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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 8, 1998
Dominion Resources, Inc.
_______________________________________________________________
(Exact name of registrant as specified in its charter)
Virginia 1-8489 54-1229715
(State of other juris- (Commission (IRS Employer
diction of Incorporation) File Number) Identification No.)
901 East Byrd Street, Richmond, Virginia 23219-6111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 775-5700
___________________________________________________________________
(Former name or former address if changed since last report.)
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ITEM 5. OTHER EVENTS
Dominion Resources, Inc.'s largest subsidiary, Virginia Electric
and Power Company (Virginia Power) has reached a proposed
settlement of the consolidated proceeding pending before the
Virginia State Corporation Commission (the Virginia Commission)
concerned with Virginia Power's 1995 Annual Informational Filing.
The settlement defines a new regulatory framework for Virginia
Power's transition to electric competition. The major provisions
of the settlement are as follows:
A two-phased base rate reduction: $100 million per annum
beginning March 1, 1998 with one additional $50 million
per annum reduction beginning March 1, 1999
A base rate freeze until March 1, 2002 unless a change is
necessary to protect the legitimate interests of
Virginia Power, its shareholders or ratepayers
An immediate, one-time refund of $150 million for the period
March 1, 1997 through February 28, 1998
A write-off of $220 million in regulatory assets
An incentive mechanism until March 1, 2002 for earnings
above the following return on equity (ROE) benchmarks:
1998 10.5%
After 1998 30-Yr Treasury + 450 basis points
All Virginia jurisdiction earnings up to the ROE
benchmark flow to shareholders.
Any earnings above the benchmark are allocated 1/3 to
shareholders, 2/3 to accelerated amortization of
regulatory assets; except that all earnings above the
ROE benchmark plus 270 basis points (initially 13.2%)
go to accelerated amortization of regulatory assets.
For financial reporting purposes, Virginia Power plans to write-
off $220 million of regulatory assets as a one-time impact to
earnings in 1998 - a decrease of $101 million (after tax) in net
income ($220 million net of $65 million accelerated cost recovery
reserve balance). Other one-time items in 1998 are expected to
include the rate refund impact which represents a $97 million
(after-tax) reduction to net income, offset by an adjustment of
$17 million (after-tax) related to depreciation and
decommissioning expense.
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The proposed settlement, initiated by Virginia Power, was reached
on June 8, 1998, with all major parties involved in the case,
including the Staff of the Virginia State Corporation Commission,
the office of the Virginia Attorney General, and the Virginia
Committee for Fair Utility Rates . The full text of the proposed
settlement is filed herewith as Exhibit 99 to this Form 8-K. A
Public Hearing is currently scheduled for July 10, 1998. The
parties to the settlement have requested the Virginia Commission
to consider the proposed settlement at that time.
Forward-Looking Information
This report includes discussion of forward-looking information
concerning Dominion Resources, Inc. and its subsidiaries and the
effect of the settlement on our future financial performance.
Statements based on management's expectations, beliefs, estimates
and assumptions are included. Actual results or outcomes could
differ materially from those expressed. Some important factors
which could cause material differences include additional
regulatory action, unanticipated changes in circumstances which
require that the settlement terms be changed or further addressed
and other matters detailed in our filings with the Securities and
Exchange Commission, including our annual and quarterly reports.
We do not undertake any obligation to publicly update or revise
any forward-looking statements, whether as a result of changes in
actual results, changes in assumptions or any other factors.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibits
99 - Motion For Consideration of Stipulation and Changes in
Procedural Schedule and Stipulation, dated June 8, 1998
(filed herewith).
SIGNATURES
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.
DOMINION RESOURCES, INC.
