accrual or termination of voting rights of the Preferred
Stock, whenever requested to be called in the manner provided in Article III of
the Articles of Incorporation.
ARTICLE V.
Notice of Shareholders' Meetings and Voting Lists.
Written notice stating the place, day and hour of each Shareholders'
Meeting and the purpose or purposes for which the meeting is called shall be
given not less than 10 nor more than 60 days before the date of the meeting, or
such longer period as is specified below, by, or at the direction of, the Board
of Directors or its Chairman, any Chief Executive Officer, any President or any
Vice President or the Corporate Secretary or any Assistant Corporate Secretary,
by hand or by mail, to each Shareholder of record entitled to vote at the
meeting, at his or her registered address and the person giving such notice
shall make affidavit in relation thereto. Such notice shall be deemed to be
given when deposited in the United States mails addressed to the Shareholder at
his address as it appears on the stock transfer books, with postage thereon
prepaid or when hand delivered at said address.
<PAGE>
Notice of a Shareholders' Meeting to act on an amendment of the Articles
of Incorporation, on a plan of merger or share exchange, on a proposed
dissolution of the Corporation or on a proposed sale, lease or exchange, or
other disposition, of all, or substantially all, of the property of the
Corporation otherwise than in the usual and regular course of business, shall
be given in the manner provided above, not less than 25 nor more than 60 days
before the date of the meeting. Any notice of a Shareholders' Meeting to act
on an amendment of the Articles of Incorporation, a plan of merger or share
exchange or a proposed sale, lease or exchange, or other disposition of all,
or substantially all, of the property of the Corporation otherwise than in the
usual and regular course of business shall be accompanied by a copy of the
proposed amendment, plan of merger or exchange or agreement effecting the
disposition of assets.
Any meeting at which all Shareholders having voting power in respect of
the business to be transacted thereat are present, either in person or by
proxy, or of which those not present waive notice in writing, whether before
or after the meeting, shall be a legal meeting for the transaction of business
notwithstanding that notice has not been given as hereinbefore provided.
The officer or agent having charge of the share transfer books of the
Corporation shall make, at least 10 days before each meeting of Shareholders,
a complete list of the Shareholders entitled to vote at such meeting or any
adjournment thereof, with the address of and number of shares held by each.
The list shall be arranged by voting group and within each voting group by
class or series of shares. Such list, for a period of 10 days prior to such
meeting, shall be kept on file at the principal office of the Corporation.
Any person who shall have been a Shareholder of record for at least 6 months
immediately preceding his demand or who shall be the holder of record of at
least 5% of all the outstanding shares of the Corporation, upon demand stating
with reasonable particularity the purpose thereof, shall have the right to
inspect such list, in person, for any proper purpose if such list is directly
connected with such purpose, during usual business hours within the period of
10 days prior to the meeting. Such list shall also be produced at the time
and place of the meeting and shall be subject to the inspection of any
Shareholder during the whole time of the meeting for the purposes thereof.
ARTICLE VI.
Waiver of Notice.
Notice of any Shareholders' Meeting may be waived by any Shareholder,
whether before or after the date of the meeting. Such waiver of notice shall
be in writing, signed by the Shareholder and delivered to the Corporate
Secretary. Any Shareholder who attends a meeting shall be deemed to have
waived objection to lack of notice or defective notice of the meeting, unless
the Shareholder at the beginning of the meeting objects to holding the meeting
or transacting business at the meeting and shall be deemed to have waived
objection to consideration of a particular matter at the meeting that is not
within the purpose or purposes described in the meeting notice, unless the
Shareholder objects to considering the matter when it is presented.
ARTICLE VII.
Quorum.
