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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

Securities registered pursuant to Section 12(b) of the Act:

Each of the following classes or series of securities is registered on the New York Stock Exchange.

Securities registered pursuant to Section 12(g) of the Act: None

        Indicate by check mark whether the registrants: (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes ý    No o

        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.

SCANA Corporation o
South Carolina Electric & Gas Company o
Public Service Company of North Carolina, Incorporated ý

        Indicate by check mark whether the registrants are accelerated filers (as defined in Exchange Act Rule 12b-2).

SCANA Corporation Yes ý    No o
South Carolina Electric & Gas Company Yes o    No ý
Public Service Company of North Carolina, Incorporated Yes o    No ý

        The aggregate market value of voting stock held by non-affiliates of SCANA Corporation was $4.0 billion at June 30, 2004, based on a price of $36.37. Each of the other registrants is a wholly owned subsidiary of SCANA Corporation and has no voting stock other than its common stock. A description of registrants' common stock follows:

(a)

Held beneficially and of record by SCANA Corporation.

        Documents incorporated by reference:    Specified sections of SCANA Corporation's 2005 Proxy Statement, in connection with its 2005 Annual Meeting of Shareholders, are incorporated by reference in Part III hereof.

        This combined Form 10-K is separately filed by SCANA Corporation, South Carolina Electric & Gas Company and Public Service Company of North Carolina, Incorporated. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes no representation as to information relating to the other companies.

        Public Service Company of North Carolina, Incorporated meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and therefore is filing this form with the reduced disclosure format allowed under General Instruction I(2).

TABLE OF CONTENTS

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DEFINITIONS

        The following abbreviations used in the text have the meanings set forth below unless the context requires otherwise:

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PART I

ITEM 1. BUSINESS

CORPORATE STRUCTURE

SCANA CORPORATION

        A holding company owning the significant direct, wholly-owned subsidiaries listed below

SOUTH CAROLINA ELECTRIC & GAS COMPANY
Generates and sells electricity to wholesale and retail customers and purchases, sells and transports natural gas to wholesale and retail customers.

SOUTH CAROLINA GENERATING COMPANY, INC.
Owns and operates Williams Station and sells electricity to SCE&G.

SOUTH CAROLINA FUEL COMPANY, INC.
Acquires, owns and provides financing for SCE&G's nuclear fuel, fossil fuel and sulfur dioxide emission allowances.

PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
Doing business as PSNC Energy, purchases, sells and transports natural gas to retail customers.

SOUTH CAROLINA PIPELINE CORPORATION
Purchases, sells and transports natural gas to wholesale and industrial customers. Owns and operates two LNG plants for the liquefaction, storage and regasification of natural gas.

SCG PIPELINE, INC.
Provides transportation of natural gas in Georgia and South Carolina.

SCANA COMMUNICATIONS, INC.
Provides fiber optic telecommunications, ethernet services and data center facilities and builds, manages and leases communications towers in South Carolina, North Carolina and Georgia.

SCANA ENERGY MARKETING, INC.
Markets natural gas, primarily in the Southeast, and provides energy-related risk management services to producers and customers. Through its SCANA Energy division, markets natural gas in Georgia's retail natural gas market.

SERVICECARE, INC.
Provides service contracts on home appliances and heating and air conditioning units.

PRIMESOUTH, INC.
Provides management and maintenance services for power plants and a synfuel production facility.

SCANA SERVICES, INC.
Provides administrative, management and other services to the subsidiaries and business units within SCANA Corporation.

        SCANA and each of its direct, wholly-owned subsidiaries are incorporated under the laws of the State of South Carolina. In addition to the subsidiaries above, SCANA owns two other energy-related companies that are insignificant and one additional company that is in liquidation.

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RISK FACTORS

The risk factors that follow relate in each case to SCANA Corporation and its subsidiaries (SCANA), and where indicated the risk factors also relate to South Carolina Electric and Gas Company and its consolidated affiliates (SCE&G) or Public Service Company of North Carolina, Incorporated and its subsidiaries (PSNC Energy) or both.

Commodity price changes may affect the operating costs and competitive positions of SCANA's, SCE&G's and PSNC Energy's energy businesses, thereby adversely impacting results of operations, cash flows and financial condition.

        Our energy businesses are sensitive to changes in coal, gas, oil and other commodity prices. Any changes could affect the prices these businesses charge, their operating costs and the competitive position of their products and services. SCE&G is able to recover the cost of fuel used in electric generation through retail customers' bills, but increases in fuel costs affect electric prices and, therefore, the competitive position of electricity against other energy sources. In the case of regulated natural gas operations at SCE&G and PSNC Energy, costs for purchased gas and pipeline capacity are recovered through retail customers' bills, but increases in gas costs affect total retail prices and, therefore, the competitive position of gas relative to electricity, other forms of energy and other gas suppliers. Increases in gas costs may also result in lower usage by customers unable to switch to alternate fuels.

SCANA, SCE&G and PSNC Energy are subject to complex government rate regulation, which could adversely affect revenues and results of operations.

        SCANA, SCE&G and PSNC Energy are subject to extensive regulation which could adversely affect operations. In particular, SCE&G's electric operations in South Carolina, and SCANA's gas operations in South Carolina (including SCE&G) and North Carolina (PSNC Energy), are regulated by state utilities commissions. Our gas marketing operations in Georgia are also subject to state regulatory oversight. Although we believe we have constructive relationships with our regulators, our ability to obtain rate increases that will allow us to maintain reasonable rates of return is dependent upon regulatory discretion, and there can be no assurance that we will be able to implement rate increases when sought. Moreover, in connection with SCANA's acquisition of PSNC Energy, PSNC Energy agreed not to seek a general rate increase until after August 2005.

SCANA, SCE&G and PSNC Energy are vulnerable to interest rate increases and may not have access to capital at favorable rates, if at all, which would increase borrowing costs and adversely affect results of operations, cash flows and financial condition.

        Changes in interest rates can affect the cost of borrowing on variable rate debt outstanding, on refinancing of debt maturities and on incremental borrowing to fund new investments. SCANA's business plan, and the business plans of SCE&G and PSNC Energy, reflect the expectation that we will have access to the capital markets on satisfactory terms to fund commitments. Moreover, the ability to maintain short-term liquidity by utilizing commercial paper programs is dependent upon maintaining investment grade debt ratings. The liquidity of SCANA, SCE&G and PSNC Energy would be adversely affected by unfavorable changes in the commercial paper market or if bank credit facilities became unavailable at acceptable rates.

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SCANA may not be able to reduce its leverage as quickly as planned. This could result in downgrades of SCANA's debt ratings, thereby increasing its borrowing costs and adversely affecting its results of operations, cash flows and financial condition.

        SCANA's leverage ratio of debt to capital increased significantly following its acquisition of PSNC Energy in 2000, and was approximately 58% at December 31, 2004. SCANA has publicly announced its desire to reduce this leverage ratio to between 50% to 52%, but SCANA's ability to do so depends on a number of factors. If SCANA is not able to reduce its leverage ratio, SCANA's debt ratings may be affected, it may be required to pay higher interest rates on its long- and short-term indebtedness, and its access to the capital markets may be limited.

Operating results may be adversely affected by abnormal weather.

        SCANA, SCE&G and PSNC Energy have historically sold less power, delivered less gas and/or received lower prices for natural gas in deregulated markets, and consequently earned less income, when weather conditions are milder than normal. Mild weather in the future could diminish the revenues and results of operations and harm the financial condition of SCANA, SCE&G and PSNC Energy. In addition, severe weather can be destructive, causing outages and property damage, adversely affecting operating expenses and revenues.

Potential competitive changes may adversely affect gas and electricity businesses due to the loss of customers, reductions in revenues, or write-down of stranded assets.

        The utility industry has been undergoing dramatic structural change for several years, resulting in increasing competitive pressures on electric and natural gas utility companies. Competition in wholesale power sales has been introduced on a national level. Some states have also mandated or encouraged competition at the retail level. Increased competition may create greater risks to the stability of the utility earnings of SCE&G and PSNC Energy generally and may in the future reduce earnings from retail electric and natural gas sales. In a deregulated environment, formerly regulated utility companies that are not responsive to a competitive energy marketplace may suffer erosion in market share, revenues and profits as competitors gain access to their customers. In addition, SCANA's and SCE&G's generation assets would be exposed to considerable financial risk in a deregulated electric market. If market prices for electric generation do not produce adequate revenue streams and the enabling legislation or regulatory actions do not provide for recovery of the resulting stranded costs, a write-down in the value of the related assets could be required.

SCANA, SCE&G and PSNC Energy are subject to risks associated with changes in business climate which could limit access to capital, thereby increasing costs and adversely affecting results of operations, cash flows and financial condition.

        Factors that generally could affect our ability to access capital include general economic conditions and our capital structure. Much of our business is capital intensive, and achievement of our long-term growth targets is dependent, at least in part, upon our ability to access capital at rates and on terms we determine to be attractive. If our ability to access capital becomes significantly constrained, our interest costs will likely increase and our financial condition and future results of operations could be significantly harmed.

SCANA, SCE&G and PSNC Energy do not fully hedge against price changes in commodities. This could result in increased costs, thereby resulting in lower margins and adversely affecting results of operations, cash flows and financial condition.

