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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number 1-8809
SCANA CORPORATION
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 57-0784499
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
1426 MAIN STREET, COLUMBIA, SOUTH CAROLINA 29201
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (803) 748-3000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, without par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date within
60 days prior to the date of filing. (See definition of affiliate in Rule
405.)
1
Note: If a determination as to whether a particular person or
entity is an affiliate cannot be made without involving unreasonable
effort and expense, the aggregate market value of the common stock held by
non-affiliates may be calculated on the basis of assumptions reasonable
under the circumstances, provided that the assumptions are set forth in
this form.
The aggregate market value of the voting stock held by nonaffiliates
of the registrant was $2,865,232,398 at February 29, 1996 based on the
closing price of the Common Stock on such date, as reported by the New
York Stock Exchange composite tape in The Wall Street Journal.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes No
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
The total number of shares of the registrant's Common Stock,
no par value, outstanding at February 29, 1996 was 104,190,269.
DOCUMENTS INCORPORATED BY REFERENCE.
List hereunder the following documents if incorporated by reference
and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the
document is incorporated: (1) any annual report to security-holders; (2)
any proxy or information statement; and (3) any prospectus filed pursuant
to Rule 424(b) or (c) under the Securities Act of 1933. The listed
documents should be clearly described for identification purposes (e.g.,
annual report to security-holders for fiscal year ended December 24,
1980).
Specified sections of the Registrant's 1996 Proxy Statement, dated
March 15, 1996, in connection with its 1996 Annual Meeting of
Stockholders, are incorporated by reference in Part III hereof.
2
TABLE OF CONTENTS
Page
DEFINITIONS ....................................................... 4
PART I
Item 1. Business ............................................ 5
Item 2. Properties .......................................... 22
Item 3. Legal Proceedings ................................... 24
Item 4. Submission of Matters to a Vote of
Security Holders ................................... 24
Corporate Structure .......................................... 25
Executive Officers of the Registrant ......................... 26
PART II
Item 5. Market for Registrant's Common Stock
and Related Security Holder Matters ................ 28
Item 6. Selected Financial Data ............................. 29
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations ...... 30
Item 8. Financial Statements and Supplementary Data ......... 40
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ............. 69
PART III
Item 10. Directors and Executive Officers of the
Registrant ......................................... 69
Item 11. Executive Compensation .............................. 69
Item 12. Security Ownership of Certain Beneficial
Owners and Management .............................. 69
Item 13. Certain Relationships and Related Transactions ...... 69
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K ............................ 70
SIGNATURES ........................................................ 71
3
DEFINITIONS
The following abbreviations used in the text have the meanings set forth
below unless the context requires otherwise:
ABBREVIATION TERM
AFC......................... Allowance for Funds Used During Construction
BTU......................... British Thermal Unit
Circuit Court............... South Carolina Circuit Court
Clean Air Act............... Clean Air Act Amendments of 1990
Company..................... SCANA Corporation and its subsidiaries
Consumer Advocate........... Consumer Advocate of South Carolina
Dekatherm................... One million BTUs
DHEC........................ South Carolina Department of Health and
Environmental Control
DOE......................... United States Department of Energy
Energy Marketing............ SCANA Energy Marketing, Inc.
EPA......................... United States Environmental Protection Agency
FERC........................ United States Federal Energy Regulatory
Commission
Fuel Company................ South Carolina Fuel Company, Inc.
GENCO....................... South Carolina Generating Company, Inc.
InterCel.................... InterCel, Inc.
Investor Plus Plan.......... SCANA Corporation Investor Plus Plan
KVA......................... Kilovolt-ampere
KW.......................... Kilowatt
KWH......................... Kilowatt-hour
LNG......................... Liquefied Natural Gas
MCF......................... Thousand Cubic Feet
MHz......................... Megahertz
MPX......................... MPX Systems, Inc.
MTA......................... Major Trading Area
MW.......................... Megawatt
NEPA........................ National Energy Policy Act of 1992
NRC......................... United States Nuclear Regulatory Commission
PCS......................... Personal Communications Service
Petroleum Resources......... SCANA Petroleum Resources, Inc.
Pipeline Corporation........ South Carolina Pipeline Corporation
PRP......................... Potentially Responsible Party
PSA......................... The South Carolina Public Service Authority
PSC......................... The Public Service Commission of South
Carolina
PUHCA....................... Public Utility Holding Company Act of 1935,
as amended
SCANA....................... SCANA Corporation, the parent company
SCE&G....................... South Carolina Electric & Gas Company
SEC......................... United States Securities and Exchange
Commission
Southern Natural............ Southern Natural Gas Company
SPSP........................ SCANA Corporation Stock Purchase-Savings Plan
Suburban.................... Suburban Propane Group, Inc.
Summer Station.............. V. C. Summer Nuclear Station
Supreme Court............... South Carolina Supreme Court
Transco..................... Transcontinental Gas Pipeline Corporation
USEC........................ United States Enrichment Corporation
Westinghouse................ Westinghouse Electric Corporation
Williams Station............ A. M. Williams coal-fired, electric
generating station owned by GENCO
4
PART I
ITEM 1. BUSINESS
THE COMPANY
ORGANIZATION
SCANA, a South Carolina corporation having general
business powers, was incorporated on October 10, 1984 and is
a public utility holding company within the meaning of PUHCA but
is exempt from registration under such Act (see "Regulation").
SCANA has its principal executive office at 1426 Main Street,
Columbia, South Carolina 29201, telephone number (803) 748-3000.
SCANA holds, directly or indirectly, all the capital stock of
each of its subsidiaries except for the Preferred Stock of SCE&G.
SCANA and its subsidiaries had 4,347 full-time, permanent
employees as of December 31, 1995 as compared to 4,575 full-time,
permanent employees as of December 31, 1994.
RESTATEMENTS
Prior year financial information in this Annual Report on
Form 10-K has been restated to reflect the effect of a two-for-
one stock split in May 1995 and the effect of a change in
accounting principle during the second quarter of 1995 from the
successful efforts method of accounting to the full cost method
of accounting for the Company's oil and natural gas operations.
SEGMENTS OF BUSINESS
SCANA neither owns nor operates any physical properties. It
has twelve direct, wholly owned subsidiaries which are engaged in
the functionally distinct operations described below.
Regulated Utilities
The Company's principal subsidiary, SCE&G, is a regulated
public utility engaged in the generation, transmission,
distribution and sale of electricity and in the purchase and
sale, primarily at retail, of natural gas in South Carolina.
SCE&G also renders urban bus service in the metropolitan areas of
Columbia and Charleston, South Carolina. SCE&G's business is
subject to seasonal fluctuations. Generally, sales of
electricity are higher during the summer and winter months
because of air-conditioning and heating requirements, and sales
of natural gas are greater in the winter months due to its use
for heating requirements.
SCE&G's electric service area extends into 24 counties
covering more than 15,000 square miles in the central, southern
and southwestern portions of South Carolina. The service area
for natural gas encompasses all or part of 30 of the 46 counties
in South Carolina and covers more than 20,000 square miles. The
total population of the counties representing the combined
service area is approximately 2.3 million.
The predominant industries in the territories served by
SCE&G include: synthetic fibers; chemicals and allied products;
fiberglass and fiberglass products; paper and wood products;
metal fabrication; stone, clay and sand mining and processing;
and various textile-related products.
GENCO owns and operates Williams Station and sells
electricity solely to SCE&G. Fuel Company acquires, owns and
provides financing for SCE&G's nuclear fuel, fossil fuel and
sulfur dioxide emission allowance requirements.
5
Pipeline Corporation is engaged in the purchase,
transmission and sale of natural gas on a wholesale basis to
distribution companies and directly to industrial customers in 40
counties throughout South Carolina. Pipeline Corporation owns
LNG liquefaction and storage facilities. It also supplies the
natural gas for SCE&G's gas distribution system. Other resale
customers include municipalities and county gas authorities and
gas utilities. The industrial customers of Pipeline Corporation
are primarily engaged in the manufacturing or processing of
ceramics, paper, metal, food and textiles.
Nonregulated Businesses
Petroleum Resources owns and/or operates interests in oil
and gas properties in nine states and Federal waters offshore
Texas, Louisiana and Alabama. Petroleum Resources and Fina Oil
and Chemical Company (Fina) have entered into a joint exploration
and development agreement providing for the exclusive oil and gas
development rights on approximately 183,000 acres of onshore
lands owned by Fina in Terrebonne and LaFourche Parishes in
southern Louisiana. Petroleum Resources and Fina are continuing
an extensive 3-D seismic acquisition program on the property.
Fina is the operator of the multi-million dollar seismic program
which is financed primarily with internal cash flows from the
existing Petroleum Resources operations.
Energy Marketing markets natural gas and light hydrocarbons,
provides energy-related risk management services to producers and
consumers, and owns and operates gas gathering systems in
Wilburton, Oklahoma; Waskom, Texas; and offshore Alabama in
Mobile Bay. It also owns and operates a 60-million gallon under-
ground propane storage facility near York, South Carolina and a
62-mile, six-inch propane pipeline that connects the facility
with Dixie Pipeline Company's system, which traverses central
South Carolina. Energy Marketing leases cavern storage space to
industries, utilities and others. Energy Marketing has filed
with the FERC requesting certification for power marketing
status.
Suburban Propane purchases, delivers and sells propane. In
1995 Suburban sold approximately 27 million gallons of propane
and had approximately 34,000 residential, commercial and
industrial customers at year end.
MPX is involved in telecommunications-related ventures
providing fiber optic telecommunications, video conferencing and
specialized mobile radio services. MPX has installed over 900
miles of fiber optic cable in South Carolina, Georgia, Alabama,
Mississippi, Louisiana and Texas, and in addition, is active in
video conferencing and the establishment of a Specialized Mobile
Radio system in South Carolina. MPX has signed a seven-year
contract with the State of South Carolina for the build-out of
the 800 MHz radio system which will allow emergency agencies to
establish statewide communications during a disaster. Powertel
PCS Partners, L.P. (Powertel), a limited partnership that
includes MPX, successfully bid for three PCS licenses in the
Southeast offered by the Federal Communications Commission for
the development of a new generation of wireless communications.
Powertel had winning bids totaling $124.5 million in the FCC's
auction for radio airspace in three MTAs that cover parts of six
states. The areas are the Jacksonville MTA, a 50-county area of
northern Florida and southern Georgia; the Memphis MTA, a 93-
county area that includes southwest Tennessee, northern and
middle Mississippi and parts of eastern Arkansas; and the
Birmingham MTA, a 53-county area of Alabama. MPX held the
largest partnership interest, approximately 40%, of Powertel.
Powertel signed and consummated a business combination agreement
with InterCel, a publicly- traded cellular telephone company
providing services in Georgia, Alabama and Maine. MPX's interest
in the combined entity, after giving effect to public offerings
of common stock of the combined entity consummated February 7,
1996, is approximately 17%.
On March 6, 1996 InterCel entered into a definitive
agreement with GTE Mobilnet Incorporated (GTE) to purchase GTE's
PCS license for the Atlanta MTA for $195 million. InterCel plans
to finance the purchase principally through a $150 million
private placement of convertible preferred stock. The Company
has agreed to purchase $75 million of a series of preferred stock
that is non-convertible for four years. Closing of the purchase
is subject to regulatory approval.
6
ServiceCare, Inc. is engaged in providing energy related
products and services beyond the energy meter. Its primary
business is providing homeowners with service contracts on their
home appliances. At year end, ServiceCare had approximately
36,542 customers.
Primesouth, Inc. is engaged in power plant management and
maintenance services.
SCANA Resources, Inc. conducts energy-related businesses and
services.
Information with respect to major segments of business for
the years ended December 31, 1995, 1994 and 1993 is contained in
Note 11 of the Notes to Consolidated Financial Statements and all
such information is incorporated herein by reference.
COMPETITION
The electric utility industry has begun a major transition
that could lead to expanded market competition and less
regulatory protection. Future deregulation of electric wholesale
and retail markets will create opportunities to compete for new
and existing customers and markets. As a result, profit margins
and asset values of some utilities could be adversely affected.
The pace of deregulation, the future market price of electricity,
and the regulatory actions which may be taken by the PSC in
response to the changing environment cannot be predicted.
However, the Company is aggressively pursuing actions to position
itself strategically for the transformed environment. To enhance
its flexibility and responsiveness to change, the Company's
electric and gas utility, SCE&G, operates Strategic Business
Units. Maintaining a competitive cost structure is of paramount
importance in the utility's strategic plan. SCE&G has undertaken
a variety of initiatives, including reductions in operation and
maintenance costs and in staffing levels. In January 1996 the
PSC approved (as discussed under "Capital Requirements and
Financing Program") the accelerated recovery of SCE&G's electric
regulatory assets and the shift of depreciation reserves from
transmission and distribution assets to nuclear production
assets. SCE&G believes that these actions as well as numerous
others that have been and will be taken demonstrate its ability
and commitment to succeed in the new operating environment to
come.
Regulated public utilities are allowed to record as assets
some costs that would be expensed by other enterprises. If
deregulation or other changes in the regulatory environment
occur, the Company may no longer be qualified to apply this
accounting treatment and may be required to eliminate such
regulatory assets from its balance sheet. Such an event could
have a material adverse effect on the Company's results of
operations in the period the write-off is recorded. The Company
reported approximately $116 million and $4 million of regulatory
assets and liabilities, respectively, excluding amounts related
to net accumulated deferred income tax assets of approximately
$27 million, on its balance sheet at December 31, 1995.
CAPITAL REQUIREMENTS AND FINANCING PROGRAM
Capital Requirements
The cash requirements of the Company arise primarily from
SCE&G's operational needs, the Company's construction program and
the need to fund the activities or investments of the Company's
nonregulated subsidiaries. The ability of the Company's
regulated subsidiaries to replace existing plant investment, as
well as to expand to meet future demand for electricity and gas,
will depend upon their ability to attract the necessary financial
capital on reasonable terms. The Company's regulated
subsidiaries recover the costs of providing services through
rates charged to customers. Rates for regulated services are
generally based on historical costs. As customer growth and
inflation occur and the regulated subsidiaries expand their
construction programs, it is necessary to seek increases in
rates. As a result, the Company's future financial position and
results of operations will be affected by the regulated
subsidiaries' ability to obtain adequate and timely rate and
other regulatory relief.
7
On July 10, 1995, SCE&G filed an application with the PSC
for an increase in retail electric rates. On January 9, 1996 the
PSC issued an order granting SCE&G an increase of 7.34% which
will produce additional revenues of approximately $67.5 million
annually. The increase will be implemented in two phases. The
first phase, an increase in revenues of approximately $59.5
million annually based on a test year, or 6.47%, commenced on
January 15, 1996. The second phase will be implemented in
January 1997 and will produce additional revenues of
approximately $8.0 million annually, or .87% more than current
rates. The PSC authorized a return on common equity of 12.0%.
The PSC also approved establishment of a Storm Damage Reserve
Account capped at $50 million to be collected through rates over
a ten-year period. Additionally, the PSC approved accelerated
recovery of substantially all of SCE&G's electric regulatory
assets (excluding accumulated deferred income taxes) and the
transition obligation for postretirement benefits other than
pensions, changing the amortization periods to allow recovery by
the end of the year 2000. SCE&G's request to shift approximately
$257 million of depreciation reserves from transmission and
distribution assets to nuclear production assets was also
approved.
During 1996 the Company is expected to meet its capital
requirements, exclusive of additional PCS investments by MPX (see
"Other" below), principally through internally generated funds
(approximately 75%, after payment of dividends), sales of
additional shares of common stock including sales pursuant to the
Investor Plus Plan and the SPSP, and the issuance and sale of
debt securities. Short-term liquidity is expected to be provided
primarily by issuance of commercial paper. The timing and amount
of such sales and the type of securities to be sold will depend
upon market conditions and other factors.
The Company's estimates of its cash requirements for
construction and nuclear fuel expenditures, which are subject to
continuing review and adjustment, for 1996 and the four-year
period 1997-2000 are as follows:
Type of Facilities 1997-2000 1996
(Thousands of Dollars)
South Carolina Electric & Gas Company:
Electric Plant:
Generation . . . . . . . . . . . . . . $ 268,987 $ 49,036
Transmission . . . . . . . . . . . . . 92,502 17,976
Distribution . . . . . . . . . . . . . 319,092 64,227
Other. . . . . . . . . . . . . . . . . 34,152 13,835
Nuclear Fuel. . . . . . . . . . . . . . . 86,413 21,147
Gas . . . . . . . . . . . . . . . . . . . 94,147 16,918
Common . . . . . . . . . . . . . . . . . 34,089 34,633
Other . . . . . . . . . . . . . . . . . . 1,511 553
Total . . . . . . . . . . . . . . . . . 930,893 218,325
Other Companies Combined. . . . . . . . . . 138,708 79,101
Total . . . . . . . . . . . $1,069,601 $297,426
The above estimates exclude AFC.
Construction
The Company's cost estimates for its construction program
for the periods 1996 and 1997-2000, shown in the above table,
include costs of the projects described below.
8
SCE&G entered into a contract with Duke/Fluor Daniel in 1991
to design, engineer and build a 385 MW coal-fired electric
generating plant near Cope, South Carolina. Construction of the
plant started in November 1992. Commercial operation began in
January 1996. The cost of the Cope plant, excluding AFC, is
$410.9 million. In addition, the transmission lines for
interconnection with SCE&G's system cost $22.5 million.
Approximately $9.8 million of the amounts included in the above
table for 1996 relate to the completion of the Cope plant.
During 1995 SCE&G and GENCO expended approximately $23.4
million as part of a program to extend the operating lives of
certain non-nuclear generating facilities. Additional
improvements to be made under the program during 1996 are
estimated to cost approximately $21.5 million.
Actual expenditures for the years 1996 and 1997-2000 may
vary from the estimates set forth above due to factors such as
inflation, economic conditions, regulation, legislation, rates of
load growth, environmental protection standards and the cost and
availability of capital.
Other
In addition to the Company's capital requirements for 1996
described above, approximately $26.1 million will be required for
refunding and retiring outstanding securities and obligations.
For the years 1997-2000, the Company has an aggregate of $485
million of long-term debt maturing (including approximately $69.2
million for sinking fund requirements, of which $68.7 million may
be satisfied by deposit and cancellation of bonds issued upon the
basis of property additions or bond retirement credits) and $9.8
million of purchase or sinking fund requirements for preferred
stock.
On March 6, 1996 InterCel entered into a definitive
agreement with GTE Mobilnet Incorporated (GTE) to purchase GTE's
PCS license for the Atlanta MTA for approximately $195 million.
InterCel plans to finance the purchase principally through a $150
million private placement of convertible preferred stock. The
Company has agreed to purchase $75 million of a series of
preferred stock that is non-convertible for four years. Closing
of the purchase is subject to regulatory approval. The purchase
is expected to be financed through internally generated funds,
the sales of additional equity securities and the incurrence of
additional short-term and long-term indebtedness.
A percentage of the projected annual revenues for the year's
1996-2003 of certain fiber optic routes of a joint venture
between MPX and a subsidiary of ITC has been guaranteed by MPX.
The aggregate maximum amount of such guarantee over the eight-
year period is approximately $46.2 million, prior to reduction
for revenue contracts obtained by the joint venture.
Financing Program
The Company has in effect a medium-term note program for the
issuance from time to time of unsecured medium-term debt
securities. The proceeds from the sales of these securities may
be used to fund additional business activities in nonutility
subsidiaries, to reduce short-term debt incurred in connection
therewith or for general corporate purposes. At December 31,
1995 the Company had available for issuance $317.6 million under
this program.
SCE&G's First and Refunding Mortgage Bond Indenture, dated
April 1, 1945 (Old Mortgage), contains provisions prohibiting the
issuance of additional bonds thereunder (Class A Bonds) unless
net earnings (as therein defined) for twelve consecutive months
out of the fifteen months prior to the month of issuance are at
least twice the annual interest requirements on all Class A Bonds
to be outstanding (Bond Ratio). For the year ended December 31,
1995 the Bond Ratio was 3.97. The issuance of additional Class A
Bonds also is restricted to an additional principal amount equal
to (i) 60% of unfunded net property additions (which unfunded net
property additions totaled approximately $162.3 million at
December 31, 1995), (ii) retirements of Class A Bonds (which
retirement credits totaled $64.8 million at December 31, 1995),
and (iii) cash on deposit with the Trustee.
9
SCE&G has a new bond indenture (New Mortgage) dated April 1,
1993 covering substantially all of its electric properties under
which its future mortgage-backed debt (New Bonds) will be issued.