At any meeting of the Shareholders, a majority in number of votes of all
the shares issued and outstanding having voting power in respect of the
business to be transacted thereat, represented by such Shareholders of record
in person or by proxy, shall constitute a quorum, but a lesser interest may
adjourn any meeting from time to time and the meeting may be held as adjourned
without further notice. When a quorum is present at any meeting, a majority
vote represented thereat shall decide any question brought before such
meeting, unless the question is one upon which by express provision of law or
of the Articles of Incorporation or of these Bylaws a larger or different vote
is required, in which case such express provision shall govern and control the
decision of such question. The provisions of this Article are, however,
subject to the provisions of Article III of the Articles of Incorporation.
<PAGE>
ARTICLE VIII.
Proxy and Voting.
Shareholders of record entitled to vote may vote at any meeting held, in
person or by proxy executed in writing by the Shareholder or by his duly
authorized attorney-in-fact, which shall be filed with the Corporate Secretary
or the secretary of the meeting before being voted. A proxy shall designate
only one person as proxy, except that proxies executed pursuant to a general
solicitation of proxies may designate one or more persons as proxies.
Proxies shall entitle the holders thereof to vote at any adjournment of the
meeting, but shall not be valid after the final adjournment thereof. No proxy
shall be valid after 11 months from its date unless the appointment form
expressly provides for a longer period of validity. Shareholders entitled to
vote may also be represented by an agent personally present, duly designated
by power of attorney, with or without power of substitution, and such power
of attorney shall be produced at the meeting on request. Each holder of record
of stock of any class shall, as to all matters in respect of which stock of any
class has voting power, be entitled to one vote for each share of stock of such
class standing in his name on the books.
ARTICLE IX.
Board of Directors.
A Board of Directors shall be chosen by ballot at the Annual Meeting of the
Shareholders or at any meeting held in lieu thereof as herein before provided in
Article III. The number of Directors may be fixed from time to time by
Resolution of the Board of Directors within a variable range of not less than
three nor more than eighteen. Except as otherwise provided in Article XXI
hereof, each Director shall serve until the next Annual Meeting of Shareholders
and until his successor is duly elected and qualified or until the number of
Directors is decreased. The foregoing provisions are, however, subject to
Article III of the Articles of Incorporation, if and whenever the same may
become applicable by the accrual of voting rights to the Preferred Stock.
ARTICLE X.
Powers of Directors.
All corporate powers shall be exercised by or under the authority of, and
the business and affairs of the Corporation shall be managed under the
direction of, the Board of Directors, subject to any limitation set forth in
the Articles of Incorporation and so far as this delegation of authority is
not inconsistent with the laws of the Commonwealth of Virginia, with the
Articles of Incorporation or with these Bylaws.
ARTICLE XI.
Executive and Other Committees.
The Board of Directors, by resolution passed by a majority of the whole
Board, may designate two or more of its number to constitute an Executive
Committee. If a quorum is present, the Committee may act upon the affirmative
vote of a majority of the Committee members present. When the Board of
Directors is not in session, the Executive Committee shall have and may
exercise all of the authority of the Board of Directors except that the
Executive Committee shall not (i) approve or recommend to Shareholders action
that Virginia law requires to be approved by Shareholders; (ii) fill vacancies
on the Board of Directors or any of its Committees or elect officers; (iii)
Amend Articles of Incorporation other than as permitted by statute; (iv)
adopt, amend or repeal these Bylaws; (v) approve a plan of merger not
requiring Shareholder approval; (vi) authorize or approve a distribution,
except according to a general formula or method prescribed by the Board of
Directors; or (vii) authorize or approve the issuance or sale or contract for
sale of shares, or determine the designation and relative rights, preferences,
and limitations of a class or series of shares, except that the Board of
Directors may authorize the Executive Committee to do so within limits
specifically prescribed by the Board of Directors. If the Executive Committee
is created for any designated purpose, its authority shall be limited to such
<PAGE>
purpose. The Executive Committee shall report its action to the Board of
Directors. Regular and special meetings of the Executive Committee may be
called and held subject to the same requirements with respect to time, place
and notice as are specified in these Bylaws for regular and special meetings
of the Board of Directors. Members of the Executive Committee shall receive
such compensation for attendance at meetings as may be fixed by the Board of
Directors.
