SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-Q
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X    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    X   No         

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yes       No    X  

At April 30, 2004, the latest practicable date for determination, 177,932 shares of common stock, without par value, of the registrant were outstanding.

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The accompanying notes are an integral part of the Consolidated Financial Statements.

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The accompanying notes are an integral part of the Consolidated Financial Statements.

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The accompanying notes are an integral part of the Consolidated Financial Statements.

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The accompanying notes are an integral part of the Consolidated Financial Statements.

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Note 1. Nature of Operations

Virginia Electric and Power Company (the Company), a Virginia public service company, is a wholly-owned subsidiary of Dominion Resources, Inc. (Dominion). The Company is a regulated public utility that generates, transmits and distributes electric energy within a 30,000 square-mile area in Virginia and northeastern North Carolina. It sells electricity to approximately 2.2 million retail customers, including governmental agencies, and to wholesale customers such as rural electric cooperatives, municipalities, power marketers and other utilities. The Virginia service area comprises about 65% of Virginia's total land area but accounts for over 80% of its population. The Company has trading relationships beyond the geographic limits of its retail service territory and buys and sells wholesale electricity, natural gas and other energy commodities.

The "Company" is used throughout this report and, depending on the context of its use, may represent any of the following: the legal entity, Virginia Electric and Power Company, one of Virginia Electric and Power Company's consolidated subsidiaries or the entirety of Virginia Electric and Power Company and its consolidated subsidiaries.

The Company manages its daily operations through three primary operating segments: Generation, Energy and Delivery. In addition, the Company reports its corporate and other functions as a segment.

Note 2. Significant Accounting Policies

As permitted by the rules and regulations of the Securities and Exchange Commission (SEC), the accompanying unaudited Consolidated Financial Statements contain certain condensed financial information and exclude certain footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles). These unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes in the Company's Annual Report on Form 10-K for the year ended December 31, 2003.

In the opinion of the Company's management, the accompanying unaudited Consolidated Financial Statements contain all adjustments, including normal recurring accruals, necessary to present fairly the Company's financial position as of March 31, 2004 and its results of operations and cash flows for the three months ended March 31, 2004 and 2003.

The Company makes certain estimates and assumptions in preparing its Consolidated Financial Statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses for the periods presented. Actual results may differ from those estimates.

The Consolidated Financial Statements represent the Company's accounts after the elimination of intercompany transactions.

The Company reports certain contracts and instruments at fair value in accordance with generally accepted accounting principles. Market pricing and indicative price information from external sources are used to measure fair value when available. In the absence of this information, the Company estimates fair value based on near-term and historical price information and statistical methods. For individual contracts, the use of differing assumptions could have a material effect on the contract's estimated fair value. See Note 2 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2003 for more discussion of the Company's estimation techniques.

The results of operations for the interim periods are not necessarily indicative of the results expected for the full year. Information for quarterly periods is affected by seasonal variations in sales and other factors.

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Certain amounts in the 2003 Consolidated Financial Statements have been reclassified to conform to the 2004 presentation.

The Company adopted FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, (FIN 46R) for its interests in variable interest entities (VIEs) that are not considered special purpose entities on March 31, 2004. FIN 46R addresses the identification and consolidation of VIEs, which are entities that are not controllable through voting interests or in which the VIEs' equity investors do not bear the residual economic risks and rewards. There was no impact on the Company's results of operations or financial position relating to this adoption.

As described in Note 20 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2003, the Company is a party to long-term contracts for purchases of electric generation capacity and energy from other utilities, qualifying facilities and independent power producers. Certain variable pricing mechanisms in some of these contracts cause them to be considered potential variable interests that require evaluation under the provisions of FIN 46R. If a power generator that holds one of these specific types of contracts is determined to be a VIE and the Company is determined to be the primary beneficiary, the Company would be required to consolidate the entity in its financial statements. Consolidation of one of these potential VIEs would primarily result in the addition of property, plant and equipment, long-term debt and minority interest to the Company's balance sheet. The impact on the Company's consolidated results of operations would be that purchased energy and capacity expenses attributable to the long-term contract with the VIE would be replaced by the VIE's operations, maintenance and interest expense, with the VIE's results of operations being reported as income attributable to a minority interest. Long-term debt of these potential VIEs, even if consolidated, would be nonrecourse to the Company.

