RICHMOND, Va., May 1 /PRNewswire-FirstCall/ -- Dominion (NYSE: D) today announced unaudited net income determined in accordance with Generally Accepted Accounting Principles (GAAP) for the three months ended March 31, 2008, of $680 million ($1.18 per share) compared to net income of $453 million (65 cents per share) for the same period in 2007.

Operating earnings for the three months ended March 31, 2008, amounted to $578 million ($1.00 per share) compared to operating earnings of $518 million (74 cents per share) for the same period in 2007. Operating earnings are defined as GAAP earnings adjusted for certain items.

Dominion uses operating earnings as the primary performance measurement of its earnings outlook and results for public communications with analysts and investors. Dominion also uses operating earnings internally for budgeting, for reporting to the board of directors, for the company's incentive compensation plans and for its targeted dividend payouts. Dominion management believes operating earnings provide a more meaningful representation of the company's fundamental earnings power.

Business segment results and detailed descriptions of items included in 2008 and 2007 GAAP earnings but excluded from operating earnings can be found on Schedules 1, 2 and 3 of this release.

Thomas F. Farrell II, chairman, president and chief executive officer, said:

"We had an outstanding quarter operationally, and we continue to provide excellent service while developing growth projects across our regulated and nonregulated businesses. Despite warmer than normal weather in our Virginia service area, our quarterly results exceeded the upper end of our guidance range.

"The quarter positions us to meet our 2008 earnings target. We affirm our operating earnings guidance of $3.05 to $3.15 per share for the year and reiterate our expected annual earnings per share growth rate of at least 6 percent."

First-quarter 2008 operating earnings compared to guidance

First-quarter 2008 operating earnings of $1.00 per share compare to guidance of 89 cents to 94 cents per share. Drivers that compared favorably to guidance include contributions from the generation businesses and certain tax benefits. Factors that compared negatively to guidance include warmer-than-normal-weather and storm restoration-related expenses in the company's electric utility service area.

First-quarter 2008 operating earnings compared to 2007

The increase in first-quarter 2008 operating earnings per share as compared to 2007 is primarily attributable to the absence of unrecovered Virginia fuel expenses due to the deferral of fuel expenses in excess of current period recovery; higher contributions from the merchant generation business; higher volumes and realized prices from the company's remaining E&P operations, including volumes associated with reacquired overriding royalty interests arising from the volumetric production payment agreements terminated in 2007; lower interest expense; and accretion due to share repurchases. These positives were partially offset by the absence of earnings resulting from the divestiture of the company's U.S. E&P operations; the exclusion of earnings from Peoples Natural Gas and Hope Gas, Inc.; and warmer-than-normal-weather in the company's electric utility service area.

Complete details of first-quarter 2008 operating earnings compared to 2007 can be found on Schedule 4 of this release.

Second-quarter 2008 operating earnings guidance

Dominion expects second-quarter 2008 operating earnings in the range of 47 cents to 52 cents per share. This compares to operating earnings of 44 cents per share in the second-quarter of 2007. Drivers expected to compare favorably to 2007 include the absence of unrecovered Virginia fuel expenses due to the deferral of fuel expenses in excess of current period recovery; higher volumes and realized prices for the company's remaining E&P operations, including volumes associated with reacquired overriding royalty interests arising from the volumetric production payment agreements terminated in 2007; lower interest expense; and accretion due to share repurchases. Expected offsets include the absence of earnings resulting from the divestiture of the company's U.S. E&P operations; a return to normal weather in our electric utility service area; higher maintenance and depreciation expenses in our electric utility businesses; and the exclusion of earnings from Peoples Natural Gas and Hope Gas, Inc. Complete details of the company's second-quarter 2008 guidance can be found in Dominion's first-quarter 2008 Earnings Release Kit published this morning on Dominion's Web page under Financial Modeling, Earnings Release Kits at http://www.dom.com/investors/.

In providing its second-quarter 2008 operating earnings guidance, the company notes that there will be differences between expected 2008 GAAP and operating earnings for matters such as, but not limited to, divestitures or changes in accounting principles. At this time, Dominion management is not able to estimate the impact, if any, of these items on GAAP earnings. Accordingly, Dominion is not able to provide a corresponding GAAP equivalent for its operating earnings guidance and outlook.