Registrant
J. L. TRUEHEART
J. L. Trueheart
Vice President and Controller
(Principal Accounting Officer)
Date: June 9, 1998
Exhibit 99
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
APPLICATION OF
VIRGINIA ELECTRIC AND POWER CASE NO. PUE960036
COMPANY
1995 Annual Informational Filing
COMMONWEALTH OF VIRGINIA
At the relation of the
STATE CORPORATION COMMISSION CASE NO. PUE960296
Ex Parte: Investigation of Electric Utility
Industry Restructuring - Virginia
Electric and Power Company
Stipulation
This Stipulation sets forth the agreement among Virginia
Electric and Power Company ("Virginia Power" or "Company"), the
Staff of the State Corporation Commission ("Staff"), the Division
of Consumer Counsel of the Office of the Attorney General
("Attorney General"), the Virginia Committee for Fair Utility
Rates ("VCFUR"), and the Apartment and Office Building
Association of Metropolitan Washington ("AOBA"), collectively
referred to as "Stipulating Participants", as to an appropriate
resolution of certain rate issues in the above-captioned
proceedings. As to Case No. PUE960036, these issues are included
in Virginia Power's 1995 Annual Informational Filing ("AIF")
dated June 13, 1996, and the Staff Report filed on March 28,
1997. As to Case No. PUE960296 ("1996 Rate Case"), the issues
are included in the Company's Application, accompanying Schedules
and direct testimony filed on March 24, 1997, the testimony filed
on December 23, 1997, on behalf of the Attorney General, VCFUR
and AOBA and the Staff's testimony filed on March 24, 1998. The
Stipulating Participants believe that this Stipulation of these
issues will result in a fair and reasonable resolution of certain
rate issues in the 1995 AIF and the 1996 Rate Case (including all
issues that would be raised in a 1996 AIF); will provide for an
appropriate refund to Virginia jurisdictional customers and a
just and reasonable level of rates on a going-forward basis; will
allow the Stipulating Participants to re-direct their resources
to the study and resolution of issues related to the transition
to a competitive electric market as provided in recently enacted
Virginia House Bill No. 1172, Senate Joint Resolution No. 91, and
the Commission's Order Establishing Investigation in Case No.
PUE980138; and will efficiently and expeditiously reduce
significantly the scope of the above-captioned proceedings.
The Stipulating Participants will, as soon as possible after
execution of this Stipulation, file it with the Commission,
together with a motion of the Staff requesting the Commission to
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(a) consider the Stipulation and such other matters as the
Commission may determine at a hearing (presently scheduled for
July 10, 1998 (the "Hearing")), subject to such changes in
procedural dates and in the hearing date as the Commission may
direct, (b) retain for further consideration in this docket or to
transfer to a separate docket any issues that have been properly
raised in this docket and that are not resolved by the
Stipulation, and (c) enter an order prescribing appropriate
procedures for other parties to comment and be heard upon the
issues presented in the Stipulation and for the Commission's
consideration of the Stipulation and such other issues as may be
considered at the Hearing.
The rate plan proposed herein shall be a five-year plan
extending from March 1, 1997, through February 28, 2002 ("Rate
Period"). A summary of the rate refund, rate reductions, and
write-offs by Virginia Power is as follows:
Refund: $150,000,000 for the 12 months ended February 28,
1998 (plus interest)
Rate Reduction: $100,000,000, effective March 1, 1998 (and applicable
refund plus interest)
Additional Rate
Reduction: $50,000,000, effective March 1, 1999
Write-offs: $220,000,000 minimum, with additional write-offs
depending on earnings
The stipulated agreements are as follows:
1. Virginia Power shall refund to its Virginia
jurisdictional customers an amount consisting of (a) a
one-time refund of excess revenues based on an annual
jurisdictional base revenue reduction of $150 million
for the period March 1, 1997, through February 28,
1998, (b) a one-time pro-rata refund associated with
an annual base revenue reduction of $100 million for
the period March 1, 1998, through February 28, 1999,
and (c) interest on these amounts until paid as
specified in Exhibit 1 to this Stipulation,
incorporated herein by reference. Payment shall be
completed 90 days from the date of the order approving
this stipulation. The payment to each customer shall
be based on that customer's billing history from March
1, 1997, through the effective date of the Commission's
final order approving this Stipulation.
2. Virginia Power shall reduce its base rates to its
Virginia jurisdictional customers by $150 million
pursuant to the following schedule: first, for service
rendered on and after March 1, 1998, rates will be
reduced by $100 million on an annual basis (and
appropriate refunds with interest shall be made); and
second, for service rendered on and after March 1,
1999, rates will be reduced by an additional $50
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million on an annual basis. The $150 refund and the
$100 million and $50 million rate reductions shall be
allocated among classes of customers as set forth on
Exhibit 2 to this Stipulation, incorporated herein by
reference.
3. Subject to the conditions set forth in this paragraph,
it is intended that the base rates approved herein
shall remain in effect during the Rate Period except to
effect the $50 million rate reduction on March 1, 1999.
If, however, during the Rate Period developments,
changes of circumstance or other factors make it
necessary for the protection of the legitimate
interests of the Company's customers or its
shareholders, the Commission may, on its own motion or
on motion of any of the Stipulating Participants or any
other interested party, institute a proceeding to
consider and to order such increases, decreases, or
other changes in rates necessary for the protection of
those interests. Nothing in this Stipulation shall
impair the Commission's ability to exercise its lawful
jurisdiction or carry out its lawful responsibilities
or limit the Staff in the performance of its duties and
responsibilities. Except as provided in the
Stipulation, all regulatory requirements shall remain
in effect.
