2017Annual Report.pdf

Dominion Enersy Utah Dominion Enersy Wyomins D{tE6F{ld,&S"
Law Department
333 South State Street, Salt Lake City, UT 84'l 1'1
Dom inion Energy.com ?Hllui;e"znl$ APR l6 PH 12: 05
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April 13,2018
VIA FEDERAL EXPRESS
Ms. Terri Carlock
Idaho Public Utilities Commission
472West Washington
P.O. Box 83720
Boise, ID 83702
Questar Gas Company dba Dominion Energt Utah
2017 Annual Report
Dear Ms. Carlock:
Enclosed are three originals of the Gas Utilities Annual Report for 2017. This is the
report format utilized by the State of Utah for reporting annual financial results for the
utility. We are providing the same report to you to meet the State of Idaho's requirement.
You will also find a copy of Questar Gas Company dba Dominion Energy Utah's intemal
financial report for 2017. We trust that this information will be adequate in fulfilling the
Commission's six requirements.
V truly yours,
Jenniffer N Clark
Senior Counsel
JNC/rp
Enclosures
Re:
)
APH 16
GAS UTILITIES
ANNUAL REPORT
OF
Questar Gas Company dba Dominion Energy Utah
Utah Business Entity Number:558729-0142
TO THE
PUBLIC SERVICE COMMISSION
OF UTAH
For Calendar Year
2017
F.TCE IVED
12:05
C
SSION
Annual Report
(RGS)(Rev. Jan/07)
GAS UTILITIES
Annual Report of Operations
INSTRUCTIONS FOR FILING
1. PURPOSE - This form is a regulatory requirement designed to collect financial and other operating data
from ALL regulated utilities operating in the State of Utah. This report is Mandatory under
UCA S 54-3-22 & Rule R746'400.
2. DATE DUE - This report is for the period January 01 to December 31 . A signed original and an
electronic copy of this report are due at the Utah Division of Public Utilities by 4pf!.!:!5=
3. WHERE TO FILE - The completed report is to be mailed or delivered to:
Mailing Address Delivery Address
Utah Division of Public Utilities Utah Division of Public Utilities
8ox146751 160 East 300 South, 4th Floor
Salt Lake City, UT 84114-6751 Salt Lake City, UT 84111
Email Address
[e-mail]
Questions
801 -530-6653
4. One copy of the report should be retained by the respondent in its files.
5. Complete the report by a means which will result in a permanent record.
6. Each question should be completed fully and accurately, even if answered in a previous annual
report. Enter the word "None" where it truly and completely states the fact.
7. For any question, section, or page which is not applicable to the respondent enter the words "Not
Applicable" or "NA". Do not omit any pages.
8. Round all dollar figures to whole dollars.
Annual Report
(RGS)(Rev. Jan/07)
Questar Gas Co dba Dominion U1 CalendarYear 20'17
ATTESTATION / CERTI FIGATION
OF
RESPONSIBILIry
I certify that I have examined the information contained in this report submitted to the Utah
Division of Public Utilities, and that, to the best of my knowledge, information, and belief, all
statements of fact contained in this report are true and represent an accurate statement of the
affairs of the respondent company as of the date shown below.
Signature:
Print Name:
Title:
Phone Number:
Fax Number:
hall Date:l8
Regulatory Affairs
[phone] Extension:
Email:t<ettv.menOennall@dominionenerqv
Pleas send one completed hard copy and email one copy to the following:
Hard copy to:
Utah Division of Public Utilities
Heber Wells Building, 4th Floor
160 East 300 South
Salt Lake City, UT 84111-6751
Email copy to: (using State approved e-filing protocol.)
[e-mail]
Annual Report
(RGS)(Rev. Jan/07)
General Company & Contact lnformation
Company Name:Questar Gas Company dba Dominion Enerqy Utah
DBA Name (if different):
FKA Name (if different):
Address:
City:
Phone Number:
(800) Number:
333 South State
Salt Lake City State: UT Zip 84145
(801)324-s100 Fax Number:
Principle Business Address: 333 South State
City:Salt Lake City State:UT Zip 84145
Corporate Book Address:120 Tredegar Street
City Richmond State: VA Zip 00002-321 I
Report Contact Person
Name:
Phone Number:
Fax Number:
Mike Rawlins Title: Accounting[\ilanager
(801)321:26!q Extension
Email:mike.rawlins@domin ronenerqv.com
Corporate Book Gustodian
Name: Karen Doggett Title: AssistantCorporateSecretary
Phone Number: [phone] Extension:
Email:Fax Number:karen.doggeft@domin ionenergy.com
Contact lnformation
Attorney:
George l\4arget Title: Managing General CounselName:
Firm Name:
Address:
Gity:
Phone Number:
(800) Number:
333 South State St
Salt Lake City State: UT zip:84145
[phone] Extension:
Fax Number:
Accountant:
Name:
Firm Name:
Address:
City:
Phone Number:
(800) Number:
Title:
State: _zip:
Extension:
Fax Number:
Other Contacts:
Name:
Phone Number:
Fax Number:
Title:
Extension
E-mail:
Name:
Phone Number:
Fax Number:
Title:
Extension:
E-mail:
Name:
Phone Number:
Fax Number:
Title:
Extension:
E-mail:
OFFICERS AND DIREGTORS
Report below the officers and directors of respondent at the end of the year. If there were any changes
during the year, show name, title, and address of previous officer or director and date of change.
Name Address Official Title Salary
Number of directors required to constitute a quorum.........
UT 84145
* See Statement to
Cha
Annual
1
3
&
vA 23219
P. Zimmer
Total amount of directors'fees paid during year........
Number of board of directors meetings held during year.
333 S State
JJJ
120
120
120
S State
St
St
St
UT 84145
uT 84145
23219
23219
23219
vA 23219
vA 23219
vA 23219
Director
Director
Director
Chief Executive Officer
EVP & CFO
President
F
Mark F. McGettrick
Carter M. Reid
Michelle L. Cardiff
Colleen Larkin Bell
Shosted
STOCKHOLDERS
Report below the names and addresses of the stockholders who, at the end of the year, owned or
held directly or indirectly 5 percent or more of the voting securities of the respondent.
AddressName
No, of
shares Salary
lnmininn flr rac 333 S State SLC, UT 84145 9,1 89,626
Total number ofshares at end ofyear...
Total number of stockholders at end ofyear..
100%
9,1 89,626
Total shares represented by above..
-3-
IMPORTANT CHANGES DURING THE YEAR
Give particulars concerning the following matters. tVlake the statements explicit and precise.
Each inquiry must be answered. Only use "none" or "not applicable" if it correctly states the fact.
1. lmportant additions or changes in franchise rights, including the actual consideration, if any,
therefore.
2. lmportant additions or extensions of the utility system such as new structures, exchanges,
toll etc.
--None--
--None--
4
COMPARATIVE BALANCE SHEETS
(Utah Operations FinancialStatement in Accordance with GAAP)
Certificated entity only. Do not consolidate with other affiliated entities.
Account
Balance at
beginning
of year
Balance at
end of
year
7,559,770
1,191
150,225,673
88,645,058
94,107
49,333,98'l
27,626,129
4,293,858
3,756,430
3,408,362
6,652,071
15,035,386
68,458,005
91,423,665
52,89'1,067
25,178,232
5,839,469
5,362,243
'10,684,690
334,944,558
76,816,315
2,806,201,599
(737,640,O17)
281,524,827
91 , 105,288
2,950,635,432
-745.918.549
2,145,377,897
5,652,450
14,702,619
3,671,409
2,295,822,171
5,652,450
16,123,130
115,065,368
2,504,348,932 2,714,187,947
200,000,000
48,000,000
'14,500,000
140,834,761
27,887,441
2,955,387
6,916,941
13,O58,142
165,000,000
75,000,000
120,000,000
159,535,478
16,946,125
5,155,915
7,232,880
12,369,335
1,448,609
620,000,000
117,118
77,823,040
475,902,735
18,956,887
199,900,593
454,152,672
600,000,000
5,232,099
78,437,715
274,730,742
12,128,595
455,959,644
562,688,342
1,846,853,045
22,974,065
272.445.463
362,076,359
1,989,177,137
22,974,065
272,445,463
429.591,282
657,495,887 725,010,810
1 Cash and cash equivalents
2 Federal income taxes receivable
3 Accounts and notes receivable
4 Unbilled gas accounts receivable
5 Deferred income taxes - current
6 Gas stored underground
7 Materials and supplies
8 Current regulatory assets
9 Prepaid expenses and other
10 Purchased gas adjustment
11 Total current assets
'12 Construction Work in Progress
13 Property, plant and equipment
14 Less allowances for depreciation
15 Net property, plant and equipment
16 Other long-term assets
'17 Goodwill
18 Regulatory assets
19 Other longterm assets
20 Total Assets
21 Shortterm debt
22 Notes payable to affiliates
23 Notes pay - Current Port LT Debt
24 Federal income taxes payable
25 Accounts payable and accrued expenses
26 Customer credit balance
27 Current regulatory liabilities
28 lnterest payable
29 Other taxes payable
30 Deferred income taxes - current
31 Purchased gas adjustment
32 Total current liabilities
31 Long-term debt, less current portion
32 Other liabilities
33 Asset retirement obligation
34 Deferred investment tax credits
35 Deferred income taxes
36 Customer contributions-in-aid-of-construction
37 Regulatory and other noncurrent liabilities
38 Total Liabilities
39 Common stock
40 Additional paid-in capital
41 Retained earnings
42 Iotal shareholder's equity-43' Total liabilities and equity ---' -2,714,187,947
-5-
COMPARATIVE STATEMENTS OF INCOME
(Utah Operations Financial Statement in Accordance with GAAP)
Certificated entity only. Do not consolidate with other affiliated entities.
Account
Amount for
Preceding
Year
Amount for
Current
Year
1 Operating Revenues
2 Utility Operating Expenses:
3 Gas Purchases
4 Operating Expense
5 Maintenance Expense
6 Depreciation and Amortization
7 Taxes Other Than lncome Taxes
8 lncome Taxes
9 lncome Taxes - Deferred
10 Total Utility Operating Expenses
11 Net Operating lncome
12 Other lncome
13 Other Income Deductions
14 Merger & Restructuring Expense
15 Total Other lncome and Deductions
16 lnterest Charges
17 Net lncome
917,372,395
542,102,395
144,110,958
12,805,655
60,986,811
20,864,958
1,142,859
34,909,109
816,922,745
100,449,651
3,280,068
(365,73e)
(15,942,189)
(13,027,861)
30,195,462
940,309,864
555,439,839
125,886,273
11,547,824
66,734,934
22,257,842
12,049,867
35,594,691
829,511,270
1 10,798,594
5,758,279
-383,249
(14,479,592)
(9,104,562)
34,179,109
57,226,328 67,514,923
-b-
COMPARATIVE STATEMENTS OF CASH FLOW
(Utah Operations Financial Statement in Accordance with GAAP)
Certificated entity only. Do not consolidate with other affiliated entities.
Amount for
Preceding
Year
Amount for
Current
YearAccount
57,226,328
55,855,973
(118,487,916)
39,147,479
955,815
6,275,793
(15,984,006)
(166,504)
(52,583,559)
35,608,018
3,557,237
15,5'13,867
9,053,647
36,621,0s9
6,364,824
120,391,702
67,514,923
62,537,032
(199,629,277)
(7,819,415)
(1 ,1 09,1 88)
(108,315,477)
86,938,367
(15,034,195)
(688,806)
(7,276,328)
(2,708,276)
424,870
2,570,923
260,657,128
199,349,755
(24O,378,523)
(10,731,028)
138,062,279
(215,429,75s)
(301,110)
(251 ,1 09,551 )
4,773,976
99,317,896
(25,300,000)
(30,000,000)
(215,730,865)
99,260,888
(14,500,000)
(8,000,000)
7,559,770
48,791,871
(2,967,925)
10,527,695
6,652,071
76,760,888
(e07,6ee)
7,559,770
Operating Activities
Net lncome
Adjustments to reconcile net income to net cash provided
from operating activities:
Depreciation, depletion and amortization
ARO - Accum Depr Change
Deferred income taxes
Shared-based compensation
Changes in operating assets and liabilities
Accounts receivable
Inventories
Prepaid expenses and other
Accounts payable and accrued expenses
Federal income taxes
Other taxes
Purchased gas adjustments
Other assets
Regulatory assets(current)
Regulatory liabilities(current)
Other liabilities
NET CASH (USED lN) PROVIDED FROM OPERATING
lnvesting Activities
Capital expenditures
Property, plant and equiPment
Proceeds from disposition of assets
NET CASH (USED rN) PROVIDED FROM INVESTING
Financing Activities
Common stock issued
Long-term debt issued, net of issue costs
Long-term debt repaid
Change in short-term debt
Dividends paid
Excess tax benefits from share-based compensation
NET CASH(USED lN) PROVIDED FROM FINANCING
Change in cash and cash equivalents
Beginning cash and cash equivalents
Ending cash and cash equivalents
-7-
NOTES TO FINANCIAL STATEMENTS
(Utah Operations Financial Statement in Accordance with GAAP)
Provide the notes to the financial statements and sign the certification below.
See Attached
Signature of officer
-8-
Notes to Financial Statements
Notr 1. Narunr or OprnarroNs
Questar Gas is a wholly-owned subsidiary of Dominion
Energy Questar which, effective Septernber 2016, is a wholly-
owned sub-sidiary of Dominion Energy.
Questar Gas distributes natural gas as a public utility in Utah,
southwestern Wyoming and a small portion of southeastem Idaho.
The Utah, Wyoming and Idaho Commissions have granted
Questar Gas the necessary regulatory approvals to serve these
areas. Questar Gas also has long-term franchises granted by
communities and counties within its service area.
Revenue generated by Questar Gas is based primarily on
rates established by the Utah and Wyoming Commissions. The
Idaho Commission has contracted with the Utah Commission
for rate oversight of Questar Gas operations.
Wexpro, an affiliate, provides the majority of Questar Gas'
natural gas supply and Dominion Energy Questar Pipeline, an
affiliate, provides the majority of Questar Gas'transportation
and storage services.
Questar Gas manages its daily operations through one pri-
mary operating segment. It also reports a Corporate and Other
segment that primarily includes specific items attributable to its
operating segment that are not included in profit measures eval-
uated by executive management in assessing the segment's per-
formance or in allocating resources.
NorB 2. SrcNrrrcANT AccoUNTING PoLICIES
General
Questar Gas makes certain estimates and assumptions in prepar-
ing its Financial Statements in accordance with GAAP. These
estimates and assumptions affect the reported amounts of assets
and liabilities, the disclosure ofcontingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues, expenses and cash flows for the periods presented.
Actual results may differ from those estimates.
Questar Gas reports certain contracts and instruments at
fair value. See Note 5 for further information on fair value
measure-ments.
Certain amounts in the 2016 and 2015 Financial
Statements and footnotes have been reclassified to conform to
the2017 pre-sentation for comparative purposes. The
reclassifications did not affect Questar Gas' net income, total
assets, liabilities, equity or cash flows.
Operating Revenue
Operating revenue is recorded on the basis ofservices rendered,
commodities delivered or contracts settled and includes amounts
yet to be billed to customers. Questar Gas collects sales taxes;
however, these amounts are excluded from revenue. Questar Gas'
customer receivables at December 31,2017 and2016 included
$91.4 million and $88.6 miltion, respectively, of accrued unbilled
revenue based on estimated amounts ofnatural gas delivered but
not yet billed to its customers.
The primary types of sales and service activities reported
. as operating revenue for.Questar,Gas-are as.foilows:
Regulated gas sales consist of delivery of natural gas to
resi-dential, commercial and industrial customers;
Gas transportation consists oftransportation ofgas for
commercial and industrial customers who buy their own
gas supply; and
Other primarily consists of connection fees,
royalties, miscellaneous product sales, etc.
Purchased Gas
Questar Gas obtains the majority of its gas supply from Wexpro's
cost-of-service production and pays Wexpro an operator service
fee based on the terms of the Wexpro Agreement and the Wexpro
II Agreement. Questar Gas also obtains transportation and
storage services from Dominion Energy Questar Pipeline. See
Note 19 for more information. During the second and third
quarters ofthe year, a significant portion ofthe natural gas
from Wexpro production is injected into underground storage.
This gas is withdrawn from storage as needed during the
heating season in the first and fourth quarters. Purchased gas is
credited with the value of natural gas as it is injected into
storage and debited as it is withdrawn from storage.
The details of Questar Gas' purchased gas are as follows:
Year Ended December 31 2017 2016 2015
(millions)
Gas purchases
Affiliated operator service fee
Transportation and storage(1)
Gathering
Royalties
Storage (injection), net
Purchased-gas account adjustment
Other
Total purchased qas $555.4 $542.1 $ 558.1
(l) See Note 1 9 for amounts attributable to related parties.
Purchased Gas-Deferred Costs
Where permitted by regulatory authorities, the diflerences
between Questar Gas' purchased gas expenses and the related lev-
els ofrecovery for these expenses in current rates are deferred and
matched against recoveries in future periods. The deferral of gas
costs in excess ofcurrent period recovery is recognized as a regu-
latory asset, while rate recovery in excess ofcurrent period gas
costs is recognized as a regulatory liability.
Virtually all of Questar Gas' nafural gas purchases are
either subject to defenal accounting or are recovered from the
customer in the same accounting period as the sale.
lncome Taxes
Judgment and the use of estimates are required in developing the
provision for income taxes and reporting oftax-related assets and
liabilities. The interpretation oftax laws, including the provisions
of the2017 Tax Reform Act, involves uncertainty, since tax
authorities may interpret the laws differently. In addition, the states
in which we operate may or may not conform to some or all the
provisions in the 2017 Tax Reform Act. Ultimate resolution or
clarification of income tax matters may result in favorable or
unfavorable impacts to net income and cash flows, and adjust-
ments to tax-related assets and liabilities could be material.
A consolidated federal income tax retum is filed for Domin-
ion Energy and its subsidiaries, including Questar Gas for the full
year 2017 and going forward. For 2016, a consolidated federal
$125.5
304.2
84.9
24.9
21.6
(3.6)
(7.3)
5.2
$102.0 $ 82.5
311 .7 319.0
79.3 79.223.7 22.1
26.3 33.3(5.5) (3.5)
(0.6) 20.5
5.2 5.0
20
income tax retum was filed for Dominion Energy Questar,
including Questar Gas, for the period January 1,2016 through
Sep-tember 16,2016. Questar Gas was part of the consolidated
federal income tax return filed by Dominion Energy for the
period September 17,2016 through December 31,2016.\n
addition, where applicable, combined income tax retums for
Dominion Energy and its subsidiaries are filed in various states;
otherwise, separate state income tax retums are filed.
Questar Gas participates in intercompany tax sharing
agreements with Dominion Energy and its subsidiaries.
Current income taxes are based on taxable income or loss
and credits determined on a separate company basis.
Under the agreements, if a subsidiary incurs a tax loss or
earns a credit, recognition of current income tax benefits is
limited to refunds of prior year taxes obtained by the carryback
ofthe net operating loss or credit or to the extent the tax loss or
credit is absorbed by the taxable income of other Dominion
Energy consolidated group members. Otherwise, the net
operating loss or credit is carried forward and is recognized as
a deferred tax asset until realized.
The 2017 Tax Reform Act includes a broad range oftax reform
provisions affecting Dominion Energy and its subsidiary Questar
Gas, including changes in corporate tax rates and busi-ness
deductions. The 2017 Tax Reform Act reduces the corporate
income tax rate from 35% to 21%o for tax years beginning after
December 31, 2017 . Deferred tax assets and liabilities are meas-
ured at the enacted tax rate expected to apply when temporary
differences are realized or settled. Thus, at the date of enactment,
deferred taxes were remeasured based upon the new 2 I o/o tax rate.
The total effect oftax rate changes on federal deferred tax balan-
ces is recorded as a component ofthe income tax provision related
to continuing operations for the period in which the law is enacted,
even ifthe assets and liabilities relate to other compo-nents ofthe
financial statements. As a regulated utility, Questar Gas is required
to adjust deferred income tax assets and liabilities for the change in
income tax rates. However, as it is probable that the effect of the
change in income tax rates will be recovered or refunded in future
rates, Questa.r Gas recorded a regulatory asset or liability instead of
an increase or decrease to deferred income tax expense.
Accounting for income taxes involves an asset and liability
approach. Deferred income tax assets and liabilities are provided,
representing fufure effects on income taxes for temporary differ-
ences between the bases of assets and liabilities for financial
reporting and tax purposes. Accordingly, defened taxes are recog-
nized for the future consequences ofdifferent treatments used for
the reporting oftransactions in financial accounting and income
tax returns. Questar Gas establishes a valuation allowance when it
is more-likely-than-not that ail, or a portion, of a defened tax asset
will not be realized. A regulatory asset is recognized if it is
probable that future revenues will be provided for the payment of
deferred tax liabilities.
Questar Gas recognizes positions taken, or expected to be
taken, in income tax retums that Ne more-likely-thaa-not to be
realized, assuming that the position will be examined by tax
authorities with'fuI1 knowledge of all relevant information.
If it is not more-likely-than-not that a tax position, or some
portion thereo{ will be sustained, the related tax benefits are not
recognized in the financial statements. Unrecognized tax benefits
may result in an increase in income taxes payable, a reduction
of income tax refunds receivable or changes in deferred taxes.
Also, when uncertainty about the deductibility of an amount is
limited to the timing of such deductibility, the increase in
income taxes payable (or reduction in tax refunds receivable) is
accompanied by a decrease in deferred tax liabilities. Except
when such amounts are presented net with amounts receivable
from or amounts pre-paid to tax authorities, noncurrent income
taxes payable related to unrecognized tax benefits are classified
in other defened credits and other liabilities in the Balance
Sheets and current payables are included in accrued interest,
payroll and taxes in the Balance Sheets.
Questar Gas recognizes interest on underpayments and over-
payments of income taxes in interest expense and other income,
respectively. Penalties are also recognized in other income.
Questar Gas' interest and penalties were immaterial in
2017 ,2016 and 20 I 5.
At December 31,2017, Questar Gas' Balance Sheet
included $25.0 million of tax-related payables to affiliates,
representing $22.0 million of current federal income taxes
payable and $3.0 million of state income taxes payable.
At December 31,2016, Questar Gas' Balance Sheet included
tax-related payables to affiliates of $3.1 million comprised of
$1.4 million of federal income taxes payable and $1.7 million of
state income taxes payable. These amounts were settled with
Dominion Energy during 2017 as part of the final 2016 tax
return settlement.
Investment tax credits are deferred and amortized over
the service lives ofthe properties giving rise to the credits.
Cash and Gash Equivalents
Cunent banking arrangements generally do not require checks to
be funded until they are presented for payment. At December 3 1,
2017 ard 2016, accounts payable included $14.9 million and
$7.7 million, respectively, ofchecks outstanding but not yet pre-
sented for payment. For purposes ofthe Statements ofCash
Flows, cash and cash equivalents include cash on hand, cash in
banks and temporary investments purchased with an original
maturity of three months or less.
Derivative lnstruments
Questar Gas uses derivative instruments such as physical
forwards and options to manage the commodity risk of its
business oper-ations. All derivatives, except those for which an
exception applies, are required to be reported in the Balance
Sheets at fair value. Derivative contracts representing
unrealized gain positions and purchased options are reported as
derivative assets. Derivative contracts representing unrealized
losses and options sold are reported as derivative liabilities.
One of the exceptions to fair value accounting, normal
purchases and normal sales, may be elected when the contract
satisfies certain criteria, including a requirement that physical
delivery of the underlying commodity is probable. Expenses
and revenues resulting from deliveries under normal purchase
contracts and normal sales conhacts, respectively, are included
in eamings at the time of contract per-formance.
Questar Gas does not offset amounis iecognized for the right
to reclaim cash collateral or the obligation to retum cash collateral
against amounts recognized for derivative instruments executed
with the same counterparty under the same master netting
2t
Notes to Financial Statements, Continued
amangement. See Note 6 for further information
about derivatives.
Changes in the fair value of derivative instruments result in
the recognition ofregulatory assets or regulatory liabilities. Real-
ized gains or losses on the derivative instruments are generally
recognized when the related transactions impact earnings.
Property, Plant and Equipment
Property, plant and equipment is recorded at iower of original
cost or fair value, if impaired. Capitalized costs include labor,
materials and other direct and indirect costs such as asset retire-
ment costs, AFUDC and overhead costs. The cost of repairs and
maintenance, including minor additions and replacements, is
generally charged to expense as it is incurred.
In2017,2016 and20l5, Questar Gas capitalized AFUDC to
properfy, plant and equipment of $0.5 million, $0.4 million and
$0.1 million, respectively.
The undepreciated cost ofproperfy, less salvage value, is
generally charged to accumulated depreciation at retirement.
Cost of removal collections from utility customers not
representing AROs are recorded as regulatory liabilities. For
properly subject to cost-of-service rate regulation that will be
abandoned significantly before tire end of its useful life, the net
carrying value is reclassified from plant-in-service when it
becomes probable it will be abandoned.
Depreciation of properfy, plant and equipment is
computed on the straight-line method based on projected
service lives. Questar Gas' average composite depreciation
rates on utility property, plant and equipment are as follows:
Year Ended December 31 2017 2016 2015
(percent)
Distribution
Questar Gas evaluates whether or not recovery of its regu-
latory assets through future rates is probable and makes various
assumptions in its analyses. The expectations of future recovery
are generally based on orders issued by regulatory commissions,
legislation or historical experience, as well as discussions with
applicable regulatory authorities and legal counsel. Ifrecovery ofa
regulatory asset is determined to be less than probable, it will be
written off in the period such assessment is made.
Asset Retirement Obligations
Questar Gas recognizes AROs at fair value as incurred or when
sufficient information becomes available to determine a reason-
able estimate of the fair value of future retirement activities to be
performed for which a legal obiigation exists. These amounts are
generally capitalized as costs ofthe related tangible long-lived
assets. Since relevant market information is not available, fair
value is estimated using discounted cash flow analyses. Quarterly,
Questar Gas assesses its AROs to determine if circumstances
indicate that estimates of the amounts or timing of future cash
flows associated with retirement activities have changed. AROs
are adjusted when significant changes in the amounts or timing of
future cash flows are identified. Questar Gas reports accretion of
AROs and depreciation on asset retirement costs associated with
its natural gas pipeline assets as an adjustment to the related regu-
latory liabilities when revenue is recoverable from customers for
AROs.
Debt lssuance Costs
Questar Gas defers and amortizes debt issuance costs and debt
premiums or discounts over the expected lives of the
respective debt issues, considering maturity dates and, if
applicable, redemption rights held by others. Deferred debt2.52 2.42 2.60 issuance costs axe recorded as a reduction in long-term debt in
General and other 4.11 3.79 3.49 the Balance Sheets. Amortization of the issuance costs is
reported as interest expense. Unamortized costs associated
Long-Lived and lntangible Assets with redemptions of debt securities prior to stated maturity
Questar Gas performs an evaluation for impairment whenever dates are generally recognized and recorded in interest expense
events or changes in circumstances indicate that the carrying immediately. As permitted by regulatory authorities, gains or
amount of longJived assets or intangible assets with finite lives losses resulting from the refinancing of debt allocable to utility
may not be recoverable. A long-lived or intangible asset is written operations subject to cost-based rate regulation are deferred
down to fair value if the sum of its expected future undiscounted and amortized over the lives of the new issu-ances.
cash flows is less than its carrying amount. Intangible assets with
finite lives are amortized over their estimated useful lives. lnventories
Materials and supplies inventories are valued primarily using
Regulatory Assets and Liabilities the weighted-average cost method. Stored gas inventory for
The accounting for Questar Gas' operations differs from the Questar Gas used in gas distribution operations is valued
accounting for nonregulated operations in that it is required to reflect using the weighted-average cost method.
the effect ofrate regulation in its Financial Statements. For regulated
businesses subject to state cost-of-service rate regulation, regJatory Goodwill
practices that assign costs to accounting periods may differ from Questar Gas evaluates goodwill for impairment annually as of
accounting methods generally applied by nonregulated companies. April I and whenever an event occurs or circumstances
When it is probable that regulators will permit the recovery of current change in the interim that would moreJikely-than-not reduce
costs through future rates charged to customers, these costs that the fair value of a reporting unit below its carrying amount.
otherwise would be expensed by nonregulated companies are deferred rr-
asregulatory assets. Likewise, regulatory liabitities;;;.;;;^* New Accounting Standards
whg_n.g is p-rglable that regulatorf willpqglr. custo*e..efiindr yvENUE RECOGNITIoN
.-- ' In May 2014, the FASB issued revised accounting guidance formrougn ruIllre rates or when revenue ls coltecteo ITom customers Ior, revenue recognition from contracts with customers. The coreexpenolures that nave yet to be rncurred. ueneraily, reguatory assets. ; orinciple ofthis revised accounting guidance is that an entityano lraDllrues are amortlzed mto ulcome over tne penoo autnonzeo Dy- should recognize revenue to depict the transfer ofpromised goodsme regulator.
22
or services to customers in an amount that reflects the consid-
eration to which the entity expects to be entitled in exchange for
those goods or services. The amendments in this update also
require disclosure of the nature, amount, timing and uncertainty
ofrevenue and cash flows arising from contracts with customers.
For Questar Gas, the revised accounting guidance is effective
for interim and annual periods beginning January l, 2018. We
have completed the evaluation of the impact of this guidance and
expect no significant impact on our results of operations. Questar
Gas will apply the standard using the modified retrospective
method as opposed to the full retrospective method.
Tlx Rrnonu
In December 2017,rhe staffof the SEC issued guidance which
clarifies accounting for income taxes if information is not yet
available or complete and provides for up to a one yea.r measure-
ment period in which to complete the required analyses and
accounting. The guidance describes three scenarios associated
with a company's status of accounting for income tax reform:
(l) a company is complete with its accounting for certain effects
of tax reform, (2) a company is able to determine a reasonable
estimate for certain effects of tax reform and records that estimate
as a provisional amount, or (3) a company is not able to determine
a reasonable estimate and therefore continues to apply accounting
for income taxes based on the provisions of the tax laws that were
in effect immediately prior to the 2017 Tax Reform Act being
enacted. In addition, the guidance provides clarification related to
disclosures for entities which are utilizing the measurement
period. Questar Gas has recorded its best estimate of the impacts
of the 2017 Tax Reform Act as discussed in Note 4. The amounts
are considered to be provisional and may result in adjustments to
be recognized during the measurement period.
Norr 3. OpBnauNG REvENTTE
Questar Gas' operating revenue consists of the following:
Year Ended December 31,2017 2016 2015
(millions)
Residential and commercial gas sales
lndustrial gas sales
Gas transportation
other(1)
As indicated in Note 2, Questar Gas' operations, including
accounting for income taxes, are subject to regulatory treatment.
Reductions in accumulated deferred income tax balances due to
the reduction in the corporate income tax rates to 21Yo under the
provisions of the 2017 Tax Reform Act may result in arnounts
previously collected from utility customers for these deferred taxes
to be refundable to such customers, generally through reductions
in future rates. The 2017 Tax Reform Act includes provisions that
stipulate how these excess deferred taxes are to be passed back to
customers for certain accelerated tax depreciation benefits.
Potential refunds of other deferred taxes will be determined by
Questar Gas' state regulators. See Note 10 for more information.
Questar Gas has completed or has made a reasonable estimate
for the measurement and accounting ofcertain effects ofthe 2017
Tax Reform Act which have been reflected in the December 3 1,
2017 financial statements. The changes in defened taxes were
recorded as either an increase to a regulatory liability or as an
adjustment to Questar Gas' deferred tax provision.
The items reflected as provisional amounts are related to accel-
erated depreciation for tax purposes ofcertain property acquired
and placed into service after September 27 ,2017 and the impact of
accelerated depreciation on state income taxes to the extent there is
uncertainty on conformity to the new federal tax system.
The determination of the impact of the income tax effects of
the items reflected as provisional amounts represents a reasonable
estimate, but will require additional analysis ofhistorical records
and further interpretation of the 2017 Tax Reform Act from yet to
be issued U.S. Departrnent of the Treasury regulations which will
require more time, information and resources than currently
available to Questar Gas.
Details of Questar Gas' income tax expense and
deferred income taxes are provided in the following tables.
The components of income tax expense were as follows:
Year Ended December 31 2017 2016 2015
(millions)
Current:
Federal
State
Total current expense (benefit)1.3 1.4 (18.0)
Deferred:
Federal
State
lnvestment tax credits
$1.1 $
0.2
1.2
o.2
$(16.0)
(2.0)
$877.8
11.7
26.2
31.3
$854.6
17.3
24.6
24.8
$847.3
23.6
21.2
25.5 48.8
4.2
(0.2)
39.8,:29.9
5.9
(0.1)Total operating revenue $947.0 $921.3 $917.6
(1) See Note l9for amounts attributable to afiliates
Norn 4. INcourB Taxrs
The 2017 Tax Reform Act includes a broad range oftax reform
provisions affecting Questar Gas, as discussed in Note 2. The
2017 Act Reform Act reduces the corporate income tax rate
from 35Yo to 2lo/o for tax years beginning after December 3 I ,
2,017. Lt the date of enactment, federal defened tax assets and
liabilities were remeasured based upon the enacted 2lo/o tax
rate expected to apply when temporary differences are to be
realized and settled. The specific provisions related to regulated
public utilities inthe2017 Tax Reform Act generally allows for
the continueii Gilucti-bility of interesi exf6nselchanges the tax
depreciation of certain properfy acquired after September 27,
2017, arrd continues cer-tain rate normalization requirements
for accelerated depreciation benefits.
Total deferred expense 45-2 35.7 52.8
Total income tax expense $46.5 $ 37.1 $34.8
The accounting for the reduction in the corporate income tax
rate increased deferred income tax expense by $3.0 million for
the year ending December 31,2017.
23
Notes to Financial Statements, Continued
The difference between the statutory federal income tax rate and
Questar Gas' effective income tax rate is explained as follows:
Year Ended December 3'1,2017 2016 2015
(millions)
Federal income taxes statutory rate
lncreases (reductions) resulting from:
State taxes, net of federal benefit
Amortization of investment tax credits related to
rate-regulated assets
Leg islative change-federal
Other
Effective income tax rate 40.8% 39.3% 35.1%
ln 2017 , Questar Gas' effective tax rates reflect the net
detriment of remeasuring deferred taxes resulting from the
lower corporate income tax rate promulgated by the 2017 Tax
Reform Act.
Significant components of Questar Gas' deferred income
taxes were as follows:
Year Ended December 31,2017 2016
(millions)
Deferred income taxes:
Total deferred income tax assets $ 65.8 $ 2.0
Total deferred income tax liabilities 341.9 477.8
Total deferred income tax liabilities $276.1 9475.8
Total deferred income taxes:
Property, plant and equipment
2O17 Tax Reform Act impact
Employee benefits
Deferred compensation
Purchased gas costs
Other
Norn 5. Farn Var,ur MrasunsunNrs
Fair value is defined as the price that would be received to sell an
asset or paid to transfer a liability (exit price) in an orderly trans-
action between market participants at the measurement date.
However, the use of a mid-market pricing convention (the mid-
point between bid and ask prices) is permitted. Fair values are
based on assumptions that market participants would use when
pricing an asset or liability, including assumptions about risk and
the risks inherent in valuation techniques and the inputs to
valuations. This includes not only the credit standing of coun-
terparties involved and the impact of credit enhancements but also
the impact of Questar Gas' own nonperformance risk on its
liabilities. Fair value measurements assume that the transaction
occurs in the principal market for the asset or liability (the market
with the most volume and activity for the asset or liability fiom
the perspective ofthe reporting entity), or in the absence ofa
principal market, the most advantageous market for the asset or
liability (the market in which the reporting entity would be able to
maximize the amount received or minimize the amount paid).
Questar Gas applies fair value measurements to commodity
derivative instruments in accordance with the requirements
described above. Questar Gas applies credit adjustments to its
derivative fair values in accordance with the requirements
described above.
lnputs and Assumptions
Questar Gas maximizes the use of observable inputs and mini-
mizes the use of unobservable inputs when measuring fair value.
Fair value is based on actively-quoted market prices, ifavailable.
In the absence of actively-quoted market prices, price infonnation
is sought from external sources, including broker quotes and
industry publications. When evaluating pricing information pro-
vided by brokers and other pricing services, Questar Gas considers
whether the broker is willing and abie to trade at the quoted price,
ifthe broker quotes are based on an active market or an inactive
market and the extent to which brokers are utilizing a particular
model if pricing is not readily available. If pricing information
from extemal sources is not available, or if Questar Gas believes
that observable pricing is not indicative of fair value, judgment is
required to develop the estimates offair value. In those cases
Questar Gas must estimate prices based on available historical and
near-term future price information and certain statistical methods,
including regression analysis, that reflect its market assumptions.
Questar Gas' commodity derivative valuations are prepared by
Dominion Energy's Enterprise Risk Management department
which creates mark-to-market valuations for Questar Gas'
derivative transactions using computer-based statistical models.
The inputs that go into the market valuations are transactional
information and market pricing information that resides in data
warehouse databases. The majority offorward prices are
automatically uploaded into the data warehouse databases from
various third-party sources. Inputs obtained from third-party
sources are evaluated for reliability considering the reputation,
independence, market presence, and methodology used by the
tliird-party. If for,ivard piices are not available UOa 161i6:p@
sources, then Dominion Energy's Enterprise Risk Management
department models the forward prices based on other available
market data. A team consisting of risk management and risk
35.0% 35.0% 35.O%
3.2 4.2 1.4
$317.1
(60.7)
19.3
('1.41
1.5
0.3
$448.2
27.9
(0.6)
0.1
0.2
Total net deferred income tax liabilities $276.1 $475.8
The most significant impact reflected for the 2017 Tax
Reform Act is the adjustment of the net accumulated defened
income tax liability for the reduction in the corporate income tax
rateto2l%o. In addition to amounts recognized in deferred
income tax expense, the impacts of the20l7 Tax Reform Act
decreased the accumulated defened income tax liability by
$184.2 million at December 31,2017. The December 31,2017
balance sheet reflects the impact of the20l7 Tax Reform Act on
Questar Gas' regulatory liabilities which increased regulatory
liabilities by $244.9 million, and a related deferred tax asset of
$60.7 million. This adjustment had no impact on our 2017 cash
flows.
There were no unrecognized tax benefits at the beginning
or end of the years ended December 31, 2017 , 2016 or 2015.
The 2017 federal income tax retum has not been filed.
24
quantitative analysts meets to assess the validity of market
prices and mark-to-market valuations. During this meeting, the
changes in mark-to-market valuations from period to period
are examined and qualified against historical expectations. If
any discrepancies are identified during this process, the mark-
to-market valuations or the market pricing information is
evaluated further and adjusted, if necessary.
For options and conhacts with option-like
characteristics where observable pricing information is not
available from external sources, Questar Gas generally uses
a modified Black-Scholes Model or other option model.
The inputs and assumptions used in measuring fair value
for commodity derivative contracts include the following:
Forward commodity prices
Transaction prices
Price correlation
Volumes
Commodity location
Interest rates
Credit quality of counterparties and Questar Gas
Credit enhancements
Time value
Levels
Questar Gas also utilizes the following fair value hierarchy,
which prioritizes the inputs to valuation techniques used to
measure fair value into three broad levels:
Level l-Quoted prices (unadjusted) in active markets for
iden-tical assets and liabilities that it has the ability to
access at the measurement date.
Level 2-Inputs other than quoted prices included within Level
I that are either directly or indirectly observable for the asset
or liability, including quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or sim-
ilar assets or liabilities in inactive markets, inputs other than
quoted prices that are observable for the asset or liability, and
inputs that are derived from observable market data by
correlation or other means. Instruments categorized in Level 2
primarily include commodity forwards and options.
Level 3-Unobservable inputs for the asset or liability, includ-
ing situations where there is little, if any, market activity.
Instruments categorized in Level 3 primarily include long-
dated commodity derivatives.
The fair value hierarchy gives the highest priority to
quoted prices in active markets (Level 1) and the lowest
priority to unobservable data (Level 3). In some cases, the
inputs used to measure fair value might fall in different levels
ofthe fair value hierarchy. In these cases, the lowest level
input that is significant to a fair value measurement in its
entirety determines the appli-cable level in the fair value
hierarchy. Assessing the significance of a particular input to
the fair value measurement in its entirety requires judgment,
considering factors specific to the asset or liability.
For derivative contracts, Questar Gas recognizes transfers
among Level 1, Level 2 and Level 3 based on fair values as of
the first day of the month in which the transfer-occurs.
Transfers out oflevel 3 represent assets and liabilities that
were previously classified as Level 3 for which the inputs
became observable for classification in either Level 1 or Level
2. Because the activity and
liquidity of commodity markets vary substantially between
regions and time periods, the availability of observable inputs
for substantially the full term and value of Questar Gas' over-
the-counter derivative contracts is subject to change.
Level 3 Valuations
Fair value measurements are categorized as Level 3 when price
or other inputs that are considered to be unobservable are
significant to their valuations. Long-dated commodity
derivatives are generally based on unobservable inputs due to
the length of time to settlement and the absence of market
activity and are therefore categorized as Level 3.
Questar Gas enters into certain physical forwards, which are
considered Level 3 as they have one or more inputs that are not
observable and are significant to the valuation. The discounted
cash flow method is used to value Level 3 physical forward con-
tracts. The discounted cash flow model for forwards calculates
mark-to-market valuations based on forward market prices, origi-
nal transaction prices, volumes, risk-free rate ofrefurn, and credit
spreads. For Level 3 fair value measurements, certain forward
market prices are considered unobservable. The unobservable
inputs are developed and substantiated using historical
information, available market dat4 third-party data, and stat-
istical analysis. Periodically, inputs to valuation models are
reviewed and revised as needed, based on historical information,
updated market dat4 market liquidity and relationships, and
changes in third-party pricing sources.
The following table presents Questar Gas' quantitative
information about Level 3 fair value measurements at
December 31,2017. The range and weighted average are
pre-sented in dollars for market price inputs.
Fair Value Valuation Unobservable Weighted
(millions) Techniques lnput RangeAverage(1)
Assets
Physical forwards:
Natural gas(2) $2.4 Discounted Market price 2.2 - 2.2 Z.B
cash flow (per Dth)(3)
Total assets $2.4
(l) Averages weighted by volume.
(2) Includes basis.
(3) Represents market prices beyond defined terms for Level I and 2.
Significant Unobservable
lnputs Position
lmpacl on
Change to Fair Value
lnpul Measurement
Market price
Market price
Buy lncrease
(decrease)Sell lncrease
(decrease)
Gain (loss)
Loss (gain)
25
Sensitivity of the fair value measurements to changes in
the significant unobservable inputs is as follows:
Notes to Financial Statements, Continued
Recurring Fair Value Measurements
The following table presents Questar Gas' assets and liabilities
that are measured at fair value on a recurring basis for each hier-
archy 1evel, including both current and noncurrent portions:
Levell Level2 Level3 Total
(millions)
At December 31,2017
Assets:
Derivatives:
Commodity $- $- $2.4 $2.4
Total assets $- $- $2.4 $2.4
At December 31,2016
Assets:
Derivatives:
Commodity
Total assets
remaining ntaturities. Thefair value measurements are
classified as Level 2.
(2) Carrying amount includes amounts which represent tlle
unamortized debt issuance costs, discount or premium.
Nom 6. DnnrvauvEs AND Hpocp
AccouNrrNc AcrrvrrrEs
Questar Gas uses derivative instruments to manage exposure to
supply and price risk. As discussed in Note 2, changes in the fair
value ofderivatives are deferred as regulatory assets or regulatory
liabilities until the related transactions impact earnings. See Note
5 for further information about fair value measurements and
associated valuation methods for derivatives.
Derivative assets and liabilities are presented gross on Questar
Gas' Balance Sheets. Questar Gas' derivative contracts include
over-the-counter transactions, which are bilateral contracts that are
transacted directly with a counterparty. At December 31, 2017 ,
substantially all ofQuestar Gas' derivative assets and liabilities
were not subject to a master netting or similar arangement.
Volumes
The following table presents the volume of Questar Gas'
derivative activity at December 3l, 2017 . These volumes are
based on open derivative positions and represent the combined
absolute value oftheir long and short positions, except in the case
ofoffsetting transactions, for which they represent the absolute
value of the net volume of their long and short positions.
Cunent Noncunent
$- $0.1 $- $0.1
$- $0.1 $- $0.1
Liabilities:
Derivatives:
Commodity $- $0.1 $- $0.1
2017 2016
(millions)
Balance at January 1,
Total realized and unrealized gains (losses):
lncluded in earnings(l)
Included in regulatory assets/liabilities
Settlements
Balance at December 31 ,$2.4 $ -
(l) The gains and losses included in earnings were classified in purchased gas.
There were no unrealized gains or losses included in
eamings in the Level 3 fair value category relating to
assets/liabilities still held at the reporting date for the years
ended December 3 1, 2017 and 2016.
Fair Value of Financial Instruments
Substantially all of Questar Gas' financial instruments are recorded
at fair value, with the exception of the instruments described
below, which are reported at historical cost. Estimated fair values
have been determined using available market information and
valuation methodologies considered appropriate by management.
The carrying amount of cash and cash equiv-alents, customer and
other receivables, affi liated receivables, short-term debt, afliliated
current borrowings, payables to affiliates and accounts payabie are
representative offair value because ofthe short-term nature of
these instruments. For Questar Gas' financial instruments that are
not recorded at fair value, the carrying amounts and estimated fair
values are as follows:
At December 31,2017 2016
Carrying Estimated Fair Carrying Estimated Fair
Amount Value(1) Amount Value(1)
(millions)
Long-term debt,
including securities
due within one year(2) g71s.9
(l) Fair value is estimated using markzt prices, where available, and interest
rates currently available for issuance ofdebt with sintilar terms and
Fair Value and Gains and Losses on Derivative lnstruments
The following table presents the fair values of Questar Gas'
derivatives and where they are presented in its Balance Sheets.
Fair Value -
Derivatives
not under TotalHedge Fair
Accounting Value
(millions)
At December 31,2017
ASSETS
Current Assets
Commodity $0.4 $0.4
Total current derivative assets(1 )0.4 0.4
Noncurrent Assets
Commodity 2.0 2.O
Total noncurrent derivative assets(2)2.0 2.0
Total derivative assets $2.4 $2.4
At December 31,2016
ASSETS
Current Assets
Commodity $0.1 $0.1
Total current derivative assets(1 )0.1 0.1
Total derivative assets $0.1 $0.1
$- $-
0.4 0.2
2.4(0.4) (0.2)Natural Gas (bcf):
Basis 9.3 23.0
$783.2 $630.8 $672.6
LIABILITIES' -- ' 'Cuirent Liabilities
Commodity $0.1 $0.1
Total current derivative liabilities(3)0.1 0.1
26
Total derivative liabilities $0.1 $0.1
Total liabilities g- 90.'l $ - $0.'1
The following table presents the net change in Questar Gas'
assets and liabilities measured at fair value on a recurring basis
and included in the Level 3 fair value category. Questar Gas
did not have any such items at December 31,2015.
(1) Current derivatit)e assets are presented in other cutent assets in
Questar Gas' Balance Sheets.
(2) Noncurrent derivative assets are presented in other deferred
charges and other assets in Questar Gas' Balance Sheets.
(j) Current derivative liabilities are presented in other current
liabilities in Questar Gas' Balance Sheets.
The following table presents the gains and losses on
Questar Gas' derivatives, as well as where the associated
activity is pre-sented in its Statements of Income.
Derivatives not designated as hedging Amount of Gain (Loss) Recognized in lncome
instruments on Derivatives(l)
Year Ended December 31,2017 2016 2015
(millions)
Derivative Type and Location of
Gains (Losses)
Commodity(2)
Total
(1) Includes derivative dctivity amortized out ofregulatory
assets/liabilitie s. Amounts deferued into regulatory assets/ltab ilities
have no associated ffict in Questar Gas' Statements of Income.
(2) Amounts recorded in Questar Gas ' Statements of Income are
classified in purchased gas.
NorB 7. Pnoponry, PLANT AND EeUIrMENT
Major classes of property, plant and equipment and their
respective balances for Questar Gas are as follows:
Year Ended December 31 2017 2016
NorB 9. Rrcul.rroRY Assnrs aNr
Ltanu-rrrrs
Regulatory assets and Iiabilities include the following
2017 2016
(milllons)
Regulatory assets:
Purchased-gas adjustment(1 )
gEp(z)
Pipeline integrity costs(3)
Contract withholding(a)
Other
$$10.7
3.3
2.0
0.4
o.2
3.4
1.1
1.9
2.6
0.6
Regulatory assets-current
Cost of reacquired debt(s)
Pipeline integrity costs(3)$(0.1) s(0.2)$-Reg ulatory assets-noncu rrent(6)$(0.1) $(0.2)$-Total regulatory assets
16.6 9.6
2.7
0.6
3.2
2.3
3.3 5.5
$ 19.9 $ 15.1
Regulatory liabilities:
6610)
Cost of plant removal and AROs(8)
Other
$ 4.4$
4.2
1.3
2.9
3.5
0.1
Regulatory Iiabilities-current(s)9.9 6.5
Income taxes refundable through future rates(10)
Cost of plant removal and AROs(8)
Other
244.9
194.0
2.1
'189.1
(millions)
Distribution
General and other
Plant under construction
Total property, plant and equipment $3,041.7 $2,883.0
NorB 8. Gooownr,
The changes in Questar Gas' carrying amount and segment
alloca-tion of goodwill are presented below:
Gas Corporate andlnfrastructure Other Total
Regulatory liabilities-noncurrent M1.0 189.1
Total regulatory liabilities $ 450.9 $ 195.6
(1) Purchased-gas costs that are differentfrom those providedfor in
present rates are accumulated and recovered or credited through
future rate changes.
(2) The EEP relates to funds expendedfor promoting the
conservation ofnatural gas through advertising, rebates for
eficient homes and appli-ances and home energ) audits. Costs
are recovered from customers through periodtc rate adjustments.
Costs incurred in excess ofrecoveries result in an asset;
recoyeries in excess of costs incurred result in a liability.
(3) The costs of complying with pipeline-integrity regulations are
recovered in rates subject to a Utah Commission order. Questar
Gas is allowed to recover $7.0 million per year. Costs incurued in
excess of this amount will be recovered infuture rate changes.
(4) The balance at December 31, 2016 represents a disputed amount
with-heldfrom a supplier ofstorage services. The dispute was
settled in March 2017 and the amount y)as reversed, which
resulted in no material impact to Questar Gas'results of
operations, financial position or cash/lows.
(5) Gahu and losses on the reacquisition ofdebt by rate-regulated companies are
deferred and amortized as interest expense over the would-be remain-ing life
ofthe reacquired debt. The reacquired debt costs had aweighted-atterage life
ofapproximately 5.1 years as ofDecember 31, 2017.
(6) Noncurrent regulatory assets are presented in other deferred
charges and other assets in the Balance Sheets.
(7) Represents the dffirence between actual and allowed revenues.
Any defi-ciency in amounts collected are recovered through
per iodic rate adj us t-me nts.
$2,605.0
345.6
91.1
$2,436.7
369.5
76.8
(millions)
Balance at December 31, 2015(1)
No events affecting goodwill
$5.6 $_ $5.6
No events affecting goodwill - - -
Balance at December 31, 2017(1) $s.e $- $5.6
(l) There are no accumulated impairment losses.
27
Notes to Financial Statements, Continued
(8) Cost ofplant removal and AROs represent amounts recovered
from cus-tomersfor costs offuture acttvities to remove assets that
are expected to be incurred at the tinte ofretirement.
(9) Current regulatory liabilities are presented in other current
liabilities in the Balance Sheets.
(10) Amounts recorded to pass the effect ofreduced income tax rdtes
from the 2017 Tax Reform Act to customers infuture periods,
which will reverse at the weighted average tax rate that was used
to build the reserves over the remaining book life of the property
At December 31,2017, none of Questar Gas'
regulatory assets were earning a return.
Norn 10. RrculAToRY Ml.rrnns
As a public utility, Questar Gas is subject to the jurisdiction of
the Utah Commission and the Wyoming Commission. Natural
gas sales and transportation services are provided under rate
schedules approved by the two regulatory commissions.
Questar Gas has an infrastructure cost-tracking mechanism
that allows it to place into rate base, and eam areturn on, capital
expenditures associated with a multi-year natural gas
infrastructure-replacement program upon the completion of each
proj ect. A 2014 Utah general rate case reset the recovery of costs
under the infrastructure-replacement program into general rates
until Questar Gas invested $84 million in new pipelines. This
dollar threshold was met in November 2014, and thereafter Ques-
tar Gas has been able to recover progam capital expenditures
through the infrastructure-replacement mechanism. Questar Gas
spent approximately $69 million in 2017 under this program.
As part of the Dominion Energy Questar Combination,
Questar Gas agreed with the Utah Commission to not file a new
general rate case to adjust its base distribution non-gas rates prior
to July l, 2019 unless otherwise ordered by the Utah Commis-
sion. ln addition, Questar Gas agreed with the Wyoming Com-
mission to not file a general rate case application with a requested (millions)
base rates by $14.5 million. Also, in January 2018, Questar Gas
submitted a filing with the Utah Commission for a $2.5 million
non-gas revenue requirement decrease due to impacts of the 2017
Tax Reform Act. These filings are pending. Questar Gas will begin
to reserve the impacts ofthe cost ofservice reduction as a
regulatory liability beginning in 2018 until the rates are reset. The
2017 Tax Reform Act is expected to reduce customer rates due to
lower income tax expense recoveries and the settlement of income
taxes refundable through future rates. The ultimate resolution of
the amount and timing of these rate reductions with Questar Gas'
regulators could be material to Questar Gas' operating cash flows.
Questar Gas has recorded a reasonable estimate of net
income taxes refundable through future rates in the
jurisdictions in which it operates. Through actions by the Utah,
Wyoming or Idaho Commissions the estimates may be subject
to changes that could have a material impact on Questar Gas'
results ofoperations, financial condition and/or cash flows.
Norn 1L. Assnr RnrrnnrrpNT OBLrcATroNs
AROs represent obligations that result from laws, statutes, con-
tuacts and regulations related to the eventual retirement ofcertain
of Questar Gas' long-lived assets. Revisions to estimates result
from material changes in the expected timing or amount of cash
flows associated with AROs. As a result of a change in the esti-
mated timing of cash flows for the interim retirement of natural
gas pipeline components, Questar Gas recorded an increase of
$75.1 million to AROs in the third quarter of 2016. The current
porlion of the ARO balance is $1.6 million and is included in
other current liabilities in the Balance Sheets. The changes to
AROs during 2016 and2017 were as follows:
Amount
rate effective date earlier than January 1,2020.
In September 2017, Questar Gas submitted a filing with
the Utah Commission for a $5.9 million non-gas increase
reflecting forecasted increases in infrastrucfure replacement
costs. The Utah Commission approved the filing in September
2017 wilh rates effective October 2017.
In October 2017, Questar Gas submitted filings with both
the Utah and Wyoming Commissions for a combined
$25.8 million gas cost increase reflecting forecasted increases in
commodity and transportation costs. The Utah and Wyoming
Commissions both approved the f,rlings in October 2017 with
rates effective November 2017.
In November 2017, Questar Gas submitted a filing with the
Utah Commission for a $0.7 million non-gas decrease due to
intemrption penalties that were paid by transportation customers.
The Utah Commission approved the filing in November.
Subsequent to the enactment ofthe 2017 Tax Reform Act
Questar Gas' state regulators issued orders requesting that public
utilities evaluate the total tax impact on Questar Gas' cost of serv-
ice and accrue a regulatory liability attributable to the benefits of
the reduction in the corporate income tax rate. Certain of the
and Wyoming Commissions detailing the total tax impact on the
utility's cost of service. In January 2018, Questar Gas submitted a
response to the Utah Commission detailing that the 2017 Tax
Reform Act would reduce Questar Gas' revenue requirement for
AROs at December 31,2015
Accretion
Revision in estimated cash flows
Obligations settled during the period
$ 0.6
2.9
75.1
(0.8)
AROs at December 31 , 201 6 $ 77.8
Accretion
Obligations incurred during the period
3.2
0.6
(3.1)Obliqations settled during the
qr_{e-ry reqqested tha! QuesJar-Ga1,gb.ql1response to the Utah _and 2016, respegliyely,-p--E-_Q$*provides operatioral services to
AROs at December 31,2017 $ 78.5
Norr 12. VanhsLE INTEREST ENTITIES
The primary beneficiary of a VIE is required to consolidate the
VIE and to disclose certain information about its significant
variable interest in the VIE. The primary beneficiary of a VIE is
the entity that has both: (l) the power to direct activities that most
significantiy impact the entity's economic performance and
(2) the obligation to absorb losses or receive benefits from
the entify that could potentially be significant to the VIE.
Questar Gas purchased shared services from DEQPS of $1.5
million and $0.1 million for the years ended December 31,2017
certain Dominion Energy subsidiaries, including Questar Gas, as
a subsidiary service company. The Balance Sheets at December
31, 2017 and 2016 included less than $0. I million and $0. I
million due to DEQPS, respectively.
28
Questar Gas entered into a service agreement effective January
2018 with DES, an affiliated VIE. DES provides accounting, legal,
finance and certain administrative and technical services to
Dominion Energy and its subsidiaries including Questar Gas.
Questar Gas determined that it is not the primary beneficiary
of DEQPS or DES as it does not have both the power to direct the
activities that most significantly impact their economic per-
formance as well as the obligation to absorb losses and benefits
which could be significant to it. Questar Gas has no obligation to
absorb more than its allocated share of DEQPS and DES costs.
Norr 13. Snonr-rERM DnsrAND CREDTT
AcnnnupNrs
Questar Gas uses short-term debt to fund working capital
require-ments and as a bridge to long-term debt financings. The
levels of borrowing may vary significantly during the course of
the year, depending upon the timing and amount of cash
requirements not satisfied by cash from operations.
Questar Gas' short-term flrnancing is supported by the hvo
joint revolving credit facilities with Dominion Energy, Virginia
Power and Dominion Energy Gas, to which Questar Gas was
added as a co-borrower in November 2016. In December 2016,
Questar Gas entered into a commercial paper program pursuant to
which it began accessing the commercial paper markets. These
credit facilities can be used for working capital, as support for the
combined commercial paper programs of Dominion Energy,
Virginia Power, Dominion Energy Gas and Questar Gas and for
other general corporate purposes.
Questar Gas' share of commercial paper and letters of
credit outstanding under its joint credit facilities with
Dominion Energy, Virginia Power and Dominion Energy
Gas were as follows:
Outstanding
Facility Commercial Outstanding
Limit Paper(2) Letters of Credit
(millions)
At December 31,2017
Joint revolving credit facility(l )
Joint revolving credit facility(1)
Total $ 1,ooo.o $165.0 $-
At December 31,2016
Joint revolving credit facility(1 )
Joint revolving credit facility(1)
Total $ 1,000.0 $200.0 $-
(l) A maxtmurn of $1.0 billion of thefacilities is available to Questar Gas,
assuming adequate capacity is available after giving effect to uses by
co-borrowers Dominion Energl, Virginia Power and Dominion Energt
Gas. Sublimits for Questar Gas are set within the facility limit but can
be changed at the option of the boffovers multiple times per year. At
December 31, 2017, the sub-limitfor Questar Gas was $250.0 million.
lf Questar Gas has liquidity needs in excess of its subJimit, the sub-
limit may be changed or such needs may be satisfied through short-
telm inter-company borrowingsfrom Dominion Energt. The maturtty
datefor thesefacilities is April 2020. These creditfocilities can be used
to support bank borrowings and the issuance oJ commercial paper, as
ySlJ q!_!-o-j!pp9!!up to $1.0 billion ("o1_th.e sy!-!tnq!, whichever is less)
ofletters ofcredit.
(2) The weighted-average interest rate ofthe outstanding commercial
paper supported by these creditfacililies was 1.56% and 1.10%
at December 3 1, 201 7 and 20 I 6, respectively.
Dominion Energy has indicated its intention to replace the
existing two joint revolving credit facilities with a $6.0 billion
joint revolving credit facility in the first quarter of2018.
Terms and covenants ofthe new credit facility are expected to
be similar to the existing credit facilities, including that
Virginia Power, Dominion Energy Gas and Questar Gas will
remain as co-borrowers, except that the maturity will be in
five years and the maximum allowed total debt to total capital
ratio, with respect to Dominion Energy only, will be increased
from 65o/oto 67.5%o.
Norn 14. LoNc-rERM DEBT
2017 Weighted-
average
At December 31.coupon(l) 2017 2016
(millions, except percentages)
Unsecured Senior and Medium-
Term Notes:
2.98% to 7.2OYo, due 2017 to
2051 4.60% $720.0 $634.5
Total principal 720.0 634.5
Securities due within one year
Debt issuance costs
Total long{erm debt $ 595.9 $6'16.3
(I) Represents weighted-average coupon rates for debt
outstanding as of December 3 l, 20 I 7.
Based on stated maturity dates, the scheduled principal pay-
ments of long-term debt at December 31,2017 , were as follows:
2018 2019 2020 2021 2022 Thereafler Total
(millions,
except
percentages)
Questar
Gas $120.0 $- $- $- $- $600.0 $720.0
Weighted-
average
Coupon
5.72% (120.0)
(4.11
(14.5)
(3.7)
5.72%4_37%$ 500.0
500.0
$165.0 tr
$ 500.0
500.0
$200.0
In October 2017, Questar Gas entered into an agreement with
certain investors to issue through private placement $50
million of 3.30%o l2-year senior notes and $100 million of
3.97%;o30-year senior notes in April 2018.
Questar Gas' short-term credit facilities and long-term debt
agreements contain customary covenants and default
provisions. As of December 31,2017, there were no events of
default under these covenants.
Any new long-term debt issuance by Questar Gas is subject
to approval by the Wyoming Commission.
Norr 15. DrvmnND RnsrRrcrroNs
The Utah Commission may prohibit any public service company,
including Questar Gas, from declaring or paying a dividend to an
affiliete iTit is determined that the capiial of Questar Gas is beinfi-- ---
impaired or that its service to the public is likely to become
impaired. At December 3L,2017 , the Utah Commission had not
restricted the payment of dividends by Questar Gas.
29
Notes to Financial Statements, Continued
Norn 16. EvrploYEE BENEFTTS
Questar Gas participates in retirement benefit plans sponsored
by Dominion Energy effective December 2017, reflecting the
merger of plans previously sponsored by Dominion Energy
Questar, which provides certain retirement benefits to eligible
active employees, retirees and qualifying dependents of
Questar Gas. Under the terms of its benefit plans, Dominion
Energy reserves the right to change, modi$ or terminate the
plans. From time to time in the past, benefits have changed,
and some ofthese changes have reduced benefits.
Pension benefits for Questar Gas employees are covered by a
defined benefit pension plan sponsored by Dominion Energy that
provides benefits to multiple Dominion Energy subsidiaries.
Retirement benefits payable are based primarily on years of serv-
Energy subsidiaries. Questar Gas recognized $5.0 million,
$4.7 million and $4.5 million of expense in other operations
and maintenance expense in the Statements of Income in
2017 , 2016 and 2015, respectively, as employer matching
contributions to this plan.
Share-based Gompensation
Prior to the Dominion Energy Questar Combination, Questar Gas
employees participated in certain share-based compensation plans
of Dominion Energy Questar. Effective with the Dominion Energy
Questar Combination all such awards vested on September 16,
2016. Total share-based compensation experse amounted to $3.0
million in2016 and $1.4 million in 2015.
ice, age and the employee's compensation. As a participating NO1f 17. COUIUTMENTS AND
employer, Questar Gas is subject to Dominion Energy's funding CONffNCfNCffSpolicy, which is to contribute annually an amount that is in
accordance with the provisions of ENSA. During 2017, Questar As a result of issues generated in the ordinary course of business,
Gas made $12.2 million of contributions to the pension plan. No Questar Gas is involved in legal proceedings before various courts
contributions to the plan by euestar Gas are cunently expected in and is periodically subject to govemmental examinations
2018. Net periodic pension expense (credit) related to the plan was (including by regulatory authorities), inquiries and investigations.
$(g.2) million, $6.4 million and $10.4 million in2017,2016 and certain legal proceedings and governmental examinations involve
2015, respectively, recorded in other operations and main-tenance demands for unspecified amounts of damages, are in an initial
expense in the Statements of Income. The funded status of various procedural phase, involve uncertainty as to the outcome of pend-
Dominion Energy subsidiary groups and employee compensation ing appeals or motions, or involve significant factual issues that
are the basis for determining the share oftotal pension costs for need to be resolved, such that it is not possible for Questar Gas to
participating Dominion Energy subsidiaries. At December 31, estimate a range of possible loss. For such matters for which
2017 ard2016, the amount due to euestar Gas associated with this Questar Gas cannot estimate a range of possible loss, a statement
plan, was $107.1 million and $87.8 million, respectively, recorded to this effect is made in the description of the matter. Other mat-
in pension and other postretirement benefit assets in Questar Gas' ters may have progressed sufficiently through the litigation or
Balance Sheet. investigative processes such that Questar Gas is able to estimate a
Retiree healthcare and life insurance benefits for euestar Gas range.ofpossible loss. For legal proceedings and governmental
employees are covered by a health and welfare plan sponsored by examinations for which Questar Gas is able to reasonably estimate
Dominion Energy that provides certain retiree healthcare and life a range ofpossible losses, an estimated range ofpossible loss is
insurance benefits to multiple Dominion Energy subsidiaries. provided, in excess of the accrued liability (if any) for such mat-
Annual employee premiums are based on several factors such as ters'.Any accrued liability is recorded on a gross basis with a
retirement date and years ofservice. Net periodic benefit expens. receivable also recorded for any probable insurance recoveries.
(credit) related to this plan was $(0.g) miilion, $0.g million and Estimated ranges of loss are inclusive of legal fees and net of any
$0.9 million in20l7, iorc *a2015, respectively, recorded in anticipated insurance recoveries. Any estimated range is based on
other operations and maintenance expense in the Statements of currently available information and involves elements ofjudg-
Income. Employee headcount is the basis for determining the ment and significant uncertainties. Any estimated range of possi-
share of total other postretirement benefit costs for particlpating ble loss may not represent Questar Gas' maximum possible loss
Dominion Energy subsidiaries. At December 3l,zol7 *Zzotk exposure- The circumstances of such legal proceedings and gov-
the amount due from Questar Gas associated with this plan was emmental examinations will change from time to time and actual
$14.g million and $13.0 million, respectively, and is reflected as results may vary significantly from the current estimate. For cur-
pension and other postretirement benefit liabilities in euestar rent proceedings not specifically reported below, management does
Gas, Balance Sheet. not anticipate that the liabilities, ifany, arising from such
Dominion Energy holds investments in trusts to fund employee proce.edings would have a material effect on the financial position,
benefit payments for the pension and other postretirement benefit liquidity or results of operations of Questar Gas'
plans in which euestar Gas' employees participate. Any The CERCL,\ as amended, provides for immediate response
investment-related declines in these trusts wili result in future and removal actions coordinated by the EPA in the event of
increases in the net periodic cost recognized for such employee threatened releases ofhazardous substances into the environment
benefit plans and will be included in the determination of the and authorizes the U.S. government either to clean up sites at
amount of cash that euestar Gas will provide to Dominion Enerry which hazardous substances have created actua1 or potential envi-
for_its.share of emproyee benent plan contributions. i:H:::ilr#*:%;.#itr#H:J;:5:;:lHflll*jiu-eligo
Defined Contribution Plan hansporters of hazardous substances, as well as past and present
Questar Gas also participates in a Dominion Energy-sponsored owners and operators of contaminated sites, can be jointly, sev-
defined contribution plan which covers multiple Dominion erally and strictly liable for the cost of cleanup. These potentially
30
responsible parties can be ordered to perform a cleanup, be
sued for costs associated with an EPA-directed cleanup,
voluntarily settle with the U.S. government conceming their
liability for cleanup costs, or voluntarily begin a site
investigation and site remediation under state oversight.
Questar Gas has determined that it is associated with two
former manufactured gas plant sites that contain coal tar and
other potentially harmful materials. None of the former sites
with which Questar Gas is associated is under investigation by
any state or federal environmental agency. Due to the
uncertainty surrounding the sites, Questar Gas is unable to
make an estimate of the potential financial statement impacts.
Commitments
Currently, the majority of Questar Gas' natural gas supply is
provided by cost-of-service reserves developed and produced by
Wexpro. In 2017 , Questar Gas purchased the remainder of its gas
supply from multiple third parties under index-based or fixed-price
contracts. Questar Gas has commitments to purchase gas for $24.6
million in 2018, $17.6 million in2019, $17.0 million in2020,
$17.2 million in2021 and $10.0 million in2022 based on forward
market prices. Generally, at the conclusion ofthe heating season
and after a bid process, new agreements for the next heating
season are put in place. Questar Gas bought natural gas under
third-parly purchase agreements amounting to $125.5 million in
2017 , $102.0 million in 2016, and $82.4 million in 201 5.
In addition, Questar Gas stores gas during off-peak periods
(typically during the summer) and withdraws gas from storage to
meet peak gas demand (typically in the winter). Questar Gas has
contracted for transportation and underground storage services
with Dominion Energy Questar Pipeline. Annual payments for
these services are expected to amount to $67.8 million in 2018,
$58.0 million in2019, $55.3 million in2020, $54.6 million in
2021, and $51.4 million n2022. Questar Gas has third-party
transportation and gathering commitments requiring yearly
payments of $36.3 million in 2018 afi2019, $35.5 million in
2020, $33.0 million in202l, and $32.3 million in 2022.
Norr 18. Cnporr Rrsr
Credit risk is the risk offinancial loss ifcounterparties fail to
perform their contractual obligations. In order to minimize
over-all credit risk, credit policies are maintained, including
requiring customer deposits and the evaluation of counterparty
financial condition. In addition, counterparties may make
available collateral, including letters ofcredit or cash held as
margin depos-its, as a result ofexceeding agreed-upon credit
limits, or may be required to prepay the transaction.
Questar Gas maintains a provision for credit losses based
on factors surrounding the credit risk of its customers,
historical trends and other information. Management believes,
based on credit policies and the December 31,2017 provision
for credit losses, that it is unlikely that a material adverse
effect on financial position, results of operations or cash flows
would occur as a result ofcounterparty nonperformance.
Norr 19. RnlarnD-PARTy TnaNslcrroNs
Questar Gas engages in related party-transactions primarily with
affiliates Wexpro, for cost-of-service natural gas supply, and
Dominion Energy Questar Pipeline, for transportation and stor-
age services. See Notes 2 and 77 for more details. Questar Gas'
receivables and payables balances with affiliates are settled
based on contractual terms or on a monthiy basis, depending on
the nature ofthe underlying transactions. A discussion of
significant related party transactions follows.
Questar Gas participates in certain Dominion Energy
benefit plans as discussed in Note 16.
Dominion Energy Questar and other affiliates provide
accounting, legal, finance and certain administrative and
technical services to Questar Gas. These costs are included in
other oper-ations and maintenance in the Statements of Income
The admin-istrative charges are generally allocated based on
each affiliated company's proportional share ofrevenues less
product costs; property, plant and equipment; and labor costs.
Management believes that the allocation method is reasonable.
Questar Gas provides certain services to related parties,
including technical services. The billed amounts of these
services are allocated based on the specific nature ofthe
charges. Management believes that the allocation methods are
reasonable. The amounts of these services follow:
Year Ended December 31 2017 2016 2015
(millions)
Transportation and storage services from
affiliates(1)
Services provided by related parties
Services provided to related parties
$73.7
50.2
6.0
$ 72.9
65.0
3.2
$ 73.0
55.7
6.7
(1) The costs ofthese services were included in purchased gas in
Questar Gas' Statements of Income.
The Dominion Energy Questar Combination resulted in
merger and restructuring costs of $9.8 million and $13.8 charged
from Dominion Energy Questar for the years ended December 31,
2017 ar,d 2016, respectively. There were no merger and
restructuring costs for the year ended December 3 1, 2015. These
costs primarily consist of employee related costs allocated to
Questar Gas and are included in other operations and maintenance
in Questar Gas' Statements of Income.
Questar Gas' borrowings under the IRCA with Dominion
Energy totaled $75.0 million and $48.0 million as of
December 3 l, 2017 and 2016, respectively. The weighted-average
interest rate for these borrowing was l.53Yo and 1.04%o at
December 3 l, 20 17 and 20 | 6, respectively. Interest charges
related to Questar Gas' total borrowings from Dominion Energy
and Dominion Energy Questar totaled $0.2 million and
$ 1.3 million for the years ended December 3 l, 2017 and
2016, respectively, and were immaterial for 2015.
Norn 20. OprnarrNc SEGMENT
The Corporate and Other Segment primwily includes specific
items attributable to Questar Gas' operating segment that are not
inciuded-ih profit measures evaliiated by executive management in - -
assessing the segment's performance or in allocating resources.
The net expense for specific items, primarily related to trans-
action costs associated with the Dominion Energy Questar
31
Notes to Financial Statements, Continued
(millions)
2017
Operating revenue
Depreciation and amortization
lnterest income
lnterest and related charges
lncome taxes
Net income (loss)
Capital expendltures
Total assets (billions)
Combination, totaled $14.5 million ($11.9 million after-tax)
and $15.9 million ($9.6 million after-tax), in2017 and2016
respectively. These costs primarily consist of employee related
costs incurred at or allocated to Questar Gas and are included
in other operations and maintenance in Questar Gas'
Statements of Income.
The following table presents segment information
pertaining to Questar Gas' operations:
Year Ended December 31
Gas Corporate Consolidated
lnfrastructure and Other Totat
Questar Gas' 2017 results include the impact of the
following signifi cant item:
Second quarter results include a $6.9 million after-tax
charge for transaction costs associated with the Dominion
Energy Questar Combination.
Questar Gas' 2016 results include the impact of the
following sigrifi cant item:
Third quarter results include a $7.7 million after-tax
charge for transaction costs associated with the
Dominion Energy Questar Combination.
Norrc 22. SUppT,BMENTAL Orr.aNo Gas
INronuarroN (UNAUDTTED)
The following information is provided with respect to estimated
natural gas reserves, which are managed, developed and delivered
by Wexpro at cost-of-service pursuant to the Wexpro Agreement.
The estimates of proved gas reserves rvere prepared by Wexpro's
reservoir engineers. Gas reserve estimates are subject to numerous
uncertainties inherent in estimating quantities ofproved reserves,
projecting fufure rates or production and timing of development
expenditures. The accuracy ofthese estimates depends on the
quality ofavailable data and on engineering and geological inter-
pretation and judgment. Reserve estimates are imprecise and will
change as additional information becomes available. Geological
and engineering data demonshate with reasonable certainty that
these quantities are recoverable under existing economic and
operating conditions. Since the gas reserves operated by Wexpro
are delivered to Questar Gas at cost-of-service, SEC guidelines
with respect to standard economic assumptions are not applicable.
The SEC anticipated this potential difficulty and provides that
companies may give appropriate recognition to differences
because ofthe effect ofthe ratemaking process. Accordingly,
Wexpro uses a minimum-producing rate or maximum well-life
limit to determine the ultimate quantity of gas reserves.
Proved Reserves Natural Gas
(bc0
Balance at December 31, 2017
Balance at December 31,2016
Balance at December 31 2015
$947.0
70.3
0.6
34.5
49.1
79.4
215.7
2.7
(2.6)
(1 1.9)
$947.0
70.3
0.6
34.5
46.5
67.5
215.7
2.7
$
20't6
Operating revenue
Depreciation and amortization
lnterest income
lnterest and related charges
lncome taxes
Net income (loss)
Capital expenditures
Total assets (billions)
$921.3
61.0
0.3
30.2
43.4
66.8
240.4
2.5
c $921.3
61.0
0.3
30.2
37.1
57.2
240.4
2.5
(;
(e.6)
2015
Operating revenue
Depreciation and amortization
Interest income
lnterest and related charges
lncome taxes
Net income
Capital expenditures
$917.6
53. I
1.2
28.3
34.8
64.3
217.4
$917.6
55.1
1.2
28.3
34.8
64.3
217.4
$
Noru 21. QuanrERLy f,'TNANCIAL Dara
(uNauonon)
A summary of Questar Gas' quarterly results of operations for
the years ended December 31, 2017 and 2016 follows.
Amounts reflect all adjustments necessary in the opinion of
management for a fair statement of the results for the interim
periods. Results for interim periods may fluctuate as a result of
weather con-ditions, changes in rates and other factors.
429.5
469.8
522.4
First Second Third
Quarter Quarter
Fourth
QuarterQuarter
(millions)
2017
Operating revenue
lncome (loss) from operations
Net income (loss)
2016
Operating revenue
lncome (loss) from operations
Net income (loss)
$407.9 $128.283.4 3.8
--47.6 - (16)
$ 87.S $297.3(1e.8) 53.3(17.7) 28:9-
$396.9
91.9
52.2
$139.7
(2.5)
(6.2)
$ 90.9
(6.6)
(8.5)
$319.5
61.5
30.0