        SCANA, SCE&G and PSNC Energy enter into contracts to purchase and sell electricity and natural gas. We attempt to manage our exposure by establishing risk limits and entering into contracts

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to offset some of our positions (i.e., to hedge our exposure to demand, market effects of weather and other changes in commodity prices). We do not hedge the entire exposure of our operations from commodity price volatility. To the extent we do not hedge against commodity price volatility or our hedges are not effective, results of operations, cash flows and financial condition may be diminished.

A downgrade in the credit rating of SCANA, SCE&G or PSNC Energy could negatively affect its ability to access capital and to operate its businesses, thereby adversely affecting results of operations, cash flows and financial condition.

        Standard & Poor's Ratings Services (S&P), Moody's Investors Service (Moody's) and Fitch Ratings (Fitch) rate SCANA's long-term senior unsecured debt at BBB+, A3 and A-, respectively. The S&P and Fitch ratings carry a stable outlook while the Moody's rating outlook is negative. S&P, Moody's and Fitch rate SCE&G's long-term senior secured debt at A-, A1 and A+, respectively, with a stable outlook at S&P and Fitch and a negative outlook at Moody's. S&P and Moody's rate PSNC's long-term senior unsecured debt at A- and A2, respectively, with a stable outlook. Fitch does not rate PSNC. If S&P, Moody's or Fitch were to downgrade any of these long-term ratings, particularly to below investment grade, borrowing costs would increase, which would diminish financial results, and the potential pool of investors and funding sources could decrease. S&P and Moody's rate the short-term debt of SCE&G and PSNC at A-2 and P-1, respectively, and Fitch rates the short-term debt of SCE&G at F-1. If these short-term ratings were to decline, it could significantly limit access to the commercial paper market and other sources of liquidity.

Changes in the environmental laws and regulations to which SCANA, SCE&G and PSNC Energy are subject could increase costs or curtail activities, thereby adversely impacting results of operations and financial condition.

        SCANA's, SCE&G's and PSNC Energy's compliance with extensive federal, state and local environmental laws and regulations requires us to commit significant capital toward environmental monitoring, installation of pollution control equipment, emission fees and permits at our facilities. These expenditures have been significant in the past and are expected to increase in the future. Changes in compliance requirements or a more burdensome interpretation by governmental authorities of existing requirements may impose additional costs on us or require us to curtail some of our activities. Costs of compliance with environmental regulations could harm our industry, our business and our results of operations and financial position, especially if emission or discharge limits are reduced, more extensive permitting requirements are imposed or additional substances become regulated.

Changing regulatory and energy marketing structures could affect the ability of SCANA and SCE&G to compete in our electric markets, thereby adversely impacting results of operations, cash flows and financial condition.

        Federal energy legislation and FERC's regulatory initiatives, if enacted as currently proposed, would bring sweeping changes to the country's existing regulatory framework governing transmission, open access and energy markets and would attempt, in large measure, to standardize the national energy market. Any rules standardizing the markets could have a significant impact on SCE&G's access to or cost of power for its native load customers and for its marketing of power outside its service territory. At this time, management is unable to predict the final rules or timing of implementation of such standardization and the resultant impact on results of operations, cash flows and financial condition.

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Repeal of PUHCA could adversely impact business by increasing costs or otherwise changing or restricting the nature of activities in which SCANA, SCE&G and PSNC Energy may engage. Any such changes could thereby impact results of operations, cash flows or financial condition.

        SCANA is a registered holding company under PUHCA. In recent years, repeal of PUHCA has been proposed, but it is unclear whether or when such a repeal would occur. It is also unclear to what extent repeal of PUHCA would result in additional or new regulatory oversight or action at the federal and state levels, or what the impact of those developments might be on SCANA's business or that of SCE&G or PSNC Energy.

Problems with operations could cause us to incur substantial costs, thereby adversely impacting results of operations, cash flows and financial condition.

        As the operator of power generation facilities, SCE&G could incur problems such as the breakdown or failure of power generation equipment, transmission lines, other equipment or processes which would result in performance below assumed levels of output or efficiency. The failure of a power generation facility may result in SCE&G purchasing replacement power at market rates. These purchases are subject to state regulatory prudency reviews for recovery through rates.

Covenants in certain financial instruments may limit SCANA's ability to pay dividends, thereby adversely impacting the valuation of our common stock and our access to capital.

        Our assets consist primarily of investments in subsidiaries. Dividends on our common stock depend on the earnings, financial condition and capital requirements of our subsidiaries, principally SCE&G and PSNC Energy. Our ability to pay dividends on our common stock may also be limited by existing or future covenants limiting the right of our subsidiaries to pay dividends on their common stock. Any significant reduction in our payment of dividends in the future may result in a decline in the value of our common stock. Such a decline in value could limit our ability to raise debt and equity capital.

A significant portion of SCE&G's generating capacity is derived from nuclear power, the use of which exposes us to regulatory, environmental and business risks. These risks could increase our costs or otherwise constrain our business, thereby adversely impacting our results of operations, cash flows and financial condition.

        The V.C. Summer nuclear plant, operated by SCE&G, provided approximately 5.5 million MWh, or 21% of our generation capacity, in 2004. As such, SCE&G is subject to various risks of nuclear generation, which include the following:

•

The potential harmful effects on the environment and human health resulting from a release of radioactive materials in connection with the operation of nuclear facilities and the storage, handling and disposal of radioactive materials;



•

Limitations on the amounts and types of insurance commercially available to cover losses that might arise in connection with our nuclear operations or those of others in the United States;



•

Uncertainties with respect to contingencies if insurance coverage is inadequate; and



•

Uncertainties with respect to the technological and financial aspects of decommissioning nuclear plants at the end of their operating lives.

        The NRC has broad authority under federal law to impose licensing and safety-related requirements for the operation of nuclear generation facilities. In the event of non-compliance, the NRC has the authority to impose fines or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance is achieved. Revised safety requirements promulgated by the NRC could necessitate capital expenditures at nuclear plants such as ours. In addition, although we have no reason to anticipate a serious nuclear incident, if a major incident should occur at a domestic

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nuclear facility, it could harm our results of operations, cash flows and financial condition. A major incident at a nuclear facility anywhere in the world could cause the NRC to limit or prohibit the operation or licensing of any domestic nuclear unit. Finally, in today's environment, there is a heightened risk of terrorist attack on the nation's nuclear facilities, which has resulted in increased security costs at our nuclear plant.

ORGANIZATION

        SCANA, a South Carolina corporation having general business powers, was incorporated in 1984, and registered as a public utility holding company under PUHCA in 2000. SCANA holds, directly or indirectly, all of the capital stock of each of its subsidiaries except for the preferred stock of SCE&G. SCANA and its subsidiaries had full-time, permanent employees as of February 18, 2005 and February 13, 2004 of 5,549 and 5,458, respectively. SCE&G was incorporated under the laws of South Carolina in 1924, and is an operating public utility. SCE&G had full-time, permanent employees as of February 18, 2005 and February 13, 2004 of 2,775 and 2,865, respectively. Prior to being acquired by SCANA in 2000, PSNC Energy was incorporated under the laws of North Carolina in 1938. PSNC Energy is now incorporated under the laws of South Carolina, and is an operating public utility in North Carolina with full-time, permanent employees as of February 18, 2005 and February 13, 2004 of 705 and 775, respectively.

INVESTOR INFORMATION

        SCANA's, SCE&G's and PSNC Energy's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed with or furnished to the SEC are available free of charge through SCANA's internet website at www.scana.com as soon as reasonably practicable after these reports are filed or furnished. The information found on SCANA's website is not part of this or any other report filed with or furnished to the SEC.

SEGMENTS OF BUSINESS

        SCANA does not directly own or operate any physical properties. SCANA's significant, wholly-owned subsidiaries are engaged in the functionally distinct operations described below. SCANA also has an investment in one LLC which owns and operates a cogeneration facility in Charleston, South Carolina. SCANA also owns two other energy-related companies that are insignificant and one company that is in liquidation.

        Information with respect to major segments of business is contained in Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G and the consolidated financial statements for SCANA and SCE&G (Note 11) and PSNC Energy (Note 9). All such information is incorporated herein by reference.

Regulated Utilities

        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. 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 higher in the winter months due to 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 34 of the 46 counties in South Carolina and covers more than 22,000 square miles. The total population of the counties representing the combined service area is more than 2.8 million. Resale customers include municipalities, electric cooperatives, investor-owned utilities and federal and state electric agencies. Predominant industries in

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the areas served by SCE&G include synthetic fibers, chemicals, fiberglass, paper and wood, metal fabrication, stone, clay and sand mining and processing and textile manufacturing.

        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.

        PSNC Energy is a public utility engaged primarily in purchasing, selling and transporting natural gas to approximately 409,000 residential, commercial and industrial customers (as of December 31, 2004). PSNC Energy provides service to its 28 franchised counties covering approximately 12,000 square miles in North Carolina. The industrial customers of PSNC Energy include manufacturers or processors of textiles, chemicals, ceramics and clay products, glass, automotive products, minerals, pharmaceuticals, plastics, metals, electronic equipment, furniture and a variety of food and tobacco products.

        SCPC is engaged in the purchase, transmission and sale of natural gas on a wholesale basis to distribution companies (including SCE&G) and industrial customers throughout most of South Carolina. SCPC owns LNG liquefaction and storage facilities. It also supplies the natural gas for SCE&G's gas distribution system. Other resale customers include municipalities and county gas authorities and gas utilities. The industrial customers of SCPC are primarily engaged in the manufacturing or processing of ceramics, paper, metal, food and textiles.

