# DOMINION ENERGY, INC (D) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from DOMINION ENERGY, INC's 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/715957/000156459022006589/d-10k_20211231.htm
Accession: 0001564590-22-006589
Filing date: 2022-02-24
Report date: 2021-12-31
Extracted from a substantive MD&A body after the formal Item 7 span was a TOC or reference stub.
Confidence: high

Company profile: /company/D/
All MD&A years: /company/D/mda/
Next year: /company/D/mda/fy2022/ (FY 2022)

Results of Operations

Presented below is a summary of Dominion Energy’s consolidated results:

[[GREPCENT_TABLE]]
[["Year Ended December 31,","","2021","","","$ Change","","","2020","","","$ Change","","","2019"],["(millions, except EPS)"],["Net income (loss) attributable to Dominion Energy","","$","3,288","","","$","3,689","","","$","(401",")","","$","(1,759",")","","$","1,358"],["Diluted EPS","","","3.98","","","","4.55","","","","(0.57",")","","","(2.19",")","","","1.62"]]
[[/GREPCENT_TABLE]]

Overview

2021 VS. 2020

Net income attributable to Dominion Energy increased $3.7 billion, primarily due to the absence of: charges associated with the cancellation of the Atlantic Coast Pipeline Project and related portions of the Supply Header Project which are presented in discontinued operations, the planned early retirements of certain electric generation facilities in Virginia, an impairment of interests in certain nonregulated solar generation facilities and the termination of a contract in connection with the sale of Fowler Ridge. In addition, there was an increase in net investment earnings on nuclear decommissioning trust funds, a decrease in charges associated with Virginia Power’s 2021 Triennial Review and a gain on the sale of the Q-Pipe Group to Southwest Gas. These increases were

61

partially offset by charges associated with the settlement of the South Carolina electric base rate case, increased unrealized losses on economic hedging activities and a net loss on the sales of non-wholly-owned nonregulated solar facilities.

Analysis of Consolidated Operations

Presented below are selected amounts related to Dominion Energy’s results of operations:

[[GREPCENT_TABLE]]
[["Year Ended December 31,","","2021","","","$ Change","","","2020","","","$ Change","","","2019"],["(millions)"],["Operating revenue","","$","13,964","","","$","(208",")","","$","14,172","","","$","(229",")","","$","14,401"],["Electric fuel and other energy-related purchases","","","2,368","","","","125","","","","2,243","","","","(642",")","","","2,885"],["Purchased electric capacity","","","70","","","","17","","","","53","","","","(35",")","","","88"],["Purchased gas","","","1,083","","","","194","","","","889","","","","(671",")","","","1,560"],["Other operations and maintenance","","","3,734","","","","49","","","","3,685","","","","(105",")","","","3,790"],["Depreciation, depletion and amortization","","","2,478","","","","146","","","","2,332","","","","49","","","","2,283"],["Other taxes","","","909","","","","38","","","","871","","","","(12",")","","","883"],["Impairment of assets and other charges","","","195","","","","(1,910",")","","","2,105","","","","585","","","","1,520"],["Loss (gain) on sales of assets","","","108","","","","169","","","","(61",")","","","91","","","","(152",")"],["Earnings from equity method investees","","","276","","","","236","","","","40","","","","32","","","","8"],["Other income","","","1,157","","","","464","","","","693","","","","(110",")","","","803"],["Interest and related charges","","","1,354","","","","(23",")","","","1,377","","","","(109",")","","","1,486"],["Income tax expense","","","425","","","","342","","","","83","","","","(126",")","","","209"],["Net income (loss) from discontinued operations including noncontrolling interests","","","641","","","","2,519","","","","(1,878",")","","","(2,594",")","","","716"],["Noncontrolling interests","","","26","","","","175","","","","(149",")","","","(167",")","","","18"]]
[[/GREPCENT_TABLE]]

An analysis of Dominion Energy’s results of operations follows:

2021 VS. 2020

Operating revenue decreased 1%, primarily reflecting:

[[GREPCENT_TABLE]]
[["\u2022","A $402 million decrease associated with market prices affecting Millstone, including economic hedging impacts of net realized and unrealized losses on freestanding derivatives ($495 million);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $356 million decrease for refunds to be provided to retail electric customers in Virginia associated with the settlement of the 2021 Triennial Review;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $151 million decrease from an unbilled revenue reduction at Virginia Power;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $80 million decrease as a result of the contribution of certain nonregulated natural gas retail energy contracts to Wrangler;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $62 million decrease associated with settlements of economic hedges of certain Virginia Power regulated electric sales; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $51 million decrease in PJM off-system sales."]]
[[/GREPCENT_TABLE]]

These decreases were partially offset by:

[[GREPCENT_TABLE]]
[["\u2022","A $390 million increase in the fuel cost component included in utility rates as a result of an increase in commodity costs associated with sales to gas utility customers ($239 million) and electric utility retail customers ($151 million);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $117 million increase from gas utility capital cost riders;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $75 million increase in sales to electric utility retail customers associated with growth;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $62 million increase in sales to electric utility customers associated with economic and other usage factors;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $52 million increase from the absence of planned outages at Millstone;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $51 million increase in sales to electric utility retail customers from an increase in heating degree days during the heating season ($71 million) partially offset by a decrease in cooling degree days during the cooling season ($20 million);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $26 million increase in sales to customers from non-jurisdictional solar generation facilities; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $22 million increase in sales to gas utility customers associated with growth."]]
[[/GREPCENT_TABLE]]

62

Electric fuel and other energy-related purchases increased 6%, primarily due to higher commodity costs for electric utilities ($151 million), partially offset by a decrease in PJM off-system sales ($51 million), which are offset in operating revenue and do not impact net income.

Purchased electric capacity increased 32%, primarily due to an increase in expense related to the annual PJM capacity performance market effective June 2021 ($24 million) and an increase in expense related to the annual PJM capacity performance market effective June 2020 ($17 million), partially offset by a decrease in expense associated with DESC’s electric utility operations ($24 million).

Purchased gas increased 22%, primarily due to an increase in commodity costs for gas utilities, which are offset in operating revenue and do not impact net income.

Other operations and maintenance increased 1%, primarily reflecting:

[[GREPCENT_TABLE]]
[["\u2022","A $117 million increase in salaries, wages and benefits, including $28 million of costs for employer-provided healthcare;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $44 million charge related to a revision in estimated recovery of spent nuclear fuel costs associated with the decommissioning of Kewaunee; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $32 million increase in storm damage and restoration costs in Virginia Power\u2019s service territory; partially offset by"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $58 million decrease in merger and integration-related costs associated with the SCANA Combination;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $44 million decrease in certain Virginia Power expenditures which are primarily recovered through state- and FERC-regulated rates and do not impact net income; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $26 million net decrease in outage costs as a result of a decrease in Millstone outage costs ($45 million) partially offset by an increase in Virginia Power outage costs ($19 million)."]]
[[/GREPCENT_TABLE]]

Depreciation, depletion and amortization increased 6%, primarily due to various projects being placed into service ($132 million) and an increase for amortization from the establishment of a regulatory asset associated with the 2021 Triennial Review ($61 million), partially offset by a decrease due to the impairment of certain nonregulated solar generation facilities in 2020 ($20 million).

