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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2010

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 000-50039





OLD DOMINION ELECTRIC COOPERATIVE

(Exact Name of Registrant as Specified in Its Charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|VIRGINIA                                                       |  | 23-7048405                          
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|4201 Dominion Boulevard, Glen Allen, Virginia                  |  | 23060                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          





(804) 747-0592

(Registrants Telephone Number, Including Area Code)





Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of larger accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  | x |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No  x

The
Registrant is a membership corporation and has no authorized or outstanding equity securities.









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OLD DOMINION ELECTRIC COOPERATIVE

INDEX



|                              |  |                                                                                                                                                      |  |            |    | 
|----------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | -- | 
|                              |  |                                                                                                                                                      |  | PageNumber |   
|                              | 
|PART I. Financial Information |  |                                                                                                                                                      |  |           
|                              |  |                                                                                                                                                     
|Item 1.                       |  | Financial Statements                                                                                                                                 |  |            |    | 
|                              |  |                                                                                                                                                     
|                              |  | Condensed Consolidated Balance Sheets  September 30, 2010 (Unaudited) and December 31, 2009                                                         |  |            | 3  | 
|                              |  |                                                                                                                                                     
|                              |  | Condensed Consolidated Statements of Revenues, Expenses and Patronage Capital (Unaudited)  Three and
 Nine months Ended September 30, 2010 and 2009 |  |            | 4  | 
|                              |  |                                                                                                                                                     
|                              |  | Condensed Consolidated Statements of Cash Flows (Unaudited)  Nine months Ended September 30, 2010 and
 2009                                         |  |            | 5  | 
|                              |  |                                                                                                                                                     
|                              |  | Notes to Condensed Consolidated Financial Statements                                                                                                 |  |            | 6  | 
|                              |  |                                                                                                                                                     
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                |  |            | 12 | 
|                              |  |                                                                                                                                                     
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                           |  |            | 21 | 
|                              |  |                                                                                                                                                     
|Item 4.                       |  | Controls and Procedures                                                                                                                              |  |            | 21 | 
|                              | 
|PART II. Other Information    |  |                                                                                                                                                      |  |           
|                              |  |                                                                                                                                                     
|Item 1.                       |  | Legal Proceedings                                                                                                                                    |  |            | 22 | 
|                              |  |                                                                                                                                                     
|Item 1A.                      |  | Risk Factors                                                                                                                                         |  |            | 22 | 
|                              |  |                                                                                                                                                     
|Item 5.                       |  | Other Information                                                                                                                                    |  |            | 22 | 
|                              |  |                                                                                                                                                     
|Item 6.                       |  | Exhibits                                                                                                                                             |  |            | 23 | 



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|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | - | ---------------- | - | --------- | -
|OLD DOMINION ELECTRIC COOPERATIVE
PART 1. FINANCIAL INFORMATION 
ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS | 
|                                                                                                                                    |  | September 30,2010 |           |   | December 31,2009 |  
|                                                                                                                                    |  | (in thousands)    |          
|                                                                                                                                    |  | (unaudited)       |           |   |                  |  
|ASSETS:                                                                                                                             |  |                   |           |   |                  |   |           |  
|Electric Plant:                                                                                                                     |  |                   |           |   |                  |   |           |  
|In service                                                                                                                          |  | $                 | 1,621,615 |   |                  | $ | 1,578,459 |  
|Less accumulated depreciation                                                                                                       |  |                   | (656,757  | ) |                  |   | (630,600  | )
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|                                                                                                                                    |  |                   | 964,858   |   |                  |   | 947,859   |  
|Nuclear fuel, at amortized cost                                                                                                     |  |                   | 14,706    |   |                  |   | 13,519    |  
|Construction work in progress                                                                                                       |  |                   | 57,297    |   |                  |   | 46,995    |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Net Electric Plant                                                                                                                  |  |                   | 1,036,861 |   |                  |   | 1,008,373 |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Investments:                                                                                                                        |  |                   |           |   |                  |   |           |  
|Nuclear decommissioning trust                                                                                                       |  |                   | 92,451    |   |                  |   | 85,437    |  
|Lease deposits                                                                                                                      |  |                   | 88,701    |   |                  |   | 87,052    |  
|Unrestricted investments and other                                                                                                  |  |                   | 4,016     |   |                  |   | 3,587     |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Total Investments                                                                                                                   |  |                   | 185,168   |   |                  |   | 176,076   |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Current Assets:                                                                                                                     |  |                   |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                           |  |                   | 44,554    |   |                  |   | 6,278     |  
|Accounts receivable                                                                                                                 |  |                   | 3,692     |   |                  |   | 264       |  
|Accounts receivable  deposits                                                                                                      |  |                   | 10,910    |   |                  |   | 3,800     |  
|Accounts receivable  members                                                                                                       |  |                   | 70,035    |   |                  |   | 72,716    |  
|Fuel, materials and supplies                                                                                                        |  |                   | 35,596    |   |                  |   | 49,290    |  
|Prepayments and other                                                                                                               |  |                   | 2,510     |   |                  |   | 3,521     |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Total Current Assets                                                                                                                |  |                   | 167,297   |   |                  |   | 135,869   |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Deferred Charges:                                                                                                                   |  |                   |           |   |                  |   |           |  
|Regulatory assets                                                                                                                   |  |                   | 124,934   |   |                  |   | 97,864    |  
|Other                                                                                                                               |  |                   | 18,421    |   |                  |   | 21,730    |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Total Deferred Charges                                                                                                              |  |                   | 143,355   |   |                  |   | 119,594   |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Total Assets                                                                                                                        |  | $                 | 1,532,681 |   |                  | $ | 1,439,912 |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|                                                                                                                                    |  |                  
|CAPITALIZATION AND LIABILITIES:                                                                                                     |  |                   |           |   |                  |   |           |  
|Capitalization:                                                                                                                     |  |                   |           |   |                  |   |           |  
|Patronage capital                                                                                                                   |  | $                 | 336,893   |   |                  | $ | 329,520   |  
|Non-controlling interest                                                                                                            |  |                   | 13,180    |   |                  |   | 13,178    |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Total Patronage capital and Non-controlling interest                                                                                |  |                   | 350,073   |   |                  |   | 342,698   |  
|Long-term debt                                                                                                                      |  |                   | 473,720   |   |                  |   | 688,736   |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Total Capitalization                                                                                                                |  |                   | 823,793   |   |                  |   | 1,031,434 |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Current Liabilities:                                                                                                                |  |                   |           |   |                  |   |           |  
|Long-term debt due within one year                                                                                                  |  |                   | 237,917   |   |                  |   | 22,917    |  
|Lines of credit                                                                                                                     |  |                   |          |   |                  |   | 26,954    |  
|Accounts payable                                                                                                                    |  |                   | 66,663    |   |                  |   | 48,966    |  
|Accounts payable  members                                                                                                          |  |                   | 75,911    |   |                  |   | 29,004    |  
|Interest rate hedge                                                                                                                 |  |                   | 30,392    |   |                  |   |          |  
|Accrued expenses                                                                                                                    |  |                   | 18,773    |   |                  |   | 4,659     |  
|Deferred energy                                                                                                                     |  |                   | 44,183    |   |                  |   | 38,740    |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Total Current Liabilities                                                                                                           |  |                   | 473,839   |   |                  |   | 171,240   |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Deferred Credits and Other Liabilities:                                                                                             |  |                   |           |   |                  |   |           |  
|Asset retirement obligations                                                                                                        |  |                   | 67,035    |   |                  |   | 64,543    |  
|Obligations under long-term leases                                                                                                  |  |                   | 63,753    |   |                  |   | 60,612    |  
|Regulatory liabilities                                                                                                              |  |                   | 87,494    |   |                  |   | 96,456    |  
|Other                                                                                                                               |  |                   | 16,767    |   |                  |   | 15,627    |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Total Deferred Credits and Other Liabilities                                                                                        |  |                   | 235,049   |   |                  |   | 237,238   |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  
|Commitments and Contingencies                                                                                                       |  |                   |          |   |                  |   |          |  
|Total Capitalization and Liabilities                                                                                                |  | $                 | 1,532,681 |   |                  | $ | 1,439,912 |  
|                                                                                                                                    |  |                   |           |   |                  |   |           |  

The accompanying notes are an integral part of the condensed consolidated financial statements.



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OLD DOMINION ELECTRIC COOPERATIVE

CONDENSED CONSOLIDATED STATEMENTS OF REVENUES,

EXPENSES AND PATRONAGE CAPITAL (UNAUDITED)



|                                                             |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------ |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                             |  | Three Months
EndedSeptember 30, |         |   | Nine Months
EndedSeptember 30, |  
|                                                             |  | 2010                            |         |   | 2009                           |   |         | 2010 |  |   | 2009    |  
|                                                             |  | (in thousands)                  |         |   | (in thousands)                 |  
|                                                             |  |                                 |         |  
|Operating Revenues                                           |  | $                               | 245,430 |   |                                | $ | 182,952 |      |  | $ | 605,150 |   |  | $ | 554,612 |  
|                                                             |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|                                                             |  |                                 |         |  
|Operating Expenses:                                          |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Fuel                                                         |  |                                 | 51,136  |   |                                |   | 38,186  |      |  |   | 119,388 |   |  |   | 96,995  |  
|Purchased power                                              |  |                                 | 155,610 |   |                                |   | 88,466  |      |  |   | 339,567 |   |  |   | 285,243 |  
|Deferred energy                                              |  |                                 | (8,308  | ) |                                |   | 9,231   |      |  |   | 5,443   |   |  |   | 23,253  |  
|Operations and maintenance                                   |  |                                 | 10,546  |   |                                |   | 9,276   |      |  |   | 28,907  |   |  |   | 35,304  |  
|Administrative and general                                   |  |                                 | 9,409   |   |                                |   | 9,141   |      |  |   | 32,198  |   |  |   | 28,356  |  
|Depreciation, amortization and decommissioning               |  |                                 | 10,373  |   |                                |   | 10,296  |      |  |   | 31,050  |   |  |   | 30,779  |  
|Amortization of regulatory asset/(liability), net            |  |                                 | 761     |   |                                |   | 166     |      |  |   | 2,460   |   |  |   | (40     | )
|Accretion of asset retirement obligations                    |  |                                 | 841     |   |                                |   | 817     |      |  |   | 2,492   |   |  |   | 2,452   |  
|Taxes, other than income taxes                               |  |                                 | 2,103   |   |                                |   | 2,006   |      |  |   | 6,413   |   |  |   | 6,044   |  
|                                                             |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total Operating Expenses                                     |  |                                 | 232,471 |   |                                |   | 167,585 |      |  |   | 567,918 |   |  |   | 508,386 |  
|                                                             |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Operating Margin                                             |  |                                 | 12,959  |   |                                |   | 15,367  |      |  |   | 37,232  |   |  |   | 46,226  |  
|                                                             |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Other Expense, net                                           |  |                                 | (446    | ) |                                |   | (363    | )    |  |   | (1,317  | ) |  |   | (1,245  | )
|Investment Income                                            |  |                                 | 1,067   |   |                                |   | 594     |      |  |   | 3,414   |   |  |   | 1,641   |  
|Interest Charges, net                                        |  |                                 | (10,746 | ) |                                |   | (12,791 | )    |  |   | (31,954 | ) |  |   | (38,143 | )
|Income Taxes                                                 |  |                                 | (7      | ) |                                |   | (69     | )    |  |   |        |   |  |   | (266    | )
|                                                             |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net Margin Including Non-controlling Interest                |  |                                 | 2,827   |   |                                |   | 2,738   |      |  |   | 7,375   |   |  |   | 8,213   |  
|Non-controlling Interest                                     |  |                                 | (28     | ) |                                |   | (112    | )    |  |   | (2      | ) |  |   | (433    | )
|                                                             |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net Margin Attributable to Old Dominion Electric Cooperative |  |                                 | 2,799   |   |                                |   | 2,626   |      |  |   | 7,373   |   |  |   | 7,780   |  
|Patronage CapitalBeginning of Period                        |  |                                 | 334,094 |   |                                |   | 324,987 |      |  |   | 329,520 |   |  |   | 319,833 |  
|                                                             |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Patronage CapitalEnd of Period                              |  | $                               | 336,893 |   |                                | $ | 327,613 |      |  | $ | 336,893 |   |  | $ | 327,613 |  
|                                                             |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  

The accompanying notes are an integral part of the condensed consolidated financial statements.



