Good morning and welcome to Dominion's second quarter earnings conference call. On the call today we have Tom Farrell, CEO; and other members of senior management.

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 earnings release kit. Schedules in the earnings release are intended to answer the more detailed 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 use the time to address questions of a strategic nature or those related to third quarter 2009 guidance or 2010 outlook. If you have not done so, I encourage you to visit our Web site, register for e-mail alert and view our second quarter 2009 earnings documents. Our Web site is www.dom.com/investors. In addition to the earnings release, we also have added a slide presentation that will guide this morning's discussion that can be accessed through our Web site. And now, for the usual cautionary language. 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 the most recent annual report on Form 10-K and our 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 our third quarter and full year 2009 operating earnings guidance and our outlook for 2010, as well as operating earnings before interest and tax, commonly referred to as EBIT. Reconciliation of such measures to the most directly comparable GAAP financial measures we are able to calculate and report are contained in our earnings release kit. I will now turn the call over to our Chief Financial Officer, Mark McGettrick.

Thank you, Greg, and good morning everyone. Joining me on the call this morning is our CEO Tom Farrell; and recently appointed heads of our principal business units, Dave Christian from Dominion Generation; Gary Sypolt from Dominion Energy; and Paul Koonce, who moved from Dominion Energy to lead Dominion Virginia Power. Tom Farrell will update you on regulatory proceedings and other operational and strategic issues following my overview of second quarter financial results, third quarter operating earnings guidance, and our revised outlook for 2010. We will then be happy to answer your questions. Dominion had a strong second quarter. Operating earnings were $0.68 per share, $0.02 above the upper end of our quarterly guidance range. We were also able to add to our 2010 hedge positions at levels that support our operating earnings outlook. In addition, we added to our 2011 Millstone and natural gas production hedge positions, which is consistent with our stated strategy of averaging in hedges for these assets over time. We have also completed nearly all of our 2009 financing needs with several successful transactions last quarter. You can find a complete reconciliation of operating earnings compared to quarterly guidance on pages 33 to 39 of the earnings release kit. GAAP earnings were $0.76 per share for the second quarter. The major difference between GAAP and operating earnings was related to a downward revision in our nuclear decommissioning asset retirement obligation for Millstone Unit One. A reconciliation of GAAP to operating earnings can be found on Schedules 2 and 3 of the earnings release kit. Now I'll review the second quarter operating results for our individual business units. The details of these results are also included in your earnings release kit. I'll begin with Dominion Virginia Power. Second quarter 2009 EBIT for Dominion Virginia Power was…

Good morning, everyone and thank you for joining us. As I have done in our previous calls, I will begin with a brief update on our safety and operational performance. Safety has been and will continue to be one of our core values. I am pleased to report that across every one of our business units, measures of safety performance improved in the second quarter over the prior quarter and over the same period last year. Dominion includes operational excellence as another core value. During the second quarter, our nuclear fleet achieved a net capacity factor, excluding refueling outages, of 100%. We completed a refueling outage at Suri Unit One in 23 days, a station and fleet record. As of July 3rd, Millstone Unit Two had been online for 368 days when it had to shut down to repair a small leak in the reactor cooling system. It returned to service last week. We still expect our nuclear fleet to meet its full year operational expectations. Operations at our coal and combined cycle merchant plants were also excellent during the quarter, with an equivalent forced outage rate of 3.9%. Dominion Energy also had a strong quarter. On April 1, Dominion Transmission began providing storage service from its 4.4 Bcf USA storage project and placed the Cove Point expansion project into commercial service. DTI achieved a year-to-date reliability rate of 99.8% at its Hastings extraction plant and delivered 7% more wet gas volume this second quarter compared to the same quarter last year. Our E&P team drilled 103 wells in the second quarter and 165 wells in the first half of the year, without a single dry hole. Well costs have declined 15% this year and are down about 25% since this time last year. Our second quarter 2009 lifting costs…

(Operator instructions). Our first question comes from Hugh Wynne with Sanford Bernstein.

Good morning, Wayne.

Good morning. Wonder if you could help me understand a little bit the premises for the 2010 revised guidance. I understand that we're cutting the earnings growth outlook from 4% to 6% to 0% to 3%, partly reflecting the expected outcome of the Dutco [ph] rate case, partly reflecting the level of gas prices. You're assuming $6.75 gas to $7.25 gas if I heard you correctly. And I also understand from your disclosures that you are about 60% hedged with respect to your power sales in New England. So I guess the first part of my question is why this relatively high expected gas price, let's say $7 on average, relative to the forward strip of $6? And then secondly, if you perhaps could elaborate a little bit on the expected impact of the Dutco rate case on the earnings outlook for next year?

