10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

OR

o 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
	(a South Carolina corporation)
	1426 Main Street, Columbia, South Carolina 29201
	(803) 217-9000
1-3375	South Carolina Electric & Gas Company	57-0248695
	(a South Carolina corporation)
	1426 Main Street, Columbia, South Carolina 29201
	(803) 217-9000
1-11429	Public Service Company of North Carolina, Incorporated	56-2128483
	(a South Carolina corporation)
	1426 Main Street, Columbia, South Carolina 29201
	(803) 217-9000

Indicate by check mark whether the registrants: (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. SCANA Corporation Yes x No o  South Carolina Electric & Gas Company Yes x No o Public Service Company of North Carolina, Incorporated Yes x No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). SCANA Corporation Yes x No o South Carolina Electric & Gas Company Yes o No x Public Service Company of North Carolina, Incorporated Yes o  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

	Description of	Shares Outstanding
Registrant	Common Stock	at July 31, 2005
SCANA Corporation	Without Par Value	114,042,772
South Carolina Electric & Gas Company	$4.50 Par Value	40,296,147 (a)
Public Service Company of North Carolina, Incorporated	Without Par Value	1,000 (a)
(a)Owned beneficially and of record by SCANA Corporation.

This combined Form 10-Q is separately filed by SCANA Corporation, South Carolina Electric & Gas Company and Public Service Company of North Carolina, Incorporated. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes no representation as to information relating to the other companies.

Public Service Company of North Carolina, Incorporated meets the conditions set forth in General Instruction H (1)(a) and (b) of Form 10-Q and therefore is filing this form with the reduced disclosure format allowed under General Instruction H(2).

INDEX

PART I. FINANCIAL INFORMATION	Page
SCANA Corporation Financial Section	2
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004	3
Condensed Consolidated Statements of Income for the Periods Ended June 30, 2005 and 2004	5
Condensed Consolidated Statements of Cash Flows for the Periods Ended June 30, 2005 and 2004	6
Condensed Consolidated Statements of Comprehensive Income for the Periods  Ended June 30, 2005 and 2004	7
Notes to Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3. Quantitative and Qualitative Disclosures About Market Risk	26
Item 4. Controls and Procedures	27
South Carolina Electric & Gas Company Financial Section	28
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004	29
Condensed Consolidated Statements of Income for the Periods Ended June 30, 2005 and 2004	31
Condensed Consolidated Statements of Cash Flows for the Periods Ended June 30, 2005 and 2004	32
Notes to Condensed Consolidated Financial Statements	33
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3. Quantitative and Qualitative Disclosures About Market Risk	45
Item 4. Controls and Procedures	45
Public Service Company of North Carolina, Incorporated Financial Section	46
Item 1. Financial Statements  Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004	47
Condensed Consolidated Statements of Operations for the Periods Ended June 30, 2005 and 2004	49
Condensed Consolidated Statements of Cash Flows for the Periods Ended June 30, 2005 and 2004	50
Notes to Condensed Consolidated Financial Statements	51
Item 2. Management’s Narrative Analysis of Results of Operations	54
Item 4. Controls and Procedures	55
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	56
Item 4. Submission of Matters to a Vote of Security Holders	57
Item 6. Exhibits	57
Signatures	58
Exhibit Index	59

1

2

PART I. FINANCIAL INFORMATION

SCANA CORPORATION

(Unaudited)

	June 30,			December 31,
Millions of dollars	2005			2004
Assets
Utility Plant In Service	$	8,753		$	8,373
Accumulated depreciation and amortization		(2,562	)		(2,315	)
		6,191			6,058
Construction work in progress		177			432
Nuclear fuel, net of accumulated amortization		38			42
Acquisition adjustments		230			230
Utility Plant, Net		6,636			6,762
Nonutility Property and Investments:
Nonutility property, net of accumulated depreciation of $57 and $50		103			104
Assets held in trust, net - nuclear decommissioning		52			49
Investments		60			63
Nonutility Property and Investments, Net		215			216
Current Assets:
Cash and cash equivalents		146			120
Receivables, net of allowance for uncollectible accounts of $23 and $16		544			687
Receivables - affiliated companies		23			19
Inventories (at average cost):
Fuel		177			191
Materials and supplies		73			70
Emission allowances		36			9
Prepayments and other		54			53
Total Current Assets		1,053			1,149
Deferred Debits:
Environmental		25			18
Pension asset, net		294			285
Other regulatory assets		378			402
Other		160			164
Total Deferred Debits		857			869
Total	$	8,761		$	8,996

3

	June 30,		December 31,
Millions of dollars	2005		2004
Capitalization and Liabilities
Shareholders’ Investment:
Common equity	$	2,560	$	2,451
Preferred stock (Not subject to purchase or sinking funds)		106		106
Total Shareholders’ Investment		2,666		2,557
Preferred Stock, net (Subject to purchase or sinking funds)		8		9
Long-Term Debt, net		3,072		3,186
Total Capitalization		5,746		5,752
Current Liabilities:
Short-term borrowings		446		211
Current portion of long-term debt		54		204
Accounts payable		227		381
Accounts payable - affiliated companies		23		18
Customer deposits		50		50
Taxes accrued		67		132
Interest accrued		52		51
Dividends declared		47		43
Other		92		100
Total Current Liabilities		1,058		1,190
Deferred Credits:
Deferred income taxes, net		859		879
Deferred investment tax credits		120		121
Asset retirement obligation - nuclear plant		128		124
Other asset retirement obligations		467		450
Postretirement benefits		145		142
Other regulatory liabilities		107		209
Other		131		129
Total Deferred Credits		1,957		2,054
Commitments and Contingencies (Note 6)		-		-
Total	$	8,761	$	8,996

  See Notes to Condensed Consolidated Financial Statements.

4

 SCANA CORPORATION

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
Millions of dollars, except per share amounts	2005			2004			2005			2004
Operating Revenues:
Electric	$	438		$	434		$	853		$	814
Gas - regulated		219			188			680			614
Gas - nonregulated		234			224			624			547
Total Operating Revenues		891			846			2,157			1,975
Operating Expenses:
Fuel used in electric generation		137			120			265			215
Purchased power		11			20			18			33
Gas purchased for resale		376			335			1,037			906
Other operation and maintenance		153			144			312			298
Depreciation and amortization		89			66			334			129
Other taxes		40			38			78			77
Total Operating Expenses		806			723			2,044			1,658
Operating Income		85			123			113			317
Other Income (Expense):
Other income, including allowance for equity funds
used during construction of $3, $5, $6 and $10		13			16			25			30
Interest charges, net of allowance for borrowed funds
used during construction of $1, $3, $1 and $6		(54	)		(51	)		(108	)		(101	)
Gain on sale of investments and assets		8			1			8			1
Total Other Expense		(33	)		(34	)		(75	)		(70	)
Income Before Income Taxes, Earnings (Losses) from Equity
Method Investments and Preferred Stock Dividends		52			89			38			247
Income Tax Expense (Benefit)		3			28			(176	)		84
Income Before Earnings (Losses) from Equity Method
Investments and Preferred Stock Dividends		49			61			214			163
Earnings (Losses) from Equity Method Investments		(3	)		1			(65	)		2
Income Before Preferred Stock Dividends		46			62			149			165
Cash Dividends on Preferred Stock of Subsidiary		2			2			4			4
Net Income	$	44		$	60		$	145		$	161
Basic and Diluted Earnings Per Share of Common Stock	$	.39		$	.54		$	1.28		$	1.45
Weighted Average Shares Outstanding (millions)		113.6			111.2			113.3			111.0
See Notes to Condensed Consolidated Financial Statements.

5

SCANA CORPORATION

(Unaudited)

	Six Months Ended
	June 30,
Millions of dollars	2005			2004
Cash Flows From Operating Activities:
Net income	$	145		$	161
Adjustments to reconcile net income to net cash provided from operating activities:
Losses (earnings) from equity method investments		65			(2	)
Depreciation and amortization		342			134
Amortization of nuclear fuel		8			11
Gain on sale of assets and investments		(8	)		(1	)
Hedging activities		5			(3	)
Allowance for funds used during construction		(6	)		(10	)
Cash provided (used) by changes in certain assets and liabilities:
Receivables, net		139			78
Inventories		(36	)		(19	)
Prepayments and other		17			(9	)
Pension asset		(8	)		(7	)
Other regulatory assets		22			(25	)
Deferred income taxes, net		(29	)		34
Regulatory liabilities		(166	)		14
Postretirement benefits obligations		3			3
Accounts payable		(122	)		(23	)
Taxes accrued		(65	)		(42	)
Interest accrued		1			1
Changes in fuel adjustment clauses		10			44
Changes in other assets		6			(4	)
Changes in other liabilities		10			10
Net Cash Provided From Operating Activities		333			345
Cash Flows From Investing Activities:
Utility property additions and construction expenditures		(212	)		(253	)
Proceeds from sale of assets and investments		6			1
Nonutility property additions		(7	)		(3	)
Investments in affiliates and other		(27	)		(8	)
Net Cash Used For Investing Activities		(240	)		(263	)
Cash Flows From Financing Activities:
Proceeds from issuance of debt		197			124
Proceeds from issuance of common stock		47			22
Repayment of debt		(456	)		(4	)
Repurchase of common stock		-			(4	)
Redemption of preferred stock		(1	)		-
Dividends on equity securities		(89	)		(83	)
Short-term borrowings, net		235			(27	)
Net Cash (Used For) Provided From Financing Activities		(67	)		28
Net Increase In Cash and Cash Equivalents		26			110
Cash and Cash Equivalents, January 1		120			117
Cash and Cash Equivalents, June 30	$	146		$	227
Supplemental Cash Flow Information:
Cash paid for - Interest (net of capitalized interest of $1 and $6)	$	110		$	100
- Income taxes		45			21
Noncash Investing and Financing Activities:
Unrealized loss on securities available for sale, net of tax		-			(12	)
Accrued construction expenditures		14			18

See Notes to Condensed Consolidated Financial Statements.

6

SCANA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
Millions of dollars	2005			2004			2005		2004
Net Income	$	44		$	60		$	145	$	161
Other Comprehensive Income (Loss), net of tax:
Unrealized losses on securities available for sale		-			(6	)		-		(12	)
Unrealized gains (losses) on hedging activities		(3	)		-			4		(2	)
Total Comprehensive Income (1)	$	41		$	54		$	149	$	147
(1) Accumulated other comprehensive income (loss) totaled $0.4 million and $(3.8) million as of June 30, 2005 and December 31, 2004, respectively.
See Notes to Condensed Consolidated Financial Statements.

7

SCANA CORPORATION

June 30, 2005

(Unaudited)

The following notes should be read in conjunction with the Notes to Consolidated Financial Statements appearing in SCANA Corporation’s (SCANA, and together with its consolidated subsidiaries, the Company) Annual Report on Form 10-K for the year ended December 31, 2004. These are interim financial statements, and due to the seasonality of the Company’s business, the amounts reported in the Condensed Consolidated Statements of Income are not necessarily indicative of amounts expected for the full year. In the opinion of management, the information furnished herein reflects all adjustments, all of a normal recurring nature, which are necessary for a fair statement of the results for the interim periods reported.

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.      Basis of Accounting

The Company accounts for its regulated utility operations, assets and liabilities in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) 71, “Accounting for the Effects of Certain Types of Regulation.” SFAS 71 requires cost-based rate-regulated utilities to recognize in their financial statements certain revenues and expenses in different time periods than do enterprises that are not rate-regulated. As a result, as of June 30, 2005 the Company has recorded approximately $403 million and $574 million of regulatory assets (including environmental) and liabilities, respectively. Information relating to regulatory assets and liabilities follows.

	June 30,			December 31,
Millions of dollars	2005			2004
Accumulated deferred income taxes, net	$	127		$	126
Under-collections - electric fuel and gas cost adjustment clauses, net		13			41
Deferred purchased power costs		21			26
Deferred environmental remediation costs		25			18
Asset retirement obligation - nuclear decommissioning		51			49
Other asset retirement obligations		(467	)		(450	)
Deferred synthetic fuel tax benefits, net		-			(97	)
Storm damage reserve		(35	)		(33	)
Franchise agreements		56			58
Deferred regional transmission organization costs		12			14
Other		26			19
Total	$	(171	)	$	(229	)

Accumulated deferred income tax liabilities arising from utility operations that have not been included in customer rates are recorded as a regulatory asset. Accumulated deferred income tax assets arising from deferred investment tax credits are recorded as a regulatory liability.

Under-collections - electric fuel and gas cost adjustment clauses, net, represent amounts under-collected from customers pursuant to the fuel adjustment clause (electric customers) or gas cost adjustment clause (gas customers) as approved by the Public Service Commission of South Carolina (SCPSC) or the North Carolina Utilities Commission (NCUC) during annual hearings.

Deferred purchased power costs - represents costs that were necessitated by outages at two of South Carolina Electric & Gas Company (SCE&G)’s base load generating plants in winter 2000-2001. The SCPSC approved recovery of these costs in base rates over three years beginning January 2005.

Deferred environmental remediation costs represent costs associated with the assessment and clean-up of manufactured gas plant (MGP) sites currently or formerly owned by the Company. Costs incurred at sites owned by SCE&G are being recovered through rates, of which approximately $13.6 million remain. A portion of the costs incurred at sites owned by Public Service Company of North Carolina, Incorporated (PSNC Energy) has been recovered through rates. Amounts incurred and deferred, net of insurance settlements, that are not currently being recovered through rates are approximately $2.4 million. Management believes that these costs and the remaining costs of approximately $8.8 million will be recoverable.

Asset retirement obligation (ARO) - nuclear decommissioning represents the regulatory asset associated with the legal obligation to decommission and dismantle V. C. Summer Nuclear Station (Summer Station) as required by SFAS 143, “Accounting for Asset Retirement Obligations.”

Other asset retirement obligations represent net collections through depreciation rates of estimated costs to be incurred for the future retirement of assets for which no legal retirement obligation exists.

Deferred synthetic fuel tax benefits represented the deferral of partnership losses and other expenses offset by the tax benefits of those losses and expenses and accumulated synthetic fuel tax credits associated with SCE&G’s investment in two partnerships involved in converting coal to synthetic fuel. In 2005, under an accounting plan approved by the SCPSC, any tax credits generated from synthetic fuel produced by the partnerships and ultimately passed through to SCE&G, net of partnership losses and other expenses, have been used to offset the capital costs of constructing the back-up dam at Lake Murray. See Note 2.

8

   The storm damage reserve represents an SCPSC approved reserve account for SCE&G capped at $50 million to be collected through rates. The accumulated storm damage reserve can be applied to offset incremental storm damage costs in excess of $2.5 million in a calendar year. For the six months ended June 30, 2005, no significant amounts have been drawn from this reserve account.

Franchise agreements represent costs associated with the 30-year electric and gas franchise agreements with the cities of Charleston and Columbia, South Carolina. These amounts are being amortized through cost of service rates over approximately 15 years.

Deferred regional transmission organization costs represent costs incurred by SCE&G in the United States Federal Energy Regulatory Commission (FERC)-mandated formation of GridSouth. The project was suspended in 2002. Effective January 2005, the SCPSC approved the amortization of these amounts through cost of service rates over approximately five years.

The SCPSC and the NCUC (collectively, state commissions) have reviewed and approved through specific orders most of the items shown as regulatory assets. Other items represent costs which are not yet approved for recovery by a state commission. In recording these costs as regulatory assets, management believes the costs will be allowable under existing rate-making concepts that are embodied in rate orders received by the Company. However, ultimate recovery is subject to state commission approval. 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, liquidity or financial position in the period the write-off would be recorded.

B.      Equity Compensation Plan

Under the SCANA Corporation Long-Term Equity Compensation Plan (the Plan), certain employees and non-employee directors may receive incentive and nonqualified stock options and other forms of equity compensation. The Company accounts for this equity-based compensation using the intrinsic value method under APB 25, “Accounting for Stock Issued to Employees,” and related interpretations. In addition, the Company has adopted the disclosure provisions of SFAS 123, “Accounting for Stock-Based Compensation” and SFAS 148, “Accounting for Stock-Based Compensation-Transition and Disclosure.”

Options, all of which were granted prior to 2003, were granted with exercise prices equal to the fair market value of the Company’s stock on the respective grant dates since the Plan’s inception; therefore, no compensation expense has been recognized in connection with such grants. If the Company had recognized compensation expense for the issuance of options based on the fair value method described in SFAS 123, pro forma net income and earnings per share would have been as follows:

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2005	2004	2005	2004
Net income - as reported (millions)	$44	$60	$145	$161
Net income - pro forma (millions)	$44	$60	$145	$161
Basic and diluted earnings per share - as reported	$.39	$.54	$1.28	$1.45
Basic and diluted earnings per share - pro forma	$.39	$.54	$1.28	$1.45

 The Company also grants other forms of equity based compensation to certain employees. The value of such awards is recognized as compensation expense under APB 25. Total expense recorded for these awards was approximately $2.9 million and $4.8 million for the three and six months ended June 30, 2005, respectively, and approximately $2.5 million and $4.8 million for the corresponding periods ended June 30, 2004, respectively.

9

C.      Pension and Other Postretirement Benefit Plans

Components of net periodic benefit income or cost recorded by the Company were as follows:

	Pension Benefits						Other Postretirement Benefits
Millions of dollars	2005			2004			2005		2004
Three months ended June 30
Service cost	$	3.1		$	2.8		$	0.9	$	0.8
Interest cost		9.5			9.6			2.8		2.9
Expected return on assets		(19.1	)		(17.8	)		-		-
Prior service cost amortization		1.7			1.6			0.3		0.2
Transition obligation amortization		0.2			0.2			0.2		0.2
Amortization of actuarial loss		-			-			0.4		0.5
Net periodic benefit (income) cost	$	(4.6	)	$	(3.6	)	$	4.6	$	4.6

Six months ended June 30
Service cost	$	6.1		$	5.6		$	1.8	$	1.6
Interest cost		19.0			18.7			5.6		5.8
Expected return on assets		(38.2	)		(35.5	)		-		-
Prior service cost amortization		3.4			3.2			0.6		0.4
Transition obligation amortization		0.4			0.4			0.4		0.4
Amortization of actuarial loss		-			-			0.8		1.0
Net periodic benefit (income) cost	$	(9.3	)	$	(7.6	)	$	9.2	$	9.2

D.      Earnings Per Share

Earnings per share amounts have been computed in accordance with SFAS 128, “Earnings Per Share.” Under SFAS 128, basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the period, after giving effect to securities considered to be dilutive potential common stock. The Company uses the treasury stock method in determining total dilutive potential common stock. The Company has no securities that would have an antidilutive effect on earnings per share.

E.      Transactions with Affiliates

SCE&G holds equity-method investments in two partnerships involved in converting coal to synthetic fuel. SCE&G had recorded as receivables from these affiliated companies approximately $23.0 million and $18.6 million at June 30, 2005 and December 31, 2004, respectively. SCE&G had recorded as payables to these affiliated companies approximately $23.3 million and $17.8 million at June 30, 2005 and December 31, 2004, respectively. SCE&G purchased approximately $62.8 million and $51.5 million of synthetic fuel from these affiliated companies for the three months ended June 30, 2005 and 2004, respectively. SCE&G purchased approximately $113.7 million and $90.2 million of synthetic fuel from these affiliated companies for the six months ended June 30, 2005 and 2004, respectively.

F.      New Accounting Matters 

SFAS 154, “Accounting Changes and Error Corrections,” was issued in June 2005. It requires retrospective application to prior periods’ financial statements of every voluntary change in accounting principle unless it is impracticable. SFAS 154 replaces Accounting Principles Board (APB) Opinion 20, “Accounting Changes,” and SFAS 3, “Reporting Accounting Changes in Interim Financial Statements,” although it carries forward some of their provisions. The Company will adopt SFAS 154 in the first quarter of 2006, and does not expect that the initial adoption will have a material impact on the Company’s results of operations, cash flows or financial position.

 Financial Accounting Standards Board Interpretation (FIN) 47, “Accounting for Conditional Asset Retirement Obligations,” was issued in March 2005 to clarify the term “conditional asset retirement” as used in SFAS 143, “Accounting for Asset Retirement Obligations.” It requires that a liability be recognized for the fair value of a conditional asset retirement obligation when incurred, if the fair value of the liability can be reasonably estimated. Uncertainty about the timing or method of settlement of a conditional asset retirement obligation would be factored into the measurement of the liability when sufficient information exists. This interpretation is effective no later than the end of fiscal years ending after December 15, 2005. Accordingly, the Company will adopt FIN 47 in the fourth quarter of 2005. The impact FIN 47 may have on the Company’s assets and liabilities has not been determined but could be material. The Company does not expect that the initial adoption of FIN 47 will have a material impact on the Company’s results of operations, cash flows or financial position.

10

SFAS 123 (revised 2004), “Share-Based Payment,” was issued in December 2004 and will require compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the instruments issued. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS 123(R) replaces SFAS 123, “Accounting for Stock-Based Compensation” and supersedes APB 25, “Accounting for Stock Issued to Employees.” In April 2005, the Securities and Exchange Commission delayed the date for mandatory adoption of SFAS 123(R) until the first interim or annual reporting period of the first fiscal year beginning on or after June 15, 2005. Accordingly, the Company will adopt SFAS 123(R) in the first quarter of 2006. The Company does not expect that the initial adoption of SFAS 123(R) will have a material impact on the Company’s results of operations, cash flows or financial position.

G.      Reclassifications

Certain amounts from prior periods have been reclassified to conform with the presentation adopted for 2005.

2.       RATE AND OTHER REGULATORY MATTERS

   South Carolina Electric & Gas Company (SCE&G)

Electric

In a January 2005 order, the SCPSC granted SCE&G a composite increase in retail electric rates of approximately 2.89%, designed to produce additional annual revenues of approximately $41.4 million based on a test year calculation. The SCPSC lowered SCE&G's return on common equity from 12.45% to an amount not to exceed 11.4%, with rates set at 10.7%. The new rates became effective in January 2005. As part of its order, the SCPSC approved SCE&G's recovery of construction and operating costs for SCE&G's new Jasper County Electric Generating Station, recovery of costs of mandatory environmental upgrades primarily related to Federal Clean Air Act regulations and, beginning in January 2005, the application of current and anticipated net synthetic fuel tax credits to offset the cost of constructing the back-up dam at Lake Murray. Under the accounting methodology approved by the SCPSC, current and future construction costs related to the Lake Murray Dam project are recorded in a special dam remediation account outside of rate base, and depreciation is being recognized against the balance in this account on an accelerated basis, subject to the availability of the synthetic fuel tax credits.

In the January 2005 order the SCPSC also approved recovery over a five-year period of SCE&G's approximately $14 million of costs incurred in the formation of the GridSouth Regional Transmission Organization and recovery through base rates over three years of approximately $25.6 million of purchased power costs that were previously deferred. As a part of its order, the SCPSC extended through 2010 its approval of the accelerated capital recovery plan for SCE&G's Cope Generating Station. Under the plan, in the event that SCE&G would otherwise earn in excess of its maximum allowed return on common equity, SCE&G may increase depreciation of its Cope Generating Station up to $36 million annually without additional approval of the SCPSC. Any unused portion of the $36 million in any given year may be carried forward for possible use in the following year.

SCE&G's rates are established using a cost of fuel component approved by the SCPSC which may be modified periodically to reflect changes in the price of fuel purchased by SCE&G. SCE&G's cost of fuel component in effect during the period January 1, 2004 through June 30, 2005 was as follows:

Rate Per KWh	Effective Date
$.01678	January-April 2004
$.01821	May-December 2004
$.01764	January-April 2005
$.02256	May 2005-June 2005

Gas

SCE&G's rates are established using a cost of gas component approved by the SCPSC which may be modified periodically to reflect changes in the price of natural gas purchased by SCE&G. SCE&G's cost of gas component in effect during the period January 1, 2004 through June 30, 2005 was as follows:

Rate Per Therm	Effective Date
$.877	January-October 2004
$.903	November 2004-June 2005

On April 26, 2005, SCE&G filed an application with the SCPSC requesting a 7.09 percent increase in retail natural gas base rates, or approximately $28 million based on an adjusted test year ended December 31, 2004. A hearing on this request is expected to be held in September 2005. If approved, it is anticipated that the new rates would go into effect in November 2005.

11

Public Service Company of North Carolina, Incorporated (PSNC Energy)

PSNC Energy’s rates are established using a benchmark cost of gas approved by the NCUC, which may be modified periodically to reflect changes in the market price of natural gas. PSNC Energy revises its tariffs with the NCUC as necessary to track these changes and accounts for any over- or under-collections of the delivered cost of gas in its deferred accounts for subsequent rate consideration. The NCUC reviews PSNC Energy’s gas purchasing practices annually.

PSNC Energy’s benchmark cost of gas in effect during the period January 1, 2004 through June 30, 2005 was as follows:

Rate Per Therm	Effective Date
$.600	January-September 2004
$.675	October-November 2004
$.825	December 2004-January 2005
$.725	February-June 2005

 On August 1, 2005 the NCUC approved PSNC Energy's request to increase the benchmark cost of gas from $.725 per therm to $.825 per therm for service rendered on and after August 1, 2005.

     On June 1, 2005 PSNC Energy filed testimony in the 2005 Annual Prudence Review related to the 12 months ended March 31, 2005. The NCUC will hold a hearing in August 2005 to consider the filing.

A state expansion fund, established by the North Carolina General Assembly in 1991 and funded by refunds from PSNC Energy’s interstate pipeline transporters, provides financing for expansion into areas that otherwise would not be economically feasible to serve. On May 12, 2005 PSNC Energy filed an application with the NCUC to extend natural gas service to Louisburg, North Carolina, and requested authorization to withdraw up to approximately $1.2 million from its expansion fund for this project. The NCUC will hold a hearing in August 2005 to consider the filing.

In March 2005 PSNC Energy refunded approximately $7.7 million in pipeline supplier refunds by a direct bill credit to various customers. This refund resulted in a reduction in restricted cash and the associated current liability.

On January 21, 2005 the NCUC authorized PSNC Energy to defer for subsequent rate consideration certain expenses incurred to comply with the U. S. Department of Transportation’s Pipeline Integrity Management requirements. This accounting treatment was effective November 1, 2004. As of June 30, 2005 such deferrals totaled $0.3 million.

   South Carolina Pipeline Corporation (SCPC)

SCPC’s purchased gas adjustment for cost recovery and gas purchasing policies are reviewed annually by the SCPSC. In a July 2005 order, the SCPSC found that for the period January through December 2004 SCPC’s gas purchasing policies and practices were prudent and SCPC properly adhered to the gas cost recovery provisions of its gas tariff.

3.       DEBT AND CREDIT FACILITIES

In June 2005 $650 million in committed five-year revolving credit facilities for SCE&G, South Carolina Fuel Company, Inc. (Fuel Company) and PSNC Energy were amended to extend the term of the existing credit facilities by an additional year. The credit facilities now will expire on June 30, 2010.

On June 15, 2005 SCE&G retired at maturity $150 million in first mortgage bonds. These bonds were bore interest at 7.50%. SCE&G used available cash, together with short-term borrowings, to effect the retirement.

During the second quarter of 2005, the Company terminated two interest rate swap agreements with an aggregate notional amount of $225 million.  Under the swap agreements, the Company received fixed rate interest of 5.81% and 6.25%, and paid variable rate interest.  The termination of these swap agreements did not significantly impact the Company's financial position, results of operations or cash flows.

In March 2005 SCANA issued $100 million in senior unsecured floating rate medium-term notes maturing in March 2008. The interest rate on the floating rate notes is reset quarterly based on three-month LIBOR plus 15 basis points. The proceeds from the sale, together with available cash, were used for the redemption on April 1, 2005 of $200 million of floating rate medium-term notes due to mature in November 2006.

In March 2005 SCE&G issued $100 million in first mortgage bonds having an annual interest rate of 5.25% and maturing March 1, 2035. The proceeds from the sale of these bonds were used for the redemption on April 1, 2005 of $100 million in first mortgage bonds due April 1, 2025, which bore interest at 7.625%.

4.       RETAINED EARNINGS

The Company’s Restated Articles of Incorporation do not limit the dividends that may be paid on its common stock. However, the Restated Articles of Incorporation of SCE&G contain provisions that, under certain circumstances, which the Company considers to be remote, 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 June 30, 2005, of SCE&G’s approximately $934 million in retained earnings, approximately $50 million were restricted by this requirement as to payment of cash dividends on SCE&G’s common stock.

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5.       FINANCIAL INSTRUMENTS

The Company follows the guidance required by FAS 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, in accounting for derivatives, including those arising from cash flow hedges related to natural gas. The Company also utilizes swap agreements to manage interest rate risk. These transactions are more fully described in Note 9 to the consolidated financial statements in SCANA’s Annual Report on Form 10-K for the year ended December 31, 2004.

The Company recognizes gains (losses) as a result of qualifying cash flow hedges whose hedged transactions occur during the reporting period and records them, net of taxes, in cost of gas. The Company recognized a gain of $0.5 million and a loss of $(2.7) million for the three and six months ended June 30, 2005, respectively, and recognized gains of $1.2 million and $3.0 million for the corresponding periods ended June 30, 2004, respectively. The Company estimates that most of the June 30, 2005 unrealized gain balance of $1.1 million, net of tax, will be reclassified from accumulated other comprehensive income (loss) to earnings in 2005 and 2006 as a decrease to gas cost if market prices remain at current levels. As of June 30, 2005, all of the Company's cash flow hedges settle by their terms before the end of March 2007.

At June 30, 2005 the estimated fair value of the Company’s swaps totaled $0.9 million (gain) related to combined notional amounts of $47.4 million.

6.    COMMITMENTS AND CONTINGENCIES

Reference is made to Note 10 to the consolidated financial statements appearing in SCANA’s Annual Report on Form 10-K for the year ended December 31, 2004. Commitments and contingencies at June 30, 2005 include the following:

A.    Nuclear Insurance

The Price-Anderson Indemnification Act (the Act) deals with public liability for a nuclear incident. Though the Act expired in 2003, existing licensees, such as the Company, are “grandfathered” under the Act until such time as it is renewed. The Act establishes the liability limit for third party claims associated with any nuclear incident at $10.5 billion. Each reactor licensee is currently liable for up to $100.6 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 $67.1 million per incident, but not more than $6.7 million per year.

SCE&G currently maintains policies (for itself and on behalf of the South Carolina Public Service Authority, the one-third owner of Summer Station) with Nuclear Electric Insurance Limited. The policies, covering the nuclear facility for property damage, excess property damage and outage costs, permit retrospective assessments under certain conditions to cover insurer’s losses. Based on the current annual premium, SCE&G’s portion of the retrospective premium assessment would not exceed $15.8 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. However, if such an incident were to occur, it would have a material adverse impact on the Company’s results of operations, cash flows and financial position.

B.    Environmental

In March 2005 the Environmental Protection Agency (EPA) issued a final rule known as the Clean Air Interstate Rule (CAIR). CAIR requires the District of Columbia and 28 states, including South Carolina, to reduce nitrogen oxides and sulfur dioxide emissions in order to attain mandated state levels. SCE&G has petitioned the United States Court of Appeals for the District of Columbia Circuit to review CAIR. Several other electric utilities have filed separate petitions. The petitioners seek a change in the method CAIR uses to allocate sulfur dioxide emission allowances to a method the petitioners believe is more equitable. The Company believes that installation of additional air quality controls will be needed to meet the CAIR requirements. Compliance plans and cost to comply with the rule will be determined once the Company completes its review. Such costs will be material and are expected to be recoverable through rates.

In March 2005 the EPA issued a final rule establishing a mercury emissions cap and trade program for coal-fired power plants that requires limits to be met in two phases, in 2010 and 2018. The Company is reviewing the final rule. Installation of additional air quality controls is likely to be required to comply with the mercury rule’s emission caps. Compliance plans and costs to comply with the rule will be determined once the Company completes its review. Such costs will be material and are expected to be recoverable through rates.

The Company maintains an environmental assessment program to identify and evaluate current and former 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 solely to regulated operations.

  South Carolina Electric & Gas Company

  At SCE&G, site assessment and cleanup costs are deferred and are being recovered through rates (see Note 1). Deferred amounts, net of amounts previously recovered through rates and insurance settlements, totaled $13.6 million at June 30, 2005. The deferral includes the estimated costs associated with the following matters.

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    SCE&G owns a decommissioned MGP site in the Calhoun Park area of Charleston, South Carolina. The site is currently being remediated for contamination. SCE&G anticipates that the remaining remediation activities will be completed by the end of 2005, with certain monitoring and retreatment activities continuing until 2010. As of June 30, 2005, SCE&G had spent approximately $20.9 million to remediate the Calhoun Park site and expects to spend an additional $1.0 million. In addition, the National Park Service of the Department of the Interior made an initial demand to SCE&G for payment of approximately $9 million for certain costs and damages relating to this site. Any costs arising from these matters are expected to be recoverable through rates under South Carolina regulatory process.

      SCE&G owns three other decommissioned MGP sites in South Carolina which contain residues of by-product chemicals. One of the sites has been remediated and will undergo routine monitoring until released by the South Carolina Department of Health and Environmental Control (DHEC). The other sites are currently being investigated under work plans approved by DHEC. SCE&G anticipates that major remediation activities for the three sites will be completed in 2010. As of June 30, 2005, SCE&G had spent approximately $4.2 million related to these three sites, and expects to spend an additional $8.3 million.

  Public Service Company of North Carolina, Incorporated

 PSNC Energy is responsible for environmental cleanup at five sites in North Carolina on which MGP residuals are present or suspected. PSNC Energy’s actual remediation costs for these sites will depend on a number of factors, such as actual site conditions, third-party claims and recoveries from other potentially responsible parties. The Company has recorded a liability and associated regulatory asset of approximately $8.8 million, which reflects its estimated remaining liability at June 30, 2005. Amounts incurred and deferred to date, net of insurance settlements, that are not currently being recovered through gas rates are approximately $2.4 million. Management believes that all MGP cleanup costs will be recoverable through gas rates.

C.      Claims and Litigation

In 1999 an unsuccessful bidder for the purchase of certain propane gas assets of the Company filed suit against SCANA in Circuit Court, seeking unspecified damages. The suit alleged the existence of a contract for the sale of assets to the plaintiff and various causes of action associated with that contract. On October 21, 2004, the jury issued an adverse verdict on this matter against SCANA for four causes of action for damages totaling $48 million.

Upon receiving the jury verdict prior to reporting results for the third quarter of 2004, it was the Company’s interpretation that the damages awarded with respect to certain causes of action were overlapping and that the plaintiff would be required to elect a single remedy. Therefore, it was the Company’s belief that a reasonably possible estimate of the total damages based on the amounts awarded by the jury would be in the range of $18 - $36 million. As such, in accordance with generally accepted accounting principles, in the third quarter of 2004 the Company accrued a liability of $18 million pre-tax, which was its reasonable estimate of the minimum liability that was probable if the final judgment were to be consistent with the jury verdict.

Post-verdict motions were heard in November 2004 and January 2005. In April 2005, post-trial motions were decided by the Court, and the plaintiff was ordered to elect a single remedy from the multiple jury awards. In response to the April 2005 election order, the Plaintiff elected a remedy with damages totaling $18 million, and the Company placed the funds in escrow with the Clerk of Court to forestall the accrual of post-judgment interest. The funds held in escrow are recorded within prepayments and other assets on the balance sheet and appear as an investing activity in the statement of cash flows. The Company believes its accrued liability is still reasonable. However, the Company continues to believe that the verdict was inconsistent with the facts presented and applicable laws. Both parties have appealed the judgment.

The Company is also defending another claim for $2.7 million for reimbursement of legal fees and expenses under an indemnification and hold harmless agreement in the contract for the sale of these propane gas assets. A bench trial on the indemnification was held on January 14, 2005; however, a ruling has not been received. The Company believes that the resolution of this claim will not have a material adverse impact on its results of operations, cash flows or financial condition.

On August 21, 2003, SCE&G was served as a co-defendant in a purported class action lawsuit styled as Collins v. Duke Energy Corporation, Progress Energy Services Company, and SCE&G in South Carolina's Circuit Court of Common Pleas for the Fifth Judicial Circuit. The plaintiffs are seeking damages for the alleged improper use of electric transmission and distribution easements but have not asserted a dollar amount for their claims. Specifically, the plaintiffs contend that the licensing of attachments on electric utility poles, towers and other facilities to non-utility third parties or telecommunication companies for other than the electric utilities' internal use along the electric transmission and distribution line rights-of-way constitutes a trespass. The Company is confident of the propriety of SCE&G’s actions and intends to mount a vigorous defense. The Company further believes that the resolution of these claims will not have a material adverse impact on its results of operations, cash flows or financial condition.

On May 17, 2004, the Company was served with a purported class action lawsuit styled as Douglas E. Gressette, individually and on behalf of other persons similarly situated v. South Carolina Electric & Gas Company and SCANA Corporation. The case was filed in South Carolina’s Circuit Court of Common Pleas for the Ninth Judicial Circuit (the Court). The plaintiff alleges the Company made improper use of certain easements and rights-of-way by allowing fiber optic communication lines and/or wireless communication equipment to transmit communications other than the Company’s electricity-related internal communications.  The plaintiff asserted causes of action for unjust enrichment, trespass, injunction and declaratory judgment. The plaintiff did not assert a specific dollar amount for the claims. The Company believes its actions are consistent with governing law and the applicable documents granting easements and rights-of-way. The Court granted the Company’s motion to dismiss and issued an Order dismissing the case on June 29, 2005. An appeal by the Plaintiff is expected. The Company intends to mount a vigorous defense and believes that the resolution of these claims will not have a material adverse impact on its results of operations, cash flows or financial condition.

