Dominion Energy Inc.

Overview Key strengths Key risks Large multistate presence that provides operating and regulatory diversity. Elevated capital spending program that requires ongoing balanced funding and timely cost recovery to support the credit profile. Mostly lower-risk, rate-regulated utility assets. Continued discretionary cash flow deficit that indicates external funding needs. Generally effective management of regulatory risk across most jurisdictions. Minimal financial cushion to our downgrade threshold. Some measures, including the proposal to allow for securitization of deferred fuel costs and the requirement for VEPCO to be authorized for a 9.7% return on equity based on an equity capitalization ratio of 52.1% supports credit quality. Other measures suggest regulatory risk for DEI such as the proposal to consolidate and in certain instances eliminate rider

...The Virginia General Assembly recently passed several measures, including Senate Bill (SB) 1256, which we think could affect the regulatory construct for Virginia Electric Power Co. (VEPCO), a major subsidiary of Dominion Energy Inc. (DEI). Some measures, including the proposal to allow for securitization of deferred fuel costs and the requirement for VEPCO to be authorized for a 9.7% return on equity based on an equity capitalization ratio of 52.1% supports credit quality. Other measures suggest regulatory risk for DEI such as the proposal to consolidate and in certain instances eliminate rider cost recovery mechanisms. This would make VEPCO subject to more frequent review of its base rates compared with the current law. Also suggesting risk is the proposed change to the...

Full Report