Mark McGettrick - Chief Financial Officer and Executive Vice President Thomas Farrell - Executive Chairman, Chief Executive Officer, President, Chairman of Virginia Electric & Power Company, Chief Executive Officer of Dominion Energy and Chief Executive Officer of Virginia Electric Gregory Snyder - Paul Koonce - Chief Executive Officer of Dominion Virginia Power

Greg Gordon - Morgan Stanley Paul Ridzon - KeyBanc Capital Markets Inc. Paul Patterson - Glenrock Associates Jonathan Arnold - Deutsche Bank AG Hugh Wynne - Bernstein Research

[Operator Instructions] I would now like to turn the conference over to Greg Snyder, Director of Investor Relations, for Safe Harbor treatment.

Good morning, and welcome to Dominion's Second Quarter Earnings Conference Call. During this call, we will refer to certain schedules included in this morning's earnings release and pages from our second quarter earnings release kit. Schedules in the earnings release kit are intended to answer the more detailed questions pertaining to operating statistics and accounting. Investor Relations will be available after the call for any clarification on these schedules. If you have not done so, I encourage you to visit our website, register for email alerts and view our second quarter 2010 earning documents. Our website address is www.dom.com/investors. In addition to the earnings release kit, we have included a slide presentation that will guide this morning's discussions that can be accessed through our website. And now for the usual cautionary language. The earnings release and other matters that will be discussed on the call today may contain forward-looking statements and estimates that are subject to various risks and uncertainties. Please refer to our SEC filings, including our most recent annual report on Form 10-K and our quarterly report on Form 10-Q, for a discussion of factors that may cause results to differ from management's projections, forecast, estimates and expectations. Also, on this call, we will discuss some measures about our company's performance that differ from those recognized by GAAP. Those measures include our third quarter and full year 2010 and 2011 operating earnings guidance, as well as operating earnings before interest and tax, commonly referred to as EBIT. Reconciliation of such measures to the most directly comparable GAAP financial measures we are able to calculate and report are contained in our earnings release kit. I will now turn the call over to our CFO, Mark McGettrick.

