# DOMINION ENERGY, INC (D) FY 2023 MD&A Verbatim Item 7 Management's Discussion and Analysis from DOMINION ENERGY, INC's 10-K for fiscal year 2023. SEC filing source: https://www.sec.gov/Archives/edgar/data/715957/000095017024019110/d-20231231.htm Accession: 0000950170-24-019110 Filing date: 2024-02-23 Report date: 2023-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/D/ All MD&A years: /company/D/mda/ Previous year: /company/D/mda/fy2022/ (FY 2022) Next year: /company/D/mda/fy2024/ (FY 2024) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations MD&A discusses Dominion Energy’s results of operations, general financial condition and liquidity and Virginia Power’s results of operations. MD&A should be read in conjunction with Item 1. Business and the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data. Virginia Power meets the conditions to file under the reduced disclosure format, and therefore has omitted certain sections of MD&A. CONTENTS OF MD&A MD&A consists of the following information: • Forward-Looking Statements—Dominion Energy and Virginia Power • Accounting Matters—Dominion Energy • Results of Operations—Dominion Energy and Virginia Power • Segment Results of Operations—Dominion Energy • Outlook—Dominion Energy • Liquidity and Capital Resources—Dominion Energy • Future Issues and Other Matters—Dominion Energy FORWARD-LOOKING STATEMENTS This report contains statements concerning the Companies’ expectations, plans, objectives, future financial performance and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In most cases, the reader can identify these forward-looking statements by such words as “anticipate,” “estimate,” “forecast,” “expect,” “believe,” “should,” “could,” “plan,” “may,” “continue,” “target” or other similar words. The Companies make forward-looking statements with full knowledge that risks and uncertainties exist that may cause actual results to differ materially from predicted results. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Additionally, other factors may cause actual results to differ materially from those indicated in any forward-looking statement. These factors include but are not limited to: • Unusual weather conditions and their effect on energy sales to customers and energy commodity prices; • Extreme weather events and other natural disasters, including, but not limited to, hurricanes, high winds, severe storms, earthquakes, flooding, climate changes and changes in water temperatures and availability that can cause outages and property damage to facilities; • The impact of extraordinary external events, such as the pandemic health event resulting from COVID-19, and their collateral consequences, including extended disruption of economic activity in the Companies’ markets and global supply chains; • Federal, state and local legislative and regulatory developments, including changes in or interpretations of federal and state tax laws and regulations; • The direct and indirect impacts of implementing recommendations resulting from the business review announced in November 2022; • Risks of operating businesses in regulated industries that are subject to changing regulatory structures; • Changes to regulated electric rates collected by the Companies and regulated gas distribution, transportation and storage rates collected by Dominion Energy; • Changes in rules for RTOs and ISOs in which the Companies join and/or participate, including changes in rate designs, changes in FERC’s interpretation of market rules and new and evolving capacity models; • Risks associated with Virginia Power’s membership and participation in PJM, including risks related to obligations created by the default of other participants; • Risks associated with entities in which Dominion Energy shares ownership with third parties, including risks that result from lack of sole decision making authority, disputes that may arise between Dominion Energy and third party participants and difficulties in exiting these arrangements; 56 • Changes in future levels of domestic and international natural gas production, supply or consumption; • Timing and receipt of regulatory approvals necessary for planned construction or growth projects and compliance with conditions associated with such regulatory approvals; • The inability to complete planned construction, conversion or growth projects at all, or with the outcomes or within the terms and time frames initially anticipated, including as a result of increased public involvement, intervention or litigation in such projects; • Risks and uncertainties that may impact the Companies’ ability to develop and construct the CVOW Commercial Project within the currently proposed timeline, or at all, and consistent with current cost estimates along with the ability to recover such costs from customers; • Changes to federal, state and local environmental laws and regulations, including those related to climate change, the tightening of emission or discharge limits for GHGs and other substances, more extensive permitting requirements and the regulation of additional substances; • Cost of environmental strategy and compliance, including those costs related to climate change; • Changes in implementation and enforcement practices of regulators relating to environmental standards and litigation exposure for remedial activities; • Difficulty in anticipating mitigation requirements associated with environmental and other regulatory approvals or related appeals; • Unplanned outages at facilities in which the Companies have an ownership interest; • The impact of operational hazards, including adverse developments with respect to pipeline and plant safety or integrity, equipment loss, malfunction or failure, operator error and other catastrophic events; • Risks associated with the operation of nuclear facilities, including costs associated with the disposal of spent nuclear fuel, decommissioning, plant maintenance and changes in existing regulations governing such facilities; • Changes in operating, maintenance and construction costs; • Domestic terrorism and other threats to the Companies’ physical and intangible assets, as well as threats to cybersecurity; • Additional competition in industries in which the Companies operate, including in electric markets in which Dominion Energy’s nonregulated generation facilities operate and potential competition from the development and deployment of alternative energy sources, such as self-generation and distributed generation technologies, and availability of market alternatives to large commercial and industrial customers; • Competition in the development, construction and ownership of certain electric transmission facilities in the Companies’ service territory in connection with Order 1000; • Changes in technology, particularly with respect to new, developing or alternative sources of generation and smart grid technologies; • Changes in demand for the Companies’ services, including industrial, commercial and residential growth or decline in the Companies’ service areas, changes in supplies of natural gas delivered to Dominion Energy’s pipeline system, failure to maintain or replace customer contracts on favorable terms, changes in customer growth or usage patterns, including as a result of energy conservation programs, the availability of energy efficient devices and the use of distributed generation methods; • Receipt of approvals for, and timing of, closing dates for acquisitions and divestitures; • Impacts of acquisitions, divestitures, transfers of assets to joint ventures and retirements of assets based on asset portfolio reviews; • The expected timing and likelihood of the completion of any or all of the East Ohio, PSNC and Questar Gas Transactions, including the ability to obtain the requisite regulatory approvals and the terms and conditions of such approvals; • The expected timing and likelihood of the completion of the proposed sale of a 50% noncontrolling interest in the CVOW Commercial Project to Stonepeak, including the ability to obtain the requisite regulatory approvals and the terms and conditions of such approvals; • Adverse outcomes in litigation matters or regulatory proceedings; • Counterparty credit and performance risk; 57 • Fluctuations in the value of investments held in nuclear decommissioning trusts by the Companies and in benefit plan trusts by Dominion Energy; • Fluctuations in energy-related commodity prices and the effect these could have on Dominion Energy’s earnings and the Companies’ liquidity position and the underlying value of their assets; • Fluctuations in interest rates; • The effectiveness to which existing economic hedging instruments mitigate fluctuations in currency exchange rates of the Euro and Danish Krone associated with certain fixed price contracts for the major offshore construction and equipment components of the CVOW Commercial Project; • Changes in rating agency requirements or credit ratings and their effect on availability and cost of capital; • Global capital market conditions, including the availability of credit and the ability to obtain financing on reasonable terms; • Political and economic conditions, including inflation and deflation; • Employee workforce factors including collective bargaining agreements and labor negotiations with union employees; and • Changes in financial or regulatory accounting principles or policies imposed by governing bodies. Additionally, other risks that could cause actual results to differ from predicted results are set forth in Item 1A. Risk Factors. The Companies’ forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. The Companies caution the reader not to place undue reliance on their forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. The Companies undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made. ACCOUNTING MATTERS Critical Accounting Policies and Estimates Dominion Energy has identified the following accounting policies, including certain inherent estimates, that as a result of the judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operations involved, could result in material changes to its financial condition or results of operations under different conditions or using different assumptions. Dominion Energy has discussed the development, selection and disclosure of each of these policies with the Audit Committee of its Board of Directors. Accounting for Regulated Operations The accounting for Dominion Energy’s regulated electric and gas operations differs from the accounting for nonregulated operations in that Dominion Energy is required to reflect the effect of rate regulation in its Consolidated Financial Statements. For regulated businesses subject to federal or state cost-of-service rate regulation, regulatory practices that assign costs to accounting periods may differ from accounting methods generally applied by nonregulated companies. When it is probable that regulators will permit the recovery of current costs through future rates charged to customers, these costs that otherwise would be expensed by nonregulated companies are deferred as regulatory assets. Likewise, regulatory liabilities are recognized when it is probable that regulators will require customer refunds or other benefits through future rates or when revenue is collected from customers for expenditures that have yet to be incurred. In addition, a loss is recognized if it becomes probable that capital expenditures will be disallowed for ratemaking purposes and if a reasonable estimate of the amount of the disallowance can be made. Dominion Energy evaluates whether or not recovery of its regulatory assets through future rates is probable as well as whether a regulatory liability due to customers is probable and makes various assumptions in its analyses. These analyses are generally based on: • Orders issued by regulatory commissions, legislation and judicial actions; • Past experience; • Discussions with applicable regulatory authorities and legal counsel; • Estimated construction costs; • Forecasted earnings; and • Considerations around the likelihood of impacts from events such as unusual weather conditions, extreme weather events and other natural disasters and unplanned outages of facilities. 