-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IgYTUplC5PsD61NyYD15ZxW1cwghKDHkTQqEyNZ22jwLe8SbzS4ehu3BIop0W/1u eYx0hvO+x6pxRk4nbeUqVg== 0000091882-00-000002.txt : 20000328 0000091882-00-000002.hdr.sgml : 20000328 ACCESSION NUMBER: 0000091882-00-000002 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTH CAROLINA ELECTRIC & GAS CO CENTRAL INDEX KEY: 0000091882 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 570248695 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-03375 FILM NUMBER: 578920 BUSINESS ADDRESS: STREET 1: 1426 MAIN ST CITY: COLUMBIA STATE: SC ZIP: 29201 BUSINESS PHONE: 8032179000 MAIL ADDRESS: STREET 1: 1426 MAIN ST CITY: COLUMBIA STATE: SC ZIP: 29201 10-K405 1 YEAR END FORM 10-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1999 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address and Telephone Number Identification No. 1-8809 SCANA Corporation 57-0784499 1426 Main Street Columbia, South Carolina 29201 (803) 217-9000 1-3375 South Carolina Electric & Gas Company 57-0248695 1426 Main Street Columbia, South Carolina 29201 (803) 217-9000 Securities registered pursuant to Section 12(b) of the Act: Each of the following classes or series of securities registered pursuant to Section 12(b) of the Act is registered on the New York Stock Exchange. Title of each class Registrant Common Stock, without par value SCANA Corporation 5% Cumulative Preferred Stock South Carolina Electric & Gas Company par value $50 per share 7.55% Trust Preferred Securities, Series A liquidation value $25 per Trust Preferred Security ================================================================================ Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No SCANA: 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. ( ) SCE&G: 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 amendments to this Form 10-K. (X) The aggregate market value of voting stock held by non-affiliates of SCANA Corporation was $2,487,726,284 at February 29, 2000, based on a price of $23.8125. The total number of shares outstanding at February 29, 2000 was 104,730,049. South Carolina Electric & Gas Company is a wholly-owned subsidiary of SCANA Corporation and has no voting stock other than its common stock. At February 29, 2000, there were issued and outstanding 40,296,147 Common Shares, $4.50 par value, of South Carolina Electric & Gas Company, held in entirety by SCANA Corporation. Documents incorporated by reference: Specified sections of SCANA Corporation's 2000 Proxy Statement, dated March 17, 2000, in connection with its 2000 Annual Meeting of Stockholders, are incorporated by reference in Part III hereof. This combined Form 10-K is separately filed by SCANA Corporation and South Carolina Electric & Gas Company. Information contained herein relating to SCANA Corporation or any of its direct or indirect subsidiaries other than South Carolina Electric & Gas Company is provided solely by SCANA Corporation and shall be deemed not included in the Form 10-K of South Carolina Electric & Gas Company. TABLE OF CONTENTS Page DEFINITIONS............................................................... 4 PART I Item 1. Business.................................................... 5 Item 2. Properties ................................................. 16 Item 3. Legal Proceedings........................................... 18 Item 4. Submission of Matters to a Vote of Security Holders ........ 18 Corporate Structure ................................................. 19 Executive Officers of SCANA Corporation ............................. 20 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........................................ 21 Item 6. Selected Financial Data..................................... 23 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 26 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.. 40 Item 8. Financial Statements and Supplementary Data................. 41 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................................. 103 PART III Item 10. Directors and Executive Officers of the Registrants....... 104 Item 11. Executive Compensation ................................... 109 Item 12. Security Ownership of Certain Beneficial Owners and Management ......................................... 115 Item 13. Certain Relationships and Related Transactions ........... 115 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ............................................ 116 SIGNATURES.............................................................. 123 DEFINITIONS The following abbreviations used in the text have the meanings set forth below unless the context requires otherwise: TERM MEANING AFC...................... Allowance for Funds Used During Construction BTU...................... British Thermal Unit Circuit Court............ South Carolina Circuit Court Clean Air Act............ Clean Air Act Amendments of 1990 Consumer Advocate........ Consumer Advocate of South Carolina Dekatherm................ One Million BTUs DHEC..................... South Carolina Department of Health and Environmental Control DOE...................... United States Department of Energy DT....................... Dekatherm Energy Marketing......... SCANA Energy Marketing, Inc. EPA...................... United States Environmental Protection Agency FERC..................... United States Federal Energy Regulatory Commission Fuel Company............. South Carolina Fuel Company, Inc. GENCO.................... South Carolina Generating Company, Inc. Investor Plus Plan....... SCANA Corporation Investor Plus Plan KVA...................... Kilovolt-ampere KW....................... Kilowatt KWH...................... Kilowatt-hour LLC...................... Limited Liability Company LNG...................... Liquefied Natural Gas MCF...................... Thousand Cubic Feet MGP...................... Manufactured Gas Plant Mhz...................... Megahertz MMCF..................... Million Cubic Feet MW....................... Megawatt NEPA..................... National Energy Policy Act of 1992 NCUC..................... North Carolina Utilities Commission NRC...................... United States Nuclear Regulatory Commission PCS...................... Personal Communications Service Pipeline Corporation..... South Carolina Pipeline Corporation PRP...................... Potentially Responsible Party PSC...................... The Public Service Commission of South Carolina PSNC..................... Public Service Company of North Carolina, Incorporated PUHCA.................... Public Utility Holding Company Act of 1935, as amended SCI...................... SCANA Communications, Inc. SCANA.................... SCANA Corporation, the parent company SCE&G.................... South Carolina Electric & Gas Company SEC...................... United States Securities and Exchange Commission Southern Natural......... Southern Natural Gas Company SPSP..................... SCANA Corporation Stock Purchase-Savings Plan Summer Station........... V. C. Summer Nuclear Station Supreme Court............ South Carolina Supreme Court Transco.................. Transcontinental Gas Pipeline Corporation Williams Station......... A. M. Williams Coal-Fired, Electric Generating Station Owned by GENCO PART I ITEM 1. BUSINESS THE COMPANY ORGANIZATION SCANA, a South Carolina corporation having general business powers, was incorporated on October 10, 1984, and registered as a public utility holding company under PUHCA on February 10, 2000, concurrent with the completion of its merger with PSNC. SCANA holds, directly or indirectly, all of the capital stock of each of its subsidiaries except for the preferred stock of SCE&G, the preferred securities of SCE&G Trust I and 30% of an indirect subsidiary. SCANA and its subsidiaries (the Company) had 5,488 full-time, permanent employees as of February 29, 2000 as compared to 4,697 full-time, permanent employees as of December 31, 1998. SCE&G was incorporated under the laws of South Carolina in 1924, and is an operating public utility. SEGMENTS OF BUSINESS SCANA neither owns nor operates any physical properties. It has 14 direct, wholly owned subsidiaries that are engaged in the functionally distinct operations described below. It also has investments in two LLCs: one has built and operates a cogeneration facility in Charleston, South Carolina and the other has constructed and operates a lime production facility in Charleston, South Carolina. Information with respect to major segments of business for the years ended December 31, 1999, 1998 and 1997 is contained in Management's Discussion and Analysis of Financial Condition and Results of Operations and in Note 11 of the Notes to Consolidated Financial Statements appearing in Item 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA for SCANA and SCE&G. 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 in South Carolina. SCE&G also renders urban bus service in the metropolitan area of Columbia, South Carolina. SCE&G's business is subject to seasonal fluctuations. Generally, sales of electricity are higher during the summer and winter months because of air-conditioning and heating requirements, and sales of natural gas are greater in the winter months due to 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 31 of the 46 counties in South Carolina and covers more than 21,000 square miles. The total population of the counties representing the combined service area is approximately 2.4 million. Predominant industries in 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. 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. Pipeline Corporation is engaged in the purchase, transmission and sale of natural gas on a wholesale basis to distribution companies and directly to industrial customers in 40 counties throughout South Carolina. Pipeline Corporation owns LNG liquefaction and storage facilities. It also supplies the natural gas for SCE&G's gas distribution system. Other resale customers include municipalities and county gas authorities and gas utilities. The industrial customers of Pipeline Corporation are primarily engaged in the manufacturing or processing of ceramics, paper, metal, food and textiles. On November 10, 1999 a wholly owned subsidiary of Pipeline Corporation sold its 62-mile, six-inch propane pipeline that connects with the propane storage facility formerly owned by SCANA Propane Storage, Inc. Pipeline Corporation's, subsidiary continues to maintain this pipeline. On February 10, 2000 SCANA completed its acquisition of PSNC. PSNC is a public utility engaged primarily in transporting, distributing and selling natural gas to approximately 351,000 residential, commercial and industrial customers in 31 counties in North Carolina. The industrial customers of PSNC include manufacturers 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. PSNC was organized in 1938. PSNC, through wholly owned, non-regulated subsidiaries, conducts gas brokering activities, refuels natural gas vehicles and converts gasoline-fueled vehicles to natural gas. Nonregulated Businesses Energy Marketing markets electricity, natural gas and other light hydrocarbons primarily in the southeast. In addition, Energy Marketing markets natural gas to approximately 431,000 customers in Georgia's deregulated natural gas market. Energy Marketing also provides energy-related risk management services to producers and customers. SCI owns and operates a 500 mile fiber optics telecommunications network in South Carolina as well as an 800 Mhz radio service network within the state. In addition, SCI provides tower site construction, management and rental services in South Carolina and Georgia. SCANA Communications Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of SCI, has investments in Powertel, Inc., ITC Holding Company, Inc., ITC^DeltaCom, Inc., and Knology, Inc., which are telecommunications services companies in the southeastern United States. ServiceCare, Inc. is engaged in providing energy-related products and services beyond the energy meter. Its primary businesses are providing homeowners with service contracts on their home appliances and home security services. Primesouth, Inc. is engaged in power plant management and maintenance services. SCANA Resources, Inc. conducts energy-related businesses and services. On November 10, 1999 substantially all of the assets of SCANA Propane Gas, Inc., SCANA Propane Storage, Inc. and C&T Pipeline, LLC (a wholly owned subsidiary of Pipeline Corporation) were sold. Service Company SCANA Services, Inc. provides administrative, management and other services to the subsidiaries and business units within SCANA. COMPETITION For a discussion of the impact of competition, see the Competition section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G. CAPITAL REQUIREMENTS AND FINANCING PROGRAM Capital Requirements The Company's cash requirements arise primarily from SCE&G's operational needs, the Company's construction program and the need to fund the activities or investments of SCANA's nonregulated subsidiaries. The ability of SCANA's regulated subsidiaries to replace existing plant investment, as well as to expand to meet future demand for electricity and gas, will depend upon their ability to attract the necessary financial capital on reasonable terms. SCANA's regulated subsidiaries recover the costs of providing services through rates charged to customers. Rates for regulated services are generally based on historical costs. As customer growth and inflation occur and the regulated subsidiaries continue their ongoing construction programs, it may be necessary to seek increases in rates. As a result, the Company's future financial position and results of operations will be affected by the regulated subsidiaries' ability to obtain adequate and timely rate and other regulatory relief, if requested. For a discussion of the impact of various rate matters on the Company's capital requirements, see Regulatory Matters in the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G. During 2000 the Company is expected to meet its capital requirements principally through internally generated funds (approximately 51%, after payment of dividends) and the incurrence of additional short-term and long-term indebtedness. Sales of additional equity securities may also be made. The Company expects that it has or can obtain adequate sources of financing to meet its projected cash requirements for the next 12 months and for the foreseeable future. The Company's current estimates of its cash requirements for construction and nuclear fuel expenditures, which are subject to continuing review and adjustment, for 2000 and the two-year period 2001-2002 are as follows: - -------------------------------------- ----------------------- ---------------- Type of Facilities 2001-2002 2000 (Millions of Dollars) South Carolina Electric & Gas Company: Electric Plant: Generation $322 $112 Transmission 38 21 Distribution 156 76 Other 14 14 Nuclear Fuel 33 31 Gas 38 20 Common 29 24 Other 1 1 ---- ---- Total 631 299 Other Companies Combined 130 99 ---- ----- Total $761 $398 - --------------------------------------------------------------- ---------------- The above estimates exclude AFC. During 1999 SCE&G and GENCO expended approximately $56.5 million and $1.5 million, respectively, as part of a program to extend the operating lives of certain non-nuclear generating facilities. Additional improvements to be made under the program during 2000, included in the table above, are estimated to cost approximately $29.1 million and $0.9 million, respectively. In addition to the capital requirements for 2000 described above, the Company and SCE&G will require approximately $373.3 million and $198.3 million, respectively, to refund and retire outstanding securities and obligations. For the years 2001-2004, the Company has an aggregate of $520.4 million of long-term debt maturing, which includes an aggregate of $293.4 million for SCE&G and $2.2 million of purchase or sinking fund requirements for SCE&G's preferred stock. In addition, SCANA borrowed a total of $700 million from February 8-10, 2000, maturing within three years, to consummate the acquisition of PSNC. SCE&G's long-term debt maturities for the years 2001-2004 include approximately $79.2 million for sinking fund requirements, of which $73.9 million may be satisfied by deposit and cancellation of bonds issued upon the basis of property additions or bond retirement credits. SCANA and Westvaco each own a 50 percent interest in Cogen South LLC (Cogen). Cogen was formed to build and operate a cogeneration facility at Westvaco's Kraft Division Paper Mill in North Charleston, South Carolina. The facility began operations in March 1999. Financing for the facility of approximately $139.8 million was provided to Cogen by banks. On December 30, 1998 SCANA provided a capital contribution of approximately $15.5 million to Cogen. On September 10, 1998, the contractor in charge of construction filed suit in Circuit Court seeking approximately $52 million from Cogen, alleging that it incurred construction cost overruns relating to the facility and that the construction contract provides for recovery of these costs. In addition to Cogen, Westvaco, SCE&G and SCANA were also named in the suit. SCANA and the other defendants believe the suit is without merit and are mounting an appropriate defense. SCANA and SCE&G do not believe that the resolution of this issue will have a material impact on results of operations, cash flows or financial position. Financing Program SCANA has in effect a medium-term note program for the issuance from time to time of unsecured medium-term debt securities. At December 31, 1999 SCANA had registered with the SEC and available for issuance $1.0 billion under this program. The proceeds from the sales of these securities may be used to refinance bank borrowings and other privately sold indebtedness incurred in connection with the acquisition of PSNC. In addition, the proceeds may be used to fund additional business activities in nonutility subsidiaries, to reduce short-term debt incurred in connection therewith or for general corporate purposes. SCE&G's First and Refunding Mortgage Bond Indenture, dated April 1, 1945 (Old Mortgage), contains provisions prohibiting the issuance of additional bonds thereunder (Class A Bonds) unless net earnings (as therein defined) for 12 consecutive months out of the 18 months prior to the month of issuance are at least twice the annual interest requirements on all Class A Bonds to be outstanding (Bond Ratio). For the year ended December 31, 1999 the Bond Ratio was 6.01. The Old Mortgage allows the issuance of additional Class A Bonds to an additional principal amount equal to (i) 70 percent of unfunded net property additions (which unfunded net property additions totaled approximately $1,250 million at December 31, 1999), (ii) retirements of Class A Bonds (which retirement credits totaled $91.8 million at December 31, 1999), and (iii) cash on deposit with the Trustee. SCE&G has a bond indenture dated April 1, 1993 (New Mortgage) covering substantially all of its electric properties under which its future mortgage-backed debt (New Bonds) will be issued. New Bonds are issued under the New Mortgage on the basis of a like principal amount of Class A Bonds issued under the Old Mortgage which have been deposited with the Trustee of the New Mortgage (of which $715 million were available for such purpose at December 31, 1999). New Bonds will be issuable under the New Mortgage only if adjusted net earnings (as therein defined) for 12 consecutive months out of the 18 months immediately preceding the month of issuance are at least twice the annual interest requirements on all outstanding bonds (including Class A Bonds) and New Bonds to be outstanding (New Bond Ratio). For the year ended December 31, 1999 the New Bond Ratio was 5.95. The following additional financing transactions have occurred since January 1, 1999: o On March 9, 1999 SCE&G issued $100 million of First Mortgage Bonds having an annual interest rate of 6 1/8 percent and maturing on March 1, 2009. The proceeds from the sale of these bonds were used to reduce short-term debt. o On June 29, 1999 SCANA issued $150 million one-year floating rate medium-term notes maturing on July 14, 2000. The interest rate on the notes is reset monthly and is based on a one-month LIBOR plus 35 basis points. The proceeds from these notes were used to reduce short-term bank debt. o On July 15, 1999 SCANA paid at maturity all $43 million principal amount outstanding of its 7.17 percent medium-term notes. o On October 8, 1999 SCANA paid at maturity all $30 million principal amount outstanding of its 6.6 percent medium-term notes. o On November 1, 1999 SCANA's shelf registration statement filed with the SEC became effective, providing for the issuance of up to an additional $1 billion in medium-term notes. o On December 1, 1999 SCANA signed a credit agreement with banks for a maximum of $300 million for a three-year term loan, all of which was drawn on February 10, 2000 to consummate SCANA's acquisition of PSNC. o On February 8, 2000 the Company issued $400 million of two-year floating rate notes maturing February 8, 2002. The interest rate on the notes is reset quarterly based on a three-month LIBOR plus 50 basis points. The proceeds from these privately sold notes were used to consummate SCANA's acquisition of PSNC. Without the consent of at least a majority of the total voting power of SCE&G's preferred stock, SCE&G may not issue or assume any unsecured indebtedness if, after such issue or assumption, the total principal amount of all such unsecured indebtedness would exceed 10 percent of the aggregate principal amount of all of SCE&G's secured indebtedness and capital and surplus. However, no such consent is required to enter into agreements for payment of principal, interest and premium for securities issued for pollution control purposes. Pursuant to Section 204 of the Federal Power Act, SCE&G and GENCO must obtain FERC authority to issue short-term debt. The FERC has authorized SCE&G to issue up to $250 million of unsecured promissory notes or commercial paper with maturity dates of 12 months or less but not later than December 31, 2001. GENCO has not sought such authorization. At December 31, 1999 SCE&G had $285 million of authorized lines of credit which includes credit agreements for a maximum of $250 million to support the issuance of commercial paper. Unused lines of credit at December 31, 1999 totaled $285 million. SCE&G commercial paper outstanding at December 31, 1999 and December 31, 1998 was $143.1 million and $125.2 million, respectively. See Fuel Financing Agreements for a discussion of Fuel Company's credit agreement. SCE&G's Restated Articles of Incorporation prohibit issuance of additional shares of preferred stock without the consent of the preferred stockholders unless net earnings (as defined therein) for the 12 consecutive months immediately preceding the month of issuance are at least one and one-half times the aggregate of all interest charges and preferred stock dividend requirements (Preferred Stock Ratio). For the year ended December 31, 1999 the Preferred Stock Ratio was 1.79. PSNC has committed lines of credit with five commercial banks that vary in amount monthly depending upon seasonal requirements and a five-year revolving line of credit with one bank. These lines of credit range from a minimum of $55 million to a winter-period maximum of $75 million. PSNC also has total uncommitted lines of credit ranging from $70 million to $100 million. As a result of SCANA's acquisition of PSNC that was consummated on February 10, 2000, SCANA and PSNC shareholders received cash and shares of SCANA common stock. PSNC shareholders were paid $212 million in cash and 17,413,929 shares of SCANA common stock. SCANA shareholders were paid $488 million in cash and 87,316,120 shares of SCANA common stock. On September 17, 1999 an additional 4,000,000 shares of SCANA common stock were registered for sale under the SPSP. On September 9, 1999 an additional 3,000,000 shares of SCANA common stock were registered for sale under the Investor Plus Plan. During 1999, shares for the SPSP and the Investor Plus Plan were purchased on the open market. The Company's ratios of earnings to fixed charges (SEC method) were 2.98, 3.67, 3.64, 3.60 and 3.00 for the years ended December 31, 1999, 1998, 1997, 1996 and 1995, respectively. For SCE&G these ratios were 3.71, 4.40, 3.85, 3.80 and 3.41 for the same periods. The Company expects that it has or can obtain adequate sources of financing to meet its projected cash requirements for the next 12 months and for the foreseeable future. Fuel Financing Agreements SCE&G has assigned to Fuel Company all of its rights and interests in its various contracts relating to the acquisition and ownership of nuclear and fossil fuels. To finance nuclear and fossil fuels and sulfur dioxide emission allowances, Fuel Company issues, from time to time, commercial paper which is supported, up to $125 million, by a revolving credit agreement which expires December 19, 2000. This commercial paper and amounts outstanding under the revolving credit agreement, if any, are guaranteed by SCE&G. The full amount of the credit agreement was available at December 31, 1999. At December 31, 1999 commercial paper outstanding was approximately $70.2 million at a weighted average interest rate of 6.44 percent. (See Note 4 of Notes to Consolidated Financial Statements.) ELECTRIC OPERATIONS Electric Sales In 1999 residential sales of electricity accounted for 41% of electric sales revenues; commercial sales 30%; industrial sales 19%; sales for resale 4%; and all other 6%. The Company's KWH sales by classification for the years ended December 31, 1999 and 1998 are presented below: Sales KWH (Millions) - -------------------------------------------------------------------------------- CLASSIFICATION 1999 1998 % CHANGE - -------------------------------------------------------------------------------- Residential 6,269 6,324 (1%) Commercial 5,950 5,899 1% Industrial 6,140 5,824 5% Sales for resale 1,189 1,125 6% Other 518 536 (3%) - -------------------------------------------------- ------------------ --------- Total Territorial 20,066 19,708 2% Negotiated Market Sales Tariff 1,678 1,495 12% ================================================== ============================= Total 21,744 21,203 3% ================================================== ============================= Sales for resale includes electricity furnished for resale to two municipalities and two electric cooperatives. One electric cooperative has notified SCE&G of its intent to terminate in the year 2000 its wholesale power contract with SCE&G and bid out its electric requirements. Sales under the Negotiated Market Sales Tariff during 1999 include sales to 32 investor-owned utilities and registered marketers, seven electric cooperatives, two municipalities and four federal/state electric agencies. During 1998, sales under the Negotiated Market Sales Tariff included sales to 34 investor-owned utilities, three electric cooperatives, one municipality and four federal/state electric agencies. The electric sales volume from residential sales decreased for 1999 primarily as a result of milder weather. During 1999 the Company recorded a net increase of 6,105 customers, increasing its total customers to 523,552. The all-time peak demand of 4,158 MW was set on August 18, 1999. Electric Interconnections SCE&G purchases all of the electric generation of Williams Station, owned by GENCO, under a Unit Power Sales Agreement which has been approved by the FERC. Williams Station has a generating capacity of 580 MW. SCE&G's transmission system is part of the interconnected grid extending over a large part of the southern and eastern portions of the nation. SCE&G, Virginia Power Company, Duke Power Company, Carolina Power & Light Company, Yadkin, Incorporated and Santee Cooper are members of the Virginia-Carolinas Reliability Group, one of the several geographic divisions within the Southeastern Electric Reliability Council. This Council provides for coordinated planning for reliability among bulk power systems in the Southeast. SCE&G is also interconnected with Georgia Power Company, Savannah Electric & Power Company, Oglethorpe Power Corporation and the Southeastern Power Administration's Clark Hill Project. Fuel Costs The following table sets forth the average cost of nuclear fuel and coal and the weighted average cost of all fuels (including oil and natural gas) used by the Company for the years 1997-1999. 1999 1998 1997 ---- ---- ---- Nuclear: Per million BTU $ .46 $ .46 $ .47 Coal: SCE&G Per ton $39.37 $38.19 $38.22 Per million BTU 1.57 1.54 1.50 GENCO: Per ton $41.46 $41.67 $44.49 Per million BTU 1.61 1.61 1.63 Weighted Average Cost of All Fuels: Per million BTU $ 1.50 $ 1.49 $ 1.52 Fuel Supply The following table shows the sources and approximate percentages of the Company's total KWH generation by each category of fuel for the years 1997-1999 and the estimates for 2000 and 2001. Percent of Total KWH Generated ------------------------------------------------------------ Estimated Actual --------------------- ------------------------------------ 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- Coal 70% 73% 73% 69% 71% Nuclear 24 21 22 25 24 Hydro 5 5 4 5 5 Natural Gas & Oil 1 1 1 1 - ------ ----- ----- ----- ----- 100% 100% 100% 100% 100% === === === === === Coal is used at all 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 truck deliveries are used at three of these plants. On December 31, 1999 SCE&G had approximately a 59-day supply of coal in inventory and GENCO had approximately a 52-day supply. Coal is obtained through contracts and purchases on the spot market. Spot market purchases are expected to continue for coal requirements in excess of those provided by SCANA's existing contracts. Contracts for the purchase of coal represent approximately 75-80 percent of expected requirements for 2000. Contract coal is purchased from 11 suppliers located in eastern Kentucky, Tennessee, southwest Virginia and West Virginia. Contract commitments, which expire at various times from 2000 through 2008, approximate 5.3 million tons annually. Sulfur restrictions on the contract coal range from 0.75 percent to 2 percent. The Company believes that SCE&G's and GENCO's operations are in compliance with all existing regulations relating to the discharge of sulfur dioxide and nitrogen oxides. The Company is unaware that any more stringent sulfur content requirements for existing plants are contemplated at the state level by DHEC. SCE&G has adequate supplies of uranium or enriched uranium product under contract to manufacture nuclear fuel for Summer Station through 2005. The following table summarizes all contract commitments for the stages of nuclear fuel assemblies: Remaining Expiration Commitment Contractor Regions(1) Date Enrichment United States Enrichment Corporation (2) 15-18 2005 Fabrication Westinghouse Electric Corporation 15-21 2009 (1) A region represents approximately one-third to one-half of the nuclear core in the reactor at any one time. Region 15 will be loaded in 2000. (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 2006 and expects to be able to expand its storage capacity to accommodate the spent fuel output for the life of the plant through spent fuel pool reracking, dry cask storage or other technology as it becomes available. In addition, there is sufficient on-site storage capacity over the life of Summer Station to permit storage of the entire reactor core in the event that complete unloading should become desirable or necessary for any reason. (See Nuclear Fuel Disposal under Environmental Matters for information regarding the contract with the DOE for disposal of spent fuel.) Summer Station will conduct a refueling outage in October 2000 that is expected to last approximately 30 days. Decommissioning For information regarding the decommissioning of Summer Station, see Note 1H, Nuclear Decommissioning, of the Notes to Consolidated Financial Statements appearing in Item 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA for SCANA and SCE&G. GAS OPERATIONS Gas Sales - Regulated In 1999 the Company's residential sales accounted for 24% of gas sales revenues; commercial sales 18%; industrial sales 46%; sales for resale 12%. During the same period, SCE&G's residential sales accounted for 42% of gas sales revenues; commercial sales 32%; industrial sales 26%. Dekatherm sales by classification for the years ended December 31, 1999 and 1998 are presented below: Sales Dekatherms (000) - -------------------------------------------------------------------------------- SCANA SCE&G CLASSIFICATION 1999 1998 % Change 1999 1998 % Change - -------------------------------------------------------------------------------- Residential 11,823 11,917 (0.8%) 11,823 11,917 (0.8%) Commercial 11,781 11,383 3.5% 11,699 11,294 3.6% Industrial 61,192 61,251 (0.1%) 17,958 17,314 3.7% Sales for Resale 15,947 15,744 1.3% - - - Transportation gas 4,227 4,435 (4.7%) 1,975 2,004 (1.4%) - -------------------------------------------------------------------------------- Total 104,970 104,730 0.2% 43,455 42,529 2.2% ================================================================================ The Company's and SCE&G's gas sales volume increased for 1999 primarily as a result of customer growth and customer expansion. During 1999 the Company recorded a net increase of 3,404 customers, increasing its total customers to 260,362. SCE&G recorded a net increase of 3,404 gas customers, increasing its total customers to 260,246. The demand for gas is affected by the weather, the price relationship between gas and alternate fuels and other factors. Pipeline Corporation has been successful in purchasing lower cost natural gas in the spot market and arranging for its transportation to South Carolina. Pipeline Corporation has also negotiated contracts with certain direct and indirect industrial customers for the transportation of natural gas that the industrial customers purchase directly from suppliers. Pipeline Corporation, operating wholly within the State of South Carolina, provides natural gas utility service, including transportation services, for its customers, and supplies natural gas to SCE&G and other wholesale purchasers. Energy Marketing acquires and sells natural gas in regulated and deregulated markets. Energy Marketing has not supplied natural gas to any affiliate for use in providing regulated gas utility services. Gas Cost and Supply Pipeline Corporation purchases natural gas under contracts with producers and marketers on a short-term basis at current price indices and on a long-term basis for reliability assurance at index prices plus a gas inventory charge. The gas is brought to South Carolina through transportation agreements with Southern Natural (expiring in 2003) and Transco (expiring in 2008 and 2017). The daily volume of gas that Pipeline Corporation is entitled to transport under these contracts on a firm basis is 188 MMCF from Southern Natural and 105 MMCF from Transco. Additional natural gas volumes are brought to Pipeline Corporation's system as capacity is available for interruptible transportation. SCE&G, under contract with Pipeline Corporation, is entitled to receive a daily contract demand of 266,495 dekatherms. The contract allows SCE&G to receive amounts in excess of this demand based on availability. During 1999 Pipeline Corporation's average cost per MCF of natural gas purchased for resale, excluding firm service demand charges, was $2.54 compared to $2.39 during 1998. SCE&G's average cost per MCF was $3.73 and $3.67 during 1999 and 1998, respectively. Pipeline Corporation has engaged in hedging activities on the New York Mercantile Exchange (NYMEX) of its gas supply pursuant to a limited program authorized and monitored by the PSC. Any gains or losses associated with that hedging activity are accounted for in Pipeline Corporation's purchased gas adjustment clause and, therefore, have no impact on net income. To meet the requirements of its high priority natural gas customers during periods of maximum demand, Pipeline Corporation supplements its supplies of natural gas from two LNG plants. The LNG plants are capable of storing the liquefied equivalent of 1,880 MMCF of natural gas, of which approximately 1,178 MMCF were in storage at December 31, 1999. On peak days the LNG plants can regasify up to 150 MMCF per day. Additionally, Pipeline Corporation had contracted for 6,447 MMCF of natural gas storage space of which 5,012 MMCF were in storage on December 31, 1999. The Company believes that supplies under contract and supplies available for spot market purchase are adequate to meet existing customer demands and to accommodate growth. Curtailment Plans The PSC has established allocation priorities applicable to firm and interruptible capacities on Pipeline Corporation. The curtailment plan priorities of Pipeline Corporation apply to the resale distribution customers of Pipeline Corporation, including SCE&G. Gas Marketing - Nonregulated Energy Marketing markets natural gas and provides energy-related risk management services to producers and consumers, including the deregulated Georgia marketplace. In 1996, the FERC approved Energy Marketing's application to become a power marketer, allowing Energy Marketing to buy and sell large blocks of electric capacity in wholesale markets. Propane Operations On November 10, 1999 substantially all of the assets of SCANA Propane Gas, Inc., SCANA Propane Storage, Inc. and C & T Pipeline, LLC (a wholly owned subsidiary of Pipeline Corporation) were sold. REGULATION General SCANA became a registered public utility holding company under PUHCA on February 10, 2000, concurrent with completion of its merger with PSNC. SCANA and its subsidiaries are subject to the jurisdiction of the SEC as to financings, acquisitions and diversifications, affiliate transactions and other matters. SCE&G is subject to the jurisdiction of the PSC as to retail electric, gas and transit rates, service, accounting, issuance of securities (other than short-term promissory notes) and other matters. Pipeline Corporation is subject to the jurisdiction of the PSC as to gas rates, service, accounting and other matters. PSNC is subject to the jurisdiction of the NCUC as to gas rates, issuance of securities, (other than notes with a maturity of two years or less or renewals of notes over a six-year or shorter period), service, accounting and other matters. Federal Energy Regulatory Commission SCE&G and GENCO are subject to regulation under the Federal Power Act, administered by the FERC and the DOE, in the transmission of electric energy in interstate commerce and in the sale of electric energy at wholesale for resale, as well as with respect to licensed hydroelectric projects and certain other matters, including accounting and the issuance of short-term promissory notes. (See Capital Requirements and Financing Program.) SCE&G holds licenses under the Federal Water Power Act or the Federal Power Act with respect to all of its hydroelectric projects. The expiration dates of the licenses covering the projects are as follows: Project License Expiration Neal Shoals 2036 Stevens Creek 2025 Columbia 2000 Saluda 2007 Parr Shoals 2020 Fairfield Pumped Storage 2020 The current license for Columbia expires on June 30, 2000. SCE&G filed an application for a new license for Columbia on June 30, 1998. The application was officially accepted for filing by FERC notice dated December 23, 1999. At the termination of a license under the Federal Power Act, the United States government may take over the project covered thereby, or the FERC may extend the license or issue a license to another applicant. If the Federal government takes over a project or the FERC issues a license to another applicant, the original licensee is entitled to be paid its net investment in the project, not to exceed fair value, plus severance damages. In May 1996 the FERC approved SCE&G's application establishing open access transmission tariffs and requesting authorization to sell bulk power to wholesale customers at market-based rates. Nuclear Regulatory Commission SCE&G is subject to regulation by the NRC with respect to the ownership and operation of Summer Station. The NRC's jurisdiction encompasses broad supervisory and regulatory powers over the construction and operation of nuclear reactors, including matters of health and safety, antitrust considerations and environmental impact. In addition, the Federal Emergency Management Agency is responsible for the review, in conjunction with the NRC, of certain aspects of emergency planning relating to the operation of nuclear plants. In 1998 the NRC completed the Systematic Assessment of Licensee Performance (SALP) for Summer Station. The SALP assesses the four functional areas of plant operations, maintenance, engineering and plant support. In 1998 Summer Station received a superior rating (the NRC's highest rating) in each of the four functional areas. In addition, Summer Station has received a category one rating from the Institute of Nuclear Power Operations (INPO) in seven out of the last eight evaluations. The category one rating is the highest given by INPO for a nuclear plant's overall operations. National Energy Policy Act of 1992 and FERC Orders 636 and 888 The Company's regulated business operations were impacted by the NEPA and FERC Orders No. 636 and 888. NEPA was designed to create a more competitive wholesale power supply market by creating "exempt wholesale generators" and by potentially requiring utilities owning transmission facilities to provide transmission access to wholesalers. See the Competition section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G for a discussion of FERC Order 888. Order No. 636 was intended to deregulate the markets for interstate sales of natural gas by requiring that pipelines provide transportation services that are equal in quality for all gas suppliers whether the customer purchases gas from the pipeline or another supplier. In the opinion of the Company, it continues to be able to meet successfully the challenges of these altered business climates and does not anticipate there will be any material adverse impact on the results of operations, cash flows, financial position or business prospects. RATE MATTERS For a discussion of the impact of various rate matters, see Regulatory Matters in the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G. Fuel Cost Recovery Procedures The PSC has established a fuel cost recovery procedure which determines the fuel component in SCE&G's retail electric base rates annually based on projected fuel costs for the ensuing 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 the April 1999 annual review of the fuel cost component of electric rates, the PSC increased the rate to 13.37 mills per KWH. 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 a fixed cost of gas, based on projections, as established by the PSC in annual gas cost and gas purchase practice hearings. Any differences between actual and projected gas costs are deferred and included when projecting gas costs during the next annual gas cost recovery hearing. In the October 1999 review the PSC increased the base cost of gas to 54.334 cents per therm. ENVIRONMENTAL MATTERS General Federal and state authorities have imposed environmental regulations and standards relating primarily to air emissions, wastewater discharges and solid, toxic and hazardous waste management. Developments in these areas may require that equipment and facilities be modified, supplemented or replaced. The ultimate effect of these regulations and standards upon existing and proposed operations cannot be forecast. For a more complete discussion of how these regulations and standards impact the Company and SCE&G, see the Environmental Matters section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G. Capital Expenditures In the years 1997 through 1999, the Company's capital expenditures for environmental control amounted to approximately $103.7 million (including approximately $94.6 million for SCE&G). This was in addition to expenditures included in "Other operation" and "Maintenance" expenses, which were approximately $18.2 million, $18.8 million, and $17.1 million during 1999, 1998 and 1997, respectively (including approximately $15.0 million, $16.2 million and $15.3 million for SCE&G during 1999, 1998 and 1997, respectively). It is not possible to estimate all future costs for environmental purposes, but forecasts for capitalized expenditures for the Company are $4.9 million for 2000 and $118.5 million for the four-year period 2001 through 2004 (including $4.4 million for 2000 and $63.2 million for the four-year period 2001 through 2004 for SCE&G). These expenditures are included in the Company's and SCE&G's construction program. The EPA has issued rules on regional ozone control which require revised State Implementation Plans for 22 eastern and midwestern states and the District of Columbia. These rules are being challenged in court by various states and industry and other interests, including the State of South Carolina. The outcomes of the court and future regulatory proceedings are uncertain. The Company may incur up to $50 million for additional capital improvements in addition to those already forecasted in the preceding paragraph. These additional costs, if incured, would all be for SCE&G facilities. Nuclear Fuel Disposal The Nuclear Waste Policy Act of 1982 required that the United States government make available by 1998 a permanent repository for high-level radioactive waste and spent nuclear fuel and imposes a fee of 1.0 mil per KWH of net nuclear generation after April 7, 1983. Payments, which began in 1983, are subject to change and will extend through the operating life of SCE&G's Summer Station. SCE&G entered into a contract with the DOE on June 29, 1983 providing for permanent disposal of its spent nuclear fuel by the DOE. The DOE presently estimates that the permanent storage facility will not be available until 2010. SCE&G has on-site spent nuclear fuel storage capability until at least 2006 and expects to be able to expand its storage capacity to accommodate the spent nuclear fuel output for the life of the plant through spent fuel pool reracking, dry cask storage or other technology as it becomes available. The Act also imposes on utilities the primary responsibility for storage of their spent nuclear fuel until the repository is available. OTHER MATTERS With regard to SCE&G's insurance coverage for Summer Station, reference is made to Note 10Bof the Notes to Consolidated Financial Statements, which is incorporated herein by reference. On November 10, 1999 substantially all of the assets of SCANA Propane Gas, Inc., SCANA Propane Storage, Inc., and C&T Pipeline, LLC (a wholly owned subsidiary of Pipeline Corporation) were sold for approximately $94.5 million. The resulting after-tax gain of $29.9 million was recorded in "Other Income." Proceeds from the sale were used to reduce short-term debt. For a description of the Company's investments in various telecommunications companies, see Other in the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA. For a discussion of the results of measures taken to address the Year 2000 issue, see Other Matters in the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations for SCANA and SCE&G. 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, the preferred securities of SCE&G Trust I and 30% of an indirect subsidiary. It also has investments in two LLC's: one has built and operates a cogeneration facility in Charleston, South Carolina and the other has constructed and operates a lime production 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 subject to a first mortgage lien. For a brief description of the properties of the Company's other subsidiaries, which are not significant as defined in Rule 1-02 of Regulation S-X, see Item 1, BUSINESS-SEGMENTS OF BUSINESS-Nonregulated Businesses. ELECTRIC Information on electric generating facilities, all of which are owned by SCE&G except as noted, is as follows: Net Generating Present Year Capacity Facility Fuel Capability Location In-Service (Summer Rating) (KW) Steam Urquhart Coal/Gas Beech Island, SC 1953 250,000 McMeekin Coal/Gas Irmo, SC 1958 252,000 Canadys Coal/Gas Canadys, SC 1962 415,000 Wateree Coal Eastover, SC 1970 700,000 Williams (1) Coal Goose Creek, SC 1973 600,000 Summer (2) Nuclear Parr, SC 1984 635,000 D-Area (3) Coal DOE Savannah River Site, SC 1995 38,000 Cope Coal Cope, SC 1996 410,000 Westvaco * Charleston, SC 1999 55,000 Gas Turbines Burton Gas/Oil Burton, SC 1961 28,500 Faber Place Gas Charleston, SC 1961 9,500 Hardeeville Oil Hardeeville, SC 1968 14,000 Urquhart Gas/Oil Beech Island, SC 1969 38,000 Coit Gas/Oil Columbia, SC 1969 30,000 Parr Gas/Oil Parr, SC 1970 60,000 Williams Gas/Oil Goose Creek, SC 1972 49,000 Hagood Gas/Oil Charleston, SC 1991 95,000 Urquhart #4 Gas/Oil Beech Island, SC 1999 48,000 Hydro Neal Shoals Carlisle, SC 1905 5,000 Parr Shoals Parr, SC 1914 14,000 Stevens Creek Martinez, GA 1914 9,000 Columbia Columbia, SC 1927 10,000 Saluda Irmo, SC 1930 206,000 Pumped Storage Fairfield Parr, SC 1978 512,000 -------- 4,483,000 (1) The steam unit at Williams Station is owned by GENCO. (2) Represents SCE&G's two-thirds portion of the Summer Station. (3) This plant is leased from the DOE and is dedicated to DOE's Savannah River Site steam needs. "Net Generating Capability" for this plant is expected average hourly output. The lease expires on October 1, 2005. * SCE&G receives shaft horse power from Cogen South, LLC to operate its generator. Cogen South, LLC is owned 50 percent by SCANA and 50 percent by Westvaco. SCE&G owns 447 substations having an aggregate transformer capacity of 22,360,586 KVA. The transmission system consists of 3,164 miles of lines and the distribution system consists of 16,571 pole miles of overhead lines and 3,771 trench miles of underground lines. GAS Natural Gas SCE&G's gas system consists of approximately 12,300 miles of distribution mains and related service facilities. Pipeline Corporation's gas system consists of approximately 1,919 miles of transmission pipeline of up to 24 inches in diameter which connect its resale customers' distribution systems with transmission systems of Southern Natural and Transco. Pipeline Corporation owns two LNG plants, one located near Charleston, South Carolina and the other in Salley, South Carolina. The Charleston facility can liquefy up to 6 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's gas system consists of approximately 761 miles of transmission pipeline of up to 24 inches in diameter that connect its distribution systems with Transco. PSNC's distribution system consists of approximately 6,857 miles of distribution mains and related service facilities. PSNC also owns, through a wholly owned subsidiary, 33.21% of Cardinal Pipeline Company, LLC, which owns a 105-mile transmission pipeline. Propane SCE&G has propane air peak shaving facilities which can supplement the supply of natural gas by gasifying propane to yield the equivalent of 73 MMCF per day. These facilities can store the equivalent of 430 MMCF of natural gas. TRANSIT SCE&G owns 49 motor coaches used in the operation of the Columbia transit system. The Columbia system is comprised of 17 routes covering 177 miles. SCE&G intends to dispose of its investment in the Columbia transit system within two years. Management is uncertain as to what the costs associated with the disposition of the transit system will be. ITEM 3. LEGAL PROCEEDINGS For information regarding legal proceedings, see Item 1, BUSINESS RATE MATTERS, Environmental Matters in the Liquidity and Capital Resources section of Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, and Note 10 of Notes to Consolidated Financial Statements appearing in Item 8., FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable CORPORATE STRUCTURE SCANA CORPORATION A holding company, owning the direct, wholly owned subsidiaries listed below SOUTH CAROLINA ELECTRIC & SCANA COMMUNICATIONS, INC. - -------------------------- -------------------------- GAS COMPANY Provides fiber optic telecommunications - ----------- in South Carolina, a public safety radio Generates and sells electricity communications network, tower and gas to wholesale and retail construction, management and rental customers, sells and transports services for wireles providers and natural gas at retail and invests in telecommunications companies. provides public transit service in Columbia. SOUTH CAROLINA GENERATING SCANA ENERGY MARKETING, INC. COMPANY, INC. Markets electricity, natural gas and Owns and operates Williams Station other light hydrocarbons primarily in and sells electricity to SCE&G. the southeast. Markets natural gas in Georgia's deregulated natural gas SOUTH CAROLINA FUEL market. Provides energy-related risk COMPANY, INC. management services to producers and Acquires, owns and provides customers. financing for SCE&G's nuclear fuel, fossil fuel and sulfur dioxide emission allowances. SERVICECARE, INC. Provides energy-related products, SOUTH CAROLINA PIPELINE service contracts on home appliances CORPORATION and home security services. Purchases, sells and transports natural gas to wholesale and direct PRIMESOUTH, INC. industrial customers. Owns and Engages in power plant management and operates two LNG plants for the maintenance services. liquefactin, storage and regasification of natural gas. SCANA RESOURCES, INC. PUBLIC SERVICE COMPANY OF Conducts energy-related businesses and - ------------------------- services. NORTH CAROLINA - -------------- SCANA SERVICES, INC. Purchases, sells and transports Provides administrative, management natural gas to retail customers, and other services to the subsidiaries markets natural gas, refuels natural and business units within SCANA gas vehicles and refuels natural gas Corporation. vehicles and converts gasoline-fueled vehicles to natural gas. Each of the above listed companies is organized and incorporated under the laws of the State of South Carolina. EXECUTIVE OFFICERS OF SCANA CORPORATION The executive officers are elected at the annual organizational meeting of the Board of Directors, held immediately after the annual meeting of stockholders, and hold office until the next such organizational meeting, unless a resignation is submitted, or unless the Board of Directors shall otherwise determine. Positions Held During Name Age Past Five Years Dates W. B. Timmerman 53 Chairman of the Board and Chief Executive Officer 1997-present Chief Operating Officer 1996-1997 President 1995-present President, SCI 1996-1997 Executive Vice President *-1995 Chief Financial Officer and Controller *-1996 J. L. Skolds 49 President and Chief Operating Officer, SCE&G 1996-present Senior Vice President - Generation, SCE&G *-1996 Senior Vice President - Nuclear Operations, SCE&G *-1995 C. E. Zeigler 53 President and Chief Operating Officer of PSNC 2000-present Chairman, President and Chief Executive Officer of PSNC *-2000 A. H. Gibbes 53 President, Pipeline Corporation 1996-present Senior Vice President and General Counsel *-1996 President and Treasurer, SCANA Development Corp. *-present K. B. Marsh 44 Senior Vice President - Finance, Chief Financial Officer and Controller 1998-present Vice President - Finance, Chief Financial Officer and Controller 1996-1998 Vice President - Finance, Treasurer and Secretary *-1996 H. T. Arthur 54 Senior Vice President and General Counsel 1998-present Vice President and General Counsel 1996-1998 Vice President and General Counsel, Pipeline Corporation *-1996 A. M. Milligan 40 Senior Vice President - Marketing 1998-present Director of Consumer Credit Marketing, Barnett Bank, N. A., FL 1996-1998 Senior Vice President - Marketing, Barnett Card Services, FL *-1996 G. J. Bullwinkel 51 Senior Vice President, Governmental Affairs and Economic Development 1999-present President, SCI 1997-present Senior Vice President - Retail Electric, SCE&G 1995-1999 * Indicates position held at least since March 1, 1995. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS COMMON STOCK INFORMATION - SCANA Corporation - ---------------- ---------------------------- --------------------------------------------- 1999 1998 - ---------------- ----------------- --------------------------------------------- -- -------- 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. - ---------------- --------- ------------------- ------------------------------------ -------- Price Range: (a) High 28 5/16 25 11/16 26 15/16 32 9/16 37 1/4 33 7/8 31 3/8 31 Low 23 5/8 22 13/16 21 1/8 21 9/16 31 5/16 28 1/2 28 27 7/8 - ---------------- --------- ------------------- ------------------------------------ -------- (a) As reported on the New York Stockxchange Composite Listing.