4. By the end of the Rate Period, March 1, 2002, Virginia
Power shall amortize against earnings $220 million of
deferred expenses (consisting of $60 million of
deferred capacity expenses and $160 million of
previously approved generation-related (except as
otherwise specified herein) deferred costs ("Regulatory
Assets") regardless of actual earnings during the Rate
Period. This amount is in addition to those amounts of
Regulatory Assets now being amortized and collected in
current rates. The schedule for recognition of the
$220 million of write-offs of Regulatory Assets for
ratemaking purposes shall be in accordance with an
"earnings test" as described in paragraph 5. If,
however, such earnings tests result in total Regulatory
Asset write-offs of less than $220 million by the end
of the Rate Period, then an additional amount of
Regulatory Assets shall be written off in the final
year of the Rate Period to assure that a total of $220
million shall be written off by the end of the Rate
Period. If earnings pursuant to the earnings tests
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during the Rate Period are such that an amount greater
than $220 million of Regulatory Assets can be written
off, then such greater amount shall be written off.
Subject to the earnings test for each year, the
Virginia jurisdictional balances of Regulatory Assets
are to be written off in the following order: the total
such balances of (a) deferred capacity expenses, (b)
unamortized losses on reacquired debt and preferred
stock, and (c) the generation-related portions of the
balances of (i) Surry and North Anna steam generator
removal costs, (ii) asbestos removal costs, (iii) North
Anna electric generator removal costs, (iv) 40 year
versus 20 year amortization of Other Post Employment
Benefit ("OPEB") transition obligations, (v) nuclear
design basis documentation costs, (vi) depreciation
reserve deficiency, and (vii) Department of Energy
decontamination and decommissioning. The system
balances of the aforesaid Regulatory Assets as of
December 31, 1996 are set forth on Exhibit 3 to this
Stipulation, incorporated herein by reference. If all
book balances of Virginia jurisdictional generation-
related Regulatory Assets are written off without
exhausting the earnings available for such write-offs,
the remaining earnings shall, with the concurrence of
the Staff, be used to write off book balances of other
Regulatory Assets. No new regulatory asset or other
new deferred non-fuel costs shall be created during the
Rate Period, except that, in the event the Financial
Accounting Standards Board ("FASB") changes the
accounting requirements related to obligations
associated with the retirement of long-lived assets,
including nuclear decommissioning (1), the Company reserves
the right to seek approval from the Staff to create any
regulatory asset that would be appropriate as part of
adopting such new requirements. Except as provided in
paragraph 6, the Stipulating Participants agree that
nothing herein shall be deemed to limit any position
regarding stranded costs or benefits issues.
(1) This issue is currently under consideration in a FASB Agenda Project
entitled "Obligations Associated with the Retirement of Long-Lived Assets".
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5. The annual earnings test referred to in paragraph 4
shall be applied using the same methodology and
comparable adjustments adopted by the Commission in
Virginia Power's last base rate proceeding, Case No.
PUE920041. The earnings test shall include only those
regulated revenues and related expenses and investments
incurred in furnishing electric utility service to
Virginia jurisdictional customers. Beginning in 1999,
Virginia Power shall submit by March 31 its calculation
of such an earnings test for the preceding calendar
year during the Rate Period. The calculation of the
earnings test for calendar year 1997 shall be filed
within 90 days from the date that the Commission
approves this Stipulation. The benchmark earnings in
the earnings test shall be a return on equity ("ROE")
of 10.5%, and the earnings to be tested against that
benchmark shall be the ROE actually earned in the
preceding calendar year, after applying regulatory
adjustments similar in nature to those adjustments
adopted in Case No. PUE920041. These adjustments
should reflect differences between financial reporting
and Virginia regulatory accounting, the removal of
costs excluded from the cost of service for Virginia
ratemaking purposes, and adjustments necessary to
reflect revenues at the actual pro-rated approved
revenue level for the earnings test period. There
shall be two steps in the application of the earnings
test: first, an actual ROE level shall be determined
before any write-off of any portion (other than
scheduled amortization) of the Regulatory Assets
specified in paragraph 4, and second, if the actual ROE
exceeds 10.5%, the difference between that actual ROE
above 10.5% and a 10.5% ROE shall be allocated between
the amortization of Regulatory Assets and shareholder
return. Earnings between 10.5% and 13.2% shall be
allocated two-thirds to amortization of Regulatory
Assets as set forth in paragraph 4 and one-third to
shareholder return, and earnings above 13.2% shall be
applied 100% to amortization of Regulatory Assets.