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A complaint was filed on October 22, 2003 against SCE&G by the State of South Carolina alleging that SCE&G violated the Unfair Trade Practices Act by charging municipal franchise fees to some customers residing outside a municipality’s limits. The complaint alleged that SCE&G failed to obey, observe or comply with the lawful order of the SCPSC by charging franchise fees to those not residing within a municipality. The complaint sought restitution to all affected customers and penalties up to $5,000 for each separate violation. The State of South Carolina v. SCE&G claim has been settled by an agreement between the parties, and the settlement has been approved by the court. The allegations were also the subject of a purported class action lawsuit filed in December 2003, against Duke Energy Corporation, Progress Energy Services Company and SCE&G (styled as Edwards v. SCE&G), but that case has been dismissed by the Plaintiff. In addition, SCE&G filed a petition with the SCPSC on October 23, 2003 pursuant to S. C. Code Ann. R.103-836. The petition requests that the SCPSC exercise its jurisdiction to investigate the operation of the municipal franchise fee collection requirements applicable to SCE&G’s electric and gas service, to approve SCE&G’s efforts to correct any past franchise fee billing errors, to adopt improvements in the system which will reduce such errors in the future, and to adopt any regulation that the SCPSC deems just and proper to regulate the franchise fee collection process. A hearing on this petition has not been scheduled. The Company believes that the resolution of these matters will not have a material adverse impact on its results of operations, cash flows or financial condition.

The Company is also engaged in various other claims and litigation incidental to its business operations which management anticipates will be resolved without material loss to the Company.

7. SEGMENT OF BUSINESS INFORMATION

The Company’s reportable segments are listed in the following table. The Company uses operating income to measure profitability for its regulated operations. Therefore, net income is not allocated to the Electric Operations, Gas Distribution and Gas Transmission segments. The Company uses net income to measure profitability for its Retail Gas Marketing and Energy Marketing segments. Gas Distribution is comprised of the local distribution operations of SCE&G and PSNC Energy which meet SFAS 131 criteria for aggregation. All Other includes equity method investments and other nonreportable segments.

							Operating			Net
Millions of dollars	External Revenue			Intersegment Revenue			Income (Loss)			Income (Loss)		Segment Assets
Three Months Ended June 30, 2005
Electric Operations	$	438		$	1		$	83			n/a
Gas Distribution		168			-			(5	)		n/a
Gas Transmission		51			71			5			n/a
Retail Gas Marketing		92			-			n/a		$	1
Energy Marketing		142			24			n/a			-
All Other		18			81			n/a			1
Adjustments/Eliminations		(18	)		(177	)		2			42
Consolidated Total	$	891		$	-		$	85		$	44

Six Months Ended June 30, 2005
Electric Operations	$	853		$	2		$	8		n/a		$	5,287
Gas Distribution		572			-			55		n/a			1,484
Gas Transmission		108			195			12		n/a			291
Retail Gas Marketing		331			-			n/a	$	23			119
Energy Marketing		293			43			n/a		(1	)		67
All Other		34			155			n/a		(62	)		365
Adjustments/Eliminations		(34	)		(395	)		38		185			1,148
Consolidated Total	$	2,157		$	-		$	113	$	145		$	8,761

Three Months Ended June 30, 2004
Electric Operations	$	434		$	1		$	120			n/a
Gas Distribution		137			-			(9	)		n/a
Gas Transmission		51			63			5			n/a
Retail Gas Marketing		91			-			n/a		$	3
Energy Marketing		133			23			n/a			(1	)
All Other		18			72			n/a			3
Adjustments/Eliminations		(18	)		(159	)		7			55
Consolidated Total	$	846		$	-		$	123		$	60

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Six Months Ended June 30, 2004
Electric Operations	$	814		$	2		$	217		n/a		$	5,169
Gas Distribution		509			-			49		n/a			1,412
Gas Transmission		105			181			11		n/a			323
Retail Gas Marketing		309			-			n/a	$	23			106
Energy Marketing		238			26			n/a		(1	)		73
All Other		33			142			n/a		5			641
Adjustments/Eliminations		(33	)		(351	)		40		134			887
Consolidated Total	$	1,975		$	-		$	317	$	161		$	8,611

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

SCANA CORPORATION

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in SCANA Corporation’s (SCANA, and together with its consolidated subsidiaries, the Company) Annual Report on Form 10-K for the year ended December 31, 2004.

Statements included in this discussion and analysis (or elsewhere in this quarterly report) which are not statements of historical fact are intended to be, and are hereby identified as, “forward-looking statements” for purposes of 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) regulatory actions or changes in the utility and nonutility regulatory environment, (3) current and future litigation, (4) changes in the economy, especially in areas served by subsidiaries of SCANA, (5) the impact of competition from other energy suppliers, including competition from alternate fuels in industrial interruptible markets, (6) growth opportunities for SCANA’s regulated and diversified subsidiaries, (7) the results of financing efforts, (8) changes in the Company’s accounting policies, (9) weather conditions, especially in areas served by SCANA’s subsidiaries, (10) performance of SCANA’s pension plan assets, (11) inflation, (12) changes in environmental regulations, (13) volatility in commodity natural gas markets and (14) the other risks and uncertainties described from time to time in SCANA’s periodic reports filed with the United States Securities and Exchange Commission. SCANA disclaims any obligation to update any forward-looking statements.

Electric Operations

  The Energy Policy Act of 2005 (the “energy bill”) passed both houses of Congress in July 2005 and is expected to be signed by the President in August 2005.   Some key provisions of the energy bill include the establishment of an electric reliability organization to enforce reliability standards for transmission systems, the restriction of standard market design (SMD) rulemaking by the Federal Energy Regulatory Commission (FERC) and the provision for continued reservation of electric transmission capacity needed to serve native load customers.  Also, the energy bill repeals the Public Utility Holding Company Act of 1935, and provides for greater regulatory oversight by other federal and state authorities.  The Company is reviewing the energy bill to determine the impact it will have on the Company’s operations. In a separate development, in July 2005 FERC terminated its proposed rule for SMD.  The Company cannot predict when or if FERC will advance other regulatory initiatives related to the national energy market or what conditions such initiatives would impose on utilities.

Gas Distribution

On April 26, 2005, SCE&G filed an application with the Public Service Commission of South Carolina (SCPSC) requesting a 7.09 percent increase in retail natural gas base rates, or approximately $28 million based on an adjusted test year ended December 31, 2004. A hearing on this request is expected to be held in September 2005. If approved, it is anticipated that the new rates would go into effect in November 2005.

In February 2005, the Natural Gas Stabilization Act of 2005 (Stabilization Act) became law in South Carolina. The Stabilization Act allows natural gas distribution companies to request annual adjustments to rates to reflect changes in revenues and expenses and changes in investment. Such annual adjustments are subject to certain qualifying criteria and review by the SCPSC.

Gas Transmission

SCANA plans to merge two of its subsidiaries, South Carolina Pipeline Corporation (SCPC) and SCG Pipeline, Inc., into a new company to be called Carolina Gas Transmission Corporation (CGT). CGT will operate as an open access transportation only interstate pipeline company. The merger is subject to approval by FERC. SCPC is reviewing the major issues relating to the merger with its customers in an attempt to reach an agreement with them prior to filing the application with FERC. SCANA does not expect to receive approval for the merger from FERC before the summer of 2006.

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Retail Gas Marketing

In June 2005 the Georgia Public Service Commission (GPSC) voted to retain SCANA Energy as Georgia’s regulated provider of natural gas for a two-year period ending August 31, 2007, with an option by the GPSC to extend the term for an additional year. In connection with this contract extension, SCANA Energy has agreed to file financial and other information periodically with the GPSC, and such information will be available at www.psc.state.ga.us.

  SCANA Energy has maintained a long-standing agreement with Cobb Energy Management Corporation (Cobb Energy), an affiliate of Cobb Electric Membership Corporation (Cobb EMC) under the terms of which the parties work in an exclusive relationship to attract and retain customers for SCANA Energy.  In July 2005, Southern Company Gas, the natural gas marketing affiliate of Southern Company, announced that Cobb EMC is preparing to seek certification from the GPSC to become a licensed natural gas marketer and that Southern Company Gas had signed a letter of intent to negotiate the sale of its business to a soon to be formed affiliate of Cobb EMC.  SCANA Energy believes that such efforts to enter the Georgia natural gas market are not consistent with our agreement and could affect the competitive market.  SCANA Energy is evaluating the prospects of the above announcement and is addressing this issue with Cobb Energy and Cobb EMC.   

RESULTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005

AS COMPARED TO THE CORRESPONDING PERIODS IN 2004

Earnings Per Share

The Company's reported earnings are prepared in accordance with GAAP. Management believes that, in addition to reported earnings under GAAP, the Company's GAAP-adjusted net earnings from operations provides a meaningful representation of its fundamental earnings power and can aid in performing period-over-period financial analysis and comparison with peer group data. In management's opinion, GAAP-adjusted net earnings from operations is a useful indicator of the financial results of the Company's primary businesses. This measure is also a basis for management's provision of earnings guidance and growth projections, and it is used by management in making resource allocation and other budgetary and operational decisions. This non-GAAP performance measure is not intended to replace the GAAP measure of net earnings, but is offered as a supplement to it. A reconciliation of reported (GAAP) earnings per share to GAAP-adjusted net earnings from operations per share is provided in the table below:

	Second Quarter				Year to Date
	2005		2004		2005		2004
Reported (GAAP) earnings per share	$	.39	$	.54	$	1.28	$	1.45
Less realized gain from sale of telecommunications investment		.03		-		.03		-
GAAP-adjusted net earnings from operations per share	$	.36	$	.54	$	1.25	$	1.45

Discussion of adjustment:

The realized gain on telecommunications investment resulted from the receipt of additional proceeds from the prior sale of the Company’s investment in ITC Holding Company in 2003. These additional proceeds had been held in escrow pending resolution of certain contingencies.

Second Quarter

GAAP-adjusted net earnings from operations per share decreased primarily due to unfavorable electric margins of $.03 (primarily caused by unfavorable weather), increased depreciation and amortization expense of $.05 (net of income tax benefits applied based on the January 2005 SCPSC order described below), increased operations and maintenance expenses of $.05, increased interest expense of $.01, increased property taxes of $.01 and the effects of dilution of $.01. Accelerated depreciation on the Lake Murray back-up dam and recognition of synthetic fuel tax credits and related items had no effect on net income, as discussed below.

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Year to Date

GAAP-adjusted net earnings from operations per share decreased primarily due to increased depreciation and amortization expense of $.12 (net of income tax benefits applied based on the January 2005 SCPSC order described below), increased operations and maintenance expenses of $.08, increased interest expense of $.04 and the effects of dilution of $.03, partially offset by favorable electric margins of $.02 and favorable gas margins of $.07. Accelerated depreciation on the Lake Murray back-up dam and recognition of synthetic fuel tax credits and related items had no effect on net income, as discussed below.

Recognition of Synthetic Fuel Tax Credits

SCE&G holds equity-method investments in two partnerships involved in converting coal to synthetic fuel, the use of which fuel qualifies for federal income tax credits. These synthetic fuel production facilities were placed in operation in 2000 and 2001. Under an accounting plan approved by the SCPSC in June 2000, the synthetic fuel tax credits generated by the partnerships and passed through to SCE&G, net of partnership losses and other expenses, were to be deferred until the SCPSC approved their application to offset capital costs of projects required to comply with legislative or regulatory actions.

In a January 2005 order, the SCPSC approved SCE&G’s request to apply these synthetic fuel tax credits to offset the construction costs of the Lake Murray Dam project. Under the accounting methodology approved by the SCPSC, construction costs related to the project are recorded in utility plant in service in a special dam remediation account outside of rate base, and depreciation is recognized against the balance in this account on an accelerated basis, subject to the availability of the synthetic fuel tax credits.

The level of depreciation expense and related tax benefit recognized in the income statement will be equal to the available synthetic fuel tax credits, less partnership losses and other expenses, net of taxes. As a result, the balance of unrecovered costs in the dam remediation account is declining as accelerated depreciation is recorded. Although these entries collectively have no impact on consolidated net income, they can have a significant impact on individual line items within the income statement. In addition, SCE&G is allowed to record non-cash carrying costs on the unrecovered investment, which is described further at Allowance For Funds Used During Construction. The accelerated depreciation, synthetic fuel tax credits, partnership losses and the income tax benefit arising from such losses recognized by SCE&G during 2005 are as follows:

	Recognized
Factors Increasing (Decreasing)	2nd Quarter			Year to Date
Net Income (millions)	2005			2005
Recognized in Statement of Income:
Depreciation and amortization expense	$	(13.9	)	$	(183.6	)
Income tax benefits:
From synthetic fuel tax credits		11.2			155.2
From accelerated depreciation		5.3			70.2
From partnership losses		1.6			25.9
Total income tax benefits		18.1			251.3
Losses from Equity Method Investments		(4.2	)		(67.7	)
Impact on Net Income		-			-

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Pension Income

Pension income was recorded on the Company’s financial statements as follows:

	Second Quarter				Year to Date
Millions of dollars	2005		2004		2005		2004
Income Statement Impact:
Reduction in employee benefit costs	$	1.2	$	0.8	$	2.3	$	1.8
Other income		3.0		2.5		6.0		4.9
Balance Sheet Impact:
Reduction in capital expenditures		0.3		0.2		0.7		0.6
Component of amount due to Summer Station co-owner		0.1		0.1		0.3		0.3
Total Pension Income	$	4.6	$	3.6	$	9.3	$	7.6

For the last several years, the market value of the Company’s retirement plan (pension) assets has exceeded the total actuarial present value of accumulated plan benefits. Pension income for the second quarter and year to date 2005 increased compared to the corresponding periods in 2004, primarily as a result of positive investment returns.

Allowance for Funds Used During Construction (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. The Company includes an equity portion of AFC in nonoperating income and a debt portion of AFC in interest charges (credits) as noncash items, both of which have the effect of increasing reported net income. AFC for the three and six months ended June 30, 2005 decreased primarily due to completion of the Jasper County Electric Generating Station in May 2004. Included in the equity portion of AFC for the three and six months ended June 30, 2005 is approximately $2.8 million and $5.6 million, respectively, which was accrued as a result of the January 2005 SCPSC rate order related to construction costs for the back-up dam at Lake Murray.

Dividends Declared

The Company’s Board of Directors has declared the following dividends on common stock during 2005:

Declaration Date	Dividend Per Share	Record Date	Payment Date
February 17, 2005	$.39	March 10, 2005	April 1, 2005
May 5, 2005	$.39	June 10, 2005	July 1, 2005
July 27, 2005	$.39	September 9, 2005	October 1, 2005

Electric Operations

Electric Operations is comprised of the electric operations of SCE&G, South Carolina Generating Company, Inc. (GENCO) and South Carolina Fuel Company, Inc. (Fuel Company). Electric operations sales margins were as follows:

	Second Quarter							Year to Date
Millions of dollars	2005		% Change			2004		2005		% Change			2004
Operating revenues	$	437.6		0.7	%	$	434.5	$	852.9		4.7	%	$	814.4
Less: Fuel used in generation		137.2		14.2	%		120.1		265.0		23.0	%		215.5
Purchased power		11.0		(44.4	)%		19.8		17.6		(45.8	)%		32.5
Margin	$	289.4		(1.8	)%	$	294.6	$	570.3		0.7	%	$	566.4

Second Quarter

Margin decreased primarily due to unfavorable weather, which had an impact of $19.8 million. This decrease was offset by $9.7 million due to increased retail electric rates that went into effect in January 2005, by $2.6 million related to increased off-system sales and by customer growth and increased consumption of $2.0 million.

20

Year to Date

Margin increased primarily due to increased retail electric rates that went into effect in January 2005, which had an impact of $19.3 million, by $2.6 million related to increased off-system sales and by customer growth and increased consumption of $7.4 million. These factors were partially offset by $25.2 million due to unfavorable weather.

Gas Distribution

Gas Distribution is comprised of the local distribution operations of SCE&G and Public Service Company of North Carolina, Incorporated (PSNC Energy). Gas distribution sales margins (including transactions with affiliates) were as follows:

	Second Quarter							Year to Date
Millions of dollars	2005		% Change			2004		2005		% Change			2004
Operating revenues	$	168.6		22.8	%	$	137.3	$	571.4		12.3	%	$	509.0
Less: Gas purchased for resale		124.1		26.9	%		97.8		417.0		15.2	%		362.0
Margin	$	44.5		12.7	%	$	39.5	$	154.4		5.0	%	$	147.0

Second Quarter

Margin increased primarily due to customer growth and increased consumption.

Year to Date

Margin increased primarily due to customer growth and increased consumption of $8.1 million, partially offset by lower transportation revenue.

Gas Transmission

Gas Transmission is comprised of the operations of SCPC. Gas transmission sales margins (including transactions with affiliates) were as follows:

	Second Quarter							Year to Date
Millions of dollars	2005		% Change			2004		2005		% Change			2004
Operating revenues	$	121.9		7.0	%	$	113.9	$	302.9		5.8	%	$	286.2
Less: Gas purchased for resale		109.9		9.2	%		100.6		275.8		6.8	%		258.3
Margin	$	12.0		(9.8	)%	$	13.3	$	27.1		(2.9	)%	$	27.9

Second Quarter

Margin decreased due to lower sales volumes to industrial interruptible customers.

Year to Date

Margin decreased slightly due to lower sales volumes to industrial interruptible customers offset by higher transportation volumes.

Retail Gas Marketing

Retail Gas Marketing is comprised of SCANA Energy, a division of SCANA Energy Marketing, Inc., which operates in Georgia’s natural gas market. Retail Gas Marketing revenues and net income were as follows:

	Second Quarter							Year to Date
Millions of dollars	2005		% Change			2004		2005		% Change			2004
Operating revenues	$	91.9		0.8	%	$	91.2	$	330.8		7.1	%	$	308.9
Net income	$	1.0		(68.8	)%	$	3.2	$	23.4		(1.3	)%	$	23.7

21

Second Quarter

Operating revenues increased slightly primarily as a result of higher average retail prices due to higher commodity gas costs. Net income decreased primarily due to lower sales margins and higher operating and customer service expenses.

Year to Date

Operating revenues increased primarily as a result of higher average retail prices due to higher commodity gas costs. Net income decreased slightly primarily due to higher operating and customer service expenses offsetting higher margins.

Energy Marketing

Energy Marketing is comprised of the Company’s non-regulated marketing operations, excluding SCANA Energy. Energy Marketing operating revenues and net loss were as follows:

	Second Quarter									Year to Date
Millions of dollars	2005			% Change			2004			2005			% Change			2004
Operating revenues	$	166.5			4.5	%	$	159.3		$	337.0			22.8	%	$	274.5
Net loss	$	(0.2	)		*		$	(0.5	)	$	(1.1	)		*		$	(1.0	)

* Not meaningful

Second Quarter

Operating revenues increased primarily as a result of higher commodity prices which more than offset decreased volumes. Net loss decreased primarily due to decreased operating expenses.

Year to Date

Operating revenues increased primarily as a result of higher commodity prices which more than offset decreased volumes. Net loss increased primarily due to lower gas margins.

Other Operating Expenses

Other operating expenses, which arose from the operating segments previously discussed, were as follows:

	Second Quarter							Year to Date
Millions of dollars	2005		% Change			2004		2005		% Change			2004
Other operation and maintenance	$	152.0		6.0	%	$	143.4	$	311.0		4.4	%	$297.8
Depreciation and amortization		89.0		*			66.6		333.8		*		129.3
Other taxes		40.0		4.2	%		38.4		78.0		1.0	%	77.2
Total	$	281.0		*		$	248.4	$	722.8		*		$504.3

* Not meaningful

Second Quarter

Other operation and maintenance expenses increased primarily due to increased nuclear and fossil maintenance expenses of $6.8 million. Depreciation and amortization increased approximately $13.9 million due to accelerated depreciation of the back-up dam at Lake Murray (previously explained at Recognition of Synthetic Fuel Tax Credits) and increased $2.7 million due to the completion of the Jasper County Electric Generating Station in May 2004 and $1.4 million due to normal net property changes. In addition, as a result of the January 2005 rate order, SCE&G received approval to amortize previously deferred purchased power costs and to implement new depreciation rates, resulting in $4.4 million of additional depreciation expense in the period.

22

    Year to Date

Other operation and maintenance expenses increased primarily due to increased nuclear and fossil maintenance expenses of $11.4 million, partially offset by decreases in storm expenses of $1.9 million and $1.9 million of employee benefit expenses. Depreciation and amortization increased approximately $183.6 million due to accelerated depreciation of the back-up dam at Lake Murray (previously explained at Recognition of Synthetic Fuel Tax Credits) and increased $8.7 million due to the completion of the Jasper County Electric Generating Station in May 2004 and $2.9 million due to normal net property changes. In addition, as a result of the January 2005 rate order, SCE&G received approval to amortize previously deferred purchased power costs and to implement new depreciation rates, resulting in $8.7 million of additional depreciation expense in the period.

Income Taxes

Income tax expense for the three and six months ended June 30, 2005 decreased primarily due to the application of synthetic fuel tax credits, as previously discussed at Recognition of Synthetic Fuel Tax Credits.

LIQUIDITY AND CAPITAL RESOURCES

The Company anticipates that its contractual cash obligations will be met through internally generated funds, the incurrence of additional short-term and long-term indebtedness and sales of additional equity securities. The Company expects that it has or can obtain adequate sources of financing to meet its projected cash requirements for the foreseeable future. The Company’s ratio of earnings to fixed charges for the 12 months ended June 30, 2005 was 1.75.

Cash requirements for the Company’s regulated subsidiaries arise primarily from their operational needs, funding their construction programs and payment of dividends to SCANA. The ability of the regulated subsidiaries to replace existing plant investment, as well as to expand to meet future demand for electricity and gas, will depend on their ability to attract the necessary financial capital on reasonable terms. 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 these subsidiaries continue their ongoing construction programs, rate increases will be sought. The future financial position and results of operations of the regulated subsidiaries will be affected by their ability to obtain adequate and timely rate and other regulatory relief, if requested.

In a January 2005 order, the SCPSC granted SCE&G a composite increase in retail electric rates of approximately 2.89%, designed to produce additional annual revenues of approximately $41.4 million based on a test year calculation. The SCPSC lowered SCE&G's return on common equity from 12.45% to an amount not to exceed 11.4%, with rates set at 10.7%. The new rates became effective in January 2005. As part of its order, the SCPSC approved SCE&G's recovery of construction and operating costs for SCE&G's new Jasper County Electric Generating Station, recovery of costs of mandatory environmental upgrades primarily related to Federal Clean Air Act regulations and the application of current and anticipated net synthetic fuel tax credits to offset the cost of constructing the back-up dam at Lake Murray (as previously discussed in Recognition of Synthetic Fuel Tax Credits). The SCPSC also approved recovery over a five-year period of SCE&G's approximately $14 million of costs incurred in the formation of the GridSouth Regional Transmission Organization and recovery through base rates over three years of approximately $25.6 million of purchased power costs that were previously deferred. As a part of its order, the SCPSC extended through 2010 its approval of the accelerated capital recovery plan for SCE&G's Cope Generating Station. Under the plan, in the event that SCE&G would otherwise earn in excess of its maximum allowed return on common equity, SCE&G may increase depreciation of its Cope Generating Station up to $36 million annually without additional approval of the SCPSC. Any unused portion of the $36 million in any given year may be carried forward for possible use in the following year.

The following table summarizes how the Company generated and used funds for property additions and construction expenditures during the six months ended June 30, 2005 and 2004:

	Six Months Ended
	June 30,
Millions of dollars	2005			2004
Net cash provided from operating activities	$	333		$	345
Net cash (used for) provided from financing activities		(67	)		28
Cash provided from sale of investments and assets		6			1
Cash and cash equivalents available at the beginning of the period		120			117
Funds used for utility property additions and construction expenditures	$	(212	)	$	(253	)
Funds used for nonutility property additions		(7	)		(3	)
Funds used for investments		(27	)		(8	)

23

The Company’s issuance of various securities, including long-term and short-term debt, is subject to customary approval or authorization by state and federal regulatory bodies, including state public service commissions and the Securities and Exchange Commission.

CAPITAL TRANSACTIONS

In June 2005 $650 million in committed five-year revolving credit facilities for SCE&G, Fuel Company and PSNC Energy were amended to extend the term of the existing credit facilities by an additional year. The credit facilities now will expire on June 30, 2010. None of the five-year credit facilities require the borrower to make a representation as to “no material adverse change” related to financial condition or material litigation at the time of a borrowing, and none of the facilities contains covenants based on credit ratings under which lenders could refuse to advance funds.

On June 15, 2005 SCE&G retired at maturity $150 million in first mortgage bonds. These bonds bore interest at 7.50%. SCE&G used available cash, together with short-term borrowings, to effect the retirement.

During the second quarter of 2005, the Company terminated two interest rate swap agreements with an aggregate notional amount of $225 million.  Under the swap agreements, the Company received fixed rate interest of 5.81% and 6.25%, and paid variable rate interest.  The termination of these swap agreements did not significantly impact the Company's financial position, results of operations or cash flows.

In March 2005 SCANA issued $100 million in senior unsecured floating rate medium-term notes maturing in March 2008. The interest rate on the floating rate notes is reset quarterly based on three-month LIBOR plus 15 basis points. The proceeds from the sale, together with available cash, were used for the redemption on April 1, 2005 of $200 million of floating rate medium-term notes due to mature in November 2006.

In March 2005 SCE&G issued $100 million in first mortgage bonds having an annual interest rate of 5.25% and maturing March 1, 2035. The proceeds from the sale of these bonds were used for the redemption on April 1, 2005 of $100 million in first mortgage bonds due April 1, 2025 which bore interest at 7.625%.

CAPITAL PROJECTS

In May 2005 SCE&G substantially completed construction of a back-up dam at Lake Murray in order to comply with new federal safety standards mandated by FERC. Construction of the project and related activities are estimated to cost approximately $275 million, excluding AFC.

ENVIRONMENTAL MATTERS

In March 2005 the Environmental Protection Agency (EPA) issued a final rule known as the Clean Air Interstate Rule (CAIR). CAIR requires the District of Columbia and 28 states, including South Carolina, to reduce nitrogen oxides and sulfur dioxide emissions in order to attain mandated state levels. SCE&G has petitioned the United States Court of Appeals for the District of Columbia Circuit to review CAIR. Several other electric utilities have filed separate petitions. The petitioners seek a change in the method CAIR uses to allocate sulfur dioxide emission allowances to a method the petitioners believe is more equitable. The Company believes that installation of additional air quality controls will be needed to meet the CAIR requirements. Compliance plans and cost to comply with the rule will be determined once the Company completes its review. Such costs will be material and are expected to be recoverable through rates.

In March 2005 the EPA issued a final rule establishing a mercury emissions cap and trade program for coal-fired power plants that requires limits to be met in two phases, in 2010 and 2018. The Company is reviewing the final rule. Installation of additional air quality controls is likely to be required to comply with the mercury rule’s emission caps. Compliance plans and costs to comply with the rule will be determined once the Company completes its review. Such costs will be material and are expected to be recoverable through rates.

For other information on environmental matters, see Note 6B to condensed consolidated financial statements.

24

OTHER MATTERS

Synthetic Fuel

SCE&G holds equity-method investments in two partnerships involved in converting coal to synthetic fuel, the use of which fuel qualifies for federal income tax credits. These synthetic fuel production facilities were placed in operation in 2000 and 2001. Under an accounting plan approved by the SCPSC in June 2000, the synthetic fuel tax credits generated by the partnerships and passed through to SCE&G, net of partnership losses and other expenses, were to be deferred until the SCPSC approved their application to offset capital costs of projects required to comply with legislative or regulatory actions.

The aggregate investment in these partnerships as of June 30, 2005 is approximately $2.8 million, and through June 30, 2005, they have generated and passed through to SCE&G approximately $155.2 million in such tax credits. As previously described at Earnings Per Share, in a January 2005 order, the SCPSC approved SCE&G’s request to apply these synthetic fuel tax credits to offset the construction costs of the Lake Murray Dam project. Under the accounting methodology approved by the SCPSC, construction costs related to the project are recorded in utility plant in service in a special dam remediation account outside of rate base, and depreciation is recognized against the balance in this account on an accelerated basis, subject to the availability of the synthetic fuel tax credits.

The level of depreciation expense and related income tax benefit recognized in the income statement is equal to the available synthetic fuel tax credits, less partnership losses and other expenses, net of taxes. As a result, the balance of unrecovered costs in the dam remediation account is declining as accelerated depreciation is recorded. Although these entries collectively have no impact on consolidated net income, they can have a significant impact on individual line items within the income statement.

Depreciation on the Lake Murray Dam remediation account will be matched to available synthetic fuel tax credits on a quarterly basis until the balance in the dam remediation account is zero or until all of the available synfuel tax credits have been utilized. The synthetic fuel tax credit program expires at the end of 2007.

The ability to utilize the synthetic fuel tax credits is dependent on several factors, one of which is the average annual domestic wellhead price per barrel of crude oil as published by the U.S. Government. Under a phase-out provision included in the program, if the domestic wellhead reference price of oil per barrel for a given year is below an inflation-adjusted benchmark range for that year, all of the synthetic fuel tax credits that have been generated in that year are available for use. If that price is above the benchmark range, none of the tax credits would be available. If that price falls within the benchmark range, a certain percentage of the credits would be available.

25

The lower end of the inflation-adjusted benchmark range for 2004 was about $51 per barrel, while the upper end of that range was about $64. Since the reference price of oil for 2004 was less than $37, all of the synthetic fuel tax credits the Company had recorded and deferred through 2004 were available for use. While the benchmark price range for 2005 has been estimated at between $52 and $65 per barrel, the 2005 reference price will not be known until April 2006. During 2005 and subject to continuing review of the estimated benchmark range and reference price of oil for 2005, the Company intends to continue to record synthetic fuel tax credits as they are generated and to apply those credits quarterly to allow the recording of accelerated depreciation related to the balance in the dam remediation project account. The Company cannot predict what impact, if any, the price of oil may have on the Company’s ability to earn synthetic fuel tax credits in the future.

In order to earn these tax credits, SCANA also must be subject to a regular federal income tax liability in an amount at least equal to the credits generated in any tax year. This tax liability could be insufficient if the Company’s consolidated taxable income were to be significantly reduced as the result of realizing lower income or large deductions in any tax year. The availability of these synthetic fuel tax credits is also subject to coal availability and other operational risks related to the generating plants.

In March 2004, one of the partnerships, S. C. Coaltech No. 1 L.P. received a “No Change” letter from the Internal Revenue Service (IRS) related to its synthetic fuel operations for the tax year 2000. After review of testing procedures and supporting documentation and conducting an independent investigation, the IRS found that the partnership produces a qualifying fuel under section 29 of the Internal Revenue Code (IRC) and found no reason to challenge the first placed-in-service status of the facility. This letter supports the Company’s position that the synthetic fuel tax credits have been properly claimed.

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 long-term debt issued by the Company and other 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. For interest rate swaps, the figures shown reflect notional amounts and related maturities. Fair values for debt and swaps represent quoted market prices.

As of June 30, 2005			Expected Maturity Date
Millions of dollars
						There-		Fair
Liabilities	2005	2006	2007	2008	2009	After	Total	Value
Long-Term Debt:
Fixed Rate ($)	5.0	174.4	68.6	158.6	143.6	2,532.8	3,083.0	3,404.5
Average Fixed Interest Rate (%)	7.51	8.50	6.96	8.12	8.21	6.15	6.50	n/a
Variable Rate ($)				100.0			100.0	100.0
Average Variable Interest Rate (%)				3.48			3.48
Interest Rate Swaps:
Pay Variable/Receive Fixed ($)	-	3.2	28.2	3.2	3.2	9.6	47.4	0.9
Average Pay Interest Rate (%)	-	6.63	6.94	6.63	6.63	6.63	6.81	n/a
Average Receive Interest Rate (%)	-	8.75	7.11	8.75	8.75	8.75	7.77	n/a

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.

26

Commodity price risk - The following table 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. Fair value represents quoted market prices.

Expected Maturity:
				Options
	Futures Contracts			Purchased Call
2005	Long ($)	Short ($)		(Long) ($)
Settlement Price (a)	7.16	7.09
Contract Amount	26.6	14.6	Strike Price (a)	7.42
Fair Value	28.1	14.4	Contract Amount	29.7
2006
Settlement Price (a)	8.40	8.61
Contract Amount	4.2	1.7	Strike Price (a)	8.41
Fair Value	5.0	1.7	Contract Amount	8.1
(a) Weighted average

Swaps
	2005	2006	2007
Pay fixed/receive variable ($)	9.4	7.9	0.7
Average pay interest rate (%) (a)	7.12	7.44	7.10
Average received interest rate (%) (a)	7.46	8.27	8.10
Pay variable/receive variable ($)	15.5	-	-
Average pay interest rate (%) (a)	7.16	-	-
Average received interest rate (%) (a)	7.14	-	-
(a) Weighted average

As of June 30, 2005 an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that as of June 30, 2005 the Company’s disclosure controls and procedures were effective. There has been no change in the Company’s internal control over financial reporting during the quarter ended June 30, 2005 that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

27

28

Item 1. Financial Statements

SOUTH CAROLINA ELECTRIC & GAS COMPANY

(Unaudited)

	June 30,			December 31,
Millions of dollars	2005			2004
Assets
Utility Plant In Service	$	7,483		$	7,096
Accumulated depreciation and amortization		(2,172	)		(1,934	)
		5,311			5,162
Construction work in progress		157			417
Nuclear fuel, net of accumulated amortization		38			42
Utility Plant, Net		5,506			5,621
Nonutility Property and Investments:
Nonutility property, net of accumulated depreciation		26			27
Assets held in trust, net - nuclear decommissioning		52			49
Investments		6			6
Nonutility Property and Investments, Net		84			82
Current Assets:
Cash and cash equivalents		17			20
Receivables, net of allowance for uncollected accounts of $2 and $1		306			267
Receivables - affiliated companies		33			19
Inventories (at average cost):
Fuel		62			35
Materials and supplies		66			64
Emission allowances		36			9
Prepayments and other		26			30
Total Current Assets		546			444
Deferred Debits:
Environmental		14			11
Pension asset, net		294			285
Due from affiliates - pension and postretirement benefits		23			23
Other regulatory assets		367			376
Other		138			138
Total Deferred Debits		836			833
Total	$	6,972		$	6,980

29

	June 30,		December 31,
Millions of dollars	2005		2004
Capitalization and Liabilities
Shareholders’ Investment:
Common equity	$	2,238	$	2,164
Preferred stock (Not subject to purchase or sinking funds)		106		106
Total Shareholders’ Investment		2,344		2,270
Preferred Stock, net (Subject to purchase or sinking funds)		8		9
Long-Term Debt, net		1,975		1,981
Total Capitalization		4,327		4,260
Minority Interest		81		81
Current Liabilities:
Short-term borrowings		446		153
Current portion of long-term debt		48		198
Accounts payable		77		106
Accounts payable - affiliated companies		94		113
Customer deposits		27		26
Taxes accrued		87		152
Interest accrued		34		35
Dividends declared		40		38
Other		50		50
Total Current Liabilities		903		871
Deferred Credits:
Deferred income taxes, net		721		744
Deferred investment tax credits		119		119
Asset retirement obligation - nuclear plant		128		124
Other asset retirement obligations		376		363
Due to affiliates - pension and postretirement benefits		13		14
Postretirement benefits		145		142
Other regulatory liabilities		91		198
Other		68		64
Total Deferred Credits		1,661		1,768
Commitments and Contingencies (Note 5)		-		-
Total	$	6,972	$	6,980

See Notes to Condensed Consolidated Financial Statements.

30

SOUTH CAROLINA ELECTRIC & GAS COMPANY

(Unaudited)

	Three Months Ended							Six Months Ended
	June 30,							June 30,
Millions of dollars		2005			2004			2005			2004
Operating Revenues:
Electric		$	438		$	435		$	854		$	817
Gas			85			68			242			213
Total Operating Revenues			523			503			1,096			1,030
Operating Expenses:
Fuel used in electric generation			137			120			265			215
Purchased power			11			20			17			33
Gas purchased for resale			71			55			192			166
Other operation and maintenance			112			104			221			212
Depreciation and amortization			78			55			311			107
Other taxes			36			35			71			70
Total Operating Expenses			445			389			1,077			803
Operating Income			78			114			19			227
Other Income (Expense):
Other Income, including allowance for equity funds
used during construction of $3, $4, $5 and $9			7			7			13			14
Interest charges, net of allowance for borrowed funds
used during construction of $1, $3, $1 and $6			(37	)		(35	)		(74	)		(70	)
Gain on sale of assets			1			1			1			2
Total Other Expense			(29	)		(27	)		(60	)		(54	)
Income (Loss) Before Income Taxes, Losses from Equity Method
Investments, Minority Interest and Preferred Stock Dividends			49			87			(41	)		173
Income Tax Expense (Benefit)			3			29			(205	)		58
Income Before Losses from Equity Method Investments,
Minority Interest and Preferred Stock Dividends			46			58			164			115
Losses from Equity Method Investments			(5	)		-			(69	)		(1	)
Minority Interest			1			1			3			3
Net Income			40			57			92			111
Preferred Stock Cash Dividends Declared			2			2			4			4
Earnings Available for Common Shareholder		$	38		$	55		$	88		$	107
See Notes to Condensed Consolidated Financial Statements.