As a result of these contracts, the Company has identified significant variable interests in ten potential VIEs. Since these entities were established and are legally owned by parties not affiliated with the Company, the Company has submitted requests to these potential VIEs for the information necessary to perform the required assessments. The Company has recently received some, but not all, of the requested information from one of the potential VIE supplier entities, which owns and manages a 180 Mw cogeneration facility in North Carolina. Furthermore, the potential VIE supplier entity has indicated that it does not intend to provide quarterly financial information. The Company is in the process of evaluating, but has not yet concluded whether this supplier entity is a VIE or, if it is a VIE, whether the Company would be the primary beneficiary under FIN 46R. If the Company were to determine that it is required to consolidate this entity, the Company's balance sheet would increase by the amounts presented below, which are based on the unaudited financial statements provided by the supplier entity for the year ended December 31, 2003:

(millions)

Because the requested information has not been provided by the other nine potential VIEs, the Company is unable to apply FIN 46R to its interests in those entities. The Company will continue its efforts to obtain the information and, if it is received in the future, will evaluate these contracts under the provisions of FIN 46R at that time.

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The Company has remaining purchase commitments under contracts with these ten potential VIEs of $4.7 billion at March 31, 2004. The Company purchased $174 million and $184 million of electric generation capacity and energy from these entities in the quarters ended March 31, 2004 and 2003, respectively. The Company's exposure to losses from its involvement with these entities cannot be determined since losses, if any, would be represented by either: 1) the difference between (a) the amount payable by the Company for energy and capacity under the long-term contract and (b) amounts recoverable through regulated electric sales or wholesale market transactions; or 2) if the potential VIE supplier fails to perform, any amount paid by the Company to obtain replacement energy and capacity in excess of the amounts otherwise payable under the long-term contract with the potential VIE supplier entity.

As described more fully in Note 3 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2003, the Company adopted FIN 46R for its interests in special purpose entities on December 31, 2003.

Effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations, which provides accounting requirements for the recognition and measurement of liabilities associated with the retirement of tangible long-lived assets. Upon adoption, the Company recognized a $139 million after-tax gain as the cumulative effect of this change in accounting principle.

On January 1, 2003, the Company adopted Emerging Issues Task Force (EITF) Issue No. 02-3, Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities, that rescinded EITF Issue No. 98-10, Accounting for Contracts Involved in Energy Trading and Risk Management Activities. The implementation of EITF 02-3 resulted in the discontinuance of fair value accounting for non-derivative energy-related contracts held for trading purposes. Upon adoption, the Company recognized an after-tax loss of $55 million as the cumulative effect of this change in accounting principle.

The Company's operating revenue consists of the following:

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The following table presents total comprehensive income:

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The following table presents selected information related to cash flow hedges included in accumulated other comprehensive income in the Consolidated Balance Sheet at March 31, 2004:

The actual amounts that will be reclassified to earnings during the next 12 months will vary from the expected amounts presented above as a result of changes in market prices, interest rates and foreign exchange rates. The effect of amounts being reclassified from accumulated other comprehensive income to earnings will generally be offset by the recognition of the hedged transactions (e.g., anticipated purchases) in earnings, thereby achieving the realization of prices contemplated by the underlying risk management strategies.

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At March 31, 2004, total outstanding commercial paper supported by the joint credit facilities was $1.53 billion, of which the Company's borrowings were $760 million. At March 31, 2004, total outstanding letters of credit supported by the three-year facility were $148 million, of which $75 million was issued on behalf of an unregulated subsidiary of the Company and $73 million was issued on behalf of other Dominion subsidiaries. At March 31, 2004, capacity available under the two credit facilities was $322 million.

Other than the matters discussed below, there have been no significant developments regarding commitments and contingencies as disclosed in Note 20 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2003, nor have any significant new matters arisen during the first quarter of 2004.