58 If recovery of a regulatory asset is determined to be less than probable, it will be written off in the period such assessment is made. A regulatory liability, if considered probable, will be recorded in the period such assessment is made or reversed into earnings if no longer probable. In connection with the 2023 Biennial Review, the Companies have concluded that it is not probable that Virginia Power will have earnings in excess of 70 basis points above its authorized ROE for the period January 1, 2021 through December 31, 2022 currently under review with the Virginia Commission or in excess of an expected authorized ROE of 9.70% for the period January 1, 2023 through December 31, 2024 in connection with the future 2025 Biennial Review. As a result, no regulatory liability for Virginia Power ratepayer credits to customers has been recorded at December 31, 2023. See Note 13 to the Consolidated Financial Statements for additional information. Asset Retirement Obligations Dominion Energy recognizes liabilities for the expected cost of retiring tangible long-lived assets for which a legal obligation exists and the ARO can be reasonably estimated. These AROs are recognized at fair value as incurred or when sufficient information becomes available to determine fair value and are generally capitalized as part of the cost of the related long-lived assets. In the absence of quoted market prices, Dominion Energy estimates the fair value of its AROs using present value techniques, in which it makes various assumptions including estimates of the amounts and timing of future cash flows associated with retirement activities, credit-adjusted risk free rates and cost escalation rates. The impact on measurements of new AROs or remeasurements of existing AROs, using different cost escalation or credit-adjusted risk free rates in the future, may be significant. When Dominion Energy revises any assumptions used to calculate the fair value of existing AROs, it adjusts the carrying amount of both the ARO liability and the related long-lived asset for assets that are in service; for assets that have ceased or are expected to cease operations, Dominion Energy adjusts the carrying amount of the ARO liability with such changes either recognized in income or as a regulatory asset. Dominion Energy’s AROs include a significant balance related to the future decommissioning of its nonregulated and utility nuclear facilities. These nuclear decommissioning AROs are reported in Dominion Energy Virginia, Dominion Energy South Carolina and Contracted Energy. At both December 31, 2023 and 2022, Dominion Energy’s nuclear decommissioning AROs totaled $1.9 billion. The following discusses critical assumptions inherent in determining the fair value of AROs associated with Dominion Energy’s nuclear decommissioning obligations. Dominion Energy obtains from third-party specialists periodic site-specific base year cost studies in order to estimate the nature, cost and timing of planned decommissioning activities for its nuclear plants. These cost studies are based on relevant information available at the time they are performed; however, estimates of future cash flows for extended periods of time are by nature highly uncertain and may vary significantly from actual results. These cash flows include estimates on timing of decommissioning, which for regulated nuclear units factors in the probability of NRC approval for license extensions. In addition, Dominion Energy’s cost estimates include cost escalation rates that are applied to the base year costs. Dominion Energy determines cost escalation rates, which represent projected cost increases over time due to both general inflation and increases in the cost of specific decommissioning activities, for each nuclear facility. The selection of these cost escalation rates is dependent on subjective factors which are considered to be critical assumptions. At December 31, 2023, a 0.25% increase in cost escalation rates would have resulted in an approximate $390 million increase in Dominion Energy’s nuclear decommissioning AROs. Income Taxes Judgment and the use of estimates are required in developing the provision for income taxes and reporting of tax-related assets and liabilities. The interpretation of tax laws and associated regulations involves uncertainty since tax authorities may interpret the laws differently. Ultimate resolution or clarification of income tax matters may result in favorable or unfavorable impacts to net income and cash flows, and adjustments to tax-related assets and liabilities could be material. Given the uncertainty and judgment involved in the determination and filing of income taxes, there are standards for recognition and measurement in financial statements of positions taken or expected to be taken by an entity in its income tax returns. Positions taken by an entity in its income tax returns that are recognized in the financial statements must satisfy a more-likely-than-not recognition threshold, assuming that the position will be examined by tax authorities with full knowledge of all relevant information. At December 31, 2023 and 2022, Dominion Energy had $110 million and $117 million, respectively, of unrecognized tax benefits. Changes in these unrecognized tax benefits may result from remeasurement of amounts expected to be realized, settlements with tax authorities and expiration of statutes of limitations. Deferred income tax assets and liabilities are recorded representing future effects on income taxes for temporary differences between the bases of assets and liabilities for financial reporting and tax purposes. Dominion Energy evaluates quarterly the probability of realizing deferred tax assets by considering current and historical financial results, expectations for future taxable income and the availability of tax planning strategies that can be implemented, if necessary, to realize deferred tax assets. Failure to achieve forecasted taxable income or successfully implement tax planning strategies may affect the realization of deferred tax assets. In addition, changes in tax laws or tax rates may require reconsideration of the realizability of existing deferred tax assets. Dominion Energy establishes a 59 valuation allowance when it is more-likely-than-not that all or a portion of a deferred tax asset will not be realized. At December 31, 2023 and 2022, Dominion Energy had established $130 million and $137 million, respectively, of valuation allowances. Accounting for Derivative Contracts and Financial Instruments at Fair Value Dominion Energy uses derivative contracts such as physical and financial forwards, futures, swaps, options and FTRs to manage commodity, interest rate and/or foreign currency exchange rate risks of its business operations. Derivative contracts, with certain exceptions, are reported in the Consolidated Balance Sheets at fair value. The majority of investments held in Dominion Energy’s nuclear decommissioning and rabbi trusts and pension and other postretirement funds are also subject to fair value accounting. See Notes 6 and 22 to the Consolidated Financial Statements for further information on these fair value measurements. Fair value is based on actively-quoted market prices, if available. In the absence of actively-quoted market prices, management seeks indicative price information from external sources, including broker quotes and industry publications. When evaluating pricing information provided by brokers and other pricing services, Dominion Energy considers whether the broker is willing and able to trade at the quoted price, if the broker quotes are based on an active market or an inactive market and the extent to which brokers are utilizing a particular model if pricing is not readily available. If pricing information from external sources is not available, or if Dominion Energy believes that observable pricing information is not indicative of fair value, judgment is required to develop the estimates of fair value. In those cases, Dominion Energy must estimate prices based on available historical and near-term future price information and use of statistical methods, including regression analysis, that reflect its market assumptions. Dominion Energy maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. See Note 6 to the Consolidated Financial Statements for quantitative information on unobservable inputs utilized in Dominion Energy’s fair value measurements of certain derivative contracts. Use of Estimates in Goodwill Impairment Testing In April of each year, Dominion Energy tests its goodwill for potential impairment, and performs additional tests more frequently if an event occurs or circumstances change in the interim that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. The 2023, 2022 and 2021 annual test did not result in the recognition of any goodwill impairment. In general, Dominion Energy estimates the fair value of its reporting units by using a combination of discounted cash flows and other valuation techniques that use multiples of earnings for peer group companies and analyses of recent business combinations involving peer group companies. Fair value estimates are dependent on subjective factors such as Dominion Energy’s estimate of future cash flows, the selection of appropriate discount and growth rates, and the selection of peer group companies and recent transactions. These underlying assumptions and estimates are made as of a point in time; subsequent modifications, particularly changes in discount rates or growth rates inherent in Dominion Energy’s estimates of future cash flows, could result in a future impairment of goodwill. Although Dominion Energy has consistently applied the same methods in developing the assumptions and estimates that underlie the fair value calculations, such as estimates of future cash flows, and based those estimates on relevant information available at the time, such cash flow estimates are highly uncertain by nature and may vary significantly from actual results. If the estimates of future cash flows used in the most recent test had been 10% lower or if the discount rate had been 0.25% higher, the resulting fair values would have still been greater than the carrying values of each of those reporting units tested, indicating that no impairment was present. In addition to the annual goodwill impairment testing described above, in December 2023, Dominion Energy’s current period calculation of the expected gain or loss on the Questar Gas and East Ohio Transactions resulted in an impairment of the related goodwill totaling $286 million, reflected in discontinued operations in Dominion Energy’s Consolidated Statements of Income. Until each of the Questar Gas, PSNC and East Ohio Transactions are complete, the current financial position of each disposal group relative to the expected purchase price, including related post-closing adjustments, could result in significant fluctuations potentially resulting in additional impairment of the related goodwill balances, which are reflected in current assets held for sale in Dominion Energy’s Consolidated Balance Sheets. See Notes 2 and 11 to the Consolidated Financial Statements for additional information. Use of Estimates in Long-Lived Asset Impairment Testing Impairment testing for an individual or group of long-lived assets, including intangible assets with definite lives, is required when circumstances indicate those assets may be impaired. When a long-lived asset’s carrying amount exceeds the undiscounted estimated future cash flows associated with the asset, the asset is considered impaired to the extent that the asset’s fair value is less than its 60 carrying amount. Performing an impairment test on long-lived assets involves judgment in areas such as identifying if circumstances indicate an impairment may exist, identifying and grouping affected assets in the case of long-lived assets, and developing the undiscounted and discounted estimated future cash flows (used to estimate fair value in the absence of a market-based value) associated with the asset, including probability weighting such cash flows to reflect expectations about possible variations in their amounts or timing, expectations about the operations of the long-lived assets and the selection of an appropriate discount rate. When determining whether a long-lived asset or asset group has been impaired, management groups assets at the lowest level that has identifiable cash flows. Although cash flow estimates are based on relevant information available at the time the estimates are made, estimates of future cash flows are, by nature, highly uncertain and may vary significantly from actual results. For example, estimates of future cash flows would contemplate factors which may change over time, such as the expected use of the asset or underlying assets of equity method investees, including future production and sales levels, expected fluctuations of prices of commodities sold and consumed and expected proceeds from dispositions. In 2022, Dominion Energy determined that its nonregulated solar generation assets within Contracted Energy were impaired. The estimates of future cash flows and selection of a discount rate are considered to be critical assumptions. A 10% decrease in projected future pre-tax cash flows would have resulted in a $52 million increase to the impairment charge recorded. A 0.25% increase in the discount rate would have resulted in a $9 million increase to the impairment charge recorded. See Note 10 to the Consolidated Financial Statements for further information concerning the impairment related to certain of Dominion Energy’s nonregulated solar generation assets. There were no tests performed in 2023 of long-lived assets which could have resulted in material impairments. Held for Sale Classification Dominion Energy recognizes the assets and liabilities of a disposal group as held for sale in the period (i) it has approved and committed to a plan to sell the disposal group, (ii) the disposal group is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the disposal group have been initiated, (iv) the sale of the disposal group is probable, (v) the disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Dominion Energy initially measures a disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a disposal group until closing. Upon designation as held for sale, Dominion Energy stops recording depreciation expense and assesses the fair value of the disposal group less any costs to sell at each reporting period and until it is no longer classified as held for sale. The determination as to whether the sale of the disposal group is probable may include significant judgments from management related to the expectation of obtaining approvals from applicable regulatory agencies such as state utility regulatory commissions, FERC or the U.S. Federal Trade Commission. This analysis is generally based on orders issued by regulatory commissions, past experience and discussions with applicable regulatory authorities and legal counsel. See Note 3 to the Consolidated Financial Statements for