        SCG Pipeline provides interstate transportation services for natural gas to southeastern Georgia and South Carolina. SCG Pipeline transports natural gas from interconnections with Southern Natural at Port Wentworth, Georgia, and from an import terminal owned by Southern LNG, Inc. at Elba Island, near Savannah, Georgia. The endpoint of the pipeline is at the site of SCE&G's Jasper County Electric Generating Station. In 2005, SCANA expects to merge SCPC with SCG Pipeline, subject to customary closing conditions and FERC approval.

Nonregulated Businesses

        SEMI markets natural gas primarily in the southeast and provides energy-related risk management services to producers and customers. In addition, SCANA Energy, a division of SEMI, markets natural gas to over 470,000 customers (as of December 31, 2004) in Georgia's natural gas market. The GPSC regulates the gas rates charged to approximately 60,000 of these customers who are served by SCANA Energy as the regulated provider. This group includes low-income and high credit risk customers. In March 2004 SCANA Energy acquired approximately 47,000 retail natural gas customers formerly served by another gas marketer in Georgia. With this transaction, SCANA Energy's total customer base represents about a 30 percent share of the approximately 1.5 million customers in Georgia's deregulated natural gas market. SCANA Energy remains the second largest natural gas marketer in the state.

        SCI owns and operates a 500-mile fiber optic telecommunications network and data center facilities in South Carolina and, through its joint venture with FRC, LLC, has an interest in an additional 693 miles of fiber in South Carolina, North Carolina and Georgia. SCI also provides ethernet services in South Carolina, as well as tower site construction, management and rental services in South Carolina and North Carolina. SCH, a Delaware corporation and a wholly owned subsidiary of SCI, holds an insignificant investment in a telecommunications services company. In 2004 SCH sold its primary investments and recorded losses on those sales totaling $13.9 million, net of taxes. Also in 2004, SCH recorded impairment losses on its investments totaling $16.2 million, net of taxes. See additional discussion at the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA.

        Other significant businesses owned by SCANA are described in the preceding Corporate Structure section.

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COMPETITION

        For a discussion of the impact of competition, see the Overview section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G, and the Competition section of Management's Narrative Analysis of Results of Operations for PSNC Energy.

CAPITAL REQUIREMENTS

        SCANA's, SCE&G's and PSNC Energy's cash requirements arise primarily from operational needs, construction programs and payment of dividends. The ability of regulated utilities to replace existing plant investment, as well as to expand to meet future demand for electricity and gas, depends upon their ability to attract the necessary financial capital on reasonable terms. Regulated utilities 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 utilities continue their ongoing construction programs, regulated utilities expect to seek increases in rates. SCANA's, SCE&G's and PSNC Energy's future financial position and results of operations will be affected by their ability to obtain adequate and timely rate and other regulatory relief, if requested.

        For a discussion of the impact of various rate matters on capital requirements, see the Regulatory Matters section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G and Note 2 to the consolidated financial statements for SCANA, SCE&G and PSNC Energy.

        During the three-year period 2005-2007, SCANA, SCE&G and PSNC Energy expect to meet capital requirements principally through internally generated funds and the incurrence of additional short-term and long-term indebtedness and sales of additional equity securities by SCANA. Beginning in May 2004, shares of SCANA's common stock purchased on behalf of participants in the Investor Plus Plan and the Stock Purchase-Savings Plan were purchased directly from SCANA rather than on the open market. SCANA expects such purchases to continue indefinitely. SCANA, SCE&G and PSNC Energy expect that they have or can obtain adequate sources of financing to meet their projected cash requirements for the next 12 months and for the foreseeable future.

        For a discussion of cash requirements for construction and nuclear fuel expenditures, see the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G.

CAPITAL PROJECTS

        In May 2004 SCE&G's 880 megawatt Jasper County Electric Generating Station began commercial operation. The plant includes three natural gas combustion-turbine generators and one steam-turbine generator. The total cost of the project was approximately $506 million, which includes the original construction costs for the plant itself, as well as AFC and other project-related costs. All such costs have been approved for recovery in rate base.

        In 2001 SCE&G began construction to reinforce its Lake Murray Dam in order to comply with new federal safety standards mandated by the FERC. Construction for the project and related activities is expected to cost approximately $275 million (excluding AFC) and be completed in 2005. Costs incurred through December 31, 2004 totaled approximately $240 million.

        Construction of SCPC's South System Loop was completed in March 2004 at a cost of approximately $21 million. This pipeline stretches 38.3 miles from SCG Pipeline's connection with SCE&G's Jasper County Electric Generating Station to Yemassee in Hampton County, South Carolina, providing a new gas supply source to SCPC's current system.

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        For a discussion of contractual cash obligations, financing limits, financing transactions and other related information, see the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G and the Capital Expansion Program and Liquidity Matters section of Management's Narrative Analysis of Results of Operations for PSNC Energy.

        SCANA's ratios of earnings to fixed charges were 2.65, 2.82, 0.53, 4.37 and 2.47 for the years ended December 31, 2004, 2003, 2002, 2001 and 2000, respectively. To achieve a ratio of 1.0 for the year ended December 31, 2002, SCANA would have needed an additional $108.6 million in income before income taxes. SCANA's ratio for 2002 was negatively impacted by the impairment charge related to the acquisition adjustment associated with PSNC Energy and the impairments of SCANA's investments in certain telecommunications securities. For SCE&G these ratios were 4.31, 4.13, 4.28, 4.54 and 5.02 for the same periods. For PSNC Energy these ratios were 2.80, 3.37, (7.78), 2.54 and 3.05 for the same periods. To achieve a ratio of 1.0 for the year ended December 31, 2002, PSNC Energy would have needed an additional $193.2 million in income before income taxes. PSNC Energy's ratio for 2002 was negatively impacted by the impairment charge related to the acquisition adjustment described above.

ELECTRIC OPERATIONS

Electric Sales

        SCE&G's sales of electricity by class as a percent of total electric revenues for 2004 and 2003 were as follows:

        Sales for resale include sales to one municipality and two electric cooperatives. Sales under the NMST during 2004 include sales to 31 investor-owned utilities and registered marketers, seven electric cooperatives, one municipality and three federal/state electric agencies. During 2003 sales under the NMST included sales to 29 investor-owned utilities and registered marketers, seven electric cooperatives, five municipalities and three federal/state electric agencies.

        During 2004 SCE&G recorded a net increase of 14,324 customers, increasing its total electric customers to 585,264 at year end. A new all-time peak summer demand of 4,574 MW was set on July 14, 2004. The previous all-time peak demand of 4,474 MW was set on January 24, 2003.

        For the three-year period 2005-2007, SCE&G's total territorial KWh sales of electricity are projected to increase 2.0% annually, assuming normal weather. SCE&G's total electric customer base is projected to increase 2.0% annually. Over the same three-year period, SCE&G's territorial peak load (summer, in MW) is projected to increase 2.2% annually. SCE&G's goal is to maintain a reserve margin of between 12% and 18%. As of December 31, 2004 the reserve margin was approximately 15%.

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Electric Interconnections

        SCE&G purchases all of the electric generation of GENCO's Williams Station under a Unit Power Sales Agreement which has been approved by FERC. See Properties—Electric Properties for Williams Station's generating capacity.

        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 Electric and Power Company, Duke Power Company, Carolina Power & Light Company (Progress Energy Carolinas), APGI (Yadkin Division) and Santee Cooper are members of the Virginia-Carolinas Reliability Group, one of 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 and Power Company, Oglethorpe Power Corporation and the Southeastern Power Administration's Clarks Hill Project. For a discussion of the impact certain legislative and regulatory initiatives may have on SCE&G's transmission system, see Electric Operations within the Overview section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G.

Fuel Costs

        The following table sets forth the average cost of nuclear fuel, coal and gas and the weighted average cost of all fuels (including oil) for the years 2002-2004.

Fuel Supply

        The following table shows the sources and approximate percentages of total MWh generation by each category of fuel for the years 2002-2004 and the estimates for the years 2005-2007.

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        Coal is used at five of SCE&G's fossil fuel-fired plants and GENCO's Williams Station. Unit train deliveries are used at all of these plants and in some cases truck deliveries are used. On December 31, 2004 SCE&G had approximately a 27-day supply of coal in inventory and GENCO had approximately a 22-day supply.

        Coal is obtained through supply contracts and purchases on the spot market. Spot market purchases are expected to continue for coal requirements in excess of those provided by existing contracts or when spot market prices are favorable.

        Contract coal is purchased from ten suppliers located in eastern Kentucky, Tennessee, West Virginia and southwest Virginia. Contract commitments, which expire at various times through 2008, are approximately 6 million tons annually, which is 86% of total expected coal purchases for 2005. Sulfur restrictions on the contract coal range from 1.0% to 1.5%.

        SCANA & SCE&G believe that SCE&G's and GENCO's operations comply with all existing regulations relating to the discharge of sulfur dioxide and nitrogen oxides (NOx). See additional discussion at Environmental Matters in Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G.

        SCE&G has adequate supplies of uranium or enriched uranium product under contract to manufacture nuclear fuel for Summer Station through 2008. The following table summarizes all contract commitments for the stages of nuclear fuel assemblies:

(1)

A region represents approximately one-third to one-half of the nuclear core in the reactor at any one time. Region 17 was loaded in 2003. Region 18 is scheduled to be loaded in 2005.

(2)

Contract provisions for the delivery of enriched uranium product encompass supply, conversion and enrichment services.