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OLD DOMINION ELECTRIC COOPERATIVE

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



|                                                                                   |  |                                |          |   |      |   |          |  
|---------------------------------------------------------------------------------- |  | ------------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                   |  | Nine Months
EndedSeptember 30, |         
|                                                                                   |  | 2010                           |          |   | 2009 |  
|                                                                                   |  | (in thousands)                 |         
|                                                                                   |  |                               
|Operating Activities:                                                              |  |                                |          |   |      |   |          |  
|Net Margin                                                                         |  | $                              | 7,373    |   |      | $ | 7,780    |  
|Adjustments to reconcile net margins to net cash provided by operating activities: |  |                                |          |   |      |   |          |  
|Depreciation, amortization and decommissioning                                     |  |                                | 31,050   |   |      |   | 30,779   |  
|Other non-cash charges                                                             |  |                                | 7,737    |   |      |   | 7,332    |  
|Non-controlling interest                                                           |  |                                | 2        |   |      |   | 433      |  
|Amortization of lease obligations                                                  |  |                                | 3,141    |   |      |   | 3,716    |  
|Interest on lease deposits                                                         |  |                                | (1,931   | ) |      |   | (2,556   | )
|Change in current assets                                                           |  |                                | 6,848    |   |      |   | 19,440   |  
|Change in deferred energy                                                          |  |                                | 5,443    |   |      |   | 23,253   |  
|Change in current liabilities                                                      |  |                                | 78,718   |   |      |   | (80,267  | )
|Change in regulatory assets and liabilities                                        |  |                                | (10,217  | ) |      |   | 66,519   |  
|Change in deferred charges and credits                                             |  |                                | 5,262    |   |      |   | 301      |  
|                                                                                   |  |                                |          |   |      |   |          |  
|Net Cash Provided by Operating Activities                                          |  |                                | 133,426  |   |      |   | 76,730   |  
|                                                                                   |  |                                |          |   |      |   |          |  
|                                                                                   |  |                               
|Financing Activities:                                                              |  |                                |          |   |      |   |          |  
|Obligations under long-term leases                                                 |  |                                |         |   |      |   | (236     | )
|Draws on lines of credit                                                           |  |                                | 85,408   |   |      |   | 494,415  |  
|Repayments on lines of credit                                                      |  |                                | (112,362 | ) |      |   | (544,607 | )
|                                                                                   |  |                                |          |   |      |   |          |  
|Net Cash Used for Financing Activities                                             |  |                                | (26,954  | ) |      |   | (50,428  | )
|                                                                                   |  |                                |          |   |      |   |          |  
|                                                                                   |  |                               
|Investing Activities:                                                              |  |                                |          |   |      |   |          |  
|Increase in other investments                                                      |  |                                | (2,583   | ) |      |   | (448     | )
|Electric plant additions                                                           |  |                                | (65,613  | ) |      |   | (29,792  | )
|                                                                                   |  |                                |          |   |      |   |          |  
|Net Cash Used for Investing Activities                                             |  |                                | (68,196  | ) |      |   | (30,240  | )
|                                                                                   |  |                                |          |   |      |   |          |  
|Net Change in Cash and cash equivalents                                            |  |                                | 38,276   |   |      |   | (3,938   | )
|Cash and cash equivalentsBeginning of Period                                      |  |                                | 6,278    |   |      |   | 12,025   |  
|                                                                                   |  |                                |          |   |      |   |          |  
|Cash and cash equivalentsEnd of Period                                            |  | $                              | 44,554   |   |      | $ | 8,087    |  
|                                                                                   |  |                                |          |   |      |   |          |  

The accompanying notes are an integral part of the condensed consolidated financial statements.



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OLD DOMINION ELECTRIC COOPERATIVE

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



|1. | In the opinion of our management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which include only normal recurring
adjustments, necessary for a fair statement of our consolidated financial position as of September 30, 2010, and our consolidated results of operations, and cash flows for the three and nine months ended September 30, 2010 and 2009. The
consolidated results of operations for the three and nine months ended September 30, 2010, are not necessarily indicative of the results to be expected for the entire year. These financial statements should be read in conjunction with the
financial statements and notes thereto included in our 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2. | Presentation. The accompanying financial statements reflect the consolidated accounts of Old Dominion Electric Cooperative (ODEC or we or
our) and TEC Trading, Inc. (TEC). We are a not-for-profit wholesale power supply cooperative, incorporated under the laws of the Commonwealth of Virginia in 1948. We have two classes of members. Our Class A members are
eleven customer-owned electric distribution cooperatives engaged in the retail sale of power to member consumers located in Virginia, Delaware, Maryland, and parts of West Virginia. Our sole Class B member is TEC, a taxable corporation owned by
our member distribution cooperatives. Our board of directors is composed of two representatives from each of the member distribution cooperatives and one representative from TEC.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We do not have any other comprehensive income for the periods presented.

In accordance with Consolidation Accounting, TEC is considered a variable interest entity for which we are the primary beneficiary. We
have eliminated all intercompany balances and transactions in consolidation. The assets and liabilities and non-controlling interest of TEC are recorded at carrying value and the net assets consolidated were $13.2 million at September 30, 2010
and December 31, 2009. The income taxes reported on our Statement of Revenues, Expenses and Patronage Capital relate to the tax provision for TEC. As TEC is 100% owned by our Class A members, its equity is presented as a non-controlling
interest in our consolidated financial statements.

Our rates are set periodically by a formula that was accepted for filing by
the Federal Energy Regulatory Commission (FERC), but are not regulated by the respective states public service commissions.

We comply with the Uniform System of Accounts as prescribed by FERC. In conformity with accounting principles generally accepted in the United States (GAAP), the accounting policies and
practices applied by us in the determination of rates are also employed for financial reporting purposes.

The preparation of
our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Actual results could differ from those estimates.

Certain reclassifications have been made to the prior years consolidated financial statements to conform to the current years
presentation.



|3. | Fair Value Measurements.
|-- | ------------------------

The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable
data (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. The lowest level input that is significant to a fair value measurement in its entirety determines the applicable level
in the fair value hierarchy. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability.



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The following table
summarizes our financial assets and liabilities measured at fair value on a recurring basis (at least annually) as of September 30, 2010 and December 31, 2009:



|                                            |  |                   |        |  |                                                           |   |        |                                           |  |   |                                         |  |  |   |       | 
|------------------------------------------- |  | ----------------- | ------ |  | --------------------------------------------------------- | - | ------ | ----------------------------------------- |  | - | --------------------------------------- |  |  | - | ----- | 
|                                            |  | September 30,2010 |        |  | Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) |   |        | SignificantOtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level
 3) | 
|                                            |  | (in thousands)    |       
|Nuclear decommissioning trust(1)            |  | $                 | 92,451 |  |                                                           | $ | 92,451 |                                           |  | $ |                                        |  |  | $ |      | 
|Unrestricted investments and other(2)(3)    |  |                   | 2,275  |  |                                                           |   | 57     |                                           |  |   |                                        |  |  |   | 2,218 | 
|Derivatives  renewable energy credit sales |  |                   | 357    |  |                                                           |   |       |                                           |  |   | 357                                     |  |  |   |      | 
|                                            |  |                   |        |  |                                                           |   |        |                                           |  |   |                                         |  |  |   |       | 
|Total Financial Assets                      |  | $                 | 95,083 |  |                                                           | $ | 92,508 |                                           |  | $ | 357                                     |  |  | $ | 2,218 | 
|                                            |  |                   |        |  |                                                           |   |        |                                           |  |   |                                         |  |  |   |       | 
|                                            |  |                   |        | 
|Derivativesgas and power(4)                |  | $                 | 8,853  |  |                                                           | $ | 8,853  |                                           |  | $ |                                        |  |  | $ |      | 
|Derivativeinterest rate hedge(5)           |  |                   | 30,392 |  |                                                           |   |       |                                           |  |   | 30,392                                  |  |  |   |      | 
|                                            |  |                   |        |  |                                                           |   |        |                                           |  |   |                                         |  |  |   |       | 
|Total Financial Liabilities                 |  | $                 | 39,245 |  |                                                           | $ | 8,853  |                                           |  | $ | 30,392                                  |  |  | $ |      | 
|                                            |  |                   |        |  |                                                           |   |        |                                           |  |   |                                         |  |  |   |       | 
|                                            |  |                   |        | 
|                                            |  | December 31,2009  |        |  | Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) |   |        | SignificantOtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level
 3) | 
|                                            |  | (in thousands)    |       
|Nuclear decommissioning trust(1)            |  | $                 | 85,437 |  |                                                           | $ | 85,437 |                                           |  | $ |                                        |  |  | $ |      | 
|Unrestricted investments and other(2)(3)    |  |                   | 1,869  |  |                                                           |   | 56     |                                           |  |   |                                        |  |  |   | 1,813 | 
|                                            |  |                   |        |  |                                                           |   |        |                                           |  |   |                                         |  |  |   |       | 
|Total Financial Assets                      |  | $                 | 87,306 |  |                                                           | $ | 85,493 |                                           |  | $ |                                        |  |  | $ | 1,813 | 
|                                            |  |                   |        |  |                                                           |   |        |                                           |  |   |                                         |  |  |   |       | 
|                                            |  |                   |        | 
|Derivativesgas and power(4)                |  | $                 | 6,904  |  |                                                           | $ | 6,152  |                                           |  | $ | 752                                     |  |  | $ |      | 
|                                            |  |                   |        |  |                                                           |   |        |                                           |  |   |                                         |  |  |   |       | 
|Total Financial Liabilities                 |  | $                 | 6,904  |  |                                                           | $ | 6,152  |                                           |  | $ | 752                                     |  |  | $ |      | 
|                                            |  |                   |        |  |                                                           |   |        |                                           |  |   |                                         |  |  |   |       | 



|(1) | For additional
information about our nuclear decommissioning trust see Note 7 of the Notes to Consolidated Financial Statements in our 2009 Annual Report on Form 10-K.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Unrestricted investments and other includes investments that were available for sale and classified as level 1 related to equity securities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Unrestricted investments and other includes investments that were available for sale and classified as level 3. As of September 30, 2010 and
December 31, 2009, we had $17.3 million of principal invested in six auction rate security investments and preferred stock (ARS). As of September 30, 2010 and December 31, 2009, we had an unrealized loss of $15.1 million
and $15.5 million, respectively, related to these ARS which was recorded as a regulatory asset in accordance with Accounting for Regulated Operations. For additional information, see Notes 7 and 8 of the Notes to Consolidated Financial Statements in
our 2009 Annual Report on Form 10-K.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Derivativesgas and power represent natural gas futures contracts and purchased power contracts, which are recorded on our balance sheet in
deferred credits and other liabilitiesother. For additional information about our derivative financial instruments, refer to Notes 1 and 4 of the Notes to Consolidated Financial Statements in our 2009 Annual Report on Form 10-K.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Derivativeinterest rate hedge represents the fair value of the interest rate hedge. On May 14, 2010, we entered into an interest rate hedge
with an initial notional amount of $300.0 million and a settlement rate tied to the 30-year U.S. Treasury bond. At September 30, 2010, the fair value of this interest rate hedge was a liability of $30.4 million, which is recorded on our balance
sheet as a current liability.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



