Dominion Resources (NYSE:D) posted operating earning of $0.84 a share in the fourth quarter of 2014, a penny ahead of consensus expectations. Operating revenues in the quarter were $2.94 billion, below Wall Street expectations of $3.1 billion. For the full year last year, operating earnings were $3.43 a share, in line with analyst estimates, though operating revenues of $12.4 billion were below the Street's $13 billion call. All in, it was a decent performance in what could be looked at as a transition year for the company.

Under the covers ...
Dominion's operating earnings were roughly twice its GAAP earnings in the fourth quarter and were about 50% higher than GAAP earnings for the full year. But there was a lot going on behind these numbers. For example, Dominion IPOed Dominion Midstream Partners LP (NYSE:DM) in mid-October after the Cove Point liquefied natural gas terminal that is the new company's main asset received key government approvals.

Cove Point Construction. Source: Acroterion, via Wikimedia Commons

The fourth quarter earnings report said about 35% of the adjustment made to GAAP earnings in 2014 came from "Virginia legislation enacted in April that permits Virginia Power to recover 70% of the costs previously deferred or capitalized through Dec. 31, 2013, relating to the development of a third nuclear unit located at North Anna and offshore wind facilities as part of the 2013 and 2014 base rates." Another 30% or so came from the repositioning of the company's Producer Services business, as it stopped trading natural gas and ceased certain energy marketing activities. And 25% came from costs associated with early debt reductions.

Although there were a lot of moving parts, the end story is a relatively good one. For example, the new Virginia law allows Dominion to write off money it has already spent on key growth projects, notably in the nuclear space. It's a contentious issue, since, according to the Richmond Times-Dispatch, opponents believe the law will require ratepayers to "start paying for an expensive power plant that may never be constructed while [Dominion] avoids any future ability of the State Corporation Commission to direct refunds to customers in 2015 or, if necessary, reductions in electricity rates in 2017."

Essentially, pushing costs into 2014 reduced the company's GAAP earnings. That, in turn, brought the company's earnings below levels that might have required customer refunds because Dominion would have earned more than its regulated return. It's understandable that customers would be angry about this, but Dominion certainly appears to have come out a winner.

Source: ReubenGBrewer, via Wikimedia Commons

And the Dominion Midstream IPO is another big win, since it provides Dominion additional ways to tap the public markets for growth capital. That's going to be beneficial for Cove Point, but also for the company's ongoing plans to expand its natural gas infrastructure and other energy businesses. The best part is that Dominion is the General Partner of Cove Point and owns a material stake in the LP. That means it gets paid for managing the asset, paid distributions through the LP units it owns, and receives incentive distribution rights as the distribution grows over time. That growth will likely be fueled by assets Dominion sells to the LP in the future.

Changing with a changing world
Dominion is one of the country's largest utilities. And it's taking an aggressive approach to change with the times. For example, it's been moving out of the struggling merchant power business, is expanding its natural gas operations, making use of the limited partnership structure to help fund future growth, and increasingly investing in renewable power sources like solar and wind. There was a lot going on last year, but the vast majority of it looks like it was good for Dominion's future. This story hasn't changed: Dominion is still shifting with the times and becoming a better company as it does.