31

SOUTH CAROLINA ELECTRIC & GAS COMPANY

(Unaudited)

	Six Months Ended
	June 30,
Millions of dollars	2005			2004
Cash Flows From Operating Activities:
Net income	$	92		$	111
Adjustments to reconcile net income to net cash provided from operating activities:
Losses from equity method investments		69			1
Minority interest		3			3
Depreciation and amortization		310			107
Amortization of nuclear fuel		8			11
Allowance for funds used during construction		(5	)		(9	)
Gain on sale of assets		(1	)		(2	)
Cash provided (used) by changes in certain assets and liabilities:
Receivables, net		(53	)		(25	)
Inventories		(75	)		(26	)
Prepayments		4			(29	)
Pension asset		(9	)		(8	)
Other regulatory assets		23			(24	)
Deferred income taxes, net		(38	)		31
Regulatory liabilities		(144	)		14
Postretirement benefits obligations		3			3
Accounts payable		(24	)		13
Taxes accrued		(65	)		(49	)
Interest accrued		(1	)		1
Changes in fuel adjustment clauses		(9	)		40
Changes in other assets		(6	)		(8	)
Changes in other liabilities		(9	)		10
Net Cash Provided From Operating Activities		73			165
Cash Flows From Investing Activities:
Utility property additions and construction expenditures		(183	)		(232	)
Proceeds from sale of assets		1			1
Investments in affiliates		(9	)		(8	)
Net Cash Used For Investing Activities		(191	)		(239	)
Cash Flows From Financing Activities:
Proceeds from issuance of debt		97			124
Repayment of debt		(253	)		-
Redemption of preferred stock		(1	)		-
Dividends on equity securities		(78	)		(80	)
Distribution to parent		-			(28	)
Contribution from parent		59			-
Short-term borrowings from affiliate, net		(2	)		(7	)
Short-term borrowings, net		293			28
Net Cash Provided From Financing Activities		115			37
Net Decrease In Cash and Cash Equivalents		(3	)		(37	)
Cash and Cash Equivalents, January 1		20			56
Cash and Cash Equivalents, June 30	$	17		$	19
Supplemental Cash Flow Information:
Cash paid for - Interest (net of capitalized interest of $1 and $6)	$	71		$	70
- Income taxes		23			33
Noncash Investing and Financing Activities:
Accrued construction expenditures		13			17
See Notes to Condensed Consolidated Financial Statements.

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SOUTH CAROLINA ELECTRIC & GAS COMPANY

June 30, 2005

(Unaudited)

  The following notes should be read in conjunction with the Notes to Consolidated Financial Statements appearing in South Carolina Electric & Gas Company’s (SCE&G, and together with its consolidated affiliates, the Company) Annual Report on Form 10-K for the year ended December 31, 2004. These are interim financial statements, and due to the seasonality of the Company’s business, the amounts reported in the Condensed Consolidated Statements of Income are not necessarily indicative of amounts expected for the full year. In the opinion of management, the information furnished herein reflects all adjustments, all of a normal recurring nature, which are necessary for a fair statement of the results for the interim periods reported.

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.   Variable Interest Entity

Financial Accounting Standards Board Interpretation No. 46 (Revised 2003) (FIN 46), “Consolidation of Variable Interest Entities,” requires an enterprise’s consolidated financial statements to include entities in which the enterprise has a controlling financial interest. SCE&G has determined that it has a controlling financial interest in South Carolina Generating Company, Inc. (GENCO) and South Carolina Fuel Company, Inc. (Fuel Company), and accordingly, the accompanying condensed consolidated financial statements include the accounts of SCE&G, GENCO and Fuel Company. The equity interests in GENCO and Fuel Company are held solely by SCANA Corporation (SCANA), the Company’s parent. Accordingly, GENCO’s and Fuel Company’s equity and results of operations are reflected as minority interest in the Company’s condensed consolidated financial statements.

GENCO owns and operates a coal-fired electric generating station with a 615 megawatt net generating capacity (summer rating). GENCO’s electricity is sold solely to SCE&G under the terms of a power purchase and related operating agreement. Fuel Company acquires, owns and provides financing for SCE&G’s nuclear fuel, fossil fuel and sulfur dioxide emission allowances. The effects of these transactions are eliminated in consolidation. Substantially all of GENCO’s property (carrying value of approximately $81 million) serves as collateral for its long-term borrowings.

B.    Basis of Accounting

The Company accounts for its regulated utility operations, assets and liabilities in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) 71, “Accounting for the Effects of Certain Types of Regulation.” SFAS 71 requires cost-based rate-regulated utilities to recognize in their financial statements certain revenues and expenses in different time periods than do enterprises that are not rate-regulated. As a result, as of June 30, 2005 the Company has recorded approximately $381 million and $467 million of regulatory assets (including environmental) and liabilities, respectively. Information relating to regulatory assets and liabilities follows.

	June 30,			December 31,
Millions of dollars	2005			2004
Accumulated deferred income taxes, net	$	122		$	121
Under-collections - electric fuel and gas cost adjustment clauses, net		22			31
Deferred purchased power costs		21			26
Deferred environmental remediation costs		14			11
Asset retirement obligation - nuclear decommissioning		51			49
Other asset retirement obligations		(376	)		(363	)
Deferred synthetic fuel tax benefits, net		-			(97	)
Storm damage reserve		(35	)		(33	)
Franchise agreements		56			58
Deferred regional transmission organization costs		12			14
Other		27			19
Total	$	(86	)	$	(164	)

  Accumulated deferred income tax liabilities arising from utility operations that have not been included in customer rates are recorded as a regulatory asset. Accumulated deferred income tax assets arising from deferred investment tax credits are recorded as a regulatory liability.

Under-collections - electric fuel and gas cost adjustment clauses, net, represent amounts under-collected from customers pursuant to the fuel adjustment clause (electric customers) or gas cost adjustment clause (gas customers) as approved by the Public Service Commission of South Carolina (SCPSC) during annual hearings.

Deferred purchased power costs - represents costs that were necessitated by outages at two of SCE&G’s base load generating plants in winter 2000-2001. The SCPSC approved recovery of these costs in base rates over three years beginning in January 2005.

Deferred environmental remediation costs represent costs associated with the assessment and clean-up of manufactured gas plant (MGP) sites currently or formerly owned by SCE&G. Costs incurred by SCE&G at such sites are being recovered through rates, of which approximately $13.6 million remain.

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Asset retirement obligation (ARO) - nuclear decommissioning represents the regulatory asset associated with the legal obligation to decommission and dismantle V. C. Summer Nuclear Station (Summer Station) as required by SFAS 143, “Accounting for Asset Retirement Obligations.”

Other asset retirement obligations represent net collections through depreciation rates of estimated costs to be incurred for the future retirement of assets for which no legal retirement obligation exists.

Deferred synthetic fuel tax benefits represented the deferral of partnership losses and other expenses offset by the tax benefits of those losses and expenses and accumulated synthetic fuel tax credits associated with SCE&G’s investment in two partnerships involved in converting coal to synthetic fuel. In 2005, under an accounting plan approved by the SCPSC, any tax credits generated from synthetic fuel produced by the partnerships and ultimately passed through to SCE&G, net of partnership losses and other expenses, have been used to offset the capital costs of constructing the back-up dam at Lake Murray. See Note 2.

The storm damage reserve represents an SCPSC approved reserve account capped at $50 million to be collected through rates. The accumulated storm damage reserve can be applied to offset incremental storm damage costs in excess of $2.5 million in a calendar year. For the six months ended June 30, 2005, no significant amounts have been drawn from this reserve account.

Franchise agreements represent costs associated with the 30-year electric and gas franchise agreements with the cities of Charleston and Columbia, South Carolina. These amounts are being amortized through cost of service rates over approximately 15 years.

Deferred regional transmission organization costs represent costs incurred by SCE&G in the United States Federal Energy Regulatory Commission (FERC)-mandated formation of GridSouth. The project was suspended in 2002. Effective January 2005, the SCPSC approved the amortization of these amounts through cost of service rates over approximately five years.

The SCPSC has reviewed and approved through specific orders most of the items shown as regulatory assets. Other items represent costs which are not yet approved for recovery by the SCPSC. In recording these costs as regulatory assets, management believes the costs will be allowable under existing rate-making concepts that are embodied in rate orders received by SCE&G. However, ultimate recovery is subject to SCPSC approval. 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, liquidity or financial position in the period the write-off would be recorded.

C.      Transactions with Affiliates

SCE&G has entered into agreements with certain affiliates to purchase all gas for resale to its distribution customers and to purchase electric energy. SCE&G purchases natural gas for resale and for electric generation from South Carolina Pipeline Corporation (SCPC) and had approximately $20.7 million and $49.5 million payable to SCPC for such gas purchases at June 30, 2005 and December 31, 2004, respectively.

SCE&G holds equity-method investments in two partnerships involved in converting coal to synthetic fuel. The Company had recorded as receivables from these affiliated companies approximately $23.0 million and $18.6 million at June 30, 2005 and December 31, 2004, respectively. SCE&G had recorded as payables to these affiliated companies approximately $23.3 million and $17.8 million at June 30, 2005 and December 31, 2004, respectively. SCE&G purchased approximately $62.8 million and $51.5 million of synthetic fuel from these affiliated companies for the three months ended June 30, 2005 and 2004, respectively. SCE&G purchased approximately $113.7 million and $90.2 million of synthetic fuel from these affiliated companies for the six months ended June 30, 2005 and 2004, respectively.

In the six months ended June 30, 2005, the Company purchased approximately 342 miles of gas distribution pipeline from SCPC at it’s net book value, which totaled approximately $20.8 million.

D.      Pension and Other Postretirement Benefit Plans

Components of net periodic benefit income or cost recorded by the Company were as follows:

	Pension Benefits						Other Postretirement Benefits
Millions of dollars	2005			2004			2005			2004
Three months ended June 30
Service cost	$	3.1		$	2.8		$	0.9		$	0.8
Interest cost		9.5			9.6			2.8			2.9
Expected return on assets		(19.1	)		(17.8	)		-			-
Prior service cost amortization		1.7			1.6			0.3			0.2
Transition obligation amortization		0.2			0.2			0.2			0.2
Amortization of actuarial loss		-			-			0.4			0.5
Amount attributable to Company affiliates		(0.5	)		(0.5	)		(1.3	)		(1.4	)
Net periodic benefit (income) cost	$	(5.1	)	$	(4.1	)	$	3.3		$	3.2

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Six months ended June 30
Service cost	$	6.1		$	5.6		$	1.8		$	1.6
Interest cost		19.0			18.7			5.6			5.8
Expected return on assets		(38.2	)		(35.5	)		-			-
Prior service cost amortization		3.4			3.2			0.6			0.4
Transition obligation amortization		0.4			0.4			0.4			0.4
Amortization of actuarial loss		-			-			0.8			1.0
Amount attributable to Company affiliates		(0.9	)		(0.9	)		(2.6	)		(2.8	)
Net periodic benefit (income) cost	$	(10.2	)	$	(8.5	)	$	6.6		$	6.4

E.       Equity Compensation Plan

The Company participates in the SCANA Corporation Long-Term Equity Compensation Plan (the Plan), under which certain employees and non-employee directors may receive incentive and nonqualified stock options and other forms of equity compensation. SCANA accounts for this equity-based compensation using the intrinsic value method under APB 25, “Accounting for Stock Issued to Employees,” and related interpretations. In addition, SCANA has adopted the disclosure provisions of SFAS 123, “Accounting for Stock-Based Compensation” and SFAS 148, “Accounting for Stock-Based Compensation-Transition and Disclosure.”

Options, all of which were granted prior to 2003, were granted with exercise prices equal to the fair market value of SCANA’s common stock on the respective grant dates since the Plan’s inception; therefore, no compensation expense has been recognized in connection with such grants. If SCANA had recognized compensation expense for the issuance of options based on the fair value method described in SFAS 123, the Company’s pro forma net income would have been as follows:

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2005	2004	2005	2004
Net income - as reported (millions)	$38	$55	$88	$107
Net income - pro forma (millions)	$38	$55	$88	$107

SCANA also grants other forms of equity based compensation to certain employees of the Company. The value of such awards is recognized as compensation expense under APB 25. Total expense recorded for these awards was approximately $1.8 million and $3.1 million for the three and six months ended June 30, 2005, respectively, and approximately $1.6 million and $3.1 million for the corresponding periods ended June 30, 2004, respectively.

F.      New Accounting Matters

SFAS 154, “Accounting Changes and Error Corrections,” was issued in June 2005. It requires retrospective application to prior periods’ financial statements of every voluntary change in accounting principle unless it is impracticable. SFAS 154 replaces Accounting Principles Board (APB) Opinion 20, “Accounting Changes,” and SFAS 3, “Reporting Accounting Changes in Interim Financial Statements,” although it carries forward some of their provisions. The Company will adopt SFAS 154 in the first quarter of 2006, and does not expect that the initial adoption will have a material impact on the Company’s results of operations, cash flows or financial position.

Financial Accounting Standards Board Interpretation (FIN) 47, “Accounting for Conditional Asset Retirement Obligations,” was issued in March 2005 to clarify the term “conditional asset retirement” as used in SFAS 143, “Accounting for Asset Retirement Obligations.” It requires that a liability be recognized for the fair value of a conditional asset retirement obligation when incurred, if the fair value of the liability can be reasonably estimated. Uncertainty about the timing or method of settlement of a conditional asset retirement obligation would be factored into the measurement of the liability when sufficient information exists. This interpretation is effective no later than the end of fiscal years ending after December 15, 2005. Accordingly, the Company will adopt FIN 47 in the fourth quarter of 2005. The impact FIN 47 may have on the Company’s assets and liabilities has not been determined but could be material. The Company does not expect that the initial adoption of FIN 47 will have a material impact on the Company’s results of operations, cash flows or financial position.

SFAS 123 (revised 2004), “Share-Based Payment,” was issued in December 2004 and will require compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the instruments issued. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS 123(R) replaces SFAS 123, “Accounting for Stock-Based Compensation” and supersedes APB 25, “Accounting for Stock Issued to Employees.” In April 2005, the Securities and Exchange Commission delayed the date for mandatory adoption of SFAS 123(R) until the first interim or annual reporting period of the first fiscal year beginning on or after June 15, 2005. Accordingly, the Company will adopt SFAS 123(R) in the first quarter of 2006. The Company does not expect that the initial adoption of SFAS 123(R) will have a material impact on the Company’s results of operations, cash flows or financial position.

G.      Reclassifications

Certain amounts from prior periods have been reclassified to conform with the presentation adopted for 2005.

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2.       RATE AND OTHER REGULATORY MATTERS

Electric

In a January 2005 order, the SCPSC granted SCE&G a composite increase in retail electric rates of approximately 2.89%, designed to produce additional annual revenues of approximately $41.4 million based on a test year calculation. The SCPSC lowered SCE&G's return on common equity from 12.45% to an amount not to exceed 11.4%, with rates set at 10.7%. The new rates became effective in January 2005. As part of its order, the SCPSC approved SCE&G's recovery of construction and operating costs for SCE&G's new Jasper County Electric Generating Station, recovery of costs of mandatory environmental upgrades primarily related to Federal Clean Air Act regulations and, beginning in January 2005, the application of current and anticipated net synthetic fuel tax credits to offset the cost of constructing the back-up dam at Lake Murray. Under the accounting methodology approved by the SCPSC, current and future construction costs related to the Lake Murray Dam project are recorded in a special dam remediation account outside of rate base, and depreciation is being recognized against the balance in this account on an accelerated basis, subject to the availability of the synthetic fuel tax credits.

In the January 2005 order the SCPSC also approved recovery over a five-year period of SCE&G's approximately $14 million of costs incurred in the formation of the GridSouth Regional Transmission Organization and recovery through base rates over three years of approximately $25.6 million of purchased power costs that were previously deferred. As a part of its order, the SCPSC extended through 2010 its approval of the accelerated capital recovery plan for SCE&G's Cope Generating Station. Under the plan, in the event that SCE&G would otherwise earn in excess of its maximum allowed return on common equity, SCE&G may increase depreciation of its Cope Generating Station up to $36 million annually without additional approval of the SCPSC. Any unused portion of the $36 million in any given year may be carried forward for possible use in the following year.

SCE&G's rates are established using a cost of fuel component approved by the SCPSC which may be modified periodically to reflect changes in the price of fuel purchased by SCE&G. SCE&G's cost of fuel component in effect during the period January 1, 2004 through June 30, 2005 was as follows:

Rate Per KWh	Effective Date
$.01678	January-April 2004
$.01821	May-December 2004
$.01764	January-April 2005
$.02256	May-June 2005

Gas

SCE&G's rates are established using a cost of gas component approved by the SCPSC which may be modified periodically to reflect changes in the price of natural gas purchased by SCE&G. SCE&G's cost of gas component in effect during the period January 1, 2004 through June 30, 2005 was as follows:

Rate Per Therm	Effective Date
$.877	January-October 2004
$.903	November 2004-June 2005

On April 26, 2005, SCE&G filed an application with the SCPSC requesting a 7.09 percent increase in retail natural gas base rates, or approximately $28 million based on an adjusted test year ended December 31, 2004. A hearing on this request is expected to be held in September 2005. If approved, it is anticipated that the new rates would go into effect in November 2005.

3.       DEBT AND CREDIT FACILITIES

In June 2005 $525 million in committed five-year revolving credit facilities for SCE&G and Fuel Company were amended to extend the term of the existing credit facilities by an additional year. The credit facilities now will expire on June 30, 2010.

On June 15, 2005 SCE&G retired at maturity $150 million in first mortgage bonds. These bonds bore interest at 7.50%. SCE&G used available cash, together with short-term borrowings, to effect the retirement.

     In March 2005 SCE&G issued $100 million in first mortgage bonds having an annual interest rate of 5.25% and maturing March 1, 2035. The proceeds from the sale of these bonds were used for the redemption on April 1, 2005 of $100 million in first mortgage bonds due April 1, 2025, which bore interest at 7.625%.

4.        RETAINED EARNINGS

SCE&G’s Restated Articles of Incorporation contain provisions that, under certain circumstances, which SCE&G considers remote, 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 June 30, 2005, of SCE&G’s approximately $934 million in retained earnings, approximately $50 million were restricted by this requirement as to payment of cash dividends on common stock.

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5.       COMMITMENTS AND CONTINGENCIES

Reference is made to Note 10 to the consolidated financial statements appearing in SCE&G’s Annual Report on Form 10-K for the year ended December 31, 2004. Commitments and contingencies at June 30, 2005 include the following:

A. Nuclear Insurance

The Price-Anderson Indemnification Act (the Act) deals with public liability for a nuclear incident. Though the Act expired in 2003, existing licensees, such as the Company, are “grandfathered” under the Act until such time as it is renewed. The Act establishes the liability limit for third party claims associated with any nuclear incident at $10.5 billion. Each reactor licensee is currently liable for up to $100.6 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 $67.1 million per incident, but not more than $6.7 million per year.

SCE&G currently maintains policies (for itself and on behalf of the South Carolina Public Service Authority, the one-third owner of Summer Station) with Nuclear Electric Insurance Limited. The policies, covering the nuclear facility for property damage, excess property damage and outage costs, permit retrospective assessments under certain conditions to cover insurer’s losses. Based on the current annual premium, SCE&G’s portion of the retrospective premium assessment would not exceed $15.8 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. However, if such an incident were to occur, it would have a material adverse impact on the Company’s results of operations, cash flows and financial position.

B.    Environmental

In March 2005 the Environmental Protection Agency (EPA) issued a final rule known as the Clean Air Interstate Rule (CAIR). CAIR requires the District of Columbia and 28 states, including South Carolina, to reduce nitrogen oxides and sulfur dioxide emissions in order to attain mandated state levels. SCE&G has petitioned the United States Court of Appeals for the District of Columbia Circuit to review CAIR. Several other electric utilities have filed separate petitions. The petitioners seek a change in the method CAIR uses to allocate sulfur dioxide emission allowances to a method the petitioners believe is more equitable. The Company believes that installation of additional air quality controls will be needed to meet the CAIR requirements. Compliance plans and cost to comply with the rule will be determined once the Company completes its review. Such costs will be material and are expected to be recoverable through rates.

In March 2005 the EPA issued a final rule establishing a mercury emissions cap and trade program for coal-fired power plants that requires limits to be met in two phases, in 2010 and 2018. The Company is reviewing the final rule. Installation of additional air quality controls is likely to be required to comply with the mercury rule’s emission caps. Compliance plans and costs to comply with the rule will be determined once the Company completes its review. Such costs will be material and are expected to be recoverable through rates.

SCE&G maintains an environmental assessment program to identify and evaluate current and former 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 solely to regulated operations.

At SCE&G, site assessment and cleanup costs are deferred and are being recovered through rates (see Note 1). Deferred amounts, net of amounts previously recovered through rates and insurance settlements, totaled $13.6 million at June 30, 2005. The deferral includes the estimated costs associated with the following matters.

SCE&G owns a decommissioned MGP site in the Calhoun Park area of Charleston, South Carolina. The site is currently being remediated for contamination. SCE&G anticipates that the remaining remediation activities will be completed by the end of 2005, with certain monitoring and retreatment activities continuing until 2010. As of June 30, 2005, SCE&G had spent approximately $20.9 million to remediate the Calhoun Park site and expects to spend an additional $1.0 million. In addition, the National Park Service of the Department of the Interior made an initial demand to SCE&G for payment of approximately $9 million for certain costs and damages relating to this site. Any costs arising from these matters are expected to be recoverable through rates under South Carolina regulatory process.

SCE&G owns three other decommissioned MGP sites in South Carolina which contain residues of by-product chemicals. One of the sites has been remediated and will undergo routine monitoring until released by the South Carolina Department of Health and Environmental Control (DHEC). The other sites are currently being investigated under work plans approved by DHEC. SCE&G anticipates that major remediation activities for the three sites will be completed in 2010. As of June 30, 2005, SCE&G had spent approximately $4.2 million related to these three sites, and expects to spend an additional $8.3 million.

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C.      Claims and Litigation

          On August 21, 2003, SCE&G was served as a co-defendant in a purported class action lawsuit styled as Collins v. Duke Energy Corporation, Progress Energy Services Company, and SCE&G in South Carolina's Circuit Court of Common Pleas for the Fifth Judicial Circuit. The plaintiffs are seeking damages for the alleged improper use of electric transmission and distribution easements but have not asserted a dollar amount for their claims. Specifically, the plaintiffs contend that the licensing of attachments on electric utility poles, towers and other facilities to non-utility third parties or telecommunication companies for other than the electric utilities' internal use along the electric transmission and distribution line rights-of-way constitutes a trespass. SCE&G is confident of the propriety of its actions and intends to mount a vigorous defense. SCE&G further believes that the resolution of these claims will not have a material adverse impact on its results of operations, cash flows or financial condition.

On May 17, 2004, SCE&G was served with a purported class action lawsuit styled as Douglas E. Gressette, individually and on behalf of other persons similarly situated v. South Carolina Electric & Gas Company and SCANA Corporation. The case was filed in South Carolina’s Circuit Court of Common Pleas for the Ninth Judicial Circuit. The plaintiff alleges that SCE&G made improper use of certain easements and rights-of-way by allowing fiber optic communication lines and/or wireless communication equipment to transmit communications other than SCE&G’s electricity-related internal communications. The plaintiff asserted causes of action for unjust enrichment, trespass, injunction and declaratory judgment. The plaintiff did not assert a specific dollar amount for the claims. SCE&G believes its actions are consistent with governing law and the applicable documents granting easements and rights-of-way. The Court granted SCE&G’s motion to dismiss and issued an Order dismissing the case on June 29, 2005. An appeal by the Plaintiff is expected. SCE&G intends to mount a vigorous defense and believes that the resolution of these claims will not have a material adverse impact on its results of operations, cash flows or financial condition.

A complaint was filed on October 22, 2003 against SCE&G by the State of South Carolina alleging that SCE&G violated the Unfair Trade Practices Act by charging municipal franchise fees to some customers residing outside a municipality’s limits. The complaint alleged that SCE&G failed to obey, observe or comply with the lawful order of the SCPSC by charging franchise fees to those not residing within a municipality. The complaint sought restitution to all affected customers and penalties up to $5,000 for each separate violation. The State of South Carolina v. SCE&G claim has been settled by an agreement between the parties, and the settlement has been approved by the court. The allegations were also the subject of a purported class action lawsuit filed in December 2003, against Duke Energy Corporation, Progress Energy Services Company and SCE&G (styled as Edwards v. SCE&G), but that case has been dismissed by the Plaintiff. In addition, SCE&G filed a petition with the SCPSC on October 23, 2003 pursuant to S. C. Code Ann. R.103-836. The petition requests that the SCPSC exercise its jurisdiction to investigate the operation of the municipal franchise fee collection requirements applicable to SCE&G’s electric and gas service, to approve SCE&G’s efforts to correct any past franchise fee billing errors, to adopt improvements in the system which will reduce such errors in the future, and to adopt any regulation that the SCPSC deems just and proper to regulate the franchise fee collection process. A hearing on this petition has not been scheduled. The Company believes that the resolution of these matters will not have a material adverse impact on its results of operations, cash flows or financial condition.

The Company is also engaged in various other claims and litigation incidental to its business operations which management anticipates will be resolved without material loss to the Company.

6.        SEGMENT OF BUSINESS INFORMATION

The Company’s reportable segments are listed in the following table. The Company uses operating income to measure profitability for its regulated operations. Therefore, net income is not allocated to the Electric Operations and Gas Distribution segments. Intersegment revenues were not significant. All Other includes equity method investments.

	2005									2004
			Operating			Net						Operating			Net
	External		Income			Income			Segment	External		Income			Income		Segment
Millions of Dollars	Revenue		(Loss)			(Loss)			Assets	Revenue		(Loss)			(Loss)		Assets
Three Months Ended June 30,
Electric Operations	$	438	$	83			n/a			$	435	$	120			n/a
Gas Distribution		85		(5	)		n/a				68		(6	)		n/a
All Other		-		-			(5	)			-		-			-
Adjustments/Eliminations		-		-			43				-		-		$	55
Consolidated Total	$	523	$	78		$	38			$	503	$	114		$	55
Six Months Ended June 30,

Electric Operations	$	854	$	8			n/a		$	5,287	$	817	$	217		n/a		$	5,169
Gas Distribution		242		12			n/a			381		213		10		n/a			328
All Other		-		-			(69	)		3		-		-	$	(1	)		3
Adjustments/Eliminations		-		(1	)		157			1,301		-		-		108			1,214
Consolidated Total	$	1,096	$	19		$	88		$	6,972	$	1,030	$	227	$	107		$	6,714

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

SOUTH CAROLINA ELECTRIC & GAS COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in South Carolina Electric & Gas Company’s (SCE&G, and together with its consolidated affiliates, the Company) Annual Report on Form 10-K for the year ended December 31, 2004.

Statements included in this discussion and analysis (or elsewhere in this quarterly report) which are not statements of historical fact are intended to be, and are hereby identified as, “forward-looking statements” for purposes of 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) regulatory actions or changes in the utility regulatory environment, (3) current and future litigation, (4) changes in the economy, especially in SCE&G’s service territory, (5) the impact of competition from other energy suppliers, including competition from alternate fuels in industrial interruptible markets, (6) growth opportunities, (7) the results of financing efforts, (8) changes in the Company’s accounting policies, (9) weather conditions, especially in areas served by SCE&G, (10) performance of SCANA Corporation’s (SCANA) pension plan assets and the impact on SCE&G’s results of operations, (11) inflation, (12) changes in environmental regulations and (13) the other risks and uncertainties described from time to time in SCE&G’s periodic reports filed with the United States Securities and Exchange Commission. The Company disclaims any obligation to update any forward-looking statements.

Electric Operations

  The Energy Policy Act of 2005 (the “energy bill”) passed both houses of Congress in July 2005 and is expected to be signed by the President in August 2005.   Some key provisions of the energy bill include the establishment of an electric reliability organization to enforce reliability standards for transmission systems, the restriction of standard market design (SMD) rulemaking by the Federal Energy Regulatory Commission (FERC) and the provision for continued reservation of electric transmission capacity needed to serve native load customers.  Also, the energy bill repeals the Public Utility Holding Company Act of 1935, and provides for greater regulatory oversight by other federal and state authorities.  The Company is reviewing the energy bill to determine the impact it will have on the Company’s operations.  In a separate development, in July 2005 FERC terminated its proposed rule for SMD.  The Company cannot predict when or if FERC will advance other regulatory initiatives related to the national energy market or what conditions such initiatives would impose on utilities.

Gas Distribution

On April 26, 2005, SCE&G filed an application with the Public Service Commission of South Carolina (SCPSC) requesting a 7.09 percent increase in retail natural gas base rates, or approximately $28 million based on an adjusted test year ended December 31, 2004. A hearing on this request is expected to be held in September 2005. If approved, it is anticipated that the new rates would go into effect in November 2005.

In February 2005, the Natural Gas Stabilization Act of 2005 (Stabilization Act) became law in South Carolina. The Stabilization Act allows natural gas distribution companies to request annual adjustments to rates to reflect changes in revenues and expenses and changes in investment. Such annual adjustments are subject to certain qualifying criteria and review by the SCPSC.

RESULTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005

AS COMPARED TO THE CORRESPONDING PERIODS IN 2004

Net Income

Net income was as follows:

	Second Quarter		Year to Date
Millions of dollars	2005	2004	2005	2004
Net income	$39.9	$56.9	$92.0	$110.7

39

Second Quarter

Net income decreased by approximately $3.8 million due to higher depreciation and operating expenses related to the Jasper County Electric Generating Station, $19.8 million due to milder weather, $1.4 million due to increased interest expense, $2.2 million due to new depreciation rates and $1.5 million due to other operating expenses. These decreases were partially offset by approximately $9.7 million from increased retail electric rates that went into effect in January 2005, off-system sales of $2.6 million and increased growth and consumption of $2.0 million. Accelerated depreciation on the Lake Murray back-up dam and recognition of synthetic fuel tax credits and related items had no effect on net income, as discussed below.

Year to Date

Net income decreased by approximately $11.0 million due to higher depreciation and operating expenses related to the Jasper County Electric Generating Station, $25.2 million due to milder weather, $2.8 million due to increased interest expense, $4.4 million due to new depreciation rates and $4.6 million due to other operating expenses. These decreases were partially offset by approximately $19.3 million from increased retail electric rates that went into effect in January 2005, off-system sales of $2.6 million and increased growth and consumption of $7.4 million. Accelerated depreciation on the Lake Murray back-up dam and recognition of synthetic fuel tax credits and related items had no effect on net income, as discussed below.

Recognition of Synthetic Fuel Tax Credits

SCE&G holds equity-method investments in two partnerships involved in converting coal to synthetic fuel, the use of which fuel qualifies for federal income tax credits. These synthetic fuel production facilities were placed in operation in 2000 and 2001. Under an accounting plan approved by the SCPSC in June 2000, the synthetic fuel tax credits generated by the partnerships and passed through to SCE&G, net of partnership losses and other expenses, were to be deferred until the SCPSC approved their application to offset capital costs of projects required to comply with legislative or regulatory actions.

In a January 2005 order, the SCPSC approved SCE&G’s request to apply these synthetic fuel tax credits to offset the construction costs of the Lake Murray Dam project. Under the accounting methodology approved by the SCPSC, construction costs related to the project are recorded in utility plant in service in a special dam remediation account outside of rate base, and depreciation is recognized against the balance in this account on an accelerated basis, subject to the availability of the synthetic fuel tax credits.

The level of depreciation expense and related tax benefit recognized in the income statement will be equal to the available synthetic fuel tax credits, less partnership losses and other expenses, net of taxes. As a result, the balance of unrecovered costs in the dam remediation account is declining as accelerated depreciation is recorded. Although these entries collectively have no impact on consolidated net income, they can have a significant impact on individual line items within the income statement. In addition, SCE&G is allowed to record non-cash carrying costs on the unrecovered investment, which is described further at Allowance For Funds Used During Construction. The accelerated depreciation, synthetic fuel tax credits, partnership losses and the income tax benefit arising from such losses recognized by SCE&G during 2005 are as follows:

Factors Increasing (Decreasing) Net Income (millions)	Recognized 2nd Quarter 2005			Year to Date 2005
Recognized in Statement of Income:
Depreciation and amortization expense	$	(13.9	)	$	(183.6	)
Income tax benefits:
From synthetic fuel tax credits		11.2			155.2
From accelerated depreciation		5.3			70.2
From partnership losses		1.6			25.9
Total income tax benefits		18.1			251.3
Losses from Equity Method Investments		(4.2	)		(67.7	)
Impact on Net Income		-			-

40

Pension Income

Pension income was recorded on the Company’s financial statements as follows:

	Second Quarter				Year to Date
Millions of dollars	2005		2004		2005		2004
Income Statement Impact:
Reduction in employee benefit costs	$	1.5	$	1.1	$	3.0	$	2.4
Other income		3.1		2.6		6.1		5.1
Balance Sheet Impact:
Reduction in capital expenditures		0.4		0.3		0.8		0.7
Component of amount due to Summer Station co-owner		0.1		0.1		0.3		0.3
Total Pension Income	$	5.1	$	4.1	$	10.2	$	8.5

 

For the last several years, the market value of SCANA’s retirement plan (pension) assets has exceeded the total actuarial present value of accumulated plan benefits. The Company’s portion of SCANA’s pension income for the second quarter and year to date 2005 increased compared to the corresponding periods in 2004, primarily as a result of positive investment returns.

Allowance for Funds Used During Construction (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. The Company includes an equity portion of AFC in nonoperating income and a debt portion of AFC in interest charges (credits) as noncash items, both of which have the effect of increasing reported net income. AFC for the three months ended June 30, 2005 decreased slightly primarily due to completion of the Jasper County Electric Generating Station in May 2004. Included in the equity portion of AFC for the three and six months ended June 30, 2005 is approximately $2.8 million and $5.6 million, respectively, which was accrued as a result of the January 2005 SCPSC rate order related to construction costs for the back-up dam at Lake Murray.

Dividends Declared

SCE&G’s Board of Directors has declared the following dividends on common stock held by SCANA during 2005:

Declaration Date	Amount	Quarter Ended	Payment Date
February 17, 2005	$38.0 million	March 31, 2005	April 1, 2005
May 5, 2005	$38.0 million	June 30, 2005	July 1, 2005
July 27, 2005	$38.0 million	September 30, 2005	October 1, 2005

Electric Operations

Electric Operations is comprised of the electric operations of SCE&G, South Carolina Generating Company, Inc. and South Carolina Fuel Company, Inc. Electric operations sales margins were as follows:

	Second Quarter							Year to Date
Millions of dollars	2005		% Change			2004		2005		% Change			2004
Operating revenues	$	438.2		0.6	%	$	435.4	$	854.5		4.6	%	$	816.6
Less: Fuel used in generation		137.2		14.2	%		120.1		265.0		23.0	%		215.5
Purchased power		11.0		(44.4	)%		19.8		17.6		(45.8	)%		32.5
Margin	$	290.0		(1.9	)%	$	295.5	$	571.9		0.6	%	$	568.6

Second Quarter

Margin decreased primarily due to unfavorable weather, which had an impact of $19.8 million. This decrease was offset by $9.7 million due to increased retail electric rates that went into effect in January 2005, by $2.6 million related to increased off-system sales and by customer growth and increased consumption of $2.0 million.

Year to Date

Margin increased primarily due to increased retail electric rates that went into effect in January 2005, which had an impact of $19.3 million, by $2.6 million related to increased off-system sales and by customer growth and increased consumption of $7.4 million. These factors were partially offset by $25.2 million due to unfavorable weather.

41

Gas Distribution

Gas Distribution is comprised of the local distribution operations of SCE&G. Gas distribution sales margins (including transactions with affiliates) were as follows:

	Second Quarter							Year to Date
Millions of dollars	2005		% Change			2004		2005		% Change			2004
Operating revenues	$	84.8		24.9	%	$	67.9	$	241.7		13.2	%	$	213.5
Less: Gas purchased for resale		71.0		28.4	%		55.3		191.7		15.4	%		166.1
Margin	$	13.8		9.5	%	$	12.6	$	50.0		5.5	%	$	47.4

Second Quarter and Year to Date

Margin increased primarily due to customer growth.

Other Operating Expenses

Other operating expenses were as follows:

	Second Quarter							Year to Date
Millions of dollars	2005		% Change			2004		2005		% Change			2004
Other operation and maintenance	$	112.5		8.7	%	$	103.5	$	221.9		4.6	%	$	212.2
Depreciation and amortization		77.7		*			55.5		311.2		*			107.4
Other taxes		36.0		3.7	%		34.7		70.9		1.7	%		69.7
Total	$	226.2		*		$	193.7	$	604.0		*		$	389.3

*Not meaningful

Second Quarter

Other operation and maintenance expenses increased primarily due to increased nuclear and fossil maintenance expenses of $6.8 million. Depreciation and amortization increased approximately $13.9 million due to accelerated depreciation of the back-up dam at Lake Murray (previously explained at Recognition of Synthetic Fuel Tax Credits) and increased $2.7 million due to the completion of the Jasper County Electric Generating Station in May 2004 and $1.4 million due to normal net property changes. In addition, as a result of the January 2005 rate order, SCE&G received approval to amortize previously deferred purchased power costs and to implement new depreciation rates, resulting in $4.4 million of additional depreciation expense in the period.

