Dominion Self-Reports Infraction, Cooperates Fully with FERC'S Market Oversight Office

-Company Agrees to Pay Civil Penalty, Reimburse Gas Storage Customers

August 2, 2004

RICHMOND, Va. - Dominion (NYSE:D) today announced a settlement with the Federal Energy Regulatory Commission that resulted from Dominion’s self-reporting of an infraction it discovered involving sharing of non-public information between two employees at its energy trading unit and its services company.

According to the company, the employees did not intend to violate FERC’s regulations; however, under FERC “Standards of Conduct” regulations, affiliated companies are prohibited from sharing such information before it has been made public.

Under the settlement, Dominion will pay a $500,000 civil penalty, refund $4.5 million to its non-affiliated natural gas storage customers and enhance internal training and oversight of employees who handle non-public, market-sensitive data.

Dominion notified FERC’s Office of Market Oversight & Investigations upon discovery of the data-sharing violation in July 2003. The company immediately retained Hogan & Hartson, a Washington law firm, to conduct an independent and thorough investigation. Dominion also retained an independent accounting firm to review the company’s control processes related to compliance with these and other key regulatory requirements. The company also has taken appropriate employee disciplinary action.

As part of the settlement, Dominion has strengthened controls, training and oversight among employees who handle confidential market data. This includes enhancement of the existing training program for employees, including a greater emphasis on electronic training and record-keeping; heightened oversight and monitoring of employee responsibilities and job transfers between business units; greater emphasis on use of an internal “hotline” so that infractions of FERC-mandated restrictions can be reported to Dominion’s chief compliance officer; stricter oversight and monitoring of internal information distribution; and more restrictive standards of access to routine internal e-mails.

Thomas F. Farrell, president and chief operating officer, said:

“Free markets work efficiently only when investors, market players and regulators have confidence that the markets are transparent, fairly administered and open to all. We promptly reported the problem. We worked closely with FERC to evaluate the problem. We fixed it, and produced a measured and reasonable outcome. By doing so, Dominion and FERC are signaling strong support for level playing fields that work because all participants are playing by the rules.”

The violations occurred between May 2000 and July 2003 when the services unit employee, who had formerly been employed by Dominion Transmission, received weekly e-mails containing non-public information about the transmission unit’s natural gas storage system. He routinely communicated the information to a Dominion gas trader on the belief that the sharing of this data was permissible. The services company employee also used the information as one of 24 inputs in developing an independent assessment of industry-wide gas storage levels, which he distributed to others at the company. The data sharing occurred before the information was made public through the U.S. Energy Information Agency’s (EIA) weekly report on national natural gas storage levels. Management discovered the problem during a routine job evaluation of the services unit employee.

The inquiry showed that the services unit employee’s assessment of market conditions generally corresponded with public market views commonly available. However, Dominion and FERC devised a formula that quantified potential distortions in specific gas transactions during the period of improper data sharing. FERC and Dominion agreed to customer reimbursements based on that formula.

Dominion, headquartered in Richmond, Va., is one of the nation’s largest producers of energy.

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