South Carolina Electric & Gas Company Files for Increases to Customer Rates

South Carolina Electric & Gas Company (SCE&G), principal subsidiary of SCANA Corporation (NYSE:SCG), today filed an application with the Public Service Commission of South Carolina (PSC) requesting a 6.75 percent overall increase in retail electric base rates. In a separate application also filed today, the company requested a 1.33 percent overall increase to its retail natural gas base rates under terms of the Natural Gas Rate Stabilization Act.

Electric request
SCE&G’s electric rate filing is the company’s first requested increase to base rates since 2004. The proposed overall 6.75 percent increase to electric rates breaks out as follows:

* 7.49 percent for residential customers
* 5.83 percent for small commercial customers
* 6.87 percent for medium commercial customers
* 5.96 percent for large commercial/industrial customers.

If approved, the monthly bill of a residential customer using 1,000 kilowatt-hours of electricity would increase $7.62.

SCE&G President Kevin Marsh said the company needs the additional revenue to ensure continued safe and reliable service to its customers. Among the factors driving the need for those additional funds, he cited mandatory environmental upgrades to the company’s generating plants, increased costs associated with growing and maintaining reliability of the company’s electric transmission and distribution system and other operating expenses.

“We are committed to conducting business in an environmentally responsible manner and to meeting all local, state and federal environmental requirements,” said Marsh. “Since 2004, we’ve invested about $107 million in clean air technologies at our coal-fired generating plants.”

Marsh added, “Since 2004, we’ve spent $314 million building transmission and distribution infrastructure to support the state’s rapidly rising demand for power. The cost of materials associated with that infrastructure – the steel in our transformers and meters; the copper in our conductors; the power poles we put in the ground – has risen tremendously. In fact, we’ve seen a 30 to 45 percent increase in the costs of underground and overhead transformers and pole hardware. Wire and cable is up about 170 percent for that same period. In short, our rates are going up because the cost of serving our customers safely and reliably has gone up.”

The requested increase is based upon a 9.18 percent overall return on rate base, including an 11.75 percent return on common equity, and would produce approximately $118 million in additional annual revenues based on a test year ended March 31, 2007.

A public hearing on SCE&G’s application is expected to be held by the PSC in November. If approved, the new rates would go into effect in January 2008.

Natural gas request
SCE&G is filing for an adjustment to natural gas rates under a new law that went into effect in 2005 called the Natural Gas Rate Stabilization Act. The statute is designed to reduce volatility of customer rates by allowing for more efficient recovery of the costs that regulated utilities incur in expanding, improving and maintaining natural gas service infrastructure to meet the needs of customers. The law also works to reduce customer rates when increased revenues cause a utility’s earnings to exceed the return-on-equity (ROE) range authorized by the PSC.

The law requires that South Carolina’s Office of Regulatory Staff (ORS) annually review SCE&G’s financials for the 12 months ending March 31. If the company’s ROE for that period was more than a half percent above or below the 10.25 percent return authorized by the PSC, SCE&G then files for a rate adjustment to bring earnings back to that authorized rate of return. SCE&G earned an ROE of 8.11 percent for the 12 months ending March 31, 2007.

“Customer driven growth is the key driver in our natural gas filing,” said Marsh. “Increasingly, industrial customers and businesses throughout the state are demanding availability of natural gas, as are residential developers and their customers. This increase will enable us to continue making the capital investments that are necessary to safely meet that growing demand.”

The information supporting SCE&G’s filing will be reviewed by the ORS, which will issue an audit report by Sept. 1. The PSC will then review SCE&G’s filing and the ORS audit report and will issue an order in October. The rate adjustment would be implemented with the first billing cycle of November 2007.

The proposed overall 1.33 percent increase to natural gas rates breaks out as follows:

* 2.33 percent for residential customers
* 2.03 percent for small commercial customers
* 0.88 percent for medium commercial customers
* 1.52 percent for large commercial/industrial customers.

If the request is approved, residential customers would pay about $19.70 more a year for natural gas based on average annual usage.