Thank you, Greg, and good morning, everyone. Joining me on the call this morning is our CEO, Tom Farrell, and the other members of our management team. On today's call, I will discuss the earnings results for the second quarter, our outlook for the third quarter and full year 2010 and our financing plans for the remainder of the year. Tom will briefly update you on regulatory proceedings and other operational activities. We will then take your questions. Dominion had a very strong second quarter. Our operating earnings were $0.72 per share, which was above the top of our guidance range of $0.55 to $0.65 per share. Warmer-than-normal weather was the principal positive factor relative to our guidance, adding $0.06 per share. Another factor relative to guidance was lower interest expense. I'll discuss our financing plans in a minute, but because we anticipate not needing all of the long-term debt we have previously planned to issue, the interest rate hedges related to some of those planned issues were closed this quarter. The associated impact had the effect of lowering our interest expense for the quarter which, increased our operating earnings by $0.03 per share. Excluding these two items, operating earnings for the quarter were still about $0.63 per share at the upper end of our guidance range. Lower interest costs and lower operation and maintenance expenses, which are two principal drivers of our 2010 earnings, came in even better than expected. When comparing our results to the second quarter of 2009, our operating earnings were $0.04 per share higher than last year. Higher revenues from rate adjustment clauses, favorable weather, lower interest expense and lower outage costs offset reduced merchant generation margins, the absence of earnings from our Appalachian E&P business and a lower contribution from Producer Services. GAAP earnings were $2.98 per share for the second quarter. The principal difference between GAAP and operating earnings was a $1.4 billion after-tax gain on the sale of our Appalachian E&P operations. We also took a $95 million charge after-tax to impair our State Line power station, triggered by the EPA's new one-hour SO2 rule that was finalized during the quarter. A summary and reconciliation of GAAP to operating earnings can be found on Schedules 2 and 3 of the earnings release kit. Now moving to the results by operating segment. At Dominion Virginia Power, second quarter EBIT were $219 million, well above the $188 million $208 million range included in our guidance. Favorable weather was the principal factor behind the improvement. EBIT for Dominion Energy in the second quarter was $164 million, which was at the midpoint of our guidance range. Higher revenues from our Transmission and Distribution businesses were offset by lower contribution from Producer Services. Second quarter EBIT from Dominion Generation was $483 million, which was well above the second quarter guidance range of $390 million to $435 million. Favorable weather and lower interest expenses in O&M help offset lower merchant generation margins. We are very pleased with these operating segment results. In addition to our traditional presentation of operating results from our three business units, we have prepared a number of supplemental schedules in the alternative breakdown structure format that can be found on our website, following the conclusion of our earnings call. These supplemental schedules show quarterly EBIT for the legal entity Virginia Power, which includes Utility Generation, Electric Transmission and Distribution operations, as well as quarterly EBIT for our Regulated Gas businesses, Merchant Generation and Dominion Retail. Moving to cash flow and treasury activities. We closed the sale of our Appalachian E&P business to CONSOL Energy on April 30. Net proceeds of $2.2 billion are being used, among other things, to offset our equity financing needs, reduce debt and repurchase shares. At our May 7 Investor and Analyst Meeting, we outlined our specific plans for the proceeds, including $910 million for share repurchases. As of that date, we had purchased 12.2 million shares at a cost of approximately $500 million. We have not repurchased any shares since May 7. However, we intend to be in the market periodically through the remainder of the year to complete our share repurchase program. Our cash flow has been very strong this year, and as a result, we have almost no outstanding commercial paper and overall amount of floating rate debt is well below our target levels. Because of this, we have modified our financing plans for the remainder of the year, and we will not be moving forward with the number of previously planned debt issues and will increase our use of short-term debt. We now intend to issue term debt of approximately $300 million at Virginia Power and $500 million at the parent company later this year. Liquidity was very strong at $5 billion on June 30. For statements of cash flow and liquidity, please see Pages 16 and 43 of the earnings release kit. Also, we are in the midst of replacing our existing credit facilities with two facilities totaling $3.5 billion. We're in the process of receiving commitments to support our credit needs and expect to close the facilities by the end of the third quarter. Bank interest in these two facilities has been very strong. Now to third quarter and full year 2010 guidance. Dominion expects third quarter 2010 operating earnings in a range of $0.99 to $1.04 per share compared to operating earnings of $0.99 per share in the third quarter of 2009. Positive factors for the third quarter of 2010 compared to the prior year include higher rider revenues and normal weather for the rest of the quarter. Recall that weather in the third quarter of 2009 included the mildest July on record, impacting earnings by about $0.05 per share. Up to now, weather for July has been above normal. Factors offsetting these positives include lower merchant generation margins and the absence of earnings from our E&P business. We are increasing our 2010 operating earnings guidance range to $3.25 to $3.40 per share from $3.20 to $3.40 per share. This change reflects the strong results for the first half of the year, the warm weather in July and assumes normal weather for the remainder of the year. Our guidance for 2011 remains $3.10 to $3.40 per share. GAAP earnings for the full year of 2010 are currently estimated to be about $900 million higher than our projected operating earnings, reflecting the net benefit of recent divestitures and charges related to the workforce reduction plan, the impairment of our State Line plant and the elimination of certain tax deductions associated with the new health care law. As to hedging, we've added to our hedge positions for Millstone, increasing coverage of expected output to 50% for 2011 and 20% for 2012. We also increased our hedge position at State Line to 60% for 2011. Our sensitivity in 2011 to a $5 change in New England Power prices is currently about $0.07 per share. The update of our hedge positions can be found on Page 33 of our earnings release kit. Before turning the call over to Tom Farrell, I want to discuss the impact of the recently enacted financial reform legislation on Dominion. The legislation itself was over 2,300 pages long, calls for several hundred new rule-making actions on the part of various federal agencies. The largest potential impact to Dominion would be related to the use of derivatives to hedge our purchase and sale of various energy-related commodities. It is our understanding that as an end user, we would not be classified as a swap dealer and would not be required to clear all of our transactions through an exchange and be subject to increased requirements for collateral. The House incentive leaders behind the legislation have made their intentions clear to supplemental correspondents. They do not intend for end users, such as Dominion, to be subject to these additional requirements. We are actively monitoring the implementation of the new legislation and will provide any updates of changes to our assessment. I will now turn the call over to Tom Farrell.