The Board of Directors likewise may appoint from their number other
Committees from time to time, the number composing such Committees and the
power conferred upon the same to be subject to the foregoing exceptions for an
Executive Committee but otherwise as determined by vote of the Board of
Directors.
ARTICLE XII.
Meetings of Directors and Quorum.
Regular Meetings of the Board of Directors may be held at such places
within or without the Commonwealth of Virginia and at such times as the Board by
vote may determine from time to time, and if so determined no notice thereof
need be given. Special Meetings of the Board of Directors may be held at any
time or place either within or without the Commonwealth of Virginia, whenever
called by the Chairman of the Board of Directors, the President, any Vice
President, the Corporate Secretary, or three or more Directors, notice thereof
being given to each Director by the Corporate Secretary or an Assistant
Corporate Secretary, the Directors or the officer calling the meeting, or at any
time without formal notice provided all the Directors are present or those not
present waive notice thereof. Notice of Special Meetings, stating the time and
place thereof, shall be given by mailing the same to each Director at his
residence or business address at least two days before the meeting, or by
delivering the same to him personally or telephoning the same to him at his
residence or business address at least one day before the meeting, unless, in
case of exigency, the Chairman of the Board of Directors or any Chief Executive
Officer shall prescribe a shorter notice to be given personally or by
telephoning each Director at his residence or business address.
A written waiver of notice signed by the Director entitled to such
notice, whether before or after the date of the meeting, shall be equivalent
to the giving of such notice. A Director who attends or participates in a
meeting shall be deemed to have waived timely and proper notice of the meeting
unless the Director, at the beginning of the meeting or promptly upon his
arrival, objects to holding the meeting or transacting business at the meeting
and does not thereafter vote for or assent to action taken at the meeting.
A majority of the number of Directors fixed at the time in accordance
with the Bylaws shall constitute a quorum for the transaction of business, but
a lesser number may adjourn any meeting from time to time, and the meeting may
be held without further notice. The foregoing provision is, however, subject
to Article III of the Articles of Incorporation. When a quorum is present at
any meeting, a majority of the members present thereat shall decide any
question brought before such meeting, except as otherwise provided by law, by
the Articles of Incorporation or by these Bylaws.
ARTICLE XIII.
Action Without a Meeting.
Any action required to be taken at a meeting of the Directors, or any
action which may be taken at a meeting of the Directors or of a Committee, may
be taken without a meeting if a consent in writing (which may be in any number
of counterparts), setting forth the action so to be taken, shall be signed by
all of the Directors, or all of the members of the Committee, as the case may
be, either before or after such action is taken. Such consent shall have the
same force and effect as a unanimous vote.
<PAGE>
ARTICLE XIV.
Officers.
The Board of Directors shall appoint such officers of the Corporation with
such titles and duties as the Board in its discretion may determine. The
Chairman of the Board of Directors and the Vice Chairman, if one is elected,
shall be officers unless they are not full-time employees of the Corporation.
The officers and the Chairman of the Board shall be elected or appointed by the
Board of Directors after each election of Directors by the Shareholders, and a
meeting of the Board of Directors may be held without notice for the purpose of
electing officers following the Annual Meeting of the Shareholders. The
foregoing shall not preclude the Board from electing individual officers at any
regular or special meeting of the Board of Directors.
The Board of Directors may appoint one or more Chief Executive Officers,
Presidents, Chief Operating Officers, Chief Financial Officers, Treasurers and
Controllers and other officers with such titles, powers and duties with respect
to the Corporation and its operating divisions as the Board of Directors may
prescribe. Except as otherwise prescribed by the Board of Directors, such
officers shall have the powers and duties commonly incident to their offices.
Where more than one such Chief Executive Officer or Chief Financial Officer has
been so appointed, each shall be authorized to execute documents on behalf of
the Corporation as its chief executive officer or chief financial officer, as
the case may be, for purposes of filing the same with governmental or regulatory
authorities including, without limitation, the State Corporation Commission of
the Commonwealth of Virginia and the Securities and Exchange Commission.