New Bonds are issued under the New Mortgage on the basis of a
like principal amount of Class A Bonds issued under the Old
Mortgage which have been deposited with the Trustee of the
New Mortgage (of which $185 million were available for such
purpose at December 31, 1995), until such time as all presently
outstanding Class A Bonds are retired. Thereafter, New Bonds
will be issuable on the basis of property additions in a
principal amount equal to 70% of the original cost of electric
and common plant properties (compared to 60% of value for Class A
Bonds under the Old Mortgage), cash deposited with the Trustee,
and retirement of New Bonds. New Bonds will be issuable under
the New Mortgage only if adjusted net earnings (as therein
defined) for twelve consecutive months out of the eighteen months
immediately preceding the month of issuance are at least twice
the annual interest requirements on all outstanding bonds
(including Class A Bonds) and New Bonds to be outstanding (New
Bond Ratio). For the year ended December 31, 1995 the New Bond
Ratio was 5.31.
The following additional financing transactions have
occurred since December 31, 1994:
On January 13, 1995 SCANA closed a $60 million unsecured
bank loan due January 12, 1996, and used the proceeds to pay
off loans in a like total amount. On January 12, 1996 SCANA
refinanced the loan with unsecured bank loans totaling $60
million due January 10, 1997 at initial interest rates
between 5.684% and 5.730%, subject to reset quarterly at
LIBOR plus a spread of nine to fifteen basis points.
On April 12, 1995 SCE&G issued $100 million of First
Mortgage Bonds, 7 5/8% series due April 1, 2025 to repay
short-term borrowings.
On September 25, 1995, SCANA sold 4,500,000 shares of its common stock.
Net proceeds were used for the reduction of
short-term indebtedness incurred by the Company for
investment in utility plant and nonregulated subsidiaries,
and for general corporate purposes.
Without the consent of at least a majority of the total
voting power of SCE&G's preferred stock, SCE&G may not issue or
assume any unsecured indebtedness if, after such issue or
assumption, the total principal amount of all such unsecured
indebtedness would exceed 10% of the aggregate principal amount
of all of SCE&G's secured indebtedness and capital and surplus;
provided, however, that no such consent shall be required to
enter into agreements for payment of principal, interest and
premium for securities issued for pollution control purposes.
Pursuant to Section 204 of the Federal Power Act, SCE&G and
GENCO must obtain FERC authority to issue short-term debt. The
FERC has authorized SCE&G to issue up to $200 million of
unsecured promissory notes or commercial paper with
maturity dates of twelve months or less but not later than
December 31, 1997. GENCO has not sought such authorization.
SCE&G had $165 million authorized and unused lines of credit
at December 31, 1995. In addition, Fuel Company has a credit
agreement for a maximum of $125 million with the full amount
available at December 31, 1995. The credit agreement supports
the issuance of short-term commercial paper for the financing of
nuclear and fossil fuels and sulfur dioxide emission allowances.
Fuel Company commercial paper outstanding at December 31, 1995
was $76.8 million.
SCE&G's Restated Articles of Incorporation prohibit issuance
of additional shares of preferred stock without consent of the
preferred stockholders unless net earnings (as defined therein)
for the twelve consecutive months immediately preceding the month
of issuance are at least one and one-half times the aggregate of
all interest charges and preferred stock dividend
requirements (Preferred Stock Ratio). For the year ended
December 31, 1995 the Preferred Stock Ratio was 2.58.
10
During 1995 SCANA issued 1,434,664 shares of the Company's
common stock under its Investor Plus Plan. In addition, SCANA
issued 1,630,993 shares of its common stock pursuant to its SPSP.
At December 31, 1995 SCANA has authorized and reserved for
issuance, and registered under effective registration statements,
1,506,108 and 2,551,139 shares of common stock pursuant to the
Investor Plus Plan and the SPSP, respectively.
The ratios of earnings to fixed charges (SEC method) were
3.00, 2.55, 3.38, 2.79 and 3.04 for the years ended December 31,
1995, 1994, 1993, 1992 and 1991 respectively.
The Company expects that it has or can obtain adequate
sources of financing to meet its projected cash requirements for
the next twelve months and for the foreseeable future.
Fuel Financing Agreements
SCE&G has assigned to Fuel Company all of its rights and
interests in various contracts relating to the acquisition and
ownership of nuclear and fossil fuels. To finance nuclear and
fossil fuels and sulfur dioxide emission allowances, Fuel Company
issues, from time to time, commercial paper which is supported,
up to $125 million, by an irrevocable revolving credit agreement
which expires July 31, 1998. Accordingly, the amounts
outstanding have been included in long-term debt. This
commercial paper and amounts outstanding under the revolving
credit agreement, if any, are guaranteed by SCE&G.
At December 31, 1995 commercial paper outstanding was
approximately $76.8 million at a weighted average interest rate
of 5.76%. (See Note 4 of Notes to Consolidated Financial
Statements).
ELECTRIC OPERATIONS
Electric Sales
In 1995 residential sales of electricity accounted for 43%
of electric sales revenues; commercial sales 30%; industrial
sales 20%; sales for resale 4%; and all other 3%. KWH sales by
classification for the years ended December 31, 1995 and 1994 are
presented below:
Sales
KWH %
Classification 1995 1994 Change
(thousands)
Residential 5,726,815 5,311,139 7.83
Commercial 5,076,091 4,846,619 4.73
Industrial 5,210,368 5,161,717 0.94
Sale for resale 1,063,064 1,024,376 3.78
Other 506,806 494,030 2.59
Total Territorial 17,583,144 16,837,881 4.43
Interchange 195,591 171,046 14.35
Total 17,778,735 17,008,927 4.53
11
SCE&G furnishes electricity for resale to three
municipalities, four investor-owned utilities, two electric
cooperatives and one public power authority. Such sales for
resale accounted for 4% of SCE&G's total electric sales revenues
in 1995.
During 1995 the Company recorded a net increase of 7,942
electric customers, increasing its total customers to 484,354.
The electric sales volume increased for the year ended
December 31, 1995 compared to the prior year as a result of
increased residential and commercial sales due to favorable
weather and customer growth. The all-time peak demand of 3,683
MW was set on August 14, 1995.
On August 8, 1995 SCE&G signed an agreement with the DOE to
lease the Savannah River Site's (SRS) power and steam generation
and transmission facilities. The agreement calls for SRS to
purchase all its electrical and a majority of its steam
requirements from SCE&G. SCE&G will lease (with an option to
renew) the power plant for ten years and the electrical
transmission lines for 40 years, with an option to refurbish the
facilities or build a new system.
Electric Interconnections
SCE&G's transmission system is part of the interconnected
grid extending over a large part of the southern and eastern
portions of the nation. SCE&G, Virginia Power Company, Duke
Power Company, Carolina Power & Light Company, Yadkin,
Incorporated and PSA are members of the Virginia-Carolinas
Reliability Group, one of the several geographic divisions within
the Southeastern Electric Reliability Council. The Council
provides for coordinated planning for reliability among bulk
power systems in the Southeast. SCE&G is also interconnected
with Georgia Power Company, Savannah Electric & Power Company,
Oglethorpe Power Corporation and Southeastern Power
Administration's Clark Hill Project.
Fuel Costs
The following table sets forth the average cost of nuclear
fuel and coal and the weighted average cost of all fuels
(including oil and natural gas) used by the Company for the years
1993-1995.
1995 1994 1993
Nuclear:
Per million BTU $ .48 $ .51 $ .47
Coal:
Per ton $40.57 $40.43 $40.48
Per million BTU 1.58 1.59 1.57
Weighted Average Cost
of All Fuels:
Per million BTU $ 1.26 $ 1.39 $ 1.31
The fuel costs shown above exclude the effects of a PSC-
approved offsetting of fuel costs through the application of
credits carried on SCE&G's books as a result of a 1980 settlement
of certain litigation.
12
Fuel Supply
The following table shows the sources and approximate
percentages of total KWH generation by each category of fuel for
the years 1993-1995 and the estimates for 1996 and 1997.
Percent of Total KWH Generated
Estimated Actual
1997 1996 1995 1994 1993
Coal 73% 71% 65% 76% 72%
Nuclear 24 24 27 17 23
Hydro 3 3 5 6 5
Natural Gas & Oil - 2 3 1 -
100% 100% 100% 100% 100%
Coal is used at all five of SCE&G's major fossil fuel-fired
plants and GENCO's Williams Station. Unit train deliveries are
used at all of these plants. On December 31, 1995 SCE&G had
approximately a 73-day supply of coal in inventory and GENCO had
approximately a 49-day supply.
The supply of coal is obtained through contracts and
purchases on the spot market. Spot market purchases are expected
to continue for coal requirements in excess of those provided by
the Company's existing contracts. Contracts for the purchase of
coal represent 91.5% of estimated requirements for 1996
(approximately 5.3 million tons).
The supply of contract coal is purchased from seven
suppliers located in eastern Kentucky and southwest Virginia.
Contract commitments, which expire at various times from 1997-
2003, approximate 4.85 million tons annually. Sulfur
restrictions on the contract coal range from .75% to 2%.
The Company believes that SCE&G's and GENCO's operations are
in substantial compliance with all existing regulations relating
to the discharge of sulfur dioxide. The Company has not been
advised by officials of DHEC that any more stringent sulfur
content requirements for existing plants are contemplated at the
State level. However, the Company will be required to meet the
more stringent Federal emissions standards established by the
Clean Air Act (see "Environmental Matters").
SCE&G has adequate supplies of uranium under contract to
manufacture nuclear fuel for Summer Station through 2005. The
following table summarizes all contract commitments for the
stages of nuclear fuel assemblies:
Commitment Contractor Regions(1) Term
Uranium Energy Resources
of Australia 9-13 1990-1997
Uranium Everest Minerals 9-13 1990-1996
Conversion Sequoyah Fuel Corp. 8-12 1989-1995
Enrichment USEC 12-18 1995-2005
Fabrication Westinghouse 1-21 1982-2009
Reprocessing None
(1) A region represents approximately one-third to one-half of the nuclear core
in the reactor at any one time. Region no. 11 was loaded in 1994 and
Region no. 12 will be loaded in 1996.
13
SCE&G has on-site spent nuclear fuel storage capability until at least 2009
and expects to be able to expand its storage capacity to accommodate the spent
fuel output for the life of the plant through rod consolidation, dry cask
storage or other technology as it becomes available. In addition, there is
sufficient on-site storage capacity over the life of Summer Station to permit
storage of the entire reactor core in the event that complete unloading should
become desirable or necessary for any reason. (See "Nuclear Fuel Disposal"
under "Environmental Matters" for information regarding the contract with the
DOE for disposal of spent fuel.)
Decommissioning
Decommissioning of Summer Station is presently projected to commence in the
year 2022 when the operating license expires. Based on a 1991 study, the
expenditures (on a before-tax basis) related to SCE&G's share of
decommissioning activities are estimated, in 2022 dollars assuming a 4.5%
annual rate of inflation, to be $545.3 million including partial reclamation
costs. SCE&G is providing for its share of estimated decommissioning costs of
Summer Station over the life of Summer Station. SCE&G's method of funding
decommissioning costs is referred to as COMReP (Cost of Money Reduction Plan).
Under this plan, funds collected through rates ($3.2 million in each of 1995
and 1994) are used to purchase insurance policies on the lives of certain
Company personnel. Through the purchase of insurance contracts, SCE&G is
able to take advantage of income tax benefits and accrue earnings on the fund
on a tax-deferred basis at a rate higher than can be achieved using more
traditional funding approaches. Amounts for decommissioning collected through
electric rates, insurance proceeds, and interest on proceeds less expenses
are transferred by SCE&G to an external trust fund in compliance with
the financial assurance requirements of the NRC. Management intends
for the fund, including earnings thereon, to provide for all eventual
decommissioning expenditures on an after-tax basis. The trust's
sources of decommissioning funds under the COMReP program include investment
components of life insurance policy proceeds, return on investment and the
cash transfers from SCE&G described above. SCE&G records its liability for
decommissioning costs in deferred credits.
GAS OPERATIONS
Gas Sales
In 1995 residential sales accounted for 27% of gas sales revenues;
commercial sales 19%; industrial sales 42%; sales for resale 12%. Dekatherm
sales by classification for the years ended December 31, 1995 and 1994
are presented below:
SALES
DEKATHERMS %
CLASSIFICATION 1995 1994 CHANGE
Residential 12,333,769 11,531,558 7.0
Commercial 10,519,581 9,886,622 6.4
Industrial 49,474,314 41,513,880 19.2
Sale for resale 15,923,483 15,178,820 4.9
Transportation gas 7,978,251 16,067,294 (50.4)
Total 96,229,398 94,178,174 2.2
14
During 1995 the Company recorded a net increase of 4,909
customers, increasing its total customers to 243,523.
The demand for gas is affected by conservation, the weather,
the price relationship between gas and alternate fuels and other
factors.
Pipeline Corporation has been successful in purchasing lower
cost natural gas in the spot market and arranging for its
transportation to South Carolina. Pipeline Corporation has also
negotiated contracts with certain direct and indirect industrial
customers for the transportation of natural gas that the
industrial customers purchase directly from suppliers.
On November 1, 1993 Transco and Southern Natural (Pipeline
Corporation's interstate suppliers) began operations under Order
No. 636, which deregulated the markets for interstate sales of
natural gas by requiring that pipelines provide transportation
services that are equal in quality for all gas supplies whether
the customer purchases gas from the pipeline or another supplier.
Pipeline Corporation, operating wholly within the State of
South Carolina, provides natural gas utility service, including
transportation services, for its customers, and supplies natural
gas to SCE&G and other wholesale purchasers. Energy Marketing
acquires and sells natural gas in the newly deregulated markets.
Petroleum Resources owns natural gas reserves and supplies
natural gas in the interstate markets. Neither Energy Marketing
nor Petroleum Resources supplies natural gas to any affiliate for
use in providing regulated gas utility services.
To reduce dependence on imported oil, NEPA imposes purchase
requirements for the purchase of alternate fuel vehicles on
Federal, state, municipal and private fleets. The Company
expects these requirements to develop business opportunities for
the sale of compressed natural gas as fuel for vehicles, but it
cannot predict the magnitude of this new market.
Gas Cost and Supply
Pipeline Corporation purchases natural gas under contracts
with producers and marketers on a short-term basis at current
price indices and on a long-term basis for reliability assurance
at index prices plus a gas inventory charge. The gas is brought
to South Carolina through transportation agreements with both
Southern Natural and Transco, which expire at various times from
1996 to 2003. The volume of gas which Pipeline Corporation is
entitled to transport under these contracts on a firm basis is
shown below:
Maximum Daily
Supplier Contract Demand Capacity (MCF)
Southern Natural Firm Transportation 184,974
Transco Firm Transportation 29,300
Total 214,274
Additional natural gas volumes are brought to Pipeline
Corporation's system as capacity is available for interruptible
transportation.
During 1995 the average cost per MCF of natural gas
purchased for resale, excluding firm service demand charges, was
approximately $1.95 compared to approximately $2.00 during 1994.
15
Pipeline Corporation has engaged in hedging activities on
the New York Mercantile Exchange (NYMEX) of its gas supply
pursuant to an experimental and limited program monitored by the
PSC. Any gains or losses associated with that hedging activity
are accounted for in Pipeline Corporation's purchased gas
adjustment clause and have impact on corporate earnings.
To meet the requirements of its other high priority natural
gas customers during periods of maximum demand, Pipeline
Corporation supplements its supplies of natural gas from two LNG
plants. The plants are capable of storing the liquefied
equivalent of 1,900,000 MCF of natural gas, of which
approximately 1,695,489 MCF were in storage at December 31, 1995.
On peak days the LNG plants can regasify up to 150,000 MCF per
day. Additionally, Pipeline Corporation had contracted for
6,450,727 MCF of natural gas storage space of which 4,307,796 MCF
were in storage on December 31, 1995.
The Company believes that supplies under contract and
available for spot market purchase are adequate to meet existing
customer demands and to accommodate growth.
Curtailment Plans
The FERC has established allocation priorities applicable to
firm and interruptible capacities on interstate pipeline
companies which require Southern Natural and Transco to allocate
capacity to Pipeline Corporation. The FERC allocation priorities
are not applicable to deliveries by Pipeline Corporation to its
customers, which are governed by a separate curtailment plan
approved by the PSC.
Gas Reserves
Petroleum Resources is engaged in oil and natural gas
exploration, development and production activities. It currently
owns and/or operates interests in oil and gas properties in
Texas, Louisiana, Mississippi, Oklahoma, California, Arkansas,
New Mexico, Alabama, Wyoming and Federal waters offshore Texas,
Louisiana and Alabama.
Gas Marketing
Energy Marketing markets natural gas and other light
hydrocarbons. It also owns and operates gas gathering systems in
Wilburton, Oklahoma; Waskom, Texas; and offshore Alabama in
Mobile Bay.
Propane Operations
Suburban purchases, delivers and sells propane. In 1995
Suburban sold approximately 27 million gallons of propane and had
approximately 34,000 residential, commercial and industrial
customers at year end.
Energy Marketing owns and operates a 60-million gallon
underground propane storage facility and leases storage space to
industrial companies, utilities and others. It also owns and
operates a 62-mile propane pipeline that connects the storage
facility with the Dixie Pipeline System which traverses central
South Carolina.
16
REGULATION
General
SCANA is a public utility holding company within the
meaning of PUHCA, but is exempt under Section 3(a)(1) of PUHCA
from regulation by the SEC as a registered holding company unless
and until the SEC shall otherwise order, except for Section
9(a)(2) thereof prohibiting the acquisition of securities of
other public utilities without a prior order of the SEC.
SCE&G is subject to the jurisdiction of the PSC as to retail
electric, gas and transit rates, service, accounting, issuance of
securities (other than short-term promissory notes) and other
matters.
Federal Energy Regulatory Commission
SCE&G and GENCO are subject to regulation under the Federal
Power Act, administered by the FERC and the DOE, in the
transmission of electric energy in interstate commerce and in the
sale of electric energy at wholesale for resale, as well as with
respect to licensed hydroelectric projects and certain other
matters, including accounting and the issuance of short-term
promissory notes. (See "Capital Requirements and Financing
Program.")
SCE&G holds licenses under the Federal Water Power Act or
the Federal Power Act with respect to all its hydroelectric
projects. The expiration dates of the licenses covering the
projects are as follows:
Project Capability (KW) License Expiration Date
Neal Shoals 5,000 1993
Stevens Creek 9,000 2025
Columbia 10,000 2000
Saluda 206,000 2007
Parr Shoals 14,000 2020
Fairfield Pumped Storage 512,000 2020
Pursuant to the provisions of the Federal Power Act, as
amended, applications for new licenses for Neal Shoals and
Stevens Creek were filed with the FERC on December 30, 1991. No
competing applications were filed. The FERC issued a new 30-year
license for the Stevens Creek project on November 22, 1995. The
Neal Shoals license application is in the final stage of review.
The FERC has issued a Notice of Authorization for Continued
Project Operation for Neal Shoals until the FERC acts on SCE&G's
application for a new license.
At the termination of a license under the Federal Power Act,
the United States government may take over the project covered
thereby, or the FERC may extend the license or issue a license to
another applicant. If the United States takes over a project or
the FERC issues a license to another applicant, the original
licensee is entitled to be paid its net investment in the
project, not to exceed fair value, plus severance damages.
SCE&G has filed an application with the FERC requesting
authorization to sell bulk power at market based rates. The
application also included proposed open access transmission
tariffs. (See "National Energy Policy Act of 1992 and FERC Order
636.")
Nuclear Regulatory Commission
SCE&G is subject to regulation by the NRC with respect to
the ownership and operation of Summer Station. The NRC's
jurisdiction encompasses broad supervisory and regulatory powers
over the construction and operation of nuclear reactors,
including matters of health and safety, antitrust considerations
and environmental impact. In addition, the Federal Emergency
Management Agency is responsible for the review, in conjunction
with the NRC, of certain aspects of emergency planning relating
to the operation of nuclear plants.
17
For the fourth time in the last five evaluations, Summer
Station received a category one rating from the Institute of
Nuclear Power Operations (INPO). The category one rating is the
highest given by INPO for a nuclear plant's overall operations.
National Energy Policy Act of 1992 and FERC Order 636
The Company's regulated business operations are likely to be
impacted by the NEPA and FERC Order No. 636. NEPA is designed to
create a more competitive wholesale power supply market by
creating "exempt wholesale generators" and by potentially
requiring utilities owning transmission facilities to provide
transmission access to wholesalers. Order No. 636 is intended to
deregulate the markets for interstate sales of natural gas by
requiring that pipelines provide transportation services that are
equal in quality for all gas suppliers whether the customer
purchases gas from the pipeline or another supplier. In the
opinion of the Company, it will be able to meet successfully the
challenges of these altered business climates and does not
anticipate there to be any material adverse impact on the results
of its operations, its financial position or its business
prospects.