Year to Date

Other operation and maintenance expenses increased primarily due to increased nuclear and fossil maintenance expenses of $11.4 million, partially offset by decreases in storm expenses of $1.9 million and $1.9 million of employee benefit expenses. Depreciation and amortization increased approximately $183.6 million due to accelerated depreciation of the back-up dam at Lake Murray (previously explained at Recognition of Synthetic Fuel Tax Credits) and increased $8.7 million due to the completion of the Jasper County Electric Generating Station in May 2004 and $2.9 million due to normal net property changes. In addition, as a result of the January 2005 rate order, SCE&G received approval to amortize previously deferred purchased power costs and to implement new depreciation rates, resulting in $8.7 million of additional depreciation expense in the period.

Interest Expense

Interest expense for the three and six months ended June 30, 2005 increased primarily due to reduced AFC of $4.6 million which was partially offset by lower interest rates and reduced long-term debt.

Income Taxes

Income tax expense for the three and six months ended June 30, 2005 decreased primarily due to the application of synthetic fuel tax credits, as previously discussed at Recognition of Synthetic Fuel Tax Credits.

LIQUIDITY AND CAPITAL RESOURCES

The Company anticipates that its contractual cash obligations will be met through internally generated funds and the incurrence of additional short-term and long-term indebtedness. The Company expects that it has or can obtain adequate sources of financing to meet its projected cash requirements for the foreseeable future. The Company’s ratio of earnings to fixed charges for the 12 months ended June 30, 2005 was 2.94.

42

 The Company’s cash requirements arise primarily from its operational needs, funding its construction programs and payment of dividends to SCANA. The ability of the Company 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, SCE&G expects to seek increases in rates. The Company’s future financial position and results of operations will be affected by SCE&G’s ability to obtain adequate and timely rate and other regulatory relief, if requested.

In a January 2005 order the SCPSC granted SCE&G a composite increase in retail electric rates of approximately 2.89%, designed to produce additional annual revenues of approximately $41.4 million based on a test year calculation. The SCPSC lowered SCE&G's return on common equity from 12.45% to an amount not to exceed 11.4%, with rates to be set at 10.7%. The new rates became effective in January 2005. As part of its order, the SCPSC approved SCE&G's recovery of construction and operating costs for SCE&G's new Jasper County Electric Generating Station, recovery of costs of mandatory environmental upgrades primarily related to Federal Clean Air Act regulations and the application of current and anticipated net synthetic fuel tax credits to offset the cost of constructing the back-up dam at Lake Murray (as previously discussed in Recognition of Synthetic Fuel Tax Credits). The SCPSC also approved recovery over a five-year period of SCE&G's approximately $14 million of costs incurred in the formation of the GridSouth Regional Transmission Organization and recovery through base rates over three years of approximately $25.6 million of purchased power costs that were previously deferred. As a part of its order, the SCPSC extended through 2010 its approval of the accelerated capital recovery plan for SCE&G's Cope Generating Station. Under the plan, in the event that SCE&G would otherwise earn in excess of its maximum allowed return on common equity, SCE&G may increase depreciation of its Cope Generating Station up to $36 million annually without additional approval of the SCPSC. Any unused portion of the $36 million in any given year may be carried forward for possible use in the following year.

The following table summarizes how SCE&G generated and used funds for property additions and construction expenditures during the six months ended June 30, 2005 and 2004:

	Six Months Ended
	June 30,
Millions of dollars	2005			2004
Net cash provided from operating activities	$	73		$	165
Net cash provided from financing activities		115			37
Cash provided from sale of assets		1			1
Cash and cash equivalents available at the beginning of the period		20			56
Funds used for utility property additions and construction expenditures	$	(183	)	$	(232	)
Funds used for investments		(9	)		(8	)

The Company's issuance of various securities, including long-term and short-term debt, is subject to customary approval or authorization by state and federal regulatory bodies including state public service commissions and the Securities and Exchange Commission.

CAPITAL TRANSACTIONS

In June 2005 $525 million in committed revolving five-year credit facilities for SCE&G and Fuel Company were amended to extend the term of the existing credit facilities by an additional year. The credit facilities now will expire on June 30, 2010. None of these credit facilities require the borrower to make a representation as to “no material adverse change” related to financial condition or material litigation at the time of a borrowing, and none of the facilities contains covenants based on credit ratings under which lenders could refuse to advance funds.

On June 15, 2005 SCE&G retired at maturity $150 million in first mortgage bonds. These bonds bore interest at 7.50%. SCE&G used available cash, together with short-term borrowings, to effect the retirement.

In March 2005 SCE&G issued $100 million in first mortgage bonds having an annual interest rate of 5.25% and maturing March 1, 2035. The proceeds from the sale of these bonds were used for the redemption on April 1, 2005 of $100 million in first mortgage bonds due April 1, 2025 which bore interest at 7.625%

CAPITAL PROJECTS

In May 2005 SCE&G substantially completed construction of a back-up dam at Lake Murray in order to comply with new federal safety standards mandated by FERC. Construction of the project and related activities are estimated to cost approximately $275 million, excluding AFC.

43

ENVIRONMENTAL MATTERS

In March 2005 the Environmental Protection Agency (EPA) issued a final rule known as the Clean Air Interstate Rule (CAIR). CAIR requires the District of Columbia and 28 states, including South Carolina, to reduce nitrogen oxides and sulfur dioxide emissions in order to attain mandated state levels. SCE&G has petitioned the United States Court of Appeals for the District of Columbia Circuit to review CAIR. Several other electric utilities have filed separate petitions. The petitioners seek a change in the method CAIR uses to allocate sulfur dioxide emission allowances to a method the petitioners believe is more equitable. The Company believes that installation of additional air quality controls will be needed to meet the CAIR requirements. Compliance plans and cost to comply with the rule will be determined once the Company completes its review. Such costs will be material and are expected to be recoverable through rates.

In March 2005 the EPA issued a final rule establishing a mercury emissions cap and trade program for coal-fired power plants that requires limits to be met in two phases, in 2010 and 2018. The Company is reviewing the final rule. Installation of additional air quality controls is likely to be required to comply with the mercury rule’s emission caps. Compliance plans and costs to comply with the rule will be determined once the Company completes its review. Such costs will be material and are expected to be recoverable through rates.

For other information on environmental matters, see Note 5B to condensed consolidated financial statements.

OTHER MATTERS

Synthetic Fuel

SCE&G holds equity-method investments in two partnerships involved in converting coal to synthetic fuel, the use of which fuel qualifies for federal income tax credits. These synthetic fuel production facilities were placed in operation in 2000 and 2001. Under an accounting plan approved by the SCPSC in June 2000, the synthetic fuel tax credits generated by the partnerships and passed through to SCE&G, net of partnership losses and other expenses, were to be deferred until the SCPSC approved their application to offset capital costs of projects required to comply with legislative or regulatory actions.

The aggregate investment in these partnerships as of June 30, 2005 is approximately $2.8 million, and through June 30, 2005, they have generated and passed through to SCE&G approximately $155.2 million in such tax credits. As previously described at Net Income, in a January 2005 order, the SCPSC approved SCE&G’s request to apply these synthetic fuel tax credits to offset the construction costs of the Lake Murray Dam project. Under the accounting methodology approved by the SCPSC, construction costs related to the project are recorded in utility plant in service in a special dam remediation account outside of rate base, and depreciation is recognized against the balance in this account on an accelerated basis, subject to the availability of the synthetic fuel tax credits.

The level of depreciation expense and related income tax benefit recognized in the income statement is equal to the available synthetic fuel tax credits, less partnership losses and other expenses, net of taxes. As a result, the balance of unrecovered costs in the dam remediation account is declining as accelerated depreciation is recorded. Although these entries collectively have no impact on consolidated net income, they can have a significant impact on individual line items within the income statement.

       Depreciation on the Lake Murray Dam remediation account will be matched to available synthetic fuel tax credits on a quarterly basis until the balance in the dam remediation account is zero or until all of the available synfuel tax credits have been utilized. The synthetic fuel tax credit program expires at the end of 2007.

The ability to utilize the synthetic fuel tax credits is dependent on several factors, one of which is the average annual domestic wellhead price per barrel of crude oil as published by the U.S. Government. Under a phase-out provision included in the program, if the domestic wellhead reference price of oil per barrel for a given year is below an inflation-adjusted benchmark range for the year, all of the synthetic fuel tax credits that have been generated in that year are available for use. If that price is above the benchmark range, none of the tax credits would be available. If that price falls within the benchmark range, a certain percentage of the credits would be available.

The lower end of the inflation-adjusted benchmark range for 2004 was about $51 per barrel while the upper end of that range was about $64. Since the reference price of oil for 2004 was less than $37, all of the synthetic fuel tax credits the Company had recorded and deferred through 2004 were available for use. While the benchmark price range for 2005 has been estimated at between $52 and $65 per barrel, the 2005 reference price will not be known until April 2006. During 2005 and subject to continuing review of the estimated benchmark range and reference price of oil for 2005, the Company intends to continue to record synthetic fuel tax credits as they are generated and to apply those credits quarterly to allow the recording of accelerated depreciation related to the balance in the dam remediation project account. The Company cannot predict what impact, if any, the price of oil may have on the Company’s ability to earn synthetic fuel tax credits in the future.

In order to earn these tax credits, SCANA also must be subject to a regular federal income tax liability in an amount at least equal to the credits generated in any tax year. This tax liability could be insufficient if SCANA’s consolidated taxable income were to be significantly reduced as the result of realizing lower income or large deductions in any tax year. The availability of these synthetic fuel tax credits is also subject to coal availability and other operational risks related to the generating plants.

In March 2004, one of the partnerships, S. C. Coaltech No. 1 L.P. received a “No Change” letter from the Internal Revenue Service (IRS) related to its synthetic fuel operations for the tax year 2000. After review of testing procedures and supporting documentation and conducting an independent investigation, the IRS found that the partnership produces a qualifying fuel under section 29 of the Internal Revenue Code (IRC) and found no reason to challenge the first placed-in-service status of the facility. This letter supports the Company’s position that the synthetic fuel tax credits have been properly claimed.

44

Item 3. 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 long-term debt issued by the Company which is 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. Fair values for debt represent quoted market prices.

As of June 30, 2005
Millions of dollars				Expected Maturity Date
							There-		Fair
Liabilities	2005	2006	2007		2008	2009	after	Total	Value
Long-Term Debt:
Fixed Rate ($)	3.7	169.9	39.2		39.2	139.2	1,718.2	2,109.4	2,285.7
Average Interest Rate (%)	7.78	8.51	6.86		6.86	6.33	5.88	6.16	n/a

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 4. Controls and Procedures

As of June 30, 2005 an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that as of June 30, 2005 the Company’s disclosure controls and procedures were effective. There has been no change in the Company’s internal control over financial reporting during the quarter ended June 30, 2005 that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

45

Public Service Company of North Carolina, Incorporated meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and therefore is filing this form with the reduced disclosure format allowed under General Instruction H(2).

46

Item 1. Financial Statements.

PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED

(Unaudited)

	June 30,			December 31,
Millions of dollars	2005			2004
Assets
Gas Utility Plant	$	971		$	947
Accumulated depreciation		(274	)		(262	)
Acquisition adjustment		210			210
Gas Utility Plant, Net		907			895
Nonutility Property and Investments, Net		27			27
Current Assets:
Cash and cash equivalents		28			1
Restricted cash and temporary investments		-			8
Receivables, net of allowance for uncollectible accounts of $3 and $2		44			128
Receivables-affiliated companies		3			7
Inventories (at average cost):
Stored gas		55			70
Materials and supplies		5			5
Prepayments		1			2
Deferred income taxes, net		4			4
Other		-			1
Total Current Assets		140			226
Deferred Debits:
Due from affiliate-pension asset		11			12
Regulatory assets		15			27
Other		5			4
Total Deferred Debits		31			43
Total	$	1,105		$	1,191

47

	June 30,		December 31,
Millions of dollars	2005		2004
Capitalization and Liabilities
Capitalization:
Common equity	$	531	$	513
Long-term debt, net		270		274
Total Capitalization		801		787
Current Liabilities:
Short-term borrowings		-		58
Current portion of long-term debt		3		3
Accounts payable		27		66
Accounts payable-affiliated companies		7		8
Customer deposits		8		8
Taxes accrued		2		4
Interest accrued		6		6
Distributions/dividends declared		4		4
Other		6		17
Total Current Liabilities		63		174
Deferred Credits:
Deferred income taxes, net		105		105
Deferred investment tax credits		1		1
Due to affiliate-postretirement benefits		19		19
Other regulatory liabilities		15		10
Asset retirement obligations		88		84
Other		13		11
Total Deferred Credits		241		230
Commitments and Contingencies (Note 5)		-		-
Total	$	1,105	$	1,191

See Notes to Condensed Consolidated Financial Statements.

48

PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
Millions of dollars	2005			2004			2005		2004
Operating Revenues	$	84		$	69		$	329	$	296
Cost of Gas		53			42			225		196
Gross Margin		31			27			104		100
Operating Expenses:
Operation and maintenance		19			19			40		40
Depreciation and amortization		9			9			17		17
Other taxes		2			2			4		4
Total Operating Expenses		30			30			61		61
Operating Income (Loss)		1			(3	)		43		39
Other Income, Including Allowance for Equity Funds Used During Construction		-			-			2		-
Interest Charges, Net of Allowance for Borrowed Funds Used During Construction		5			5			11		10
Income (Loss) Before Income Tax Expense (Benefit) and
Earnings from Equity Method Investments		(4	)		(8	)		34		29
Income Tax Expense (Benefit)		(1	)		(3	)		14		12
Income (Loss) Before Earnings from Equity Method Investments		(3	)		(5	)		20		17
Earnings from Equity Method Investments		1			1			2		2
Net Income (Loss)	$	(2	)	$	(4	)	$	22	$	19

 

      See Notes to Condensed Consolidated Financial Statements.

49

PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED

(Unaudited)

	Six Months Ended
	June 30,
Millions of dollars	2005			2004
Cash Flows From Operating Activities:
Net income	$	22		$	19
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization		18			18
Loss on sale of assets		-			1
Cash provided (used) by changes in certain assets and liabilities:
Receivables, net		88			84
Inventories		15			14
Regulatory assets		(3	)		-
Regulatory liabilities		1			1
Accounts payable		(41	)		(20	)
Taxes accrued		(2	)		(7	)
Changes in gas adjustment clauses		19			2
Changes in other assets		2			2
Changes in other liabilities		(8	)		(1	)
Net Cash Provided From Operating Activities		111			113
Cash Flows From Investing Activities:
Construction expenditures, net of AFC		(24	)		(26	)
Nonutility and other		6			(1	)
Net Cash Used For Investing Activities		(18	)		(27	)
Cash Flows From Financing Activities:
Short-term borrowings, net		(58	)		(55	)
Net capital contribution from parent		2			-
Retirement of long-term debt		(3	)		(3	)
Distributions/dividends		(7	)		(8	)
Net Cash Used For Financing Activities		(66	)		(66	)
Net Increase In Cash and Cash Equivalents		27			20
Cash and Cash Equivalents, January 1		1			18
Cash and Cash Equivalents, June 30	$	28		$	38
Supplemental Cash Flow Information:
Cash paid for - Interest (net of capitalized interest of $0.2 and $0.4)	$	9		$	9
- Income taxes		17			19
Noncash Investing and Financing Activities:
Accrued construction expenditures		0.8			0.4

See Notes to Condensed Consolidated Financial Statements.

50

June 30, 2005

(Unaudited)

The following notes should be read in conjunction with the Notes to Consolidated Financial Statements appearing in Public Service Company of North Carolina, Incorporated’s (PSNC Energy, and together with its consolidated subsidiaries, the Company) Annual Report on Form 10-K for the year ended December 31, 2004. These are interim financial statements, and due to the seasonality of the Company’s business, the amounts reported in the Condensed Consolidated Statements of Operations are not necessarily indicative of amounts expected for the full year. In the opinion of management, the information furnished herein reflects all adjustments, all of a normal recurring nature, which are necessary for a fair statement of the results for the interim periods reported.

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.  Basis of Accounting

The Company accounts for its regulated utility operations, assets and liabilities in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) 71, “Accounting for the Effects of Certain Types of Regulation.” SFAS 71 requires cost-based rate-regulated utilities to recognize in their financial statements certain revenues and expenses in different time periods than do enterprises that are not rate-regulated. As a result, as of June 30, 2005 the Company has recorded approximately $15 million and $103 million of regulatory assets (including environmental) and liabilities, respectively. Information relating to regulatory assets and liabilities follows.

	June 30,			December 31,
Millions of dollars	2005			2004
Excess deferred income taxes	$	(2	)	$	(1	)
Under- (over-) collections-gas cost adjustment clause, net		(9	)		10
Deferred environmental remediation costs		11			8
Asset retirement obligations		(88	)		(84	)
Total	$	(88	)	$	(67	)

Excess deferred income taxes represent deferred income taxes recorded in prior years at a rate higher than the current statutory rate. Pursuant to a North Carolina Utilities Commission (NCUC) order, the Company is required to refund these amounts to customers through a rate decrement.

Under- (over-) collections-gas cost adjustment clause, net represents amounts under- or over-collected from customers pursuant to the Company’s Rider D mechanism approved by the NCUC. This mechanism allows the Company to recover all prudently incurred gas costs.

Deferred environmental remediation costs represent costs associated with the assessment and cleanup of manufactured gas plant (MGP) sites currently or formerly owned by the Company. A portion of the costs incurred has been recovered through rates. Amounts incurred and deferred, net of insurance settlements, that are not currently being recovered through rates are approximately $2.4 million. Management believes that these costs and the remaining costs of approximately $8.8 million will be recoverable.

Asset retirement obligations represent net collections through depreciation rates of estimated costs to be incurred for the future retirement of assets for which no legal retirement obligation exists.

The NCUC has reviewed and approved through specific orders most of the items shown as regulatory assets. Other items represent costs which are not yet approved for recovery by the NCUC. In recording these costs as regulatory assets, management believes the costs will be allowable under existing rate-making concepts that are embodied in rate orders received by the Company. However, ultimate recovery is subject to NCUC approval. 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, liquidity or financial position in the period the write-off would be recorded.

51

B.Total Comprehensive Income

Total comprehensive income was not significantly different from net income for any period reported. Accumulated other comprehensive income (loss) of the Company totaled $(0.6) million and $(0.7) million as of June 30, 2005 and December 31, 2004, respectively.

C. New Accounting Matters

SFAS 154, “Accounting Changes and Error Corrections,” was issued in June 2005. It requires retrospective application to prior periods’ financial statements of every voluntary change in accounting principle unless it is impracticable. SFAS 154 replaces Accounting Principles Board (APB) Opinion 20, “Accounting Changes,” and SFAS 3, “Reporting Accounting Changes in Interim Financial Statements,” although it carries forward some of their provisions. The Company will adopt SFAS 154 in the first quarter of 2006, and does not expect that the initial adoption will have a material impact on the Company’s results of operations, cash flows or financial position.

Financial Accounting Standards Board Interpretation (FIN) 47, “Accounting for Conditional Asset Retirement Obligations,” was issued in March 2005 to clarify the term “conditional asset retirement” as used in SFAS 143, “Accounting for Asset Retirement Obligations.” It requires that a liability be recognized for the fair value of a conditional asset retirement obligation when incurred, if the fair value of the liability can be reasonably estimated. Uncertainty about the timing or method of settlement of a conditional asset retirement obligation would be factored into the measurement of the liability when sufficient information exists. This interpretation is effective no later than the end of fiscal years ending after December 15, 2005. Accordingly, the Company will adopt FIN 47 in the fourth quarter of 2005. The impact FIN 47 may have on the Company’s assets and liabilities has not been determined but could be material. The Company does not expect that the initial adoption of FIN 47 will have a material impact on the Company’s results of operations, cash flows or financial position.

D. Reclassifications

Certain amounts from prior periods have been reclassified to conform with the presentation adopted for 2005.

2. RATE AND OTHER REGULATORY MATTERS

The Company’s rates are established using a benchmark cost of gas approved by the NCUC, which may be modified periodically to reflect changes in the market price of natural gas. The Company revises its tariffs with the NCUC as necessary to track these changes and accounts for any over- or under-collections of the delivered cost of gas in its deferred accounts for subsequent rate consideration. The NCUC reviews the Company’s gas purchasing practices annually.

The Company’s benchmark cost of gas in effect during the period January 1, 2004 through June 30, 2005 was as follows:

Rate Per Therm	Effective Date
$.600	January-September 2004
$.675	October-November 2004
$.825	December 2004-January 2005
$.725	February-June 2005

 On August 1, 2005 the NCUC approved the Company's request to increase the benchmark cost of gas from $.725 per therm to $.825 per therm for service rendered on and after August 1, 2005.

On June 1, 2005 the Company filed testimony in the 2005 Annual Prudence Review related to the 12 months ended March 31, 2005. The NCUC will hold a hearing in August 2005 to consider the filing.

A state expansion fund, established by the North Carolina General Assembly in 1991 and funded by refunds from the Company’s interstate pipeline transporters, provides financing for expansion into area that otherwise would not be economically feasible to serve. On May 12, 2005 the Company filed an application with the NCUC to extend natural gas service to Louisburg, North Carolina and requested authorization to withdraw approximately $1.2 million from its expansion fund for this project. The NCUC will hold a hearing in August 2005 to consider the filing.

In March 2005 the Company refunded approximately $7.7 million in pipeline supplier refunds by a direct bill credit to various customers. This refund resulted in a reduction in restricted cash and the associated current liability.

On January 21, 2005 the NCUC authorized the Company to defer for subsequent rate consideration certain expenses incurred to comply with the U. S. Department of Transportation’s Pipeline Integrity Management requirements. This accounting treatment was effective November 1, 2004. As of June 30, 2005 such deferrals totaled $0.3 million.

52

3.  FINANCIAL INSTRUMENTS

The Company follows the guidance required by SFAS 133 “Accounting for Derivative Instruments and Hedging Activities,” as amended, in accounting for derivatives, including those arising from cash flow hedges related to natural gas. The Company also utilizes swap agreements to manage interest rate risk. These transactions are more fully described in Note 7 to the consolidated financial statements in the Company’s 2004 Annual Report on Form 10-K.

The Company utilizes hedging activities for natural gas purchases. Transaction fees and any realized gains or losses are recorded in deferred accounts for subsequent rate consideration. As of June 30, 2005 the Company had deferred net costs of approximately $3.2 million.

The Company also utilizes swap agreements to manage interest rate risk. At June 30, 2005 the estimated fair value of the Company’s swap was $1.0 million (gain) related to combined notional amounts of $22.4 million.

4.  LONG-TERM DEBT

In June 2005 PSNC Energy amended its $125 million committed five-year revolving credit facility to extend the term of the existing facility by an additional year. The facility now will expire on June 30, 2010.

5.  COMMITMENTS AND CONTINGENCIES

The Company is responsible for environmental cleanup at five sites in North Carolina on which MGP residuals are present or suspected. The Company’s actual remediation costs for these sites will depend on a number of factors, such as actual site conditions, third-party claims and recoveries from other potentially responsible parties. The Company has recorded a liability and associated regulatory asset of approximately $8.8 million, which reflects its estimated remaining liability at June 30, 2005. Amounts incurred and deferred to date, net of insurance settlements, that are not currently being recovered through gas rates are approximately $2.4 million. Management believes that all MGP cleanup costs will be recoverable through gas rates.

6. SEGMENT OF BUSINESS INFORMATION

Gas Distribution is the Company’s only reportable segment. Gas Distribution uses operating income to measure profitability. Intersegment revenues were not significant. All Other includes equity method investments.

			2005									2004
					Net							Operating			Net
	External		Operating		Income			Segment		External		Income			Income			Segment
(Millions of dollars)	Revenue		Income		(Loss)			Assets		Revenue		(Loss)			(Loss)			Assets
Three Months Ended June 30,
Gas Distribution	$	84	$	1	$	(2	)			$	69	$	(3	)	$	(4	)
All Other		-		n/a		-					-		n/a			-
Adjustments/Eliminations		-		-		-					-		-			-
Consolidated Total	$	84	$	1	$	(2	)			$	69	$	(3	)	$	(4	)
Six Months Ended June 30,
Gas Distribution	$	329	$	43	$	22		$	1,007	$	296	$	39		$	19		$	996
All Other		-		n/a		-			28		-		n/a			-			28
Adjustments/Eliminations		-		-		-			70		-		-			-			61
Consolidated Total	$	329	$	43	$	22		$	1,105	$	296	$	39		$	19		$	1,085

53

PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED

MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

The following discussion should be read in conjunction with Management’s Narrative Analysis of Results of Operations appearing in Public Service Company of North Carolina, Incorporated’s (together with its consolidated subsidiaries, PSNC Energy) Annual Report on Form 10-K for the year ended December 31, 2004.

Statements included in this narrative analysis (or elsewhere in this quarterly 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) regulatory actions or changes in the utility regulatory environment, (3) current and future litigation, (4) changes in the economy, especially in PSNC Energy’s service territory, (5) the impact of competition from other energy suppliers, including competition from alternate fuels in industrial interruptible markets, (6) growth opportunities, (7) the results of financing efforts, (8) changes in PSNC Energy’s accounting policies, (9) weather conditions, especially in areas served by PSNC Energy, (10) performance of SCANA Corporation’s (SCANA) pension plan assets and the impact on PSNC Energy’s results of operations, (11) inflation, (12) changes in environmental regulations and (13) the other risks and uncertainties described from time to time in PSNC Energy’s periodic reports filed with the United States Securities and Exchange Commission. PSNC Energy disclaims any obligation to update any forward-looking statements.

Net Income and Distributions/Dividends

Net income for the six months ended June 30, 2005 increased $3.7 million compared to the same period in 2004, primarily due to increased margin.

The nature of PSNC Energy’s business is seasonal. The quarters ending June 30 and September 30 are generally PSNC Energy’s least profitable quarters due to decreased demand for natural gas related to space heating requirements.

PSNC Energy’s Board of Directors has authorized the following distributions/dividends on common stock held by SCANA during 2005:

Declaration Date	Amount	Quarter Ended	Payment Date
February 17, 2005	$3.5 million	March 31, 2005	April 1, 2005
May 5, 2005	$3.5 million	June 30, 2005	July 1, 2005
July 27, 2005	$4.0 million	September 30, 2005	October 1, 2005

Gas Distribution

Gas distribution is comprised of the local distribution operations of PSNC Energy. Changes in the gas distribution sales margins were as follows:

	Six Months Ended June 30,
Millions of dollars	2005		% Change			2004
Operating revenues	$	329.7		11.6	%	$	295.4
Less: Gas purchased for resale		225.3		15.0	%		195.9
Margin	$	104.4		4.9	%	$	99.5

Gas distribution sales margin for the six months ended June 30, 2005 increased by approximately $4.9 million primarily due to increased residential customer growth and increased consumption.

Other Income

Other income in 2005 improved primarily due to the recognition of a $1.0 million loss in 2004 on the sale of PSNC Energy’s former corporate headquarters.

Income Taxes

Income taxes changed primarily as a result of changes in operating and other income.

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Capital Expansion Program and Liquidity Matters

PSNC Energy’s capital expansion program includes the construction of lines, systems and facilities and the purchase of related equipment. PSNC Energy’s 2005 construction budget is approximately $58 million, compared to actual construction expenditures through June 30, 2005 of $25.2 million. PSNC Energy’s ratio of earnings to fixed charges for the 12 months ended June 30, 2005 was 3.08.

At June 30, 2005 PSNC Energy had no outstanding short-term borrowings. In addition, in June 2005 PSNC Energy amended a $125 million committed five-year revolving credit facility to extend the term of the existing facility by an additional year. The credit facility now will expire on June 30, 2010. The facility does not require the borrower to make a representation as to “no material adverse change” related to financial condition or material litigation at the time of a borrowing, and the facility does not contain covenants based on credit ratings under which lenders could refuse to advance funds.

As of June 30, 2005 an evaluation was performed under the supervision and with the participation of PSNC Energy’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of PSNC Energy’s disclosure controls and procedures. Based on that evaluation, PSNC Energy’s management, including the CEO and CFO, concluded that as of June 30, 2005 PSNC Energy’s disclosure controls and procedures were effective. There has been no change in PSNC Energy’s internal control over financial reporting during the quarter ended June 30, 2005 that has materially affected or is reasonably likely to materially affect PSNC Energy’s internal control over financial reporting.

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A complaint was filed on October 22, 2003 against South Carolina Electric & Gas Company (SCE&G) by the State of South Carolina alleging that SCE&G violated the Unfair Trade Practices Act by charging municipal franchise fees to some customers residing outside a municipality’s limits. The complaint alleged that SCE&G failed to obey, observe or comply with the lawful order of the SCPSC by charging franchise fees to those not residing within a municipality. The complaint sought restitution to all affected customers and penalties up to $5,000 for each separate violation. The State of South Carolina v. SCE&G claim has been settled by an agreement between the parties, and the settlement has been approved by the court. The allegations were also the subject of a purported class action lawsuit filed in December 2003, against Duke Energy Corporation, Progress Energy Services Company and SCE&G (styled as Edwards v. SCE&G), but that case has been dismissed by the Plaintiff. In addition, SCE&G filed a petition with the SCPSC on October 23, 2003 pursuant to S. C. Code Ann. R.103-836. The petition requests that the SCPSC exercise its jurisdiction to investigate the operation of the municipal franchise fee collection requirements applicable to SCE&G’s electric and gas service, to approve SCE&G’s efforts to correct any past franchise fee billing errors, to adopt improvements in the system which will reduce such errors in the future, and to adopt any regulation that the SCPSC deems just and proper to regulate the franchise fee collection process. A hearing on this petition has not been scheduled. The Company believes that the resolution of these matters will not have a material adverse impact on its results of operations, cash flows or financial condition.

In 1999 an unsuccessful bidder for the purchase of certain propane gas assets of the subsidiaries of SCANA Corporation (SCANA) filed suit against SCANA in Circuit Court, seeking unspecified damages. The suit alleged the existence of a contract for the sale of assets to the plaintiff and various causes of action associated with that contract. On October 21, 2004, the jury issued an adverse verdict on this matter against SCANA for four causes of action for damages totaling $48 million.

Upon receiving the jury verdict prior to reporting results for the third quarter of 2004, it was SCANA’s interpretation that the damages awarded with respect to certain causes of action were overlapping and that the plaintiff would be required to elect a single remedy. Therefore, it was SCANA’s belief that a reasonably possible estimate of the total damages based on the amounts awarded by the jury would be in the range of $18 - $36 million. As such, in accordance with generally accepted accounting principles, in the third quarter of 2004 SCANA accrued a liability of $18 million pre-tax, which was its reasonable estimate of the minimum liability that was probable if the final judgment were to be consistent with the jury verdict.

Post-verdict motions were heard in November 2004 and January 2005. In April 2005, post-trial motions were decided by the Court, and the plaintiff was ordered to elect a single remedy from the multiple jury awards. In response to the April 2005 election order, the Plaintiff elected a remedy with damages totaling $18 million, and the Company placed the funds in escrow with the Clerk of Court to forestall the accrual of post-judgment interest. SCANA believes its accrued liability is still reasonable. However, SCANA continues to believe that the verdict was inconsistent with the facts presented and applicable laws. Both parties have appealed the judgment.

SCANA is also defending another claim for $2.7 million for reimbursement of legal fees and expenses under an indemnification and hold harmless agreement in the contract for the sale of these propane gas assets. A bench trial on the indemnification was held on January 14, 2005; however, a ruling has not been received. SCANA believes that the resolution of this claim will not have a material adverse impact on its results of operations, cash flows or financial condition.

Each of SCANA, SCE&G and Public Service Company of North Carolina, Incorporated are engaged in various claims and litigation incidental to their business operations which management anticipates will be resolved without material loss. The status of matters previously disclosed in their respective 2004 Annual Reports on Form 10-K have not changed significantly unless noted above.

56

Item 4. Submission of Matters to a Vote of Security-Holders (not applicable for South Carolina Electric & Gas

            Company and Public Service Company of North Carolina Incorporated).

At the Annual Meeting of Shareholders of SCANA Corporation (SCANA) held on May 5, 2005, the shareholders of SCANA voted on the following three items:

1. To elect three Class III Directors for the terms specified in the Proxy Statement.

Nominee	Number of Shares Voting For	Number of Shares Voting to Withhold Authority	Total Shares Voted
Bill L. Amick	95,208,223	1,470,918		96,679,141
D. Maybank Hagood	95,374,039	1,305,102		96,679,141
William B. Timmerman	95,098,415	1,580,726		96,679,141

2. To approve the amended and restated Long-Term Equity Compensation Plan

	Number of Shares
FOR	65,829,794
AGAINST	4,359,918
ABSTAIN	1,321,891
BROKER NON-VOTES	30,287,473
TOTAL	101,799,076

3. To approve the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for

the Corporation.

	Number of Shares
FOR	95,348,835
AGAINST	877,817
ABSTAIN	452,489
TOTAL	96,679,141

    SCANA Corporation (SCANA), South Carolina Electric & Gas Company (SCE&G) and Public Service Company of North Carolina, Incorporated (PSNC Energy):

    Exhibits filed or furnished with this Quarterly Report on Form 10-Q are listed in the following Exhibit Index.

    As permitted under Item 601(b)(4)(iii) of Regulation S-K, instruments defining the rights of holders of long-term debt of less than 10% of the total consolidated assets of SCANA, for itself and its subsidiaries, of SCE&G, for itself and its consolidated affiliates, and of PSNC Energy, for itself and its subsidiaries, have been omitted and SCANA, SCE&G and PSNC Energy agree to furnish a copy of such instruments to the Commission upon request.

57

Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. The signature of each registrant shall be deemed to relate only to matters having reference to such registrant and any subsidiaries thereof.

SCANA CORPORATION

SOUTH CAROLINA ELECTRIC & GAS COMPANY

PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED

(Registrants)

By:	/s/James E. Swan, IV
August 5, 2005	James E. Swan, IV
	Controller
	(Principal accounting officer)

58

	Applicable to Form 10-Q of
Exhibit			PSNC
No.	SCANA	SCE&G	Energy	Description

3.11		X		Articles of Amendment dated March 9, 2005 amending the Restated Articles of Incorporation of South Carolina Electric & Gas Company (Filed as Exhibit 3.11 to Form 10-Q for the quarter ended March 31, 2005)
3.12		X		Articles of Amendment dated May 16, 2005 amending the Restated Articles of Incorporation of South Carolina Electric & Gas Company (Filed herewith)
3.13		X		Articles of Amendment dated June 15, 2005 amending the Restated Articles of Incorporation of South Carolina Electric & Gas Company (Filed herewith)
4.12			X	Amended and Restated Five-Year Credit Agreement dated June 30, 2005 (Filed herewith)
31.01	X			Certification of Principal Executive Officer Required by Rule 13a-14 (Filed herewith)
31.02	X			Certification of Principal Financial Officer Required by Rule 13a-14 (Filed herewith)
31.03		X		Certification of Principal Executive Officer Required by Rule 13a-14 (Filed herewith)
31.04		X		Certification of Principal Financial Officer Required by Rule 13a-14 (Filed herewith)
31.05			X	Certification of Principal Executive Officer Required by Rule 13a-14 (Filed herewith)
31.06			X	Certification of Principal Financial Officer Required by Rule 13a-14 (Filed herewith)
32.01	X			Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 (Furnished herewith)
32.02	X			Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 (Furnished herewith)
32.03		X		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 (Furnished herewith)
32.04		X		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 (Furnished herewith)
32.05			X	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 (Furnished herewith)
32.06			X	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 (Furnished herewith)

59

EX-3.11

STATE OF SOUTH CAROLINA

SECRETARY OF STATE

ARTICLES OF AMENDMENT

TYPE OR PRINT CLEARLY IN BLACK INK

Pursuant to Section 33-10-106 of the 1976 South Carolina Code of Laws, 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.   Date of Incorporation July 19, 1924  

3.   Agent's Name and Address Francis P. Mood, 1426 Main Street, Columbia, SC 29201  

4.   On May 16, 2005, the corporation adopted the following Amendment(s) of its Articles of Incorporation: (Type or attach the complete text of each Amendment)  

See the attached Exhibit A.

5. 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: (if not applicable, insert “not applicable” or “NA”).

Not applicable

6.   Complete either "a" or "b", whichever is applicable.  

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
Group	Shares	to be Cast	the Meeting	For or Against

South Carolina Electric & Gas Company

Name of Corporation

*NOTE: Pursuant to Section 33-10-106(6)(i) of the 1976 South Carolina Code of Laws, as amended, the corporation can alternatively state the total number of undisputed shares cast for the amendment by each voting group together with a statement that the number cast for the amendment by each voting group was sufficient for approval by that voting group.

b. The Amendment(s) was duly adopted by the incorporators or board of directors without shareholder approval pursuant to Section 33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina Code of Laws, as amended, and shareholder action was not required.

7. Unless a delayed date is specified, the effective date of these Articles of Amendment shall be the date of acceptance for filing by the Secretary of State (See Section 33-1-230(b) of 1976 South Carolina Code of Laws, as amended)

	South Carolina Electric & Gas Company
	Name of Corporation
Date: May 16, 2005	/s/Lynn M. Williams
	Lynn M. Williams
	Secretary

FILING INSTRUCTIONS

1. Two copies of this form, the original and either a duplicate original or a conformed copy, must be filed.

2. If the space in this form is insufficient, please attach additional sheets containing a reference to the appropriate paragraph in this form.