Dividends Per Share: 1999 Amount Date Declared Date Paid ---- ------ ------------- --------- First Quarter .3850 March 9, 1999 April 1, 1999 Second Quarter .3850 June 9, 1999 July 1, 1999 Third Quarter .2750 September 10, 1999 October 1, 1999 Fourth Quarter .2750 December 10, 1999 January 1, 2000 1998 Amount Date Declared Date Paid ---- ------ ------------- --------- First Quarter .3850 February 17, 1998 April 1, 1998 Second Quarter .3850 April 23, 1998 July 1, 1998 Third Quarter .3850 August 19, 1998 October 1, 1998 Fourth Quarter .3850 October 20, 1998 January 1, 1999 December 31, ------------------------------------- 1999 1998 ---- ---- Number of common shares outstanding 103,572,623 103,572,623 Number of common stockholders of record 25,369 30,983 The principal market for SCANA common stock is the New York Stock Exchange. The ticker symbol used is SCG. The corporate name SCANA is used in newspaper stock listings. The total number of shares of SCANA common stock outstanding at February 29, 2000 was 104,730,049. The number of common stockholders of record at February 29, 2000 was 16,215. All of SCE&G's common stock is owned by SCANA and has no market. During 1999 and 1998 SCE&G paid $122.4 million and $167.3 million, respectively, in cash dividends to SCANA. SECURITIES RATINGS (As of February 29, 2000) SCANA CORPORATION SOUTH CAROLINA ELECTRIC & GAS COMPANY - -------------------------------- ------------------------------------------------------------------------------- Rating Medium-Term First Mortgage First and Refunding Preferred Trust Preferred Commercial Agency Notes Bonds Mortgage Bonds Stock Securities Paper ------ ----- ----- -------------- ----- ---------- ----- Duff & Phelps A- A+ A+ A A D-1 Moody's A3 A1 A1 a2 a2 P-1 Standard & Poors A- A A BBB+ BBB+ A-1 - -------------------------------- -------------------------------------------------------------------------------
Further reference is made to Note 5 of the Notes to Consolidated Financial Statements appearing in Item 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA for SCANA and SCE&G. Between January 1, 1997 and December 31, 1999 67,532 shares of SCANA's no par value common stock ("Common Stock") were purchased in open market transactions by SunTrust Bank as Trustee of the SCANA Propane Gas, Inc. (SPG) Profit Sharing and 401(K) Plan and Trust (the "Plan"). These shares were not registered under the Securities Act of 1933, as amended. These shares were purchased for the accounts of those employees of SPG and certain other affiliates (Participating Employers) that participated in the Plan. Under the terms of the Plan, employees could contribute up to 10 percent of their "eligible earnings" to the Plan. For each dollar the employee contributed, the Participating Employer matched it with 50 cents up to 4 percent of the employee's eligible earnings. Prior to January 1, 1999 the Plan required that the employee's eligible earnings that were matched, along with the matching funds provided by the Participating Employers be invested in SCANA's common stock. Beginning January 1, 1999 only the matching funds were required to be invested in SCANA's common stock. All other contributions could be invested in a variety of securities, including SCANA's common stock, at the employees' discretion. The Plan was discontinued on November 10, 1999, concurrent with the sale of substantially all of the assets of SPG. Although the matter is not free from doubt, the Company believes that the open market purchase of shares by the Trustee might be deemed to be an offer or sale of securities subject to the registration requirements of the Securities Act of 1933, as amended. The Restated Articles of Incorporation of SCE&G and the Indenture underlying its First and Refunding Mortgage Bonds contain provisions that, under certain circumstances, could limit the payment of cash dividends on common stock. In addition, with respect to hydroelectric projects, the Federal Power Act requires the appropriation of a portion of certain earnings therefrom. At December 31, 1999 approximately $29.7 million of retained earnings were restricted by this requirement as to payment of cash dividends on common stock of SCE&G. ITEM 6. SELECTED FINANCIAL DATA SCANA SELECTED FINANCIAL DATA - ----------------------------------------------------------------------------------------------------- For the Years Ended December 31, 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------- (Millions of dollars, except statistics and per share amounts) Statement of Income Data Operating Revenues $1,650 $1,632 $1,523 $1,513 $1,353 Operating Income 310 345 314 314 288 Other Income 22 13 38 29 8 Net Income 179 223 221 215 168 Balance Sheet Data Utility Plant, Net $3,851 $3,787 $3,648 $3,529 $3,469 Total Assets 6,011 5,281 4,932 4,759 4,534 Capitalization: Common equity 2,099 1,746 1,788 1,684 1,555 Preferred Stock (Not subject to purchase or sinking fund) 106 106 106 26 26 Preferred Stock, net (Subject to purchase or sinking fund) 11 11 12 43 46 SCE&G - obligated mandatorily redeemable preferred securities of SCE&G's subsidiary, SCE&G Trust I, holding solely $50 million principal amount of 7.55% Junior Subordinated Debentures of SCE&G, due 2027 50 50 50 - - Long-term debt, net 1,563 1,623 1,566 1,581 1,589 - --------------------- - Total Capitalization $3,829 $3,536 $3,522 $3,334 $3,216 ============================================================================================================== Common Stock Data Weighted Average Number of Common Shares Outstanding (Millions) 103.6 105.3 107.1 105.1 99.0 Earnings Per Weighted Average Share of Common Stock $1.73 $2.12 $2.06 $2.05 $1.70 Dividends Declared Per Share of Common Stock $1.32 $1.54 $1.51 $1.47 $1.44 Common Shares Outstanding (Year-End) (Millions) 103.6 103.6 107.3 106.1 103.6 Book Value Per Share of Common Stock (Year-End) $20.26 $16.86 $16.66 $15.86 $15.00 Number of Common Shareholders of Record 25,369 30,983 33,395 36,178 38,231 Other Statistics Electric: Customers (Year-End) 523,552 517,447 503,905 493,320 484,354 Total sales (Million KWH) 21,774 21,203 18,852 18,905 17,779 Residential: Average annual use per customer (KWH) 14,011 14,481 13,214 14,149 13,859 Average annual rate per KWH $.0787 $.0801 $.0799 $.0785 $.0747 Generating capability - Net MW (Year-End) 4,483 4,387 4,350 4,316 4,282 Territorial peak demand - Net MW 4,158 3,935 3,734 3,698 3,683 Regulated Gas: Customers (Year-End) 260,362 256,957 252,701 248,681 243,523 Sales, excluding transportation (Thousand Therm 1,012,890 1,002,952 945,289 893,170 877,728 Residential: Average annual use per customer (Therms) 507 521 531 639 570 Average annual rate per therm $.86 $.86 $.86 $.74 $.82 Nonregulated Gas: Retail customers (Year-End) 430,950 78,091 - - - Firm customer deliveries (Thousand Therms) 229,660 4,692 - - - Interruptible customer deliveries (Thousand Therms) 618,551 2,167,931 - - - SCE&G SELECTED FINANCIAL DATA For the Years Ended December 31, 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------- (Millions of dollars, except statistics) Statement of Income Data Operating Revenues $1,467 $1,451 $1,338 $1,345 $1,211 Operating Income 283 312 282 286 256 Other Income 12 13 9 4 9 Net Income 189 227 195 190 169 Earnings Available for Common Stock 182 219 186 185 163 Balance Sheet Data Utility Plant, Net $3,500 $3,432 $3,310 $3,197 $3,158 Total Assets 4,404 4,246 4,054 3,959 3,802 Capitalization: Common equity 1,558 1,499 1,447 1,413 1,315 Preferred Stock (Not subject to purchase or sinking funds) 106 106 106 26 26 Preferred Stock, Net (Subject to purchase or sinking funds) 11 11 12 43 46 Company - Obligated mandatorily redeemable preferred securities of the Company's Subsidiary Trust, SCE&G Trust I, holding solely $50 million, principal amount of 7.55% of Junior Subordinated Debentures of the Company, due 2027 50 50 50 - - Long-term debt, net 1,121 1,206 1,262 1,277 1,279 - ------------------------------------------------------------------------------------------------------------------- Total Capitalization $2,846 $2,872 $2,877 $2,759 $2,666 =================================================================================================================== Other Statistics Electric: Customers (Year-End) 523,581 517,472 503,930 493,346 484,381 Total sales (Million KWH) 21,746 21,204 18,853 18,907 17,781 Residential: Average annual use per customer (KWH) 14,011 14,481 13,214 14,149 13,859 Average annual rate per KWH $.0787 $.0801 $.0799 $.0785 $.0747 Generating capability - Net MW (Year-End) 3,883 3,807 3,790 3,756 3,722 Territorial peak demand - Net MW 4,158 3,935 3,734 3,698 3,683 Gas: Customers (Year-End) 260,246 256,842 252,587 248,496 242,342 Sales, excluding transportation (Thousand Therms) 414,780 405,249 381,726 387,328 357,601 Residential: Average annual use per customer (Therms) 507 521 531 639 570 Average annual rate per therm $.86 $.86 $.86 $.74 $.82 - 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SCANA CORPORATION FINANCIAL SECTION 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 the safe harbor provided by 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) changes in the utility regulatory environment, (3) changes in the economy in areas served by SCANA's subsidiaries, (4) the impact of competition from other energy suppliers, (5) the management of the Company's operations, (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 in areas served by the Company's subsidiaries, (10) performance of the telecommunications companies in which the Company has made significant investments, (11) inflation, (12) changes in environmental regulations and (13) the other risks and uncertainties described from time to time in the Company's periodic reports filed with the SEC. The Company disclaims any obligation to update any forward-looking statements. COMPETITION The electric utility industry continues a major transition that is resulting in expanded market competition and less regulation. Deregulation of electric wholesale and retail markets is creating opportunities to compete for new and existing customers and markets. As a result, profit margins and asset values of some utilities could be adversely affected. Legislative initiatives at the Federal and state levels are being considered and, if enacted, could mandate market deregulation. The pace of deregulation, future prices of electricity, and the regulatory actions which may be taken by the PSC, the NCUC, the FERC and the SEC in response to the changing environment cannot be predicted. However, the FERC, in issuing Order 888 in April 1996, accelerated competition among electric utilities by providing for open access to wholesale transmission service. Order 888 requires utilities under FERC jurisdiction that own, control or operate transmission lines to file nondiscriminatory open access tariffs that offer to others the same transmission service they provide themselves. The FERC has also permitted utilities to seek recovery of wholesale stranded costs from departing customers by direct assignment. Approximately two percent of SCE&G's electric revenues is under FERC jurisdiction for the purpose of setting rates for wholesale service. Legislation is pending in South Carolina that would deregulate the state's retail electric market and enable customers to choose their supplier of electricity. The Company is not able to predict whether the legislation will be enacted and, if it is, the conditions it will impose on utilities that currently operate in the state and future market participants. The Company is aggressively pursuing actions to position itself strategically for the transformed environment. To enhance its flexibility and responsiveness to change, one of SCANA's wholly owned subsidiaries, SCANA Energy Marketing (Energy Marketing), is aggressively marketing natural gas to residential and commercial customers in Georgia's newly deregulated natural gas market. Management believes that successfully competing in the Georgia market will provide necessary experience and potential market share for a deregulated electric industry. In addition, SCANA's electric and gas utility, SCE&G, has undertaken a variety of initiatives, including the accelerated recovery of its electric regulatory assets. SCE&G has established open access transmission tariffs and is selling bulk power to wholesale customers at market-based rates. A significant new management information system was implemented in 1998, and a new customer information and billing system was implemented in 1999. Marketing of services to commercial and industrial customers has increased significantly. SCE&G has obtained long term power supply contracts with a significant portion of its industrial customers. The Company believes that these actions as well as numerous others that have been and will be taken demonstrate its ability and commitment to succeed in the evolving operating environment. Regulated public utilities are allowed to record as assets some costs that would be expensed by other enterprises. If deregulation or other changes in the regulatory environment occur, the Company may no longer be eligible to apply this accounting treatment and may be required to eliminate such regulatory assets from its balance sheet. Although the potential effects of deregulation cannot be determined at present, discontinuation of the accounting treatment could have a material adverse effect on the Company's results of operations in the period the write-off would be recorded. It is expected that cash flows and the financial position of the Company would not be materially affected by the discontinuation of the accounting treatment. The Company reported approximately $201 million and $64 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax assets and liabilities of approximately $131 million and $48 million, respectively, on its balance sheet at December 31, 1999. The Company's generation assets are exposed to considerable financial risks 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, the Company could be required to write down its investment in these assets. The Company cannot predict whether any write-downs will be necessary and, if they are, the extent to which they would adversely affect the Company's results of operations in the period in which they would be recorded. As of December 31, 1999, the Company's net investment in fossil/hydroelectric generation and nuclear generation assets was $1,267.5 million and $602.3 million, respectively. North Carolina Gas Market On February 10, 2000 SCANA completed its acquisition of Public Service Company of North Carolina, Inc. (PSNC) in a transaction valued at approximately $900 million, including the assumption of debt. The transaction is being accounted for as a purchase. PSNC will be operated as a wholly-owned subsidiary of SCANA. As a result of the transaction, SCANA has become a registered public utility holding company under PUHCA. Georgia Retail Gas Market Energy Marketing exceeded projections for acquiring customers in Georgia's natural gas market. At December 31, 1999, Energy Marketing had approximately 431,000 customers compared to approximately 78,000 at December 31, 1998. As a result, expenses were significantly higher than expected. For the 12 months ended December 31, 1999, Energy Marketing incurred losses (net of taxes) of approximately $47.1 million. Startup costs were expensed as incurred. A significant portion of those costs came from a $50 per customer promotional sign-up offer, which expired April 15, 1999. Other significant costs were incurred to establish local offices, call centers, and billing and collection functions. The level of future revenues and expenditures is dependent on several factors that cannot be reasonably predicted. These factors include Energy Marketing's ability to retain customers and market share, the intensity of competition as it continues to develop, the weather, the margin Energy Marketing is able to achieve on gas sales and its ability to find industrial interruptible customers to purchase available capacity. Energy Marketing anticipates breaking even in Georgia for the year 2000. Proposed Interstate Pipeline On April 14, 1999, Pipeline Corporation, a wholly owned subsidiary of the Company, announced plans to develop an interstate natural gas pipeline to ensure adequate supplies to growing gas markets in South Carolina and North Carolina. Details of the proposal are being finalized. Construction of the project will require approval by the FERC and other federal and state agencies. Contingent upon development of a market in North Carolina, Pipeline Corporation plans to file its application with FERC. LIQUIDITY AND CAPITAL RESOURCES The Company's cash requirements arise primarily from SCE&G's operational needs, the Company's construction program and the need to fund the activities or investments of SCANA's nonregulated subsidiaries. The ability of SCANA's regulated subsidiaries to replace existing plant investment, as well as to expand to meet future demand for electricity and gas, will depend upon their ability to attract the necessary financial capital on reasonable terms. SCANA's regulated subsidiaries recover the costs of providing services through rates charged to customers. Rates for regulated services are generally based on historical costs. As customer growth and inflation occur and the regulated subsidiaries continue their ongoing construction programs, it may be necessary to seek increases in rates. As a result, the Company's future financial position and results of operations will be affected by the regulated subsidiaries' ability to obtain adequate and timely rate and other regulatory relief, if requested. SCANA and Westvaco each own a 50 percent interest in Cogen South LLC (Cogen). Cogen was formed to build and operate a cogeneration facility at Westvaco's Kraft Division Paper Mill in North Charleston, South Carolina. The facility began operations in March 1999. Financing for the facility of approximately $139.8 million was provided to Cogen by banks. On December 30, 1998, SCANA provided a capital contribution of approximately $15.5 million to Cogen. On September 10, 1998, the contractor in charge of construction filed suit in Circuit Court seeking approximately $52 million from Cogen, alleging that it incurred construction cost overruns relating to the facility, and that the construction contract provides for recovery of these costs. In addition to Cogen, Westvaco, SCE&G and SCANA were also named in the suit. SCANA and the other defendants believe the suit is without merit and are mounting an appropriate defense. SCANA does not believe that the resolution of this issue will have a material impact on its results of operations, cash flows or financial position. On December 2, 1999 an unsuccessful bidder for the purchase of the propane gas assets of SCANA filed suit against SCANA in Circuit Court seeking unspecified damages. The suit alleges the existence of a contract for the sale of assets to the plaintiff and various causes of action associated with that contract. The Company is confident in its position and intends to vigorously defend the lawsuit. SCANA does not believe that the resolution of this issue will have a material impact on its results of operations, cash flows or financial position. On August 7, 1996 the City of Charleston executed 30-year electric and gas franchise agreements with SCE&G. In consideration for the electric franchise agreement, SCE&G is paying the City $25 million over seven years (1996 through 2002) and has donated to the City the existing transit assets in Charleston. The $25 million is included in electric plant-in-service. In settlement of environmental claims the City may have had against SCE&G involving the Calhoun Park area, where SCE&G and its predecessor companies operated a manufactured gas plant until the 1960's, SCE&G paid the City $26 million over a four-year period (1996 through 1999). As part of the environmental settlement, SCE&G agreed to construct an 1,100 space parking garage on the Calhoun Park site and to transfer the facility to the City in exchange for a 20-year municipal bond backed by revenues from the parking garage and a mortgage on the parking garage. The total amount of the bond is not to exceed $16.9 million, the maximum expected project cost. The parking garage is currently under construction, and is scheduled for completion in the spring of the year 2000. The revised estimated primary cash requirements for 2000, excluding requirements for fuel liabilities and short-term borrowings, and the actual primary cash requirements for 1999 are as follows: 2000 1999 - ------------------------------------------------------------------------------- (Millions of Dollars) Property additions and construction expenditures, net of allowance for funds used during construction $367 $256 Nuclear fuel expenditures 31 5 Investments 73 - Maturing obligations, redemptions and sinking and purchase fund requirements 286 97 - ---------------------------------------------------------- --------------------- Total $684 $431 ============================================= ========== ===================== Approximately 22% of total cash requirements (after payment of dividends) was provided from internal sources in 1999 as compared to 45% in 1998. On February 22, 1999 the NCUC approved PSNC's application to use expansion funds to extend natural gas service into Alexander County, North Carolina and authorized disbursements from the fund of approximately $4 million. Most of Alexander County lies within PSNC's franchised service territory and does not currently have natural gas service. PSNC estimates that the project will be completed prior to April 2000 at a cost of approximately $6.2 million. SCANA has in effect a medium-term note program for the issuance from time to time of unsecured medium-term debt securities. At December 31, 1999, SCANA had registered with the SEC and available for issuance $1.0 billion under this program. The proceeds from the sales of these securities may be used to refinance bank borrowings and other privately sold indebtedness incurred in connection with the acquisition of PSNC. In addition, the proceeds may be used to fund additional business activities in nonutility subsidiaries, to reduce short-term debt incurred in connection therewith or for general corporate purposes. SCE&G's First and Refunding Mortgage Bond Indenture, dated April 1, 1945 (Old Mortgage), contains provisions prohibiting the issuance of additional bonds thereunder (Class A Bonds) unless net earnings (as therein defined) for 12 consecutive months out of the 18 months prior to the month of issuance are at least twice the annual interest requirements on all Class A Bonds to be outstanding (Bond Ratio). For the year ended December 31, 1999 the Bond Ratio was 6.01. The Old Mortgage allows the issuance of additional Class A Bonds to an additional principal amount equal to (i) 70 percent of unfunded net property additions (which unfunded net property additions totaled approximately $1,250 million at December 31, 1999), (ii) retirements of Class A Bonds (which retirement credits totaled $91.8 million at December 31, 1999), and (iii) cash on deposit with the Trustee. SCE&G has a bond indenture dated April 1, 1993 (New Mortgage) covering substantially all of its electric properties under which its future mortgage-backed debt (New Bonds) will be issued. New Bonds are issued under the New Mortgage on the basis of a like principal amount of Class A Bonds issued under the Old Mortgage which have been deposited with the Trustee of the New Mortgage (of which $715 million were available for such purpose at December 31, 1999). New Bonds will be issuable under the New Mortgage only if adjusted net earnings (as therein defined) for 12 consecutive months out of the 18 months immediately preceding the month of issuance are at least twice the annual interest requirements on all outstanding bonds (including Class A Bonds) and New Bonds to be outstanding (New Bond Ratio). For the year ended December 31, 1999 the New Bond Ratio was 5.95. The following additional financing transactions have occurred since January 1, 1999: o On March 9, 1999 SCE&G issued $100 million of First Mortgage Bonds having an annual interest rate of 6 1/8 percent and maturing on March 1, 2009. The proceeds from the sale of these bonds were used to reduce short-term debt. o On June 29, 1999 SCANA issued $150 million one-year floating rate medium-term notes maturing on July 14, 2000. The interest rate on the notes is reset monthly and is based on a one-month LIBOR plus 35 basis points. The proceeds from these notes were used to reduce short-term bank debt. o On July 15, 1999 SCANA paid at maturity all $43 million principal amount outstanding of its 7.17 percent medium-term notes. o On October 8, 1999 SCANA paid at maturity all $30 million principal amount outstanding of its 6.6 percent medium-term notes. o On November 1, 1999 SCANA's shelf registration statement filed with the SEC became effective, providing for the issuance of up to an additional $1 billion in medium-term notes. o On December 1, 1999 SCANA signed a credit agreement with banks for a maximum of $300 million for a three-year term loan, all of which was drawn on February 10, 2000 to consummate SCANA's acquisition of PSNC. o On February 8, 2000 SCANA issued $400 million of two-year floating rate notes maturing February 8, 2002. The interest rate on the notes is reset quarterly based on a three-month LIBOR plus 50 basis points. The proceeds from these privately sold notes were used to consummate SCANA's acquisition of PSNC. Without the consent of at least a majority of the total voting power of SCE&G's preferred stock, SCE&G may not issue or assume any unsecured indebtedness if, after such issue or assumption, the total principal amount of all such unsecured indebtedness would exceed 10 percent of the aggregate principal amount of all of SCE&G's secured indebtedness and capital and surplus; however, no such consent is required to enter into agreements for payment of principal, interest and premium for securities issued for pollution control purposes. Pursuant to Section 204 of the Federal Power Act, SCE&G and GENCO must obtain FERC authority to issue short-term debt. The FERC has authorized SCE&G to issue up to $250 million of unsecured promissory notes or commercial paper with maturity dates of 12 months or less, but not later than December 31, 2001. GENCO has not sought such authorization. At December 31, 1999 SCE&G had $285 million of authorized lines of credit which include a credit agreement for a maximum of $250 million to support the issuance of commercial paper. Unused lines of credit at December 31, 1999 totaled $285 million. SCE&G's commercial paper outstanding at December 31, 1999 and December 31, 1998 was $143.1 million and $125.2 million, respectively. In addition, Fuel Company has a credit agreement for a maximum of $125 million with the full amount available at December 31, 1999. The credit agreement supports the issuance of short-term commercial paper for the financing of nuclear and fossil fuels and sulfur dioxide emission allowances. Fuel Company commercial paper outstanding at December 31, 1999 was $70.2 million. This commercial paper and amounts outstanding under the revolving credit agreement, if any, are guaranteed by SCE&G. SCE&G's Restated Articles of Incorporation prohibit issuance of additional shares of preferred stock without consent of the preferred stockholders unless net earnings (as defined therein) for the 12 consecutive months immediately preceding the month of issuance are at least one and one-half times the aggregate of all interest charges and preferred stock dividend requirements (Preferred Stock Ratio). For the year ended December 31, 1999 the Preferred Stock Ratio was 1.79. PSNC has committed lines of credit with five commercial banks which vary monthly depending upon seasonal requirements and a five-year revolving line of credit with one bank. These lines of credit range from a minimum of $55 million to a winter-period maximum of $75 million. PSNC also has total uncommitted lines of credit ranging from $70 million to $100 million. On May 21, 1999 PSNC filed with the SEC a registration statement (amended on June 7, 1999) covering up to an aggregate of $150 million of senior unsecured debt securities. At September 30, 1999 $150 million remained on the shelf registration. On May 11, 1999 SCANA registered 112,202,217 shares of SCANA common stock for issuance to complete its acquisition of PSNC. On September 17, 1999 an additional 4, 000,000 shares of SCANA common stock were registered for sale under the SPSP. On September 9, 1999 an additional 3,000,000 shares of SCANA common stock were registered for sale under the Investor Plus Plan. During 1999, shares for the SPSP and the Investor Plus Plan were purchased on the open market. The Company anticipates that its 2000 cash requirements of $472 million will be met through internally generated funds (approximately 51%, after payment of dividends), and the incurrence of additional short-term and long-term indebtedness. Sales of additional equity securities may also be made. The Company expects that it has or can obtain adequate sources of financing to meet its projected cash requirements for the next 12 months and for the foreseeable future. On September 21, 1999 SCE&G announced a $180 million gas turbine generator project in Aiken County, South Carolina. Two combined-cycle turbines will burn natural gas to produce 300 megawatts of new electric generation and use exhaust heat to replace coal-fired steam that powers two existing 75 megawatt turbines at the Urquhart Generating Station. The turbine project is scheduled to be completed by June 2002. On October 15, 1999 the FERC notified SCE&G of its agreement with SCE&G's plan to reinforce Lake Murray Dam in order to maintain the lake in case of an extreme earthquake. SCE&G and FERC have been discussing possible reinforcement alternatives for the dam over the past several years as part of SCE&G's ongoing hydroelectric operating license with FERC. Costs of the alternatives being discussed range up to approximately $195 million. Although any costs incurred by SCE&G would be recoverable through electric rates, SCE&G also is exploring alternative sources of funding. The project is to be completed by the end of 2003. Environmental Matters The Clean Air Act requires electric utilities to substantially reduce emissions of sulfur dioxide and nitrogen oxide by the year 2000. These requirements are being phased in over two periods. The first phase had a compliance date of January 1, 1995 and the second, January 1, 2000. The Company's facilities did not require modifications to meet the requirements of Phase I. The Company is meeting the Phase II requirements through the burning of natural gas and/or lower sulfur coal in its generating units and the purchase and use of sulfur dioxide emission allowances. Low nitrogen oxide burners have been installed to reduce nitrogen oxide emissions to the levels required by Phase II. Air toxicity regulations for the electric generating industry are likely to be proposed in 2000. SCE&G and GENCO filed compliance plans with DHEC related to Phase II sulfur dioxide requirements in 1995 and Phase II nitrogen oxide requirements in 1999, 1998 and 1997. The Company currently estimates that air emissions control equipment will require capital expenditures of $141 million over the 2000-2004 period to retrofit existing facilities, with increased operation and maintenance costs of approximately $18 million per year. To meet compliance requirements through the year 2009, the Company anticipates total capital expenditures of approximately $146 million. The Federal Clean Water Act, as amended, provides for the imposition of effluent limitations that require various levels of treatment for each wastewater discharge. Under this Act, compliance with applicable limitations is achieved under a national permit program. Discharge permits have been issued for all and renewed for nearly all of SCE&G's and GENCO's generating units. Concurrent with renewal of these permits, the permitting agency has implemented a more rigorous program in monitoring and controlling thermal discharges and strategies for toxicity reduction in wastewater streams. The Company has been developing compliance plans for these initiatives. Amendments to the Clean Water Act proposed in Congress include several provisions which, if passed, could prove costly to SCE&G and GENCO. These include, but are not limited to, limitations to mixing zones and the implementation of technology-based standards. In 1998 DHEC promulgated regulations for the disposal of industrial solid waste as directed by the South Carolina Solid Waste Policy and Management Act of 1991. These regulations may significantly increase SCE&G's and GENCO's costs of construction and operation of existing and future ash management facilities. The Company has an environmental assessment program to identify and assess current and former operations sites that could require environmental cleanup. As site assessments are initiated, estimates are made of the expenditures, if any, deemed necessary to investigate and clean up each site. These estimates are refined as additional information becomes available; therefore, actual expenditures could differ significantly from the original estimates. Amounts estimated and accrued to date for site assessments and cleanup relate primarily to regulated operations. Such amounts are deferred and amortized with recovery provided through rates. The Company has also recovered portions of its environmental liabilities through settlements with various insurance carriers. As of December 31, 1998, the Company had recovered all amounts previously deferred for its electric operations. The Company expects to recover all deferred amounts related to its gas operations by December 2005. Deferred amounts, net of amounts recovered through rates and insurance settlements, totaled $23.7 million and $21.3 million at December 31, 1999 and 1998, respectively. The deferral includes the estimated costs associated with the matters discussed below. o In September 1992 the EPA notified SCE&G, the City of Charleston and the Charleston Housing Authority of their potential liability for the investigation and cleanup of the Calhoun Park area site in Charleston, South Carolina. This site encompasses approximately 30 acres and includes properties which were locations for industrial operations, including a wood preserving (creosote) plant, one of SCE&G's decommissioned MGPs, properties owned by the National Park Service and the City of Charleston, and private properties. The site has not been placed on the National Priorities List, but may be added in the future. The PRPs have negotiated an administrative order by consent for the conduct of a Remedial Investigation/Feasibility Study and a corresponding Scope of Work. Field work began in November 1993, and the EPA approved a Remedial Investigation Report in February 1997 and a Feasibility Study Report in June 1998. In July 1998 the EPA approved SCE&G's Removal Action Work Plan for soil excavation. SCE&G completed Phase One of the Removal Action in 1998 at a cost of approximately $1.5 million. Phase Two, which cost approximately $3.5 million, included excavation and installation of several permanent barriers to mitigate coal tar seepage. On September 30, 1998 a Record of Decision was issued which sets forth the EPA's view of the extent of each PRP's responsibility for site contamination and the level to which the site must be remediated. SCE&G estimates that the Record of Decision will result in costs of approximately $13.3 million, of which approximately $4 million remains. On January 13, 1999 the EPA issued a Unilateral Administrative Order for Remedial Design and Remedial Action directing SCE&G to design and carry out a plan of remediation for the Calhoun Park site. The Order is temporarily stayed pending further negotiations between SCE&G and the EPA. However, SCE&G submitted a Comprehensive Remedial Design Work Plan on December 17, 1999, and is proceeding with implementation pending agency approval. In October 1996 the City of Charleston and SCE&G settled all environmental claims the City may have had against SCE&G involving the Calhoun Park area for a payment of $26 million over four years (1996-1999) by SCE&G to the City. SCE&G is recovering the amount of the settlement, which does not encompass site assessment and cleanup costs, through rates in the same manner as other amounts accrued for site assessments and cleanup as discussed above. As part of the environmental settlement, SCE&G agreed to construct an 1,100 space parking garage on the Calhoun Park site and to transfer the facility to the City in exchange for a 20-year municipal bond backed by revenues from the parking garage and a mortgage on the parking garage. The total amount of the bond is not to exceed $16.9 million, the maximum expected project cost. The parking garage is currently under construction and is scheduled for completion in the spring of the year 2000. o SCE&G owns three other decommissioned MGP sites which contain residues of by-product chemicals. For the site located in Sumter, South Carolina, effective September 15, 1998, SCE&G entered into a Remedial Action Plan Contract with DHEC pursuant to which it agreed to undertake a full site investigation and remediation under the oversight of DHEC. Site investigation and characterization are proceeding according to schedule. Upon selection and successful implementation of a site remedy, DHEC will give SCE&G a Certificate of Completion, and a covenant not to sue. SCE&G is continuing to investigate the other two sites, and is monitoring the nature and extent of residual contamination. In addition, PSNC owns, or has owned, all or portions of six sites in North Carolina on which MGPs were formerly operated. Intrusive investigation (including drilling, sampling and analysis) has begun at only one site and the remaining sites have been evaluated using historical records and observations of current site conditions. These evaluations have revealed that MGP residuals are present or suspected at several of the sites. The North Carolina Department of Environment and Natural Resources has recommended that no further action be taken with respect to one site. In March and April 1994, an environmental consulting firm retained by PSNC estimated that the aggregate cost of investigating and monitoring the extent of environmental degradation and of implementing remedial procedures with respect to the remaining five sites may range from $3.7 million to $50.1 million over a 30-year period. PSNC is unable to determine the rate at which costs may be incurred over this time period. The estimated cost range has not been discounted to present value. The range includes cost of investigating and monitoring the sites at the low end of the range and investigating, monitoring and extensively remediating the sites at the high end of the range. PSNC's associated actual costs for these sites will depend on a number of factors, such as actual site conditions, third-party claims and recoveries from other PRPs. An order of the NCUC dated May 11, 1993 authorized deferral accounting for all costs associated with the investigation and remediation of MGP sites. As of September 30, 1999, PSNC has recorded a liability and associated regulatory asset at the minimum amount of the range, or $3.7 million. The NCUC concluded that it is proper and in the public interest to allow recovery of prudently incurred clean-up costs from current customers as reasonable operating expenses even though the MGP sites are not used and useful in providing gas service to current customers. However, the NCUC will not allow recovery of carrying costs on deferred amounts. Regulatory Matters On December 30, 1999 PSNC filed an application with the NCUC to extend natural gas service to Madison, Jackson and Swain Counties, North Carolina. PSNC estimates that the cost of this project will be approximately $31.4 million and had requested the use of $30 million from its expansion fund to make this project economically feasible. Pursuant to state statutes, the NCUC required PSNC to forfeit its exclusive franchises to serve six counties in western North Carolina effective January 31, 2000 because these counties were not receiving any natural gas service. Madison, Jackson and Swain Counties were included in the forfeiture order. PSNC has requested reassignment of the exclusive franchises for Madison, Jackson and Swain Counties to PSNC in its request to provide service to these counties. On September 14, 1999 the PSC approved an accelerated capital recovery plan for SCE&G's Cope Generating Station. The plan will be implemented beginning January 1, 2000 for a three-year period. The PSC approved an accelerated capital recovery methodology wherein SCE&G will increase depreciation of its Cope Generating Station in excess of amounts that would be recorded based upon currently approved depreciation rates. The amount of the accelerated depreciation will be determined by SCE&G based on the level of revenues and operating expenses, not to exceed $36 million annually without the approval of the PSC. Any unused portion of the $36 million in any given year could be carried forward for possible use in the subsequent year. The accelerated capital recovery plan will be accomplished through existing customer rates. On December 11, 1998 the PSC issued an order requiring SCE&G to reduce retail electric rates on a prospective basis. The PSC acted in response to SCE&G reporting that it earned a 13.04 percent return on common equity for its retail electric operations for the 12 months ended September 30, 1998. This return on common equity exceeded SCE&G's authorized return of 12 percent by 1.04 percent, or $22.7 million, primarily as a result of record-breaking heat experienced during the summer. The order required prospective rate reductions on a per kilowatt-hour basis, based on actual retail sales for the 12 months ended September 30, 1998.. On January 12, 1999 the PSC denied SCE&G's motion for reconsideration, ruled that no further rate action was required, and reaffirmed SCE&G's return on equity of 12 percent. The rate reductions were placed into effect with the first billing cycle of January 1999. On November 6, 1997 the NCUC issued an order permitting PSNC, on a two-year trial basis, to establish its commodity cost of gas for large commercial and industrial customers on the basis of market prices for natural gas. This procedure allows PSNC to manage its deferred gas costs balance better by ensuring that the amount paid for natural gas to serve these customers approximates the amount collected from them. PSNC has filed an application with the NCUC for authority to make this procedure permanent. The Carolina Utility Customers Association, Inc. (CUCA) has intervened in opposition of its continuance. The NCUC issued an order scheduling a hearing in February 2000 on PSNC's application, and authorized PSNC to continue to use this mechanism pending issuance of a final order sometime in 2000. While management cannot predict the outcome of PSNC's application, it does not expect the decision to have a material financial impact. PSNC will continue to establish a benchmark cost of gas for residential and commercial/small industrial customers pursuant to its existing procedures. On January 9, 1996 the PSC issued an order granting SCE&G an increase in retail electric rates which were fully implemented by January 1997. The PSC authorized a return on common equity of 12.0 percent. The PSC also approved establishment of a Storm Damage Reserve Account capped at $50 million to be collected through rates over a ten-year period. Additionally, the PSC approved accelerated recovery of a significant portion of SCE&G's electric regulatory assets (excluding deferred income tax assets) and the remaining transition obligation for postretirement benefits other than pensions, changing the amortization periods to allow recovery by the end of the year 2000. SCE&G's request to shift, for rate-making purposes, approximately $257 million of depreciation reserves from transmission and distribution assets to nuclear production assets was also approved. The Consumer Advocate and two other intervenors appealed certain issues in the order initially to the Circuit Court, which affirmed the PSC's decisions, and subsequently, to the Supreme Court. In March 1998, SCE&G, the PSC, the Consumer Advocate and one of the other intervenors reached an agreement that provided for the reversal of the shift in depreciation reserves and the dismissal of the appeal of all other issues. The PSC also authorized SCE&G to adjust depreciation rates that had been approved in the 1996 rate order for its electric transmission, distribution and nuclear production properties to eliminate the effect of the depreciation reserve shift and to retroactively apply such depreciation rates to February 1996. As a result, a one-time reduction in depreciation expense of $9.8 million was recorded in March 1998. The agreement does not affect retail electric rates. The FERC had previously rejected the transfer of depreciation reserves for rates subject to its jurisdiction. In September 1998 the Supreme Court affirmed the Circuit Court's rulings on the issues contested by the remaining intervenor. On August 8, 1990, the PSC issued an order approving changes in Pipeline Corporation's gas rate design for sales for resale service and upholding the "value-of-service" method of regulation for its direct industrial service. After appeals to the Circuit Court initiated by direct industrial customers and a subsequent appeal to the Supreme Court initiated by Pipeline Corporation, the PSC order was reinstated. The Supreme Court held that the industrial customer group's appeal was premature and failed to exhaust administrative remedies. Additionally, the Supreme Court interpreted the ratemaking statutes of South Carolina to give discretion to the PSC in selecting the methodology to be used in setting rates for natural gas service. The PSC then held another hearing and issued its Order dated December 12, 1995 maintaining the present level of the maximum markup on industrial sales ("cap"). This Order was appealed to the Circuit Court by Pipeline Corporation and the industrial customer group with several other parties intervening, including the Consumer Advocate. On October 10, 1997, the Circuit Court issued an order in favor of the Consumer Advocate and the industrial customer group, which remanded the case to the PSC to determine an overall rate of return for Pipeline Corporation and a second order which ruled against Pipeline Corporation and affirmed the PSC's decision that the cap should not be increased. Several motions and appeals were filed subsequently at the Supreme Court. The Supreme Court has dismissed the appeals of the PSC and Pipeline Corporation from the first order without prejudice until the PSC completes proceedings on remand and held Pipeline Corporation's appeal of the second order in abeyance until the PSC completes proceeding on remand. The remanded case was heard by the PSC in June 1998. The PSC set an overall rate of return on equity for Pipeline Corporation of 12.5-16.5 percent. The South Carolina Energy Users Committee (SCEUC) appealed the order to the Circuit Court. On March 26, 1999, the Circuit Court dismissed the SCEUC's appeal on the grounds that it was not timely filed. The Company's regulated business operations were impacted by the NEPA and FERC Orders No. 636 and 888. NEPA was designed to create a more competitive wholesale power supply market by creating "exempt wholesale generators" and by potentially requiring utilities owning transmission facilities to provide transmission access to wholesalers. See Competition for a discussion of FERC Order 888. Order No. 636 was intended to deregulate the markets for interstate sales of natural gas by requiring that pipelines provide transportation services that are equal in quality for all gas suppliers whether the customer purchases gas from the pipeline or another supplier. In the opinion of the Company, it continues to be able to meet successfully the challenges of these altered business climates and does not anticipate any material adverse impact on the results of operations, cash flows, financial position or business prospects. Other At December 31, 1999, SCANA Communications Holdings, Inc. (SCH), a wholly owned subsidiary of SCI, held the following investments in ITC Holding Company (ITC) and its affiliates: o Powertel, Inc. (Powertel) is a publicly traded company that owns and operates PCS systems in several major Southeastern markets. SCH owns approximately 4.9 million common shares of Powertel at a cost of approximately $72.8 million. Powertel common stock closed at $100.375 per share on December 31, 1999, resulting in a pre-tax unrealized holding gain of $417.8 million. The after-tax amount of such gain is included in "Other Comprehensive Income." In addition, SCH owns the following series of non-voting convertible preferred shares, at the approximate cost noted: 100,000 shares series B ($75.1 million), 50,000 shares series D ($22.5 million) and 50,000 shares 6.5% series E ($75.0 million). Dividends on Preferred series E shares are paid in common shares of Powertel. Preferred series B shares are convertible in March 2002 at a conversion price of $16.50 per common share or approximately 4.5 million common shares. Preferred series D shares are convertible in March 2002 at a conversion price of $12.75 per common share or approximately 1.7 million common shares. Preferred series E shares are convertible in June 2003 at a conversion price of $22.01 per common share or approximately 3.4 million common shares. The market value of the convertible preferred shares of Powertel is not readily determinable. However, as converted, the market value of the underlying common shares for the preferred shares was approximately $975.3 million at December 31, 1999, resulting in an unrecorded pre-tax holding gain of $802.7 million. o ITC^DeltaCom, Inc. (ITCD) is a fiber optic telecommunications provider. SCH owns approximately 5.1 million common shares of ITCD at a cost of approximately $42.7 million. ITCD common stock closed at $27.625 per share on December 31, 1999, resulting in a pre-tax unrealized holding gain of $98.3 million. The after-tax amount of such gain is included in "Other Comprehensive Income." In addition, SCH owns 1,480,771 shares of series A preferred stock of ITCD at a cost of approximately $11.2 million. Series A preferred shares are convertible in March 2002 into 2,961,542 shares of ITCD common stock. The market value of series A preferred stock of ITCD is not readily determinable. However, as converted, the market value of the underlying common stock for the series A preferred stock was approximately $81.8 million at December 31, 1999, resulting in an unrecorded pre-tax holding gain of $70.6 million. o Knology Holdings, Inc. (Knology) is a broad-band service provider of cable television, telephone and internet services. SCH owns 71,050 units of Knology. Each unit consists of one 11.875 percent Senior Discount Note due 2007 and one warrant entitling the holder to purchase .003734 shares of preferred stock of Knology. The cost of this investment was approximately $40 million. In addition, in November 1999, SCH exercised 753 warrants to purchase 753 series A preferred shares of Knology at a cost of $1.1 million. Immediately following this purchase, Knology preferred shares split 600 for one, resulting in SCH's ownership of 451,800 shares. The market value of this investment is not readily determinable. o ITC has an ownership interest in several Southeastern communications companies. SCH owns approximately 3.1 million common shares, 645,153 series A convertible preferred shares, and 133,664 series B convertible preferred shares of ITC. These investments cost approximately $7.1 million, $8.9 million, and $5.0 million, respectively. Series A and series B preferred shares are convertible in March 2002 into ITC common shares on a four to one basis. The market value of these investments is not readily determinable. The Company successfully completed its efforts to ensure Year 2000 readiness for all of its critical systems. As a result, the Company experienced no interruption in the services it provides to its customers during the transition to the Year 2000. Although the Company has not experienced any Year 2000 problems, there can be no guarantees that there will not be any Year 2000 problems in the future. The cost of the Company's Year 2000 efforts totaled approximately $16.3 million. On November 10, 1999 substantially all of the assets of SCANA Propane Gas, Inc., SCANA Propane Storage, Inc., and C&T Pipeline, LLC were sold for approximately $94.5 million. The resulting after-tax gain of $29.9 million was recorded in "Other Income." Proceeds from the sale were used to reduce short-term debt. On December 1, 1997, SCANA Petroleum Resources sold substantially all of its assets for $110 million. The resulting after-tax gain of $17.6 million was recorded in "Other Income." Proceeds from the sale were used during 1998 to repurchase approximately 3.7 million shares of SCANA's outstanding common stock through open market purchases and through privately negotiated transactions. All of the repurchased shares were retired, reducing the number of shares issued and outstanding. RESULTS OF OPERATIONS Earnings and Dividends Earnings per share of common stock, the percent increase (decrease) from the previous year and the rate of return earned on common equity for the years 1999 through 1997 were as follows: 1999 1998 1997 ----------------------------------------------------- ------------------------ Earnings derived from: Continuing operations $1.39 $2.07 $1.90 Non-recurring gains .34 .05 .16 ------- ------- ------- Earnings per weighted average share $1.73 $2.12 $2.06 ===== ===== ===== Return earned on common equity 8.5% 12.8% 12.3% ----------------------------------------------------- ------------------------ o 1999 Earnings derived from continuing operations decreased $.68, primarily as a result of losses from the Company's entry into the Georgia retail gas market ($.37 greater loss in 1999). In addition, electric margin decreased $.12 (see discussion at Electric Operations), gas margin decreased $.04, and expenses were higher for other operations and maintenance ($.04), depreciation and amortization ($.09) and interest expense ($.11). These decreases were partially offset by improved results from energy marketing activities ($.04, non-Georgia), the impact of fewer common shares outstanding ($.03), and other ($.02). o 1998 Earnings derived from continuing operations increased $.17, primarily as a result of increased electric margin ($.47; see discussion at Electric Operations), an increase in gas margin ($.05), the impact of fewer common shares outstanding ($.03), and lower preferred stock dividends ($.02). These increases were partially offset by increased Other operation and maintenance ($.18), expenses from the Company's entry into the Georgia retail gas market ($.08), lower margins from energy marketing activities ($.05, non-Georgia), higher interest expense ($.03), higher property taxes ($.03), higher depreciation and amortization expense ($.01), and other ($.02). Pension income recorded by the Company reduced operations expense by $17.3 million, $16.9 million and $12.2 million for the years ended December 31, 1999, 1998 and 1997, respectively. In addition, pension income increased other income by $10.5 million and $9.0 million for the years ended December 31, 1999 and 1998, respectively. The reductions to operations expense for 1998 and 1997 were substantially offset by accelerated amortizations of a significant portion of the transition obligation for postretirement benefits other than pensions and certain regulatory assets as approved by the PSC. Non-recurring gains resulted from the sale of retail propane assets ($.29) and telecommunications towers ($.05) in 1999, a retroactive change in electric depreciation rates ($.05) in 1998, and the sale of oil and natural gas production assets ($.16) in 1997. Return on common equity decreased in 1999 primarily due to decreased earnings. In addition, common equity increased in 1999 due to a $311 million unrealized gain on the Company's investments in telecommunications securities. The increase in common equity, without a proportional increase in net income, decreased the return earned on common equity by 1.6%. The Company's financial statements include AFC. AFC is a utility accounting practice whereby a portion of the cost of both equity and borrowed funds used to finance construction (which is shown on the balance sheet as construction work in progress) is capitalized. An equity portion of AFC is included in nonoperating income and a debt portion of AFC is included in interest charges (credits) as noncash items, both of which have the effect of increasing reported net income. AFC represented approximately 2.4 percent of income before income taxes in 1999, 4.4 percent in 1998 and 4.0 percent in 1997. On February 17, 1999, the Board of Directors adopted a new common stock dividend policy to bring the Company's dividend payout ratio more in line with that of growth-oriented utilities. The board's action makes the Company's indicated annual dividend rate on common stock $1.10 per share. On November 10, 1999, substantially all of the retail propane assets of the Company were sold for approximately $94.5 million. The resulting after-tax gain of $29.9 million was recorded in "Other Income." Electric Operations Electric operations sales margins for 1999, 1998 and 1997 were as follows: 1999 1998 1997 - ---------------------------------- ------------- ------------- ------------- (Millions of Dollars) Operating revenues $1,226.0 $1,219.8 $1,103.0 Less: Fuel used in generation 284.6 262.3 248.4 Purchased power 35.9 31.5 9.4 - ---------------------------------- ------------- ------------- ------------- Margin $ 905.5 $ 926.0 $ 845.2 ================================== ============= ============= ============= o 1999 The sales margin decreased primarily due to the impact of a rate reduction at SCE&G and milder weather, which was partially offset by customer growth. o 1998 The sales margin increased for 1998 primarily due to more favorable weather and customer growth. Increases (decreases) from the prior year in megawatt-hour (MWH) sales volume by classes were as follows: Classification 1999 % Change 1998 % Change - -------------------------------------------------------------------------- ----- Residential (55,207) (0.9%) 676,578 12.0% Commercial 51,212 0.9% 578,290 10.9% Industrial 316,086 5.4% 389,931 7.2% Sales for Resale (excluding interchange) 63,306 5.6% 65,367 6.2% Other (17,653) (3.3%) 29,823 5.9% - ------------------------------------------------------------------------------ - Total territorial 357,744 1.8% 1,739,989 9.7% Negotiated Market Sales Tariff 183,442 12.3% 610,784 69.1% ============================================================================== = Total 541,186 2.6% 2,350,773 12.5% ============================================================================== = o 1999 The sales volume decrease for residential was primarily due to milder weather which was partially offset by customer growth. Volumes for the remaining classes increased primarily due to customer growth. o 1998 The sales volume increases for 1998 were primarily due to more favorable weather and customer growth. Gas Distribution Gas distribution sales margins for 1999, 1998 and 1997 were as follows: 1999 1998 1997 - --------------------------------------------- ------------- ------------- (Millions of Dollars) Operating revenues $ 239.0 $ 230.4 $ 233.6 Less: Gas purchased for resale 152.6 142.4 151.9 Margin $ 86.4 $ 88.0 $ 81.7 ============================================= ============= ============= o 1999 The sales margin decreased for 1999 primarily as a result of higher gas costs. o 1998 The sales margin increased over 1997 due to renegotiation of industrial customers' contracts, lower gas prices and increased sales to electric generation facilities. Increases (decreases) from the prior year in dekatherm (DT) sales volume by classes, including transportation gas, were as follows: Classification 1999 % Change 1998 % Change - ---------------------------------- --------------- -------------------------- Residential (94,027) (0.8%) 0.0% (2,685) Commercial 404,654 3.6% 3.6% 389,468 Industrial 644,485 3.7% 1,965,506 12.8% Transportation gas (28,732) (1.4%) (25.2%) (673,795) Total 926,380 2.2% 1,678,494 4.1% ================================== =============== ========================== o 1999The sales volume increased for 1999 primarily as a result of customer expansion and customer growth. Residential volume decreased primarily due to milder weather. o 1998 The sales volume for commercial and industrial customers increased for 1998 as a result of lower gas prices and increased sales to electric generation facilities. Gas Transmission Gas transmission sales margins for 1999, 1998 and 1997 were as follows: 1999 1998 1997 - --------------------------------------------- ------------- ------------- (Millions of Dollars) Operating revenues $342.4 $329.8 $339.9 Less: Gas purchased for resale 295.1 276.7 289.3 Margin $ 47.3 $ 53.1 $ 50.6 ============================================= ============= ============= o 1999 The sales margin decreased from 1998 primarily as a result of increased competition with oil prices and a decrease in the value of released capacity on the interstate pipeline system. o 1998 The sales margin increased over 1997 primarily as a result of increased sales to electric generation facilities. Increases (decreases) from the prior year in dekatherms (DT) sales volume by classes including transportation gas were as follows: Classification 1999 % Change 1998 % Change --------------------------------------------------------- ------------ Commercial 200 0.2% 9,799 12.0% Industrial (916,235) (2.0%) 5,238,940 13.0% Transportation (179,029) (7.4%) (695,921) (22.3%) Sale for resale 2,122,252 3.8% 314,895 0.6% ========================================================= ============ Total 1,027,188 1.0% 4,867,713 4.9% ========================================================= ============ o 1999The sales volumes for sale for resale customers increased for 1999 as a result of customer growth and customer expansion on our sale for resale customers' systems. Transportation volumes decreased due to improved results from gas marketing efforts. These improved results were more than offset by increased competition with oil prices, which resulted in an overall decrease in industrial volumes. o 1998The sales volume for commercial and industrial customers increased for 1998 as a result of lower gas prices and increased sales to electric generation facilities. Transportation volumes decreased due to improved results from gas marketing efforts. Energy Marketing Energy marketing sales margins for 1999, 1998 and 1997 were as follows: 1999 1998 1997 -------------------------------------------------------------- (Millions of Dollars) Operating revenue $429.9 $568.1 $205.9 Less: Gas and electricity purchased for resale 432.1 569.8 203.3 --------------------------------------------------- ----------- Margin $(2.2) $(1.7) $ 2.6 =================================================== =========== o 1999 The sales margin decreased in 1999 primarily due to intense competition in the Georgia retail natural gas market. o 1998 The sales margin decreased for 1998 primarily due to losses on energy trading, intense competition related to Energy Marketing's entry into the Georgia retail natural gas market, and continued mild weather. Delivered volumes for 1999 totaled approximately 84,821,175 DT, which included firm customer volumes of 22,966,029 DT and interruptible customer volumes of 61,855,146 DT. Approximately 27.1 percent of total delivered volumes were for residential and commercial customers in Georgia. Total volumes decreased from 1998 primarily due to closure of the Houston wholesale trading office. Delivered volumes for 1998 totaled approximately 217,262,286 DT, which included firm customer volumes of 469,189 DT and interruptible customer volumes of 216,793,097 DT. Other Operating Expenses and Taxes Increases (decreases) in other operating expenses, including taxes, were as follows: 1999 % Change 1998 % Change - ----------------------------------------------------------------------------- (Millions of Dollars) Other operation and maintenance $6.9 2.0% $31.1 10.0% Depreciation and amortization 23.4 16.1% (8.2) (5.4%) Income taxes (25.6) (18.8%) 30.8 29.2% Other taxes 1.9 1.9% 5.7 5.9% ============================================================================ Total 6.6 0.9% $59.4 8.9% ============================================================================ o 1999 Other operation and maintenance increased primarily due to costs associated with a cogeneration facility becoming operational, costs associated with an early retirement program and other operating costs. These costs were partially offset by pension income, which in 1998 had been offset by the accelerated amortization of the electric portion of the Company's transition obligation expense for post-retirement benefits and other regulatory assets. Depreciation and amortization increased primarily due to the impact of the non-recurring adjustment to depreciation expense discussed under earnings and dividends, increased amortization due to completion of a new customer billing system, and normal increases in utility plant. Income taxes decreased primarily due to decreased operating income. Other taxes increased primarily due to increased property taxes. o 1998 Other operating and maintenance expenses increased over 1997 primarily due to increased maintenance costs for electric generating and distribution facilities, various other electric operating costs and Year 2000 testing and remediation. The decrease in depreciation and amortization expense reflects the non-recurring adjustment to depreciation expense discussed under earnings and dividends. The increase in income tax expense primarily reflects changes in operating income. The increase in other taxes primarily results from increased property taxes. Other Income o 1999Other income, net of taxes, increased approximately $9.1 million, primarily as a result of the gain on the sale of non-regulated propane assets and telecommunications towers, which was partially offset by increased losses from retail gas marketing activities. o 1998 Other income, net of taxes, decreased approximately $25.1 million, primarily as a result of the gain on the sale of Petroleum Resources recorded in 1997. In addition, lower earnings from non-regulated businesses, primarily losses from energy marketing activities, resulted from decreased gas margins, volatility in power markets related to unusually hot summer weather and startup costs in new markets. The impact of these items was partially offset by pension income recorded in 1998. Interest Expense Increases (decreases) in interest expense, excluding the debt component of AFC, were as follows: 1999 1998 - ---------------------------------------------------------------------- (Millions of Dollars) Interest on long-term debt, net $11.4 $5.4 Other interest expense 3.9 (1.8) - ----------------------------------------------- --------------------- Total $15.3 $3.6 =============================================== ===================== o 1999 Interest expense increased over 1998 as a result of increased long-term debt and increased weighted average interest rates on long-term and short-term borrowings. o 1998 Interest expense increased over 1997 as a result of the issuance of medium-term notes in 1998 to finance nonregulated activities. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK All financial instruments held by the Company described below are held for purposes other than trading. Interest rate risk - The table below provides information about the Company's financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. December 31, 1999 Expected Maturity Date ------------------------------------------------------ (Millions of Dollars) Liabilities 2000 2001 2002 2003 2001 Thereafter Total Fair Value ------------------------ --------------- ------------- Long-Term Debt: Fixed Rate ($) (1) 152.5 32.5 32.5 289.3 178.8 1,150.3 1,836.1 1,680.7 Average Fixed Interest Rate 6.85 6.85 6.17 7.50 7.33 6.20 7.05 Variable Rate ($) 150.0 150.0 150.0 Average Variable Interest Rate 6.45 December 31, 1998 Expected Maturity Date ---------------------------------------------------------- (Millions of Dollars) Liabilities 2000 2001 2002 2003 2001 Thereafter Total Fair Value ------ --------------------------------------------------- Long-Term Debt: Fixed Rate ($) 106.7 213.5 27.5 27.5 284.4 1,165.8 1,825.4 1869.2 Average Interest Rate 6.86 6.86 6.29 7.48 6.86 5.95 7.06 (1) There were no debt issuances outstanding under the December 1, 1999 credit agreement for $300 million. While a decrease in interest rates would increase the fair value of debt, it is unlikely that events which would result in a realized loss will occur. In addition, the Company has invested in a telecommunications company approximately $40 million for 11.875 percent senior discount notes due 2007. The fair value of these notes approximates cost. An increase in market interest rates would result in a decrease in fair value of these notes and a corresponding adjustment, net of tax, to other comprehensive income. Commodity price risk - The table below provides information about the Company's financial instruments that are sensitive to changes in natural gas prices. Weighted average settlement prices are per 10,000 mmbtu. December 31, 1999 Expected Maturity in 2000 Weighted Avg Contract Fair Natural Gas Derivatives: Settlement Price Amount Value - --------------------------------------------------- ------------- ------------- (Millions of Dollars) Future Contracts: Long $2.3318 $20.0 $19.8 Short $2.3290 $ 1.2 $ 1.1 SET Futures Contracts (1): Long $2.7161 $ 5.0 $ 5.1 Short $2.7461 $ 4.7 $ 4.8 December 31, 1998 Expected Maturity in 2000 Weighted Avg Contract Fair Natural Gas Derivatives: Settlement Price Amount Value - -------------------------------- ------------------ ------------- ------------- (Millions of Dollars) Future Contracts: Long $2.3850 $1.9 $1.8 Short $ - $ - $ - SET Futures Contracts (1): None December 31, 1998 Expected Maturity in 1999 Weighted Avg Contract Fair Natural Gas Derivatives: Settlement Price Amount Value - -------------------------------- ------------------ ------------- ------------- (Millions of Dollars) Future Contracts: Long $2.0032 $13.0 $12.2 Short $1.9417 $ 0.8 $ 0.8 SET Futures Contracts (1): None (1) SCANA Energy Trading, LLC (SET) is a 70% owned subsidiary of SCANA Energy Marketing, Inc. Amounts shown are at 100%. Equity price risk - Investments in telecommunications companies' marketable equity securities are carried at the lower of their cost or market value of which totaled $889.1 million, in accordance with Statement of Financial Accounting Standards No. 115. A ten percent decline in market value would result in a $88.9 million reduction in fair value and a corresponding adjustment, net of tax effect, to the related equity account for unrealized gains/losses. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA TABLE OF CONTENTS OF CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA Page Independent Auditors' Report............................................ 42 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 1999 and 1998............. 43 Consolidated Statements of Income and Retained Earnings for the years ended December 31, 1999, 1998 and 1997............... 45 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997................................... 46 Consolidated Statements of Capitalization as of December 31, 1999 and 1998...................................................... 47 Consolidated Statements of Changes in Common Equity for the years ended December 31, 1999, 1998 and 1997.............................. 49 Notes to Consolidated Financial Statements.............................. 50 Information required to be disclosed in supplemental financial statement schedules is included in the consolidated financial statements or in the notes thereto. INDEPENDENT AUDITORS' REPORT SCANA Corporation: We have audited the accompanying Consolidated Balance Sheets and Statements of Capitalization of SCANA Corporation (Company) as of December 31, 1999 and 1998 and the related Consolidated Statements of Income and Retained Earnings, Changes in Common Equity and of Cash Flows for each of the three years in the period ended December 31, 1999. Our audits also included the financial satement schedule listed in Part IV at Item 14. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1999 and 1998 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered taken as a whole, presents fairly in all material aspects the information set forth therein. s/Deloitte & Touche LLP DELOITTE & TOUCHE LLP Columbia, South Carolina February 10, 2000 SCANA Corporation CONSOLIDATED BALANCE SHEETS December 31, 1999 1998 ASSETS (Millions of Dollars) Utility Plant (Notes 1, 3 & 4): Electric $4,633 $4,406 Gas 632 604 Other 191 175 - -------------------------------------------------------------------------------- Total 5,456 5,185 Less accumulated depreciation and amortization 1,829 1,728 - -------------------------------------------------------------------------------- Total 3,627 3,457 Construction work in progress 159 251 Nuclear fuel, net of accumulated amortization 43 56 Acquisition adjustment-gas, net of accumulated amortization 22 23 - -------------------------------------------------------------------------------- Utility Plant, Net 3,851 3,787 - -------------------------------------------------------------------------------- Nonutility Property and Investments (net of accumulated depreciation)(Note 1) 999 493 - -------------------------------------------------------------------------------- Current Assets: Cash and temporary cash investments (Note 8) 116 62 Receivables 320 276 Inventories (At average cost): Fuel (Notes 3 & 4) 55 63 Materials and supplies 78 56 Prepayments 27 22 Deferred income taxes (Note 7) 16 22 - -------------------------------------------------------------------------------- Total Current Assets 612 501 - -------------------------------------------------------------------------------- Deferred Debits: Emission allowances 31 31 Environmental 24 22 Nuclear plant decommissioning fund (Note 1) 64 56 Pension asset, net (Note 1) 144 115 Other regulatory assets 177 194 Other (Notes 1 & 10) 109 82 - ------------------------------------------------------------------------------ Total Deferred Debits 549 500 - -------------------------------------------------------------------------------- Total $6,011 $5,281 ================================================================================ December 31, 1999 1998 CAPITALIZATION AND LIABILITIES (Millions of Dollars) Stockholders' Investment: Common Equity (Note 5) $2,099 $1,746 Preferred stock (Not subject to purchase or sinking funds) 106 106 - -------------------------------------------------------------------------------- Total Stockholders' Investment 2,205 1,852 Preferred Stock, net (Subject to purchase or sinking funds)(Notes 6 & 8) 11 11 SCE&G-Obligated Mandatorily Redeemable Preferred Securities of SCE&G's Subsidiary Trust, SCE&G Trust I, holding solely $50 million principal amount of the 7.55% Junior Subordinated Debentures of SCE&G, due 2027 (Note 6) 50 50 Long-Term Debt, net (Notes 3 & 8) 1,563 1,623 - ------------------------------------------------------------------------------- Total Capitalization 3,829 3,536 - -------------------------------------------------------------------------------- Current Liabilities: Short-term borrowings (Notes 4, 8 & 9) 266 195 Current portion of long-term debt (Note 3) 303 107 Accounts payable 189 219 Customer deposits 16 18 Taxes accrued 86 72 Interest accrued 29 28 Dividends declared 31 42 Other 13 13 - -------------------------------------------------------------------------------- Total Current Liabilities 933 694 - -------------------------------------------------------------------------------- Deferred Credits: Deferred income taxes (Notes 1 & 7) 805 628 Deferred investment tax credits (Notes 1 & 7) 116 108 Reserve for nuclear plant decommissioning (Note 1) 64 56 Postretirement benefits (Note 1) 98 87 Other regulatory liabilities 64 71 Other (Note 1) 102 101 - -------------------------------------------------------------------------------- Total Deferred Credits 1,249 1,051 - -------------------------------------------------------------------------------- Commitments and Contingencies (Note 10) - - - -------------------------------------------------------------------------------- Total $6,011 $5,281 ================================================================================ See Notes to Consolidated Financial Statements. SCANA Corporation CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS For the Years Ended December 31, 1999 1998 1997 - ----------------------------------------------------------------------------------------- (Millions of Dollars except per share amounts) Operating Revenues (Notes 1 & 2): Electric $1,226 $1,220 $1,103 Gas 422 411 419 Transit 2 1 1 - ------------------------------------------------------------------------------------------ Total Operating Revenues 1,650 1,632 1,523 - ------------------------------------------------------------------------------------------ Operating Expenses: Fuel used in electric generation 285 262 248 Purchased power 36 31 9 Gas purchased for resale 289 269 287 Other operation (Note 1) 258 257 239 Maintenance (Note 1) 90 84 72 Depreciation and amortization (Note 1) 168 145 153 Income taxes (Notes 1 & 7) 110 136 105 Other taxes 104 103 96 - ------------------------------------------------------------------------------------------ Total Operating Expenses 1,340 1,287 1,209 - ------------------------------------------------------------------------------------------ Operating Income 310 345 314 - ------------------------------------------------------------------------------------------ Other Income (Note 1): Other income(loss), net of income taxes (20) 5 13 Gain on sale of subsidiary assets, net of income taxes 39 - 18 Allowance for equity funds used during construction 3 8 7 - ------------------------------------------------------------------------------------------ Total Other Income 22 13 38 - ------------------------------------------------------------------------------------------ Income Before Interest Charges and Preferred Stock Dividends 332 358 352 - ------------------------------------------------------------------------------------------ Interest Charges (Credits): Interest on long-term debt, net 132 121 115 Other interest expense 14 10 12 Allowance for borrowed funds used during construction (Note 1) (4) (8) (6) - ------------------------------------------------------------------------------------------ Total Interest Charges, Net 142 123 121 - ------------------------------------------------------------------------------------------ Income Before Preferred Dividend Requirements on Mandatorily Redeemable Preferred Securities 190 235 231 Preferred Dividend Requirement of SCE&G -Obligated Mandatorily Redeemable Preferred Securities 4 4 1 - ------------------------------------------------------------------------------------------ Income Before Preferred Stock Cash Dividends of Subsidiary 186 231 230 Preferred Stock Cash Dividends of Subsidiary (At stated rates) 7 8 9 - ------------------------------------------------------------------------------------------ Net Income 179 223 221 Retained Earnings at Beginning of Year 678 617 558 Common Stock Cash Dividends Declared (Note 5) (137) (162) (162) - ------------------------------------------------------------------------------------------ Retained Earnings at End of Year $ 720 $ 678 $ 617 ========================================================================================== Net Income $ 179 $ 223 $ 221 Weighted Average Number of Common Shares Outstanding (Millions) 103.6 105.3 107.1 Earnings Per Weighted Average Share of Common Stock (Basic and Diluted) $1.73 $2.12 $2.06 ========================================================================================== See Notes to Consolidated Financial Statements. SCANA Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1999 1998 1997 - --------------------------------------------------------------------------------------------------------- (Millions of Dollars) Cash Flows From Operating Activities: Net income $179 $223 $221 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation, depletion and amortization 177 152 176 Amortization of nuclear fuel 18 20 19 Deferred income taxes, net 19 15 30 Pension asset (29) (33) (24) Postretirement benefits 11 26 24 Other regulatory assets 23 16 37 Other regulatory liabilities (7) 4 4 Allowance for funds used during construction (7) (16) (13) Over (under) collection, fuel adjustment clause (6) 1 - Changes in certain current assets and liabilities: (Increase) decrease in receivables (44) (28) 1 (Increase) decrease in inventories (14) (16) 15 Increase (decrease) in accounts payable (30) 88 (26) Increase (decrease) in taxes accrued 14 13 (12) Other, net (80) 2 (40) - ---------------------------------------------------------------------------------------------------------- Net Cash Provided From Operating Activities 224 467 412 - --------------------------------------------------------------------------------------------------------- Cash Flows From Investing Activities: Utility property additions and construction expenditures, net of AFC (238) (281) (250) (Increase) decrease in nonutility property and investments: Sale of subsidiary assets 112 - 118 Nonutility property (23) (22) (38) Investments (73) (106) (75) Net Cash Used For Investing Activities (222) (409) (245) - ---------------------------------------------------------------------------------------------------------- Cash Flows From Financing Activities: Proceeds: Issuance of SCE&G-obligated mandatorily redeemable trust preferred securities - - 49 Issuance of First Mortgage Bonds 99 - - Issuance of common stock - - 29 Issuance of notes and loans 200 249 86 Issuance of preferred stock - - 99 Repayments and repurchases: Mortgage bonds (10) (50) (15) Notes and loans (77) (96) (70) Other long-term debt (10) - (8) Preferred stock - (1) (53) Common stock - (110) - Dividend payments: Common stock (148) (163) (160) Preferred stock (7) (7) (9) Short-term borrowings, net 71 136 (86) Fuel financings, net (66) (14) 14 - --------------------------------------------------------------------------------------------------------- Net Cash Provided From (Used For) Financing Activities 52 (56) (124) - ---------------------------------------------------------------------------------------------------------- Net Increase in Cash and Temporary Cash Investments 54 2 43 Cash and Temporary Cash Investments, January 1 62 60 17 - --------------------------------------------------------------------------------------------------------- Cash and Temporary Cash Investments, December 31 $116 $ 62 $ 60 ========================================================================================================= Supplemental Cash Flow Information: Cash paid for - Interest (Includes capitalized interest of $4, $7 and $6) $142 $127 $124 - Income taxes 84 114 113 Noncash Financing Activities: Unrealized gain on securities available for sale (net of tax) 311 7 18 See Notes to Consolidated Financial Statements. SCANA Corporation CONSOLIDATED STATEMENTS OF CAPITALIZATION December 31, 1999 1998 Common Equity (Note 5): (Millions of Dollars) Common stock, without par value, authorized 150,000,000 shares; issued and outstanding, 103,572,623 shares in 1999 and 1998 $1,043 $1,043 Unrealized gain on securities available for sale 336 25 Retained earnings 720 678 - ------------------------------------------------------------------------------------------------------ Total Common Equity 2,099 55% 1,746 50% - ------------------------------------------------------------------------------------------------------------ South Carolina Electric & Gas Company: Cumulative Preferred Stock (Not subject to purchase or sinking funds): $100 Par Value - Authorized 1,200,000 shares $50 Par Value - Authorized 125,209 shares Shares Outstanding Redemption Price Series 1999 1998 $100 Par 6.52% 1,000,000 1,000,000 100.00 100 100 $50 Par 5.00% 125,209 125,209 52.50 6 6 - ------------------------------------------------------------------------------------------------------ Total Preferred Stock (Not subject to purchase or sinking funds) 106 3% 106 3% - ------------------------------------------------------------------------------------------------------------ South Carolina Electric & Gas Company: Cumulative Preferred Stock (Subject to purchase or sinking funds)(Notes 6 and 8): $100 Par Value - Authorized 1,550,000 shares; None outstanding in 1999 and 1998 $50 Par Value - Authorized 1,571,487 shares Shares Outstanding Redemption Price Series 1999 1998 4.50% 11,200 12,800 51.00 1 1 4.60%(A) 18,052 20,052 51.00 1 1 4.60%(B) 61,200 64,600 50.50 3 3 5.125% 68,000 69,000 51.00 3 3 6.00% 73,035 73,600 50.50 4 4 ------------------- Total 231,487 240,052 =================== $25 Par Value - Authorized 2,000,000 shares; None outstanding in 1999 and 1998 Total Preferred Stock (Subject to purchase or sinking funds) 12 12 Less: Current portion, including sinking fund requirements 1 1 - ------------------------------------------------------------------------------------------------------ Total Preferred Stock, Net (Subject to purchase or sinking funds) 11 11 - ------------------------------------------------------------------------------------------------------ SCE&G-Obligated Mandatorily Redeemable Preferred Securities of SCE&G's Subsidiary Trust, SCE&G Trust I, holding solely $50 million principal amount of 7.55% Junior Subordinated Debentures of SCE&G, due 2027 50 1% 50 1% - ----------------------------------------------------------------------------------------------------------- S> December 31, 1999 1998 - --------------------------------------------------------------------------------------------- Long-Term Debt (Notes 3, 4 & 8): (Millions of Dollars) SCANA Corporation: Medium-Term Notes: Year of Series Maturity 7.17% 1999 - 43 6.60% 1999 - 30 5.52% 2000 150 - 6.15% 2000 20 20 6.51% 2003 20 20 6.05% 2003 60 60 6.25% 2003 75 75 7.44% 2004 50 - 6.90% 2007 25 25 5.81% 2008 115 115 South Carolina Electric & Gas Company: First Mortgage Bonds: Year of Series Maturity 6% 2000 100 100 6 1/4% 2003 100 100 7.70% 2004 100 100 6 1/8% 2009 100 - 7 1/8% 2013 150 150 7 1/2% 2023 150 150 7 5/8% 2023 100 100 7 5/8% 2025 100 100 First and Refunding Mortgage Bonds: Year of Series Maturity 9% 2006 131 131 8 7/8% 2021 103 114 Pollution Control Facilities Revenue Bonds: Fairfield County Series 1984, due 2014 (6.50%) 57 57 Orangeburg County Series 1994, due 2024 (5.70%) 30 30 Other 17 16 Charleston Franchise Agreement due 1997-2002 11 14 Charleston Environmental Agreement - 6 South Carolina Generating Company, Inc.: Berkeley County Pollution Control Facilities Revenue Bonds, Series 1984 due 2014 (6.50%) 36 36 Note, 7.78%, due 2011 49 53 South Carolina Fuel Company, Inc. Commercial Paper - 66 South Carolina Pipeline Corporation Notes, 6.72%, due 2013 17 19 Other 3 3 - --------------------------------------------------------------------------------------------- Total Long-Term Debt 1,869 1,733 Less - Current maturities, including sinking fund requirements 303 107 - Unamortized discount 3 3 - --------------------------------------------------------------------------------------------- Total Long-Term Debt, Net 1,563 41% 1,623 46% - -------------------------------------------------------------------------------------------- Total Capitalization $3,829 100% $3,536 100% ============================================================================================ See Notes to Consolidated Financial Statements. SCANA Corporation CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY For the years Ended December 31, 1999 1998 1997 - ------------------------------------------------------------------------------------------------- (Millions of Dollars) Retained Earnings: Balance at January 1 $ 678 $ 617 $ 558 Net Income 179 $179 223 $223 221 $221 Dividends declared on common stock (137) (162) (162) ----- ------ ------ Balance at December 31 720 678 617 ------ ------ ------ Accumulated other comprehensive income: Balance at January 1 25 18 - Unrealized gains on securities, net of taxes ($165, $4 and $11 in 1999, 1998 and 1997, respectively) 311 311 7 7 18 18 ------ ----- ------ ---- ------ ----- Comprehensive income $490 $230 $239 ==== ==== ===== Balance at December 31 336 25 18 ------ ------ ------ Common Stock: Balance at January 1 1,043 1,153 1,125 Shares issued - - 28 Shares repurchased - (110) - ------ ------ ------ Balance at December 31 1,043 1,043 1,153 ------ ------ ------- Total Common Equity $2,099 $1,746 $1,788 ====== ====== ======
Accumulated other comprehensive income at December 31, 1999,1998 and 1997 was comprised of unrealized holding gains on securities, net of taxes. There were no realized gains or losses from these securities for the years ended December 31, 1999, 1998 and 1997. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: A. Organization and Principles of Consolidation SCANA Corporation (Company), a South Carolina corporation, is a public utility holding company within the meaning of the Public Utility Holding Company Act of 1935 (PUHCA) but is exempt from registration under such Act (see Note 13). The Company, through wholly owned subsidiaries, is engaged predominately in the generation and sale of electricity to wholesale and retail customers in South Carolina and in the purchase, sale and transportation of natural gas to wholesale and retail customers in South Carolina. The Company is also engaged in other energy-related businesses. The Company has investments in telecommunications companies and provides fiber optic communications in South Carolina. The accompanying Consolidated Financial Statements reflect the accounts of the Company and its wholly owned subsidiaries: Regulated utilities South Carolina Electric & Gas Company (SCE&G) South Carolina Fuel Company, Inc. (Fuel Company) South Carolina Generating Company, Inc. (GENCO) South Carolina Pipeline Corporation (Pipeline Corporation) Nonregulated businesses SCANA Energy Marketing, Inc. SCANA Communications, Inc. (SCI) ServiceCare, Inc. Primesouth, Inc. SCANA Resources, Inc. SCANA Propane Gas, Inc. (in liquidation) SCANA Propane Services, Inc. (in liquidation) SCANA Petroleum Resources, Inc. (in liquidation) SCANA Development Corporation (in liquidation) Certain investments are reported using the cost or equity method of accounting, as appropriate. Significant intercompany balances and transactions have been eliminated in consolidation except as permitted by Statement of Financial Accounting Standards No. 71 (SFAS 71), "Accounting for the Effects of Certain Types of Regulation" which provides that profits on intercompany sales to regulated affiliates are not eliminated if the sales price is reasonable and the future recovery of the sales price through the rate-making process is probable. B. Basis of Accounting The Company accounts for its regulated utility operations, assets and liabilities in accordance with the provisions of SFAS 71. The accounting standard requires cost-based rate-regulated utilities to recognize in their financial statements revenues and expenses in different time periods than do enterprises that are not rate-regulated. As a result the Company has recorded, as of December 31, 1999, approximately $201 million and $64 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax assets and liabilities of approximately $131 million and $48 million, respectively. The electric and gas regulatory assets of approximately $35 million and $34 million, respectively (excluding deferred income tax assets), are being recovered through rates and, as discussed in Note 2C, the Public Service Commission of South Carolina (PSC) has approved accelerated recovery of approximately $7 million of the electric regulatory assets. In the future, as a result of deregulation or other changes in the regulatory environment, the Company may no longer meet the criteria for continued application of SFAS 71 and could be required to write off its regulatory assets and liabilities. Such an event could have a material adverse effect on the Company's results of operations in the period the write-off would be recorded, but it is not expected that cash flows or financial position would be materially affected. C. System of Accounts The accounting records of the Company's regulated subsidiaries are maintained in accordance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission (FERC) and as adopted by the PSC. D. Utility Plant Utility plant is stated substantially at original cost. The costs of additions, renewals and betterments to utility plant, including direct labor, material and indirect charges for engineering, supervision and an allowance for funds used during construction, are added to utility plant accounts. The original cost of utility property retired or otherwise disposed of is removed from utility plant accounts and generally charged, along with the cost of removal, less salvage, to accumulated depreciation. The costs of repairs, replacements and renewals of items of property determined to be less than a unit of property are charged to maintenance expense. SCE&G, operator of the V. C. Summer Nuclear Station (Summer Station), and Santee Cooper (formerly the South Carolina Public Service Authority) are joint owners of Summer Station in the proportions of two-thirds and one-third, respectively. The parties share the operating costs and energy output of the plant in these proportions. Each party, however, provides its own financing. Plant-in-service related to SCE&G's portion of Summer Station was approximately $959.7 million and $983.3 million as of December 31, 1999 and 1998, respectively. Accumulated depreciation associated with SCE&G's share of Summer Station was approximately $365.1 million and $369.2 million as of December 31, 1999 and 1998, respectively. SCE&G's share of the direct expenses associated with operating Summer Station is included in "Other operation" and "Maintenance" expenses. E. Allowance for Funds Used During Construction AFC, a noncash item, reflects the period cost of capital devoted to plant under construction. This accounting practice results in the inclusion of, as a component of construction cost, the costs of debt and equity capital dedicated to construction investment. AFC is included in rate base investment and depreciated as a component of plant cost in establishing rates for utility services. The Company's regulated subsidiaries calculated AFC using composite rates of 8.1%, 8.7% and 9.1% for 1999, 1998 and 1997, respectively. These rates do not exceed the maximum allowable rate as calculated under FERC Order No. 561. Interest on nuclear fuel in process and sulfur dioxide emission allowances is capitalized at the actual interest amount incurred. F. Revenue Recognition Customers' meters are read and bills are rendered on a monthly cycle basis. SCE&G and Pipeline Corporation record base revenue during the accounting period in which the meters are read. Fuel costs for electric generation are collected through the fuel cost component in retail electric rates. The fuel cost component contained in electric rates is established by the PSC during annual fuel cost hearings. Any difference between actual fuel costs and that contained in the fuel cost component is deferred and included when determining the fuel cost component during the next annual fuel cost hearing. SCE&G had undercollected through the electric fuel cost component approximately $10.1 million and $3.1 million at December 31, 1999 and December 31, 1998, respectively, which are included in "Deferred Debits - Other." Customers subject to the gas cost adjustment clause are billed based on a fixed cost of gas determined by the PSC during annual gas cost recovery hearings. Any difference between actual gas costs and that contained in rates is deferred and included when establishing gas costs during the next annual gas cost recovery hearing. At December 31, 1999 and 1998 the Company had undercollected through the gas cost recovery procedure approximately $4.1 million and $5.2 million, respectively, which are included in "Deferred Debits Other." SCE&G's gas rate schedules for residential, small commercial and small industrial customers include a weather normalization adjustment, which minimizes fluctuations in gas revenues due to abnormal weather conditions. G. Depreciation and Amortization Provisions for depreciation are recorded using the straight-line method for financial reporting purposes and are based on the estimated service lives of the various classes of property. The composite weighted average depreciation rates were as follows: - ---------------------------------- -------------- --------------- 1999 1998 1997 - ---------------------------------- -------------- --------------- SCE&G 2.99% 3.02% 3.09% GENCO 2.56% 2.65% 2.63% Pipeline Corporation 2.62% 2.63% 2.62% Aggregate of Above 2.95% 2.98% 3.05% - ---------------------------------- -------------- --------------- Nuclear fuel amortization, which is included in "Fuel used in electric generation" and is recovered through the fuel cost component of SCE&G's rates, is recorded using the units-of-production method. Provisions for amortization of nuclear fuel include amounts necessary to satisfy obligations to the Department of Energy (DOE) under a contract for disposal of spent nuclear fuel. The acquisition adjustment relating to the purchase of certain gas properties in 1982 is being amortized over a 40-year period using the straight-line method. H. Nuclear Decommissioning Decommissioning of Summer Station is presently scheduled to commence when the operating license expires in the year 2022. Based on a 1991 study, the expenditures (on a before-tax basis) related to SCE&G's share of decommissioning activities are estimated, in 2022 dollars assuming a 4.5 percent annual rate of inflation, to be $545.3 million including partial reclamation costs. SCE&G is providing for its share of estimated decommissioning costs of Summer Station over the life of Summer Station. SCE&G's method of funding decommissioning costs is referred to as COMReP (Cost of Money Reduction Plan). Under this plan, funds collected through rates ($3.2 million in each of 1999 and 1998) are used to pay premiums on insurance policies on the lives of certain Company personnel. SCE&G is the beneficiary of these policies. Through these insurance contracts, SCE&G is able to take advantage of income tax benefits and accrue earnings on the fund on a tax-deferred basis. Amounts for decommissioning collected through electric rates, insurance proceeds, and interest on proceeds less expenses are transferred by SCE&G to an external trust fund in compliance with the financial assurance requirements of the Nuclear Regulatory Commission. Management intends for the fund, including earnings thereon, to provide for all eventual decommissioning expenditures on an after-tax basis. The trust's sources of decommissioning funds under the COMReP program include investment components of life insurance policy proceeds, return on investment and the cash transfers from SCE&G described above. SCE&G records its liability for decommissioning costs in deferred credits. Pursuant to the National Energy Policy Act passed by Congress in 1992 and the requirements of the DOE, SCE&G has recorded a liability for its estimated share of the DOE's decontamination and decommissioning obligation. The liability, approximately $3.2 million at December 31, 1999, has been included in "Long-Term Debt, net." SCE&G is recovering the cost associated with this liability through the fuel cost component of its rates; accordingly, this amount has been deferred and is included in "Deferred Debits - Other." I. Income Taxes Deferred tax assets and liabilities are recorded for the tax effects of all significant temporary differences between the book basis and tax basis of assets and liabilities at currently enacted tax rates. Deferred tax assets and liabilities are adjusted for changes in such rates through charges or credits to regulatory assets or liabilities if they are expected to be recovered from, or passed through to, customers of the Company's regulated subsidiaries; otherwise, they are charged or credited to income tax expense. J. Pension Expense and Other Postretirement Benefits The Company has a noncontributory defined benefit pension plan, which covers substantially all permanent employees. Benefits are based on years of accredited service and the employee's average annual base earnings received during the last three years of employment. The Company's policy has been to fund the plan to the extent permitted by the applicable Federal income tax regulations as determined by an independent actuary. In addition to pension benefits, the Company provides certain health care and life insurance benefits to active and retired employees. Retirees share in a portion of their medical care cost. The Company provides life insurance benefits to retirees at no charge. The costs of postretirement benefits other than pensions are accrued during the years the employees render the service necessary to be eligible for the applicable benefits. Additionally, to accelerate the amortization of the remaining transition obligation for postretirement benefits other than pensions, as authorized by the PSC, the Company expensed approximately $0.7 million, $15.7 million and $15.6 million for the years ended December 31, 1999, 1998 and 1997, respectively. (See Note 2C.) Disclosures required for these plans under Statement of Financial Accounting Standards No. 132, "Employer's Disclosures about Pensions and Other Postretirement Benefits" are set forth in the following tables: Components of Net Periodic Benefit Cost Other Retirement Benefits Postretirement Benefits 1999 1998 1997 1999 1998 1997 ---- ---- ---- ---- ---- ---- (Millions of Dollars) (Millions of Dollars) Service Cost $10.0 $ 8.3 $ 6.8 $3.0 $2.6 $2.5 Interest Cost 27.9 25.9 23.5 9.5 9.4 7.8 Expected return on assets (65.5) ( 59.3) (41.6) N/A N/A N/A Prior service cost amortization 1.1 1.1 1.1 0.7 0.7 0.7 Actuarial (gain) loss (8.6) (9.6) (7.0) 1.2 1.0 0.1 Transition amount amortization 0.8 0.8 0.8 1.7 19.1 18.9 Special termination benefit cost 5.5 0.0 0.0 1.0 0.0 0.0 Net periodic benefit (income) ----- ----- ---- ----- ----- ----- cost $(28.8) $(32.8) $(16.4) $17.1 $32.8 $30.0 ====== ====== ====== ===== ===== =====
Weighted-Average Assumptions as of December 31 Other Retirement Benefits Postretirement Benefits 1999 1998 1997 1999 1998 1997 ---- ---- ---- ---- ---- ---- Discount rate 8.0% 7.0% 7.5% 8.0% 7.0% 7.5% Expected return on plan assets 9.5% 9.5% 8.0% NA NA NA Rate of compensation increase 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Change in Benefit Obligation Other Retirement Benefits Postretirement Benefits 1999 1998 1999 1998 (Millions of Dollars) (Millions of Dollars) Benefit obligation, Jan. 1 $389.3 $344.3 137.0 $108.8 Service cost 10.0 8.3 3.0 2.6 Interest cost 27.9 25.9 9.5 9.4 Plan participants' contributions 0.1 0.2 0.5 0.5 Actuarial loss/(gain) (51.6) 28.3 (14.5) 23.3 Benefits paid (18.9) (17.7) (6.7) (7.6) Special termination benefit cost 5.5 0.0 1.0 0.0 ------ ------ ------ ------ Benefit obligation, Dec. 31 $362.3 $389.3 $129.8 $137.0 ====== ====== ====== ====== Change in Plan Assets Retirement Benefits 1999 1998 (Millions of Dollars) Fair value of plan assets, Jan. 1 $698.8 $632.9 Actual return on plan assets 103.0 83.5 Company contribution 0.0 0.0 Plan participants' contributions 0.1 0.1 Benefits paid (18.9) (17.7) ------ ------ Fair value of plan assets, Dec. 31 $783.0 $698.8 ====== ====== The Company does not fund postretirement benefits other than pensions. Funded Status of Plans Other Retirement Benefits Postretirement Benefits 1999 1998 1999 1998 (Millions of Dollars) (Millions of Dollars) Funded status, Dec. 31 $420.8 $309.5 $(129.8) $(137.0) Unrecognized actuarial (gain)/loss (294.0) (213.4) 18.8 34.5 Unrecognized prior service cost 11.3 12.3 4.3 5.1 Unrecognized net transition obligation 5.6 6.5 9.1 10.7 ------ ------ ------- ------- Net amount recognized in Consolidated Balance Sheets $ 43.7 $114.9 $ (97.6) $ (86.7) ====== ====== ======= ======= Health Care Trends The determination of net periodic postretirement benefit cost is based on the following assumptions: 1999 1998 1997 - -------------------------------------------------- ---------- ---------- Health care cost trend rate 8.0% 8.5% 9.0% Ultimate health care cost trend rate 5.5% 5.0% 5.5% Year achieved 2005 2005 2004 The effect of a one-percentage-point increase or decrease in the assumed health care cost trend rates on the aggregate of the service and interest cost components of net periodic postretirement health care benefit cost and the accumulated postretirement benefit obligation for health care benefits are as follows: 1% 1% Increase Decrease (Millions of Dollars) Effect on health care cost $0.2 $(0.2) Effect on postretirement obligation 2.9 (3.3) K. Debt Premium, Discount and Expense, Unamortized Loss on Reacquired Debt Long-term debt premium, discount and expense are being amortized as components of "Interest on long-term debt, net" over the terms of the respective debt issues. Gains or losses on reacquired debt that is refinanced are deferred and amortized over the term of the replacement debt. L. Environmental The Company has an environmental assessment program to identify and assess current and former operations sites that could require environmental cleanup. As site assessments are initiated, estimates are made of the amount of expenditures, if any, deemed necessary to investigate and clean up each site. These estimates are refined as additional information becomes available; therefore, actual expenditures could differ significantly from the original estimates. Amounts estimated and accrued to date for site assessments and cleanup relate primarily to regulated operations. Such amounts are deferred and amortized with recovery provided through rates. The Company has also recovered portions of its environmental liabilities through settlements with various insurance carriers. As of December 31, 1999 the Company has recovered all amounts previously deferred for its electric operations. The Company expects to recover all deferred amounts related to its gas operations by December 2005. Deferred amounts, net of amounts recovered through rates and insurance settlements, totaled $23.7 million and $21.3 million at December 31, 1999 and 1998, respectively. The deferral includes the estimated costs associated with the matters discussed in Note 10C. M. Oil and Gas On December 1, 1997 substantially all of the assets of the Company's oil and gas exploration and production subsidiary, SCANA Petroleum Resources, Inc., were sold for $110 million, resulting in an after-tax gain of $17.6 million. The Company followed the full cost method of accounting for its oil and gas operations and, accordingly, capitalized all costs it incurred in the acquisition, exploration and development of interests in oil and gas properties. In addition, the capitalized costs were subject to a "ceiling test". However, no non-cash writedowns resulted from the application of the ceiling test for the year ended December 31, 1997. N. Temporary Cash Investments The Company considers temporary cash investments having original maturities of three months or less to be cash equivalents. Temporary cash investments are generally in the form of commercial paper, certificates of deposit and repurchase agreements. O. Commodity Derivatives To minimize price risk due to market fluctuations, the Company utilizes forward contracts, futures contracts, option contracts and swap agreements to hedge certain purchases and sales of natural gas. For such transactions related to the Company's regulated operations, gains and losses on these contracts are included as a component of the related cost of gas which is subject to recovery under the fuel adjustment clause. (See Note 1F). The resulting under or over recovery of such costs is recorded in "Deferred Debits" or "Deferred Credits," respectively, on the balance sheet. Changes in the market value of contracts pertaining to nonregulated operations are deferred and included in income in the period in which the related transactions close. P. Recently Issued Accounting Standard The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." The provisions of the Statement, which will be implemented by the Company for the fiscal year beginning January 1, 2001, establish accounting and reporting standards for derivative instruments, including those imbedded in other contracts, and hedging activities. The impact that adoption of the provisions of the Statement will have on the Company's results of operations, cash flows and financial position has not been determined. Q. Reclassifications Certain amounts from prior periods have been reclassified to conform with the 1999 presentation. R. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. RATE MATTERS: A. On September 14, 1999 the PSC approved an accelerated capital recovery plan for SCE&G's Cope Generating Station. The plan was implemented beginning January 1, 2000 for a three-year period. The PSC approved an accelerated capital recovery methodology wherein SCE&G will increase depreciation of its Cope Generating Station in excess of amounts that would be recorded based upon currently approved depreciation rates. The amount of the accelerated depreciation will be determined by SCE&G based on the level of revenues and operating expenses, not to exceed $36 million annually without the approval of the PSC. Any unused portion of the $36 million in any given year could be carried forward for possible use in the subsequent year. The accelerated capital recovery plan will be accomplished through existing customer rates. B. On December 11, 1998 the PSC issued an order requiring SCE&G to reduce retail electric rates on a prospective basis. The PSC acted in response to SCE&G reporting that it earned a 13.04 percent return on common equity for its retail electric operations for the 12 months ended September 30, 1998. This return on common equity exceeded SCE&G's authorized return of 12 percent by 1.04 percent, or $22.7 million, primarily as a result of record heat experienced during the summer. The order required prospective rate reductions on a per kilowatt-hour basis, based on actual retail sales for the 12 months ended September 30, 1998. On January 12, 1999 the PSC denied SCE&G's motion for reconsideration. However, the PSC also ruled that no further rate action was required, and reaffirmed SCE&G's return on equity of 12 percent. The rate reductions were placed into effect with the first billing cycle of January 1999. C. On January 9, 1996 the PSC issued an order granting SCE&G an increase in retail electric rates which were fully implemented by January 1997. The PSC authorized a return on common equity of 12.0 percent. The PSC also approved establishment of a Storm Damage Reserve Account capped at $50 million to be collected through rates over a ten-year period. Additionally, the PSC approved accelerated recovery of a significant portion of SCE&G's electric regulatory assets (excluding deferred income tax assets) and the remaining transition obligation for postretirement benefits other than pensions, changing the amortization periods to allow recovery by the end of the year 2000. SCE&G's request to shift, for ratemaking purposes, approximately $257 million of depreciation reserves from transmission and distribution assets to nuclear production assets was also approved. The Consumer Advocate and two other intervenors appealed certain issues in the order initially to the Circuit Court, which affirmed the PSC's decisions, and, subsequently, to the Supreme Court. In March 1998 SCE&G, the PSC, the Consumer Advocate and one of the other intervenors reached an agreement that provided for the reversal of the shift in depreciation reserves and the dismissal of the appeal of all other issues. The PSC also authorized SCE&G to adjust depreciation rates that had been approved in the 1996 rate order for its electric transmission, distribution and nuclear production properties to eliminate the effect of the depreciation reserve shift and to retroactively apply such depreciation rates to February 1996. As a result, a one-time reduction in depreciation expense of $9.8 million was recorded in March 1998. The agreement does not affect retail electric rates. The FERC had previously rejected the transfer of depreciation reserves for rates subject to its jurisdiction. In September 1998 the Supreme Court affirmed the Circuit Court's rulings on the issues contested by the remaining intervenor. D. In 1994 the PSC issued an order approving SCE&G's request to recover through a billing surcharge to its gas customers the costs of environmental cleanup at the sites of former manufactured gas plants (MGPs). The billing surcharge is subject to annual review and provides for the recovery of substantially all actual and projected site assessment and cleanup costs and environmental claims settlements for SCE&G's gas operations that had previously been deferred. In October 1999, as a result of the annual review, the PSC approved SCE&G's request to maintain the billing surcharge at $.011 per therm to provide for the recovery of the remaining balance of $24.2 million. E. In September 1992 the PSC issued an order granting SCE&G a $.25 increase in transit fares from $.50 to $.75 in Columbia, South Carolina; however, the PSC also required $.40 fares for low income customers and denied SCE&G's request to reduce the number of routes and frequency of service. The new rates were placed into effect in October 1992. SCE&G appealed the PSC's order to the Circuit Court, which in May 1995 ordered the case back to the PSC for reconsideration of several issues including the low income rider program, routing changes, and the $.75 fare. The Supreme Court declined to review an appeal of the Circuit Court decision and dismissed the case. The PSC and other intervenors filed another Petition for Reconsideration, which the Supreme Court denied. The PSC and other intervenors filed another appeal to the Circuit Court which the Circuit Court denied in an order dated May 9, 1996. In this order, the Circuit Court upheld its previous orders and remanded them to the PSC. During August 1996 the PSC heard oral arguments on the orders on remand from the Circuit Court. On September 30, 1996 the PSC issued an order affirming its previous orders and denied SCE&G's request for reconsideration. SCE&G has appealed these two PSC orders to the Circuit Court where they are awaiting action. F. On August 8, 1990 the PSC issued an order approving changes in Pipeline Corporation's gas rate design for sales for resale service and upholding the "value-of-service" method of regulation for its direct industrial service. Direct industrial customers seeking "cost-of-service" based rates appealed to the Circuit Court, which reversed and remanded to the PSC its August 8, 1990 order. Pipeline Corporation appealed that decision to the Supreme Court, which on January 10, 1994 reversed the Circuit Court decision and reinstated the PSC order. Additionally, the Supreme Court interpreted the rate-making statutes of South Carolina to give discretion to the PSC in selecting the methodology to be used in setting rates for natural gas service. The PSC then held another hearing and issued its order dated December 12, 1995 maintaining the present level of the maximum markup on industrial sales ("cap"). This Order was appealed to the Circuit Court by Pipeline Corporation and the industrial customer group with several other parties intervening, including the Consumer Advocate of South Carolina. On October 10, 1997, the Circuit Court issued an order in favor of the Consumer Advocate and the industrial customer group and remanded the case to the PSC to determine an overall rate of return for Pipeline Corporation. The Circuit Court also issued a second order which ruled against Pipeline Corporation and affirmed the PSC's decision that the cap should not be increased. Several motions and appeals were filed subsequently at the Supreme Court. The Supreme Court has dismissed the appeals of the PSC and Pipeline Corporation from the first order without prejudice until the PSC completes proceedings on remand and has held Pipeline Corporation's appeal of the second order in abeyance until the PSC completes proceedings on remand. The remanded case was heard by the PSC in June 1998. The PSC set an overall rate of return on equity for Pipeline Corporation of 12.5-16.5 percent. The South Carolina Energy Users Committee (SCEUC) appealed the order to the Circuit Court. On March 26, 1999, the Circuit Court dismissed the SCEUC's appeal on the grounds that it was not timely filed. 3. LONG-TERM DEBT: The annual amounts of long-term debt maturities and sinking fund requirements for the years 2000 through 2004 are summarized as follows: ------------------- ----------------- ------------------ ----------------- Year Amount Year Amount ------------------- ----------------- ------------------ ----------------- (Millions of Dollars 2000 $302.5 2003 $298.3 2001 32.5 2004 178.8 2002 32.5 ------------------- ----------------- ------------------ ----------------- Approximately $23.6 million of the portion of long-term debt payable in 2000 may be satisfied by either deposit and cancellation of bonds issued upon the basis of property additions or bond retirement credits, or by deposit of cash with the Trustee. On August 7, 1996 the City of Charleston executed 30-year electric and gas franchise agreements with SCE&G. In consideration for the electric franchise agreement, SCE&G is paying the City $25 million over seven years (1996-2002) and has donated to the City the existing transit assets in Charleston. The $25 million is included in electric plant-in-service. In settlement of environmental claims the City may have had against SCE&G involving the Calhoun Park area, where SCE&G and its predecessor companies operated a MGP until the 1960's, SCE&G paid the City $26 million over a four-year period (1996-1999). Such amount was deferred (see Note 1L)and included in "Long-Term Debt." SCE&G has three-year revolving lines of credit totaling $75 million, in addition to other lines of credit, that provide liquidity for issuance of commercial paper. The three-year lines of credit provide back-up liquidity when commercial paper outstanding is in excess of $175 million. The long-term nature of the lines of credit allow commercial paper in excess of $175 million to be classified as long-term debt. SCE&G's commercial paper outstanding totaled $143.1 million and $125.2 million at December 31, 1999 and 1998 at weighted average interest rates of 6.63 percent and 5.32 percent, respectively. Substantially all utility plant and fuel inventories are pledged as collateral in connection with long-term debt. The Company has a credit agreement with banks totaling $300 million for a three-year term loan. The unused amount at December 31, 1999 was $300 million (see Note 13). 4. FUEL FINANCINGS: Nuclear and fossil fuel inventories and sulfur dioxide emission allowances are financed through the issuance by Fuel Company of short-term commercial paper. These short-term borrowings are supported by a three-year revolving credit agreement which expires December 19, 2000. The credit agreement provides for a maximum amount of $125 million that may be outstanding at any time. Since the credit agreement expires within one year, commercial paper amounts outstanding have been classified as short-term debt instead of the long-term classification of prior years. Commercial paper outstanding totaled $70.2 million and $66.0 million at December 31, 1999 and 1998 at weighted average interest rates of 6.44 percent and 5.45 percent, respectively. 5. COMMON EQUITY: The changes in "Common Stock," without par value, during 1999, 1998 and 1997 are summarized as follows: - ---------------------------------------------------- ------------------------ Number of Shares Millions of Dollars - ---------------------------------------------------- ------------------------ Balance December 31, 1996 106,175,273 $1,125.3 Issuance of common stock 1,145,840 27.6 - ---------------------------------------------------- ------------------------ Balance December 31, 1997 107,321,113 1,152.9 Repurchase of common stock (3,748,490) (110.0) - ---------------------------------------------------- ------------------------ Balance December 31, 1998 103,572,623 1,042.9 Changes in common stock - - - ---------------------------------------------------- ------------------------ Balance December 31, 1999 103,572,623 $1,042.9 ==================================================== ======================== The Restated Articles of Incorporation of the Company do not limit the dividends that may be payable on its common stock. However, the Restated Articles of Incorporation of SCE&G and the Indenture underlying its First and Refunding Mortgage Bonds contain provisions that, under certain circumstances, could limit the payment of cash dividends on its common stock. In addition, with respect to hydroelectric projects, the Federal Power Act requires the appropriation of a portion of certain earnings therefrom. At December 31, 1999 approximately $29.7 million of retained earnings were restricted by this requirement as to payment of cash dividends on SCE&G's common stock. Cash dividends on common stock were declared during 1999, 1998 and 1997at an annual rate per share of $1.32, $1.54 and $1.51, respectively. 6. PREFERRED STOCK: The call premium of the respective series of preferred stock in no case exceeds the amount of the annual dividend. Retirements under sinking fund requirements are at par values. The aggregate annual amount of purchase fund or sinking fund requirements for preferred stock for the years 2000 through 2004 is $2.8 million. The changes in "Total Preferred Stock (Subject to purchase or sinking funds)" during 1999, 1998 and 1997 are summarized as follows: - ---------------------------------------------------- ----------------------- Number of Shares Millions of Dollars - ---------------------------------------------------- ----------------------- Balance December 31, 1996 706,102 $ 45.4 Shares Redeemed: $100 par value (202,812) (20.3) $50 par value (252,196) (12.6) - ---------------------------------------------------- ----------------------- Balance December 31, 1997 251,094 12.5 Shares Redeemed: $50 par value (11,042) (0.5) - ---------------------------------------------------- ----------------------- Balance December 31, 1998 240,052 12.0 Shares Redeemed: $50 par value (8,565) (0.4) - ---------------------------------------------------- ----------------------- Balance December 31, 1999 231,487 $ 11.6 ==================================================== ======================= On October 28, 1997 SCE&G Trust I (the "Trust"), a wholly owned subsidiary of SCE&G, issued $50 million (2,000,000 shares) of 7.55 percent Trust Preferred Securities, Series A (the "Preferred Securities"). SCE&G owns all of the Common Securities of the Trust (the "Common Securities"). The Preferred Securities and the Common Securities (the "Trust Securities") represent undivided beneficial ownership interests in the assets of the Trust. The Trust exists for the sole purpose of issuing the Trust Securities and using the proceeds thereof to purchase from SCE&G its 7.55 percent Junior Subordinated Debentures due September 30, 2027. The sole asset of the Trust is $50.0 million of Junior Subordinated Debentures of SCE&G. Accordingly, no financial statements of the Trust are presented. SCE&G's obligations under the Guarantee Agreement entered into in connection with the Preferred Securities, when taken together with SCE&G's obligation to make interest and other payments on the Junior Subordinated Debentures issued to the Trust and SCE&G's obligations under the Indenture pursuant to which the Junior Subordinated Debentures were issued, provides a full and unconditional guarantee by SCE&G of the Trust's obligations under the Preferred Securities. Proceeds were used to redeem preferred stock of SCE&G. The preferred securities of the Trust are redeemable only in conjunction with the redemption of the related 7.55 percent Junior Subordinated Debentures. The Junior Subordinated Debentures will mature on September 30, 2027 and may be redeemed, in whole or in part, at any time on or after September 30, 2002 or upon the occurrence of a Tax Event. A Tax Event occurs if an opinion is received from counsel experienced in such matters that there is more than an insubstantial risk that: (1) the Trust is or will be subject to Federal income tax, with respect to income received or accrued on the Junior Subordinated Debentures, (2) interest payable by SCE&G on the Junior Subordinated Debentures will not be deductible, in whole or in part, by SCE&G for Federal income tax purposes, or (3) the Trust will be subject to more than a de minimis amount of other taxes, duties, or other governmental charges. Upon the redemption of the Junior Subordinated Debentures, payment will simultaneously be applied to redeem Preferred Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Junior Subordinated Debentures. The Preferred Securities are redeemable at $25 per preferred security plus accrued distributions. 7. INCOME TAXES: Total income tax expense for 1999, 1998 and 1997 is as follows: - ----------------------------------------------- ----------------- -------------- 1999 1998 1997 - ----------------------------------------------- ----------------- -------------- - -------------------------------------------------------------------------------- (Millions of Dollars) Current taxes: Federal $ 94.5 $114.8 $101.3 State 0.6 2.2 (5.4) - ----------------------------------------------- ----------------- -------------- - ----------------------------------------------- ----------------- -------------- Total current taxes 95.1 117.0 95.9 - ----------------------------------------------- ----------------- -------------- - ----------------------------------------------- ----------------- -------------- Deferred taxes, net: Federal 6.1 2.3 3.5 State 1.5 2.0 0.3 - ----------------------------------------------- ----------------- -------------- - ----------------------------------------------- ----------------- -------------- Total deferred taxes 7.6 4.3 3.8 - ----------------------------------------------- ----------------- -------------- - ----------------------------------------------- ----------------- -------------- Investment tax credits: Deferred - State 13.4 14.3 19.0 Amortization of amounts deferred - State (1.2) (0.9) (1.5) Amortization of amounts deferred - Federal (3.6) (3.6) (3.6) - ---------------------------------------------------------------- --------------- - ---------------------------------------------------------------- --------------- Total investment tax credits 8.6 9.8 13.6 - ---------------------------------------------------------------- --------------- ================================================================ =============== Total income tax expense $111.3 $131.1 $113.6 ================================================================ =============== The difference in total income tax expense and the amount calculated from the application of the statutory Federal income tax rate (35% for 1999, 1998 and 1997) to pre-tax income is reconciled as follows: 1999 1998 1997 (Millions of Dollars) Net income $179.0 $223.4 $220.7 Total income tax expense: Charged to operating expense 109.9 136.2 105.4 Charged (credited) to other items 1.4 (5.1) 8.2 Preferred stock dividends 7.4 7.5 9.2 ===================================================== ========================== Total pre-tax income $297.7 $362.0 $343.5 ===================================================== ========================== Income taxes on above at statutory Federal income tax rate $104.2 $126.7 $120.2 Increases (decreases) attributed to: State income taxes (less Federal income tax effect) 9.3 11.4 8.1 Deferred income tax reversal at higher than statutory rates (3.6) (3.7) (4.2) Amortization of Federal investment tax credits (3.6) (3.6) (3.6) Allowance for equity funds used during construction (2.8) (1.1) (2.5) Non-deductible book basis for assets sold 3.5 - - Other differences, net 2.7 3.0 (4.4) ================================================= =============== ============== Total income tax expense $111.3 $131.1 $113.6 ================================================= =============== ============== The tax effects of significant temporary differences comprising the Company's net deferred tax liability of $789.2 million at December 31, 1999 and $606.2 million at December 31, 1998, (see Note 1I), are as follows: 1999 1998 - ----------------------------------------------------------- ------------------ (Millions of Dollars) Deferred tax assets: Unamortized investment tax credits $ 62.8 $ 66.9 Cycle billing 15.5 20.6 Early retirement programs 14.8 13.0 Deferred compensation 8.8 7.4 Other postretirement benefits 36.6 32.9 Other 19.0 23.7 - ----------------------------------------------------------- ------------------ Total deferred tax assets 157.5 164.5 - ----------------------------------------------------------- ------------------ Deferred tax liabilities: Property, plant and equipment 665.4 658.8 Pension expense 50.7 39.2 Research and experimentation 27.3 32.5 Reacquired debt 7.6 7.5 Investments in equity securities 184.7 20.5 Other 11.0 12.2 - ----------------------------------------------------------- ------------------ Total deferred tax liabilities 946.7 770.7 - ----------------------------------------------------------- ------------------ Net deferred tax liability $789.2 $606.2 =========================================================== ================== The Internal Revenue Service has examined and closed consolidated Federal income tax returns of the Company through 1995, and is currently examining the Company's Federal returns for 1996 and 1997. The Company does not anticipate that any adjustments which might result from these examinations will have a significant impact on the results of operations, cash flows or financial position of the Company. 8. FINANCIAL INSTRUMENTS: The carrying amounts and estimated fair values of the Company's financial instruments at December 31, 1999 and 1998 are as follows: - -------------------------------------------------------------------------------- 1999 1998 - -------------------------------------------------------------------------------- Estimated Estimated Carrying Fair Carrying Fair Amount Value Amount Value - -------------------------------------------------------------------------------- (Millions of Dollars Assets: Cash and temporary cash investments $116.0 $116.0 $ 62.0 $ 62.0 Investments 941.8 1,952.4 409.7 464.7 Liabilities: Short-term borrowings 266.5 266.5 194.4 194.4 Long-term debt 1,865.8 1,830.7 1,729.7 1,869.2 Preferred stock (subject to purchase or sinking funds) 11.6 12.0 11.3 8.5 The information presented herein is based on pertinent information available to the Company as of December 31, 1999 and 1998. Although the Company is not aware of any factors that would significantly affect the estimated fair value amounts, such financial instruments have not been comprehensively revalued since December 31, 1999, and the current estimated fair value may differ significantly from the estimated fair value at that date. The following methods and assumptions were used to estimate the fair value of the above classes of financial instruments: o Cash and temporary cash investments, including commercial paper, repurchase agreements, treasury bills and notes, are valued at their carrying amount. o Fair values of investments and long-term debt are based on quoted market prices of the instruments or similar instruments, or for those instruments for which there are no quoted market prices available, fair values are based on net present value calculations. Settlement of long-term debt may not be possible or may not be a prudent management decision. o Short-term borrowings are valued at their carrying amount. o The fair value of preferred stock (subject to purchase or sinking funds) is estimated on the basis of market prices. o Potential taxes and other expenses that would be incurred in an actual sale or settlement have not been taken into consideration. At December 31, 1999, SCANA Communications Holdings, Inc. (SCH), a wholly owned subsidiary of SCI, held the following investments in ITC Holding Company (ITC) and its affiliates: o Powertel, Inc. (Powertel) is a publicly traded company that owns and operates PCS systems in several major Southeastern markets. SCH owns approximately 4.9 million common shares of Powertel at a cost of approximately $72.8 million. Powertel common stock closed at $100.375 per share on December 31, 1999, resulting in a pre-tax unrealized holding gain of $417.8 million. The after-tax amount of such gain is included in "Other Comprehensive Income." In addition, SCH owns the following series of non-voting convertible preferred shares, at the approximate cost noted: 100,000 shares series B ($75.1 million), 50,000 shares series D ($22.5 million) and 50,000 shares 6.5 percent series E ($75.0 million). Dividends on Preferred series E shares are paid in common shares of Powertel. Preferred series B shares are convertible in March 2002 at a conversion price of $16.50 per common share or approximately 4.5 million common shares. Preferred series D shares are convertible in March 2002 at a conversion price of $12.75 per common share or approximately 1.7 million common shares. Preferred series E shares are convertible in June 2003 at a conversion price of $22.01 per common share or approximately 3.4 million common shares. The market value of the convertible preferred shares of Powertel is not readily determinable. However, as converted , the market value of the underlying common shares for the preferred shares was approximately $975.3 million at December 31, 1999, resulting in an unrecorded pre-tax holding gain of $802.7 million. o ITC^DeltaCom, Inc. (ITCD) is a fiber optic telecommunications provider. SCH owns approximately 5.1 million common shares of ITCD at a cost of approximately $42.7 million. ITCD common stock closed at $27.625 per share on December 31, 1999, resulting in a pre-tax unrealized holding gain of $98.3 million. The after-tax amount of such gain is included in "Other Comprehensive Income." In addition, SCH owns 1,480,771 shares of series A preferred stock of ITCD at a cost of approximately $11.2 million. Series A preferred shares are convertible in March 2002 into 2,961,542 shares of ITCD common stock. The market value of series A preferred stock of ITCD is not readily determinable. However, as converted, the market value of the underlying common stock for the series A preferred stock was approximately $81.8 million at December 31, 1999, resulting in an unrecorded pre-tax holding gain of $70.6 million. o Knology Holdings, Inc. (Knology) is a broad-band service provider of cable television, telephone and internet services. SCH owns 71,050 units of Knology. Each unit consists of one 11.875% Senior Discount Note due 2007 and one warrant entitling the holder to purchase .003734 shares of preferred stock of Knology. The cost of this investment was approximately $40 million. In November 1999, SCH exercised 753 warrants to purchase 753 series A preferred shares of Knology at a cost of $1.1 million. Immediately following this purchase, Knology preferred shares split 600 for one, resulting in SCH's ownership of 451,800 shares. The market value of this investment is not readily determinable. o ITC has an ownership interest in several Southeastern communications companies. SCH owns approximately 3.1 million common shares, 645,153 series A convertible preferred shares, and 133,664 series B convertible preferred shares of ITC. These investments cost approximately $7.1 million, $8.9 million, and $5.0 million, respectively. Series A and series B preferred shares are convertible in March 2002 into ITC common shares on a four to one basis. The market value of these investments is not readily determinable. On November 10, 1999 substantially all of the assets of SCANA Propane Gas, Inc., SCANA Propane Storage, Inc., and C&T Pipeline, LLC (a wholly owned subsidiary of Pipeline Corporation) were sold for approximately $94.5 million. The resulting after-tax gain of $29.9 million was recorded in "Other Income." Proceeds from the sale were used to reduce short-term debt. 9. SHORT-TERM BORROWINGS: The Company pays fees to banks as compensation for its committed lines of credit. Commercial paper borrowings are for 270 days or less. Details of lines of credit (including uncommitted lines of credit) and short-term borrowings, excluding amounts classified as long-term (Note 3), at December 31, 1999 and 1998 and for the years then ended are as follows: - ------------------------------------------------------------ --------------- 1999 1998 - ------------------------------------------------------------ --------------- (Millions of Dollars) Authorize lines of credit at year-end $558.3 $513.0 Unused lines of credit at year-end $505.0 $443.8 Short-term borrowings outstanding at year-end: Bank loans $ 53.2 $ 69.2 Weighted average interest rate 7.80% 6.66% Commercial paper 213.3 $125.2 Weighted average interest rate 6.63% 5.32% - ------------------------------------------------------------ --------------- 10. COMMITMENTS AND CONTINGENCIES: A. Lake Murray Dam Reinforcement On October 15, 1999 the FERC notified SCE&G of its agreement with SCE&G's plan to reinforce Lake Murray Dam in order to maintain the lake in case of an extreme earthquake. SCE&G and FERC have been discussing possible reinforcement alternatives for the dam over the past several years as part of SCE&G's ongoing hydroelectric operating license with FERC. Costs of the alternatives being discussed range up to approximately $195 million. Although any costs incurred by SCE&G would be recoverable through electric rates, SCE&G also is exploring alternative sources of funding. The project is to be completed by the end of 2003. B. Nuclear Insurance The Price-Anderson Indemnification Act, which deals with public liability for a nuclear incident, currently establishes the liability limit for third-party claims associated with any nuclear incident at $9.5 billion. Each reactor licensee is currently liable for up to $88.1 million per reactor owned for each nuclear incident occurring at any reactor in the United States, provided that not more than $10 million of the liability per reactor would be assessed per year. SCE&G's maximum assessment, based on its two-thirds ownership of Summer Station, would be approximately $58.7 million per incident, but not more than $6.7 million per year. SCE&G currently maintains policies (for itself and on behalf of Santee Cooper) with Nuclear Electric Insurance Limited (NEIL) and American Nuclear Insurers (ANI) providing combined property and decontamination insurance coverage of $2.0 billion for any losses at Summer Station. SCE&G pays annual premiums and, in addition, could be assessed a retroactive premium not to exceed five times its annual premium in the event of property damage loss to any nuclear generating facility covered under the NEIL program. Based on the current annual premium, this retroactive premium assessment would not exceed $3.3 million. To the extent that insurable claims for property damage, decontamination, repair and replacement and other costs and expenses arising from a nuclear incident at Summer Station exceed the policy limits of insurance, or to the extent such insurance becomes unavailable in the future, and to the extent that SCE&G's rates would not recover the cost of any purchased replacement power, SCE&G will retain the risk of loss as a self-insurer. SCE&G has no reason to anticipate a serious nuclear incident at Summer Station. If such an incident were to occur, it could have a material adverse impact on the Company's results of operations, cash flows and financial position. C. Environmental In September 1992 the Environmental Protection Agency (EPA) notified SCE&G, the City of Charleston and the Charleston Housing Authority of their potential liability for the investigation and cleanup of the Calhoun Park area site in Charleston, South Carolina. This site encompasses approximately 30 acres and includes properties which were locations for industrial operations, including a wood preserving (creosote) plant, one of SCE&G's decommissioned MGPs, properties owned by the National Park Service and the City of Charleston, and private properties. The site has not been placed on the National Priorities List, but may be added in the future. The Potentially Responsible Parties (PRPs) have negotiated an administrative order by consent for the conduct of a Remedial Investigation/Feasibility Study and a corresponding Scope of Work. Field work began in November 1993, and the EPA approved a Remedial Investigation Report in February 1997 and a Feasibility Study Report in June 1998. In July 1998 the EPA approved SCE&G's Removal Action Work Plan for soil excavation. SCE&G completed Phase One of the Removal Action in 1998 at a cost of approximately $1.5 million. Phase Two, which cost approximately $3.5 million, included excavation and installation of several permanent barriers to mitigate coal tar seepage. On September 30, 1998 a Record of Decision was issued which sets forth the EPA's view of the extent of each PRP's responsibility for site contamination and the level to which the site must be remediated. On January 13, 1999 the EPA issued a Unilateral Administrative Order for Remedial Design and Remedial Action directing SCE&G to design and carry out a plan of remediation for the Calhoun Park site. The Order is temporarily stayed pending further negotiations between SCE&G and the EPA. In October 1996 the City of Charleston and SCE&G settled all environmental claims the City may have had against SCE&G involving the Calhoun Park area for a payment of $26 million over four years (1996-1999) by SCE&G to the City. SCE&G is recovering the amount of the settlement, which does not encompass site assessment and cleanup costs, through rates in the same manner as other amounts accrued for site assessments and cleanup. As part of the environmental settlement, SCE&G agreed to construct an 1,100 space parking garage on the Calhoun Park site and to transfer the facility to the City in exchange for a 20-year municipal bond backed by revenues from the parking garage and a mortgage on the parking garage. The total amount of the bond is not to exceed $16.9 million, the maximum expected project cost. The parking garage is currently under construction, and is scheduled for completion in the spring of 2000. SCE&G owns three other decommissioned MGP sites which contain residues of by-product chemicals. For the site located in Sumter, South Carolina, effective September 15, 1998, SCE&G entered into a Remedial Action Plan Contract with the South Carolina Department of Health and Environmental Control (DHEC) pursuant to which it agreed to undertake a full site investigation and remediation under the oversight of DHEC. Site investigation and characterization are proceeding according to schedule. Upon selection and successful implementation of a site remedy, DHEC will give SCE&G a Certificate of Completion, and a covenant not to sue. SCE&G is continuing to investigate the other two sites, and is monitoring the nature and extent of residual contamination. D. Franchise Agreement See Note 3 for a discussion of the electric franchise agreement between SCE&G and the City of Charleston. E. Claims and Litigation The Company is engaged in various claims and litigation incidental to its business operations which management anticipates will be resolved without material loss to the Company. No estimate of the range of loss from these matters can be currently determined. The Company and Westvaco each own a 50 percent interest in Cogen South LLC (Cogen). Cogen was formed to build and operate a cogeneration facility at Westvaco's Kraft Division Paper Mill in North Charleston, South Carolina. The facility began operations in March 1999. Financing for the facility of approximately $139.8 million was provided to Cogen by banks. On September 10, 1998 the contractor in charge of construction filed suit in South Carolina Circuit Court seeking approximately $52 million from Cogen, alleging that construction cost overruns relating to the facility were incurred and that the construction contract provides for recovery of these costs. In addition to Cogen, Westvaco, SCE&G and the Company are also named in the suit. The Company and the other defendants believe the suit is without merit and are mounting an appropriate defense. The Company does not believe that the resolution of this issue will have a material impact on its results of operations, cash flows or financial position. On December 2, 1999 an unsuccessful bidder for the purchase of the propane gas assets of SCANA filed suit against SCANA in Circuit Court seeking unspecified damages. The suit alleges the existence of a contract for the sale of assets to the plaintiff and various causes of action associated with that contract. The Company is confident in its position and intends to vigorously defend the lawsuit. The Company does not believe that the resolution of this issue will have a material impact on its results of operations, cash flows or financial position. 