RATE MATTERS
The following table presents a summary of significant rate
activity for the years 1991 - 1995 based on test years:
REQUESTED GRANTED
Date of % of
General Rate Application/ Amount % Increase Date of Amount Increase
Applications Hearing (Millions) Requested Order (Millions) Granted
PSC
Electric
Retail 07/10/95 $ 76.7 8.4% 1/09/96 $ 67.5 88%
Retail 12/07/92 $ 72.0* 11.4% 6/07/93 $ 60.5 84%
Transit
Fares 03/12/92 $ 1.7 42.0% 9/14/92 $ 1.0 59%
*As modified to reflect lowering of rate of return SCE&G was seeking.
On July 10, 1995, SCE&G filed an application with the PSC
for an increase in retail electric rates. On January 9, 1996 the
PSC issued an order granting SCE&G an increase of 7.34% which
will produce additional revenues of approximately $67.5 million
annually. The increase will be implemented in two phases. The
first phase, an increase in revenues of approximately $59.5
annually based on a test year, or 6.47%, commenced on January 15,
1996. The second phase will be implemented in January 1997 and
will produce additional revenues of approximately $8.0 million
annually, or .87% more than current rates. The PSC authorized a
return on common equity of 12.0%. The PSC also approved
establishment of a Storm Damage Reserve Account capped at $50
million to be collected through rates over a ten-year period.
Additionally, the PSC approved accelerated recovery of
substantially all (excluding accumulated deferred income taxes)
of SCE&G's electric regulatory assets and the remaining
transition obligation for postretirement benefits other than
pensions, changing the amortization periods to allow recovery by
the end of the year 2000. SCE&G's request to shift approximately
$257 million of depreciation reserves from transmission and
distribution assets to nuclear production assets was also
approved.
18
On October 27, 1994 the PSC issued an order approving the
Company's request to recover through a billing surcharge to its
gas customers the costs of environmental cleanup at the sites of
former manufactured gas plants. The billing surcharge, which was
effective with the first billing cycle in November 1994 and is
subject to annual review, provides for the recovery of
approximately $16.2 million representing substantially all actual
and projected site assessment and cleanup costs for the Company's
gas operations that had previously been deferred. In October
1995, as a result of the on-going annual review, the PSC approved
the continued use of the billing surcharge. The balance
remaining to be recovered amounts to approximately $14.5 million.
On September 14, 1992 the PSC issued an order granting the
Company a $.25 increase in transit fares from $.50 to $.75 in
both Columbia and Charleston, South Carolina; however, the PSC
also required $.40 fares for low income customers and denied the
Company's request to reduce the number of routes and frequency of
service. The new rates were placed into effect on October 5,
1992. The Company has appealed the PSC's order to the Circuit
Court. On May 23, 1995, the Circuit Court ordered the case back
to the PSC for reconsideration of several issues including the
low income rider program, routing changes, and the $.75 fare.
The Supreme Court declined to review an appeal of the Circuit
Court decision and dismissed the case. The PSC and other
intervenors filed another Petition for Reconsideration, which the
Circuit Court denied. Procedural matters in this case are yet to
be resolved in the court.
Fuel Cost Recovery Procedures
The PSC has established a fuel cost recovery procedure which
determines the fuel component in SCE&G's retail electric base
rates semiannually based on projected fuel costs for the ensuing
six-month period, adjusted for any overcollection or
undercollection from the preceding six-month period. SCE&G has
the right to request a formal proceeding at any time should
circumstances dictate such a review.
In the April 1995 semiannual review of the fuel cost
component of electric rates, the PSC decreased the rate from
14.16 mills per KWH to 13.48 mills per KWH, a monthly decrease of
$.68 for an average customer using 1,000 KWH per month. For the
October 1995 review the PSC continued the rate of 13.48 mills per
KWH.
SCE&G's gas rate schedules and contracts include mechanisms
which allow it to recover from its customers changes in the
actual cost of gas. SCE&G's firm gas rates allow for the
recovery of a fixed cost of gas, based on projections, as
established by the PSC in annual gas cost and gas purchase
practice hearings. Any differences between actual and projected
gas costs are deferred and included when projecting gas costs
during the next annual gas cost recovery hearing.
In the October 1995 review the PSC decreased the base cost
of gas from 51.058 cents per therm to 43.081 cents per therm
which resulted in a monthly decrease of $7.98 (including
applicable taxes) based on an average of 100 therms per month on
a residential bill during the heating season.
ENVIRONMENTAL MATTERS
General
Federal and state authorities have imposed upon the Company
environmental regulations and standards relating primarily to air
emissions, wastewater discharges and solid, toxic and hazardous
waste management. Developments in these areas may require that
equipment and facilities be modified, supplemented or replaced.
The ultimate effect of these regulations and standards upon
existing and proposed operations cannot be forecast.
19
Capital Expenditures
In the years 1993 through 1995, capital expenditures for
environmental control amounted to approximately $93.9 million.
In addition, approximately $12.6 million, $11.1 million, and $9.4
million of environmental control expenditures were made during
1995, 1994 and 1993, respectively, which are included in "Other
operation" and "Maintenance" expenses. It is not possible to
estimate all future costs for environmental purposes but
forecasts for capitalized expenditures are $10.8 million for 1996
and $151.3 million for the four-year period 1997 through 2000.
These expenditures are included in the Company's construction
program.
Air Quality Control
The Clean Air Act requires electric utilities to reduce
substantially emissions of sulfur dioxide and nitrogen oxide by
the year 2000. These requirements are being phased in over two
periods. The first phase had a compliance date of January 1,
1995 and the second, January 1, 2000. The Company's facilities
did not require modifications to meet the requirements of Phase
I. The Company will most likely meet the Phase II requirements
through the burning of natural gas and/or lower sulfur coal in
its generating units and the purchase and use of sulfur dioxide
emission allowances. Low nitrogen oxide burners are being
installed to reduce nitrogen oxide emissions to the levels
required by Phase II. Air toxicity regulations for the electric
generating industry are likely to be promulgated around the year
2000.
The Company filed compliance plans related to Phase II
requirements with DHEC by December 31, 1995. The Company
currently estimates that air emissions control equipment will
require capital expenditures of $122 million over the 1996-2000
period to retrofit existing facilities, with increased operation
and maintenance cost of approximately $1 million per year. To
meet compliance requirements through the year 2005, the
Company anticipates total capital expenditures of approximately
$159 million.
Water Quality Control
The Federal Clean Water Act, as amended, provides for the
imposition of effluent limitations that require various levels of
treatment for each wastewater discharge. Under this Act,
compliance with applicable limitations is achieved under a
national permit program. Discharge permits have been issued for
all and renewed for nearly all of SCE&G's and GENCO's generating
units. Concurrent with renewal of these permits the permitting
agency has implemented a more rigorous control program. The
Company has been developing compliance plans to meet this
program. Amendments to the Clean Water Act proposed in Congress
include several provisions which, if passed, could prove costly
to SCE&G. These include limitations to mixing zones and the
implementation of technology-based standards.
Superfund Act and Environmental Assessment Program
The Company has an environmental assessment program to
identify and assess current and former operations sites that
could require environmental cleanup. As site assessments are
initiated, estimates are made of the cost, if any, to investigate
and clean up each site. These estimates are refined as
additional information becomes available; therefore, actual
expenditures could differ significantly from original estimates.
Amounts estimated and accrued to date for site assessments and
cleanup relate primarily to regulated operations; such amounts
are deferred and are being amortized and recovered through rates
over a ten-year period for electric operations and an eight-year
period for gas operations. Deferred amounts totaled $18.0
million and $20.2 million at December 31, 1995 and 1994,
respectively. Estimates include, among other items, the costs
estimated to be associated with the matters discussed in the
following paragraphs.
SCE&G, owns four decommissioned manufactured gas plant sites
which contain residues of by-product chemicals. SCE&G has
maintained an active review of the sites to monitor the nature
and extent of the residual contamination.
20
In September 1992, the EPA notified SCE&G, the City of
Charleston and the Charleston Housing Authority of their
potential liability for the investigation and cleanup of the
Calhoun Park Area Site in Charleston, South Carolina. This site
originally encompassed approximately eighteen acres and included
properties which were the locations for industrial operations,
including a wood preserving (creosote) plant and one of SCE&G's
decommissioned manufactured gas plants. The original scope of
this investigation has been expanded to approximately 30 acres,
including adjacent properties owned by the National Park Service
and the City of Charleston, and private properties. The site has
not been placed on the National Priority List, but may be added
before cleanup is initiated. The PRPs have agreed with the EPA
to participate in an innovative approach to site investigation
and cleanup called "Superfund Accelerated Cleanup Model,"
allowing the pre-cleanup site investigation process to be
compressed significantly. The PRPs have negotiated an
administrative order by consent for the conduct of a Remedial
Investigation/Feasibility Study and a corresponding Scope of
Work. Field work began in November 1993. SCE&G is also working
with the City of Charleston to investigate potential
contamination from the manufactured gas plant which may have
migrated to the city's aquarium site. In 1994 the City of
Charleston notified SCE&G that it considers SCE&G to be
responsible for a $43.5 million increase in costs of the aquarium
project attributable to delays resulting from contamination of
the Calhoun Park Area Site. SCE&G believes it has meritorious
defenses against this claim and does not expect its resolution to
have a material impact on its financial position or results of
operations.
SCE&G has been listed as a PRP and has recorded liabilities,
which are not material, for the Macon-Dockery waste disposal site
near Rockingham, North Carolina. SCE&G has participated in de
minimis buy-outs for the Aqua-Tech Environmental Inc. site in
Greer, South Carolina and a landfill owned by Lexington County in
South Carolina. SCE&G expects to have no further involvement
with these two sites.
The Arkansas Department of Pollution Control and Ecology has
identified SCE&G as a PRP for clean-up of PCBs at an abandoned
transformer rebuilding plant in Little Rock, Arkansas. No formal
notice from the Department has been received. SCE&G believes
that its identification as a PRP was in error, and that the
resolution of this issue will not have a material effect on
SCE&G's results of operations or financial position.
Solid Waste Control
The South Carolina Solid Waste Policy and Management Act of
1991 directed DHEC to promulgate regulations for the disposal of
industrial solid waste. DHEC has promulgated a proposed
regulation, which if adopted as a final regulation in its present
form, would significantly increase SCE&G's and GENCO's costs of
construction and operation of existing and future ash management
facilities.
Nuclear Fuel Disposal
The Nuclear Waste Policy Act of 1982 requires that the
United States government make available by 1998 a permanent
repository for high-level radioactive waste and spent nuclear
fuel and imposes a fee of 1.0 mill per KWH of net nuclear
generation after April 7, 1983. Payments, which began in 1983,
are subject to change and will extend through the operating life
of SCE&G's Summer Station. SCE&G entered into a contract with the
DOE on June 29, 1983 providing for permanent disposal of its
spent nuclear fuel by the DOE. The DOE presently estimates that
the permanent storage facility will not be available until 2010.
SCE&G has on-site spent nuclear fuel storage capability until at
least 2009 and expects to be able to expand its storage capacity
to accommodate the spent fuel output for the life of the plant
through rod consolidation, dry cask storage or other technology
as it becomes available. The Act also imposes on utilities the
primary responsibility for storage of their spent nuclear fuel
until the repository is available.
21
OTHER MATTERS
With regard to SCE&G's insurance coverage for Summer
Station, reference is made to Note 10B of Notes to Consolidated
Financial Statements, which is incorporated herein by reference.
The Company's net investment in oil and gas properties is
subject to a quarterly ceiling test calculation that limits
capitalized costs to the aggregate of the estimated present value
of future net cash flows from proved oil and gas reserves plus
the lower of cost or fair market value of unproved properties.
Carrying values of proved reserves in excess of the ceiling
limitation are expensed currently.
In an effort to limit exposure to changing natural gas
prices, in January 1995 the Company entered into a series of
forward contacts relating to natural gas production. These
forward contracts have the effect of stabilizing the price that
the Company will receive on approximately sixty percent of its
forecasted natural gas production for the years 1996-2001. The
forward contracts are at an average price of $1.92 per dekatherm.
The Company remains exposed to price risk for any production that
is not subject to such forward contracts.
ITEM 2. PROPERTIES
SCANA owns no significant property other than the capital
stock of each of its subsidiaries. It holds, directly or
indirectly, all of the capital stock of each subsidiaries except
for the Preferred Stock of SCE&G.
SCE&G's bond indentures, securing the First and Refunding
Mortgage Bonds and First Mortgage Bonds issued thereunder,
constitute direct mortgage liens on substantially all of its
property. GENCO's Williams Station is subject to a first
mortgage lien.
For a brief description of the properties of the Company's
other subsidiaries, which are not significant as defined in Rule
1-02 of Regulation S-X, see Item 1, "Business-Segments of
Business-Nonregulated Businesses."
22
ELECTRIC
The following table gives information with respect to
electric generating facilities, all of which are owned by SCE&G
except as noted.
Net Generating
Present Year Capability
Facility Fuel Capability Location In-Service (KW)(1)
Steam
Urquhart Coal/Gas Beech Island, SC 1953 250,000
McMeekin Coal/Gas Irmo, SC 1958 252,000
Canadys Coal/Gas Canadys, SC 1962 430,000
Wateree Coal Eastover, SC 1970 700,000
Williams (2) Coal Goose Creek, SC 1973 560,000
Summer (3) Nuclear Parr, SC 1984 594,000
D-Area (4) Coal DOE Savannah
River Site, SC 1995 17,000
Cope (5) Coal Cope, SC 1996 385,000
Gas Turbines
Burton Gas/Oil Burton, SC 1961 28,500
Faber Place Gas Charleston, SC 1961 9,500
Hardeeville Oil Hardeeville, SC 1968 14,000
Canadys Gas/Oil Canadys, SC 1968 14,000
Urquhart Gas/Oil Beech Island, SC 1969 38,000
Coit Gas/Oil Columbia, SC 1969 30,000
Parr (6) Gas/Oil Parr, SC 1970 60,000
Williams (7) Gas/Oil Goose Creek, SC 1972 49,000
Hagood Gas/Oil Charleston, SC 1991 95,000
Hydro
Neal Shoals Carlisle, SC 1905 5,000
Parr Shoals Parr, SC 1914 14,000
Stevens Creek Martinez, GA 1914 9,000
Columbia Columbia, SC 1927 10,000
Saluda Irmo, SC 1930 206,000
Pumped Storage
Fairfield Parr, SC 1978 512,000
Total 4,282,000
(1) Summer rating.
(2) The steam unit at Williams Station is owned by GENCO.
(3) Represents SCE&G's two-thirds portion of the Summer Station.
(4) This plant is operated under lease from the DOE and is
dispatched to DOE's Savannah River Site steam
needs. "Net Capacity Rating" for this plant is expected
average hourly output. The lease, which may be extended,
expires on October 1, 2005.
(5) Plant began commercial operation in January 1996.
(6) Two of the four Parr gas turbines are leased and have a net
capability of 34,000 KW. This lease expires on June 29, 1996.
SCE&G has agreed to purchase the leased turbines on the lease
expiration date.
(7) The two gas turbines at Williams are leased and have a net
capability of 49,000 KW. This lease expires on June 29, 1997.
23
SCE&G owns 429 substations having an aggregate transformer
capacity of 19,577,868 KVA. The transmission system consists of
3,090 miles of lines and the distribution system consists of 15,596
pole miles of overhead lines and 3,191 trench miles of underground
lines.
GAS
Natural Gas
SCE&G's gas system consists of approximately 6,833 miles of
three-inch equivalent distribution pipelines and approximately
11,265 miles of distribution mains and related service facilities.
Pipeline Corporation's gas system consists of approximately
1,776 miles of transmission pipeline of up to 24 inches in diameter
which connect its resale customers' distribution systems with
transmission systems of Southern Natural and Transco.
Pipeline Corporation owns two LNG plants, one located near
Charleston, South Carolina and the other in Salley, South Carolina.
The Charleston facility can liquefy up to 6,000 MCF per day and
store the liquefied equivalent of 1,000,000 MCF of natural gas.
The Salley facility can store the liquefied equivalent of 900,000
MCF of natural gas and has no liquefying capabilities. On peak
days, the Charleston facility can regasify up to 60,000 MCF per day
and the Salley facility can regasify up to 90,000 MCF.
Petroleum Resources owns and/or operates interests in oil and
gas properties in Texas, Louisiana, Mississippi, Oklahoma,
California, Arkansas, New Mexico, Alabama, Wyoming and Federal
waters offshore Texas, Louisiana and Alabama.
Propane
SCE&G has propane air peak shaving facilities which can
supplement the supply of natural gas by gasifying propane to yield
the equivalent of 102,000 MCF per day of natural gas. These
facilities can store the equivalent of 430,405 MCF of natural gas.
TRANSIT
SCE&G owns 98 motor coaches which operate on a route system of
286 miles.
ITEM 3. LEGAL PROCEEDINGS
For information regarding legal proceedings, see ITEM 1.,
"BUSINESS - RATE MATTERS" and "BUSINESS - ENVIRONMENTAL MATTERS -
Superfund Act and Environmental Assessment Program" and Note 10 of
Notes to Consolidated Financial Statements appearing in Item 8.,
"FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
24
CORPORATE STRUCTURE
SCANA CORPORATION
A Holding Company, Owning Twelve
Direct, Wholly Owned Subsidiaries
SOUTH CAROLINA SCANA ENERGY MARKETING, INC.
ELECTRIC & GAS COMPANY Markets natural gas and other
Generates and sells electricity light hydrocarbons and provides
to wholesale and retail customers, transportation and bulk storage
purchases, sells and transports of propane. Also owns several
natural gas at retail and provides gas gathering systems and provides
public transit service in Columbia provides energy-related risk
and Charleston. management services to producers
and consumers.
SOUTH CAROLINA GENERATING SCANA PETROLEUM RESOURCES, INC.
COMPANY, INC. Owns and/or operates interests
Owns and operates Williams in oil and gas properties.
Station and sells electricity
to SCE&G. SERVICECARE, INC.
Provides energy-related products
SOUTH CAROLINA FUEL and services beyond the energy
COMPANY, INC. meter, principally service
Acquires, owns and provides contracts on home appliances.
financing for SCE&G's nuclear
fuel, fossil fuel and sulfur PRIMESOUTH, INC.
dioxide emission allowances. Engages in power plant
management and maintenance
SUBURBAN PROPANE GROUP, INC. services.
Purchases, delivers and
sells propane. SCANA DEVELOPMENT CORPORATION
Engaged in the acquisition,
SCANA RESOURCES, INC. development, management and
Conducts energy-related sale of real estate. (In
businesses and services. liquidation.)
MPX SYSTEMS, INC. SOUTH CAROLINA PIPELINE
Provides fiber optic CORPORATION
telecommunications, video Purchases, sells and transports
conferencing, specialized natural gas to wholesale and
mobile radio services and, direct industrial customers.
through joint ventures, is Owns and operates two LNG plants
developing PCS for wireless for the liquefaction, regasifi-
communications. cation and storage of natural gas.
Each of the above listed companies is organized and incorporated under the
laws of the State of South Carolina.
25
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers are elected at the annual organizational meeting
of the Board of Directors, held immediately after the annual meeting of
stockholders, and hold office until the next such organizational meeting,
unless a resignation is submitted, or unless the Board of Directors shall
otherwise determine.
Positions Held During
Name Age Past Five Years Dates
L.M. Gressette, Jr. 64 Chairman of the Board and
Chief Executive Officer *-present
President *-1995
W.B. Timmerman 49 President 1995-present
President MPX 1996-present
Executive Vice President 1994-1995
Assistant Secretary 1993-1996
Chief Financial Officer
and Controller *-1996
Senior Vice President *-1994
B.D. Kenyon 53 President and Chief
Operating Officer - SCE&G *-present
A.H. Gibbes 49 Group Executive - SCANA
Gas Group 1996-present
President - Pipeline
Corporation 1996-present
President - C&T Pipeline, Inc. 1996-present
Senior Vice President
General Counsel and
Assistant Secretary 1994-1996
Assistant Secretary - SCE&G,
GENCO, Fuel Company, MPX,
PrimeSouth, ServiceCare
and SCANA Development Corp. 1994-1996
Vice President, General Counsel
and Assistant Secretary 1993-1994
President and Treasurer -
SCANA Development Corp. *-present
C.B. Novinger 46 Senior Vice President -
Administration *-present
Max Earwood 63 Vice-Chairman - Pipeline
Corporation, Petroleum
Resources and Energy
Marketing 1996-present
President and Treasurer -
Pipeline Corporation *-1996
President and Treasurer -
Energy Marketing and
Petroleum Resources *-present
H.T. Arthur 50 Vice President, General Counsel
and Assistant Secretary -
SCANA 1996-present
Assistant Secretary of SCE&G,
and other subsidiaries 1996-present
Vice President and General
Counsel of Pipeline *-1996
*Indicates position held at least since March 1, 1991.