The officers appointed by the Board of Directors shall include a Corporate
Secretary who shall perform the duties set forth in Article XVIII and such other
duties as are commonly incident to such office.
The Board of Directors, in its discretion, may appoint one or more Vice
Presidents and one or more assistant officers to any of the officers it appoints
with the exception of any Chief Executive Officers, Presidents, Chief Operating
Officers or Chief Financial Officers, and may appoint such other officers or
agents as it may deem advisable and prescribe their powers and duties. Unless
otherwise provided by the Board, any such officer or agent shall have the powers
and duties commonly incident to his office.
Except as otherwise provided by the Board of Directors, each Chief
Executive Officer, President and Vice President shall have authority to sign
certificates of stock, bonds, deeds and contracts and to delegate such authority
in such manner as may be approved by a Chief Executive Officer or President.
ARTICLE XV.
Eligibility of Officers.
The Chairman of the Board of Directors, any Vice Chairman of the Board of
Directors, any Chief Executive Officer and any President of the Corporation
shall be Directors. The office of Chief Executive Officer may be held by a
person who does not also hold the office of President. In the case where a
Chief Executive Officer who is not a President has been appointed by the Board
of Directors, any President also appointed shall not be chief executive officer,
but shall have such other powers and responsibilities as are prescribed by the
Board of Directors and these Bylaws. Any person may hold more than one office
provided, however, that none of the Corporate Secretary, any Treasurer, any
Chief Financial Officer or any Controller shall at the same time hold the office
of Chairman of the Board of Directors or any office as Chief Executive Officer
or President.
ARTICLE XVI.
Chairman of the Board of Directors and Vice Chairman.
The Chairman of the Board of Directors shall preside at the meetings of
the Board of Directors. He may call meetings of the Board of Directors and of
any Committee thereof whenever he deems it necessary. He shall call to order,
and act as chairman of, all meetings of the Shareholders and prescribe rules
of procedure therefor. He shall perform the duties commonly incident to his
office and such other duties as the Board of Directors shall designate from
time to time.
<PAGE>
In the absence of the Chairman of the Board of Directors, the Vice Chairman
of the Board of Directors, if one has been elected, shall perform his duties.
The Vice Chairman, if any, shall also perform the duties commonly incident to
his office and such other duties as the Board of Directors shall designate from
time to time. In the absence of the Vice Chairman of the Board of Directors, or
if no Vice Chairman has been elected, his duties shall be performed by a Chief
Executive Officer of the Corporation. If more than one Chief Executive Officer
has been appointed, the Chairman shall from time to time designate the order in
which such chief executive officers shall serve in the event of such absences.
ARTICLE XVII.
Presidents; Vice Presidents
---------------------------
In the event of the absence or disability of a Chief Executive Officer, the
duties and powers of the Chief Executive Officer shall be performed and
exercised by the President; and in the event of the absence or disability of a
President, the duties and powers of the President shall be performed and
exercised by the Vice President designated to so act by the line of succession
provided by the Board of Directors, or if not so provided by the Board of
Directors, in accordance with the order of priority set forth below. Where the
absent or disabled Chief Executive Officer or President has been appointed for a
division, the officers in the line of succession referred to in this Article
shall, unless otherwise provided by the Board of Directors, be officers in the
corresponding division. The order of priority among Vice Presidents for
succession referred to above is: (a) The Executive Vice Presidents in order of
their seniority of first election to such office, or if two or more shall have
been first elected to such office on the same day, in order of their seniority
in age; (b) The Senior Vice Presidents in order of their seniority of first
election to such office, or if two or more shall have been first elected to such
office on the same day, in order of their seniority in age; (c) All other Vice
Presidents at the principal office of the Corporation in the order of their
seniority of first election to such office or if two or more shall have been
first elected to such office on the same day, the order of their seniority in
age; and (d) Any other persons that are designated on a list that shall have
been approved by the Board of Directors, such persons to be taken in such order
of priority and subject to such conditions as may be provided in the resolution
approving the list.