        SCE&G has on-site spent nuclear fuel storage capability until at least 2018 and expects to be able to expand its storage capacity to accommodate the spent fuel output for the life of Summer Station (including the license extension discussed below) through 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 information regarding the contract and pending litigation with the DOE for disposal of spent fuel, see Nuclear Fuel Disposal within the Environmental Matters section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G.

Decommissioning

        In April 2004 the NRC approved SCE&G's application for a 20-year license extension for Summer Station. The extension allows the plant to operate through August 6, 2042. For information regarding the decommissioning of Summer Station, see Note 1H, Nuclear Decommissioning, of SCANA's and SCE&G's consolidated financial statements.

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GAS OPERATIONS

Gas Sales—Regulated

        Sales of natural gas by class as a percent of total regulated gas revenues for 2004 and 2003 were as follows:

        For the three-year period 2005-2007, SCANA's total consolidated sales of regulated natural gas in DTs are projected to increase 1.6% annually, assuming normal weather. Residential DT sales are projected to increase 2.0% annually, commercial sales 2.0% and industrial sales 1.2%. Sales for resale are not expected to increase significantly. SCANA's total consolidated natural gas customer base is projected to increase 2.3% annually.

        During 2004 SCANA recorded a net increase of approximately 20,300 regulated gas customers, increasing its regulated gas customers to approximately 691,000. SCE&G recorded a net increase of approximately 5,900 gas customers, increasing its total gas customers to approximately 282,000. PSNC Energy recorded a net increase of approximately 14,400 customers, increasing its total customers to approximately 408,000.

        The demand for gas is affected principally by the weather and the price relationship between gas and alternate fuels.

        SCPC, operating wholly within South Carolina, provides natural gas utility and transportation services for its industrial customers, and supplies natural gas to SCE&G and other wholesale purchasers. SCG Pipeline transports gas to SCE&G's Jasper County Electric Generating Station. In 2005, SCANA expects to merge SCPC and SCG Pipeline. See the Overview Section of SCANA's Management Discussion and Analysis of Financial Condition and Results of Operations.

Gas Cost, Supply and Curtailment Plans

South Carolina

        SCPC purchases natural gas under contracts with producers and marketers in both the spot and long-term markets. The gas is brought to South Carolina through transportation agreements with Southern Natural (expiring in 2010) and Transco (expiring in 2008 and 2017). The daily volume of gas that SCPC is entitled to transport under these contracts on a firm basis is 188 MMCF from Southern Natural and 105 MMCF from Transco. Of these amounts, 3.5 MMCF from Southern Natural and 1.9 MMCF from Transco have been temporarily released to the City of Orangeburg for a period of two years, and 22.3 MMCF from Southern Natural and 12.5 MMCF from Transco have been temporarily released to Patriots Energy Group for a period of two years. SCPC also had an additional firm service contract with Southern Natural (expiring in 2017) for 50 MMCF which was temporarily assigned to SCE&G for use in electric generation. In February 2005, the Southern Natural contract was permanently assigned to SCE&G. Additional natural gas volumes are brought to SCPC's system as capacity is available for interruptible transportation. SCE&G, under contract with SCPC, is entitled to receive a daily contract demand of 276,495 DTs for resale to SCE&G's customers. The contract allows

15

SCE&G to receive amounts in excess of this demand based on availability. In addition, SCE&G, under contract with SEMI, is entitled to receive a daily contract demand of 120,000 DTs for use in electric generation. SCG transports the gas to SCE&G under a separate contract.

        During 2004 SCPC's average cost per MCF of natural gas purchased for resale, including firm service demand charges, was $6.99, compared to $6.18 during 2003. SCE&G's average cost per MCF was $7.96 and $6.82 during 2004 and 2003, respectively.

        SCPC's tariffs include a purchased gas adjustment (PGA) clause that provides for the recovery of actual gas costs incurred. The SCPSC has ruled that the results of SCPC's hedging activities are to be included in the PGA. As such, costs of related derivatives that SCPC utilizes to hedge its gas purchasing activities are recoverable through its weighted average cost of gas calculation. The offset to the change in fair value of these derivatives is recorded as a current asset or liability.

        To meet the requirements of its high priority natural gas customers during periods of maximum demand, SCPC supplements its supplies of natural gas from two LNG liquefaction and storage facilities. The LNG plants are capable of storing the liquefied equivalent of 1,880 MMCF of natural gas. Approximately 1,732 MMCF (liquefied equivalent) of gas were in storage at December 31, 2004. On peak days the LNG plants can regasify up to 150 MMCF per day. Additionally, SCPC had contracted for 6,447 MMCF of natural gas storage space, of which, 154 MMCF has been temporarily released to Patriots Energy Group for a period of two years. Approximately 5,104 MMCF of gas were in storage on December 31, 2004.

        The SCPSC has established allocation priorities applicable to the firm and interruptible capacities of SCPC. These curtailment plan priorities apply to SCPC's direct industrial customers and resale distribution customers, including SCE&G.

North Carolina

        PSNC Energy 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 reservation charge. The gas is brought to North Carolina through transportation agreements with Transco and Dominion Transmission, Inc. with expiration dates ranging through 2016. The daily volume of gas that PSNC Energy is entitled to transport under these contracts on a firm basis is 259,894 DT from Transco and 30,331 DT from Dominion Transmission. In addition, PSNC Energy is entitled to firm transportation service on the Patriot Extension Project, a project of East Tennessee Natural Gas Company, and firm storage service on the Saltville Storage Project, an affiliate of East Tennessee Natural Gas Company, that provide an aggregate daily demand of 30,000 DT.

        During 2004 PSNC Energy's average cost per DT of natural gas purchased for resale, including firm service demand charges, was $7.95, compared to $6.80 during 2003.

        To meet the requirements of its high priority natural gas customers during periods of maximum demand, PSNC Energy supplements its supplies of natural gas with underground natural gas storage services and LNG peaking services. Underground natural gas storage service agreements with Dominion Gas Transmission, Columbia Gas Transmission, Transco and East Tennessee Natural Gas Company provide for storage capacity of approximately 12,000 MMCF. Approximately 9,900 MMCF were in storage at December 31, 2004. In addition, PSNC Energy's own LNG facility is capable of storing the liquefied equivalent of 1,000 MMCF of natural gas with regasification capability of approximately 100 MMCF per day. Approximately 520 MMCF (liquefied equivalent) were in storage at December 31, 2004. LNG storage service agreements with Transco, Cove Point LNG and Pine Needle LNG provide for 1,300 MMCF (liquefied equivalent) of storage space. Approximately 1,110 MMCF (liquefied equivalent) were in storage at December 31, 2004.

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        SCANA, SCE&G and PSNC Energy believe that supplies under long-term contracts and supplies available for spot market purchase are adequate to meet existing customer demands and to accommodate growth.

Gas Marketing—Nonregulated

        SEMI's activities are primarily focused in the Southeast, where SEMI markets natural gas and provides energy-related risk management services to producers and consumers. In addition, SCANA Energy, a division of SEMI, markets natural gas to over 470,000 customers (as of December 31, 2004) in Georgia's natural gas market. In March 2004 SCANA Energy acquired approximately 47,000 retail natural gas customers formerly served by another gas marketer in Georgia. With this transaction, SCANA Energy's total customer base represents about a 30 percent share of the approximately 1.5 million customers in Georgia's deregulated natural gas market. SCANA Energy remains the second largest natural gas marketer in the state.

        Policies and procedures and risk limits are established to control the level of market, credit, liquidity and operational and administrative risks assumed by SCANA, SCE&G and PSNC Energy. The Board of Directors of each company has delegated to a Risk Management Committee the authority to set risk limits, establish policies and procedures for risk management and measurement, and to oversee and review the risk management process and infrastructure. The Risk Management Committee, which is comprised of certain officers, including a Risk Management Officer and senior officers, apprises the Board of Directors with regard to the management of risk and brings to the Board's attention any areas of concern. Written policies define the physical and financial transactions that are approved, as well as the authorization requirements and limits for transactions.

REGULATION

        SCANA is a registered public utility holding company under PUHCA. SCANA and its subsidiaries are subject to the jurisdiction of the SEC as to financings, acquisitions and diversifications, affiliate transactions and other matters. Certain subsidiaries of SCANA are regulated by state public service commissions or FERC as to the following matters.

        SCE&G is subject to the jurisdiction of the SCPSC as to retail electric and gas rates, service, accounting, issuance of securities (other than short-term borrowings) and other matters.

        GENCO is subject to the jurisdiction of the SCPSC as to issuance of securities (other than short-term borrowings) and is subject to the jurisdiction of FERC as to accounting and other matters.

        PSNC Energy is subject to the jurisdiction of the NCUC as to gas rates, service, issuance of securities (other than notes with a maturity of two years or less or renewals of notes with a maturity of six years or less), accounting and other matters.

        SCPC is subject to the jurisdiction of the SCPSC as to gas rates, service, accounting and other matters.

        SCG Pipeline is subject to the jurisdiction of FERC as to gas rates, service, accounting and other matters.

        SCANA Energy is regulated by the GPSC through its certification as a natural gas marketer in Georgia and specifically is subject to the jurisdiction of the GPSC as to gas rates for certain of its customers classified as low-income or high credit risk and as to certain other marketing activities.

        SCE&G and GENCO are subject to regulation under the Federal Power Act, administered by FERC and 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

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certain other matters, including accounting. See the Regulatory Matters section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G.