26
K.B. Marsh 40 Vice President - Finance,
Chief Financial Officer
and Controller 1996-present
Vice President - Finance,
Treasurer and Secretary 1992-1996
Vice President of
Corporate Planning - SCE&G 1991
Vice President and
Controller - SCE&G *-1991
B.T. Zeigler 40 Vice President 1996-present
General Counsel of SCE&G 1995-present
Associate General Counsel -
SCE&G Legal Department 1992-1995
Partner - Lewis, Babcock &
Hawkins Law Firm *-1992
*Indicates position held at least since March 1, 1991.
27
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
COMMON STOCK INFORMATION
1995 1994
4th 3rd 2nd 1st 4th 3rd 2nd 1st
Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
Price Range: (a)
High 28 5/8 24 1/4 23 3/8 22 1/2 22 1/4 23 23 1/4 25
Low 24 1/8 21 1/8 20 3/4 20 1/2 20 1/2 21 3/8 21 22 3/8
(a) As reported on the New York Stock Exchange Composite Listing. Information prior to the May 1995 two-for-one stock split
has been restated.
Dividends Per Share:
1995 Amount Date Declared Date Paid
First Quarter .36 February 14, 1995 April 1, 1995
Second Quarter .36 April 27, 1995 July 1, 1995
Third Quarter .36 August 23, 1995 October 1, 1995
Fourth Quarter .36 October 17, 1995 January 1, 1996
1994 Amount Date Declared Date Paid
First Quarter .3525 February 15,1994 April 1, 1994
Second Quarter .3525 April 28, 1994 July 1, 1994
Third Quarter .3525 August 24, 1994 October 1, 1994
Fourth Quarter .3525 October 18, 1994 January 1, 1995
December 31,
1995 1994
Number of common shares outstanding 103,623,863 96,035,020
Number of common stockholders of record 38,231 39,516
The principal market for SCANA common stock is the New York Stock Exchange.
The ticker symbol used is SCG. The corporate name SCANA is used in
newspaper stock listings.
The total number of shares of SCANA common stock outstanding at February
29, 1996 was 104,190,269.
(a) As reported on the New York Stock Exchange Composite Listing.
SECURITIES RATINGS (As of December 31, 1995)
SCANA CORPORATION SOUTH CAROLINA ELECTRIC & GAS COMPANY
Rating First Mortgage First and Refunding Preferred Commercial
Agency Medium-Term Notes Bonds Mortgage Bonds Stock Paper
Duff &
Phelps A- A+ A+ A D-1
Moody's A3 A1 A1 a1 P-1
Standard
& Poor's A- A A A- A-1
Further reference is made to Note 5 of Notes to Consolidated Financial Statements.
28
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
For the Years Ended December 31, 1995 1994* 1993* 1992* 1991*
Statement of Income Data (Thousands of dollars except statistics and per share amounts)
Operating Revenues $1,352,971 $1,322,062 $1,264,167 $1,138,375 $1,147,826
Operating Income 287,514 259,553 245,311 209,780 222,360
Other Income 8,060 (29,749) 27,335 11,960 (1,231)
Net Income 168,339 115,452 165,240 117,667 122,965
Balance Sheet Data
Utility Plant, Net $3,468,988 $3,293,667 $3,004,075 $2,810,279 $2,664,651
Total Assets 4,534,426 4,316,512 4,026,701 3,543,057 3,290,668
Capitalization:
Common Equity 1,554,680 1,359,141 1,317,495 1,149,087 1,016,104
Preferred Stock (Not subject to purchase or sinking fund) 26,027 26,027 26,027 26,027 26,027
Preferred Stock, Net (Subject to purchase or sinking fund) 46,243 49,528 52,840 56,154 59,469
Long-Term Debt, Net 1,588,879 1,548,824 1,424,399 1,204,754 1,122,396
Total Capitalization $3,215,829 $2,983,520 $2,820,761 $2,436,022 $2,223,996
Common Stock Data
Weighted Average Number of Common Shares Outstanding
(Thousands) 99,044 94,762 90,407 82,950 80,722
Earnings Per Weighted Average Share of Common Stock $1.70 $1.22 $1.83 $1.42 $1.52
Dividends Declared Per Share of Common Stock $1.44 $1.41 $1.37 $1.34 $1.31
Common Shares Outstanding (Year-End) (Thousands) 103,624 96,035 93,239 87,821 81,569
Book Value Per Share of Common Stock (Year-End) $15.00 $14.15 $14.13 $13.08 $12.46
Number of Common Shareholders of Record 38,231 39,516 41,564 42,937 42,811
Other Statistics
Electric:
Customers (Year-End) 484,354 476,412 468,874 461,900 453,660
Territorial Sales (Million KWH) 17,583 16,838 16,880 15,794 15,695
Residential:
Average annual use per customer (KWH) 13,859 13,048 14,077 13,037 13,246
Average annual rate per KWH $.0747 $.0743 $.0707 $.0695 $.0700
Generating Capability - Net MW (Year-End) 4,282 3,876 3,864 3,912 3,912
Territorial Peak Demand - Net MW 3,683 3,444 3,557 3,380 3,300
Gas:
Customers (Year-End) 243,523 238,614 234,736 231,153 225,819
Sales (Thousand Therms) 882,511 781,109 717,417 761,721 694,801
Residential:
Average annual use per customer (Therms) 570 543 605 577 521
Average annual rate per therm $ .82 $.84 $.76 $.74 $.77
* Prior year information has been retroactively restated for the effects of a two-for-one stock split in May 1995
and for a change in accounting principle in the second quarter of 1995 from the successful efforts method of accounting
to the full cost method of accounting for the Company's oil and natural gas operations.
29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPETITION
The electric utility industry has begun a major transition
that could lead to expanded market competition and less
regulatory protection. Future deregulation of electric wholesale
and retail markets will create opportunities to compete for new
and existing customers and markets. As a result, profit margins
and asset values of some utilities could be adversely affected.
The pace of deregulation, future prices of electricity, and the
regulatory actions which may be taken by the PSC in response to
the changing environment cannot be predicted. However, the
Company is aggressively pursuing actions to position itself
strategically for the transformed environment. To enhance its
flexibility and responsiveness to change, the Company's electric
and gas utility, SCE&G, operates Strategic Business Units.
Maintaining a competitive cost structure is of paramount
importance in the utility's strategic plan. SCE&G has undertaken
a variety of initiatives, including reductions in operation and
maintenance costs and in staffing levels. In January 1996 the
PSC approved (as discussed under "Liquidity and Capital
Resources") the accelerated recovery of SCE&G's electric
regulatory assets and the shift of depreciation reserves from
transmission and distribution assets to nuclear production
assets. SCE&G believes that these actions as well as numerous
others that have been and will be taken demonstrate its ability
and commitment to succeed in the new operating environment to
come.
Regulated public utilities are allowed to record as assets
some costs that would be expensed by other enterprises. If
deregulation or other changes in the regulatory environment
occur, the Company may no longer be eligible to apply this
accounting treatment and may be required to eliminate such
regulatory assets from its balance sheet. Such an event could
have a material adverse effect on the Company's results of
operations in the period the write-off is recorded. The Company
reported approximately $116 million and $4 million of regulatory
assets and liabilities, respectively, excluding amounts related
to net accumulated deferred income tax assets of approximately
$27 million, on its balance sheet at December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The cash requirements of the Company arise primarily from
SCE&G's operational needs, the Company's construction program and
the need to fund the activities or investments of the Company's
nonregulated subsidiaries. The ability of the Company's
regulated subsidiaries to replace existing plant investment, as
well as to expand to meet future demand for electricity and gas,
will depend upon their ability to attract the necessary financial
capital on reasonable terms. The Company's regulated
subsidiaries recover the costs of providing services through
rates charged to customers. Rates for regulated services are
generally based on historical costs. As customer growth and
inflation occur and the regulated subsidiaries expand their
construction programs, it is necessary to seek increases in
rates. As a result, the Company's future financial position and
results of operations will be affected by the regulated
subsidiaries' ability to obtain adequate and timely rate and
other regulatory relief.
Due to continuing customer growth, SCE&G entered into a
contract with Duke/Fluor Daniel in 1991 to design, engineer and
build a 385 MW coal-fired electric generating plant near Cope,
South Carolina. Construction of the plant started in November
1992. Commercial operation began in January 1996. The estimated
cost of the Cope plant, excluding AFC, is $410.9 million. In
addition, the transmission lines for interconnection with SCE&G's
system cost $22.5 million.
30
On July 10, 1995, SCE&G filed an application with the PSC
for an increase in retail electric rates. On January 9, 1996 the
PSC issued an order granting SCE&G an increase of 7.34% which
will produce additional revenues of approximately $67.5 million
annually. The increase will be implemented in two phases. The
first phase, an increase in revenues of approximately $59.5
million annually based on a test year, or 6.47%, commenced on
January 15, 1996. The second phase will be implemented in
January 1997 and will produce additional revenues of
approximately $8.0 million annually, or .87% more than current
rates. The PSC authorized a return on common equity of 12.0%.
The PSC also approved establishment of a Storm Damage Reserve
Account capped at $50 million and collected through rates over a
ten-year period. Additionally, the PSC approved accelerated
recovery of substantially all of SCE&G's electric regulatory
assets (excluding accumulated deferred income taxes) and the
remaining transition obligation for postretirement benefits other
than pensions, changing the amortization periods to allow
recovery by the end of the year 2000. SCE&G's request to shift
approximately $257 million of depreciation reserves from
transmission and distribution assets to nuclear production assets
was also approved.
The estimated primary cash requirements for 1996, excluding
requirements for fuel liabilities and short-term borrowings, and
the actual primary cash requirements for 1995 are as follows:
1996 1995
(Thousands of Dollars)
Property additions and construction
expenditures, net of allowance for
funds used during construction $276,280 $303,081
Nuclear fuel expenditures 21,147 21,045
Maturing obligations, redemptions and
sinking and purchase fund requirements 26,147 24,008
Total $323,574 $348,134
Approximately 56% of total cash requirements (after payment
of dividends) was provided from internal sources in 1995 as
compared to 31% in 1994.
The Company has in effect a medium-term note program for the
issuance from time to time of unsecured medium-term debt
securities. The proceeds from the sales of these securities may
be used to fund additional business activities in nonutility
subsidiaries, to reduce short-term debt incurred in connection
therewith or for general corporate purposes. At December 31,
1995 the Company had $317.6 million available for issuance.
SCE&G's First and Refunding Mortgage Bond Indenture, dated
April 1, 1945 (Old Mortgage), contains provisions prohibiting the
issuance of additional bonds thereunder (Class A Bonds) unless
net earnings (as therein defined) for twelve consecutive months
out of the fifteen months prior to the month of issuance are at
least twice the annual interest requirements on all Class A Bonds
to be outstanding (Bond Ratio). For the year ended December 31,
1995 the Bond Ratio was 3.97. The issuance of additional Class A
Bonds also is restricted to an additional principal amount equal
to (i) 60% of unfunded net property additions (which unfunded net
property additions totaled approximately $162.3 million at
December 31, 1995), (ii) retirements of Class A Bonds (which
retirement credits totaled $64.8 million at December 31, 1995),
and (iii) cash on deposit with the Trustee.
31
SCE&G has a new indenture (New Mortgage) dated April 1, 1993
covering substantially all of its electric properties under which
its future mortgage-backed debt (New Bonds) will be issued. New
Bonds are issued under the New Mortgage on the basis of a like
principal amount of Class A Bonds issued under the Old
Mortgage which have been deposited with the Trustee of the
New Mortgage (of which $185 million were available for such
purpose as of December 31, 1995), until such time as all
presently outstanding Class A Bonds are retired. Thereafter, New
Bonds will be issuable on the basis of property additions in a
principal amount equal to 70% of the original cost of electric
and common plant properties (compared to 60% of value for Class A
Bonds under the Old Mortgage), cash deposited with the Trustee,
and retirement of New Bonds. New Bonds will be issuable under
the New Mortgage only if adjusted net earnings (as therein
defined) for twelve consecutive months out of the eighteen months
immediately preceding the month of issuance are at least twice
the annual interest requirements on all outstanding bonds
(including Class A Bonds) and New Bonds to be outstanding (New
Bond Ratio). For the year ended December 31, 1995 the New Bond
Ratio was 5.31.
The following additional financing transactions have
occurred since December 31, 1994:
On January 13, 1995 SCANA closed a $60 million unsecured bank
loan due January 12, 1996, and used the proceeds to pay
off loans in a like total amount. On January 12, 1996 SCANA
refinanced the loan with unsecured bank loans totaling $60
million due January 10, 1997 at initial interest rates
between 5.684% and 5.730%, subject to reset quarterly at
LIBOR plus a spread of nine to fifteen basis points.
On April 12, 1995 SCE&G issued $100 million of First
Mortgage Bonds, 7 5/8% series due April 1, 2025 to repay
short-term borrowings.
On September 25, 1995 SCANA sold 4,500,000 shares of its common
stock. Net proceeds were used for the reduction of
short-term indebtedness incurred by the Company for
investment in utility plant and nonregulated subsidiaries,
and for general corporate purposes.
Without the consent of at least a majority of the total
voting power of SCE&G's preferred stock, SCE&G may not issue or
assume any unsecured indebtedness if, after such issue or
assumption, the total principal amount of all such unsecured
indebtedness would exceed 10% of the aggregate principal amount
of all of SCE&G's secured indebtedness and capital and surplus;
provided, however, that no such consent shall be required to
enter into agreements for payment of principal, interest and
premium for securities issued for pollution control purposes.
Pursuant to Section 204 of the Federal Power Act, SCE&G and
GENCO must obtain FERC authority to issue short-term
indebtedness. The FERC has authorized SCE&G to issue up to $200
million of unsecured promissory notes or commercial paper
with maturity dates of twelve months or less, but not later
than December 31, 1997. GENCO has not sought such authorization.
SCE&G had $165 million authorized and unused lines of credit
at December 31, 1995. In addition, Fuel Company has a credit
agreement for a maximum of $125 million with the full amount
available at December 31, 1995. The credit agreement supports
the issuance of short-term commercial paper for the financing of
nuclear and fossil fuels and sulfur dioxide emission allowances.
Fuel Company commercial paper outstanding at December 31, 1995
was $76.8 million.
32
SCE&G's Restated Articles of Incorporation prohibit issuance
of additional shares of preferred stock without consent of the
preferred stockholders unless net earnings (as defined therein)
for the twelve consecutive months immediately preceding the month
of issuance are at least one and one-half times the aggregate of
all interest charges and preferred stock dividend
requirements (Preferred Stock Ratio). For the year ended
December 31, 1995 the Preferred Stock Ratio was 2.58.
During 1995 SCANA issued 1,434,664 shares of the Company's
common stock under its Investor Plus Plan. In addition, SCANA
issued 1,630,993 shares of its common stock pursuant to its Stock
Purchase-Savings Plan (SPSP). At December 31, 1995 SCANA has
authorized and reserved for issuance, and registered under
effective registration statements, 1,506,108 and 2,551,139 shares
of common stock pursuant to the Investor Plus Plan and the SPSP,
respectively.
The Company anticipates that its 1996 cash requirements of
$323.6 million, exclusive of additional investments by MPX (see
"Other" below"), will be met through internally generated funds
(approximately 75%, after payment of dividends), the sales of
additional equity securities and the incurrence of additional
short-term and long-term indebtedness. The timing and amount of
such financing will depend upon market conditions and other
factors. Actual 1996 expenditures may vary from the estimates
set forth above due to factors such as inflation and economic
conditions, regulation and legislation, rates of load growth,
environmental protection standards and the cost and availability
of capital.
The Company expects that it has or can obtain adequate
sources of financing to meet its projected cash requirements for
the next twelve months and for the foreseeable future.
Environmental Matters
The Clean Air Act requires electric utilities to reduce
substantially emissions of sulfur dioxide and nitrogen oxide by
the year 2000. These requirements are being phased in over two
periods. The first phase had a compliance date of January 1,
1995 and the second, January 1, 2000. The Company's facilities
did not require modifications to meet the requirements of Phase
I. The Company will most likely meet the Phase II requirements
through the burning of natural gas and/or lower sulfur coal in
its generating units and the purchase and use of sulfur dioxide
emission allowances. Low nitrogen oxide burners are being
installed to reduce nitrogen oxide emissions to the levels
required by Phase II. Air toxicity regulations for the electric
generating industry are likely to be promulgated around the year
2000.
By December 31, 1995 the Company had filed compliance plans
related to Phase II requirements with DHEC. The Company
currently estimates that air emissions control equipment will
require capital expenditures of $122 million over the 1996-2000
period to retrofit existing facilities, with increased operation
and maintenance costs of approximately $1 million per year. To
meet compliance requirements through the year 2005, the
Company anticipates total capital expenditures of approximately
$159 million.
The Federal Clean Water Act, as amended, provides for the
imposition of effluent limitations that require various levels of
treatment for each wastewater discharge. Under this Act,
compliance with applicable limitations is achieved under a
national permit program. Discharge permits have been issued for
all and renewed for nearly all of SCE&G's and GENCO's generating
units. Concurrent with renewal of these permits, the permitting
agency has implemented more rigorous control programs. The
Company has been developing compliance plans for this program.
Amendments to the Clean Water Act proposed in Congress include
several provisions which, if passed, could prove costly to SCE&G.
These include limitations to mixing zones and the implementation
of technology-based standards.
33
The South Carolina Solid Waste Policy and Management Act of
1991 directed DHEC to promulgate regulations for the disposal of
industrial solid waste. DHEC has promulgated a proposed
regulation, which if adopted as a final regulation in its present
form, would significantly increase SCE&G's and GENCO's costs of
construction and operation of existing and future ash management
facilities.
The Company has an environmental assessment program to
identify and assess current and former operations sites that
could require environmental cleanup. As site assessments are
initiated, estimates are made of the cost, if any, to investigate
and clean up each site. These estimates are refined as
additional information becomes available; therefore, actual
expenditures could differ significantly from original estimates.
Amounts estimated and accrued to date for site assessments and
cleanup relate primarily to regulated operations; such amounts
are deferred and are being amortized and recovered through rates
over a ten-year period for electric operations and an eight-year
period for gas operations. Deferred amounts totaled $18.0
million and $20.2 million at December 31, 1995 and 1994,
respectively. Estimates include, among other items, the costs
associated with the matters discussed in the following
paragraphs.
SCE&G owns four decommissioned manufactured gas plant sites
which contain residues of by-product chemicals. SCE&G maintains
an active review of the sites to monitor the nature and extent of
the residual contamination.
In September 1992 the EPA notified SCE&G, the City of
Charleston and the Charleston Housing Authority of their
potential liability for the investigation and cleanup of the
Calhoun Park Area Site in Charleston, South Carolina. This site
originally encompassed approximately eighteen acres and included
properties which were the locations for industrial operations,
including a wood preserving (creosote) plant and one of SCE&G's
decommissioned manufactured gas plants. The original scope of
this investigation has been expanded to approximately 30 acres,
including adjacent properties owned by the National Park Service
and the City of Charleston, and private properties. The site has
not been placed on the National Priority List, but may be added
before cleanup is initiated. The PRPs have agreed with the EPA
to participate in an innovative approach to site investigation
and cleanup called "Superfund Accelerated Cleanup Model,"
allowing the pre-cleanup site investigation process to be
compressed significantly. The PRPs have negotiated an
administrative order by consent for the conduct of a Remedial
Investigation/Feasibility Study and a corresponding Scope of
Work. Field work began in November 1993. SCE&G is also working
with the City of Charleston to investigate potential
contamination from the manufactured gas plant which may have
migrated to the city's aquarium site. In 1994 the City of
Charleston notified SCE&G that it considers SCE&G to be
responsible for a $43.5 million increase in costs of the aquarium
project attributable to delays resulting from contamination of
the Calhoun Park Area Site. SCE&G believes it has meritorious
defenses against this claim and does not expect its resolution to
have a material impact on its financial position or results of
operations.
Regulatory Matters
SCE&G filed for electric rate relief in 1995 to encompass
primarily the remaining costs of completing the Cope Generating
Station. As discussed under "Liquidity and Capital Resources,"
the PSC issued an order on January 9, 1996 increasing electric
retail rates.
34
The Company's regulated business operations are likely to be
impacted by the NEPA and FERC Order No. 636. NEPA is designed to
create a more competitive wholesale power supply market by
creating "exempt wholesale generators" and by potentially
requiring utilities owning transmission facilities to provide
transmission access to wholesalers. Order No. 636 is intended to
deregulate the markets for interstate sales of natural gas by
requiring that pipelines provide transportation services that are
equal in quality for all gas suppliers whether the customer
purchases gas from the pipeline or another supplier. In the
opinion of the Company, it will be able to meet successfully the
challenges of these altered business climates and does not
anticipate there to be any material adverse impact on the results
of its operations, its financial position or its business
prospects.