Good morning, everyone, and thank you for joining us. Our operating and safety performance continue to be excellent during the second quarter. Dominion now ranks number one in total safety performance among the 18 companies in the Southeastern Electric Exchange. This is an improvement from our low second quartile performance just three years ago. Our nuclear fleet achieved the capacity factor of 97%, excluding refueling outages, and our regulated fossil and hydro utility fleet had a peak season equivalent availability rate of 96%. We also continue to improve the reliability of our electric transmission and distribution systems. Our Pipeline business was ranked number one in customer value and customer satisfaction among its pipeline peers in the Northeast in a recent customer survey. We continue to make good progress on our regulated growth projects. During the second quarter, we completed a 75-megawatt uprate at our North Anna Nuclear Power Station. At the end of the second quarter, the Virginia City Hybrid Energy Center was 66% complete. The project is proceeding according to plan, with approximately 1,800 workers on site. Earlier this month, the 400-ton electric generator stator was delivered to the construction site, marking a major milestone in the construction of the 585-megawatt power station, which is scheduled for commercial operation in 2012. The Bear Garden combined-cycle plant was 70% complete at the end of the second quarter. Construction continues per plant with about 650 workers on site. All major equipment has been delivered. Assembly of the gas and steam turbines and installation of the piping and electrical systems continues on schedule. Transmission line is complete and the switchyard work is in progress. The 580-megawatt combined-cycle plant is scheduled for commercial operation in mid-2011. Next major addition to our Virginia Power generating fleet is expected to be the Warren County project, a three-on-one combined-cycle facility with a projected capacity in excess of 1,000 megawatts to be located in Northern Virginia. Dominion held its required air permit informational briefing on May 11, with the objective of obtaining the air permit by the end of the year. Proposals for the combustion turbines and the steam turbine were received last month. Last week, we received zoning approval from the County Board of Supervisors. We expect to file for approval of this plant with the Virginia State Corporation Commission early next year. With respect to North Anna, last month,, we submitted an amended combined operating license incorporating the Advanced Pressurized Water Reactor design for Mitsubishi Heavy Industries as the selected technology. Later this fall, the NRC is expected to post its new schedule for our amended COL, which we now expect to be issued in 2013. As we discussed at our May 7 Analyst Meeting, Dominion's options for the project include constructing it now with a partner or constructing it at a later date, either by ourselves or with a partner. We are continuing work with Mitsubishi on licensing and project development as we pursue potential partners. Our two major electric transmission projects are also on schedule to be fully in service in 2011. Two phases of the 500 kV Meadow Brook-to-Loudoun line are complete and in operation, while work on the final phase is well underway. Work on the 500 kV Carson-to-Suffolk line is also about 30% complete. Several other transmission projects are in various stages of completion. We also have a healthy backlog of transmission projects and anticipate investing over $500 million per year for the foreseeable future. Dominion Energy also made considerable progress in its infrastructure growth program. Dominion's Natural Gas Pipeline and Storage business has a significant list of projects intended to relieve existing congestion within its market area, as well as facilitating the development of the Marcellus Shale formation. For example, on May 20, Dominion Transmission signed a binding precedent agreement with CONSOL Energy to provide 200,000 decatherms per day of firm transportation service for Marcellus Shale volumes to the market hub at Leidy, Pennsylvania. This is referred to by us as the Marcellus Northeast Project and is expected to be in service by November 2012. We had also recently signed an agreement to provide 150,000 decatherms per day to move Marcellus Shale volumes to Craigs, New York. This project, too, is expected to be in service by November 2012. On June 1, we filed the Appalachian Gateway Project with FERC, with it's approval expected by spring of next year. This project provides nearly 500,000 decatherms per day of firm transportation to the Oakford marketing hub beginning in 2012. The related Gathering Enhancement Project, which does not require FERC approval, increases gathering and processing capacity for producers within the region. It will phase into service during 2011 and 2012. On April 19, Dominion announced an open season for Marcellus 404, a project designed to provide firm transportation, as well as gathering and processing services for up to 300 million cubic feet per day of high-BTU Marcellus natural gas production in portions of West Virginia, Pennsylvania and Ohio. Fractionation capacity for up to an additional 32,000 barrels per day of natural gas liquids is projected to be added as well. We are excited about the numerous growth opportunities available to our regulated businesses. These opportunities extend well beyond the projects I have covered this morning. Later this year, we will provide more details about our infrastructure growth plans for the next five years. Now a few minutes on the progress in our regulatory proceedings and other matters. With respect to EPA's proposed Transport Rule, we are evaluating its potential impact on both our Virginia Power and merchant fleets. It is the complex rule that is likely to be modified as it goes through the process. As Mark noted, however, our decision to take a charge at State Line in the second quarter was not related to this proposed rule making but rather primarily to the one-hour SO2 rule, which will likely require significant environmental expense at that plant in the future. We expect to give you more complete evaluation as the Transport Rule making progresses. During the first quarter, we filed for a $46 million increase in base rate and fuel revenues for our North Carolina service territory. We expect the decision in that proceeding before the end of the year. Last week, we received an order from the Virginia State Corporation Commission approving our request to invest $500 million of equity into Virginia Power. The equity injection is intended to offset the impact of the charges related to the settlement agreement in the company's base rate case and will restore the Virginia Power's equity ratio to about 53%. On June 30, we filed our annual update to the riders for Virginia City and Bear Garden Power Stations. These filings cover the financing cost for both projects for 2011, as well as the operating costs for Bear Garden, which is expected to be in service by summer of next year. The change in rates would be effective on April 1, 2011. Overall, we are quite pleased with the results for the second quarter. Despite lower commodity prices, we achieved operating earnings well above our guidance range and near the top of the range when weather normalized. Our infrastructure growth program continues to provide the foundation for sustained earnings growth in the future. Thank you, and we are now ready for your questions.