7



---

##### Table of Contents



The following table
presents the net change in our financial assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category for the nine months ended September 30, 2010:



|                                                    |  |                                    |       | 
|--------------------------------------------------- |  | ---------------------------------- | ----- | 
|                                                    |  | Nine MonthsEndedSeptember 30, 2010 |      
|                                                    |  | (in thousands)                     |      
|Balance at January 1, 2010                          |  | $                                  | 1,813 | 
|Total realized and unrealized gain:                 |  |                                    |       | 
|Included in regulatory and other assets/liabilities |  |                                    | 405   | 
|Purchases, issuances and settlements                |  |                                    |      | 
|Transfers out of Level 3                            |  |                                    |      | 
|                                                    |  |                                    |       | 
|Balance at September 30, 2010                       |  | $                                  | 2,218 | 
|                                                    |  |                                    |       | 

The unrealized gain (change in market value) was reported in regulatory assets in our Condensed Consolidated
Balance Sheet as of September 30, 2010.



|4. | Derivatives and Hedging:
|-- | ------------------------

We are exposed to market purchases of power and natural gas to meet the power supply needs of our member distribution cooperatives that
are not met by our owned generation. In addition, we are exposed to fluctuations in long-term interest rates related to our issuance and refunding of long-term debt. To manage this exposure, we utilize derivative instruments. See Note 1 of the Notes
to Consolidated Financial Statements in our 2009 Annual Report on Form 10-K.

Changes in the fair value of our derivative
instruments are recorded as a regulatory asset or regulatory liability. The change in these accounts is included in the operating activities section of our statement of cash flows.

Excluding contracts accounted for as normal purchase/normal sale, we had the following outstanding derivative instruments:



|                         |  |                 |  |                        |             |  |                       |  |           | 
|------------------------ |  | --------------- |  | ---------------------- | ----------- |  | --------------------- |  | --------- | 
|                         |  |                 |  | As
ofSeptember 30,2010 |             |  | As ofDecember 31,2009 | 
|Commodity                |  | Unit of Measure |  | Quantity               |             |  | Quantity              | 
|Natural gas              |  | MMBTU           |  |                        | 4,260,000   |  |                       |  | 4,910,000 | 
|Purchased power          |  | MWh             |  |                        |            |  |                       |  | 108,935   | 
|Renewable energy credits |  | REC             |  |                        | 60,000      |  |                       |  |          | 
|Interest rate hedge      |  | US Dollars      |  |                        | 300,000,000 |  |                       |  |          | 

The fair value of our
derivative instruments, excluding contracts accounted for as normal purchase/normal sale, was as follows:

Fair Value of
Derivative Instruments



|                                                                            |  |                                              |        |                        |        |   |                       |   |       | 
|--------------------------------------------------------------------------- |  | -------------------------------------------- | ------ | ---------------------- | ------ | - | --------------------- | - | ----- | 
|                                                                            |  |                                              |        | Fair Value             |       
|                                                                            |  | Balance Sheet Location                       |        | As ofSeptember 30,2010 |        |   | As ofDecember 31,2009 |  
|                                                                            |  |                                              |        | (in thousands)         |       
|Derivatives in an asset position designated as hedging instruments:         |  |                                              |        |                        |        |   |                       |  
|                                                                            |  |                                              |       
|Renewable energy credit sales                                               |  | Prepayments and other                        |        | $                      | 357    |   |                       | $ |      | 
|                                                                            |  |                                              |        |                        |        |   |                       |   |       | 
|Total derivatives in an asset position designated as hedging instruments    |  | $                                            | 357    |                        |        | $ |                      |  
|                                                                            |  |                                              |        |                        |        |   |                       |   |       | 
|                                                                            |  |                                             
|Derivatives in a liability position designated as hedging instruments:      |  |                                              |        |                        |        |   |                       |  
|                                                                            |  |                                              |       
|Natural gas futures contracts                                               |  | Deferred credits and other liabilities-other |        | $                      | 8,853  |   |                       | $ | 6,152 | 
|Purchased power contracts                                                   |  | Deferred credits and other liabilities-other |        |                        |       |   |                       |   | 752   | 
|Interest rate hedge                                                         |  | Interest rate hedge                          |        |                        | 30,392 |   |                       |   |      | 
|                                                                            |  |                                              |        |                        |        |   |                       |   |       | 
|Total derivatives in a liability position designated as hedging instruments |  | $                                            | 39,245 |                        |        | $ | 6,904                 |  
|                                                                            |  |                                              |        |                        |        |   |                       |   |       | 



8



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##### Table of Contents



The Effect of
Derivative Instruments on the Statement of Revenues, Expenses and Patronage Capital

for the Three and Nine Months Ended
September 30, 2010 and September 30, 2009



|                                                         |      |                                                                                                       |         |      |                                                                                  |   |                                                                                                          |      |  |                                                                                                              |      |   |        |      |  |   |         |   |  |   |        |   |  |   |         |  
|-------------------------------------------------------- | ---- | ----------------------------------------------------------------------------------------------------- | ------- | ---- | -------------------------------------------------------------------------------- | - | -------------------------------------------------------------------------------------------------------- | ---- |  | ------------------------------------------------------------------------------------------------------------ | ---- | - | ------ | ---- |  | - | ------- | - |  | - | ------ | - |  | - | ------- | -
|Derivatives Accounted for UtilizingRegulatory Accounting |      | Amount ofGain
(Loss)Recognized withinRegulatoryAsset/Liability forDerivatives as ofSept. 30, Dec. 31, |         |      | Location of Gain
(Loss) Reclassified from Regulatory Asset/Liability into
Income |   | Amount of Gain(Loss) Reclassifiedfrom RegulatoryAsset/Liability intoIncome for
theQuarter EndedSept. 30, |      |  | Amount of Gain(Loss) Reclassifiedfrom RegulatoryAsset/Liability intoIncome for
theNine MonthsEnded Sept. 30, |     
|                                                         |      |                                                                                                       |        
|                                                         | 2010 |                                                                                                       |         | 2009 |                                                                                  |   |                                                                                                          | 2010 |  |                                                                                                              | 2009 |   |        | 2010 |  |   | 2009    |  
|                                                         |      | (in thousands)                                                                                        |         |      |                                                                                  |   | (in thousands)                                                                                           |      |  | (in thousands)                                                                                               |     
|Natural gas futures contracts(1)                         |      | $                                                                                                     | (8,853  | )    |                                                                                  | $ | (6,152                                                                                                   | )    |  | Fuel/Purchased power                                                                                         |      | $ | (2,164 | )    |  | $ | (10,748 | ) |  | $ | (3,604 | ) |  | $ | (19,832 | )
|Purchased power contracts                                |      |                                                                                                       |        |      |                                                                                  |   | (752                                                                                                     | )    |  | Purchased power                                                                                              |      |   |       |      |  |   |        |   |  |   | (365   | ) |  |   |        |  
|Renewable energy credit sales                            |      |                                                                                                       | 357     |      |                                                                                  |   |                                                                                                         |      |  | Operating revenue                                                                                            |      |   |       |      |  |   |        |   |  |   |       |   |  |   |        |  
|Purchased powerexcess sales                             |      |                                                                                                       |        |      |                                                                                  |   |                                                                                                         |      |  | Operating revenue                                                                                            |      |   | (669   | )    |  |   |        |   |  |   | (669   | ) |  |   |        |  
|Interest rate hedge                                      |      |                                                                                                       | (30,392 | )    |                                                                                  |   |                                                                                                         |      |  | Interest charges, net                                                                                        |      |   |       |      |  |   |        |   |  |   |       |   |  |   |        |  
|                                                         |      |                                                                                                       |         |      |                                                                                  |   |                                                                                                          |      |  |                                                                                                              |      |   |        |      |  |   |         |   |  |   |        |   |  |   |         |  
|Total                                                    |      | $                                                                                                     | (38,888 | )    |                                                                                  | $ | (6,904                                                                                                   | )    |  |                                                                                                              |      | $ | (2,833 | )    |  | $ | (10,748 | ) |  | $ | (4,638 | ) |  | $ | (19,832 | )
|                                                         |      |                                                                                                       |         |      |                                                                                  |   |                                                                                                          |      |  |                                                                                                              |      |   |        |      |  |   |         |   |  |   |        |   |  |   |         |  



|(1) | Gain (loss) related to natural gas futures contracts is recorded in fuel and purchased power.
|--- | ---------------------------------------------------------------------------------------------

Our hedging activities expose us to credit-related risks. We use hedging instruments, including forwards, futures, financial transmission
rights, and options, to manage our market price risks. Because we rely substantially on the use of hedging instruments, we are exposed to the risk that counterparties will default in performance of their obligations to us. Although we assess the
creditworthiness of counterparties and other credit issues related to these purchases, and we may require our counterparties to post collateral with us, defaults may still occur. Defaults may take the form of failure to physically deliver the
purchased energy or failure to pay. If this occurs, we may be forced to enter into alternative contractual arrangements or purchase energy in the forward, short-term or spot markets at then-current market prices that may be more or less than the
prices previously agreed upon with the defaulting counterparty.