Other
MPX, a wholly owned subsidiary of SCANA, through a joint
venture with subsidiaries of ITC Holding Company, Inc., a
Georgia-based telecommunications holding company, is constructing
a fiber optic network through Texas, Louisiana, Mississippi,
Alabama and Georgia. The network, which will consist of more
than 900 miles of fiber optic lines, has been substantially
completed and will cost approximately $73.5 million. MPX has
signed a seven-year contract with the State of South Carolina for
the build-out of the 800 MHz radio system which will allow
emergency agencies to establish statewide communications during a
disaster. Powertel PCS Partners, L.P. (Powertel), a limited
partnership that included MPX, successfully bid for three PCS
licenses in the Southeast offered by the Federal Communications
Commission for the development of a new generation of wireless
communications. Powertel had winning bids totaling $124.5
million in the FCC's auction for radio airspace in three Major
Trading Areas (MTA) that cover parts of six states. The areas are
the Jacksonville MTA, a 50-county area of northern Florida and
southern Georgia; the Memphis MTA, a 93-county area that includes
southwest Tennessee, northern and middle Mississippi and parts of
eastern Arkansas; and the Birmingham MTA, a 53-county area of
Alabama. MPX held the largest partnership interest,
approximately 40%, of Powertel. Powertel signed and consummated
a business combination agreement with InterCel, Inc. (InterCel),
a publicly traded cellular telephone company providing services
in Georgia, Alabama and Maine. MPX's interest in the combined
entity, after giving effect to public offerings of common stock
of the combined entity consummated February 7, 1996, is
approximately 17%. All new ventures currently capitalize on
fiber infrastructure in place and provide for expansion of the
network.
On March 6, 1996 InterCel entered into a definitive
agreement with GTE Mobilnet Incorporated (GTE) to purchase GTE's
PCS license for the Atlanta MTA for approximately $195 million.
InterCel plans to finance the purchase principally through a $150
million private placement of convertible preferred stock. The
Company has purchased $75 million of a series of preferred stock
that is non-convertible for four years. Closing of the purchase
is subject to regulatory approval. The purchase is expected to
be financed through internally generated funds, the sales of
additional equity securities and the incurrence of additional
short-term and long-term indebtedness.
A percentage of the projected annual revenues for the year's
1996-2003 of certain fiber optic routes of a joint venture
between MPX and a subsidiary of ITC has been guaranteed by MPX.
The aggregate maximum amount of such guarantee over the eight-
year period is approximately $46.2 million, prior to reduction
for revenue contracts obtained by the joint venture.
The Company's net investment in oil and gas properties is
subject to a quarterly ceiling test calculation that limits
capitalized costs to the aggregate of the estimated present value
of future net cash flows from proved oil and gas reserves plus
the lower of cost or fair market value of unproved properties.
Carrying values of proved reserves in excess of the ceiling
limitation are expensed currently.
In an effort to limit exposure to changing natural gas
prices, in January 1995 the Company entered into a series of
forward contacts relating to natural gas production. These
forward contracts have the effect of stabilizing the price that
the Company receives on approximately sixty percent of its
forecasted natural gas production for the years 1996-2001. The
forward contracts are at an average price of $1.92 per dekatherm.
The Company remains exposed to price risk for any production that
is not subject to such forward contracts.
35
Petroleum Resources and Fina Oil and Chemical Company (Fina)
have entered into a joint exploration and development agreement
providing for the exclusive oil and gas development rights on
approximately 183,000 acres of onshore lands owned by Fina in
Terrebonne and LaFourche Parishes in southern Louisiana.
Petroleum Resources and Fina are continuing an extensive 3-D
seismic acquisition program on the property. Fina is the
operator of the multi-million dollar seismic program, which is
financed and owned on a 50-50 basis between the companies.
Petroleum Resources' participation in the seismic and drilling
activity is financed primarily with internal cash flows from the
existing Petroleum Resources operations.
Petroleum Resources' change to the full cost method of
accounting during the second quarter of 1995 provides a better
matching of revenues and expenses given the primary focus of
Petroleum Resources on developing reserves on its own or others'
properties. In connection with the change, additional reserve
adjustments were recorded in the current and restated prior
periods. All reserve adjustments were non-cash and had no
impact on the liquidity of Petroleum Resources.
Statements of Financial Accounting Standards To Be Adopted
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." The provisions of the Statement, which will be
implemented by the Company for the fiscal year beginning January
1, 1996, require the recognition of a loss in the income
statement and related disclosures whenever events or changes in
circumstances indicate that the carrying amount of a long-lived
asset may not be recoverable. The Company does not believe that
adoption of the provisions of the Statement will have a material
impact on its results of operations or financial position.
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," which will be implemented by the Company on
January 1, 1996. The Company does not believe that adoption of
the provisions of the Statement will have a material impact on
its results of operations or financial position.
RESULTS OF OPERATIONS
Earnings and Dividends
Earnings per share of common stock, the percent increase
(decrease) from the previous year and the rate of return earned
on common equity for the years 1993 through 1995 were as follows:
1995 1994 1993
Earnings per weighted average share $1.70 $1.22 $1.83
Percent increase (decrease) in earnings
per share 39.3% (33.3%) 28.9%
Return earned on common equity (year-end) 10.8% 8.5% 12.5%
1995 Earnings per share and return on common equity increased
primarily as a result of improved results of
operations at Petroleum Resources, which recorded net losses
of $16.7 million in 1995 and $54.9 million in 1994. Higher
electric and gas margins and lower operation and maintenance
costs, which more than offset the negative impact of higher
fixed costs, also contributed to the favorable earnings
performance in 1995.
1994 Earnings per share and return on common equity decreased
primarily due to operations at Petroleum
Resources, which reported a net loss of $54.9 million for
1994 as compared to net income of $8.4 million for 1993.
The change results primarily from charges recorded from
application of the ceiling test. (See Note 1O of Notes to
Consolidated Financial Statements.)
36
The Company's financial statements include AFC. AFC is a
utility accounting practice whereby a portion of the cost of both
equity and borrowed funds used to finance construction (which is
shown on the balance sheet as construction work in progress) is
capitalized. An equity portion of AFC is included in
nonoperating income and a debt portion of AFC is included in
interest charges (credits) as noncash items both of which have
the effect of increasing reported net income. AFC represented
approximately 8.0% of income before income taxes in 1995, 8.3% in
1994 and 5.8% in 1993.
In 1995 SCANA's Board of Directors raised the quarterly cash
dividend on common stock to 36 cents per share from 35 1/4 cents
per share. The increase, effective with the dividend payable on
April 1, 1995, raised the indicated annual dividend rate to $1.44
per share from $1.41. SCANA has increased the dividend rate on
its common stock in 42 of the last 43 years.
Electric Operations
Electric sales margins for 1995, 1994 and 1993 were as
follows:
1995 1994 1993
(Millions of Dollars)
Electric operating revenues $1,006.4 $975.4 $940.1
Less: Fuel used in electric generation 227.4 235.1 229.7
Purchased power 14.7 20.1 13.1
Margin $ 764.3 $720.2 $697.3
1995 The electric sales margin increased primarily as a result of the
combined impact of warmer weather in the third
quarter of 1995, colder weather in the fourth quarter of 1995
and the base rate increase received by the Company in mid-
1994. These factors more than offset the negative impact of
milder weather experienced during the first half of 1995. An
increase of 7,942 electric customers to 484,354 total
customers contributed to an all-time peak demand record of
3,683 MW set on August 14, 1995.
1994 The increase in the electric sales margin is primarily the
result of an increase in retail electric rates
phased in over a two-year period beginning June 1993 and an
increase in industrial sales, which more than offset the
negative impact of a six percent decrease in residential sales
of electricity due to milder weather in 1994.
Increases (decreases) from the prior year in megawatt hour
(MWH) sales volume by classes were as follows:
Classification 1995 1994
Residential 415,676 (339,620)
Commercial 229,472 11,262
Industrial 48,651 274,467
Sale for Resale (excluding interchange) 38,688 18,408
Other 12,776 (6,907)
Total territorial 745,263 (42,390)
Interchange 24,545 (27,013)
Total 769,808 (69,403)
37
Gas Operations
Gas sales margins for 1995, 1994 and 1993 were as follows:
1995 1994 1993
(Millions of Dollars)
Gas operating revenues $342.7 $342.7 $320.2
Less: Gas purchased for resale 212.4 220.9 208.7
Margin $130.3 $121.8 $111.5
1995 The gas sales margin increased primarily as a result
of lower gas costs which allowed Pipeline Corporation to
compete successfully with alternate fuel suppliers in
industrial markets. A shifting of transportation customers to
the industrial class and an increase in interruptible gas
sales also contributed to the improved margin.
1994 The gas sales margin increased primarily as a result
of lower gas costs which allowed Pipeline Corporation to
compete successfully with alternate fuel suppliers in
industrial markets. Higher oil prices and a stronger economy
had a positive impact on industrial sales which increased for
both SCE&G and Pipeline Corporation.
Increases (decreases) from the prior year in dekatherm (DT)
sales volume by classes, including transportation gas, were as
follows:
Classification 1995 1994
Residential 802,211 (1,119,442)
Commercial 632,959 275,066
Industrial 7,960,434 11,178,821
Sale for resale 744,663 (3,965,310)
Transportation gas (8,089,043) (13,475,511)
Total 2,051,224 (7,106,376)
Other Operating Expenses
1995 Other operation and maintenance expenses decreased $6.6
million primarily as a result of lower pension costs and
lower costs at electric generating stations. The increase of
$10.7 million in depreciation and amortization expenses is
primarily attributable to additions to plant-in-service and
the write off of certain software costs. The $15.4 million
increase in income tax expense corresponds to the increase in
operating income. The increase in other taxes of $5.0 million
reflects higher property taxes resulting from higher millages
and assessments partially offset by lower payroll taxes
resulting from early retirements of employees.
1994 Other operation and maintenance expenses increased $2.8
million primarily due to an increase in the costs of
postretirement benefits other than pensions which are accrued
in accordance with Financial Accounting Standards Board
Statement No. 106. (See Note 1L of Notes to Consolidated
Financial Statements.) The $6.3 million increase in
depreciation and amortization expenses is attributable to
property additions and to increases in depreciation rates.
The increase in other taxes of $5.3 million reflects an
increase in SCE&G's property taxes.
38
Other Income
Other income, net of taxes, increased approximately $36
million in 1995 primarily due to the improved earnings
performance of Petroleum Resources as discussed under "Earnings
and Dividends."
Interest Expense
1995 The $17.9 million increase in interest expense, excluding the
debt component of AFC, is due primarily to
the issuance of additional debt, including commercial paper,
during the latter part of 1994 and early 1995.
1994 The $8.2 million increase in interest expense, excluding
the debt component of AFC, is primarily attributable
to the issuance of $100 million of First Mortgage Bonds in
July and $30 million of Pollution Control Facilities Revenue
Bonds in November, both to finance utility construction, and
to the issuance of long-term debt during 1993.
39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS OF CONSOLIDATED FINANCIAL
STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
Page
Independent Auditors' Report....................................... 41
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1995 and 1994... 42
Consolidated Statements of Income and Retained Earnings for
the years ended December 31, 1995, 1994 and 1993............. 44
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993............................. 45
Consolidated Statements of Capitalization as of
December 31, 1995 and 1994................................... 46
Notes to Consolidated Financial Statements..................... 48
Supplemental financial statement schedules are omitted because of the
absence of conditions under which they are required or because the required
information is included in the consolidated financial statements or in the
notes thereto.
40
INDEPENDENT AUDITORS' REPORT
SCANA CORPORATION:
We have audited the accompanying Consolidated Balance Sheets
and Consolidated Statements of Capitalization of SCANA
Corporation and subsidiaries (Company) as of December 31, 1995
and 1994 and the related Consolidated Statements of Income and
Retained Earnings and of Cash Flows for each of the three years
in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial position
of the Company at December 31, 1995 and 1994, and the results of
its operations and its cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
As discussed in Note 1B, the financial statements have been
restated to reflect the change from the successful efforts method
to the full cost method of accounting for the Company's oil and
gas operations.
s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Columbia, South Carolina
February 7, 1996
41
CONSOLIDATED BALANCE SHEETS
December 31, 1995 1994
ASSETS (Thousands of Dollars)
Utility Plant (Notes 1, 3 and 4):
Electric $3,539,068 $3,424,951
Gas 484,752 467,576
Transit 3,768 3,785
Common 91,616 77,327
Total 4,119,204 3,973,639
Less accumulated depreciation and amortization 1,367,541 1,333,360
Total 2,751,663 2,640,279
Construction work in progress 644,661 582,628
Nuclear fuel, net of accumulated amortization 46,492 43,591
Acquisition adjustment-gas, net of accumulated amortization 26,172 27,169
Utility Plant, Net 3,468,988 3,293,667
Nonutility Property and Investments (Net of accumulated
depreciation and depletion)(Note 1) 314,207 317,309
Current Assets:
Cash and temporary cash investments (Note 8) 16,082 12,938
Receivables 211,173 183,180
Inventories (At average cost):
Fuel (Notes 3 and 4) 61,499 60,273
Materials and supplies 47,674 47,463
Prepayments 15,870 19,853
Accumulated deferred income taxes 20,186 18,629
Total Current Assets 372,484 342,336
Deferred Debits:
Emission allowances 28,514 19,409
Unamortized debt expense 13,432 13,488
Unamortized deferred return on plant investment (Note 1) 6,369 10,614
Nuclear plant decommissioning fund (Note 1) 36,070 30,383
Other (Notes 1 and 10) 294,362 289,306
Total Deferred Debits 378,747 363,200
Total $4,534,426 $4,316,512
42
December 31, 1995 1994
CAPITALIZATION AND LIABILITIES (Thousands of Dollars)
Stockholders' Investment:
Common equity (Note 5) $1,554,680 $1,359,141
Preferred stock (Not subject to purchase or sinking funds) 26,027 26,027
Total Stockholders' Investment 1,580,707 1,385,168
Preferred Stock, Net (Subject to purchase or sinking
funds)(Notes 6 and 8) 46,243 49,528
Long-Term Debt, Net (Notes 3, 4 and 8) 1,588,879 1,548,824
Total Capitalization 3,215,829 2,983,520
Current Liabilities:
Short-term borrowings (Notes 8 and 9) 112,524 171,827
Current portion of long-term debt (Note 3) 40,983 38,055
Current portion of preferred stock (Note 6) 2,439 2,418
Accounts payable 138,778 119,963
Customer deposits 13,643 13,768
Taxes accrued 66,914 46,670
Interest accrued 25,884 25,226
Dividends declared 39,056 35,530
Other 14,625 17,220
Total Current Liabilities 454,846 470,677
Deferred Credits:
Accumulated deferred income taxes (Notes 1 and 7) 542,022 561,703
Accumulated deferred investment tax credits (Notes 1 and 7) 87,719 91,349
Accumulated reserve for nuclear plant decommissioning (Note 1) 36,070 30,383
Other (Note 1) 197,940 178,880
Total Deferred Credits 863,751 862,315
Commitments and Contingencies (Note 10) - -
Total $4,534,426 $4,316,512
See Notes to Consolidated Financial Statements.
43
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Years Ended December 31, 1995 1994 1993
(Thousands of Dollars
except per share amounts)
Operating Revenues (Notes 1 and 2):
Electric $1,006,420 $ 975,388 $ 940,121
Gas 342,662 342,672 320,195
Transit 3,889 4,002 3,851
Total Operating Revenues 1,352,971 1,322,062 1,264,167
Operating Expenses:
Fuel used in electric generation 227,405 235,136 229,736
Purchased power 14,704 20,104 13,057
Gas purchased for resale 212,427 220,923 208,695
Other operation (Note 1) 228,682 229,996 223,239
Maintenance (Note 1) 58,432 63,725 67,652
Depreciation and amortization (Note 1) 129,888 119,177 112,844
Income taxes (Notes 1 and 7) 109,949 94,510 90,007
Other taxes 83,970 78,938 73,626
Total Operating Expenses 1,065,457 1,062,509 1,018,856
Operating Income 287,514 259,553 245,311
Other Income (Note 1):
Other income (loss), net of income taxes (1,915) (37,925) 18,406
Allowance for equity funds used during construction 9,975 8,176 8,929
Total Other Income 8,060 (29,749) 27,335
Income Before Interest Charges
and Preferred Stock Dividends 295,574 229,804 272,646
Interest Charges (Credits):
Interest on long-term debt, net 116,368 108,804 98,695
Other interest expense 17,102 6,749 8,672
Allowance for borrowed funds used
during construction (Note 1) (11,922) (7,156) (6,178)
Total Interest Charges, Net 121,548 108,397 101,189
Income Before Preferred Stock Cash
Dividends of Subsidiary 174,026 121,407 171,457
Preferred Stock Cash Dividends of
Subsidiary (At stated rates) (5,687) (5,955) (6,217)
Net Income 168,339 115,452 165,240
Retained Earnings at Beginning of Year, as
previously reported 523,668 506,380 462,893
Adjustments for the Cumulative Effect on Prior
Years of Applying Retroactively the Full Cost
Method of Accounting for Oil and Gas (Note 1) (51,297) (15,550) (12,809)
Retained Earnings at Beginning of Year, as adjusted 472,371 490,830 450,084
Common Stock Cash Dividends Declared (Note 5) (142,719) (133,911) (124,494)
Retained Earnings at End of Year $ 497,991 $ 472,371 $ 490,830
Net Income $ 168,339 $ 115,452 $ 165,240
Weighted Average Number of Common Shares
Outstanding (Thousands) 99,044 94,762 90,407
Earnings Per Weighted Average Share of Common Stock $1.70 $1.22 $1.83
See Notes to Consolidated Financial Statements.
44
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995 1994 1993
(Thousands of Dollars)
Cash Flows From Operating Activities:
Net income $168,339 $115,452 $165,240
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation, depletion and amortization 197,735 272,106 163,263
Amortization of nuclear fuel 20,017 13,487 18,156
Deferred income taxes, net (21,969) (9,282) 63,729
Deferred investment tax credits, net (3,630) (3,632) (3,658)
Net regulatory asset - adoption of SFAS No. 109 10,797 (1,951) (31,531)
Dividends declared on preferred stock of subsidiary 5,687 5,955 6,217
Allowance for funds used during construction (21,897) (15,332) (15,107)
Loss on reacquired debt (3,313) (60) (17,063)
Nuclear refueling accrual 6,957 (4,881) (6,086)
Equity in (earnings) losses of investees 666 (230) (319)
Over (under) collections, fuel adjustment clauses 18,986 (16,966) (14,308)
Early retirements (24,823) (7,086) (11,840)
Emission allowances (9,105) (19,409) -
Changes in certain current assets and liabilities:
(Increase) decrease in receivables (27,993) (9,059) (35,244)
(Increase) decrease in inventories (1,437) 2,131 (10,995)
(Increase) decrease in prepayments 3,983 1,973 802
Increase (decrease) in accounts payable 18,815 (19,331) 33,165
Increase (decrease) in estimated rate
refunds and related interest - (2,509) (15,302)
Increase (decrease) in taxes accrued 20,244 (3,393) (14,941)
Increase (decrease) in interest accrued 658 3,442 (7,511)
Other, net 5,515 (5,517) 22,109
Net Cash Provided From Operating Activities 364,232 295,908 288,776
Cash Flows From Investing Activities:
Utility property additions and construction expenditures,
net of AFC (298,480) (389,268) (307,274)
(Increase) decrease in nonutility property and investments:
Acquisition of oil and gas producing properties - (47,189) (122,621)
Nonutility property (25,646) (115,541) (82,066)
Investments (62,750) (19,006) (4,066)
Sale of Real Estate Assets 18,528 79,439 -
Net Cash Used For Investing Activities (368,348) (491,565) (516,027)
Cash Flows From Financing Activities:
Proceeds:
Issuance of mortgage bonds 99,583 99,207 592,884
Issuance of common stock 172,036 63,317 129,066
Issuance of notes and loans 62,542 60,000 148,059
Issuance of pollution control bonds - 30,000 -
Other long-term debt - - 3,005
Repayments:
Mortgage bonds (64,779) - (430,000)
Notes (69,444) (75,545) (72,040)
Other long-term debt (11,300) (230) (1,195)
Preferred stock (3,264) (3,398) (3,295)
Dividend payments:
Common stock (139,297) (131,925) (122,129)
Preferred stock (5,750) (6,048) (6,247)
Short-term borrowings, net (59,303) 128,808 1,863
Fuel financings, net 26,236 13,844 (18,948)
Net Cash Provided By Financing Activities 7,260 178,030 221,023
Net Increase (Decrease) in Cash and Temporary Cash Investments 3,144 (17,627) (6,228)
Cash and Temporary Cash Investments, January 1 12,938 30,565 36,793
Cash and Temporary Cash Investments, December 31 $ 16,082 $ 12,938 $ 30,565
Supplemental Cash Flows Information:
Cash paid for - Interest $130,495 $110,347 $113,010
- Income taxes 99,050 90,012 93,337
Noncash Financing Activities:
Department of Energy decontamination and
decommissioning obligation - - 4,965
See Notes to Consolidated Financial Statements.