[Operator Instructions] Our first question comes from Jonathan Arnold, Deutsche Bank. Jonathan Arnold - Deutsche Bank AG: My question relates just to the 2011 guidance and what you had said at the Analyst Meeting, I believe, was that the low end of the range would be more or less consistent with mid-$5 gas and with gas having kind of being around $5.20 in 2011. Are there offsets to that pressure? And I think you can update around that, I think at the Analyst Meeting, you'd said that there might be other levels that will get pulled.

Jonathan, yes, the gas, as you mentioned, is running in the $5.20, $5.25 range. That's slightly below what we said you should assume for that one-item gas price that will take us toward the bottom of our range. But as you can see this year already, we have a lot of other items that we've got a lot of excess with. And I think we will next year, whether it'd be O&M expenses, interest expense or other areas that will be able to offset the gas price at this level and maintain the range that we have out there for 2011. Jonathan Arnold - Deutsche Bank AG: So we should kind of take that as a -- you could wear a slightly lower gas prices and still be at that low end of the range?

Yes, that's right.

Our next question comes from Greg Gordon, Morgan Stanley. Greg Gordon - Morgan Stanley: I don't have an earnings-related question as much as I have a strategic question. As I look at how you guys have evolved the company in terms of your strategic focus and the amount of capital and the amount of potentially high-return projects that you have in the regulated asset portfolio, which is your core competency, are there circumstances under which you would continue to divest asset portfolios that are highly commodity cyclical, like the Northeast asset portfolio?

We looked at all of our assets on a continuous basis. We have return on invested capital hurdles that we expect our assets to perform to. And as you've seen in the past, if they're not performing at levels we expect and we don't see a way to get them to perform at levels that we desire in a reasonable period of time, then we'll either divest them or in some case, we may choose to shut it down. We've talked, for example, about the possibility with Salem Harbor of shutting down an individual unit within the Salem Harbor Station. We continue to look at all that, and we will continue to do so. We don't have any plan at the moment to do some strategic sale of any of our assets. Greg Gordon - Morgan Stanley: I guess I asked the question because I see a lot of high-return projects and a lot of capital spending in your regulated businesses and you infer from your comments earlier that you intend to give us some more visibility on the length of that opportunity, which I would infer, it is substantial. You've done some very good things to fund the financing needs for that over the intermediate term, in terms of selling your shale position for instance. And you've positioned the company extremely well. But I just wonder whether having a merchant portfolio that's subscale, when you have all these other opportunities and needs for funding, makes sense in the long run.

Well, that's certainly a legitimate question, Greg, and we will continue to monitor. You're quite right. I would remind all of us here. If you recall our May 7 presentation and when you look at where our capital spending has flowed in the quarter and will continue to flow out in the foreseeable future, it's almost entirely going into regulated projects. So we will continue to increase our regulated content. There's two ways to increase our regulated content: grow your regulated content and shrink your commodity census content. We have done both over the course of the last few years by disposing of our E&P business. The shale sale, as you mentioned, reduced our commodity exposure by an additional 20% this year. So we focused on both, but our concentration at the moment is on continuing to expand the regulated projects through building out organically.

Our next question comes from Paul Patterson, Glenrock Associates. [Operator Instructions] Paul Patterson - Glenrock Associates: I want to sort of just -- and I'm sorry if I missed it, but the State Line impairment, could you go over that a little bit as to what exactly happened there and what the book value now of the plant is?

Paul, EPA came out with a new one-hour SO2 rule, where they used to have a 24-hour SO2 rule and they tightened that down considerably. And the states have to have compliance plans from 2014 to 2017, I think is the flexibility that they have. Based on that rule, it's apparent that State Line would need significant capital improvements on the environmental side to meet those requirements in the future. And we're not going to make a significant capital investment in State Line. So we will run that facility as long as we possibly can and comply with all the rules as long as we can, but we're not going to make a capital infusion there. So we took an impairment on that plant, and the resulting book value right now is between $60 million and $70 million. Paul Patterson - Glenrock Associates: And what's the expected life now of the plant with this new rule?

Well, we haven't set an expected life. But again, I referenced that the states have a three-year window that they have to come up with implementation plans, and so we'll see how long that will be. But again, I think the key takeaway here for us today and for everyone listening is that it will require significant CapEx at this plant and that we are not going to invest that in the future. Paul Patterson - Glenrock Associates: Is there any decrease in depreciation as a result of this impairment charge?

There wouldn't be a decrease in depreciation because we have shortened the depreciation period. But in terms of earnings, you should assume that we're earnings neutral to it. Paul Patterson - Glenrock Associates: And then on the stock buyback, you guys mentioned that since May 7, you haven't bought back any, if I understood you correctly, right?

That's correct. Paul Patterson - Glenrock Associates: And I guess what I'm sort of wondering is, how should we think about why you guys -- and because it would have that decrease, I mean there have been -- first, we don't know exactly when and what price you bought it back at. But how should we think about the philosophy of the repurchase? Because I sort of understood that you guys were thinking of buying it back pretty much throughout the balance of the year, and I'm just sort of wondering why you guys are kept out of the market.

That's a very good question, and let me give you kind of a little background on it. We talked about May 7 that we have bought back 12 million shares for about $500 million, and that leaves us with a 10 million or 11 million shares left to buy back. We have bought those shares back in a very tight window of about 40 to 45 days. So there was a pressure on that stock from a buying standpoint based on us being in the market. We wanted to stay out of the market for about 30 days or so, let the stock stabilize, trade on its own, and we anticipated getting back into the market in June of this year to continue our stock buyback on a periodic basis. However, it was very apparent to us and early June, that we were going to have a significantly better quarter than what we had previously disclosed in our guidance range. We did not think it would be prudent to buy back stock, knowing that information and that information not being public, so we elected not to buy back any stock until we disclose what our actual earnings were for the second quarter.

Our next question comes from Paul Ridzon, KeyBanc. Paul Ridzon - KeyBanc Capital Markets Inc.: As you look at the spectrum of projects you have in the Marcellus, I mean there are some that are FERC regulated, others that are not. What do you think the range of potential ROEs on those projects can be?