9



---

##### Table of Contents



|5. | Investments:
|-- | ------------

Investments
were as follows at September 30, 2010 and December 31, 2009:



|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|----------------------------------- |  | ----------- | ------------------ |  | -------------- | - | ------ | -------------------- |  | - | --------------------- |  |  | --------- | ------ | - | ------------- | - | ------- |  |  | - | ------- | 
|Description                         |  | Designation |                    |  | Cost           |   |        | GrossUnrealizedGains |  |   | GrossUnrealizedLosses |  |  | FairValue |        |   | CarryingValue |  
|                                    |  |             |                    |  | (in thousands) |  
|                                    |  |             |                    |  |                |  
|September 30, 2010                  |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|                                    |  |             |                    |  |                |  
|Nuclear decommissioning trust(1)    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Debt securities                     |  |             | Available for sale |  |                | $ | 40,639 |                      |  | $ | 1,353                 |  |  | $         |       |   |               | $ | 41,992  |  |  | $ | 41,992  | 
|Equity securities                   |  |             | Available for sale |  |                |   | 47,875 |                      |  |   | 4,549                 |  |  |           | (2,230 | ) |               |   | 50,194  |  |  |   | 50,194  | 
|Cash and other                      |  |             | Available for sale |  |                |   | 265    |                      |  |   |                      |  |  |           |       |   |               |   | 265     |  |  |   | 265     | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Total Nuclear decommissioning trust |  |             |                    |  |                | $ | 88,779 |                      |  | $ | 5,902                 |  |  | $         | (2,230 | ) |               | $ | 92.451  |  |  | $ | 92,451  | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|                                    |  |             |                    |  |                |  
|Lease deposits(2)                   |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Government obligations              |  |             | Held to maturity   |  |                | $ | 88,701 |                      |  | $ | 4,839                 |  |  | $         |       |   |               | $ | 93,540  |  |  | $ | 88,701  | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Total Lease deposits                |  |             |                    |  |                | $ | 88,701 |                      |  | $ | 4,839                 |  |  | $         |       |   |               | $ | 93,540  |  |  | $ | 88,701  | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|                                    |  |             |                    |  |                |  
|Unrestricted investments(3)         |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Debt securities                     |  |             | Available for sale |  |                | $ | 2,174  |                      |  | $ |                      |  |  | $         |       |   |               | $ | 2,174   |  |  | $ | 2,174   | 
|Equity securities                   |  |             | Available for sale |  |                |   | 44     |                      |  |   |                      |  |  |           |       |   |               |   | 44      |  |  |   | 44      | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Total Unrestricted investments      |  |             |                    |  |                | $ | 2,218  |                      |  | $ |                      |  |  | $         |       |   |               | $ | 2,218   |  |  | $ | 2,218   | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|                                    |  |             |                    |  |                |  
|Other                               |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Equity securities                   |  |             | Available for sale |  |                | $ | 62     |                      |  | $ |                      |  |  | $         | (5     | ) |               | $ | 57      |  |  | $ | 57      | 
|Non-marketable equity investments   |  |             | Equity             |  |                |   | 1,741  |                      |  |   |                      |  |  |           |       |   |               |   | 1,741   |  |  |   | 1,741   | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Total Other                         |  |             |                    |  |                | $ | 1,803  |                      |  | $ |                      |  |  | $         | (5     | ) |               | $ | 1,798   |  |  | $ | 1,798   | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Total Carrying Value                |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               | $ | 185,168 | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|December 31, 2009                   |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|                                    |  |             |                    |  |                |  
|Nuclear decommissioning trust(1)    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Debt securities                     |  |             | Available for sale |  |                | $ | 39,289 |                      |  | $ |                      |  |  | $         | (2,020 | ) |               | $ | 37,269  |  |  | $ | 37,269  | 
|Equity securities                   |  |             | Available for sale |  |                |   | 46,577 |                      |  |   | 3,661                 |  |  |           | (2,142 | ) |               |   | 48,096  |  |  |   | 48,096  | 
|Cash and other                      |  |             | Available for sale |  |                |   | 72     |                      |  |   |                      |  |  |           |       |   |               |   | 72      |  |  |   | 72      | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Total Nuclear decommissioning trust |  |             |                    |  |                | $ | 85,938 |                      |  | $ | 3,661                 |  |  | $         | (4,162 | ) |               | $ | 85,437  |  |  | $ | 85,437  | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|                                    |  |             |                    |  |                |  
|Lease deposits(2)                   |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Government obligations              |  |             | Held to maturity   |  |                | $ | 87,052 |                      |  | $ | 138                   |  |  | $         | (7,213 | ) |               | $ | 79,977  |  |  | $ | 87,052  | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Total Lease deposits                |  |             |                    |  |                | $ | 87,052 |                      |  | $ | 138                   |  |  | $         | (7,213 | ) |               | $ | 79,977  |  |  | $ | 87,052  | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|                                    |  |             |                    |  |                |  
|Unrestricted investments(4)         |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Debt securities                     |  |             | Available for sale |  |                | $ | 1,761  |                      |  | $ |                      |  |  | $         |       |   |               | $ | 1,761   |  |  | $ | 1,761   | 
|Equity securities                   |  |             | Available for sale |  |                |   | 52     |                      |  |   |                      |  |  |           |       |   |               |   | 52      |  |  |   | 52      | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Total Unrestricted investments      |  |             |                    |  |                | $ | 1,813  |                      |  | $ |                      |  |  | $         |       |   |               | $ | 1,813   |  |  | $ | 1,813   | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|                                    |  |             |                    |  |                |  
|Other                               |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Equity securities                   |  |             | Available for sale |  |                | $ | 62     |                      |  | $ |                      |  |  | $         | (6     | ) |               | $ | 56      |  |  | $ | 56      | 
|Non-marketable equity investments   |  |             | Equity             |  |                |   | 1,718  |                      |  |   |                      |  |  |           |       |   |               |   | 1,718   |  |  |   | 1,718   | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Total Other                         |  |             |                    |  |                | $ | 1,780  |                      |  | $ |                      |  |  | $         | (6     | ) |               | $ | 1,774   |  |  | $ | 1,774   | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 
|Total Carrying Value                |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  | $ | 176,076 | 
|                                    |  |             |                    |  |                |   |        |                      |  |   |                       |  |  |           |        |   |               |   |         |  |  |   |         | 



|(1) | Investments in the nuclear decommissioning trust are restricted for the use of funding our share of the asset retirement obligations of the future
decommissioning of the North Anna Nuclear Power Station. See Note 3 of the Notes to Consolidated Financial Statements in our 2009 Annual Report on Form 10-K. Realized and unrealized gains and losses related to assets held in the nuclear
decommissioning trust are deferred as a regulatory asset or liability.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Investments in lease deposits are restricted for the use of funding our future lease obligations. See Note 6 of the Notes to Consolidated Financial
Statements in our 2009 Annual Report on Form 10-K.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The cost represents investments in ARS with a par value of $28.8 million, that have been written down by $26.6 million due to the $11.5 million
recognition of a loss and the $15.1 million unrealized loss. We have deferred the $15.1 million as a regulatory asset in accordance with Accounting for Regulated Operations. See Note 8 of the Notes to Consolidated Financial Statements in our 2009
Annual Report on Form 10-K.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The cost represents investments in ARS with a par value of $28.8 million, net of a $5.0 million par value redemption in 2009 that resulted in a $1.4
million recognized loss. The cost has been written down by $27.0 million due to the $11.5 million recognition of a loss and the $15.5 million unrealized loss. We have deferred the $15.5 million as a regulatory asset in accordance with Accounting for
Regulated Operations. See Note 8 of the Notes to Consolidated Financial Statements in our 2009 Annual Report on Form 10-K.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Contractual maturities
of unrestricted debt securities at September 30, 2010, were as follows:



|                   |  |                 |   |  |           |   |   |            |  |   |                   |  |  |       |       |  |  |   |       | 
|------------------ |  | --------------- | - |  | --------- | - | - | ---------- |  | - | ----------------- |  |  | ----- | ----- |  |  | - | ----- | 
|Description        |  | Less than1 year |   |  | 1-5 years |   |   | 5-10 years |  |   | More than10 years |  |  | Total |      
|                   |  | (in thousands)  |  
|Available for Sale |  | $               |  |  |           | $ |  |            |  | $ |                  |  |  | $     | 2,174 |  |  | $ | 2,174 | 
|Held to Maturity   |  |                 |  |  |           |   |  |            |  |   |                  |  |  |       |      |  |  |   |      | 
|                   |  |                 |   |  |           |   |   |            |  |   |                   |  |  |       |       |  |  |   |       | 
|                   |  | $               |  |  |           | $ |  |            |  | $ |                  |  |  | $     | 2,174 |  |  | $ | 2,174 | 
|                   |  |                 |   |  |           |   |   |            |  |   |                   |  |  |       |       |  |  |   |       | 



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OLD DOMINION
ELECTRIC COOPERATIVE

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Caution Regarding Forward-Looking Statements

Managements Discussion
and Analysis of Financial Condition and Results of Operations contains forward-looking statements regarding matters that could have an impact on our business, financial condition, and future operations. These statements, based on our expectations
and estimates, are not guarantees of future performance and are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements. These risks,
uncertainties, and other factors include, but are not limited to, general business conditions, increased competition in the electric utility industry, demand for energy, federal and state legislative and regulatory actions and legal and
administrative proceedings, changes in and compliance with environmental laws and policies, general credit and capital market conditions, weather conditions, the cost of commodities used in our industry, and unanticipated changes in operating
expenses and capital expenditures. Our actual results may vary materially from those discussed in the forward-looking statements as a result of these and other factors. Any forward-looking statement speaks only as of the date on which the statement
is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which the statement is made even if new information becomes available or other events occur in the
future.

Critical Accounting Policies

As of September 30, 2010, there have been no significant changes in our critical accounting policies as disclosed in our 2009 Annual Report on Form 10-K. These policies include the accounting for
rate regulation, deferred energy, margin stabilization plan, and accounting for asset retirement obligations and derivative contracts.

Basis of Presentation

The accompanying financial statements reflect the consolidated accounts of Old Dominion Electric Cooperative (ODEC or
we or our) and TEC Trading, Inc. (TEC). See Note 2Notes to Condensed Consolidated Financial Statements in Part 1, Item 1.

Overview

ODEC is a not-for-profit power supply cooperative owned entirely
by its eleven Class A member distribution cooperatives and a Class B member, TEC. We supply our member distribution cooperatives power requirements, consisting of capacity requirements and energy requirements, through a portfolio of
resources including generating facilities, long-term and short-term physically-delivered forward power purchase contracts, and spot market purchases.

Our financial results for the three and nine months ended September 30, 2010, were significantly impacted by:



| |  |  | Acquisition of additional service territory by two of our member distribution cooperatives,
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Unseasonably warm weather in July and September as well as May and June which increased our member distribution cooperatives requirements for
power and increased the dispatch of our combustion turbine facilities,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reduction in our total energy rate,
| | - |  | -----------------------------------



| |  |  | Scheduled and unscheduled maintenance outages for both units at the North Anna Nuclear Power Station (North Anna); and
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | An interest rate hedge transaction.
| | - |  | -----------------------------------

Member Distribution CooperativesAcquisition of Additional Service Territory

On June 1, 2010, two of our member distribution cooperatives, Rappahannock Electric Cooperative (REC) and Shenandoah Valley Electric Cooperative (SVEC), acquired the
distribution assets and right to provide electric distribution services to approximately 102,000 customers (meters) previously owned by The Potomac Edison Company in Virginia (Potomac Edison). We estimate RECs and SVECs
acquisitions will increase our megawatt hour (MWh) and megawatt (MW) sales to our member distribution cooperatives by approximately 35% to 40% on an annualized basis.