3. Filing fees and taxes payable to the Secretary of State at time of filing application.

Filing Fee	$  10.00
Filing tax	100.00
Total	$110.00

           Return to: Secretary of State

        P.O. Box 11350

        Columbia, SC 29211

South Carolina Electric & Gas Company

Name of Corporation

EXHIBIT A TO ARTICLES OF AMENDMENT

OF

SOUTH CAROLINA ELECTRIC & GAS COMPANY

4.   On May 16, 2005, the corporation adopted the following Amendment(s) of its Articles of Incorporation: (Type or attach the complete text of each Amendment)  

(a) The amount of the stated capital of the corporation, after giving effect to the cancellation of all shares of the corporation’s preferred stock that have been acquired by the corporation through the date of these articles of amendment and that, pursuant to the corporation’s articles of incorporation, may not be reissued, is $296,487,061.50

(b) The reduction of the number of shares which the corporation has authority to issue is 3,400 itemized by class and series as follows:

Class	Series	No. of Shares
Cumulative Preferred Stock ($50 par value)	4.60% (Series B)	3,400

(c) The number of shares which the corporation has authority to issue, after giving effect to the cancellation of all shares of the corporation’s preferred stock that have been acquired by the corporation through the date of these articles of amendment and that, pursuant to the corporation’s articles of incorporation, may not be reissued, is 53,603,088, itemized by class and series as follows:

Class	Series	No. of Shares
Cumulative Preferred Stock ($50 par value)	5%	125,209
Cumulative Preferred Stock ($50 par value)	4.50%	6,765
Cumulative Preferred Stock ($50 par value)	4.60% (Series A)	8,237
Cumulative Preferred Stock ($50 par value)	5.125%	63,516
Cumulative Preferred Stock ($50 par value)	4.60% (Series B)	43,837
Cumulative Preferred Stock ($50 par value)	6%	55,524
Cumulative Preferred Stock ($100 par value)	6.52%	1,000,000
Serial Preferred Stock ($25 par value) (1/4 vote)	-----	2,000,000
Serial Preferred Stock ($50 par value) (1/2 vote)	-----	300,000
Common Stock ($4.50 par value)	-----	50,000,000
		53,603,088

EX-3.12

STATE OF SOUTH CAROLINA

SECRETARY OF STATE

ARTICLES OF AMENDMENT

TYPE OR PRINT CLEARLY IN BLACK INK

Pursuant to Section 33-10-106 of the 1976 South Carolina Code of Laws, 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.   Date of Incorporation July 19, 1924  

3.   Agent's Name and Address Francis P. Mood, 1426 Main Street, Columbia, SC 29201  

4.   On June 15, 2005, the corporation adopted the following Amendment(s) of its Articles of Incorporation: (Type or attach the complete text of each Amendment)  

See the attached Exhibit A.

5.   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: (if not applicable, insert “not applicable” or “NA”).  

Not applicable

6.   Complete either "a" or "b", whichever is applicable.  

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
Group	Shares	to be Cast	the Meeting	For or Against

South Carolina Electric & Gas Company

Name of Corporation

*NOTE: Pursuant to Section 33-10-106(6)(i) of the 1976 South Carolina Code of Laws, as amended, the corporation can alternatively state the total number of undisputed shares cast for the amendment by each voting group together with a statement that the number cast for the amendment by each voting group was sufficient for approval by that voting group.

b. The Amendment(s) was duly adopted by the incorporators or board of directors without shareholder approval pursuant to Section 33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina Code of Laws, as amended, and shareholder action was not required.

7. Unless a delayed date is specified, the effective date of these Articles of Amendment shall be the date of acceptance for filing by the Secretary of State (See Section 33-1-230(b) of 1976 South Carolina Code of Laws, as amended)

	South Carolina Electric & Gas Company
	Name of Corporation
Date: June 15, 2005	/s/Lynn M. Williams
	Lynn M. Williams
	Secretary

FILING INSTRUCTIONS

1. Two copies of this form, the original and either a duplicate original or a conformed copy, must be filed.

2. If the space in this form is insufficient, please attach additional sheets containing a reference to the appropriate paragraph in this form.

3. Filing fees and taxes payable to the Secretary of State at time of filing application.

Filing Fee	$  10.00
Filing tax	100.00
Total	$110.00

Return to: Secretary of State

P.O. Box 11350

Columbia, SC 29211

South Carolina Electric & Gas Company

Name of Corporation

EXHIBIT A TO ARTICLES OF AMENDMENT

OF

SOUTH CAROLINA ELECTRIC & GAS COMPANY

4.   On June 15, 2005, the corporation adopted the following Amendment(s) of its Articles of Incorporation: (Type or attach the complete text of each Amendment)  

(a) The amount of the stated capital of the corporation, after giving effect to the cancellation of all shares of the corporation’s preferred stock that have been acquired by the corporation through the date of these articles of amendment and that, pursuant to the corporation’s articles of incorporation, may not be reissued, is $296,437,061.50

(b) The reduction of the number of shares which the corporation has authority to issue is 1,000 itemized by class and series as follows:

Class	Series	No. of Shares
Cumulative Preferred Stock ($50 par value)	5.125%	1,000

(c) The number of shares which the corporation has authority to issue, after giving effect to the cancellation of all shares of the corporation’s preferred stock that have been acquired by the corporation through the date of these articles of amendment and that, pursuant to the corporation’s articles of incorporation, may not be reissued, is 53,602,088, itemized by class and series as follows:

Class	Series	No. of Shares
Cumulative Preferred Stock ($50 par value)	5%	125,209
Cumulative Preferred Stock ($50 par value)	4.50%	6,765
Cumulative Preferred Stock ($50 par value)	4.60% (Series A)	8,237
Cumulative Preferred Stock ($50 par value)	5.125%	62,516
Cumulative Preferred Stock ($50 par value)	4.60% (Series B)	43,837
Cumulative Preferred Stock ($50 par value)	6%	55,524
Cumulative Preferred Stock ($100 par value)	6.52%	1,000,000
Serial Preferred Stock ($25 par value) (1/4 vote)	-----	2,000,000
Serial Preferred Stock ($50 par value) (1/2 vote)	-----	300,000
Common Stock ($4.50 par value)	-----	50,000,000
		53,602,088

EX-4.12

Exhibit 4.12

Execution Copy

$125,000,000

AMENDED AND RESTATED FIVE-YEAR CREDIT AGREEMENT

dated as of

June 30, 2005

among

PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED,

THE LENDERS IDENTIFIED HEREIN

and

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Administrative Agent,

BANK OF AMERICA, N.A.,

as Syndication Agent,

and

THE BANK OF NEW YORK

and

BRANCH BANKING AND TRUST CO. OF SOUTH CAROLINA,

as Documentation Agents,

Arranged by:

WACHOVIA CAPITAL MARKETS, LLC

and

BANC OF AMERICA SECURITIES LLC,

as Co-Lead Arrangers and Joint-Book Managers

TABLE OF CONTENTS

AMENDED AND RESTATED

FIVE-YEAR CREDIT AGREEMENT

SECTION				PAGE
Article I DEFINITIONS				1
	SECTION 1.01.		Definitions	1
	SECTION 1.02.		Accounting Terms and Determinations	15
	SECTION 1.03.		Use of Defined Terms	15
	SECTION 1.04.		Terminology	15
	SECTION 1.05.		References
Article II THE CREDITS				16
	SECTION 2.01.		Commitment to Lend	16
	SECTION 2.02.		Method of Borrowing	16
	SECTION 2.03.		Evidence of Loans	17
	SECTION 2.04.		Maturity of Loans; Termination of Commitment	17
	SECTION 2.05.		Interest Rates	17
	SECTION 2.06.		Fees	18
	SECTION 2.07.		Optional Termination or Reduction of Commitment	19
	SECTION 2.08.		Mandatory Prepayments	19
	SECTION 2.09.		Optional Prepayments	19
	SECTION 2.10.		Compensation after Prepayment or Conversion	19
	SECTION 2.11.		General Provisions as to Payments	19
	SECTION 2.12.		Computation of Interest and Fees	20
	SECTION 2.13.		Compensation, Additional Interest	20
	SECTION 2.14.		Taxes	21
	SECTION 2.15.		Interest Rate Determination	22
	SECTION 2.16.		Conversion of Loans	23
	SECTION 2.17.		Set-off	24
	SECTION 2.18.		Pro Rata Treatment	25
	SECTION 2.19.		Sharing of Payments	25
Article III CONDITIONS TO BORROWINGS				26
	SECTION 3.01.		Conditions to Closing	26
	SECTION 3.02.		Conditions to All Borrowings	27
Article IV REPRESENTATIONS AND WARRANTIES				28
	SECTION 4.01.	Corporate Existence and Power		28
	SECTION 4.02.	Corporate and Governmental Authorization; Contravention		28
	SECTION 4.03.	Binding Effect		28
	SECTION 4.04.	Financial Information		29
	SECTION 4.05.	Litigation		29
	SECTION 4.06.	Compliance with ERISA		29
	SECTION 4.07.	Taxes		30
	SECTION 4.08.	Ownership of Common Stock		31
	SECTION 4.09.	Not an Investment Company; Public Utility Holding Company Subsidiary		31
	SECTION 4.10.	Ownership of Property; Liens		31
	SECTION 4.11.	No Default.		31
	SECTION 4.12.	Full Disclosure		31
	SECTION 4.13.	Environmental Matters		32
	SECTION 4.14.	Compliance with Laws.		32
	SECTION 4.15.	Margin Stock		32
	SECTION 4.16.	Purpose of Loans		32
	SECTION 4.17.	Solvency		32
	SECTION 4.18.	Insurance		32
	SECTION 4.19.	Labor Matters		33
	SECTION 4.20.	Amendments to Organizational Documents		33
Article V COVENANTS				33
	SECTION 5.01.	Information		33
	SECTION 5.02.	Inspection of Property, Books and Records		35
	SECTION 5.03.	Loans or Advances		35
	SECTION 5.04.	Investments		36
	SECTION 5.05.	Restrictions on Liens		36
	SECTION 5.06.	Maintenance of Existence		37
	SECTION 5.07.	Dissolution		37
	SECTION 5.08.	Consolidations, Mergers and Sales of Assets		37
	SECTION 5.09.	Use of Proceeds		38
	SECTION 5.10.	Compliance with Laws; Payment of Taxes		38
	SECTION 5.11.	Insurance		38
	SECTION 5.12.	Change in Fiscal Year		38
	SECTION 5.13.	Maintenance of Property		38
	SECTION 5.14.	Environmental Notices		39
	SECTION 5.15.	Environmental Matters		39
	SECTION 5.16.	Environmental Release		39
	SECTION 5.17.	Additional Shares of Common Stock		39
	SECTION 5.18.	No Significant Subsidiaries		39
	SECTION 5.19.	Debt to Total Capitalization		39
	SECTION 5.20.	Transactions with Affiliates		39
	SECTION 5.21.	Maintenance of Licenses, Permits and Registrations		40
	SECTION 5.22.	OFAC/PATRIOT ACT		40
Article VI DEFAULTS				40
	SECTION 6.01.	Events of Default		40
Article VII MISCELLANEOUS				43
	SECTION 7.01.	Notices		43
	SECTION 7.02.	No Waivers		43
	SECTION 7.03.	Expenses; Documentary Taxes; Indemnification		43
	SECTION 7.04.	Amendments, Waivers and Consents		44
	SECTION 7.05.	Benefit of Agreement		45
	SECTION 7.06.	Confidentiality.		47
	SECTION 7.07.	Representation by the Lender		48
	SECTION 7.08.	Governing Law		48
	SECTION 7.09.	Consent to Jurisdiction; Waiver of Jury Trial		48
	SECTION 7.10.	Interpretation		48
	SECTION 7.11.	Counterparts.		49
	SECTION 7.12.	Entire Agreement.		49
Article VIII AGENCY PROVISIONS				49
	SECTION 8.01.	Appointment		49
	SECTION 8.02.	Delegation of Duties		50
	SECTION 8.03.	Exculpatory Provisions.		50
	SECTION 8.04.	Reliance on Communications		51
	SECTION 8.05.	Notice of Default		51
	SECTION 8.06.	Non-Reliance on the Agent and Other Lenders		52
	SECTION 8.07.	Indemnification		52
	SECTION 8.08.	The Agent in its Individual Capacity		52
	SECTION 8.09.	Successor Agent		52
	SECTION 8.10.	Other Agents		53
	SECTION 8.11.	Existing Credit Agreement		53

SCHEDULES

Schedule 1	Commitments of the Lenders
	Schedule 4.05 Certain Litigation from the Disclosure Documents

EXHIBITS

Exhibit A	Form of Note
Exhibit B-1	Form of Opinion of Counsel to the Borrower
Exhibit B-2	Form of Opinion of General Counsel to the Borrower
Exhibit C	Form of Assignment and Acceptance
Exhibit D-1	Form of Notice of Borrowing
Exhibit D-2	Form of Notice of Conversion
Exhibit E	Form of Compliance Certificate

AMENDED AND RESTATED FIVE-YEAR CREDIT AGREEMENT

THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 30, 2005 (the “Agreement”) between PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED, a South Carolina corporation (the “Borrower”), the lenders identified herein and such other lenders as may hereafter become a party (the “Lenders”), and WACHOVIA BANK, NATIONAL ASSOCIATION as Administrative Agent (in such capacity and its successors and assigns, the “Agent”).

WHEREAS, the Borrower, the Lenders, certain other lenders and the Agent are parties to that certain Five-Year Credit Agreement, dated as of June 15, 2004, among the Borrower, the lenders identified therein and the Agent (the “Existing Credit Agreement”);

WHEREAS, the Borrower has requested that the Existing Credit Agreement be amended and restated in its entirety as set forth in this Agreement; and

WHEREAS, the Lenders are willing, on the terms and subject to the conditions set forth in this Agreement, to amend and restate the terms of the Existing Credit Agreement as more particularly set forth in this Agreement.

NOW THEREFORE, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

The terms defined in this Section 1.01 shall, for all purposes of this Agreement and any amendment hereto have the meanings set forth herein:

“Acceptable Rating Agency” means Moody’s and S&P.

“Affiliate” of any Person means (i) any other Person which directly, or indirectly through one or more intermediaries, controls such Person or (ii) any other Person which directly, or indirectly through one or more intermediaries, is controlled by or is under common control with such Person. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Agent” has the meaning set forth in the preamble.

“Agreement” has the meaning set forth in the preamble.

“Alternate Base Rate” means for any Alternate Base Rate Loan for any day, the rate per annum equal to the higher as of such day of (i) the Prime Rate and (ii) one-half of one percent (0.50%) above the Federal Funds Rate for such day. For purposes of determining the Alternate Base Rate for any day, changes in the Prime Rate and the Federal Funds Rate shall be effective on the date of each such change.

“Alternate Base Rate Loan” means a loan made pursuant to Section 2.02 which bears interest at the Alternate Base Rate.

“Applicable Percentage” shall be based on the Borrower’s Senior Unsecured Debt Rating, and as of any date of determination, shall be the per annum percentage set forth opposite the applicable ratings below (it being understood that the Applicable Percentage for LIBOR Rate Loans shall be the percentage set out under the column “Applicable LIBOR Margin”, the Applicable Percentage for the Facility Fee shall be the percentage set out under the column “Applicable Facility Fee”, the Applicable Percentage for the Utilization Fee shall be the percentage set out under the column “Applicable Utilization Fee” and the Borrower’s Senior Unsecured Debt Ratings shown below shall show the ratings for S&P first and then for Moody’s):

	Senior Unsecured Debt Ratings (S&P/Moody’s)	Applicable LIBOR Margin	Applicable Facility Fee	Applicable Utilization Fee
Level 1	At least A+/A1	0.190%	0.060%	0.100%
Level 2	Less than A+/A1; at least A/A2	0.230%	0.070%	0.100%
Level 3	Less than A/A2; at least A-/A3	0.270%	0.080%	0.100%
Level 4	Less than A-/A3; at least BBB+/Baa1	0.350%	0.100%	0.100%
Level 5	Less than BBB+/Baa1; at least BBB/Baa2	0.425%	0.125%	0.100%
Level 6	Less than BBB/Baa2; at least BBB-/Baa3	0.575%	0.175%	0.100%
Level 7	Less than BBB-/Baa3	0.775%	0.250%	0.100%

For purposes of the foregoing, (i) if either Moody’s or S&P shall not have in effect a Senior Unsecured Debt Rating (other than by reason of the circumstances referred to in the last clause of this sentence), then such rating agency shall be deemed to have established a rating less than BBB-, in the case of S&P, and less than Baa3, in the case of Moody’s; (ii) if the Senior Unsecured Debt Ratings established or deemed to have been established by Moody’s and S&P shall fall within different “Levels” and the ratings differential is one level, the higher rating will apply; (iii) if the Senior Unsecured Debt Ratings established or deemed to have been established by Moody’s and S&P shall fall within different “Levels” and the ratings differential is two levels or more, the level one below the higher of the two ratings will apply; and (iv) if the rating system of Moody’s or S&P shall change, or if Moody’s or S&P shall cease to be in the business of rating corporate debt obligations, the Borrower and the Agent and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from Moody’s or S&P, and, pending the effectiveness of any such amendment, the Senior Unsecured Debt Rating shall be determined by reference to the Senior Unsecured Debt Rating most recently in effect prior to such change or cessation. As of the date hereof, the Borrower’s Senior Unsecured Debt Rating is at Level 2.

The Applicable Percentages shall be adjusted effective on the next Business Day following any change in the ratings assigned by Moody’s and S&P to the Borrower’s Senior Unsecured Debt Rating. The Borrower shall notify the Agent in writing promptly after becoming aware of any change in such Senior Unsecured Debt Rating.

“Arrangers” means a collective reference to Wachovia Capital Markets, LLC and Banc of America Securities, LLC and “Arranger” means either of the Arrangers.

“Assignment and Acceptance” means an Assignment and Acceptance executed in accordance with Section 7.05(b) in the form attached hereto as Exhibit C.

“Authority” means any governmental authority, central bank or comparable agency, charged with the interpretation or administration of any applicable law, rule or regulation.

“BOA” means Bank of America, N.A.

“Borrower” means Public Service Company of North Carolina, Incorporated, a South Carolina corporation, and its successors.

“Borrowing” means a borrowing hereunder consisting of an Alternate Base Rate or a LIBOR Rate Loan made to the Borrower.

“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in the States of North or South Carolina are authorized or required by law to close.

“Capitalized Lease” means any lease which is required to be capitalized on a balance sheet of the lessee in accordance with GAAP, consistently applied.

“Cash Equivalents” means (a) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (b) Dollar denominated time deposits and certificates of deposit of (i) any Lender or any of its Affiliates, (ii) any domestic financial institution having capital and surplus in excess of $500,000,000 or (iii) any financial institution whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody’s is at least P-1 or the equivalent thereof (any such financial institution being an “Approved Financial Institution”), in each case with maturities of not more than twelve months from the date of acquisition, (c) or any commercial paper and variable or fixed rate notes issued by any Approved Financial Institution (or by the parent company thereof) or any domestic corporation and rated investment grade by S&P or Moody’s and maturing within 270 days of the date of acquisition, (d) repurchase agreements with an Approved Financial Institution (including any of the Lenders) or a securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States of America in which the Borrower shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations, (e) Investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to investments of the character described in the foregoing subdivisions (a) through (d) and (f) demand deposits with insured financial institutions.

“CERCLA” means the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. § 9601, et seq., as amended from time to time, and any regulations promulgated thereunder.

“CERCLIS” means the Comprehensive Environmental Response Compensation and Liability Inventory System established pursuant to CERCLA.

“Closing Date” means June 30, 2005.

“Code” means the Internal Revenue Code of 1986, as amended, or any successor federal tax code. Any reference to any provision of the Code shall also be deemed to be a reference to any successor provision or provisions thereof.

“Commitment” means (i) with respect to each Lender, the commitment of such Lender to make its pro rata percentage of Loans in an aggregate amount up to the amount set forth opposite the name of the Lender on Schedule 1 hereto, subject to adjustment on account of assignment pursuant to Section 7.05(b) or reduction in the aggregate Commitment pursuant to Section 2.07, and (ii) with respect to the Lenders collectively, the aggregate amount of all such Commitments.

“Common Equity” means, at the end of any Fiscal Quarter or Fiscal Year, the common equity of the Borrower as set forth in the balance sheet included in any financial statements for the Fiscal Quarter or Fiscal Year delivered to the Agent and the Lenders by the Borrower pursuant to Section 5.01(a) or (b) hereof as relevant.

“Common Stock” means the common stock, no par value per share, of the Borrower.

“Contingent Obligations” means, with respect to any Person, without duplication, any obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing any Debt of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (a) to purchase any such Debt or other obligation or any property constituting security therefor, (b) to advance or provide funds or other support for the payment or purchase of such Debt or obligation or to maintain working capital, solvency or other balance sheet condition of such other Person (including, without limitation, maintenance agreements, comfort letters, take or pay arrangements, put agreements or similar agreements or arrangements) for the benefit of the holder of Debt of such other Person, (c) to lease or purchase property, securities or services primarily for the purpose of assuring the owner of such Debt or (d) to otherwise assure or hold harmless the owner of such Debt or obligation against loss in respect thereof. The amount of any Contingent Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Debt in respect of which such Contingent Obligation is made.

“Controlled Group” means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code.

 “Convert,” “Conversion” and “Converted” each refers to a conversion of Loans of one Type into Loans of another Type or the selection of a new, or the renewal of the same, Interest Period for LIBOR Rate Loans, as the case may be, pursuant to Sections 2.15 or 2.16.

 “Debt” of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (iii) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person to the extent of the value of such property (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (iv) all obligations, other than trade account obligations entered into in the ordinary course of business and intercompany items, of such Person issued or assumed as the deferred purchase price of property or services purchased by such Person which would appear as liabilities on a balance sheet of such Person, (v) all Debt of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (vi) all Contingent Obligations of such Person (other than take or pay arrangements and put agreements), (vii) the principal portion of all obligations of such Person under (A) Capitalized Leases and (B) any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product of such Person where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP (collectively, “Off-Balance Sheet Debt”), (viii) all obligations of such Person with respect to Redeemable Preferred Stock (in the event such Person is a corporation), (ix) the Hedging Termination Value in respect of any Hedging Agreement (excluding commodity swaps, commodity options, forward commodity contracts and spot contracts) of such Person and (x) the maximum amount of all performance and standby letters of credit issued or bankers’ acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed). The Debt of any Person shall include the Debt of any partnership or unincorporated joint venture for which such Person is legally obligated.

“Default” means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived in writing, become an Event of Default.

“Default Rate” means, with respect to any Loan on any day, a per annum rate 2% greater than the rate which would otherwise be applicable (or if no rate is applicable, whether in respect of interest, fees or other amounts, then the Alternate Base Rate plus 2%).

“Disclosure Documents” means the Form 10-K filed by the Borrower with the SEC with respect to the Fiscal Year ended December 31, 2004, and any Form 10-Q for any subsequent period, and any Form 8-K with respect to any event occurring after December 31, 2004, and filed by the Borrower with the SEC no less than three Business Days prior to the Closing Date.

“Dollars” or “$” means dollars in lawful currency of the United States of America.

“Eligible Assignee” means (i) a Lender; (ii) an Affiliate of a Lender; and (iii) any other Person approved by the Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 7.05, the Borrower (such approval by the Agent or the Borrower not to be unreasonably withheld or delayed and such approval to be deemed given by the Borrower if no objection is received by the assigning Lender and the Agent from the Borrower within five Business Days after notice of such proposed assignment has been provided by the assigning Lender to the Borrower); provided, however that neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee.

“Environmental Authority” means any foreign, federal, state, local or regional government that exercises any form of jurisdiction or authority under any Environmental Requirement.

“Environmental Judgments and Orders” means all judgments, decrees or orders arising from or in any way associated with any Environmental Requirements, whether or not entered upon consent or written agreements with an Environmental Authority or other entity, and whether or not incorporated in a judgment, decree or order.

“Environmental Liabilities” means any liabilities, whether accrued, contingent or otherwise, arising from and in any way associated with any Environmental Requirements.

“Environmental Notices” means notice from any Environmental Authority or by any other Authority, of possible or alleged noncompliance with or liability under any Environmental Requirement, including without limitation any complaints, citations, demands or requests from any Environmental Authority or from any other Authority for correction of any violation of any Environmental Requirement or any investigations concerning any violation of any Environmental Requirement.

“Environmental Proceedings” means any judicial or administrative proceedings arising from or in any way associated with any Environmental Requirement.

“Environmental Requirement” means any legal requirement relating to health, safety or the environment and applicable to the Borrower or the Properties, including but not limited to any such requirement under CERCLA or similar state legislation and all federal, state and local laws, ordinances, regulations, orders, writs, decrees and common law.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor law. Any reference to any provision of ERISA shall also be deemed to be a reference to any successor provision or provisions thereof.

“ERISA Affiliate” means an entity, whether or not incorporated, which is under common control with the Borrower or any of its Subsidiaries within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes the Borrower or any of its Subsidiaries and which is treated as a single employer under Sections 414(b), (c), (m), or (o) of the Code.

“Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“Event of Default” has the meaning set forth in Section 6.01.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

“Existing Credit Agreement” has the meaning set forth in the recitals.

“Existing Notes” means the notes dated June 15, 2004, issued under the Existing Credit Agreement.

“Facility Fee” has the meaning set forth in Section 2.06(a).

“Facility Fee Payment Date” means each March 31, June 30, September 30 and December 31.

“Fee Letter” means that certain fee letter dated May 20, 2005, from the Agent, BOA and the Arrangers, agreed to and accepted by, among others, the Borrower.

“Federal Funds Rate” means, for any day, the rate per annum (rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (i) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average of quotations for such day on such transactions received by the Agent from three federal funds brokers of recognized standing selected by the Agent.

“Fiscal Quarter” means any fiscal quarter of the Borrower.

“Fiscal Year” means any fiscal year of the Borrower.

“GAAP” means generally accepted accounting principles in the United States of America in effect from time to time.

“Granting Bank” has the meaning set forth in Section 7.05(h).

“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds) for the purchase or payment of such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to provide collateral security or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.

“Hazardous Materials” means (a) solid or hazardous waste, as defined in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. § 6901, etseq. and its implementing regulations and amendments, or in any applicable state or local law or regulation, (b) “hazardous substance,” “pollutant” or “contaminant” as defined in CERCLA, or in any applicable state or local law or regulation, (c) gasoline, or any other petroleum product or by-product, including crude oil or any fraction thereof, (d) “toxic substances,” as defined in the Toxic Substances Control Act of 1976, or in any applicable state or local law or regulation and (e) “insecticides,” “fungicides” or “rodenticides” as defined in the Federal Insecticide, Fungicide and Rodenticide Act of 1975 or in any applicable state or local law or regulation, as each such Act, law or regulation may be amended from time to time.

“Hedging Agreement” means (a) any and all interest rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

“Hedging Termination Value” means, in respect of any one or more Hedging Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Hedging Agreements, (a) for any date on or after the date such Hedging Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Hedging Agreements, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedging Agreements (which may include a Lender or any Affiliate of a Lender).

“Indemnified Person” has the meaning set forth in Section 7.03(c).

“Indenture” means the Indenture dated as of January 1, 1996 from the Borrower as successor to Public Service Company of North Carolina, Incorporated, a North Carolina corporation, to Wachovia Bank, National Association (formerly known as First Union National Bank of North Carolina), as amended and supplemented to date and as it may hereafter be amended and supplemented.

“Interest Period” means, for each LIBOR Rate Loan, the period commencing on the date of such LIBOR Rate Loan or the date of the Conversion of any LIBOR Rate Loan into such a LIBOR Rate Loan and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period (or such other day as may be selected by the Borrower in accordance with the provisions hereto) and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, in each case as the Borrower may select by notice to the Agent pursuant to Section 2.02(a) or Section 2.15; provided, however, that:

(i)the Borrower may not select any Interest Period that ends after the Termination Date;

(ii)whenever the last day of any Interest Period would otherwise occur on a day other than a LIBOR Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding LIBOR Business Day; provided, that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding LIBOR Business Day; and

(iii)any Interest Period for a LIBOR Rate Loan which begins on the last LIBOR Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last LIBOR Business Day of the appropriate subsequent calendar month.

“Investment” means any investment in any Person, whether by means of purchase or acquisition of obligations or securities of such Person, capital contribution to such Person, loan or advance to such Person, making of a time deposit with such Person, Guarantee or assumption of any obligation of such Person or otherwise; but does not include any demand deposit with insured financial institutions.

“Lenders” means each of the Lenders identified on the signature pages hereto, and their successors and permitted assigns.

“Lending Office” means, as to each Lender, its office located at its address set forth on Schedule 1 hereof (or identified on Schedule 1 hereof as its “Domestic Lending Office”) or such other office as such Lender may hereafter designate as its Lending Office by notice to the Borrower, and as to any Eligible Assignee, the office of the Eligible Assignee designated as such in its Assignment and Acceptance or such other office as the Eligible Assignee may designate as its Lending Office.

“Lending Party” means each of the Agent and each Lender.

“LIBOR Business Day” means any Business Day on which dealings in Dollar deposits are carried on in the London interbank market and on which commercial banks are open for domestic and international business (including dealings in Dollar deposits) in London, England.

“LIBOR Lending Office” means, as to each Lender, the office of the Lender designated as its “LIBOR Lending Office” on Schedule 1 hereof, or such other office as the Lender may from time to time specify to the Borrower as its “LIBOR Lending Office,” and as to any Eligible Assignee, the office of the Eligible Assignee designated as such in its Assignment and Acceptance or such other office as the Eligible Assignee may designate as its LIBOR Lending Office.

“LIBOR Rate” means, with respect to each day during each Interest Period pertaining to a LIBOR Rate Loan, the rate appearing on Page 3750 of the Dow Jones Markets Service (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service as determined by the Agent from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) at approximately 11:00 AM (London time), two LIBOR Business Days prior to the commencement of such Interest Period, as the rate for Dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBOR Rate” with respect to such LIBOR Rate Loan for such Interest Period shall be the rate per annum equal to the rate at which the principal London office of the Agent offers to place Dollar deposits at or about 11:00 AM (London time), two LIBOR Business Days prior to the beginning of such Interest Period with first-class banks in the London interbank market for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its LIBOR Rate Loan to be outstanding during such Interest Period.

“LIBOR Rate Loan” means a Loan which bears interest at a rate based upon the LIBOR Rate.

“LIBOR Rate Reserve Percentage” for the Interest Period of any LIBOR Rate Loan means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System with respect to liabilities or assets consisting of or including Eurocurrency Liabilities.

“Lien” means, with respect to any asset, any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, security interest, security title, preferential arrangement which has the practical effect of constituting a security interest, servitude or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capitalized Lease or other title retention agreement relating to such asset.

“Loan” means an Alternate Base Rate Loan or a LIBOR Rate Loan and “Loans” means Alternate Base Rate Loans or LIBOR Rate Loans or any or all of them, as the context shall require.

“Loan Documents” means this Agreement, the Notes and any other document evidencing, relating to or securing the Loans, and any other document or instrument delivered from time to time in connection with this Agreement, the Notes or the Loans, as such documents and instruments may be amended or supplemented from time to time.

“Margin Stock” means “margin stock” as defined in Regulation T or U of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder.

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise) of the Borrower on a consolidated basis and its Subsidiaries, taken as a whole, (b) the ability of the Borrower to perform its obligations under this Agreement or any of the other Loan Documents to which the Borrower is a party or (c) the validity or enforceability against the Borrower of this Agreement, any of the other Loan Documents to which the Borrower is a party, or the rights and remedies of the Agent and the Lenders hereunder or thereunder.

“Moody’s” means Moody’s Investors Service, Inc. and its successors.

“Multi-employer Plan” shall have the meaning set forth in Section 4001(a)(3) of ERISA.

“Multiple Employer Plan” means a Plan covered by Title IV of ERISA other than a Multi-employer Plan, to which the Borrower or any ERISA Affiliate and at least one employer other than the Borrower or any ERISA Affiliate are contributing sponsors.

“NCUC” means the North Carolina Utilities Commission.

“NCUC Order” means that certain NCUC order, Docket No. G-5, Sub 453, or any renewal or replacement order thereof, together with any amendatory or supplemental order thereto, in each case authorizing the Borrower to issue the debt in such amounts and during such periods as set forth therein.

“Note” or “Notes” means each of the amended and restated promissory notes of the Borrower of even date and other promissory notes that are required hereby evidencing the obligation of the Borrower to repay the Loans to the Lenders, substantially in the form of Exhibit A.

“Notice of Borrowing” has the meaning set forth in Section 2.02(a).

“Obligations” means the obligations of the Borrower under the Existing Credit Agreement which continue pursuant to the terms of this Agreement.

“OFAC” has the meaning set forth in Section 5.22.

“Off-Balance Sheet Debt” has the meaning set forth in the definition of “Debt”.

“Other Taxes” has the meaning set forth in Section 2.14(b).

“Participant” has the meaning set forth in Section 7.05(e).

“Participation Interest” has the meaning set forth in Section 2.19.

“Patriot Act” has the meaning set forth in Section 5.22.

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

“Person” means an individual, a corporation, a partnership (including, without limitation, a joint venture), an unincorporated association, a trust or any other entity or organization, including, but not limited to, a government or political subdivision or an agency or instrumentality thereof.

“Plan” means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by a member of the Controlled Group for employees of a member of the Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions.

“Prime Rate” means a rate per annum equal to the Agent’s index or base rate of interest announced from time to time by the Agent (which is not necessarily the lowest rate charged to any customer), changing when and as such index or base rate changes.

“pro rata share” or “pro rata percentage” means for each Lender, a fraction (expressed as a decimal) the numerator of which is the Commitment of such Lender at such time and the denominator of which is the aggregate Commitment of the Lenders at such time. The initial pro rata percentages are set out on Schedule 1 hereto.

“Properties” means all real property owned, leased or otherwise used or occupied by the Borrower, wherever located.

“PUHCA” means the Public Utility Holding Company Act of 1935, as amended.

“Redeemable Preferred Stock” of any Person means any preferred stock issued by such Person which is at any time prior to the Termination Date either (i) mandatorily redeemable (by sinking fund or similar payment or otherwise) or (ii) redeemable at the option of the holder thereof.

“Register” has the meaning set forth in Section 7.05(c).

“Reportable Event” means a “reportable event” as defined in Section 4043 of ERISA with respect to which the notice requirements to the PBGC have not been waived.

“Required Lenders” means, at any time, the Lenders which are then in compliance with their obligations hereunder (as determined by the Agent) and holding in the aggregate more than 50% of the aggregate amount of all Loans outstanding under all Commitments, or, if no amount of the Loans is outstanding, more than 50% of the aggregate principal amount of all Commitments.

“Responsible Officer” means chief financial officer, chief accounting officer, vice president-finance, treasurer or assistant treasurer of the Borrower.

“SCANA” means SCANA Corporation, a South Carolina corporation, together with its successors and assigns.

“SEC” means the Securities and Exchange Commission.

“SEC Order” means that certain SEC release No. 35-27649, or any renewal or replacement order thereof, together with any supplemental order thereto, in each case authorizing the Borrower to issue debt in such amounts and during such periods as set forth therein.

“Senior Unsecured Debt Rating” means the rating assigned by an Acceptable Rating Agency to the Borrower's senior, unsecured, non-credit enhanced, long-term debt.

“Significant Subsidiary” means a Subsidiary which meets any of the following conditions:

(i)The Borrower’s and its other Subsidiaries’ investments in and advances to the Subsidiary exceed 10% of the Total Assets of the Borrower and its Subsidiaries consolidated as of the end of the most recently completed Fiscal Year; or

(ii)The Borrower’s and its other Subsidiaries’ proportionate share of the total assets (after intercompany eliminations) of the Subsidiary exceeds 10% of the Total Assets of the Borrower and its Subsidiaries consolidated as of the end of the most recently completed Fiscal Year; or

(iii)The Borrower’s and its other Subsidiaries’ equity in the income from continuing operations before income taxes, extraordinary items and cumulative effect of changes in accounting principles of the Subsidiary exceeds 10% of such income of the Borrower and its Subsidiaries consolidated for the most recently completed Fiscal Year; provided, however PSNC Cardinal Pipeline Company and PSNC Blue Ridge Corporation shall not be deemed a Significant Subsidiary if (a) such income of PSNC Cardinal Pipeline Company or PSNC Blue Ridge Corporation, as applicable, exceeds the 10% threshold set forth in this clause (iii) above and (b) PSNC Cardinal Pipeline Company or PSNC Blue Ridge Corporation, as applicable, does not meet either of the conditions set forth in clause (i) or (ii) above.

“Single Employer Plan” means any Plan which is covered by Title IV of ERISA and adopted solely by the Borrower, solely by an ERISA Affiliate or by a group consisting of the Borrower and one or more ERISA Affiliates.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and its successors.

“Solvent” means, with respect to any Person as of a particular date, that on such date (a) such Person is able to pay its debts and other liabilities, contingent liabilities and other commitments as they mature, (b) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature, (c) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person’s assets would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged or is to engage, (d) the fair value of the assets of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person and (e) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed as the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“SPC” has the meaning set forth in Section 7.05(h).

“Subsidiary” means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at the time directly or indirectly owned by the Borrower.

“Taxes” has the meaning set forth in Section 2.14(a).

“Termination Date” means June 30, 2010.

