EQUITY

Issuance of Common Stock

Dominion

Dominion maintains Dominion Direct^® and a number of employee savings plans through which contributions may be invested in Dominion's common stock. These shares may either be newly issued or purchased on the open market with proceeds contributed to these plans. In January 2014, Dominion began purchasing its common stock on the open market for these plans. In April 2014, Dominion began issuing new common shares for these direct stock purchase plans.

During 2016, Dominion received cash proceeds, net of fees and commissions, of $2.2 billion from the issuance of approximately 32 million shares of common stock through various programs resulting in approximately 628 million of shares of common stock outstanding at December 31, 2016. These proceeds include cash of $295 million received from the issuance of 4.0 million of such shares through Dominion Direct^® and employee savings plans.

In December 2014, Dominion filed an SEC shelf registration for the sale of debt and equity securities including the ability to sell common stock through an at-the-market program. Also in December 2014, Dominion entered into four separate sales agency agreements to effect sales under the program and pursuant to which it may offer from time to time up to $500 million aggregate amount of its common stock. Sales of common stock can be made by means of privately negotiated transactions, as transactions on the NYSE at market prices or in such other transactions as are agreed upon by Dominion and the sales agents and in conformance with applicable securities laws. Following issuances during the first and second quarters of 2015, Dominion has the ability to issue up to approximately $200 million of stock under the 2014 sales agency agreements; however, no additional issuances occurred under these agreements in 2016.

In both April 2016 and July 2016, Dominion issued 8.5 million shares under the related stock purchase contracts entered into as part of Dominion’s 2013 Equity Units and received $1.1 billion of total proceeds. Additionally, Dominion completed a market issuance of equity in April 2016 of 10.2 million shares and received proceeds of $756 million through a registered underwritten public offering. A portion of the net proceeds was used to finance the Dominion Questar Combination. See Note 3 for more information.

Virginia Power

In 2016, 2015 and 2014, Virginia Power did not issue any shares of its common stock to Dominion.

Shares Reserved for Issuance

At December 31, 2016, Dominion had approximately 63 million shares reserved and available for issuance for Dominion Direct^®, employee stock awards, employee savings plans, director stock compensation plans and issuance in connection with stock purchase contracts. See Note 17 for more information.

Repurchase of Common Stock

Dominion did not repurchase any shares in 2016 or 2015 and does not plan to repurchase shares during 2017, except for shares tendered by employees to satisfy tax withholding obligations on vested restricted stock, which do not count against its stock repurchase authorization.

Purchase of Dominion Midstream Units

In September 2015, Dominion initiated a program to purchase from the market up to $50 million of common units representing limited partner interests in Dominion Midstream, which expired in September 2016. Dominion purchased approximately 658,000 common units for $17 million and 887,000 common units for $25 million for the years ended December 31, 2016 and 2015, respectively.

Issuance of Dominion Midstream Units

During the fourth quarter of 2016, Dominion Midstream received $482 million of proceeds from the issuance of common units and $490 million of proceeds from the issuance of convertible preferred units. The net proceeds were primarily used to finance a portion of the acquisition of Questar Pipeline from Dominion. See Note 3 for more information.

The holders of the convertible preferred units are entitled to receive cumulative quarterly distributions payable in cash or additional convertible preferred units, subject to certain conditions. The units are convertible into Dominion Midstream common units on a one-for-one basis, subject to certain adjustments, (i) in whole or in part at the option of the unitholders any time after December 1, 2018 or, (ii) in whole or in part at Dominion Midstream’s option, subject to certain conditions, any time after December 1, 2019. The conversion of such units would result in a potential increase to Dominion’s net income attributable to noncontrolling interests.

Accumulated Other Comprehensive Income (Loss)

Presented in the table below is a summary of AOCI by component:



At December 31,	2016			2015
(millions)
Dominion
Net deferred losses on derivatives-hedging activities, net of tax of $173 and $110	$	(280	)	$	(176	)
Net unrealized gains on nuclear decommissioning trust funds, net of tax of $(318) and $(281)	569			504
Net unrecognized pension and other postretirement benefit costs, net of tax of $691 and $525	(1,082		)	(797		)
Other comprehensive loss from equity method investees, net of tax of $4 and $4	(6		)	(5		)
Total AOCI	$	(799	)	$	(474	)
Virginia Power
Net deferred losses on derivatives-hedging activities, net of tax of $5 and $4	$	(8	)	$	(7	)
Net unrealized gains on nuclear decommissioning trust funds, net of tax of $(35) and $(30)	54			47
Total AOCI	$	46		$	40
Dominion Gas
Net deferred losses on derivatives-hedging activities, net of tax of $15 and $10	$	(24	)	$	(17	)
Net unrecognized pension costs, net of tax of $68 and $56	(99		)	(82		)
Total AOCI	$	(123	)	$	(99	)

