Good morning, ladies and gentlemen, and welcome to Dominion's Second Quarter Earnings Conference Call. We now have Mr. Tom Farrell, Dominion's Chief Executive Officer, and other members of management in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of management's prepared remarks, we will open the floor for questions. At that time, instructions will be given as the procedure to follow should you want to ask a question. I will now turn the call over to Laura Kottkamp, Director of Investor Relations.

Good morning, and welcome to Dominion's second quarter earnings conference call. During this call, we will refer to certain schedules included in this morning's earnings release and pages from our second quarter 2008 earnings release kit. Schedules in the earnings release kit are intended to answer the more detailed discreet questions pertaining to operating statistics and accounting. Investor Relations will be available after the call for any clarification of these schedules. While we encourage you to call with questions in the time permitted after our prepared remarks, we ask that you, you use the time to address questions of a strategic nature or those related to third quarter 2008 guidance. If you have not done so, I encourage you to visit our website, register for email alerts and view our second quarter 2008 earnings documents. Our website address is www.dom.com/investors. The earnings release and other matters that will be discussed on the call today may contain forward-looking statements and estimates that are subject to various risks and uncertainties. Please refer to our SEC filings including our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q for a discussion of factors that may cause results to differ from management's projections, forecasts, estimates and expectations. Also on this call, we will discuss some measures about our company's performance that differ from those recognized by GAAP. Those measures include operating earnings before interest and tax commonly referred to as EBIT. Reconciliations of such measures to the most directly comparable GAAP financial measures we're able to calculate and report are contained in our earnings release kit. I'll now turn the call over to our CFO, Tom Chewning. Tom?

Thank you, Laura, and good morning everyone. After I give you an overview of second quarter results and third quarter operating earnings guidance, each of our business unit heads will review second quarter performance and discuss what they foresee for the third quarter. Following that, our CEO, Tom Farrell, will comment on several key accomplishments and other items of current interest. We'll then be happy to answer your questions. Dominion recorded GAAP earnings of $0.51 per share and operating earnings of $0.50 per share for the second quarter of 2008. You will recall that in the first quarter we made adjustments for weather and certain tax items, which lowered our operating earnings about $0.03 per share. We made these adjustments to provide a clear comparison of actual performance to quarterly guidance. This morning, we'll do the same for the second quarter. Adjusting for weather help, storm damage and negative tax items results in operating income of $0.52 per share for the quarter, at the top end of our guidance range a $0.47 to $0.52 per share. As seen on our schedule of these adjustments on Dominion's Investor Relations website under supplemental schedules, electric utility weather added $0.01 per share to earnings as a result of cooling degree days that were above their historic average, but abnormally higher storm restoration expenses cost us $0.02 per share. Additionally, our consolidated effective income tax rate was higher than our guidance. The variance was driven primarily by certain state tax impacts. Had our effective tax rate been 37% as expected, earnings would have been higher by approximately $10 million or $0.02 a share. Looking ahead to the third quarter, Dominion expects operating earnings in the range of $0.87 to $0.92 per share. This compares to operating earnings of $0.86 per share in the third…

Thank you, Tom. Dominion Virginia Power produced second quarter EBIT of $165 million, just outside the guidance range of $166 million to $178 million as shown on page 33 of our earnings release kit. Severe storm activity drove up O&M expenses by $17 million. This hurt was partially offset by the Dominion Retail's positive financial performance. Our regular electric transmission and distribution businesses faced significant operating challenges in the second quarter. Statistics on lightening strikes, wind speeds and tornado activity confirm that portions of our services territory experienced unusually high levels of extreme weather. Transmission lines were torn down and distribution facilities sustained hurricane type damage in several areas. Northern Virginia was hit pretty particularly hard experiencing six severe storms in 17 days during June. Despite the extraordinary level of high risk situations our employees have exposed to during storm restoration, we continue to see improvement in our safety performance in the second quarter 2008 as compared to 2007. Year-to-date, those recordable incident rates are down from 2.4 to 1.8. This is the number of incidents for 100 employees per year. This quarter we announced our Virginia energy conservation plan, which is expected to produce sizable environmental benefits and cost savings to our customers. A key component of the plan is investment for approximately $600 million in smart grid technologies that will enable energy to be delivered more efficiently to our customers as well as provide improvements in service reliability. Looking to third quarter guidance shown on page 40 of our earnings release kit, we expect to produce EBIT in the range of $173 million to 188... $189 million. Our expectation is lower than the EBIT produced in the third quarter of last year, primarily due to return to normal weather and our O&M expenses attributable to target investments and reliability in the 2008 energy conservation demand side management pilot. I will now turn the call over Paul Koonce. Paul?

