September 7, 2004

RICHMOND, Va. - Dominion (NYSE: D), one of the nation's largest producers of energy, today announced that it has reached an agreement to acquire three electric power generation facilities from USGen New England, Inc. for $536 million in cash, plus an adjustment for inventory and reimbursement of certain capital expenditures incurred prior to closing. Based on an expected March 2005 closing, the adjustment amount is estimated at $120 million for a total consideration of $656 million. The acquisition of USGen New England assets is part of a bankruptcy court-supervised divestiture of USGen New England's fossil assets.

The transaction and bidding procedures must be approved by the U.S. Bankruptcy Court for the District of Maryland which is overseeing USGen New England's July 2003 bankruptcy filing. As a part of the bankruptcy proceedings, the generating assets will be offered at public auction to ensure there are no other bidders willing to top Dominion's offer. If an auction occurs, it would be conducted sometime in November. Any superior offer must exceed Dominion's bid by at least $30 million under the agreement. If a superior offer is not received by the bid deadline, Dominion's purchase agreement with USGen New England will proceed to closing, after receiving formal bankruptcy court approval and regulatory approvals. If USGen New England accepts a bid other than Dominion's, USGen New England will request court permission to pay Dominion an $18 million breakup fee and to reimburse Dominion for its related expenses up to $7 million.

In addition, certain aspects of the transaction must be approved by the Federal Energy Regulatory Commission and registered with the Rhode Island Public Utilities Commission. Approval is also required under the Hart-Scott-Rodino Act.

Under terms of the agreement, Dominion will purchase the 1,599-megawatt coal- and oil-fired Brayton Point Station and the 745-megawatt coal- and oil-fired Salem Harbor Station, both in Massachusetts. Dominion will also acquire the 495-megawatt combined-cycle natural gas-fired Manchester Street Station in Rhode Island. At takeover, about 30 percent of the combined output from the three stations will be sold under contracts to unidentified buyers. The balance will be sold into the NEPOOL wholesale market.

Dominion expects the transaction to be immediately accretive upon closing. Dominion will finance the acquisition with an appropriate combination of debt and equity. Dominion is not acquiring any of the facilities' debt in the transaction.

Thos. E. Capps, chairman and chief executive officer of Dominion, said:

"This exceptional set of assets provides a unique fit with Dominion's existing generation platform in the Northeast. The addition of coal-, gas- and oil-fired capacity, combined with the output from our Millstone Nuclear Station, rounds out our mix of fuel and technology diversity. It will create the largest, most competitive generation portfolio in New England and will position us to build on our successful operation at Millstone.

"These units also offer a balanced mix of base, intermediate and peaking capacity that will enhance our ability to tailor unique and creative power supply packages for customers of our energy marketing group. It's notable that Brayton Point is the lowest-cost coal-fired producer in the NEPOOL system.

"The deep-water port serving both Brayton Point and Salem Harbor provides an additional upside—the capability to receive coal supplies from the most cost-effective sources, either domestic or foreign.

"All in all, these new units increase Dominion's generation portfolio by 10 percent and improve our competitive position in a region whose retail and wholesale markets are as robust as any in the country."

The Brayton Point facility in Somerset, Mass., includes three coal-fired units with total capacity of 1,139 megawatts, one 445-megawatt oil-fired unit and 15 megawatts of diesel capacity. The Salem Harbor facility in Salem, Mass., includes three coal-fired units with total capacity of 314 megawatts and one 431-megawatt oil-fired unit. The coal-fired units burn predominantly low-sulfur South American coal delivered by vessel. The Manchester Street facility in Providence, R.I., includes three 165-megawatt combined-cycle natural gas-fired units.

"We intend to operate each of these facilities in strict compliance with all environmental and regulatory requirements," Capps said. The company said it has accounted for necessary environmental expenditures in its projected capital spending plans but declined to provide specific details, citing the competitive nature of the bankruptcy auction process. "We will be in a better position to elaborate once the transaction has closed and the stations are integrated into the Dominion fleet," Capps said.

The three facilities employ about 515 workers.

Dominion is one of the nation's largest producers of energy, with an energy portfolio of about 25,500 megawatts of generation, 6.4 trillion cubic feet equivalent of proved natural gas reserves and 7,900 miles of natural gas transmission pipeline. Dominion also operates the nation's largest underground natural gas storage system with more than 960 billion cubic feet of storage capacity, including Cove Point, the nation's biggest and most active LNG facility. Dominion serves about 5 million retail energy customers in nine states. For more information about Dominion, visit the company's Web site at www.dom.com.

Headquartered in Bethesda, Md., USGen New England is a subsidiary of National Energy & Gas Transmission, Inc.

This release contains forward-looking statements, including our expectation that the acquisition of the USGen New England assets will be immediately accretive, 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 include changes in the expected closing date, changes in the expected adjustment to the purchase price at closing, changes in capital market conditions affecting our financing of the acquisition, and changes in our projected future capital expenditures, including environmental expenditures. Other risks include those that affect Dominion generally, including those that are detailed from time to time in our most recent quarterly report on Form 10-Q filed with the Securities & Exchange Commission.

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