Dominion

The following table presents Dominion’s changes in AOCI by component, net of tax:



	Deferred gains and losses on derivatives-hedging activities			Unrealized gains and losses on investment securities			Unrecognized pension and other postretirement benefit costs			Other comprehensive loss from equity method investees			Total
(millions)
Year Ended December 31, 2016
Beginning balance	$	(176	)	$	504		$	(797	)	$	(5	)	$	(474	)
Other comprehensive income before reclassifications: gains (losses)	55			93			(319		)	(1		)	(172		)
Amounts reclassified from AOCI: (gains) losses⁽¹⁾	(159		)	(28		)	34			—			(153		)
Net current period other comprehensive income (loss)	(104		)	65			(285		)	(1		)	(325		)
Ending balance	$	(280	)	$	569		$	(1,082	)	$	(6	)	$	(799	)
Year Ended December 31, 2015
Beginning balance	$	(178	)	$	548		$	(782	)	$	(4	)	$	(416	)
Other comprehensive income before reclassifications: gains (losses)	110			6			(66		)	(1		)	49
Amounts reclassified from AOCI: (gains) losses⁽¹⁾	(108		)	(50		)	51			—			(107		)
Net current period other comprehensive income (loss)	2			(44		)	(15		)	(1		)	(58		)
Ending balance	$	(176	)	$	504		$	(797	)	$	(5	)	$	(474	)

(1) See table below for details about these reclassifications.

The following table presents Dominion’s reclassifications out of AOCI by component:



Details about AOCI components	Amounts reclassified from AOCI			Affected line item in the Consolidated Statements of Income
(millions)
Year Ended December 31, 2016
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(330	)	Operating revenue
	13			Purchased gas
	10			Electric fuel and other energy-related purchases
Interest rate contracts	31			Interest and related charges
Foreign currency contracts	17			Other Income
Total	(259		)
Tax	100			Income tax expense
Total, net of tax	$	(159	)
Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(66	)	Other income
Impairment	23			Other income
Total	(43		)
Tax	15			Income tax expense
Total, net of tax	$	(28	)
Unrecognized pension and other postretirement benefit costs:
Prior-service costs (credits)	$	(15	)	Other operations and maintenance
Actuarial losses	71			Other operations and maintenance
Total	56
Tax	(22		)	Income tax expense
Total, net of tax	$	34
Year Ended December 31, 2015
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(203	)	Operating revenue
	15			Purchased gas
	1			Electric fuel and other energy-related purchases
Interest rate contracts	11			Interest and related charges
Total	(176		)
Tax	68			Income tax expense
Total, net of tax	$	(108	)
Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(110	)	Other income
Impairment	31			Other income
Total	(79		)
Tax	29			Income tax expense
Total, net of tax	$	(50	)
Unrecognized pension and other postretirement benefit costs:
Prior-service costs (credits)	$	(12	)	Other operations and maintenance
Actuarial losses	98			Other operations and maintenance
Total	86
Tax	(35		)	Income tax expense
Total, net of tax	$	51

Virginia Power

The following table presents Virginia Power’s changes in AOCI by component, net of tax:



	Deferred gains and losses on derivatives-hedging activities			Unrealized gains and losses on investment securities			Total
(millions)
Year Ended December 31, 2016
Beginning balance	$	(7	)	$	47		$	40
Other comprehensive income before reclassifications: gains (losses)	(2		)	11			9
Amounts reclassified from AOCI: (gains) losses⁽¹⁾	1			(4		)	(3		)
Net current period other comprehensive income (loss)	(1		)	7			6
Ending balance	$	(8	)	$	54		$	46
Year Ended December 31, 2015
Beginning balance	$	(7	)	$	57		$	50
Other comprehensive income before reclassifications: gains (losses)	(1		)	(4		)	(5		)
Amounts reclassified from AOCI: (gains) losses⁽¹⁾	1			(6		)	(5		)
Net current period other comprehensive income (loss)	—			(10		)	(10		)
Ending balance	$	(7	)	$	47		$	40

(1) See table below for details about these reclassifications.