Thanks, Dave. Energy’s second quarter EBIT of $150 million was toward the high end of our guidance of $137 million to $159 million, mainly driven higher natural gas liquids margins at Transmission and better than expected non-traditional sales at Dominion East Ohio. But we did not meet our margin expectations at producer services. This segment remains poised to capture low risk market opportunities related to its storage and transportation capacity. 2008 is setting up similar to last year for producer services, with most of the transportation of storage value realized during the transition from summer to winter season. Energy safety performance is not keeping pace with the general reduction in OSHA recordables we are seeing elsewhere at Dominion. This is our busiest summer ever at Transmission, EMP and Distribution, but even when adjusting for man-hours, OSHA incident rates are up. Year-to-date our OSHA incident rate is 2.7 versus 2.64 year-to-date 2007. While these are predominately first state incidents not resulting in lost term, we are nevertheless taking a number of steps to further highlight safety. Operationally, we experience a 10% quarter-over-quarter increase of industrial throughput at Dominion East Ohio, due to increased steel [ph] and refining operations in our service territory. We are also on pace of have installed over 350,000 automotive meters by year-end. When this program is complete, it will improve customer service and eliminate the need for estimated bills. We began installation last year, and we've had excellent implementation today. At E&P, production is at 14% quarter-over-quarter excluding royalty interest production, and we've drilled a 109 new wells this quarter versus a 103 wells for the same quarter of last year. As part of this year’s drilling program, we have drilled five verticals Marcellus wells in Pennsylvania with good success. These Marcellus wells were drilled in order…

Thank you, Paul. Dominion Generation produced strong second quarter results with earnings before interest and taxes, EBIT, of $397 million. These results were $12 million better or 3% above the high end of our guidance range and $195 million above the second quarter of 2007. Even removing the positive effects of above normal weather in our utility service area, Generation results would still be at the top of our guidance range. The major drivers of these results were, the return to full recovery of fuel in Virginia, stronger wholesale revenues and other margins in our regulative utility service territory, and increased margins at our merchant fleet. Operational performance for our utility fossil fleet was excellent with the lowest second quarter equivalent forced outage rate in three years at 5%. Our nuclear performance was mixed with a 97.3% capacity factor excluding refueling outages and a record-setting planned refueling outage at Surry Unit 2. However, our nuclear merchant fleet's planned outages ran 12 days longer than anticipated. We're very pleased that even with these extended outage days we were able to exceed our earnings guidance range. In addition to our financial results, I would like to discuss four other key items impacting Generation business since our last call. First, Generation safety performance continues to be excellent with our second quarter 2008 OSHA recordable incident rate for our nuclear, fossil and hydro operations coming in at 0.24 and 0.79 respectively. Our Millstone and Surry stations were recertified to voluntary protection program star status and remain the only fully certified fleet in the industry. Second, new hedging disclosure for our merchant fleet. As you can see on page 48 of our earnings release kit, we have increased our North East base load hedge percentages in 2009 to approximately 90%, which reflects an average hedge…

Good morning. We had an extremely active second quarter in carrying out our strategic plans. In our first quarter call, I reviewed a number of significant state and FERC regulated projects that were awaiting regulatory actions. I am pleased to report to you today that most of those approvals have now been received. As important as individual projects are in their own right, the role in collectively positioning us to achieve our overall growth in operating earnings per share of at least 6% annually is equally as important. We keep a very close eye on meeting the targets in the growth plan we outlined for you fairly last fall. Today, I will give you an update on the substantial progress we made during the second quarter, and what lies ahead. As you know, we faced a projected shortfall of 4000 megawatts in our regulated Virginia service territory. We continue to work to bring new generation in transmission capacity into service as economically and quickly as possible. New transmission lines to transport the additional megawatts and maintain reliability within the congested areas of our state are vital. These lines are not always easy to sight or construct. We are pursuing about a dozen projects in Virginia, two of which are new 500-kV lines. I am pleased to report that since our last call the Virginia State Corporation Commission Hearing Examiner has recommended approval above of those 500 kV lines. In May, the Carson to Suffolk line – in just this past Monday the key Meadowbrook to Loudoun line to serve the Washington DC suburbs. The Meadowbrook line is the final segment of alignment extends from Pennsylvania through West Virginia known as TrAILCo. Those two segments are still under regulatory review and the recommended approval in Virginia for the Meadowbrook line is…

