Bacon's Rebellion

Democracy Thrives in Sunlight

Ouch!

—

by

James A. Bacon
in

Thomas F. Farrell

Dominion Energy announced today a $1.2 billion loss in the quarter ending June 30, largely reflecting the cost of writing off its spending on the defunct Atlantic Coast Pipeline project. Operating earnings (before write-offs and other adjustments) were $706 million.

The difference between reported losses and operating earnings for the first three months, states the company in a press release, “was primarily attributable to impairment-related charges associated with the Atlantic Coast Pipeline and Supply Header projects and net gains on our nuclear decommissioning trust funds.”

That would put the loss from the ACP on the order of $2 billion. The press release did not go into details. But aside from massive legal and P.R. expenses, Dominion had pre-ordered large volumes of specialty steel and lined up union construction crews in anticipation of commencing work on the project.

In a separate announcement, the company said that Thomas F. Farrell II, 66, will step down as CEO to serve as executive chairman. He will be replaced as CEO by Robert M. Blue, executive vice president and co-chief operating officer. Farrell took the job as CEO in 2006.

— JAB

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33 responses to “Ouch!”

  1. WayneS Avatar
    WayneS

    “In a separate announcement, the company said that Thomas F. Farrell II, 66, will step down as CEO to serve as executive chairman.”

    So he screws up royally and he’ll still be with the company in another highly paid executive role? What do you call that, a Golden Trampoline?

  2. LarrytheG Avatar
    LarrytheG

    Is this an original reporting “scoop” ?

  3. Steve Haner Avatar
    Steve Haner

    This is how the taxpayers in general, state and federal, get to cover a share of the company’s losses on the defunct project. It will be interesting to see when all is said and done how the bill breaks down between taxpayers, ratepayers and shareholders. And of course many of us are all three in one!

    Wayne, “screws up royally?” Dumbest thing said on Bacon’s Rebellion in 30 days. I have many disagreements with the management of that company, but no shareholder has any reason to complain about Farrell, and overall the company is a great asset to the Commonwealth. Has it played a rough brand of hardball? Sure. For that I largely blame the General Assembly which has happily allowed itself to be corrupted and embarrassed.

    1. WayneS Avatar
      WayneS

      I respectfully disagree – about Farrell, not about Dominion being overall a great asset to the Commonwealth.

      Mr. Farrell was in charge when Dominion spent god-knows how much money to convert the Bremo power plant to natural gas, including boring a gas line under the James River from Buckingham County to Fluvanna County, only to moth-ball the entire facility about 9 months after the conversion was complete.

      Overall company profits notwithstanding, that was a stupid move. And it was not the only one.

      PS – Only thirty days?

      1. Steve Haner Avatar
        Steve Haner

        Sorry about that — especially after your nice comment in the other string…

        I’ve had personal interaction with Farrell, but not in a long while now. I’ll never forget the fun of seeing him in Scott Stadium after W&M won that opening game….I think the record on stock value and dividends will be a strong indication of his success, and understand I was basically in support of the ACP. Individual projects come and go as they please, and the power line across the James also upset folks — but we at Newport News Shipyard pushed for it HARD. As we often discuss here, the way the power companies are structured and rewarded (and protected) often lead to some strange investment decisions. Within the industry, Farrell had an excellent reputation.

        Let me add something else important. We all know people who worked or retired from there, and in general I’m always hearing they liked the company. A company being viewed as a nice place to work is important, and that also starts at the top, is a tone set in the C Suite.

        1. WayneS Avatar
          WayneS

          “Let me add something else important. We all know people who worked or retired from there, and in general I’m always hearing they liked the company. A company being viewed as a nice place to work is important, and that also starts at the top, is a tone set in the C Suite.”

          That is an excellent point, and I was probably a bit too hard on Mr, Farrell. Even as CEO he does completely control the company’s direction.

          But I had my “golden trampoline” comment ready to go and I needed to use it on SOMEONE. 😉

          1. LarrytheG Avatar
            LarrytheG

            oh it’s probably durable as a comment… 😉

          2. Steve Haner Avatar
            Steve Haner

            Maybe he’ll use it to finance another movie….

