SCE&G seeks to raise residential electric rate 8.8 percent

by Kyle Stock, Charleston Post and Courier

Published July 2, 2004

South Carolina Electric & Gas filed a request with state regu-lators Thursday to raise residential electric rates 8.8 percent to recoup the cost of building a new power plant that started operating May 1.

A household using 1,000 kilowatt hours of electricity a month would pay an additional $7.63 if the South Carolina Public Service Commission approves the request as is. Businesses and industrial facilities would see smaller increases.

The utility, the main operating unit of Columbia-based Scana Corp., is seeking to raise rates 3.3 percent for small commercial customers, 5 percent for medium-sized businesses and 2 percent for large industrial plants. The overall average increase requested is 5.66 percent, a margin that would provide an 11.75 percent return on equity for the company.

“It’s never a good time to ask for a rate increase, and it’s always difficult for folks on fixed incomes and that type of thing,” said SCE&G President Neville Lorick. “But when you look at this, what we’re asking for is pretty clear cut, and I think we have a very sound case. We’re just asking to recover the capital investment of what we put in the ground.”

The PSC has six months to rule on the request. If approved, the new rates would be on bills in January.

The state Consumer Affairs Department immediately filed an intervention contesting SCE&G’s proposal.

“We’re going to jump right into this,” said state Consumer Advocate Elliott Elam.

Elam said he had not had time to evaluate the request thoroughly but that at first glance, he was concerned that residential customers might be overcharged.

The South Carolina Small Business Chamber of Commerce said it also likely will file an intervention.

“On the surface, we have to be happy with the fact that the request was only 3.3 percent for our members,” said Frank Knapp, president of the chamber. “But until we really look at the numbers, we don’t know how justified it is and what the particulars are.”

SCE&G estimated the proposal would provide an additional $81.2 million a year.

The money is needed to pay off debt from a $450 million natural gas-burning power plant built in Jasper County over the past two years. Lorick said the new plant is necessary to meet growing demand for electricity and buttress system reliability. Until it came online this spring, SCE&G had to buy some power from other utilities.

The utility is seeking to raise rates more on residents because they comprise the segment of its client base that recently has grown the most, according to Scana spokesman Robin Montgomery. In 2002, 82 percent of demand growth came from households, a sector that buys 85 percent of SCE&G’s power.

“It takes more poles, it takes more lines and it takes more infrastructure in general to serve the residential segment of our customer base,” Montgomery said. “In the last two years, the economy has been down, and we have not seen nearly as much growth in the commercial segment.”

The company’s estimate of a $7.63-a-month increase would raise a 1,000-kilowatt user’s monthly bill to $96.04 from $88.41.

West Ashley resident Carl Green pays SCE&G about $120 to $130 a month for electricity and gas. He’s been trying to cut down on how much power he uses and was not happy Thursday afternoon to hear about the possibility of his bill going up further.

“I think 8 percent is too much,” Green said. “But I guess there’s not much you can do about it. Somebody’s got to pay if they build a new plant.”

In January 2003, the utility won a rate increase bigger than the one requested Thursday.

After a hard-fought battle that involved many Palmetto State businesses and consumer-interest groups challenging the request, state regulators OK’d a 5.8 percent overall increase that tacked an additional $4.23 per month on the average household bill.

The 2003 increase allowed Scana to recoup about two-thirds of the cost of the Jasper County plant, $276 million to date.

The utility has planned since construction started to recoup the rest of the cost when the plant came online. Scana first announced plans to request a rate increase at an annual conference with financial analysts May 25. The utility filed a letter of intent with the PSC that day.

Lorick said the rate increase request would have been “significantly higher” if Scana had not recently inked a deal to sell some of its excess power to electric cooperatives in North Carolina. The utility signed contracts to provide 350 megawatts of electricity per month in 2004 and 2005 and 250 megawatts monthly from 2006 through 2012. The company won’t say how much revenue the transactions will bring, but Lorick said they were “an extremely good deal.”

Low interest rates also will help check prices for Scana customers. The utility refinanced all of its long-term debt at relatively good rates the past few years, and 85 percent of the debt is locked in at 5.9 percent.

Scana also is riding the momentum of healthy earnings. Boosted by its last rate increase, the company swung from a $142 million loss in 2002 to a $282 million profit last year.

The utility’s net income jumped 20.2 percent in the quarter ended March 30 and revenues rose 6.3 percent. The company said new residential and small-business customers fueled the growth.

Scana expects to earn between 3.9 percent and 8.2 percent more this year than last.

Scana also is requesting approval to apply tax credits to pay for the cost of building a federally mandated backup dam at Lake Murray to be completed next year. The $275 million project was ordered as a safeguard in case an earthquake breaks up the original dam.

SCE&G has 574,000 retail and wholesale customers, who make up about 92 percent of Scana’s revenue. Scana’s stock dropped 39 cents per share, or 1.1 percent, to $35.98 on the New York Stock Exchange Thursday, in line with other publicly traded electric utilities.


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