12



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In accordance with the
wholesale power contracts between ODEC and its member distribution cooperatives, ODEC will serve the additional power requirements resulting from RECs and SVECs acquisitions. We were not a party to this transaction; however, we assumed
power supply contracts previously entered into by Potomac Edison for the service territory to serve the load of these customers. These contracts expire on June 30, 2011. A valuation of these contracts was performed as of June 1, 2010, and
the value of the contracts approximated a fair value of zero.

In accordance with our load acquisition policy, we will pay a
transition fee to REC and to SVEC that represents a portion of the projected power cost savings related to these acquisitions. The aggregate transition fee is approximately $66.7 million; and approximately $3.2 million and $4.2 million was recorded
for the three and nine months ended September 30, 2010, respectively. The transition fee is reflected as a credit on the monthly power invoices to REC and SVEC over 48 months as a reduction in sales and is being collected from our member
distribution cooperatives through our formulary rate.

Results of Operations

Formulary Rate.Our power sales are comprised of two power products  energy and capacity (also referred to as demand).
Energy is the physical electricity delivered through transmission and distribution facilities to customers. We must have sufficient committed energy available to us for delivery to our member distribution cooperatives to meet their maximum energy
needs at any time, with limited exceptions. This committed available energy at any time is referred to as capacity.

The rates
we charge our member distribution cooperatives for sales of energy and capacity are determined by a formulary rate accepted by the Federal Energy Regulatory Commission (FERC) which is intended to permit collection of revenues which will
equal the sum of:



| |  |  | all of our costs and expenses;
| | - |  | ------------------------------



| |  |  | 20% of our total interest charges; and
| | - |  | --------------------------------------



| |  |  | additional equity contributions approved by our board of directors.
| | - |  | -------------------------------------------------------------------

The formulary rate has three main components: a demand rate, a base energy rate and a fuel factor adjustment rate. The formulary rate
identifies the cost components that we can collect through rates, but not the actual amounts to be collected. With limited minor exceptions, we can change our rates periodically to match the costs we have incurred and we expect to incur without
seeking FERC approval. For further discussion on our formulary rate, see Factors Affecting ResultsFormulary Rate in Part II, Item 7 our 2009 Annual Report on Form 10-K.

Operating Revenues.Our operating revenues are derived from power sales to our member distribution cooperatives and
non-members. Our operating revenues by type of purchaser for the three and nine months ended September 30, 2010 and 2009, were as follows:



|                                 |  |                                 |         |  |                                |   |         |      |  |   |         |  |  |   |         | 
|-------------------------------- |  | ------------------------------- | ------- |  | ------------------------------ | - | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|                                 |  | Three Months
EndedSeptember 30, |         |  | Nine Months
EndedSeptember 30, |  
|                                 |  | 2010                            |         |  | 2009                           |   |         | 2010 |  |   | 2009    | 
|                                 |  | (in thousands)                  |         |  | (in thousands)                 |  
|                                 |  |                                 |         | 
|Revenue from sales to:           |  |                                 |         |  |                                |   |         |      |  |   |         |  |  |   |         | 
|Member distribution cooperatives |  | $                               | 221,189 |  |                                | $ | 173,775 |      |  | $ | 564,307 |  |  | $ | 524,162 | 
|Non-members                      |  |                                 | 24,241  |  |                                |   | 9,177   |      |  |   | 40,843  |  |  |   | 30,450  | 
|                                 |  |                                 |         |  |                                |   |         |      |  |   |         |  |  |   |         | 
|Total revenues                   |  | $                               | 245,430 |  |                                | $ | 182,952 |      |  | $ | 605,150 |  |  | $ | 554,612 | 
|                                 |  |                                 |         |  |                                |   |         |      |  |   |         |  |  |   |         | 

Energy and Demand Sales Volumes.Our energy sales in MWh to our member distribution
cooperatives and non-members for the three and nine months ended September 30, 2010 and 2009, were as follows:



|                                 |  |                                 |           |  |                                |  |           |      |  |  |           |  |  |  |           | 
|-------------------------------- |  | ------------------------------- | --------- |  | ------------------------------ |  | --------- | ---- |  |  | --------- |  |  |  | --------- | 
|                                 |  | Three Months
EndedSeptember 30, |           |  | Nine Months
EndedSeptember 30, | 
|                                 |  | 2010                            |           |  | 2009                           |  |           | 2010 |  |  | 2009      | 
|                                 |  | (in MWh)                        |           |  | (in MWh)                       | 
|Energy sales to:                 |  |                                 |           |  |                                |  |           |      |  |  |           |  |  |  |           | 
|Member distribution cooperatives |  |                                 | 3,335,713 |  |                                |  | 2,267,214 |      |  |  | 8,133,170 |  |  |  | 6,553,454 | 
|Non-members                      |  |                                 | 417,672   |  |                                |  | 332,243   |      |  |  | 782,119   |  |  |  | 944,131   | 
|                                 |  |                                 |           |  |                                |  |           |      |  |  |           |  |  |  |           | 
|Total energy sales               |  |                                 | 3,753,385 |  |                                |  | 2,599,457 |      |  |  | 8,915,289 |  |  |  | 7,497,585 | 
|                                 |  |                                 |           |  |                                |  |           |      |  |  |           |  |  |  |           | 



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Our energy sales in
MWh to our member distribution cooperatives were 47.1% and 24.1% higher for the three and nine months ended September 30, 2010, respectively, as compared to the same periods in 2009, primarily as a result of the service territory acquisition by
two of our member distribution cooperatives as of June 1, 2010 and changes in weather. The additional service territory increased our energy sales in MWh to our member distribution cooperatives approximately 35.8% and 16.7% for the three and
nine months ended September 30, 2010, respectively. During July and September as well as May and June of 2010, we experienced unseasonably warm weather.

Our energy sales in MWh to non-members were 25.7% higher and 17.2% lower for the three and nine months ended September 30, 2010, respectively, as compared to the same periods in 2009. Sales to
non-members consist of sales of excess purchased and generated energy. We primarily sell excess energy to PJM Interconnection, LLC (PJM) under its rates for providing energy imbalance services.

Our demand sales in megawatts (MW) to our member distribution cooperatives for the three and nine months ended
September 30, 2010 and 2009, were as follows:



|                                                 |  |                                |       |  |                               |  |       |      |  |  |        |  |  |  |        | 
|------------------------------------------------ |  | ------------------------------ | ----- |  | ----------------------------- |  | ----- | ---- |  |  | ------ |  |  |  | ------ | 
|                                                 |  | Three
MonthsEndedSeptember 30, |       |  | Nine MonthsEndedSeptember 30, | 
|                                                 |  | 2010                           |       |  | 2009                          |  |       | 2010 |  |  | 2009   | 
|                                                 |  | (in MW)                        |       |  | (in MW)                       | 
|                                                 |  |                                |       | 
|Demand sales to member distribution cooperatives |  |                                | 6,906 |  |                               |  | 4,304 |      |  |  | 16,322 |  |  |  | 13,344 | 
|                                                 |  |                                |       |  |                               |  |       |      |  |  |        |  |  |  |        | 

Our demand sales in MW to our member distribution cooperatives were 60.5% and 22.3% higher for the three and
nine months ended September 30, 2010, respectively, as compared to the same periods in 2009, primarily as a result of additional service territory acquired by two of our member distribution cooperatives and changes in the weather. The
additional service territory increased our demand sales in MW to our member distribution cooperatives approximately 39.9% and 16.7% for the three and nine months ended September 30, 2010, respectively. During July and September as well as May
and June of 2010, we experienced unseasonably warm weather which was partially offset by milder weather experienced in the first quarter of 2010.

Sales to Member Distribution Cooperatives.Revenues from sales to our member distribution cooperatives are a function of our formulary rate for sales of power to our member distribution
cooperatives and our member distribution cooperatives consumers requirements for power. Operating revenues on our Condensed Consolidated Statements of Revenues, Expenses and Patronage Capital reflect the actual capacity-related costs we
incurred plus the energy costs that we collected during the quarter. Estimated capacity-related costs are collected during the period through the demand component of our formulary rate. Under our formulary rate, we make adjustments for the refund or
recovery of amounts under our Margin Stabilization Plan. We adjust demand revenues and accounts payablemembers or accounts receivablemembers each quarter to reflect these adjustments. See Critical Accounting PoliciesMargin
Stabilization Plan in Part II, Item 7 of our 2009 Annual Report on Form 10-K. Growth in the number of consumers and growth in consumers requirements for power significantly affect our member distribution cooperatives
requirements for power. Factors affecting our member distribution cooperatives consumers requirements for power include weather, the economy, and residential and commercial growth. See Consumers Requirements for Power in Part
II, Item 7 of our 2009 Annual Report on Form 10-K.

Revenues from sales to our member distribution cooperatives by
formulary rate component and our average costs to our member distribution cooperatives per MWh for the three and nine months ended September 30, 2010 and 2009, were as follows:



|                                                            |  |                                 |         |  |                                |   |         |      |  |   |         |  |  |   |         | 
|----------------------------------------------------------- |  | ------------------------------- | ------- |  | ------------------------------ | - | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|                                                            |  | Three Months
EndedSeptember 30, |         |  | Nine Months
EndedSeptember 30, |  
|                                                            |  | 2010                            |         |  | 2009                           |   |         | 2010 |  |   | 2009    | 
|                                                            |  | (in thousands)                  |         |  | (in thousands)                 |  
|                                                            |  |                                 |         | 
|Revenue from sales to member distribution cooperatives:     |  |                                 |         |  |                                |   |         |      |  |   |         |  |  |   |         | 
|Base energy revenues                                        |  | $                               | 59,128  |  |                                | $ | 40,483  |      |  | $ | 144,653 |  |  | $ | 117,021 | 
|Fuel factor adjustment revenues                             |  |                                 | 87,194  |  |                                |   | 74,624  |      |  |   | 216,879 |  |  |   | 228,974 | 
|                                                            |  |                                 |         |  |                                |   |         |      |  |   |         |  |  |   |         | 
|Total energy revenues                                       |  |                                 | 146,322 |  |                                |   | 115,107 |      |  |   | 361,532 |  |  |   | 345,995 | 
|Demand (capacity) revenues                                  |  |                                 | 74,867  |  |                                |   | 58,668  |      |  |   | 202,775 |  |  |   | 178,167 | 
|                                                            |  |                                 |         |  |                                |   |         |      |  |   |         |  |  |   |         | 
|Total Revenues                                              |  | $                               | 221,189 |  |                                | $ | 173,775 |      |  | $ | 564,307 |  |  | $ | 524,162 | 
|                                                            |  |                                 |         |  |                                |   |         |      |  |   |         |  |  |   |         | 
|Average costs to member distribution cooperatives (per MWh) |  | $                               | 66.31   |  |                                | $ | 76.65   |      |  | $ | 69.38   |  |  | $ | 79.98   | 



14



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Total revenues from
sales to our member distribution cooperatives for the three and nine months ended September 30, 2010, increased $47.4 million, or 27.3%, and $40.1 million, or 7.7%, respectively, as compared to the same periods in 2009. The increase in total
revenues is related to the additional service territory and weather-related increases in our energy sales volumes, partially offset by a lower total energy rate.