The Company and Dominion Telecom, Inc. (Dominion Telecom) are defendants in a class action lawsuit pending in the U.S. District Court in Richmond, Virginia. The plaintiffs claim that the Company and Dominion Telecom strung fiber-optic cable across their land, along an electric transmission corridor without paying compensation. The plaintiffs are seeking damages for trespass and "unjust enrichment," as well as punitive damages from the defendants. In April 2004, the parties entered into a settlement agreement that is subject to approval by the court in formal proceedings. Under the terms of the settlement, a fund of $20 million will be established by defendants to pay claims of current and former landowners as well as fees of lawyers for the class. Costs of notice to the class and administration of claims will be borne separately by defendants. The settlement agreement resulted in an after-tax charge of $7 million in the first quarter of 2004.

In March 2004, the State of North Carolina filed a petition under Section 126 of the Clean Air Act seeking Environmental Protection Agency (EPA) to impose additional nitrogen oxide (NO_x) and sulfur dioxide (SO₂) reductions from electrical generating units in thirteen states, claiming emissions from the electrical generating units in those states are contributing to air quality problems in North Carolina. The Company has electrical generating units in two of the states. The issues raised by North Carolina are already being addressed by the EPA in current regulatory initiatives. The EPA has 60 days to respond to the petition. Provisions of the Clean Air Act also allow up to a six-month extension. Given the highly uncertain outcome and timing of future action, if any, by the EPA on this issue, the Company cannot predict the financial impact on its operations at this time.

At March 31, 2004, the Company had issued $10 million of surety bonds. Under the terms of the surety bonds, the Company is obligated to indemnify the respective surety bond company for any amounts paid.

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The Company's exposure to credit risk is concentrated primarily within its energy trading and risk management activities, as the Company transacts with a smaller, less diverse group of counterparties and transactions may involve large notional volumes and potentially volatile commodity prices. At March 31, 2004, gross credit exposure related to these transactions totaled $491 million, reflecting the unrealized gains for contracts carried at fair value plus any outstanding receivables (net of payables, where netting agreements exist), prior to the application of collateral. After the application of collateral, the Company's credit exposure is reduced to $486 million. Of this amount, investment grade counterparties represent 92% and no single counterparty exceeded 15%.

As of March 31, 2004 and December 31, 2003, the Company had margin deposit assets (reported in other current assets) of $39 million and $41 million, respectively, and margin deposit liabilities (reported in other current liabilities) of $6 million and $1 million, respectively.

The Company engages in related party transactions primarily with other Dominion subsidiaries. The Company's accounts receivable and payable balances with affiliates are settled based on contractual terms or on a monthly basis, depending on the nature of the underlying transactions. The significant related party transactions are disclosed below.

The Company, through an unregulated subsidiary, transacts with other Dominion affiliates for certain quantities of natural gas and other commodities at market prices in the ordinary course of business. Through the same unregulated subsidiary, the Company is involved in facilitating Dominion's enterprise risk management. In connection with this role, the Company's unregulated subsidiary enters into certain commodity derivative contracts with other Dominion affiliates. These contracts, which are principally comprised of commodity swaps, are used by Dominion affiliates to manage commodity price risks associated with purchases and sales of natural gas. As part of Dominion's enterprise risk management, the Company generally manages such risk exposures by entering into offsetting derivative instruments with non-affiliates. The Company reports both affiliated and non-affiliated derivative instruments at fair value, with related changes included in earnings.

The affiliated transactions are presented below:

The Company's Consolidated Balance Sheets included derivative assets of $92 million and $86 million with Dominion affiliates at March 31, 2004 and December 31, 2003, respectively, and derivative liabilities of $37 million and $65 million with Dominion affiliates at March 31, 2004 and December 31, 2003, respectively.

Dominion Resources Services, Inc. provided accounting, legal and certain administrative and technical services to the Company, which totaled $70 million and $72 million in the first quarters of 2004 and 2003, respectively. The Company provided certain services to affiliates, including charges for facilities and equipment usage, which totaled $5 million and $6 million in the first quarters of 2004 and 2003, respectively.

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The Company is leasing a power generation facility at its Possum Point station from another Dominion subsidiary. As a result of adopting FIN 46R on December 31, 2003 for its interests in special purpose entities, the Company includes this special purpose lessor entity in its Consolidated Financial Statements. The interest expense associated with the special purpose lessor entity's debt in the first quarter of 2004 was not material.

At March 31, 2004 and December 31, 2003, the Company and its subsidiaries had borrowed funds from Dominion under a short-term demand note ($119 million and $154 million, respectively) and a long-term note ($220 million for both periods). Interest charges on these borrowings incurred by the Company in the first quarters of 2004 and 2003 were not material.

An unregulated subsidiary of the Company, at its sole discretion, has provided at March 31, 2004 and December 31, 2003, $9 million and $8 million, respectively, of cash collateral to third parties on behalf of several of its natural gas supply customers. For this and other financial support services, the unregulated subsidiary receives fees and has a security interest in the customers' assets. The arrangements terminate at various dates beginning in 2005 through 2007, subject to periodic renewal thereafter unless terminated by either party.

Upon adoption of FIN 46R for its interests in special purpose entities on December 31, 2003, the Company ceased consolidating Virginia Power Capital Trust II, a finance subsidiary of the Company. The junior subordinated notes issued by the Company and held by the trust are reported as long-term debt. The Company reported $8 million of interest expense on the junior subordinated notes in the first quarter of 2004 and reported $7 million of distributions of subsidiary trust in the first quarter of 2003.

The Company is organized primarily on the basis of products and services sold in the United States. The majority of the Company's revenue is provided through bundled rate tariffs. Generally, such revenue is allocated for management reporting based on prior cost-of-service studies among the three operating segments:

Generation includes the Company's portfolio of electric generating facilities, power purchase contracts and marketing of its excess generation resources not needed to serve utility customers.

Energy includes the Company's electric transmission operations and its energy trading and risk management activities (clearinghouse). The electric transmission operations are subject to cost-of-service rate regulation.

Delivery includes the Company's electric distribution systems and customer service operations. The Delivery segment is subject to cost-of-service rate regulation.

In addition, the Company reports corporate and other functions as a segment. The contribution to net income by the Company's primary operating segments is determined based on a measure of profit that executive management believes to be representative of the segments' core earnings. As a result, certain specific items attributable to those segments are not included in profit measures evaluated by executive management in assessing the segment's performance or allocating resources among the segments. These specific items are instead reported in the Corporate and Other segment.

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Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) discusses the results of operations and general financial condition of Virginia Electric and Power Company. MD&A should be read in conjunction with the Consolidated Financial Statements. The "Company" is used throughout MD&A and, depending on the context of its use, may represent any of the following: the legal entity, Virginia Electric and Power Company, one of Virginia Electric and Power Company's consolidated subsidiaries or the entirety of Virginia Electric and Power Company and its consolidated subsidiaries. The Company is a wholly-owned subsidiary of Dominion.

The MD&A consists of the following information:

• Forward-Looking Statements
• Accounting Matters
• Results of Operations
• Segment Results of Operations
• Selected Information-Energy Trading Activities
• Sources and Uses of Cash
• Future Issues and Other Matters
• Risk Factors and Cautionary Statements That May Affect Future Results

This report contains statements concerning the Company's 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 words such as "anticipate," "estimate," "forecast," "expect," "believe," "should," "could," "plan," "may" or other similar words.

The Company makes forward-looking statements with full knowledge that risks and uncertainties exist that may cause actual results to be materially different from predicted results. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Additionally, other risks that may cause actual results to differ from predicted results are set forth in Risk Factors and Cautionary Statements That May Affect Future Results.

The Company bases its forward-looking statements on management's beliefs and assumptions using information available at the time the statements are made. The Company cautions the reader not to place undue reliance on its forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, materially differ from actual results. The Company undertakes no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

As of March 31, 2004, there have been no significant changes with regard to critical accounting policies and estimates as disclosed in MD&A in the Company's Annual Report on Form 10-K for the year ended December 31, 2003. The policies disclosed included the accounting for: derivative contracts at fair value; long-lived asset impairment testing; asset retirement obligations; and regulated operations.

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The Company adopted FIN 46R for its interests in VIEs that are not considered special purpose entities on March 31, 2004. FIN 46R addresses the identification and consolidation of VIEs, which are entities that are not controllable through voting interests or in which the VIEs' equity investors do not bear the residual economic risks and rewards. There was no impact on the Company's results of operations or financial position relating to this adoption. See Note 3 to the Consolidated Financial Statements for further discussion.