Hugh, this is Mark. Let me take first part of that. In terms of the commodity price outlook, even in the second quarter of this year, gas prices approached the bottom of our range and bumped up on the $6.75. And we were able to take advantage of that both on coal and gas and a few Millstone hedges. We mentioned a number of times that we protected ourselves on the front end of 2010. And so based on the production information we see out there, we think it's still a reasonable assumption that gas could get into $6.75 to $7.25 range next year. Now granted, that may occur later in the year than what we originally thought and that's why we've been protecting ourselves on the front end. But we still believe that $6.75 to $7.25 is going to occur in 2010. And if it does so that our open positions at the end of next year will take advantage of that. As far as the rate case, we considered the rate case, we considered commodity prices, and we considered what our view was on financing cost next year and what our opportunities might be on expense costs. And in aggregate, we decided it was prudent at this time to adjust our range. Even though as I said in the text, it is certainly possible we could still reach the old range depending what the outcome is along all those lines. On the rate case, our range assumes a range of potential outcomes from the regulatory proceeding, which we don't know exactly what they will be, but we tried to reflect orders to-date in a range and what we think are reasonable outcomes going forward. We also mentioned 0% to 3% in terms of growth rate, that really is going to depend on where we come in this year, so I don't know how your math worked, but that growth rate again could be higher than that depending on what the final orders look like, what final commodity prices look like, and where we finish in our range for 2010.

Thanks Mark. And then I guess just to finish it off, if we do see gas prices in the second half of next year that are closer to the forward curve, the sensitivity that we should be, which is about $1 below your estimate -- sensitivity we should be using is this one on page 10 that earnings might be then $0.11 lower in 2010 for every $1 that the gas price is below this $6.75 to $7.25 range?

Yes, I think if you look at that and as a single item which again we encourage everybody to look at it's a whole basket of opportunity that we have. But if you look at just the commodity price, I think it would be a fair assumption that if it's where it stands today, we would be at the lower end, and if it approaches the $6.75 to $7.25, we would be at the upper end.

Great. Thank you very much.

Thank you. I think we're a little bit more hedged than you listed there, Hugh, but it's all in the hedging slide on some of the assets.

Thank you. Our next question comes from Paul Patterson with Glenrock Associates.

Good morning, Paul.

Good morning. Just on the coal arbitrage that you mentioned being able to buy power and stockpile cheap coal, what's the financial impact of that in '09 and '010? I'm sorry if I missed that.

The financial impact in 2009 is immaterial. Paul, what we've been able to do is 24/7 prices at NEPOOL in the second quarter have been running in the $30 to $35 range, well below what our dispatch cost is for some of our marginal coal plants, namely at Salem. And so what we've done is we've been able to cover our hedges out of Salem and be able to bank coal to move it in 2010. This is a very low priced coal, and also to shift some deliveries from '09 to '010 as well. So the impact on '09 is immaterial, and on '010 what is allows us to do is to affect margins and dark spreads in the range of the $6.75 to $7.25 that we mentioned previously.

Okay. So I guess I mean that goes back to Hugh's question. I'm trying to get a sense as to how much this coal arbitrage is helping out in 2010 on a dollar basis?

We're not going to give a dollar figure for our coal margins, and we never have before. What I would encourage you to look at again is that as we made these hedges our statement was they supported our outlook of $6.75 to $7.25, so that's consistent with what our range would be. And the open positions are really just what our exposure is left.

Okay. Then just on rate case, I know you guys increased the ROE expectation there because of the higher leverage and I was just wondering what other factors might have -- I mean, I realize that you decreased it by $40 million, but it would seem to me that maybe there are other factors that could be influencing the revised filing to bring it in at $250 million. Could you give us a little bit more flavor? I would assume maybe $10 million of that is from the transmission. Are there any large components that are driving that?

Paul, you hit two of the three. The third one was the bad debt exposure gone up a little bit. I think its $6 million number in that range that we also added to update the case. It's those three components that put you to $250 million from what had been just about I think it was $287 million or number like that, just below $290 million.

Right. The Bear Garden, some of the staff was suggesting that part of that go into base rates. That is not in this filing; correct?

That's correct. I think that position is untenable. But we will file shortly another document that says if it turns out that's correct, which like I said, we don't believe it is, then we'll transfer those funds, that recovery just to the base rate case. It won't make any difference overall in what happens, I mean, the staff testimony says it should be recovering base rates instead of the rider. We think it's more appropriately recovered in the rider.

Just finally, the ARO benefit, what happened there?

ARO is the calculated benefit for the decommissioning trust in terms of liability expense, and periodically companies update that based on best estimates today, structure of decommissioning going forward, and I guess we're a little fortunate there, Paul, is that Unit One at Millstone is in the early stages of decommissioning. So we have much better actual cost on what it may cost going forward and probably are a little further along than some other companies in terms of plans on decommissioning. So we update our cost estimates and took a one-time reduction below the line to reflect what we think are the current expected costs to finish decommissioning for Unit One.

