MD&A discusses Dominion Energy's results of operations and general financial condition and Virginia Power's results of operations. MD&A should be read in conjunction with the Companies' Consolidated Financial Statements. 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:

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Forward-Looking Statements-Dominion Energy and Virginia Power

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Accounting Matters-Dominion Energy

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Results of Operations-Dominion Energy and Virginia Power

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Segment Results of Operations-Dominion Energy

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Outlook-Dominion Energy

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Liquidity and Capital Resources-Dominion Energy

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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:

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Unusual weather conditions and their effect on energy sales to customers and energy commodity prices;

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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;

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The impact of extraordinary external events, such as the current pandemic health event resulting from COVID-19, and their collateral consequences, including extended disruption of economic activity in our markets and global supply chains;

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Federal, state and local legislative and regulatory developments, including changes in or interpretations of federal and state tax laws and regulations;

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The direct and indirect impacts of implementing recommendations resulting from the business review announced in November 2022;

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Risks of operating businesses in regulated industries that are subject to changing regulatory structures;

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Changes to regulated electric rates collected by the Companies and regulated gas distribution, transportation and storage rates collected by Dominion Energy;

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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;

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Risks associated with Virginia Power's membership and participation in PJM, including risks related to obligations created by the default of other participants;

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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;

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Changes in future levels of domestic and international natural gas production, supply or consumption;


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Impacts to Dominion Energy's noncontrolling interest in Cove Point from fluctuations in future volumes of LNG imports or exports from the U.S. and other countries worldwide or demand for, purchases of, and prices related to natural gas or LNG;

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Timing and receipt of regulatory approvals necessary for planned construction or growth projects and compliance with conditions associated with such regulatory approvals;

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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;

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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;

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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;

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Cost of environmental strategy and compliance, including those costs related to climate change;

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Changes in implementation and enforcement practices of regulators relating to environmental standards and litigation exposure for remedial activities;

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Difficulty in anticipating mitigation requirements associated with environmental and other regulatory approvals or related appeals;

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Unplanned outages at facilities in which the Companies have an ownership interest;

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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;

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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;

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Changes in operating, maintenance and construction costs;

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Domestic terrorism and other threats to the Companies' physical and intangible assets, as well as threats to cybersecurity;

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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;

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Competition in the development, construction and ownership of certain electric transmission facilities in the Companies' service territory in connection with Order 1000;

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Changes in technology, particularly with respect to new, developing or alternative sources of generation and smart grid technologies;

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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;

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Receipt of approvals for, and timing of, closing dates for acquisitions and divestitures;

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Impacts of acquisitions, divestitures, transfers of assets to joint ventures and retirements of assets based on asset portfolio reviews;

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Adverse outcomes in litigation matters or regulatory proceedings, including matters acquired in the SCANA Combination;

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Counterparty credit and performance risk;

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Fluctuations in the value of investments held in nuclear decommissioning trusts by the Companies and in benefit plan trusts by Dominion Energy;

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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;

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Fluctuations in interest rates;


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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;

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Changes in rating agency requirements or credit ratings and their effect on availability and cost of capital;

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Global capital market conditions, including the availability of credit and the ability to obtain financing on reasonable terms;

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Political and economic conditions, including inflation and deflation;

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Employee workforce factors including collective bargaining agreements and labor negotiations with union employees; and

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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 Part I. Item 1A. Risk Factors in the Companies' Annual Report on Form 10-K for the year ended December 31, 2022.

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

As of March 31, 2023, there have been no significant changes with regard to the critical accounting policies and estimates disclosed in MD&A in the Companies' Annual Report on Form 10-K for the year ended December 31, 2022. The policies disclosed included the accounting for regulated operations, AROs, income taxes, accounting for derivative contracts and financial instruments at fair value, use of estimates in goodwill impairment testing, use of estimates in long-lived asset and equity method investment impairment testing, held for sale classification and employee benefit plans.

Results of Operations-Dominion Energy

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


                                              2023       2022       $ Change
(millions, except EPS)
First Quarter
Net income attributable to Dominion Energy   $  997     $  711     $      286
Diluted EPS                                    1.17       0.83           0.34


Overview

First Quarter 2023 vs. 2022

Net income attributable to Dominion Energy increased 40%, primarily due to an increase in net investment earnings on nuclear decommissioning trust funds, increased unrealized gains on economic hedging activities, a decrease in storm damage and service restoration costs and the absence of a charge to reflect the recognition of deferred taxes on the outside basis of Hope's stock upon meeting the classification as held for sale, partially offset by a charge associated with the impairment of a corporate office building and a decrease in sales to electric utility customers attributable to weather.


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