additional information. Employee Benefit Plans Dominion Energy sponsors noncontributory defined benefit pension plans and other postretirement benefit plans for eligible active employees, retirees and qualifying dependents. The projected costs of providing benefits under these plans are dependent, in part, on historical information such as employee demographics, the level of contributions made to the plans and earnings on plan assets. Assumptions about the future, including the expected long-term rate of return on plan assets, discount rates applied to benefit obligations, mortality rates and the anticipated rate of increase in healthcare costs and participant compensation, also have a significant impact on employee benefit costs. The impact of changes in these factors, as well as differences between Dominion Energy’s assumptions and actual experience, is generally recognized in the Consolidated Statements of Income over the remaining average service period of plan participants, rather than immediately. The expected long-term rates of return on plan assets, discount rates, healthcare cost trend rates and mortality rates are critical assumptions. Dominion Energy determines the expected long-term rates of return on plan assets for pension plans and other postretirement benefit plans by using a combination of: • Expected inflation and risk-free interest rate assumptions; • Historical return analysis to determine long-term historic returns as well as historic risk premiums for various asset classes; • Expected future risk premiums, asset classes’ volatilities and correlations; 61 • Forward-looking return expectations derived from the yield on long-term bonds and the expected long-term returns of major capital market assumptions; and • Investment allocation of plan assets. The long-term strategic target asset allocation for Dominion Energy’s pension funds is 26% U.S. equity, 19% non-U.S. equity, 32% fixed income, 3% real assets and 20% other alternative investments, such as private equity investments. Strategic investment policies are established for Dominion Energy’s prefunded benefit plans based upon periodic asset/liability studies. Factors considered in setting the investment policy include those mentioned above such as employee demographics, liability growth rates, future discount rates, the funded status of the plans and the expected long-term rate of return on plan assets. Deviations from the plans’ strategic allocation are a function of Dominion Energy’s assessments regarding short-term risk and reward opportunities in the capital markets and/or short-term market movements which result in the plans’ actual asset allocations varying from the strategic target asset allocations. Through periodic rebalancing, actual allocations are brought back in line with the targets. Future asset/liability studies will focus on strategies to further reduce pension and other postretirement plan risk, while still achieving attractive levels of returns. Dominion Energy develops its critical assumptions, which are then compared to the forecasts of an independent investment advisor or an independent actuary, as applicable, to ensure reasonableness. An internal committee selects the final assumptions. Dominion Energy calculated its pension cost using an expected long-term rate of return on plan assets assumption that ranged from 7.00% to 8.35% for 2023, 7.00% to 8.35% for 2022 and 7.00% to 8.45% for 2021. For 2024, the expected long-term rate of return for the pension cost assumption ranged from 7.00% to 8.35% for Dominion Energy’s plans held as of December 31, 2023. Dominion Energy calculated its other postretirement benefit cost using an expected long-term rate of return on plan assets assumption of 8.35% for 2023, 8.35% for 2022 and 8.45% for 2021. For 2024, the expected long-term rate of return for other postretirement benefit cost assumption is 8.35%. Dominion Energy determines discount rates from analyses of AA/Aa rated bonds with cash flows matching the expected payments to be made under its plans. The discount rates used to calculate pension cost and other postretirement benefit cost ranged from 5.65% to 5.75% for pension plans and 5.69% to 5.70% for other postretirement benefit plans in 2023, ranged from 3.06% to 3.19% for pension plans and 3.04% to 5.03% for other postretirement benefit plans in 2022 and ranged from 2.73% to 3.29% for pension plans and 2.69% to 2.80% for other postretirement benefit plans in 2021. Dominion Energy selected a discount rate ranging from 5.37% to 5.47% for pension plans and 5.40% to 5.42% for other postretirement benefit plans for determining its December 31, 2023 projected benefit obligations. Dominion Energy establishes the healthcare cost trend rate assumption based on analyses of various factors including the specific provisions of its medical plans, actual cost trends experienced and projected and demographics of plan participants. Dominion Energy’s healthcare cost trend rate assumption as of December 31, 2023 was 7.00% and is expected to gradually decrease to 5.00% by 2031 and continue at that rate for years thereafter. The following table illustrates the effect on cost of changing the critical actuarial assumptions discussed above, while holding all other assumptions constant: [[GREPCENT_TABLE]] [["","","","Increase (Decrease) in 2023 Net Periodic Cost"],["","Change in Actuarial Assumptions","","Pension Benefits","","","Other Postretirement Benefits"],["(millions, except percentages)"],["Discount rate","(0.25)%","","$","(5",")","","$","2"],["Long-term rate of return on plan assets","(0.25)%","","","26","","","","5"],["Health care cost trend rate","1%","","N/A","","","","12"]] [[/GREPCENT_TABLE]] In addition to the effects on cost, a 0.25% decrease in the discount rate would increase Dominion Energy’s projected pension benefit obligation at December 31, 2023 by $224 million and its accumulated postretirement benefit obligation at December 31, 2023 by $26 million, while a 1.00% increase in the healthcare cost trend rate would increase its accumulated postretirement benefit obligation at December 31, 2023 by $72 million. See Note 22 to the Consolidated Financial Statements for additional information on Dominion Energy’s employee benefit plans. 62 New Accounting Standards See Note 2 to the Consolidated Financial Statements for a discussion of new accounting standards. RESULTS OF OPERATIONS Dominion Energy Presented below is a summary of Dominion Energy’s consolidated results: [[GREPCENT_TABLE]] [["Year Ended December 31,","","2023","","","$ Change","","","2022","","","$ Change","","","2021"],["(millions, except EPS)"],["Net income attributable to Dominion Energy","","$","1,994","","","$","673","","","$","1,321","","","$","(2,078",")","","$","3,399"],["Diluted EPS","","","2.29","","","","0.80","","","","1.49","","","","(2.63",")","","","4.12"]] [[/GREPCENT_TABLE]] Overview 2023 VS. 2022 Net income attributable to Dominion Energy increased 51%, primarily due to the absences of a charge associated with the impairment of certain nonregulated solar generation facilities, a loss associated with the sale of Kewaunee, a charge for RGGI compliance costs deemed recovered through base rates and a charge in connection with a comprehensive settlement agreement for Virginia fuel expenses. In addition, there was an increase in net investment earnings on nuclear decommissioning trust funds, a gain on the sale of Dominion Energy’s remaining noncontrolling interest in Cove Point, increased unrealized gains on economic hedging activities and a net decrease in dismantling costs associated with the early retirement of certain electric generation facilities at Virginia Power. These increases were partially offset by a charge to reflect the recognition of deferred taxes on the outside basis of stock associated with East Ohio, PSNC, Questar Gas and Wexpro meeting the classification as held for sale, an impairment associated with the East Ohio and Questar Gas Transactions, a decrease in sales to electric utility customers attributable to weather and a decrease from the impact of 2023 Virginia legislation. 2022 VS. 2021 Net income attributable to Dominion Energy decreased 61%, primarily due to a charge associated with the impairment of certain nonregulated solar generation facilities, a loss associated with the sale of Kewaunee, a decrease in net investment earnings on nuclear decommissioning trust funds, a net decrease associated with the impacts of Virginia Power’s 2021 Triennial Review, a charge for RGGI compliance costs deemed recovered through base rates, a charge in connection with a comprehensive settlement agreement for Virginia fuel expenses and dismantling costs associated with the early retirement of certain electric generation facilities at Virginia Power. These decreases were partially offset by the absence of charges associated with the settlement of the South Carolina electric base rate case and increased unrealized gains on economic hedging activities. Analysis of Consolidated Operations Presented below are selected amounts related to Dominion Energy’s results of operations: [[GREPCENT_TABLE]] [["Year Ended December 31,","","2023","","","$ Change","","","2022","","","$ Change","","","2021"],["(millions)"],["Operating revenue","","$","14,393","","","$","455","","","$","13,938","","","$","2,519","","","$","11,419"],["Electric fuel and other energy-related purchases","","","3,935","","","","224","","","","3,711","","","","1,343","","","","2,368"],["Purchased electric capacity","","","55","","","","(4",")","","","59","","","","(11",")","","","70"],["Purchased gas","","","285","","","","(141",")","","","426","","","","34","","","","392"],["Other operations and maintenance","","","3,160","","","","(205",")","","","3,365","","","","188","","","","3,177"],["Depreciation and amortization","","","2,580","","","","138","","","","2,442","","","","325","","","","2,117"],["Other taxes","","","684","","","","9","","","","675","","","","(15",")","","","690"],["Impairment of assets and other charges","","","307","","","","(1,094",")","","","1,401","","","","1,207","","","","194"],["Losses (gains) on sales of assets","","","(27",")","","","(453",")","","","426","","","","11","","","","415"],["Other income (expense)","","","992","","","","883","","","","109","","","","(1,030",")","","","1,139"],["Interest and related charges","","","1,674","","","","672","","","","1,002","","","","(253",")","","","1,255"],["Income tax expense (benefit)","","","575","","","","462","","","","113","","","","294","","","","(181",")"],["Net income (loss) from discontinued operations including noncontrolling interests","","","(163",")","","","(1,057",")","","","894","","","","(464",")","","","1,358"],["Noncontrolling interests","","","\u2014","","","","\u2014","","","","\u2014","","","","(20",")","","","20"]] [[/GREPCENT_TABLE]] 63 An analysis of Dominion Energy’s results of operations follows: 2023 VS. 2022 Operating revenue increased 3%, primarily reflecting: • A $794 million net increase associated with market prices affecting Millstone, including economic hedging impacts of net realized and unrealized gains on freestanding derivatives ($1.1 billion); • A $298 million increase to recover the costs and an authorized return, as applicable, associated with Virginia Power non-fuel riders; • A $125 million net increase in fuel-related revenue as a result of an increase in commodity costs associated with sales to electric utility retail customers ($223 million) and a decrease in commodity costs associated with sales to gas utility customers ($98 million); • A $102 million increase in sales to electric utility retail customers associated with economic and other usage factors; • A $66 million increase in sales to electric utility retail customers associated with growth; and • The absence of a $20 million decrease associated with storm damage primarily from winter storms in Virginia. These increases were partially offset by: • A $212 million decrease in sales to electric utility retail customers, primarily due to a decrease in heating degree days during the heating season ($148 million) and a decrease in cooling degree days during the cooling season ($64 million); • A $206 million decrease from the combination of certain riders into base rates at Virginia Power as a result of 2023 Virginia legislation; • A $170 million decrease from planned outages ($94 million) and unplanned outages ($76 million) at Millstone; • A $135 million net decrease from electric utility customers who elect to pay market based or other negotiated rates, including settlements of economic hedges at Virginia Power; • A $109 million decrease from the sale of Hope; and • A $27 million decrease in PJM off-system sales at Virginia Power. Electric fuel and other energy-related purchases increased 6%, primarily due to higher commodity costs for electric utilities ($223 million) and an increase in the use of purchased renewable energy credits at Virginia Power ($55 million), partially offset by a decrease in PJM off-system sales at Virginia Power ($27 million); all of which are offset in operating revenue and do not impact net income. Purchased gas decreased 33%, primarily due to a decrease in commodity costs for gas utility operations ($98 million), which are offset in operating revenue and do not impact net income, and a decrease from the sale of Hope ($43 million). Other operations and maintenance decreased 6%, primarily reflecting: • A $187 million decrease in certain Virginia Power expenditures which are primarily recovered through state- and FERC-regulated rates and do not impact net income; • A $100 million decrease in storm damage and restoration costs in Virginia Power’s service territory; • A $25 million decrease from the sale of Hope; and • A $22 million decrease from materials and supplies expense. These decreases were partially offset by: • A $76 million increase in outage costs at Millstone ($66 million) and Virginia Power ($10 million); • A $32 million increase from the combination of certain riders into base rates at Virginia Power as a result of 2023 Virginia legislation; and • A $30 million increase in outside services. 