“Termination Event” means (a) with respect to any Single Employer Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA), (b) the withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan, (c) the distribution of a notice of intent to terminate a Single Employer Plan pursuant to Section 4041(a)(2) of ERISA, (d) the institution of proceedings to terminate or the actual termination of a Single Employer Plan by the PBGC under Section 4042 of ERISA, (e) any event or condition which might reasonably constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Single Employer Plan, or (f) the complete or partial withdrawal of the Borrower or any ERISA Affiliate from a Multi-employer Plan or the termination of a Multi-employer Plan.

“Total Assets” means, at the end of any Fiscal Quarter or Fiscal Year, the amount of total assets as set forth in the balance sheet included in any financial statements for such Fiscal Quarter or Fiscal Year delivered by the Borrower pursuant to Section 5.01(a) or (b) hereof as relevant.

“Total Capitalization” means the sum of (i) preferred stock of the Borrower and its Subsidiaries and any premium thereon (less deferred compensation relating to unallocated convertible preferred stock of the Borrower and its Subsidiaries held by the employee stock ownership plan of the Borrower and its Subsidiaries), plus (ii) Common Equity, plus (iii) all Debt of the Borrower and its Subsidiaries (net of unamortized premium and discount), less (iv) unamortized common stock expense of the Borrower and its Subsidiaries.

“Type,” with respect to any Loan, means any of the following, each of which shall be deemed to be a different “Type” of Loan: an Alternate Base Rate Loan, a LIBOR Rate Loan having a one-month Interest Period, a LIBOR Rate Loan having a two-month Interest Period, a LIBOR Rate Loan having a three-month Interest Period and a LIBOR Rate Loan having a six-month Interest Period.

“Utilization Fee” has the meaning set forth in Section 2.06(b).

“Utilization Fee Payment Date” means each March 31, June 30, September 30 and December 31.

“Wachovia” means, Wachovia Bank, National Association.

SECTION 1.02.Accounting Terms and Determinations.

Unless otherwise specified herein, all terms of an accounting character used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP, applied on a basis consistent (except for changes agreed to by the Borrower’s independent public accountants) with the most recent audited financial statements of the Borrower delivered to the Agent and the Lenders pursuant to Section 4.04(a).

SECTION 1.03.Use of Defined Terms.

All terms defined in this Agreement shall have the same meanings when used in any of the other Loan Documents, unless otherwise defined therein or unless the context shall otherwise require.

SECTION 1.04.Terminology.

All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and the plural shall include the singular. Titles of Articles and Sections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement.

SECTION 1.05.References.

Unless otherwise indicated, references in this Agreement to “Articles,” “Exhibits,” “Schedules” and “Sections” are references to articles, exhibits, schedules and sections hereof.

ARTICLE II

THE CREDITS

SECTION 2.01.Commitment to Lend.

(a)Each Lender severally agrees, on the terms and conditions set forth herein, to make its pro rata share of Loans to the Borrower from time to time before the Termination Date, provided that, immediately after each such Loan is made, (i) with respect to each Lender individually, the aggregate principal amount of Loans made or attributable to such Lender shall not exceed such Lender’s Commitment, and (ii) with respect to the Lenders collectively, the aggregate outstanding principal amount of all Loans shall not exceed the Lenders’ aggregate Commitment. Each Borrowing (whether for an Alternate Base Rate Loan or a LIBOR Rate Loan) under this Section shall be in an aggregate principal amount of $5,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate outstanding amount of the unborrowed Commitment).

(b)Within the foregoing limits, the Borrower may borrow under this Section, repay or, to the extent permitted by Section 2.09, prepay Loans and reborrow under this Section at any time before the Termination Date.

SECTION 2.02.Method of Borrowing.

(a)Each Borrowing shall be made on a Business Day, or in the case of a Borrowing which is a LIBOR Rate Loan, on a LIBOR Business Day, upon notice from the Borrower to the Agent, given (i) in the case of a Borrowing which is an Alternate Base Rate Loan, not later than 11:00 AM (Charlotte, North Carolina time) on the Business Day prior to the day of the proposed Borrowing and (ii) in the case of a Borrowing which is a LIBOR Rate Loan, not later than 11:00 AM (Charlotte, North Carolina time) on the third LIBOR Business Day prior to the date of the proposed Borrowing. Each such notice of a Borrowing (a “Notice of Borrowing”) by the Borrower shall be in substantially the form of Exhibit D-1 hereto, specifying therein the requested (A) date of such Borrowing, (B) Type of Loan to be made in connection with such Borrowing, (C) aggregate amount of such Borrowing and (D) in the case of a Borrowing comprising a LIBOR Rate Loan, initial Interest Period for each such Loan. The Agent shall give notice to each Lender promptly upon receipt of each Notice of Borrowing pursuant to this Section 2.02(a), the contents thereof and each such Lender’s share of any Borrowing to be made pursuant thereto. Each Lender shall, before 1:00 PM (Charlotte, North Carolina time) on the date of such Borrowing, make available to the Agent for the account of the Borrower in same day funds, the proceeds of such Borrowing (in Dollars). Such Borrowing will then be made available to the Borrower by the Agent by crediting the account of the Borrower on the books of the Agent with the aggregate of the amounts made available to the Agent by the Lenders and in like funds as received by the Agent.

(b)Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of LIBOR Rate Loans, the Borrower shall indemnify the applicable Lender against any loss, cost or expense incurred by such Lender as a result of any failure of the Borrower to fulfill on or before the date specified in such Notice of Borrowing for such Loans, the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired by such Lender as part of such Borrowing when such Loan is not made on such date.

SECTION 2.03.Evidence of Loans.

(a)Each Lender shall maintain an account or accounts evidencing each Loan made by such Lender to the Borrower from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. Each Lender will make reasonable efforts to maintain the accuracy of its account or accounts, and to update promptly its account or accounts from time to time, as necessary.

(b)The Agent shall maintain the Register pursuant to Section 7.05(c) and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the date, amount and Interest Period, if applicable, of each Loan, and whether such Loan is an Alternate Base Rate Loan or a LIBOR Rate Loan, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder and (iii) the amount of any sum received by the Agent hereunder from or for the account of the Borrower and each Lender’s percentage share thereof. The Agent will make reasonable efforts to maintain the accuracy of the subaccounts referred to in the preceding sentence and to update promptly such subaccounts from time to time, as necessary.

(c)The entries made in the Register, subaccounts and accounts maintained pursuant to this Section 2.03, to the extent permitted by applicable law, shall be prima facie evidence of the existence and amounts of such obligations of the Borrower therein recorded; provided, however, that the failure of the Agent or any Lender to maintain any such Register, subaccount or account, as applicable, or any error therein, shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with the terms thereof.

(d)Upon the request of any Lender, which request shall be made through the Agent to the Borrower, the Borrower shall deliver to such Lender a duly executed Note in the form of Exhibit A with appropriate insertions as to dates and principal amounts.

SECTION 2.04.Maturity of Loans; Termination of Commitment.

Each Loan shall mature, and the principal amount thereof shall be due and payable in full, and the Commitment shall terminate, on the Termination Date.

SECTION 2.05.Interest Rates.

(a)The Borrower shall pay interest on the unpaid principal amount of each Loan from the date of such Loan until such Loan shall be paid in full, at the following rates per annum:

(i)if such Loan is an Alternate Base Rate Loan, a variable rate per annum equal at all times to the Alternate Base Rate in effect from time to time, payable quarterly in arrears on the last day of each March, June, September and December while such Alternate Base Rate Loan is outstanding and on the date such Alternate Base Rate Loan shall be Converted or paid in full; and

(ii)if such Loan is a LIBOR Rate Loan, a fixed rate per annum during the Interest Period equal to the LIBOR Rate for such Interest Period plus the Applicable Percentage, payable on the last day of the Interest Period (and, if such Interest Period extends over three months, at the end of each three month interval during such Interest Period) and on the date such LIBOR Rate Loan shall be Converted or paid in full.

(b)Notwithstanding anything to the contrary contained in this Agreement or any other Loan Document, for each day following the occurrence and during the continuance of an Event of Default, the outstanding principal of and (to the extent permitted by applicable law) overdue interest on the Loans shall bear interest at a per annum rate equal to the Default Rate, payable on demand.

SECTION 2.06.Fees.

(a)The Borrower shall pay to the Agent, for the ratable benefit of the Lenders, a facility fee (the “Facility Fee”) equal to the product of (i) the average daily amount of the Commitments (regardless of usage, calculated from the later of the Closing Date or the preceding Facility Fee Payment Date) times (ii) a per annum percentage equal to the Applicable Percentage. The Facility Fee shall accrue from and including the Closing Date to, but excluding, the Termination Date and shall be payable in arrears on each Facility Fee Payment Date and on the Termination Date; provided that should the Commitments be terminated at any time prior to the Termination Date for any reason, the entire accrued and unpaid Facility Fee shall be paid on the date of such termination.

(b)If at any time the aggregate principal amount of outstanding Loans exceeds an amount equal to fifty percent (50%) of the Lenders’ aggregate Commitments, the Borrower shall pay to the Agent, for the ratable benefit of the Lenders, a utilization fee (the “Utilization Fee”) equal to the product of (i) the average daily aggregate principal amount of outstanding Loans, calculated from the date the aggregate principal amount of outstanding Loans exceeds an amount equal to fifty percent (50%) of the Lenders’ aggregate Commitments to but excluding the date the aggregate principal amount of outstanding Loans falls below an amount equal to fifty percent (50%) of the Lenders’ aggregate Commitments, times (ii) a per annum percentage equal to the Applicable Percentage. The Utilization Fee shall be payable in arrears on each Utilization Fee Payment Date and on the Termination Date; provided that should the Commitments be terminated at any time prior to the Termination Date for any reason, the entire accrued and unpaid Utilization Fee shall be paid on the date of such termination. The Utilization Fee shall accrue from any date the aggregate principal amount of outstanding Loans exceeds an amount equal to fifty percent (50%) of the Lenders’ aggregate Commitments to but excluding the date the aggregate principal amount of outstanding Loans falls below an amount equal to fifty percent (50%) of the Lenders’ aggregate Commitments.

(c)In addition to the fees provided for in substance in subsections (a) and (b) above, the Borrower shall pay to the Agent, for the account of the Agent, BOA and each Arranger, such other fees as are provided for in the Fee Letter.

SECTION 2.07.Optional Termination or Reduction of Commitment.

The Borrower may, upon at least three Business Days’ notice to the Lender, terminate at any time, or reduce from time to time by an aggregate amount of at least $5,000,000 (and in increments of $1,000,000 in excess thereof), the Commitments. All accrued Facility Fees (as provided under Section 2.06) on the Commitments (in the case of a termination of the Commitments) or on the portion of the Commitments being reduced (in the case of a reduction of the Commitments) shall be payable on the effective date of such reduction or termination.

SECTION 2.08.Mandatory Prepayments.

On each date on which the Commitments are reduced pursuant to Section 2.07, the Borrower shall repay or prepay such principal amount of the outstanding Loans, if any (together with interest accrued thereon), as may be necessary so that after such payment the aggregate unpaid principal amount of the Loans does not exceed the amount of the Commitments as then reduced.

SECTION 2.09.Optional Prepayments.

The Borrower may, (a) upon at least one Business Day’s notice to the Lender in the case of any Alternate Base Rate Loan and (b) upon at least three LIBOR Business Days notice in the case of any LIBOR Rate Loan, prepay any Loan in whole at any time, or from time to time in part in amounts aggregating at least $5,000,000 (and in increments of $1,000,000 in excess thereof), by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment and any compensation payable pursuant to Section 2.10. The Borrower will exercise its option to prepay all then outstanding Loans in full if at any time the conditions to the continued effectiveness of the authorizations in the SEC Order or the NCUC Order are not satisfied.

SECTION 2.10.Compensation after Prepayment or Conversion.

The Borrower shall, upon the demand of any Lender, pay to such Lender any amounts which are required to compensate such Lender for any losses, costs or expenses which it may reasonably incur as a result of the optional or mandatory prepayment or Conversion of any LIBOR Rate Loan on any date other than the last day of the applicable Interest Period, or the failure to prepay any Loan on the date of prepayment specified in any notice of prepayment, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain the Loan. A certificate of such Lender setting forth the basis for determining such amount or amounts necessary to compensate such Lender shall be forwarded to the Borrower through the Agent and shall be conclusively presumed to be correct save for manifest error.

SECTION 2.11.General Provisions as to Payments.

(a)The Borrower shall make each payment of principal of, and interest on, the Loans and of Facility Fees and Utilization Fees hereunder not later than 1:00 PM (Charlotte, North Carolina time) on the date when due in federal or other funds immediately available to the Agent for each Lender at its Lending Office.

(b)Subject to subsection (c) of this Section 2.11, whenever any payment of principal of, or interest on, the Loans or of Facility Fees shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time.

(c)Whenever any payment to be made hereunder in respect of any LIBOR Rate Loan, or in respect of interest computed at the LIBOR Rate, shall be stated to be due on a day other than a LIBOR Business Day, such payment shall be made on the next succeeding LIBOR Business Day and such extension of time shall in such case be included in the computation of the payment of interest; provided that, if such extension of time would cause any such payment to be made in the next following calendar month, such payment shall be made, and the last day of the applicable Interest Period shall occur, on the next preceding LIBOR Business Day.

SECTION 2.12.Computation of Interest and Fees.

(a)The Facility Fee, Utilization Fee and other fees payable hereunder and interest on LIBOR Rate Loans shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed.

(b)Interest on Alternate Base Rate Loans shall be computed on the basis of a 365- or 366-day year for the actual number of days elapsed for so long as the Alternate Base Rate is based on the Prime Rate and on the basis of a 360-day year and paid for the actual number of days elapsed so long as the Alternate Base Rate is based on the Federal Funds Rate.

SECTION 2.13.Compensation, Additional Interest.

(a)If any Lender shall have determined that after the date hereof the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any existing or future law, rule or regulation, or any change in the interpretation or administration thereof, or compliance by such Lender (or its Lending Office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any Authority, other than as described in subsection (b) of this Section 2.13, has or would have the effect of reducing the rate of return on such Lender’s capital as a consequence of its obligations hereunder to a level below that which such Lender could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then such Lender shall promptly notify the Borrower and from time to time, within 15 days after demand by such Lender, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction; provided that the Borrower shall have no liability hereunder for any amount allocable to a period earlier than 90 days before the date of such demand.

(b)Without duplication of the amounts set forth in clause (a) above, the Borrower shall pay to each Lender, so long as such Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on the unpaid principal amount of each LIBOR Rate Loan for the Interest Period of such Loan, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the LIBOR Rate for the Interest Period for such Loan from (ii) the rate obtained by dividing such LIBOR Rate by a percentage equal to 100% minus the LIBOR Rate Reserve Percentage for such Interest Period, payable on each date on which interest is payable on such LIBOR Rate Loan; provided that the Borrower shall have no liability hereunder for any amount allocable to an Interest Period ending earlier than 90 days before the date of the demand.

(c)The provisions of this Section 2.13 shall be applicable with respect to any Participant or Eligible Assignee and, subject to Section 7.05(e), any calculations required by such provisions shall be made based upon the circumstances of such Participant or Eligible Assignee.

SECTION 2.14.Taxes.

(a)Any and all payments by the Borrower to or for the account of any Lender or the Agent hereunder or under any other Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, taxes imposed on its income and franchise taxes imposed on it, by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender or the Agent, as the case may be, is organized or maintains a Lending Office (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable under this Agreement or any other Loan Document to any Lender or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.14) such Lender or the Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iv) the Borrower shall furnish to the Agent, at its address referred to in Section 7.01, the original or a certified copy of a receipt evidencing payment thereof.

(b)In addition, the Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Agreement or any other Loan Document or from the execution or delivery of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as “Other Taxes”).

(c)The Borrower agrees to indemnify each Lender and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 2.14) paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto.

(d)Each Lender that is not a United States person under Section 7701(a)(30) of the Code, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower or the Agent (but only so long as such Lender remains lawfully able to do so), shall provide the Borrower and the Agent with (i) Internal Revenue Service Form W-8 BEN or W-8 ECI, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces to zero the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States, (ii) Internal Revenue Service Form W-8 IMY (along with such other required documentation or withholding certificates), or any successor form prescribed by the Internal Revenue Service, from which the Borrower and the Agent can conclude that the Borrower and/or the Agent is not required to withhold on payments to be made to such Lender by the Borrower pursuant to this Agreement; (iii) Internal Revenue Form W-8 EXP, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is not subject to withholding tax on payments of interest; (iv) Internal Revenue Service Form W-9, or any successor form prescribed by the Internal Revenue Service certifying that such Lender is not subject to backup withholding and/or (v) any other form or certificate required by any taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that such Lender is entitled to an exemption from tax on payments pursuant to this Agreement or any of the other Loan Documents.

(e)For any period with respect to which a Lender has failed to provide the Borrower and the Agent with the appropriate form pursuant to Section 2.14(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 2.14(a) or 2.14(b) with respect to Taxes imposed by the United States; provided, however, that should a Lender, which is otherwise exempt from withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes.

(f)If the Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this Section 2.14, then such Lender will agree to use reasonable efforts to change the jurisdiction of its applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender, is not otherwise disadvantageous to such Lender.

(g)Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.14 shall survive the repayment of the Loans and other obligations under the Loan Documents and the termination of the Commitments hereunder.

SECTION 2.15.Interest Rate Determination.

(a)Upon the request of the Borrower, each Lender agrees to furnish to the Borrower timely information sufficient to permit determination of an Alternate Base Rate or LIBOR Rate, as applicable; provided, however, that such information shall not be binding upon such Lender in determining any Alternate Base Rate or LIBOR Rate applicable to any Loan.

(b)Notwithstanding any other provision of this Agreement, if any Lender shall notify the Borrower that the adoption of or any change in the interpretation or administration of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Lender or its LIBOR Lending Office to perform its obligations hereunder to make LIBOR Rate Loans or to fund or maintain LIBOR Rate Loans hereunder, (i) the obligation of such Lender to make, or to Convert Loans into, LIBOR Rate Loans shall be suspended until such Lender shall notify the Borrower that the circumstances causing such suspension no longer exist and (ii) the Borrower shall forthwith prepay in full all LIBOR Rate Loans together with interest thereon, unless (A) the Borrower, within five Business Days of notice from such Lender, Converts any LIBOR Rate Loans then outstanding into Loans of another Type in accordance with Section 2.16 or (B) the applicable Lender notifies the Borrower that the circumstances causing such suspension and prepayment no longer exist. Each Lender shall use its best efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its LIBOR Lending Office if the making of such change would avoid or eliminate such illegality and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender.

(c)If the Agent determines in connection with any request for a LIBOR Rate Loan or a Conversion into a LIBOR Rate Loan that (i) dollar deposits are not being offered to banks in the London interbank market for the applicable amount and Interest Period of such LIBOR Rate Loan, (ii) adequate and reasonable means do not exist for determining the LIBOR Rate for such LIBOR Rate Loan, or (iii) the LIBOR Rate for such LIBOR Rate Loan does not adequately and fairly reflect the cost to the Lenders of funding such LIBOR Rate Loan, the Agent will promptly notify the Borrower and all the Lenders. Thereafter, the obligation of the Lenders to make or maintain LIBOR Rate Loans shall be suspended until the Agent revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending Notice of Borrowing of LIBOR Rate Loans or Notice of Conversion into a LIBOR Rate Loan, or failing that, will be deemed to have converted such notice into a Notice of Borrowing of Alternate Base Rate Loans in the amount specified therein.

SECTION 2.16.Conversion of Loans.

(a)The Borrower may on any Business Day (in the case of Loans other than LIBOR Rate Loans) and on any LIBOR Business Day (in the case of LIBOR Rate Loans), upon notice given to the Lender not later than 12:00 noon (Charlotte, North Carolina time) on the third LIBOR Business Day prior to the date of any proposed Conversion into LIBOR Rate Loans and on the Business Day prior to the date of any proposed Conversion into Alternate Base Rate Loans subject to the provisions of Section 2.15, Convert any Loans of one Type into Loans of another Type or Types or Loans of the same Type having a new Interest Period; provided that any Conversion of, or with respect to, any LIBOR Rate Loan into Loans of another Type or Loans of the same Type having new Interest Periods shall be made on, and only on, the last day of an Interest Period for such LIBOR Rate Loan, unless the Borrower shall also reimburse the Lenders in respect thereof pursuant to Section 2.10 on the date of such Conversion; provided further, that no Loan shall be converted to a LIBOR Rate Loan if any Event of Default shall have occurred and be continuing. Each such notice of a Conversion (a “Notice of Conversion”) shall be in substantially the form of Exhibit D-2 hereto, within the restrictions specified above, specifying therein (i) the date of such Conversion, (ii) the Loans to be Converted and (iii) if such Conversion is into, or with respect to LIBOR Rate Loans, the duration of the Interest Period for each such Loan.

(b)If the Borrower shall fail to select the Type of any Loan or the duration of any Interest Period for any LIBOR Rate Loan in accordance with the provisions contained in the definition of “Interest Period” in Section 1.01 and subsection (a) of this Section 2.16 or if any proposed Conversion of a Loan to a LIBOR Rate Loan upon Conversion shall not occur as a result of the circumstances described in subsection (b) of Section 2.15 or subsection (c) of this Section 2.16, such Loan will automatically, on the last day of the then-existing Interest Period therefor, Convert into an Alternate Base Rate Loan.

(c)Each Notice of Conversion given pursuant to subsection (a) of this Section 2.16 shall be irrevocable and binding on the Borrower. In the case of any Loan that is to be converted to a LIBOR Rate Loan, the Borrower shall indemnify the Lenders against any loss, cost or expense incurred by the Lenders as a result of any failure to fulfill on the date specified for such Conversion the applicable conditions set forth in Article III, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired by the Lenders to fund such LIBOR Rate Loan, as the case may be, upon such Conversion, when such Conversion, as a result of such failure, does not occur. The Borrower’s obligations under this subsection (c) shall survive the repayment of all other amounts owing to the Lenders under this Agreement and the Notes and the termination of the Commitment.

(d)No more than six LIBOR Rate Loans may be outstanding at any time.

SECTION 2.17.Set-off.

(a)In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default and the commencement of remedies described in Section 6.01, each Lender is authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which rights being hereby expressly waived), to set-off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Lender (including, without limitation, branches, agencies or Affiliates of such Lender wherever located) to or for the credit or the account of the Borrower against obligations and liabilities of the Borrower then due and payable to the Lenders hereunder, under the Notes or the other Loan Documents, irrespective of whether the Agent or the Lenders shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default and the commencement of remedies described in Section 6.01, even though such charge is made or entered on the books of such Lender subsequent thereto.

(b)In addition to clause (a) above, with respect to any principal or interest payment, fee or any other cost or expense (including legal fees and expenses), due and payable to the Agent or the Lenders under the Loan Documents, the Borrower hereby irrevocably authorizes and directs the Agent to debit any deposit account of the Borrower with the Agent (as one of the Lenders) in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such payment, fee or other cost or expense. If there are insufficient funds in such deposit accounts to cover the amount of the payment, fee or other cost or expense then due, such debits will be reversed (in whole or in part, in the Agent's sole discretion) and such amount not debited shall be deemed to be unpaid.

SECTION 2.18.Pro Rata Treatment.

Except to the extent otherwise provided herein:

(a)Loans. Each Loan, each payment or prepayment of principal of any Loan, and each payment of interest on the Loans shall be allocated pro rata among the Lenders in accordance with the respective principal amounts of their outstanding Loans. Each payment of the Facility Fee and Utilization Fee, each reduction of the Commitments and each conversion or extension of any Loan shall be allocated pro rata among the Lenders in accordance with the respective principal amounts of their outstanding Loans and Participation Interests.

(b)Advances. Unless the Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its ratable share of such borrowing available to the Agent, the Agent may assume that such Lender is making such amount available to the Agent, and the Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Agent by such Lender within the time period specified therefor hereunder, such Lender shall pay to the Agent, on demand, such amount with interest thereon, for the period until such Lender makes such amount immediately available to the Agent, at a rate equal to the Federal Funds Rate; provided, however, that if payment is not made within three Business Days of demand, interest shall accrue at the rate applicable at that time to the Loans made in connection with such Borrowing. If such Lender’s pro rata share of such Borrowing is not made available to the Agent by such Lender within three Business Days of the date of such Borrowing, the Agent also shall be entitled to recover from the Borrower, on demand, such amount with interest thereon, for the period until the Borrower makes such repayment amount immediately available to the Agent, at the rate applicable at that time to the Loans made in connection with such Borrowing. A certificate of the Agent submitted to any Lender or the Borrower with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error.

SECTION 2.19.Sharing of Payments.

The Lenders agree among themselves that, in the event that any Lender shall obtain payment in respect of any Loan or any other obligation owing to such Lender under this Agreement through the exercise of a right of setoff, banker’s lien or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, in excess of its pro rata share of such payment as provided for in this Agreement, such Lender shall promptly purchase from the other Lenders a participation interest (a “Participation Interest”) in such Loans and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Agreement. The Lenders further agree among themselves that if payment to a Lender obtained by such Lender through the exercise of a right of setoff, banker’s lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a Participation Interest theretofore sold, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to each Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such a Participation Interest may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker’s lien or counterclaim, with respect to such Participation Interest as fully as if such Lender were a holder of such Loan or other obligation in the amount of such Participation Interest. Except as otherwise expressly provided in this Agreement, if any Lender or the Agent shall fail to remit to the Agent or any other Lender an amount payable by such Lender or the Agent to the Agent or such other Lender pursuant to this Agreement on the date when such amount is due, such payments shall be made together with interest thereon for each day from the date such amount is due until the date such amount is paid to the Agent or such other Lender at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 2.19 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 2.19 to share in the benefits of any recovery on such secured claim.

ARTICLE III

CONDITIONS TO BORROWINGS

SECTION 3.01.Conditions to Closing.

The effectiveness of this Agreement is subject to the satisfaction of the following conditions:

The Agent shall have received the following, each dated as of the Closing Date (unless otherwise indicated), and each in form and substance satisfactory to the Agent:

(a)receipt of an executed counterpart of this Agreement;

(b)if requested by any Lender, receipt of a duly executed Note for such Lender;

(c)receipt of opinions of (i) McNair Law Firm, P.A., counsel for the Borrower and (ii) the General Counsel or an Assistant General Counsel to the Borrower, substantially in the forms of Exhibit B-1 and B-2, hereto, respectively, and covering such additional matters relating to the transactions contemplated hereby as the Lenders may reasonably request;

(d)receipt of a certificate signed by a principal financial or accounting officer of the Borrower, to the effect that (i) no Default or Event of Default has occurred and is continuing as of the Closing Date, (ii) since December 31, 2004, there has been no change or changes in the business, assets, liabilities, operations, condition (financial or otherwise) or prospects of the Borrower and its subsidiaries, taken as a whole, or in the facts and information regarding such entities which alone, or in the aggregate, could reasonably be expected to have a Material Adverse Effect and (iii) the representations and warranties of the Borrower contained in Article IV hereof are true in all material respects as of the date hereof;

(e)receipt of all documents which the Agent and the Lenders may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the other Loan Documents and any other matters relevant hereto, all in form and substance satisfactory to the Agent and the Lenders, including without limitation a certificate of incumbency of the Borrower, signed by the Secretary or an Assistant Secretary of the Borrower, certifying as to the names, true signatures and incumbency of the officer or officers of the Borrower authorized to execute and deliver the Loan Documents to which the Borrower is a party and certified copies of the following items: (i) the Borrower’s Articles of Incorporation, (ii) the Borrower’s By-laws, (iii) a certificate of the Secretary of State of the State of South Carolina as to the existence of the Borrower as a South Carolina corporation, (iv) a certificate of the Secretary of State of the State of North Carolina as to the good standing of the Borrower in North Carolina, and (v) the action taken by the Board of Directors of the Borrower authorizing the Borrower’s execution, delivery and performance of this Agreement, the Notes and the other Loan Documents to which the Borrower is a party;

(f)receipt by the Agent of evidence that the Borrower shall have irrevocably terminated all commitments and indefeasibly paid in full all amounts due under the Existing Credit Agreement;

(g)receipt by the Agent (for its own account and the account of the Lenders, as applicable) of all fees required to be received in connection with this Agreement on or before such Closing Date; and

(h)receipt of such other documents as the Agent and the Lenders may reasonably request.

SECTION 3.02.Conditions to All Borrowings.

The obligation of the Lenders to make Loans on the occasion of each Borrowing is subject to the satisfaction of the following conditions:

(a)receipt of a Notice of Borrowing;

(b)the fact that, immediately prior to and immediately after such Borrowing, no Default or Event of Default under this Agreement shall have occurred and be continuing;

(c)the fact that the representations and warranties of the Borrower contained in Article IV of this Agreement (other than with respect to Section 4.04(b) and Section 4.05) shall be true in all material respects as if made on and as of the date of such Borrowing;

(d)the fact that, immediately after such Borrowing the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; and

(e)the conditions to the continued effectiveness of the authorizations in the SEC Order and the NCUC Order are satisfied.

Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (b), (c), (d) and (e) of this Section.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants that:

SECTION 4.01.Corporate Existence and Power.

The Borrower is a corporation duly organized and validly existing under the laws of the State of South Carolina, is duly qualified to transact business in North Carolina and every other jurisdiction where, by the nature of its business, such qualification is necessary, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where the failure to be so qualified or to have such licenses, authorizations, consents and approvals could not reasonably be expected to have a Material Adverse Effect.

SECTION 4.02.Corporate and Governmental Authorization; Contravention.

The execution, delivery and performance by the Borrower of this Agreement, the Notes and the other Loan Documents to which the Borrower is a party (i) are within the Borrower’s corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of, or filing with, any governmental body, agency or official, except for (1) such authorizations as may be required from the SEC, which as set forth in the SEC Order have been obtained through April 15, 2006 and such other authorizations as may be required by the SEC after April 15, 2006 which shall be obtained prior to such date and (2) the notice filings required under PUHCA, all of which filings will be made within the time periods required; (3) such authorizations as may be required from the NCUC, which as set forth in the NCUC Order have been obtained and (4) such filings as may be required to be made with the NCUC pursuant to the NCUC Order, all of which filings will be made within the time periods required, (iv) do not contravene or constitute a default under any provision of applicable law or regulation or of the Articles of Incorporation or By-laws of the Borrower or of any material agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower and (v) do not result in the creation or imposition of any Lien on any asset of the Borrower (other than Liens created under this Agreement, if any).

SECTION 4.03.Binding Effect.

This Agreement constitutes a valid and binding agreement of the Borrower enforceable in accordance with its terms and the Notes and the other Loan Documents to which the Borrower is a party, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower enforceable in accordance with their respective terms; provided that (a) the enforceability hereof and thereof may be affected by bankruptcy, insolvency, reorganization, moratorium or similar laws applicable to creditors’ rights or the collection of debtors’ obligations generally and (b) the availability of remedies may be limited by equitable principles of general applicability.

SECTION 4.04.Financial Information.

(a)The consolidated balance sheet of the Borrower, as of December 31, 2004, and the related consolidated statements of income and cash flows for the Fiscal Year then ended, reported on by Deloitte & Touche, LLP, copies of which have been delivered to the Lenders, and the unaudited condensed consolidated financial statements of the Borrower, for the interim period ended March 31, 2005, copies of which have been delivered to the Lenders, fairly present, in conformity with GAAP, the consolidated financial position of the Borrower, as of such dates, and of its consolidated results of operations and cash flows, except that the interim financial statements are subject to customary year-end adjustments and have fewer footnotes than annual statements.

(b)Since December 31, 2004, there has been no change in the business, financial position, results of operations or prospects of the Borrower which, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

(c)The Borrower has no material liabilities other than as set forth in the most recent financial statements provided to the Agent and the Lenders pursuant to Section 4.04(a) or 5.01(a) and (b) hereof.

SECTION 4.05.Litigation.

Other than as disclosed in the Disclosure Documents, there are no actions, suits or proceedings (including, without limitation, any Environmental Proceedings) pending against or affecting the Borrower before any court or arbitrator or any governmental body, agency or official which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect (collectively, the actions, suits and proceedings set forth in the Disclosure Documents are referred to herein as the “Material Litigation”). As of the applicable date of filing, based upon the Borrower’s and its Subsidiaries’ knowledge of the relevant facts and circumstances at the time of the filing, the facts set forth in the Disclosure Documents regarding the Material Litigation were true and correct in all material respects. The Borrower does not believe that (a) the resolution of any litigation listed in Schedule 4.05 could reasonably be expected to have a Material Adverse Effect or (b) the resolution of any litigation set forth in the Disclosure Documents could reasonably be expected to materially adversely affect the ability of the Borrower to perform its obligations under the Loan Documents. Notwithstanding anything in this Section 4.05 to the contrary, any reference in the Disclosure Documents to various other claims and litigation that are not specifically described therein are not excepted from the representation given in this Section 4.05.

SECTION 4.06.Compliance with ERISA.

Except as could not reasonably be expected to have a Material Adverse Effect:

(a)During the five-year period prior to the date on which this representation is made or deemed made: (i) no Termination Event has occurred, and, to the best knowledge of the Borrower, no event or condition has occurred or exists as a result of which any Termination Event would be reasonably expected to occur; (ii) no “accumulated funding deficiency,” as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, has occurred with respect to any Single Employer Plan; (iii) each Plan has been maintained, operated, and funded in compliance with its own terms and in material compliance with the provisions of ERISA, the Code, and any other applicable federal or state laws; and (iv) no Lien in favor of the PBGC or a Plan has arisen or is reasonably likely to arise on account of any Plan.

(b)The actuarial present value of all “benefit liabilities” under each Single Employer Plan (determined within the meaning of Section 401(a)(2) of the Code, utilizing the actuarial assumptions used to fund such Plans), whether or not vested, did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the current value of the assets of such Plan allocable to such accrued liabilities, except as disclosed in the Borrower’s financial statements.

(c)Neither the Borrower nor any ERISA Affiliate has incurred, or, to the best knowledge of the Borrower, is reasonably expected to incur, any withdrawal liability under ERISA to any Multi-employer Plan or Multiple Employer Plan. Neither the Borrower nor any ERISA Affiliate has received any notification that any Multi-employer Plan is in reorganization (within the meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section 4245 of ERISA), or has been terminated (within the meaning of Title IV of ERISA), and no Multi-employer Plan is, to the best knowledge of the Borrower, reasonably expected to be in reorganization, insolvent or terminated.

(d)No prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has occurred with respect to a Plan which has subjected or would be reasonably likely to subject the Borrower or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which the Borrower or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability.

(e)The present value (determined using actuarial and other assumptions which are reasonable with respect to the benefits provided and the employees participating) of the liability of the Borrower and each ERISA Affiliate for post-retirement welfare benefits to be provided to their current and former employees under Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA), net of all assets under all such Plans allocable to such benefits, are reflected on the financial statements referenced in Sections 4.04 and 5.01 in accordance with FASB 106.

(f)Each Plan which is a welfare plan (as defined in Section 3(1) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply has been administered in compliance in all material respects with such sections.

SECTION 4.07.Taxes.

There have been filed on behalf of the Borrower all material federal, state and local income, excise, property and other tax returns which are required to be filed by the Borrower except where the failure to file would not reasonably be expected to have a Material Adverse Effect. The Borrower has paid or will pay when due all taxes, assessments, governmental charges, claims except (x) liabilities being contested in good faith by appropriate proceedings diligently pursued and against which, if requested by the Required Lenders through the Agent, the Borrower shall have set up reserves satisfactory to the Required Lenders or (y) where nonpayment could not reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Borrower in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. United States income tax returns of the Borrower have been closed through February 10, 2000.

SECTION 4.08.Ownership of Common Stock.

All of the issued and outstanding shares of Common Stock of the Borrower are owned by SCANA.

SECTION 4.09.Not an Investment Company; Public Utility Holding Company Subsidiary.

The Borrower is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Borrower is a “subsidiary” of a “registered holding company” within the meaning of PUHCA. Each of (a) the issuance by the Borrower of the Notes pursuant to this Agreement, (b) the incurrence by the Borrower of the Debt contemplated by this Agreement and (c) the borrowing, repayment and reborrowing of Loans permitted hereunder is permitted by PUHCA to the extent set forth in, and subject to continued satisfaction of the conditions in, the SEC Order and requires no authorization or approval of any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body, other than such authorizations and approvals as have already been obtained under the SEC Order and the NCUC Order, the filings required under the SEC Order or the NCUC Order and the approval of the SEC of the issuance of additional debt after the date set forth in Section 4.02.

SECTION 4.10.Ownership of Property; Liens.

The Borrower has title to its properties sufficient for the conduct of its business, and none of such property is subject to any Lien except as permitted in Section 5.05 or created by this Agreement, if any.

SECTION 4.11.No Default.

The Borrower is not in default under or with respect to any agreement, instrument or undertaking to which it is a party or by which it or any of its property is bound which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.

SECTION 4.12.Full Disclosure.

All information heretofore furnished by the Borrower to the Agent and the Lenders for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Borrower to the Agent and the Lenders will be, as of the date furnished, for the purposes for which such information is given and read together with all other previously provided information, true, accurate and complete in every material respect or based on reasonable estimates on the date as of which such information is stated or certified. The Borrower has disclosed to the Agent and the Lenders in writing any and all facts which, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect (to the extent the Borrower can now reasonably foresee).

SECTION 4.13.Environmental Matters.

