By Molly Parker, Charleston Business Journal

November 12, 2007

South Carolina Electric & Gas business and residential customers will see an increase in their electric bills starting Jan. 1, but the amount will be substantially less than what the investor-owned utility requested, according to a proposed agreement the utility signed in late October.

SCE&G asked the state’s Public Service Commission to approve an average 6.75% rate increase that would allow the company to capture about $118 million in new revenue. The proposed agreement reached in October allows for an average 4.4% increase to business and residential rates, providing roughly $76.9 million in new revenue, though this represents a 35% decrease in the company’s original request.

The Public Service Commission, which sits as the judge in rate hearings, still must sign off on the deal by the end of the year, but it generally gives its blessing if a settlement has been reached with those formally opposing the rate increase.

A number of business and government representatives, from Wal-Mart to the Navy, protested SCE&G’s rate request, the third one the utility has made in five years.

“All of the parties have agreed to the settlement,” said Dukes Scott, executive director of the Office of Regulatory Staff, the state agency charged with representing the public interest in utility cases before the commission. “The settlement agreement reduces SCE&G’s profit request by $41.2 million.”

The utility said it needed the increase to recoup construction costs it incurred during the past
three years building transmission and distribution facilities throughout the region to keep pace with new customer hookups and electricity demands.

The company also cited increased material costs in underground and overhead transformers and pole hardware and cable prices, which it noted rose by 170% over the past few years.

SCE&G sought to increase from 11% to 11.75% its allowed rate of return on equity, though the settlement agreement keeps the former cap on the regulated utility. The rate increase agreed upon in the settlement produces a 10.7% rate of return on equity, the company said.

Even though SCE&G didn’t receive all it wanted, President Kevin Marsh said in a statement that he was “pleased to have reached this agreement with all the parties.”

“The additional revenue will ensure that we provide environmental upgrades and that we can pay for the increased costs of transmission and distribution infrastructure required to continue the safe and reliable service that our customers expect,” he said.

For the average residential customer using 1,000 kilowatt hours of electricity, bills will increase roughly $5.44 monthly. The company does not provide average increases for business users, but Frank Knapp, president of the South Carolina Small Business Chamber of Commerce, one of those protesting the increase, said he thought the agreement was “the best deal we could get for the consumer.”

“We were able to achieve that reduction without going before the Public Service Commission and without spending a lot of time and money without any guarantees,” he said.

Molly Parker is a staff writer for the Business Journal. E-mail her directly at mparker@setcommedia.com.

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