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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
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 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.)
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 $2,785,523,916 at February 28, 1997 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 28, 1997 was 106,622,925.
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 1997 Proxy Statement, dated March
17, 1997, in connection with its 1997 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 .......................................... 24
Item 3. Legal Proceedings ................................... 26
Item 4. Submission of Matters to a Vote of
Security Holders ................................... 26
Corporate Structure .......................................... 27
Executive Officers of the Registrant ......................... 28
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters..................... 30
Item 6. Selected Financial Data ............................. 31
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations ...... 32
Item 8. Financial Statements and Supplementary Data ......... 43
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ............. 71
PART III
Item 10. Directors and Executive Officers of the
Registrant ......................................... 71
Item 11. Executive Compensation .............................. 71
Item 12. Security Ownership of Certain Beneficial
Owners and Management .............................. 71
Item 13. Certain Relationships and Related Transactions ...... 71
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K ............................ 72
SIGNATURES ........................................................ 73
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
ITC......................... ITC Holding Company, Inc.
KVA......................... Kilovolt-ampere
KW.......................... Kilowatt
KWH......................... Kilowatt-hour
LNG......................... Liquefied Natural Gas
MCF......................... Thousand Cubic Feet
Mhz......................... Megahertz
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
SCI......................... SCANA Communications, Inc.
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 4,285 full-time, permanent employees as of December 31, 1996
as compared to 4,347 full-time, permanent employees as of December 31, 1995.
SEGMENTS OF BUSINESS
SCANA neither owns nor operates any physical properties. It has thirteen
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 area of
Columbia, 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 2.4 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 owns and
operates a 62-mile, six-inch propane pipeline that connects the SCANA Propane
Services, Inc. propane storage facility with Dixie Pipeline Company's system,
which traverses central South Carolina. 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 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 Alabama, Arkansas, Louisiana,
Mississippi, New Mexico, Texas and Federal and state waters offshore Alabama,
Louisiana and Texas.
Energy Marketing markets natural gas and other light hydrocarbons.
Energy Marketing also owns and operates gas gathering systems in Waskom,
Texas and offshore Alabama in Mobile Bay.
Suburban purchases, delivers and sells propane within the Southeast. In
1996 Suburban sold approximately 34 million gallons of propane and had
approximately 35,000 residential, commercial and industrial customers at year
end.
SCANA Propane Services, Inc. owns and operates a 60-million gallon under-
ground propane storage facility near York, South Carolina and leases cavern
storage space to industries, utilities and others.
SCI, through a joint venture with a subsidiary of ITC, a Georgia-based
telecommunications holding company, owns and operates a 900 mile fiber optic
network through Alabama, Georgia, Louisiana, Mississippi, and Texas. SCI
holds an approximate 17% interest in the common stock of InterCel, a publicly
traded telecommunications company which owns PCS licenses for the Atlanta,
Georgia; Birmingham, Alabama; Jacksonville, Florida; and Memphis,
Tennessee/Jackson, Mississippi MTAs. InterCel was the winning bidder for
additional PCS licenses to provide service to 13 Basic Trading Areas ("BTA")
in Kentucky, Tennessee and Indiana. InterCel will market PCS in portions
of 12 southeastern states with a population of 23 million. (See "Other
Matters.")
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. On January 1,
1997 ServiceCare initiated its home security monitoring business. At year
end, ServiceCare had approximately 34,000 members in South Carolina and,
through a franchise agreement with another company, 12,150 members in
Kentucky.
Primesouth, Inc. is engaged in power plant management and maintenance
services.
SCANA Resources, Inc. conducts energy-related businesses and services.
6
Information with respect to major segments of business for the years
ended December 31, 1996, 1995 and 1994 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 regulation. Deregulation of
electric wholesale and retail markets is creating 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. Legislative initiatives
at the Federal and state levels are being considered and, if enacted, could
mandate market deregulation. The pace of deregulation, the future prices of
electricity, and the regulatory actions which may be taken by the PSC and the
FERC in response to the changing environment cannot be predicted. However,
recent FERC actions will likely accelerate competition among electric
utilities by providing for wholesale transmission access. In April 1996 the
FERC issued Order 888, which addresses open access to transmission lines and
stranded cost recovery. Order 888 requires utilities under FERC jurisdiction
that own, control or operate transmission lines to file nondiscriminatory open
access tariffs that offer to others the same transmission service they provide
themselves. The FERC has also permitted utilities to seek recovery of
wholesale stranded costs from departing customers by direct assignment.
Approximately five percent of the Company's electric revenues is under FERC
jurisdiction.
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, for
ratemaking purposes, of depreciation reserves from transmission and
distribution assets to nuclear production assets. The FERC has rejected the
depreciation reserve transfer for rates subject to its jurisdiction. In May
1996 the FERC approved SCE&G's application establishing open access
transmission tariffs and requesting authorization to sell bulk power to
wholesale customers at market-based rates. Significant investments are being
made in customer and management information systems. Marketing of services to
commercial and industrial customers has been increased significantly. The
Company 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. Although the potential effects of
deregulation cannot be determined at present, discontinuation of the
accounting treatment could have a material adverse effect on the Company's
results of operations in the period the write-off is recorded. It is expected
that cash flows and the financial position of the Company would not be
materially affected by the discontinuation of the accounting treatment. The
Company reported approximately $287 million and $59 million of regulatory
assets and liabilities, respectively, including amounts recorded for net
deferred income tax assets and liabilities of approximately $107 million and
$57 million, respectively, on its balance sheet at December 31, 1996.
7
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 continue their ongoing 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. On January 9, 1996 the PSC issued an order granting SCE&G an increase
in retail electric rates of 7.34%, which will produce additional revenues of
approximately $67.5 million annually. The increase has been 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 in January 1996.
The second phase, an increase in revenues of approximately $8.0 million
annually, based on a test year, or .87%, was implemented in January 1997. 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 a significant portion of SCE&G's electric
regulatory assets (excluding deferred income tax 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, for ratemaking purposes, approximately $257
million of depreciation reserves from transmission and distribution assets to
nuclear production assets was also approved. The PSC's ruling does not apply
to wholesale electric revenues under the FERC's jurisdiction, which constitute
approximately five percent of the Company's electric revenues. The FERC has
rejected the transfer of depreciation reserves for rates subject to its
jurisdiction.
During 1997 the Company is expected to meet its capital requirements
principally through internally generated funds (approximately 67%, 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.
8
The Company's revised estimates of its cash requirements for construction
and nuclear fuel expenditures, which are subject to continuing review and
adjustment, for 1997 and the two-year period 1998-1999 are as follows:
Type of Facilities 1998-1999 1997
(Thousands of Dollars)
South Carolina Electric & Gas Company:
Electric Plant:
Generation . . . . . . . . . . . . . . $127,397 $ 61,869
Transmission . . . . . . . . . . . . . 40,442 19,801
Distribution . . . . . . . . . . . . . 121,821 63,250
Other. . . . . . . . . . . . . . . . . 18,667 18,344
Nuclear Fuel. . . . . . . . . . . . . . . 24,257 30,706
Gas . . . . . . . . . . . . . . . . . . . 35,792 21,327
Common . . . . . . . . . . . . . . . . . 14,161 39,666
Other . . . . . . . . . . . . . . . . . . 701 559
Total . . . . . . . . . . . . . . . . . 383,238 255,522
Other Companies Combined. . . . . . . . . . 108,596 72,006
Total . . . . . . . . . . . $491,834 $327,528
The above estimates exclude AFC.
Actual expenditures for the years 1997 and 1998-1999 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.
During 1996 SCE&G and GENCO expended approximately $18.6 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 1997,
included in the table above, are estimated to cost approximately $37.6
million.
Other
In addition to the Company's capital requirements for 1997 described
above, approximately $36.4 million will be required for refunding and retiring
outstanding securities and obligations. For the years 1998-2001, the Company
has an aggregate of $476.6 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.
The Company and Westvaco Corporation have formed a limited liability
company, Cogen South LLC, to build and operate a $170 million cogeneration
facility at Westvaco's Kraft Division Paper Mill in North Charleston, South
Carolina. SCANA and Westvaco each own 50% interest in the LLC. The facility
will provide industrial process steam for the Westvaco paper mill and shaft
horsepower to enable SCE&G to generate up to 99 megawatts of electricity.
Construction financing is being provided to Cogen South LLC by banks. A $15
million capital contribution to the LLC by each partner is expected prior to
operation of the facility. In addition to the cogeneration LLC, Westvaco has
entered into a 20-year contract with SCE&G for all its electricity
requirements at the North Charleston mill at SCE&G's standard industrial rate.
Construction of the plant began in September 1996 and it is expected to be
operational in the fall of 1998.
A percentage of the projected annual revenues for the years 1997-2003 of
certain fiber optic routes of a joint venture between SCI and a subsidiary of
ITC, has been guaranteed by SCI. The amount of such guarantee over its
remaining term, net of $33.5 million for revenue contracts obtained by the
joint venture, is approximately $7.3 million. (See "Other Matters.")
9
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, 1996
the Company had available for issuance $317.6 million under this program, of
which $25 million was issued on February 12, 1997.
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, 1996
the Bond Ratio was 4.37. 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 $379 million at December 31, 1996), (ii) retirements of Class A
Bonds (which retirement credits totaled $69.6 million at December 31, 1996),
and (iii) cash on deposit with the Trustee.
SCE&G has a bond indenture dated April 1, 1993 (New Mortgage) 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, 1996), 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, 1996 the New Bond Ratio was 5.90.
The following additional financing transactions have occurred since
December 31, 1995:
On January 12, 1996 SCANA closed on unsecured bank loans totaling
$60 million due January 10, 1997, and used the proceeds to pay off a loan
in a like total amount. On January 10, 1997 SCANA refinanced the loans
with unsecured bank loans totaling $60 million due January 9, 1998 at
initial interest rates between 5.995% and 6.031%, at a fixed 12-month
LIBOR plus a spread of 10 to 12 1/2 basis points.
On February 12, 1997 SCANA closed on the sale of $25 million of Medium-
Term Notes having an annual interest rate of 6.9% and maturing February
15, 2007. These funds were used to reduce short-term borrowings at
SCANA.
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.
10
Pursuant to Section 204 of the Federal Power Act, SCE&G and GENCO must
obtain FERC authority to issue short-term debt. As amended by SCE&G's request
approved in 1997, the FERC has authorized SCE&G to issue up to $250 million of
unsecured promissory notes or commercial paper with maturity dates of
twelve months or less but not later than December 31, 1999. Commercial paper
outstanding at December 31, 1996 was $90.0 million. GENCO has not sought such
authorization.
SCE&G had $145 million authorized and unused lines of credit at December
31, 1996. In addition, Fuel Company has a credit agreement for a maximum
of $125 million with the full amount available at December 31, 1996. The
credit agreement supports the issuance of short-term commercial paper for the
financing of nuclear and fossil fuels and sulfur dioxide emission allowances.
(See "Fuel Financing Agreements.") Fuel Company commercial paper outstanding
at December 31, 1996 was $66.1 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, 1996 the Preferred Stock Ratio was 2.80.
During 1996 SCANA issued 1,118,366 shares of the Company's common stock
under its Investor Plus Plan. In addition, SCANA issued 1,393,761 shares of
its common stock pursuant to its SPSP. At December 31, 1996 SCANA has
authorized and reserved for issuance, and registered under effective
registration statements, 387,742 and 1,157,378 shares of common stock pursuant
to the Investor Plus Plan and the SPSP, respectively. On January 14, 1997 an
additional 2,500,000 shares of SCANA common stock were registered for sale
under the Investor Plus Plan. Effective February 1, 1997 the Investor Plus
Plan converted from an original issue plan to a market purchase plan.
The ratios of earnings to fixed charges (SEC method) were 3.60, 3.00,
2.55, 3.38 and 2.79 for the years ended December 31, 1996, 1995, 1994, 1993
and 1992, 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 its
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, 1996 commercial paper outstanding was approximately $66.1
million at a weighted average interest rate of 5.62%. (See Note 4 of Notes to
Consolidated Financial Statements.)
11
ELECTRIC OPERATIONS
Electric Sales
In 1996 residential sales of electricity accounted for 43% of electric
sales revenues; commercial sales 30%; industrial sales 19%; sales for resale
4%; and all other 4%. KWH sales by classification for the years ended
December 31, 1996 and 1995 are presented below:
Sales
KWH %
Classification 1996 1995 Change
(thousands)
Residential 5,939,703 5,726,815 3.72
Commercial 5,220,627 5,076,091 2.85
Industrial 5,320,515 5,210,368 2.11
Sale for resale 1,023,211 1,063,064 (3.75)
Other 505,793 506,806 (0.20)
Total Territorial 18,009,849 17,583,144 2.43
Interchange 895,016 195,591 357.60
Total 18,904,865 17,778,735 6.33
Sales for resale includes electricity furnished for resale to three
municipalities, two electric cooperatives and, for 1995, one state electric
agency. One municipality and one electric cooperative have notified SCE&G of
their intent to terminate in the year 2000 their wholesale power contracts
with SCE&G and bid out their electric requirements. Interchange sales during
1996 include sales to thirteen investor-owned utilities, one electric
cooperative and two federal/state electric agencies. During 1995, interchange
sales includes sales to four investor-owned utilities, one electric
cooperative and one state electric agency. Interchange sales volume for 1996
increased as a result of additional system capacity resulting from the startup
of the Cope plant in early 1996.
The electric sales volume from territorial sales increased for the year
ended December 31, 1996 compared to the prior year as a result of increased
residential and commercial sales due primarily to customer growth. The all-
time peak demand of 3,698 MW was set on July 23, 1996. During 1996 the
Company recorded a net increase of 8,966 electric customers, increasing its
total customers to 493,320.
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 is leasing (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. This 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.
12
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 1994-1996.
1996 1995 1994
Nuclear:
Per million BTU $ .47 $ .48 $ .51
Coal:
Per ton $39.33 $40.57 $40.43
Per million BTU 1.57 1.58 1.59
Weighted Average Cost
of All Fuels:
Per million BTU $ 1.52 $ 1.47 $ 1.53
The fuel costs for 1994 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.
Fuel Supply
The following table shows the sources and approximate percentages of the
Company's total KWH generation by each category of fuel for the years 1994-
1996 and the estimates for 1997 and 1998.
Percent of Total KWH Generated
Estimated Actual
1998 1997 1996 1995 1994
Coal 69% 71% 71% 65% 76%
Nuclear 26 24 24 27 17
Hydro 5 5 5 5 6
Natural Gas & Oil - - - 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, 1996 SCE&G had approximately a 37-day supply of coal
in inventory and GENCO had approximately a 30-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 89.1% of estimated requirements
for 1997 (approximately 5.4 million tons).
The supply of contract coal is purchased from six suppliers located in
eastern Kentucky and southwest Virginia. Contract commitments, which expire
at various times from 1997-2003, approximate 4.4 million tons annually.
Sulfur restrictions on the contract coal range from .75% to 2%.
13
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 is unaware that any more stringent sulfur
content requirements for existing plants are contemplated at the State level
by DHEC. 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 or enriched uranium product 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:
Remaining Expiration
Commitment Contractor Regions(1) Date
Uranium Energy Resources
of Australia 13 1997
Uranium Everest Minerals 13 1996
Conversion ConverDyn 13 1997
Enrichment USEC (2) 13-18 2005
Fabrication Westinghouse 13-21 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. 12 was loaded in 1996
and Region no. 13 will be loaded in 1997.
(2) Contract provisions for the delivery of enriched uranium product
encompass uranium supply and conversion and enrichment services.
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.)
14
Decommissioning
Decommissioning of Summer Station is presently scheduled to commence when
the operating license expires in the year 2022. 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 1996
and 1995) are used to pay premiums on insurance policies on the lives of
certain Company personnel. SCE&G is the beneficiary of these policies.
Through these 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 1996 residential sales accounted for 27% of gas sales revenues;
commercial sales 18%; industrial sales 41%; sales for resale 14%. Dekatherm
sales by classification for the years ended December 31, 1996 and 1995 are
presented below:
SALES
DEKATHERMS %
CLASSIFICATION 1996 1995 CHANGE
Residential 14,108,058 12,333,769 14.4
Commercial 11,105,250 10,519,581 5.6
Industrial 47,909,555 49,474,314 (3.2)
Sale for resale 16,506,523 15,923,483 3.7
Transportation gas 6,758,348 7,978,251 (15.3)
Total 96,387,734 96,229,398 0.2
During 1996 the Company recorded a net increase of 5,158 customers,
increasing its total customers to 248,681.
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.
15
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
suppliers 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.
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 1997 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 188,000
Transco Firm Transportation 29,300
Total 217,300
Additional natural gas volumes are brought to Pipeline Corporation's
system as capacity is available for interruptible transportation.
During 1996 the average cost per MCF of natural gas purchased for resale,
excluding firm service demand charges, was approximately $2.85 compared to
approximately $1.95 during 1995.
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, therefore, have no impact on net income.
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 LNG plants are capable of
storing the liquefied equivalent of 1,900,000 MCF of natural gas, of which
approximately 1,746,830 MCF were in storage at December 31, 1996. 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 6,294,474 MCF were in storage on December 31, 1996.
The Company believes that supplies under contract and available for spot
market purchase are adequate to meet existing customer demands and to
accommodate growth.
16
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 owns and/or operates interests in oil and gas
properties in Alabama, Arkansas, Louisiana, Mississippi, New Mexico and Texas
and Federal and state waters offshore Alabama, Louisiana and Texas. Petroleum
Resources and Fina Oil and Chemical Company (Fina) are parties to a joint
exploration and development agreement providing for the exclusive oil and gas
development rights on approximately 400,000 acres 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. During 1996, Petroleum Resources participated in two
seismic surveys covering approximately 175 square miles. In 1997 and 1998,
Petroleum Resources plans to participate in two additional seismic surveys
totaling approximately 250 square miles. Of three wells drilled during 1996,
one was completed with a production rate at year end of five million cubic
feet of natural gas per day and one is expected to begin producing in February
1997 at an expected rate of five million cubic feet of natural gas per day.
One additional exploration well is being drilled in early 1997. Petroleum
Resources' participation in the seismic and drilling activity is financed
largely with internal cash flows from the existing Petroleum Resources
operations.
On April 22, 1996 Petroleum Resources closed a $46.7 million sale of
substantially all of its interests in oil and gas properties in the state of
Oklahoma to ONEOK Resources Company, a subsidiary of ONEOK, Inc.
In August 1996 Petroleum Resources and Cobra Oil and Gas Corporation
(COBRA) entered into an agreement providing for the joint exploration and
development of fifteen field areas in Alabama, Arkansas, Louisiana, New Mexico
and Texas. Petroleum Resources' average interest in the program is
approximately 30%. Under the agreement, Petroleum Resources has acquired
interests in 83,000 acres of processed 3-D seismic data covering 900 square
miles.
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 Waskom, Texas and offshore Alabama in
Mobile Bay. In 1996, the FERC approved Energy Marketing's application to
become a power marketer, allowing Energy Marketing to buy and sell large
blocks of electric capacity in wholesale markets.
Propane Operations
Suburban purchases, delivers and sells propane in the Southeast. In 1996
Suburban sold approximately 34 million gallons of propane and had
approximately 35,000 residential, commercial and industrial customers at year-
end.
SCANA Propane Services, Inc. owns and operates a 60-million gallon under-
ground propane storage facility near Rock Hill, South Carolina and leases
storage space to industrial companies, utilities and others.
17
Pipeline Corporation owns and operates a 62-mile propane pipeline that
connects SCANA Propane Services, Inc.'s propane storage facility with the
Dixie Pipeline System which traverses central South Carolina.
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 otherwise orders, 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 2036
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, an
application for a new license for Neal Shoals was filed with the FERC on
December 30, 1991. No competing applications were filed. The FERC issued a
new 40-year license for the Neal Shoals project on June 17, 1996.
SCE&G filed a notice of intent to file an application for a new license
for Columbia on June 29, 1995. The application for the new license will be
filed by June 30, 1998.
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 Federal
government 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.
In May 1996 the FERC approved the Company's application establishing open
access transmission tariffs and requesting authorization to sell bulk power to
wholesale customers at market-based rates.
18
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 considera-
tions 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.
In 1996 the NRC completed the Systematic Assessment of Licensee
Performance (SALP) for Summer Station. The station was assessed in four
functional areas. The results of the assessment identified superior
performance in Plant Operations, Maintenance and Engineering and good
performance in Plant Support. Superior is the highest assessment given by the
NRC.
Summer Station has received a category one rating from the Institute of
Nuclear Power Operations (INPO) in the last four out of five evaluations. 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 Orders 636 and 888
The Company's regulated business operations were impacted by the NEPA and
FERC Orders No. 636 and 888. NEPA was 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. See "Competition" for a discussion of
FERC Order 888. Order No. 636 was 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 continues to 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 operations, cash flows,
financial position or business prospects.
RATE MATTERS
The following table presents a summary of significant rate activity for
the years 1992 - 1996 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.
19
On January 9, 1996 the PSC issued an order granting SCE&G an increase in
retail electric rates of 7.34%, which will produce additional revenues of
approximately $67.5 million annually. The increase has been 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 in January 1996.
The second phase, an increase in revenues of approximately $8.0 million
annually, or .87%, was implemented in January 1997. 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 a significant portion of SCE&G's electric regulatory assets
(excluding deferred income tax 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, for ratemaking purposes, approximately $257 million of depreciation
reserves from transmission and distribution assets to nuclear production
assets was also approved. The PSC's ruling does not apply to wholesale
electric revenues under the FERC's jurisdiction, which constitute
approximately five percent of the Company's electric revenues. The FERC has
rejected the transfer of depreciation reserves for rates subject to its
jurisdiction.
In 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 is subject to annual review and provides for the recovery of
substantially all actual and projected site assessment and cleanup costs and
environmental claims settlements for the Company's gas operations that had
previously been deferred. In October 1996, 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 $38.0 million.
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 in May 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. The PSC and other intervenors filed another Petition
for Reconsideration, which the Supreme Court denied. The PSC and other
intervenors filed another appeal to the Circuit Court which the Circuit Court
denied in an Order dated May 9, 1996. In this Order, the Circuit Court
upheld its previous Orders and remanded them back to the PSC. During August,
the PSC heard oral arguments on the Orders on remand for the Circuit Court.
On September 30, 1996, the PSC issued an order affirming its previous orders
and denied the Company's request for reconsideration. The Company has
appealed these two PSC orders back to the Circuit Court where they are
awaiting action.
20
On August 8, 1990, the PSC issued an order effective November 1, 1990,
approving changes in Pipeline Corporation's gas rate design for sales for
resale service and upholding the "value-of-service" method of regulation for
its direct industrial service. Direct industrial customers seeking "cost-of-
service" based rates initiated two separate appeals to the Circuit Court,
which reversed and remanded to the PSC its August 8, 1990 order. Pipeline
Corporation appealed that decision to the Supreme Court, which on January 10,
1994 reversed the two Circuit Court decisions and reinstated the PSC Order.
The Supreme Court held that the industrial customer group's appeal was
premature and failed to exhaust administrative remedies. Additionally, the
Supreme Court interpreted the rate-making statutes of South Carolina to give
discretion to the PSC in selecting the methodology to be used in setting rates
for natural gas service. The PSC then held another hearing and issued its
Order dated December 12, 1995 maintaining the present level of the caps. This
Order was appealed to the Circuit Court by Pipeline Corporation and the
industrial customer group with several other parties intervening. The Circuit
Court judge has written a letter to the parties indicating that he will rule
to require the PSC to set an overall rate of return. However, no order has
been issued. The impact, if any, on the Company's results of operations, cash
flows and financial position is not presently determinable.
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 annually based on
projected fuel costs for the ensuing twelve-month period, adjusted for any
overcollection or undercollection from the preceding twelve-month period.
SCE&G has the right to request a formal proceeding at any time should
circumstances dictate such a review.
In the April 1996 annual review of the fuel cost component of electric
rates, the PSC decreased the rate from 13.48 mills per KWH to 13.10 mills per
KWH, a monthly decrease of $0.38 for an average customer using 1,000 KWH per
month.
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 1996 review the PSC decreased the base cost of gas from
43.081 cents per therm to 42.800 cents per therm which resulted in a monthly
decrease of $0.28 (including applicable taxes) based on an average of 100
therms per month on a residential bill during the heating season. In November
1996, the Company requested that the base cost of gas be increased to 51.260
cents per therm as a result of unforeseen increases in current and projected
natural gas costs. The PSC approved the Company's request effective for bills
rendered beginning in December 1996. An average residential bill for 100
therms per month increased by $8.50 (including application taxes).
ENVIRONMENTAL MATTERS
General
Federal and state authorities have imposed 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.
21
Capital Expenditures
In the years 1994 through 1996, capital expenditures for environmental
control amounted to approximately $76.5 million. In addition, approximately
$13.9 million, $12.6 million, and $11.1 million of environmental control
expenditures were made during 1996, 1995 and 1994, 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 $19.6 million for 1997 and $131.7 million for
the four-year period 1998 through 2001. 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 during 1995. The Company currently estimates that air emissions
control equipment will require capital expenditures of $114 million over the
1997-2001 period to retrofit existing facilities, with increased operation and
maintenance cost of approximately $1 million per year. To meet compliance
requirements through the year 2006, the Company anticipates total capital
expenditures of approximately $131 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 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.
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 and environmental claims settlements
relate primarily to regulated operations; such amounts are deferred and are
being amortized and recovered through rates over a five-year period for
electric operations and an eight-year period for gas operations. Deferred
amounts totaled $41.4 million and $18.0 million at December 31, 1996 and
1995, respectively. The deferral includes the costs estimated to be
associated with the matters discussed below.
22
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, 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 and a draft Remedial Investigation report was submitted to the EPA
in February 1995. SCE&G resolved second and third round comments and
submitted a Final Draft Remedial Investigation Report in October 1996.
Although SCE&G is continuing to investigate cost-effective clean-up
methodologies, further work is pending EPA approval of the Final Draft
Remedial Investigation Report.
In October 1996 the City of Charleston and SCE&G settled all
environmental claims the City may have had against SCE&G involving the
Calhoun Park area for a payment of $26 million over four years by SCE&G
to the City. SCE&G is recovering the amount of the settlement, which
does not encompass site assessment and cleanup costs, through rates in
the same manner as other amounts accrued for site assessments and
cleanup. As part of the environmental settlement, SCE&G has agreed to
construct an 1,100 space parking garage on the Calhoun Park site and to
transfer the facility to the City in exchange for a 20-year municipal
bond backed by revenues from the parking garage and a mortgage on the
parking garage. The total amount of the bond is not to exceed $16.9
million, the maximum expected project cost. The Company does not expect
the settlement to have a material impact on the Company's results of
operations, cash flows or financial position.
SCE&G owns three other 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.
SCE&G is pursuing recovery of environmental liabilities from appropriate
pollution insurance carriers.
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 proposed a 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 mil 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 nuclear 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.
23
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 contracts for approximately
sixty percent of its forecasted natural gas production for the years 1996-
2001. In 1996, portions of the forward contracts for the year 1997 and all of
the forward contracts for the years 1998-2001 were removed. The closing of
the contracts did not result in a material gain or loss to the Company.
In March 1997 SCI reached an agreement with ITC to sell to ITC, in
exchange for non-voting convertible preferred stock and a subordinated note
of ITC, SCI's 64% interest in GulfStates Fibernet, a Georgia general partnership
(constituting the remaining joint venture interests of SCI), and certain fiber
optic assets of SCI located within the State of Georgia (see "Segments of
Business - Nonregulated Businesses"). Upon closing of the transaction and
expected refinancing of debt associated with the joint venture, SCI is to be
released from its revenue guarantee.
SCI, to support the purchase of InterCel of the BTA licenses and build-
out of the system, agreed to purchase 50,000 shares of InterCel Series D
non-voting convertible preferred stock for $22.5 million. The stock is
convertible after five years into InterCel common stock. (See "Segments of
Business - Nonregulated Businesses.")
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 of its 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."
24
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 628,000
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 Gas/Oil Parr, SC 1970 60,000
Williams (6) 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 4,316,000
(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 Generating Capability"
for this plant is expected average hourly output. The lease expires on
October 1, 2005.
(5) Plant began commercial operation in January 1996.
(6) The two gas turbines at Williams are leased and have a net capability of
49,000 KW. This lease expires on June 29, 1997.
25
SCE&G owns 430 substations having an aggregate transformer capacity of
21,078,351 KVA. The transmission system consists of 3,142 miles of lines and
the distribution system consists of 15,840 pole miles of overhead lines and
3,331 trench miles of underground lines.
GAS
Natural Gas
SCE&G's gas system consists of approximately 7,029 miles of three-inch
equivalent distribution pipelines and approximately 11,474 miles of distribution
mains and related service facilities.
Pipeline Corporation's gas system consists of approximately 1,904 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 Alabama, Arkansas, Louisiana, Mississippi, New Mexico, Texas,
and Federal and state waters offshore Alabama, Louisiana and Texas.
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 54 motor coaches used in the operation of the Columbia transit
system. The Columbia system is comprised of fifteen routes covering 177 miles.
Effective October 1, 1996, SCE&G transferred ownership and operation of the
Charleston transit system to the City of Charleston. As part of the transfer,
the Company conveyed ownership to the City of the facilities, equipment and four
motor coaches used in the operation of the transit system. The City and SCE&G
also entered into an interim operating agreement, renewable semiannually,
whereby SCE&G will operate the system for the City until a Regional Transit
Authority is established. SCE&G and the City have agreed upon a rate structure
that is designed to allow SCE&G to recover its costs of operating the Charleston
transit system. The Charleston system is comprised of fourteen routes covering
110 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
26
CORPORATE STRUCTURE
SCANA CORPORATION
A Holding Company, Owning Thirteen
Direct, Wholly Owned Subsidiaries
SOUTH CAROLINA SCANA ENERGY MARKETING, INC.
ELECTRIC & GAS COMPANY Markets natural gas and other
Generates and sells electricity light hydrocarbons. Also owns
to wholesale and retail customers, several gas gathering systems
purchases, sells and transports and provides energy-related risk
natural gas at retail and provides management services to producers
public transit service in Columbia. 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.)
SCANA COMMUNICATIONS, INC. SOUTH CAROLINA PIPELINE
Provides fiber optic CORPORATION
telecommunications and video Purchases, sells and transports
conferencing and invests natural gas to wholesale and
in companies developing direct industrial customers.
personal communications services Owns and operates two LNG plants
for wireless communications. for the liquefaction, regasifi-
cation and storage of natural gas.
SCANA PROPANE SERVICES, INC.
Owns and operates an underground
propane storage facility and
leases cavern storage to industries,
utilities and others.
Each of the above listed companies is organized and incorporated under the
laws of the State of South Carolina.
27
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. 65 Chairman of the Board and
Chief Executive Officer *-present
President *-1995
W.B. Timmerman ** 50 President 1995-present
President-SCI 1996-present
Executive Vice President 1994-1995
Assistant Secretary 1993-1996
Chief Financial Officer
and Controller *-1996
Senior Vice President *-1994
J. L. Skolds 46 President and Chief
Operating Officer - SCE&G 1996-present
Senior Vice President -
Generation 1994-1996
Vice President - Nuclear
Operations *-1994
A.H. Gibbes 50 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, SCI,
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 47 Senior Vice President -
Administration *-present
Max Earwood 64 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
* Indicates position held at least since March 1, 1992.
** On October 22, 1996 the Board of Directors elected W. B. Timmerman to be
Chairman of the Board and Chief Executive Officer effective March 1, 1997
upon the retirement of L. M. Gressette, Jr. Mr. Timmerman continues to
serve as President of SCANA.
28
H.T. Arthur 51 Vice President, General Counsel
and Assistant Secretary 1996-present
Assistant Secretary - SCE&G,
and other subsidiaries 1996-present
Vice President and General
Counsel - Pipeline *-1996
K.B. Marsh 41 Vice President - Finance,
Chief Financial Officer
and Controller 1996-present
Vice President - Finance,
Treasurer and Secretary *-1996
B.T. Zeigler 41 Vice President 1996-present
General Counsel - SCE&G 1995-present
Associate General Counsel -
SCE&G 1992-1995
Partner - Lewis, Babcock &
Hawkins Law Firm *-1992
D. N. Vannort 59 Vice President - Corporate
Compliance 1996-present
Partner - Deloitte & Touche LLP *-1996
* Indicates position held at least since March 1, 1992.
29
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
COMMON STOCK INFORMATION
1996 1995
4th 3rd 2nd 1st 4th 3rd 2nd 1st
Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
Price Range: (a)
High 28 28 1/4 28 1/4 28 5/8 28 5/8 24 1/4 23 3/8 22 1/2
Low 25 3/8 25 1/2 25 1/4 25 1/2 24 1/8 21 1/8 20 3/4 20 1/2
(a) As reported on the New York Stock Exchange Composite Listing.
Dividends Per Share:
1996 Amount Date Declared Date Paid
First Quarter .3675 February 20, 1996 April 1, 1996
Second Quarter .3675 April 25, 1996 July 1, 1996
Third Quarter .3675 August 21, 1996 October 1, 1996
Fourth Quarter .3675 October 22, 1996 January 1, 1997
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
December 31,
1996 1995
Number of common shares outstanding 106,175,273 103,623,863
Number of common stockholders of record 36,178 38,231
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 28, 1997 was
106,622,925.
(a) As reported on the New York Stock Exchange Composite Listing.
SECURITIES RATINGS (As of December 31, 1996)
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 a2 P-1
Standard
& Poor's A- A A A- A-1
Further reference is made to Note 5 of Notes to Consolidated Financial Statements.
30
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
For the Years Ended December 31, 1996 1995 1994 1993 1992
Statement of Income Data (Thousands of dollars except statistics and per share amounts)
Operating Revenues $1,512,831 $1,352,971 $1,322,062 $1,264,167 $1,138,375
Operating Income 313,883 287,514 259,553 245,311 209,780
Other Income 28,992 8,060 (29,749) 27,335 11,960
Net Income 215,286 168,339 115,452 165,240 117,667
Balance Sheet Data
Utility Plant, Net $3,529,028 $3,468,988 $3,293,667 $3,004,075 $2,810,279
Total Assets 4,759,346 4,534,426 4,316,512 4,026,701 3,543,057
Capitalization:
Common Equity 1,683,448 1,554,680 1,359,141 1,317,495 1,149,087
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) 43,014 46,243 49,528 52,840 56,154
Long-Term Debt, Net 1,581,608 1,588,879 1,548,824 1,424,399 1,204,754
Total Capitalization $3,334,097 $3,215,829 $2,983,520 $2,820,761 $2,436,022
Common Stock Data
Weighted Average Number of Common Shares
Outstanding (Thousands) 105,123 99,044 94,762 90,407 82,950
Earnings Per Weighted Average Share of
Common Stock $2.05 $1.70 $1.22 $1.83 $1.42
Dividends Declared Per Share of Common Stock $1.47 $1.44 $1.41 $1.37 $1.34
Common Shares Outstanding (Year-End) (Thousands) 106,175 103,624 96,035 93,239 87,821
Book Value Per Share of Common Stock (Year-End) $15.86 $15.00 $14.15 $14.13 $13.08
Number of Common Shareholders of Record 36,178 38,231 39,516 41,564 42,937
Other Statistics
Electric:
Customers (Year-End) 493,320 484,354 476,412 468,874 461,900
Territorial Sales (Million KWH) 18,010 17,583 16,838 16,880 15,794
Residential:
Average annual use per customer (KWH) 14,149 13,859 13,048 14,077 13,037
Average annual rate per KWH $.0785 $.0747 $.0743 $.0707 $.0695
Generating Capability - Net MW (Year-End) 4,316 4,282 3,876 3,864 3,912
Territorial Peak Demand - Net MW 3,698 3,683 3,444 3,557 3,380
Gas:
Customers (Year-End) 248,681 243,523 238,614 234,736 231,153
Sales, excluding transportation
(Thousand Therms) 896,294 882,511 781,109 717,417 761,721
Residential:
Average annual use per customer (Therms) 639 570 543 605 577
Average annual rate per therm $ .74 $.82 $.84 $.76 $.74
31
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 regulation. Deregulation of
electric wholesale and retail markets is creating 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. Legislative initiatives
at the Federal and state levels are being considered and, if enacted, could
mandate market deregulation. The pace of deregulation, future prices of
electricity, and the regulatory actions which may be taken by the PSC and the
FERC in response to the changing environment cannot be predicted. However,
recent FERC actions will likely accelerate competition among electric
utilities by providing for wholesale transmission access. In April 1996 the
FERC issued Order 888, which addresses open access to transmission lines and
stranded cost recovery. Order 888 requires utilities under FERC jurisdiction
that own, control or operate transmission lines to file nondiscriminatory open
access tariffs that offer to others the same transmission service they provide
themselves. The FERC has also permitted utilities to seek recovery of
wholesale stranded costs from departing customers by direct assignment.
Approximately five percent of the Company's electric revenues is under FERC
jurisdiction.
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, for ratemaking
purposes, of depreciation reserves from transmission and distribution assets
to nuclear production assets. The FERC has rejected the depreciation reserve
transfer for rates subject to its jurisdiction. In May 1996 the FERC approved
SCE&G's application establishing open access transmission tariffs and
requesting authorization to sell bulk power to wholesale customers at market-
based rates. Significant investments are being made in customer and
management information systems. Marketing of services to commercial and
industrial customers has been increased significantly. The Company 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. Although the potential effects of
deregulation cannot be determined at present, discontinuation of the
accounting treatment could have a material adverse effect on the Company's
results of operations in the period the write-off is recorded. It is
expected that cash flows and the financial position of the Company would not
be materially affected by the discontinuation of the accounting treatment.
The Company reported approximately $287 million and $59 million of regulatory
assets and liabilities, respectively, including amounts recorded for deferred
income tax assets and liabilities of approximately $107 million and $57
million, respectively, on its balance sheet at December 31, 1996.
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 continue their ongoing
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.
32
The Company and Westvaco Corporation have formed a limited liability
company, Cogen South LLC, to build and operate a $170 million cogeneration
facility at Westvaco's Kraft Division Paper Mill in North Charleston, South
Carolina. The Company and Westvaco each own a 50% interest in the LLC. The
facility will provide industrial process steam for the Westvaco paper mill and
shaft horsepower to enable SCE&G to generate up to 99 megawatts of
electricity. Construction financing is being provided to Cogen South LLC by
banks. A $15 million capital contribution to the LLC by each partner is
expected prior to operation of the facility. In addition to the cogeneration
LLC, Westvaco has entered into a 20-year contract with SCE&G for all its
electricity requirements at the North Charleston mill at SCE&G's standard
industrial rate. Construction of the plant began in September 1996 and it is
expected to be operational in the fall of 1998.
On August 7, 1996 the City of Charleston executed 30-year electric and
gas franchise agreements with SCE&G. In consideration for the electric
franchise agreement, SCE&G will pay the City $25 million over seven years
(1996-2002) and has donated to the City the existing transit assets in
Charleston.
On January 9, 1996 the PSC issued an order granting SCE&G an increase in
retail electric rates of 7.34%, which will produce additional revenues of
approximately $67.5 million annually. The increase has been 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 in January 1996.
The second phase, an increase in revenues of approximately $8.0 million
annually, or .87%, was implemented in January 1997. 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 a significant portion of SCE&G's electric regulatory assets (excluding
deferred income tax 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, for
ratemaking purposes, approximately $257 million of depreciation reserves from
transmission and distribution assets to nuclear production assets was also
approved. The PSC's ruling does not apply to wholesale electric revenues
under the FERC's jurisdiction, which constitute approximately five percent of
the Company's electric revenues. The FERC has rejected the transfer of
depreciation reserves for rates subject to its jurisdiction.
On August 8, 1990 the PSC issued an order effective November 1, 1990,
approving changes in Pipeline Corporation's gas rate design for sales for
resale service and upholding the "value-of-service" method of regulation for
its direct industrial service. Direct industrial customers seeking "cost-of-
service" based rates initiated two separate appeals to the Circuit Court,
which reversed and remanded to the PSC its August 8, 1990 order. Pipeline
Corporation appealed that decision to the Supreme Court which on January 10,
1994 reversed the two Circuit Court decisions and reinstated the PSC Order.
The Supreme Court held that the industrial customer group's appeal was
premature and failed to exhaust administrative remedies. Additionally, the
Supreme Court interpreted the rate-making statutes of South Carolina to give
discretion to the PSC in selecting the methodology to be used in setting rates
for natural gas service. The PSC then held another hearing and issued its
Order dated December 12, 1995 maintaining the present level of the caps. This
Order was appealed to the Circuit Court by Pipeline Corporation and the
industrial customer group with several other parties intervening. The Circuit
Court judge has written a letter to the parties indicating that he will rule
to require the PSC to set an overall rate of return. However, no order has
been issued. The impact, if any, on the Company's results of operations, cash
flows and financial position is not presently determinable.
33
The revised estimated primary cash requirements for 1997, excluding
requirements for fuel liabilities and short-term borrowings, and the actual
primary cash requirements for 1996 are as follows:
1997 1996
(Thousands of Dollars)
Property additions and construction
expenditures, net of allowance for
funds used during construction $296,822 $280,749
Nuclear fuel expenditures 30,706 12,724
Maturing obligations, redemptions and
sinking and purchase fund requirements 37,285 33,717
Total $364,812 $327,190
Approximately 51% of total cash requirements (after payment of dividends)
was provided from internal sources in 1996 as compared to 56% in 1995.
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, 1996
the Company had available for issuance $317.6 million under this program, of
which $25 million was issued on February 12, 1997.
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, 1996
the Bond Ratio was 4.37. 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 $379 million at December 31, 1996), (ii) retirements of Class A
Bonds (which retirement credits totaled $69.6 million at December 31, 1996),
and (iii) cash on deposit with the Trustee.
SCE&G has a bond indenture dated April 1, 1993 (New Mortgage) 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, 1996), 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, 1996 the New Bond Ratio was 5.90.
34
The following additional financing transactions have occurred since December
31, 1995:
On January 12, 1996 SCANA closed on unsecured bank loans totaling $60
million due January 10, 1997, and used the proceeds to pay off a loan in
a like total amount. On January 10, 1997 SCANA refinanced the loans with
unsecured bank loans totaling $60 million due January 9, 1998 at initial
interest rates between 5.995% and 6.031%, at a fixed 12-month LIBOR plus
a spread of 10 to 12 1/2 basis points.
On February 12, 1997 SCANA closed on the sale of $25 million of Medium-
Term Notes having an annual interest rate of 6.9% and maturing February
15, 2007. These funds were used to reduce short-term borrowings at
SCANA, which borrowings had been incurred in support of nonregulated
subsidiaries' construction activities.
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 $250 million of unsecured promissory notes
or commercial paper with maturity dates of twelve months or less, but not
later than December 31, 1999. GENCO has not sought such authorization.
SCE&G had $145 million authorized and unused lines of credit at December
31, 1996. In addition, Fuel Company has a credit agreement for a maximum
of $125 million with the full amount available at December 31, 1996. 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, 1996 was $66.1
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, 1996 the Preferred Stock Ratio was 2.80.
During 1996 SCANA issued 1,118,366 shares of the Company's common stock
under its Investor Plus Plan. In addition, SCANA issued 1,393,761 shares of
its common stock pursuant to its Stock Purchase-Savings Plan (SPSP). At
December 31, 1996 SCANA has authorized and reserved for issuance, and
registered under effective registration statements, 387,742 and 1,157,378
shares of common stock pursuant to the Investor Plus Plan and the SPSP,
respectively. On January 14, 1997 an additional 2,500,000 shares of SCANA
common stock were registered for sale under the Investor Plus Plan. Effective
February 1, 1997 the Investor Plus Plan converted from an original issue plan
to a market purchase plan.
35
The Company anticipates that its revised 1997 cash requirements of $364.8
million will be met through internally generated funds (approximately 67%,
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 1997 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.
During 1995 the Company filed compliance plans related to Phase II
requirements with DHEC. The Company currently estimates that air emissions
control equipment will require capital expenditures of $114 million over the
1997-2001 period to retrofit existing facilities, with increased operation and
maintenance costs of approximately $1 million per year. To meet compliance
requirements through the year 2006, the Company anticipates total capital
expenditures of approximately $131 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.
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.
36
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 and environmental claims settlements
relate primarily to regulated operations; such amounts are deferred and are
being amortized and recovered through rates over a five-year period for
electric operations and an eight-year period for gas operations. Deferred
amounts totaled $41.4 million and $18.0 million at December 31, 1996 and 1995,
respectively. The deferral includes the estimated costs associated with the
matters discussed below.
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, 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 and a draft Remedial
Investigation report was submitted to the EPA in February 1995.
SCE&G resolved second and third round comments and submitted a
Final Draft Remedial Investigation Report in October 1996.
Although SCE&G is continuing to investigate cost-effective cleanup
methodologies, further work is pending EPA approval of the Final
Draft Remedial Investigation Report.
In October 1996 the City of Charleston and SCE&G settled all
environmental claims the City may have had against SCE&G involving
the Calhoun Park area for a payment of $26 million over four years
by SCE&G to the City. SCE&G is recovering the amount of the
settlement, which does not encompass site assessment and cleanup
costs, through rates in the same manner as other amounts accrued
for site assessments and cleanup. As part of the environmental
settlement, SCE&G has agreed to construct an 1,100 space parking
garage on the Calhoun Park site and to transfer the facility to the
City in exchange for a 20-year municipal bond backed by revenues
from the parking garage and a mortgage on the parking garage. The
total amount of the bond is not to exceed $16.9 million, the
maximum expected project cost.
SCE&G owns three other 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.
SCE&G is pursuing recovery of environmental liabilities from appropriate
pollution insurance carriers.
37
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.
The Company's regulated business operations were impacted by the NEPA and
FERC Orders No. 636 and 888. NEPA was 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. See "Competition" for a discussion of
FERC Order 888. Order No. 636 was 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 continues to 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 operations, cash flows,
financial position or business prospects.
Other
SCI holds an approximate 17% interest in the common stock of InterCel, a
publicly traded telecommunications company which owns PCS licenses for the
Birmingham, Alabama; Jacksonville, Florida; and Memphis, Tennessee/Jackson,
Mississippi MTAs. In June 1996 InterCel purchased a PCS license for the
Atlanta MTA, financing the purchase principally through a private placement of
non-voting convertible preferred stock, of which SCI purchased $75 million.
The non-voting preferred stock is convertible to InterCel common stock in April
2000. InterCel was the winning bidder for additional PCS licenses to provide
service to thirteen BTAs in Kentucky, Tennessee and Indiana. In March 1997
SCI, to support the purchase by InterCel of the BTA licenses and build-out of
the system, agreed to purchase 50,000 shares of InterCel Series D
non-voting convertible preferred stock for $22.5 million. The stock is
convertible after five years into InterCel common stock. InterCel will
market PCS in portions of twelve states with a population of 23 million.
SCI, through GulfStates FiberNet, a joint venture with a subsidiary of
ITC, owns and operates a 900 mile fiber optic network through Alabama,
Georgia, Louisiana, Mississippi and Texas. A percentage of the projected
annual revenues for the years 1997-2003 of certain fiber optic routes of the
joint venture has been guaranteed by SCI. The amount of such guarantee over
its remaining term, net of $33.5 million for revenue contracts obtained by the
joint venture, is approximately $7.3 million. In March 1997 SCI reached an
agreement with ITC to sell to ITC, in exchange for non-voting convertible
preferred stock and a subordinated note of ITC, SCI's 64% interest in
GulfStates Fibernet, a Georgia general partnership (constituting the
remaining joint venture interests of SCI), and certain fiber
optic assets of SCI located within the State of Georgia. Upon closing of
the transaction and expected refinancing of debt associated with the joint
venture, SCI is to be released from its revenue guarantee.
SCI, as a result of an internal audit, informed the FCC that it violated
certain licensing requirements in establishing and operating an 800 Mhz radio
system in South Carolina for public safety and utility use. As a result, SCI
has returned to the FCC several licenses obtained in violation of FCC rules
and the FCC is conducting an investigation of the system. The Company does
not believe that the resolution of this issue will have a material impact on
its results of operations, cash flows or financial position.
SCI has agreed to purchase 50,000 shares of InterCel Series D convertible
preferred stock for $22.5 million. The stock is convertible after five years
into 1,764,706 shares of InterCel common stock.
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.
38
In an effort to limit exposure to changing natural gas prices, in January
1995 the Company entered into a series of forward contracts for approximately
sixty percent of its forecasted natural gas production for the years 1996-
2001. In 1996 portions of the forward contracts for the year 1997 and all of
the forward contracts for the years 1998-2001 were removed. The closing of
the contracts did not result in a material gain or loss to the Company.
Petroleum Resources and Fina Oil and Chemical Company (Fina) are parties
to a joint exploration and development agreement providing for the exclusive
oil and gas development rights on approximately 400,000 acres 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 largely with internal cash flows
from the existing Petroleum Resources operations.
On April 22, 1996 Petroleum Resources closed a $46.7 million sale of
substantially all of its interests in oil and gas properties in the state of
Oklahoma to ONEOK Resources Company, a subsidiary of ONEOK, Inc.
In August 1996, Petroleum Resources and Cobra Oil and Gas Corporation
(COBRA) entered into an agreement providing for the joint exploration and
development of fifteen field areas in Alabama, Arkansas, Louisiana, New Mexico
and Texas. Petroleum Resources' average interest in the program is
approximately 30%. Under the agreement, Petroleum Resources has acquired
interests in 83,000 acres of processed 3-D seismic data covering 900 square
miles.
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
1994 through 1996 were as follows:
1996 1995 1994
Earnings per weighted average share $2.05 $1.70 $1.22
Percent increase (decrease) in earnings
per share 20.6% 39.3% (33.3%)
Return earned on common equity (year-end) 12.8% 10.8% 8.5%
1996 Earnings per share and return on common equity increased primarily
as a result of higher electric sales margins at SCE&G and improved
earnings at Petroleum Resources which more than offset increases in
operating expenses. Additionally, SCI reported a nonrecurring
after-tax gain of $5.7 million as a result of the business
combination of Powertel PCS Partners and InterCel in February
1996.
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.
39
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 3.9% of income
before income taxes in 1996, 8.0% in 1995 and 8.3% in 1994.
In 1996 SCANA's Board of Directors raised the quarterly cash dividend on
common stock to 36 3/4 cents per share from 36 cents per share. The
increase, effective with the dividend payable on April 1, 1996, raised the
indicated annual dividend rate to $1.47 per share from $1.44. SCANA has
increased the dividend rate on its common stock in 43 of the last 44 years.
Electric Operations
Electric sales margins for 1996, 1995 and 1994 were as follows:
1996 1995 1994
(Millions of Dollars)
Electric operating revenues $1,106.5 $1,006.4 $975.4
Less: Fuel used in electric generation 250.5 227.4 235.1
Purchased power 11.4 14.7 20.1
Margin $ 844.6 $ 764.3 $720.2
1996 The electric sales margin increased primarily as a result of the
rate increase received by SCE&G in January 1996. Economic growth
factors also contributed to the increase.
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.
Increases (decreases) from the prior year in megawatt hour (MWH) sales
volume by classes were as follows:
Classification 1996 1995
Residential 212,888 415,676
Commercial 144,536 229,472
Industrial 110,147 48,651
Sale for Resale (excluding interchange) (39,853) 38,688
Other (1,013) 12,776
Total territorial 426,705 745,263
Interchange 699,425 24,545
Total 1,126,130 769,808
Interchange sales volume for 1996 increased as a result of additional
capacity resulting from the startup of the Cope plant in early 1996.
40
Gas Operations
Gas sales margins for 1996, 1995 and 1994 were as follows:
1996 1995 1994
(Millions of Dollars)
Gas operating revenues $403.2 $342.7 $342.7
Less: Gas purchased for resale 276.8 212.4 220.9
Margin $126.4 $130.3 $121.8
1996 The gas sales margin decreased primarily as a result of higher
gas costs and curtailments imposed on interruptible industrial
customers during abnormally cold weather. Also, contributing to
the decline in the gas sales margin from 1995 to 1996 were lower
gas prices in 1995 which allowed Pipeline Corporation to compete
more successfully in that year with alternate fuel suppliers in
industrial markets.
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.
Increases (decreases) from the prior year in dekatherm (DT) sales volume
by classes, including transportation gas, were as follows:
Classification 1996 1995
Residential 1,774,289 802,211
Commercial 585,669 632,959
Industrial (1,564,759) 7,960,434
Sale for resale 583,040 744,663
Transportation gas (1,219,903) (8,089,043)
Total 158,336 2,051,224
Other Operating Expenses and Taxes
Increases (decreases) in other operating expenses, including taxes, were
as follows:
Classification 1996 1995
(Millions of Dollars)
Other operation and maintenance $20.1 $(6.6)
Depreciation and amortization 17.7 10.7
Income taxes 8.1 15.4
Other taxes 3.3 5.0
Total $49.2 $24.5
41
1996 Other operation and maintenance expenses increased primarily as a
result of higher production costs attributable to the Cope plant
which became operational in January, 1996. The increase in
depreciation and amortization expenses reflects the addition of
the Cope plant and other additions to plant-in-service. The
increase in income tax expense corresponds to the increase in
operating income. The increase in other taxes reflects higher
property taxes resulting from property additions and higher
millages and assessments.
1995 Other operation and maintenance expenses decreased primarily as a
result of lower pension costs and lower costs at electric
generating stations. The increase in depreciation and
amortization expenses is primarily attributable to additions to
plant-in-service and the write-off of certain software costs.
The increase in income tax expense corresponds to the increase in
operating income. The increase in other taxes reflects higher
property taxes resulting from higher millages and assessments
partially offset by lower payroll taxes resulting from early
retirements of employees.
Other Income
1996 Other income, net of taxes, increased approximately $23.9 million
in 1996 primarily due to the improved earnings performance of
Petroleum Resources attributable to a noncash reserve adjustment
recorded in the second quarter of 1995 and to higher gas prices
and lower production costs. The gain reported by SCI, discussed
under "Earnings and Dividends" is also included in other income
reported for 1996.
1995 Other income, net of taxes, increased $36.0 million in 1995
primarily due to the improved earnings performance of Petroleum
Resources as discussed under "Earnings and Dividends."
Interest Expense
Increases (decreases) in interest expense, excluding the debt component
of AFC, were as follows:
Classification 1996 1995
(Millions of Dollars)
Interest on long-term debt, net $(1.4) $ 7.6
Other interest expense (3.8) 10.4
Total $(5.2) $18.0
1996 The decrease in interest expense is due primarily to reductions in
outstanding debt throughout most of the year.
1995 The increase in interest expense is due primarily to the issuance
of additional debt, including commercial paper, during the latter
part of 1994 and early 1995.
42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS OF CONSOLIDATED FINANCIAL
STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
Page
Independent Auditors' Report....................................... 44
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1996 and 1995... 45
Consolidated Statements of Income and Retained Earnings for
the years ended December 31, 1996, 1995 and 1994............. 47
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994............................. 48
Consolidated Statements of Capitalization as of
December 31, 1996 and 1995................................... 49
Notes to Consolidated Financial Statements..................... 51
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.
43
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, 1996 and 1995 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, 1996. 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,
1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Columbia, South Carolina
February 7, 1997
44
CONSOLIDATED BALANCE SHEETS
December 31, 1996 1995
ASSETS (Thousands of Dollars)
Utility Plant (Notes 1, 3 and 4):
Electric $4,135,567 $3,539,068
Gas 540,196 484,752
Transit 3,923 3,768
Common 81,858 91,616
Total 4,761,544 4,119,204
Less accumulated depreciation and amortization 1,517,847 1,367,541
Total 3,243,697 2,751,663
Construction work in progress 219,150 644,661
Nuclear fuel, net of accumulated amortization 41,006 46,492
Acquisition adjustment-gas, net of accumulated amortization 25,175 26,172
Utility Plant, Net 3,529,028 3,468,988
Nonutility Property and Investments (Net of accumulated
depreciation and depletion)(Note 1) 345,248 314,207
Current Assets:
Cash and temporary cash investments (Note 8) 17,349 16,082
Receivables 239,286 211,173
Inventories (At average cost):
Fuel (Notes 3 and 4) 67,428 61,499
Materials and supplies 49,449 47,674
Prepayments 13,276 15,870
Deferred income taxes 20,776 20,186
Total Current Assets 407,564 372,484
Deferred Debits:
Emission allowances 30,457 28,514
Environmental 41,375 18,016
Nuclear plant decommissioning fund (Note 1) 42,194 36,070
Pension asset, net (Note 1) 57,931 35,354
Other (Notes 1 and 10) 305,549 260,793
Total Deferred Debits 477,506 378,747
Total $4,759,346 $4,534,426
45
December 31, 1996 1995
CAPITALIZATION AND LIABILITIES (Thousands of Dollars)
Stockholders' Investment:
Common equity (Note 5) $1,683,448 $1,554,680
Preferred stock (Not subject to purchase or sinking funds) 26,027 26,027
Total Stockholders' Investment 1,709,475 1,580,707
Preferred Stock, Net (Subject to purchase or sinking
funds)(Notes 6 and 8) 43,014 46,243
Long-Term Debt, Net (Notes 3, 4 and 8) 1,581,608 1,588,879
Total Capitalization 3,334,097 3,215,829
Current Liabilities:
Short-term borrowings (Notes 8 and 9) 144,599 112,524
Current portion of long-term debt (Note 3) 51,220 40,983
Current portion of preferred stock (Note 6) 2,432 2,439
Accounts payable 157,475 138,778
Customer deposits 16,122 13,643
Taxes accrued 70,610 66,914
Interest accrued 25,609 25,884
Dividends declared 40,773 39,056
Other 7,200 8,071
Total Current Liabilities 516,040 448,292
Deferred Credits:
Deferred income taxes (Notes 1 and 7) 577,509 542,022
Deferred investment tax credits (Notes 1 and 7) 84,100 87,719
Reserve for nuclear plant decommissioning (Note 1) 42,194 36,070
Other (Note 1) 205,406 204,494
Total Deferred Credits 909,209 870,305
Commitments and Contingencies (Note 10) - -
Total $4,759,346 $4,534,426
See Notes to Consolidated Financial Statements.
46
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Years Ended December 31, 1996 1995 1994
(Thousands of Dollars
except per share amounts)
Operating Revenues (Notes 1 and 2):
Electric $1,106,524 $1,006,420 $ 975,388
Gas 403,199 342,662 342,672
Transit 3,108 3,889 4,002
Total Operating Revenues 1,512,831 1,352,971 1,322,062
Operating Expenses:
Fuel used in electric generation 250,516 227,405 235,136
Purchased power 11,449 14,704 20,104
Gas purchased for resale 276,843 212,427 220,923
Other operation (Note 1) 238,901 228,682 229,996
Maintenance (Note 1) 68,362 58,432 63,725
Depreciation and amortization (Note 1) 147,557 129,888 119,177
Income taxes (Notes 1 and 7) 118,023 109,949 94,510
Other taxes 87,297 83,970 78,938
Total Operating Expenses 1,198,948 1,065,457 1,062,509
Operating Income 313,883 287,514 259,553
Other Income (Note 1):
Other income (loss), net of income taxes 21,964 (1,915) (37,925)
Allowance for equity funds used during construction 7,028 9,975 8,176
Total Other Income 28,992 8,060 (29,749)
Income Before Interest Charges
and Preferred Stock Dividends 342,875 295,574 229,804
Interest Charges (Credits):
Interest on long-term debt, net 114,954 116,368 108,804
Other interest expense 13,283 17,102 6,749
Allowance for borrowed funds used
during construction (Note 1) (6,081) (11,922) (7,156)
Total Interest Charges, Net 122,156 121,548 108,397
Income Before Preferred Stock Cash
Dividends of Subsidiary 220,719 174,026 121,407
Preferred Stock Cash Dividends of
Subsidiary (At stated rates) (5,433) (5,687) (5,955)
Net Income 215,286 168,339 115,452
Retained Earnings at Beginning of Year, as adjusted 497,991 472,371 490,830
Other (386) - -
Common Stock Cash Dividends Declared (Note 5) (154,725) (142,719) (133,911)
Retained Earnings at End of Year $ 558,166 $ 497,991 $ 472,371
Net Income $ 215,286 $ 168,339 $ 115,452
Weighted Average Number of Common Shares
Outstanding (Thousands) 105,123 99,044 94,762
Earnings Per Weighted Average Share of Common Stock $2.05 $1.70 $1.22
See Notes to Consolidated Financial Statements.
47
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996 1995 1994
(Thousands of Dollars)
Cash Flows From Operating Activities:
Net income $215,286 $168,339 $115,452
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation, depletion and amortization 182,561 197,735 272,106
Amortization of nuclear fuel 18,601 20,017 13,487
Deferred income taxes, net 53,035 (21,969) (9,282)
Deferred investment tax credits, net (3,619) (3,630) (3,632)
Pension asset (22,577) (15,573) (8,452)
Dividends declared on preferred stock of subsidiary 5,433 5,687 5,955
Allowance for funds used during construction (13,109) (21,897) (15,332)
Nuclear refueling accrual (2,454) 6,957 (4,881)
Equity in (earnings) losses of investees (3,020) 666 (230)
Over (under) collections, fuel adjustment clauses (8,261) 18,986 (16,966)
Early retirements (1,943) (24,823) (7,086)
Emission allowances, net of AFC (1,885) (7,592) (19,409)
Changes in certain current assets and liabilities:
(Increase) decrease in receivables (28,113) (27,993) (9,059)
(Increase) decrease in inventories (7,704) (1,437) 2,131
(Increase) decrease in prepayments 2,594 3,983 1,973
Increase (decrease) in accounts payable 18,697 18,815 (19,331)
Increase (decrease) in taxes accrued 3,696 20,244 (3,393)
Increase (decrease) in interest accrued (275) 658 3,442
Other, net (6,140) 28,572 (1,585)
Net Cash Provided From Operating Activities 400,803 365,745 295,908
Cash Flows From Investing Activities:
Utility property additions and construction expenditures,
net of AFC (235,331) (299,993) (389,268)
(Increase) decrease in nonutility property and investments:
(Acquisition) sale of oil and gas producing properties 53,020 - (47,189)
Nonutility property (36,656) (25,646) (115,541)
Investments (84,669) (62,750) (19,006)
Sale of real estate assets 2,123 18,528 79,439
Net Cash Used For Investing Activities (301,513) (369,861) (491,565)
Cash Flows From Financing Activities:
Proceeds:
Issuance of mortgage bonds - 99,583 99,207
Issuance of common stock 69,099 172,036 63,317
Issuance of notes and loans 63,815 62,542 60,000
Issuance of pollution control bonds - - 30,000
Repayments:
Mortgage bonds (22,000) (64,779) -
Notes and loans (68,480) (69,444) (75,545)
Other long-term debt (110) (11,300) (230)
Preferred stock (3,236) (3,264) (3,398)
Dividend payments:
Common stock (153,010) (139,297) (131,925)
Preferred stock (5,487) (5,750) (6,048)
Short-term borrowings, net 32,075 (59,303) 128,808
Fuel financings, net (10,689) 26,236 13,844
Net Cash Provided By (Used For) Financing Activities (98,023) 7,260 178,030
Net Increase (Decrease) in Cash and Temporary Cash Investments 1,267 3,144 (17,627)
Cash and Temporary Cash Investments, January 1 16,082 12,938 30,565
Cash and Temporary Cash Investments, December 31 $ 17,349 $ 16,082 $ 12,938
Supplemental Cash Flow Information:
Cash paid for - Interest (Includes capitalized interest of
$6,081, $11,922 and $7,156) $125,958 $130,495 $110,347
- Income taxes 115,365 99,050 90,012
Noncash Financing Activities:
Charleston Franchise Agreement 21,429 - -
Charleston Environmental Agreement 19,500 - -
See Notes to Consolidated Financial Statements.
48
SCANA Corporation
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31, 1996 1995
Common Equity (Note 5): (Thousands of Dollars)
Common stock, without par value, authorized 150,000,000 shares; issued
and outstanding, 1996 - 106,175,273 shares and 1995 -103,623,863 shares $1,125,282 $1,056,689
Retained earnings 558,166 497,991
Total Common Equity 1,683,448 51% 1,554,680 48%
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 1996 1995 Current Through Minimum
$100 Par 8.40% 197,668 197,668 101.00 - 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%
South Carolina Electric & Gas Company:
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 1996 1995 Current Through Minimum
7.70% 84,000 86,965 101.00 - 101.00 8,400 8,696
8.12% 118,812 123,045 102.03 - 102.03 11,881 12,305
Total 202,812 210,010
$50 Par Value - Authorized 1,602,539 shares
Shares Outstanding Redemption Price
Eventual
Series 1996 1995 Current Through Minimum
4.50% 16,000 17,519 51.00 - 51.00 800 876
4.60% 87 834 50.50 - 50.50 4 42
4.60%(A) 24,052 26,052 51.00 - 51.00 1,203 1,303
4.60%(B) 71,400 74,800 50.50 - 50.50 3,570 3,740
5.125% 71,000 72,000 51.00 - 51.00 3,550 3,600
6.00% 80,000 83,200 50.50 - 50.50 4,000 4,160
8.72% 64,000 95,985 51.00 12-31-98 50.00 3,200 4,799
9.40% 176,751 183,219 51.175 - 51.175 8,838 9,161
Total 503,290 553,609
$25 Par Value - Authorized 2,000,000 shares; None outstanding in 1996 and 1995
Total Preferred Stock (Subject to purchase or sinking funds) 45,446 48,682
Less: Current portion, including sinking fund requirements 2,432 2,439
Total Preferred Stock, Net (Subject to purchase or sinking funds) 43,014 1% 46,243 1%
See Notes to Consolidated Financial Statements.
49
December 31, 1996 1995
Long-Term Debt (Notes 3, 4 and 8): (Thousands of Dollars)
SCANA Corporation:
Bank Notes, due 1998 (Various rates between 5.99% and 6.03%, reset annually) 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 100,000 100,000
First and Refunding Mortgage Bonds:
Year of
Series Maturity
5.45% 1996 - 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 130,771 130,771
8 7/8% 2021 113,450 120,450
Pollution Control Facilities Revenue Bonds:
5.95% Series, due 2003 6,450 6,560
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 3,187 3,560
Charleston Franchise Agreement due 1997-2002 21,429 -
Charleston Environmental Agreement due 1997-1999 19,500 -
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 60,000 63,700
South Carolina Fuel Company, Inc.:
Commercial Paper 66,141 76,830
South Carolina Pipeline Corporation:
Notes, 6.72%, due 2013 21,250 22,500
Other 3,840 3,993
Total Long-Term Debt 1,636,753 1,634,099
Less - Current maturities, including sinking fund requirements 51,220 40,983
- Unamortized discount 3,925 4,237
Total Long-Term Debt, Net 1,581,608 47% 1,588,879 50%
Total Capitalization $3,334,097 100% $3,215,829 100%
See Notes to Consolidated Financial Statements.
50
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 engaged predominately 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 invests in
companies developing personal communications services for wireless
communications.
The accompanying Consolidated Financial Statements reflect the accounts
of the Company and its wholly owned subsidiaries:
Regulated utilities
South Carolina Electric & Gas Company (SCE&G)
South Carolina Fuel Company, Inc. (Fuel Company)
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.
SCANA Propane Services, Inc.
SCANA Communications, Inc. (SCI)
Primesouth, Inc.
ServiceCare, Inc.
SCANA Resources, Inc.
SCANA Development Corporation (in liquidation)
Certain investments are reported using the cost or equity method of
accounting, as appropriate. Significant intercompany balances and
transactions have been eliminated in consolidation in compliance with
Statement of Financial Accounting Standards No. 71 (SFAS 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.
51
B. Basis of Accounting
The Company accounts for its regulated utility operations, assets and
liabilities in accordance with the provisions of SFAS 71. The accounting
standard requires 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, 1996, approximately $287 million
and $59 million of regulatory assets and liabilities, respectively, including
amounts recorded for deferred income tax assets and liabilities of
approximately $107 million and $57 million, respectively. The electric
regulatory assets of approximately $119 million (excluding deferred income tax
assets) are being recovered through rates and, as discussed in Note 2A, the
Public Service Commission of South Carolina (PSC) has approved accelerated
recovery of approximately $64 million of these assets. 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, but it is not expected
that cash flows or financial position would be materially affected.
C. System of Accounts
The accounting records of the Company's regulated subsidiaries are
maintained in accordance with the Uniform System of Accounts prescribed by the
Federal Energy Regulatory Commission (FERC) and as adopted by the PSC.
D. 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 the V. C. Summer Nuclear Station (Summer Station), and
the South Carolina Public Service Authority (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
$937.2 million and $925.1 million as of December 31, 1996 and 1995,
respectively. Accumulated depreciation associated with SCE&G's share of
Summer Station was approximately $313.2 million and $261.0 million as of
December 31, 1996 and 1995, respectively. SCE&G's share of the direct
expenses associated with operating Summer Station is included in "Other
operation" and "Maintenance" expenses.
52
E. 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 9.1%, 8.6% and 8.5% for 1996, 1995 and 1994, 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.
F. 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 $1.9 million and
$3.8 million at December 31, 1996 and December 31, 1995, respectively, which
are included in "Deferred Credits - Other."
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 costs and that contained in rates
is deferred and included when establishing gas costs during the next annual
gas cost recovery hearing. At December 31, 1996 and 1995 the Company had
undercollected through the gas cost recovery procedure approximately $10.9
million and $4.6 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.
G. Depreciation 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:
1996 1995 1994
SCE&G 3.13% 3.02% 3.01%
GENCO 2.68% 2.67% 2.70%
Pipeline Corporation 2.56% 2.78% 2.79%
Aggregate of Above 3.08% 2.98% 2.98%
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
Department Of Energy (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.
53
H. Nuclear Decommissioning
Decommissioning of Summer Station is presently scheduled to commence when
the operating license expires in the year 2022. 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 1996
and 1995) are used to pay premiums on insurance policies on the lives of
certain Company personnel. SCE&G is the beneficiary of these policies.
Through these 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 Nuclear Regulatory Commission. 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.
Pursuant to the National Energy Policy Act passed by Congress in 1992 and
the requirements of the DOE, SCE&G has recorded a liability for its estimated
share of the DOE's decontamination and decommissioning obligation. The
liability, approximately $3.2 million at December 31, 1996, has been included
in "Long-Term Debt, Net." SCE&G is recovering 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."
I. 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.
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.
J. Pension Expense
The Company has a noncontributory defined benefit pension plan, which
covers 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 the
plan to the extent permitted by the applicable Federal income tax regulations
as determined by an independent actuary.
54
Net periodic pension cost for the years ended December 31, 1996, 1995 and
1994 included the following components:
1996 1995 1994
(Thousands of Dollars)
Service cost--benefits earned during the period $ 6,511 $ 5,187 $ 8,684
Interest cost on projected benefit obligation 21,985 19,473 21,711
Adjustments:
Return on plan assets (78,614) (103,874) 2,365
Net amortization and deferral 40,150 74,769 (29,760)
Net periodic pension (income) expense $ (9,968) $ (4,445) $ 3,000
The determination of net periodic pension cost is based upon the following
assumptions:
1996 1995 1994
Annual discount rate 7.5% 8.0% 7.25%
Expected long-term rate of
return on plan assets 8.0% 8.0% 8.0%
Annual rate of salary increases 3.0% 2.5% 4.75%
The following table sets forth the funded status of the plan at December
31, 1996 and 1995:
1996 1995
(Thousands of Dollars)
Actuarial present value of benefit obligations:
Vested benefit obligation $243,872 $228,434
Nonvested benefit obligation 23,732 15,540
Accumulated benefit obligation $267,604 $243,974
Plan assets at fair value
(invested primarily in equity
and debt securities) $523,530 $447,760
Projected benefit obligation 306,881 284,145
Plan assets greater than
projected benefit obligation 216,649 163,615
Unrecognized net transition liability 8,178 9,022
Unrecognized prior service costs 8,223 9,660
Unrecognized net gain (175,119) (146,943)
Pension asset recognized in
Consolidated Balance Sheets $ 57,931 $ 35,354
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 1996 and 1995.
1996 1995
Annual discount rate used to determine
benefit obligations 7.5% 7.5%
Assumed annual rate of future salary increases
for projected benefit obligation 3.0% 3.0%
55
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
$9.8 million, $8.5 million and $8.6 million, net of payments to current
retirees, for the years ended December 31, 1996, 1995 and 1994, respectively.
Additionally, in 1996 the Company expensed approximately $6.2 million to
accelerate the amortization of the remaining transition obligation for
postretirement benefits other than pensions, as authorized by the PSC. (See
Note 2A.)
Net periodic postretirement benefit cost for the years ended December 31,
1996, 1995 and 1994, included the following components:
1996 1995 1994
(Thousands of Dollars)
Service cost--benefits earned during the period $ 2,631 $ 2,076 $ 2,417
Interest cost on accumulated postretirement
benefit obligation 7,841 7,253 6,644
Adjustments:
Return on plan assets - - -
Amortization of unrecognized transition
obligation 9,513 3,344 3,344
Other net amortization and deferral 1,150 661 860
Net periodic postretirement benefit cost $21,135 $13,334 $13,265
The determination of net periodic postretirement benefit cost is based
upon the following assumptions:
1996 1995 1994
Annual discount rate 7.5% 8.0% 7.25%
Health care cost trend rate 9.5% 11.0% 11.25%
Ultimate health care cost trend rate (to be
achieved in 2004) 5.5% 6.0% 5.25%
The following table sets forth the funded status of the plan at December
31, 1996 and 1995:
1996 1995
(Thousands of Dollars)
Accumulated postretirement benefit obligations for:
Retirees $ 74,181 $ 64,989
Other fully eligible participants 6,674 6,685
Other active participants 29,275 27,076
Accumulated postretirement benefit obligation 110,130 98,750
Plan assets at fair value - -
Accumulated postretirement benefit obligation 110,130 98,750
Plan assets less than accumulated postretirement
benefit obligation (110,130) (98,750)
Unrecognized net transition liability 48,724 58,237
Unrecognized prior service costs 6,224 5,320
Unrecognized net loss 17,838 13,840
Postretirement benefit liability recognized
in Consolidated Balance Sheets $(37,344) $(21,353)
56
The accumulated postretirement benefit obligation is based upon the plan's
benefit provisions and the following assumptions:
1996 1995
Assumed health care cost trend rate used to
measure expected costs 9.5% 10.5%
Ultimate health care cost trend rate
(to be achieved in 2004) 5.5% 5.5%
Annual discount rate 7.5% 7.5%
Annual rate of salary increases 3.0% 3.0%
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, 1996 and the accumulated postretirement benefit
obligation as of December 31, 1996 would be to increase such amounts by
$191,000 and $3.2 million, respectively.
K. 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.
L. Environmental
The Company has an environmental assessment program to identify and
assess current and former operating 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 and environmental claims settlements relate primarily to regulated
operations; such amounts are deferred and are being amortized and recovered
through rates over a five-year period for electric operations and an eight-
year period for gas operations. Such deferred amounts totaled $41.4 million
and $18.0 million at December 31, 1996 and 1995, respectively. The deferral
includes the costs estimated to be associated with the matters discussed in
Note 10C.
M. 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 $0 millon, $24.2 million and $94.1
million in the years ended December 31, 1996, 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.
57
N. 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.
O. Reclassifications
Certain amounts from prior periods have been reclassified to conform with
the 1996 presentation.
P. 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 January 9, 1996 the PSC issued an order granting SCE&G an increase
in retail electric rates of 7.34%, which will produce additional revenues of
approximately $67.5 million annually. The increase has been 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 in January 1996.
The second phase, an increase in revenues of approximately $8.0 million
annually, or .87%, was implemented in January 1997. 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 a significant portion of SCE&G's electric regulatory assets
(excluding deferred income tax 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, for ratemaking purposes, approximately $257 million of depreciation
reserves from transmission and distribution assets to nuclear production
assets was also approved. The PSC's ruling does not apply to wholesale
electric revenues under the FERC's jurisdiction, which constitute
approximately five percent of the Company's electric revenues. The FERC has
rejected the transfer of depreciation reserves for rates subject to its
jurisdiction.
B. In 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 is subject to annual review and provides for the recovery of
substantially all actual and projected site assessment and cleanup costs and
environmental claims settlements for the Company's gas operations that had
previously been deferred. In October 1996, 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 $38.0 million.
58
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 in May 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. The PSC and other intervenors filed another Petition
for Reconsideration, which the Supreme Court denied. The PSC and other
intervenors filed another appeal to the Circuit Court which the Circuit Court
denied in an Order dated May 9, 1996. In this Order, the Circuit Court
upheld its previous Orders and remanded them back to the PSC. During August,
the PSC heard oral arguments on the Orders on remand for the Circuit Court.
On September 30, 1996, the PSC issued an order affirming its previous orders
and denied the Company's request for reconsideration. The Company has
appealed these two PSC orders back to the Circuit Court where they are
awaiting action.
D. On August 8, 1990, the PSC issued an order effective November 1, 1990,
approving changes in Pipeline Corporation's gas rate design for sales for
resale service and upholding the "value-of-service" method of regulation for
its direct industrial service. Direct industrial customers seeking "cost-of-
service" based rates initiated two separate appeals to the Circuit Court,
which reversed and remanded to the PSC its August 8, 1990 order. Pipeline
Corporation appealed that decision to the Supreme Court, which on January 10,
1994 reversed the two Circuit Court decisions and reinstated the PSC Order.
The Supreme Court held that the industrial customer group's appeal was
premature and failed to exhaust administrative remedies. Additionally, the
Supreme Court interpreted the rate-making statutes of South Carolina to give
discretion to the PSC in selecting the methodology to be used in setting rates
for natural gas service. The PSC then held another hearing and issued its
Order dated December 12, 1995 maintaining the present level of the caps. This
Order was appealed to the Circuit Court by Pipeline Corporation and the
industrial customer group with several other parties intervening. The Circuit
Court judge has written a letter to the parties indicating that he will rule
to require the PSC to set an overall rate of return. However, no order has
been issued. The impact, if any, on the Company's results of operations, cash
flows and financial position is not presently determinable.
3. LONG-TERM DEBT:
The annual amounts of long-term debt maturities, including the amounts
due under the nuclear and fossil fuel agreements (see Note 4), and sinking
fund requirements for the years 1997 through 2001 are summarized as follows:
Year Amount Year Amount
(Thousands of Dollars)
1997 $ 51,220 2000 $146,200
1998 199,126 2001 26,205
1999 105,095
Approximately $17.3 million of the portion of long-term debt payable in
1997 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 10, 1997 the Company made unsecured bank loans totaling
$60 million, due January 9, 1998 at initial rates between 5.995% and 6.031%,
at a fixed 12-month LIBOR plus a spread of 10 to 12 1/2 basis points.
Proceeds from the loans were used to repay unsecured bank loans totaling $60
million due January 10, 1997 which were classified as long-term debt at
December 31, 1996.
59
On August 7, 1996 the City of Charleston executed 30-year electric and
gas franchise agreements with SCE&G. In consideration for the electric
franchise agreement, SCE&G will pay the City $25 million over seven years
(1996-2002) and has donated to the City the existing transit assets in
Charleston. The $25 million is included in electric plant-in-service. In
settlement of environmental claims the City may have had against SCE&G
involving the Calhoun Park area, where SCE&G and its predecessor companies
operated a manufactured gas plant until the 1960's, SCE&G will pay the City
$26 million over a four-year period (1996-1999). Such amount is deferred (see
Note 1L). Accordingly, the unpaid balances of these amounts are included in
"Long-Term Debt."
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
$90 million at December 31, 1996.
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.
Commercial paper outstanding totaled $66.1 million and $76.8 million at
December 31, 1996 and 1995 at weighted average interest rates of 5.62% and
5.76%, respectively.
5. COMMON EQUITY:
The changes in "Common Stock," without par value, during 1996, 1995 and
1994 are summarized as
follows:
Number Thousands
of Shares of Dollars
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
Issuance of common stock 2,551,410 68,593
Balance December 31, 1996 106,175,273 $1,125,282
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,
1996 approximately $17.6 million of retained earnings were restricted by this
requirement as to payment of cash dividends on SCE&G's common stock.
60
Cash dividends on common stock were declared at an annual rate per share
of $1.47, $1.44 and $1.41 for 1996, 1995 and 1994, 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 1997 through 2001 are summarized as follows:
Year Amount Year Amount
(Thousands of Dollars)
1997 $2,432 2000 $2,440
1998 2,440 2001 2,440
1999 2,440
The changes in "Total Preferred Stock (Subject to purchase or sinking
funds)" during 1996, 1995 and 1994 are summarized as follows:
Number Thousands
of Shares of Dollars
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
Shares Redeemed:
$100 par value (7,198) (720)
$50 par value (50,319) (2,516)
Balance December 31, 1996 706,102 $45,446
7. INCOME TAXES:
Total income tax expense for 1996, 1995 and 1994 is as follows:
1996 1995 1994
(Thousands of Dollars)
Current taxes:
Federal $ 98,286 $101,656 $62,033
State 14,051 16,193 13,178
Total current taxes 112,337 117,849 75,211
Deferred taxes, net:
Federal 8,635 (13,878) (9,006)
State 1,706 (1,224) (86)
Total deferred taxes 10,341 (15,102) (9,092)
Investment tax credits:
Amortization of amounts deferred (credit) (3,619) (3,630) (3,631)
Total income tax expense $119,059 $ 99,117 $62,488
61
The difference in total income tax expense and the amount calculated from
the application of the statutory Federal income tax rate (35% for 1996, 1995
and 1994) to pretax income is reconciled as follows:
1996 1995 1994
(Thousands of Dollars)
Net income $215,286 $168,339 $115,452
Total income tax expense:
Charged to operating expenses 118,023 109,949 94,510
Charged (credited) to other income 1,036 (10,832) (32,022)
Preferred stock dividends 5,433 5,687 5,955
Total pretax income $339,778 $273,143 $183,895
Income taxes on above at statutory
Federal income tax rate $118,922 $ 95,600 $ 64,363
Increases (decreases) attributable to:
State income taxes (less Federal income
tax effect) 10,242 9,730 8,510
Deferred income tax reversal at higher
than statutory rates (4,073) (3,941) (4,327)
Amortization of investment tax credits (3,619) (3,630) (3,631)
Other differences, net (2,413) 1,358 (2,427)
Total income tax expense $119,059 $ 99,117 $ 62,488
The tax effects of significant temporary differences comprising the
Company's net deferred tax liability of $556.7 million at December 31, 1996
and $521.8 million at December 31, 1995 are as follows:
1996 1995
(Thousands of Dollars)
Deferred tax assets:
Unamortized investment tax credits $ 52,113 $ 54,342
Cycle billing 19,799 19,143
Nuclear operations expenses 4,722 3,755
Oil and gas properties 8,267 9,738
Deferred compensation 6,749 5,647
Other postretirement benefits 10,764 6,371
Other 12,883 7,599
Total deferred tax assets 115,297 106,595
Deferred tax liabilities:
Property, plant and equipment 610,957 592,160
Pension expense 21,790 14,191
Research and experimentation 12,528 6,196
Reacquired debt 8,334 6,680
Deferred Fuel 3,701 541
Other 14,721 8,662
Total deferred tax liabilities 672,031 628,430
Net deferred tax liability $556,734 $521,835
The Internal Revenue Service has examined and closed consolidated Federal
income tax returns of the Company through 1989, has examined and proposed
adjustments to the Company's Federal returns for 1990 through 1992 and is
currently examining the Company's Federal returns for 1993 through 1995. The
Company does not anticipate that any adjustments which might result from these
examinations will have a significant impact on the results of operations, cash
flows or financial position of the Company.
62
8. FINANCIAL INSTRUMENTS:
The carrying amounts and estimated fair values of the Company's financial
instruments at December 31, 1996 and 1995 are as follows:
1996 1995
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
(Thousands of Dollars)
Assets:
Cash and temporary
cash investments $ 17,349 $ 17,349 $ 16,082 $ 16,082
Investments 179,809 167,657 90,380 105,280
Liabilities:
Short-term borrowings 144,599 144,599 112,524 112,524
Long-term debt 1,632,828 1,673,085 1,629,862 1,737,686
Preferred stock
(subject to purchase
or sinking funds) 45,446 44,342 48,682 46,603
The information presented herein is based on pertinent information
available to the Company as of December 31, 1996 and 1995. 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, 1996, 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.
63
SCI was a principal partner in Powertel PCS Partners L.P. (Powertel),
which owned licenses to develop a personal communications services (PCS)
system in major markets in the Southeast. As a result of the February 7, 1996
merger of Powertel with InterCel, Inc., an established provider of cellular
telephone services, SCI received approximately 4.5 million shares of InterCel
common stock at a distribution price per share of $16.50. Such shares are
restricted securities until early 1998. Based on the value of InterCel common
stock on the distribution date, SCI recorded in "Other Income" a one-time
after-tax gain on its investment of approximately $5.7 million. In April
1996, SCI purchased 100,000 shares of InterCel non-voting convertible
preferred stock for $75 million. Such stock is convertible in April 2000 at a
conversion price of $16.50, or approximately 4.5 million common shares.
InterCel common stock closed at 12 1/4 per share on December 31, 1996,
resulting in a pretax unrealized holding loss of approximately $31.1 million.
The common stock ranged from a low of 11 3/4 to a high of 26 1/4 during 1996
and, through February 12, ranged from a low of 12 1/16 to a high of 17 during
1997.
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, 1996, 1995 and 1994 and for the
years then ended are as follows:
1996 1995 1994
(Millions of Dollars)
Authorized lines of credit at year-end $525.1 $477.1 $379.1
Unused lines of credit at year-end $470.4 $470.0 $355.1
Short-term borrowings outstanding at
year-end:
Bank loans $ 54.6 $ 32.0 $ 71.8
Weighted average interest rate 5.81% 6.21% 6.38%
Commercial paper $ 90.0 $ 80.5 $100.0
Weighted average interest rate 5.53% 5.83% 6.04%
10. COMMITMENTS AND CONTINGENCIES:
A. Construction
The Company and Westvaco Corporation have formed a limited liability
company, Cogen South LLC, to build and operate a $170 million cogeneration
facility at Westvaco's Kraft Division Paper Mill in North Charleston, South
Carolina. SCANA and Westvaco each own a 50% interest in the LLC. The
facility will provide industrial process steam for the Westvaco paper mill and
shaft horsepower to enable SCE&G to generate up to 99 megawatts of
electricity. Construction financing is being provided to Cogen South LLC by
banks. A $15 million capital contribution to the LLC by each partner is
expected prior to operation of the facility. In addition to the cogeneration
LLC, Westvaco has entered into a 20-year contract with SCE&G for all its
electricity requirements at the North Charleston mill at SCE&G's standard
industrial rate. Construction of the plant began in September 1996 and it is
expected to be operational in the fall of 1998.
64
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 five
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 $5.7 million.
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 results of operations, cash flows and financial position.
C. Environmental
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, 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 and a draft Remedial Investigation Report was submitted
to the EPA in February 1995. SCE&G resolved second and third round comments
and submitted a Final Draft Remedial Investigation Report in October 1996.
Although SCE&G is continuing to investigate cost-effective cleanup
methodologies, further work is pending EPA approval of the Final Draft
Remedial Investigation Report.
In October 1996 the City of Charleston and SCE&G settled all
environmental claims the City may have had against SCE&G involving the Calhoun
Park area for a payment of $26 million over four years by SCE&G to the City.
SCE&G is recovering the amount of the settlement, which does not encompass
site assessment and cleanup costs, through rates in the same manner as other
amounts accrued for site assessments and cleanup (see Note 1L). As part of
the environmental settlement, SCE&G has agreed to construct an 1,100 space
parking garage on the Calhoun Park site and to transfer the facility to the
City in exchange for a 20-year municipal bond backed by revenues from the
parking garage and a mortgage on the parking garage. The total amount of the
bond is not to exceed $16.9 million, the maximum expected project cost.
65
SCE&G owns three other 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.
SCE&G is pursuing recovery of environmental liabilities from appropriate
pollution insurance carriers.
D. Franchise Agreement
See Note 3 for a discussion of an electric franchise agreement between
SCE&G and the City of Charleston.
E. 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 for approximately
sixty percent of its forecasted natural gas production for the years 1996-
2001. In 1996, portions of the forward contracts for the year 1997 and all of
the forward contracts for the years 1998-2001 were removed. The closing of
the contracts did not result in a material gain or loss to the Company.
F. SCI Matters
A percentage of the projected annual revenues for the years 1996-2003 of
certain fiber optic routes of a joint venture between SCI and a subsidiary of
ITC has been guaranteed by SCI. The amount of such guarantee over the
remaining portion of the eight-year period, net of $33.5 million for revenue
contracts obtained by the joint venture, is approximately $7.3 million.
SCI, as a result of an internal audit, informed the Federal Communications
Commission (FCC) that it violated certain licensing requirements in
establishing and operating an 800 Mhz radio system in South Carolina for
public safety and utility use. As a result, SCI has returned to the FCC
several licenses obtained in violation of FCC rules and the FCC is conducting
an investigation of the system. The Company does not believe that the
resolution of this issue will have a material impact on results of operations,
cash flows or financial position.
G. Claims and Litigation
The Company is engaged in various claims and litigation incidental to its
business operations which management anticipates will be resolved without
material loss to the Company. No estimate of the range of loss from these
matters can currently be determined.
66
11. SEGMENT OF BUSINESS INFORMATION:
Segment information at December 31, 1996, 1995 and 1994 and for the years
then ended is as follows:
1996
Electric Gas Transit Total
(Thousands of Dollars)
Operating revenues $1,106,524 $403,199 $ 3,108 $1,512,831
Operating expenses,
excluding depreciation
and amortization 692,127 349,918 9,346 1,051,391
Depreciation and
amortization 129,588 17,706 263 147,557
Total operating expenses 821,715 367,624 9,609 1,198,948
Operating income (loss) $ 284,809 $ 35,575 $(6,501) 313,883
Add - Other income, net 28,992
Less - Interest charges, net 122,156
- Preferred stock dividends 5,433
Net income $ 215,286
Capital expenditures:
Identifiable $ 198,671 $ 48,338 $ 443 $ 247,452
Utilized for overall Company operations 23,981
Total $ 271,433
Identifiable assets at
December 31, 1996:
Utility plant, net $3,047,648 $370,772 $ 1,875 $3,420,295
Inventories 83,931 26,057 423 110,411
Total $3,131,579 $396,829 $ 2,298 3,530,706
Other assets 1,228,640
Total assets $4,759,346
67
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, net 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
68
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, net 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
69
12. QUARTERLY FINANCIAL DATA (UNAUDITED):
1996
First Second Third Fourth
Quarter Quarter Quarter Quarter Annual
Total operating
revenues (000) $394,962 $350,386 $402,284 $365,199 $1,512,831
Operating
income (000) 85,386 66,447 97,726 64,324 313,883
Net income (000) 68,813 38,300 69,963 38,210 215,286
Earnings per weighted
average share of
common stock
as reported .66 .37 .66 .36 2.05
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
70
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 28 herein. The other
information required by Item 10 is incorporated herein by reference to the
captions "Election of Directors - Proposal 1" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's definitive proxy statement
for the 1997 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 1997 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 1997 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 1997 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 1997 annual meeting of stockholders shall not be incorporated by
reference into any such filings.
71
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
72
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 18, 1997
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 18, 1997
(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 18, 1997
BY (SIGNATURE) s/B. L. Amick
(NAME AND TITLE) B. L. Amick, Director
DATE February 18, 1997
BY (SIGNATURE) s/W. B. Bookhart, Jr.
(NAME AND TITLE) W. B. Bookhart, Jr., Director
DATE February 18, 1997
BY (SIGNATURE) s/W. T. Cassels, Jr.
(NAME AND TITLE) W. T. Cassels, Jr., Director
DATE February 18, 1997
BY (SIGNATURE) s/H. M. Chapman
(NAME AND TITLE) H. M. Chapman, Director
DATE February 18, 1997
73
BY (SIGNATURE) s/J. B. Edwards
(NAME AND TITLE) J. B. Edwards, Director
DATE February 18, 1997
BY (SIGNATURE) s/E. T. Freeman
(NAME AND TITLE) E. T. Freeman, Director
DATE February 18, 1997
BY (SIGNATURE) s/B. A. Hagood
(NAME AND TITLE) B. A. Hagood, Director
DATE February 18, 1997
BY (SIGNATURE) s/W. Hayne Hipp
(NAME AND TITLE) W. Hayne Hipp, Director
DATE February 18, 1997
BY (SIGNATURE) s/F. C. McMaster
(NAME AND TITLE) F. C. McMaster, Director
DATE February 18, 1997
BY (SIGNATURE) s/Henry Ponder
(NAME AND TITLE) Henry Ponder, Director
DATE February 18, 1997
BY (SIGNATURE) s/W. B. Timmerman
(NAME AND TITLE) W. B. Timmerman, Director
DATE February 18, 1997
BY (SIGNATURE) s/J. B. Rhodes
(NAME AND TITLE) J. B. Rhodes, Director
DATE February 18, 1997
BY (SIGNATURE) s/E. C. Wall, Jr.
(NAME AND TITLE) E. C. Wall, Jr., Director
DATE February 18, 1997
74
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 June 18, 1996
(Exhibit 4(B) to Registration Statement No.
333-18149)................................................ #
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.
75
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.
76
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)......... 79
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
Not Applicable
21. Subsidiaries of the Registrant
Included herein on Page 27
# Incorporated herein by reference as indicated.
77
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)............ 83
24. Power of Attorney
Not Applicable
27. Financial Data Schedule
Filed herewith
99. Additional Exhibits
Not Applicable
# Incorporated herein by reference as indicated.
78