(a)Other than as disclosed in the Disclosure Documents, the Borrower is not subject to any Environmental Liability which individually or in the aggregate is likely to have a Material Adverse Effect and the Borrower has not been designated as a potentially responsible party under CERCLA or under any state statute similar to CERCLA with respect to any matter or matters which, individually or in the aggregate, are likely to have a Material Adverse Effect. Other than as disclosed in the Disclosure Documents, none of the Properties have been identified on any current or proposed (i) National Priorities List under 40 C.F.R. § 300, (ii) CERCLIS list or (iii) any list arising from a state statute similar to CERCLA relating to any matter or matters which, individually or in the aggregate, are likely to have a Material Adverse Effect.

(b)Other than as disclosed in the Disclosure Documents, no Hazardous Materials have been or are being used, produced, manufactured, processed, generated, stored, disposed of, managed at, or shipped or transported to or from the Properties or are otherwise present at, on, in or under the Properties except for (i) Hazardous Materials used, produced, manufactured, processed, generated, stored, disposed of and managed in the ordinary course of business in material compliance with all applicable Environmental Requirements or (ii) other Hazardous Materials the unlawful handling, discharge or disposal of which could not reasonably be expected to have a Material Adverse Effect.

SECTION 4.14.Compliance with Laws.

The Borrower is in compliance with all applicable laws, regulations and similar requirements of governmental authorities, except where the failure to be in compliance, alone or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

SECTION 4.15.Margin Stock.

The Borrower will not apply the proceeds of any of the Loans, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any Margin Stock.

SECTION 4.16.Purpose of Loans.

The Loans will be used for general corporate purposes including, without limitation, commercial paper backup.

SECTION 4.17.Solvency.

The Borrower is, and after the consummation of the transactions contemplated by this Agreement will be, Solvent.

SECTION 4.18.Insurance.

The Borrower maintains with financially sound and reputable insurance companies or through self-insurance, insurance in at least such amounts with such deductibles or self-insurance retentions and against at least such risks (including on all of its Properties, general liability and worker’s compensation) as are usually insured against in the same general area by companies of established repute engaged in the same or similar business as the Borrower.

SECTION 4.19.Labor Matters.

Except as could not reasonably be expected to have, alone or in the aggregate, a Material Adverse Effect:

(a)there are no strikes or lockouts against the Borrower pending or, to the knowledge of the Borrower, threatened;

(b)the hours worked by and payments made to employees of the Borrower have not been in violation of the Fair Labor Standards Act or any other applicable federal, state, local or foreign law dealing with such matters; and

(c)all payments due from the Borrower, or for which any claim may be made against the Borrower, on account of wages and employee, health and welfare insurance and other benefits (attributable to any employee benefit plan (as defined in Section 3 of ERISA) or otherwise), have been paid or accrued as a liability on the books of the Borrower.

SECTION 4.20.Amendments to Organizational Documents.

Neither the articles of incorporation nor bylaws of the Borrower have been amended, modified or changed since the Closing Date in any manner which could be reasonably expected to materially adversely affect the rights of the Lenders.

ARTICLE V

COVENANTS

The Borrower agrees that, so long as the Commitments hereunder shall remain outstanding or any amount payable under this Agreement remains unpaid:

SECTION 5.01.Information.

The Borrower will deliver to the Agent, on behalf of the Lenders, and the Agent will promptly distribute to each Lender, which distribution may be via acceptable electronic means, copies of the following financial statements, reports, notices and information:

(a)as soon as available and in any event within 120 days after the end of each Fiscal Year, a consolidated balance sheet of the Borrower as of the end of such Fiscal Year and the related consolidated statements of income or operations and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all reported on by Deloitte & Touche LLP or other independent public accountants of nationally recognized standing, with such report to be free of exceptions and qualifications not reasonably acceptable to the Agent and the Lenders. The delivery by electronic mail or other form of electronic distribution reasonably satisfactory to the Agent of a Form 10-K as filed with the SEC within 120 days after the end of such Fiscal Year shall be deemed to satisfy the requirements contained in this Section 5.01(a);

(b)as soon as available and in any event within 90 days after the end of each Fiscal Quarter (other than the last Fiscal Quarter of each Fiscal Year), a condensed consolidated balance sheet of the Borrower as of the end of such Fiscal Quarter and the related condensed consolidated statement of income or operations for such Fiscal Quarter and for the portion of the Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter and the corresponding portion of the previous Fiscal Year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP (except that such statements contain fewer footnotes than the annual statements) and consistency (other than changes of accounting principles recorded in accordance with GAAP) by a Responsible Officer. The delivery by electronic mail or other form of electronic distribution reasonably satisfactory to the Agent of a Form 10-Q as filed with the SEC within 90 days after the end of such Fiscal Quarter shall be deemed to satisfy the requirements contained in this Section 5.01(b);

(c)simultaneously with the delivery of each set of financial statements referred to in subsections (a) and (b) of this Section 5.01, a certificate, substantially in the form of Exhibit E hereto, of a Responsible Officer (i) stating whether any Default or Event of Default exists on the date of such certificate and, if any Default or Event of Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto, (ii) setting forth the amount of Off-Balance Sheet Debt in excess of $5,000,000 in the aggregate of the Borrower as of the end of such fiscal period, if any, and (iii) demonstrating compliance with Section 5.19 as of the end of each Fiscal Quarter and setting forth the computations used by the Borrower in determining such compliance;

(d)within five Business Days after the Borrower becomes aware of the occurrence of any Default or Event of Default, a certificate of a Responsible Officer setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto;

(e)as soon as possible and in any event within 30 days after (i) the Borrower has been served with legal process in litigation of such a nature that the Borrower would be required to disclose such litigation in a Current Report on Form 8-K pursuant to the Exchange Act or (ii) the receipt of notice of a default by the Borrower that could reasonably be expected to have a Material Adverse Effect, notice of such litigation or notice of such default describing the factual basis alleged to underlie such litigation or asserted in such notice of default and a brief statement of the Borrower’s proposed actions in connection therewith;

(f)Upon the Borrower or any ERISA Affiliate obtaining knowledge thereof, the Borrower will give written notice to the Agent promptly (and in any event within five Business Days) of any of the following which would result in or reasonably could be expected to have a Material Adverse Effect: (i) any event or condition, including, but not limited to, any Reportable Event that constitutes, or would be reasonably expected to lead to, a Termination Event; (ii) with respect to any Multi-employer Plan, the receipt of notice as prescribed in ERISA or otherwise of any withdrawal liability assessed against the Borrower or any of its ERISA Affiliates, or of a determination that any Multi-employer Plan is in reorganization or insolvent (both within the meaning of Title IV of ERISA); (iii) the failure to make full payment on or before the due date (including extensions) thereof of all amounts which the Borrower or any of its Subsidiaries or ERISA Affiliates is required to contribute to each Plan pursuant to its terms and as required to meet the minimum funding standard set forth in ERISA and the Code with respect thereto; or (iv) a change in the funding status of any Plan, in each case together with a description of any such event or condition or a copy of any such notice and a statement by an officer of the Borrower briefly setting forth the details regarding such event, condition or notice, and the action, if any, which has been or is being taken or is proposed to be taken with respect thereto. Promptly upon request, the Borrower shall furnish the Agent with such additional information concerning any Plan as may be reasonably requested, including, but not limited to, copies of each annual report/return (Form 5500 series), as well as all schedules and attachments thereto required to be filed with the Department of Labor and/or the Internal Revenue Service pursuant to ERISA and the Code, respectively, for each “plan year” (within the meaning of Section 3(39) of ERISA); and

(g)from time to time such additional information regarding the financial position or business of the Borrower as the Agent and the Lenders may reasonably request.

SECTION 5.02.Inspection of Property, Books and Records.

The Borrower will (i) keep proper books of record and account in which full, true and correct entries in accordance with the accounting requirements of the Federal Energy Regulatory Commission as set forth in its applicable Uniform System of Accounts and published accounting releases shall be made of all dealings and transactions in relation to its business and activities and (ii) permit representatives of the Agent at the Lenders’ expense to visit and inspect any of its Properties, to examine and make abstracts from any of its books and records and to discuss its affairs, finances and accounts with its officers, employees and independent public accountants; provided, however, that so long as no Default or Event of Default has occurred and is continuing, an officer or authorized agent of the Borrower is (at the option of the Borrower) present during any such discussions with employees or accountants. The Borrower agrees to cooperate and assist in such visits and inspections, in each case at such reasonable times and as often as may reasonably be desired.

SECTION 5.03.Loans or Advances.

The Borrower shall not make loans or advances to any Person except: (i) loans or advances to employees, to the extent permitted by applicable law, not exceeding Two Million Dollars ($2,000,000) in the aggregate outstanding at any given time made in the ordinary course of business and consistent with practices existing on the Closing Date, (ii) loans or advances to finance acquisitions of property or services purchased from the Borrower made in the ordinary course of business, (iii) loans or advances to fund the operations of any Affiliate which provides or will provide steam and/or energy to any Person where the aggregate amount of all such loans and advances does not exceed, at the end of any Fiscal Quarter, 10% of Total Assets, (iv) deposits required by government agencies or public utilities and (v) advances to the utility money pool in connection with PUHCA not to exceed an aggregate principal amount of $150,000,000 outstanding at any one time; provided that after giving effect to the making of any loans, advances or deposits permitted by clause (i), (ii), (iii), (iv) or (v) of this Section, no Default or Event of Default shall have occurred and be continuing.

SECTION 5.04.Investments.

The Borrower shall not make Investments in any Person except (i) as permitted by Section 5.03, (ii) Investments which are cash or Cash Equivalents or (iii) that the Borrower may make Investments in any Subsidiary or Affiliate provided such Investment is not prohibited by Section 5.18.

SECTION 5.05.Restrictions on Liens.

The Borrower shall not incur any Debt secured by any Lien, or suffer to exist any Lien, upon or with respect to its Properties or assets, whether now owned or hereafter acquired, without effectively providing that the Loans then outstanding and thereafter created (together with any other Debt or obligations then existing and any other indebtedness or obligation thereafter created ranking equally with the Loans then existing or thereafter created which is not subordinated to the Loans) shall be secured equally and ratably with (or prior to) such Debt or obligations so long as such Debt or obligation is so secured, except that the foregoing provision shall not apply to:

(a)Debt issued under the Indenture or any renewal, replacement or extension of such Indenture;

(b)“Secured Debt” as defined in Section 9.8 of the Indenture;

(c)Liens encumbering premises, land and interests in land or other property, real, personal, intangible or mixed, used or to be used in or in connection with the Borrower’s natural gas utility business;

(d)Liens consisting of (i) pledges or deposits in the ordinary course of business to secure obligations under workmen’s compensation laws or similar legislation, including liens of judgments thereunder which are not currently dischargeable, (ii) deposits in the ordinary course of business to secure or in lieu of surety, appeal or customs bonds to which the Borrower is a party, (iii) liens created by or resulting from any litigation or legal proceeding which is being contested in good faith by appropriate proceedings diligently conducted, (iv) pledges or deposits in the ordinary course of business to secure performance in connection with bids, tenders or contracts (other than contracts for the payment of money) or (v) materialmen’s, mechanics’, carriers’, workmen’s, repairmen’s or other like Liens incurred in the ordinary course of business for sums not yet due or currently being contested in good faith by appropriate proceedings diligently conducted or deposits to obtain the release of such Liens;

(e)Liens created to secure indebtedness representing, or incurred to finance, the cost of property available, used, acquired, constructed or improved by the Borrower or any subsidiary in the ordinary course of business, including under any Capitalized Lease or Liens existing on such property at the time of acquisition thereof or attaching to such property within 18 months of the acquisition thereof;

(f)any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Borrower and not created in contemplation of such event;

(g)any Lien existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition;

(h)Liens incidental to the conduct of its business or the ownership of its assets which (i) do not secure Debt and (ii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business;

(i)any Lien on Margin Stock;

(j)Liens on property (including any natural gas, oil or other mineral property) to secure all or a part of the cost of exploration, drilling or development thereof or to secure Debt incurred to provide funds for any such purpose;

(k)Liens and security interests created, incurred or assumed in connection with the purchase, lease, financing or refinancing of pollution control facilities;

(l)Liens created to secure sales of accounts receivable and other receivables;

(m)Liens created for the sole purpose of extending, renewing or replacing in whole or in part Debt secured by any Lien, mortgage or security interest referred to in the foregoing subsections (a) through (l); provided, however, that the principal amount of Debt or obligations secured thereby shall not exceed the principal amount of Debt or obligations so secured at the time of such extension, renewal or replacement and that such extension, renewal or replacement, as the case may be, shall be limited to all or a part of the property that secured the lien or mortgage so extended, renewed or replaced (and any improvements on such property); and

(n)Liens on property, in addition to those otherwise permitted by clauses (a) through (m) above, securing directly or indirectly, Debt which does not exceed, in the aggregate at any one time outstanding, $15,000,000.

SECTION 5.06.Maintenance of Existence.

The Borrower shall maintain its corporate existence and, except as permitted under Section 5.08 hereof, carry on its business in substantially the same manner and in substantially the same fields as such business is now carried on and maintained.

SECTION 5.07.Dissolution.

The Borrower shall not suffer or permit dissolution or liquidation either in whole or in part or redeem or retire any shares of its Common Stock, except through corporate reorganization to the extent permitted by Section 5.08.

SECTION 5.08.Consolidations, Mergers and Sales of Assets.

(a)The Borrower will not consolidate or merge with or into any other Person, or, except in connection with any conveyance, sale, lease, transfer or disposition described in clause (b) of this Section, discontinue or eliminate any business line or segment other than in the ordinary course of business; provided that the Borrower may merge with another Person if (i) such Person was organized under the laws of the United States of America or one of its states, (ii) the Borrower is the corporation surviving such merger and (iii) immediately after giving effect to such merger, no Default or Event of Default shall have occurred and be continuing.

(b)Unless otherwise required by law, during the term of this Agreement, the Borrower will not in the aggregate, convey, sell, lease, transfer or otherwise dispose of assets, business or operations with a net book value in excess of 10% of Total Assets, as calculated as of the end of the most recent Fiscal Quarter.

SECTION 5.09.Use of Proceeds.

No portion of the proceeds of the Loans will be used by the Borrower (i) in connection with, whether directly or indirectly, any tender offer for, or other acquisition of, stock of any corporation with a view towards obtaining control of such other corporation, (ii) directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any Margin Stock or (iii) for any purpose in violation of any applicable law or regulation. The proceeds of the Loans will be used solely for the purposes provided in Section 4.16.

SECTION 5.10.Compliance with Laws; Payment of Taxes.

The Borrower will comply with all applicable laws (including but not limited to ERISA and Environmental Requirements), regulations and similar requirements of governmental authorities (including but not limited to the PBGC), except (a) where the necessity of such compliance is being contested in good faith through appropriate proceedings diligently pursued or (b) where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. The Borrower will pay when due all taxes, assessments, governmental charges, claims for labor, supplies, rent and other obligations which, if unpaid, might become a Lien against the Property of the Borrower except (x) liabilities being contested in good faith by appropriate proceedings diligently pursued and against which, if requested by any Lender, the Borrower shall have set up reserves satisfactory to such Lender or (y) where nonpayment could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.11.Insurance.

The Borrower will at all times maintain in full force and effect, with financially sound and reputable insurance companies or through self-insurance (including workers’ compensation insurance and general liability insurance) in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as are in accordance with normal industry practice.

SECTION 5.12.Change in Fiscal Year.

The Borrower will not change its Fiscal Year from year ending December 31 without the consent of the Required Lenders unless such change would not be materially adverse to the interests of the Lenders.

SECTION 5.13.Maintenance of Property.

The Borrower shall maintain all of its Properties and assets in good condition, repair and working order, ordinary wear and tear excepted, in accordance with standards observed by companies of established repute engaged in the same or similar business as the Borrower, except where the failure to so maintain its Properties and assets could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.14.Environmental Notices.

The Borrower shall furnish to the Agent, on behalf of the Lenders prompt written notice of all Environmental Liabilities, pending, threatened or anticipated Environmental Proceedings, Environmental Notices, Environmental Judgments and Orders, and Environmental Releases at, on, in, under or in any way affecting the Properties or, to the extent the Borrower has actual notice thereof, any adjacent property, and all facts, events or conditions that could lead to any of the foregoing; provided that the Borrower shall not be required to give such notice unless it reasonably believes that any of the foregoing, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

SECTION 5.15.Environmental Matters.

The Borrower will not use, produce, manufacture, process, generate, store, dispose of, manage at, or ship or transport to or from the Properties any Hazardous Materials other than as disclosed to the Lenders in writing at or prior to the Closing Date except for (i) Hazardous Materials used, produced, manufactured, processed, generated, stored, disposed of or managed in the ordinary course of business in material compliance with all applicable Environmental Requirements or (ii) other Hazardous Materials the unlawful handling, discharge or disposal of which, individually or in the aggregate, could not reasonably expected to have a Material Adverse Effect.

SECTION 5.16.Environmental Release.

Upon becoming aware of the occurrence of an Environmental Release, the Borrower will promptly investigate the extent of, and take appropriate remedial action in a timely manner to eliminate, such Environmental Release, whether or not ordered or otherwise directed to do so by any Environmental Authority.

SECTION 5.17.Additional Shares of Common Stock.

The Borrower shall not issue any shares of its Common Stock to any Person other than SCANA.

SECTION 5.18.No Significant Subsidiaries.

The Borrower shall not at any time form, acquire, invest in or otherwise permit to exist any Significant Subsidiary without the prior written consent of the Required Lenders.

SECTION 5.19.Debt to Total Capitalization.

The Borrower will maintain at all times a ratio of consolidated Debt to consolidated Total Capitalization of not more than .70 to 1.00.

SECTION 5.20.Transactions with Affiliates.

Unless otherwise required by law or regulation (including PUHCA and the rules issued thereunder), the Borrower shall not enter into, or permit any of its Subsidiaries to enter into, any transaction with any of its Affiliates unless such transaction is on terms no less favorable to the Borrower or such Subsidiary than if the transaction had been negotiated in good faith on an arm’s length basis with a non-Affiliate.

SECTION 5.21.Maintenance of Licenses, Permits and Registrations.

The Borrower shall maintain in effect at all times all licenses and permits from, and registrations with, any governmental authority or any other Person necessary for the operation by the Borrower of its business as then conducted, except where the failure to so maintain such licenses and permits could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.22.OFAC/PATRIOT ACT.

The Borrower shall not permit the transfer of controlling interest in the Borrower to any Person (or any beneficial owner of such Person) listed on the specifically Designated Nationals and Blocked Persons List maintained by the Office of Foreign Asset Control, Department of the Treasury (“OFAC”), pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders, or use the proceeds of any Loans to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto. The Lenders hereby notify the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56) (signed into law October 26, 2001) (the “PatriotAct”), they are required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow the Lenders to identify the Borrower in accordance with the Patriot Act.

ARTICLE VI

DEFAULTS

SECTION 6.01.Events of Default.

If one or more of the following events (each an “Event of Default”) shall have occurred and be continuing:

(a)the Borrower shall: (i) default in the payment when due of any principal of any of the Loans; or (ii) default, and such default shall continue for three Business Days, in the payment when due of any interest on the Loans or of any fees or other amounts owing hereunder, under any of the other Loan Documents or in connection herewith or therewith; or

(b)the Borrower shall fail to observe or perform any covenant or agreement contained in Sections 5.01(d), 5.03, 5.04, 5.05, 5.06, 5.07, 5.08, 5.09, 5.17 or 5.19; or

(c)the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by subsections (a) or (b) of this Section 6.01) for 30 days after the earlier to occur of (i) written notice thereof has been given to the Borrower by the Agent or any Lender or (ii) any officer of the Borrower otherwise becomes aware of such failure; or

(d)any representation, warranty, certification or statement made or deemed made by the Borrower in Article IV of this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); or

(e)the Borrower shall fail to make any payment in respect of Debt outstanding (other than the Loans) in an aggregate principal amount (individually or in the aggregate) in excess of $5,000,000 when due or within an applicable grace period; or

(f)any event or condition shall occur (other than in connection with sinking fund or other purchases or redemptions of the Borrower’s preferred stock or secured Debt undertaken pursuant to the terms of the governing instruments or at the election of the Borrower) which results in the acceleration of the maturity of Debt outstanding in an aggregate principal amount in excess of $5,000,000 (individually or in the aggregate) of the Borrower or the obligation to purchase such Debt by the Borrower (or its designee) prior to the scheduled maturity thereof or enables the holders of such Debt or any Person acting on such holders’ behalf to accelerate the maturity thereof or to require the purchase thereof by the Borrower (or its designee) prior to the scheduled maturity thereof, without regard to whether such holders or other Person shall have exercised or waived their right to do so; or

(g)loss or failure by the Borrower to obtain or maintain any necessary material public utility or other material license, permit or authorization; or

(h)the Borrower shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally, or shall admit in writing its inability, to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or

(i)an involuntary case or other proceeding shall be commenced against the Borrower seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower under the federal bankruptcy laws as now or hereafter in effect; or

(j)The occurrence of any of the following events or conditions, if any of the same would have or would be reasonably expected to have a Material Adverse Effect: (i) any “accumulated funding deficiency,” as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall exist with respect to any Plan, or any lien shall arise on the assets of the Borrower or any ERISA Affiliate in favor of the PBGC or a Plan; (ii) a Termination Event shall occur with respect to a Single Employer Plan which is, in the reasonable opinion of the Agent, likely to result in the termination of such Plan for purposes of Title IV of ERISA; (iii) a Termination Event shall occur with respect to a Multi-employer Plan or Multiple Employer Plan which is, in the reasonable opinion of the Agent, likely to result in (A) the termination of such Plan for purposes of Title IV of ERISA, or (B) the Borrower or any ERISA Affiliate incurring any liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency (within the meaning of Section 4245 of ERISA) of such Plan; or (iv) any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall occur which would be reasonably expected to subject the Borrower or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which the Borrower or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability; or

(k)one or more judgments, orders, or decrees shall be entered against the Borrower involving a liability of $15,000,000 or more, in the aggregate (to the extent not paid or covered by insurance provided by a carrier who has acknowledged coverage), and such judgments, orders or decrees (i) shall continue unsatisfied, undischarged and unstayed for a period ending on the first to occur of (A) the last day on which such judgment, order or decree becomes final and unappealable and, where applicable, with the status of a judicial lien or (B) 60 days; provided that if such judgment, order or decree provides for periodic payments over time then the Borrower shall have a grace period of 30 days with respect to each such periodic payment and (ii) have been the subject of any enforcement proceeding commenced by any creditor for a period of at least five Business Days; or

(l)a federal tax lien relating to an amount in excess of $5,000,000 shall be filed against the Borrower or any of its Subsidiaries under Section 6323 of the Code or a lien relating to an amount in excess of $5,000,000 of the PBGC shall be filed against the Borrower or any of its Subsidiaries under Section 4068 of ERISA and in either case such lien shall remain undischarged for a period of 25 days after the date of filing; or

(m)all or a substantial part of the Properties of the Borrower shall be condemned, seized or appropriated; or

(n)any of the Loan Documents shall fail to be in full force and effect in any material respect or the Borrower shall so assert in writing or any of the Loan Documents shall fail to give the Agent or the Lenders the material rights, powers, liens and privileges purported to be created thereby; or

(o)SCANA shall cease to own, directly or indirectly, all of the outstanding Common Stock; or

(p)failure by the Borrower or any member of the Controlled Group to comply with all applicable laws (including, but not limited to ERISA), regulations or similar requirements of governmental authorities (including but not limited to the PBGC, the Internal Revenue Service and the United States Department of Labor), except (i) (A) where the necessity of such compliance is being contested in good faith through appropriate proceedings diligently pursued or (B) where the failure to so comply would not have a Material Adverse Effect, and (ii) such failure shall continue for 30 days after the earlier to occur of (x) written notice thereof has been given to the Borrower by the Agent at the request of any Lender or (y) an officer of the Borrower otherwise becomes aware of any such failure;

then, and in every such event, the Agent, on behalf of the Lenders may (i) by notice to the Borrower terminate the Commitments and they shall thereupon terminate and (ii) by notice to the Borrower declare the Loans (together with accrued interest thereon) and all other amounts payable hereunder and under the other Loan Documents to be, and the Loans (together with all accrued interest thereon) and all other amounts payable hereunder and under the other Loan Documents shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that if any Event of Default specified in subsection (h) or (i) of this Section 6.01 occurs with respect to the Borrower, without any notice to the Borrower or any other act by the Agent or any Lender, the Commitment shall thereupon automatically terminate and the Loans (together with accrued interest thereon) and all other amounts payable hereunder and under the other Loan Documents shall automatically become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

ARTICLE VII

MISCELLANEOUS

SECTION 7.01.Notices.

All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, facsimile transmission or similar writing) and shall be given to such party at its address, or telecopy number set forth on Schedule 1 hereof or such other address or telecopy number as such party may hereafter specify for the purpose by notice to each other party. Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopy number specified as provided in this Section and the confirmation of delivery is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered at the address specified as provided in this Section; provided that Notices of Borrowings to the Agent under Article II shall not be effective until received.

SECTION 7.02.No Waivers.

No failure or delay by the Agent or any Lender in exercising any right, power or privilege hereunder or under any of the other Loan Documents shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

SECTION 7.03.Expenses; Documentary Taxes; Indemnification.

(a)The Borrower shall pay (i) all out-of-pocket expenses of the Agent, BOA and the Arrangers (including reasonable fees and disbursements of one law firm serving as special counsel for the Agent) in connection with the preparation of this Agreement and the other Loan Documents, any waiver or consent hereunder or thereunder or any amendment hereof or thereof or any Default hereunder or thereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agent and each of the Lenders, including reasonable fees and disbursements of counsel of the Agent and each Lender, in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom, including out-of-pocket expenses incurred in enforcing this Agreement and the other Loan Documents.

(b)The Borrower shall indemnify the Lenders against any transfer taxes, documentary taxes, assessments or charges made by any Authority by reason of the execution and delivery of this Agreement or the other Loan Documents (other than any Assignment and Acceptance); provided that no Eligible Assignee shall be entitled to receive any greater payment under this subsection (b) than the related transferor Lender would have been entitled to receive.

(c)The Borrower shall indemnify the Agent, each Arranger, each Lender and each Affiliate thereof and their respective directors, officers, employees and agents (each such person or entity, an “Indemnified Person”) from and hold each of them harmless against any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from any use by the Borrower of the proceeds of any extension of credit by any Lender hereunder or breach by the Borrower of this Agreement or any other Loan Document or from investigation, litigation (including, without limitation, any actions taken by the Agent or such Lender to enforce this Agreement or any of the other Loan Documents (except, as to any such Indemnified Person, enforcement action brought by such Indemnified Person, on which the Borrower prevailsin a final non-appealable judgment in favor of the Borrower by a court of competent jurisdiction)) or other proceeding (including, without limitation, any threatened investigation or proceeding) relating to the foregoing (and whether or not such Indemnified Person is a party to any such investigation, litigation or proceeding) and the Borrower shall reimburse each Indemnified Person upon demand for any reasonable expenses (including, without limitation, legal fees) incurred in connection with any such investigation or proceeding; but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified as determined by a court of competent jurisdiction. No Indemnified Person shall be responsible or liable for consequential or punitive damages relating to this Agreement or any other Loan Documents or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date). The agreements in this Section 7.03 shall survive the resignation of the Agent, the replacement of any Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all the obligations of the Borrower to the Agent and the Lenders under this Agreement and the other Loan Documents. All amounts due under this Section 7.03 shall be payable within ten Business Days after demand therefor.

SECTION 7.04.Amendments, Waivers and Consents.

Neither this Agreement nor any other Loan Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing and signed by the Required Lenders and the Borrower; provided that no such amendment, change, waiver, discharge or termination shall without the consent of each Lender affected thereby:

(i)extend the final maturity of any Loan, or any portion thereof;

(ii)reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) thereof or fees hereunder;

(iii)reduce or waive the principal amount of any Loan;

(iv)increase the Commitment of a Lender over the amount thereof in effect (it being understood and agreed that a waiver of any Default or Event of Default or a mandatory reduction in the Commitments shall not constitute a change in the terms of any Commitment of any Lender);

(v)release the Borrower from its obligations under the Loan Documents;

(vi)reduce any percentage specified in, or otherwise modify, the definition of Required Lenders;

(vii)consent to the assignment or transfer by the Borrower of any of its rights and obligations under (or in respect of) the Loan Documents except as permitted thereby; or

(viii)amend, modify or waive any provision of this Section 7.04.

SECTION 7.05.Benefit of Agreement.

(a)This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto, each Indemnified Person referred to in Section 7.03, and each of their respective successors and assigns; provided that the Borrower may not assign or transfer any of its interests and obligations without prior written consent of each of the Lenders; provided further, that the rights of each Lender to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth in this Section 7.05;

(b)Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Loans, its Notes and its Commitment); provided, however, that

(i)each such assignment shall be to an Eligible Assignee;

(ii)except in the case of an assignment to another Lender, an Affiliate of an existing Lender or any fund that invests in bank loans and is advised or managed by an investment advisor to an existing Lender or an assignment of all of a Lender’s rights and obligations under this Agreement, any such partial assignment shall be in an amount at least equal to $5,000,000 (or, if less, the remaining amount of the Commitment being assigned by such Lender) or an integral multiple of $1,000,000 in excess thereof;

(iii)each such assignment by a Lender of any portion of its Loans shall be accompanied by an assignment of a constant, and not varying, percentage of all of such Lender’s Loans, and each such assignment by a Lender of any portion of its Commitment shall be accompanied by an assignment of a constant, and not varying, percentage of all of such Lender’s Commitment; and

(iv)the parties to such assignment shall execute and deliver to the Agent for its acceptance an Assignment and Acceptance, together with any Note subject to such assignment and a processing fee of $4,000.

Upon execution, delivery and acceptance of such Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Agreement arising after the effective date of such Assignment and Acceptance. Upon the consummation of any assignment pursuant to this Section 7.05, the assignor, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. If the assignee is not a United States person under Section 7701(a)(30) of the Code, it shall deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of Taxes in accordance with Section 2.14.

(c)The Agent shall maintain at its address referred to in Section 7.01 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. Any assignment of any Loan or other obligations shall be effective only upon an entry with respect thereto being made in the Register.

(d)Upon its receipt of an Assignment and Acceptance executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto.

(e)Each Lender may sell participations to one or more Persons (each a “Participant”) in all or a portion of its rights and/or obligations under this Agreement (including all or a portion of its Commitment or its Loans); provided, however, that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Participant shall be entitled to the benefit of the yield protection provisions, and the right of set-off contained in Section 2.17, and (iv) the Borrower shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower hereunder owing to such Lender and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing the amount of principal of or the rate at which interest is payable on such Loans or Notes, extending any scheduled principal payment date or date fixed for the payment of interest on such Loans or Notes or extending its Commitment).

(f)Notwithstanding any other provision set forth in this Agreement, any Lender may at any time assign and pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder.

(g)Any Lender may furnish any information concerning the Borrower in the possession of such Lender from time to time to assignees and Participants (including prospective assignees and Participants), subject, however, to the provisions of Section 7.06 hereof.

(h)Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Bank”) may grant to a special purpose funding vehicle (a “SPC”), identified as such in writing from time to time by the Granting Bank and approved by the Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan advance that such Granting Bank would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan advance, and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan advance, the Granting Bank shall be obligated to make such Loan advance in full pursuant to the terms hereof. The making of a Loan advance by an SPC hereunder shall utilize the Commitment of the Granting Bank to the same extent, and as if, such Loan advance were made by such Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain solely with the Granting Bank to the full extent of the Commitments hereunder). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any state thereof. In addition, notwithstanding anything to the contrary contained in this Section 7.05 any SPC may (i) with notice to, but without the prior written consent of, the Borrower and the Agent and without payment of any processing fee therefor, assign all or a portion of its interests in any Loan advances to the Granting Bank or to any financial institutions (consented to by the Borrower and the Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loan advances and (ii) disclose on a confidential basis any non-public information relating to its Loan advances to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. This section may not be amended without the written consent of each SPC unless the Lenders confirm that no such SPCs exist.

SECTION 7.06.Confidentiality.

Each Lending Party agrees to keep confidential any information furnished or made available to it by or on behalf of the Borrower pursuant to this Agreement; provided that nothing herein shall prevent any Lending Party from disclosing such information (a) to any other Lending Party or any Affiliate of any Lending Party, or any officer, director, employee, agent or advisor of any Lending Party or any Affiliate of any Lending Party (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (b) to any other Person if reasonably incidental to the administration of this Agreement or the other Loan Documents (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (c) as required by any law, rule or regulation or by any subpoena or similar legal proceeding, (d) upon the order of any court or administrative agency, (e) upon the request or demand of any regulatory agency or authority, (f) that is or becomes available to the public or that is or becomes available to any Lending Party other than as a result of a disclosure by any Lending Party prohibited by this Agreement, (g) in connection with any litigation to which such Lending Party or any of its Affiliates may be a party; provided that if permitted by applicable law or regulation, the Borrower is given notice prior to such disclosure and is given an opportunity to obtain a protective order, (h) to the extent necessary in connection with the exercise of any remedy under this Agreement or any other Loan Document, (i) to the National Association of Insurance Commissioners or any successor organization or any nationally recognized rating agency that requires access to information about a Lender’s investment portfolio in connection with ratings issued with respect to such Lender, (j) to any direct or indirect contractual counterparty in swap agreements or such contractual counterparty’s professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty (i) has been approved in writing by the Borrower and (ii) agrees in a writing enforceable by the Borrower to be bound by the provisions of this Section 7.06) and (k) subject to provisions substantially similar to those contained in this Section 7.06, to any actual or proposed Participant or assignee. The agreements in this Section 7.06 shall survive any assignments pursuant to Sections 7.05(b) and 8.09 hereof; provided, however, that the obligations of a Lender Party under this Section 7.06 shall terminate upon the first anniversary of the date of the repayment of the Loans and other obligations under the Loan Documents and the termination of the Commitments hereunder.

SECTION 7.07.Representation by the Lender.

Each Lender hereby represents that it is a commercial lender or financial institution which makes loans in the ordinary course of its business and that it will make its Loans hereunder for its own account in the ordinary course of such business; provided that, subject to Section 7.05 of this Agreement, the disposition of the Notes or an interest in this Agreement held by such Lender shall at all times be within its exclusive control.

SECTION 7.08.Governing Law.

This Agreement and each of the other Loan Documents shall be construed in accordance with and governed by the law of the State of South Carolina.

SECTION 7.09.Consent to Jurisdiction; Waiver of Jury Trial.

(a)The Borrower (i) submits to personal jurisdiction in the State of South Carolina, the courts thereof and the United States District Courts sitting therein, for the enforcement of this Agreement, the Notes and the other Loan Documents and (ii) waives any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of South Carolina for the purpose of litigation to enforce this Agreement, the Notes or the other Loan Documents. Nothing herein contained, however, shall prevent any Lender from bringing any action or exercising any rights against any security and against the Borrower personally or against any assets of the Borrower, within any other state or jurisdiction.

(b)THE AGENT, THE LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT AND ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE AGENT, THE LENDERS OR THE BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT.

SECTION 7.10.Interpretation.

No provision of this Agreement or any other Loan Document shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or dictated such provision.

SECTION 7.11.Counterparts.

This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

SECTION 7.12.Entire Agreement.

This Agreement and the other Loan Documents embody the entire agreement and understanding between the parties hereto and thereto in respect of the transactions contemplated hereby and thereby and supersede all prior negotiations, understandings and agreements between such parties or any of them in respect of such transactions.

ARTICLE VIII

AGENCY PROVISIONS

SECTION 8.01.Appointment.

Each Lender hereby designates and appoints Wachovia, as the Agent of such Lender to act as specified herein and in the other Loan Documents, and each such Lender hereby authorizes the Agent as the Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated by the terms hereof and of the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere herein and in the other Loan Documents, the Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any of the other Loan Documents, or shall otherwise exist against the Agent. The provisions of this Section are solely for the benefit of the Agent and the Lenders and the Borrower shall not have any rights as a third party beneficiary of the provisions hereof. In performing its functions and duties under this Agreement and the other Loan Documents, the Agent shall act solely as the Agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for the Borrower or any of its Affiliates.

SECTION 8.02.Delegation of Duties.

The Agent may execute any of its duties hereunder or under the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

SECTION 8.03.Exculpatory Provisions.

The Agent and its officers, directors, employees, agents, attorneys-in-fact or affiliates shall not be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection herewith or in connection with any of the other Loan Documents (except for its or such Person’s own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower contained herein or in any of the other Loan Documents or in any certificate, report, document, financial statement or other written or oral statement referred to or provided for in, or received by the Agent under or in connection herewith or in connection with the other Loan Documents, or the enforceability or sufficiency therefor of any of the other Loan Documents, or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Agent shall not be responsible, to any Lender for the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement, or any of the other Loan Documents or for any representations, warranties, recitals or statements made by the Borrower herein or therein or made by the Borrower in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Agent to the Lenders or by or on behalf of the Borrower to the Agent or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default or to inspect the properties, books or records of the Borrower or its Affiliates.

SECTION 8.04.Reliance on Communications.

The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower, independent accountants and other experts selected by the Agent with reasonable care). The Agent may deem and treat the Lenders as the owner of their respective interests hereunder for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent in accordance with Section 7.05 hereof. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or under any of the other Loan Documents unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or under any of the other Loan Documents in accordance with a request of the Required Lenders (or to the extent specifically provided in Section 7.04, all the Lenders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders (including their successors and assigns).

SECTION 8.05.Notice of Default.

The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Lender or the Borrower referring to the Loan Documents, describing such Default or Event of Default and stating that such notice is a “notice of default.” In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders.

SECTION 8.06.Non-Reliance on the Agent and Other Lenders.