Conference call today

Dominion will host its first-quarter earnings conference call at 10 a.m. EDT on Thursday, May 1. Dominion management will discuss first-quarter 2008 financial results, second-quarter 2008 guidance and other matters of interest to the financial community.

Domestic callers should dial (866) 710-0179. The passcode for the conference call is "Dominion." International callers should dial (334) 323-9871. Participants should dial in 10 minutes to 15 minutes prior to the scheduled start time. Members of the media also are invited to listen.

A live webcast of the conference call will be available on the company's investor information page at http://www.dom.com/investors/.

A replay of the conference call will be available beginning about 1 p.m. EDT May 1 and lasting until 11 p.m. EDT May 8. Domestic callers may access the recording by dialing (877) 919-4059. International callers should dial (334) 323-7226. The PIN for the replay is 81599236. Additionally, a replay of the webcast will be available on the company's investor information page by the end of the day May 1.

Dominion is one of the nation's largest producers and transporters of energy, with a portfolio of approximately 26,500 megawatts of generation, 1.1 trillion cubic feet equivalent of proved natural gas and oil reserves, 14,000 miles of natural gas transmission, gathering and storage pipeline and 6,000 miles of electric transmission lines. Dominion operates the nation's largest natural gas storage facility with 975 billion cubic feet of storage capacity and serves retail energy customers in 11 states. For more information about Dominion, visit the company's Web site at http://www.dom.com/.

This release contains certain forward-looking statements, including our forecasted operating earnings for 2008 as well as projected future long-term operating earnings growth rates, that are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations may include factors that are beyond the company's ability to control or estimate precisely, such as fluctuations in energy-related commodity prices, the timing of the closing dates of acquisitions or divestitures, estimates of future market conditions, estimates of proved and unproved reserves, the company's ability to meet its natural gas and oil production forecasts, the timing and receipt of regulatory approvals necessary for planned projects, acquisitions and divestitures, and the ability to complete planned construction or expansion projects as scheduled. Other factors include, but are not limited to, weather conditions, including the effects of hurricanes on operations, the behavior of other market participants, state and federal legislative and regulatory developments and changes to environmental and other laws and regulations, including those related to climate change, economic conditions in the company's service area, risks of operating businesses in regulated industries that are subject to changing regulatory structures, changes to regulated gas and electric rates collected by Dominion, changes to rating agency requirements and ratings, changing financial accounting standards, trading counter-party credit risks, risks related to energy trading and marketing, and other uncertainties. Other risk factors are detailed from time to time in Dominion's most recent quarterly report on Form 10-Q or annual report on Form 10-K filed with the Securities & Exchange Commission.

  Schedule 1 - Segment Operating Earnings

  Preliminary, Unaudited
  (millions, except earnings per share)        Three months ended March 31,
                                                2008        2007    Change
  Operating Revenue (GAAP Based)               $4,389     $4,661    $(272)

  Earnings: (1)
    Dominion Virginia Power                      $118       $132     $(14)
    Dominion Energy                               182        142       40
    Dominion Generation                           336        139      197
    Corporate and Other: (2)
      Other                                       (58)       (53)      (5)
      Divested U.S. E&P Operations (3)            -          123     (123)
      Peoples & Hope (4)                          -           35      (35)
    OPERATING EARNINGS                           $578       $518      $60
    Items excluded from operating
     earnings (3),(5)                             102        (65)     167
    GAAP EARNINGS                                $680       $453     $227


  Common Shares Outstanding (average,
   diluted)                                     578.4      701.7

  Earnings Per Share (EPS): (1)
    Dominion Virginia Power                     $0.20      $0.19    $0.01
    Dominion Energy                              0.32       0.20     0.12
    Dominion Generation                          0.58       0.20     0.38
    Corporate and Other: (2)
      Other                                     (0.10)     (0.08)   (0.02)
      Divested U.S. E&P Operations (3)           -          0.18    (0.18)
      Peoples & Hope (4)                         -          0.05    (0.05)
    OPERATING EARNINGS                          $1.00      $0.74    $0.26
    Items excluded from operating
     earnings (3), (5)                           0.18      (0.09)    0.27
    GAAP EARNINGS                               $1.18      $0.65    $0.53