Our total energy rate (including base energy rate and fuel factor adjustment rate) was $6.90, or 13.6% and $8.34, or 15.8%, lower on a per MWh basis for the three and nine months ended September 30,
2010, respectively, as compared to the same periods in 2009.

The following table summarizes the changes to our total energy
rate as a result of changes to our fuel factor adjustment rate:



|                               |  |                    |      |  
|------------------------------ |  | ------------------ | ---- | -
|Effective Date of Rate Change: |  | % Change(Decrease) |     
|January 1, 2009                |  |                    | (8.2 | )
|April 1, 2009                  |  |                    | (3.7 | )
|August 1, 2009                 |  |                    | (5.7 | )
|October 1, 2009                |  |                    | (8.0 | )
|April 1, 2010                  |  |                    | (3.8 | )

These decreases are due to
the continued reduction in our realized as well as projected energy costs.

The capacity costs we incurred, and thus the
capacity-related revenues we reflected pursuant to our formulary rate, increased $16.2 million, or 27.6%, and $24.6 million, or 13.8%, for the three and nine months ended September 30, 2010, respectively, as compared to the same periods in
2009, due to higher purchased power capacity costs partially offset by lower interest charges, net.

Our average costs to
member distribution cooperatives decreased $10.34 per MWh, or 13.5%, and $10.60, or 13.3%, for the three and nine months ended September 30, 2010, respectively, as compared to the same periods in 2009, as a result of decreases in our total
energy rate partially offset by higher capacity costs.

Sales to Non-Members.Non-member revenue increased by
$15.1 million or 164.2%, and $10.4 million, or 34.1%, in the three and nine months ended September 30, 2010, respectively, as compared to the same periods in 2009. For the three months ended September 30, 2010, the increase is due to an
increase in the prices at which we sold excess energy to non-members and an increase in the volume of excess energy sales. For the nine months ended September 30, 2010, the increase is due to an increase in the prices at which we sold excess
energy to non-members partially offset by a decrease in the volume of excess energy sales. Excess energy is sold at the prevailing market price at the time of the sale and is the result of changes in our purchased power portfolio, differences
between actual and forecasted needs, as well as changes in market conditions.



15



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##### Table of Contents



Power Supply Resources

We supply our member distribution cooperatives power requirements, consisting of capacity requirements and
energy requirements, through (i) our interests in electric generating facilities which consist of a 50% interest in the Clover Power Station (Clover), an 11.6% interest in North Anna, our Louisa combustion turbine facility
(Louisa), our Marsh Run combustion turbine facility (Marsh Run), our Rock Springs combustion turbine facility (Rock Springs), and our distributed generation facilities, and (ii) power purchases from third
parties through power purchase contracts and forward, short-term and spot market energy purchases. Our energy supply for the three and nine months ended September 30, 2010 and 2009, was as follows:



|                       |  |                                 |           |  |                                |  |       |      |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |  
|---------------------- |  | ------------------------------- | --------- |  | ------------------------------ |  | ----- | ---- |  |  | --------- |  |  |  | ----- | - |  |  | --------- |  |  |  | ----- | - |  |  | --------- |  |  |  | ----- | -
|                       |  | Three Months
EndedSeptember 30, |           |  | Nine Months
EndedSeptember 30, | 
|                       |  | 2010                            |           |  | 2009                           |  |       | 2010 |  |  | 2009      | 
|                       |  | (in MWh and percentages)        |           |  | (in MWh and percentages)       | 
|Generated:             |  |                                 |           |  |                                |  |       |      |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |  
|Clover                 |  |                                 | 728,055   |  |                                |  | 19.2  | %    |  |  | 812,126   |  |  |  | 31.1  | % |  |  | 2,345,630 |  |  |  | 26.0  | % |  |  | 2,160,336 |  |  |  | 28.6  | %
|North Anna             |  |                                 | 410,315   |  |                                |  | 10.8  |      |  |  | 464,538   |  |  |  | 17.8  |   |  |  | 1,206,562 |  |  |  | 13.4  |   |  |  | 1,318,249 |  |  |  | 17.5  |  
|Louisa                 |  |                                 | 131,619   |  |                                |  | 3.5   |      |  |  | 61,169    |  |  |  | 2.3   |   |  |  | 237,270   |  |  |  | 2.6   |   |  |  | 87,541    |  |  |  | 1.1   |  
|Marsh Run              |  |                                 | 204,448   |  |                                |  | 5.4   |      |  |  | 54,097    |  |  |  | 2.1   |   |  |  | 355,176   |  |  |  | 4.0   |   |  |  | 80,734    |  |  |  | 1.1   |  
|Rock Springs           |  |                                 | 137,783   |  |                                |  | 3.6   |      |  |  | 22,062    |  |  |  | 0.9   |   |  |  | 192,062   |  |  |  | 2.1   |   |  |  | 29,906    |  |  |  | 0.4   |  
|Distributed generation |  |                                 | 557       |  |                                |  |      |      |  |  | 448       |  |  |  |      |   |  |  | 896       |  |  |  |      |   |  |  | 455       |  |  |  |      |  
|                       |  |                                 |           |  |                                |  |       |      |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |  
|Total generated        |  |                                 | 1,612,777 |  |                                |  | 42.5  |      |  |  | 1,414,440 |  |  |  | 54.2  |   |  |  | 4,337,596 |  |  |  | 48.1  |   |  |  | 3,677,221 |  |  |  | 48.7  |  
|                       |  |                                 |           |  |                                |  |       |      |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |  
|Purchased:             |  |                                 |           |  |                                |  |       |      |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |  
|Total purchased        |  |                                 | 2,180,747 |  |                                |  | 57.5  |      |  |  | 1,196,953 |  |  |  | 45.8  |   |  |  | 4,675,302 |  |  |  | 51.9  |   |  |  | 3,873,036 |  |  |  | 51.3  |  
|                       |  |                                 |           |  |                                |  |       |      |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |  
|Total available energy |  |                                 | 3,793,524 |  |                                |  | 100.0 | %    |  |  | 2,611,393 |  |  |  | 100.0 | % |  |  | 9,012,898 |  |  |  | 100.0 | % |  |  | 7,550,257 |  |  |  | 100.0 | %
|                       |  |                                 |           |  |                                |  |       |      |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |   |  |  |           |  |  |  |       |  

We satisfy the majority of our capacity requirements and approximately half of our energy requirements
through our ownership interests in Clover, North Anna, Louisa, Marsh Run and Rock Springs. We purchase capacity and energy from the market to supply the remaining needs of our member distribution cooperatives.

Our operating expenses are significantly affected by the extent to which we purchase power and, relatedly, the availability of our base
load generating facilities, Clover and North Anna. Base load generating facilities generally have relatively higher fixed costs but relatively lower variable costs. When either Clover or North Anna is off-line or if they are not dispatched by PJM,
we purchase replacement energy from either Virginia Electric and Power Company (Virginia Power) or from the market. As a result, our operating expenses, and consequently our rates to our member distribution cooperatives, are more
significantly affected by the operations of Clover and North Anna than by our combustion turbine facilities. Our combustion turbine facilities have relatively lower fixed costs and greater operational flexibility; however, they have relatively
higher variable costs; and as a result we will operate them only when the market price of energy makes their operation economical or when their operation is required by PJM for system reliability purposes.

The output of Clover and North Anna for the three and nine months ended September 30, 2010 and 2009, as a percentage of the maximum
net dependable capacity rating of the facilities was as follows:



|         |  |                                 |      |   |                                |  |      |                                 |  |  |                                |   |  |      |      |   |      |  |      |      |  |  |       |   |  |  |      |   |  |  |       |  
|-------- |  | ------------------------------- | ---- | - | ------------------------------ |  | ---- | ------------------------------- |  |  | ------------------------------ | - |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ----- | - |  |  | ---- | - |  |  | ----- | -
|         |  | Clover                          |      |   | North Anna                     | 
|         |  | Three Months EndedSeptember 30, |      |   | Nine Months EndedSeptember 30, |  |      | Three Months EndedSeptember 30, |  |  | Nine Months EndedSeptember 30, |  
|         |  | 2010                            |      |   | 2009                           |  |      | 2010                            |  |  | 2009                           |   |  | 2010 |      |   | 2009 |  |      | 2010 |  |  | 2009  |  
|Unit 1   |  |                                 | 74.9 | % |                                |  | 85.3 | %                               |  |  | 81.7                           | % |  |      | 83.6 | % |      |  | 74.5 | %    |  |  | 100.5 | % |  |  | 91.9 | % |  |  | 91.5  | %
|Unit 2   |  |                                 | 77.8 |   |                                |  | 84.2 |                                 |  |  | 83.6                           |   |  |      | 68.5 |   |      |  | 95.1 |      |  |  | 100.3 |   |  |  | 80.5 |   |  |  | 100.7 |  
|Combined |  |                                 | 76.4 |   |                                |  | 84.8 |                                 |  |  | 82.7                           |   |  |      | 76.1 |   |      |  | 84.8 |      |  |  | 100.4 |   |  |  | 86.2 |   |  |  | 96.1  |  

The scheduled and
unscheduled outages for Clover for the three and nine months ended September 30, 2010 and 2009, were as follows:



|         |  |                                 |     |  |                                |  |   |                                 |  |  |                                |  |  |      |      |  |      |  |     |      |  |  |      |  |  |  |     |  |  |  |     | 
|-------- |  | ------------------------------- | --- |  | ------------------------------ |  | - | ------------------------------- |  |  | ------------------------------ |  |  | ---- | ---- |  | ---- |  | --- | ---- |  |  | ---- |  |  |  | --- |  |  |  | --- | 
|         |  | Scheduled Outages               |     |  | Unscheduled Outages            | 
|         |  | Three Months EndedSeptember 30, |     |  | Nine Months EndedSeptember 30, |  |   | Three Months EndedSeptember 30, |  |  | Nine Months EndedSeptember 30, | 
|         |  | 2010                            |     |  | 2009                           |  |   | 2010                            |  |  | 2009                           |  |  | 2010 |      |  | 2009 |  |     | 2010 |  |  | 2009 | 
|         |  | (in days)                       |     |  | (in days)                      |  |   | (in days)                       |  |  | (in days)                      | 
|Unit 1   |  |                                 |    |  |                                |  |  |                                 |  |  | 8.0                            |  |  |      | 14.0 |  |      |  | 2.6 |      |  |  |     |  |  |  | 4.4 |  |  |  | 2.9 | 
|Unit 2   |  |                                 | 5.2 |  |                                |  |  |                                 |  |  | 13.1                           |  |  |      | 53.1 |  |      |  |    |      |  |  | 0.9  |  |  |  | 0.4 |  |  |  | 4.4 | 
|         |  |                                 |     |  |                                |  |   |                                 |  |  |                                |  |  |      |      |  |      |  |     |      |  |  |      |  |  |  |     |  |  |  |     | 
|Combined |  |                                 | 5.2 |  |                                |  |  |                                 |  |  | 21.1                           |  |  |      | 67.1 |  |      |  | 2.6 |      |  |  | 0.9  |  |  |  | 4.8 |  |  |  | 7.3 | 
|         |  |                                 |     |  |                                |  |   |                                 |  |  |                                |  |  |      |      |  |      |  |     |      |  |  |      |  |  |  |     |  |  |  |     | 