Each Lender expressly acknowledges that each of the Agent and its officers, directors, employees, agents, attorneys-in-fact or affiliates has not made any representations or warranties to it and that no act by the Agent or any affiliate thereof hereinafter taken, including any review of the affairs of the Borrower or any of its Affiliates, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower or its Affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower and its Affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial or other conditions, prospects or creditworthiness of the Borrower or its respective Affiliates which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.

SECTION 8.07.Indemnification.

The Lenders agree to indemnify the Agent in its capacity as such (to the extent required by the terms hereof to be, but not so reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitments (or if the Commitments have expired or been terminated, in accordance with the respective principal amounts of outstanding Loans of the Lenders), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time be imposed on, incurred by or asserted against the Agent in its capacity as such in any way relating to or arising out of this Agreement or the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Agent. If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished (which additional indemnity shall be furnished in accordance with the terms of this Section 8.07). The agreements in this Section shall survive the repayment of the Loans and other obligations under the Loan Documents and the termination of the Commitments hereunder.

SECTION 8.08.The Agent in its Individual Capacity.

The Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower, its Subsidiaries or their respective Affiliates as though the Agent were not the Agent hereunder. With respect to the Loans made by and all obligations of the Borrower hereunder and under the other Loan Documents, the Agent shall have the same rights and powers under this Loan Agreement as any Lender and may exercise the same as though it were not the Agent, and the terms “Lender” and “Lenders” shall include the Agent in its individual capacity.

SECTION 8.09.Successor Agent.

The Agent may, at any time, resign upon 20 days’ written notice to the Borrower and the Lenders. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the notice of resignation, then the retiring Agent shall select a successor Agent provided such successor is a Lender hereunder or a commercial bank organized under the laws of the United States of America or of any State thereof and has a combined capital and surplus of at least $400,000,000. Upon the acceptance of any appointment as the Agent hereunder by a successor, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations as the Agent, as appropriate, under this Agreement and the other Loan Documents and the provisions of this Section 8.09 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement.

SECTION 8.10.Other Agents.

The Arrangers and any Lender identified as an “Agent” other than the Agent shall not have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the forgoing, none of the Lenders so identified shall have or be deemed to have any fiduciary relationship with any other Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

SECTION 8.11.Existing Credit Agreement.

On the date hereof, each of the Existing Credit Agreement and each of the Existing Notes shall be amended and restated in their entirety. The parties hereto acknowledge and agree that (a) the execution of this Agreement and the Notes does not constitute a novation, payment and reborrowing, or termination of the obligations under the Existing Credit Agreement and the Existing Notes as in effect prior to the date hereof and which remain outstanding, (b) the Obligations are in all respects continuing (as amended and restated hereby) and (c) references in the other Loan Documents to the “Credit Agreement” shall be deemed to be references to this Agreement and references to the notes issued pursuant to the Existing Credit Agreement shall be deemed to be references to the Notes issued pursuant to this Agreement, and to the extent necessary to effect the foregoing, each such Loan Document is hereby deemed to be amended accordingly.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

	PUBLIC SERVICE COMPANY OF NORTH
	CAROLINA, INCORPORATED
By:	/s/ CathyY. Kirven
Name:	Cathy Y. Kirven
Title:	Treasurer

	WACHOVIA BANK,
	NATIONAL ASSOCIATION, as Agent
	and a Lender
By:	/s/Frederick W. Price
Name:	Frederick W. Price
Title:	Managing Director

	BANK OF AMERICA, N.A., as
	Syndication Agent and a Lender
By:	/s/Michelle A. Schoenfeld
Name:	Michelle A. Schoenfeld
Title:	Senior Vice President

	THE BANK OF NEW YORK, as a
	Documentation Agent and a Lender
By:	/s/David T. Sunderwirth
Name:	David T. Sunderwirth
Title:	Vice President

	BRANCH BANKING AND TRUST CO.
	OF SOUTH CAROLINA, as a
	Documentation Agent and a Lender
By:	/s/H. B. Armstrong, Jr.
Name:	H. B. Armstrong, Jr.
Title:	Senior Vice President

	UBS LOAN FINANCE LLC, as a Lender
By:	/s/Wilfred V. Saint
Name:	Wilfred V. Saint
Title:	Director, Banking Products Services, US
By:	/s/Richard L. Tavrow
Name:	Richard L. Tavrow
Title:	Director, Banking Products Services, US

	SUNTRUST BANK, as a Lender
By:	/s/Kelley Brunson
Name:	Kelley Brunson
Title:	Vice President

	CREDIT SUISSE, CAYMAN ISLANDS
	BRANCH, as a Lender
By:	/s/Vanessa Gomez
Name:	Vanessa Gomez
Title:	Vice President
By:	/s/Rianka Mohan
Name:	Rianka Mohan
Title:	Associate

	CAROLINA FIRST BANK, as a Lender
By:	/s/Edward P. West, Jr.
Name:	Edward P. West, Jr.
Title:	Executive Vice President

	THE NATIONAL BANK OF SOUTH
	CAROLINA, as a Lender
By:	/s/Jessie C. Ford
Name:	Jessie C. Ford
Title:	Senior Vice President

	SOUTH CAROLINA BANK AND
	TRUST, N.A., as a Lender
By:	/s/James C. Hunter, Jr.
Name:	James C. Hunter, Jr.
Title:	EVP

SCHEDULE I

PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED, COMMITMENTS AND PRO RATA SHARES

LENDING/LIBOR OFFICE Wachovia Bank, National Association One Wachovia Center 201 South College Street, CP-8 Charlotte, North Carolina 28288-0680 Attention: Syndication Agency Services Telephone: (704) 383-7698 Facsimile: (704) 383-0288 with a copy of Notices to: One Wachovia Center, DC-5 301 South College Street Charlotte, North Carolina 28288-0251 Attn: Frederick W. Price Telephone: (704) 374-4062 Facsimile: (704) 374-3300 Email: rick.price@wachovia.com		Commitment $24,038,461.53	Pro Rata Share 19.23%
LIBOR/LENDING OFFICE Bank of America, N.A. Shelly Schoenfeld 100 North Tryon Street NC1-007-13-13 Charlotte, North Carolina 28255 Telephone: (704) 386-1432 Facsimile: (704) 386-1319 Email: michelle.a.schoenfeld@bankofamerica.com with a copy of Notices to: Jackie Archuleta 901 Main Street TX1-492-14-12 Dallas, Texas 75202-3714 Telephone: (214) 209-2135 Facsimile: (214) 290-8372 Email: Jacqueline.archuleta@bankofamerica.com	Commitment $24,038,461.53			Pro Rata Share 19.23%
LENDING/LIBOR OFFICE The Bank of New York David T. Sunderwrith, Vice President One Wall Street, 19th Floor New York, New York 10286 Telephone: 212-635-8804 Facsimile: (212) 635-7552 Email: dsunderwrith@bankofny.com with a copy of Notices to: Lisa Williams One Wall Street, 19th Floor New York, New York Telephone: (212) 685-7535 Facsimile: (212) 635-7552 Email: lwilliams@bankofny.com		Commitment $16,346,153.85	Pro Rata Share 13.08%
LENDING/LIBOR OFFICE Branch Bank and Trust Co. of South Carolina H.B. Armstrong, Jr., Senior Vice President 1901 Assembly Street Columbia, South Carolina 29201 Telephone: (803) 251-1394 Facsimile: (803) 251-1776 Email: harmstrong@bbandt.com with a copy of Notices to: Joseph L Carag 1901 Assembly Street Columbia, South Carolina 29201 Telephone: (803) 251-1394 Facsimile: (803) 251-1776 Email: jcarag@bbandt.com		Commitment $16,346,153.85	Pro Rata Share 13.08%
LENDING/LIBOR OFFICE UBS Loan Finance LLC Terry Donovan 677 Washington Boulevard Stamford, Connecticut 06901 Telephone: (203) 719-6100 Email: terry.donovan@ubs.com with a copy of Notices to: Christopher Aithin 677 Washington Boulevard Stamford, Connecticut 06901 Telephone: (203) 719-3845 Facsimile: (203) 719-3888 Email: Christopher.aithin@ubs.com		Commitment $12,500,000.00	Pro Rata Share 10.00%
LENDING/LIBOR OFFICE SunTrust Bank Linda Stanley 303 Peachtree Street, 10th Floor Atlanta, GA 30308 Tel: 404-532-0989 Fax: 404-827-6270 Linda.stanley@suntrust.com with a copy of Notices to: Bonnie Langley 303 Peachtreet Street, NE, 10th Floor Atlanta, Georgia 30308 Telephone: (404) 284-4624 Email: bonnie.langley@suntrust.com		Commitment $9,615,384.62	Pro Rata Share 7.69%
LENDING/LIBOR OFFICE Credit Suisse First Boston, Acting Through Its Cayman Island Branch Sarah Wu Eleven Madison Avenue New York, New York 10010 Telephone: (212) 325-5813 Facsimile: (212) 743-2042 Email: sarah.wu@csfb.com with a copy of Notices to: Ronald Davis One Madison Avenue New York, New York 10010 Telephone: (212) 325-0178 Facsimile: (917) 326-8428 Email: ronald.davis@csfb.com		Commitment $9,615,384.62	Pro Rata Share 7.69%
LENDING/LIBOR OFFICE The National Bank of South Carolina Jessie Ford P.O. Box 1457 Columbia, South Carolina 29202 Telephone: (803) 929-2004 Facsimile: (803) 929-2009 Email: jessieford@nationalbanksc.com with a copy of Notices to: Jane B. Rich P.O. Box 1457 Columbia, South Carolina 29202 Telephone: (803) 929-2011 Facsimile: (803) 929-2031 Email: janerich@nationalbanksc.com		Commitment $6,730,769.23	Pro Rata Share 5.38%
LENDING/LIBOR OFFICE Carolinas First Bank Charles D. Chamberlain 104 South Main Street, 10th Floor Greenville, South Carolina 29601 Telephone: (864) 255-8924 Facsimile: (864) 255-8991 Email: charles.chamberlain@carolinasfirst.com with a copy of Notices to: Meredith M. Whitt 104 South Main Street, 6th Floor Greenville, South Carolina 29601 Telephone: (864) 298-6092 Facsimile: (864) 255-8920 Email: Meredith.millender@carolinasfirst.com		Commitment $4,807,692.31	Pro Rata Share 3.85%
LENDING/LIBOR OFFICE South Carolina Bank and Trust, N.A. Jim Hunter 3205 St. Matthews Road Orangeburg, South Carolina 29115 Telephone: (803) 531-0572 Facsimile: (803) 531-8753 with a copy of Notices to: Mavis Horger 950 John C. Calhoun Drive Orangeburg, South Carolina 29115 Telephone: (803) 531-0513 Facsimile: (803) 531-0518		Commitment $961,538.46	Pro Rata Share 0.77%

NOTICE TO BORROWER:

1426 Main Street

Columbia, South Carolina 29201

Attention: Cathy Kirven

Telecopy number: (803) 217-8869

Confirmation number: (813) 217-9824

Schedule 4.05

None

EXHIBIT A

AMENDED AND RESTATED

NOTE

Columbia, South CarolinaJune 30, 2005

For value received, PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED, a South Carolina corporation (the “Borrower”), promises to pay to the order of ___________________________ (the “Lender”), for the account of its Lending Office, the principal sum of __________________ Dollars ($_________), or such lesser amount as shall equal the unpaid principal amount of each Loan made by the Lender to the Borrower pursuant to the Credit Agreement referred to below, on the dates provided in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of this Note on the dates and at the rate or rates provided for in the Credit Agreement. Following the occurrence of an Event of Default, principal of and, to the extent permitted by law, overdue interest on the principal amount hereof shall bear interest at the Default Rate, as provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in federal or other immediately available funds at the Lending Office of the Lender as set forth in the Credit Agreement.

All Loans made by the Lender, the length of the respective Interest Periods, if any, and the effective interest rates from time to time applicable thereto and all prepayments of the principal thereof and whether such Loans are Alternate Base Rate Loans or LIBOR Rate Loans shall be recorded by the Lender and, prior to any transfer hereof, endorsed by the Lender on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof, provided that the failure of the Lender to make, or any error of the Lender in making, any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement.

This Note is one of the Notes referred to in the Amended and Restated Five-Year Credit Agreement (as the same may be amended from time to time, the “Credit Agreement”) dated as of June 30, 2005 among the Borrower, the lenders party thereto (including the Lender) and Wachovia, as the Agent. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment and the repayment hereof and the acceleration of the maturity hereof.

The Borrower hereby waives presentment, demand, protest, notice of demand, protest and nonpayment and any other notice required by law relative hereto, except to the extent as otherwise may be expressly provided for in the Credit Agreement.

The Borrower agrees, in the event that this Note or any portion hereof is collected by law or through an attorney at law, to pay all reasonable costs of collection, including, without limitation, reasonable attorneys’ fees, to the extent expressly provided for in the Credit Agreement.

This Note shall be construed in accordance with and governed by the laws of the State of South Carolina. This Note is an amendment and restatement of that certain note dated June 15, 2004, in favor of the Lender. It is not intended as a novation or substitution of the original obligation of the Borrower, but is a modification thereof only. All Obligations represented by the original note shall continue, except as may be modified hereby.

IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed under seal, by its duly authorized officer as of the day and year first above written.

	PUBLIC SERVICE COMPANY OF NORTH
	CAROLINA, INCORPORATED
By:
Name:
Title:
	(SEAL)

Note (cont’d)

LOANS AND PREPAYMENTS OF PRINCIPAL

    Date Type of Loan   Interest Rate Amount of Loan Amount of Principal Prepaid Length of Interest Period   Notation Made By

EXHIBIT B-1

[DRAFT]

June 30, 2005

Wachovia Bank, National Association, as Administrative Agent,

under the Credit Agreement referenced below

201 South College Street

Charlotte, North Carolina 28244

Bank of America, N.A., as Syndication Agent,

under the Credit Agreement

100 North Tryon Street

Charlotte, North Carolina 28255

and

The Lenders listed on Schedule I hereto which are

parties to the Credit Agreement on the date hereof

Gentlemen:

We have acted as counsel for Public Service Company of North Carolina, Incorporated, a South Carolina corporation (the “Borrower”), in connection with the $125,000,000 Amended and Restated Five-Year Credit Agreement dated as of June 30, 2005 (the “Credit Agreement”), among the Borrower, the Lenders identified therein, Wachovia Bank, National Association, as Administrative Agent, and Bank of America, N.A., as Syndication Agent (collectively, the “Agents”). Terms defined in the Credit Agreement are used herein as defined therein. This opinion is being furnished to you pursuant to Section 3.01(c) of the Credit Agreement.

In connection with this opinion, we have examined copies of the Credit Agreement and the Notes which have been executed and delivered by the Borrower. We also have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. As to questions of fact relating to the Borrower material to such opinion, we have relied upon representations of officers of the Borrower and certificates of public officials. In connection with the matters addressed in paragraphs 2(iii) and 3, we have relied upon the opinion of Francis P. Mood, Senior Vice President and General Counsel to the Borrower of even date herewith addressed to you.

When used herein, “Loan Documents” shall mean the Credit Agreement and the Notes.

In our examination, we have assumed, with your permission:

(a)   the genuineness of all signatures and the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents;

(b)   that each of the Loan Documents has been duly authorized, executed and delivered by each of the parties thereto other than the Borrower, and is a valid and binding obligation of each such party other than Borrower, enforceable against each such party in accordance with its terms;

(c) that good and adequate consideration was given for the execution and delivery of the Loan Documents;

(d) that the Loans provided for in the Credit Agreement are for commercial purposes; and

(e) that the Agents and the Lenders will exercise their rights and remedies under the Loan Documents in good faith and in a commercially reasonable manner.

Upon the basis of the foregoing, but subject to the assumptions and qualifications set forth herein, we are of the opinion that:

1.The Borrower is a corporation existing under the laws of the State of South Carolina (the "State"), has all corporate power required to carry on its business as now conducted and is duly qualified to transact business in every jurisdiction in which, by the nature of its business, such qualification is necessary, except where the failure to be so qualified would not have a material adverse effect on the business, operations, property or financial or other condition of the Borrower on a consolidated basis.

2.The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes (i) are within the Borrower’s corporate power, (ii) have been duly authorized by all necessary corporate action and (iii) assuming compliance with the SEC Order and the NCUC Order and that all required regulatory filings are made, do not contravene, or constitute a default under, any provision of applicable law or regulation or of the Articles of Incorporation or By-laws of the Borrower.

3.Each of the Credit Agreement and each of the Notes constitutes a valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms.

4.The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

5.The rates of interest to be charged on the Loans to the Borrower under the Credit Agreement are not usurious under applicable constitutional, legislative, judicial or administrative provisions, statutes, regulations, decisions, rulings or other laws of the State.

The opinions expressed herein are qualified as follows:

A. We express no opinion as to compliance with law, or consents, approvals, authorizations, orders, registrations or qualifications with or from courts or governmental or regulatory authorities, with respect to the conduct of the Borrower’s ongoing business operations.

B. This opinion is based upon laws and regulations in effect on the date hereof, and administrative and judicial interpretations thereof, and we assume no obligation to update or supplement this opinion to reflect any events or state of facts that may hereafter come to our attention or any changes in laws, regulations or court decisions that may hereafter occur.

C. We are qualified to practice law in the State and we express no opinion as to any laws other than the laws of the State and of the United States of America.

D. We advise you that we previously have represented and currently are representing some of the Lenders and the Agents in unrelated matters. By your acceptance of this opinion letter, you waive any claim for conflicts of interest as a result of our representation of the Borrower in this transaction and our representation of the Lenders and the Agents in unrelated matters.

E. The obligations of the Borrower, and the rights of the Agents and the Lenders under the Loan Documents, are subject to (i) the United States Bankruptcy Code, 11 USC §101, et seq. (the “Bankruptcy Code”); (ii) bankruptcy, insolvency, fraudulent conveyance, marshalling, appraisal rights, liquidation, receivership, moratorium, reorganization or other similar laws affecting the enforcement of creditors’ rights generally; (iii) general principles of equity limiting the availability of the remedy of specific performance and affecting the enforcement of creditors’ rights generally, regardless of whether such matters are considered in a proceeding at law or in equity; (iv) considerations of public policy including those limiting the enforceability of indemnities and remedies; (v) a requirement that remedies be exercised in good faith; and (vi) rights of any governmental authority or agency thereof arising under any applicable law or regulation.

F. This opinion is limited to the matters expressly set forth herein. We express no opinion with respect to any other matters or with respect to any federal or State antitying, antitrust, securities, intellectual property or tax laws, and no other opinions should be inferred beyond the matters expressly stated.

G. Delay on the part of a lender to exercise remedies under a loan document has, in some cases, been determined by the courts of the State to constitute a waiver of such remedies. We express no opinion as to whether provisions like those in the Loan Documents which purport to preclude such waivers will be deemed enforceable if considered by the courts of the State.

H. The waiver of rights, such as, without limitation, waivers of acceptance, presentment, demand, protest, notice, defenses, appraisement, valuation, stay, marshalling, rights of redemption, objections to jurisdiction, venue and inconvenient forum, jury trial rights and other similar rights are present waivers in advance of the existence of those rights and, as such, are of doubtful enforceability in the State. In addition, certain waivers may be unenforceable as against public policy, including but not limited to waivers of defenses based on lack of capacity or lack of consideration, and compulsory counterclaims may not be waived. Moreover, with respect to waivers of rights to jury trials, we must advise you that while there appears to be a basis of support in case law upholding such waivers, State courts have strictly construed such waivers.

I. We express no opinion as to the enforceability of provisions in the Loan Documents pursuant to which the Borrower agrees to waivers on behalf of third parties not a party to such Loan Documents.

J. We express no opinion as to the enforceability of remedial provisions of the Loan Documents which are dependent on licensure of or grant of other governmental authority to the Agents or the Lenders.

K. As noted in Mr. Mood’s opinion, further authorizations will be required in order for the Borrower to borrow under the Credit Agreement after April 15, 2006, and certain filings are required under the SEC Order and the NCUC Order.

L. We express no opinion as to the enforceability of any provision whereby the Agents or any Lender reserve the right to charge "default interest" or a higher rate of interest after default than the interest that would otherwise accrue under the documents, or any other charge or fee, however calculated, which would be deemed a penalty to the extent such interest, charge or fee is in violation of public policy.

This opinion is delivered to you in connection with the transactions referenced above and may only be relied upon by you or any Eligible Assignee or Participant under the Credit Agreement, and by no other Person, without our prior written consent.

Very truly yours,

McNAIR LAW FIRM, P.A.

By: __________________________________

A member of the Firm

Schedule I

Lenders identified in the Credit Agreement

Wachovia Bank, National Association

Bank of America, N.A.

The Bank of New York

Branch Banking and Trust Co. of South Carolina

UBS Loan Finance LLC

Suntrust Bank

Credit Suisse First Boston, acting through its Cayman Islands Branch

The National Bank of South Carolina

Carolina First Bank

South Carolina Bank and Trust, N.A.

EXHIBIT B-2

June 30, 2005

Wachovia Bank, National Association, as Administrative Agent,

under the Credit Agreement referenced below

201 South College Street

Charlotte, North Carolina 28244

Bank of America, N.A., as Syndication Agent,

under the Credit Agreement

100 North Tryon Street

Charlotte, North Carolina 28255

and

The Lenders listed on Schedule I hereto which are

parties to the Credit Agreement on the date hereof

Gentlemen:

I am Senior Vice President and General Counsel of Public Service Company of North Carolina, Incorporated, a South Carolina corporation (the “Borrower”), and have acted as counsel to the Borrower in connection with the $125,000,000 Amended and Restated Five-Year Credit Agreement dated as of June 30, 2005 (the “Credit Agreement”), among the Borrower, the Lenders identified therein, Wachovia Bank, National Association, as Administrative Agent, and Bank of America, N.A., as Syndication Agent. Terms defined in the Credit Agreement are used herein as therein defined. This opinion is being furnished to you pursuant to Section 3.01(c) of the Credit Agreement.

In connection with this opinion, I have examined copies of the Credit Agreement and the Notes which have been executed and delivered by the Borrower. I also have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. In my examination, I have assumed the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies and the authenticity of the originals of such latter documents. I have assumed for purposes of my opinion set forth below that the Credit Agreement has been duly authorized, executed and delivered by each of the parties thereto other than the Borrower. As to questions of fact relating to the Borrower material to such opinion, I have relied upon representations of appropriate officers of the Borrower and certificates of public officials.

Upon the basis of the foregoing and subject to the qualifications, limitations and exceptions set forth herein, I am of the opinion that:

1.The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes (i) do not contravene, or constitute a default under, any provision of applicable law or regulation (including, without limitation, PUHCA) or any material agreement, judgment, injunction, order, decree or other instrument which is binding upon the Borrower provided that the conditions in the SEC Order set out in the Credit Agreement continue to be complied with, except that, in order for the Borrower to borrow under the Credit Agreement after April 15, 2006, additional authorization from the Securities and Exchange Commission (the “SEC”) will be required; (ii) do not result in the creation or imposition of any Lien on any asset of the Borrower (other than Liens created under the Credit Agreement); and (iii) require no action by or in respect of, or filing with, any governmental body, agency or official, except for (a) such authorizations as may be required from the SEC which have been obtained through April 15, 2006, (b) the filings set forth in the SEC Order which filings, if any, required to have been made on or before the date hereof, have been made, (c) such authorizations as may be required by the NCUC which as set forth in the NCUC Order have been obtained and (d) the filings required under the NCUC Order, which filings will be made within the time periods required.

With respect to the matters addressed in paragraph 1(i) above, I note for you that the Borrower is a party to a Debenture Purchase Agreement dated as of June 25, 1992 relating to the Borrower’s $32,000,000 original principal amount 8.75% Senior Debentures due June 30, 2012 (the “Debenture Agreement”). The Debenture Agreement contains covenants on the part of the Borrower to limit the amount of (a) additional unsecured Funded Debt as defined in the Debenture Agreement as all Debt (as defined in the Debenture Agreement) which would, in accordance with generally accepted accounting principles, constitute long term debt, and in any event includes (A) any Debt with a maturity more than one year after the date of determination, (B) any Debt outstanding under a revolving credit or similar agreement providing for borrowings (and renewals and extensions thereof) over a period extending more than one year from the date of determination notwithstanding that any such Debt may be payable on demand or within one year after such date, (C) any Financing Lease Obligation (as defined in the Debenture Agreement) and (D) any Guaranty (as defined in the Debenture Agreement) with respect to Funded Debt of another person; and (b) Current Debt as defined in the Debenture Agreement as all Debt which would, in accordance with generally accepted accounting principles, constitute short term debt, and in any event includes all such Debt with a maturity one year or less after the date of determination (except any such Debt included in Funded Debt by reason of clause (B) of the definition thereof). For purposes of the matters addressed in paragraph 1(i) above, I have assumed that the Borrower, in the course of its performance (but not the execution and delivery) of the Credit Agreement and the Notes, will not violate the limitations on Funded Debt or Current Debt set forth in the Debenture Agreement.

2.Other than as disclosed in the Disclosure Documents, there are no actions, suits or proceedings pending or, to my knowledge, threatened against or affecting the Borrower before any court or arbitrator or any governmental body, agency or official except actions, suits or proceedings that, if adversely determined, would not individually or in the aggregate have a reasonable possibility (taking into account the likelihood of an adverse determination) of having a Material Adverse Effect.

I am qualified to practice in the State of South Carolina and do not purport to be an expert on, or to express any opinion herein concerning any law other than the law of the State of South Carolina and the federal law of the United States. I have made no independent investigation of the law of any jurisdiction other than the law of the State of South Carolina and the federal law of the United States.

This opinion is delivered to you in connection with the transactions referenced above and may only be relied upon by you or any Eligible Assignee or Participant under the Credit Agreement and by no other Person, without my prior written consent. Furthermore, these opinions are rendered as of the date hereof, and I disclaim any requirements to update this opinion subsequent to the date hereof.

Very truly yours,

By:

Francis P. Mood, Jr.,

Senior Vice President and General Counsel

Schedule I

Lenders identified in the Credit Agreement

EXHIBIT C

FORM OF ASSIGNMENT AND ACCEPTANCE

Reference is made to the Amended and Restated Five-Year Credit Agreement dated as of June 30, 2005 (as amended and modified from time to time, the “Credit Agreement”) among PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED, a South Carolina corporation, the Lenders identified therein and Wachovia Bank, National Association, as the Agent. Terms defined in the Credit Agreement are used herein with the same meaning.

The “Assignor” and the “Assignee” referred to on Schedule I agree as follows:

1.The Assignor hereby sells and assigns to the Assignee, without recourse and without representation or warranty except as expressly set forth herein, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor’s rights and obligations under the Agreement and the other Loan Documents as of the date hereof equal to the percentage interest specified on Schedule I of all outstanding rights and obligations under the Agreement and the other Loan Documents. After giving effect to such sale and assignment, the Assignee’s Commitment and the amount of the Loans owing to the Assignee will be as set forth on Schedule I and the Assignor’s Commitment and the amount of the Loans owing to the Assignor will be as set forth on Schedule I.

2.The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Loan Documents or any other instrument or document furnished pursuant thereto; and (iv) attaches the Notes held by the Assignor and requests that the Agent exchange such Notes for new Notes payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto and to the Assignor in an amount equal to the Commitment retained by the Assignor, if any, as specified on Schedule I.

3.The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Sections 4.04(a) and 5.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender; and (vi) attaches any U.S. Internal Revenue Service or other forms required under Section 2.14.

4.Following the execution of this Assignment and Acceptance, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date for this Assignment and Acceptance (the “Effective Date”) shall be the date of acceptance hereof by the Agent, unless otherwise specified on Schedule I.

5.Upon such acceptance and recording by the Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance and the Credit Agreement, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance and the Credit Agreement, relinquish its rights and be released from its obligations under the Credit Agreement.

6.Upon such acceptance and recording by the Agent, from and after the Effective Date, the Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves.

7.This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of South Carolina.

8.This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance.

IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date hereof.

____________________________, as Assignor

By:

Name

Title:

_______________________________, as Assignee

By:

Name:

Title:

Notice address of Assignee:

<<Assignee>>

_________________________

_________________________

Attn: _____________________

Telephone: (___) ___________

Telecopy: (___) ____________

CONSENTED TO:

WACHOVIA BANK, NATIONAL ASSOCIATION,*

as the Agent

By:

Name:

Title:

PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED*

By:

Name:

Title:

_____________________________________

*Required if the Assignee is an Eligible Assignee solely by reason of clause (iii) of the definition of “Eligible Assignee.”

*Required if the Assignee is an Eligible Assignee solely by reason of clause (iii) of the definition of “Eligible Assignee.”

SCHEDULE I

to

ASSIGNMENT AND ACCEPTANCE

(a)	Date of Assignment:
(b)	Legal Name of Assignor:
(c)	Legal Name of Assignee:
(d)	Effective Date of Assignment*:
(e)	Pro Rata Percentage Assigned (expressed as a percentage set forth to at least 8 decimals)	%
(f)	Pro Rata Percentage of Assignee after giving effect to this Assignment and Acceptance on the Effective Date (set forth to at least 8 decimals)	%
(g)	Pro Rata Percentage of Assignor after giving effect to this Assignment and Acceptance on the Effective Date (set forth to at least 8 decimals)	%
(h)	Outstanding Balance of Loans as of the Effective Date	$__________
(i)	Dollar Amount of Assignor’s portion of the Loans after giving effect to this Assignment and Acceptance on the Effective Date (the amount set forth in (h) multiplied by the percentage set forth in (g))	$__________
(j)	Dollar Amount of Assignee’s portion of the Loans after giving effect to this Assignment and Acceptance on the Effective Date (the amount set forth in (h) multiplied by the percentage set forth in (f))	$__________

__________________

*This date should be no earlier than five Business Days after delivery of this Assignment and Acceptance to the Agent.

EXHIBIT D-1

NOTICE OF BORROWING

[Date]

This Notice of Borrowing is given under and pursuant to Section 2.02 of the Amended and Restated Five-Year Credit Agreement (as amended from time to time, the “Credit Agreement”) dated as of June 30, 2005, among PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED, the Lenders identified therein and Wachovia, as the Agent. Capitalized terms used and not defined herein shall have the meanings assigned to them in the Credit Agreement.

9.The date of the Borrowing in connection with which this Notice of Borrowing is given shall be ______________________________.

10.The Type of and Interest Period (if applicable) for the Loan shall be _______________________.

11.The aggregate amount of such Borrowing shall be $___________________.

12.In the case of a Borrowing comprising LIBOR Rate Loans the initial Interest Period is: [1, 2, 3 or 6] months.

13.The Borrower hereby represents and warrants that on the date the Borrowing requested hereunder is made (both before and after giving effect to the making of such Borrowing and after giving effect to the application, directly or indirectly, of the proceeds of such Borrowing):

(b)no Default or Event of Default has occurred and is continuing; and

(c)the representations and warranties of the Borrower contained in Article IV of the Credit Agreement (other than with respect to Section 4.04(b) and Section 4.05) are true and correct in all material respects as if made on and as of the date of such Borrowing.

The Borrower has caused this Notice of Borrowing to be executed and delivered and the certification and warranties contained herein to be made by its duly authorized officer this _______ day of ________________________, 20___.

PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED

By:

Title:

EXHIBIT D-2

FORM OF NOTICE OF CONVERSION

[Date]

This Notice of Conversion is given under and pursuant to Section 2.16 of the Amended and Restated Five-Year Credit Agreement (as amended from time to time, the “Credit Agreement”), dated as of June 30, 2005, among PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED, the Lenders identified therein and WACHOVIA, as the Agent. Capitalized terms used and not defined herein shall have the meanings assigned to them in the Credit Agreement.

1.This Notice of Conversion is made pursuant to the terms of the Credit Agreement.

2.Please be advised that the Borrower is requesting that as of _________ a portion of the current outstanding Loans, in the amount of $______________, currently accruing interest at _____________, be continued or converted at the interest rate option set forth in paragraph 3 below.

3.The interest rate option applicable to the conversion of all or part of the existing Loans shall be:

a.________the Alternate Base Rate

b.________the LIBOR Rate plus the Applicable Percentage

for an Interest Period of:

________ one month

________ two months

________ three months

________ six months

PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED

By:

Name:

Title:

EXHIBIT E

FORM OF COMPLIANCE CERTIFICATE

COMPLIANCE CERTIFICATE

Reference is made to the Amended and Restated Five-Year Credit Agreement dated as of June 30, 2005 (as modified and supplemented and in effect from time to time, the “Credit Agreement”) by and among Public Service Company of North Carolina, Incorporated, the Lenders from time to time parties thereto, and Wachovia, as the Agent. Capitalized terms used herein shall have the meanings ascribed thereto in the Credit Agreement; all amounts shown herein, unless expressly set forth to the contrary, shall be without duplication.

Pursuant to the terms of the Credit Agreement, _________________________, the duly authorized ____________________ of the Borrower, hereby certifies to the Agent and the Lenders that, as of and for the Fiscal Quarter/Fiscal Year ended ___________, (i) the quarterly/annual financial statements for the fiscal period cited, which accompany this certificate, fairly present in all material respects the financial condition of the Borrower and have been prepared in accordance with GAAP (in the case of any quarterly financial statements, subject to changes resulting from normal year-end audit adjustments and with the understanding that such financial statements may not contain the complete notes appearing in the annual financial statements). (ii) no Default or Event of Default is in existence on and as of the date hereof, (iii) Schedule 1 attached hereto sets forth the true and correct amount of Off-Balance Sheet Debt in excess of $5,000,000 in the aggregate of the Borrower as of the end of fiscal period cited above and (iv) Schedule 2 attached hereto sets forth the calculations (calculated as of the date of the financial statements referred to above) demonstrating compliance by the Borrower with the financial covenant contained in Section 5.19 of the Credit Agreement as of the end of the fiscal period cited above.

PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED

By:

Name:

Title:

Schedule 1

Off Balance Sheet Debt of the Borrower in Excess of $5,000,000 in the Aggregate

Schedule 2

Compliance with Financial Covenant

Compliance with Section 5.19 - Debt Capitalization
A.		Debt	$
B.		Total Capitalization	$
	1.	preferred stock	$
	2.	Common Equity	$
	3.	Debt (Line A)	$
	4.	unamortized common stock expense	$
	5.	Total Capitalization (Line B.1 plus Line B.2
		plus Line B.3 minus Line B.4)
C.		Ratio of Debt to Total Capitalization (Line A to Line B.5)		to 1.0
				(Not to exceed .70 to 1.0)

EX-31.01

Exhibit 31.01

CERTIFICATION

I, William B. Timmerman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of SCANA Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2005
	/s/William B. Timmerman
	William B. Timmerman
	Chairman of the Board, President and
	Chief Executive Officer

EX-31.02

Exhibit 31.02

CERTIFICATION

I, Kevin B. Marsh certify that:

1. I have reviewed this quarterly report on Form 10-Q of SCANA Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2005
	/s/Kevin B. Marsh
	Kevin B. Marsh
	Senior Vice President and Chief Financial Officer

EX-31.03

Exhibit 31.03

CERTIFICATION

I, William B. Timmerman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of South Carolina Electric & Gas Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5 The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2005 

                                                                                                           /s/William B. Timmerman

                                                                                                           William B. Timmerman

                                                                                                           Chairman of the Board and

Chief Executive Officer

EX-31.04

Exhibit 31.04

CERTIFICATION

I, Kevin B. Marsh, certify that:

1. I have reviewed this quarterly report on Form 10-Q of South Carolina Electric & Gas Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5 The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2005 

                                                                                                            /s/Kevin B. Marsh

                                                                                                     Kevin B. Marsh

                                                                                                           Senior Vice President and Chief Financial Officer

EX-31.05

Exhibit 31.05

CERTIFICATION

I, William B. Timmerman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Public Service Company of North Carolina, Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5 The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2005 

                                                                                                           /s/William B. Timmerman

                                                                                                           William B. Timmerman

                                                                                                           Chairman of the Board and

Chief Executive Officer

EX-31.06

Exhibit 31.06

CERTIFICATION

I, Kevin B. Marsh, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Public Service Company of North Carolina, Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5 The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2005 

                                                                                                            /s/Kevin B. Marsh

                                                                                                     Kevin B. Marsh

                                                                                                           Senior Vice President and Chief Financial Officer

EX-32.01

Exhibit 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SCANA Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 5, 2005

/s/ William B. Timmerman

William B. Timmerman

Chairman of the Board, President and

Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.02

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SCANA Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 5, 2005

/s/ Kevin B. Marsh

Kevin B. Marsh

Senior Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.3

Exhibit 32.03

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of South Carolina Electric & Gas Company (the “Company”) on Form 10-Q for the quarter ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 5, 2005

/s/ William B. Timmerman

William B. Timmerman

Chairman of the Board and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.4

Exhibit 32.04

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of South Carolina Electric & Gas Company (the “Company”) on Form 10-Q for the quarter ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 5, 2005

/s/ Kevin B. Marsh

Kevin B. Marsh

Senior Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.5

Exhibit 32.05

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Public Service Company of North Carolina, Incorporated (the “Company”) on Form 10-Q for the quarter ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 5, 2005

/s/ William B. Timmerman

William B. Timmerman

Chairman of the Board and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.6

Exhibit 32.06

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Public Service Company of North Carolina, Incorporated (the “Company”) on Form 10-Q for the quarter ended June 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 5, 2005

/s/ Kevin B. Marsh

Kevin B. Marsh

Senior Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.