  (1)  2007 segment earnings and per share values have been recast to
       reflect the impact of segment realignment and the November 2007
       2-for-1 common stock split.
  (2)  Earnings have been recast to exclude income and losses from
       discontinued operations.
  (3)  Dominion sold the majority of its E&P operations in 2007.
  (4)  Earnings for the Peoples Natural Gas Company (Peoples) and Hope Gas,
       Inc. (Hope) are excluded from our 2008 operating earnings and
       guidance.
  (5)  Refer to schedules 2 and 3 for details related to items excluded from
       operating earnings, or find "GAAP Reconciliation" on Dominion's Web
       site at http://www.dom.com/investors/


  Schedule 2 - Reconciliation of 2008 Operating Earnings to GAAP

  2008 Earnings (Three months ended March 31, 2008)

The net effects of the following items, all shown on an after-tax basis, are included in 2008 reported earnings, but are excluded from operating earnings:

  -- $136 million net benefit related to the planned sale of Peoples and
     Hope natural gas distribution companies, mainly reflecting the reversal
     of deferred tax liabilities established in 2006, due to a change in the
     expected tax treatment of the sale.
  -- $34 million of earnings from Peoples and Hope.
  -- $38 million impairment charge related to a Dominion Capital investment.
  -- $16 million of impairment charges reflecting other-than-temporary
     declines in the fair value of securities held in merchant nuclear
     decommissioning trust funds.
  -- $14 million in other charges, including an increase to tax valuation
     allowances, primarily related to the effect of lower projected capital
     gain income on the realizability of existing state loss carryforwards.



  (millions, except per share amounts)  1Q08   2Q08   3Q08   4Q08   YTD 2008
  Operating earnings                    $578                           $578
  Items excluded from operating
   earnings (after-tax):
    Tax benefit related to the
     planned sale of Peoples & Hope      136                            136
    Peoples and Hope operations           34                             34
    Dominion Capital asset impairment    (38)                           (38)
    Impairment losses in nuclear
     decommisioning trust funds          (16)                           (16)
    Other charges                        (14)                           (14)
    Total items excluded from
     operating earnings                  102                            102
  Reported net income                   $680                           $680
  Common shares outstanding (average,
   diluted)                            578.4                          578.4
  Operating earnings per share         $1.00                          $1.00
  Items excluded from operating
   earnings (after-tax)                 0.18                           0.18
  Reported earnings per share          $1.18                          $1.18



  Schedule 3 - Reconciliation of 2007 Operating Earnings to GAAP

  2007 Earnings (Twelve months ended December 31, 2007)

The net effects of the following items, all shown on an after-tax basis, are included in 2007 reported earnings, but are excluded from operating earnings:

  -- $1.5 billion net benefit resulting from the sale of the majority of our
     E&P operations including:
     -- $2.1 billion net gain from the sales; partially offset by
     -- $506 million in other charges including the effect of discontinuing
        hedge accounting for certain gas and oil hedges and subsequent
        changes in the fair value of these hedges ($342 million), settlement
        of volumetric production payment (VPP) agreements ($108 million),
        and employee-related expenses; and
     -- $148 million in net charges related to the early retirement of debt
        associated with the completion of our debt tender offer in July
        2007;
  -- $119 million net benefit related to the release of tax valuation
     allowances;
  -- $270 million of impairment charges related to our merchant generation
     assets including $252 million related to the sale of a partially
     completed generation facility (Dresden);
  -- $137 million charge related to the termination of a power sales
     agreement at our State Line generating facility;
  -- $158 million extraordinary item related to the reapplication of SFAS
     No. 71, Accounting for the Effects of Certain Types of Regulation, to
     the Virginia jurisdiction of our electric utility generation
     operations;
  -- $56 million in charges related to the impairment of certain Dominion
     Capital investments;
  -- $29 million in charges related to litigation reserves;
  -- $93 million in other charges, including losses from certain
     discontinued operations.