45
SCANA Corporation
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31, 1995 1994
Common Equity (Note 5): (Thousands of Dollars)
Common stock, without par value, authorized 150,000,000 shares; issued
and outstanding, 1995 - 103,623,863 shares and 1994 - 96,035,020 shares $1,056,689 $ 886,770
Retained earnings 497,991 472,371
Total Common Equity 1,554,680 48% 1,359,141 46%
South Carolina Electric & Gas Company:
Cumulative Preferred Stock (Not subject to purchase or sinking funds):
$100 Par Value - Authorized 200,000 shares
$50 Par Value - Authorized 125,209 shares
Shares Outstanding Redemption Price
Eventual
Series 1995 1994 Current Through Minimum
$100 Par 8.40% 197,668 197,668 102.80 11-30-96 101.00 19,767 19,767
$50 Par 5.00% 125,209 125,209 52.50 - 52.50 6,260 6,260
Total Preferred Stock (Not subject to purchase or sinking funds) 26,027 1% 26,027 1%
Cumulative Preferred Stock (Subject to purchase or sinking funds)(Notes 6 and 8):
$100 Par Value - Authorized 1,550,000 shares
Shares Outstanding Redemption Price
Eventual
Series 1995 1994 Current Through Minimum
7.70% 86,965 89,984 101.00 - 101.00 8,696 8,998
8.12% 123,045 126,835 102.03 - 102.03 12,305 12,684
Total 210,010 216,819
$50 Par Value - Authorized 1,614,405 shares
Shares Outstanding Redemption Price
Eventual
Series 1995 1994 Current Through Minimum
4.50% 17,519 19,088 51.00 - 51.00 876 954
4.60% 834 2,334 50.50 - 50.50 42 117
4.60%(A) 26,052 28,052 51.00 - 51.00 1,303 1,403
4.60%(B) 74,800 78,200 50.50 - 50.50 3,740 3,910
5.125% 72,000 73,000 51.00 - 51.00 3,600 3,650
6.00% 83,200 86,400 50.50 - 50.50 4,160 4,320
8.72% 95,985 127,956 51.00 12-31-98 50.00 4,799 6,398
9.40% 183,219 190,245 51.175 - 51.175 9,161 9,512
Total 553,609 605,275
$25 Par Value - Authorized 2,000,000 shares; None outstanding in 1995 and 1994
Total Preferred Stock (Subject to purchase or sinking funds) 48,682 51,946
Less: Current portion, including sinking fund requirements 2,439 2,418
Total Preferred Stock, Net (Subject to purchase or sinking funds) 46,243 1% 49,528 2%
See Notes to Consolidated Financial Statements.
46
December 31, 1995 1994
Long-Term Debt (Notes 3, 4 and 8): (Thousands of Dollars)
SCANA Corporation:
Bank Notes, due 1997 (Various rates between 5.684% and 5.730%, reset quarterly) 60,000 60,000
Medium-Term Notes:
Year of
Series Maturity
5.76% 1998 20,000 20,000
7.17% 1999 42,400 42,400
6.60% 1999 30,000 30,000
6.15% 2000 20,000 20,000
6.51% 2003 20,000 20,000
South Carolina Electric & Gas Company:
First Mortgage Bonds:
Year of
Series Maturity
6% 2000 100,000 100,000
6 1/4% 2003 100,000 100,000
7.70% 2004 100,000 100,000
7 1/8% 2013 150,000 150,000
7 1/2% 2023 150,000 150,000
7 5/8% 2023 100,000 100,000
7 5/8% 2025 100,000 -
First and Refunding Mortgage Bonds:
Year of
Series Maturity
4 7/8% 1995 - 16,000
5.45% 1996 15,000 15,000
6% 1997 15,000 15,000
6 1/2% 1998 20,000 20,000
7 1/4% 2002 30,000 30,000
9% 2006 130,771 145,000
8 7/8% 2021 120,450 155,000
Pollution Control Facilities Revenue Bonds:
5.95% Series, due 2003 6,560 6,660
Fairfield County Series 1984, due 2014 (6.50%) 56,820 56,820
Richland County Series 1985, due 2014 (6.50%) 5,210 5,210
Fairfield County Series 1986, due 2014 (6.50%) 1,090 1,090
Colleton and Dorchester Counties Series 1987, due 2014 (6.60%) 4,365 4,365
Orangeburg County Series 1994, due 2024 (Daily adjusted rate) 30,000 30,000
Department of Energy Decontamination and Decommissioning Obligation 3,560 3,922
Commercial Paper - 11,200
Other 3,993 3,294
South Carolina Generating Company, Inc.:
Berkeley County Pollution Control
Facilities Revenue Bonds, due 2014 (6.50%) 35,850 35,850
Note, 7.78%, due 2011 63,700 67,400
South Carolina Fuel Company, Inc.:
Commercial Paper 76,830 50,594
South Carolina Pipeline Corporation:
Notes, 6.72%, due 2013 22,500 23,750
SCANA Development Corporation:
Bank Loans - 3,246
Total Long-Term Debt 1,634,099 1,591,801
Less - Current maturities, including sinking fund requirements 40,983 38,055
- Unamortized discount 4,237 4,922
Total Long-Term Debt, Net 1,588,879 50% 1,548,824 51%
Total Capitalization $3,215,829 100% 2,983,520 100%
See Notes to Consolidated Financial Statements.
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. Organization and Principles of Consolidation
SCANA Corporation (Company), a South Carolina corporation,
is a public utility holding company within the meaning of the
Public Utility Holding Company Act of 1935 but is exempt from
registration under such Act. The Company, through wholly owned
subsidiaries, is predominately engaged in the generation and sale
of electricity to wholesale and retail customers in South
Carolina and in the purchase, sale and transportation of natural
gas to wholesale and retail customers in South Carolina. The
Company is also engaged in other energy-related businesses, such
as owning and operating interests in oil and gas properties and
natural gas marketing. The Company also provides, in the South
and Southeast, fiber optic communications and, through joint
ventures, is developing personal communication services for
wireless communications.
The accompanying Consolidated Financial Statements reflect
the consolidation of the accounts of the Company and its wholly
owned subsidiaries:
Regulated utilities
South Carolina Electric & Gas Company (SCE&G)
South Carolina Fuel Company, Inc.
South Carolina Generating Company, Inc. (GENCO)
South Carolina Pipeline Corporation (Pipeline Corporation)
Nonregulated businesses
SCANA Petroleum Resources, Inc. (Petroleum Resources)
SCANA Energy Marketing, Inc.
Suburban Propane Group, Inc.
MPX Systems, Inc. (MPX)
Primesouth, Inc.
ServiceCare, Inc.
SCANA Resources, Inc.
SCANA Development Corporation (in liquidation)
Certain investments are reported using the equity method of
accounting. Significant intercompany balances and transactions
have been eliminated in consolidation in compliance with
Statement of Financial Accounting Standards No. 71 "Accounting
for the Effects of Certain Types of Regulation" which provides
that profit on intercompany sales to regulated affiliates are not
eliminated if the sales price is reasonable and the future
recovery of the sales price through the rate-making process is
probable.
B. Stock Split and Change in Accounting Principle
On April 27, 1995 the Company's Board of Directors approved a
two-for-one split of the Company's common stock effective at the
close of business May 11, 1995. The weighted average number of
common shares outstanding, earnings per weighted average share of
common stock and cash dividends declared per share of common
stock have been restated to reflect the stock split for all
periods reported.
48
During the second quarter of 1995, Petroleum Resources
changed from the successful efforts method to the full cost
method of accounting for its oil and gas operations. The Company
believes the full cost method provides a better matching of
revenues and expenses given the change in Petroleum Resources'
primary focus from a purchaser of interests in producing oil and
gas properties to a developer of reserves on its own and others'
properties. The financial statements have been restated to apply
the new method retroactively. The effects of the accounting
change on the income statements for the years ended December 31,
1995, 1994 and 1993, respectively, are as follows:
Increase (Decrease)
Year Ended December
Effect on-- 1995 1994 1993
(Thousands, except per share amounts)
Other income, net of
income taxes $ (349) $(35,747) $(2,741)
Net income (349) (35,747) (2,741)
Earnings Per Weighted
Average Share of
Common Stock $ - $ (.38) $ (.03)
The balances of retained earnings as of December 31, 1995,
1994 and 1993 have been reduced for the effect (net of income
taxes) of applying retroactively the new method of accounting.
C. Basis of Accounting
The Company prepares its financial statements in accordance
with the provisions of Statement of Financial Accounting
Standards No. 71 (SFAS 71), "Accounting for the Effects of
Certain Types of Regulations." The accounting standard allows
cost-based rate-regulated utilities, such as the Company, to
recognize in their financial statements revenues and expenses in
different time periods than do enterprises that are not rate-
regulated. As a result the Company has recorded, as of
December 31, 1995, approximately $116 million and $4 million of
regulatory assets and liabilities, respectively, excluding net
accumulated deferred income tax assets of approximately $27
million. As discussed in Note 2A, the Public Service Commission
of South Carolina (PSC) has approved accelerated recovery of
substantially all of SCE&G's electric regulatory assets
(approximately $84.8 million). In the future, as a result of
deregulation or other changes in the regulatory environment, the
Company may no longer meet the criteria for continued application
of SFAS 71 and would be required to write off its regulatory
assets and liabilities. Such an event could have a material
adverse effect on the Company's results of operations in the
period the write-off is recorded.
D. System of Accounts
The accounting records of the Company's regulated
subsidiaries are maintained in accordance with the Uniform System
of Accounts prescribed by FERC and as adopted by the PSC.
49
E. Utility Plant
Utility plant is stated substantially at original cost. The
costs of additions, renewals and betterments to utility plant,
including direct labor, material and indirect charges for
engineering, supervision and an allowance for funds used during
construction, are added to utility plant accounts. The original
cost of utility property retired or otherwise disposed of is
removed from utility plant accounts and generally charged, along
with the cost of removal, less salvage, to accumulated
depreciation. The costs of repairs, replacements and renewals of
items of property determined to be less than a unit of property
are charged to maintenance expense.
SCE&G, operator of Summer Station and the PSA are joint
owners of Summer Station in the proportions of two-thirds and
one-third, respectively. The parties share the operating costs
and energy output of the plant in these proportions. Each party,
however, provides its own financing. Plant-in-service related to
SCE&G's portion of Summer Station was approximately $925.1
million and $923.1 million as of December 31, 1995 and 1994,
respectively. Accumulated depreciation associated with SCE&G's
share of Summer Station was approximately $261.0 million and
$297.9 million as of December 31, 1995 and 1994, respectively.
(See Note 2A.) SCE&G's share of the direct expenses associated
with operating Summer Station is included in "Other operation"
and "Maintenance" expenses.
F. Allowance for Funds Used During Construction
AFC, a noncash item, reflects the period cost of capital
devoted to plant under construction. This accounting practice
results in the inclusion of, as a component of construction cost,
the costs of debt and equity capital dedicated to construction
investment. AFC is included in rate base investment and
depreciated as a component of plant cost in establishing rates
for utility services. The Company's regulated subsidiaries
calculated AFC using composite rates of 8.6%, 8.5% and 9.3% for
1995, 1994 and 1993, respectively. These rates do not exceed the
maximum allowable rate as calculated under FERC Order No. 561.
Interest on nuclear fuel in process and sulfur dioxide emission
allowances is capitalized at the actual interest amount.
G. Deferred Return on Plant Investment
Commencing July 1, 1987, as approved by a PSC order on that
date, SCE&G ceased the deferral of carrying costs associated with
400 MW of electric generating capacity previously removed from
rate base and began amortizing the accumulated deferred carrying
costs on a straight-line basis over a ten-year period.
Amortization of deferred carrying costs, included in
"Depreciation and amortization," was approximately $4.2 million
for each of 1995, 1994 and 1993.
H. Revenue Recognition
Customers' meters are read and bills are rendered on a
monthly cycle basis. Base revenue is recorded during the
accounting period in which the meters are read.
Fuel costs for electric generation are collected through the
fuel cost component in retail electric rates. The fuel cost
component contained in electric rates is established by the PSC
during semiannual fuel cost hearings. Any difference between
actual fuel costs and that contained in the fuel cost component
is deferred and included when determining the fuel cost component
during the next semiannual fuel cost hearing. SCE&G had
overcollected through the electric fuel cost component
approximately $3.8 million at December 31, 1995 and
undercollected approximately $3.5 million at December 31, 1994
which are included in "Deferred Credits - Other" and "Deferred
Debits - Other," respectively.
50
Customers subject to the gas cost adjustment clause are
billed based on a fixed cost of gas determined by the PSC during
annual gas cost recovery hearings. Any difference between actual
gas cost and that contained in rates is deferred and included
when establishing gas costs during the next annual gas cost
recovery hearing. At December 31, 1995 and 1994 the Company had
undercollected through the gas cost recovery procedure
approximately $4.6 million and $16.3 million, respectively, which
are included in "Deferred Debits - Other."
SCE&G's gas rate schedules for residential, small commercial
and small industrial customers include a weather normalization
adjustment, which minimizes fluctuations in gas revenues due to
abnormal weather conditions.
I. Depreciation, Depletion and Amortization
Provisions for depreciation are recorded using the straight-
line method for financial reporting purposes and are based on the
estimated service lives of the various classes of property. The
composite weighted average depreciation rates were as follows:
1995 1994 1993
SCE&G 3.02% 3.01% 2.97%
GENCO 2.67% 2.70% 2.64%
Pipeline Corporation 2.78% 2.79% 2.62%
Aggregate of Above 2.98% 2.98% 2.92%
Nuclear fuel amortization, which is included in "Fuel used
in electric generation" and is recovered through the fuel cost
component of SCE&G's rates, is recorded using the units-of-
production method. Provisions for amortization of nuclear fuel
include amounts necessary to satisfy obligations to the DOE under
a contract for disposal of spent nuclear fuel.
The acquisition adjustment relating to the purchase of
certain gas properties in 1982 is being amortized over a 40-year
period using the straight-line method.
Depreciation, depletion and amortization of the capitalized
costs of oil and gas producing properties is provided for on the
units-of-production basis. Units-of-production rates are based
on estimated proved reserves.
J. Nuclear Decommissioning
Decommissioning of Summer Station is presently projected to
commence in the year 2022 when the operating license expires.
Based on a 1991 study, the expenditures (on a before-tax basis)
related to SCE&G's share of decommissioning activities are
estimated, in 2022 dollars assuming a 4.5% annual rate of
inflation, to be $545.3 million including partial reclamation
costs. SCE&G is providing for its share of estimated
decommissioning costs of Summer Station over the life of Summer
Station. SCE&G's method of funding decommissioning costs is
referred to as COMReP (Cost of Money Reduction Plan). Under this
plan, funds collected through rates ($3.2 million in each of 1995
and 1994) are used to purchase insurance policies on the lives of
certain Company personnel. Through the purchase of insurance
contracts, SCE&G is able to take advantage of income tax benefits
and accrue earnings on the fund on a tax-deferred basis at a rate
higher than can be achieved using more traditional funding
approaches. Amounts for decommissioning collected through
electric rates, insurance proceeds, and interest on proceeds less
expenses are transferred by SCE&G to an external trust fund in
compliance with the financial assurance requirements of the NRC.
Management intends for the fund, including earnings thereon, to
provide for all eventual decommissioning expenditures on an
after-tax basis. The trust's sources of decommissioning funds
under the COMReP program include investment components of life
insurance policy proceeds, return on investment and the cash
transfers from SCE&G described above. SCE&G records its
liability for decommissioning costs in deferred credits.
51
The staff of the SEC has questioned certain of the current
accounting practices of the electric utility industry regarding
the recognition, measurement and classification of
decommissioning costs for financial statements of electric
utilities with nuclear generating facilities. In response to
these questions, the Financial Accounting Standards Board has
agreed to review the accounting for removal costs, including
decommissioning. If the current electric utility industry
accounting practices for such decommissioning are changed: (1)
annual provisions for decommissioning could increase, and (2)
trust fund income from the external decommissioning trusts could
be reported as investment income rather than as a reduction of
decommissioning expense.
Pursuant to the NEPA passed by Congress in 1992, SCE&G has
recorded a liability for its estimated share of amounts required
by the DOE for its decommissioning fund. The liability,
approximately $3.6 million at December 31, 1995, has been
included in "Long-Term Debt, Net." SCE&G will recover the cost
associated with this liability through the fuel cost component of
its rates; accordingly, this amount has been deferred and is
included in "Deferred Debits - Other."
K. Income Taxes
The Company and its subsidiaries file a consolidated Federal
income tax return. Income taxes are allocated to individual
companies based on their contributions to the consolidated total.
As required by Statement of Financial Accounting Standards
No. 109, deferred tax assets and liabilities are recorded for the
tax effects of temporary differences between the book basis and
tax basis of assets and liabilities at currently enacted tax
rates. Deferred tax assets and liabilities are adjusted for
changes in such rates through charges or credits to regulatory
assets or liabilities if they are expected to be recovered from,
or passed through to, customers of the Company's regulated
subsidiaries; otherwise, they are charged or credited to income
tax expense.
L. Pension Expense
The Company has a noncontributory defined benefit pension
plan covering substantially all permanent employees. Benefits
are based on years of accredited service and the employee's
average annual base earnings received during the last three years
of employment. The Company's policy has been to fund pension
costs accrued to the extent permitted by the applicable Federal
income tax regulations as determined by an independent actuary.
Net periodic pension cost for the years ended December 31,
1995, 1994 and 1993 included the following components:
1995 1994 1993
(Thousands of Dollars)
Service cost--benefits earned during the period $ 5,187 $ 8,684 $ 7,629
Interest cost on projected benefit obligation 19,473 21,711 20,413
Adjustments:
Return on plan assets (103,874) 2,365 (50,389)
Net amortization and deferral 74,769 (29,760) 25,936
Net periodic pension (income) expense $ (4,445) $ 3,000 $ 3,589
The determination of net periodic pension cost is based upon the
following assumptions:
1995 1994 1993
Annual discount rate 8.0% 7.25% 8.0%
Expected long-term rate of
return on plan assets 8.0% 8.0% 8.0%
Annual rate of salary increases 2.5% 4.75% 5.5%
52
The following table sets forth the funded status of the plan at December
31, 1995 and 1994:
1995 1994
(Thousands of Dollars)
Actuarial present value of benefit obligations:
Vested benefit obligation $228,434 $205,364
Nonvested benefit obligation 15,540 13,966
Accumulated benefit obligation $243,974 $219,330
Plan assets at fair value
(invested primarily in equity
and debt securities) $447,760 $347,702
Projected benefit obligation 284,145 246,318
Plan assets greater than
projected benefit obligation 163,615 101,384
Unrecognized net transition liability 9,022 11,307
Unrecognized prior service costs 9,660 9,374
Unrecognized net gain (146,943) (102,284)
Pension asset recognized in
Consolidated Balance Sheets $ 35,354 $ 19,781
The accumulated benefit obligation is based on the plan's
benefit formulas without considering expected future salary
increases. The following table sets forth the assumptions used
in determining the amounts shown above for the years 1995 and
1994.
1995 1994
Annual discount rate used to determine
benefit obligations 7.5% 8.0%
Assumed annual rate of future salary increases
for projected benefit obligation 3.0% 2.5%
The change in the annual discount rate used to determine
benefit obligations from 8.0% to 7.5% and the change in the
expected salary increase rate from 2.5% to 3.0% as of December
31, 1995 increased the projected benefit obligation and decreased
the unrecognized net gain by approximately $28.6 million.
In addition to pension benefits, the Company provides
certain health care and life insurance benefits to active
and retired employees. The costs of postretirement benefits
other than pensions are accrued during the years the employees
render the service necessary to be eligible for the applicable
benefits. Prior to 1993 the Company expensed these benefits,
which are primarily health care, as claims were incurred. In its
June 1993 electric rate order, the PSC approved the inclusion in
rates of the portion of increased expenses related to electric
operations. The Company expensed approximately $8.5 million and
$8.6 million, net of payments to current retirees, for the years
ended December 31, 1995 and 1994, respectively. The PSC has
authorized accelerated amortization of SCE&G's remaining
transition obligation for postretirement benefits other than
pensions related to electric operations (See Note 2A.)