Thank you. [Operators Instructions]. Our first question comes from Paul Fremont with Jefferies. Sir, please go ahead.

Thank you very much. With respect to the change in guidance next year, you guys have said that it relates to Marcellus. Should we assume that it includes some disposition of the remaining properties or is the $0.05 revision related only to the Antero sale?

Paul, it’s Tom Chewning. In – I don’t want to isolate that one factor too much. We do have a range of Marcellus from where we are now to a greater amount, but we also have some other changes that go plus and minus. So the answer is we have many assumptions and we have a low end of the Marcellus assumption and a high end. Obviously, when you start to pick a new number for the low end you get real serious because you want to make sure you don't go below that and the upper end would indicate probably and logically that there would be more Marcellus Shales.

And as a follow-up on the Marcellus, when would... you’ve got a royalty interest range that I guess is part of your arrangement with Antero. When would you expect to begin to receive payment under those wells or under that royalty arrangement?

Paul, this is Paul Koonce. The agreement has been reached. Antero is going through and doing a bit of due diligence. We expect that transaction to close in September. Antero is making plans to move rigs into the areas. So they will begin drilling we believe immediately, and as soon as they begin production we will begin receiving the proceeds on the royalty portion.

So would that be in '09 or '10 or-?

Certainly, we expect that we’ll begin receiving proceeds as early as '09 and that's going to be a function of how quickly Antero gets their equipment and manpower onsite and comment drilling, which again we believe is going to be before the end of this year.

Thank you very much.

Thank you for your question. [Operator Instruction]. Our next question comes from Jonathan Arnold with Merrill Lynch.

Good morning, guys.

Good morning, Jon

I had a couple of thing. You obviously disclosed hedging on the Generation portfolio for 2010, and I believe what you doing is just disclosing the hedged position, but that… it wasn't necessarily entered into during the second quarter. Could you confirm that that is accurate and then maybe comment a bit on what kind of time frame… when you… when those hedges were put on and how you related to where market is today?

Jonathan, it's Mark McGettrick. The hedge percentage I quoted was the actual percentages where we stand today. If you look at it versus the pervious tables, we have increased our hedge percentages at Millstone in '09 by about 6% and at the Northeast coal units about 9% in '09 and about 8% in 2010 from our pervious disclosure, all in the second quarter.

Okay. But the 2010 hedges, where you’re giving us pricing for the first time, that was… I guess we have the historical percentages, it is about... in former disclosure?

That's correct.

Okay. And then I just have one thing on… when I look at the quarter you have… you seem to have missed the contracted EBITDA number, I guess largely [inaudible] and you mentioned that you would run over on your outaged, thinking about what just mainly the factor. But then within Generation that seem to offset by a really big upside versus guidance at the other line right below DD&A, it’s on page 35. Can you explain what on that... in the utility that was not in any of those specific categories?

Yes, Jonathan. First, you’re right, on the [inaudible] assets our Millstone outage ran over, so that’s why we are outside at the lower end of that range there. In terms of the other category in Virginia, that's a combination of areas. It includes FTR’s ancillaries and capacity expenses that were all favorable to our guidance range. We saw a high degree of congestion in our region during the quarter, and we also had our units operated at a fairly high level in respond to ancillary service revenues. So that was much higher than what we anticipated in our original guidance when put it out a quarter ago.

Okay, thank you. And just one other thing related to Marcellus site, I know some of the other players have been having issues related to water permits and the like. Can you just help us understand where you stand on that issue and anything to think about there in terms of timing around getting this moving?