Impairment of assets and other charges decreased 91%, primarily reflecting:

[[GREPCENT_TABLE]]
[["\u2022","The absence of a charge associated with the planned early retirements of certain electric generation facilities in Virginia ($747 million);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","The absence of a charge associated with certain nonregulated solar generation facilities ($665 million);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A benefit from the establishment of a regulatory asset associated with the early retirements of certain coal- and oil-fired generating units associated with the settlement of the 2021 Triennial Review ($549 million);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","The absence of a contract termination charge in connection with the sale of Fowler Ridge ($221 million);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","The absence of a charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to legislation enacted in November 2020 ($127 million); and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","The absence of dismantling costs associated with certain Virginia Power electric generation facilities ($54 million); partially offset by"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","Charges associated with the settlement of the South Carolina electric base rate case ($249 million);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to Virginia\u2019s 2021 budget process ($77 million);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A charge for corporate office lease termination ($62 million);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","An increase in charges for CCRO benefits provided to retail electric customers in Virginia associated with Virginia Power\u2019s 2021 Triennial Review ($58 million); and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A charge for the write-off of nonregulated retail software development assets ($20 million)."]]
[[/GREPCENT_TABLE]]

63

Loss on sales of assets increased $169 million, primarily due to a net loss on the sales of non-wholly-owned nonregulated solar facilities ($211 million) partially offset by an increase in gains on the sale of nonregulated retail energy marketing assets ($23 million).

Earnings from equity method investees increased $236 million, primarily due to accounting for Cove Point as an equity method investment for a full year following the closing of the GT&S Transaction in November 2020.

Other income increased 67%, primarily due to an increase in net investment gains on nuclear decommissioning trust funds ($237 million), the absence of a charge for social justice commitments ($80 million), an increase in non-service components of pension and other postretirement employee benefit plan credits ($77 million), the absence of charges associated with litigation acquired in the SCANA Combination ($25 million) and an increase in AFUDC associated with rate-regulated projects ($25 million), partially offset by charges associated with the settlement of the South Carolina electric base rate case ($18 million).

Interest and related charges decreased 2%, primarily due to the absence of borrowings in response to COVID-19 in 2020 ($42 million), the absence of charges associated with the early redemption of certain securities in the first quarter of 2020 ($31 million) and a benefit associated with the effective settlement of uncertain tax positions ($21 million), partially offset by decreased carrying costs associated with the recovery of CEP beginning January 2021 ($29 million), charges associated with the early redemption of certain securities in the third quarter of 2021 ($23 million) and lower unrealized gains in 2021 associated with freestanding derivatives ($13 million).

Income tax expense increased $342 million, primarily due to higher pre-tax income ($365 million), lower investment tax credits ($38 million), the absence of prior year benefits including reductions in consolidated state deferred income taxes associated with gas transmission and storage operations ($45 million) and adjustments finalizing the effects of changes in tax status of certain subsidiaries in connection with the Dominion Energy Gas Restructuring ($24 million). These increases are partially offset by a benefit associated with the effective settlement of uncertain tax positions ($38 million), the benefit of a state legislative change ($21 million) and the absence of prior year expense primarily associated with the impairment of nonregulated solar generating assets held in partnerships attributable to the noncontrolling interest ($55 million).

Net income from discontinued operations including noncontrolling interests increased $2.5 billion, primarily due to a decrease in charges associated with the Atlantic Coast Pipeline Project and related portions of the Supply Header Project ($2.1 billion) and a gain on the sale of Q-Pipe ($493 million), partially offset by the absence of operations sold in the GT&S Transaction ($56 million).

Noncontrolling interests increased $175 million, primarily due to the absence of impairments associated with certain nonregulated solar generation facilities ($267 million) partially offset by the closing of the GT&S Transaction in November 2020 ($106 million).

Outlook

Dominion Energy’s 2022 net income is expected to increase on a per share basis as compared to 2021 primarily from the following:

[[GREPCENT_TABLE]]
[["\u2022","The absence of charges associated with Virginia Power\u2019s 2021 Triennial Review;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","The absence of charges associated with the settlement of the South Carolina electric base rate case;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","The absence of a net loss on the sales of certain non-wholly-owned nonregulated solar facilities;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","The absence of charges associated with litigation acquired in the SCANA Combination; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","Construction and operation of growth projects in electric utility and gas distribution operations."]]
[[/GREPCENT_TABLE]]

These increases are expected to be partially offset by the following:

[[GREPCENT_TABLE]]
[["\u2022","The absence of operations of the Q-Pipe Group sold to Southwest Gas and associated gain on sale;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","The absence of a benefit from the establishment of a regulatory asset associated with the early retirements of certain coal- and oil-fired generating units associated with the 2021 Triennial Review and an increase from a full year of amortization of this regulatory asset; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","Share dilution."]]
[[/GREPCENT_TABLE]]

64

SEGMENT RESULTS OF OPERATIONS

Segment results include the impact of intersegment revenues and expenses, which may result in intersegment profit or loss. Presented below is a summary of contributions by Dominion Energy’s operating segments to net income (loss) attributable to Dominion Energy:

[[GREPCENT_TABLE]]
[["Year Ended December 31,","","2021","","","2020","","","2019"],["","","Net income (loss) attributable to Dominion Energy","","","Diluted EPS","","","Net income (loss) attributable to Dominion Energy","","","Diluted EPS","","","Net income (loss) attributable to Dominion Energy","","","Diluted EPS"],["(millions, except EPS)"],["Dominion Energy Virginia","","$","1,919","","","$","2.37","","","$","1,891","","","$","2.28","","","$","1,786","","","$","2.21"],["Gas Distribution","","","600","","","","0.74","","","","560","","","","0.67","","","","487","","","","0.60"],["Dominion Energy South Carolina","","","437","","","","0.54","","","","419","","","","0.51","","","","430","","","","0.53"],["Contracted Assets","","","431","","","","0.53","","","","402","","","","0.48","","","","460","","","","0.57"],["Corporate and Other","","","(99",")","","","(0.20",")","","","(3,673",")","","","(4.51",")","","","(1,805",")","","","(2.29",")"],["Consolidated","","$","3,288","","","$","3.98","","","$","(401",")","","$","(0.57",")","","$","1,358","","","$","1.62"]]
[[/GREPCENT_TABLE]]

Dominion Energy Virginia

Presented below are operating statistics related to Dominion Energy Virginia’s operations:

[[GREPCENT_TABLE]]
[["Year Ended December 31,","","2021","","","% Change","","","2020","","","% Change","","","2019"],["Electricity delivered (million MWh)","","","85.2","","","","2","","%","","83.3","","","","(5",")","%","","87.7"],["Electricity supplied (million MWh):"],["Utility","","","85.7","","","","(1",")","","","87.0","","","","(1",")","","","88.2"],["Non-Jurisdictional","","","1.0","","","","43","","","","0.7","","","","75","","","","0.4"],["Degree days (electric distribution and utility service area):"],["Cooling","","","1,783","","","","1","","","","1,759","","","","(13",")","","","2,031"],["Heating","","","3,210","","","","8","","","","2,970","","","","(9",")","","","3,259"],["Average electric distribution customer accounts (thousands)","","","2,697","","","","1","","","","2,661","","","","1","","","","2,626"]]
[[/GREPCENT_TABLE]]

Presented below, on an after-tax basis, are the key factors impacting Dominion Energy Virginia’s net income contribution:

2021 VS. 2020

[[GREPCENT_TABLE]]
[["","","Increase (Decrease)"],["","","Amount","","","EPS"],["(millions, except EPS)"],["Regulated electric sales:"],["Weather","","$","44","","","$","0.05"],["Other","","","20","","","","0.02"],["Rider equity return","","","41","","","","0.05"],["Electric capacity","","","(28",")","","","(0.03",")"],["Outages","","","(14",")","","","(0.02",")"],["Depreciation and amortization","","","(18",")","","","(0.02",")"],["Renewable energy investment tax credits","","","7","","","","0.01"],["Salaries, wages and benefits & administrative costs","","","(22",")","","","(0.03",")"],["Other","","","(2",")","","","\u2014"],["Share accretion","","","\u2014","","","","0.06"],["Change in net income contribution","","$","28","","","$","0.09"]]
[[/GREPCENT_TABLE]]

65

Gas Distribution

Presented below are selected operating statistics related to Gas Distribution’s operations:

[[GREPCENT_TABLE]]
[["Year Ended December 31,","","2021","","","% Change","","","2020","","","% Change","","","2019"],["Gas distribution throughput (bcf):"],["Sales","","","183","","","","2","","%","","180","","","","(6",")","%","","192"],["Transportation","","","975","","","","12","","","","868","","","","7","","","","811"],["Heating degree days (gas distribution service area):"],["North Carolina","","","2,947","","","","8","","","","2,734","","","","(7",")","","","2,942"],["Ohio and West Virginia","","","5,121","","","","(1",")","","","5,148","","","","(4",")","","","5,355"],["Utah, Wyoming, and Idaho","","","4,874","","","","(2",")","","","4,973","","","","(10",")","","","5,501"],["Average gas distribution customer accounts (thousands):"],["Sales","","","1,935","","","","2","","","","1,897","","","","2","","","","1,857"],["Transportation","","","1,131","","","","1","","","","1,123","","","","1","","","","1,108"]]
[[/GREPCENT_TABLE]]

Presented below, on an after-tax basis, are the key factors impacting Gas Distribution’s net income contribution:

2021 VS. 2020

[[GREPCENT_TABLE]]
[["","","Increase (Decrease)"],["","","Amount","","","EPS"],["(millions, except EPS)"],["Regulated gas sales:"],["Weather","","$","\u2014","","","$","\u2014"],["Other","","","31","","","","0.04"],["Rider equity return","","","40","","","","0.05"],["Salaries, wages and benefits & administrative costs","","","(8",")","","","(0.01",")"],["Interest expense, net","","","12","","","","0.01"],["Other","","","(35",")","","","(0.04",")"],["Share accretion","","","\u2014","","","","0.02"],["Change in net income contribution","","$","40","","","$","0.07"]]
[[/GREPCENT_TABLE]]

Dominion Energy South Carolina

Presented below are selected operating statistics related to Dominion Energy South Carolina’s operations:

[[GREPCENT_TABLE]]
[["Year Ended December 31,","","2021","","","% Change","","","2020","","","% Change","","","2019"],["Electricity delivered (million MWh)","","","22.4","","","","1","","%","","22.1","","","","(4",")","%","","23.0"],["Electricity supplied (million MWh)","","","23.5","","","","2","","","","23.0","","","","(5",")","","","24.1"],["Degree days (electric and gas distribution service areas):"],["Cooling","","","859","","","","8","","","","794","","","","(17",")","","","951"],["Heating","","","1,280","","","","19","","","","1,074","","","","(9",")","","","1,179"],["Average electric distribution customer accounts (thousands)","","","766","","","","2","","","","753","","","","2","","","","739"],["Gas distribution throughput (bcf):"],["Sales","","","72","","","","9","","","","66","","","","2","","","","65"],["Average gas distribution customer accounts (thousands)","","","412","","","","3","","","","399","","","","3","","","","386"]]
[[/GREPCENT_TABLE]]

66

Presented below, on an after-tax basis, are the key factors impacting Dominion Energy South Carolina’s net income contribution:

2021 VS. 2020

[[GREPCENT_TABLE]]
[["","","Increase (Decrease)"],["","","Amount","","","EPS"],["(millions, except EPS)"],["Regulated electric sales:"],["Weather","","$","(6",")","","$","(0.01",")"],["Other","","","48","","","","0.06"],["Regulated gas sales","","","9","","","","0.01"],["Capital cost rider","","","(6",")","","","(0.01",")"],["Depreciation and amortization","","","(9",")","","","(0.01",")"],["Interest expense, net","","","7","","","","0.01"],["Salaries, wages and benefits & administrative costs","","","(46",")","","","(0.06",")"],["Other","","","21","","","","0.02"],["Share accretion","","","\u2014","","","","0.02"],["Change in net income contribution","","$","18","","","$","0.03"]]
[[/GREPCENT_TABLE]]

Contracted Assets

Presented below are selected operating statistics related to Contracted Asset’s operations:

[[GREPCENT_TABLE]]
[["Year Ended December 31,","","2021","","","% Change","","","2020","","","% Change","","","2019"],["Electricity supplied (million MWh)","","","20.8","","","","8","","%","","19.3","","","","(4",")","%","","20.2"]]
[[/GREPCENT_TABLE]]

Presented below, on an after-tax basis, are the key factors impacting Contracted Asset’s net income contribution:

2021 VS. 2020

[[GREPCENT_TABLE]]
[["","","Increase (Decrease)"],["","","Amount","","","EPS"],["(millions, except EPS)"],["Margin(1)","","$","28","","","$","0.03"],["Planned outage costs","","","33","","","","0.04"],["Renewable energy investment tax credits","","","(43",")","","","(0.05",")"],["Absence of contract associated with Fowler Ridge","","","14","","","","0.02"],["Other","","","(3",")","","","(0.00",")"],["Share accretion","","","\u2014","","","","0.01"],["Change in net income contribution","","$","29","","","$","0.05"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Includes earnings associated with a 50% noncontrolling interest in Cove Point."]]
[[/GREPCENT_TABLE]]

Corporate and Other

Presented below are the Corporate and Other segment’s after-tax results:

[[GREPCENT_TABLE]]
[["Year Ended December 31,","","2021","","","2020","","","2019"],["(millions, except EPS)"],["Specific items attributable to operating segments","","$","(493",")","","$","(1,241",")","","$","(1,901",")"],["Specific items attributable to Corporate and Other segment","","","590","","","","(2,166",")","","","384"],["Total specific items","","","97","","","","(3,407",")","","","(1,517",")"],["Other corporate operations:"],["Interest expense, net","","","(410",")","","","(384",")","","","(383",")"],["Other","","","214","","","","118","","","","95"],["Total other corporate operations","","","(196",")","","","(266",")","","","(288",")"],["Total net expense","","","(99",")","","","(3,673",")","","","(1,805",")"],["EPS impact","","$","(0.20",")","","$","(4.51",")","","$","(2.29",")"]]
[[/GREPCENT_TABLE]]

67

TOTAL SPECIFIC ITEMS

Corporate and Other includes specific items attributable to Dominion Energy’s primary operating segments that are not included in profit measures evaluated by executive management in assessing the segments’ performance or in allocating resources. See Note 26 to the Consolidated Financial Statements for discussion of these items in more detail. Corporate and Other also includes specific items attributable to the Corporate and Other segment. In 2021, this primarily included $641 million net income from discontinued operations, primarily associated with the Q-Pipe Group, a $64 million after-tax benefit for derivative mark-to-market changes, $62 million of after-tax charges for workplace realignment, primarily related to a corporate office lease termination and $32 million of after-tax charges for merger and integration-related costs associated with the SCANA Combination. In 2020, this primarily included $2.2 billion of after-tax loss associated with discontinued operations, including the results of operations of the entities included in the GT&S and Q-Pipe Transactions as well as charges associated with the cancellation of the Atlantic Coast Pipeline Project, $82 million of after-tax charges for merger and integration-related costs associated with the SCANA Combination, a $78 million after-tax benefit of derivative mark-to-market changes and a $69 million tax benefit associated with the GT&S Transaction. In 2019, this primarily included $521 million of after-tax earnings for the results of operations of the entities included in the GT&S and Q-Pipe Transactions and $135 million of after-tax transaction and transition costs associated with the SCANA Combination.