64 Depreciation and amortization increased 6%, primarily due to various projects being placed into service ($159 million), partially offset by decrease due to the impairment of certain nonregulated solar generation facilities in 2022 ($19 million). Impairment of assets and other charges decreased 78%, primarily reflecting: • The absence of a charge associated with the impairment of certain nonregulated solar generation facilities ($829 million); • The absence of a charge in connection with a comprehensive settlement agreement for Virginia fuel expenses ($191 million); • A net decrease in dismantling costs and other activities associated with certain retired electric generation facilities at Virginia Power ($182 million); • The absence of a charge for RGGI compliance costs deemed recovered through base rates at Virginia Power ($180 million); and • The absence of a charge for the write-off of inventory ($40 million). These decreases were partially offset by: • The impairment of a corporate office building ($93 million); • A charge related to the revision of AROs for Millstone Unit 1 ($83 million); • A charge for an easement related to the CVOW Commercial Project for which Virginia Power will not seek recovery ($65 million); • A charge for the write-off of certain previously deferred amounts related to the cessation of certain riders effective July 2023 ($36 million); and • A charge associated with the abandonment of certain regulated solar generation and other facilities at Virginia Power ($25 million). Gains on sales of assets increased $453 million, primarily due to the absence of a loss associated with the sale of Kewaunee ($649 million), partially offset by the absence of a gain on the contribution of certain privatization operations to Dominion Privatization ($155 million). Other income increased $883 million, primarily due to net investment gains in 2023 compared to net investment losses in 2022 on nuclear decommissioning trust funds ($968 million), partially offset by Dominion Energy’s share of an impairment of certain property, plant and equipment at Align RNG ($35 million). Interest and related charges increased 67%, primarily due to increased commercial paper and long-term debt borrowings ($198 million), higher interest rates on commercial paper and long-term debt ($178 million), lower unrealized gains in 2023 compared to 2022 associated with freestanding derivatives ($173 million), higher interest rates on variable rate debt and cash flow interest rate swaps ($124 million), lower premiums received on interest rate derivatives ($60 million), and the absence of benefits associated with the early redemption of certain securities in the third and fourth quarters of 2022 ($35 million), partially offset by increased interest costs subject to recovery through riders ($38 million). Income tax expense increased $462 million, primarily due to higher pre-tax income ($521 million) and an increase in consolidated state deferred income taxes associated with the East Ohio, PSNC and Questar Gas Transactions and the sale of Dominion Energy’s 50% noncontrolling interest in Cove Point ($29 million), partially offset by the absence of tax expense on the sale of Hope’s stock ($90 million) and decreased consolidated state deferred income taxes on pre-tax gains from nuclear decommissioning trusts and economic hedges ($12 million). Net income from discontinued operations including noncontrolling interests decreased $1.1 billion, primarily due to charges reflecting the recognition of deferred taxes on the outside basis of stock associated with East Ohio, PSNC, Questar Gas and Wexpro meeting the classification as held for sale that will reverse when the sale is completed ($825 million), an impairment associated with the East Ohio and Questar Gas Transactions ($323 million), lower unrealized gains in 2023 compared to 2022 on interest rate derivatives for economic hedging of debt secured by Dominion Energy’s interest in Cove Point ($169 million), a decrease in equity method earnings from the sale of Dominion Energy’s noncontrolling interest in Cove Point ($44 million), a charge associated with the impairment of Birdseye ($34 million), an increase in interest expense primarily associated with debt issuances in 2022 ($31 million), the absence of a gain associated with the Q-Pipe Group for the finalization of the working capital adjustment in the first quarter of 2022 ($20 million) and an impairment charge of certain nonregulated solar assets ($11 million), partially offset by the gain on the sale of Dominion Energy’s remaining noncontrolling interest in Cove Point ($348 million), a net decrease in charges associated with the 65 impairment of the Madison solar project ($57 million) and an increase following the approved base rate case for Questar Gas ($42 million). 2022 VS. 2021 Operating revenue increased 22%, primarily reflecting: • A $1.3 billion increase in fuel-related revenue as a result of an increase in commodity costs associated with sales to electric utility retail customers ($1.2 billion) and gas utility customers ($99 million); • A $505 million increase to recover the costs and an authorized return, as applicable, associated with Virginia Power non-fuel riders; • The absence of a $356 million decrease for refunds provided to retail electric customers in Virginia associated with the settlement of the 2021 Triennial Review; • A $290 million net increase associated with market prices affecting Millstone, including economic hedging impacts of net realized and unrealized losses on freestanding derivatives ($6 million); • The absence of a $151 million decrease from an unbilled revenue reduction at Virginia Power; • A $57 million increase in sales to electric utility retail customers from an increase in heating degree days during the heating season ($52 million) and a net increase in cooling degree days during the cooling season ($5 million); • A $54 million increase in sales to utility retail customers associated with growth at electric ($46 million) and gas ($8 million) utilities; • A $38 million net increase from electric utility customers who elect to pay market-based or other negotiated rates, including settlements of economic hedges at Virginia Power; • A $30 million increase in sales to electric utility retail customers associated with economic and other usage factors; • A $24 million increase in sales to customers from non-jurisdictional solar generation facilities at Virginia Power; and • A $20 million increase in non-fuel base rates associated with the settlement in 2021 of the South Carolina electric base rate case. These increases were partially offset by: • A $155 million decrease from the sale of non-wholly-owned nonregulated solar facilities; • An $80 million decrease as a result of the contribution of certain nonregulated gas retail energy contracts to Wrangler; • A $55 million decrease reflecting a reduction in base rates associated with the settlement of the 2021 Triennial Review; • A $49 million decrease from the sale of Hope; • A $26 million decrease from a planned outage at Millstone; and • A $20 million decrease associated with storm damage primarily from winter storms in Virginia. Electric fuel and other energy-related purchases increased 57%, primarily due to higher commodity costs for electric utilities ($1.2 billion) and an increase in the use of purchased renewable energy credits at Virginia Power ($58 million), which are offset in operating revenue and do not impact net income. Other operations and maintenance increased 6%, primarily reflecting: • An $84 million increase in certain Virginia Power expenditures which are primarily recovered through state- and FERC-regulated rates and do not impact net income; • A $51 million increase in storm damage and restoration costs primarily from winter storms in Virginia Power’s service territory; • A $42 million increase in outage costs at Millstone ($26 million) and Virginia Power ($16 million); • A $36 million increase in materials and supplies expense primarily as a result of higher prices; • A $33 million increase in bad debt expense; and • An $18 million increase in outside services. 66 These increases were partially offset by: • The absence of a $44 million charge related to a revision in estimated recovery of spent nuclear fuel costs associated with the decommissioning of Kewaunee; and • A $31 million decrease in merger and integration-related costs associated with the SCANA Combination. Depreciation and amortization increased 15%, primarily due to various projects being placed into service ($183 million), an increase for amortization of a regulatory asset established in the settlement of the 2021 Triennial Review ($183 million), and an increase in RGGI-related amortization ($128 million), which except for the suspended period of Rider RGGI is offset in operating revenue and does not impact net income, partially offset by depreciation rates revised in the first quarter of 2022 at Virginia Power ($82 million) and a decrease from the sale of non-wholly-owned nonregulated solar facilities ($45 million). Impairment of assets and other charges increased $1.2 billion, primarily reflecting: • A charge associated with the impairment of certain nonregulated solar generation facilities ($829 million); • The absence of a benefit from the establishment of a regulatory asset associated with the early retirement of certain coal- and oil-fired generating units associated with the settlement of the 2021 Triennial Review ($549 million); • A charge in connection with a comprehensive settlement agreement for Virginia fuel expenses ($191 million); • A charge for RGGI compliance costs deemed recovered through base rates at Virginia Power ($180 million); • Dismantling costs associated with the early retirement of certain electric generation facilities at Virginia Power ($167 million); and • A charge for the write-off of inventory ($40 million). These increases were partially offset by: • The absence of charges associated with the settlement of the South Carolina electric base rate case ($249 million); • The absence of charges for CCRO benefits provided to retail electric customers in Virginia associated with Virginia Power’s 2021 Triennial Review ($188 million); • A decrease in charges associated with litigation acquired in the SCANA Combination ($97 million); • The absence of a charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to Virginia’s 2021 budget process ($77 million); • The absence of a charge for corporate office lease termination ($62 million); and • The absence of a write-off of nonregulated retail software development assets ($20 million). Losses on sales of assets increased 3%, primarily due to a loss associated with the sale of Kewaunee ($649 million) and the absence of gains on the sale of nonregulated retail energy marketing assets ($87 million), partially offset by the absence of a net loss on the sales of non-wholly-owned nonregulated solar facilities ($513 million), a gain on the contribution of certain privatization operations to Dominion Privatization ($155 million), a gain on the transfer of certain non-utility and utility property in South Carolina ($20 million) and a gain on the sale of certain utility property in South Carolina ($20 million). Other income decreased 90%, primarily due to net investment losses in 2022 compared to net investment gains in 2021 on nuclear decommissioning trust funds ($1.1 billion), partially offset by an increase in non-service components of pension and other postretirement employee benefit plan credits ($100 million) and the absence of charges associated with the settlement of the South Carolina electric base rate case ($18 million). Interest and related charges decreased 20%, primarily due to higher unrealized gains associated with freestanding derivatives ($270 million), higher premiums received on interest rate derivatives ($60 million), a decrease due to junior subordinated note repayments in 2021 ($52 million), benefits associated with the early redemption of certain securities in the third and fourth quarters of 2022 ($35 million) and the absence of charges associated with the early redemption of certain securities in the third quarter of 2021 ($23 million), partially offset by an increase from net debt issuances ($90 million), higher interest rates on commercial paper borrowings ($51 million), higher interest rates on variable rate debt and cash flow interest rate swaps ($41 million) and the absence of a benefit associated with the effective settlement of uncertain tax positions ($21 million). 