Examples of the effect of this formula on Virginia
Power's ROE follow:
If earnings test ROE is 10.50%
No write-off; ROE remains 10.50%
If earnings test ROE is 11.00%
ROE after write-off is 10.67%
If earnings test ROE is 11.50%
ROE after write-off is 10.83%
If earnings test ROE is 12.00%
ROE after write-off is 11.00%
If earnings test ROE is 12.50%
ROE after write-off is 11.17%
If earnings test ROE is 13.00%
ROE after write-off is 11.33%
If earnings test ROE is 13.20% or above
ROE after write-off is 11.40%
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The benchmark ROEs of 10.5% and 13.2% used in the
earnings test shall be adjusted each year (beginning for
1999) as follows:
(a) The low-end benchmark (presently
10.5%) shall be changed to an ROE equal to the
sum of (i) the average yield on 30-year Treasury
securities for the most recent preceding
September-November period, and (ii) 450 basis
points; and
(b) The high-end benchmark (presently
13.2%) shall be an ROE equal to the new low-end
benchmark for each year plus 270 basis points.
This formula is applicable only to the earnings test
prescribed in this Stipulation, and it shall not
necessarily constitute evidence or proof of what is a
reasonable ROE at any time.
6. As of March 1, 2002, Virginia Power's Virginia
jurisdictional costs for purposes of determining future
rates and charges to customers shall have been reduced
by the write-off of Regulatory Assets prescribed
herein, which shall be at least $220 million. As a
result, Virginia Power's future rates and charges shall
not include any of the costs eliminated by such write-
offs. The Commission shall ensure that jurisdictional
customers in the future receive the benefit of such
write-offs in future rates and charges.
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7. Virginia Power shall terminate the deferral of capacity
expenses effective as of March 1, 1998. Virginia
Power's depreciation and nuclear decommissioning rates
in effect as of February 28, 1997 shall remain in
effect through the duration of the Rate Period.
8. Virginia Power shall maintain the overall reliability
of its electric service at levels no less than the
overall levels it has achieved in the past decade.
Virginia Power will provide quarterly service
reliability reports (annual data for an historical five
year period) indicating its System Average Interruption
Duration Index (SAIDI) and the System Average
Interruption Frequency Index (SAIFI), and these indices
shall be determined and reported both including and
excluding major storm events. The Company also commits
to provide such other data as required by the Staff,
including information on transmission and generation
reliability. Virginia Power will meet with the
Commission every six months to review such reports and
other operational information. If the Commission
promulgates new reliability standards for electric
utilities, they shall be applicable to Virginia Power.
9. The right to apply for new alternative rate designs or
experiments, or special rates, contracts or incentives
to individual customers or classes of customers, as
allowed under law and implementing Commission
regulations, shall continue during the Rate Period.
10. The Stipulating Participants recognize that this
Stipulation, if adopted by the Commission, would
represent a full and fair resolution of certain rate
issues raised in Case Nos. PUE960036 and PUE960296. In
recognition of that, all matters addressed in this
Stipulation shall be deemed not to have been adopted or
rejected by the Commission and shall have no
precedential effect in subsequent proceedings.
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11. This Stipulation reflects a balancing of many important
interests put forward in these proceedings by the
Stipulating Participants. If the Commission does not
intend to approve all aspects of this Stipulation, then
the Stipulating Participants respectfully request that
the Commission (a) notify them of such intention and
(b) allow them [10] days to attempt to reach a modified
stipulation that addresses the Commission's concerns.
If no such modified stipulation is reached after [10]
days, then the Stipulating Participants, or any of
them, may withdraw their support of this Stipulation
and request a hearing on any issues raised in the above-
captioned proceedings.
Respectfully submitted,
STAFF OF STATE CORPORATION
COMMISSION OF VIRGINIA
JAMES C. DIMITRI
Title General Counsel
DIVISION OF CONSUMER COUNSEL OF THE
OFFICE OF THE ATTORNEY GENERAL
JUDITH WILLIAMS JAGDMANN
Title Deputy Attorney General
VIRGINIA COMMITTEE FOR FAIR UTILITY
RATES
EDWARD L. PETRINI
Title Vice President & General Counsel
APARTMENT AND OFFICE BUILDING
ASSOCIATION OF METROPOLITAN WASHINGTON
FRANN G. FRANCIS
Title V.P. & General Counsel
VIRGINIA ELECTRIC AND POWER COMPANY
THOMAS F. FARRELL
Title Executive Vice President & General Counsel
June 8, 1998
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James C. Dimitri
William H. Chambliss
State Corporation Commission
Tyler Building
1300 East Main Street
Richmond, VA 23219
Judith Williams Jagdmann
Thomas B. Nicholson
Office of the Attorney General
Division of Consumer Counsel
900 E. Main Street, 2nd Floor
Richmond, VA 23219
Louis R. Monacell
Edward L. Petrini
John F. Dudley
Christian & Barton, L.L.P.