        SCE&G holds licenses under the Federal Water Power Act or the Federal Power Act with respect to all of its hydroelectric projects. The expiration dates of the licenses covering the projects are as follows:

        In November 2003 FERC granted SCE&G a five-year license extension (until 2010) for the Saluda project at Lake Murray because the FERC-mandated draw-down of Lake Murray will affect the studies required of normal lake conditions. The five-year extension will allow time for the lake level to return to normal operating conditions and to stabilize in order to conduct meaningful studies that may impact future license requirements. For a discussion of SCE&G's agreement with FERC to reinforce the Lake Murray Dam (related to the Saluda project), see the previous discussion under Capital Projects and see Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G.

        At the termination of a license under the Federal Power Act, the United States government may take over the project covered thereby, or FERC may extend the license or issue a license to another applicant. If the federal government takes over a project or 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.

        For a discussion of legislative and regulatory initiatives being proposed that would affect SCE&G's transmission system, see Electric Operations within the Overview section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G.

        SCE&G is subject to regulation by the NRC with respect to the ownership, operation and decommissioning of Summer Station. The NRC's jurisdiction encompasses broad supervisory and regulatory powers over the construction and operation of nuclear reactors, including matters of health and safety, antitrust considerations and environmental impact. In addition, the Federal Emergency Management Agency is responsible for the review, in conjunction with the NRC, of certain aspects of emergency planning relating to the operation of nuclear plants.

RATE MATTERS

        For a discussion of the impact of various rate matters, see the Regulatory Matters section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G, and Note 2 to the consolidated financial statements for SCANA, SCE&G and PSNC Energy.

        SCE&G's and PSNC Energy's gas rate schedules for their residential and small commercial and small industrial customers include a WNA. SCE&G's and PSNC Energy's WNA were approved by the SCPSC and NCUC, respectively, and are in effect for bills rendered during the period November 1 through April 30 of each year. In each case the WNA increases tariff rates if weather is warmer than normal and decreases rates if weather is colder than normal. The WNA does not change the seasonality of gas revenues; however, it does reduce fluctuations caused by abnormal weather.

        In a January 2005 order the SCPSC granted SCE&G a composite increase in retail electric rates of approximately 2.89%, designed to produce additional annual revenues of approximately $41.4 million

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based on a test year calculation. The SCPSC lowered SCE&G's return on common equity from 12.45% to a range of between 10.4% and 11.4%, with rates to be set at 10.7%. The new rates became effective in January 2005. As part of its order, the SCPSC approved SCE&G's recovery of construction and operating costs for SCE&G's new Jasper County Electric Generating Station, recovery of costs of mandatory environmental upgrades primarily related to Federal Clean Air Act regulations and the application of current and anticipated net synthetic fuel tax credits to offset the cost of constructing the back-up dam at Lake Murray. The SCPSC also approved recovery over a five-year period of SCE&G's approximately $14 million of costs incurred in the formation of the GridSouth Regional Transmission Organization and recovery through base rates over three years of approximately $25.6 million of purchased power costs that were previously deferred. As a part of its order, the SCPSC extended through 2010 its approval of the accelerated capital recovery plan for SCE&G's Cope Generating Station. Under the plan, based on the level of revenues and operating expenses, SCE&G may increase depreciation of its Cope Generating Station in excess of amounts that would be recorded based upon currently approved depreciation rates, not to exceed $36 million annually, without additional approval of the SCPSC. Any unused portion of the $36 million in any given year may be carried forward for possible use in the following year.

Fuel Cost Recovery Procedures

        The SCPSC 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 12-month period, adjusted for any overcollection or undercollection from the preceding 12-month period. SCE&G has the right to request a formal proceeding at any time should circumstances dictate such a review. In April 2004 the SCPSC approved SCE&G's request to increase the fuel component of rates charged to electric customers from 1.678 cents per KWh to 1.821 cents per KWh. The increase reflects higher fuel costs projected for the period May 2004 through April 2005. The increase also provides continued recovery for under-collected actual fuel costs through February 2004. The new rates were effective as of the first billing cycle in May 2004.

        SCE&G's gas rate schedules and contracts include mechanisms that 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 the cost of gas, based on projections, as established by the SCPSC 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.

        PSNC Energy operates under two rate provisions in addition to WNA that serve to reduce fluctuations in PSNC Energy's earnings. First, its Rider D rate mechanism allows PSNC Energy to recover, in any manner authorized by the NCUC, margin losses on negotiated gas sales. The Rider D rate mechanism also allows PSNC Energy to recover from customers all prudently incurred gas costs, including changes in natural gas prices. Second, PSNC Energy operates with full margin transportation rates. These rates allow PSNC Energy to earn the same margin on gas delivered to customers regardless of whether the gas is sold or only transported by PSNC Energy to the customer.

        PSNC Energy's rates are established using a benchmark cost of gas approved by the NCUC, which may be modified periodically to reflect changes in the market price of natural gas. PSNC Energy revises its tariffs with the NCUC as necessary to track these changes and accounts for any over- or under-collections of the delivered cost of gas in its deferred accounts for subsequent rate consideration. The NCUC reviews PSNC Energy's gas purchasing practices annually.

        SCPC's purchased gas adjustment for cost recovery and gas purchasing policies are reviewed annually by the SCPSC. In an October 2004 order, the SCPSC found that for the period January 2003 through December 2003 SCPC's gas purchasing policies and practices were prudent and SCPC properly adhered to the gas cost recovery provisions of its gas tariff.

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ENVIRONMENTAL MATTERS

        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 predicted. For a more complete discussion of how these regulations and standards impact SCANA, SCE&G and PSNC Energy, see the Environmental Matters section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G and the consolidated financial statements for SCANA and SCE&G (Note 10C) and PSNC Energy (Note 8A).

OTHER MATTERS

        For a discussion of SCE&G's insurance coverage for Summer Station, see Note 10B to the consolidated financial statements for SCANA and for SCE&G.

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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. It also has an investment in one LLC which operates a cogeneration facility in Charleston, South Carolina.

        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 also subject to a first mortgage lien.

        For a brief description of the properties of SCANA'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.

ELECTRIC PROPERTIES

        Information on electric generating facilities, all of which are owned by SCE&G except as noted, is as follows:

(1)

Represents SCE&G's two-thirds portion of the Summer Station (one-third owned by Santee Cooper).

(2)

The steam unit at Williams Station is owned by GENCO.

(3)

This plant is leased from the DOE and is dedicated to DOE's Savannah River Site steam needs. The reported net generating capacity for this plant is its expected average hourly output. The lease expires on October 1, 2005.

(4)

SCE&G receives shaft horse power from Cogen South, LLC to operate SCE&G's generator. Cogen South, LLC is owned 50% by SCANA and 50% by MeadWestvaco.

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(5)

Two combined-cycle turbines burn natural gas or fuel oil to produce 341 MW of electric generation and use exhaust heat to replace coal-fired steam that powers two 75 MW turbines at the Urquhart Generating Station. Unit 3 remains as the only coal-fired steam unit at the site.

(6)

SCE&G also owns three other hydro units in South Carolina that were placed in service in 1905 and 1914 and have an aggregate net generating capacity of 32 MW.

        SCE&G owns nine other combustion turbine peaking units fueled by gas and/or oil located at various sites in SCE&G's service territory. These turbines were placed in service at various times from 1961 to 1999 and have aggregate net generating capacity of 365 MW.

        SCE&G owns 439 substations having an aggregate transformer capacity of 25.6 million KVA (kilovolt-ampere). The transmission system consists of 3,255 miles of lines, and the distribution system consists of 17,621 pole miles of overhead lines and 4,903 trench miles of underground lines.

NATURAL GAS DISTRIBUTION AND TRANSMISSION PROPERTIES

        SCE&G's natural gas system consists of approximately 13,700 miles of distribution mains and related service facilities. SCE&G also has propane air peak shaving facilities which can supplement the supply of natural gas by gasifying propane to yield the equivalent of 70 MMCF per day. These facilities can store the equivalent of 244 MMCF of natural gas.

        SCPC's natural gas system consists of approximately 1,820 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. SCPC 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 MMCF per day and store the liquefied equivalent of 980 MMCF of natural gas. The Salley facility can store the liquefied equivalent of 900 MMCF of natural gas and has no liquefying capabilities. On peak days, the Charleston facility can regasify up to 60 MMCF per day and the Salley facility can regasify up to 90 MMCF.

        PSNC Energy's natural gas system consists of approximately 870 miles of transmission pipeline of up to 24 inches in diameter that connect its distribution systems with Transco. PSNC Energy's distribution system consists of approximately 8,180 miles of distribution mains and related service facilities. PSNC Energy owns one LNG plant with storage capacity of 1,000 MMCF and the capacity to regasify approximately 100 MMCF per day. PSNC Energy also owns, through a wholly owned subsidiary, 33.21% of Cardinal Pipeline Company, LLC, which owns a 105-mile transmission pipeline in North Carolina. In addition, PSNC Energy owns, through a wholly owned subsidiary, 17% of Pine Needle LNG Company, LLC. Pine Needle owns and operates a liquefaction, storage and regasification facility in North Carolina.

ITEM 3. LEGAL PROCEEDINGS

        Certain material legal proceedings and environmental and regulatory matters and uncertainties, some of which remain outstanding at December 31, 2004, are described below. These issues affect SCANA and, to the extent indicated, they also affect SCE&G or PSNC Energy.