11. SEGMENT OF BUSINESS INFORMATION: The Company's reportable segments, based on combined revenues from external and internal sources, are Electric Operations, Gas Distribution, Gas Transmission and Energy Marketing. Electric Operations is comprised of the electric portion of SCE&G, GENCO and Fuel Company and is primarily engaged in the generation, transmission and distribution of electricity. SCE&G's electric service territory extends into 24 counties covering more than 15,000 square miles in the central, southern and southwestern portions of South Carolina. Sales of electricity to industrial, commercial and residential customers are regulated by the PSC. SCE&G is also regulated by the FERC. GENCO owns and operates the Williams Station generating facility and sells all of its electric generation to SCE&G. GENCO is regulated by the FERC. Fuel Company acquires, owns and provides financing for the fuel and emission allowances required for the operation of SCE&G and GENCO generation facilities. Gas Distribution, comprised of SCE&G's local distribution operations, is engaged in the purchase and sale, primarily at retail, of natural gas. These operations extend to 30 counties in South Carolina covering approximately 21,000 square miles. Gas Transmission is comprised of Pipeline Corporation, which is engaged in the purchase, transmission and sale of natural gas on a wholesale basis to distribution companies (including SCE&G), and directly to industrial customers in 40 counties throughout South Carolina. Pipeline Corporation also owns LNG liquefaction and storage facilities. Both of these segments are regulated by the PSC. Energy Marketing markets electricity, natural gas and other light hydrocarbons, primarily in the Southeast. Energy Marketing, doing business as SCANA Energy, also markets natural gas in Georgia's deregulated natural gas market. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company records intersegment sales and transfers of electricity and gas based on rates established by the appropriate regulatory authority. Non-regulated sales and transfers are recorded at current market prices. The Company's regulated reportable segments share a similar regulatory environment and, in some cases, overlapping service areas. However, Electric Operations' product differs from the other segments, as does its generation process and method of distribution. The gas segments differ from each other primarily based on the class of customers each serves and the marketing strategies resulting from those differences. Energy Marketing is a non-regulated segment. Disclosure of Reportable Segments (Millions of Dollars) - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- Electric Gas Gas Energy All Adjustments/ Consolidated 1999 Operations Distribution Transmission Marketing Other Eliminations Total - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- External Customer Revenue $1,226 $234 $188 $431 $ 75 $ (504) $ 1,650 Intersegment Revenue 308 5 154 11 (478) - - Operating Income (Loss 288 17 14 (5) 310 - (4) Interest Expense 12 n/a 4 23 98 142 5 Depreciation & Amortization 148 13 7 13 (14) 168 1 Income Tax Expense/(Benefit) 1 n/a 7 (26) 21 107 110 Net Income 6 n/a 14 (49) 22 186 179 Segment Assets 4,751 399 253 144 1,269 (805) 6,011 Expenditures for Assets 201 19 8 30 (1) 261 4 Deferred Tax Assets 6 n/a 3 1 16 2 4 - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- Electric Gas Gas Energy All Adjustments/ Consolidated 1998 Operations Distribution Transmission Marketing Other Eliminations Total - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- External Customer Revenue $1,220 $226 $ 185 $568 $ 69 $(636) $1,632 Intersegment Revenue 286 5 145 - 8 (444) - Operating Income (Loss) 319 21 20 - (5) (10) 345 Interest Expense 11 n/a 4 - 19 89 123 Depreciation & Amortization 126 12 7 - 11 (11) 145 Income Tax Expense/(Benefit) 1 n/a 8 (8) (2) 137 136 Net Income 6 n/a 16 (14) (4) 219 223 Segment Assets 4,600 381 239 73 764 (776) 5,281 Expenditures for Assets 205 19 11 4 56 8 303 Deferred Tax Assets 5 n/a 3 - 9 5 22 - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- Electric Gas Gas Energy All Adjustments/ Consolidated 1997 Operations Distribution Transmission Marketing Other Eliminations Total - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- External Customer Revenue $1,103 $ 231 $188 $207 $ 88 $ (294) $ 1,523 Intersegment Revenue 124 3 152 2 50 (331) - Operating Income (Loss) 280 22 21 - (4) (5) 314 Interest Expense 12 n/a 4 - 14 91 121 Depreciation & Amortization 135 11 6 1 28 (28) 153 Income Tax Expense/(Benefit) 1 n/a 7 - 9 88 105 Net Income 5 n/a 18 (1) 19 180 221 Segment Assets 4,417 364 243 40 614 (746) 4,932 Expenditures for Assets 189 15 18 - 70 (4) 288 Deferred Tax Assets 6 n/a 5 - (1) 15 25 - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- ---------------
Revenues and assets from segments below the quantitative thresholds are attributable to SCE&G's transit operations, which are regulated by the PSC, and to nine other wholly owned subsidiaries of the Company. These subsidiaries conduct non-regulated operations in the electric, natural gas and telecommunications industries. None of these subsidiaries met any of the quantitative thresholds for determining reportable segments in 1999, 1998 or 1997. Significant non-cash activities included the Charleston electric franchise agreement and the Charleston environmental agreement related to a MGP site. Management uses operating income to measure segment profitability for regulated operations. For non-regulated operations, management uses net income for this purpose. Accordingly, SCE&G does not allocate interest charges or income tax expense/(benefit) to the Electric Operations or Gas Distribution segments. Similarly, management evaluates utility plant for segments attributable to SCE&G and total assets for SCE&G as a whole, as well as for other operating segments. Therefore, SCE&G does not allocate accumulated depreciation, common and non-utility plant, or deferred tax assets to reportable segments. However, GENCO does have interest charges, income taxes and deferred tax assets which are included in Electric Operations. Interest income is not reported by segment and is not material. The Consolidated Financial Statements report operating revenues, comprised of the reportable segments, except Energy Marketing, and the non-reportable transit operations segment. Energy Marketing's revenues and revenues from other non-reportable segments are included in Other Income. Therefore, the adjustments to total revenue remove revenues from non-regulated segments. Adjustments to Net Income consist of SCE&G's unallocated net income. Adjustments to assets consist of various reclassifications made for external reporting purposes. Segment assets include utility plant only (excluding accumulated depreciation) for Electric Operations, Gas Distribution and Transit Operations, and all assets for Gas Transmission and the remaining non-reportable segments. As a result, unallocated assets include accumulated depreciation, offset in part by common, non-utility and non-regulated plant for SCANA and SCE&G, and by non-fixed assets for Electric Operations, Gas Distribution and Transit Operations. Adjustments to Interest Charges, Income Tax Expense/(Benefit) and Deferred Tax Assets include primarily the totals from SCANA or SCE&G that are not allocated to the segments. Interest Charges is also adjusted to eliminate inter-affiliate charges. Adjustments to depreciation and amortization consist of non-regulated segment expenses, which are not included in the depreciation and amortization reported on a consolidated basis. Deferred Tax Assets are also adjusted to remove the non-current portion of those assets. 12. QUARTERLY FINANCIAL DATA (UNAUDITED): 1999 - ----------------------------------------------------------------------- ------- First Second Third Fourth Quarter Quarter Quarter Quarter Annual - --------------------------------------------- -------------- ------------------ (Millions of Dollars, except per share amounts) Total operating revenues $397 $375 $480 $398 $1,650 Operating income 78 65 109 58 310 Net income 37 24 67 51 179 Earnings per weighted average share of common stock as reported .36 .23 .65 .49 1.73 - --------------------------------------------- ------------------ --------------- 1998 - -------------------------------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Annual - ----------------------------------------------------- -------------- ----------- (Millions of Dollars, except per share amounts) Total operating revenues $406 $387 $474 $365 $1,632 Operating income 91 74 120 60 345 Net income 64 42 86 31 223 Earnings per weighted average share of common stock as reported .60 .40 .82 .30 2.12 - -------------------------------------------------------------------------------- 13. COMPLETED ACQUISITION On February 10, 2000, the Company completed its acquisition of Public Service Company of North Carolina, Inc, (PSNC) and became a registered public utility holding company under PUHCA. The transaction is being accounted for as a purchase. The transaction is valued at approximately $900 million, including the assumption of debt, and was financed through the issuance of two-year floating rate notes and bank credit agreements totaling $700 million. . SOUTH CAROLINA ELECTRIC & GAS COMPANY FINANCIAL SECTION 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 the safe harbor provided by 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) changes in the utility regulatory environment, (3) changes in the economy in SCE&G's service territory, (4) the impact of competition from other energy suppliers, (5) the management of SCE&G's operations, (6) growth opportunities, (7) the results of financing efforts, (8) changes in SCE&G's accounting policies, (9) weather conditions in areas served, (10) inflation, (11) changes in environmental regulations and (12) the other risks and uncertainties described from time to time in SCE&G's periodic reports filed with the SEC. SCE&G disclaims any obligation to update any forward-looking statements. COMPETITION The electric utility industry continues a major transition that is resulting in expanded market competition and less regulation. Deregulation of electric wholesale and retail markets is creating opportunities to compete for new and existing customers and markets. As a result, profit margins and asset values of some utilities could be adversely affected. Legislative initiatives at the Federal and state levels are being considered and, if enacted, could mandate market deregulation. The pace of deregulation, future prices of electricity, and the regulatory actions which may be taken by the PSC, the FERC and the SEC in response to the changing environment cannot be predicted. However, the FERC, in issuing Order 888 in April 1996, accelerated competition among electric utilities by providing for open access to wholesale transmission service. Order 888 requires utilities under FERC jurisdiction that own, control or operate transmission lines to file nondiscriminatory open access tariffs that offer to others the same transmission service they provide themselves. The FERC has also permitted utilities to seek recovery of wholesale stranded costs from departing customers by direct assignment. Approximately two percent of SCE&G's electric revenue is under FERC jurisdiction for the purpose of setting rates for wholesale service. Legislation is pending in South Carolina that would deregulate the state's retail electric market and enable customers to choose their supplier of electricity. SCE&G is not able to predict whether the legislation will be enacted and, if it is, the conditions it will impose on utilities that currently operate in the state and future market participants. SCE&G and its parent company, SCANA, are aggressively pursuing actions to position themselves strategically for the transformed environment. To enhance its flexibility and responsiveness to change, one of SCANA's wholly owned subsidiaries, SCANA Energy Marketing (Energy Marketing), is aggressively marketing natural gas to residential and commercial customers in Georgia's newly deregulated natural gas market. Management believes that successfully competing in the Georgia market will provide necessary experience and potential market share for a deregulated electric industry. In addition, SCE&G has undertaken a variety of initiatives, including the accelerated recovery of its electric regulatory assets. SCE&G has established open access transmission tariffs and is selling bulk power to wholesale customers at market-based rates. A significant new management information system was implemented in 1998, and a new customer information and billing system was implemented in 1999. Marketing of services to commercial and industrial customers has increased significantly. SCE&G has obtained long term power supply contracts with a significant portion of its industrial customers. SCE&G believes that these actions as well as numerous others that have been and will be taken demonstrate its ability and commitment to succeed in the evolving operating environment. Regulated public utilities are allowed to record as assets some costs that would be expensed by other enterprises. If deregulation or other changes in the regulatory environment occur, SCE&G may no longer be eligible to apply this accounting treatment and may be required to eliminate such regulatory assets from its balance sheet. Although the potential effects of deregulation cannot be determined at present, discontinuation of the accounting treatment could have a material adverse effect on SCE&G's results of operations in the period the write-off would be recorded. It is expected that cash flows and the financial position of SCE&G would not be materially affected by the discontinuation of the accounting treatment. SCE&G reported approximately $188 million and $59 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax assets and liabilities of approximately $121million and $43 million, respectively, on its balance sheet at December 31, 1999. SCE&G's generation assets are exposed to considerable financial risks 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, SCE&G could be required to write down its investment in these assets. SCE&G cannot predict whether any write-downs will be necessary and, if they are, the extent to which they would adversely affect SCE&G's results of operations in the period in which they would be recorded. As of December 31, 1999, SCE&G's net investment in fossil\hydroelectric generation and nuclear generation assets was $1,084.1 million and $602.3 million, respectively. LIQUIDITY AND CAPITAL RESOURCES The cash requirements of SCE&G arise primarily from its operational needs and construction program. The ability of SCE&G to replace existing plant investment, as well as to expand to meet future demand for electricity and gas, will depend upon its ability to attract the necessary financial capital on reasonable terms. SCE&G recovers 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 SCE&G continues its ongoing construction program, it may be necessary to seek increases in rates. As a result, SCE&G's future financial position and results of operations will be affected by its ability to obtain adequate and timely rate and other regulatory relief, if requested. SCANA and Westvaco each own a 50 percent interest in Cogen South LLC (Cogen). Cogen was formed to build and operate a cogeneration facility at Westvaco's Kraft Division Paper Mill in North Charleston, South Carolina. The facility began operations in March 1999. Financing for the facility of approximately $139.8 million was provided to Cogen by banks. On September 10, 1998 the contractor in charge of construction filed suit in Circuit Court seeking approximately $52 million from Cogen, alleging that it incurred construction cost overruns relating to the facility, and that the construction contract provides for recovery of these costs. In addition to Cogen, Westvaco, SCE&G and SCANA were also named in the suit. SCE&G and the other defendants believe the suit is without merit and are mounting an appropriate defense. SCE&G does not believe that the resolution of this issue will have a material impact on its results of operations, cash flows or financial position. On August 7, 1996 the City of Charleston executed 30-year electric and gas franchise agreements with SCE&G. In consideration for the electric franchise agreement, SCE&G is paying the City $25 million over seven years (1996 through 2002) and has donated to the City the existing transit assets in Charleston. The $25 million is included in electric plant-in-service. In settlement of environmental claims the City may have had against SCE&G involving the Calhoun Park area, where SCE&G and its predecessor companies operated a manufactured gas plant until the 1960's, SCE&G paid the City $26 million over a four-year period (1996 through 1999). As part of the environmental settlement, SCE&G agreed to construct an 1,100 space parking garage on the Calhoun Park site and to transfer the facility to the City in exchange for a 20-year municipal bond backed by revenues from the parking garage and a mortgage on the parking garage. The total amount of the bond is not to exceed $16.9 million, the maximum expected project cost. The parking garage is currently under construction, and is scheduled for completion in the spring of the year 2000. The revised estimated primary cash requirements for 2000, excluding requirements for fuel liabilities and short-term borrowings and including notes payable to affiliated companies, and the actual primary cash requirements for 1999 are as follows: 2000 1999 - --------------------------------------------------------- --------------- (Millions of Dollars) Property additions and construction expenditures, net of allowance for funds used during construction $267 $222 Nuclear fuel expenditures 31 5 Maturing obligations, redemptions and sinking and purchase fund requirements 105 19 - --------------------------------------------------------- --------------- Total $403 $246 ========================================================= =============== Approximately 69% of total cash requirements (after payment of dividends) was provided from internal sources in 1999 as compared to 78% in 1998. SCE&G's First and Refunding Mortgage Bond Indenture, dated April 1, 1945 (Old Mortgage), contains provisions prohibiting the issuance of additional bonds thereunder (Class A Bonds) unless net earnings (as therein defined) for 12 consecutive months out of the 18 months prior to the month of issuance are at least twice the annual interest requirements on all Class A Bonds to be outstanding (Bond Ratio). For the year ended December 31, 1999 the Bond Ratio was 6.01. The Old Mortgage allows the issuance of additional Class A Bonds to an additional principal amount equal to (i) 70 percent of unfunded net property additions (which unfunded net property additions totaled approximately $1,250 million at December 31, 1999), (ii) retirements of Class A Bonds (which retirement credits totaled $91.8 million at December 31, 1999), and (iii) cash on deposit with the Trustee. SCE&G has a bond indenture dated April 1, 1993 (New Mortgage) covering substantially all of its electric properties under which its future mortgage-backed debt (New Bonds) will be issued. New Bonds are issued under the New Mortgage on the basis of a like principal amount of Class A Bonds issued under the Old Mortgage which have been deposited with the Trustee of the New Mortgage (of which $715 million were available for such purpose as of December 31, 1999). New Bonds will be issuable under the New Mortgage only if adjusted net earnings (as therein defined) for 12 consecutive months out of the 18 months immediately preceding the month of issuance are at least twice the annual interest requirements on all outstanding bonds (including Class A Bonds) and New Bonds to be outstanding (New Bond Ratio). For the year ended December 31, 1999 the New Bond Ratio was 5.95. On March 9, 1999 SCE&G issued $100 million of First Mortgage Bonds having an annual interest rate of 6 1/8 percent and maturing on March 1, 2009. The proceeds from the sale of these bonds were used to reduce short-term debt. Without the consent of at least a majority of the total voting power of SCE&G's preferred stock, SCE&G may not issue or assume any unsecured indebtedness if, after such issue or assumption, the total principal amount of all such unsecured indebtedness would exceed 10 percent of the aggregate principal amount of all of SCE&G's secured indebtedness and capital and surplus; however, no such consent is required to enter into agreements for payment of principal, interest and premium for securities issued for pollution control purposes. Pursuant to Section 204 of the Federal Power Act, SCE&G must obtain FERC authority to issue short-term debt. The FERC has authorized SCE&G to issue up to $250 million of unsecured promissory notes or commercial paper with maturity dates of 12 months or less, but not later than December 31, 2001. At December 31, 1999 SCE&G had $285 million of authorized lines of credit which include a credit agreement for a maximum of $250 million to support the issuance of commercial paper. Unused lines of credit at December 31, 1999 totaled $285 million. SCE&G's commercial paper outstanding at December 31, 1999 and December 31, 1998 was $143.1 million and $125.2 million, respectively. In addition, Fuel Company has a credit agreement for a maximum of $125 million with the full amount available at December 31, 1999. The credit agreement supports the issuance of short-term commercial paper for the financing of nuclear and fossil fuels and sulfur dioxide emission allowances. Fuel Company commercial paper outstanding at December 31, 1999 was $70.2 million. This commercial paper and amounts outstanding under the revolving credit agreement, if any, are guaranteed by SCE&G. SCE&G's Restated Articles of Incorporation prohibit issuance of additional shares of preferred stock without consent of the preferred stockholders unless net earnings (as defined therein) for the 12 consecutive months immediately preceding the month of issuance are at least one and one-half times the aggregate of all interest charges and preferred stock dividend requirements (Preferred Stock Ratio). For the year ended December 31, 1999 the Preferred Stock Ratio was 1.79. SCE&G anticipates that its 2000 cash requirements of $526 million will be met through internally generated funds (approximately 70%, after payment of dividends) and the incurrence of additional short-term and long-term indebtedness. SCE&G expects that it has or can obtain adequate sources of financing to meet its projected cash requirements for the next 12 months and for the foreseeable future. On September 21, 1999 SCE&G announced a $180 million gas turbine generator project in Aiken County, South Carolina. Two combined-cycle turbines will burn natural gas to produce 300 megawatts of new electric generation and use exhaust heat to replace coal-fired steam that powers two existing 75 megawatt turbines at the Urquhart Generating Station. The turbine project is scheduled to be completed by June 2002. On October 15, 1999 the FERC notified SCE&G of its agreement with SCE&G's plan to reinforce Lake Murray Dam in order to maintain the lake in case of an extreme earthquake. SCE&G and FERC have been discussing possible reinforcement alternatives for the dam over the past several years as part of SCE&G's ongoing hydroelectric operating license with FERC. Costs of the alternatives being discussed range up to approximately $195 million. Although any costs incurred by SCE&G would be recoverable through electric rates, SCE&G also is exploring alternative sources of funding. The project is to be completed by the end of 2003. Environmental Matters The Clean Air Act requires electric utilities to reduce emissions of sulfur dioxide and nitrogen oxide substantially by the year 2000. These requirements are being phased in over two periods. The first phase had a compliance date of January 1, 1995 and the second, January 1, 2000. SCE&G's facilities did not require modifications to meet the requirements of Phase I. SCE&G is meeting the Phase II requirements through the burning of natural gas and/or lower sulfur coal in its generating units and the purchase and use of sulfur dioxide emission allowances. Low nitrogen oxide burners have been installed to reduce nitrogen oxide emissions to the levels required by Phase II. Air toxicity regulations for the electric generating industry are likely to be proposed in 2000. SCE&G filed compliance plans with DHEC related to Phase II sulfur dioxide requirements in 1995 and Phase II nitrogen oxide requirements in 1999, 1998 and 1997. SCE&G currently estimates that air emissions control equipment will require capital expenditures of $48 million over the 2000-2004 period to retrofit existing facilities, with increased operation and maintenance costs of approximately $1 million per year. To meet compliance requirements through the year 2009, SCE&G anticipates total capital expenditures of approximately $53 million. The Federal Clean Water Act, as amended, provides for the imposition of effluent limitations that require various levels of treatment for each wastewater discharge. Under this Act, compliance with applicable limitations is achieved under a national permit program. Discharge permits have been issued for all and renewed for nearly all of SCE&G's generating units. Concurrent with renewal of these permits, the permitting agency has implemented a more rigorous program in monitoring and controlling thermal discharges and strategies for toxicity reduction in wastewater streams. SCE&G has been developing compliance plans for these initiatives. Amendments to the Clean Water Act proposed in Congress include several provisions which, if passed, could prove costly to SCE&G. These include, but are not limited to, limitations to mixing zones and the implementation of technology-based standards. In 1998 DHEC promulgated regulations for the disposal of industrial solid waste as directed by the South Carolina Solid Waste Policy and Management Act of 1991. These regulations may significantly increase SCE&G's costs of construction and operation of existing and future ash management facilities. SCE&G has an environmental assessment program to identify and assess current and former operations sites that could require environmental cleanup. As site assessments are initiated, estimates are made of the expenditures, if any, deemed necessary to investigate and clean up each site. These estimates are refined as additional information becomes available; therefore, actual expenditures could differ significantly from the original estimates. Amounts estimated and accrued to date for site assessments and cleanup relate primarily to regulated operations. Such amounts are deferred and amortized with recovery provided through rates. SCE&G has also recovered portions of its environmental liabilities through settlements with various insurance carriers. As of December 31, 1998, SCE&G had recovered all amounts previously deferred for its electric operations. SCE&G expects to recover all deferred amounts related to its gas operations by December 2005. Deferral amounts, net of amounts recovered through rates and insurance settlements, totaled $23.7 million and $21.3 million at December 31, 1999 and 1998, respectively. The deferral includes the estimated costs to be associated with the matters discussed below. o In September 1992 the EPA notified SCE&G, the City of Charleston and the Charleston Housing Authority of their potential liability for the investigation and cleanup of the Calhoun Park area site in Charleston, South Carolina. This site encompasses approximately 30 acres and includes properties which were locations for industrial operations, including a wood preserving (creosote) plant, one of SCE&G's decommissioned MGPs, properties owned by the National Park Service and the City of Charleston, and private properties. The site has not been placed on the National Priorities List, but may be added in the future. The PRPs have negotiated an administrative order by consent for the conduct of a Remedial Investigation/Feasibility Study and a corresponding Scope of Work. Field work began in November 1993, and the EPA approved a Remedial Investigation Report in February 1997 and a Feasibility Study Report in June 1998. In July 1998 the EPA approved SCE&G's Removal Action Work Plan for soil excavation. SCE&G completed Phase One of the Removal Action in 1998 at a cost of approximately $1.5 million. Phase Two, which cost approximately $3.5 million, included excavation and installation of several permanent barriers to mitigate coal tar seepage. On September 30, 1998 a Record of Decision was issued which sets forth the EPA's view of the extent of each PRP's responsibility for site contamination and the level to which the site must be remediated. SCE&G estimates that the Record of Decision will result in costs of approximately $13.3 million, of which approximately $4 million remains. On January 13, 1999 the EPA issued a Unilateral Administrative Order for Remedial Design and Remedial Action directing SCE&G to design and carry out a plan of remediation for the Calhoun Park site. The Order is temporarily stayed pending further negotiations between SCE&G and the EPA. However, SCE&G submitted a Comprehensive Remedial Design Work Plan on December 17, 1999, and is proceeding with implementation pending agency approval. In October 1996 the City of Charleston and SCE&G settled all environmental claims the City may have had against SCE&G involving the Calhoun Park area for a payment of $26 million over four years (1996-1999) by SCE&G to the City. SCE&G is recovering the amount of the settlement, which does not encompass site assessment and cleanup costs, through rates in the same manner as other amounts accrued for site assessments and cleanup as discussed above. As part of the environmental settlement, SCE&G agreed to construct an 1,100 space parking garage on the Calhoun Park site and to transfer the facility to the City in exchange for a 20-year municipal bond backed by revenues from the parking garage and a mortgage on the parking garage. The total amount of the bond is not to exceed $16.9 million, the maximum expected project cost. The parking garage is currently under construction and is scheduled for completion in the spring of the year 2000. o SCE&G owns three other decommissioned MGP sites which contain residues of by-product chemicals. For the site located in Sumter, South Carolina, effective September 15, 1998, SCE&G entered into a Remedial Action Plan Contract with DHEC pursuant to which it agreed to undertake a full site investigation and remediation under the oversight of DHEC. Site investigation and characterization are proceeding according to schedule. Upon selection and successful implementation of a site remedy, DHEC will give SCE&G a Certificate of Completion, and a covenant not to sue. SCE&G is continuing to investigate the other two sites, and is monitoring the nature and extent of residual contamination. Regulatory Matters On September 14, 1999 the PSC approved an accelerated capital recovery plan for SCE&G's Cope Generating Station. The plan will be implemented beginning January 1, 2000 for a three-year period. The PSC approved an accelerated capital recovery methodology wherein SCE&G will increase depreciation of its Cope Generating Station in excess of amounts that would be recorded based upon currently approved depreciation rates. The amount of the accelerated depreciation will be determined by SCE&G based on the level of revenues and operating expenses, not to exceed $36 million annually without the approval of the PSC. Any unused portion of the $36 million in any given year could be carried forward for possible use in the subsequent year. The accelerated capital recovery plan will be accomplished through existing customer rates. On December 11, 1998 the PSC issued an order requiring SCE&G to reduce retail electric rates on a prospective basis. The PSC acted in response to SCE&G reporting that it earned a 13.04 percent return on common equity for its retail electric operations for the 12 months ended September 30, 1998. This return on common equity exceeded SCE&G's authorized return of 12 percent by 1.04 percent, or $22.7 million, primarily as a result of record-breaking heat experienced during the summer. The order required prospective rate reductions on a per kilowatt-hour basis, based on actual retail sales for the 12 months ended September 30, 1998. . On January 12, 1999 the PSC denied SCE&G's motion for reconsideration, ruled that no further rate action was required, and reaffirmed SCE&G's return on equity of 12 percent. The rate reductions were placed into effect with the first billing cycle of January 1999. On January 9, 1996 the PSC issued an order granting SCE&G an increase in retail electric rates which were fully implemented by January 1997. The PSC authorized a return on common equity of 12.0 percent. The PSC also approved establishment of a Storm Damage Reserve Account capped at $50 million to be collected through rates over a ten-year period. Additionally, the PSC approved accelerated recovery of a significant portion of SCE&G's electric regulatory assets (excluding deferred income tax assets) and the remaining transition obligation for postretirement benefits other than pensions, changing the amortization periods to allow recovery by the end of the year 2000. SCE&G's request to shift, for rate-making purposes, approximately $257 million of depreciation reserves from transmission and distribution assets to nuclear production assets was also approved. The Consumer Advocate and two other intervenors appealed certain issues in the order initially to the Circuit Court, which affirmed the PSC's decisions, and subsequently, to the Supreme Court. In March 1998, SCE&G, the PSC, the Consumer Advocate and one of the other intervenors reached an agreement that provided for the reversal of the shift in depreciation reserves and the dismissal of the appeal of all other issues. The PSC also authorized SCE&G to adjust depreciation rates that had been approved in the 1996 rate order for its electric transmission, distribution and nuclear production properties to eliminate the effect of the depreciation reserve shift and to retroactively apply such depreciation rates to February 1996. As a result, a one-time reduction in depreciation expense of $9.8 million was recorded in March 1998. The agreement does not affect retail electric rates. The FERC had previously rejected the transfer of depreciation reserves for rates subject to its jurisdiction. In September 1998 the Supreme Court affirmed the Circuit Court's rulings on the issues contested by the remaining intervenor. SCE&G's regulated business operations were impacted by the NEPA and FERC Orders No. 636 and 888. NEPA was designed to create a more competitive wholesale power supply market by creating "exempt wholesale generators" and by potentially requiring utilities owning transmission facilities to provide transmission access to wholesalers. See Competition for a discussion of FERC Order 888. Order No. 636 was intended to deregulate the markets for interstate sales of natural gas by requiring that pipelines provide transportation services that are equal in quality for all gas suppliers whether the customer purchases gas from the pipeline or another supplier. In the opinion of SCE&G, it continues to be able to meet successfully the challenges of these altered business climates and does not anticipate any material adverse impact on the results of operations, cash flows, financial position or business prospects. Other Matters SCE&G successfully completed its efforts to ensure Year 2000 readiness for all of its critical systems. As a result, SCE&G experienced no interruption in the services it provides to its customers during the transition to the Year 2000. Although SCE&G has not experienced any Year 2000 problems, there can be no guarantees that there will not be any Year 2000 problems in the future. The cost of SCE&G's Year 2000 efforts totaled approximately $15.8 million. RESULTS OF OPERATIONS Net Income Net income and the percent increase from the previous year for the years 1999, 1998 and 1997 were as follows: 1999 1998 1997 - ---------------------------------------------- ----------- ---------- (Millions of Dollars) Net income $189.2 $227.2 $194.7 Percent increase (decrease) in net income (16.75%) 16.72% 2.19% - ---------------------------------------------- ----------- ---------- o 1999 Net income decreased for the year primarily due to a rate reduction, milder weather, and higher fuel costs. In addition, completion of a new customer billing system and cogeneration facility, among other factors, resulted in increased operating and depreciation expenses. These factors were partially offset by customer growth and pension income. Also affecting the decrease in net income was the depreciation reduction recorded in 1998 (as discussed below). o 1998 Net income increased for the year primarily as a result of more favorable weather and customer growth which more than offset the impact of higher operating costs. In addition, net income includes a one-time, after-tax reduction to depreciation expense of approximately $5.5 million related to a change in depreciation rates retroactive to February 1996. This change in rates results from the reversal of a $257 million shift of depreciation reserves from electric transmission and distribution assets to nuclear production assets, previously approved in a PSC rate order in January 1996. See Liquidity and Capital Resources. Pension income recorded by SCE&G reduced operations expense by $16.3 million, $16.6 million and $11.7 million for the years ended December 31, 1999, 1998 and 1997, respectively. In addition, pension income increased other income by $10.5 million and $9.0 million for the years ended December 31, 1999 and 1998, respectively. The reductions to operations expense for 1998 and 1997 were substantially offset by accelerated amortizations of a significant portion of the transition obligation for postretirement benefits other than pensions and certain regulatory assets as approved by the PSC. SCE&G's financial statements include AFC. AFC is a utility accounting practice whereby a portion of the cost of both equity and borrowed funds used to finance construction (which is shown on the balance sheet as construction work in progress) is capitalized. An equity portion of AFC is included in nonoperating income and a debt portion of AFC is included in interest charges (credits) as noncash items, both of which have the effect of increasing reported net income. AFC represented approximately 2.0 percent of income before income taxes in 1999, 3.8 percent in 1998 and 4.0 percent in 1997. Electric Operations Electric operations sales margins for 1999, 1998 and 1997 were as follows: 1999 1998 1997 - -------------------------------------------------- ----------- ------------ - ---------------------------------------------------------------------------- (Millions of Dollars) Electric revenue $1,226.0 $1,219.8 $1,103.1 Less: Fuel used in electric generation 214.4 212.3 181.0 Purchased power 141.4 116.4 109.2 - ----------------------------------------------------------------------------- Margin $ 870.2 $891.1 $812.9 ============================================================================= o 1999 The sales margin decreased for 1999 primarily due to a rate reduction, milder weather and higher fuel costs. These factors were partially offset by customer growth. o 1998 The sales margin increased for 1998 primarily due to more favorable weather and customer growth. Increases (decreases) from the prior year in megawatt-hour (MWH) sales volume by classes were as follows: Classification 1999 % Change 1998 % Change ---------------------------------------------------------------- ------------- Residential (55,208) (0.9%) 676,578 12.0% Commercial 52,440 0.9% 577,852 10.9% Industrial 316,087 5.4% 389,931 7.2% Sales for Resale (excluding interchange) 63,304 5.6% 65,367 6.2% Other (17,652) (3.3%) 29,823 5.9% ---------------------------------------------------------------- ------------- Total territorial 358,971 - 1,739,551 - Negotiated Market Sales Tariff 183,442 12.3% 610,784 69.1% ------------------------------------------------------------------ ----------- Total 542,413 2.6% 2,350,335 12.5% ================================================================== =========== o 1999 The sales volume decrease for residential was primarily due to milder weather which was partially offset by customer growth. Volumes for the remaining classes increased primarily due to customer growth. o 1998The sales volume increases for 1998 were primarily due to more favorable weather and customer growth. Gas Distribution Gas sales margins for 1999, 1998 and 1997 were as follows: 1999 1998 1997 ------------------------------------------------ -------------- ------------ (Millions of Dollars) Gas operating revenues $239.0 $230.4 $233.6 Less: Gas purchased for resale 152.6 142.4 151.9 ------------------------------------------------ -------------- ------------ Margin $ 86.4 $ 88.0 $ 81.7 ================================================ ============== ============ o 1999 The sales margin decreased for 1999 primarily as a result of higher gas costs. o 1998 The sales margin increased over 1997 due to renegotiation of industrial customers' contracts, lower gas prices and increased sales to electric generation facilities. Increases (decreases) from the prior year in dekatherm (DT) sales volume by classes, including transportation gas, were as follows: Classification 1999 % Change 1998 % Change ------------------------------ ------------- ------------ ------------ Residential (94,027) (0.8%) (2,685) 0.0% Commercial 404,654 3.6% 389,468 3.6% Industrial 644,485 3.7% 1,965,506 12.8% Transportation gas (28,732) (1.4%) (673,795) (25.2%) Total 926,380 2.2% 1,678,494 4.1% ============================== ============= ============ ============ o 1999The gas sales volume increases for 1999 were primarily due to customer expansion and customer growth. Residential volume decreased primarily due to milder weather. o 1998 The sales volume for commercial and industrial customers increased for 1998 as a result of lower gas prices and increased sales to electric generation facilities. Other Operating Expenses and Taxes Increases (decreases) in other operating expenses, including taxes, were as follows: 1999 1998 - ------------------------------------------------ --------------------- (Millions of Dollars) Other operation and maintenance $ 6.5 $27.4 Depreciation and amortization 23.2 (9.0) Income taxes (24.8) 29.9 Other taxes 1.8 5.6 - ------------------------------------------------ --------------------- Total $ 6.7 $53.9 ================================================ ===================== o 1999Other operation and maintenance increased primarily due to a shift in labor from capital to expense related to the completion of a new customer billing system, a cogeneration facility becoming operational, and other operating costs. Thesecosts were partially offset by pension income, which in 1998 had been offset by the accelerated amortization of the Company's transition obligation expense for post-retirement benefits and other regulatory assets. Depreciation and amortization increased primarily due to the impact of the non-recurring adjustment to depreciation expense discussed under Net Income, increased amortization due to completion of a new customer billing system, and normal increases in utility plant. Income taxes decreased primarily due to decreased operating income. Other taxes increased primarily due to increased property taxes. o 1998 Other operation and maintenance expenses increased primarily due to increased maintenance costs for electric generation and distribution facilities, various other electric operating costs and Year 2000 testing and remediation. The decrease in depreciation and amortization expense reflects the non-recurring adjustment to depreciation expense discussed under Net Income. The increase in income tax expense primarily reflects changes in operating income. The increase in other taxes primarily results from increased property taxes. Interest Expense Increases (decreases) in interest expense, excluding the debt component of AFC, were as follows: 1999 1998 - ------------------------------------------------- --------------------- (Millions of Dollars) Interest on long-term debt, net $1.9 $(1.4) Other interest expense 2.4 1.3 - ------------------------------------------------- --------------------- Total $4.3 $(0.1) ================================================= ===================== Interest expense increased over 1998 as a result of increased borrowings and increased weighted average interest rates on short-term and long-term borrowings. Interest expense did not change materially in 1998. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK All financial instruments held by SCE&G described below are held for purposes other than trading. Interest rate risk - The table below provides information about SCE&G's financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. December 31, 1999 Expected Maturity Date ------------------------------------------------------- (Millions of Dollars) Liabilities 2000 2001 2002 2003 2004 Thereafter Total Fair Value ---------- -------- --------- ----------- --------- --- Long-Term Debt: Fixed Rate ($) 127.5 27.6 27.6 129.4 123.9 933.0 1,369.0 1,232.7 Average Interest Rate 6.16 6.73 6.73 6.37 7.52 7.72 7.39 December 31, 1998 Expected Maturity Date ------------------------------------------------------- (Millions of Dollars) Liabilities 2000 2001 2002 2003 2004 Thereafter Total Fair Value ---------- -------- --------- ----------- --------- --- Long-Term Debt: Fixed Rate ($) 29.0 188.5 22.6 22.6 124.5 943.4 1,333.6 1,356.4 Average Interest Rate 6.56 5.89 6.72 6.72 6.95 7.73 7.11 While a decrease in interest rates would increase the fair value of debt, it is unlikely that events which would result in a realized loss will occur. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Independent Auditors' Report.............................................. 80 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 1999 and 1998.......... 81 Consolidated Statements of Income and Retained Earnings for years ended December 31, 1999, 1998 and 1997............................. 83 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997........................................... 84 Consolidated Statements of Capitalization as of December 31, 1999 and 1998................................................ 85 Notes to Consolidated Financial Statements............................ 87 Information required to be disclosed in supplemental financial statement schedules is included in the consolidated financial statements or in the notes thereto. INDEPENDENT AUDITORS' REPORT South Carolina Electric & Gas Company: We have audited the accompanying Consolidated Balance Sheets and Statements of Capitalization of South Carolina Electric & Gas Company (Company) as of December 31, 1999 and 1998 and the related Consolidated Statements of Income and Retained Earnings and of Cash Flows for each of the three years in the period ended December 31, 1999. Our audits also included the financial statement schedule listed in Part IV at Item 14. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1999 and 1998 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. Also, in our opinion, such financil statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. s/Deloitte & Touche LLP DELOITTE & TOUCHE LLP Columbia, South Carolina February 10 , 2000
SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED BALANCE SHEETS December 31, 1999 1998 - -------------------------------------------------------------------------------------------- (Millions of Dollars) ASSETS Utility Plant (Notes 1, 3 & 4): Electric $4,337 $4,133 Gas 392 366 Other 191 175 - ------------------------------------------------------------------------------------------- Total 4,920 4,674 Less accumulated depreciation and amortization 1,611 1,517 - ------------------------------------------------------------------------------------------- Total 3,309 3,157 Construction work in progress 149 219 Nuclear fuel, net of accumulated amortization 43 56 - ------------------------------------------------------------------------------------------- Utility Plant, Net 3,501 3,432 - ------------------------------------------------------------------------------------------- Nonutility Property and Investments, net of accumulated depreciation (Note 8) 19 16 - ------------------------------------------------------------------------------------------- Current Assets: Cash and temporary cash investments (Note 8) 78 36 Receivables - customer and other 195 178 Inventories (At average cost): Fuel (Notes 1, 3 & 4) 30 32 Materials and supplies 48 47 Prepayments 8 8 Deferred income taxes (Note 7) 16 21 - ------------------------------------------------------------------------------------------- Total Current Assets 375 322 - ------------------------------------------------------------------------------------------- Deferred Debits: Emission allowances 31 31 Environmental 24 22 Nuclear plant decommissioning fund (Note 1) 64 56 Pension asset, net (Note 1) 144 115 Other regulatory assets 164 180 Other (Note 1) 82 72 - ------------------------------------------------------------------------------------------- Total Deferred Debits 509 476 - ------------------------------------------------------------------------------------------- Total $4,404 $4,246 =========================================================================================== SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED BALANCE SHEETS December 31, 1999 1998 - -------------------------------------------------------------------------------------------- (Millions of Dollars) CAPITALIZATION AND LIABILITIES Stockholders' Investment: Common equity (Note 5) $1,558 $1,499 Preferred stock (Not subject to purchase or sinking funds) 106 106 - ------------------------------------------------------------------------------------------- Total Stockholders' Investment 1,664 1,605 Preferred Stock, net (Subject to purchase or sinking funds)(Notes 6 & 8) 11 11 Company - Obligated Mandatorily Redeemable Preferred Securities of the Company's Subsidiary Trust, SCE&G Trust I holding solely $50 million, principal amount of 7.55% of Junior Subordinated Debentures of the Company, due 2027 (Note 6) 50 50 Long-Term Debt, net (Notes 3 & 8) 1,121 1,206 - ----------------------------------------------------------------------------------------- Total Capitalization 2,846 2,872 - ------------------------------------------------------------------------------------------- Current Liabilities: Short-term borrowings (Notes 4, 8 & 9) 213 125 Current portion of long-term debt (Note 3) 128 29 Accounts payable 78 97 Accounts payable - affiliated companies (Notes 1 & 3) 33 23 Customer deposits 17 17 Taxes accrued 60 75 Interest accrued 22 21 Dividends declared 28 38 Other 10 10 - ------------------------------------------------------------------------------------------- Total Current Liabilities 589 435 - ------------------------------------------------------------------------------------------- Deferred Credits: Deferred income taxes (Notes 1 & 7) 560 549 Deferred investment tax credits (Notes 1 & 7) 108 100 Reserve for nuclear plant decommissioning (Note 1) 64 56 Postretirement benefits (Note 1) 98 87 Regulatory liabilities 59 65 Other (Note 1) 80 82 - ------------------------------------------------------------------------------------------- Total Deferred Credits 969 939 - ------------------------------------------------------------------------------------------- Commitments and Contingencies (Note 10) - - Total $4,404 $4,246 =========================================================================================== See Notes to Consolidated Financial Statements. SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS For the Years Ended December 31, 1999 1998 1997 - ------------------------------------------------------------------------------------------- (Millions of Dollars) Operating Revenues (Notes 1 & 2): Electric $1,226 $1,220 $1,103 Gas 239 230 234 Transit 2 1 1 - -------------------------------------------------------------------------------------------- Total Operating Revenues 1,467 1,451 1,338 - -------------------------------------------------------------------------------------------- Operating Expenses: Fuel used in electric generation 214 212 181 Purchased power (including affiliated purchases)(Note 1) 142 116 109 Gas purchased from affiliate for resale (Note 1) 153 142 152 Other operation 239 239 222 Maintenance (Note 1) 85 79 67 Depreciation and amortization (Note 1) 154 131 140 Income taxes (Notes 1 & 7) 103 128 98 Other taxes 94 92 87 - -------------------------------------------------------------------------------------------- Total Operating Expenses 1,184 1,139 1,056 - -------------------------------------------------------------------------------------------- Operating Income 283 312 282 - -------------------------------------------------------------------------------------------- Other Income (Note 1): Allowance for equity funds used during construction 3 7 6 Other income (loss), net of income taxes 9 6 3 - -------------------------------------------------------------------------------------------- Total Other Income 12 13 9 - -------------------------------------------------------------------------------------------- Income Before Interest Charges 295 325 291 - --------------------------------------------------------------------------------------------- Interest Charges (Credits): Interest on long-term debt, net 97 95 96 Other interest expense (Notes 1 & 3) 8 6 5 Allowance for borrowed funds used during construction (Note 1) (3) (7) (6) - -------------------------------------------------------------------------------------------- Total Interest Charges, Net 102 94 95 - -------------------------------------------------------------------------------------------- Income Before Preferred Dividend Requirements on Mandatorily Redeemable Preferred Securities 193 231 196 Preferred Dividend Requirement of Company - Obligated Mandatorily Redeemable Preferred Securities 4 4 1 - -------------------------------------------------------------------------------------------- Net Income 189 227 195 Preferred Stock Cash Dividends (At stated rates) (7) (8) (9) - -------------------------------------------------------------------------------------------- Earnings Available for Common Stock 182 219 186 Retained Earnings at Beginning of Year 491 438 415 Common Stock Cash Dividends Declared (Note 5) (123) (166) (163) - -------------------------------------------------------------------------------------------- Retained Earnings at End of Year $ 550 $ 491 $ 438 ============================================================================================ See Notes to Consolidated Financial Statements. SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1999 1998 1997 - -------------------------------------------------------------------------------------------- (Millions of Dollars) Cash Flows From Operating Activities: Net income $189 $ 227 $ 195 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization 154 131 140 Amortization of nuclear fuel 18 20 19 Deferred income taxes, net 16 49 16 Pension asset (29) (33) (24) Postretirement benefits 11 26 24 Other regulatory assets 16 (23) 39 Other regulatory liabilities (6) 4 6 Allowance for funds used during construction (6) (14) (12) Over (under) collection, fuel adjustment clause (6) 1 - Changes in certain current assets and liabilities: (Increase) decrease in receivables (17) (13) 6 (Increase) decrease in inventories 1 (8) 8 Increase (decrease) in accounts payable (9) 35 (13) Increase (decrease) in taxes accrued (15) 30 (22) Other, net (7) 9 (14) - ----------------------------------------------------------------------------------------- Net Cash Provided From Operating Activities 310 441 368 - ------------------------------------------------------------------------------------------ Cash Flows From Investing Activities: Utility property additions and construction expenditures, net of AFC (227) (252) (232) Increase in nonutility property and investments (3) (1) (5) - ------------------------------------------------------------------------------------------ Net Cash Used For Investing Activities (230) (253) (237) - ------------------------------------------------------------------------------------------ Cash Flows From Financing Activities: Proceeds: Issuance of mortgage bonds and other long-term debt 99 - 1 Issuance of company - obligated mandatorily redeemable trust preferred securities - - 49 Equity contributions from parent - - 12 Issuance of preferred stock - - 99 Repayments: Mortgage bonds - (50) (15) Other long-term debt (9) (11) - Preferred stock - (1) (53) Repayment of bank notes (10) - - Repayment of bank loans - - (10) Dividend Payments: Common stock (133) (187) (141) Preferred stock (7) (7) (9) Short-term borrowings, net 88 112 (77) Fuel and emission allowance financings, net (66) (14) 14 - ------------------------------------------------------------------------------------------ Net Cash Used For Financing Activities (38) (158) (130) - ------------------------------------------------------------------------------------------ Net Increase (Decrease) in Cash and Temporary Cash Investments 42 30 1 Cash and Temporary Cash Investments, January 1 36 6 5 - ------------------------------------------------------------------------------------------ Cash and Temporary Cash Investments, December 31 $ 78 $ 36 $ 6 ========================================================================================== Supplemental Cash Flows Information: Cash paid for - Interest (includes capitalized interest of $3, $7 and $6) $102 $ 101 $ 98 - Income taxes 109 92 (48) See Notes to Consolidated Financial Statements. SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION December 31, 1999 1998 Common Equity (Note 5): (Millions of Dollars) Common stock, 4.50 par value, authorized 50,000,000 shares; issued and outstanding, 40,296,147 shares $ 181 $ 181 Premium on common stock 395 395 Other paid-in capital 437 437 Capital stock expense (5) (5) Retained earnings 550 491 - ----------------------------------------------------------------------------------------------------------------- Total Common Equity 1,558 55% 1,499 52% - ---------------------------------------------------------------------------------------------------------------- Cumulative Preferred Stock (Not subject to purchase or sinking funds): $100 Par Value - Authorized 1,200,000 shares $50 Par Value - Authorized 125,209 shares Shares Outstanding Redemption Price Series 1999 1998 $100 Par 6.52% 1,000,000 1,000,000 100.00 100 100 $50 Par 5.00% 125,209 125,209 52.50 6 6 --------------------------------------------------------------------------------------------------------------- Total Preferred Stock (Not subject to purchase or sinking funds) 106 4% 106 4% - ---------------------------------------------------------------------------------------------------------------- Cumulative Preferred Stock (Subject to purchase or sinking funds)(Notes 6 & 8): $100 Par Value - Authorized 1,550,000 shares; None outstanding in 1999 and 1998 $50 Par Value - Authorized 1,571,487 shares Shares Outstanding Redemption Price Series 1999 1998 4.50% 11,200 12,800 51.00 1 1 4.60%(A) 18,052 20,052 51.00 1 1 4.60%(B) 61,200 64,600 50.50 3 3 5.125% 68,000 69,000 51.00 3 3 6.00% 73,035 73,600 50.50 4 4 ------------------- Total 231,487 240,052 =================== $25 Par Value - Authorized 2,000,000 shares; None outstanding in 1999 and 1998 Total Preferred Stock (Subject to purchase or sinking funds) 12 12 Less: Current portion, including sinking fund requirements 1 1 - ---------------------------------------------------------------------------------------------------------------- Total Preferred Stock, Net (Subject to purchase or sinking funds) 11 11 - ---------------------------------------------------------------------------------------------------------------- Company-Obligated Mandatorily Redeemable Preferred Securities of the Company's Subsidiary Trust, SCE&G Trust I, holding solely $50 million principal amount of 7.55% of Junior Subordinated Debentures of the Company, due 2027. 50 2% 50 2% - ---------------------------------------------------------------------------------------------------------------- SOUTH CAROLINA ELECTRIC & GAS COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION December 31, 1999 1998 - ------------------------------------------------------------------------------------------------------ (Millions of Dollars) Long-Term Debt (Notes 3, 4 & 8): First Mortgage Bonds: Year of Series Maturity 6% 2000 100 100 6 1/4% 2003 100 100 7.70% 2004 100 100 6 1/8% 2009 100 - 7 1/8% 2013 150 150 7 1/2% 2023 150 150 7 5/8% 2023 100 100 7 5/8% 2025 100 100 First and Refunding Mortgage Bonds: Year of Series Maturity 9% 2006 131 131 8 7/8% 2021 103 114 Pollution Control Facilities Revenue Bonds: Fairfield County Series 1984, due 2014 (6.50%) 57 57 Orangeburg County Series 1994 due 2024 (5.70%) 30 30 Other 17 16 Commercial Paper - 66 Charleston Franchise Agreement due 1997-2002 11 14 Charleston Environmental Agreement - 6 Other 3 4 - ------------------------------------------------------------------------------------------------------ Total Long-Term Debt 1,252 1,238 Less: Current maturities, including sinking fund requirements 128 29 Unamortized discount 3 3 - ------------------------------------------------------------------------------------------------------ Total Long-Term Debt, Net 1,121 39% 1,206 42% - ----------------------------------------------------------------------------------------------------- Total Capitalization $2,846 100% $2,872 100% ===================================================================================================== See Notes to Consolidated Financial Statements.