VIRGINIA POWER

Results of Operations

Presented below is a summary of Virginia Power’s consolidated results:

[[GREPCENT_TABLE]]
[["Year Ended December 31,","","2021","","","$ Change","","","2020","","","$ Change","","","2019"],["(millions)"],["Net income","","$","1,712","","","$","691","","","$","1,021","","","$","(128",")","","$","1,149"]]
[[/GREPCENT_TABLE]]

Overview

2021 VS. 2020

Net income increased 68%, primarily due to the absence of charges related to the planned early retirements of certain electric generation facilities and a decrease in charges associated with the 2021 Triennial Review.

Analysis of Consolidated Operations

Presented below are selected amounts related to Virginia Power’s results of operations:

[[GREPCENT_TABLE]]
[["Year Ended December 31,","","2021","","","$ Change","","","2020","","","$ Change","","","2019"],["(millions)"],["Operating revenue","","$","7,470","","","$","(293",")","","$","7,763","","","$","(345",")","","$","8,108"],["Electric fuel and other energy-related purchases","","","1,735","","","","99","","","","1,636","","","","(542",")","","","2,178"],["Purchased (excess) electric capacity","","","24","","","","41","","","","(17",")","","","(57",")","","","40"],["Other operations and maintenance","","","1,793","","","","7","","","","1,786","","","","43","","","","1,743"],["Depreciation and amortization","","","1,364","","","","112","","","","1,252","","","","29","","","","1,223"],["Other taxes","","","326","","","","(1",")","","","327","","","","(1",")","","","328"],["Impairment of assets and other charges (benefits)","","","(269",")","","","(1,362",")","","","1,093","","","","336","","","","757"],["Other income","","","146","","","","66","","","","80","","","","(18",")","","","98"],["Interest and related charges","","","534","","","","18","","","","516","","","","(8",")","","","524"],["Income tax expense","","","397","","","","168","","","","229","","","","(35",")","","","264"]]
[[/GREPCENT_TABLE]]

An analysis of Virginia Power’s results of operations follows:

2021 VS. 2020

Operating revenue decreased 4%, primarily reflecting:

[[GREPCENT_TABLE]]
[["\u2022","A $356 million decrease for refunds to be provided to retail electric customers in Virginia associated with the settlement of the 2021 Triennial Review;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $151 million decrease from an unbilled revenue reduction;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $62 million decrease associated with settlements of economic hedges of certain regulated electric sales; and"]]
[[/GREPCENT_TABLE]]

68

[[GREPCENT_TABLE]]
[["\u2022","A $51 million decrease in PJM off-system sales;"]]
[[/GREPCENT_TABLE]]

These decreases were partially offset by:

[[GREPCENT_TABLE]]
[["\u2022","A $125 million increase in the fuel cost component included in utility rates as a result of a net increase in commodity costs associated with sales to electric utility retail customers"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $59 million increase in sales to retail customers from an increase in heating degree days during the heating season ($65 million) partially offset by a decrease in cooling degree days during the cooling season ($6 million);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $49 million increase in sales to electric utility retail customers associated with growth;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $35 million increase in sales to electric utility retail customers associated with economic and other usage factors; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $26 million increase in sales to customers from non-jurisdictional solar generation facilities."]]
[[/GREPCENT_TABLE]]

Electric fuel and other energy-related purchases increased 6%, primarily due to higher commodity costs for electric utilities ($125 million), partially offset by a decrease in PJM off-system sales ($51 million), which are offset in operating revenue and do not impact net income.

Purchased electric capacity increased $41 million, primarily due to an increase in expense related to the annual PJM capacity performance market effective June 2021 ($24 million) and an increase in expense related to the annual PJM capacity performance market effective June 2020 ($17 million).

Other operations and maintenance increased $7 million, primarily reflecting:

[[GREPCENT_TABLE]]
[["\u2022","A $57 million increase in outside services;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $32 million increase in storm damage and service restoration costs;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $20 million increase in materials and supplies; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $19 million increase in planned outage costs; partially offset by"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $44 million decrease in certain expenses which are primarily recovered through state- and FERC-regulated rates and do not impact net income;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $12 million gain on the sale of corporate office real estate;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","The absence of a $11 million charge associated with ash pond and landfill closure costs;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","The absence of a $11 million charge associated with credit risk on customer accounts related to COVID-19;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $10 million reduction in bad debt expense due to the forgiveness of Virginia retail electric customer accounts in arrears pursuant to Virginia\u2019s 2021 budget process; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A $10 million decrease in environmental remediation costs."]]
[[/GREPCENT_TABLE]]

Depreciation and amortization increased 9%, primarily due to an increase for amortization from the establishment of a regulatory asset associated with the 2021 Triennial Review ($61 million), various projects being placed into service ($57 million), partially offset by the absence of depreciation from certain electric generation facilities that were retired early ($11 million).

Impairment of assets and other charges (benefits) decreased $1.4 billion, primarily reflecting:

[[GREPCENT_TABLE]]
[["\u2022","The absence of charges associated with the planned early retirements of certain electric generation facilities ($747 million);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A benefit from the establishment of a regulatory asset associated with the early retirements of certain coal- and oil-fired generating units associated with the settlement of the 2021 Triennial Review ($549 million);"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","The absence of a charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to legislation enacted in November 2020 ($127 million); and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","The absence of charges for dismantling costs associated with certain electric generation facilities ($54 million); partially offset by"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","A charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to Virginia\u2019s 2021 budget process ($77 million); and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["\u2022","An increase in charges for CCRO benefits provided to retail electric customers in Virginia associated with the 2021 Triennial Review ($58 million)."]]
[[/GREPCENT_TABLE]]

69

Other income increased 83%, primarily due to an increase in net investment gains on nuclear decommissioning trust funds ($38 million) and an increase in AFUDC associated with rate-regulated projects ($24 million).

Income tax expense increased 73%, primarily due to higher pre-tax income ($192 million) partially offset by the benefit of a state legislative change ($16 million).

LIQUIDITY AND CAPITAL RESOURCES

Dominion Energy depends on both cash generated from operations and external sources of liquidity to provide working capital and as a bridge to long-term financings. Dominion Energy’s material cash requirements include capital and investment expenditures, repaying short-term and long-term debt obligations and paying dividends on its common and preferred stock.

Analysis of Cash Flows

Presented below are selected amounts related to Dominion Energy’s cash flows:

[[GREPCENT_TABLE]]
[["Year Ended December 31,","","2021","","","2020","","","2019"],["(millions)"],["Cash, restricted cash and equivalents at beginning of year","","$","247","","","$","269","","","$","391"],["Cash flows provided by (used in):"],["Operating activities","","","4,037","","","","5,227","","","","5,204"],["Investing activities","","","(6,247",")","","","(2,916",")","","","(4,622",")"],["Financing activities","","","2,371","","","","(2,333",")","","","(704",")"],["Net increase (decrease) in cash, restricted cash and equivalents","","","161","","","","(22",")","","","(122",")"],["Cash, restricted cash and equivalents at end of year","","$","408","","","$","247","","","$","269"]]
[[/GREPCENT_TABLE]]

Operating Cash Flows

Net cash provided by Dominion Energy's operating activities decreased $1.2 billion, including a $1.4 billion decrease from discontinued operations largely due to the absence of operations sold in the GT&S Transaction. Net cash provided by continuing operations increased $200 million, primarily as the result of higher operating cash flows from electric utility and gas distribution operations driven by weather, customer growth and riders ($737 million), the absence of a cash pension plan contribution ($250 million), increased distributions from Cove Point ($230 million), absence of a contract termination payment in connection with the sale of Fowler Ridge ($221 million), decreases in severance payments primarily related to a voluntary retirement program ($174 million) and a decrease in payments associated with litigation acquired in the SCANA Combination ($143 million), lower income tax payments ($132 million) and changes in working capital ($161 million). These increases were partially offset by lower deferred fuel cost recoveries ($1.2 billion) and increased margin deposits ($690 million).

Investing Cash Flows

Net cash used in Dominion Energy’s investing activities increased $3.3 billion, primarily due to a net decrease in proceeds from the sale of the Q-Pipe Group compared to the GT&S Transaction ($2.2 billion), the repayment of the Q-Pipe Transaction deposit ($1.3 billion), an increase in contributions to equity method affiliates including Atlantic Coast Pipeline ($873 million), partially offset by the proceeds from the sale of non-wholly-owned nonregulated solar facilities ($495 million), the absence of acquisitions of equity method investments ($178 million) and a decrease in acquisitions of solar development projects ($210 million).

Financing Cash Flows

Net cash provided by Dominion Energy’s financing activities was $2.4 billion for the year ended December 31, 2021, compared to net cash used by financing activities of $2.3 billion for the year ended December 31, 2020. This change is primarily due to the absence of common stock repurchases ($3.1 billion), higher net issuances of short-term debt ($1.4 billion), lower common stock dividend payments ($837 million) and the issuance of Series C Preferred Stock ($742 million), partially offset by increased repayments and redemptions of long-term debt ($871 million).

70

Credit Facilities and Short-Term Debt

Dominion Energy generally uses proceeds from short-term borrowings, including commercial paper, to satisfy short-term cash requirements not met through cash from operations. The levels of borrowing may vary significantly during the course of the year, depending on the timing and amount of cash requirements not satisfied by cash from operations. A description of Dominion Energy’s primary available sources of short-term liquidity follows.

Joint Revolving Credit Facility

Dominion Energy maintains a $6.0 billion joint revolving credit facility which provides for a discount in the pricing of certain annual fees and amounts borrowed by Dominion Energy under the facility if Dominion Energy achieves certain annual renewable electric generation and diversity and inclusion objectives.

Dominion Energy’s commercial paper and letters of credit outstanding, as well as capacity available under its credit facility were as follows:

[[GREPCENT_TABLE]]
[["","","Facility Limit","","","Outstanding Commercial Paper(1)","","","Outstanding Letters of Credit","","","Facility Capacity Available"],["(millions)"],["At December 31, 2021"],["Joint revolving credit facility(2)","","$","6,000","","","$","1,883","","","$","131","","","$","3,986"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","The weighted-average interest rate of the outstanding commercial paper supported by Dominion Energy\u2019s credit facility was 0.31% at December 31, 2021."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","This credit facility matures in June 2026, with the potential to be extended by the borrowers to June 2028, and can be used by the borrowers under the credit facility to support bank borrowings and the issuance of commercial paper, as well as to support up to a combined $2.0 billion of letters of credit."]]
[[/GREPCENT_TABLE]]

Dominion Energy Reliability InvestmentSM Program

Dominion Energy has an effective registration statement with the SEC for the sale of up to $3.0 billion of variable denomination floating rate demand notes, called Dominion Energy Reliability InvestmentSM. The registration limits the principal amount that may be outstanding at any one time to $1.0 billion. The notes are offered on a continuous basis and bear interest at a floating rate per annum determined by the Dominion Energy Reliability Investment Committee, or its designee, on a weekly basis. The notes have no stated maturity date, are non-transferable and may be redeemed in whole or in part by Dominion Energy or at the investor’s option at any time. At December 31, 2021, Dominion Energy’s Consolidated Balance Sheets include $431 million presented within short-term debt.  The proceeds are used for general corporate purposes and to repay debt.

Other Facilities

In addition to the primary sources of short-term liquidity discussed above, from time to time Dominion Energy enters into separate supplementary credit facilities or term loans as discussed in Note 17 to the Consolidated Financial Statements.

Long-Term Debt

Issuances and Borrowings of Long-Term Debt

During 2021, Dominion Energy issued or borrowed the following long-term debt. Unless otherwise noted, the proceeds were used for the repayment of existing long-term indebtedness and for general corporate purposes.  

71

[[GREPCENT_TABLE]]
[["Month of Issuance","","Type","","Public / Private","","Issuer / Borrowing Entity","","Principal","","","Rate","","","Stated Maturity"],["","","","","","","","","(millions)"],["March","","Senior notes","","Private","","PSNC","","$","150","","","","3.100","%","","2051"],["April","","Senior notes","","Public","","Dominion Energy","","","600","","","","1.450","%","","2026"],["April","","Senior notes","","Public","","Dominion Energy","","","500","","","","3.300","%","","2041"],["June","","Sustainability Revolving Credit Agreement(1)","","Private","","Dominion Energy","","","250","","","variable","","","2024"],["August","","Sustainability Revolving Credit Agreement(1)","","Private","","Dominion Energy","","","650","","","variable","","","2024"],["August","","Senior notes(2)","","Public","","Dominion Energy","","","1,000","","","","2.250","%","","2031"],["August","","Senior notes","","Private","","Questar Gas","","","125","","","","2.210","%","","2031"],["August","","Senior notes","","Private","","Questar Gas","","","125","","","","3.150","%","","2051"],["November","","Senior notes","","Public","","Virginia Power","","","500","","","","2.300","%","","2031"],["November","","Senior notes","","Public","","Virginia Power","","","500","","","","2.950","%","","2051"],["November","","First mortgage bonds","","Public","","DESC","","","400","","","","2.300","%","","2031"],["December","","Term loan(3)","","Private","","DECP Holdings","","","2,500","","","variable","","","2024"],["Total issuances and borrowings","","","","","","$","7,300"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(1)","This supplemental credit facility offers a reduced interest rate margin with respect to borrowed amounts allocated to certain environmental sustainability or social investment initiatives. Proceeds of the supplemental credit facility may also be used for general corporate purposes, but such proceeds are not eligible for a reduced interest rate margin. The proceeds from these borrowings were used to support environmental sustainability and social investment initiatives ($250 million) and for general corporate purposes ($650 million). At December 31, 2021, no amounts were outstanding under this arrangement."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(2)","The proceeds from this offering will be used to finance and/or refinance, in whole or in part, existing and future capital expenditures associated with the development, construction, acquisition and operation of certain solar projects."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","(3)","The maturity date for this term loan has the potential to be extended to December 2026."]]
[[/GREPCENT_TABLE]]

Dominion Energy currently meets the definition of a well-known seasoned issuer under SEC rules governing the registration, communications and offering processes under the Securities Act of 1933, as amended. The rules provide for a streamlined shelf registration process to provide registrants with timely access to capital. This allows Dominion Energy to use automatic shelf registration statements to register any offering of securities, other than those for exchange offers or business combination transactions.