Rate and Other Regulatory Matters

        In a January 2005 order the SCPSC granted SCE&G a composite increase in retail electric rates of approximately 2.89%, designed to produce additional annual revenues of approximately $41.4 million based on a test year calculation. The SCPSC lowered SCE&G's return on common equity from 12.45% to a range of between 10.4% and 11.4%, with rates to be set at 10.7%. The new rates became effective in January 2005. As part of its order, the SCPSC approved SCE&G's recovery of construction and operating costs for SCE&G's new Jasper County Electric Generating Station, recovery of costs of

22

mandatory environmental upgrades primarily related to Federal Clean Air Act regulations and the application of current and anticipated net synthetic fuel tax credits to offset the cost of constructing the back-up dam at Lake Murray. The SCPSC also approved recovery over a five-year period of SCE&G's approximately $14 million of costs incurred in the formation of the GridSouth Regional Transmission Organization and recovery through base rates over three years of approximately $25.6 million of purchased power costs that were previously deferred. As a part of its order, the SCPSC extended through 2010 its approval of the accelerated capital recovery plan for SCE&G's Cope Generating Station. Under the plan, based on the level of revenues and operating expenses, SCE&G may increase depreciation of its Cope Generating Station in excess of amounts that would be recorded based upon currently approved depreciation rates, not to exceed $36 million annually, without additional approval of the SCPSC. Any unused portion of the $36 million in any given year may be carried forward for possible use in the following year.

        In 2001 SCE&G began construction to reinforce its Lake Murray Dam in order to comply with new federal safety standards mandated by the FERC. Construction for the project and related activities is expected to cost approximately $275 million (excluding AFC) and be completed in 2005. Costs incurred through December 31, 2004 totaled approximately $240 million.

Environmental Matters

        SCE&G owns a decommissioned MGP site in the Calhoun Park area of Charleston, South Carolina. The site is currently being remediated for contamination. SCE&G anticipates that the remaining remediation activities will be completed by the end of 2005, with certain monitoring and other activities continuing until 2010. As of December 31, 2004, SCE&G has spent approximately $20.5 million to remediate the Calhoun Park site, and expects to spend an additional $1.3 million. In addition, SCE&G is party to certain claims for cost and damages from this site, for which claims the National Park Service of the Department of the Interior made an initial demand for payment of approximately $9 million. Any costs arising from these matters are expected to be recoverable through rates under South Carolina regulatory processes.

        SCE&G owns three other decommissioned MGP sites in South Carolina which contain residues of by-product chemicals. One of the sites has been remediated and will undergo routine monitoring until released by DHEC. The other two sites are currently being investigated under work plans approved by DHEC. SCE&G anticipates that major remediation activities for the three sites will be completed in 2010. As of December 31, 2004, SCE&G has spent approximately $4 million related to these three sites, and expects to spend an additional $4 million.

        PSNC Energy is responsible for environmental cleanup at five sites in North Carolina on which MGP residuals are present or suspected. PSNC Energy's actual remediation costs for these sites will depend on a number of factors, such as actual site conditions, third-party claims and recoveries from other PRPs. PSNC Energy has recorded a liability and associated regulatory asset of approximately $6.5 million, which reflects the estimated remaining liability at December 31, 2004. Amounts incurred and deferred to date, net of insurance settlements, that are not currently being recovered through gas rates are approximately $1.4 million. Management believes that all MGP cleanup costs incurred will be recoverable through gas rates.

        On January 28, 2004 SCE&G and Santee Cooper (one-third owner of Summer Station) filed suit in the Court of Federal Claims against the DOE for breach of contract. The contract, entered into in 1983, known as the Standard Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste (Standard Contract) required the federal government to accept and dispose of spent nuclear fuel and high-level radioactive waste beginning not later than January 31, 1998, in exchange for agreed payments fixed in the Standard Contract at particular amounts. As of the date of filing, the federal government has accepted no spent fuel from Summer Station or any other utility for transport

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and disposal, and has indicated that it does not anticipate doing so until 2010, at the earliest. As a consequence of the federal government's breach of contract, the plaintiffs have incurred and will continue to incur substantial costs. There are two additional causes of action alleged as well—a claim for damages for breach of the implied covenant of good faith and fair dealing and a takings claim demanding just compensation for the taking of the plaintiffs' real property (necessitated by the storage). This lawsuit is similar to numerous other lawsuits brought by nuclear utilities.

Pending Litigation

        In 1999 an unsuccessful bidder for the purchase of certain of SCANA's propane gas assets filed suit against SCANA in Circuit Court, seeking unspecified damages. The suit alleged the existence of a contract for the sale of assets to the plaintiff and various causes of action associated with that contract. On October 21, 2004, the jury issued an adverse verdict on this matter against SCANA for four causes of action for damages totaling $48 million. Post-verdict motions were heard in November 2004 and January 2005. It is SCANA's interpretation that the damages awarded with respect to certain causes of action are overlapping. Therefore, it is SCANA's belief that a reasonably possible estimate of the total damages based on the amounts awarded by the jury will be in the range of $18-$36 million. However, SCANA believes that the verdict was inconsistent with the facts presented and applicable law and intends to appeal any adverse judgment by the Circuit Court. Based on the current status of this matter, and in accordance with generally accepted accounting principles, SCANA recorded a pre-tax charge to earnings in the third quarter of 2004 of $18 million, $11 million after-tax, or 10 cents per share, which is SCANA's reasonable estimate of the minimum loss that is probable if the final judgment is consistent with the jury verdict. The charge and associated liability are reported in Other Income (Expense) and Current Liabilities-Other in the financial statements. It is expected that the final judgment will be rendered in 2005 but that appeals may continue for a longer period. The Company is also defending another claim for $2.7 million for reimbursement of legal fees and expenses under an indemnification and hold harmless agreement in the contract of sale. A bench trial on the indemnification was held on January 14, 2005, and a ruling is expected in March.

        On August 21, 2003, SCE&G was served as a co-defendant in a purported class action lawsuit styled as Collins v. Duke Energy Corporation, Progress Energy Services Company, and SCE&G, in South Carolina's Circuit Court of Common Pleas for the Fifth Judicial Circuit. The plaintiffs are seeking damages for the alleged improper use of electric transmission and distribution easements but have not asserted a dollar amount for their claims. Specifically, the plaintiffs contend that the licensing of attachments on electric utility poles, towers and other facilities to non-utility third parties or telecommunication companies for other than the electric utilities' internal use along the electric transmission line right-of-way constitutes a trespass. SCANA is confident of the propriety of SCE&G's actions. SCE&G intends to mount a vigorous defense. SCANA and SCE&G further believe that the resolution of these claims will not have a material adverse impact on their results of operations, cash flows or financial condition.

        On May 17, 2004, SCANA and SCE&G were served with a purported class action lawsuit styled as Douglas E. Gressette, individually and on behalf of other persons similarly situated, v. South Carolina Electric & Gas Company and SCANA Corporation. The case was filed in South Carolina's Circuit Court of Common Pleas for the Ninth Judicial Circuit. The plaintiff alleges SCANA and SCE&G made improper use of certain easements and rights-of-way by allowing fiber optic communication lines and/or wireless communication apparatuses to transmit communications other than SCANA's and SCE&G's electricity-related internal communications. The plaintiff asserts causes of action for unjust enrichment, trespass, injunction and declaratory judgment. The plaintiff did not assert a specific dollar amount for the claims. SCANA and SCE&G believe their actions are consistent with governing law and the applicable documents granting easements and rights-of-way. SCANA and SCE&G intend to mount a

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vigorous defense and believe that the resolution of these claims will not have a material adverse impact on their results of operations, cash flows or financial condition.

        A complaint was filed on October 22, 2003 against SCE&G by the State of South Carolina alleging that SCE&G violated the Unfair Trade Practices Act by charging municipal franchise fees to some customers residing outside a municipality's limits. The complaint alleged that SCE&G failed to obey, observe or comply with the lawful order of the SCPSC by charging franchise fees to those not residing within a municipality. The complaint sought restitution to all affected customers and penalties of up to $5,000 for each separate violation. The State of South Carolina v. SCE&G has been settled by an agreement between the parties, and the settlement has been approved by the court. The allegations are also the subject of a purported class action lawsuit filed in December 2003, against Duke Energy Corporation, Progress Energy Services Company and SCE&G (styled Edwards v. SCE&G). Duke Energy and Progress Energy have been voluntarily dismissed from the Edwards lawsuit. SCANA and SCE&G believe that the resolution of these actions will not have a material adverse impact on their results of operations, cash flows or financial condition. In addition, SCE&G filed a petition with the SCPSC on October 23, 2003 pursuant to S. C. Code Ann. R.103-836. The petition requests that the SCPSC exercise its jurisdiction to investigate the operation of the municipal franchise fee collection requirements applicable to SCE&G's electric and gas service, to approve SCE&G's efforts to correct any past franchise fee billing errors, to adopt improvements in the system which will reduce such errors in the future, and to adopt any regulation that the SCPSC deems just and proper to regulate the franchise fee collection process.

        SCANA, SCE&G and PSNC Energy are also engaged in various other claims and litigation incidental to their business operations which management anticipates will be resolved without material loss to any of them.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        Not Applicable.

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EXECUTIVE OFFICERS OF SCANA CORPORATION

        The executive officers are elected at the annual meeting of the Board of Directors, held immediately after the annual meeting of shareholders, and hold office until the next such annual meeting, unless a resignation is submitted, or unless the Board of Directors shall otherwise determine. Positions held are for SCANA and all subsidiaries unless otherwise indicated.