Net income decreased 72% to $109 million, as compared to the first quarter of 2003, primarily reflecting:

• A decrease in the contribution from energy trading and risk management activities, resulting primarily from unfavorable price changes on derivative contracts, including comparatively lower price volatility on natural gas option positions, and the transfer of certain wholesale electric contracts to another Dominion subsidiary in October 2003; and
• A $12 million ($7 million after-tax) charge related to an agreement to settle a class action lawsuit involving a dispute over the Company's rights to lease fiber-optic cable along a portion of its electric transmission corridor.

These decreases were partially offset by a $16 million ($10 million after-tax) benefit from the reduction of accrued expenses associated with Hurricane Isabel restoration activities in 2003 and reported in Corporate and Other segment.

The decrease in net income also reflected the net benefit of certain items recognized in 2003 that did not recur in 2004. These items were reported in Corporate and Other segment and included:

• An $84 million net after-tax gain, representing the cumulative effect of changes in accounting principles, resulting from the adoption of two new accounting standards on January 1, 2003:
• SFAS No. 143-$139 million after-tax gain; and
• EITF 02-3-$55 million after-tax loss.
• Severance costs associated with workforce reductions of $8 million ($5 million after-tax).

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Presented below are selected amounts related to the Company's results of operations:

An analysis of the Company's results of operations for the first quarter of 2004 compared to the first quarter of 2003 follows:

Regulated electric sales revenue increased 3% to $1.3 billion, primarily reflecting:

• A $12 million increase representing customer growth associated with new customer connections; and
• A $55 million increase resulting from fuel rate recoveries. This increase in fuel rate recoveries was generally offset by a comparable increase in fuel expense and did not materially affect net income.

These increases were partially offset by a $19 million decrease associated with comparably milder weather.

Other revenue decreased 95% to $12 million, primarily reflecting lower margins in non-regulated electric and gas sales revenue from energy trading and risk management activities, resulting primarily from unfavorable price changes on derivative contracts, including comparatively lower price volatility on natural gas option positions, partially offset by a $54 million increase in coal sales revenue.

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Electric fuel and energy purchases, net increased 9% to $395 million, reflecting a $55 million increase in the cost of fuel and energy purchases recovered through fuel rates, partially offset by a $21 million decrease in costs, including a $9 million decrease associated with the transfer of certain wholesale electric contracts to another Dominion subsidiary in October 2003.

Purchased electric capacity expense decreased 9% to $146 million, primarily resulting from the termination of a long-term power purchase contract in connection with the purchase of the related generating facility in November 2003.

Other purchased energy commodities increased 63% to $111 million, primarily reflecting a $79 million increase in the cost of coal purchased for resale, partially offset by a $27 million decrease in the cost of oil sales.

Other operations and maintenance expense rose 21% to $249 million, primarily reflecting:

• The impact of lower mark-to-market gains in 2004 due to the transfer of certain electric wholesale contracts to another Dominion subsidiary in October 2003; and
• A $12 million charge related to an agreement to settle a class action lawsuit involving a dispute over the Company's rights to lease fiber-optic cable along a portion of its electric transmission corridor.

These increases were partially offset by:

• A $16 million benefit from the reduction of accrued expenses associated with Hurricane Isabel restoration activities in 2003;
• A $7 million decrease in expenses due to fewer nuclear refueling outages; and
• An $8 million decrease in expenses due to severance costs associated with workforce reductions recognized in 2003 that did not recur in 2004.

Depreciation and amortization expense increased 4% to $120 million, primarily due to incremental expense resulting from property additions, including the consolidation of a special purpose lessor entity as a result of adopting FIN 46R at December 31, 2003.

Income taxes-The Company's effective tax rate increased 1.1% to 38.8% for the first quarter of 2004. The increase primarily resulted from an increase in state income taxes.

Cumulative effect of changes in accounting principles-On January 1, 2003, the Company adopted two new accounting standards, resulting in a net after-tax gain of $84 million, which included:

• SFAS No. 143-$139 million after-tax gain; and
• EITF 02-3-$55 million after-tax loss.

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The Generation segment includes the Company's electric generation operations and energy marketing activities.