67 Income tax expense increased $294 million, primarily due to the absence of investment tax credits recognized in connection with the sale of SBL Holdco and the 50% controlling interest in Four Brothers and Three Cedars ($392 million), tax expense on the sale of Hope’s stock ($90 million), the absence of benefits from the effective settlement of uncertain tax positions ($38 million), and a state legislative change ($21 million), partially offset by lower pre-tax income including lower state income tax benefits on pre-tax losses from nuclear decommissioning trusts and economic hedges ($236 million). Net income from discontinued operations including noncontrolling interests decreased 34%, primarily due to the completion of the sale of the Q-Pipe Group in December 2021 ($638 million), a charge associated with the impairment of the Madison solar project ($76 million) and higher interest rates on variable rate debt secured by Dominion Energy’s interest 50% noncontrolling interest in Cove Point ($54 million), partially offset by unrealized gains in 2022 compared to unrealized losses in 2021 on interest rate derivatives for economic hedging of debt secured by Dominion Energy’s 50% noncontrolling interest in Cove Point ($188 million), an increase from gas utility capital cost riders ($25 million) and cost saving incentive earned under the Wexpro Agreements ($21 million). Noncontrolling interests decreased $20 million, primarily due to the absence of operations in connection with the sale of certain nonregulated solar generating projects held in partnerships. Virginia Power Presented below is a summary of Virginia Power’s consolidated results: [[GREPCENT_TABLE]] [["Year Ended December 31,","","2023","","","$ Change","","","2022","","","$ Change","","","2021"],["(millions)"],["Net income","","$","1,452","","","$","340","","","$","1,112","","","$","(550",")","","$","1,662"]] [[/GREPCENT_TABLE]] Overview 2023 VS. 2022 Net income increased 31%, primarily due to the absences of a charge for RGGI compliance costs deemed recovered through base rates and a charge in connection with a comprehensive settlement agreement for Virginia fuel expenses as well as an increase in net investment earnings on nuclear decommissioning trust funds, a decrease in storm damage and service restoration costs and a net decrease in dismantling costs associated with the early retirement of certain electric generation facilities, partially offset by a decrease in sales to electric utility customers attributable to weather and the impact of 2023 Virginia legislation. 2022 VS. 2021 Net income decreased 33%, primarily due to a decrease in net investment earnings on nuclear decommissioning trust funds, a net decrease associated with the impacts of the 2021 Triennial Review, a charge for RGGI compliance costs deemed recovered through base rates, a charge in connection with a comprehensive settlement agreement for Virginia fuel expenses and dismantling costs associated with the early retirement of certain electric generation facilities. Analysis of Consolidated Operations Presented below are selected amounts related to Virginia Power’s results of operations: [[GREPCENT_TABLE]] [["Year Ended December 31,","","2023","","","$ Change","","","2022","","","$ Change","","","2021"],["(millions)"],["Operating revenue","","$","9,573","","","$","(81",")","","$","9,654","","","$","2,184","","","$","7,470"],["Electric fuel and other energy-related purchases","","","2,918","","","","5","","","","2,913","","","","1,178","","","","1,735"],["Purchased electric capacity","","","46","","","","\u2014","","","","46","","","","22","","","","24"],["Other operations and maintenance","","","1,851","","","","(200",")","","","2,051","","","","258","","","","1,793"],["Depreciation and amortization","","","1,871","","","","135","","","","1,736","","","","372","","","","1,364"],["Other taxes","","","298","","","","(5",")","","","303","","","","(23",")","","","326"],["Impairment of assets and other charges (benefits)","","","115","","","","(442",")","","","557","","","","826","","","","(269",")"],["Other income (expense)","","","131","","","","131","","","","\u2014","","","","(146",")","","","146"],["Interest and related charges","","","764","","","","122","","","","642","","","","108","","","","534"],["Income tax expense","","","389","","","","95","","","","294","","","","(153",")","","","447"]] [[/GREPCENT_TABLE]] 68 An analysis of Virginia Power’s results of operations follows: 2023 VS. 2022 Operating revenue decreased 1%, primarily reflecting: • A $206 million decrease from the combination of certain riders into base rates as a result of 2023 Virginia legislation; • A $167 million decrease in sales to electric utility retail customers from a decrease in heating degree days during the heating season ($118 million) and a decrease in cooling degree days during the cooling season ($49 million); • An $86 million net decrease from electric utility customers who elect to pay market based or other negotiated rates, including settlements of economic hedges; • A $27 million decrease in PJM off-system sales; and • A $19 million decrease from the absence of privatization operations. These decreases were partially offset by: • A $298 million increase to recover the costs and an authorized return, as applicable, associated with non-fuel riders; • A $126 million increase in sales to electric utility retail customers associated with economic and other usage factors; and • A $37 million increase in sales to electric utility retail customers associated with growth. Electric fuel and other energy-related purchases increased $5 million, primarily due to an increase in the use of purchased renewable energy credits ($55 million), partially offset by a decrease in PJM off-system sales ($27 million); both of which are offset in operating revenue and do not impact net income and a decrease in purchased power costs ($13 million). Other operations and maintenance decreased 10%, primarily reflecting: • A $187 million decrease in certain expenses which are primarily recovered through state- and FERC-regulated rates and do not impact net income; and • A $100 million decrease in storm damage and restoration costs. These decreases were partially offset by: • A $56 million increase in salaries, wages and benefits and administrative costs; • A $32 million increase from the combination of certain riders into base rates as a result of 2023 Virginia legislation; • A $27 million increase in outside services; and • A $15 million increase in bad debt expense. Impairment of assets and other charges (benefits) decreased 79%, primarily reflecting: • The absence of a charge in connection with a comprehensive settlement agreement for Virginia fuel expenses ($191 million); • A net decrease in dismantling costs and other activities associated with certain retired electric generation facilities ($182 million); • The absence of a charge for RGGI compliance costs deemed recovered through base rates ($180 million); and • A net decrease in charges for the write-off of inventory ($14 million). These decreases were partially offset by: • A charge for an easement related to the CVOW Commercial Project for which Virginia Power will not seek recovery ($65 million); • A charge for the write-off of certain previously deferred amounts related to the cessation of certain riders effective July 2023 ($36 million); and • A charge associated with the abandonment of certain regulated solar generation and other facilities ($25 million). 69 Other income increased $131 million, primarily due to net investment gains in 2023 compared to net investment losses in 2022 on nuclear decommissioning trust funds. Interest and related charges increased 19%, primarily due to an increase in the average outstanding balance of commercial paper and intercompany borrowings with Dominion Energy, and increased long-term debt ($124 million) and higher interest rates on commercial paper, long-term debt and intercompany borrowings with Dominion Energy ($39 million), partially offset by increased interest costs subject to recovery through riders ($38 million). Income tax expense increased 32%, primarily due to higher pre-tax income ($117 million) and lower investment tax credits ($17 million), partially offset by the absence of the recognition of a deferred intercompany gain related to the transfer and subsequent contribution of existing privatization operations in Virginia to Dominion Privatization ($34 million). 2022 VS. 2021 Operating revenue increased 29%, primarily reflecting: • A $1.1 billion increase in fuel-related revenue as a result of a net increase in commodity costs associated with sales to electric utility retail customers; • A $505 million increase to recover the costs and an authorized return, as applicable, associated with non-fuel riders; • The absence of a $356 million decrease for refunds provided to retail electric customers in Virginia associated with the settlement of the 2021 Triennial Review; • The absence of a $151 million decrease from an unbilled revenue reduction; • A $29 million net increase in sales to retail customers from an increase in heating degree days during the heating season ($47 million), partially offset by a decrease in cooling degree days during the cooling season ($18 million); • A $26 million increase in sales to electric utility retail customers associated with growth; • A $24 million increase in sales to customers from non-jurisdictional solar generation facilities; and • A $19 million net increase from electric utility customers who elect to pay market-based or other negotiated rates, including settlements of economic hedges. These increases were partially offset by: • A $55 million decrease reflecting a reduction in base rates associated with the settlement of the 2021 Triennial Review. Electric fuel and other energy-related purchases increased 68%, primarily due to higher commodity costs for electric utilities ($1.1 billion) and an increase in the use of purchased renewable energy credits ($58 million), which are offset in operating revenue and do not impact net income. Purchased electric capacity increased 92%, primarily due to an increase in expense related to the annual PJM capacity performance market effective June 2021. Other operations and maintenance increased 14%, primarily reflecting: • An $84 million increase in certain expenses which are primarily recovered through state- and FERC-regulated rates and do not impact net income; • A $51 million increase in storm damage and service restoration costs primarily from winter storms; • A $28 million increase in bad debt expense; • A $26 million increase in materials and supplies expense primarily as a result of higher prices; • A $19 million increase in outside services; • A $17 million increase in nuclear insurance costs; and • A $16 million increase in planned outage costs. 70 Depreciation and amortization increased 27%, primarily due to an increase for amortization of a regulatory asset established in the settlement of the 2021 Triennial Review ($183 million), an increase due to various projects being placed into service ($144 million) and an increase in RGGI-related amortization ($128 million), which except for the suspended period of Rider RGGI is offset in operating revenue and does not impact net income, partially offset by depreciation rates revised in the first quarter of 2022 ($82 million). Impairment of assets and other charges (benefits) increased $826 million, primarily reflecting: • The absence of a benefit from the establishment of a regulatory asset associated with the early retirement of certain coal- and oil-fired generating units associated with the settlement of the 2021 Triennial Review ($549 million); • A charge in connection with a comprehensive settlement agreement for Virginia fuel expenses ($191 million); • A charge for RGGI compliance costs deemed recovered through base rates ($180 million); • Dismantling costs associated with the early retirement of certain electric generation facilities ($167 million); and • A charge for the write-off of inventory ($19 million). These increases were partially offset by: • The absence of charges for CCRO benefits provided to retail electric customers in Virginia associated with Virginia Power’s 2021 Triennial Review ($188 million); and • The absence of a charge for the forgiveness of Virginia retail electric customer accounts in arrears pursuant to Virginia’s 2021 budget process ($77 million). Other income decreased $146 million, primarily due to net investment losses in 2022 compared to net investment gains in 2021 on nuclear decommissioning trust funds. Interest and related charges increased 20%, primarily due to an increase from net debt issuances in 2022 and 2021 ($60 million), higher interest rates on commercial paper borrowings ($17 million) and an increase in principal and interest rates on intercompany borrowings with Dominion Energy ($14 million). Income tax expense decreased 34%, primarily due to lower pre-tax income ($182 million) and higher investment tax credits ($11 million), partially offset by the recognition of a deferred intercompany gain related to the transfer and subsequent contribution of existing privatization operations in Virginia to Dominion Privatization ($34 million), and the absence of the benefit of a state legislative change ($16 million). SEGMENT RESULTS OF OPERATIONS Segment results include the impact of intersegment revenues and expenses, which may result in intersegment profit or loss. In September 2023, Dominion Energy revised its operating segments subsequent to entering agreements for the East Ohio, PSNC and Questar Gas Transactions as well as completing the sale of its noncontrolling interest in Cove Point. In addition, certain operations were reclassified in December 2023 to the Corporate and Other segment. See Notes 1 and 26 to the Consolidated Financial Statements for additional information. The historical information presented herein has been recast to reflect the current segment presentation. 