      2. WayneS Avatar
        WayneS

        My apologies – I exaggerated a bit. The converted plant ran for about 2-1/2 years before being shut down.

        And someone other than God does know the cost – about $54 million.

        It was converted as part of obtaining approval for the Virginia City Hybrid Energy Center – but why not simply shut it down altogether in 2015 instead of spending all that money and then shutting it down anyway? The ultimate outcome would have been the same.

        1. LarrytheG Avatar
          LarrytheG

          Don’t really know but suspect the costs associated with Bremo were recoverable from ratepayers and not investor equity.

          Seems like when that is the case – Dominion is embolden to do stuff more so than when it affects investors which actually made the ACP even more of a outlier and risk for Dominion – but they apparently believed they could overcome opposition.

          I’m not convinced yet that opposition delays turned it.

          For instance, if electricity is needed why shut down Bremo after it was converted to gas – which seemed to be the premise behind the ACP?

  4. LarrytheG Avatar
    LarrytheG

    re: “the screw-up and “rough brand of hardball”.

    No question, Dominion has been a darling of Wall Street but they’ve made some enemies also with their “my way or the highway” behaviours.

    so it’s a little ironic that we “admire” them for their ability to get their way… no?

    It’s hard to tell from afar what the corporate machinations are with regard to Farrell’s situation – but suspect much of what Dominion does has to have more than Farrell in agreement.

    but I was also curious about this: “was primarily attributable to impairment-related charges associated with the Atlantic Coast Pipeline and Supply Header projects and net gains on our nuclear decommissioning trust funds.”

    what does “net gains” mean in the context of reporting a loss?

    1. Steve Haner Avatar
      Steve Haner

      It’s a long column of red and black ink entries which this time ended with the ending value in red ink. Or do you want Utility Accounting 101, which I’m not suited to teach?

      It is also going to become a major financial chip in the 2021 review of its books and adjustments (if any) to its rates. That company is always five chess moves ahead. Trust me, only somebody who has butted heads with them as much as I have gets that. My current moratorium on those efforts may end soon.

      1. LarrytheG Avatar
        LarrytheG

        just this one thing: ” net gains on our nuclear decommissioning trust funds.”

        so they highlighted it so I’m assuming it’s a major cost but not sure why it’s any more of a major cost now than in normally year to year costs…

        how much cost and is it attributable to it’s nuclear plants?

        1. Steve Haner Avatar
          Steve Haner

          For decades we’ve all been paying into trust funds for the future decommissioning of the plants and fuel disposal. The feds can’t decide how to dispose of the fuel, so the money accumulates and grows in those trust funds while the spent fuel is stored on site. Now, how those trust funds produce revenue for the company books is something somebody else needs to explain.

      2. Dick Hall-Sizemore Avatar
        Dick Hall-Sizemore

        Your comment about your moratorium maybe ending soon is most welcome.

  5. djrippert Avatar
    djrippert

    My complaint about the executive suite at Dominion is that they are paid too much. Farrell pocketed about $15m per year, year after year. Dominion is a highly regulated utility where executive mistakes are often covered by ratepayers. It is a monopoly for large swaths of its business protected by law from competition. In return for these ratepayer-funded benefits the General Assembly should cap the compensation of Dominion executives.

    https://www.salary.com/tools/executive-compensation-calculator/dominion-energy-inc-executive-salaries?year=2019

    1. WayneS Avatar
      WayneS

      I agree with you there. While a CEO’s compensation should usually be based on the success of the company, how much credit can a CEO take for the success of a company whose success is pretty much guaranteed by law.

      1. LarrytheG Avatar
        LarrytheG

        I dunno… if Dominion was a public service corporation – yes but as a private sector corporation – I’d hate to see the government bureaucracy get in the business of deciding compensation for corporate leaders though I strongly suspect you’d get agreement from some anti-capitalism street protestors!

        and yes, credit some of Dominions success on 20+ years of General Assembly complicitness… but don’t forget – we send them back to office also. There is no ballot box penalty for GA enablers of Dominion.