53
Net periodic postretirement benefit cost for the years ended
December 31, 1995, 1994 and 1993, included the following
components:
1995 1994 1993
(Thousands of Dollars)
Service cost--benefits earned during the period $ 2,076 $ 2,417 $ 1,908
Interest cost on accumulated postretirement
benefit obligation 7,253 6,644 5,502
Adjustments:
Return on plan assets - - -
Amortization of unrecognized transition
obligation 3,344 3,344 3,344
Other net amortization and deferral 661 860 -
Net periodic postretirement benefit cost $13,334 $13,265 $10,754
The determination of net periodic postretirement benefit cost is based
upon the following assumptions:
1995 1994 1993
Annual discount rate 8.0% 7.25% 8.0%
Health care cost trend rate 11.0% 11.25% 13.0%
Ultimate health care cost trend rate (to be
achieved in 2004) 6.0% 5.25% 6.0%
The following table sets forth the funded status of the plan at December
31, 1995 and 1994:
1995 1994
(Thousands of Dollars)
Accumulated postretirement benefit obligations for:
Retirees $ 64,989 $ 59,174
Other fully eligible participants 6,685 4,995
Other active participants 27,076 24,889
Accumulated postretirement benefit obligation 98,750 89,058
Plan assets at fair value - -
Plan assets less accumulated postretirement
benefit obligation (98,750) (89,058)
Unrecognized net transition liability 58,237 61,581
Unrecognized prior service costs 5,320 3,453
Unrecognized net loss 13,840 11,156
Postretirement benefit liability recognized
in Consolidated Balance Sheets $(21,353) $(12,868)
The accumulated postretirement benefit obligation is based upon the plan's
benefit provisions and the following assumptions:
1995 1994
Assumed health care cost trend rate used to
measure expected costs 10.5% 12.0%
Ultimate health care cost trend rate
(to be achieved in 2004) 5.5% 6.0%
Annual discount rate 7.5% 8.0%
Annual rate of salary increases 3.0% 2.5%
54
The effect of a one percentage-point increase in the assumed
health care cost trend rate for each future year on the aggregate
of the service and interest cost components of net periodic
postretirement benefit cost for the year ended December 31, 1995
and the accumulated postretirement benefit obligation as of
December 31, 1995 would be to increase such amounts by $203,000
and $3.4 million, respectively.
M. Debt Premium, Discount and Expense, Unamortized Loss on
Reacquired Debt
Long-term debt premium, discount and expense are being
amortized as components of "Interest on long-term debt, net" over
the terms of the respective debt issues. Gains or losses on
reacquired debt that is refinanced are deferred and amortized
over the term of the replacement debt.
N. Environmental
The Company has an environmental assessment program to
identify and assess current and former operations sites that
could require environmental cleanup. As site assessments are
initiated an estimate is made of the amount of expenditures, if
any, necessary to investigate and clean up each site. These
estimates are refined as additional information becomes
available; therefore, actual expenditures could differ
significantly from the original estimates. Amounts estimated and
accrued to date for site assessments and cleanup relate primarily
to regulated operations; such amounts are deferred and are being
amortized and recovered through rates over a ten-year period for
electric operations and an eight-year period for gas operations.
Such deferred amounts totaled $18.0 million and $20.2 million at
December 31, 1995 and 1994, respectively, and are included in
"Deferred Debits - Other."
O. Oil and Gas
The Company follows the full cost method of accounting for
its oil and gas operations and, accordingly, capitalizes all
costs it incurs in the acquisition, exploration and development
of interests in oil and gas properties. The Company amortizes
capitalized costs on the units-of-production method, based on
total estimated proved recoverable reserves. The Company
accounts for normal dispositions of interests in oil and gas
properties as adjustments to capitalized costs and does not
recognize any gain or loss.
In addition, the capitalized costs are subject to a "ceiling
test," which limits such costs to the aggregate of the estimated
present value of future net cash flows from proved oil and gas
reserves, plus the lower of cost or fair market value of unproved
properties. Non-cash write-downs resulting from the application
of the ceiling test were $118.2 million and $94.1 million in the
years ended December 31, 1995 and 1994, respectively.
The valuation estimates of interests in oil and natural gas
properties are significantly influenced by oil and natural gas
market prices and the results of recurring reserve studies of
such properties. Net income of the Company may be materially
adversely affected by a decline in oil and natural gas prices or
reserve estimates.
P. Temporary Cash Investments
The Company considers temporary cash investments having
original maturities of three months or less to be cash
equivalents. Temporary cash investments are generally in the
form of commercial paper, certificates of deposit and repurchase
agreements.
55
Q. Recently Issued Accounting Standards
The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." The provisions of the Statement, which will be
implemented by the Company for the fiscal year beginning
January 1, 1996, require the recognition of a loss in the income
statement and related disclosures whenever events or changes in
circumstances indicate that the carrying amount of a long-lived
asset may not be recoverable. The Company does not believe that
adoption of the provisions of the Statement will have a material
impact on its results of operations or financial position.
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," which will be implemented by the Company on
January 1, 1996. The Company does not believe that adoption of
the provisions of the Statement will have a material impact on
its results of operations or financial position.
R. Reclassifications
Certain amounts from prior periods have been reclassified to
conform with the 1995 presentation.
S. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
2. RATE MATTERS:
A. On July 10, 1995, SCE&G filed an application with the PSC
for an increase in retail electric rates. On January 9, 1996 the
PSC issued an order granting SCE&G an increase of 7.34% which
will produce additional revenues of approximately $67.5 million
annually. The increase will be implemented in two phases. The
first phase, an increase in revenues of approximately $59.5
million annually based on a test year, or 6.47%, commenced on
January 15, 1996. The second phase will be implemented in
January 1997 and will produce additional revenues of
approximately $8.0 million annually, or .87% more than current
rates. The PSC authorized a return on common equity of 12.0%.
The PSC also approved establishment of a Storm Damage Reserve
Account capped at $50 million and collected through rates over a
ten-year period. Additionally, the PSC approved accelerated
recovery of substantially all of SCE&G's electric regulatory
assets (excluding accumulated deferred income taxes) and the
transition obligation for postretirement benefits other than
pensions, changing the amortization periods to allow recovery by
the end of the year 2000. SCE&G's request to shift approximately
$257 million of depreciation reserves from transmission and
distribution assets to nuclear production assets was also
approved.
B. On October 27, 1994 the PSC issued an order approving the
Company's request to recover through a billing surcharge to its
gas customers the costs of environmental cleanup at the sites of
former manufactured gas plants. The billing surcharge, which was
effective with the first billing cycle in November 1994 and is
subject to annual review, provides for the recovery of
approximately $16.2 million representing substantially all site
assessment and cleanup costs for the Company's gas operations
that had previously been deferred. In October 1995, as a result
of the ongoing annual review, the PSC approved the continued use
of the billing surcharge. The balance remaining to be recovered
amounts to approximately $14.5 million.
56
C. In September 1992 the PSC issued an order granting the
Company a $.25 increase in transit fares from $.50 to $.75 in
both Columbia and Charleston, South Carolina; however, the PSC
also required $.40 fares for low-income customers and denied the
Company's request to reduce the number of routes and frequency of
service. The new rates were placed into effect in October 1992.
The Company appealed the PSC's order to the Circuit Court, which
on May 23, 1995, ordered the case back to the PSC for
reconsideration of several issues, including the low-income rider
program, routing changes, and the $.75 fare. The Supreme Court
declined to review an appeal of the Circuit Court decision and
dismissed the case. Another Petition for Reconsideration was
filed by the PSC and other intervenors, which was denied by the
Circuit Court. Procedural matters in this case are yet to be
resolved in the court.
3. LONG-TERM DEBT:
The annual amounts of long-term debt maturities, including
the amounts due under the nuclear and fossil fuel agreement (see
Note 4), and sinking fund requirements for the years 1996 through
2000 are summarized as follows:
Year Amount Year Amount
(Thousands of Dollars)
1996 $ 40,983 1999 $ 95,013
1997 98,202 2000 142,618
1998 139,433
Approximately $17.3 million of the portion of long-term
debt payable in 1996 may be satisfied by either deposit and
cancellation of bonds issued upon the basis of property additions
or bond retirement credits, or by deposit of cash with the
Trustee.
On January 12, 1996 the Company arranged for unsecured
bank loans totaling $60 million, due January 10, 1997 at initial
rates between 5.684% and 5.730%, subject to reset quarterly at
LIBOR plus a spread of nine to fifteen basis points. Proceeds
from the loans were used to repay a bank loan of $60 million due
January 12, 1996; accordingly, the loan is included in long-term
debt at December 31, 1995.
SCE&G has three-year revolving lines of credit totaling $100
million, in addition to other lines of credit, that provide
liquidity for issuance of commercial paper. The three-year lines
of credit provide back-up liquidity when commercial paper
outstanding is in excess of $100 million. The long-term nature
of the lines of credit allow commercial paper in excess of $100
million to be classified as long-term debt. SCE&G had
outstanding commercial paper of $111.2 million at December 31,
1994, of which $11.2 million was reclassified to long-term debt.
Substantially all utility plant and fuel inventories are
pledged as collateral in connection with long-term debt.
4. FUEL FINANCINGS:
Nuclear and fossil fuel inventories and sulfur dioxide
emission allowances are financed through the issuance by Fuel
Company of short-term commercial paper. These short-term
borrowings are supported by an irrevocable revolving credit
agreement which expires July 31, 1998. Accordingly, the amounts
outstanding have been included in long-term debt. The credit
agreement provides for a maximum amount of $125 million that may
be outstanding at any time.
57
Commercial paper outstanding totaled $76.8 million and $50.6
million at December 31, 1995 and 1994 at weighted average
interest rates of 5.76% and 6.06%, respectively.
5. COMMON EQUITY:
The changes in "Common Stock," without par value, during
1995, 1994 and 1993 are summarized as
follows:
Number Thousands
of Shares of Dollars
Balance December 31, 1992 87,821,262 $ 699,003
Issuance of common stock 5,417,652 127,662
Balance December 31, 1993 93,238,914 826,665
Issuance of common stock 2,796,106 60,105
Balance December 31, 1994 96,035,020 886,770
Issuance of common stock 7,588,843 169,919
Balance December 31, 1995 103,623,863 $1,056,689
The Restated Articles of Incorporation of the Company do not
limit the dividends that may be payable on its common stock.
However, the Restated Articles of Incorporation of SCE&G and the
Indenture underlying its First and Refunding Mortgage Bonds
contain provisions that, under certain circumstances, could limit
the payment of cash dividends on its common stock. In addition,
with respect to hydroelectric projects, the Federal Power Act
requires the appropriation of a portion of certain earnings
therefrom. At December 31, 1995 approximately $14.5 million of
retained earnings were restricted by this requirement as to
payment of cash dividends on SCE&G's common stock.
Cash dividends on common stock were declared at an annual
rate per share of $1.44, $1.41 and $1.37 for 1995, 1994 and 1993,
respectively.
6. PREFERRED STOCK (Subject to Purchase or Sinking Funds):
The call premium of the respective series of preferred stock
in no case exceeds the amount of the annual dividend.
Retirements under sinking fund requirements are at par values.
The aggregate annual amounts of purchase fund or sinking fund
requirements for preferred stock for the years 1996 through 2000
are summarized as follows:
Year Amount Year Amount
(Thousands of Dollars)
1996 $2,439 1999 $2,440
1997 2,440 2000 2,440
1998 2,440
58
The changes in "Total Preferred Stock (Subject to purchase or sinking
funds)" during 1995, 1994 and 1993 are summarized as follows:
Number Thousands
of Shares of Dollars
Balance December 31, 1992 940,529 $58,639
Shares Redeemed:
$100 par value (7,374) (737)
$50 par value (51,187) (2,558)
Balance December 31, 1993 881,968 55,344
Shares Redeemed:
$100 par value (8,072) (807)
$50 par value (51,802) (2,591)
Balance December 31, 1994 822,094 51,946
Shares Redeemed:
$100 par value (6,809) (681)
$50 par value (51,666) (2,583)
Balance December 31, 1995 763,619 $48,682
7. INCOME TAXES:
Total income tax expense for 1995, 1994 and 1993 is as follows:
1995 1994 1993
(Thousands of Dollars)
Current taxes:
Federal $101,656 $62,033 $59,590
State 16,193 13,178 6,409
Total current taxes 117,849 75,211 65,999
Deferred taxes, net:
Federal (13,878) (9,006) 21,743
State (1,224) (86) 6,003
Total deferred taxes (15,102) (9,092) 27,746
Investment tax credits:
Amortization of amounts deferred (credit) (3,630) (3,631) (3,659)
Total income tax expense $ 99,117 $62,488 $90,086
59
The difference in actual income taxes and the income taxes
calculated from the application of the statutory Federal income
tax rate (35% for 1995, 1994 and 1993) to pretax income is
reconciled as follows:
1995 1994 1993
(Thousands of Dollars)
Net income $168,339 $115,452 $165,240
Total income tax expense:
Charged to operating expenses 109,949 94,510 90,007
Charged (credited) to other income (10,832) (32,022) 79
Preferred stock dividends 5,687 5,955 6,217
Total pretax income $273,143 $183,895 $261,543
Income taxes on above at statutory
Federal income tax rate $ 95,600 $ 64,363 $ 91,540
Increases (decreases) attributable to:
Allowance for equity funds used
during construction (3,491) (2,862) (3,125)
Amortization of deferred return
on plant investment 1,486 1,486 1,486
Depreciation differences 3,086 2,860 2,794
Amortization of investment tax credits (3,630) (3,631) (3,659)
State income taxes (less Federal income
tax effect) 9,730 8,510 8,068
Deferred income tax flowback at higher
than statutory rates (3,941) (4,327) (4,411)
Alternate fuel production tax credit (850) (1,274) (1,373)
Other differences, net 1,127 (2,637) (1,234)
Total income tax expense $ 99,117 $ 62,488 $ 90,086
The tax effects of significant temporary differences comprising the Company's
net deferred tax liability of $521.8 million at December 31, 1995 and $543.1
million at December 31, 1994 determined in accordance with Statement No. 109
(see Note 1K) are as follows:
1995 1994
(Thousands of Dollars)
Deferred tax assets:
Unamortized investment tax credits $ 54,342 $ 56,588
Cycle billing 19,143 17,521
Nuclear operations expenses 3,755 206
Oil and gas properties 9,738 -
Deferred compensation 5,647 5,513
Other postretirement benefits 6,371 3,187
Other 7,599 8,392
Total deferred tax assets 106,595 91,407
Deferred tax liabilities:
Property, plant and equipment 592,160 598,313
Pension expense 14,191 9,022
Reacquired debt 6,680 7,146
Research and experimentation 6,196 2,276
Other 9,203 17,724
Total deferred tax liabilities 628,430 634,481
Net deferred tax liability $521,835 $543,074
The Internal Revenue Service has examined and closed consolidated Federal
income tax returns of the Company through 1989 and is currently examining the
1990, 1991 and 1992 Federal income tax returns. Adjustments are currently
proposed by the examining agent. The Company does not anticipate that any
adjustments which might result from this examination will have a significant
impact on the earnings or financial position of the Company.
60
8. FINANCIAL INSTRUMENTS:
The carrying amounts and estimated fair values of the
Company's financial instruments at December 31, 1995 and 1994
are as follows:
1995 1994
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
(Thousands of Dollars)
Assets:
Cash and temporary
cash investments $ 16,082 $ 16,082 $ 12,938 $ 12,938
Investments 90,380 105,280 24,858 40,299
Liabilities:
Short-term borrowings 112,524 112,524 171,827 171,827
Long-term debt 1,629,862 1,737,686 1,586,879 1,502,052
Preferred stock
(subject to purchase
or sinking funds) 48,682 46,603 51,946 49,348
The information presented herein is based on pertinent
information available to the Company as of December 31, 1995
and 1994. Although the Company is not aware of any factors that
would significantly affect the estimated fair value amounts, such
financial instruments have not been comprehensively revalued
since December 31, 1995, and the current estimated fair value may
differ significantly from the estimated fair value at that date.
The following methods and assumptions were used to estimate
the fair value of the above classes of financial instruments:
Cash and temporary cash investments, including commercial
paper, repurchase agreements, treasury bills and notes are valued
at their carrying amount.
Fair values of investments and long-term debt are based on
quoted market prices of the instruments or similar instruments,
or for those instruments for which there are no quoted market
prices available, fair values are based on net present value
calculations. Investments which are not considered to be
financial instruments (goodwill) have been excluded from the
carrying amount and estimated fair value. Settlement of long-
term debt may not be possible or may not be a prudent management
decision.
Short-term borrowings are valued at their carrying amount.
The fair value of preferred stock (subject to purchase or
sinking funds) is estimated on the basis of market prices.
Potential taxes and other expenses that would be incurred in
an actual sale or settlement have not been taken into
consideration.
61
9. SHORT-TERM BORROWINGS:
The Company pays fees to banks as compensation for its
committed lines of credit. Commercial paper borrowings are for
270 days or less. Details of lines of credit and short-term
borrowings, excluding amounts classified as long-term (Notes 3
and 4), at December 31, 1995, 1994 and 1993 and for the years
then ended are as follows:
1995 1994 1993
(Millions of Dollars)
Authorized lines of credit at year-end $477.1 $379.1 $335.0
Unused lines of credit at year-end $470.0 $355.1 $308.0
Short-term borrowings outstanding at
year-end:
Bank loans $ 32.0 $ 71.8 $ 42.0
Weighted average interest rate 6.21% 6.38% 3.71%
Commercial paper $ 80.5 $100.0 $ 1.0
Weighted average interest rate 5.83% 6.04% 3.35%
10. COMMITMENTS AND CONTINGENCIES:
A. Construction
SCE&G entered into a contract with Duke/Fluor Daniel in 1991
to design, engineer and build a 385 MW coal-fired electric
generating plant near Cope, South Carolina. Construction of the
plant started in November 1992. Commercial operation began in
January 1996. The cost of the Cope plant, excluding AFC, is
$410.9 million. In addition, the transmission lines for
interconnection with SCE&G's system cost $22.5 million.
Under the Duke/Fluor Daniel contract the aggregate amount of
required minimum payments remaining at December 31, 1995 is $4.2
million due in 1996. Through December 31, 1995 SCE&G had paid
$378.7 million under the contract.
B. Nuclear Insurance
The Price-Anderson Indemnification Act, which deals with
public liability for a nuclear incident, currently establishes
the liability limit for third-party claims associated with any
nuclear incident at $8.9 billion. Each reactor licensee is
currently liable for up to $79.3 million per reactor owned for
each nuclear incident occurring at any reactor in the United
States, provided that not more than $10 million of the liability
per reactor would be assessed per year. SCE&G's maximum
assessment, based on its two-thirds ownership of Summer Station,
would be approximately $52.9 million per incident, but not more
than $6.7 million per year.
SCE&G currently maintains policies (for itself and on behalf
of the PSA) with Nuclear Electric Insurance Limited (NEIL) and
American Nuclear Insurers (ANI) providing combined property and
decontamination insurance coverage of $1.9 billion for any losses
at Summer Station. SCE&G pays annual premiums and, in addition,
could be assessed a retroactive premium not to exceed 7 1/2 times
its annual premium in the event of property damage loss to any
nuclear generating facilities covered under the NEIL program.
Based on the current annual premium, this retroactive premium
would not exceed $8.2 million.
62
To the extent that insurable claims for property damage,
decontamination, repair and replacement and other costs and
expenses arising from a nuclear incident at Summer Station exceed
the policy limits of insurance, or to the extent such insurance
becomes unavailable in the future, and to the extent that SCE&G's
rates would not recover the cost of any purchased replacement
power, SCE&G will retain the risk of loss as a self-insurer.
SCE&G has no reason to anticipate a serious nuclear incident at
Summer Station. If such an incident were to occur, it could have
a material adverse impact on the Company's financial position and
results of operations.
C. Environmental
As described in Note 1N of Notes to Consolidated Financial
Statements, the Company has an environmental assessment program
to identify and assess current and former operations sites that
could require environmental cleanup. As site assessments are
initiated, estimates are made of the cost, if any, to investigate
and clean up each site. These estimates are refined as
additional information becomes available; therefore, actual
expenditures could differ significantly from original estimates.
Amounts estimated and accrued to date for site assessments and
cleanup relate primarily to regulated operations; such amounts
are deferred and are being amortized and recovered through rates
over a ten-year period for electric operations and an eight-year
period for gas operations. Such deferred amounts totaled $18.0
million and $20.2 million at December 31, 1995 and 1994,
respectively. Estimates to date include, among other items, the
costs estimated to be associated with the matters discussed in
the following paragraphs.
SCE&G, the Company's principal subsidiary, owns four
decommissioned manufactured gas plant sites which contain
residues of by-product chemicals. SCE&G maintains an active
review of the sites to monitor the nature and extent of the
residual contamination.