  (millions, except per share amounts)  1Q07   2Q07    3Q07   4Q07 YTD 2007*
  Operating earnings                    $518   $310     $551   $299  $1,678
  Items excluded from operating
   earnings (after-tax):
    Items related to the sale of the
     majority of our E&P operations:
      Net gain on sale                    (2)     5    2,124     12   2,139
      Other related charges               (6)  (482)     (15)    (3)   (506)
      Net charges related to debt
       tender offer                              15     (163)          (148)
    Release of tax valuation
     allowances, net                      (6)    70       55            119
    Impairment of merchant generation
     assets                                    (252)     (18)          (270)
    Termination of the State Line
     power sales agreement                              (140)     3    (137)
    Extraordinary item related to the
     reapplication of SFAS 71                  (158)                   (158)
    Dominion Capital impairment of
     assets                                              (55)    (1)    (56)
    Litigation reserves                  (16)            (16)     3     (29)
    Other charges                        (35)   (38)      (6)   (14)    (93)
    Total items excluded from
     operating earnings                  (65)  (840)   1,766      0     861
  Reported net income                   $453  ($530)  $2,317   $299  $2,539
  Common shares outstanding (average,
   diluted) **                         701.7  698.2    639.6  578.1   655.2
  Operating earnings per share         $0.74  $0.44    $0.86  $0.52   $2.56
  Items excluded from operating
   earnings (after-tax)                (0.09) (1.20)    2.76   0.00    1.32
  Reported earnings per share          $0.65 ($0.76)   $3.62  $0.52   $3.88

  *  YTD 2007 EPS may not equal sum of quarters due to share count
     differences.
  ** As a result of the net loss from continuing operations for the three
     months ended June 30, 2007, the issuance of common stock under
     potentially-dilutive securities was considered antidilutive and
     therefore not included in the calculation of the diluted loss per share
     for that period.



  Schedule 4 - Reconciliation of 2008 Earnings to 2007

  Preliminary, unaudited                              Three Months Ended
  (millions, except EPS)                                   March 31,
                                                         2008 vs. 2007
                                                    Increase / (Decrease)
  Reconciling Items                                  Amount         EPS

  Dominion Virginia Power
    Regulated electric sales:
      Weather                                          ($9)        ($0.01)
      Customer growth                                    3           0.00
    Interest Expense                                    (6)         (0.01)
    Major storm damage and service restoration
     - distribution operations                          (4)         (0.01)
    Retail energy marketing operations                   6           0.01
    Other                                               (4)         (0.01)
    Share Accretion                                     --           0.04
    Change in contribution to operating earnings      ($14)         $0.01

  Dominion Energy
    Producer services                                   (8)         (0.01)
    Gas and Oil - production (1)                        35           0.06
    Gas and Oil - prices                                16           0.02
    Gas and Oil - DDA expense                          (12)         (0.02)
    Other                                                9           0.01
    Share Accretion                                     --           0.06
    Change in contribution to operating earnings       $40          $0.12

  Dominion Generation
    Regulated electric sales:
      Weather                                         ($16)        ($0.02)
      Customer growth                                    4           0.01
    Other                                               15           0.02
    Virginia fuel underrecovery                        125           0.18
    Merchant generation margin                          62           0.08
    Sales of emissions allowances                        9           0.01
    Outage costs                                        (3)          0.00
    Depreciation and amortization                      (12)         (0.02)
    Other                                               13           0.02
    Share Accretion                                     --           0.10
    Change in contribution to operating earnings      $197          $0.38

  Corporate and Other
    Change in contribution to operating earnings (2) ($163)        ($0.25)

  Change in consolidated operating earnings            $60          $0.26

  Change in items excluded from operating
   earnings (2),(3)                                   $167          $0.27

  Change in net income (GAAP earnings)                $227          $0.53

  (1) Increase is primarily due to volumes associated with reacquired
      overriding royalty interest arising from the VPPs terminated in 2007.
  (2) Earnings for the Peoples Natural Gas Company (Peoples) and Hope Gas,
      Inc. (Hope) are excluded from our 2008 operating earnings.
  (3) Refer to schedules 2 and 3 for details of items excluded from
      operating earnings, or find "GAAP Reconciliation" on Dominion's Web
      site at http://www.dom.com/investors.

SOURCE: Dominion

CONTACT: Media, Mark Lazenby, +1-804-819-2042, Mark.Lazenby@dom.com, or
Ryan Frazier, +1-804-819-2521, C.Ryan.Frazier@dom.com, or Analysts, Greg
Snyder, +1-804-819-2383, James.Gregory.Snyder@dom.com, or Laura Kottkamp,
+1-804-819-2254, Laura.E.Kottkamp@dom.com, all of Dominion

Web site: http://www.dom.com/