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mwhrs = megawatt hours

Presented below are the key factors impacting the Generation segment's operating results:

The Generation segment's net income contribution increased $3 million, as compared to the first quarter of 2003, primarily reflecting the following:

• A decrease in regulated electric sales due to comparably milder weather;
• Customer growth in the electric franchise service area, primarily reflecting an increase in new residential customers;
• Reduced purchased power capacity expenses, primarily due to the termination of a long-term power purchase contract in connection with the purchase of the related generating facility in November 2003;
• Decreased nuclear expenses, due to fewer refueling outage days at the Company's nuclear generating units; and
• Increased depreciation and amortization expenses, reflecting property additions, including the consolidation of a special purpose lessor entity upon the adoption of FIN 46R at December 31, 2003.

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The Energy segment includes the Company's electric transmission business and its clearinghouse (energy trading and risk management activities) operations:

Presented below are the key factors impacting the Energy segment's operating results:

The Energy segment's net income decreased $208 million, as compared to the first quarter of 2003, primarily reflecting the following:

• A decrease in the contribution from energy trading and risk management activities, resulting primarily from unfavorable price changes on derivative contracts, including comparatively lower price volatility on natural gas option positions, and the transfer of certain wholesale electric contracts to another Dominion subsidiary in October 2003. These wholesale electric contracts are not supplied from the Company's own generation resources and involve marketing and trading activities outside of its service territory; and
• A decrease in electric transmission margins, primarily due to lower wheeling revenue.

The Delivery segment includes the Company's electric distribution and customer service operations.

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Presented below are the key factors impacting Delivery's operating results:

The Delivery segment's net income was substantially unchanged, as compared to the first quarter of 2003, primarily reflecting the following:

• An increase in regulated electric sales due to customer growth in the electric franchise service area, primarily reflecting new residential customers;
• A decrease in regulated electric sales due to comparably milder weather; and
• A decrease in salaries, wages and benefit costs, primarily reflecting the impact of a workforce reduction program and overall attrition in 2003.

Corporate and Other includes the Company's corporate and other functions. Presented below are Corporate and Other's operating results:

The Company reported in the Corporate and Other segment the following items attributable to its operating segments:

Other operations and maintenance expense:

• $16 million ($10 million after-tax) benefit from the reduction of accrued expenses associated with Hurricane Isabel restoration activities in 2003 (Delivery); partially offset by
• A $12 million ($7 million after-tax) charge related to an agreement to settle a class action lawsuit involving a dispute over the Company's rights to lease fiber-optic cable along a portion of its electric transmission corridor (Energy).

• Cumulative effect of changes in accounting principles-$84 million net after-tax gain resulting from the adoption of two new accounting standards, as described in Note 3 to the Consolidated Financial Statements, including:
• SFAS No. 143-a $139 million after-tax gain ($140 million after-tax gain-Generation and $1 million after-tax loss-Delivery); and
• EITF 02-3-a $55 million after-tax loss (Energy).
• Other operations and maintenance expense-$8 million ($5 million after-tax) of severance costs for workforce reductions ($3 million-Generation and $5 million-Delivery).

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See Selected Information-Energy Trading Activities in MD&A in the Company's Annual Report on Form 10-K for the year ended December 31, 2003 for a detailed discussion of the energy trading and risk management activities and related accounting policies. For additional discussion of the Company's trading activities, see Market Rate Sensitive Instruments and Risk Management in Item 3.

During 2003 and prior periods, the Company's clearinghouse operations also included contracts for purchases and sales of electricity. In 2004, in connection with Dominion's plan to conduct its non-utility wholesale electric marketing and trading activities through another Dominion subsidiary, the Company assigned to that affiliate certain wholesale electric contracts that are not supplied from its own generation resources and involve activities outside of its service territory. The Company will continue to market its generation resources not needed to serve utility customers but will do so as part of its management of utility system resources in the Generation segment rather than through its clearinghouse operations.

A summary of the changes in the unrealized gains and losses recognized for the Company's energy-related derivative instruments held for trading purposes follows:

The balance of net unrealized gains and losses recognized for the Company's energy-related derivative instruments held for trading purposes at March 31, 2004 is summarized in the following table based on the approach used to determine fair value and contract settlement or delivery dates:

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