In September 1992 the Environmental Protection Agency (EPA)
notified SCE&G, the City of Charleston and the Charleston Housing
Authority of their potential liability for the investigation and
cleanup of the Calhoun Park Area Site in Charleston, South
Carolina. This site originally encompassed approximately
eighteen acres and included properties which were the locations
for industrial operations, including a wood preserving (creosote)
plant and one of SCE&G's decommissioned manufactured gas plants.
The original scope of this investigation has been expanded to
approximately 30 acres, including adjacent properties owned by
the National Park Service and the City of Charleston, and private
properties. The site has not been placed on the National
Priority List, but may be added before cleanup is initiated. The
potentially responsible parties (PRP) have agreed with the EPA to
participate in an innovative approach to site investigation and
cleanup called "Superfund Accelerated Cleanup Model," allowing
the pre-cleanup site investigation process to be compressed
significantly. The PRPs have negotiated an administrative order
by consent for the conduct of a Remedial
Investigation/Feasibility Study and a corresponding Scope of
Work. Field work began in November 1993. SCE&G is also working
with the City of Charleston to investigate potential
contamination from the manufactured gas plant which may have
migrated to the city's aquarium site. In 1994 the City of
Charleston notified SCE&G that it considers SCE&G to be
responsible for a $43.5 million increase in costs of the aquarium
project attributable to delays resulting from contamination of
the Calhoun Park Area Site. SCE&G believes it has meritorious
defenses against this claim and does not expect its resolution to
have a material impact on its financial position or results of
operations.
63
D. Oil and Gas Forward Contracts
In an effort to limit exposure to changing natural gas
prices, in January 1995 the Company entered into a series of
forward contracts relating to natural gas production. These
forward contracts have the effect of stabilizing the price that
the Company receives on approximately sixty percent of its
forecasted natural gas production for the years 1996-2001. The
forward contracts are at an average price of $1.92 per dekatherm.
E. MPX Guarantee
A percentage of the projected annual revenues for the years
1996-2003 of certain fiber optic routes of a joint venture
between MPX and a subsidiary of ITC Holding Company, Inc., a
Georgia-based telecommunications holding company, has been
guaranteed by MPX. The aggregate maximum amount of such
guarantee over the eight-year period is approximately $46.2
million, prior to reduction for revenue contracts obtained by the
joint venture.
F. Claims and Litigation
The Company is engaged in various claims and litigation
incidental to its business operations which management
anticipates will be resolved without loss to the Company. No
estimate of the range of loss from these matters can currently be
determined.
64
11. SEGMENT OF BUSINESS INFORMATION:
Segment information at December 31, 1995, 1994 and 1993 and for the years
then ended is as follows:
1995
Electric Gas Transit Total
(Thousands of Dollars)
Operating revenues $1,006,420 $ 342,662 $ 3,889 $1,352,971
Operating expenses,
excluding depreciation
and amortization 638,480 286,660 10,429 935,569
Depreciation and
amortization 110,865 18,016 1,007 129,888
Total operating expenses 749,345 304,676 11,436 1,065,457
Operating income (loss) $ 257,075 $ 37,986 $ (7,547) 287,514
Add - Other income, net 8,060
Less - Interest charges 121,548
- Preferred stock dividends 5,687
Net income $ 168,339
Capital expenditures:
Identifiable $ 253,577 $ 38,718 $ 265 $ 292,560
Utilized for overall Company operations 27,816
Total $ 320,376
Identifiable assets at
December 31, 1995:
Utility plant, net $3,033,887 $ 337,939 $ 1,878 $3,373,704
Inventories 87,143 15,714 561 103,418
Total $3,121,030 $ 353,653 $ 2,439 3,477,122
Other assets 1,057,304
Total assets $4,534,426
65
1994
Electric Gas Transit Total
(Thousands of Dollars)
Operating revenues $975,388 $342,672 $ 4,002 $1,322,062
Operating expenses,
excluding depreciation
and amortization 640,528 292,227 10,577 943,332
Depreciation and
amortization 102,647 16,304 226 119,177
Total operating expenses 743,175 308,531 10,803 1,062,509
Operating income (loss) $232,213 $ 34,141 $ (6,801) 259,553
Add - Other income, net (29,749)
Less - Interest charges 108,397
- Preferred stock dividends 5,955
Net income $ 115,452
Capital expenditures:
Identifiable $364,007 $ 20,079 $ 347 $ 384,433
Utilized for overall Company operations 20,167
Total $ 404,600
Identifiable assets at
December 31, 1994:
Utility plant, net $2,897,954 $315,746 $ 1,791 $3,215,491
Inventories 79,260 17,026 495 96,781
Total $2,977,214 $332,772 $ 2,286 3,312,272
Other assets 1,004,240
Total assets $4,316,512
66
1993
Electric Gas Transit Total
(Thousands of Dollars)
Operating revenues $ 940,121 $320,195 $ 3,851 $1,264,167
Operating expenses,
excluding depreciation
and amortization 621,339 274,936 9,737 906,012
Depreciation and
amortization 97,849 14,820 175 112,844
Total operating expenses 719,188 289,756 9,912 1,018,856
Operating income (loss) $ 220,933 $ 30,439 $(6,061) 245,311
Add - Other income, net 27,335
Less - Interest charges 101,189
- Preferred stock dividends 6,217
Net income $ 165,240
Capital expenditures:
Identifiable $ 279,082 $ 28,761 $ 604 $ 308,447
Utilized for overall Company operations 13,934
Total $ 322,381
Identifiable assets at
December 31, 1993:
Utility plant, net $2,628,374 $312,437 $ 1,673 $2,942,484
Inventories 77,805 22,019 463 100,287
Total $2,706,179 $334,456 $ 2,136 3,042,771
Other assets 983,930
Total assets $4,026,701
67
12. QUARTERLY FINANCIAL DATA (UNAUDITED):
1995
First Second Third Fourth
Quarter Quarter Quarter Quarter Annual
Total operating
revenues (000) $344,760 $311,136 $373,476 $323,599 $1,352,971
Operating
income (000) 75,046 61,012 95,438 56,018 287,514
Net income (000) 51,265 15,586 68,029 33,459 168,339
Earnings per weighted
average share of
common stock
as reported .53 .16 .69 .32 1.70
1994
First Second Third Fourth
Quarter Quarter Quarter Quarter Annual
Total operating
revenues (000) $347,309 $296,046 $361,329 $317,378 $1,322,062
Operating
income (000) 69,398 50,048 86,708 53,399 259,553
Net income (000) 51,442 30,254 16,701 17,055 115,452
Earnings per weighted
average share of
common stock
as reported .55 .32 .18 .17 1.22
68
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
PART III
The information required by Item 10, "Directors and
Executive Officers of the Registrant," with respect to executive
officers is, pursuant to General Instruction G(3) to Form 10-K,
set forth in Part I of this Form 10-K under the heading
"Executive Officers of the Registrant" on page 26 herein. The
other information required by Item 10 is incorporated herein by
reference to the captions "Election of Directors - Proposal 1"
and "Compliance with Section 16(a) of the Securities Exchange Act
of 1934" in the Company's definitive proxy statement for the 1996
annual meeting of stockholders which will be filed with the SEC
pursuant to Regulation 14A, promulgated under the Securities
Exchange Act of 1934.
The information called for by Item 11, Executive
Compensation is incorporated herein by reference to the captions
"Compensation of Directors," "Compensation Committee Interlocks
and Insider Participation," and "Executive Compensation" in the
Company's definitive proxy statement for the 1996 annual meeting
of stockholders.
The information called for by Item 12, "Security Ownership
of Certain Beneficial Owners and Management" is incorporated
herein by reference to the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's definitive
proxy statement for the 1996 annual meeting of stockholders.
The information called for by Item 13, "Certain
Relationships and Related Transactions" is incorporated herein by
reference to the caption "Compensation Committee Interlocks and
Insider Participation" in the Company's definitive proxy
statement for the 1996 annual meeting of stockholders.
Notwithstanding anything to the contrary set forth in any of
the Company's previous filings under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended,
that might incorporate by reference future filings, including
this Annual Report on Form 10-K, in whole or in part, the Report
of the Management Development and Corporate Performance Committee
and the Long-term Compensation Committee on Executive
Compensation and the Performance Graph included in the Company's
definitive proxy statement for the 1996 annual meeting of
stockholders shall not be incorporated by reference into any such
filings.
69
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Documents filed as a part of this report:
1. Financial Statements and Schedules: See Table of Contents of
Consolidated Financial Statements and Supplementary Financial
Data on page 40.
2. Exhibits:
Exhibits required to be filed with this Annual Report on Form
10-K are listed in the Exhibit Index following the signature
page. Certain of such exhibits which have heretofore been filed
with the SEC and which are designated by reference to their
exhibit numbers in prior filings are incorporated herein by
reference and made a part hereof.
Pursuant to Rule 15d-21 promulgated under the Securities Exchange
Act of 1934, the annual reports for the Company's employee stock
purchase plan will be furnished under cover of Form 10-K/A to the
Commission when the information becomes available.
As permitted under Item 601(b)(4)(iii), instruments defining the
rights of holders of long-term debt of less than 10 percent of
the total consolidated assets of the Company and its
subsidiaries, have been omitted and the Company agrees to furnish
a copy of such instruments to the Commission upon request.
(b) Reports on Form 8-K
None
70
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(REGISTRANT) SCANA CORPORATION
BY (SIGNATURE) s/L. M. Gressette, Jr.
(NAME AND TITLE) L. M. Gressette, Jr., Chairman of the Board, Chief
Executive Officer and Director
DATE February 20, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
(i) Principal executive officer:
BY (SIGNATURE) s/L. M. Gressette, Jr.
(NAME AND TITLE) L. M. Gressette, Jr., Chairman of the Board, Chief
Executive Officer and Director
DATE February 20, 1996
(ii) Principal financial and accounting officer:
BY (SIGNATURE) s/K. B. Marsh
(NAME AND TITLE) K. B. Marsh, Vice President - Finance,
Chief Financial Officer and Controller
DATE February 20, 1996
BY (SIGNATURE) s/B. L. Amick
(NAME AND TITLE) B. L. Amick, Director
DATE February 20, 1996
BY (SIGNATURE) s/W. B. Bookhart, Jr.
(NAME AND TITLE) W. B. Bookhart, Jr., Director
DATE February 20, 1996
BY (SIGNATURE) s/W. T. Cassels, Jr.
(NAME AND TITLE) W. T. Cassels, Jr., Director
DATE February 20, 1996
BY (SIGNATURE) s/H. M. Chapman
(NAME AND TITLE) H. M. Chapman, Director
DATE February 20, 1996
BY (SIGNATURE) s/J. B. Edwards
(NAME AND TITLE) J. B. Edwards, Director
DATE February 20, 1996
71
BY (SIGNATURE) s/E. T. Freeman
(NAME AND TITLE) E. T. Freeman, Director
DATE February 20, 1996
BY (SIGNATURE) s/B. A. Hagood
(NAME AND TITLE) B. A. Hagood, Director
DATE February 20, 1996
BY (SIGNATURE) s/W. Hayne Hipp
(NAME AND TITLE) W. Hayne Hipp, Director
DATE February 20, 1996
BY (SIGNATURE) s/B. D. Kenyon
(NAME AND TITLE) B. D. Kenyon, Director
DATE February 20, 1996
BY (SIGNATURE) s/F. C. McMaster
(NAME AND TITLE) F. C. McMaster, Director
DATE February 20, 1996
BY (SIGNATURE) s/Henry Ponder
(NAME AND TITLE) Henry Ponder, Director
DATE February 20, 1996
BY (SIGNATURE) s/W. B. Timmerman
(NAME AND TITLE) W. B. Timmerman, Director
DATE February 20, 1996
BY (SIGNATURE) s/J. B. Rhodes
(NAME AND TITLE) J. B. Rhodes, Director
DATE February 20, 1996
BY (SIGNATURE) s/E. C. Wall, Jr.
(NAME AND TITLE) E. C. Wall, Jr., Director
DATE February 20, 1996
72
SCANA CORPORATION
EXHIBIT INDEX
Sequentially
Numbered
Pages
Number
2. Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession
Not applicable
3. Articles of Incorporation and By-Laws
A. Restated Articles of Incorporation of SCANA
Corporation as adopted on April 26, 1989
(Exhibit 3-A to Registration Statement No.
33-49145)................................................. #
B. Articles of Amendment dated April 27, 1995
(Exhibit 4-B to Registration Statement
No. 33-62421)............................................. #
C. Copy of By-Laws of SCANA Corporation as
revised and amended on February 15, 1994
(Exhibit 4.2 to Post-Effective Amendment No. 1
to Registration Statement No. 33-56923)................... #
4. Instruments Defining the Rights of Security Holders,
Including Indentures
A. Articles of Exchange of South Carolina
Electric & Gas Company and SCANA Corporation
(Exhibit 4-A to Post-Effective Amendment No. 1
to Registration Statement No. 2-90438).................... #
B. Indenture dated as of November 1, 1989 to
The Bank of New York, Trustee (Exhibit 4-A
to Registration No. 33-32107)............................. #
C. Indenture dated as of January 1, 1945, from
the South Carolina Power Company (the "Power
Company") to Central Hanover Bank and Trust
Company, as Trustee, as supplemented by three
Supplemental Indentures dated respectively as
of May 1, 1946, May 1, 1947 and July 1, 1949
(Exhibit 2-B to Registration No. 2-26459)................. #
D. Fourth Supplemental Indenture dates as of
April 1, 1950, to Indenture referred to in
Exhibit 4C, pursuant to which the Company
assumed said Indenture (Exhibit 2-C to
Registration No. 2-26459)................................. #
E. Fifth through Fifty-second Supplemental
Indenture referred to in Exhibit 4C dated
as of the dates indicated below and filed
as exhibits to the Registration Statements
and 1934 Act reports whose file numbers are
set forth below........................................... #
December 1, 1950 Exhibit 2-D to Registration No. 2-26459
July 1, 1951 Exhibit 2-E to Registration No. 2-26459
June 1, 1953 Exhibit 2-F to Registration No. 2-26459
June 1, 1955 Exhibit 2-G to Registration No. 2-26459
November 1, 1957 Exhibit 2-H to Registration No. 2-26459
September 1, 1958 Exhibit 2-I to Registration No. 2-26459
September 1, 1960 Exhibit 2-J to Registration No. 2-26459
June 1, 1961 Exhibit 2-K to Registration No. 2-26459
December 1, 1965 Exhibit 2-L to Registration No. 2-26459
# Incorporated herein by reference as indicated.
73
SCANA CORPORATION
EXHIBIT INDEX
Sequentially
Numbered
Pages
Number
June 1, 1966 Exhibit 2-M to Registration No. 2-26459
June 1, 1967 Exhibit 2-N to Registration No. 2-29693
September 1, 1968 Exhibit 4-O to Registration No. 2-31569
June 1, 1969 Exhibit 4-C to Registration No. 33-38580
December 1, 1969 Exhibit 4-Q to Registration No. 2-35388
June 1, 1970 Exhibit 4-R to Registration No. 2-37363
March 1, 1971 Exhibit 2-B-17 to Registration No. 2-40324
January 1, 1972 Exhibit 4-C to Registration No. 33-38580
July 1, 1974 Exhibit 2-A-19 to Registration No. 2-51291
May 1, 1975 Exhibit 4-C to Registration No. 33-38580
July 1, 1975 Exhibit 2-B-21 to Registration No. 2-53908
February 1, 1976 Exhibit 2-B-22 to Registration No. 2-55304
December 1, 1976 Exhibit 2-B-23 to Registration No. 2-57936
March 1, 1977 Exhibit 2-B-24 to Registration No. 2-58662
May 1, 1977 Exhibit 4-C to Registration No. 33-38580
February 1, 1978 Exhibit 4-C to Registration No. 33-38580
June 1, 1978 Exhibit 2-A-3 to Registration No. 2-61653
April 1, 1979 Exhibit 4-C to Registration No. 33-38580
June 1, 1979 Exhibit 4-C to Registration No. 33-38580
April 1, 1980 Exhibit 4-C to Registration No. 33-38580
June 1, 1980 Exhibit 4-C to Registration No. 33-38580
December 1, 1980 Exhibit 4-C to Registration No. 33-38580
April 1, 1981 Exhibit 4-D to Registration No. 33-49421
June 1, 1981 Exhibit 4-D to Registration No. 2-73321
March 1, 1982 Exhibit 4-D to Registration No. 33-49421
April 15, 1982 Exhibit 4-D to Registration No. 33-49421
May 1, 1982 Exhibit 4-D to Registration No. 33-49421
December 1, 1984 Exhibit 4-D to Registration No. 33-49421
December 1, 1985 Exhibit 4-D to Registration No. 33-49421
June 1, 1986 Exhibit 4-D to Registration No. 33-49421
February 1, 1987 Exhibit 4-D to Registration No. 33-49421
September 1, 1987 Exhibit 4-D to Registration No. 33-49421
January 1, 1989 Exhibit 4-D to Registration No. 33-49421
January 1, 1991 Exhibit 4-D to Registration No. 33-49421
February 1, 1991 Exhibit 4-D to Registration No. 33-49421
July 15, 1991 Exhibit 4-D to Registration No. 33-49421
August 15, 1991 Exhibit 4-D to Registration No. 33-49421
April 1, 1993 Exhibit 4-E to Registration No. 33-49421
July 1, 1993 Exhibit 4-D to Registration No. 33-57955
F. Indenture dated as of April 1, 1993 from
South Carolina Electric & Gas Company to
NationsBank of Georgia, National Association
(Filed as Exhibit 4-F to Registration Statement
No. 33-49421)............................................. #
G. First Supplemental Indenture to Indenture
referred to in Exhibit 4-F dated as of June 1, 1993
(Filed as Exhibit 4-G to Registration Statement
No. 33-49421)............................................. #
H. Second Supplemental Indenture to Indenture
referred to in Exhibit 4-F dated as of June 15, 1993
(Filed as Exhibit 4-G to Registration Statement
No. 33-57955)............................................. #
9. Voting Trust Agreement
Not Applicable
# Incorporated herein by reference as indicated.
74
SCANA CORPORATION
EXHIBIT INDEX
Sequentially
Numbered
Pages
Number
10. Material Contracts
A. Copy of Voluntary Deferral Plan as amended through
October 26, 1988 (Exhibit 10-A to Form 10-K
for the year ended December 31, 1988 under cover of
Form SE, File No. 1-8809)................................. #
B. Copy of Supplementary Voluntary Deferral Plan as
amended and restated through August 28, 1991
(Exhibit 10-B to Form 10-K for the year ended
December 31, 1991, under cover of Form SE,
File No. 1-8809).......................................... #
C. Copy of Key Executive Severance Benefit Plan as
adopted on February 28, 1990 (Exhibit 10-C to Form 10-K
for the year ended December 31, 1989 under cover of
Form SE, File No. 1-8809)................................. #
D. Copy of SCANA Corporation Performance Share Plan
as amended and restated effective February 16, 1993
(Exhibit 10-D to Form 10-K for the year ended
December 31, 1992, File No. 1-8809)....................... #
E. Form of Agreement under SCANA Corporation Key
Employee Retention Program (Exhibit 10-E to Form
10-K for the year ended December 31, 1991, under
cover of Form SE, File No. 1-8809)........................ #
F. Description of SCANA Corporation Whole Life Option
(Exhibit 10-F to Form 10-K for the year ended
December 31, 1991, under cover of Form SE, File
No. 1-8809)............................................... #
G. Description of SCANA Corporation Performance
Incentive Plan (Exhibit 10-G to Form 10-K for
the year ended December 31, 1991, under cover
of Form SE, File No. 1-8809).............................. #
11. Statement Re Computation of Per Share Earnings
Not Applicable
12. Statements Re Computation of Ratios (Filed herewith)......... 77
13. Annual Report to Security Holders, Form 10-Q or
Quarterly Report to Security Holders
Not Applicable
16. Letter Re Change in Certifying Accountant
Not Applicable
18. Letter Re Change in Accounting Principles
(Exhibit 18 to Form 10-Q for the quarter ended
June 30, 1995, File No. 1-8809).............................. #
21. Subsidiaries of the Registrant
Included herein on Page 25
# Incorporated herein by reference as indicated.
75
SCANA CORPORATION
EXHIBIT INDEX
Number
22. Published Report Regarding Matters Submitted to
Vote of Security Holders
Not Applicable
23. Consents of Experts and Counsel
Consent of Deloitte & Touche LLP (Filed herewith)............ 81
24. Power of Attorney
Not Applicable
27. Financial Data Schedule
Filed herewith
28. Information from Reports Furnished to State
Insurance Regulatory Authorities
Not Applicable
99. Additional Exhibits
Not Applicable
# Incorporated herein by reference as indicated.
76