Dominion Energy anticipates, excluding potential opportunistic financings, issuing between approximately $3.2 billion and $4.4 billion of long-term debt during 2022, inclusive of $1.0 billion issued at Virginia Power in January 2022. The raising of external capital is subject to certain regulatory requirements, including registration with the SEC for certain issuances.

Repayment, Repurchases and Redemptions of Long-Term Debt

Dominion Energy may from time to time reduce its outstanding debt and level of interest expense through redemption of debt securities prior to maturity or repurchases of debt securities in the open market, in privately negotiated transactions, through tender offers or otherwise.

The following long-term debt was repaid, repurchased or redeemed in 2021:

[[GREPCENT_TABLE]]
[["Month of Redemption","","Type","","Entity","","Principal","","(1)","Rate","","","Stated Maturity"],["","","","","","","(millions)"],["Debt scheduled to mature in 2021","","","","$","2,109","","(2)","various"],["Early redemptions"],["August","","July 2016 hybrids(3)","","Dominion Energy","","","800","","","","5.250","%","","2076"],["November","","Senior notes","","Virginia Power","","","450","","","","2.950","%","","2022"],["November","","Sustainability Revolving Credit Agreement","","Dominion Energy","","","650","","","variable","","","2024"],["December","","Sustainability Revolving Credit Agreement","","Dominion Energy","","","250","","","variable","","","2024"],["December","","Senior notes","","Dominion Energy","","","400","","","","2.750","%","","2022"],["December","","Term loan","","Dominion Solar Projects III, Inc.","","","177","","","variable","","","2024"],["Total repayments, repurchases and redemptions(4)","","","","$","4,836"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Total amount redeemed prior to maturity includes remaining outstanding principal plus accrued interest."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","Includes repayment of $225 million associated with supplemental 364-Day revolving credit facility borrowings."]]
[[/GREPCENT_TABLE]]

72

[[GREPCENT_TABLE]]
[["(3)","The July 2016 hybrids were listed on the NYSE under the symbol DRUA. Expenses related to the early redemption were $23 million reflected within interest and related charges in Dominion Energy\u2019s Consolidated Statements of Income for the year ended December 31, 2021."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(4)","Amounts exclude $265 million of long-term debt assumed by Terra Nova Renewable Partners in connection with the sale of SBL Holdco in December 2021."]]
[[/GREPCENT_TABLE]]

See Note 18 to the Consolidated Financial Statements for additional information regarding scheduled maturities and other cancellations of Dominion Energy’s long-term debt, including related average interest rates.

Remarketing of Long-Term Debt

In 2021, Dominion Energy was not required to and did not complete the remarketing of any of its long-term debt. In 2022, Dominion Energy expects to remarket approximately $165 million of its senior notes and tax-exempt bonds.

Credit Ratings

Dominion Energy’s credit ratings affect its liquidity, cost of borrowing under credit facilities and collateral posting requirements under commodity contracts, as well as the rates at which it is able to offer its debt securities. The credit ratings for Dominion Energy are affected by its financial profile, mix of regulated and nonregulated businesses and respective cash flows, changes in methodologies used by the rating agencies and event risk, if applicable, such as major acquisitions or dispositions.

Credit ratings and outlooks as of February 21, 2022 are as follows:

[[GREPCENT_TABLE]]
[["","","Fitch","","Moody's","","Standard & Poor's"],["Dominion Energy"],["Issuer","","BBB+","","Baa2","","BBB+"],["Senior unsecured debt securities","","BBB+","","Baa2","","BBB"],["Junior subordinated notes","","BBB","","Baa3","","BBB"],["Enhanced junior subordinated notes","","BBB-","","Baa3","","BBB-"],["Preferred Stock","","BBB-","","Ba1","","BBB-"],["Commercial paper","","F2","","P-2","","A-2"],["Outlook","","Stable","","Stable","","Positive"]]
[[/GREPCENT_TABLE]]

A credit rating is not a recommendation to buy, sell or hold securities and should be evaluated independently of any other rating. Ratings are subject to revision or withdrawal at any time by the applicable rating organization.

Financial Covenants

As part of borrowing funds and issuing both short-term and long-term debt or preferred securities, Dominion Energy must enter into enabling agreements. These agreements contain customary covenants that, in the event of default, could result in the acceleration of principal and interest payments; restrictions on distributions related to capital stock, including dividends, redemptions, repurchases, liquidation payments or guarantee payments; and in some cases, the termination of credit commitments unless a waiver of such requirements is agreed to by the lenders/security holders. These provisions are customary, with each agreement specifying which covenants apply. These provisions are not necessarily unique to Dominion Energy.

Dominion Energy is required to pay annual commitment fees to maintain its joint revolving credit facility. In addition, the credit agreement contains various terms and conditions that could affect Dominion Energy’s ability to borrow under the facility. They include a maximum debt to total capital ratio, which is also included in Dominion Energy’s Sustainability Revolving Credit Agreement entered into in 2021, and cross-default provisions.

As of December 31, 2021, the calculated total debt to total capital ratio, pursuant to the terms of the agreements, was as follows:

[[GREPCENT_TABLE]]
[["Company","","Maximum Allowed Ratio","","","Actual Ratio(1)"],["Dominion Energy","","","67.5","%","","","56.0","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Indebtedness as defined by the agreements excludes certain junior subordinated notes reflected as long-term debt as well as AOCI reflected as equity in the Consolidated Balance Sheets. Capital is inclusive of preferred stock whether classified as equity or mezzanine equity."]]
[[/GREPCENT_TABLE]]

73

If Dominion Energy or any of its material subsidiaries fails to make payment on various debt obligations in excess of $100 million, the lenders could require the defaulting company, if it is a borrower under Dominion Energy’s joint revolving credit facility, to accelerate its repayment of any outstanding borrowings and the lenders could terminate their commitments, if any, to lend funds to that company under the credit facility. In addition, if the defaulting company is Virginia Power, Dominion Energy’s obligations to repay any outstanding borrowing under the credit facility could also be accelerated and the lenders’ commitments to Dominion Energy could terminate.

Dominion Energy monitors compliance with these covenants on a regular basis in order to ensure that events of default will not occur. As of December 31, 2021, there have been no events of default under Dominion Energy’s covenants.

Common Stock, Preferred Stock and Other Equity Securities

Issuances of Equity Securities

Dominion Energy maintains Dominion Energy Direct® and a number of employee savings plans through which contributions may be invested in Dominion Energy’s common stock. These shares may either be newly issued or purchased on the open market with proceeds contributed to these plans. In January 2021, Dominion Energy began issuing new shares of common stock for these direct stock purchase plans. During 2021, Dominion Energy issued 2.6 million of such shares and received proceeds of $192 million.