The following table presents Virginia Power’s reclassifications out of AOCI by component:



Details about AOCI components	Amounts reclassified from AOCI			Affected line item in the Consolidated Statements of Income
(millions)
Year Ended December 31, 2016
(Gains) losses on cash flow hedges:
Interest rate contracts	$	1		Interest and related charges
Total	1
Tax	—			Income tax expense
Total, net of tax	$	1
Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(9	)	Other income
Impairment	3			Other income
Total	(6		)
Tax	2			Income tax expense
Total, net of tax	$	(4	)
Year Ended December 31, 2015
(Gains) losses on cash flow hedges:
Commodity contracts	$	1		Electric fuel and other energy-related purchases
Total	1
Tax	—			Income tax expense
Total, net of tax	$	1
Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(14	)	Other income
Impairment	4			Other income
Total	(10		)
Tax	4			Income tax expense
Total, net of tax	$	(6	)

Dominion Gas

The following table presents Dominion Gas' changes in AOCI by component, net of tax:



	Deferred gains and losses on derivatives-hedging activities			Unrecognized pension costs			Total
(millions)
Year Ended December 31, 2016
Beginning balance	$	(17	)	$	(82	)	$	(99	)
Other comprehensive income before reclassifications: losses	(16		)	(20		)	(36		)
Amounts reclassified from AOCI^(1): losses	9			3			12
Net current period other comprehensive loss	(7		)	(17		)	(24		)
Ending balance	$	(24	)	$	(99	)	$	(123	)
Year Ended December 31, 2015
Beginning balance	$	(20	)	$	(66	)	$	(86	)
Other comprehensive income before reclassifications: gains (losses)	6			(20		)	(14		)
Amounts reclassified from AOCI⁽¹⁾: (gains) losses	(3		)	4			1
Net current period other comprehensive income (loss)	3			(16		)	(13		)
Ending balance	$	(17	)	$	(82	)	$	(99	)

(1) See table below for details about these reclassifications.

The following table presents Dominion Gas' reclassifications out of AOCI by component:



Details about AOCI components	Amounts reclassified from AOCI			Affected line item in the Consolidated Statements of Income
(millions)
Year Ended December 31, 2016
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(4	)	Operating revenue
Interest rate contracts	2			Interest and related charges
Foreign currency contracts	17			Other income
Total	15
Tax	(6		)	Income tax expense
Total, net of tax	$	9
Unrecognized pension costs:
Actuarial losses	$	5		Other operations and maintenance
Total	5
Tax	(2		)	Income tax expense
Total, net of tax	$	3
Year Ended December 31, 2015
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(6	)	Operating revenue
Total	(6		)
Tax	3			Income tax expense
Total, net of tax	$	(3	)
Unrecognized pension costs:
Actuarial losses	$	7		Other operations and maintenance
Total	7
Tax	(3		)	Income tax expense
Total, net of tax	$	4

Stock-Based Awards

The 2005 and 2014 Incentive Compensation Plans permit stock-based awards that include restricted stock, performance grants, goal-based stock, stock options, and stock appreciation rights. The Non-Employee Directors Compensation Plan permits grants of restricted stock and stock options. Under provisions of these plans, employees and non-employee directors may be granted options to purchase common stock at a price not less than its fair market value at the date of grant with a maximum term of eight years. Option terms are set at the discretion of the CGN Committee of the Board of Directors or the Board of Directors itself, as provided under each plan. At December 31, 2016, approximately 24 million shares were available for future grants under these plans.

Dominion measures and recognizes compensation expense relating to share-based payment transactions over the vesting period based on the fair value of the equity or liability instruments issued. Dominion's results for the years ended December 31, 2016, 2015 and 2014 include $33 million, $39 million, and $39 million, respectively, of compensation costs and $11 million, $14 million, and $14 million, respectively of income tax benefits related to Dominion's stock-based compensation arrangements. Stock-based compensation cost is reported in other operations and maintenance expense in Dominion's Consolidated Statements of Income. Excess Tax Benefits are classified as a financing cash flow. Dominion realized less than $1 million and $3 million of Excess Tax Benefits from the vesting of restricted stock awards during the year ended December 31, 2016 and 2015, respectively, and less than $1 million during the year ended December 31, 2014.