71 Presented below is a summary of contributions by Dominion Energy’s operating segments to net income (loss) attributable to Dominion Energy: [[GREPCENT_TABLE]] [["Year Ended December 31,","","2023","","","2022","","","2021"],["","","Net income (loss) attributable to Dominion Energy","","","EPS(1)","","","Net income (loss) attributable to Dominion Energy","","","EPS(1)","","","Net income (loss) attributable to Dominion Energy","","","EPS(1)"],["(millions, except EPS)"],["Dominion Energy Virginia","","$","1,684","","","$","2.01","","","$","1,905","","","$","2.31","","","$","1,863","","","$","2.31"],["Dominion Energy South Carolina","","","377","","","","0.45","","","","505","","","","0.61","","","","437","","","","0.54"],["Contracted Energy","","","99","","","","0.12","","","","188","","","","0.23","","","","226","","","","0.28"],["Corporate and Other","","","(166",")","","","(0.29",")","","","(1,277",")","","","(1.66",")","","","873","","","","0.99"],["Consolidated","","$","1,994","","","$","2.29","","","$","1,321","","","$","1.49","","","$","3,399","","","$","4.12"]] [[/GREPCENT_TABLE]] (1) Consolidated results are presented on a diluted EPS basis. The dilutive impacts, primarily consisting of potential shares which had not yet been issued, are included within the results of the Corporate and Other segment. EPS contributions for Dominion Energy’s operating segments are presented utilizing basic average shares outstanding for the period. Dominion Energy Virginia Presented below are operating statistics related to Dominion Energy Virginia’s operations: [[GREPCENT_TABLE]] [["Year Ended December 31,","","2023","","","% Change","","","2022","","","% Change","","","2021"],["Electricity delivered (million MWh)","","","89.9","","","","\u2014","","%","","90.0","","","","6","","%","","85.2"],["Electricity supplied (million MWh):"],["Utility","","","90.0","","","","\u2014","","","","90.2","","","","5","","","","85.7"],["Non-Jurisdictional","","","1.6","","","","7","","","","1.5","","","","50","","","","1.0"],["Degree days (electric distribution and utility service area):"],["Cooling","","","1,643","","","","(7",")","","","1,765","","","","(1",")","","","1,783"],["Heating","","","2,830","","","","(20",")","","","3,555","","","","11","","","","3,210"],["Average electric distribution customer accounts (thousands)","","","2,752","","","","1","","","","2,724","","","","1","","","","2,697"]] [[/GREPCENT_TABLE]] Presented below, on an after-tax basis, are the key factors impacting Dominion Energy Virginia’s net income contribution: 2023 VS. 2022 [[GREPCENT_TABLE]] [["","","Increase (Decrease)"],["","","Amount","","","EPS"],["(millions, except EPS)"],["Weather","","$","(126",")","","$","(0.15",")"],["Customer usage and other factors","","","123","","","","0.15"],["Customer-elected rate impacts","","","(64",")","","","(0.08",")"],["Impact of 2023 Virginia legislation","","","(155",")","","","(0.19",")"],["Rider equity return","","","146","","","","0.18"],["Storm damage and restoration costs","","","12","","","","0.01"],["Depreciation and amortization","","","(27",")","","","(0.03",")"],["Renewable energy investment tax credits","","","(17",")","","","(0.02",")"],["Interest expense, net","","","(38",")","","","(0.05",")"],["Other","","","(75",")","","","(0.09",")"],["Share dilution","","","\u2014","","","","(0.03",")"],["Change in net income contribution","","$","(221",")","","$","(0.30",")"]] [[/GREPCENT_TABLE]] 72 2022 VS. 2021 [[GREPCENT_TABLE]] [["","","Increase (Decrease)"],["","","Amount","","","EPS"],["(millions, except EPS)"],["Weather","","$","21","","","$","0.03"],["Customer usage and other factors","","","25","","","","0.03"],["Customer-elected rate impacts","","","13","","","","0.02"],["Base rate case impacts","","","(41",")","","","(0.05",")"],["Rider equity return","","","63","","","","0.08"],["Storm damage and service restoration","","","(17",")","","","(0.02",")"],["Planned outage costs","","","(12",")","","","(0.01",")"],["Depreciation and amortization","","","19","","","","0.02"],["Renewable energy investment tax credits","","","11","","","","0.01"],["Salaries, wages and benefits & administrative costs","","","28","","","","0.03"],["Interest expense, net","","","(14",")","","","(0.02",")"],["Other","","","(54",")","","","(0.07",")"],["Share dilution","","","\u2014","","","","(0.05",")"],["Change in net income contribution","","$","42","","","$","\u2014"]] [[/GREPCENT_TABLE]] Dominion Energy South Carolina Presented below are selected operating statistics related to Dominion Energy South Carolina’s operations: [[GREPCENT_TABLE]] [["Year Ended December 31,","","2023","","","% Change","","","2022","","","% Change","","","2021"],["Electricity delivered (million MWh)","","","21.9","","","","(5",")","%","","23.0","","","","3","","%","","22.4"],["Electricity supplied (million MWh)","","","23.0","","","","(5",")","","","24.1","","","","3","","","","23.5"],["Degree days (electric and gas distribution service areas):"],["Cooling","","","725","","","","(5",")","","","767","","","","(11",")","","","859"],["Heating","","","917","","","","(29",")","","","1,294","","","","1","","","","1,280"],["Average electric distribution customer accounts (thousands)","","","790","","","","2","","","","777","","","","1","","","","766"],["Gas distribution throughput (bcf):"],["Sales","","","66","","","","(3",")","","","68","","","","(6",")","","","72"],["Average gas distribution customer accounts (thousands)","","","443","","","","4","","","","427","","","","4","","","","412"]] [[/GREPCENT_TABLE]] Presented below, on an after-tax basis, are the key factors impacting Dominion Energy South Carolina’s net income contribution: 2023 VS. 2022 [[GREPCENT_TABLE]] [["","","Increase (Decrease)"],["","","Amount","","","EPS"],["(millions, except EPS)"],["Weather","","$","(34",")","","$","(0.04",")"],["Customer usage and other factors","","","11","","","","0.01"],["Customer-elected rate impacts","","","(37",")","","","(0.04",")"],["Base rate case & Natural Gas Rate Stabilization Act impacts","","","5","","","","0.01"],["Capital cost rider","","","(8",")","","","(0.01",")"],["Gains on sales of property","","","(32",")","","","(0.04",")"],["Depreciation and amortization","","","(18",")","","","(0.02",")"],["Interest expense, net","","","(25",")","","","(0.03",")"],["Other","","","10","","","","\u2014"],["Share dilution","","","\u2014","","","","\u2014"],["Change in net income contribution","","$","(128",")","","$","(0.16",")"]] [[/GREPCENT_TABLE]] 73 2022 VS. 2021 [[GREPCENT_TABLE]] [["","","Increase (Decrease)"],["","","Amount","","","EPS"],["(millions, except EPS)"],["Weather","","$","21","","","$","0.03"],["Customer usage and other factors","","","38","","","","0.05"],["Customer-elected rate impacts","","","14","","","","0.02"],["Base rate case & Natural Gas Rate Stabilization Act impacts","","","22","","","","0.03"],["Capital cost rider","","","(8",")","","","(0.01",")"],["Gains on sales of property","","","17","","","","0.02"],["Depreciation and amortization","","","(15",")","","","(0.02",")"],["Interest expense, net","","","(16",")","","","(0.02",")"],["Other","","","(5",")","","","(0.02",")"],["Share dilution","","","\u2014","","","","(0.01",")"],["Change in net income contribution","","$","68","","","$","0.07"]] [[/GREPCENT_TABLE]] Contracted Energy Presented below are selected operating statistics related to Contracted Energy’s operations: [[GREPCENT_TABLE]] [["Year Ended December 31,","","2023","","","% Change","","","2022","","","% Change","","","2021"],["Electricity supplied (million MWh)","","","14.8","","","","(17",")","%","","17.8","","","","(14",")","%","","20.8"]] [[/GREPCENT_TABLE]] Presented below, on an after-tax basis, are the key factors impacting Contracted Energy’s net income contribution: 2023 VS. 2022 [[GREPCENT_TABLE]] [["","","Increase (Decrease)"],["","","Amount","","","EPS"],["(millions, except EPS)"],["Margin","","$","83","","","$","0.10"],["Planned Millstone outages(1)(2)","","","(111",")","","","(0.13",")"],["Unplanned Millstone outages(1)","","","(52",")","","","(0.06",")"],["Depreciation and amortization","","","14","","","","0.02"],["Other","","","(23",")","","","(0.04",")"],["Share dilution","","","\u2014","","","","\u2014"],["Change in net income contribution","","$","(89",")","","$","(0.11",")"]] [[/GREPCENT_TABLE]] (1) Includes earnings impact from outage costs and lower energy margins. (2) Includes the effect of two planned refueling outages during 2023 as compared to one planned outage in 2022. 2022 VS. 2021 [[GREPCENT_TABLE]] [["","","Increase (Decrease)"],["","","Amount","","","EPS"],["(millions, except EPS)"],["Margin","","$","14","","","$","0.02"],["Sale of non-wholly-owned nonregulated solar facilities","","","(30",")","","","(0.04",")"],["Planned Millstone outage(1)","","","(44",")","","","(0.05",")"],["Renewable energy investment tax credits","","","(7",")","","","(0.01",")"],["Other","","","29","","","","0.03"],["Share dilution","","","\u2014","","","","\u2014"],["Change in net income contribution","","$","(38",")","","$","(0.05",")"]] [[/GREPCENT_TABLE]] (1) Includes earnings impact from outage costs and lower energy margins. 74 Corporate and Other Presented below are the Corporate and Other segment’s after-tax results: [[GREPCENT_TABLE]] [["Year Ended December 31,","","2023","","","2022","","","2021"],["(millions, except EPS)"],["Specific items attributable to operating segments","","$","405","","","$","(2,386",")","","$","(316",")"],["Specific items attributable to Corporate and Other segment","","","(154",")","","","1,073","","","","1,307"],["Net income (expense) from specific items","","","251","","","","(1,313",")","","","991"],["Corporate and other operations:"],["Interest expense, net","","","(564",")","","","(332",")","","","(414",")"],["Equity method investments(1)","","","6","","","","138","","","","87"],["Pension and other postretirement benefit plans","","","264","","","","256","","","","212"],["Corporate service company costs","","","(126",")","","","(127",")","","","(135",")"],["Other","","","3","","","","101","","","","132"],["Net income (expense) from corporate and other operations","","","(417",")","","","36","","","","(118",")"],["Total net income (expense)","","","(166",")","","","(1,277",")","","","873"],["EPS impact","","$","(0.29",")","","$","(1.66",")","","$","0.99"]] [[/GREPCENT_TABLE]] (1) Includes gains associated with certain transactions of $115 million and $55 million recorded in 2022 and 2021, respectively. See Note 9 to the Consolidated Financial Statements for additional information. 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 2023, this primarily included an $825 million charge to reflect the recognition of deferred taxes on the outside basis of stock associated with East Ohio, PSNC, Questar Gas and Wexpro meeting the classification as held for sale that will reverse when the sales are completed, $662 million net income from discontinued operations, primarily associated with operations included in the East Ohio, PSNC and Questar Gas Transactions and Dominion Energy’s noncontrolling interest in Cove Point, including the gain on sale, as well as an impairment charge associated with the East Ohio and Questar Gas Transactions, a $127 million after-tax benefit for derivative mark-to-market changes and a $69 million after-tax charge associated with the impairment of a corporate office building. In 2022, this primarily included $894 million net income from discontinued operations, primarily associated with operations included in the East Ohio, PSNC and Questar Gas Transactions and Dominion Energy’s noncontrolling interest in Cove Point, a $254 million after-tax benefit for derivative mark-to-market changes and a $78 million loss associated with the sale of Hope. In 2021, this primarily included $1.4 billion net income from discontinued operations, primarily associated with the Q-Pipe Group, operations included in the East Ohio, PSNC and Questar Gas Transactions and Dominion Energy’s noncontrolling interest in Cove Point, 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 $32 million of after-tax charges for merger and integration-related costs associated with the SCANA Combination. OUTLOOK Dominion Energy’s 2024 net income is expected to increase on a per share basis as compared to 2023 primarily from the following: • The absence of charges associated with the East Ohio, PSNC and Questar Gas Transactions; • A return to normal weather in its electric service territories; • The absence of amortization of a regulatory asset established in connection with the settlement of the 2021 Triennial Review; • A reduction in planned and unplanned outages at Millstone; • A reduction in interest expense from the utilization of sales proceeds to reduce debt; • A reduction in interest expense following the securitization of certain Virginia Power deferred fuel costs; and • Construction and operation of growth projects primarily in electric utility operations. These increases are expected to be partially offset by the following: • The absence of operations associated with the expected closings of the East Ohio, PSNC and Questar Gas Transactions; 75 • The absence of operations associated with the sale of Dominion Energy’s remaining noncontrolling interest in Cove Point and gain on sale; and • The combination of certain riders into base rates at Virginia Power for the entire year. LIQUIDITY AND CAPITAL RESOURCES Dominion Energy depends on both cash generated from operations and external sources of liquidity to provide working capital and as a bridge to long-term financings. Dominion Energy’s material cash requirements include capital and investment expenditures, repaying short-term and long-term debt obligations and paying dividends on its common and preferred stock. Analysis of Cash Flows Presented below are selected amounts related to Dominion Energy’s cash flows: [[GREPCENT_TABLE]] [["Year Ended December 31,","","2023","","","2022","","","2021"],["(millions)"],["Cash, restricted