Okay. Great. Thanks a lot, guys.

Thank you.

Thank you. Our next question comes from Andrew Wessel [ph] with Macquarie Capital.

Hi, good morning. Another question on the hedging activity. You mentioned that you expect downward pressure on natural gas in the near-term. We agree with that view. So I understand that the 2010 hedges are weighted toward the first half of the year. But if that's the case, why not add more hedges for 2009? If you expect a recovery around mid-year 2010, why add hedges on 2011 output now? How would you describe your view on gas in 2011?

Well, first, in 2009 we're almost completely hedged anyway for the rest of the year for our assets. We have a small open position at Millstone but we're comfortable, that's about as far as we want to go for hedging. In terms of 2011, we did put some hedges in recently for 2011, and it really goes back to we're not a big risk taker here. We're going to average in our hedges and not keep huge open positions going into any calendar year. We typically have done that over a three year period and we're going to continue with that philosophy. Now depending what our view is it might be a little slower or a little quicker depending on where we're going into a year. But we felt the positions we had in 2011, we wanted to start closing those and we thought the hedge price we had out there, which I think the average is about $72 on power as you look at what we put in place are fair on averaging basis. Our view that gas price is going to rise, it's just do nothing but increase that price in terms of the average basis as we go forward. But it's really the risk profile that we want. We want to balance that and average in over time.

Okay. Great. And then just one last question on the 2010 guidance. You mentioned operating expense control; can you elaborate or quantify some of the key moving parts there relative to your previous expectations?

We will get into the details of the operating expense and our other opportunities in January when we talk about more specifically on guidance. I guess what I would mention to you is we have $3.3 billion in operating expenses. And we're going to look closely what our opportunities might be to optimize those over the next couple years if there are any.

Terrific. Thank you very much.

Thank you. Our next question comes from Greg Gordon with Morgan Stanley. (Operator instructions). Go ahead, Mr. Gordon.

Good morning, gentlemen.

Good morning, Greg.

When I look at the guidance, the range of gas price assumptions now is the same as it was in your prior guidance, and you're saying that you've been able to optimize your fuel position for next year. So should I presume that the actual outlook as you see it embedded in the guidance, at least for the merchant business, is the same? Or is it that heat rates are lower in your outlook now or some other thing is driving lower expected margins in that business, vis-à-vis the lower guidance?

I think the assumption should be it's the same. Again, if the actual gas prices and correlating power prices turn out to be lower than what the $6.75 to $7.25 is, that would drive us more toward the bottom. And if it lands in that range, we should be middle to the top.

Great. I understand that. So then the change in the guidance really relates more to changes in the assumed outcome in Virginia and financial market conditions and expense control, the other items you delineated on page 10 of your presentation; right?

Greg, I think it's all of the factors. As we said in our script, certainly, it is certainly possible that we could earn in that original forecast that we gave in January. The economy though seems to be bouncing along a bottom for an extended period, although I believe you all study things all across the country much more closely than we do. Our service territory here in Virginia compared to many is I guess you can't call anything robust, but in a relative manner it is. And that will continue. But as we were looking out we want to try to give you our best thinking when we have it about what's going to happen in 2010. We've hedged some more Millstone. It's now at 60%. The coal assets in New England are now at 65% for 2010. Mark mentioned to you that have over $3 billion in non-fuel O&M expense at the company. We made some O&M cuts as we entered this year against what our budget was. We have other opportunities if necessary. Our interest expense if we stay in a recession for a longer period of time is going to be lower than is in the forecast. We're hopeful is that people will look at all of the variables that we have, things we can control in a positive way, and things we can't control. It's when you take all those factors into account that we think it was prudent at this stage to give a forecast for next year that reflects all of those factors.

Great. Okay. Thank you.

Thank you, Greg.

Thank you. Our next question comes from Nathan Judge with Atlantic Equities.

Good morning. Wanted to ask a bit on demand and the impact of weather. I know you've reduced or taken some type of adjustment for your outlook on July weather. Unfortunately, the sun hasn't shown much. Can you just give us an idea of what that weather were to continue into August, what kind of impact that would have and what your now forecast looks like for demand for the rest of the year?

The weather forecast for August are normal and the same for September so we don't expect there to be any other serious deterioration, you make a lot of money around here if you get a hot week. So I can't tell you. I unfortunately can't answer that question, because it looks like weather will be normal for the balance of the quarter. But there's lots of things we can do, and we're very confident in our 2009 forecast. The sales growth at both our residential and commercial customers is flat or positive for the year-to-date and we expect that to continue. Our new connects is on our budget. July has been a good month for that. The industrial customers continue to lag. We think as the economy goes along, that will start increasing and as the new connects get into our system, we believe that we will come out of the end of the year as we've been saying since the beginning of the year; we'll exit 2009 with some positive sales growth. We do have revenue growth even in that down sales situation because of the way our regulatory system here works and our rider revenues that we're getting from the Southwest Virginia case are in rates already. The transmission increases will be in rates and our filing will be in rates. That latter part subject to refund. The other two are not subject to refund. So as we exit the year, we think we're not going to be wild growing at a really rapid pace, but we expect to have positive sales growth by the time we get to the end of the year. And I think we can handle the weather with what we've had happened so far.

Just a clarification. Can you quantify how much you reduced your expectation this year for or you made adjustments for this year related to the June or July weather?

July weather.

Very good. Do you have a sensitivity to gas prices related to 2011?

We do not. We're going to talk more about 2011 on our January call as we typically would.

Very good. And then just on E&P, I know you accelerated the number of wells you've drilled, and when you look at lifting cost, lifting costs have come down. But they seem to have fallen less than what a 60% decline in rig rates across the country would suggest that they maybe perhaps cost of rig rates would have fallen. Could you just give us some bit of idea of what's going on in there and your opportunities and challenges at this point?

I'm going to ask Gary Sypolt to answer that question.

Actually, we have seen costs drop on our conventional drilling. Most of it's been tied to steel cost that hasn't been a significant drop. But when you look at it, you see that we did drop our drilling costs, you said insignificantly, we actually were fairly proud of that drop. But the drilling costs themselves in Appalachia for rigs haven't dropped significantly yet because we have seen a great decline in Appalachia, not similar to the 60% you've seen across Texas and other parts of the nation.

Okay. And you may have said this. I apologize if I've missed it. But you've made some adjustment to your base rates and fuel costs and things of this nature. Now could you just give us an idea of what the impact of the customers, net-net of all these adjustments would have been?

Well, if you looked at all of it, I guess it was originally about under a 7% increase and since there's a little bit coming out of the revenue requirement, it will be closer to 6% probably increase overall. (inaudible) when you take all of it into account.

Thank you.

Thank you. Our last question comes from Dan Eggers with Credit Suisse.

Good morning. I know we spent a lot of time talking about 2010 and the new onus to hunker down in line. But if you look at the demand outlook from here, are you seeing any need to re-evaluate some of the capital programs either in absolute terms or in potentially pushing out some of the timing if demand is not as good as you originally anticipated?

No. The PJM came out just a couple of months ago and reaffirmed that Virginia still needs a lot of new power generation before we get just out over the next 10 years, over 2019. We've done 785 megawatts of upgrades already. Bear Garden is approved and under construction. The Southwest Virginia case is approved and under construction. We're looking at further expansions of Warren County for combined cycle. Also our Possum Point facility we're looking at. And we've got our new wind farms also that we're looking at in Southwest Virginia and some biomass projects. North Anna is we're just going to have to see how these bids come out and we have to have the power in this state. It's a mandate from our legislature and I think the commission's view of that is best enunciated not by us, but by them in the Bear Garden order if you have a chance to review that, what they think the power needs are and the way they want us to go about meeting those. If North Anna turns out that we can't come up with a proposal that we're satisfied with and the commission's satisfied with on the risk sharing and the cost, then we will have to supply the power with other methods, whether it's more gas-fired plants or other means. It won't be from purchasing power out of the markets, because that is contrary to the legislative mandate and the governor's energy policy plan that was adopted last year. On the Dominion Energy front, we are looking hard at the Appalachian Gateway project because while there is a plenty of gas in Appalachia, there is not plenty of infrastructure in Appalachia to get the gas to market. So that we will be looking at. We did an open season. It was fully subscribed at rates that we like. We have another project we're looking at in Appalachia. East Ohio, we will be doing the bare steel pipe replacements with the Cove Point Pier expansion. That project is fully subscribed to our shippers, so those costs are covered. So our transmission upgrades are going forward. They're approved, under construction. We will be filing for substantial additional funding for our transmission infrastructure, electric infrastructure, with some of the new NERC requirements, and other upgrades that are necessary. So we will trim our capital budgets as we go along, as we always do. But the demand situation in Virginia is relative to other places, still quite good.

So separate from some economic adjustment to 2010, no change to long-term growth rates then?

That's correct.

Okay. Thank you.

Thank you.

Thank you. Ladies and gentlemen, we have reached the end of our allotted time. Mr. McGettrick, do you have any closing remarks?

Thank you. I would like to thank everybody for joining us this morning. Just reminder that our Forms 10-Q are expected to be filed with the SEC later today and our third quarter earnings release is scheduled for October 30th. Have a good day. Thank you.

Thank you. This does conclude this morning's teleconference. You may disconnect your lines and enjoy your day.