Restricted Stock

Restricted stock grants are made to officers under Dominion's LTIP and may also be granted to certain key non-officer employees from time to time. The fair value of Dominion's restricted stock awards is equal to the closing price of Dominion's stock on the date of grant. New shares are issued for restricted stock awards on the date of grant and generally vest over a three-year service period. The following table provides a summary of restricted stock activity for the years ended December 31, 2016, 2015 and 2014:



	Shares		Weighted - average Grant Date Fair Value
	(thousands)
Nonvested at December 31, 2013	1,007		$	49.35
Granted	354		67.98
Vested	(278	)	44.50
Cancelled and forfeited	(18	)	53.61
Nonvested at December 31, 2014	1,065		$	56.74
Granted	302		73.26
Vested	(510	)	50.71
Cancelled and forfeited	(2	)	62.62
Nonvested at December 31, 2015	855		$	66.16
Granted	372		71.67
Vested	(301	)	56.83
Cancelled and forfeited	(40	)	71.75
Nonvested at December 31, 2016	886		$	71.40

As of December 31, 2016, unrecognized compensation cost related to nonvested restricted stock awards totaled $31 million and is expected to be recognized over a weighted-average period of 1.9 years. The fair value of restricted stock awards that vested was $21 million, $37 million, and $19 million in 2016, 2015 and 2014, respectively. Employees may elect to have shares of restricted stock withheld upon vesting to satisfy tax withholding obligations. The number of shares withheld will vary for each employee depending on the vesting date fair market value of Dominion stock and the applicable federal, state and local tax withholding rates.

Goal-Based Stock

Goal-based stock awards are granted under Dominion's LTIP to officers who have not achieved a certain targeted level of share ownership, in lieu of cash-based performance grants. Current outstanding goal-based shares include awards granted to officers in February 2015 and February 2016.

The issuance of awards is based on the achievement of two performance metrics during a two-year period: TSR relative to that of companies listed as members of the Philadelphia Utility Index as of the end of the performance period and ROIC. The actual number of shares issued will vary between zero and 200% of targeted shares depending on the level of performance metrics achieved. The fair value of goal-based stock is determined on the date of grant. Awards to officers vest at the end of the two-year performance period. All goal-based stock awards are settled by issuing new shares.

The following table provides a summary of goal-based stock activity for the years ended December 31, 2016, 2015 and 2014:



	Targeted Number of Shares		Weighted - average Grant Date Fair Value
	(thousands)
Nonvested at December 31, 2013	5		$	53.85
Granted	13		68.83
Vested	(1	)	52.48
Nonvested at December 31, 2014	17		$	65.15
Granted	14		72.72
Vested	(7	)	56.22
Nonvested at December 31, 2015	24		$	72.27
Granted	12		69.93
Vested	(10	)	68.83
Cancelled and forfeited	(3	)	68.83
Nonvested at December 31, 2016	23		$	72.99

At December 31, 2016, the targeted number of shares expected to be issued under the February 2015 and February 2016 awards was approximately 23 thousand. In January 2017, the CGN Committee determined the actual performance against metrics established for the February 2015 awards with a performance period that ended December 31, 2016. Based on that determination, the total number of shares to be issued under the February 2015 goal-based stock awards was approximately 9 thousand.

As of December 31, 2016, unrecognized compensation cost related to nonvested goal-based stock awards was not material.

Cash-Based Performance Grants

Cash-based performance grants are made to Dominion's officers under Dominion's LTIP. The actual payout of cash-based performance grants will vary between zero and 200% of the targeted amount based on the level of performance metrics achieved.

In February 2014, a cash-based performance grant was made to officers. The performance grant was paid out in January 2016 based on the achievement of two performance metrics during 2014 and 2015: TSR relative to that of companies listed as members of the Philadelphia Utility Index as of the end of the performance period and ROIC. The total of the payout under the grant was $10 million.

In February 2015, a cash-based performance grant was made to officers. Payout of the performance grant occurred in January 2017 based on the achievement of two performance metrics during 2015 and 2016: TSR relative to that of companies listed as members of the Philadelphia Utility Index as of the end of the performance period and ROIC. The total of the payout under the grant was $10 million.

In February 2016, a cash-based performance grant was made to officers. Payout of the performance grant is expected to occur by March 15, 2018 based on the achievement of two performance metrics during 2016 and 2017: TSR relative to that of companies listed as members of the Philadelphia Utility Index as of the end of the performance period and ROIC. At December 31, 2016, the targeted amount of the grant was $14 million and a liability of $6 million had been accrued for this award.