cash and equivalents at beginning of year","","$","341","","","$","408","","","$","247"],["Cash flows provided by (used in):"],["Operating activities(1)","","","6,572","","","","3,700","","","","4,037"],["Investing activities","","","(7,207",")","","","(6,746",")","","","(6,247",")"],["Financing activities","","","595","","","","2,979","","","","2,371"],["Net increase (decrease) in cash, restricted cash and equivalents","","","(40",")","","","(67",")","","","161"],["Cash, restricted cash and equivalents at end of year","","$","301","","","$","341","","","$","408"]] [[/GREPCENT_TABLE]] (1) Includes cash outflows of $78 million, $63 million and $53 million for energy efficiency programs in Virginia and $27 million, $26 million and $21 million for DSM programs in South Carolina for the years ended December 31, 2023, 2022 and 2021, respectively. Operating Cash Flows Net cash provided by Dominion Energy’s operating activities increased $2.9 billion, inclusive of a $366 million decrease from discontinued operations. Net cash provided by continuing operations increased $3.2 billion primarily due to higher deferred fuel and purchased gas cost recoveries ($2.7 billion), a decrease in refund payments to Virginia electric customers associated with the settlement of the 2021 Triennial Review ($293 million), lower margin deposits ($258 million), an increase from changes in working capital ($311 million) and a $173 million increase primarily due to lower income tax payments, partially offset by an increase in interest payments driven by higher interest rates and borrowings ($530 million). Investing Cash Flows Net cash used in Dominion Energy’s investing activities increased $461 million, primarily due to an increase in plant construction and other property additions ($2.6 billion), absence of net proceeds from the sale of Hope ($727 million), a decrease in proceeds from the sale of assets and equity method investments ($205 million), higher cost of removal less salvage ($161 million), the absence of withdrawals from Kewaunee’s nuclear decommissioning trust ($80 million) and increased contributions to equity method affiliates ($61 million), substantially offset by net proceeds from the sale of the remaining noncontrolling interest in Cove Point ($3.3 billion) and lower acquisitions of solar development projects ($143 million). Financing Cash Flows Net cash provided by Dominion Energy’s financing activities decreased $2.4 billion primarily due to a $5.9 billion decrease due to net repayments of long-term debt in 2023 versus net issuances in 2022, a decrease in common stock issuance ($1.8 billion) including the absence of the settlement of the stock purchase contract component of the 2019 Equity Units in 2022 ($1.6 billion), lower net issuances of short-term debt ($576 million) and net repayment of credit facility borrowings ($450 million), partially offset by net borrowings on 364-day term loan facilities ($4.8 billion) and the absence of the redemption of Series A Preferred Stock in 2022 ($1.6 billion). 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. 76 Joint Revolving Credit Facility Dominion Energy maintains a $6.0 billion joint revolving credit facility which provides for a discount in the pricing of certain annual fees and amounts borrowed by Dominion Energy under the facility if Dominion Energy achieves certain annual renewable electric generation and diversity and inclusion objectives. Dominion Energy’s commercial paper and letters of credit outstanding, as well as capacity available under its credit facility were as follows: [[GREPCENT_TABLE]] [["","","Facility Limit","","","Outstanding Commercial Paper(1)","","","Outstanding Letters of Credit","","","Facility Capacity Available"],["(millions)"],["At December 31, 2023"],["Joint revolving credit facility(2)","","$","6,000","","","$","3,547","","","$","16","","","$","2,437"]] [[/GREPCENT_TABLE]] (1) The weighted-average interest rate of the outstanding commercial paper supported by Dominion Energy’s credit facility was 5.69% at December 31, 2023. (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. 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 statement 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, 2023, Dominion Energy’s Consolidated Balance Sheets include $409 million presented within short-term debt, with a weighted-average interest rate of 5.50%. 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. In January 2023, Dominion Energy entered into a $2.5 billion 364-day term loan facility which bears interest at a variable rate and was scheduled to mature in January 2024 with the proceeds to be used to repay existing long-term debt and short-term debt upon maturity and for other general corporate purposes. Concurrently, Dominion Energy borrowed an initial $1.0 billion with the proceeds used to repay long-term debt. In February and March 2023, Dominion Energy borrowed $500 million and $1.0 billion, respectively, with the proceeds used for general corporate purposes and to repay long-term debt. At December 31, 2023, Dominion Energy’s Consolidated Balance Sheet includes $2.5 billion with respect to such facility presented within securities due within one year. In January 2024, the facility was amended and will mature in July 2024. The amended agreement contains certain mandatory early repayment provisions, including that any after-tax proceeds in connection with the East Ohio, Questar Gas and PSNC Transactions be applied to any outstanding borrowings under the facility. The maximum allowed total debt to total capital ratio under the facility is consistent with such allowed ratio under Dominion Energy’s joint revolving credit facility. In July 2023, Dominion Energy entered into two $600 million 364-day term loan facilities which bore interest at a variable rate and were scheduled to mature in July 2024 with the proceeds to be used to repay existing long-term debt and/or short-term debt upon maturity and for other general corporate purposes. Subsequently in July 2023, Dominion Energy borrowed an initial $750 million in the aggregate under these facilities with the proceeds used to repay short-term debt and for general corporate purposes. Dominion Energy was permitted to make up to three additional borrowings under each agreement through November 2023, at which point any unused capacity would cease to be available to Dominion Energy. The agreements contained certain mandatory early repayment provisions, including that any after-tax proceeds in connection with a sale of Dominion Energy’s noncontrolling interest in Cove Point, following the repayment of DECP Holding’s term loan secured by its noncontrolling interest in Cove Point, be applied to any outstanding borrowings under the facilities. In September 2023, Dominion Energy repaid the $750 million borrowing with after-tax proceeds from the sale of Dominion Energy’s noncontrolling interest in Cove Point, as discussed in Note 9. Subsequently in September 2023, Dominion Energy borrowed $225 million in the aggregate under these facilities with the proceeds used to repay short-term debt and for general corporate purposes. In October 2023, Dominion Energy repaid the $225 million borrowing and terminated the facilities along with any remaining unused commitments. 77 In October 2023, Dominion Energy entered into a $2.25 billion 364-day term loan facility which bears interest at a variable rate and will mature in October 2024 with the proceeds to be used for general corporate purposes. Concurrently, Dominion Energy borrowed an initial $1.0 billion with the proceeds used for general corporate purposes, including to repay short-term and long-term debt. In November and December 2023, Dominion Energy borrowed $500 million and $750 million, respectively, with the proceeds used for general corporate purposes. Dominion Energy also has the ability through August 2024 to request an increase in the amount of this facility by up to an additional $500 million. The agreement contains certain mandatory early repayment provisions, including that any after-tax proceeds in connection with the East Ohio, PSNC and Questar Gas Transactions, following the repayment of the 364-day term loan facility entered into in January 2023, be applied to any outstanding borrowings under this facility. At December 31, 2023, Dominion Energy’s Consolidated Balance Sheet includes $2.25 billion with respect to such facility presented within securities due within one year. The maximum allowed total debt to total capital ratio under this facility is consistent with such allowed ratio under Dominion Energy’s joint revolving credit facility. Long-Term Debt Sustainability Revolving Credit Facility Dominion Energy maintains a $900 million Sustainability Revolving Credit Facility which matures in June 2024 and bears interest at a variable rate. The facility offers a reduced interest rate margin with respect to borrowed amounts allocated to certain environmental sustainability or social investment initiatives. In March 2023, Dominion Energy borrowed $450 million with the proceeds used for general corporate purposes. In April 2023, Dominion Energy repaid $450 million borrowed for general corporate purposes. In September 2023, Dominion Energy borrowed $450 million under this facility with the proceeds used for general corporate purposes. In October 2023, Dominion Energy repaid $450 million borrowed for general corporate purposes. At December 31, 2023, Dominion Energy had $450 million outstanding under this supplemental credit facility, borrowed to support environmental sustainability and social investment initiatives. Issuances and Borrowings of Long-Term Debt During 2023, Dominion Energy issued or borrowed the following long-term debt. Unless otherwise noted, the proceeds were used for the repayment of existing long-term indebtedness and for general corporate purposes. [[GREPCENT_TABLE]] [["Month","","Type","","Public / Private","","Entity","","Principal","","","Rate","","","Stated Maturity"],["March","","Senior notes","","Public","","Virginia Power","","$","750","","","","5.000","%","","2033"],["March","","Senior notes","","Public","","Virginia Power","","","750","","","","5.450","%","","2053"],["August","","Senior notes","","Public","","Virginia Power","","","400","","","","5.300","%","","2033"],["August","","Senior notes","","Public","","Virginia Power","","","600","","","","5.700","%","","2053"],["October","","First mortgage bonds","","Public","","DESC","","","500","","","","6.250","%","","2053"],["November","","Senior notes","","Private","","PSNC","","","75","","","","6.160","%","","2033"],["November","","Senior notes","","Private","","PSNC","","","75","","","","6.730","%","","2053"],["Total issuances and borrowings","","","","","","$","3,150"]] [[/GREPCENT_TABLE]] In January 2024, Virginia Power issued $500 million of 5.00% senior notes and $500 million of 5.35% senior notes that mature in 2034 and 2054, respectively. The proceeds were used for general corporate purposes and/or to repay short-term debt. In February 2024, Virginia Power completed a securitization of $1.3 billion of deferred fuel costs for its Virginia service territory. See Note 18 to the Consolidated Financial Statements for additional information. 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. Pending any impacts from the completion of the on-going comprehensive business review announced in November 2022, Dominion Energy anticipates, excluding potential opportunistic financings and deferred fuel securitization, issuing approximately $4 billion of long-term debt during 2024, inclusive of $1.0 billion issued at Virginia Power in January 2024. Dominion Energy expects to issue long-term debt to satisfy cash needs for capital expenditures and maturing long-term debt to the extent such amounts are not satisfied from cash available from operations following the payment of dividends, after-tax proceeds from the completion of the East Ohio, PSNC and Questar Gas Transactions remaining after the repayment of 364-day term loan facilities, after-tax proceeds from the completion of the proposed sale of a 50% noncontrolling interest in the CVOW Commercial Project and any borrowings made from 78 unused capacity of Dominion Energy’s credit facilities discussed above. The raising of external capital is subject to certain regulatory requirements, including registration with the SEC for certain issuances. Repayments, Repurchases and Redemptions of Long-Term Debt Dominion Energy may from time to time reduce its outstanding debt and level of interest expense through redemption of debt securities prior to maturity or repurchases of debt securities in the open market, in privately negotiated transactions, through tender offers or otherwise. The following long-term debt was repaid, repurchased or redeemed in 2023: [[GREPCENT_TABLE]] [["Month","","Type","","Entity","","Principal","","(1)","Rate","","Stated Maturity"],["","","","","","","(millions)"],["Debt scheduled to mature in 2023","","","","$","2,818","","","various"],["Early repurchases & redemptions"],["September","","Term loan","","DECP Holdings","","","2,247","","","variable","","2024"],["Total repayments, repurchases and redemptions","","","","$","5,065"]] [[/GREPCENT_TABLE]] (1) Total amount redeemed prior to maturity includes remaining outstanding principal plus accrued interest. In February 2024, Eagle Solar redeemed the remaining principal outstanding of $279 million on its 4.82% secured senior notes which otherwise would have matured in 2042. See Note 18 to the Consolidated Financial Statements for additional information. 