Dominion Energy also maintains sales agency agreements to effect sales under an at-the-market program. Under the sales agency agreements, Dominion Energy may, from time to time, offer and sell shares of its common stock through the sales agents or enter into one or more forward sale agreements with respect to shares of its common stock. Sales by Dominion Energy through the sales agents or by forward sellers pursuant to a forward sale agreement cannot exceed $1.0 billion in the aggregate. In November 2021, Dominion Energy entered forward sale agreements for approximately 1.1 million shares of its common stock to be settled by November 2022 at an average initial forward price of $74.66 per share. See Note 20 to the Consolidated Financial Statements for additional information.

In addition, Dominion Energy issued shares of its common and preferred stock, as discussed in Notes 19 and 20 to the Consolidated Financial Statements, respectively, as follows:

[[GREPCENT_TABLE]]
[["","\u2022","In 2021, Dominion Energy issued 2.0 million shares of its common stock, valued at $149 million, to satisfy obligations under settlement agreements associated with litigation acquired in the SCANA Combination."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","In December 2021, Dominion Energy issued 750,000 shares of Series C Preferred Stock and received cash proceeds of $742 million, net of issuance costs. Also in December 2021, Dominion Energy issued 250,000 shares of Series C Preferred Stock, valued at $250 million, to the qualified pension plans."]]
[[/GREPCENT_TABLE]]

Between Dominion Energy Direct® and its at-the-market program (including any related forward-sale agreements), and excluding potential opportunistic financings, Dominion Energy anticipates raising between $300 million and $500 million of capital through the issuance of common stock in 2022. In addition, Dominion Energy may issue up to $150 million of stock under settlement agreements associated with litigation acquired in the SCANA Combination as discussed in Note 23 to the Consolidated Financial Statements. As discussed in Note 19 to the Consolidated Financial Statements, in 2022, Dominion Energy will settle the stock purchase contract component of the 2019 Equity Units expected to result in proceeds of $1.6 billion and the issuance of up to 21.8 million shares, subject to a formula based on the average closing price of Dominion Energy common stock upon settlement.

Repurchases of Equity Securities

In November 2020, the Board of Directors authorized the repurchase of up to $1.0 billion of Dominion Energy’s common stock. This repurchase program does not include a specific timetable or price or volume targets and may be modified, suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions or otherwise at the discretion of management subject to prevailing market conditions, applicable securities laws and other factors. No purchases have been made under this authorization as of December 31, 2021.

Dominion Energy does not plan to repurchase shares of common stock in 2022, except for shares tendered by employees to satisfy tax withholding obligations on vested restricted stock, which does not impact the available capacity under its stock repurchase authorization.

74

Capital Expenditures

See Note 26 to the Consolidated Financial Statements for Dominion Energy’s historical capital expenditures by segment. Dominion Energy’s total planned capital expenditures for each segment over the next five years are presented in the table below:

[[GREPCENT_TABLE]]
[["","","2022","","","2023","","","2024","","","2025","","","2026","","","Total(1)"],["(billions)"],["Dominion Energy Virginia","","$","5.8","","","$","7.2","","","$","7.5","","","$","7.5","","","$","5.3","","","$","33.2"],["Gas Distribution","","","1.4","","","","1.4","","","","1.2","","","","1.5","","","","1.1","","","","6.5"],["Dominion Energy South Carolina","","","0.8","","","","0.9","","","","0.9","","","","0.8","","","","0.7","","","","4.2"],["Contracted Assets","","","0.6","","","","0.9","","","","0.9","","","","0.9","","","","0.5","","","","3.8"],["Corporate and Other segment","","","0.1","","","","0.1","","","","0.1","","","","0.1","","","","0.1","","","","0.4"],["Total(1)","","$","8.6","","","$","10.3","","","$","10.7","","","$","10.6","","","$","7.7","","","$","47.9"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Totals may not foot due to rounding."]]
[[/GREPCENT_TABLE]]

Dominion Energy’s planned growth expenditures are subject to approval by the Board of Directors as well as potentially by regulatory bodies based on the individual project and are expected to include significant investments in support of its clean energy profile. See Dominion Energy Virginia, Gas Distribution, Dominion Energy South Carolina and Contracted Assets in Item 1. Business for additional discussion of various significant capital projects currently under development. The above estimates are based on a capital expenditures plan reviewed and endorsed by Dominion Energy’s Board of Directors in December 2021 and are subject to continuing review and adjustment and actual capital expenditures may vary from these estimates. Dominion Energy may also choose to postpone or cancel certain planned capital expenditures in order to mitigate the need for future debt financings and equity issuances.

Dividends

Dominion Energy believes that its operations provide a stable source of cash flow to contribute to planned levels of capital expenditures and maintain or grow the dividend on common shares. In December 2021, Dominion Energy’s Board of Directors established an annual dividend rate for 2022 of $2.67 per share of common stock, a 6% increase over the 2021 rate. Dividends are subject to declaration by the Board of Directors. In January 2022, Dominion Energy’s Board of Directors declared dividends payable in March 2022 of 66.75 cents per share of common stock.

See Note 19 for a discussion of Dominion Energy’s outstanding preferred stock and associated dividend rates.

Subsidiary Dividend Restrictions

Certain of Dominion Energy’s subsidiaries may, from time to time, be subject to certain restrictions imposed by regulators or financing arrangements on their ability to pay dividends, or to advance or repay funds, to Dominion Energy. At December 31, 2021, these restrictions did not have a significant impact on Dominion Energy’s ability to pay dividends on its common or preferred stock or meet its other cash obligations.

See Note 21 to the Consolidated Financial Statements for a description of such restrictions and any other restrictions on Dominion Energy’s ability to pay dividends.

Collateral and Credit Risk

Collateral requirements are impacted by commodity prices, hedging levels, Dominion Energy’s credit ratings and the credit quality of its counterparties. In connection with commodity hedging activities, Dominion Energy is required to provide collateral to counterparties under some circumstances. Under certain collateral arrangements, Dominion Energy may satisfy these requirements by electing to either deposit cash, post letters of credit or, in some cases, utilize other forms of security. From time to time, Dominion Energy may vary the form of collateral provided to counterparties after weighing the costs and benefits of various factors associated with the different forms of collateral. These factors include short-term borrowing and short-term investment rates, the spread over these short-term rates at which Dominion Energy can issue commercial paper, balance sheet impacts, the costs and fees of alternative collateral postings with these and other counterparties and overall liquidity management objectives.

Dominion Energy’s exposure to potential concentrations of credit risk results primarily from its energy marketing and price risk management activities. Presented below is a summary of Dominion Energy’s credit exposure as of December 31, 2021 for these activities. Gross credit exposure for each counterparty is calculated as outstanding receivables plus any unrealized on- or off-balance sheet exposure, taking into account contractual netting rights.

