SCE&G pursues increase in rates

July 2, 2004

By Ben Werner, The State

Residential customers of SCE&G could see an 8.8 percent jump in their monthly electric bills in January.
South Carolina Electric & Gas, which serves 574,000 customers in 24 counties, asked state regulators Thursday for permission to increase electric rates 5.66 percent overall to pay for its new $450 million Jasper County power plant.

For businesses, the increase in rates would vary:

* 3 percent for small businesses

* 5 percent for medium-sized commercial users

* 2 percent for industrial and large commercial users.

Neville O. Lorick, SCE&G president and chief operating officer, said the proposed residential rate works out to about a $7.63 per month increase for a typical home’s 1,000 kilowatt hours of use.

How big a house is that? Lorick said it’s hard to generalize, but his 2,200 square-foot home averages about 1,100 kilowatt hours of use per month.

The request is expected to be reviewed this fall by the S.C. Public Service Commission.

SCE&G, the largest subsidiary of Columbia-based SCANA Corp., built the Jasper plant to meet current electricity demand and future growth. The plant started operating May 1.

The company has seen 18 percent growth in its customer base and a 30 percent jump in usage since the Cope Generating Station in southern Orangeburg County opened in 1995.

Lorick stressed that the Jasper plant will serve S.C. residents and businesses, adding that any power sold across state lines to large industrial users will be secondary to the needs of in-state customers.

“We don’t build merchant plants,” he said. “We always build with native load (existing customers) as our first priority.”

Lorick said electricity still offers a great value, but conceded not all of his customers will easily shrug off the added expense.

“There’s never a good time to go into a rate increase,” he said.

For small businesses, though, now is really a bad time, said Frank Knapp, president of the S.C. Small Business Chamber of Commerce.

The chamber and the state’s consumer advocate plan to press SCE&G for details of this proposed rate increase.

Knapp recalled his members’ worry two years ago when they faced a 14 percent rate increase, which SCE&G proposed to cover initial construction in Jasper and improvements to an Aiken plant.

State regulators cut that request nearly in half, but Knapp said small businesses are still trying to digest it. Now they are being served an additional 3 percent increase.

“Times are still tough for small businesses,” he said.

Elliott Elam, the state’s acting consumer advocate, said he expects SCE&G to ask regulators for a significant depreciation on the new plant.

The company was rebuffed when it tried to get a higher write-off rate two years ago, he said.

Public questioning of SCE&G’s proposal also can influence regulators. But this fall, when a hearing is likely to occur, the state’s public advocacy role in utility cases will be moving from Elam’s office to the Public Service Commission. Knapp speculated SCE&G is trying to gain an advantage by having its case reviewed while the state’s consumer advocate is being drained of staff.

“It looks like (SCE&G) wanted to have (the rate case) done before the (PSC’s) Office of Regulatory Affairs takes over,” Knapp said.

Previously, SCE&G has said it couldn’t count Jasper as a capital expense until the plant went online, and wouldn’t file the rate increase request until the final cost was known.

Wall Street investors will be watching the outcome of this case closely. They have already been primed to accept SCANA’s financial results showing a large capital expenditure for two quarters until new rates are set, but some questions remain, said Shelby Tucker, an analyst with Banc of America Securities.

The investment community’s acceptance of this rate increase, he said, hinges on whether the company receives its proposed 11.75 percent return on common equity, which shows how well SCANA is using its capital.

“The cost of debt is easy to figure out,” he said. “The cost of equity is a little more nebulous.”

Part of what the regulators will do is figure out the appropriate return on equity.

“SCANA has done a good job in managing its relationship with state regulators,” Tucker said. “They’ve generally gotten between 80 and 85 percent of what they ask.”

Reach Werner at (803) 771-8509 or


The utility asked state regulators Thursday for permission to pay for its new $450 million Jasper County power plant by increasing electric rates. The breakdown:

* 8.88 percent for residences

* 5 percent for medium-sized commercial users

* 3 percent for small businesses

* 2 percent for industrial users.

For the average residential user of 1,000 kilowatt hours, the rate increase, if approved, would add about $7.63 to the monthly bill of $88.41.

If approved, the new rates would take effect in January.

SCE&G also wants the state’s blessing on its plan to use anticipated federal synthetic-fuel tax credits to offset the $275 million price tag for the Lake Murray backup dam.


Thursday’s request for an electricity rate increase is the third SCE&G has made since 1995. The other two requests were:

* In 1995, the company sought a 7.5 percent increase over two years to recoup the cost of building its Cope Generating Station and set up a $50 million reserve fund.

* In 2002, the company sought a 5 percent rate increase to pay for $105 million in improvements made to its Aiken plant and Jasper County plant construction. SCE&G received an increase worth $70 million.

* In addition, SCE&G applies for fuel cost increases, which are essentially rate increases that only cover the increased cost of natural gas, coal and oil that is used to generate power. In May, SCE&G started charging a tenth of a cent per kilowatt hour rate increase to cover a rise in the cost of fuel. This worked out to about $1.43 per month for the average home using 1,000 kilowatt hours per month.


The S.C. Public Service Commission is expected to hold a public hearing this fall on SCE&G’s rate increase request.

* For information about the request, visit

* For information about the hearing, contact the commission’s consumer services department at (803) 896-5230, or visit

* You can also contact the state Consumer Affairs agency at (803) 734-4200 or (800) 922-1594, or visit


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