Yes. This is Paul. We have drilled fast vertical Marcellus wells. They don't require quite the same degree of water that a horizontal well requires. We've had these discussions with Antero. They've got some new thoughts about how they're going to deal with water, which we think are very creative, and we're looking forward to working with them in the basin to bring about adequate water. We don't see it as an issue, certainly not in West Virginia and certainly not in the Pennsylvania areas where this acreage is involved. So, we don't see it as an issue, they don't see it as an issue, and as I said we're looking forward to there getting equipment on the ground so that we can help them get their drilling started.

Can you give a bit more color on what you mean by creative ways of handling water, and how critical is the success of that… of what you just said?

I think I would refer you to Antero. It's their technology and their work process, and I think it's probably best that you pursue that question with them.

All right. Thanks very much, guys.

Thank you.

Thank you for your question, sir. [Operator Instructions]. Our next question comes from Hugh Wynne with Sanford Bernstein. Please go ahead.

Good morning. I just wanted to follow up on the issue of liquidity in the quarter. I'm looking at your cash flow statement for the second quarter, and I notice that the net cash provided by operating activities of 528 is actually lower than the net cash you're generated in the first quarter of 551, seemingly implying that second quarter did not contribute to net cash?

Well, I think that if you take a look before working capital changes, that's not true. When we take a look at three large working capital items to of which deal with margin requirements, which were posted, which obviously drew down some of our liquidity, also we had tax payments related… state and federal tax payments related to the… some of the sale of their properties from last year that weren’t made to that quarter. And I think third, we... you’ve got to help me here… deferred fuel was… our agreement last year on our fuel cost was to cap the amount of the recovery of the ‘07 fuel factor. And so… in fact you're right that it didn't produce as much as when you consider those items that our normal operations did produce.

Yes… no, I appreciate that and I appreciate these three large items, I just wanted to make sure that I understood exactly what's going on. And let me just please… let me just quickly tell you what I think has happened and perhaps you can just me correct if I’m wrong. I understand on the margin deposit and liabilities, let’s see, about $590 million, this was your forward sale of electricity at prices below market. As the market price rose the valuable of that obligation rose and you had to put up margin and that ate cash there, is the right?

It’s total electric and gas. Yes, it's held positions. I wouldn't say they were contracts with third parties, but they were market contracts. It's our normal mark-to-market--.

In a rising environment where gas prices and power prices are going up and your position is becoming more and more expensive to fulfill.

It is, however I think if you’ve noticed in our remarks about our liquidity, at this point we’re back to $2.4 billion in liquidity as of yesterday afternoon, which shows the impact of the new credit facility, but also over $0.5 billion has come back to us from declining positions. In addition of that, the two other points you just... I can tell you that the thing that I would lose most sleep over is if I didn't think we had an appropriate liquidity position. But in addition to the markets coming down and additional facility, we've changed the underlying margin requirements under most of our contracts. So if prices go up again, we are not compelled to put up as much over margin requirement as we did on those contracts before.

Okay, that's good. The deferred fuel is just incomplete recovery of your power generation costs in Virginia?

Yes, the fuel costs are because we had an agreement last year, I believe we were limited to 4.5%... 4% recovery during the year. So that shows up and will continue to show up until we collect it in the future.

And you had a nice positive inflow from deferred income taxes equal to almost a third of your net income. Is this something that you would expect to be a continuing positive flow of cash for you at more or less this rate or is there anything about the first half that's that normal?

Hey, this is Tom Farrell. That levels that we experienced in the first half of the year was probably a little bit higher than what we would experience going forward, but we are building a deferred tax balance. So we are going to have positive cash flow from that. But that I think $300 million just so is the higher run rate than you normally see.

Okay. And then just the last one is the prepayments, but what is behind the outlook for prepayments?

The prepayments there is just the way that we manage our quarterly tax liability, and to stay within the Safe Harbors of winning tax penalties, we've paid a little bit ahead on our federal income tax that we project to be our tax liability and that will work its way out through the balance of the year, so that as we approach year-end we will have smaller payments.

Great.

That's really a cash outflow that you would not be referring the balance of the year.

Great. Thanks for your patience, and I appreciate the detailed responses.

Thank you, Hugh.

Thank you for your question, sir. [Operator Instructions]. Our next question comes from Steve Fleishman [ph] with Catapult. Please go ahead.