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 June 2023, Virginia Power remarketed three series of tax-exempt bonds, with an aggregate outstanding principal of $160 million to new investors. All three series of bonds will bear interest at a coupon of 3.65% until October 2027, after which they will bear interest at a market rate to be determined at that time. In 2024, Dominion Energy expects to remarket approximately $270 million of its 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 16, 2024 are as follows: [[GREPCENT_TABLE]] [["","","Fitch","","Moody\u2019s","","Standard & Poor\u2019s"],["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","","Negative"]] [[/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 79 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 the 364-day term loan facilities entered into in January 2023 and October 2023, and cross-default provisions. As of December 31, 2023, 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","%","","","61.6","%"]] [[/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. 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, 2023, 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 2021, Dominion Energy began issuing new shares of common stock for these direct stock purchase plans. In August 2023, Dominion Energy began purchasing its common stock on the open market for these direct stock purchase plans. During 2023, Dominion Energy issued 1.7 million of such shares and received proceeds of $94 million. Dominion Energy also maintained sales agency agreements to effect sales under an at-the-market program. Under the sales agency agreements, Dominion Energy was able, from time to time, to 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. Dominion Energy did not issue any shares or enter into any forward sale agreements under this program in 2023 prior to its expiration in June 2023. Pending any impacts from the completion of the on-going comprehensive business review announced in November 2022, Dominion Energy expects to issue equity through programs such as Dominion Energy Direct® and employee savings plans of similar amounts in 2024 compared to 2023. The raising of external capital is subject to certain regulatory requirements, including registration with the SEC for certain issuances. 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. At December 31, 2023, Dominion Energy had $920 million of available capacity under this authorization. Dominion Energy does not plan to repurchase shares of common stock in 2024, except for shares tendered by employees to satisfy tax withholding obligations on vested restricted stock, which does not impact the available capacity under its stock repurchase authorization. 80 Capital Expenditures See Note 26 to the Consolidated Financial Statements for Dominion Energy’s historical capital expenditures by segment. As a result of the comprehensive business review announced in November 2022, Dominion Energy has not completed a long-term capital expenses plan and, as discussed in Future Issues and Other Matters, the implementation of the recommendations resulting from the business review could result in a material adjustment to capital allocations. Dominion Energy’s total planned capital expenditures for each segment for 2024 are presented in the table below: [[GREPCENT_TABLE]] [["","","2024"],["(billions)"],["Dominion Energy Virginia(1)","","$","9.4"],["Dominion Energy South Carolina","","","1.3"],["Contracted Energy","","","0.5"],["Corporate and Other segment(2)","","","0.7"],["Total(3)","","$","11.8"]] [[/GREPCENT_TABLE]] (1) Includes $3.3 billion for 100% of the CVOW Commercial Project. (2) Includes $0.6 billion related to gas distribution operations expected to be sold to Enbridge. (3) Totals may not foot due to rounding. 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, Dominion Energy South Carolina and Contracted Energy 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 January 2024 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 2023, Dominion Energy’s Board of Directors established an annual dividend rate for 2024 of $2.67 per share of common stock, consistent with the 2023 rate. Dividends are subject to declaration by the Board of Directors. In January 2024, Dominion Energy’s Board of Directors declared dividends payable in March 2024 of 66.75 cents per share of common stock. See Note 19 to the Consolidated Financial Statements 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, 2023, 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. 81 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, 2023 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. [[GREPCENT_TABLE]] [["","","Gross Credit Exposure","","","Credit Collateral","","","Net Credit Exposure"],["(millions)"],["Investment grade(1)","","$","266","","","$","\u2014","","","$","266"],["Non-Investment grade(2)","","","9","","","","\u2014","","","","9"],["No external ratings:"],["Internally rated\u2014investment grade(3)","","","43","","","","6","","","","37"],["Internally rated\u2014non-investment grade(4)","","","27","","","","\u2014","","","","27"],["Total","","$","345","","","$","6","","","$","339"]] [[/GREPCENT_TABLE]] (1) Designations as investment grade are based upon minimum credit ratings assigned by Moody’s and Standard & Poor’s. The five largest counterparty exposures, combined, for this category represented approximately 54% of the total net credit exposure. (2) The five largest counterparty exposures, combined, for this category represented approximately 3% of the total net credit exposure. (3) The five largest counterparty exposures, combined, for this category represented approximately 11% of the total net credit exposure. (4) The five largest counterparty exposures, combined, for this category represented approximately 6% of the total net credit exposure. Fuel and Other Purchase Commitments Dominion Energy is party to various contracts for fuel and purchased power commitments related to both its regulated and nonregulated operations. Total estimated costs for such commitments at December 31, 2023 are presented in the table below. These costs represent estimated minimum obligations for various purchased power and capacity agreements and actual costs may differ from amounts presented below depending on actual quantities purchased and prices paid. [[GREPCENT_TABLE]] [["","","","2024"],["(millions)"],["Purchased electric capacity for utility operations","","$","62"],["Fuel commitments for utility operations","","","1,103"],["Fuel commitments for nonregulated operations","","","157"],["Pipeline transportation and storage","","","591"],["Total","","$","1,913"]] [[/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, 2023. Such obligations include: • Operating and financing lease obligations – See Note 15 to the Consolidated Financial Statements; • Regulatory liabilities – See Note 12 to the Consolidated Financial Statements; • AROs – See Note 14 to the Consolidated Financial Statements; • Employee benefit plan obligations – See Note 22 to the Consolidated Financial Statements; and • Charitable commitments – See Note 23 to the Consolidated Financial Statements. 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: • Off-balance sheet leasing arrangements – See Note 15 to the Consolidated Financial Statements; and • Guarantees – See Note 23 to the Consolidated Financial Statements. 82 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. Business Review In November 2022, Dominion Energy announced the commencement of a business review of value-maximizing strategic business actions, alternatives to its current business mix and capital allocation and regulatory options which may assist customers to manage costs and provide greater predictability to its long-term, state-regulated utility value proposition. In April 2023, the legislative process in Virginia was substantially completed resulting in new legislation which shifts $350 million of annual revenue requirement for costs recovered through riders into base rates effective July 2023, eliminates the ability of Virginia Power to utilize CCROs and adjusts the parameters for determining an authorized ROE and revenue sharing. In addition, new legislation allows Virginia Power to apply for the securitization of certain deferred fuel costs as well as seek approval for a noncontrolling equity financing partner for the CVOW Commercial Project. In September 2023, Dominion Energy entered agreements to sell East Ohio, PSNC, Questar Gas and Wexpro to Enbridge and completed the sale of its 50% noncontrolling limited partner interest in Cove Point to BHE under the agreement signed in July 2023 as discussed in Notes 3 and 9 to the Consolidated Financial Statements. In February 2024, Virginia Power completed the securitization of $1.3 billion of deferred fuel costs as discussed in Notes 13 and 18 to the Consolidated Financial Statements. In February 2024, Dominion Energy entered into an agreement to sell a 50% noncontrolling equity interest in the CVOW Commercial Project to Stonepeak, as discussed in Note 10 to the Consolidated Financial Statements, representing the final strategic component of the on-going business review. Dominion Energy is in the process of finalizing its long-term financial plan which will allow for the conclusion of the review. The implementation of recommendations resulting from the business review, including the items discussed above, is expected to have a material impact on Dominion Energy's future results of operations, financial condition and/or cash flows; however, the full impacts cannot be estimated until the review is completed. 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. Inflation Reduction Act The IRA includes provisions which impose an annual fee for waste methane emissions from the oil and natural gas industry beginning with emissions reported in calendar year 2024 to the extent that an entity’s emissions exceed a stated threshold, with implementation to be addressed by future rulemaking by the EPA. Pending the completion of such rulemaking, Dominion Energy currently does not expect these provisions to materially affect its future results of operations, financial condition and/or cash flows. Proposed EPA Rules In March 2023, the EPA released a proposed rule to further revise the Effluent Limitations Guidelines for the Steam Electric Power Generating Category, which apply primarily to wastewater discharges at coal and oil steam generating stations. Also in March 2023, the EPA released its first proposed rule to establish national drinking water standards for PFAS. Dominion Energy anticipates that the EPA will release additional rulemakings as part of an overall strategy to identify and mitigate PFAS exposure. In April 2023, the EPA released a proposal to tighten aspects of the Mercury and Air Toxics Standards, including the reduction of emissions limits for 83 filterable particulate matter, and requiring the use of continuous emissions monitoring systems to demonstrate compliance. In May 2023, the EPA proposed a package of rules designed to reduce CO2 emissions from certain fossil fuel-fired electric generating units. The proposal sets standards of performance and emission guidelines for CO2 emissions from new gas-fired combustion turbines and modified coal-fired steam generating units. The proposed rulemaking package also proposes emission guidelines, including presumptive emission limits, for existing coal, oil and gas-fired steam generating units and certain gas-fired combustion turbines. Also in May 2023, the EPA released a proposed rule to regulate inactive surface impoundments located at retired generating stations that contained CCR and liquids after October 2015, and certain other inactive or previously closed surface impoundments, landfills or other areas that contain accumulations of CCR. Until the EPA ultimately takes final action on these rulemakings, Dominion Energy is unable to predict whether or to what extent the new rules will ultimately require additional controls. The expenditures required to implement additional controls could have a material impact on Dominion Energy’s financial condition and 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 Inflation Reduction Act The IRA imposes a 15% alternative minimum tax on GAAP net income, as adjusted for certain items, of corporations in excess of $1 billion, for tax years beginning after December 31, 2022. Entities that are subject to the alternative minimum tax may use tax credits to reduce the liability by up to 75% and will receive a tax credit carryforward with an indefinite life that can be claimed against the regular tax in future years. Pending final guidance, the alternative minimum tax is not expected to have an effect on the assessment of the realizability of Dominion Energy’s deferred tax assets or a material impact on Dominion Energy’s future results of operations or cash flows. Tax Repairs Guidance In April 2023, the IRS issued safe harbor guidance to taxpayers on the treatment of amounts paid to repair, maintain, replace, or improve natural gas distribution property, including whether expenditures should be deducted as repairs or capitalized and depreciated on tax returns. The guidance includes safe harbor tax accounting methods which a taxpayer may choose to elect and provides special transition rules and incentives that vary depending on which tax year is the year of change. Dominion Energy is evaluating this new guidance and while it cannot currently estimate the potential financial statement impacts, it does not expect a material impact to its results of operations, financial condition and/or cash flows based on its expectation that the East Ohio, PSNC and Questar Gas Transactions will close in 2024. 84