*

Indicates position held at least since March 1, 2000.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

COMMON STOCK INFORMATION

SCANA Corporation

        The principal market for SCANA common stock is the New York Stock Exchange, using the ticker symbol SCG. The corporate name SCANA is used in newspaper stock listings. At February 18, 2005 SCANA common stock totaling 112,909,904 shares were held by approximately 37,219 stockholders of record.

        SCANA declared quarterly dividends on its common stock of $.365 per share and $.345 per share in 2004 and 2003, respectively.

SCE&G and PSNC Energy

        All of SCE&G's and PSNC Energy's common stock is owned by SCANA and has no market. During 2004 and 2003 SCE&G paid $143.0 million and $149.3 million, respectively, in cash dividends to SCANA. During 2004 and 2003 PSNC Energy paid $14.5 million and $18.5 million, respectively, in cash distributions/dividends to SCANA.

SECURITIES RATINGS (As of February 18, 2005)

(1)

S&P and Fitch ratings carry a stable outlook. Moody's outlook is negative.

(2)

Stable outlook

        Additional information regarding these debt and equity securities is provided in Notes 4, 5 and 7 to the consolidated financial statements for SCANA and SCE&G and Notes 4 and 5 to the consolidated financial statements for PSNC Energy.

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        Securities ratings used by Moody's, Standard & Poors and Fitch are as follows:

(3)

Additional Modifiers: 1, 2, 3 (Aa to Baa)

(4)

Additional Modifiers: +/- (AA to BBB)

        A security rating should be evaluated independently of other ratings and is not a recommendation to buy, sell or hold securities. In addition, security ratings are subject to revision or withdrawal at any time by the assigning rating organization.

        For a discussion of provisions that could limit the payment of cash dividends see Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G and Note 6 to the consolidated financial statements for SCANA and SCE&G. For a summary of equity securities issuable under SCANA's compensation plans at December 31, 2004, see Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

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ITEM 6. SELECTED FINANCIAL AND OTHER STATISTICAL DATA

(1)

Reflects write-down of $230 million for goodwill impairment in 2002 upon adoption of SFAS 142.

(2)

Other Statistics for 2000 exclude the effect of the change in accounting for unbilled revenues, where applicable.

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SCANA CORPORATION

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        Statements included in this discussion and analysis (or elsewhere in this annual report) which are not statements of historical fact are intended to be, and are hereby identified as, "forward-looking statements" for purposes of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following:(1) that the information is of a preliminary nature and may be subject to further and/or continuing review and adjustment, (2) regulatory actions or changes in the utility and nonutility regulatory environment, (3) current and future litigation, (4) changes in the economy, especially in areas served by subsidiaries of SCANA Corporation (SCANA, and together with its subsidiaries, the Company), (5) the impact of competition from other energy suppliers, including competition from alternate fuels in industrial interruptible markets, (6) growth opportunities for the Company's regulated and diversified subsidiaries, (7) the results of financing efforts, (8) changes in the Company's accounting policies, (9) weather conditions, especially in areas served by the Company's subsidiaries, (10) performance of the Company's pension plan assets, (11) inflation, (12) changes in environmental regulations, (13) volatility in commodity natural gas markets and (14) the other risks and uncertainties described from time to time in the Company's periodic reports filed with the SEC, including those risks described in Item 1 under Risk Factors. The Company disclaims any obligation to update any forward-looking statements.

OVERVIEW

        SCANA is a registered holding company under PUHCA. Through its wholly owned regulated subsidiaries, SCANA is primarily engaged in the generation, transmission and distribution of electricity in parts of South Carolina and the purchase, transmission and sale of natural gas in portions of North Carolina and South Carolina. Through a wholly owned nonregulated subsidiary, SCANA markets natural gas to retail customers in Georgia and to wholesale customers primarily in the southeast. Other wholly owned nonregulated subsidiaries perform power plant management and maintenance services and provide service contracts to homeowners on certain home appliances and heating and air conditioning units. Additionally, a service company subsidiary of SCANA provides administrative, management and other services to the other subsidiaries.

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        Following are percentages of the Company's revenues and net income earned by regulated and nonregulated businesses and the percentage of total assets held by them.

(1)

In 2004, net income for regulated businesses totaled $272.0 million and net loss for nonregulated businesses totaled $14.9 million. Net loss for nonregulated businesses included impairments and losses recognized on the sale of certain of the Company's telecommunications investments ($29.8 million, net of tax) and a charge related to pending litigation associated with the Company's 1999 sale of its propane assets ($11.1 million, net of taxes). See Results of Operations for more information.

(2)

In 2002, net income for regulated businesses totaled $13.6 million and net loss for nonregulated businesses totaled $155.3 million. Net income for regulated subsidiaries included an impairment charge related to the acquisition adjustment associated with PSNC Energy ($230 million, net of tax). Net loss for nonregulated businesses included impairment charges for the Company's telecommunications investments ($189.2 million, net of tax), which were partially offset by gains the Company recognized from the sale of a radio service network ($9.4 million, net of tax) and the sale of DTAG shares ($15.3 million, net of tax). See Results of Operations for more information.

Electric Operations

        The electric operations segment is comprised of the electric operations of SCE&G, GENCO and Fuel Company, and is primarily engaged in the generation, transmission and distribution of electricity in South Carolina. At December 31, 2004 SCE&G provided electricity to over 580,000 customers in an area of approximately 15,000 square miles. GENCO owns and operates a coal-fired generation 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.

        Operating results for electric operations are primarily driven by customer demand for electricity, the ability to control costs and rates allowed to be charged to customers. Embedded in the rates charged to customers is an allowed regulatory return on equity. The allowed return on equity for SCE&G was 12.45% in 2004. In January 2005, as a result of an electric rate case, the allowed return on equity was lowered to a range of 10.4% to 11.4%, with rates to be set at 10.7%. See further discussion at Liquidity and Capital Resources. Demand for electricity is primarily affected by weather, customer growth and the economy.

        Legislative and regulatory initiatives also could significantly impact the results of operations and cash flows for the electric operations segment. In South Carolina the state legislature is not actively pursuing electric restructuring. However, both houses of the U.S. Congress introduced energy legislation in the 2003-2004 legislative sessions, but failed to reach a compromise on certain key issues unrelated to utilities. Energy legislation is expected to be reintroduced in 2005. It is anticipated that

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such legislation would include provisions that would repeal PUHCA and transfer additional regulatory authority to FERC. Provisions in the legislation would likely impose reliability standards for high-voltage transmission systems. New legislation may also impose stringent requirements on power plants to reduce emissions of sulfur dioxide, nitrogen oxides (NOx) and mercury. It is also possible that new initiatives will be introduced to reduce carbon dioxide emissions. The Company cannot predict whether such legislation will be enacted, and if it is, the conditions it would impose on utilities.

        In April 2004 the joint U.S.-Canada Power System Outage Task Force issued its "Final Report on the August 14, 2003 Blackout in the United States and Canada: Causes and Recommendations" (Blackout Report). The Blackout Report contains 46 recommendations that, if implemented, the Task Force believes would improve reliability of North America's interconnected bulk power system (the grid). Full implementation of the Blackout Report's recommendations would require a number of actions by legislative, regulatory and industry participants. However, the Blackout Report asserts as its single most important recommendation that the U.S. Congress should enact tougher reliability standards. It is anticipated that any reliability legislation, if passed, would make reliability standards mandatory and enforceable with penalties for non-compliance and would strengthen the role of FERC.

        Regardless of the outcome of any legislative activity, FERC is expected to proceed with regulatory initiatives that, if enacted, could significantly change the country's existing regulatory framework governing transmission, open access and energy markets and would attempt, in large measure, to standardize the national energy market and attempt to disaggregate the remaining vertically integrated utilities. In July 2002 FERC issued a Notice of Proposed Rulemaking on Standard Market Design (SMD) which FERC supplemented with the issuance of a "white paper" in April 2003. If implemented, the proposed rule could have a significant impact on SCE&G's access to or cost of power for its native load customers and on SCE&G's marketing of power outside its service territory. The Company is currently evaluating FERC's action to determine potential effects on SCE&G's operations. Additional directives from FERC are expected.

        The North American Electric Reliability Council (NERC) also is expected to continue its initiatives to develop, establish and enforce additional standards for the grid. To that end, NERC is working closely with FERC to implement stronger reliability standards among NERC's voluntary membership. SCE&G, along with other NERC members, is also working closely with NERC in these efforts. Such initiatives could be significantly influenced by any reliability legislation enacted by Congress. The Company cannot predict whether Congress will enact reliability legislation or the extent to which the other recommendations contained in the Blackout Report will be implemented. Any action by Congress or initiatives by FERC or NERC could significantly impact SCE&G's access to or cost of power for its native load customers and SCE&G's marketing of power outside its service territory.

Gas Distribution

        The gas distribution segment is comprised of the distribution operations of SCE&G and PSNC Energy, and is primarily engaged in the purchase, transmission and sale of natural gas in portions of North Carolina and South Carolina. At December 31, 2004 this segment provided natural gas to more than 690,000 customers in an area of approximately 34,000 square miles.

        Operating results for gas distribution are primarily influenced by customer demand for natural gas, the ability to control costs and allowed rates to be charged to customers. Embedded in the rates charged to customers is an allowed regulatory return on equity, which in 2004 was 12.25% for SCE&G and 11.4% for PSNC Energy. Demand for natural gas is primarily affected by weather, customer growth, the economy and, for commercial and industrial customers, the availability and price of alternate fuels. Natural gas competes with electricity, propane and heating oil to serve the heating and, to a lesser extent, other household energy needs of residential and small commercial customers. This competition is generally based on price and convenience. Large commercial and industrial customers

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often have the ability to switch from natural gas to an alternate fuel, such as propane or fuel oil. Natural gas competes with these alternate fuels based on price. As a result, any significant disparity between supply and demand, either of natural gas or of alternate fuels, and due either to production or delivery disruptions or other factors, will affect price and impact the Company's ability to retain large commercial and industrial customers.

