MD&A discusses our results of operations and general financial condition. MD&A should be read in conjunction with our Consolidated Financial Statements. The terms "Dominion," "Company," "we," "our" and "us" are used throughout this report and, depending on the context of their use, may represent any of the following: the legal entity, Dominion Resources, Inc., one or more of Dominion Resources, Inc.'s consolidated subsidiaries or operating segments or the entirety of Dominion Resources, Inc. and its consolidated subsidiaries.

Contents of MD&A

The reader will find the following information in our MD&A:

• Forward-Looking Statements

• Accounting Matters

• Results of Operations

• Segment Results of Operations

• Selected Information - Energy Trading Activities

• Liquidity and Capital Resources

• Future Issues and Other Matters

Forward-Looking Statements

This report contains statements concerning our expectations, plans, objectives, future financial performance and other statements that are not historical facts. These statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In most cases, the reader can identify these forward-looking statements by such words as "anticipate," "estimate," "forecast," "expect," "believe," "should," "could," "plan," "may," "target" or other similar words.

We make forward-looking statements with full knowledge that risks and uncertainties exist that may cause actual results to differ materially from predicted results. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Additionally, other factors may cause actual results to differ materially from those indicated in any forward-looking statement. These factors include but are not limited to:

• Unusual weather conditions and their effect on energy sales to customers and energy commodity prices;

• Extreme weather events, including hurricanes and severe storms, that can cause outages and property damage to our facilities;

• State and federal legislative and regulatory developments and changes to environmental and other laws and regulations, including those related to climate change, greenhouse gases and other emissions, to which we are subject;

• Cost of environmental compliance, including those costs related to climate change;

• Risks associated with the operation of nuclear facilities;

• Fluctuations in energy-related commodity prices and the effect these could have on our earnings, liquidity position and the underlying value of our assets;

• Counterparty credit risk;

• Capital market conditions, including price risk due to securities held as investments in nuclear decommissioning and benefit plan trusts;

• Fluctuations in interest rates;

• Changes in federal and state tax laws and regulations;

• Changes to benefit plan assumptions such as discount rates and the expected rate of return on plan assets;

• Changes in rating agency requirements or credit ratings and their effect on availability and cost of capital;

• Changes in financial or regulatory accounting principles or policies imposed by governing bodies;

• Employee workforce factors including collective bargaining agreements and labor negotiations with union employees;

• The risks of operating businesses in regulated industries that are subject to changing regulatory structures;

• Changes to regulated gas and electric rates collected by Dominion and the timing of such collection as it relates to fuel costs;

• Receipt of approvals for and timing of closing dates for acquisitions and divestitures;

• Changes in rules for RTOs in which we participate, including changes in rate designs and capacity models;

• Adverse outcomes in litigation matters;

• Timing and receipt of regulatory approvals necessary for planned construction or expansion projects;

• The inability to complete planned construction or expansion projects within the terms and time frames initially anticipated; and

• Completing the divestiture of Peoples and Hope.

Additionally, other risks that could cause actual results to differ from predicted results are set forth in Item 1A. Risk Factors in this report, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, and in our Annual Report on Form 10-K for the year ended December 31, 2007.

Our forward-looking statements are based on our beliefs and assumptions using information available at the time the statements are made. We caution the reader not to place undue reliance on our forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. We undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

Accounting Matters

Critical Accounting Policies and Estimates

As of June 30, 2008, there have been no significant changes with regard to the critical accounting policies and estimates disclosed in MD&A in our Annual Report on Form 10-K for the year ended December 31, 2007. The policies disclosed included the accounting for derivative contracts at fair value, goodwill and long-lived asset impairment testing, regulated operations, asset retirement obligations, employee benefit plans, gas and oil operations, and income taxes.

Other

See Notes 3 and 4 to our Consolidated Financial Statements for a discussion of newly adopted and recently issued accounting standards.

Results of Operations

Presented below is a summary of our consolidated results for the quarter and
year-to-date periods ended June 30, 2008 and 2007:



                                           2008     2007        $ Change
                 (millions, except EPS)
                 Second Quarter
                 Net income (loss)        $  298   $  (530 )   $      828
                 Diluted EPS                0.51     (0.76 )         1.27

                 Year-To-Date
                 Net income (loss)        $  978   $   (77 )   $    1,055
                 Diluted EPS                1.69     (0.11 )         1.80

Overview

Second Quarter 2008 vs. 2007

Net income was $298 million in 2008, as compared to a net loss of $530 million in 2007. Diluted EPS increased to $0.51 and includes $0.08 of share accretion resulting primarily from the repurchase of shares in 2007 with proceeds received from the sale of the majority of our E&P operations. Favorable drivers include the absence of the following 2007 items:

• Charges related to the sale of the majority of our E&P operations;

• An impairment charge related to the sale of Dresden;

• An extraordinary charge in connection with the reapplication of SFAS No. 71 to the Virginia jurisdiction of our utility generation operations.

Additional favorable drivers include the reinstatement of annual fuel rate adjustments for the Virginia jurisdiction of our utility generation operations effective July 1, 2007, with deferred fuel accounting for over- or under-recoveries of fuel costs and a higher contribution from our merchant generation operations. Unfavorable drivers include a decrease in earnings due to the sale of the majority of our E&P operations and an increase in outage costs at certain electric generating facilities.

Year-to-Date 2008 vs. 2007

Net income was $978 million in 2008, as compared to a net loss of $77 million in 2007. Diluted EPS increased to $1.69 and includes $0.26 of share accretion resulting primarily from the repurchase of shares in 2007 with proceeds received from the sale of the majority of our E&P operations. Favorable drivers include the absence of the following 2007 items:

• Charges related to the sale of the majority of our E&P operations;

• An impairment charge related to the sale of Dresden;

• An extraordinary charge in connection with the reapplication of SFAS No. 71 to the Virginia jurisdiction of our utility generation operations.

Additional favorable drivers include the reversal of deferred tax liabilities associated with the planned sale of Peoples and Hope, the reinstatement of annual fuel rate adjustments for the Virginia jurisdiction of our utility generation operations effective July 1, 2007, with deferred fuel accounting for over- or under-recoveries of fuel costs, a higher contribution from our merchant generation operations and higher volumes and realized prices for our remaining E&P operations. Unfavorable drivers include a decrease in earnings due to the sale of the majority of our E&P operations and an increase in outage costs at certain electric generating facilities.