Dominion Energy
Essential electric monopolies with rising demand but cash-hungry buildout risk
Dominion Energy is a primarily regulated electric utility serving Virginia, North Carolina and South Carolina, with long-lived, monopoly franchises and an expanding rate base underwritten by surging load from data centers and grid reliability mandates.
The company completed a major portfolio simplification in 2024, selling three gas LDCs to Enbridge and closing a 50% noncontrolling partnership on its 2.6 GW Coastal Virginia Offshore Wind project, which remains on schedule after a brief federal pause was overturned by a court injunction in January 2026. These moves improved its balance sheet flexibility and share construction risk with a deep-pocketed partner.
The investment case hinges on Dominion’s durable efficient-scale moat, constructive (if demanding) regulation, and secular load growth led by data centers.
Offsetting these strengths are negative TTM free cash flow from heavy capex, leverage that still requires vigilant management, and policy/regulatory uncertainty around offshore wind and rate design. Using TTM metrics, free cash flow is materially negative, so valuation must lean on regulated earnings quality and normalization post-CVOW.
Overall, this is a quality, essential-service utility with improving strategic focus but still in an intense reinvestment phase; patience and a margin-of-safety entry are warranted.
Does Dominion Energy have a strong competitive moat?
Dominion operates monopoly electric utilities with exclusive territories in Virginia, North Carolina and South Carolina. This efficient scale and the regulatory compact create high barriers to entry and durable customer captivity, reinforced by critical transmission and distribution networks and nuclear/offshore wind resources.
We assess moat components as follows: Efficient scale 85/100 (regulated monopoly, large T&D footprint, PJM projects awarded), Intangible/regulatory relationships 70/100 (constructive but exacting oversight with defined ROEs and rate mechanisms), Switching costs 75/100 (customers cannot practically switch providers; self-generation and DERs remain partial substitutes), Cost advantage 55/100 (scale helps, but fuel mix and project execution can erode advantages), Network effects 30/100. Weighted, this yields ~73. Risks to moat durability include: distributed energy resources, federal policy volatility that temporarily paused offshore wind in Dec 2025, and potential adverse rate outcomes if data center cost allocation is challenged.
Recent actions such as a dedicated high-usage rate class and PJM-approved transmission projects support moat persistence.
Does Dominion Energy have pricing power in its industry?
As a regulated utility, Dominion’s pricing power is mediated by regulators rather than market dynamics. The company secured an authorized ROE of 9.8% in Virginia for the 2026–2027 period and 9.94% in South Carolina under a 2024 settlement.
Base rates and riders provide cost recovery, and the proposed data center rate class with 14-year commitments is designed to reduce cross-subsidy risk. Still, requested increases can be trimmed by commissions, as seen in the SCC’s reduction of Dominion’s proposed 2026–2027 increases.
Offshore wind risk-sharing with Stonepeak further limits exposure to unforeseen cost inflation. Overall, pricing power is moderate and predictable within the regulatory paradigm, but not discretionary.
How predictable is Dominion Energy's business?
Earnings visibility is supported by regulated rate structures, defined allowed returns, and multi-year capital plans. Load growth from data centers provides additional tailwind, with nearly 10 GW under executed electric service agreements and more in pre-construction stages. The CVOW rider and long-term IRPs point to sustained rate base expansion.
Offsetting factors include policy shocks such as the December 2025 Department of the Interior suspension of offshore wind work (subsequently enjoined by a federal court in January 2026) and the usual regulatory cadence that can alter timing or magnitude of cost recovery.
On balance, cash flows and earnings are relatively predictable for a utility, albeit temporarily depressed free cash flow due to investment cycle.
Is Dominion Energy financially strong?
The 2024 portfolio review delivered significant deleveraging capacity and improved liquidity, including proceeds from LDC divestitures and the 50% CVOW sale to Stonepeak.
Nevertheless, leverage remains meaningful: total debt was about $46 billion at Sept. 30, 2025, with junior subordinated notes and securitization bonds alongside substantial long-term debt. Moody’s affirmed ratings but revised Dominion’s outlook to negative in May 2025, citing metrics and execution risks.
Critically, TTM free cash flow is deeply negative given elevated capex: summing Q4 2024 through Q3 2025 implies about negative $7.8 billion FCF. Liquidity is supported by large revolvers and ongoing ATM equity programs.
Financial strength is adequate for a regulated utility, but watchlists center on project execution, rate relief timing, and interest rate sensitivity.
How effective is Dominion Energy's capital allocation strategy?
Management simplified the portfolio, exited three gas LDCs, and structured CVOW with a noncontrolling partner funding 50% of remaining capital and sharing cost risks, which we view as sound.
The dividend has been held steady at $2.67 per share annualized in 2025 and continued into 2026; equity issuance via ATM and forwards has been used to preserve credit metrics during peak capex. These are pragmatic choices for a capital-intensive, rate-regulated utility, though dilution risk is nontrivial and buybacks are off the table.
Our view: capital allocation is rational and credit-aware, but the investment cycle leaves little room for opportunistic repurchases and keeps FCF negative until major projects are in service.
Does Dominion Energy have high-quality management?
CEO Robert M. Blue and the board concluded the business review and executed complex asset and partnership transactions while maintaining on-time, on-budget status for CVOW through 2025. Compensation practices are increasingly performance-linked, but some stakeholders criticize CEO pay levels.
Execution quality on rate cases and project delivery will be the decisive test. Overall, we see competent, pragmatic leadership with improving strategic focus, balanced against stakeholder scrutiny and the need to deliver projects flawlessly.
Is Dominion Energy a quality company?
Dominion Energy is an average quality company with a quality score of 63/100
- Portfolio reset complete: ~$14 billion LDC sales to Enbridge and 50% CVOW partnership closed, collectively facilitating ~$20+ billion of debt reduction and risk sharing.
- CVOW about half complete and on budget with updated cost now ~$10.7 billion excluding financing; January 2026 court injunction allowed construction to resume after a temporary federal pause.
- Regulatory framework: authorized ROE of 9.8% in Virginia for 2026–2027 and 9.94% in South Carolina; new high-usage rate class aims to ensure data centers bear full costs.
- Load growth tailwind: data center pipeline continues to expand with ~10 GW under executed service agreements and additional stages of contracted capacity, supporting multi-year rate base growth.
- Financial discipline improving but TTM FCF remains deeply negative on large buildout; Moody’s revised outlook to negative in 2025, underscoring the need for conservative financing and execution.
What is the fair value of Dominion Energy stock?
Is Dominion Energy a good investment at $61?
The following analysis is provided for informational and educational purposes only. It does not constitute financial advice, investment advice, or a recommendation to buy or sell any security. The opinions expressed are based on publicly available information and historical data. Beanvest and its contributors may hold positions in the securities mentioned. Investors should conduct their own due diligence or consult a licensed financial advisor before making any investment decision.