Gas Transmission

        For 2004 the gas transmission segment was comprised of SCPC, which owns and operates an intrastate pipeline engaged in the purchase, transmission and sale of natural gas on a wholesale basis to distribution companies (including SCE&G) and industrial customers throughout most of South Carolina. Operating results for 2004 were primarily influenced by customer demand for natural gas, the ability to control costs and allowed rates to be charged to customers. Embedded in these rates is an allowed regulatory return on equity, which in 2004 was 12.5% to 16.5%. Demand for natural gas is primarily affected by the price of alternate fuels and customer growth. SCPC supplies natural gas to SCE&G for its resale to gas distribution customers and for certain electric generation needs. SCPC also sells natural gas to large commercial and industrial customers in South Carolina and faces the same competitive pressures as the gas distribution segment for these classes of customers.

        In 2005, SCANA expects to merge SCPC with another subsidiary, SCG Pipeline, which owns and operates an interstate pipeline that transports natural gas from southeast Georgia to South Carolina and delivers natural gas to SCE&G's Jasper County Electric Generating Station. The merger is subject to customary closing conditions and FERC approval. Assuming the merger is completed, the new company will operate as an interstate pipeline engaged in the transmission of natural gas in southeast Georgia and South Carolina. The new company's rates for transmission services, including an allowed return on equity, would be set and regulated by FERC.

Retail Gas Marketing

        SCANA Energy, a division of SEMI, comprises the retail gas marketing segment. This segment markets natural gas to over 470,000 customers (as of December 31, 2004) throughout Georgia. SCANA Energy's total customer base represents about a 30 percent share of the approximately 1.5 million customers in Georgia's deregulated natural gas market. SCANA Energy remains the second largest natural gas marketer in the state. SCANA Energy's competitors include affiliates of other large energy companies with experience in Georgia's energy market as well as several electric membership cooperatives. SCANA Energy's ability to maintain its market share depends on the prices it charges customers relative to the prices charged by its competitors, its ability to continue to provide high levels of customer service and other factors. In addition, the pipeline capacity available for SCANA Energy to serve industrial and other customers is tied to the market share held by SCANA Energy in the retail market.

        As Georgia's regulated provider, SCANA Energy serves low-income customers at rates approved by the GPSC and receives funding from the Universal Service Fund for bad debts. At December 31, 2004 SCANA Energy's regulated division served approximately 60,000 customers. In 2004 the GPSC extended SCANA Energy's term as the regulated provider through August 2005. In 2005, using a request for proposal process, the GPSC will select a regulated provider for the two-year period beginning September 1, 2005. SCANA Energy intends to submit a bid during this process.

        SCANA Energy and SCANA's other natural gas distribution, transmission and marketing segments maintain gas inventory and also utilize forward contracts and financial instruments, including futures contracts and options, to manage their exposure to fluctuating commodity natural gas prices. See Note 9 to the consolidated financial statements. As a part of this risk management process, at any given time, a portion of SCANA's projected natural gas needs has been purchased or otherwise placed

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under contract. Since SCANA Energy operates in a competitive market, it may be unable to sustain its current levels of customers and/or pricing, thereby reducing expected margins and profitability.

Energy Marketing

        The divisions of SEMI, excluding SCANA Energy, comprise the energy marketing segment. This segment markets natural gas primarily in the southeast and provides energy-related risk management services to producers and customers.

        The operating results for energy marketing are primarily influenced by customer demand for natural gas and the ability to control costs. Demand for natural gas is primarily affected by the price of alternate fuels and customer growth.

RESULTS OF OPERATIONS

        The Company's reported earnings (loss) are prepared in accordance with GAAP. Management believes that, in addition to reported earnings (loss) under GAAP, the Company's GAAP-adjusted net earnings from operations provides a meaningful representation of its fundamental earnings power and can aid in performing period-over-period financial analysis and comparison with peer group data. In management's opinion, GAAP-adjusted net earnings from operations is a useful indicator of the financial results of the Company's primary businesses. This measure is also a basis for management's provision of earnings guidance and growth projections, and it is used by management in making resource allocation and other budgetary and operational decisions. This non-GAAP performance measure is not intended to replace the GAAP measure of net earnings, but is offered as a supplement to it. A reconciliation of reported (GAAP) earnings (loss) per share to GAAP-adjusted net earnings from operations per share, as well as cash dividend information, is provided in the table below:

Discussion of above adjustments:

        Realized gains (losses) on telecommunications investments of $(.14), $.35 and $.24 were recognized in 2004, 2003 and 2002, respectively, and arose as a result of the Company's previously announced plans to monetize these telecommunications investments. All significant investments have now been monetized.

        The after-tax loss of $.14 per share in 2004 relates to the sale of substantially all of the Company holdings in ITC^DeltaCom, Inc. (ITC^DeltaCom) and Knology, Inc. (Knology) in December of 2004. Proceeds from these sales in the amount of approximately $63 million, and the cash refund resulting from tax loss carrybacks to be received in 2005 (estimated to be $58 million) are expected to be used for debt reduction. The gain of $.35 per share in 2003 arose from the sale of the Company's interest in ITC Holding Company (ITC Holding) and the receipt of a minority investment interest in a newly

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formed entity, Magnolia Holding Company, LLC (Magnolia Holding). In 2002, the Company recognized after-tax gains of $.09 per share and $.15 per share related to the sale of a radio service network and shares of DTAG, respectively. The DTAG investment had been received in exchange for a previously held investment interest in Powertel, Inc. (Powertel).

        Telecommunications investment impairments were recorded as follows:

        As noted above, the Company exchanged a previous investment in Powertel for DTAG shares, resulting in the recording of a $3.38 per share gain in 2001. The DTAG shares experienced a significant decline in market value after that exchange but prior to their sale in 2002. The Company's ITC^DeltaCom shares experienced a significant impairment upon ITC^DeltaCom's filing for bankruptcy in 2002, while the Company's Knology holdings experienced other-than-temporary impairments in 2003 and 2004. As noted previously, the Company's investments in Knology and ITC^DeltaCom were monetized in December 2004.

        Upon adoption of SFAS 142 in 2002, the Company recorded an impairment charge related to the goodwill recorded upon the acquisition of PSNC Energy. Annual evaluations of the carrying value of goodwill in subsequent periods have not resulted in similar charges.

        In 2004, a jury issued its verdict in a case in which an unsuccessful bidder for the purchase of certain of SCANA's propane gas assets in 1999 alleged breach of contract and related claims. Based on this verdict, the Company recorded a charge of $.10 per share, its best estimate of the minimum award to be granted if the court's final judgment is consistent with the jury verdict and the Company's understanding of applicable law. It is expected that the final judgment will be rendered in 2005 but that appeals may continue for a longer period. See also Note 10 to the consolidated financial statements.

        Management believes that all of the above adjustments are appropriate in determining the non-GAAP financial performance measure. Management utilizes such measure itself in exerting budgetary control, managing business operations and determining eligibility for incentive compensation payments. Such non-GAAP measure is based on management's decision that the telecommunications assets are not a part of the Company's core businesses and will not be available to provide earnings on a long-term basis. The non-GAAP measure also provides a consistent basis upon which to measure performance by properly excluding the effects on per share earnings of transactions involving the Company's telecommunications investments, the cumulative effect of adopting a new accounting standard and a litigation charge related to the sale of a prior business.

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Pension Income

        Pension income was recorded on the Company's financial statements as follows:

        For the last several years, the market value of the Company's retirement plan (pension) assets has exceeded the total actuarial present value of accumulated plan benefits. Pension income's sharp decline in 2003 and its increase in 2004 are consistent with overall investment market results. See also the discussion of pension accounting in Critical Accounting Estimates.

Allowance for Funds Used During Construction (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. The Company includes an equity portion of AFC in nonoperating income and a debt portion of AFC in interest charges (credits) as noncash items, both of which have the effect of increasing reported net income. AFC represented approximately 6.6% of income before income taxes in 2004, 7.2% in 2003 and 25.8% in 2002. The ratio in 2002 was significantly higher than historical norms due to the inclusion in income before income taxes of $291 million of impairments related to the other than temporary decline in market value of the Company's investment in DTAG and ITC^DeltaCom.

        In addition to the effect of impairments, the decrease in AFC for 2004 vs 2003 is partially due to completion of the Jasper County Electric Generating Station in May 2004. The decrease in AFC for 2003 vs 2002 is partially due to the completion of the Urquhart Station repowering project in June 2002. Also, in January 2003 the SCPSC issued an order allowing SCE&G to include all Jasper County generating project expenditures as of December 31, 2002 and other construction work in progress expenditures as of June 30, 2002 in its electric rate base. At the time the expenditures were included in the rate base, AFC was no longer calculated on those amounts. These decreases were partially offset by increased AFC from subsequent construction expenditures related to the Jasper County generating and Lake Murray Dam projects (see discussion at CAPITAL PROJECTS).

Electric Operations

        Electric Operations is comprised of the electric operations of SCE&G, GENCO and Fuel Company. Electric operations sales margins for 2004, 2003 and 2002 were as follows: