The ratings on Dominion Resources Inc. are supported by cash flow stability and a favorable regulatory environment for its utility subsidiaries. Virginia Power's service territory continues to be strong in growth and per capita income. The rate-capped structure, which was approved by the Virginia legislature in 1999, keeps retail prices set through June 2007 and allows the company to retain cost savings, but also requires the company to absorb all unanticipated costs increases, such as the $125 million post-tax costs incurred recently for Hurricane Isabel. After June 2007, the utility will sell energy at market-based prices that could be higher or lower than the prices currently set in the transition plan, unless the rate plan is extended, which could occur.