16



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##### Table of Contents



The scheduled and
unscheduled outages for North Anna for the three and nine months ended September 30, 2010 and 2009, were as follows:



|         |  |                                 |      |  |                                |  |   |                                 |  |  |                                |  |  |      |      |  |      |  |     |      |  |  |      |  |  |  |      |  |  |  |   | 
|-------- |  | ------------------------------- | ---- |  | ------------------------------ |  | - | ------------------------------- |  |  | ------------------------------ |  |  | ---- | ---- |  | ---- |  | --- | ---- |  |  | ---- |  |  |  | ---- |  |  |  | - | 
|         |  | Scheduled Outages               |      |  | Unscheduled Outages            | 
|         |  | Three Months EndedSeptember 30, |      |  | Nine Months EndedSeptember 30, |  |   | Three Months EndedSeptember 30, |  |  | Nine Months EndedSeptember 30, | 
|         |  | 2010                            |      |  | 2009                           |  |   | 2010                            |  |  | 2009                           |  |  | 2010 |      |  | 2009 |  |     | 2010 |  |  | 2009 | 
|         |  | (in days)                       |      |  | (in days)                      |  |   | (in days)                       |  |  | (in days)                      | 
|Unit 1   |  |                                 | 19.0 |  |                                |  |  |                                 |  |  | 19.0                           |  |  |      | 25.1 |  |      |  | 4.4 |      |  |  |     |  |  |  | 4.4  |  |  |  |  | 
|Unit 2   |  |                                 |     |  |                                |  |  |                                 |  |  | 36.3                           |  |  |      |     |  |      |  | 2.0 |      |  |  |     |  |  |  | 13.0 |  |  |  |  | 
|         |  |                                 |      |  |                                |  |   |                                 |  |  |                                |  |  |      |      |  |      |  |     |      |  |  |      |  |  |  |      |  |  |  |   | 
|Combined |  |                                 | 19.0 |  |                                |  |  |                                 |  |  | 55.3                           |  |  |      | 25.1 |  |      |  | 6.4 |      |  |  |     |  |  |  | 17.4 |  |  |  |  | 
|         |  |                                 |      |  |                                |  |   |                                 |  |  |                                |  |  |      |      |  |      |  |     |      |  |  |      |  |  |  |      |  |  |  |   | 

Combustion turbine facilities.During the three and nine months ended September 30, 2010
and 2009, the operational availability of Louisa, Marsh Run and Rock Springs was as follows:



|             |  |                                 |      |   |                                |  |      |      |  |  |      |   |  |  |      |  
|------------ |  | ------------------------------- | ---- | - | ------------------------------ |  | ---- | ---- |  |  | ---- | - |  |  | ---- | -
|             |  | Three Months EndedSeptember 30, |      |   | Nine Months EndedSeptember 30, | 
|             |  | 2010                            |      |   | 2009                           |  |      | 2010 |  |  | 2009 |  
|Louisa       |  |                                 | 96.0 | % |                                |  | 99.3 | %    |  |  | 98.2 | % |  |  | 98.7 | %
|Marsh Run    |  |                                 | 95.3 |   |                                |  | 90.5 |      |  |  | 96.7 |   |  |  | 96.4 |  
|Rock Springs |  |                                 | 98.1 |   |                                |  | 99.7 |      |  |  | 95.0 |   |  |  | 96.0 |  

Operating Expenses

The components of our operating expenses for the three and nine months ended September 30, 2010 and 2009, were as
follows:



|                                                  |  |                                 |         |   |                                |   |         |      |  |   |         |  |  |   |         |  
|------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------- |  |  | - | ------- | -
|                                                  |  | Three Months
EndedSeptember 30, |         |   | Nine Months
EndedSeptember 30, |  
|                                                  |  | 2010                            |         |   | 2009                           |   |         | 2010 |  |   | 2009    | 
|                                                  |  | (in thousands)                  |         |   | (in thousands)                 |  
|                                                  |  |                                 |         |  
|Fuel                                              |  | $                               | 51,136  |   |                                | $ | 38,186  |      |  | $ | 119,388 |  |  | $ | 96,995  |  
|Purchased power                                   |  |                                 | 155,610 |   |                                |   | 88,466  |      |  |   | 339,567 |  |  |   | 285,243 |  
|Deferred energy                                   |  |                                 | (8,308  | ) |                                |   | 9,231   |      |  |   | 5,443   |  |  |   | 23,253  |  
|Operations and maintenance                        |  |                                 | 10,546  |   |                                |   | 9,276   |      |  |   | 28,907  |  |  |   | 35,304  |  
|Administrative and general                        |  |                                 | 9,409   |   |                                |   | 9,141   |      |  |   | 32,198  |  |  |   | 28,356  |  
|Depreciation, amortization and decommissioning    |  |                                 | 10,373  |   |                                |   | 10,296  |      |  |   | 31,050  |  |  |   | 30,779  |  
|Amortization of regulatory asset/(liability), net |  |                                 | 761     |   |                                |   | 166     |      |  |   | 2,460   |  |  |   | (40     | )
|Accretion of asset retirement obligations         |  |                                 | 841     |   |                                |   | 817     |      |  |   | 2,492   |  |  |   | 2,452   |  
|Taxes other than income taxes                     |  |                                 | 2,103   |   |                                |   | 2,006   |      |  |   | 6,413   |  |  |   | 6,044   |  
|                                                  |  |                                 |         |   |                                |   |         |      |  |   |         |  |  |   |         |  
|Total Operating Expenses                          |  | $                               | 232,471 |   |                                | $ | 167,585 |      |  | $ | 567,918 |  |  | $ | 508,386 |  
|                                                  |  |                                 |         |   |                                |   |         |      |  |   |         |  |  |   |         |  

Aggregate operating expenses increased $64.9 million, or 38.7%, for the three months ended
September 30, 2010, as compared to the same period in 2009 primarily due to the increase in purchased power expense and fuel expense slightly offset by a decrease in deferred energy.



| |  |  | Purchased power expense increased $67.1 million, or 75.9%, due to an 82.2% increase in the volume of purchased power slightly offset by a 3.5% decrease
in the average cost of purchased power. Our owned generation resources supplied 42.5% of our members power needs in 2010 versus 54.2% in 2009. The increase in purchased power volume was primarily related to the additional service territory. Also,
Clover was dispatched less by PJM and North Anna had decreased availability due to maintenance outages.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fuel expense increased $13.0 million, or 33.9%, primarily due to the increase in the dispatch of our combustion turbine facilities.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Deferred energy expense decreased $17.5 million, or 190.0%. During the three months ended September 30, 2010, we under-collected $8.3 million in
energy costs; whereas in the three months ended September 30, 2009, we over-collected $9.2 million in energy costs.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



17



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Aggregate operating
expenses increased by $59.5 million, or 11.7%, for the nine months ended September 30, 2010, as compared to the same period in 2009. The increase was primarily due to the increase in purchased power expense and fuel expense partially offset by
the decrease in deferred energy.



| |  |  | Purchased power expense increased $54.3 million, or 19.0%, primarily due to a 20.7% increase in the volume of purchased power slightly offset by a 1.4%
decrease in the average cost of purchased power. The increase in the volume was primarily related to the additional service territory.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fuel expense increased $22.4 million, or 23.1%, due to the increase in the dispatch of our combustion turbine facilities. This increase was slightly
offset by decreased coal costs at Clover as a result of the amortization of the regulatory liability associated with the Norfolk Southern dispute settlement partially offset by higher coal consumption at Clover. For further discussion of our dispute
with Norfolk Southern, see Part 1, Item 3 and Financial Condition in Part II, Item 7 in our 2009 Annual Report on Form 10-K.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Deferred energy expense decreased $17.8 million, or 76.6%. During the nine months ended September 30, 2010, we over-collected $5.4 million in
energy costs; whereas in the nine months ended September 30, 2009, we over-collected $23.3 million in energy costs.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Items

Investment Income.Investment income increased $0.5 million, or 79.6%, and $1.8 million, or 108.0%, for the three and
nine months ended September 30, 2010, respectively, as compared to the same periods in 2009, primarily due to higher investment balances.

Interest Charges, net. The primary factors affecting our interest charges, net are scheduled annual payments of principal on our indebtedness, interest charges related to our dispute
with Norfolk Southern Railway Company (Norfolk Southern), interest charges related to our credit facilities, and capitalized interest. We settled a dispute with Norfolk Southern in 2009. For further discussion of our dispute with Norfolk
Southern, see Part 1, Item 3 and Financial Condition in Part II, Item 7 in our 2009 Annual Report on Form 10-K.

The major components of interest charges, net for the three and nine months ended September 30, 2010 and 2009, were as follows:



|                                                      |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|----------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                      |  | Three Months
EndedSeptember 30, |         |   | Nine Months
EndedSeptember 30, |  
|                                                      |  | 2010                            |         |   | 2009                           |   |         | 2010 |  |   | 2009    |  
|                                                      |  | (in thousands)                  |         |   | (in thousands)                 |  
|Interest expense on long-term debt                    |  | $                               | (11,604 | ) |                                | $ | (11,938 | )    |  | $ | (34,771 | ) |  | $ | (35,789 | )
|Interest charges related to Norfolk Southern(1)       |  |                                 | 1,261   |   |                                |   | (770    | )    |  |   | 3,784   |   |  |   | (2,147  | )
|Other                                                 |  |                                 | (861    | ) |                                |   | (426    | )    |  |   | (2,153  | ) |  |   | (967    | )
|                                                      |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total Interest Charges                                |  |                                 | (11,204 | ) |                                |   | (13,134 | )    |  |   | (33,140 | ) |  |   | (38,903 | )
|Allowance for borrowed funds used during construction |  |                                 | 458     |   |                                |   | 343     |      |  |   | 1,186   |   |  |   | 760     |  
|                                                      |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Interest Charges, net                                 |  | $                               | (10,746 | ) |                                | $ | (12,791 | )    |  | $ | (31,954 | ) |  | $ | (38,143 | )
|                                                      |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  



|(1) | In 2010, includes amortization of the regulatory liability related to settlement of a dispute with Norfolk Southern. In 2009, includes interest charge
related to potential liability associated with the dispute.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Margin.Our net
margin, which is a function of our total interest charges plus any equity contributions, increased $0.2 million, or 6.6% and decreased $0.4 million, or 5.2%, for the three and nine months ended September 30, 2010, as compared to the same
periods in 2009. On June 29, 2010, our board of directors approved an equity contribution of $1.3 million for 2010 to be collected June 1, 2010 to December 31, 2010. The three and nine months ended September 30, 2010 includes
$0.5 million and $0.7 million, respectively, of equity contribution.