156 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: A. Organization and Principles of Consolidation South Carolina Electric & Gas Company (the Company), a public utility, is a South Carolina corporation organized in 1924 and a wholly owned subsidiary of SCANA Corporation, a South Carolina holding company. The Company is engaged predominately in the generation and sale of electricity to wholesale and retail customers in South Carolina and in the purchase, sale and transportation of natural gas to retail customers in South Carolina. The accompanying Consolidated Financial Statements include the accounts of the Company, South Carolina Fuel Company, Inc. (Fuel Company) and SCE&G Trust I. Intercompany balances and transactions between the Company, Fuel Company and SCE&G Trust I have been eliminated in consolidation. Affiliated Transactions The Company has entered into agreements with certain affiliates to purchase gas for resale to its distribution customers and to purchase electric energy. The Company purchases all of its natural gas requirements from Pipeline Corporation, and at December 31, 1999 and 1998, the Company had approximately $20.9 million and $16.1 million, respectively, payable to Pipeline Corporation for such gas purchases. The Company purchases all of the electric generation of Williams Station, which is owned by GENCO, under a unit power sales agreement. At December 31, 1999 and 1998 the Company had approximately $9.2 million and $5.8 million, respectively, payable to GENCO for unit power purchases. Such unit power purchases, which are included in "Purchased power," amounted to approximately $105.5 million, $85.0 million and $99.8 million in 1999, 1998 and 1997, respectively. Total interest income, based on market interest rates, associated with the Company's advances to affiliated companies was approximately $921,000, $281,000 and $20,000 in 1999, 1998 and 1997, respectively. In 1999, 1998 and 1997 there were no amounts relating to advances from affiliated companies included in "Other interest expense." B. Basis of Accounting The Company accounts for its regulated utility operations, assets and liabilities in accordance with the provisions of Statements of Financial Accounting Standards No. 71 (SFAS 71). The accounting standard requires cost-based rate-regulated utilities to recognize in their financial statements revenues and expenses in different time periods than do enterprises that are not rate-regulated. As a result the Company has recorded, as of December 31, 1999, approximately $188 million and $59 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax assets and liabilities of approximately $121 million and $43 million, respectively. The electric and gas regulatory assets of approximately $35 million and $34 million, respectively (excluding deferred income tax assets) are being recovered through rates and, as discussed in Note 2C, the Public Service Commission of South Carolina (PSC) has approved accelerated recovery of approximately $7 million of the electric regulatory assets. In the future, as a result of deregulation or other changes in the regulatory environment, the Company may no longer meet the criteria for continued application of SFAS 71 and could be required to write off its regulatory assets and liabilities. Such an event could have a material adverse effect on the Company's results of operations in the period the write-off would be recorded, but it is not expected that cash flows or financial position would be materially affected. C. System of Accounts The accounting records of the Company are maintained in accordance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission (FERC) and as adopted by the PSC. D. Utility Plant Utility plant is stated substantially at original cost. The costs of additions, renewals and betterments to utility plant, including direct labor, material and indirect charges for engineering, supervision and an allowance for funds used during construction, are added to utility plant accounts. The original cost of utility property retired or otherwise disposed of is removed from utility plant accounts and generally charged, along with the cost of removal, less salvage, to accumulated depreciation. The costs of repairs, replacements and renewals of items of property determined to be less than a unit of property are charged to maintenance expense. The Company, operator of the V. C. Summer Nuclear Station (Summer Station), and Santee Cooper (formerly the South Carolina Public Service Authority) are joint owners of Summer Station in the proportions of two-thirds and one-third, respectively. The parties share the operating costs and energy output of the plant in these proportions. Each party, however, provides its own financing. Plant-in-service related to the Company's portion of Summer Station was approximately $959.7 million and $983.3 million as of December 31, 1999 and 1998, respectively. Accumulated depreciation associated with the Company's share of Summer Station was approximately $365.1 million and $369.2 million as of December 31, 1999 and 1998, respectively. The Company's share of the direct expenses associated with operating Summer Station is included in "Other operation" and "Maintenance" expenses. E. Allowance for Funds Used During Construction AFC, a noncash item, reflects the period cost of capital devoted to plant under construction. This accounting practice results in the inclusion of, as a component of construction cost, the costs of debt and equity capital dedicated to construction investment. AFC is included in rate base investment and depreciated as a component of plant cost in establishing rates for utility services. The Company has calculated AFC using composite rates of 7.7%, 8.5% and 8.8% for 1999, 1998 and 1997, respectively. These rates do not exceed the maximum allowable rate as calculated under FERC Order No. 561. Interest on nuclear fuel in process and sulfur dioxide emission allowances is capitalized at the actual interest amount incurred. F. Revenue Recognition Customers' meters are read and bills are rendered on a monthly cycle basis. Base revenue is recorded during the accounting period in which the meters are read. Fuel costs for electric generation are collected through the fuel cost component in retail electric rates. The fuel cost component contained in electric rates is established by the PSC during annual fuel cost hearings. Any difference between actual fuel costs and that contained in the fuel cost component is deferred and included when determining the fuel cost component during the next annual fuel cost hearing. The Company had undercollected through the electric fuel cost component approximately $10.1 million and $3.1 million at December 31, 1999 and 1998, respectively, which are included in "Deferred Debits - - Other." Customers subject to the gas cost adjustment clause are billed based on a fixed cost of gas determined by the PSC during annual gas cost recovery hearings. Any difference between actual gas costs and that contained in rates is deferred and included when establishing gas costs during the next annual gas cost recovery hearing. At December 31, 1999 and 1998 the Company had undercollected through the gas cost recovery procedure approximately $4.1 million and $5.2 million, respectively, which are included in "Deferred Debits Other." The Company's gas rate schedules for residential, small commercial and small industrial customers include a weather normalization adjustment, which minimizes fluctuations in gas revenues due to abnormal weather conditions. G. Depreciation and Amortization Provisions for depreciation are recorded using the straight-line method for financial reporting purposes and are based on the estimated service lives of the various classes of property. The composite weighted average depreciation rates were 2.99%, 3.02% and 3.09% for 1999, 1998 and 1997, respectively. Nuclear fuel amortization, which is included in "Fuel used in electric generation" and is recovered through the fuel cost component of the Company's rates, is recorded using the units-of-production method. Provisions for amortization of nuclear fuel include amounts necessary to satisfy obligations to the Department of Energy (DOE) under a contract for disposal of spent nuclear fuel. The acquisition adjustment relating to the purchase of certain gas properties in 1982 is being amortized over a 40-year period using the straight-line method. H. Nuclear Decommissioning Decommissioning of Summer Station is presently scheduled to commence when the operating license expires in the year 2022. Based on a 1991 study, the expenditures (on a before-tax basis) related to the Company's share of decommissioning activities are estimated, in 2022 dollars assuming a 4.5 percent annual rate of inflation, to be $545.3 million including partial reclamation costs. The Company is providing for its share of estimated decommissioning costs of Summer Station over the life of Summer Station. The Company's method of funding decommissioning costs is referred to as COMReP (Cost of Money Reduction Plan). Under this plan, funds collected through rates ($3.2 million in each of 1999 and 1998) are used to pay premiums on insurance policies on the lives of certain Company personnel. The Company is the beneficiary of these policies. Through these insurance contracts, the Company is able to take advantage of income tax benefits and accrue earnings on the fund on a tax-deferred basis. Amounts for decommissioning collected through electric rates, insurance proceeds, and interest on proceeds less expenses are transferred by the Company to an external trust fund in compliance with the financial assurance requirements of the Nuclear Regulatory Commission. Management intends for the fund, including earnings thereon, to provide for all eventual decommissioning expenditures on an after-tax basis. The trust's sources of decommissioning funds under the COMReP program include investment components of life insurance policy proceeds, return on investment and the cash transfers from the Company described above. The Company records its liability for decommissioning costs in deferred credits. Pursuant to the National Energy Policy Act passed by Congress in 1992 and the requirements of the DOE, the Company has recorded a liability for its estimated share of the DOE's decontamination and decommissioning obligation. The liability, approximately $3.2 million at December 31, 1999, has been included in "Long-Term Debt, net." The Company is recovering the cost associated with this liability through the fuel cost component of its rates; accordingly, this amount has been deferred and is included in "Deferred Debits - Other." I. Income Taxes Deferred tax assets and liabilities are recorded for the tax effects of all significant temporary differences between the book basis and tax basis of assets and liabilities at currently enacted tax rates. Deferred tax assets and liabilities are adjusted for changes in such rates through charges or credits to regulatory assets or liabilities if they are expected to be recovered from, or passed through to, customers; otherwise, they are charged or credited to income tax expense. J. Pension Expense and Other Postretirement Benefits The Company participates in SCANA's noncontributory defined benefit pension plan, which covers substantially all permanent employees. Benefits are based on years of accredited service and the employee's average annual base earnings received during the last three years of employment. SCANA's policy has been to fund the plan to the extent permitted by the applicable Federal income tax regulations as determined by an independent actuary. In addition to pension benefits, the Company provides certain health care and life insurance benefits to active and retired employees. Retirees share in a portion of their medical care cost. The Company provides life insurance benefits to retirees at no charge. The costs of postretirement benefits other than pensions are accrued during the years the employees render the service necessary to be eligible for the applicable benefits. Additionally, to accelerate the amortization of the remaining transition obligation for postretirement benefits other than pensions, as authorized by the PSC, the Company expensed approximately $0.7 million, $15.7 million and $15.6 million for the years ended December 31, 1999, 1998 and 1997, respectively. (See Note 2C.) Disclosures required for these plans under Statement of Financial Accounting Standards No. 132, "Employer's Disclosures about Pensions and Other Postretirement Benefits" are set forth in the following tables: Components of Net Periodic Benefit Cost Other Retirement Benefits Postretirement Benefits 1999 1998 1997 1999 1998 1997 (Millions of Dollars) (Millions of Dollars) Service Cost 10.0 8.3 6.8 3.0 2.6 2.5 Interest Cost 27.9 25.9 23.5 9.5 9.4 7.8 Expected return on assets (65.5) (59.3) (41.6) N/A N/A N/A Prior service cost amortization 1.1 1.1 1.1 0.7 0.7 0.7 Actuarial (gain) loss (8.6) (9.6) (7.0) 1.2 1.0 0.1 Transition amount amortization 0.8 0.8 0.8 1.7 19.1 18.9 Special termination benefit cost 5.5 0.0 0.0 1.0 0.0 0.0 Amounts contributed (by) to Company affiliates 1.1 0.3 0.3 (0.9) (0.7) (0.7) Net periodic benefit (income) cost (27.7) (32.5) (16.1) 16.2 32.1 29.3 Weighted-Average Assumptions as of December 31 Other Retirement Benefits Postretirement Benefits 1999 1998 1997 1999 1998 1997 ---- ---- ---- ---- ---- ---- Discount rate 8.0% 7.0% 7.5% 8.0% 7.0% 7.5% Expected return on plan assets 9.5% 9.5% 8.0% N/A N/A N/A Rate of compensation increase 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Change in Benefit Obligation Other Retirement Benefits Postretirement Benefits 1999 1998 1999 1998 (Millions of Dollars) (Millions of Dollars) Benefit obligation, Jan. 1 389.3 344.4 137.0 108.8 Service cost 10.0 8.3 3.0 2.6 Interest cost 27.9 25.9 9.5 9.4 Plan participants' contributions 0.1 0.1 0.5 0.5 Actuarial loss (gain) (51.6) 28.3 (14.5) 23.3 Benefits paid (18.9) (17.7) (6.7) (7.6) Special termination benefit cost 5.5 0.0 1.0 0.0 Benefit obligation, Dec. 31 362.3 389.3 129.8 137.0 Change in Plan Assets Retirement Benefits 1999 1998 (Millions of Dollars) Fair value of plan assets, Jan. 1 698.8 632.9 Actual return on plan assets 103.0 83.5 Company contribution - - Plan participants' contributions 0.1 0.1 Benefits paid (18.9) (17.7) Fair value of plan assets, Dec. 31 783.0 698.8 The Company does not fund postretirement benefits other than pensions. Funded Status of Plans Other Retirement Benefits Postretirement Benefits 1999 1998 1999 1998 (Millions of Dollars) (Millions of Dollars) Funded status, Dec. 31 420.8 309.5 (129.8) (137.0) Unrecognized actuarial (gain)/loss (294.0) (213.4) 18.8 34.5 Unrecognized prior service cost 11.3 12.3 4.3 5.1 Unrecognized net transition obligation 5.6 6.5 9.1 10.7 ----- ----- ----- ----- Net amount recognized 143.7 114.9 (97.6) (86.7) Health Care Trends The determination of net periodic postretirement benefit cost is based on the following assumptions: 1999 1998 1997 - ----------------------------------------------------- ------------ ------------- Health care cost trend rate 8.0% 8.5% 9.0% Ultimate health care cost trend rate 5.5% 5.0% 5.5% Year achieved 2005 2005 2004 The effect of a one-percentage-point increase or decrease in the assumed health care cost trend rates on the aggregate of the service and interest cost components of net periodic postretirement health care benefit cost and the accumulated postretirement benefit obligation for health care benefits are as follows: 1% 1% Increase Decrease (Millions of Dollars) Effect on health care cost 0.2 (0.2) Effect on postretirement obligation 2.9 (3.3) K. Debt Premium, Discount and Expense, Unamortized Loss on Reacquired Debt Long-term debt premium, discount and expense are being amortized as components of "Interest on long-term debt, net" over the terms of the respective debt issues. Gains or losses on reacquired debt that is refinanced are deferred and amortized over the term of the replacement debt. L. Environmental The Company has an environmental assessment program to identify and assess current and former operations sites that could require environmental cleanup. As site assessments are initiated, estimates are made of the amount of expenditures, if any, deemed necessary to investigate and clean up each site. These estimates are refined as additional information becomes available; therefore, actual expenditures could differ significantly from the original estimates. Amounts estimated and accrued to date for site assessments and cleanup relate primarily to regulated operations. Such amounts are deferred and amortized with recovery provided through rates. The Company has also recovered portions of its environmental liabilities through settlements with various insurance carriers. As of December 31, 1999 the Company has recovered all amounts previously deferred for its electric operations. The Company expects to recover all deferred amounts related to its gas operations by December 2005. Deferred amounts, net of amounts recovered through rates and insurance settlements, totaled $23.7 million and $21.3 million at December 31, 1999 and 1998, respectively. The deferral includes the estimated costs associated with the matters discussed in Note 10C. M. Fuel Inventories Nuclear fuel and fossil fuel inventories and sulfur dioxide emission allowances are purchased and financed by Fuel Company under a contract which requires the Company to reimburse Fuel Company for all costs and expenses relating to the ownership and financing of fuel inventories and sulfur dioxide emission allowances. Accordingly, such fuel inventories and emission allowances and fuel-related assets and liabilities are included in the Company's consolidated financial statements. (See Note 4.) N. Temporary Cash Investments The Company considers temporary cash investments having original maturities of three months or less to be cash equivalents. Temporary cash investments are generally in the form of commercial paper, certificates of deposit and repurchase agreements. O. Recently Issued Accounting Standard The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." The provisions of the Statement, which will be implemented by the Company for the fiscal year beginning January 1, 2001, establish accounting and reporting standards for derivative instruments, including those imbedded in other contracts, and hedging activities. The impact that adoption of the provisions of the Statement will have on the Company's results of operations, cash flows and financial position has not been determined. P. Reclassifications Certain amounts from prior periods have been reclassified to conform with the 1999 presentation. Q. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. RATE MATTERS: A. On September 14, 1999 the PSC approved an accelerated capital recovery plan for the Company's Cope Generating Station. The Plan was implemented beginning January 1, 2000 for a three-year period. The PSC approved an accelerated capital recovery methodology wherein the Company will increase depreciation of its Cope Generating Station in excess of amounts that would be recorded based upon currently approved depreciation rates. The amount of the accelerated depreciation will be determined by the Company based on the level of revenues and operating expenses, not to exceed $36 million annually without the approval of the PSC. Any unused portion of the $36 million in any given year could be carried forward for possible use in the subsequent year. The accelerated capital recovery plan will be accomplished through existing customer rates. B. On December 11, 1998 the PSC issued an order requiring the Company to reduce retail electric rates on a prospective basis. The PSC acted in response to the Company reporting that it earned a 13.04 percent return on common equity for its retail electric operations for the 12 months ended September 30, 1998. This return on common equity exceeded the Company's authorized return of 12 percent by 1.04 percent, or $22.7 million, primarily as a result of record-breaking heat experienced during the summer. The order required prospective rate reductions on a per kilowatt-hour basis, based on actual retail sales for the 12 months ended September 30, 1998. On January 12, 1999 the PSC denied the Company's motion for reconsideration. However, the PSC also ruled that no further rate action was required, and reaffirmed the Company's return on equity of 12 percent. The rate reductions were placed into effect with the first billing cycle of January 1999. C. On January 9, 1996 the PSC issued an order granting the Company an increase in retail electric rates which were fully implemented by January 1997. The PSC authorized a return on common equity of 12.0 percent. The PSC also approved establishment of a Storm Damage Reserve Account capped at $50 million to be collected through rates over a ten-year period. Additionally, the PSC approved accelerated recovery of a significant portion of the Company's electric regulatory assets (excluding deferred income tax assets) and the remaining transition obligation for postretirement benefits other than pensions, changing the amortization periods to allow recovery by the end of the year 2000. The Company's request to shift, for rate-making purposes, approximately $257 million of depreciation reserves from transmission and distribution assets to nuclear production assets was also approved. The Consumer Advocate and two other intervenors appealed certain issues in the order initially to the Circuit Court, which affirmed the PSC's decisions, and subsequently, to the Supreme Court. In March 1998 the Company, the PSC, the Consumer Advocate and one of the other intervenors reached an agreement that provided for the reversal of the shift in depreciation reserves and the dismissal of the appeal of all other issues. The PSC also authorized the Company to adjust depreciation rates that had been approved in the 1996 rate order for its electric transmission, distribution and nuclear production properties to eliminate the effect of the depreciation reserve shift and to retroactively apply such depreciation rates to February 1996. As a result, a one-time reduction in depreciation expense of $9.8 million was recorded in March 1998. The agreement does not affect retail electric rates. The FERC had previously rejected the transfer of depreciation reserves for rates subject to its jurisdiction. In September 1998 the Supreme Court affirmed the Circuit Court's rulings on the issues contested by the remaining intervenor. D. In 1994 the PSC issued an order approving the Company's request to recover through a billing surcharge to its gas customers the costs of environmental cleanup at the sites of former manufactured gas plants (MGPs). The billing surcharge is subject to annual review and provides for the recovery of substantially all actual and projected site assessment and cleanup costs and environmental claims settlements for the Company's gas operations that had previously been deferred. In October 1999, as a result of the annual review, the PSC approved the Company's request to maintain the billing surcharge at $.011 per therm to provide for the recovery of the remaining balance of $24.2 million. E. In September 1992 the PSC issued an order granting the Company a $.25 increase in transit fares from $.50 to $.75 in Columbia , South Carolina; however, the PSC also required $.40 fares for low income customers and denied the Company's request to reduce the number of routes and frequency of service. The new rates were placed into effect in October 1992. The Company appealed the PSC's order to the Circuit Court, which in May 1995 ordered the case back to the PSC for reconsideration of several issues including the low income rider program, routing changes, and the $.75 fare. The Supreme Court declined to review an appeal of the Circuit Court decision and dismissed the case. The PSC and other intervenors filed another Petition for Reconsideration, which the Supreme Court denied. The PSC and other intervenors filed another appeal to the Circuit Court which the Circuit Court denied in an order dated May 9, 1996. In this order, the Circuit Court upheld its previous orders and remanded them to the PSC. During August 1996 the PSC heard oral arguments on the orders on remand from the Circuit Court. On September 30, 1996 the PSC issued an order affirming its previous orders and denied the Company's request for reconsideration. The Company has appealed these two PSC orders to the Circuit Court where they are awaiting action. 3. LONG-TERM DEBT: The annual amounts of long-term debt maturities and sinking fund requirements for the years 2000 through 2004 are summarized as follows: ------------------- ----------------- ------------------ ----------------- Year Amount Year Amount ------------------- ----------------- ------------------ ----------------- (Millions of Dollars 2000 $127.5 2003 $129.4 2001 27.6 2004 123.9 2002 27.6 ------------------- ----------------- ------------------ ----------------- Approximately $23.6 million of the portion of long-term debt payable in 2000 may be satisfied by either deposit and cancellation of bonds issued upon the basis of property additions or bond retirement credits, or by deposit of cash with the Trustee. On August 7, 1996 the City of Charleston executed 30-year electric and gas franchise agreements with the Company. In consideration for the electric franchise agreement, the Company is paying the City $25 million over seven years (1996-2002) and has donated to the City the existing transit assets in Charleston. The $25 million is included in electric plant-in-service. In settlement of environmental claims the City may have had against the Company involving the Calhoun Park area, where the Company and its predecessor companies operated a MGP until the 1960's, the Company paid the City $26 million over a four-year period (1996-1999). Such amount was deferred (see Note 1L) and included in "Long-Term Debt." The Company has three-year revolving lines of credit totaling $75 million, in addition to other lines of credit, that provide liquidity for issuance of commercial paper. The three-year lines of credit provide back-up liquidity when commercial paper outstanding is in excess of $175 million. The long-term nature of the lines of credit allow commercial paper in excess of $175 million to be classified as long-term debt. The Company had outstanding commercial paper of $143.1million and $125.2 million at December 31, 1999 and 1998, at weighted average interest rates of 6.63 percent and 5.32 percent, respectively. Substantially all utility plant and fuel inventories are pledged as collateral in connection with long-term debt. 4. FUEL FINANCINGS: Nuclear and fossil fuel inventories and sulfur dioxide emission allowances are financed through the issuance by Fuel Company of short-term commercial paper. These short-term borrowings are supported by a three-year revolving credit agreement which expires December 19, 2000. The credit agreement provides for a maximum amount of $125 million that may be outstanding at any time. Since the credit agreement expires within one year, commercial paper amounts outstanding have been classified as short-term debt instead of the long-term classification of prior years. Commercial paper outstanding totaled $70.2 million and $66.0 million at December 31, 1999 and 1998 at weighted average interest rates of 6.44 percent and 5.45 percent, respectively. 5. COMMON EQUITY: The changes in "Stockholders' Investment" (Including Preferred Stock Not Subject to Purchase or Sinking Funds) during 1999, 1998 and 1997 are summarized as follows: Common Shares Preferred Shares Millions of Dollars - -------------------------------------------------------------------------------------- -------------------- Balance December 31, 1996 10,296,147 322,877 $1,439.5 Changes in Retained Earnings: Net Income 194.6 Cash Dividends Declared: Preferred Stock (at stated rates) (9.3) Common Stock (162.6) Equity Contributions from Parent including transfer of assets 12.1 Issuance of Preferred Stock 1,000,000 100.0 Redemption of Preferred Stock (197,668) (19.8) Changes in Capital Stock Expense 0.1 Changes in Loss on Resale of Reacquired Stock (1.6) - -------------------------------------------------------------------------------------- -------------------- Balance December 31, 1997 40,296,147 1,125,209 1,553.0 Changes in Retained Earnings: 227.2 Net income Cash Dividends Declared: Preferred Stock (at stated rates) (7.5) Common Stock (167.3) Other Paid in Capital (0.2) - -------------------------------------------------------------------------------------- -------------------- Balance December 31, 1998 40,296,147 1,125,209 1,605.2 Changes in Retained Earnings Net Income 189.1 Cash Dividends Declared: Preferred Stock (at stated rates) (7.4) Common Stock (122.4) - -------------------------------------------------------------------------------------- -------------------- Balance December 31, 1999 40,296,147 1,125,209 $1,664.5 ====================================================================================== ====================
The Restated Articles of Incorporation of the Company and the Indenture underlying its First and Refunding Mortgage Bonds contain provisions that, under certain circumstances, could limit the payment of cash dividends on common stock. In addition, with respect to hydroelectric projects, the Federal Power Act requires the appropriation of a portion of certain earnings therefrom. At December 31, 1999 approximately $29.7 million of retained earnings were restricted by this requirement as to payment of cash dividends on common stock. 6. PREFERRED STOCK: The call premium of the respective series of preferred stock in no case exceeds the amount of the annual dividend. Retirements under sinking fund requirements are at par values. The aggregate annual amount of purchase fund or sinking fund requirements for preferred stock for the years 2000 through 2004 is $2.8 million. The changes in "Total Preferred Stock (Subject to purchase or sinking funds)" during 1999, 1998 and 1997 are summarized as follows: - ----------------------------------------------------- ----------------------- Number of Shares Millions of Dollars - ----------------------------------------------------- ----------------------- Balance December 31, 1996 706,102 $ 45.4 Shares Redeemed: $100 par value (202,812) (20.3) $50 par value (252,196) (12.6) - ----------------------------------------------------- ----------------------- Balance December 31, 1997 251,094 12.5 Shares Redeemed: $50 par value (11,042) (0.5) - ----------------------------------------------------- ----------------------- Balance December 31, 1998 240,052 12.0 Shares Redeemed: $50 par value (8,565) (0.4) - ----------------------------------------------------- ----------------------- Balance December 31, 1999 231,487 $ 11.6 ===================================================== ======================= On October 28, 1997 SCE&G Trust I (the "Trust"), a wholly-owned subsidiary of the Company, issued $50 million (2,000,000 shares) of 7.55 percent Trust Preferred Securities, Series A (the "Preferred Securities"). The Company owns all of the Common Securities of the Trust (the "Common Securities"). The Preferred Securities and the Common Securities (the "Trust Securities") represent undivided beneficial ownership interests in the assets of the Trust. The Trust exists for the sole purpose of issuing the Trust Securities and using the proceeds thereof to purchase from the Company its 7.55 percent Junior Subordinated Debentures due September 30, 2027. The sole asset of the Trust is $50 million of Junior Subordinated Debentures of the Company. Accordingly, no financial statements of the Trust are presented. The Company's obligations under the Guarantee Agreement entered into in connection with the Preferred Securities, when taken together with the Company's obligation to make interest and other payments on the Junior Subordinated Debentures issued to the Trust and the Company's obligations under the Indenture pursuant to which the Junior Subordinated Debentures were issued, provides a full and unconditional guarantee by the Company of the Trust's obligations under the Preferred Securities. Proceeds were used to redeem preferred stock of the Company. The preferred securities of the Trust are redeemable only in conjunction with the redemption of the related 7.55 percent Junior Subordinated Debentures. The Junior Subordinated Debentures will mature on September 30, 2027 and may be redeemed, in whole or in part, at any time on or after September 30, 2002 or upon the occurrence of a Tax Event. A Tax Event occurs if an opinion is received from counsel experienced in such matters that there is more than an insubstantial risk that: (1) the Trust is or will be subject to Federal income tax, with respect to income received or accrued on the Junior Subordinated Debentures, (2) interest payable by the Company on the Junior Subordinated Debentures will not be deductible, in whole or in part, by the Company for Federal income tax purposes, or (3) the Trust will be subject to more than a de minimis amount of other taxes, duties, or other governmental charges. Upon the redemption of the Junior Subordinated Debentures, payment will simultaneously be applied to redeem Preferred Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Junior Subordinated Debentures. The Preferred Securities are redeemable at $25 per preferred security plus accrued distributions. 7. INCOME TAXES: Total income tax expense for 1999, 1998 and 1997 is as follows: - ----------------------------------------------- ----------------------------- 1999 1998 1997 - ---------------------------------------------------------------------------- (Millions of Dollars) Current taxes: Federal $ 91.3 $116.1 $ 88.0 State 0.3 2.1 (6.9) - -------------------------------------------- ------------- ------------ Total current taxes 91.6 118.2 81.1 - -------------------------------------------- ------------- ------------- Deferred taxes, net: Federal 7.7 1.8 3.7 State 1.4 2.0 1.5 - -------------------------------------------- ------------- ------------- Total deferred taxes 9.1 3.8 5.2 - -------------------------------------------------------------- Investment tax credits: Deferred - State 13.4 14.3 19.0 Amortization of amounts deferred - State (1.2) (0.9) (1.5) Amortization of amounts deferred - Federal (3.2) (3.2) (3.2) - -------------------------- ----------------- ------------ Total investment tax credits 9.0 10.2 14.3 - -------------------------------------------------- ------------- -------------- ================================================== ============= ============== Total income tax expense $109.7 $132.2 $100.6 ================================================== ============= ============== The difference in total income tax expense and the amount calculated from the application of the statutory Federal income tax rate (35% for 1999, 1998 and 1997) to pre-tax income is reconciled as follows: - ------------------------------------------------------------------------ ------- 1999 1998 1997 - ------------------------------------------------------------- -------------- --- (Millions of Dollars) Net income $189.2 $227.2 $194.7 Total income tax expense: Charged to operating expense 103.1 127.9 98.1 Charged (credited) to other items 6.6 4.2 2.5 ============================================================= ========= ======== Total pre-tax income $298.9 $359.3 $295.3 ============================================================= ========= ======== Income taxes on above at statutory Federal income tax rate $104.6 $125.8 $103.4 Increases (decreases) attributed to: State income taxes (less Federal income tax effect) 9.0 11.4 7.9 Deferred income tax reversal at higher than statutory rates (3.0) (3.1) (3.5) Amortization of Federal investment tax credits (3.2) (3.2) (3.2) Allowance for equity funds used during construction (2.4) (0.9) (2.1) Other differences, net 3.3 3.6 (1.9) ============================================================= ================== Total income tax expense $109.7 $132.2 $100.6 ============================================================= ================== The tax effects of significant temporary differences comprising the Company's net deferred tax liability of $544.8 million at December 31, 1999 and $528.2 million at December 31, 1998 (see Note 1I), are as follows: - ------------------------------------------------------ ------------------ 1999 1998 - ------------------------------------------------------ ------------------ (Millions of Dollars) Deferred tax assets: Unamortized investment tax credits $ 57.9 $ 61.7 Cycle billing 15.5 20.6 Early retirement programs 14.8 13.0 Deferred compensation 8.6 7.2 Other postretirement benefits 36.6 32.9 Other 11.1 12.0 - ------------------------------------------------------ ------------------ Total deferred tax assets 144.5 147.4 - ------------------------------------------------------ ------------------ Deferred tax liabilities: Property, plant and equipment 593.5 584.9 Pension expense 50.7 39.2 Reacquired debt 7.6 7.5 Research and experimentation 27.3 32.5 Deferred fuel 5.5 3.4 Other 4.7 8.1 - ------------------------------------------------------ ------------------ Total deferred tax liabilities 689.3 675.6 - ------------------------------------------------------ ------------------ Net deferred tax liability $544.8 $528.2 ====================================================== ================== The Internal Revenue Service has examined and closed consolidated Federal income tax returns of SCANA through 1995, and is currently examining SCANA's Federal returns for 1996 and 1997. The Company does not anticipate that any adjustments which might result from these examinations will have a significant impact on the results of operations, cash flows or financial position of the Company. 8. FINANCIAL INSTRUMENTS: The carrying amounts and estimated fair values of the Company's financial instruments at December 31, 1999 and 1998 are as follows: - ------------------------------------------------------------------- ------------ 1999 1998 - ---------------------------------------------------------------- --------------- Estimated Estimated Carrying Fair Carrying Fair Amount Value Amount Value - ---------------------------------------------------------------- --------------- (Millions of Dollars Assets: Cash and temporary cash investments $ 78.4 $ 78.4 $ 35.6 $ 35.6 Investments 5.1 4.7 4.7 5.1 Liabilities: Short-term borrowings 213.3 213.3 125.2 125.2 Long-term debt 1,248.6 1,232.7 1,234.8 1,356.4 Preferred stock (subject to purchase or sinking funds) 11.6 11.5 11.3 8.5 The information presented herein is based on pertinent information available to the Company as of December 31, 1999 and 1998. Although the Company is not aware of any factors that would significantly affect the estimated fair value amounts, such financial instruments have not been comprehensively revalued since December 31, 1999, and the current estimated fair value may differ significantly from the estimated fair value at that date. The following methods and assumptions were used to estimate the fair value of the above classes of financial instruments: o Cash and temporary cash investments, including commercial paper, repurchase agreements, treasury bills and notes, are valued at their carrying amount. o Fair values of investments and long-term debt are based on quoted market prices of the instruments or similar instruments, or for those instruments for which there are no quoted market prices available, fair values are based on net present value calculations. Settlement of long term debt may not be possible or may not be a prudent management decision. o Short-term borrowings are valued at their carrying amount. o The fair value of preferred stock (subject to purchase or sinking funds) is estimated on the basis of market prices. o Potential taxes and other expenses that would be incurred in an actual sale or settlement have not been taken into consideration. 9. SHORT-TERM BORROWINGS: The Company pays fees to banks as compensation for its committed lines of credit. Commercial paper borrowings are for 270 days or less. Details of lines of credit (including uncommitted lines of credit) and short-term borrowings, excluding amounts classified as long-term (Note 3 ), at December 31, 1999 and 1998 and for the years then ended are as follows: - -------------------------------------------------------------- --------------- 1999 1998 - -------------------------------------------------------------- --------------- (Millions of Dollars) Authorize lines of credit at year-end $410 $513.0 Unused lines of credit at year-end $410 $443.8 Short-term borrowings outstanding at year-end: Commercial paper 213.3 $125.2 Weighted average interest rate 6.63% 5.32% - -------------------------------------------------------------- --------------- 10. COMMITMENTS AND CONTINGENCIES: A. Lake Murray Dam Reinforcement On October 15, 1999 the FERC notified the Company of its agreement with the Company's plan to reinforce Lake Murray Dam in order to maintain the lake in case of an extreme earthquake. The Company and FERC have been discussing possible reinforcement alternatives for the dam over the past several years as part of the Company's ongoing hydroelectric operating license with FERC. Costs of the alternatives being discussed range up to approximately $195 million. Although any costs incurred by the Company would be recoverable through electric rates, the Company also is exploring alternative sources of funding. The project is to be completed by the end of 2003. B. Nuclear Insurance The Price-Anderson Indemnification Act, which deals with public liability for a nuclear incident, currently establishes the liability limit for third-party claims associated with any nuclear incident at $9.5 billion. Each reactor licensee is currently liable for up to $88.1 million per reactor owned for each nuclear incident occurring at any reactor in the United States, provided that not more than $10 million of the liability per reactor would be assessed per year. The Company's maximum assessment, based on its two-thirds ownership of Summer Station, would be approximately $58.7 million per incident, but not more than $6.7 million per year. The Company currently maintains policies (for itself and on behalf of Santee Cooper) with Nuclear Electric Insurance Limited (NEIL) and American Nuclear Insurers (ANI) providing combined property and decontamination insurance coverage of $2.0 billion for any losses at Summer Station. The Company pays annual premiums and, in addition, could be assessed a retroactive premium not to exceed five times its annual premium in the event of property damage loss to any nuclear generating facility covered under the NEIL program. Based on the current annual premium, this retroactive premium assessment would not exceed $3.3 million. To the extent that insurable claims for property damage, decontamination, repair and replacement and other costs and expenses arising from a nuclear incident at Summer Station exceed the policy limits of insurance, or to the extent such insurance becomes unavailable in the future, and to the extent that the Company's rates would not recover the cost of any purchased replacement power, the Company will retain the risk of loss as a self-insurer. The Company has no reason to anticipate a serious nuclear incident at Summer Station. If such an incident were to occur, it could have a material adverse impact on the Company's results of operations, cash flows and financial position. C. Environmental In September 1992 the Environmental Protection Agency (EPA) notified the Company, the City of Charleston and the Charleston Housing Authority of their potential liability for the investigation and cleanup of the Calhoun Park area site in Charleston, South Carolina. This site encompasses approximately 30 acres and includes properties which were locations for industrial operations, including a wood preserving (creosote) plant, one of the Company's decommissioned MGPs, properties owned by the National Park Service and the City of Charleston, and private properties. The site has not been placed on the National Priorities List, but may be added in the future. The Potential Responsible Parties (PRPs) have negotiated an administrative order by consent for the conduct of a Remedial Investigation/Feasibility Study and a corresponding Scope of Work. Field work began in November 1993, and the EPA approved a Remedial Investigation Report in February 1997 and a Feasibility Study Report in June 1998. In July 1998 the EPA approved the Company's Removal Action Work Plan for soil excavation. The Company completed Phase One of the Removal Action in 1998 at a cost of approximately $1.5 million. Phase Two, which cost approximately $3.5 million, included excavation and installation of several permanent barriers to mitigate coal tar seepage. On September 30, 1998 a Record of Decision was issued which sets forth the EPA's view of the extent of each PRP's responsibility for site contamination and the level to which the site must be remediated. On January 13, 1999 the EPA issued a Unilateral Administrative Order for Remedial Design and Remedial Action directing the Company to design and carry out a plan of remediation for the Calhoun Park site. The Order is temporarily stayed pending further negotiations between the Company and the EPA. In October 1996 the City of Charleston and the Company settled all environmental claims the City may have had against the Company involving the Calhoun Park area for a payment of $26 million over four years (1996-1999) by the Company to the City. The Company is recovering the amount of the settlement, which does not encompass site assessment and cleanup costs, through rates in the same manner as other amounts accrued for site assessments and cleanup. As part of the environmental settlement, the Company agreed to construct an 1,100 space parking garage on the Calhoun Park site and to transfer the facility to the City in exchange for a 20-year municipal bond backed by revenues from the parking garage and a mortgage on the parking garage. The total amount of the bond is not to exceed $16.9 million, the maximum expected project cost. The parking garage is currently under construction, and is scheduled for completion in the spring of the year 2000. The Company owns three other decommissioned MGP sites which contain residues of by-product chemicals. For the site located in Sumter, South Carolina, effective September 15, 1998, the Company entered into a Remedial Action Plan Contract with DHEC pursuant to which it agreed to undertake a full site investigation and remediation under the oversight of DHEC. Site investigation and characterization are proceeding according to schedule. Upon selection and successful implementation of a site remedy, DHEC will give the Company a Certificate of Completion, and a covenant not to sue. The Company is continuing to investigate the other two sites, and is monitoring the nature and extent of residual contamination. D. Franchise Agreement See Note 3 for a discussion of the electric franchise agreement between SCE&G and the City of Charleston. E. Claims and Litigation The Company is engaged in various claims and litigation incidental to its business operations which management anticipates will be resolved without material loss to the Company. No estimate of the range of loss from these matters can be currently determined. SCANA and Westvaco each own a 50 percent interest in Cogen South LLC (Cogen). Cogen was formed to build and operate a cogeneration facility at Westvaco's Kraft Division Paper Mill in North Charleston, South Carolina. The facility began operations in March 1999. Financing for the facility of approximately $139.8 million was provided to Cogen by banks. On September 10, 1998 the contractor in charge of construction filed suit in South Carolina Circuit Court seeking approximately $52 million from Cogen, alleging that construction cost overruns relating to the facility were incurred and that the construction contract provides for recovery of these costs. In addition to Cogen, Westvaco, the Company and SCANA are also named in the suit. The Company and the other defendants believe the suit is without merit and are mounting an appropriate defense. The Company does not believe that the resolution of this issue will have a material impact on its results of operations, cash flows or financial position. 11. SEGMENT OF BUSINESS INFORMATION: The Company's reportable segments, based on combined revenues from external and internal sources, are Electric Operations and Gas Distribution. Electric Operations is comprised of the electric portion of SCE&G and Fuel Company and is primarily engaged in the generation, transmission, and distribution of electricity. The Company's electric service territory extends into 24 counties covering more than 15,000 square miles in the central, southern, and southwestern portions of South Carolina. Sales of electricity to industrial, commercial, and residential customers are regulated by the PSC. Fuel Company acquires, owns, and provides financing for the fuel and emission allowances required for the operation of SCE&G generation facilities. Gas Distribution is comprised of SCE&G's local distribution operations. This segment is engaged in the purchase and sale, primarily at retail, of natural gas. These operations extend to 30 counties in South Carolina covering approximately 21,000 square miles. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company records intersegment sales and transfers of electricity and gas based on rates established by the appropriate regulatory authority. Non-regulated sales and transfers are recorded at current market prices. The Company's reportable segments share a similar regulatory environment and, in some cases, overlapping service areas. However, Electric Operation's product differs from Gas Distribution, as does its generation process and method of distribution. Disclosure of Reportable Segments (Millions of Dollars) - --------------------------- ---------------------------------------------------- Electric Gas All Adjustments/ Consolidated 1999 Operations Distribution Other Eliminations Total - --------------------------- ---------------------------------------------------- External Customer Revenue $1,226 $239 $ 2 $ - $1,467 Intersegment Revenue 203 2 - (205) - Operating Income (Loss) 275 17 (4) (5) 283 Interest Expense 5 n/a 4 93 102 Depreciation & Amortization 141 13 - - 154 Segment Assets 4,452 399 222 (669) 4,404 Expenditures for Assets 198 19 13 - 230 Deferred Tax Assets 2 n/a - 14 16 - --------------------------- ---------------------------------------------------- - --------------------------------------- ------------- ----------- -------------- Electric Gas All Adjustments/ Consolidated 1998 Operations Distribution Other Eliminations Total - --------------------------------------- ------------- ------ ----------------- - External Customer Revenue $1,220 $230 $ 1 $ - $1,451 Intersegment Revenue 201 3 - (204) - Operating Income (Loss) 307 21 (5) (11) 312 Interest Expense 4 n/a 4 86 94 Depreciation & Amortization 120 11 - - 131 Assets 4,305 381 209 (649) 4,246 Expenditures for Assets 179 19 39 8 245 Deferred Tax Assets 1 n/a - 20 21 - --------------------------------------- ------------- ------ ----------------- - - ---------------------------------------- ------------- ----------- ------------ Electric Gas All Adjustments/ Consolidated 1997 Operations Distribution Other Eliminations Total - ---------------------------------------- ------------- ----------- ------------- External Customer Revenue $1,103 $234 $ 1 $ - $1,338 Intersegment Revenue 24 1 - (25) - Operating Income (Loss) 269 22 (4) (5) 282 Interest Expense n/a 1 89 95 5 Depreciation & Amortization 129 11 - - 140 Assets 4,240 364 227 (777) 4,054 Expenditures for Assets 186 15 32 (1) 232 Deferred Tax Assets n/a - 20 21 1 - ---------------------------------------- ------------- ----------- ------------- Revenues and assets from segments below the quantitative thresholds are attributable primarily to the Company's transit operations, SCE&G Trust I and non-regulated activities. None of these segments met any of the quantitative thresholds for determining reportable segments in 1999, 1998 or 1997. Significant non-cash activities included the Charleston electric franchise agreement and the Charleston environmental agreement related to a MGP site. Management uses operating income to measure segment profitability for regulated operations. Accordingly, the Company does not allocate interest charges or income tax expense/(benefit) to its segments. Similarly, management evaluates utility plant for its segments. Therefore, the Company does not allocate accumulated depreciation, common and non-utility plant, or deferred tax assets to its segments. Interest income is not reported by segment and is not material. The Consolidated Financial Statements report operating revenues, comprised of the reportable segments and the non-reportable transit operations segment. Adjustments to assets consist of various reclassifications made for external reporting purposes. Segment assets include utility plant only (excluding accumulated depreciation) for all segments. As a result, adjustments to assets include accumulated depreciation, offset in part by common and non-utility plant and non-fixed assets for the segments. Adjustments to Interest Charges and Deferred Tax Assets include primarily the unallocated amounts from the Company. Interest Charges is also adjusted to eliminate inter-segment charges. Deferred Tax Assets are also adjusted to remove the non-current portion of those assets. 12. QUARTERLY FINANCIAL DATA (UNAUDITED): 1999 - ------------------------------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Annual - ------------------------------------------------------------------------------- (Millions of Dollars, except per share amounts) Total operating revenues $353 $338 $431 $345 $1,467 Operating income 72 60 101 50 283 Net income 48 37 77 27 189 - --------------------------------------------- --------- --------- ----------- 1998 - ------------------------------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Annual - ------------------------------------------------------------- ------------ ---- (Millions of Dollars, except per share amounts) Total operating revenues $358 $343 $431 $319 $1,451 Operating income 83 67 112 50 312 Net income 60 44 88 35 227 - ---------------------------------------------------------------------- -------- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT SCANA: The information required by Item 10, Directors and Executive Officers of the Registrant, with respect to executive officers is, pursuant to General Instruction G(3) to Form 10-K, set forth in Part I of this Form 10-K under the heading Executive Officers of SCANA Corporation on page 20 herein. The other information required by Item 10 is incorporated herein by reference, pursuant to General Instruction G(3) to Form 10-K, to the captions Election of Directors Items 1, 2 and 3, Continuing Directors, and Other Information - Section 16(a) Beneficial Ownership Reporting Compliance in SCANA's definitive proxy statement for the 2000 annual meeting of shareholders which will be filed with the SEC pursuant to Regulation 14A, promulgated under the Securities Exchange Act of 1934. SCE&G: DIRECTORS The directors listed below were elected April 22, 1999 (except as otherwise indicated) to hold office until the next annual meeting of SCE&G's stockholders on April 27, 2000. Name and Year First Became Director Age Principal Occupation; Directorships Bill L. Amick 56 For more than five years, Chairman of the (1990) Board and Chief Executive Officer of Amick Farms, Inc., Amick Processing, Inc. and Amick Broilers, Inc., Batesburg, SC (vertically integrated broiler operations). Director, SCANA Corporation, Columbia, SC.; Public Service Company of North Carolina, Inc., (PSNC), Gastonia, NC; Blue Cross and Blue Shield of South Carolina, Columbia, SC. James A. Bennett 39 Since February 2000, Economic Development (1997) Director, First Citizens Bank, Columbia, SC. From December 1998 to February 2000, Senior Vice President and Director of Professional Banking, First Citizens Bank. From December 1994 to December 1998, Senior Vice President and Director of Community Banking, First Citizens Bank. Director, SCANA Corporation; PSNC, Gastonia, NC. William B. Bookhart, Jr. 58 For more than five years, a partner in (1979) Bookhart Farms, Elloree, SC (general farming). Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC. Name and Year First Became Director Age Principal Occupation; Directorships William C. Burkhardt* 62 For more than five years, President and Chief (2000) Executive Officer of Austin Quality Foods, Inc., Cary, NC. Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC; Capital Bank, Raleigh, NC. Hugh M. Chapman 67 Since June 30, 1997, retired from NationsBank (1988) South, Atlanta, GA (a division of NationsBank Corporation, bank holding company). For more than five years prior to June 30, 1997 Chairman of NationsBank South. Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC; West Point-Stevens, West Point, GA; PrintPack, Inc., Atlanta, GA; The Williams Companies, Inc., Tulsa, OK. Elaine T. Freeman 64 For more than five years, Executive Director (1992) of ETV Endowment of South Carolina, Inc. (non-profit organization), Spartanburg, SC. Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC; National Bank of South Carolina, Columbia, SC. Lawrence M. Gressette, Jr. 68 Since February 28, 1997, Chairman Emeritus (1987) of SCANA Corporation, Columbia, SC. For more than five years prior to February 28, 1997, Chairman of the Board and Chief Executive Officer of SCANA Corporation. For more than five years prior to December 13, 1995, President of SCANA Corporation. Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC. D. Maybank Hagood 38 For more than five years, President and Chief (1999) Executive Officer of William M. Bird and Company, Inc., Charleston, SC (wholesale distributor of floor covering materials). Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC. W. Hayne Hipp 60 For more than five years, Chairman, President (1983) and Chief Executive Officer, The Liberty Corporation, Greenville, SC (insurance and broadcasting holding company). Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC; The Liberty Corporation, Greenville, SC; Wachovia Corporation, Winston-Salem, NC. Name and Year First Became Director Age Principal Occupation; Directorships Lynne M. Miller 48 Since February 1998, Chief Executive Officer (1997) of Environmental Strategies Corporation, Reston, VA (environmental consulting and engineering). For more than five years prior to February 1998, President of Environmental Strategies Corporation. Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC; Adams National Bank, Washington, DC. John B. Rhodes 69 For more than five years, Chairman and Chief (1967) Executive Officer, Rhodes Oil Company, Inc., Walterboro, SC (distributor of petroleum products). Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC. Maceo K. Sloan 50 For more than five years, Chairman, President (1997) and Chief Executive Officer of Sloan Financial Group, Inc. (holding company) and Chairman and Chief Executive Officer of NCM Capital Management Group, Inc. (investment company), Durham, NC. Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC; MRF Bankcorp, Inc., and its subsidiary Farmers and Mechanics Bank, Durham, NC; Virtual Technology Corporation, Minneapolis, MN. Harold C. Stowe 53 Since March 1997, President and Chief Executive (1999) Officer of Canal Industries, Inc., Conway, SC (forest products industry). From 1996 to March 1997, Co-President of Canal Industries, Inc. From 1991 to 1996, Executive Vice President of CSI Group, Inc., a division of Canal Industries, Inc. Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC; Canal Industries, Inc., Conway, SC; Ruddick Corporation, Charlotte, NC. Name and Year First Became Director Age Principal Occupation; Directorships William B. Timmerman 53 Since March 1, 1997, Chairman and Chief (1991) Executive Officer of SCANA Corporation, Columbia, SC. Since December 13, 1995, President of SCANA Corporation. From August 21, 1996 to March 1, 1997, Chief Operating Officer of SCANA Corporation. From May 1, 1994 to December 13, 1995, Executive Vice President of SCANA Corporation. From at least March 1, 1995 to February 20, 1996, Chief Financial Officer and Controller of SCANA Corporation. Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC; Powertel, Inc., West Point, GA; ITC^DeltaCom, Inc. West Point, GA; The Liberty Corporation, Greenville, SC. G. Smedes York* 59 For more than five years, President and (2000) treaser of York Properties, Inc., Raleigh, NC. Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC. Charles E. Zeigler, Jr.