ARTICLE XVIII.
Corporate Secretary.
The Corporate Secretary shall keep accurate minutes of all meetings of the
Shareholders, the Board of Directors and the Executive Committee, shall perform
the duties commonly incident to his office, and shall perform such other duties
and have such other powers as the Board of Directors shall designate from time
to time. The Corporate Secretary shall have power, together with a Chief
Executive Officer, a President or a Vice President, to sign certificates for
shares of stock. In his absence an Assistant Corporate Secretary shall perform
his duties.
ARTICLE XIX.
Treasurer.
The Treasurer, subject to the order of the Board of Directors, shall have
the care and custody of the money, funds and securities of the Corporation and
shall have and exercise under the supervision of the Board of Directors, all
the powers and duties commonly incident to his office. He shall deposit all
funds of the Corporation in such bank or banks, trust company or trust
companies or with such firm or firms doing a banking business, as the
Directors shall designate. He may endorse for deposit or collection all
checks, notes, et cetera, payable to the Corporation or to its order, may
accept drafts on behalf of the Corporation, and, together with the President
or a Vice President, may sign certificates for shares of stock.
All checks, drafts, notes and other obligations for the payment of money
except bonds, debentures and notes issued under an Indenture shall be signed
either manually or, if and to the extent authorized by the Board of Directors,
through facsimile, by the Treasurer or an Assistant Treasurer or such other
officer or agent as the Board of Directors shall authorize. Checks for the
total amount of any payroll may be drawn in accordance with the foregoing
<PAGE>
provisions and deposited in a special fund. Checks upon this fund may be
drawn by such person as the Treasurer shall designate.
Where a Treasurer has been appointed to serve for a division of the
Corporation, he shall exercise the foregoing power and duties with respect to
such division.
ARTICLE XX.
Controller.
The Controller shall keep accurate books of account of the Corporation's
transactions and shall perform such other duties and have such other powers as
the Board of Directors shall designate from time to time.
ARTICLE XXI.
Resignation and Removals.
Any Director may resign at any time by giving written notice to the Board
of Directors, to the Chairman of the Board of Directors, to a Chief Executive
Officer or to the Corporate Secretary, and any member of any Committee may
resign by giving written notice either as aforesaid or to the Committee of which
he is a member or the chairman thereof. Any officer may resign at any time by
delivering notice to the Corporation. Any such resignation shall take effect at
the time specified therein or, if the time be not specified, upon receipt
thereof; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
The Shareholders, at any meeting called for the purpose, by vote of a
majority of the stock having voting power issued and outstanding, may remove
any Director from office with or without cause and elect his successor; but
this provision is subject to Article III of the Articles of Incorporation, if
and whenever the same may become applicable by the accrual of voting rights to
the Preferred Stock. The Board of Directors, by vote of a majority of the
entire Board, may remove any officer, agent or member of any Committees
elected or appointed by them, with or without cause, from office.
ARTICLE XXII.
Vacancies.
If the office of any officer or agent, one or more, becomes vacant by
reason of death, disability, resignation, removal, disqualification or
otherwise, the Directors at the time in office, may, by a majority vote at a
meeting at which a quorum is present, choose a successor or successors who
shall hold office for the unexpired term or until his successor is duly
elected and qualified or his position is eliminated.
ARTICLE XXIII.
Certificates for Shares.
Every Shareholder shall be entitled to a certificate or certificates for
shares of record owned by him in such form as may be prescribed by the Board of
Directors, duly numbered and setting forth the number and kind of shares to
which such Shareholder is entitled. Such certificates shall be signed by a Chief
Executive Officer, a President or a Vice President and by a Treasurer or an
Assistant Treasurer or the Corporate Secretary or an Assistant Corporate
Secretary. The Board of Directors may also appoint one or more Transfer Agents
and/or Registrars for its stock of any class or classes and may require stock
certificates to be countersigned and/or registered by one or more of such
Transfer Agents and/or Registrars. If certificates for shares are signed by a
Transfer Agent or by a Registrar, the signatures thereon of the President or a
Vice President and the Treasurer or an Assistant Treasurer or the Corporate
Secretary or an Assistant Corporate Secretary may be facsimiles, engraved or
printed. Any provisions of these Bylaws with reference to the signing of stock
certificates shall include, in cases above permitted, such facsimiles. In case
any officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on, any such certificate or certificates shall
cease to
<PAGE>
be such officer or officers of the Corporation, whether because of death,
resignation or otherwise, before such certificate or certificates shall have
been delivered by the Corporation, such certificate or certificates may
nevertheless be issued and delivered as though the person or persons who
signed such certificate or certificates or whose facsimile signature or
signatures shall have been used thereon had not ceased to be such officer or
officers of the Corporation.
Notwithstanding the foregoing, the Board of Directors may authorize the issue
of some or all of the shares of any or all of its classes or series without
certificates. Within a reasonable time after the issue or transfer of shares
without certificates, the Corporation shall send the Shareholder a written
statement of the information required on certificates by the Virginia Stock
Corporation Act or other applicable law.
ARTICLE XXIV.
Transfer of Shares.
Shares may be transferred by delivery of the certificate accompanied
either by an assignment in writing on the back of the certificate or by a
written power of attorney to sell, assign and transfer the same on the books
of the Corporation, signed by the person appearing by the certificate to be
the owner of the shares represented thereby, and shall be transferable on the
books of the Corporation upon surrender thereof so assigned or endorsed. The
person registered on the books of the Corporation as the owner of any shares
shall be entitled exclusively as the owner of such shares to receive dividends
and to vote in respect thereof. It shall be the duty of every Shareholder to
notify the Corporation of his address.
ARTICLE XXV.
Record Date.
For the purpose of determining the Shareholders entitled to notice of or
to vote at any meeting of Shareholders, or any adjournment thereof, or
entitled to receive payment of any dividend, or in order to make a
determination of Shareholders for any other proper purpose, the Board of
Directors may fix in advance a date as the record date for any such
determination of Shareholders, provided that such date shall not in any case
be more than 70 days prior to the date on which the particular action,
requiring such determination of Shareholders, is to be taken. If no record
date shall be fixed for the determination of Shareholders entitled to notice
of or to vote at a meeting of Shareholders, or for the determination of the
Shareholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of Shareholders in such cases.
A determination of Shareholders entitled to notice of or to vote at a
Shareholders' meeting is effective for any adjournment of the meeting unless
the Board of Directors fixes a new record date, which it shall do if the
meeting is adjourned to a date more than 120 days after the date fixed for the
original meeting.
ARTICLE XXVI.
Voting of Shares Held.
Unless the Board of Directors shall otherwise provide, the Chairman of the
Board of Directors, any Chief Executive Officer, President or Vice President, or
the Corporate Secretary may from time to time appoint one or more attorneys-in-
fact or agents of the Corporation, in the name and on behalf of the Corporation,
to cast the votes that the Corporation may be entitled to cast as a shareholder
or otherwise in any other corporation, any of whose stock or securities of which
may be held by the Corporation, at meetings of the holders of any such other
corporations, or to consent in writing to any action by any such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such votes or giving such consent, and may execute or cause to
be executed on behalf of the Corporation such written proxies, consents, waivers
or other instruments as he may deem necessary or proper in the
<PAGE>
premises; or either the Chairman of the Board of Directors, a Chief Executive
officer, a President or the Corporate Secretary may himself attend any meeting
of the shareholders of any such other corporation and there at vote or exercise
any or all other powers of the Corporation as the shareholder of such other
corporation.
ARTICLE XXVII.
Bonds, Debentures and Notes Issued Under an Indenture.
All bonds, debentures and notes issued under an Indenture shall be signed
by a Chief Executive Officer, President or any Vice President or such other
officer or agent as the Board of Directors shall authorize and by the Corporate
Secretary or any Assistant Corporate Secretary or by a Treasurer or any
Assistant Treasurer or such other officer or agent as the Board of Directors
shall authorize.
The signature of any authorized officer of the Corporation on bonds and
debentures authenticated by a corporate trustee may be made manually or by
facsimile.
ARTICLE XXVIII.
Amendments.
All Bylaws shall be subject to alteration or repeal, and new Bylaws may
be made by the affirmative vote of a majority of the Directors. The
Shareholders entitled to vote, however, shall have the power to rescind,
amend, alter or repeal the Bylaws and to enact Bylaws which, if expressly so
provided, may not be amended, altered or repealed by the Board of Directors.
ARTICLE XXIX.
Emergency Bylaws.
The Emergency Bylaws provided in this Article XXIX shall be operative
during any emergency notwithstanding any different provision in the preceding
Articles of the Bylaws or in the Articles of Incorporation of the Corporation
or in the Virginia Stock Corporation Act. An emergency exists if a quorum of
the Corporation's Board of Directors cannot readily be assembled because of
some catastrophic event. To the extent not inconsistent with these Emergency
Bylaws, the Bylaws provided in the preceding Articles shall remain in effect
during such emergency and upon the termination of such emergency the Emergency
Bylaws shall cease to be operative unless and until another such emergency
shall occur.
During any such emergency:
(a) Any meeting of the Board of Directors may be called by any officer of
the Corporation or by any Director. Notice shall be given by the person
calling the meeting. The notice shall specify the place of the meeting, which
shall be the principal office of the Corporation at the time if feasible, but
otherwise shall be any other place specified in the notice. The notice shall
also specify the time of the meeting. Notice may be given only to such of the
Directors as it may be feasible to reach at the time and by such means as may
be feasible at the time, including publication or radio. If given by mail,
messenger or telephone, the notice shall be addressed to the Director's
address or such other place as the person giving the notice shall deem most
suitable. Notice shall be similarly given, to the extent feasible, to the
other persons referred to in (b) below. Notice shall be given at least two
days before the meeting if feasible in the judgment of the person giving the
notice, but otherwise shall be given any time before the meeting as the person
giving the notice shall deem necessary.
(b) At any meeting of the Board of Directors, a quorum shall consist of a
majority of the number of Directors fixed at the time by Article IX of the
Bylaws. If the Directors present at any particular meeting shall be fewer
than the number required for such quorum, other persons present, as determined
by the following provisions and in the following order of priority, up to the
number necessary to make up such quorum, shall be deemed Directors for such
particular meeting:
<PAGE>
(i) The Executive Vice Presidents;
(ii) The Senior Vice Presidents in the order of their seniority of
first election to such office, or if two or more shall have been first
elected to such office on the same day, in the order of their
seniority in age;
(iii) All other Vice Presidents at the principal office of the
Corporation in the order of their seniority of first election to such
office, or if two or more shall have been first elected to such office
on the same day, in the order of their seniority in age; and
(iv) Any other persons that are designated on a list that shall have
been approved by the Board of Directors before the emergency, such
persons to be taken in such order of priority and subject to such
conditions as may be provided in the resolution approving the list.
(c) The Board of Directors, during as well as before any such emergency,
may provide, and from time to time modify, lines of succession in the event
that during such an emergency any or all officers or agents of the Corporation
for any reason shall be rendered incapable of discharging their duties.
(d) The Board of Directors, before and during any such emergency, may,
effective in the emergency, change the principal office or designate several
alternative principal offices or regional offices, or authorize the officers
so to do.
No officer, Director or employee shall be liable for any action taken in
good faith in accordance with these Emergency Bylaws.
These Emergency Bylaws shall be subject to repeal or change by further
action of the Board of Directors or by action of the Shareholders, except that
no such repeal or change shall modify the provisions of the next preceding
paragraph with regard to action or inaction prior to the time of such repeal
or change. Any such amendment of these Emergency Bylaws may make any further
or different provision that may be practical and necessary for the
circumstances of the emergency.
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