Well, they tend to be in the mid-teens as they are developed, and they're fairly similar. I mean the gathering ones that are not FERC regulated, we can get done faster, obviously, because you don't have the regulatory process to go through. But whereas we have to be just as careful with environmental and construction operation, obviously, as you do with the larger pipelines. But that's the target that we see, sort of mid-teens. Paul Ridzon - KeyBanc Capital Markets Inc.: And then just any update on your proposed alternative to PATH and kind of how that could unfold over the coming months.

I'll give you just a quick sentence on it, and I'll let Paul Koonce talk about more of the detail. We filed PATH with PJM, and it will go through its process, and I expect we'll hear more about what its potential is in the fall. But Paul, go ahead.

Yes. Just where this stands, all the information has been provided to PJM as part of its RTEP process. We have a TEAC meeting in August. We have provided construction plans because if you're going to take the line out of service, there needs to be a lot of planning around when that happens. So we'll provide all that information. There'll be a TEAC meeting in August, where we'll review some of that information. And then ultimately, we expect that PJM will issue its RTEP plan that will address all of these issues in the September time frame. Paul Ridzon - KeyBanc Capital Markets Inc.: So we should have a final answer by September?

Yes, we've said now what the build-out plan looks like in the September time frame.

Our last question comes from Hugh Wynne, Sanford Bernstein. Hugh Wynne - Bernstein Research: I just wanted to ask a few questions on the outlook for the merchant generation margin in part, given your disclosures around State Line. So I noticed that merchant generation margin in the second quarter was about $0.16 short of what you had earned in the similar quarter last year. And that's down from the first quarter, when I think merchant generation margin had been down by about $0.12 compared to last year. Looking forward, it appears that the State Line plant will be taken out of service because you're not going to scrub it. My question is, is the trajectory of merchant generation earnings playing out this year and next year broadly as you had expected? Or have things deteriorated, possibly in light of these new environmental regulations so that the expectations have declined?

This is Mark. Expectations have been pretty much in line with what we thought. Again, if you reference the State Line, that is not a near-term issue. That's a long-term issue. State Line will be running for a long time to come. And if you look at this year and next year in terms of any environmental rules versus what our expectations were on merchant contributions, they haven't changed at all. I'd reference you back to our May 7 presentation for, this year, where we talked about what we expected in terms of merchant margins versus '09 for the rest of the year, which said that our merchant margins would be impacted by about $0.14 to $0.18 per share year-over-year for the second half. And that's right in line with what we think they're going to be. So we're comfortable with what we have out there for '10 and '11 on merchant, and the environmental, we see as a much longer-term issue. And again, the only one that has clarity near term based on an environmental rule is Salem, but that clarity is only that they're not going to invest any capital in it. And the question's going to be just how long would we run it. We're going to run it as long as we can. Hugh Wynne - Bernstein Research: So '10, '11 were basically hitting the expectations for merchant generation margin. Salem and State Line, we can probably expect would be retired after that. But are we looking then at the '12, '14 time frame, given the Transport Rule requirements?

Well, I think Transport Rule is too early to speculate on to see where it's going to go. It's just we'll stay out for comment now, and we'll see what the final rules are there. But we've always been clear on Salem that we've tried to delist that unit in the capacity market. And I think you're very close to this subject, but there's competing forces here. And one is on the environmental side that are coming out with rules from EPA. The other is on the reliability side, which the ISOs and FERC have a keen interest in. And we have Salem caught in the middle of both of those. So our commitment is, on Salem, we'll run it as long as we can, on State Line as long as we can, provided we're in compliance. And we're going to let the ISOs and EPA organizations to side what your long-term life is based on their two interests.

Ladies and gentlemen, we've reached the end of our allotted time. Mr. McGettrick, do you have any closing remarks?

Yes, thanks very much. Just to remind you that our Form 10-Q are expected to be filed with the SEC in the next few days, and our third quarter earnings release was scheduled for October 29. Thank you for joining us today.