Suite 1200
909 East Main Street
Richmond, VA 23219-3095
Frann G. Francis
Margaret O. Jeffers
Apartment and Office Building Association
of Metropolitan Washington
1050 17th Street, NW, Suite 300
Washington, DC 20036
Pamela Johnson
Virginia Electric and Power Company
P. O. Box 26666
Richmond, VA 23261-6666
Evans B. Brasfield
Richard D. Gary
Hunton & Williams
951 E. Byrd Street
Riverfront Plaza, East Tower
Richmond, VA 23219-4074
James C. Roberts
Edward L. Flippen
Mays & Valentine, L.L.P.
1111 E. Main Street
Richmond, VA 23219
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Exhibit 1
Provisions Governing Payment of Interest
(1) Interest upon the refunds specified in the Stipulation
of which this Exhibit is a part shall be computed from the date
payment of each monthly bill was due during the periods covered
by the refunds until the date refunds are made, at an average
prime rate for each calendar quarter. The applicable average
prime rate for each calendar quarter shall be the arithmetic
mean, to the nearest one hundredth of one percent, of the prime
rate values published in the Federal Reserve Bulletin or in the
Federal Reserve's Selected Interest Rates ("Selected Rates")
(Statistical Release G.13), for the three months of the preceding
calendar quarter.
(2) The interest required to be paid shall be compounded
quarterly.
(3) The refunds may be accomplished by credit to the
appropriate customer's account for current customers (each such
refund category being shown separately on each customer's bill).
Refunds to former customers shall be made by a check to the last
known address of such customers when the refund amount is $1 or
more. Virginia Power may offset the credit or refund to the
extent no dispute exists regarding the outstanding balances of
its past or current customers. To the extent that outstanding
balances of such customers are disputed, no offset shall be
permitted for the disputed portion. Virginia Power may retain
refunds owed to former customers when such refund amount is less
than $1; however, Virginia Power will prepare and maintain a list
detailing each of the former accounts for which refunds are less
than $1 and in the event such former customers contact Virginia
Power and request refunds, such refunds shall be made promptly.
All unclaimed refunds shall be handled in accordance with Va.
Code 55-210.6:2.
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Exhibit 2
Allocation of Refunds and Rate Reductions
The $150 million refund shall be allocated among classes of
customers as follows:
Residential $ 75,507,907
GS-1 $ 19,004,879
GS-2 $ 23,476,002
GS-3 $ 21,180,649
GS-4 $ 9,150,000
Churches $ 597,403
Lighting $ 1,083,160
TOTAL $ 150,000,000
The $100 million rate reduction effective March 1, 1998 shall be
allocated among classes of customers as follows:
Residential $ 50,338,604
GS-1 $ 12,669,919
GS-2 $ 15,650,668
GS-3 $ 14,120,433
GS-4 $ 6,100,000
Churches $ 398,269
Lighting $ 722,107
TOTAL $ 100,000,000
The $50 million rate reduction effective March 1, 1999 shall be
allocated among classes of customers as follows:
Residential $ 25,169,303
GS-1 $ 6,334,960
GS-2 $ 7,825,334
GS-3 $ 7,060,216
GS-4 $ 3,050,000
Churches $ 199,134
Lighting $ 361,053
TOTAL $ 50,000,000
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Exhibit 3
Regulatory Assets
System
(millions)
Regulatory Assets Balance
Total Balances:
Deferred Capacity Expense (balance @ 3/1/98) $ 61.1
Unamortized Losses on Reacquired Debt and $ 93.4
Preferred Stock (balance @ 12/31/96)
Generation-related Balances @ 12/31/96
Surry & North Anna Steam Generators $ 62.7
Asbestos Removal $ 12.3
North Anna Electric Generator $ 3.3
OPEB 20 year versus 40 year recovery $ 7.7
Nuclear Design Basis Documentation $ 44.3
Depreciation Reserve Deficiency $142.6
DOE Decontamination and Decommissioning $ 73.5
TOTAL $500.9
The foregoing amounts of regulatory assets as of December 31,
1996 do not represent the amounts to be written off pursuant to
the Stipulation of which this Exhibit is a part. The amounts to
be written off will be determined by the results of the earnings
tests prescribed by the Stipulation, the Virginia jurisdictional
allocation factors at the time of the write-offs, and the extent
to which the December 31, 1996 balances shall have been
previously amortized.