* 53 Since February 2000, President and Chief (2000) Operating Officer of PSNC, Gastonia, NC. From February 1993 to February 2000, Chairman, President and Chief Executive Officer of PSNC. Director, SCANA Corporation, Columbia, SC; PSNC, Gastonia, NC. * Became a director of SCE&G on March 15, 2000. EXECUTIVE OFFICERS OF SCE&G SCE&G's officers are elected at the annual organizational meeting of the Board of Directors and hold office until the next such organizational meeting, unless the Board of Directors shall otherwise determine, or unless a resignation is submitted. Positions Held During Name Age Past Five Years Dates W.B. Timmerman 53 Chairman of the Board and Chief Executive Officer 1997-present President, SCANA 1995-present Chief Operating Officer, SCANA 1996-1997 President, SCI, an affiliate 1996-1997 Executive Vice President, SCANA *-1995 Chief Financial Officer and Controller, SCANA *-1996 J. L. Skolds 49 President and Chief Operating Officer 1996-present Senior Vice President - Generation *-1996 Senior Vice President - Nuclear Operations *-1995 K. B. Marsh 44 Senior Vice President - Finance, Chief Financial Officer and Controller, SCANA 1998-present Vice President 1996-present Vice President - Finance, Chief Financial Officer and Controller, SCANA 1996-1998 Vice President - Finance, Treasurer and Secretary, SCANA *-1996 H. T. Arthur 54 Senior Vice President and General Counsel 1998-present Vice President and General Counsel 1996-1998 *Indicates position held at least since March 1, 1995 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE All of SCE&G's common stock is held by its parent, SCANA Corporation. The required forms indicate that no equity securities of SCE&G are owned by its directors and executive officers. Based solely on a review of the copies of such forms and amendments furnished to SCE&G and written representations from the executive officers and directors, SCE&G believes that during 1999 all Section 16(a) filing requirements applicable to its executive officers, directors and greater than 10 percent beneficial owners were complied with. ITEM 11. EXECUTIVE COMPENSATION SCANA: The information called for by Item 11, Executive Compensation, is incorporated herein by reference to the captions Director Compensation and Compensation Committee Interlocks and Insider Participation, and Executive Compensation in SCANA's definitive proxy statement for the 2000 annual meeting of shareholders. SCE&G: The information called for by Item 11, Executive Compensation, is as follows: SUMMARY COMPENSATION TABLE Name and Principal Year Annual Compensation Long-Term Position Compensation(2)(3) Other Payouts (4) (1) Annual LTIP All Other Salary Bonus Compensation Payouts Compensation ($) ($) ($) ($) ($) W. B. Timmerman Chairman, President 1999 490,313 312,900 17,212 298,813 29,419 and Chief Executive 1998 455,909 303,780 17,514 - 27,138 Officer - SCANA 1997 400,634 318,815 12,220 88,338 24,038 J. L. Skolds 1999 330,665 168,288 16,232 150,618 19,840 President and Chief 1998 305,123 163,399 14,099 - 18,201 Operating Officer - SCE&G 1997 277,132 161,677 5,777 70,283 16,628 K. B. Marsh 1999 241,354 128,058 10,337 81,555 14,481 Senior Vice President- 1998 219,860 99,372 8,654 - 13,122 Finance, Chief Financial 1997 199,845 104,276 2,945 44,491 11,991 Officer and Controller - SCANA H. T. Arthur 1999 219,806 93,825 15,939 65,843 13,188 Senior Vice President 1998 203,162 99,372 9,534 - 12,190 and General Counsel 1997 178,173 84,438 5,158 23,858 10,690 G. J. Bullwinkel 1999 239,973 93,825 14,172 81,555 14,398 Senior Vice President 1998 229,152 99,372 11,726 - 11,726 - Governmental Affairs, 1997 219,273 92,796 7,776 70,283 7,776 Economic Development and Customer Relations - ----------------- (1) Payments under the Annual Incentive Plan. (2) For 1999, other annual compensation consists of automobile allowance, life insurance premiums on policies owned by named executive officers and payments to cover taxes on benefits of $9,000, $7,435 and $777 for Mr. Timmerman; $9,000, $6,878 and $354 for Mr. Skolds; $9,000, $1,183 and $154 for Mr.Marsh; $9,000, $6,830, and $109 for Mr. Arthur and $9,000, $4,993 and $179 for Mr. Bullwinkel. (3) Payments under the Performance Share Plan. (4) All other compensation for all named executive officers consists solely of contributions to defined contribution plans. The following table lists the target awards made in 1999 (for potential payment in 2002) under the Performance Share Plan and estimated future payouts under that plan at threshold, target and maximum levels for each of the executive officers included in the Summary Compensation Table. LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR Number of Performance Estimated Future Payouts Under Shares, or Other Non-Stock Price-Based Plans Units or Period Until Other Maturation Threshold Target Maximum Name Rights(#) or Payout (#) (#) (#) W. B. Timmerman 9,700 1999-2001 3,880 9,700 14,550 J. L. Skolds 4,890 1999-2001 1,956 4,890 7,335 K. B. Marsh 3,780 1999-2001 1,512 3,780 5,670 H. T. Arthur 2,640 1999-2001 1,056 2,640 3,960 G. J. Bullwinkel 2,640 1999-2001 1,056 2,640 3,960 Payouts occur when SCANA's Total Shareholder Return is in the top two-thirds of the Performance Share Plan peer group, and will vary based on SCANA's ranking against the peer group. Executives earn threshold payouts at the 33rd percentile of three-year performance. Target payouts will be made at the 50th percentile of three-year performance. Maximum payouts will be made when performance is at or above the 75th percentile of the peer group. Payments will be made on a sliding scale for performance between threshold and target and target and maximum. No payouts will be earned if performance is at less than the 33rd percentile. Awards are designated as target shares of SCANA Common Stock and may be paid in stock or cash or a combination of stock and cash. DEFINED BENEFIT PLANS In addition to its Retirement Plan for all eligible employees, SCANA has Supplemental Executive Retirement Plans ("SERPs") for certain eligible employees, including officers. A SERP is an unfunded plan, that provides for benefit payments in addition to those payable under a qualified retirement plan. It maintains uniform application of the Retirement Plan benefit formula and would provide, among other benefits, payment of Retirement Plan formula pension benefits, if any, which exceed those payable under the Internal Revenue Code ("IRC") maximum benefit limitations. The following table illustrates the estimated maximum annual benefits payable upon retirement at normal retirement date under SCANA's Retirement Plan and the SERPs. Pension Plan Table Final Service Years Average Pay 15 20 25 30 35 -------------------------------------------------------------- $150,000 $ 41,578 $ 55,437 $ 69,296 $ 83,156 $ 85,765 200,000 56,578 75,437 94,296 113,156 117,015 250,000 71,578 95,437 119,296 143,156 148,265 300,000 86,578 115,437 144,296 173,156 179,515 350,000 101,578 135,437 169,296 203,156 210,765 400,000 116,578 155,437 194,296 233,156 242,015 450,000 131,578 175,437 219,296 263,156 273,265 500,000 146,578 195,437 244,296 293,156 304,515 550,000 161,578 215,437 269,296 323,156 335,765 600,000 176,578 235,437 294,296 353,156 367,015 650,000 191,578 255,437 319,296 383,156 398,265 700,000 206,578 275,437 344,296 413,156 429,515 750,000 221,578 295,437 369,296 443,156 460,765 800,000 236,578 315,437 394,296 473,156 492,015 850,000 251,578 335,437 419,296 503,156 523,265 900,000 266,578 355,437 444,296 533,156 554,515 950,000 281,578 375,437 469,296 563,156 585,765 1,000,000 296,578 395,437 494,296 593,156 617,015 For all the executive officers included in the Summary Compensation Table, the 1999 compensation shown in the column labeled "Salary" of the Summary Compensation Table is covered by the Retirement Plan or SERP. As of December 31, 1999, Messrs. Timmerman, Skolds, Arthur, Bullwinkel and Marsh had credited service under the Retirement Plan (or its equivalent under the SERP) of 21, 13, 17, 28 and 15 years, respectively. Benefits are computed based on a straight-life annuity with an unreduced 60 percent surviving spouse benefit. The amounts in the above table assume continuation of the primary Social Security benefits in effect at January 1, 2000 and are not subject to any deduction for Social Security or other offset amounts. SCANA has a Key Employee Retention Plan (the "Key Employee Retention Plan") covering officers and certain other executive employees that provides supplemental retirement or death benefits for participants. Under the plan, each participant may elect to receive either (i) a monthly retirement benefit for 180 months upon retirement (at or after the earlier of the attainment of age 65, or in some cases, completion of 35 years of service with the Company) equal to 25 percent of the average monthly salary of the participant over his final 36 months of employment prior to such retirement, or (ii) an optional death benefit payable monthly to a participant's designated beneficiary for 180 months, in an amount equal to 35 percent of the average monthly salary of the participant over his final 36 months of employment prior to such retirement. In the event of the participant's death prior to such retirement, SCANA will pay to the participant's designated beneficiary for 180 months, a monthly benefit equal to 50 percent of the participant's base monthly salary in effect at death. All of the executive officers named in the Summary Compensation Table are participating in the plan. The estimated annual retirement benefits payable at age 65 under the Key Employee Retention Plan, based on projected eligible compensation (assuming increases of 4 percent per year), to the executive officers named in the Summary Compensation Table are as follows: Mr. Timmerman-$185,129; Mr. Skolds-$147,276; Mr. Arthur-$80,102, Mr. Bullwinkel-$97,715 and Mr. Marsh-$131,754 . TERMINATION, SEVERANCE AND CHANGE IN CONTROL ARRANGEMENTS SCANA maintains an Executive Benefit Plan Trust. The purpose of the Trust is to help retain and attract quality leadership in key SCANA positions in the current transitional environment of the utilities industry. The Trust is used to receive SCANA contributions which may be used to pay the deferred compensation benefits of certain directors, executives and other key employees of SCANA in the event of a Change in Control (as defined in the Trust). All the executive officers included in the Summary Compensation Table participate in some of the plans listed below which are covered by the Trust including, in all cases, the Plans listed at (7) and (8). (1) SCANA Corporation Voluntary Deferral Plan (2) SCANA Corporation Supplementary Voluntary Deferral Plan (3) SCANA Corporation Key Employee Retention Plan (4) SCANA Corporation Supplemental Executive Retirement Plan (5) SCANA Corporation Performance Share Plan (6) SCANA Corporation Annual Incentive Plan (7) SCANA Corporation Key Executive Severance Benefits Plan (8) SCANA Corporation Supplementary Key Executive Severance Benefits Plan The Trust and the plans provide flexibility to SCANA in responding to a Potential Change in Control (as defined in the Trust) depending upon whether the Change in Control would be viewed as being "hostile" or "friendly". This flexibility includes the ability to deposit and withdraw SCANA contributions up to the point of a Change in Control, and to affect the number of plan participants who may be eligible for benefit distributions upon, or following, a Change in Control. The Key Executive Severance Benefits Plan is operative as a "single trigger" plan, meaning that upon the occurrence of a "hostile" Change in Control, benefits provided under Plans (1) through (6) above would be distributed in a lump sum. In contrast, the Supplementary Key Executive Severance Benefits Plan is operative for a period of 24 months following a Change in Control which prior to its occurrence is viewed as being "friendly". In this circumstance, the Key Executive Severance Benefits Plan is inoperative. The Supplementary Key Executive Severance Benefits Plan is a "double trigger" plan that would pay benefits in lieu of those otherwise provided under plans (1) through (6) in either of two circumstances: (a) the participant's involuntary termination of employment without "Just Cause", or (b) the participant's voluntary termination of employment for "Good Reason" (as these terms are defined in the Supplementary Key Executive Severance Benefits Plan). Benefit distributions relative to a Change in Control, as to which either the Key Executive Severance Benefits Plan or the Supplementary Key Executive Severance Benefits Plan is operative, will be grossed up to include estimated federal, state and local income taxes and any applicable excise taxes owed by plan participants on those benefits. The benefit distributions under the Key Executive Severance Benefits Plan would include the following: o An amount equal to three times the sum of: (1) the officer's annual base salary in effect as of the Change in Control and (2) the larger of (i) the officer's target award in effect as of the Change in Control under the Annual Incentive Plan or (ii) the officer's average of actual annual incentive bonuses received during the prior three years under the Annual Incentive Plan. o An amount equal to the projected cost for coverage for three full years following the Change in Control as though the officer had continued to be a SCANA employee with respect to medical coverage, long-term disability coverage and either Life Plus (a special life insurance program combining whole life and term coverages) or group term life coverage in accordance with the officer's election, in each case so as to provide substantially the same level of coverage and benefits as the officer enjoyed as of the date of the Change in Control. o A benefit distribution under the Voluntary Deferral Plan calculated as of the date of the Change in Control including implied interest through such date, and a benefit under the Supplementary Voluntary Deferral Plan calculated to include any implied dividends accrued under the plan through the date of the Change in Control. o A benefit distribution under the Key Employee Retention Plan calculated as of the date of the Change in Control to include projected increases to each participant's base salary applying cost of living increases and as though the participant had reached the earlier of age 65 or completed 35 years of service, as applicable. o A benefit distribution under the Supplemental Executive Retirement Plan calculated as an actuarial equivalent through the date of the Change in Control with three additional years of compensation at the participant's rate then in effect as though the participant had attained age 65 and completed 35 years of benefit service and without any early retirement or other actuarial reductions, which benefit would then be reduced by the actuarial equivalent of the participant's qualified plan benefit amount under the Retirement Plan. o A benefit distribution under the Performance Share Plan equal to 100 percent of the targeted awards for all performance periods which are not yet completed as of the date of the Change in Control. Benefits under the Supplementary Key Employee Severance Benefits Plan would be the same except that the benefits under the Voluntary Deferral Plan and the Supplementary Voluntary Deferral Plan would be increased by implied interest from the date of the Change in Control until the end of the month preceding the month in which the benefit is distributed. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION For the 1999 fiscal year, decisions on various elements of executive compensation were made by the Management Development and Corporate Performance Committee and the Performance Share Plan Committee. No officer, employee or former officer of SCANA or any of its subsidiaries served as a member of the Management Development and Corporate Performance Committee or the Performance Share Plan Committee except Mr. Timmerman, who served as an ex-officio, non-voting member of the Management Development and Corporate Performance Committee. Although Mr. Timmerman served as a member of the Management Development and Corporate Performance Committee, he did not participate in any of its decisions concerning executive officer compensation. Since January 1, 1999, SCANA and its subsidiaries have engaged in business transactions with entities with which Mr. Amick (a member of the Management Development and Corporate Performance Committee) is related. Mr. Amick is President and a 20 percent owner of Team Amick Motor Sports LLC, a business that owns and operates a NASCAR sanctioned racing car. This car participates in the Busch Grand National Racing Series. During 1999, SCANA participated in a shared sponsorship agreement with Powertel Inc., a wireless personal communications services (PCS) provider, to sponsor the Team Amick Racing Car. SCANA's portion of the sponsorship during 1999 was $841,797, pursuant to which SCANA received promotional considerations associated with NASCAR racing. Powertel's sponsorship was approximately $600,000. As of January 31, 2000, SCANA Communications Holdings, Inc., a subsidiary of SCANA, owned a 32.41 percent interest in Powertel.. SCANA is not continuing as a primary sponsor but has sponsorship rights for advertising up to an amount of $250,000 with Team Amick Motor Sports LLC in 2000. SCANA has been informed that Powertel will continue its primary sponsorship for 2000. Directors Compensation Board Fees Officers of SCANA who are also directors do not receive additional compensation for their service as directors. Since April 1999, compensation for non-employee directors has included the following: o an annual retainer of $19,400 (41 percent of the annual retainer fee is paid in shares of SCANA Common Stock); o a fee of $2,000 for each board meeting attended; o a fee of $1,000 for attendance at a committee meeting, which is held on a day other than a regular meeting of the board (no additional fees are paid if a committee meeting is held on the same day as a board meeting); o a fee of $200 for participation in a telephone conference meeting; o a fee of $1,000 for attendance at an all-day conference; and o reimbursement for expenses incurred in connection with all of the above. Deferral Plan Non-employee directors may participate in SCANA's Voluntary Deferral Plan. This plan permits non-employee directors to defer receipt of all or part of their fees (except the portion paid in shares of SCANA Common Stock) and receive, upon ceasing to serve as director, the amount that would have resulted from investing the deferred amounts in an interest bearing savings account. Since January 1, 1999, the interest rate has been set at the announced prime rate as published in the Money Rates Section of The Wall Street Journal. Mr. Rhodes and Mr. Bennett were the only directors participating in the plan during 1999. Mr. Rhodes became a participant in July 1987, and Mr. Bennett in December 1997. During 1999, interest credited to Mr. Rhodes' deferral account was $34,953 and interest credited to Mr. Bennett's deferral account was $827. Endowment Plan. Upon election to a second term, a director becomes eligible to participate in the SCANA Director Endowment Plan, which provides for SCANA to make a tax deductible, charitable contribution totaling $500,000 to institutions of higher education designated by the director. The plan is intended to reinforce SCANA's commitment to quality higher education and to enhance its ability to attract and retain qualified board members. A portion is contributed upon retirement of the director and the remainder upon the director's death. The plan is funded in part through insurance on the lives of the directors. Designated in-state institutions of higher education must be approved by the Chief Executive Officer of SCANA. Any out-of-state designation must be approved by the Management Development and Corporate Performance Committee. The designated institutions are reviewed on an annual basis by the Chief Executive Officer to assure compliance with the intent of the program. Other As a Company retiree, Mr. Gressette receives a monthly benefit of $9,488 under the Key Employee Retention Plan and a monthly benefit of $28,380 under the Retirement Plan and a SERP. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT SCANA: The information called for by Item 12, Security Ownership of Certain Beneficial Owners and Management is incorporated herein by reference to the caption Share Ownership of Directors, Nominees and Executive Officers and Five Percent Owner of SCANA Common Stock in SCANA's definitive proxy statement for the 2000 annual meeting of shareholders. SCE&G: All of the outstanding voting securities of SCE&G are owned by SCANA. The following table list shares of SCANA common stock beneficially owned on March 10, 2000 by each director, each nominee and each executive officer named in the Summary Compensation table on page 109. SECURITY OWNERSHIP OF MANAGEMENT Amount and Nature Amount and Nature of Beneficial Ownership of of Beneficial Ownership of SCANA Common Stock *(1) (2) SCANA Common Stock *(1) (2)(3) Name Name - ----- ----- --- B. L. Amick 10,785 W. H. Hipp 4,084 H. T. Arthur 11,860 K. B. Marsh 13,613 J. A. Bennett 1,556 L. M. Miller 1,834 W. B. Bookhart, Jr. 20,424 J. B. Rhodes 11,560 G. J. Bullwinkel 26,495 J. L. Skolds 13,365 W. C. Burkhardt 3,066 M. S. Sloan 2,826 H. M. Chapman 6,844 H. C. Stowe 3,284 E. T. Freeman 5,236 W. B. Timmerman 50,844 L. M. Gressette, Jr. 62,490 G. S. York 8,561 D. M. Hagood 347 C. E. Zeigler, Jr. 26,025 *Each of the directors, nominees and named executive officers owns less than 1% of the shares outstanding. All directors and executive officers as a group (19 persons) TOTAL 258,604.TOTAL PERCENT OF CLASS, outstanding and entitled to vote at the Annual Meeting of Shareholders 0.2%.---------- 1) Includes shares owned by close relatives, the beneficial ownership of which is disclaimed by the director, nominee or named executive officers, as follows: Mr. Amick-480; Mr. Bookhart-5,567; Mr. Gressette-1,060; and by all directors, nominees and executive officers 7,107 in total. (2) Includes shares purchased through February 29, 2000, by the Trustee under SCANA's Stock Purchase Savings Plan. (3) Includes shares that may be issued within 60 days under the Performance Share Plan on account of the 1997-1997 performance period. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS SCANA: The information called for by Item 13, Certain Relationships and Related Transactions is incorporated herein by reference to the captions Compensation Committee Interlocks and Insider Participation and Other Related Transactions in SCANA's definitive proxy statement for the 2000 annual meeting of stockholders. Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate by reference future filings, including this Annual Report on Form 10-K, in whole or in part, the "Report on Executive Compensation" and the "Performance Graph" included in SCANA's definitive proxy statement for the 2000 annual meeting of shareholders shall not be incorporated by reference into any such filings. SCE&G: For information regarding certain relationships and related transactions, see Item 11, Executive Compensation under the heading Compensation Committee Interlocks and Insider Participation. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report on this Form 10-K: (1) Financial Statements and Schedules: Independent Auditor's Reports on the financial statements for SCANA and SCE&G are listed under Item 8 herein. The financial statements and supplementary financial data filed as part of this report for SCANA and SCE&G are listed under Item 8 herein. The Financial Statement Schedules filed as part of this report for SCANA and SCE&G are listed beginning on page 117. (2) Exhibits Exhibits required to be filed with this Annual Report on Form 10-K are listed in the Exhibit Index following the signature page. Certain of such exhibits which have heretofore been filed with the Securities and Exchange Commission and which are designated by reference to their exhibit number in prior filings are hereby incorporated herein by reference and made a part hereof. Pursuant to rule 15d-21 promulgated under the Securities Exchange Act of 1934, the annual report for SCANA's employee stock purchase plan will be furnished under cover of Form 10-K/A to the Commission when the information becomes available. As permitted under Item 601(b)(4)(iii), instruments defining the rights of holders of long-term debt of less than 10 percent of the total consolidated assets of SCANA and its subsidiaries, have been omitted and SCANA agrees to furnish a copy of such instruments to the Commission upon request. (b) Reports on Form 8-K during the fourth quarter of 1999 None
SCANA: Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 1998, 1998 and 1997. For December 31, 1999 Additions Beginning Charged to Charged to Deductions Ending Description Balance Income Other Accounts From Reserves Balance - ---------------------------------------------------------------------------------------------- ---------------- Reserves deducted from related assets on the balance sheet: Uncollectible accounts 1,965,732 5,636,123 - 299,582 7,302,273 Reserves other than those deducted from assets on the balance sheet: Reserve for investment impairment 10,292,611 - - 6,158,843 4,133,768 Reserve for injuries and damages 4,287,986 1,352,448 - 418,890 5,221,544 Provision for pension and benefit Staff Reduction Plan 6,256,249 231,116 - - 6,487,365 Provision for environmental remediation and settlement 3,619,572 - - 395,751 3,223,821 For December 31, 1998 Additions Beginning Charged to Charged to Deductions Ending Description Balance Income Other Accounts from Reserves Balance - --------------------------------------- ---------------- ---------------- ------------------ ---------------- ------------------- Reserves deducted from related assets on the balance sheet: Uncollectible accounts 1,807,047 184,257 - 25,572 1,965,732 Reserves other than those deducted from assets on the balance sheet: Reserve for investment impairment 11,150,060 - - 857,449 10,292,611 Reserve for injuries and damages 4,187,594 461,462 - 361,070 4,287,986 Provision for pension and benefit Staff Reduction Plan 4,486,895 6,256,249 - 4,486,895 6,256,249 Provision for environmental remediation and settlement 4,006,562 - - 386,990 3,619,572 For December 31, 1997 Additions Beginning Charged to Charged to Deductions Ending Description Balance Income Other Accounts from Reserves Balance - --------------------------------------- ---------------- ---------------- ------------------ ---------------- ------------------- Reserves deducted from related assets on the balance sheet: Uncollected accounts 2,513,126 424 - 706,503 1,807,047 Reserves other than those deducted from assets on the balance sheet: Reserve for investment impairment 5,426,426 5,723,634 - - 11,150,060 Reserve for injuries and damages 5,135,643 1,158,902 - 2,106,951 4,187,594 Provision for pension and benefit Staff Reduction Plan 3,383,261 1,103,634 - - 4,486,895 Provision for environmental remediation and settlement 3,187,393 819,169 - - 4,006,562 SCE&G: Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 1999, 1998 and 1997. For December 31, 1999 Additions Beginning Charged to Charged to Deductions Ending Description Balance Income Other Accounts from Reserves Balance - --------------------------------------- ---------------- ---------------- ---------------- ---------------- ---------------- Reserves deducted from related assets on the balance sheet: Uncollectible accounts 611,001 80,000 - 154,001 537,000 Reserves other than those deducted from assets on the balance sheet: Reserve for injuries and damages 4,176,794 104,000 - 307,978 3,972,816 Provision for pension and benefit Staff Reduction Plan - - - - - Provision for environmental remediation and settlement 3,619,572 - - 395,751 3,223,821 For December 31, 1998 Additions Beginning Charged to Charged to Deductions Ending Description Balance Income Other Accounts from Reserves Balance - --------------------------------------- ---------------- ---------------- ---------------- ---------------- ---------------- Reserves deducted from related assets on the balance sheet: Uncollectible accounts 611,001 - - - 611,001 Reserves other than those deducted from assets on the balance sheet: Reserve for injuries and damages 4,039,148 460,462 - 322,816 4,176,794 Provision for pension and benefit Staff Reduction Plan 4,486,895 - - 4,486,895 - Provision for environmental remediation and settlement 4,006,562 - - 386,990 3,619,572 For December 31, 1997 Additions Beginning Charged to Charged to Deductions Ending Description Balance Income Other Accounts from Reserves Balance - --------------------------------------- ---------------- ---------------- ---------------- ---------------- ---------------- Reserves deducted from related assets on the balance sheet: Uncollectible accounts 873,001 - - 262,000 611,001 Reserves other than those deducted from assets on the balance sheet: Reserve for injuries and damages 5,135,643 1,010,456 - 2,106,951 4,039,148 Provision for pension and benefit Staff Reduction Plan 3,383,261 1,103,634 - - 4,486,895 Provision for environmental remediation and settlement 3,187,393 819,169 - - 4,006,562
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. SCANA CORPORATION By: s/W. B. Timmerman W. B. Timmerman, Chairman of the Board, President, Chief Executive Officer and Director By: s/K. B. Marsh (K. B. Marsh, Attorney-in-fact) DATE: March 24, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: s/W. B. Timmerman W. B. Timmerman, Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer) By: s/K. B. Marsh K. B. Marsh, Senior Vice President - Finance, Chief Financial Officer and Controller (Principal Financial and Accounting Officer) DATE: March 24, 2000 Directors: B. L. Amick W. H. Hipp J. A. Bennett L. M. Miller W. B. Bookhart, Jr. J. B. Rhodes W. C. Burkhardt M. K. Sloan H. M. Chapman H. C. Stowe E. T. Freeman G. S. York L. M. Gressette, Jr. C. E. Zeigler, Jr. D. M. Hagood SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof. SOUTH CAROLINA ELECTRIC & GAS COMPANY By: s/J. L. Skolds J. L. Skolds, President and Chief Operating Officer By: s/K. B. Marsh (K. B. Marsh, Attorney-in-Fact) Date: March 24, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: s/W. B. Timmerman W. B. Timmerman Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer) By: s/K. B. Marsh K. B. Marsh, Senior Vice President - Finance and Chief Financial Officer (Principal Financial Officer) Date: March 24, 2000 By: s/J. E. Addison J. E. Addison, Vice President and Controller (Principal Accounting Officer) Date: March 24, 2000 Directors: B. L. Amick W. H. Hipp J. A. Bennett L. M. Miller W. B. Bookhart, Jr. J. B. Rhodes W. C. Burkhardt M. K. Sloan H. M. Chapman H. C. Stowe E. T. Freeman G. S. York L. M. Gressette, Jr. C. E. Zeigler, Jr. D. M. Hagood EXHIBIT INDEX Applicable to Exhibit Form 10-K of No. SCANA SCE&G Description 2.01 X Agreement and Plan of Merger, dated as of February 16, 1999 as amended and restated as of May 10, 1999, by and among Public Service Company of North Carolina, Incorporated, SCANA Corporation, New Sub I, Inc. and New Sub II, Inc. (Filed as Exhibit 2.1 to SCANA Form S-4 on May 11, 1999 and incorporated by reference herein) 3.01 X Restated Articles of Incorporation of SCANA as adopted on April 26, 1989 (Filed as Exhibit 3-A to Registration Statement No. 33-49145 and incorporated by reference herein) 3.02 X Restated Articles of Incorporation of SCE&G, as adopted on December 15, 1993 (Filed as Exhibit 3.01 to Registration Statement No. 333-86387 and incorporated by reference herein) 3.03 X Articles of Amendment of SCANA, dated April 27, 1995 (Filed as Exhibit 4-B to Registration Statement No. 33-62421 and incorporated by reference herein) 3.04 X Articles of Amendment of SCE&G, dated June 7, 1994 and filed June 9, 1994 (Filed as Exhibit 3.02 to Registration Statement No. 333-86387 and incorporated by reference herein) 3.05 X Articles of Amendment of SCE&G, dated November 9, 1994 (Filed as Exhibit 3.03 to Registration Statement No. 333-86387 and incorporated by reference herein) 3.06 X Articles of Amendment of SCE&G, dated December 9, 1994 (Filed as Exhibit 3.04 to Registration Statement No. 333-86387 and incorporated by reference herein) 3.07 X Articles of Correction of SCE&G, dated January 17, 1995 (Filed as Exhibit 3.05 to Registration Statement No. 333-86387 and incorporated by reference herein) 3.08 X Articles of Amendment of SCE&G, dated January 13, 1995 and filed January 17, 1995 (Filed as Exhibit 3.06 to Registration Statement No. 333-86387 and incorporated by reference herein) 3.09 X Articles of Amendment of SCE&G, dated March 30, 1995 (Filed as Exhibit 3.07 to Registration Statement No. 333-86387 and incorporated by reference herein) 3.10 X Articles of Correction of SCE&G - Amendment to Statement filed March 30, 1995, dated December 13, 1995 (Filed as Exhibit 3.08 to Registration Statement No. 333-86387 and incorporated by reference herein) 3.11 X Articles of Amendment of SCE&G, dated December 13, 1995 (Filed as Exhibit 3.09 to Registration Statement No. 333-86387 and incorporated by reference herein) 3.12 X Articles of Amendment of SCE&G, dated February 18, 1997 (Filed as Exhibit 3-L to Registration Statement No. 333-24919 and incorporated by reference herein) Applicable to Exhibit Form 10-K of No. SCANA SCE&G Description 3.13 X Articles of Amendment of SCE&G, dated February 21, 1997 (Filed as Exhibit 3.11 to Registration Statement No. 333-86387 and incorporated by reference herein) 3.14 X Articles of Amendment of SCE&G, dated April 22, 1997 (Filed as Exhibit 3.12 to Registration Statement No. 333-86387 and incorporated by reference herein) 3.15 X Articles of Amendment of SCE&G, dated April 9, 1998 (Filed as Exhibit 3.13 to Registration Statement No. 333-86387 and incorporated by reference herein) 3.16 X Articles of Amendment of SCE&G, dated May 19, 1999 (Filed herewith on page 130) 3.17 X Articles of Amendment of SCE&G, dated August 13, 1999 (Filed herewith on page 132) 3.18 X Articles of Amendment of SCE&G, dated March 1, 2000 (Filed herewith on page 134) 3.19 X By-Laws of SCANA as revised and amended on February 22, 2000. (Filed herewith on page 136) 3.20 X By-Laws of SCE&G as amended and adopted on February 22, 2000. (Filed herewith on page 156) 4.01 X Articles of Exchange of South Carolina Electric and Gas Company and SCANA Corporation (Filed as Exhibit 4-A to Post-Effective Amendment No. 1 to Registration Statement No. 2-90438 and incorporated by reference herein) 4.02 X Indenture dated as of November 1, 1989 between SCANA Corporation and The Bank of New York, as Trustee (Filed as Exhibit 4-A to Registration No. 33-32107 and incorporated by reference herein) 4.03 X X Indenture dated as of January 1, 1945, between the South Carolina Power Company and Central Hanover Bank and Trust Company, as Trustee, as supplemented by three Supplemental Indentures dated respectively as of May 1, 1946, May 1, 1947 and July 1, 1949 (Filed as Exhibit 2-B to Registration Statement No. 2-26459 and incorporated by reference herein) 4.04 X X Fourth Supplemental Indenture dated as of April 1, 1950, to Indenture referred to in Exhibit 4.03, pursuant to which SCE&G assumed said Indenture (Exhibit 2-C to Registration Statement No. 2-26459 and incorporated by reference herein) Applicable to Exhibit Form 10-K of No. SCANA SCE&G Description 4.05 X X Fifth through Fifty-third Supplemental Indenture referred to in Exhibit 4.03 dated as of the dates indicated below and filed as exhibits to the Registration Statements whose file numbers are set forth below and are incorporated by reference herein December 1, 1950 Exhibit 2-D to Registration No. 2-26459 July 1, 1951 Exhibit 2-E to Registration No. 2-26459 June 1, 1953 Exhibit 2-F to Registration No. 2-26459 June 1, 1955 Exhibit 2-G to Registration No. 2-26459 November 1, 1957 Exhibit 2-H to Registration No. 2-26459 September 1, 1958 Exhibit 2-I to Registration No. 2-26459 September 1, 1960 Exhibit 2-J to Registration No. 2-26459 June 1, 1961 Exhibit 2-K to Registration No. 2-26459 December 1, 1965 Exhibit 2-L to Registration No. 2-26459 June 1, 1966 Exhibit 2-M to Registration No. 2-26459 June 1, 1967 Exhibit 2-N to Registration No. 2-29693 September 1, 1968 Exhibit 4-O to Registration No. 2-31569 June 1, 1969 Exhibit 4-C to Registration No. 33-38580 December 1, 1969 Exhibit 4-O to Registration No. 2-35388 June 1, 1970 Exhibit 4-R to Registration No. 2-37363 March 1, 1971 Exhibit 2-B-17 to Registration No. 2-40324 January 1, 1972 Exhibit 2-B to Registration No. 33-38580 July 1, 1974 Exhibit 2-A-19 to Registration No. 2-51291 May 1, 1975 Exhibit 4-C to Registration No. 33-38580 July 1, 1975 Exhibit 2-B-21 to Registration No. 2-53908 February 1, 1976 Exhibit 2-B-22 to Registration No. 2-55304 December 1, 1976 Exhibit 2-B-23 to Registration No. 2-57936 March 1, 1977 Exhibit 2-B-24 to Registration No. 2-58662 May 1, 1977 Exhibit 4-C to Registration No. 33-38580 February 1, 1978 Exhibit 4-C to Registration No. 33-38580 June 1, 1978 Exhibit 2-A-3 to Registration No. 2-61653 April 1, 1979 Exhibit 4-C to Registration No. 33-38580 June 1, 1979 Exhibit 2-A-3 to Registration No. 33-38580 April 1, 1980 Exhibit 4-C to Registration No. 33-38580 June 1, 1980 Exhibit 4-C to Registration No. 33-38580 December 1, 1980 Exhibit 4-C to Registration No. 33-38580 April 1, 1981 Exhibit 4-D to Registration No. 33-49421 June 1, 1981 Exhibit 4-D to Registration No. 2-73321 March 1, 1982 Exhibit 4-D to Registration No. 33-49421 April 15, 1982 Exhibit 4-D to Registration No. 33-49421 May 1, 1982 Exhibit 4-D to Registration No. 33-49421 December 1, 1984 Exhibit 4-D to Registration No. 33-49421 December 1, 1985 Exhibit 4-D to Registration No. 33-49421 June 1, 1986 Exhibit 4-D to Registration No. 33-49421 February 1, 1987 Exhibit 4-D to Registration No. 33-49421 September 1, 1987 Exhibit 4-D to Registration No. 33-49421 January 1, 1989 Exhibit 4-D to Registration No. 33-49421 January 1, 1991 Exhibit 4-D to Registration No. 33-49421 February 1, 1991 Exhibit 4-D to Registration No. 33-49421 July 15, 1991 Exhibit 4-D to Registration No. 33-49421 August 15, 1991 Exhibit 4-D to Registration No. 33-49421 April 1, 1993 Exhibit 4-E to Registration No. 33-49421 July 1, 1993 Exhibit 4-D to Registration No. 33-57955 May 1, 1999 Exhibit 4.04 to Registration No. 333-86387 Applicable to Exhibit Form 10-K of No. SCANA SCE&G Description 4.06 X X Indenture dated as of April 1, 1993 from South Carolina Electric & Gas Company to NationsBank of Georgia, National Association (Filed as Exhibit 4-F to Registration Statement No. 33-49421 and incorporated by reference herein) 4.07 X X First Supplemental Indenture to Indenture referred to in Exhibit 4.06 dated as of June 1, 1993 (Filed as Exhibit 4-G to Registration Statement No. 33-49421 and incorporated by reference herein) 4.08 X X Second Supplemental Indenture to Indenture referred to in Exhibit 4.06 dated as of June 15, 1993 (Filed as Exhibit 4-G to Registration Statement No. 33-57955 and incorporated by reference herein) 4.09 X X Trust Agreement for SCE&G Trust I (Filed as Exhibit 4-G to SCE&G Form 10-K for the year ended December 31, 1997 and incorporated by reference herein) 4.10 X X Certificate of Trust of SCE&G Trust I (Filed as Exhibit 4-H to SCE&G Form 10-K for the year ended December 31, 1997 and incorporated by reference herein) 4.11 X X Junior Subordinated Indenture for SCE&G Trust I (Filed as Exhibit 4-I to SCE&G Form 10-K for the year ended December 31, 1997 and incorporated by reference herein) 4.12 X X Guarantee Agreement for SCE&G Trust I (Filed as Exhibit 4-J to SCE&G Form 10-K for the year ended December 31, 1997 and incorporated by reference herein) 4.13 X X Amended and Restated Trust Agreement for SCE&G Trust I (Filed as Exhibit 4-K to SCE&G Form 10-K for the year ended December 31, 1997 and incorporated by reference herein) 9.01 Voting Trust Agreement (Not Applicable) 10.01 X SCANA Voluntary Deferral Plan as amended through October 21, 1997 (Filed as Exhibit 10.01(a) to Registration Statement No. 333-86803 and incorporated by reference herein) 10.02 X SCANA Supplemental Executive Retirement Plan as amended and restated effective as of October 21, 1997 (Filed as Exhibit 10.01(b) to Registration Statement No. 333-86803 and incorporated by reference herein) 10.03 X SCANA Supplementary Voluntary Deferral Plan as amended and restated through October 21, 1997 (Filed as Exhibit 10-B to SCANA Form 10-K for the year ended December 31, 1997 and incorporated by reference herein) 10.04 X SCANA Key Executive Severance Benefits Plan as amended and restated effective as of October 21, 1997 (Filed as Exhibit 10.01(c) to Registration Statement No. 333-86803 and incorporated by reference herein) 10.05 X SCANA Supplementary Key Executive Severance Benefits Plan effective as of December 17, 1997 (Filed as Exhibit 10.01(d) to Registration Statement No. 333-86803 and incorporated by reference herein) Applicable to Exhibit Form 10-K of No. SCANA SCE&G Description 10.06 X SCANA Performance Share Plan as amended and restated effective December 1, 1999 (Filed herewith on page 177) 10.07 X SCANA Key Employee Retention Plan as amended and restated effective as of October 21, 1997 (Filed as Exhibit 10-E to Form 10-K for the year ended December 31, 1997 and incorporated by reference herein) 10.08 X Description of SCANA Whole Life Option (Filed as Exhibit 10-F to Form 10-K for the year ended December 31, 1991, under cover of Form SE, File No. 1-8809 and incorporated by reference herein) 10.09 X Description of SCANA Corporation Annual Incentive Plan (Filed as Exhibit 10-G to Form 10-K for the year ended December 31, 1991, under cover of Form SE, File No. 1-8809 and incorporated by reference herein) 10.10 X SCANA Corporation Nonemployee Director Stock Plan effective January 1, 1997 (Filed as Exhibit 4.3 to Registration Statement No. 333-18973 and incorporated by reference herein) 11.01 Statement Re Computation of Per Share Earnings (Not Applicable) 12.01 X X Statements Re Computation of Ratios 13.01 Annual Report to Security Holders, Form 10-Q or Quarterly Report to Security Holders (Not Applicable) 16.01 Letter Re Change in Certifying Accountant (Not Applicable) 18.01 Letter Re Change in Accounting Principles (Not Applicable) 21.01 Subsidiaries of the Registrant (Not Applicable) 22.01 Published Report Regarding Matters Submitted to Vote of Security Holders (Not Applicable) 23.01 X Consents of Experts and Counsel Independent Auditors' Consent 23.02 X Consents of Experts and Counsel Independent Auditors' Consent 24.01 Power of Attorney (Not Applicable) 27.01 X Financial Data Schedule 27.02 X Financial Data Schedule 99.01 Additional Exhibits (Not Applicable) EX-3.(I) 2 ARTICLES OF AMENDMENT Exhibit 3.16 STATE OF SOUTH CAROLINA SECRETARY OF STATE ARTICLES OF AMENDMENT Pursuant to Section 33-10-106 of the 1976 South Carolina Code, as amended, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: 1. The name of the corporation is SOUTH CAROLINA ELECTRIC & GAS COMPANY. 2. On , the corporation adopted the following Amendment(s) of its Articles of Incorporation: NOT APPLICABLE 3. The manner, if not set forth in the amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the Amendment shall be effected, is as follows: (a) The number of redeemable shares of the corporation reacquired by redemption or purchase is 9,407 itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 4.50% 1,600 Cumulative Preferred Stock ($50 par value) 4.60% (Series A) 1,842 Cumulative Preferred Stock ($50 par value) 5.125% 2,000 Cumulative Preferred Stock ($50 par value) 6.00% 565 Cumulative Preferred Stock ($50 par value) 4.60% (Series B) 3,400 (b) The aggregate number of issued shares of the corporation after giving effect to such cancellation is 41,656,443, itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 5% 25,209 " " " " 4.60% 0 " " " " 4.50% 12,800 " " " " 4.60% (Series A) 20,052 " " " " 5.125% 68,000 " " " " 4.60% (Series B) 61,200 " " " " 6% 73,035 " " " " 9.40% 0 " " " ($100 par value) 8.12% 0 " " " " 7.70% 0 " " " " 8.40% 0 " " " ($50 par value) 8.72% 0 " " " ($100 par value) 6.52% 1,000,000 Common Stock ($4.50 par value) ------ 40,296,147 ---------- 41,656,443 (c) The amount of the stated capital of the corporation after giving effect to such cancellation is $299,347,461.50. Page 2 (d) The number of shares which the corporation has authority to issue after giving effect to such cancellation is 56,450,296, itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 5% 125,209 " " " " 4.60% 0 " " " " 4.50% 12,800 " " " " 4.60% (Series A) 20,052 " " " " 5.125% 68,000 " " " " 4.60% (Series B) 61,200 " " " " 6% 73,035 " " " " 9.40% 0 " " " ($100 par value) 8.12% 0 " " " " 7.70% 0 " " " " 8.40% 0 " " " ($50 par value) 8.72% 0 " " " ($100 par value) 6.52% 1,000,000 Serial Preferred Stock ($50 par value) (1 vote) --- 640,000 Serial Preferred Stock ($100 par value) (1 vote) ---- 1,750,000 Serial Preferred Stock ($25 par value) (1/4 vote) ---- 2,000,000 Serial Preferred Stock ($50 par value) (1/2 vote) ---- 700,000 Common Stock ($4.50 par value) ---- 50,000,000 ---------- 56,450,296 -- 4. (a) |__| Amendment(s) adopted by shareholder action. At the date of adoption of the amendment, the number of outstanding shares of each voting group entitled to vote separately on the Amendment, and the vote of such shares was: Number of Number of Number of Votes Number of Undisputed Voting Outstanding Votes Entitled Represented at Shares Voted Group Shares to be Cast the meeting For Against --- (b) |XX| The Amendment(s) was duly adopted by the incorporators or board of directors without shareholder approval pursuant to Sections 33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina Code, as amended, and shareholder action was not required. 5. Unless a delayed date is specified, the effective date of these Articles of Amendment shall be the date of the acceptance for filing by the Secretary of State (See Section 33-1-230(b)): SOUTH CAROLINA ELECTRIC & GAS COMPANY Date: May 19, 1999 By:_s/Lynn M. Williams_____________________ ------------------ Secretary Exhibit 3.17 STATE OF SOUTH CAROLINA SECRETARY OF STATE ARTICLES OF AMENDMENT Pursuant to Section 33-10-106 of the 1976 South Carolina Code, as amended, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: 1. The name of the corporation is SOUTH CAROLINA ELECTRIC & GAS COMPANY. 2. On , the corporation adopted the following Amendment(s) of its Articles of Incorporation: NOT APPLICABLE 3. The manner, if not set forth in the amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the Amendment shall be effected, is as follows: (a) The number of redeemable shares of the corporation reacquired by redemption or purchase is 3,600 itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 4.50% 1,600 Cumulative Preferred Stock ($50 par value) 4.60% (Series A) 2,000 (b) The aggregate number of issued shares of the corporation after giving effect to such cancellation is 41,652,843, itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 5% 125,209 " " " " 4.60% 0 " " " " 4.50% 11,200 " " " " 4.60% (Series A) 18,052 " " " " 5.125% 68,000 " " " " 4.60% (Series B) 61,200 " " " " 6% 73,035 " " " " 9.40% 0 " " " ($100 par value) 8.12% 0 " " " " 7.70% 0 " " " " 8.40% 0 " " " ($50 par value) 8.72% 0 " " " ($100 par value) 6.52% 1,000,000 Common Stock ($4.50 par value) 40,296,147 ---------- 41,652,843 (c) The amount of the stated capital of the corporation after giving effect to such cancellation is $299,167,461.50. Page 2 (d) The number of shares which the corporation has authority to issue after giving effect to such cancellation is 56,446,696, itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 5% 125,209 " " " " 4.60% 0 " " " " 4.50% 11,200 " " " " 4.60% (Series A) 18,052 " " " " 5.125% 68,000 " " " " 4.60% (Series B) 61,200 " " " " 6% 73,035 " " " " 9.40% 0 " " " ($100 par value) 8.12% 0 " " " " 7.70% 0 " " " " 8.40% 0 " " " ($50 par value) 8.72% 0 " " " ($100 par value) 6.52% 1,000,000 Serial Preferred Stock ($50 par value) (1 vote) 640,000 Serial Preferred Stock ($100 par value) (1 vote) 1,750,000 Serial Preferred Stock ($25 par value) (1/4 vote) 2,000,000 Serial Preferred Stock ($50 par value) (1/2 vote) 700,000 Common Stock ($4.50 par value) 50,000,000 ---------- 56,446,696 -- 4. (a) |__| Amendment(s) adopted by shareholder action. At the date of adoption of the amendment, the number of outstanding shares of each voting group entitled to vote separately on the Amendment, and the vote of such shares was: Number of Number of Number of Votes Number of Undisputed Voting Outstanding Votes Entitled Represented at Shares Voted Group Shares to be Cast the meeting For Against -- (b) |XX| The Amendment(s) was duly adopted by the incorporators or board of directors without shareholder approval pursuant to Sections 33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina Code, as amended, and shareholder action was not required. 5. Unless a delayed date is specified, the effective date of these Articles of Amendment shall be the date of the acceptance for filing by the Secretary of State (See Section 33-1-230(b)): SOUTH CAROLINA ELECTRIC & GAS COMPANY Date: August 13, 1999 By:_s/Lynn M. Williams______________________ Secretary Exhibit 3.18 STATE OF SOUTH CAROLINA SECRETARY OF STATE ARTICLES OF AMENDMENT Pursuant to Section 33-10-106 of the 1976 South Carolina Code, as amended, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: 1. The name of the corporation is SOUTH CAROLINA ELECTRIC & GAS COMPANY. 2. On , the corporation adopted the following Amendment(s) of its Articles of Incorporation: NOT APPLICABLE 3. The manner, if not set forth in the amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the Amendment shall be effected, is as follows: (a) The number of redeemable shares of the corporation reacquired by redemption or purchase is 3,200 itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 6.00% 3,200 (b) The aggregate number of issued shares of the corporation after giving effect to such cancellation is 41,649,643, itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 5% 125,209 " " " " 4.60% 0 " " " " 4.50% 11,200 " " " " 4.60% (Series A) 18,052 " " " " 5.125% 68,000 " " " " 4.60% (Series B) 61,200 " " " " 6% 69,835 " " " " 9.40% 0 " " " ($100 par value) 8.12% 0 " " " " 7.70% 0 " " " " 8.40% 0 " " " ($50 par value) 8.72% 0 " " " ($100 par value) 6.52% 1,000,000 Common Stock ($4.50 par value) 40,296,147 ---------- 41,649,643 (c) The amount of the stated capital of the corporation after giving effect to such cancellation is $299,007,461.50. Page 2 (d) The number of shares which the corporation has authority to issue after giving effect to such cancellation is 56,446,696, itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 5% 125,209 " " " " 4.60% 0 " " " " 4.50% 11,200 " " " " 4.60% (Series A) 18,052 " " " " 5.125% 68,000 " " " " 4.60% (Series B) 61,200 " " " " 6% 69,835 " " " " 9.40% 0 " " " ($100 par value) 8.12% 0 " " " " 7.70% 0 " " " " 8.40% 0 " " " ($50 par value) 8.72% 0 " " " ($100 par value) 6.52% 1,000,000 Serial Preferred Stock ($50 par value) (1 vote) 640,000 Serial Preferred Stock ($100 par value) (1 vote) 1,750,000 Serial Preferred Stock ($25 par value) (1/4 vote) 2,000,000 Serial Preferred Stock ($50 par value) (1/2 vote) 700,000 Common Stock ($4.50 par value) ---- 50,000,000 ---------- 56,443,496 -- 4. (a) |__| Amendment(s) adopted by shareholder action. At the date of adoption of the amendment, the number of outstanding shares of each voting group entitled to vote separately on the Amendment, and the vote of such shares was: Number of Number of Number of Votes Number of Undisputed Voting Outstanding Votes Entitled Represented at Shares Voted Group Shares to be Cast the meeting For Against --- (b) |XX| The Amendment(s) was duly adopted by the incorporators or board of directors without shareholder approval pursuant to Sections 33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina Code, as amended, and shareholder action was not required. 5. Unless a delayed date is specified, the effective date of these Articles of Amendment shall be the date of the acceptance for filing by the Secretary of State (See Section 33-1-230(b)): SOUTH CAROLINA ELECTRIC & GAS COMPANY Date: March 1, 2000 By:__s/Lynn M. Williams___________________________ Secretary EX-3.(II) 3 SCANA BY-LAWS Exhibit 3.19 BYLAWS OF SCANA CORPORATION As Revised and Amended February 22, 2000 ARTICLE I OFFICES Section 1. The principal office of the Corporation, which shall also be designated as its registered office, shall be located in the City of Columbia, County of Richland, State of South Carolina. Section 2. The Corporation may also have offices and places of business at such other places, within or without the State of South Carolina, as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II SEAL Section 1. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "South Carolina". If authorized by the Board of Directors, the corporate seal may be affixed to any certificates of stock, bonds, debentures, notes or other engraved, lithographed or printed instruments, by engraving, lithographing or printing thereon such seal or a facsimile thereof, and such seal or facsimile thereof so engraved, lithographed or printed thereon shall have the same force and effect, for all purposes, as if such corporate seal had been affixed thereto by indentation. ARTICLE III STOCKHOLDERS' MEETINGS Section 1. Written or printed notices for annual or special meetings of stockholders shall state the place, day and hour of such meetings and, in case of special meetings, the purpose or purposes for which the meetings are called. Section 2. Annual meetings of the stockholders shall be held on a date and at a time and place selected by the Board of Directors. Such meeting may be held either within or without the State of South Carolina. The Board will select a date at said meeting for the following year with the date occurring between April 16 and April 30 of said year, when they shall elect members of the Board of Directors in accordance with the provisions of the Corporation's Articles of Incorporation and transact such other business as may properly be brought before the meeting. Section 3. Except as otherwise provided by law, by the Articles of Incorporation as the same may be amended from time to time, or by these Bylaws as they may be amended from time to time, the holders of a majority of the shares of stock of the Corporation issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at any meeting of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at such meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power, by a majority vote of those present, to adjourn the meeting from time to time without notice (unless otherwise provided in Section 8 of this Article III) other than by announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which may have been transacted at the meeting as originally noticed provided notice of such adjourned meeting, when required by Section 8 of this Article III, shall have been given or waived. Section 4. At each meeting of the stockholders each stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by written or printed instrument executed by such stockholder or by his duly authorized attorney or by telegram or cablegram appearing to have been transmitted by such stockholder but, except as otherwise provided by statute, no proxy shall be valid after expiration of eleven months from the date of its execution. Every proxy shall be dated as of its execution and no proxy shall be undated or postdated. Every holder of record of stock having voting power shall be entitled to one vote for every share of stock standing in his name on the books of the Corporation. The vote for directors and, upon the demand of any stockholder or his duly authorized proxy, the vote upon any question before the meeting shall be by ballot. All elections shall be decided by a plurality of the votes cast by the holders of the shares entitled to vote at the meeting of stockholders and, except as otherwise provided by statute or by the Articles of Incorporation, all other questions shall be decided by a majority of the votes cast by holders of shares entitled to vote on such question at such meeting. Section 5. The Secretary or the agent of the Corporation having charge of its stock transfer books shall, in advance of each meeting of stockholders, prepare a complete list of the stockholders entitled to vote at such meeting of stockholders or adjournment thereof, which list shall be arranged in alphabetical order with the address of and the number of shares held by each stockholder. Unless the record of stockholders kept by the Secretary or agent of the Corporation having charge of its stock transfer books readily shows, in alphabetical order or by alphabetical index, the information required to appear on such a list of stockholders, such list of stockholders shall, for a period commencing upon the date when notice of such meeting is given, and in no event less than 10 days prior to the date of such meeting, be kept on file at the registered office of the Corporation or at its principal place of business or at the office of its transfer agent or registrar, and shall be subject to inspection by any stockholder at any time during usual business hours. In any event, such list shall be produced and kept open at the time and place of such meeting and shall be subject to the inspection of any stockholder during the whole time of such meeting. Section 6. Special meetings of the stockholders for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board, by the Vice Chairman of the Board or by the President, and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of holders of ten per cent or more of the shares of stock of the Corporation issued and outstanding and entitled to vote at the proposed meeting. Such request shall state the purpose or purposes of the proposed meeting. Section 7. Business transacted at all special meetings shall be confined to the objects stated in the call; provided, however, that if all the stockholders of the Corporation entitled to vote shall be present in person or by proxy, any business pertaining to the affairs of the Corporation may be transacted. Section 8. Notice of annual meetings of stockholders and notice of any special meeting of stockholders for the election of directors or for any other purpose, unless otherwise provided by statute, shall be delivered personally or mailed, not less than ten nor more than fifty days before the meeting, to each person who appears on the books of the Corporation as a stockholder entitled to vote at said meeting. In the event of the adjournment of any meeting of stockholders, for whatever reason, for 30 days or more, notice of the adjourned meeting shall be delivered personally or mailed not less than ten nor more than fifty days before the date for such adjourned meeting to each person whose name appears on the books of the Corporation as a stockholder entitled to vote at said adjourned meeting. Any such notice may be either written or printed, or partly written and partly printed, and if mailed it shall be directed to the stockholder at his address as it appears on the books of the Corporation. Such notice shall briefly state the business which it is proposed to present or to submit to such meeting. Section 9. Conduct of Meeting. The Board of Directors shall be entitled to make such rules, regulations and procedures for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules, regulations and procedures of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing (a) an agenda or order of business for the meeting, (b) rules, regulations and procedures for maintaining order at the meeting and the safety of those present, (c) limitations on participation in such meeting to stockholders of record of the Corporation and their duly authorized and constituted proxies and such other persons as the chairman shall permit, (d) restrictions on entry to the meeting after the time fixed for the commencement thereof, (e) limitations on the time allotted to questions or comments by participants and (f) rules, regulations and procedures governing the opening and closing of the polls for balloting and matters which are to be voted on by ballot. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure. ARTICLE IV DIRECTORS Section 1. The property and business of the Corporation shall be managed by its Board of Directors. The number of directors which shall constitute the entire Board of Directors shall be fixed from time to time by the vote of a majority of the entire Board, but such number shall in no case be less than nine nor more than twenty. Each director shall own at least 100 shares of Common Stock of the Corporation. Except as otherwise provided by statute or in the Articles of Incorporation, the term of each director heretofore or hereafter elected shall be from the time of his election and qualification until the third annual meeting following his election and until his successor shall have been duly elected and shall have qualified. The vote of at least 80% of the shares of stock of the Corporation entitled to vote shall be required to remove an incumbent member of the Board of Directors except for cause. "For Cause" shall mean fraudulent or dishonest acts, or gross abuse of authority in discharge of duties to the Corporation and shall be established after written notice of specific charges and opportunity to meet and refute such charges. Section 2. In addition to the powers and authorities by these Bylaws expressly conferred upon them, the Board may exercise all such power of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders. A director or officer of this Corporation shall not be disqualified by his office from dealing or contracting with the Corporation either as a vendor, purchaser or otherwise, nor shall any transaction or contract of this Corporation be void or voidable solely by reason of the fact that any director or officer or any firm of which any director or officer is a member or employee, or any corporation of which any director or officer is a shareholder, director, officer or employee, is in any way interested in such transaction or contract, provided that the material facts as to such interest and as to such transaction or contract are disclosed or known to the Board of Directors or the Executive Committee and noted in their respective minutes, or to the stockholders entitled to vote with respect thereto, as the case may be, and that such transaction or contract is or shall be authorized, ratified or approved either (1) by the vote of a majority of a quorum of the Board of Directors or of the Executive Committee, or (2) by a majority of the votes cast by holders of shares of stock entitled to vote with respect thereto, without counting (except for quorum purposes) the vote of or shares held or controlled and voted by, as the case may be, any director so interested or member or employee of a firm so interested or a shareholder, director, officer or employee of a corporation so interested; nor shall any director or officer be liable to account to the Corporation for any profits realized by and from or through any such transaction, or contract of this Corporation authorized, ratified or approved as aforesaid by reason of the fact that he or any firm of which he is a member or employee, or any corporation of which he is a shareholder, director, officer or employee was interested in such transaction or contract. ARTICLE V MEETINGS OF THE BOARD Section 1. Within 10 days following the annual meeting of stockholders for the election of directors, the Chief Executive Officer shall call a meeting of the newly elected Board for the purpose of organization, election of officers and transaction of other business, such meeting to be held at such time, not later than 15 days after such annual meeting of stockholders, and place as shall be specified by the Chief Executive Officer. The Secretary or other officer performing his duties shall give notice, either personally or by mail or telegram, to each director not less than four business days before the meeting, provided, however, that no notice of such meeting need be given if all of the directors are present or if those not present sign waivers of notice either before or after the meeting. In the event that the Chief Executive Officer shall fail to call such meeting within 10 days after such annual meeting of stockholders, as aforesaid, the newly elected Board shall meet at the registered office of the Corporation, in Columbia, South Carolina, at 2:00 p.m. Columbia, South Carolina time, on the fifteenth day following such annual meeting of stockholders, if not a legal holiday, and if a legal holiday then on the next business day following. Section 2. Regular meetings of the Board may be held without notice at such time and place as shall from time to time be designated by the Board. Section 3. Special meetings of the Board may be called by the Chairman of the Board, the Vice Chairman of the Board or the President or any two directors and may be held at the time and place designated in the call and notice of the meeting. The Secretary or other officer performing his duties shall give notice either personally or by mail or telegram not less than twenty-four hours before the meeting. Meetings may be held at any time and place without notice if all the directors are present or if those not present sign waivers of notice either before or after the meeting. Section 4. At all meetings of the Board a majority of the total number of directors then in office shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Articles of Incorporation or by these Bylaws. Section 5. Any regular or special meeting of the Board may be adjourned to any other time at the same or any other place by a majority of the directors present at the meeting, whether or not a quorum shall be present at such meeting, and no notice of the adjourned meeting shall be required other than announcement at the meeting. Section 6. Directors, other than those who are salaried officers or employees of the Corporation or of any affiliated Company, shall receive compensation for their services as directors at an annual rate as shall be set from time to time by resolution of the Board of Directors, payable in quarterly installments at the beginning of each quarter of the calendar year and, in addition thereto, each such director shall receive such compensation for each meeting of the Board, or of any committee of the Board, which he shall have attended, as shall be set by resolution of the Board of Directors, such additional compensation to be paid as soon as practicable after the date of such meeting. All directors shall be reimbursed for their reasonable expenses of attendance, if any, at each regular or special meeting of the Board of Directors. Section 7. Directors who are salaried officers or employees of the Corporation or of any affiliated Company and who are members of the Executive Committee shall receive no compensation for their services as such members in addition to such compensation as may be paid to them as officers or directors, but shall be reimbursed for their reasonable expenses, if any, in attending meetings of the Executive Committee, or otherwise performing their duties as members of the Executive Committee. ARTICLE VI EXECUTIVE AND OTHER COMMITTEES Section 1. The Board of Directors may, by vote of a majority of the full Board, designate three or more of their number to constitute an Executive Committee, to hold office for one year and until their respective successors shall be designated. Such Executive Committee shall advise with and aid the officers of the Corporation in all matters concerning its interests and the management of its business, and shall, between sessions of the Board, except as otherwise provided by law, have all the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. The taking of any action by the Executive Committee shall be conclusive evidence that the Board of Directors was not in session at the time of such action. The Board of Directors may, by vote of a majority of the full Board, appoint from among their number, one or more additional committees, consisting of three or more directors, which shall have such powers and duties as may be fixed by the resolution of the Board of Directors appointing such Committee. Section 2. The Executive Committee shall cause to be kept regular minutes of its proceedings, which may be transcribed in the regular minute book of the Corporation, and all such proceedings shall be reported to the Board of Directors at its next succeeding meeting, and shall be subject to revision or alteration by the Board, provided that no rights of third persons shall be affected by such revision or alteration. A majority of the Executive Committee shall constitute a quorum at any meeting. The Executive Committee may take action without a meeting on the written approval of such action by all the members of the Committee. The Board of Directors may by vote of a majority of the full Board fill any vacancies in the Executive Committee. The Executive Committee may, from time to time, subject to the approval of the Board of Directors, prescribe rules and regulations for the calling and conduct of meetings of the Committee, and other matters relating to its procedure and the exercise of its powers. Section 3. Other committees appointed by the Board shall cause to be kept regular minutes of their proceedings and in general the provisions as to procedure for such committees shall be that set forth above with respect to the Executive Committee. ARTICLE VII OFFICERS Section 1. The officers of the Corporation shall be elected by the Board of Directors. They shall include a President, one or more Vice Presidents, a Secretary, a Treasurer and a Controller and may include a Chairman of the Board and a Vice Chairman of the Board. In the event there shall be a Chairman of the Board and a Vice Chairman of the Board, the Board of Directors shall designate whether the Chairman of the Board, the Vice Chairman of the Board or the President shall be the Chief Executive Officer of the Corporation. If there shall be no Chairman of the Board or Vice Chairman of the Board, the President shall be the Chief Executive Officer of the Corporation. Any two or more of such offices except those of Treasurer and Controller may be occupied by the same person; provided, however, the same person may not act in more than one capacity where action by two or more officers is required. Section 2. The Board of Directors, at its first meeting after the election of directors by the stockholders, shall elect from among its members, if it deems proper, a Chairman of the Board and a Vice Chairman of the Board. It shall also elect a President and one or more Vice Presidents, a Secretary, a Treasurer and a Controller, none of whom need be members of the Board. The Board of Directors, at any meeting, may elect such additional Vice Presidents, and such Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controllers, as it shall deem necessary, none of whom need be members of the Board. Section 3. The Board of Directors, at any meeting, may elect or appoint such other officers and agents as it shall deem necessary. The tenure and duties of such officers and agents shall be fixed by the Board of Directors or, in the absence of any action by the Board of Directors so fixing such tenure and duties, the tenure and duties shall be fixed by the Chief Executive Officer of the Corporation, or by such officers or department heads to whom he shall delegate such authority. Section 4. The salaries and compensation of the officers of the Corporation and of agents of the Corporation appointed by the Board shall be fixed by the Board of Directors. The salaries and compensation of all other employees of the Corporation shall, in the absence of any action by the Board of Directors, be fixed by the Chief Executive Officer of the Corporation. Section 5. The officers of the Corporation elected pursuant to Section 2 of this Article VII shall hold office until the first meeting of the Board of Directors after the next succeeding annual meeting of stockholders and until their successors are elected and qualify in their stead. The Chief Executive Officer may be removed at any time, with or without cause, by the affirmative vote of a majority of the total number of directors then in office. Any other officer or employee of the Corporation may be removed at any time, with or without cause, either (a) by vote of a majority of the directors present at any meeting of the Board of Directors at which a quorum is present, or (b) by vote of a majority of the members of the Executive Committee, or (c) by the Chief Executive Officer of the Corporation or by any officer who shall be exercising the powers of the Chief Executive Officer of the Corporation, or by any superior of such employee to whom such power of removal shall be delegated by the Chief Executive Officer of the Corporation or the officer exercising the powers of the Chief Executive Officers of the Corporation. ARTICLE VIII CHIEF EXECUTIVE OFFICER Section 1. The Chief Executive Officer of the Corporation shall supervise, direct and control the conduct of the business of the Corporation subject, however, to the general policies determined by the Board of Directors and the Executive Committee, if there be one. He shall be a member of the Executive Committee and all committees appointed by the Board of Directors, except the Audit Committee and the Long-Term Compensation Committee and any committee or subcommittee making recommendations of performance awards in shares of Company stock, shall have the general powers and duties usually vested in the chief executive officer of a corporation, and shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the Bylaws or by the Board of Directors. He shall, whenever it may in his opinion be necessary, prescribe the duties of officers and employees of the Corporation whose duties are not otherwise defined. He shall have power to remove at any time, with or without cause, any employee or officer of the Corporation. He may, in accordance with Section 5 of Article VII of these Bylaws, delegate such power of removal. ARTICLE IX CHAIRMAN OF THE BOARD Section 1. The Chairman of the Board, if there be one, shall preside at all meetings of the Board of Directors and of the stockholders, except when by statute the election of a presiding officer shall be required. He shall, if designated Chief Executive Officer pursuant to Section 1 of Article VII of these Bylaws, have all the powers and duties granted and delegated to the Chief Executive Officer by Section 1 of Article VIII of these Bylaws. In such event he may sign in the name of and on behalf of the Corporation any and all contracts, agreements or other instruments pertaining to matters which arise in the ordinary course of business of the Corporation and, if authorized by the Board of Directors or the Executive Committee, may sign in the name of and on behalf of the Corporation any other contracts, agreements or instruments of any nature pertaining to the business of the Corporation. He shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the Bylaws or by the Board of Directors. ARTICLE X THE VICE CHAIRMAN OF THE BOARD Section 1. The Vice Chairman of the Board shall, in the absence of the Chairman, preside at all meetings of the Board of Directors and of the stockholders, except when by statute the election of a presiding officer shall be required. He shall, if designated Chief Executive Officer pursuant to Section 1 of Article VII of these Bylaws, have all the powers and duties granted and delegated to the Chief Executive Officer by Section 1 of Article VIII of these Bylaws. In such event he may sign in the name of and on behalf of the Corporation any and all contracts, agreements or other instruments pertaining to matters which arise in the ordinary course of business of the Corporation and, if authorized by the Board of Directors or the Executive Committee, may sign in the name of and on behalf of the Corporation any other contracts, agreements or instruments of any nature pertaining to the business of the Corporation. He shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the Bylaws or by the Board of Directors. ARTICLE XI THE PRESIDENT Section 1. The President shall, in the absence of the Chairman of the Board or the Vice Chairman of the Board, preside at all meetings of the Board of Directors and of the stockholders, except when by statute the election of a presiding officer shall be required. He shall, if designated Chief Executive Officer of the Corporation pursuant to Section 1 of Article VII of these Bylaws, have all the powers and duties granted and delegated to the Chief Executive Officer by Section 1 of Article VIII of these Bylaws. In the event there shall be a Chairman of the Board or a Vice Chairman of the Board who shall have been designated as Chief Executive Officer of the Corporation pursuant to Section 1 of Article VII of these Bylaws, then the President shall have such powers and duties as may be assigned to him by the Chairman of the Board or the Vice Chairman of the Board of Directors. In the absence or disability of the Chairman of the Board or the Vice Chairman of the Board, he shall have all the powers and duties of the Chairman of the Board or the Vice Chairman of the Board. He may sign in the name of and on behalf of the Corporation any and all contracts, agreements or other instruments pertaining to matters which arise in the ordinary course of business of the Corporation and, if authorized by the Board of Directors or the Executive Committee, may sign in the name of and on behalf of the Corporation any other contracts, agreements or instruments of any nature pertaining to the business of the Corporation. He shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the Bylaws or by the Board of Directors. ARTICLE XII THE VICE PRESIDENT Section 1. The Vice President shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform such other duties as the Board of Directors may prescribe. The Vice President may sign in the name of and on behalf of the Corporation contracts, agreements, or other instruments pertaining to matters which arise in the ordinary course of business of the Corporation, except in cases where the signing thereof shall be expressly delegated by the Board of Directors or the Executive Committee to some other officer or agent of the Corporation. If authorized by the Board of Directors or the Executive Committee, he may sign in the name of and on behalf of the Corporation any other contracts, agreements or instruments of any nature pertaining to the business of the Corporation. He shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the Bylaws or by the Board of Directors. If there be more than one Vice President, the Board of Directors or the Chief Executive Officer of the Corporation shall assign to such Vice Presidents their respective duties. ARTICLE XIII THE SECRETARY Section 1. The Secretary shall attend all sessions of the Board and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for the committees appointed by the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chief Executive Officer, under whose supervision he shall be. He shall be sworn to the faithful discharge of his duty. Any records kept by him shall be the property of the Corporation and shall be restored to the Corporation in case of his death, resignation, retirement or removal from office. He or his agent shall be the custodian of the seal of the Corporation, the stock ledger, stock certificate book and minute books of the Corporation, and its committees, and other formal records and documents relating to the corporate affairs of the Corporation. Section 2. The Assistant Secretary or Assistant Secretaries shall assist the Secretary in the performance of his duties, exercise and perform his powers and duties, in his absence or disability, and such other powers and duties as may be conferred or required by the Board. ARTICLE XIV THE TREASURER Section 1. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors or as may be designated by persons to whom the Board of Directors delegates such authority. He shall disburse the funds of the Corporation in such manner as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. He shall give the Corporation a bond if required by the Board of Directors in a sum, and with one or more sureties satisfactory to the Board, for the faithful performance of the duties of his office, and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 2. The Assistant Treasurer or Assistant Treasurers shall assist the Treasurer in the performance of his duties, exercise and perform his powers and duties, in his absence or disability, and such other powers and duties as may be conferred or required by the Board. ARTICLE XV THE CONTROLLER Section 1. The controller of the Corporation shall be the principal accounting officer of the Corporation. He shall have full control of all the books of the Corporation and keep a true and accurate record of all property owned by it, of its debts and of its revenues and expenses, and shall keep all accounting records of the Corporation other than the record of receipts and disbursements and those relating to deposit or custody of money and securities of the Corporation, which shall be kept by the Treasurer, and shall also make reports to the directors and others of or relating to the financial condition of the Corporation. He shall exhibit at all reasonable times his books of account and records to any director of the Corporation upon application during business hours at the office of the Corporation where such books of accounts and records are kept. He shall perform all duties generally incident to the office of Controller and shall have such other powers and duties as, from time to time, may be prescribed by law, by the Bylaws, or by the Board of Directors. Section 2. The Assistant Controller or Assistant Controllers shall assist the Controller in the performance of his duties, exercise and perform his powers and duties, in his absence or disability, and such other powers and duties as may be conferred or required by the Board of Directors. ARTICLE XVI VACANCIES Section 1. Except as otherwise provided by statute or in the Articles of Incorporation, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office or any other cause shall be filled only by the Board of Directors then in office, although less than a quorum. A Director elected to fill a vacancy shall hold office until the next stockholders' meeting at which Directors of any class are elected. If the office of any officer of the Corporation shall become vacant for any reason, the Board of Directors, by a majority vote of those present at any meeting at which a quorum is present, may elect a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred. ARTICLE XVII RESIGNATIONS Section 1. Any officer or any director of the Corporation may resign at any time, such resignation to be made in writing and to take effect from the time of its receipt by the Corporation, unless some time be fixed in the resignation, and then from that time. The acceptance of a resignation shall not be required to make it effective. A vacancy shall be deemed to exist upon receipt by the Corporation of such written resignation, and a successor may, then or thereafter, be elected to take office when such resignation becomes effective. ARTICLE XVIII DUTIES OF OFFICERS MAY BE DELEGATED Section 1. In case of the absence of any officer of the Corporation, or for any other reason the Board may deem sufficient, the Board may delegate, for the time being, the powers or duties, or any of them, of such officers to any other officer or to any director. ARTICLE XIX STOCK OF OTHER CORPORATIONS Section 1. The Board of Directors shall have the right to authorize any officer or other person on behalf of the Corporation to attend, act and vote at meetings, of the stockholders of any corporation in which the Corporation shall hold stock, and to exercise thereat any and all the rights and powers incident to the ownership of such stock and to execute waivers of notice of such meetings and calls therefor; and authority may be given to exercise the same either on one or more designated occasions, or generally on all occasions until revoked by the Board. In the event that the Board shall fail to give such authority it may be exercised by the Chief Executive Officer of the Corporation in person or by proxy appointed by him on behalf of the Corporation. ARTICLE XX CERTIFICATES OF STOCK Section 1. The certificates of stock of the Corporation shall be entered in the books of the Corporation as they are issued. No fractional shares of stock shall be issued. Certificates of stock shall be signed by the President or a Vice President and by the Secretary, or an Assistant Secretary, and the seal of the Corporation shall be affixed thereto. Such seal may be facsimile, engraved or printed. Where any certificate of stock is signed by a transfer agent or transfer clerk or by a registrar, the signatures of any such President, Vice President, Secretary or Assistant Secretary, upon such stock certificate may be facsimiles, engraved or printed. In case any such officer who has signed, or whose facsimile signature has been placed upon, such certificate of stock, shall have ceased to be such officer before such certificate of stock is issued, it may be issued by the Corporation with the same effect as if such officer had not ceased to be such at the date of its issue. ARTICLE XXI TRANSFERS OF STOCK Section 1. Transfer of stock shall be made on the books of the Corporation only by the person named in the certificate or by attorney, lawfully constituted in writing, and upon surrender of the certificate therefor. ARTICLE XXII FIXING OF RECORD DATE Section 1. The Board of Directors is hereby authorized to fix a time, not less than ten (10) days nor more than fifty (50) days preceding the date of any meeting of stockholders or the date fixed for the payment of any dividend or the making of any distribution, or for the delivery of evidences of rights or evidences of interests arising out of any change, conversion or exchange of shares of stock, as a record date for the determination of the stockholders entitled to notice of and to vote at such meeting or entitled to receive any such dividend, distribution, rights or interest, as the case may be; and all persons who are holders of record of shares of stock at the date so fixed and no others, shall be entitled to notice of and to vote at such meeting, and only stockholders of record at such date shall be entitled to receive any such notice, dividend, distribution, rights or interests; and the stock transfer books shall not be closed during any such period. ARTICLE XXIII REGISTERED STOCKHOLDERS Section 1. The Corporation shall be entitled to treat the holders of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the statutes of the State of South Carolina. ARTICLE XXIV LOST CERTIFICATES Section 1. Whenever any stockholder shall desire a new certificate of stock to replace an original certificate of stock which has been lost, destroyed or wrongfully taken, he shall make application to the Corporation for the issuance of a new certificate or certificates in replacement of the certificate or certificates which were lost, destroyed or wrongfully taken and the Corporation may issue a certificate or certificates in replacement of the certificate or certificates referred to in such stockholders application upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. Upon completion by a stockholder of the requirements set forth in the preceding paragraph, the Corporation shall issue a certificate or certificates in replacement of the certificate or certificates referred to in such stockholder's application if such application is received by the Corporation before it has notice that such certificate or certificates has or have been acquired by a bona fide purchaser. ARTICLE XXV INSPECTION OF BOOKS Section 1. The Board of Directors shall have power to determine whether and to what extent, and at what time and places and under what conditions and regulations, the accounts and books of the Corporation (other than the books required by statute to be open to the inspection of stockholders), or any of them, shall be open to the inspection of stockholders, and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as such right may be conferred by the statutes of the State of South Carolina or by resolution of the directors or of the stockholders. ARTICLE XXVI CHECKS, NOTES, BONDS AND OTHER INSTRUMENTS Section 1. All checks or demands for money and notes of the Corporation shall be signed by such person or persons (who may but need not be an officer or officers of the Corporation) as the Board of Directors may from time to time designate or as may be designated by persons to whom the Board of Directors delegates such authority. The Board of Directors shall have authority to make provision, with proper safeguards, for the signatures to appear on all checks, including, but not by way of limitation, payroll checks, to be made by facsimile, whether engraved or printed. Whenever the seal of this Corporation is to be affixed to any instrument being executed on behalf of this Corporation, such seal shall be affixed thereto by the Secretary or an Assistant Secretary and the fact of such affixation shall be attested to by the person so affixing the seal. ARTICLE XXVII RECEIPT FOR SECURITIES Section 1. All receipts for stocks, bonds or other securities received by the Corporation shall be signed by the Treasurer or an Assistant Treasurer, or by such other person or persons as the Board of Directors or Executive Committee shall designate. ARTICLE XXVIII FISCAL YEAR Section 1. The fiscal year shall begin the first day of January in each year. ARTICLE XXIX RESERVES Section 1. The Board of Directors shall have power to fix and determine, and from time to time to vary, the amount to be reserved as working capital; to determine whether any, or if any, what part of any, surplus shall be declared and paid as dividends, to determine the date or dates for the declaration or payment of dividends and to direct and determine the use and disposition of any surplus, and before payment of any dividend or making any distribution of surplus there may be set aside out of the surplus of the Corporation such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interests of the Corporation. ARTICLE XXX NOTICES Section 1. In addition to the telegraphic notice permitted by Section 3 of Article V of these Bylaws, whenever under the provisions of these Bylaws notice is required to be given to any director, officer or stockholder, it shall not be construed to require personal notice, but such notice may be given in writing, by mail, by depositing a copy of the same in a post office, letter box or mail chute, maintained by the Post Office Department, in a postpaid sealed wrapper, addressed to such stockholder, officer or director, at his address as the same appears on the books of the Corporation. A stockholder, director or officer may waive any notice required to be given to him under these Bylaws. ARTICLE XXXI INSPECTORS OF ELECTION Section 1. Prior to every meeting of the stockholders the Board of Directors may appoint any odd number of inspectors of election to act as inspectors at such meeting. In the event that inspectors shall not be so appointed, they shall be appointed by the person presiding at such meeting and if any inspector shall refuse to serve, or neglect to attend such meeting or his office becomes vacant, the person presiding at the meeting may appoint another inspector in his place. The inspectors appointed to act at any meeting of the stockholders shall, before entering upon the discharge of their duties, be sworn faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of their ability. ARTICLE XXXII DIRECTOR, OFFICER AND EMPLOYEE INDEMNIFICATION Section 1. The Corporation shall indemnify any and all of its employees, officers, or directors, or former officers or directors (including their heirs, executors, and administrators), or any person who may have served at its request or by its election, designation, or request as a member, agent, employee, director or officer of any other corporation or partner, trustee or otherwise, of any organization against expenses actually and necessarily incurred by them in connection with the defense or settlement of any action, suit or proceeding (which shall include any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or arbitrative) in which they, or any of them, are made parties, or a party, by reason of being or having been agents, employees, directors or officers of the Corporation, or of such other organization, except in relation to matters as to which any such agent, employee, director or officer or former employee, director or officer or person shall be adjudged in such action, suit or proceeding to be liable for willful misconduct in the performance of duty and to such matters, as shall be settled by agreement predicated on the existence of such liability. Such indemnity shall be in accordance with a written plan adopted by the Board of Directors, which plan shall be in accordance with the law of South Carolina. The indemnification provided hereby shall not be deemed exclusive of any other right to which anyone seeking indemnification hereunder may be entitled under any By-Law, agreement, or otherwise. The Corporation may purchase and maintain insurance on the behalf of any director, officer, agent, employee or former employee, director or officer or other person, against any liability asserted against them and incurred by them. ARTICLE XXXIII AMENDMENTS Section 1. Except as otherwise provided in Section 2 below, any of these Bylaws may be altered, amended or repealed, and/or one or more Bylaws may be adopted, at a meeting of the stockholders, by a vote of the holders of a majority of all shares of stock entitled to vote to elect directors who are entitled to vote at such meeting, provided that written notice of such proposed alteration, amendment, repeal and/or adoption, as the case may be, shall have been given to all such stockholders at least ten days before such meeting. Any of these Bylaws may also be altered, amended or repealed, and/or one or more new Bylaws may be adopted, by the vote of a majority of all directors then in office, at a meeting of the Board of Directors, provided that the notice of such meeting includes therein notice of such alteration, amendment, repeal and/or adoption, as the case may be. At a meeting thereof, the stockholders, by the vote of the holders of a majority of all shares of stock entitled to vote to elect directors who are entitled to vote at such meeting, may repeal any alteration or amendment of these Bylaws made by the Board of Directors and/or reinstate any of these Bylaws repealed by the Board of Directors, and/or repeal any new By-Law adopted by the Board of Directors. Section 2. Notwithstanding the provisions of Section 1 above, any alteration, amendment or repeal by the stockholders of Section 1 of Article IV, Section 1 of Article XVI or this Section 2 of Article XXXIII of these Bylaws, or the adoption by the stockholders of any new By-Law inconsistent with any of such Sections, shall require the vote of the holders of at least 80% of all shares of stock entitled to vote to elect directors who are entitled to vote at such meeting. EX-3.(II) 4 SCE&G BY-LAWS Exhibit 3.20 BYLAWS OF SOUTH CAROLINA ELECTRIC & GAS COMPANY (Subsidiary of SCANA Corporation) AS REVISED AND AMENDED FEBRUARY 22, 2000 177 ARTICLE I OFFICES Section 1. The principal office of the Corporation, which shall also be designated as its registered office, shall be located in the City of Columbia, County of Richland, State of South Carolina. Section 2. The Corporation may also have offices and places of business at such other places, within or without the State of South Carolina, as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II SEAL Section 1. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "South Carolina". If authorized by the Board of Directors, the corporate seal may be affixed to any certificates of stock, bonds, debentures, notes or other engraved, lithographed or printed instruments, by engraving, lithographing or printing thereon such seal or a facsimile thereof, and such seal or facsimile thereof so engraved, lithographed or printed thereon shall have the same force and effect, for all purposes, as if such corporate seal had been affixed thereto by indentation. ARTICLE III STOCKHOLDERS' MEETINGS Section 1. Written or printed notices for annual or special meetings of stockholders shall state the place, day and hour of such meetings and, in case of special meetings, the purpose or purposes for which the meetings are called. Section 2. Annual meetings of the stockholders shall be held on a date and at a time and place selected by the Board of Directors. Such meeting may be held either within or without the State of South Carolina. The Board will select a date at said meeting for the following year with the date occurring between April 16 and April 30 of said year, when they shall elect members of the Board of Directors in accordance with the provisions of the Corporation's Articles of Incorporation and transact such other business as may properly be brought before the meeting. Section 3. Except as otherwise provided by law, by the Articles of Incorporation as the same may be amended from time to time, or by these Bylaws as they may be amended from time to time, the holders of a majority of the shares of stock of the Corporation issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at any meeting of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at such meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power, by a majority vote of those present, to adjourn the meeting from time to time without notice (unless otherwise provided in Article 10 hereof) other than by announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which may have been transacted at the meeting as originally noticed provided notice of such adjourned meeting, when required by Section 7 of this Article, shall have been given or waived. Section 4. At each meeting of the stockholders each stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by written or printed instrument executed by such stockholder or by his duly authorized attorney or by telegram or cablegram appearing to have been transmitted by such stockholder but, except as otherwise provided by statute, no proxy shall be valid after expiration of eleven months from the date of its execution. Every proxy shall be dated as of its execution and no proxy shall be undated or postdated. Every holder of record of stock having voting power shall be entitled to one vote for every share of stock standing in his name on the books of the Corporation. The vote for directors and, upon the demand of any stockholder or his duly authorized proxy, the vote upon any question before the meeting shall be by ballot. All elections shall be decided by a plurality of the votes cast by the holders of the shares entitled to vote at the meeting of stockholders and except as otherwise provided by statute or by the Articles of Incorporation all other questions by a majority of the votes cast by holders of shares entitled to vote on such question at such meeting. Section 5. Special meetings of the stockholders for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board or by the President, and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of holders of ten per cent or more of the shares of stock of the Corporation issued and outstanding and entitled to vote at the proposed meeting. Such request shall state the purpose or purposes of the proposed meeting. Section 6. Business transacted at all special meetings shall be confined to the objects stated in the call; provided, however, that if all the stockholders of the Corporation entitled to vote shall be present in person or by proxy, any business pertaining to the affairs of the Corporation may be transacted. Section 7. Notice of annual meetings of stockholders and notice of any special meeting of stockholders for the election of directors or for any other purpose, unless waived or unless otherwise provided by statute, shall be delivered personally or mailed, not less than ten nor more than fifty days before the meeting, to each person who appears on the books of the Corporation as a stockholder entitled to vote at said meeting. In the event of the adjournment of any meeting of stockholders, for whatever reason, for 30 days or more, notice of the adjourned meeting shall be delivered personally or mailed not less than ten nor more than fifty days before the date for such adjourned meeting to each person whose name appears on the books of the Corporation as a stockholder entitled to vote at said adjourned meeting. Any such notice may be either written or printed, or partly written and partly printed, and if mailed it shall be directed to the stockholder at his address as it appears on the books of the Corporation. Such notice shall briefly state the business which it is proposed to present or to submit to such meeting. Section 8. Conduct of Meeting. The Board of Directors shall be entitled to make such rules, regulations and procedures for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules, regulations and procedures of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing (a) an agenda or order of business for the meeting, (b) rules, regulations and procedures for maintaining order at the meeting and the safety of those present, (c) limitations on participation in such meeting to stockholders of record of the Corporation and their duly authorized and constituted proxies and such other persons as the chairman shall permit, (d) restrictions on entry to the meeting after the time fixed for the commencement thereof, (e) limitations on the time allotted to questions or comments by participants and (f) rules, regulations and procedures governing the opening and closing of the polls for balloting and matters which are to be voted on by ballot. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure. ARTICLE IV DIRECTORS Section 1. The property and business of the Corporation shall be managed by its Board of Directors. The number of directors shall be not more than twenty (20). The directors shall be elected at the annual meeting of the stockholders or at a special meeting called for that purpose. Each director shall be elected to serve until the next annual meeting of stockholders and thereafter until his successor shall be elected and shall qualify. Any director may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. Section 2. In addition to the powers and authorities by these Bylaws expressly conferred upon them, the Board may exercise all such power of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders. A director or officer of this Corporation shall not be disqualified by his office from dealing or contracting with the Corporation either as a vendor, purchaser or otherwise, nor shall any transaction or contract of this Corporation be void or voidable solely by reason of the fact that any director or officer or any firm of which any director or officer is a member or employee, or any corporation of which any director or officer is a shareholder, director, officer or employee, is in any way interested in such transaction or contract, provided that the material facts as to such interest and as to such transaction or contract are disclosed or known to the Board of Directors or the Executive Committee and noted in their respective minutes, or to the stockholders entitled to vote with respect thereto, as the case may be, and that such transaction or contract is or shall be authorized, ratified or approved either (1) by the vote of a majority of a quorum of the Board of Directors or of the Executive Committee, or (2) by a majority of the votes cast by holders of shares of stock entitled to vote with respect thereto, without counting (except for quorum purposes) the vote of or shares held or controlled and voted by, as the case may be, any director so interested or member or employee of a firm so interested or a shareholder, director, officer or employee of a corporation so interested; nor shall any director or officer be liable to account to the Corporation for any profits realized by and from or through any such transaction, or contract of this Corporation authorized, ratified or approved as aforesaid by reason of the fact that he or any firm of which he is a member or employee, or any corporation of which he is a shareholder, director, officer or employee was interested in such transaction or contract. ARTICLE V MEETINGS OF THE BOARD Section 1. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of South Carolina. If so authorized by law, members of the Board of Directors may participate in a meeting of the Board by means of telephone conference call or similar communications by which all persons participating in the meeting may hear each other at the same time. Section 2. Regular meetings of the Board may be held without notice at such time and place as shall from time to time be designated by the Board. Section 3. Special meetings of the Board may be called by the Chairman of the Board or the Vice Chairman, if any, or the President or any two directors and may be held at the time and place designated in the call and notice of the meeting. The Secretary or other officer performing his duties shall give notice either personally or by mail or telegram not less than twenty-four hours before the meeting. Meetings may be held at any time and place without notice if all the directors are present or if those not present sign waivers of notice either before or after the meeting. Section 4. At all meetings of the Board a majority of the total number of directors then in office shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Articles of Incorporation or by these Bylaws. Section 5. Any regular or special meeting of the Board may be adjourned to any other time at the same or any other place by a majority of the directors present at the meeting, whether or not a quorum shall be present at such meeting, and no notice of the adjourned meeting shall be required other than announcement at the meeting. Section 6. Whenever, by any provision of law, the vote of directors at a meeting thereof is required or permitted to be taken in connection with any corporate action, the meeting and vote of directors may be dispensed with, if all the directors shall consent in writing to such corporate action being taken. Such consents shall be filed with the minutes of meetings of the Board of Directors. Section 7. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board of Directors, a fixed fee and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board (or of any committee of the Board), provided that nothing herein contained shall be construed to preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 8. Directors who are salaried officers or employees of the Corporation or of any affiliated Company and who are members of the Executive Committee shall receive no compensation for their services as such members in addition to such compensation as may be paid to them as officers, but shall be reimbursed for their reasonable expenses, if any, in attending meetings of the Executive Committee, or otherwise performing their duties as members of the Executive Committee. ARTICLE VI EXECUTIVE AND OTHER COMMITTEES Section 1. The Board of Directors may, by vote of a majority of the full Board, designate three or more of their number to constitute an Executive Committee, to hold office for one year and until their respective successors shall be designated. Such Executive Committee shall advise with and aid the officers of the Corporation in all matters concerning its interests and the management of its business, and shall, between sessions of the Board, except as otherwise provided by law, have all the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. The taking of any action by the Executive Committee shall be conclusive evidence that the Board of Directors was not at the time of such action in session. The Board of Directors may, by vote of a majority of the full Board, appoint from among their number, one or more additional committees, consisting of three or more directors, which shall have such powers and duties as may be fixed by the resolution of the Board of Directors appointing such Committee. Section 2. The Executive Committee shall cause to be kept regular minutes of its proceedings, which may be transcribed in the regular minute book of the Corporation, and all such proceedings shall be reported to the Board of Directors at its next succeeding meeting, and shall be subject to revision or alteration by the Board, provided that no rights of third persons shall be affected by such revision or alteration. A majority of the Executive Committee shall constitute a quorum at any meeting. The Executive Committee may take action without a meeting on the written approval of such action by all the members of the Committee. The Board of Directors may by vote of a majority of the full Board fill any vacancies in the Executive Committee. The Executive Committee may, from time to time, subject to the approval of the Board of Directors, prescribe rules and regulations for the calling and conduct of meetings of the Committee, and other matters relating to its procedure and the exercise of its powers. Section 3. Other committees appointed by the Board shall cause to be kept regular minutes of their proceedings and in general the provisions as to procedure for such committees shall be that set forth above with respect to the Executive Committee. ARTICLE VII OFFICERS Section 1. The officers of the Corporation shall be elected by the Board of Directors. They shall include a President, one or more Vice Presidents, a Secretary, a Treasurer and a Controller and may include a Chairman and a Vice Chairman of the Board. In the event there shall be a Chairman of the Board, the Board of Directors shall designate whether he or the President shall be the Chief Executive Officer of the Corporation. If there shall be no Chairman of the Board, the President shall be the Chief Executive Officer of the Corporation. Any two or more of such offices, except those of Treasurer and Controller, may be occupied by the same person; provided, however, the same person may not act in more than one capacity where action by two or more officers is required. Section 2. The Board of Directors, at its first meeting after the election of directors by the stockholders, shall elect from among its members a President and, if it deems proper, a Chairman and a Vice Chairman of the Board. It shall also elect one or more Vice Presidents, a Secretary, a Treasurer and a Controller, none of whom need be members of the Board. The Board of Directors, at any meeting, may elect such additional Vice Presidents, and such Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controllers, as it shall deem necessary, none of whom need be members of the Board. Section 3. The Board of Directors, at any meeting, may elect or appoint such other officers and agents as it shall deem necessary. The tenure and duties of such officers and agents shall be fixed by the Board of Directors or, in the absence of any action by the Board of Directors so fixing such tenure and duties, the tenure and duties shall be fixed by the Chief Executive Officer of the Corporation, or by such officers or department heads to whom he shall delegate such authority. Section 4. The salaries and compensation of the officers of the Corporation and of agents of the Corporation appointed by the Board shall be fixed by the Board of Directors. The salaries and compensation of all other employees of the Corporation shall, in the absence of any action by the Board of Directors, be fixed by the Chief Executive Officer of the Corporation. No officer receiving compensation from any affiliated company shall at the same time be compensated by this corporation. Section 5. The officers of the Corporation elected pursuant to Section 2 of this Article VII shall hold office until the first meeting of the Board of Directors after the next succeeding annual meeting of stockholders and until their successors are elected and qualify in their stead. The Chief Executive Officer may be removed at any time, with or without cause, by the affirmative vote of a majority of the total number of directors then in office. Any other officer or employee of the Corporation may be removed at any time, with or without cause, either (a) by vote of a majority of the directors present at any meeting of the Board of Directors at which a quorum is present, or (b) by vote of a majority of the members of the Executive Committee, or (c) by the Chief Executive Officer of the Corporation or by any officer who shall be exercising the powers of the Chief Executive Officer of the Corporation, or by any superior of such employee to whom such power of removal shall be delegated by the Chief Executive Officer of the Corporation or the officer exercising the powers of the Chief Executive Officers of the Corporation. ARTICLE VIII CHIEF EXECUTIVE OFFICER Section 1. The Chief Executive Officer of the Corporation shall supervise, direct and control the conduct of the business of the Corporation subject, however, to the general policies determined by the Board of Directors and the Executive Committee, if there be one. He shall be a member of the Executive Committee, if there be one, and all committees appointed by the Board of Directors, except the Audit Committee, shall have the general powers and duties usually vested in the chief executive officer of a corporation, and shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the Bylaws, or by the Board of Directors. He shall, whenever it may in his opinion be necessary, prescribe the duties of officers and employees of the Corporation whose duties are not otherwise defined. He shall have power to remove at any time, with or without cause, any employee or officer of the Corporation. He may, in accordance with Section 5 of Article VII of these Bylaws, delegate such power of removal. ARTICLE IX CHAIRMAN OF THE BOARD Section 1. The Chairman of the Board, if there be one, shall preside at all meetings of the Board of Directors and of the stockholders, except when by statute the election of a presiding officer shall be required. He shall, if designated Chief Executive Officer pursuant to Article VII of these Bylaws, have all the powers and duties granted and delegated to the Chief Executive Officer by Article VIII of these Bylaws. In such event he may sign in the name of and on behalf of the Corporation any and all contracts, agreements or other instruments pertaining to matters which arise in the ordinary course of business of the Corporation and, if authorized by the Board of Directors or the Executive Committee, may sign in the name of and on behalf of the Corporation any other contracts, agreements or instruments of any nature pertaining to the business of the Corporation. He shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the Bylaws or by the Board of Directors. ARTICLE X VICE CHAIRMAN OF THE BOARD Section 1. The Vice Chairman of the Board, if there be one, shall perform necessary duties of the Chairman in case of the absence or temporary incapacity of the Chairman. He shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the Bylaws or by the Board of Directors. ARTICLE XI THE PRESIDENT Section 1. The President shall, in the absence of the Chairman and Vice Chairman of the Board or if there shall be no Chairman or Vice Chairman of the Board, preside at all meetings of the Board of Directors and of the stockholders, except when by statute the election of a presiding officer shall be required. He shall, if designated Chief Executive Officer of the Corporation pursuant to Article VII of these Bylaws, have all the powers and duties granted and delegated to the Chief Executive Officer by Article VIII of these Bylaws. In the event there shall be a Chairman of the Board who shall have been designated as Chief Executive Officer of the Corporation pursuant to Article VII of these Bylaws, then the President shall have such powers and duties as may be assigned to him by the Chairman of the Board of Directors. In addition, he shall be a member of the Executive Committee, and, in the absence or disability of the Chairman and Vice Chairman of the Board, he shall have all the powers and duties of the Chairman of the Board. He may sign in the name of and on behalf of the Corporation any and all contracts, agreements or other instruments pertaining to matters which arise in the ordinary course of business of the Corporation and, if authorized by the Board of Directors or the Executive Committee, may sign in the name of and on behalf of the Corporation any other contracts, agreements or instruments of any nature pertaining to the business of the Corporation. He shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the Bylaws or by the Board of Directors. ARTICLE XII THE VICE PRESIDENT Section 1. The Vice President shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform such other duties as the Board of Directors may prescribe. The Vice President may sign in the name of and on behalf of the Corporation contracts, agreements, or other instruments pertaining to matters which arise in the ordinary course of business of the Corporation, except in cases where the signing thereof shall be expressly delegated by the Board of Directors or the Executive Committee to some other officer or agent of the Corporation. If authorized by the Board of Directors or the Executive Committee, he may sign in the name of and on behalf of the Corporation any other contracts, agreements or instruments of any nature pertaining to the business of the Corporation. He shall have such other powers and perform such other duties as may be prescribed from time to time by law, by the Bylaws, or by the Board of Directors. If there be more than one Vice President, the Board of Directors or the Chief Executive Officer of the Corporation shall assign to such Vice Presidents their respective duties, and may designate any of such Vice Presidents as Executive Vice Presidents and Senior Vice Presidents. ARTICLE XIII THE SECRETARY Section 1. The Secretary shall attend all sessions of the Board and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for the committees appointed by the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chief Executive Officer, under whose supervision he shall be. He shall be sworn to the faithful discharge of his duty. Any records kept by him shall be the property of the Corporation and shall be restored to the Corporation in case of his death, resignation, retirement or removal from office. He or his agent shall be the custodian of the seal of the Corporation, the stock ledger, stock certificate book and minute books of the Corporation, and its committees, and other formal records and documents relating to the corporate affairs of the Corporation. Section 2. The Assistant Secretary or Assistant Secretaries shall assist the Secretary in the performance of his duties, exercise and perform his powers and duties, in his absence or disability, and such other powers and duties as may be conferred or required by the Board. ARTICLE XIV THE TREASURER Section 1. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors or as may be designated by persons to whom the Board of Directors delegates such authority. He shall disburse the funds of the Corporation in such manner as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. He shall give the Corporation a bond if required by the Board of Directors in a sum, and with one or more sureties satisfactory to the Board, for the faithful performance of the duties of his office, and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 2. The Assistant Treasurer or Assistant Treasurers shall assist the Treasurer in the performance of his duties, exercise and perform his powers and duties, in his absence or disability, and such other powers and duties as may be conferred or required by the Board. ARTICLE XV THE CONTROLLER Section 1. The controller of the Corporation, if there be one, shall be the principal accounting officer of the Corporation. He shall have full control of all the books of the Corporation and keep a true and accurate record of all property owned by it, of its debts and of its revenues and expenses, and shall keep all accounting records of the Corporation other than the record of receipts and disbursements and those relating to deposit or custody of money and securities of the Corporation, which shall be kept by the Treasurer, and shall also make reports to the directors and others of or relating to the financial condition of the Corporation. He shall exhibit at all reasonable times his books of account and records to any director of the Corporation upon application during business hours at the office of the Corporation where such books of accounts and records are kept. He shall perform all duties generally incident to the office of Controller and shall have such other powers and duties as, from time to time, may be prescribed by law, by the Bylaws, or by the Board of Directors. If there be no Controller, the Treasurer shall perform the duties set forth above for the Controller. Section 2. The Assistant Controller or Assistant Controllers shall assist the Controller in the performance of his duties, exercise and perform his powers and duties, in his absence or disability, and such other powers and duties as may be conferred or required by the Board of Directors. ARTICLE XVI VACANCIES Section 1. If the office of any director becomes vacant by reason of death, resignation, retirement, disqualification, or otherwise, the directors then in office, although less than a quorum, by a majority vote, may elect a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred. If the office of any officer of the Company shall become vacant for any reason, the Board of Directors, by a majority vote of those present at any meeting at which a quorum is present, may elect a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred. ARTICLE XVII RESIGNATIONS Section 1. Any officer or any director of the Corporation may resign at any time, such resignation to be made in writing and to take effect from the time of its receipt by the Corporation, unless some time be fixed in the resignation, and then from that time. The acceptance of a resignation shall not be required to make it effective. A vacancy shall be deemed to exist upon receipt by the Corporation of such written resignation, and a successor may, then or thereafter, be elected to take office when such resignation becomes effective. ARTICLE XVIII DUTIES OF OFFICERS MAY BE DELEGATED Section 1. In case of the absence of any officer of the Corporation, or for any other reason the Board may deem sufficient, the Board may delegate, for the time being, the powers or duties, or any of them, of such officers to any other officer or to any director. ARTICLE XIX STOCK OF OTHER CORPORATIONS Section 1. The Board of Directors shall have the right to authorize any officer or other person on behalf of the Corporation to attend, act and vote at meetings, of the stockholders of any corporation in which the Corporation shall hold stock, and to exercise thereat any and all the rights and powers incident to the ownership of such stock and to execute waivers of notice of such meetings and calls therefor; and authority may be given to exercise the same either on one or more designated occasions, or generally on all occasions until revoked by the Board. In the event that the Board shall fail to give such authority it may be exercised by the Chief Executive Officer of the Corporation in person or by proxy appointed by him on behalf of the Corporation. ARTICLE XX CERTIFICATES OF STOCK Section 1. The certificates of stock of the Corporation shall be entered in the books of the Corporation as they are issued. No fractional shares of stock shall be issued. Certificates of stock shall be signed by the President or a Vice President and by the Secretary, or an Assistant Secretary, and the seal of the Corporation shall be affixed thereto. Such seal may be facsimile, engraved or printed. Where any certificate of stock is signed by a transfer agent or transfer clerk or by a registrar, the signatures of any such President, Vice President, Secretary or Assistant Secretary, upon such stock certificate may be facsimiles, engraved or printed. In case any such officer who has signed, or whose facsimile signature has been placed upon, such certificate of stock, shall have ceased to be such officer before such certificate of stock is issued, it may be issued by the Corporation with the same effect as if such officer had not ceased to be such at the date of its issue. ARTICLE XXI TRANSFERS OF STOCK Section 1. Transfer of stock shall be made on the books of the Corporation only by the person named in the certificate or by attorney, lawfully constituted in writing, and upon surrender of the certificate therefor. ARTICLE XXII REGISTERED STOCKHOLDERS Section 1. The Corporation shall be entitled to treat the holders of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the statutes of the State of South Carolina. ARTICLE XXIII LOST CERTIFICATES Section 1. Whenever any stockholders shall desire a new certificate of stock to replace an original certificate of stock which has been lost, destroyed or wrongfully taken, he shall make application to the Corporation for the issuance of a new certificate or certificates in replacement of the certificate or certificates which were lost, destroyed or wrongfully taken, and shall file with the Corporation a good and sufficient indemnity bond, together with an affidavit stating that the applicant is the bona fide owner of such share(s) of stock and specifying the number(s) of the certificate or certificates which were lost, destroyed or wrongfully taken, the particular circumstances of such loss, destruction or wrongful taking (including a statement that the share(s) represented by such certificate or certificates has or have not been transferred or otherwise disposed of by such applicant in any manner.) Upon completion by a stockholder of the requirements set forth in the preceding paragraph, the Corporation shall issue a certificate or certificates in replacement of the certificate or certificates referred to in such stockholder's application if such application is received by the Corporation before it has notice that such certificate or certificates has or have been acquired by a bona fide purchaser. ARTICLE XXIV INSPECTION OF BOOKS Section 1. The Board of Directors shall have power to determine whether and to what extent, and at what time and places and under what conditions and regulations, the accounts and books of the Corporation (other than the books required by statute to be open to the inspection of stockholders), or any of them, shall be open to the inspection of stockholders, and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as such right may be conferred by the statutes of the State of South Carolina or by resolution of the directors or of the stockholders. ARTICLE XXV CHECKS, NOTES, BONDS AND OTHER INSTRUMENTS Section 1. All checks or demands for money and notes of the Corporation shall be signed by such person or persons (who may but need not be an officer or officers of the Corporation) as the Board of Directors may from time to time designate or as may be designated by persons to whom the Board of Directors delegates such authority. The Board of Directors shall have authority to make provision, with proper safeguards, for the signatures to appear on all checks, including, but not by way of limitation, payroll checks, to be made by facsimile, whether engraved or printed. Whenever the seal of this Corporation is to be affixed to any instrument being executed on behalf of this Corporation, such seal shall be affixed thereto by the Secretary or an Assistant Secretary and the fact of such affixation shall be attested to by the person so affixing the seal. ARTICLE XXVI RECEIPT FOR SECURITIES Section 1. All receipts for stocks, bonds or other securities received by the Corporation shall be signed by the Treasurer or an Assistant Treasurer, or by such other person or persons as the Board of Directors or Executive Committee shall designate. ARTICLE XXVII FISCAL YEAR Section 1. The fiscal year shall begin the first day of January in each year. ARTICLE XXVIII RESERVES Section 1. The Board of Directors shall have power to fix and determine, and from time to time to vary, the amount to be reserved as working capital; to determine whether any, or if any, what part of any, surplus shall be declared and paid as dividends, to determine the date or dates for the declaration or payment of dividends and to direct and determine the use and disposition of any surplus, and before payment of any dividend or making any distribution of surplus there may be set aside out of the surplus of the Corporation such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interests of the Corporation. ARTICLE XXIX NOTICES Section 1. In addition to the telegraphic notice permitted by Article XV of these Bylaws, whenever under the provisions of these Bylaws notice is required to be given to any director, officer or stockholder, it shall not be construed to require personal notice, but such notice may be given in writing, by mail, by depositing a copy of the same in a post office, letter box or mail chute, maintained by the Post Office Department, in a postpaid sealed wrapper, addressed to such stockholder, officer or director, at his address as the same appears on the books of the Corporation. A stockholder, director or officer may waive any notice required to be given to him under these Bylaws. ARTICLE XXX DIRECTOR, OFFICER AND EMPLOYEE INDEMNIFICATION Section 1. The Corporation shall indemnify any and all of its employees, officers, or directors, or former officers or directors (including their heirs, executors, and administrators), or any person who may have served at its request or by its election, designation, or request as a member, agent, employee, director or officer of any other corporation or partner, trustee or otherwise, of any organization against expenses actually and necessarily incurred by them in connection with the defense or settlement of any action, suit or proceeding (which shall include any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or arbitrative) in which they, or any of them, are made parties, or a party, by reason of being or having been agents, employees, directors or officers of the Corporation, or of such other organization, except in relation to matters as to which any such agent, employee, director or officer or former employee, director or officer or person shall be adjudged in such action, suit or proceeding to be liable for willful misconduct in the performance of duty and to such matters, as shall be settled by agreement predicated on the existence of such liability. Such indemnity shall be in accordance with a written plan adopted by the Board of Directors, which plan shall be in accordance with the law of South Carolina. The indemnification provided hereby shall not be deemed exclusive of any other right to which anyone seeking indemnification hereunder may be entitled under any By-Law, agreement, or otherwise. The Corporation may purchase and maintain insurance on the behalf of any director, officer, agent, employee or former employee, director or officer or other person, against any liability asserted against them and incurred by them. ARTICLE XXXI AMENDMENTS Section 1. Any of these Bylaws may be altered, amended or repealed, and/or one or more new Bylaws may be adopted, at a meeting of the stockholders, by a vote of the holders of a majority of all shares of stock entitled to vote to elect directors who are entitled to vote at such meeting, provided that written notice of such proposed alteration, amendment, repeal and/or adoption, as the case may be, shall have been given to all such stockholders at least ten days before such meeting. Any of these Bylaws may also be altered, amended or repealed, and/or one or more new Bylaws may be adopted, by the vote of a majority or by the written consent of all directors then in office, at a meeting of the Board of Directors, provided that the notice of such meeting includes therein notice of such alteration, amendment, repeal and/or adoption, as the case may be. At a meeting thereof, the stockholders, by the vote of the holders of a majority or by the written consent of all shares of stock entitled to vote to elect directors who are entitled to vote at such meeting, may repeal any alteration or amendment of these Bylaws made by the Board of Directors and/or reinstate any of these Bylaws repealed by the Board of Directors, and/or repeal any new By-Law adopted by the Board of Directors. EX-10 5 PERFORMANCE SHARE PLAN Exhibit 10.06 SCANA CORPORATION PERFORMANCE SHARE PLAN (As Amended and Restated Effective January 1, 1998) SCANA CORPORATION PERFORMANCE SHARE PLAN TABLE OF CONTENTS Page SECTION 1. PURPOSE AND EFFECTIVE DATE............................1 1.1 Purpose of the Plan.............................1 1.2 Effective Date of the Plan......................1 SECTION 2. DEFINITIONS...........................................3 2.1 Definitions.....................................3 2.2 Gender and Number...............................4 SECTION 3. ELIGIBILITY AND PARTICIPATION.........................5 3.1 Eligibility.....................................5 3.2 Participation...................................5 SECTION 4. HOW THE PLAN WORKS....................................6 4.1 Overview........................................6 4.2 Performance Periods and Cycles..................6 4.3 Target Awards and Target Shares.................6 4.4 Performance Criteria and Measurement............6 4.5 New Performance Award Periods...................7 SECTION 5. AWARD DETERMINATION...................................8 5.1 Preliminary Determination.......................8 5.2 Final Determination.............................8 5.3 Dividends.......................................9 SECTION 6. FORM AND TIMING OF PAYMENT...........................10 6.1 Form and Timing of Payment.....................10 6.2 Committee Certification........................10 6.3 Performance Award Tax Consequences.............10 6.4 Number of Corporation's Shares that may be Distributed................................10 6.5 Recapitalization...............................10 SECTION 7. TERMINATION OF EMPLOYMENT............................12 7.1 General Rule...................................12 7.2 Termination of Employment for Reasons Other Than Death, Disability or Retirement.........12 SECTION 8. BENEFICIARY DESIGNATION..............................13 8.1 Designation of Beneficiary.....................13 8.2 Death of Beneficiary...........................13 8.3 Ineffective Designation........................14 SECTION 9. CHANGE IN CONTROL DISTRIBUTIONS......................15 9.1 Accelerated Distributions Upon Change in Control....................................15 9.2 Tax Computation................................15 9.3 No Subsequent Recalculation of Tax Liability...15 SECTION 10. GENERAL PROVISIONS..................................16 10.1 Employment/Participation Rights................16 10.2 Nonalienation of Benefits......................16 10.3 Transferability Restriction as to Target Shares.......................................16 10.4 Regarding the Securities Act of 1933...........16 10.5 Regarding Section 16 of the Securities Exchange Act of 1934..................................17 10.6 Severability...................................17 10.7 No Individual Liability........................17 10.8 Applicable Law.................................17 SECTION 11. PLAN ADMINISTRATION, AMENDMENT AND TERMINATION......18 11.1 In General.....................................18 11.2 Claims Procedure...............................18 11.3 Finality of Determination......................18 11.4 Expenses.......................................18 11.5 Tax Withholding................................19 11.6 Incompetency...................................19 11.7 Action by Corporation..........................19 11.8 Notice of Address..............................19 11.9 Amendment and Termination......................19 SCANA CORPORATION PERFORMANCE SHARE PLAN (As Amended and Restated Effective January 1, 1998) SECTION 1. PURPOSE AND EFFECTIVE DATE 1.1 Purpose of the Plan. The SCANA Corporation Performance Share Plan ("Plan") is a long-term executive compensation incentive plan having as its purpose the rewarding of superior performance with a variable component of pay. The Plan provides as an element of executive compensation an award amount tied directly to corporate performance over three years. The Plan is intended to balance the short-term emphasis of the annual cash incentive portion of the Executive Incentive Plan with a longer-term perspective and to reinforce strategic goals by linking them to compensation. The Plan is an incentive program within the context of Department of Labor Regulation ss.2510.3-2(c), and as such is not an "employee pension benefit plan" or "pension plan" for purposes of the Employee Retirement Income Security Act of 1974, as amended, as the payouts hereunder are not systematically deferred to the termination of covered employment or beyond or to provide retirement income to executive employees. Under Section 162(m) of the Internal Revenue Code of 1986, as amended and the treasury regulations promulgated thereunder, the $1 million deduction limitation on compensation paid to covered employees by a publicly held corporation does not apply to qualified performance-based compensation. Under the Plan, the Committee (as hereinafter defined) may award qualified performance-based compensation (within the meaning of Treas. Reg. ss. 1.162-27(e)) or the Committee may grant awards that do not qualify as qualified performance-based compensation. 1.2 Effective Date of the Plan. The effective date of the Plan is January 1, 1990, as adopted by the Board of Directors of SCANA Corporation ("Board") on April 25, 1990. The Plan was amended and restated by the Board on February 18, 1992, effective as of January 1, 1992; the Target Awards for the 1992 Cycle were made subject to the approval by SCANA Corporation shareholders of the Plan which was received on April 22, 1992. The Plan was amended on February 16, 1993 and December 18, 1996 and subject to receiving shareholder approval at the 1998 annual meeting was amended and restated in its entirety on February 17, 1998, to be effective for Target Awards granted after January 1, 1998. Target Awards granted prior to January 1, 1998 shall be governed by the terms of the Plan in effect prior to this amendment and restatement; except that any issuances of the common stock of the Corporation (as hereinafter defined) shall be subject to Section 10.5. SECTION 2. DEFINITIONS 2.1 Definitions. Whenever used herein, the following terms shall have the meanings set forth below, unless otherwise expressly provided herein or unless a different meaning is plainly required by the context, and when the defined meaning is intended, the term is capitalized: (a) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (b) "Beneficiary" means any person or entity who, upon a Participant's death, is entitled to receive the Participant's benefits under the Plan in accordance with Section 8 hereof. (c) "Board" means the Board of Directors of the Corporation. (d) "Change in Control" means a change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Corporation is then subject to such reporting requirements; provided that, without limitation, such a Change in Control shall be deemed to have occurred if: (1) Any Person (as defined in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as such term is used in Section 13(d)) is or becomes the Beneficial Owner, directly or indirectly, of 25% or more of the combined voting power of the outstanding shares of capital stock of the Corporation; (2) During any period of two consecutive years (not including any period prior to December 18, 1996) there shall cease to be a majority of the Board comprised as follows: individuals who at the beginning of such period constitute the Board and any new director(s) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved; (3) The Securities and Exchange Commission (SEC) issues an order under Section 9(a)(2) of the Public Utility Holding Act of 1935 (the "1935 Act"), authorizing a third party to acquire 5% or more of the Corporation's voting shares of capital stock; (4) The shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting shares of capital stock of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting shares of capital stock of the surviving entity) at least 80% of the combined voting power of the voting shares of capital stock of the Corporation or such surviving entity outstanding immediately after such merger or consolidation; or the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets; or (5) The shareholders of the Corporation approve a plan of complete liquidation, or sale or disposition of, South Carolina Electric & Gas Company ("SCE&G"), South Carolina Pipeline Corporation or any subsidiary of the Corporation designated by the Board as a "Material Subsidiary," but such event shall represent a Change in Control only with respect to a Participant who has been assigned exclusively to SCE&G, South Carolina Pipeline Corporation or the affected Material Subsidiary. (e) "Code" means the Internal Revenue Code of 1986, as amended. (f) "Committee" means the committee established pursuant to Section 11.1 to administer the Plan. (g) "Corporation" means SCANA Corporation, a South Carolina corporation, or any successor thereto. (h) "Covered Participant" means a Participant who is a "covered employee" within the meaning of Section 1.162-27(c)(2) of the Treasury Regulations promulgated with respect to Section 162 of the Code. (i) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (j) "Participant" means an individual satisfying the eligibility requirements of Section 3. (k) "Plan" means this Amended and Restated Performance Share Plan. (l) Year" means the calendar year. 2.2 Gender and Number. Except when otherwise indicated by the context, any masculine terminology used herein also shall include the feminine and the feminine shall include the masculine, and the use of any term herein in the singular may also include the plural and the plural shall include the singular. SECTION 3. ELIGIBILITY AND PARTICIPATION 3.1 Eligibility. Eligibility in the Plan is restricted to (a) those executives of the Corporation and of subsidiaries of the Corporation who the Chief Executive Officer of the Corporation ("CEO") nominates for participation, and (b) the CEO. The underlying criteria for nomination is an executive within salary grades E-1 through E-12 (or, in the case of a nonofficer executive, a salary that is equivalent to the above enumerated grades), and determination in the discretion of the CEO that the selected executive serves in a role that is directly or indirectly (as per employment with a Corporation subsidiary) key to the Corporation's success. 3.2 Participation. Participation in the Plan is restricted to (a) those executives of the Corporation and of the subsidiaries of the Corporation who are eligible to participate in the Plan pursuant to Section 3.1 of the Plan, and (b) who are determined, in the discretion of the Committee, to serve in a role that is directly or indirectly (as per employment with a Corporation subsidiary) key to the Corporation's success. Participation will be reevaluated and determined at the beginning of each Performance Period. No executive shall have the right to be nominated by the CEO or selected by the Committee for participation in the Plan. To the extent that the Committee intends for an award to qualify as qualified performance-based compensation, the Committee will need to make the participation determination with respect to a Covered Participant not later than 90 days after the commencement of the Performance Period (as defined in Section 4.2). SECTION 4. HOW THE PLAN WORKS 4.1 Overview. The objective of the Plan is to measure the Corporation's Total Shareholder Return (as defined in Section 4.4) over each Performance Period relative to a peer group of utilities, and, based upon the performance achieved, make a payout ranging from 0% to 150% of a target award ("Target Award") expressed as a number of shares of the Corporation's common stock ("Target Shares") assigned to each Participant in accordance with the Participant's control point (E-1 through E-12 classification or, in the case of a nonofficer executive, the control point determined by the Committee), the higher the pay grade the greater the number of Target Shares. 4.2 Performance Periods and Cycles. Each performance period (a "Performance Period") shall be a period of three consecutive calendar years, and shall be designated as a cycle (a "Cycle"). Each calendar year shall begin a new cycle, as demonstrated by the following: 1998 1999 2000 2001 2002 2003 1998 Cycle: A A A 1999 Cycle: B B B 2000 Cycle: C C C 2001 Cycle: D D D 4.3 Target Awards and Target Shares. Target Awards in dollars for each Cycle are designated for each Participant as a function of a designated percentage of the Participant's control point for his pay grade. The Target Award in dollars for each Participant is then converted to a Target Share designation by dividing the Target Award amount by the closing price per share of the Corporation's common stock on December 31 (or last trading date) of the calendar year immediately preceding the first calendar year of the Cycle. To the extent that the Committee intends for an award to qualify as qualified performance-based compensation, the Committee must determine the Target Awards with respect to a Covered Participant not later than 90 days after the commencement of the Performance Period (as defined in Section 4.2). 4.4 Performance Criteria and Measurement. The Corporation's Total Shareholder Return is measured over the three calendar years of each Cycle in comparison to a peer group of electric and gas utilities each having annual revenue in excess of $100 million. The Committee may change for each Cycle the number of and/or individual composite companies of the peer group. Subsequently within a Cycle and subject to the limitations contained in Section 5.2, in response to circumstances affecting certain individual companies of the peer group (e.g., merger), the Committee may find it necessary to add to or otherwise modify the listing of companies comprising the peer group. The purpose of any such change is to establish and maintain a peer group that is objectively comparable to the Corporation to promote consistency within and between Cycles as an underlying premise for the integrity of performance evaluation. It is within this context, as an additional corrective measure, that per Section 5.2 the Committee may adjust the payout amounts otherwise indicated per Section 5.1. Total shareholder return ("Total Shareholder Return") for each Cycle is calculated after the end of the third calendar year of the Cycle using the following formula: (A) Closing Stock Price at December 31st (or last trading date) of the third calendar year of Cycle ("Ending Stock Price") less: (B) Closing Stock Price at December 31st (or last trading date) of the calendar year immediately preceding the first calendar year of the Cycle ("Beginning Stock Price") plus: (C) The sum of all cash dividends paid per share during the Cycle equals: (D) Net Number Divide (D) by (B) to yield Total Shareholder Return The result for the Corporation is then compared to the individual results of the companies comprising the peer group to determine the award in accordance with Section 5. Calculations will be adjusted by the Committee as appropriate for transactions described in Section 1.162-27(e)(2)(iii)(C) of the Treasury Regulations (e.g. stock split, dividend, merger, etc.) The computation of Total Shareholder Return also will be made for the Corporation and each of the companies of the peer group after the close of each of the first and second calendar years within each Cycle, with the data for items (A) and (C) of the above formula. The annual computation will render an on-going indication of the Corporation's comparative economic performance to the peer group for the subject Cycle. 4.5 New Performance Award Periods. Subject to Section 11.9, new performance award periods may be initiated under the Plan for five years from the effective date of this amendment and restatement. SECTION 5. AWARD DETERMINATION 5.1 Preliminary Determination. The performance achieved during each three-year Cycle will preliminarily indicate a payout as a percent of Target Shares awarded as follows: As Compared Payout As A % Performance To Peer of Target Achieved Group Companies Awarded Outstanding at or above 75 150% only (the percentile maximum) Target at or above 50 100% to 148% percentile but less than 75 percentile Threshold at or above 33 40% to 95% percentile but less than 50 percentile Below Threshold below 33 0% percentile The Threshold and Target performance categories, unlike the other two performance categories, renders payout on a sliding scale depending upon where the Corporation's performance ranking lies in comparison to the performance ranking of the individual companies comprising the peer group. Addendum A, Total Shareholder Return Award Calculations, sets forth the detailed table of payouts for the respective range of performance ranking percentages. Performance Achieved is categorized per Addendum A in whole percentages only, requiring the rounding of computational results to the nearest whole number, with .5 results rounded up if the resulting whole number would be an even number or rounded down if the resulting whole number would be an odd number. Notwithstanding the foregoing, the Committee may redefine for any Cycle the above category levels of performance as well as the respective payout percentages of Target Shares awarded. To the extent that the Committee intends for an award to qualify as qualified performance-based compensation, the Committee will need to redefine the performance levels and payout percentages for a Covered Participant not later than 90 days after the commencement of the applicable Performance Period. 5.2 Final Determination. The Committee will review the award amounts determined based on the performance achieved and, at its discretion, adjust the final payout amounts for all Participants in accordance with the purposes expressed in Section 4.4. In making adjustments, the Committee may consider factors such as, but not limited to, the following: (a) Significant acquisitions (or divestitures) within the Corporation's affiliated group; (b) Significant acquisitions or divestitures among peer group companies; and (c) Other unusual items of material consequence. If the Committee's exercise of discretion pursuant to Section 4.4 or 5.2 results in an increase in the amount of compensation to be payable under the Plan, the Committee's modifications made pursuant to Section 4.4 or 5.2 may cause the performance awards for Covered Participants to fail to qualify as qualified performance-based compensation. Except for distributions pursuant to Section 9, the maximum annual award distributed to any employee under this Plan (including amounts awarded pursuant to Section 5.3) shall not exceed an amount having a value equal to the value of 25,000 shares of common stock of the Corporation as of the date of distribution. 5.3 Dividends. After the end of a Cycle, dividends will be paid on the award shares earned, 40% to 150% of Target Shares earned (the "Earned Shares"), as if the Earned Shares had been outstanding during the entire Cycle as provided in Section 6.1. The amount of such dividends payable will be computed by multiplying the number of Earned Shares by the sum of all cash dividends paid per share during the Cycle as noted in Section 4.4(C) above. SECTION 6. FORM AND TIMING OF PAYMENT 6.1 Form and Timing of Payment. Except as provided in Section 9, the award values (Earned Shares plus related dividends) may be paid in shares of the Corporation's common stock or in cash, or in any combination thereof. Unless otherwise deferred in accordance with the terms of the Corporation's Voluntary Deferral Plan, awards will be paid out as soon as possible after the end of each Cycle except as provided in Section 9. If award dividends are paid in stock, the number of shares to be issued will be determined by dividing the amount of the award dividends earned by the closing stock price at December 31st (or last trading date) of the third calendar year of the Cycle. If Earned Shares are paid in cash, the amount to be paid shall be determined by multiplying the number of Earned Shares by the closing stock price at December 31st (or last trading date) of the third calendar year of the Cycle. 6.2 Committee Certification. Prior to the payment of any performance awards to a Covered Participant, the Committee shall certify in writing the computation of the Covered Participant's performance awards (including the extent that performance goals were in fact satisfied). For purposes of satisfying the requirements of this section, approved minutes of the Committee meeting in which the computation is made or reviewed will be deemed to constitute written certification. 6.3 Performance Award Tax Consequences. The Committee shall administer and construe the Plan in a manner so that no tax liability is incurred by the participating executive until the performance awards are actually paid. 6.4 Number of Corporation's Shares that may be Distributed. The total number of shares of the Corporation's common stock that may be distributed under this Plan originally set at 500,000 shares, and having an undistributed balance of 460,772 shares immediately prior to the 2-for-1 split of the Corporation's common stock approved by the Board effective at the close of business on May 11, 1995, per Resolution dated April 27, 1995, was on May 11, 1995 adjusted to an undistributed balance of 921,544 shares in accordance with the recapitalization provision of the Plan (see Section 6.5), and as of the effective date of this Amended and Restated Plan document, the undistributed balance is 849,712 shares. The shares to be issued under this Plan may be either original issue shares or shares purchased by the Plan in the open market. With respect to any applicable Cycle under this Plan, if the maximum number of shares of the Corporation's common stock which could be distributed as to both Earned Shares and the related dividend awards thereon are not in fact paid out after the end of the Cycle, then the number of shares of such common stock not distributed shall be available for payouts under this Plan with respect to subsequent Cycles. 6.5 Recapitalization. In the event of any increase or decrease in the total number of shares of the Corporation's common stock resulting from a subdivision or consolidation of shares or other capital adjustment or the payment of a stock dividend or other increase or decrease in such shares effected without receipt of consideration by the Corporation, the maximum number of shares of such common stock which may be distributed under the Plan, the number of Target Shares awarded under the Plan and the number of shares of the Corporation's common stock covered by each outstanding Target Share award shall be adjusted accordingly. Any such shares shall be subject to the same Plan provisions as the shares originally covered under the award. SECTION 7. TERMINATION OF EMPLOYMENT 7.1 General Rule. If death, disability or early or normal retirement, as defined in the SCANA Corporation Retirement Plan, occurs prior to the end of one or more Cycles in which an executive was a Participant, the Participant's performance award for each such Cycle will be paid as soon as possible after the end of each cycle except as provided in Section 9. Any award under this Section will be calculated as follows for each Cycle in which the executive was a Participant: (Target Shares) x (Payout % determined under Section 5.1 based upon performance results determined under Section 4) x (the fraction, the numerator of which is the number of months of continuous employment completed of the Cycle, counting the month of death, disability or retirement as though a full month of employment, and the denominator of which is 36). Added to this amount will be an award for dividends attributable to the Earned Shares in accordance with Section 5.3 above, but for each incomplete Cycle applicable only for the months of continuous employment completed, counting the month of death, disability or retirement as though a full month employment. 7.2 Termination of Employment for Reasons Other Than Death, Disability or Retirement. If a Participant's employment is terminated for reasons other than death, disability or normal or early retirement before the end of one or more Cycles in which the executive is a Participant, the individual's performance awards will be canceled and his tentative rights thereto forfeited unless the Committee in the exercise of its discretion determines that a performance payout should be made to the Participant under the circumstances of the termination. In this latter event, the payout shall be in whatever amount the Board determines, not to exceed, however, the amount that would be calculated if Section 7.1 was applicable as to each Cycle in which the executive was a Participant. Subject to Section 9, any such payout will be made in accordance with the provisions of Section 7.1. SECTION 8. BENEFICIARY DESIGNATION 8.1 Designation of Beneficiary. (a) A Participant shall designate a Beneficiary or Beneficiaries who, upon the Participant's death, are to receive the amounts that otherwise would have been paid to the Participant. All designations must be in writing and signed by the Participant. A designation shall be effective only if and when delivered to the Corporation during the lifetime of the Participant. The Participant also may change the Beneficiary or Beneficiaries by a signed, written instrument delivered to the Corporation. The payment of amounts shall be in accordance with the last unrevoked written designation of Beneficiary that has been signed and delivered to the Corporation. All Beneficiary designations shall be addressed to the Secretary of SCANA Corporation and delivered to the office of the Secretary, and shall be processed as indicated in subsection (b) below by the Secretary or by her authorized designee. (b) The Secretary of SCANA Corporation (or her authorized designee) shall, upon receipt of the Beneficiary designation: (1) ascertain that the designation has been signed, and if it has not been, return it to the Participant to be signed; and (2) if signed, stamp the designation "Received", indicate the date of receipt, and initial the designation in the proximity of the stamp. 8.2 Death of Beneficiary. (a) In the event that all of the Beneficiaries named pursuant to Section 8.1 predecease the Participant, the amounts that otherwise would have been paid to said Beneficiaries shall, where the designation fails to redirect to alternate Beneficiaries in such circumstance, be paid to the Participant's estate as the alternate Beneficiary. (b) In the event that two or more Beneficiaries are named, and one or more but less than all of such Beneficiaries predecease the Participant, each surviving Beneficiary shall receive any dollar amount or proportion of funds designated or indicated per the designation made pursuant to Section 8.1, and the dollar amount or designated or indicated share of each predeceased Beneficiary which the designation fails to redirect to an alternate Beneficiary in such circumstance shall be paid to the Participant's estate as an alternate Beneficiary. 8.3 Ineffective Designation. (a) In the event a Participant does not designate a Beneficiary, or if for any reason a designation is entirely ineffective, the amounts that otherwise would have been paid to the Beneficiary shall be paid to the Participant's estate as the alternate Beneficiary. (b) In the circumstance that designations are effective in part and ineffective in part, to the extent that a designation is effective, distribution shall be made so as to carry out as closely as discernable the intent of the Participant, with the result that only to the extent that a designation is ineffective shall distribution instead be made to the Participant's estate as an alternate Beneficiary. SECTION 9. CHANGE IN CONTROL DISTRIBUTIONS 9.1 Accelerated Distributions Upon Change in Control. Notwithstanding anything in this Plan to the contrary, upon the occurrence of a Change in Control, as to which the Key Employee Severance Benefits Plan ("KESBP") was not terminated prior to such Change in Control, all amounts (or remaining amounts) owed under this Plan as of the date of such Change in Control (referred to as each participant's "PSP Benefit") shall become immediately due and payable. The PSP Benefit shall be an amount equal to 100% of the targeted award as granted at the beginning of all Cycles which are not yet completed as of the date of the Change in Control. Each Participant's PSP Benefit determined under this Section 9.1 shall be paid to each Participant (and his Beneficiary) in the form of a single lump sum payment of all such amounts owed, together with an amount (the "Gross-Up Payment") such that the net amount retained by each Participant after deduction of any excise tax imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed) on such benefits (the "Excise Tax") and any Federal, state and local income tax upon the PSP Benefit and the Gross-Up Payment provided for by this Section 9 shall be equal to the value of the Participant's PSP Benefit. 9.2 Tax Computation. For purposes of determining the amount of the Gross-Up Payment referred to in Section 9.1, whether any of a Participant's PSP Benefit will be subject to the Excise Tax and the amounts of such Excise Tax: (i) there shall be taken into account all other payments or benefits received or to be received by a Participant in connection with a Change in Control of the Corporation (whether pursuant to the terms of the Plan or any other plan, arrangement or agreement with the Corporation, any person whose actions result in a Change in Control of the Corporation or any person affiliated with the Corporation or such person); and (ii) the amount of any Gross-Up Payment payable with respect to any Participant (or his Beneficiary) by reason of such payment shall be determined in accordance with a customary "gross-up formula," as determined by the Committee in its sole discretion. 9.3 No Subsequent Recalculation of Tax Liability. The Gross-Up Payments described in the foregoing provisions of this Section 9 are intended and hereby deemed to be a reasonably accurate calculation of each Participant's actual income tax and Excise Tax liability under the circumstances (or such tax liability of his Beneficiary), the payment of which is to be made by the Corporation or any "rabbi trust" established by the Corporation for such purposes. All such calculations of tax liability shall not be subject to subsequent recalculation or adjustment in either an underpayment or overpayment context with respect to the actual tax liability of the Participant (or his Beneficiary) ultimately determined as owed. SECTION 10. GENERAL PROVISIONS 10.1 Employment/Participation Rights. (a) Nothing in the Plan shall interfere with or limit in any way the right of the Corporation to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Corporation. (b) Nothing in the Plan shall be construed to be evidence of any agreement or understanding, express or implied, that the Corporation will continue to employ a Participant in any particular position or at any particular rate of remuneration. (c) No employee shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. (d) Nothing in this Plan shall affect the right of a recipient to participate in and receive benefits under and in accordance with any pension, profit-sharing, deferred compensation or other benefit plan or program of the Corporation. 10.2 Nonalienation of Benefits. (a) No right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void; nor shall any such disposition be compelled by operation of law, except as may be applicable in the circumstance of death of a Participant under South Carolina law or as a result of a qualified domestic relations order. (b) No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to benefits under the Plan. (c) If any Participant or Beneficiary hereunder should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit hereunder, then such right or benefit shall, in the discretion of the Board cease, and the Board shall direct in such event that the Corporation hold or apply the same or any part thereof for the benefit of the Participant or Beneficiary in such manner and in such proportion as the Board may deem proper. 10.3 Transferability Restriction as to Target Shares. Target Shares are not transferable by a Participant other than by will or ----------------------------------------------- the laws of descent and distribution. 10.4 Regarding the Securities Act of 1933. The Corporation shall not be deemed by reason of the granting of any Target Shares hereunder to have any obligation to register any shares of the Corporation's common stock with respect to this Plan under the Securities Act of 1933, as amended, or to maintain in effect any registration of such shares, or to list such shares on any exchange. As a condition to the issuance or transfer of shares of the Corporation's common stock to a Participant or to his Beneficiary or legal representative, the Committee may require such Participant, Beneficiary or legal representative to represent that the shares of stock are taken for investment and not for resale and to make such other representations as the Committee shall deem necessary to qualify the issuance of the shares as exempt from the registration requirements of the Securities Act of 1933 and any other applicable securities laws. The Corporation reserves the right to place a legend on any stock certificate issued pursuant to the Plan to further the purposes expressed herein. 10.5 Regarding Section 16 of the Securities Exchange Act of 1934. With respect to persons subject to Section 16 of the Securities Exchange Act of 1934, or any successor thereto ("Section 16"), transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Act. Accordingly, all issuances of shares of common stock of the Corporation to persons subject to the reporting requirements of Section 16 shall be, to the extent required by Section 16, approved by the Committee or in another manner provided in Section 16 or subject to a six month holding period. To the extent any provision of the Plan or action by the Committee is deemed not in compliance with an applicable condition of Rule 16b-3, that provision or action shall be deemed null and void to the extent permitted by law and deemed advisable by the Committee. 10.6 Severability. If any particular provision of the Plan shall be found to be illegal or unenforceable for any reason, the illegality or lack of enforceability of such provision shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if the illegal or unenforceable provision had not been included. 10.7 No Individual Liability. It is declared to be the express purpose and intention of the Plan that no liability whatsoever shall attach to or be incurred by the Committee, the shareholders, the officers or the directors of the Corporation or any representative appointed hereunder by the Committee, under or by reason of any of the terms or conditions of the Plan. 10.8 Applicable Law. The Plan shall be governed by and construed in accordance with the laws of the State of South Carolina, except to the extent governed by applicable federal law. SECTION 11. PLAN ADMINISTRATION, AMENDMENT AND TERMINATION 11.1 In General. The Plan shall be administered by the Committee which shall have the sole authority to construe and interpret the terms and provisions of the Plan and determine the amount, manner and time of payment of any benefits hereunder. The Committee shall consist of not less than three persons who shall be members of the Board. Each member of the Committee shall be at all times a "non-employee director" within the meaning of Rule 16b-3 of the General Rules and Regulations (Reg. ss. 16b-3(C)(2)(i)) under the Exchange Act. Additionally, each member of the Committee shall be at all times an "outside director" within the meaning of Section 1.162-27(e)(3) of the Treasury Regulations promulgated with respect to Section 162 of the Code. Once designated and for as long as the individuals qualify as members of the Committee, the Committee shall continue to serve until otherwise directed by the Board. From time to time, the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution thereof, fill vacancies however caused and remove all members of the Committee. A majority of the entire Committee shall constitute a quorum, and the action of a majority of the members present at any meeting at which a quorum is present shall be deemed the action of the Committee. In addition, any decision or determination reduced to writing and signed by all the members of the Committee shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee shall maintain records and cause payments to be made hereunder, and the requisite calculations, interpretations, determinations, regulations and, subject to the provisions of Section 11.2, calculations of the Committee shall be final and binding on all persons and parties concerned. The Committee may adopt such rules as it deems necessary, desirable or appropriate in administering the Plan. 11.2 Claims Procedure. Any person dissatisfied with the Committee's determination of a claim for benefits hereunder must file a written request for review with the Board. This request must include a written explanation setting forth the specific reasons for the requested review. The Board shall review the Committee's determination promptly and render a written decision with respect to the claim. Such decision shall be final, binding and conclusive upon all claimants under this Plan. The Board's exercise of discretion under this Section may cause the performance awards for a Covered Participant to fail to qualify as qualified performance-based compensation. 11.3 Finality of Determination. The determination of the Board as to any disputed questions arising under this Plan, including questions of construction and interpretation, shall be final, binding and conclusive upon all persons. 11.4 Expenses. The cost of payments from this Plan and the expenses of administering the Plan shall be borne by the Corporation. -------- 11.5 Tax Withholding. The Corporation shall have the right to deduct from all payments made under the Plan any federal, state or local taxes required by law to be withheld with respect to such payments. 11.6 Incompetency. Any person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally competent and of age until the Corporation receives written notice, in a form and manner acceptable to it, that such person is incompetent or a minor, and that a guardian, conservator, statutory committee under the South Carolina Code of Laws, or other person legally vested with the care of his estate has been appointed. In the event that the Corporation finds that any person to whom a benefit is payable under the Plan is unable to properly care for his affairs, or is a minor, then any payment due (unless a prior claim therefor shall have been made by a duly appointed legal representative) may be paid to the spouse, a child, a parent or a brother or sister, or to any person deemed by the Corporation to have incurred expense for the care of such person otherwise entitled to payment. In the event a guardian or conservator or statutory committee of the estate of any person receiving or claiming benefits under the Plan shall be appointed by a court of competent jurisdiction, payments shall be made to such guardian or conservator or statutory committee provided that proper proof of appointment is furnished in a form and manner suitable to the Corporation. Any payment made under the provisions of this Section 11.6 shall be a complete discharge of liability therefor under the Plan. 11.7 Action by Corporation. Any action required or permitted to be taken hereunder by the Corporation or the Board shall be --------------------- taken by the Board. 11.8 Notice of Address. Any payment made to a Participant or his Beneficiary at the last known post office address of the distributee on file with the Corporation, shall constitute a complete acquittance and discharge to the Corporation and any director or officer with respect thereto, unless the Corporation shall have received prior written notice of any change in the condition or status of the distributee. Neither the Corporation nor any director or officer shall have any duty or obligation to search for or ascertain the whereabouts of a Participant or his Beneficiary. 11.9 Amendment and Termination. If approved by the shareholders of the Corporation, the Corporation reserves the right to amend, modify or terminate the Plan at any time by action of its Board without further action of shareholders. However, no amendment will increase the total number of shares of the Corporation's common stock that may be distributed under the Plan beyond the number of shares indicated in Section 6.4 or the maximum annual award set forth in Section 5.2 without obtaining shareholder approval. Upon any such amendment, and except as provided hereunder, upon the occurrence of a Change in Control of the Corporation, each Participant and his Beneficiary shall be entitled only to such benefits as determined by the Committee pursuant to such amendment. Upon any termination of the Plan, and except as provided hereunder, upon the occurrence of a Change in Control, no Participant or Beneficiary shall be entitled to any further benefits hereunder, unless determined otherwise by the Committee, in its sole discretion. Notwithstanding the foregoing, and subject to Section 9, no amendment, modification or termination of the Plan may be made, and no Participants may be added to the Plan, upon or following a Change in Control of the Corporation without the express written consent of all of the Plan's Participants covered by the Plan at such time. In all events, however, the Corporation reserves the right to amend, modify or delete the provisions of Section 9 at any time prior to a Change in Control of the Corporation, pursuant to a Board resolution adopted by a vote of at least two-thirds of the members of the Board. ADDENDUM A TOTAL SHAREHOLDER RETURN AWARD CALCULATIONS PERFORMANCE PAYOUT AS A % OF ACHIEVED TARGET SHARES AWARDED 33 40 34 44 35 48 36 51 37 55 38 59 39 63 40 66 41 70 42 74 43 78 45 81 46 85 47 89 48 93 49 95 50 100 51 102 52 104 53 106 54 108 55 110 56 112 57 114 58 116 59 118 60 120 61 122 62 124 63 126 64 128 65 130 66 132 67 134 68 136 69 138 70 140 71 142 72 144 73 146 74 148 75 150 ADDENDUM B SCANA CORPORATION PERFORMANCE SHARE PLAN DESIGNATION OF BENEFICIARY To: Secretary of SCANA Corporation I hereby designate the following person(s), trust(s) or estate, to be the recipient(s) of any and all amounts which may become payable or may remain to be paid upon my death under the SCANA Corporation Performance Share Plan. =========================-------------------------------================== Beneficiary's Name and Social Security Relationship or Employer Beneficiary's to Dollars or Identification No. Address Participant % Share ======================================================= ============== =========================================================================== I hereby designate the following person, trust or estate as Alternate Beneficiary with respect to the contingency events described in Sections 8.2(a) and 8.2(b) of this Plan. =================================--------------------======================== Alternate Beneficiary's Name and Social Alternate Relationship Security or Employer Beneficiary's to Identification No. Address Participant ============================================================================= ============================================================================= Spouse's Consent: (Community Property States Only -- S.C. domiciliaries ignore): I hereby agree to the Beneficiary(ies) designated above: - ----------------------------------- ------------------------ Spouse's Signature Date I hereby revoke any Beneficiary designation previously made by me and reserve the right to change this designation at any time by filing a new Designation of Beneficiary form. Signature of Participant Date Social Security Number Signature of Corporate Secretary Date Received (Rev. 1996) EX-12 6 COMPTATION OF RATIOS Exhibit 12.01 SCANA CORPORATION CALCULATION OF BOND RATIO FOR THE YEAR ENDED DECEMBER 31, 1999 (Millions of Dollars) Net earnings(1) $566.4 Divide by annualized interest charges on: Bonds authenticated under SCANA's First and Refunding Mortgage Bond Indenture $31.0 Other indebtedness(1) $63.3 Total annualized interest charges $ 94.3 Bond ratio 6.01 (1) As defined under SCE&G's First and Refunding Mortgage Bond Indenture, dated April 1, 1945 (Old Mortgage). SCANA CORPORATION CALCULATION OF NEW BOND RATIO FOR THE YEAR ENDED DECEMBER 31, 1999 (Millions of Dollars) Net earnings(1) $561.1 Divide by annualized interest charges on: Bonds authenticated under SCANA's First Mortgage Bond Indenture $63.3 Other indebtedness(1) $31.0 Total annualized interest charges $ 94.3 New Bond Ratio 5.95 (1) As defined under SCE&G's Collateral Trust Mortgage Indenture, dated April 1, 1993(New Mortgage). SCANA CORPORATION CALCULATION OF PREFERRED STOCK RATIO FOR THE YEAR ENDED DECEMBER 31, 1999 (Millions of Dollars) Net Earnings (1) $181.7 Divide by annualized interest charges on: Bonds authenticated under SCE&G's mortgage bond indentures $31.0 Other indebtedness (1) $63.3 Preferred Dividend Requirements $ 7.4 Total annualized interest charges $101.7 Preferred stock ratio 1.79 (1) As defined under SCE&G's Restated Articles of Incorporation. SCANA CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES For Each of the Five Years Ended December 31, 1999 (Millions of Dollars) Years Ended December 31, 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Fixed Charges as defined: Interest on long-term debt.................. $129.2 $118.1 $113.6 $112.3 $113.9 Amortization of debt premium, discount and expense (net).............................. 3.0 2.7 2.6 2.6 2.5 Other interest expense...................... 13.8 10.0 11.7 13.3 17.1 Trust preferred............................. 3.8 3.8 .7 - - Interest component of rentals............... .8 0.8 1.7 2.3 2.8 ------ ------ ------ ------ ------ Total Fixed Charges (A)................. $150.6 $135.4 $130.3 $130.5 $136.3 ====== ====== ====== ====== ====== Earnings, as defined: Income...................................... $186.4 $230.8 $230.0 $220.7 $174.0 Income taxes................................ 111.3 131.1 113.6 119.1 99.1 Total fixed charges above................... 150.6 135.4 130.3 130.5 136.3 ------ ------ ------ ------ ------ Total Earnings (B)...................... $448.3 $497.3 $473.9 $470.3 $409.4 ====== ====== ====== ====== ====== Ratio of Earnings to fixed charges (B/A)...... 2.98 3.67 3.64 3.60 3.00 ==== ==== ==== ==== ====
Exhibit 12.01 SOUTH CAROLINA ELECTRIC & GAS COMPANY CALCULATION OF BOND RATIO FOR THE YEAR ENDED DECEMBER 31, 1999 (Millions of Dollars) Net earnings(1) $566.4 Divide by annualized interest charges on: Bonds authenticated under SCANA's First and Refunding Mortgage Bond Indenture $31.0 Other indebtedness(1) $63.3 Total annualized interest charges $ 94.3 Bond ratio 6.01 (1) As defined under SCE&G's First and Refunding Mortgage Bond Indenture, dated April 1, 1945 (Old Mortgage). SOUTH CAROLINA ELECTRIC & GAS COMPANY CALCULATION OF NEW BOND RATIO FOR THE YEAR ENDED DECEMBER 31, 1999 (Millions of Dollars) Net earnings(1) $561.1 Divide by annualized interest charges on: Bonds authenticated under SCANA's First Mortgage Bond Indenture $63.3 Other indebtedness(1) $31.0 Total annualized interest charges $ 94.3 New Bond Ratio 5.95 (1) As defined under SCE&G's Collateral Trust Mortgage Indenture, dated April 1, 1993 (New Mortgage). SOUTH CAROLINA ELECTRIC & GAS COMPANY CALCULATION OF PREFERRED STOCK RATIO FOR THE YEAR ENDED DECEMBER 31, 1999 (Millions of Dollars) Net Earnings (1) $181.7 Divide by annualized interest charges on: Bonds authenticated under SCE&G's mortgage bond indentures $31.0 Other indebtedness (1) $63.3 Preferred Dividend Requirements $ 7.4 Total annualized interest charges $101.7 Preferred stock ratio 1.79 (1) As defined under SCE&G's Restated Articles of Incorporation. SOUTH CAROLINA ELECTRIC & GAS COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES For Each of the Five Years Ended December 31, 1999 (Millions of Dollars) Year Ended December 31, 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Fixed Charges as defined: Interest on long-term debt.................. $ 94.4 $ 92.7 $ 94.0 $ 94.8 $ 96.2 Amortization of debt premium, discount and expense (net).............................. 2.5 2.3 2.3 2.3 2.2 Interest on debt to affiliate............... - - - - - Other interest expense...................... 8.6 6.2 4.9 7.4 9.2 Trust preferred............................. 3.8 3.8 .7 - - Interest component of rentals............... 0.8 0.8 1.8 2.3 2.8 ------- ------ ------ ------ ------ Total Fixed Charges (A)................. $110.1 $105.8 $103.7 $106.8 $110.4 ====== ====== ====== ====== ====== Earnings, as defined: Income...................................... $189.2 $227.2 $194.7 $190.5 $169.2 Income taxes................................ 109.7 132.2 100.6 108.1 97.3 Total fixed charges above................... 110.1 105.8 103.7 106.8 110.4 ------ ------ ------ ------ ------ Total Earnings (B)...................... $409.0 $465.2 $399.0 $405.4 $376.9 ====== ====== ====== ====== ====== Ratio of Earnings to fixed charges (B/A)...... 3.71 4.40 3.85 3.80 3.41 ==== ==== ==== ==== ====
EX-23 7 CONSENTS OF EXPERTS AND COUNSEL EXHIBIT 23.01 SCANA CORPORATION INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Post-Effective Amendment No. 1 to Registration Statement No. 33-49333 on Form S-8, Registration Statements No. 333-18973 and No. 333-87281 on Forms S-8 Registration Statement No. 333-78227 on Form S-4 and Registration Statements No. 333-86803 and No. 333-90073 on Forms S-3 of our report dated February 10, 2000 appearing in this Annual Report on Form 10-K of SCANA Corporation for the year ended December 31, 1999. s/Deloitte & Touche LLP DELOITTE & TOUCHE LLP Columbia, South Carolina March 24, 2000 Exhibit 23.02 SOUTH CAROLINA ELECTRIC & GAS COMPANY INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-86387 of South Carolina Electric & Gas Company on Form S-3 of our report dated February 10, 2000 appearing in this Annual Report on Form 10-K of South Carolina Electric & Gas Company for the year ended December 31, 1999. s/Deloitte & Touche LLP DELOITTE & TOUCHE LLP Columbia, South Carolina March 24, 2000 EX-27 8 SCANA FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
UT THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 AND THE CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS AND OF CASH FLOWS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS DEC-31-1999 DEC-31-1999 PER-BOOK 3,851 999 612 549 0 6,011 1,051 328 720 2,099 61 106 1,563 266 0 0 303 1 0 0 1,612 6,011 1,650 110 1,230 1,340 310 22 332 142 186 7 179 137 0 223 1.73 1.73
EX-27 9 SCE&G FINANCIAL DATA SCHEDULE
UT THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 AND THE CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS AND OF CASH FLOWS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS DEC-31-1999 DEC-31-1999 PER-BOOK 3,500 19 375 510 0 4,404 181 827 550 1,558 61 106 1,121 213 0 0 128 1 0 0 1,216 4,404 1,467 103 1,081 1,184 283 12 295 102 189 7 182 123 0 310 0 0
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