Hi, gentlemen. Couple of clarifying questions. First on the 2009 guidance, just to clarify, if you lets say had another similar sale to Antero tomorrow, something like that might... is already incorporated in some way into that range?

Yes. It's a pretty wide at range, so we've got to be careful in the bottom end of that, but as I had said before I think the upper end of that we’ll probably see more.

And you did mention, Tom, that obviously when you updated is there some things that got better, which I think you said on Marcellus and Generation, but maybe some things that I also got… had some pressures, any flavor on what some of the pressures are? Is it just kind of cost inflation type of thing?

It's more maybe some additional CapEx expenditures in which we have more interesting expense, and that's what we think, nothing that stands out as a sort of big number, but there’s always a lot of pluses and minuses from what we do. We just try to capture the big ones, but… nothing alarming, but I think the market has that every time you give guidance nothing positive happens that they just add it to both ends of the guidance. And I just want to remind everybody that if you run a business with as many moving parts as we do, you make a lot of assumptions and not all of them run up. One thing has been declining commodity prices since we first gave those numbers so that that is not uplift in this poor gas.

Yes. And then one other question for Mark on... one of you just give us an update on how you are dealing with coal, just delivery supply and particularly your merchant generation, is everything going okay there and also what your thought is on where the dark spread is right now, would you even want to hedge any of your generation in knowing then at this point has the dark spread really contracted there?

Steve, we… on the coal delivery side, we don't have any issues there at all whether it be international or domestic or supply, both for [inaudible] and the merchant is fine. In terms of the dark spread, we did lay about 8% of our coal supply in corresponding hedges in the second quarter and we got pretty favorable pricing on that. So as people are looking at these very, very high Central App and international coal prices, they’re moving around dramatically. For example, just in the last three weeks they dropped $20. And so, the signal you out there on a spot price isn't necessarily what might be reflective by certain vendors that might take a year or two contract from you. So we are going to be very selective on how we lock coal in and lock power at the same time, but we did in the last several months to get some we think attractive margins, locking in new supplies of coal and energy for ordinary [ph] units in 2010 and we are continuing to look for that.

Okay, great. Thanks, guys.

Thank you for your question, sir. Our next question comes from Jonathan Arnold with Merrill Lynch. Please go ahead.

It’s only a follow-up, guys. I just wanted to ask on… if there is any... do you have any kind of broad update of the CapEx numbers that you have most recently laid out? Where should we look for the most recent ones? I'm not sure if you have disclosed any in any of the schedules on the web today, I haven't seen them?

Jonathan, you… the most recent CapEx is with our most recent presentation or in the IR reference book. We haven't updated that since the beginning of the year. Right now that CapEx plan kind of supports our earnings outlook. And so we wouldn't update that without updating our complete model, where we’re just... it’s not in our interest to kind of update specific line items without doing a comprehensive update, so the earliest you would see any update on CapEx is the fall.

But did I hear Tom Chewning correctly that there is some upward movement on the CapEx, in aggregate?

There is the potential for that, Jonathan, on incremental projects we have, particularly in the wind area, because we found more opportunities there and that's… the reason we haven’t updated that is because until we really identify specific projects we don't just roll in capital, but that doesn't mean… into an exhibit… but that doesn't mean that internally when we take a look at guidance we don't take that into account in terms of the need to borrow money, etcetera. So there are a lot of… I don't want you guys to think that we believe for a second that we capture everything about next year in these models, but we do a lot of range calculations and some of them involve less capital and some of them involve more capital, but then we come out as we always do in the beginning of the next year and give you a plan that we feel we will follow and I think the work we’ve done this year is that we’ve followed our CapEx budget pretty carefully. But not every line item has been followed in the same way that we created. We’ve managed our CapEx to the numbers that involve we needed to do it for the year.

Okay, thank you.

Thank you.

Thank you for your questions, sir. We have now reached the end of our allotted time. Mr. Chewning, do you have any closing remarks?

Yes. I'd just like to thank all of you, ladies and, gentlemen who've been in the call this morning and remind you that our 10-Q will be filed latter today and our next earnings release is scheduled for Thursday, October the 30th. We wish you an enjoyable remainder of the summer. Good day.