        1. djrippert Avatar
          djrippert

          There’s nothing capitalistic about a monopoly. Large parts of Dominion’s operations are not even remotely free enterprise.

          1. LarrytheG Avatar
            LarrytheG

            Oh I totally agree but they have managed to reconfigure themselves so that parts of them are – capitalistic and hard for most of us to know which parts are and are not.

            That was an issue with the ACP from the get go – when Dominion initially claimed the gas was needed for electricity and got a bunch of folks to agree and support on that basis.

            If it had not been for the opponents – who questioned Dominion on that basis – they would have likely just rolled on…….. and the public blithely okay with it.

        2. idiocracy Avatar
          idiocracy

          Dominion would be considered a public service corporation by the most commonly accepted definition of that term.

          1. LarrytheG Avatar
            LarrytheG

            that is allowed to contribute money to legislators ?

            that makes it sound even worse……….

        3. idiocracy Avatar
          idiocracy

          Just one of the many things that makes Virginia so “special”.

  6. James Wyatt Whitehead V Avatar
    James Wyatt Whitehead V

    Good luck to the new boss of Dominion, Mr. Blue. He has some big challenges ahead.

  7. TBill Avatar
    TBill

    Misc thoughts
    > Mad Money’s Jim Cramer frequently had Farrel as guest and Cramer absolutely loves Dominion as investment
    > I am moved by an article about about how the Ohio utilities bribery scandal typifies the state/utility bed fellows
    > How much is Dominion Virginia paying into this loss? I guess this Dominion Energy vs. Dominion Virginia.
    > My mom in Pgh Pa. has about Heinz-57 varieties of electric she can purchase, which, on the one hand is nice, and the other hand, if you are 91 you only need one bill…getting 56 other competing mails is mind boggling…somehow you can opt out of the solicitations but you need a PhD to figure it out. This is perhaps more free market like what we need, plus a senior citizen electricity social worker to help elderly make the choices….sort of like tax assistance.
    > Off shore wind producers (Europe) love USA utility system as they know it is captive market and rate payers are forced to pay the high costs no matter what…no escape.

    1. djrippert Avatar
      djrippert

      Dominion is a good investment. When a regulated monopoly controls the legislature which regulates it you tend to get good results for shareholders. Kudos to Farrell and Dominion for so totally controlling Virginia’s state government. Eternal shame to Virginia’s state government for allowing itself to be controlled. Steve Haner is right – the real villain is our General Assembly.

      1. idiocracy Avatar
        idiocracy

        Not so good results for customers, who might be tired of excessive power outages (excessive by non-Virginian standards, that is).

  8. Peter Galuszka Avatar
    Peter Galuszka

    Sorry but it does not take a very stable genius to figure out that the problem is the legislature. Even my humble self wanted to look into conflicts as a long haired cub reporter ( even before Boy Wonder Stephen D Haner) and i was discouraged.

    1. Steve Haner Avatar
      Steve Haner

      I claim no special insights. You and I both remember Henry Howell, and the bumper stickers reading “Welcome to Virginia, Owned and Operated by VEPCO.” I had the privilege for 1o years or so of watching it up close, sometimes even “in the room where it happened.” Bacon’s Rebellion has given me a venue to lay some of it out since nobody is paying me in that realm now.

      1. idiocracy Avatar
        idiocracy

        VEPCO was known as the “Very Expensive Power Company”, as I recall.

  9. Peter Galuszka Avatar
    Peter Galuszka

    Sure do remember that plus Garrett Epps brilliant book

  10. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    Overlooked in this is the continuation of Dominion’s connections to the General Assembly and Democratic politics, in particular:

    Bob Blue, the CEO, taking over from Farrell, was counselor and director of policy for Mark Warner, when he was governor.

    Bill Murray, currently Senior Vice President for Corporate Affairs and Communications was deputy director of policy under Warner and legislative director for Gov. Tim Kaine. When he went to the dark side and joined Dominion, he began reporting again to Bob Blue, his former boss under Warner.

    1. LarrytheG Avatar
      LarrytheG

      that’s even more OUCH!

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