Financial Condition

The principal changes in our financial condition from December 31, 2009 to September 30, 2010, were caused by increases in
long-term debt due within one year, accounts payablemembers, interest rate hedge, regulatory assets, accounts payable, and accrued expenses, partially offset by decreases in long-term debt, lines of credit and fuel, materials and supplies.



| |  |  | Long-term debt due within one year increased $215.0 million due to the maturity of our 2001 Series A Bonds on June 1, 2011.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



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| |  |  | Accounts payablemembers increased $46.9 million due to higher member prepayments and the change in the margin stabilization adjustment as
compared to December 2009.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interest rate hedge increased $30.4 million. To mitigate a portion of our exposure to fluctuations in long-term interest rates we entered into an
interest rate hedge on May 14, 2010, with an initial notional amount of $300.0 million related to the 30-year U.S. Treasury bond. The liability is due to the interest rate on 30-year U.S. Treasury bonds decreasing after we executed the
transaction. See Liquidity and Capital ResourcesInterest Rate Hedge below.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Regulatory assets increased $27.1 million primarily related to the interest rate hedge described above.
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Accounts payable increased $17.7 million due to increased purchased power and natural gas.
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Accrued expenses increased $14.1 million primarily due to increased accrued interest.
| | - |  | -------------------------------------------------------------------------------------



| |  |  | Long-term debt decreased $215.0 million due to the maturity of our 2001 Series A Bonds on June 1, 2011.
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Amounts outstanding under our lines of credit decreased $27.0 million reflecting our repayment of all amounts outstanding under our lines of credit.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fuel, materials and supplies decreased $13.7 million related to the reduction in our inventory of coal.
| | - |  | -------------------------------------------------------------------------------------------------------

Liquidity and Capital Resources

Operations. Historically, our operating cash flows generally have been sufficient to meet our short-term and long-term capital expenditures related to our existing generating facilities, our
debt service requirements, and our ordinary business operations. During the first nine months of 2010 and 2009, our operating activities provided cash flow of $133.4 million and $76.7 million, respectively. Operating activities in the first nine
months of 2010 were primarily impacted by changes in current liabilities and regulatory assets and liabilities.



| |  |  | Current liabilities changed $78.7 million primarily related to the $46.9 million increase in accounts payablemembers, the $17.7 million increase
in accounts payable, and the $14.1 million increase in accrued expenses.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Regulatory assets and liabilities changed by $10.2 million primarily due to the amortization of the regulatory liability related to the Norfolk
Southern settlement.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

Financing Activities.In addition to liquidity from our operating
activities, we currently maintain a total of $410.0 million in committed credit facilities to cover short-term and medium-term funding needs. As of September 30, 2010, we had two short-term credit facilities totaling $95.0 million, and we had
revolving credit facilities totaling $315.0 million. At September 30, 2010, we had no short-term borrowings or letters of credit outstanding under any of these credit facilities. At December 31, 2009, we had $27.0 million of short-term
borrowings outstanding. During the third quarter of 2010, we increased our line of credit facility with Wells Fargo Bank, N.A. (formerly Wachovia Bank, N.A.) from $50.0 million to $70.0 million and extended the maturity to August 31, 2012. On
November 5, 2010, we renewed our $70.0 million line of credit with Bank of America, N.A. and extended the maturity to November 5, 2013. During the second quarter of 2010, we increased our three-year revolving credit facility with CoBank,
ACB from $75.0 million to $100.0 million and extended the maturity to June 18, 2013, and we renewed our $70.0 million line of credit with JPMorgan Chase Bank, N.A. and extended the maturity to June 1, 2012.

As of November 9, 2010, our credit facilities are as follows:



|                                                   |  |               |       |  |                 |  |                  | 
|-------------------------------------------------- |  | ------------- | ----- |  | --------------- |  | ---------------- | 
|Lender                                             |  | Amount        |       |  | Expiration Date | 
|                                                   |  | (in millions) |       |  |                 | 
|Branch Banking and Trust Company                   |  | $             | 25.0  |  |                 |  | April 30, 2011   | 
|National Rural Utilities Cooperative Finance Corp. |  |               | 75.0  |  |                 |  | April 15, 2012   | 
|JPMorgan Chase Bank, National Association          |  |               | 70.0  |  |                 |  | June 1, 2012     | 
|Wells Fargo Bank, N.A.                             |  |               | 70.0  |  |                 |  | August 31, 2012  | 
|CoBank, ACB                                        |  |               | 100.0 |  |                 |  | June 18, 2013    | 
|Bank of America, N.A.                              |  |               | 70.0  |  |                 |  | November 5, 2013 | 
|                                                   |  |               |       |  |                 |  |                  | 
|                                                   |  | $             | 410.0 |  |                 |  |                  | 
|                                                   |  |               |       |  |                 |  |                  | 



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Investing
Activities.Investing activities in the first nine months of 2010 were primarily impacted by activity related to electric plant additions for our generating facilities, and interest earned on investmentsunrestricted investments and
other, and cash and cash equivalents.

Interest Rate Hedge.We are exposed to fluctuations in long-term interest
rates related to the issuance of long-term debt and refunding of $215.0 million principal amount of our 2001 Series A Bonds that mature on June 1, 2011. To mitigate a portion of this exposure, on May 14, 2010, we entered into an interest
rate hedge with an initial notional amount of $300.0 million and a settlement rate tied to the 30-year U.S. Treasury bond. At September 30, 2010, the fair value of this interest rate hedge was a $30.4 million liability, which is recorded as a
current liability on our balance sheet.

Auction Rate Securities.As of September 30, 2010 and
December 31, 2009, we had $17.3 million of principal invested in six securities, all of which were originally issued as auction rate securities and two of which have converted to preferred stock, (ARS). The estimated fair value of
our ARS was $2.2 million as of September 30, 2010, and was $1.8 million as of December 31, 2009.

ARS pay variable
rates of interest which reset periodically in connection with the auction to purchase or sell the securities. Generally, the periodic auctions provide owners of ARS the opportunity to liquidate their investment at par value. In the event auctions
are not fully subscribed, which auction agents describe as failed auctions, these securities are typically illiquid.

In the
absence of liquidity provided by auctions, we rely on a third party to establish the estimated fair values of our ARS. The estimated fair values of our ARS are determined with a valuation model that utilizes expected cash flow streams, assessments
of credit quality, discount rates, and overall credit market liquidity, among other things.

The following represents changes
in our ARS principal, fair value, and unrealized loss for the nine months ended September 30, 2010:



|                             |  |                |        |  |            |  |  |                    |  |   |       |  |  |   |        | 
|---------------------------- |  | -------------- | ------ |  | ---------- |  |  | ------------------ |  | - | ----- |  |  | - | ------ | 
|                             |  | Principal      |        |  | Fair Value |  |  | UnrealizedLoss
(2) | 
|                             |  | (in thousands) |       
|ARS at December 31, 2009(1)  |  | $              | 17,320 |  |            |  |  |                    |  | $ | 1,813 |  |  | $ | 15,507 | 
|                             |  |                |        | 
|ARS at September 30, 2010(1) |  | $              | 17,320 |  |            |  |  |                    |  | $ | 2,218 |  |  | $ | 15,102 | 



|(1) | Recorded on our Condensed Consolidated Balance Sheet in InvestmentsUnrestricted investments and other, and classified as available for sale.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Recorded on our Condensed Consolidated Balance Sheet in Deferred ChargesRegulatory assets.
|--- | -------------------------------------------------------------------------------------------

The cumulative $15.1 million difference between the principal of our ARS and the estimated fair value of our ARS at September 30,
2010, was accounted for as a regulatory asset in accordance with Accounting for Regulated Operations. Future changes in the estimated fair value of our ARS will be accounted for in a similar manner.



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##### Table of Contents



OLD DOMINION
ELECTRIC COOPERATIVE

ITEM 3. QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

No material changes occurred in our exposure to market risk during the third quarter of 2010.

ITEM 4. CONTROLS AND PROCEDURES

As of the
end of the period covered by this report, our management, including the President and Chief Executive Officer, and Senior Vice President and Chief Financial Officer conducted an evaluation of the effectiveness of our disclosure controls and
procedures. Based upon that evaluation, the President and Chief Executive Officer, and Senior Vice President and Chief Financial Officer concluded that our disclosure controls and procedures are effective in ensuring that all material information
required to be filed in this report has been made known to them in a timely manner. We have established a Disclosure Assessment Committee comprised of members from senior and middle management to assist in this evaluation. There have been no
significant changes in our internal controls over financial reporting or in other factors that could significantly affect such controls during the past fiscal quarter.



21



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##### Table of Contents



OLD DOMINION
ELECTRIC COOPERATIVE

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Other Matters

Other than legal proceedings arising out of the ordinary
course of business, which management believes will not have a material adverse impact on our results of operations or financial condition, there is no other litigation pending or threatened against us.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for
the year ended December 31, 2009, which could affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently
known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 5. OTHER INFORMATION

Directors

On November 9, 2010, Mr. Bruce M. King resigned from our board of directors in connection with his upcoming retirement from
BARC Electric Cooperative (BARC), one of our member distribution cooperatives. Mr. Michael J. Keyser was recommended to the nominating committee by BARC to replace Mr. King and on November 9, 2010, our board of
directors elected Mr. Keyser as a member of the board of directors. Mr. Keyser will serve on the finance committee.

Power Supply
Planning

On October 29, 2010, Virginia Power announced that it will slow down its pursuit of an additional
nuclear-powered generating unit at North Anna and plans to reassess the schedule for construction of the unit in 2013. We will continue to evaluate our potential participation in the project in light of this announcement and future
developments.



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##### Table of Contents



ITEM 6.
EXHIBITS



|     |  |                                                                          
|---- |  | -------------------------------------------------------------------------
|31.1 |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)  
|31.2 |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)  
|32.1 |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. § 1350
|32.2 |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. § 1350



23



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##### Table of Contents



SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.



|                        |  |  |  |                                                  
|----------------------- |  |  |  | -------------------------------------------------
|                        |  |  |  | OLD DOMINION ELECTRIC COOPERATIVE                
|                        |  |  |  | Registrant                                       
|                        |  | 
|Date: November 10, 2010 |  |  |  | /s/ Robert L. Kees                               
|                        |  |  |  | Robert L. Kees                                   
|                        |  |  |  | Senior Vice President and Chief Financial Officer
|                        |  |  |  | (Principal financial officer)                    



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EXHIBIT INDEX



|              |  |                                                                          
|------------- |  | -------------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibit                                                   
|              | 
|31.1          |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)  
|31.2          |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)  
|32.1          |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. § 1350
|32.2          |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. § 1350



25