75

[[GREPCENT_TABLE]]
[["","","Gross Credit Exposure","","","Credit Collateral","","","Net Credit Exposure"],["(millions)"],["Investment grade(1)","","$","32","","","$","\u2014","","","$","32"],["Non-Investment grade(2)","","","6","","","","\u2014","","","","6"],["No external ratings:"],["Internally rated\u2014investment grade(3)","","","98","","","","\u2014","","","","98"],["Internally rated\u2014non-investment grade(4)","","","39","","","","28","","","","16"],["Total","","$","175","","","$","28","","","$","152"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Designations as investment grade are based upon minimum credit ratings assigned by Moody\u2019s and Standard & Poor\u2019s. The five largest counterparty exposures, combined, for this category represented approximately 17% of the total net credit exposure."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","The five largest counterparty exposures, combined, for this category represented approximately 4% of the total net credit exposure."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(3)","The five largest counterparty exposures, combined, for this category represented approximately 64% of the total net credit exposure."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(4)","The five largest counterparty exposures, combined, for this category represented approximately 5% of the total net credit exposure."]]
[[/GREPCENT_TABLE]]

Fuel and Other Purchase Commitments

Dominion Energy is party to various contracts for fuel and purchased power commitments related to both its regulated and nonregulated operations. Total estimated costs for such commitments at December 31, 2021 are presented in the table below. These costs represent estimated minimum obligations for various purchased power and capacity agreements and actual costs may differ from amounts presented below depending on actual quantities purchased and prices paid.

[[GREPCENT_TABLE]]
[["","","2022","","","2023","","","2024","","","2025","","","2026","","","Total"],["(millions)"],["Purchased electric capacity for utility operations","","$","66","","","$","66","","","$","66","","","$","65","","","$","68","","","$","331"],["Fuel commitments for utility operations","","","1,169","","","","685","","","","371","","","","178","","","","166","","","","2,569"],["Fuel commitments for nonregulated operations","","","104","","","","134","","","","88","","","","68","","","","59","","","","453"],["Pipeline transportation and storage","","","523","","","","462","","","","365","","","","303","","","","291","","","","1,944"],["Total","","$","1,862","","","$","1,347","","","$","890","","","$","614","","","$","584","","","$","5,297"]]
[[/GREPCENT_TABLE]]

Other Material Cash Requirements

In addition to the financing arrangements discussed above, Dominion Energy is party to numerous contracts and arrangements obligating it to make cash payments in future years. Dominion Energy expects current liabilities to be paid within the next twelve months. In addition to the items already discussed, the following represent material expected cash requirements recorded on Dominion Energy’s Consolidated Balance Sheets at December 31, 2021. Such obligations include:

[[GREPCENT_TABLE]]
[["","\u2022","Operating and financing lease obligations \u2013 See Note 15 to the Consolidated Financial Statements;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Regulatory liabilities \u2013 See Note 12 to the Consolidated Financial Statements;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","AROs \u2013 See Note 14 to the Consolidated Financial Statements;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Employee benefit plan obligations \u2013 See Note 22 to the Consolidated Financial Statements; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Charitable commitments \u2013 See Note 23 to the Consolidated Financial Statements."]]
[[/GREPCENT_TABLE]]

In addition, Dominion Energy is party to contracts and arrangements which may require it to make material cash payments in future years that are not recorded on its Consolidated Balance Sheets.  Such obligations include:

[[GREPCENT_TABLE]]
[["","\u2022","Off-balance sheet leasing arrangements \u2013 See Note 15 to the Consolidated Financial Statements"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Guarantees \u2013 See notes 9 and 23 to the Consolidated Financial Statements"]]
[[/GREPCENT_TABLE]]

FUTURE ISSUES AND OTHER MATTERS

See Item 1. Business and Notes 13 and 23 to the Consolidated Financial Statements for additional information on various environmental, regulatory, legal and other matters that may impact future results of operations, financial condition and/or cash flows.

76

Future Environmental Regulations

Climate Change

The federal government and several states in which Dominion Energy operates have announced a commitment to achieving carbon reduction goals. In February 2021, the U.S. rejoined the Paris Agreement, which establishes a universal framework for addressing GHG emissions.  States may also enact legislation relating to climate change matters such as the reduction of GHG emissions and renewable energy portfolio standards, similar to the VCEA. To the extent legislation is enacted at the federal or state level that is more restrictive than the VCEA and/or Dominion Energy’s commitment to achieving net zero emissions by 2050, compliance with such legislation could have a material impact to Dominion Energy’s financial condition and/or cash flows.

State Actions Related to Air and GHG Emissions

In August 2017, the Ozone Transport Commission released a draft model rule for control of NOX emissions from natural gas pipeline compressor fuel-fire prime movers. States within the ozone transport region, including states in which Dominion Energy has natural gas operations, are expected to develop reasonably achievable control technology rules for existing sources based on the Ozone Transport Commission model rule. States outside of the Ozone Transport Commission may also consider the model rules in setting new reasonably achievable control technology standards. Several states in which Dominion Energy operates, including Virginia and Ohio, are developing or have announced plans to develop state-specific regulations to control GHG emissions, including methane. Dominion Energy cannot currently estimate the potential financial statement impacts related to these matters, but there could be a material impact to its financial condition and/or cash flows.

PHMSA Regulation

The most recent reauthorization of PHMSA included new provisions on historical records research, maximum-allowed operating pressure validation, use of automated or remote-controlled valves on new or replaced lines, increased civil penalties and evaluation of expanding integrity management beyond high-consequence areas. PHMSA has not yet issued new rulemaking on most of these items.

Dodd-Frank Act

The CEA, as amended by Title VII of the Dodd-Frank Act, requires certain over-the counter derivatives, or swaps, to be cleared through a derivatives clearing organization and, if the swap is subject to a clearing requirement, to be executed on a designated contract market or swap execution facility. Non-financial entities that use swaps to hedge or mitigate commercial risk may elect the end-user exception to the CEA’s clearing requirements. Dominion Energy utilizes the end-user exception with respect to its swaps. If, as a result of changes to the rulemaking process, Dominion Energy can no longer utilize the end-user exception or otherwise becomes subject to mandatory clearing, exchange trading or margin requirements, it could be subject to higher costs due to decreased market liquidity or increased margin payments. In addition, Dominion Energy’s swap dealer counterparties may attempt to pass-through additional trading costs in connection with changes to the rulemaking process. Due to the evolving rulemaking process, Dominion Energy is currently unable to assess the potential impact of the Dodd-Frank Act’s derivative-related provisions on its financial condition, results of operations or cash flows.

North Anna

Virginia Power is considering the construction of a third nuclear unit at a site located at North Anna. If Virginia Power decides to build a new unit, it would require a Combined Construction Permit and Operating License from the NRC, approval of the Virginia Commission and certain environmental permits and other approvals. In June 2017, the NRC issued the Combined Construction Permit and Operating License. Virginia Power has not yet committed to building a new nuclear unit at North Anna.

Federal Income Tax Laws

Under existing law, the Companies utilize a financial reporting method that classifies and recognizes investment tax credits on nonregulated operations as immediate reductions to income tax expense and, therefore, immediate increases in earnings. This immediate earnings benefit provides a significant incentive for renewable energy development.  Provisions in recently proposed federal legislation would allow taxpayers to elect direct payment for investment tax credits.  While effective from a cash flow perspective, this option may not provide the same level of incentive due to the financial reporting potentially applicable to the proposed direct pay benefits and “refundable” tax credits, regardless of whether such an option is selected by the taxpayer.

Because the investment tax credit could be received as a direct payment under this proposed legislation, Dominion Energy may be required to either report the benefit ratably over the life of the qualifying facility or over the five-year recapture period. Either of these alternatives may be required instead of maintaining our historical financial reporting method regardless of whether we elect the direct pay option.  If this legislation is enacted into law, the application of these alternative accounting methodologies could have a material impact on the Companies’ future results of operations, financial condition and/or cash flows.

77