-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MsIbBdu3Hfw5MjO+xkhCETLnEzwcv5lSrIDmp2dRK36rkCX9CV4lTxQKpefiqr/u 4GDKqQnnfKb0CNPHiCCiEQ== 0000754737-01-500032.txt : 20020410 0000754737-01-500032.hdr.sgml : 20020410 ACCESSION NUMBER: 0000754737-01-500032 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCANA CORP CENTRAL INDEX KEY: 0000754737 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 570784499 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08809 FILM NUMBER: 1786621 BUSINESS ADDRESS: STREET 1: 1426 MAIN ST STREET 2: P O BOX 764 CITY: COLUMBIA STATE: SC ZIP: 29201 BUSINESS PHONE: 8032179000 MAIL ADDRESS: STREET 1: MAIL CODE 051 CITY: COLUMBIA STATE: SC ZIP: 29218 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE CO OF NORTH CAROLINA INC CENTRAL INDEX KEY: 0000081025 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 562128483 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11429 FILM NUMBER: 1786622 BUSINESS ADDRESS: STREET 1: 1426 MAIN STREET CITY: COLUMBIA STATE: SC ZIP: 29201 BUSINESS PHONE: 8032179188 MAIL ADDRESS: STREET 1: 1426 MAIN STREET CITY: COLUMBIA STATE: SC ZIP: 29201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTH CAROLINA ELECTRIC & GAS CO CENTRAL INDEX KEY: 0000091882 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 570248695 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03375 FILM NUMBER: 1786623 BUSINESS ADDRESS: STREET 1: 1426 MAIN ST CITY: COLUMBIA STATE: SC ZIP: 29201 BUSINESS PHONE: 8032179000 MAIL ADDRESS: STREET 1: 1426 MAIN ST CITY: COLUMBIA STATE: SC ZIP: 29201 10-Q 1 form10-q3.txt FORM 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 September 30, 2001 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to ------------ ----------------------- Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address and Telephone Number Identification No. 1-8809 SCANA Corporation 57-0784499 (a South CarolinaCorporation) 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. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. Description of Shares Outstanding Registrant Common Stock at October 31, - ---------- ------------ ---------------- 2001 SCANA Corporation Without Par Value 104,728,268 South Carolina Electric & Gas Company Par Value $4.50 Per Share 40,296,147(a) Public Service Company of North Carolina, Incorporated Without Par Value 1,000(a) (a)Held 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 Page PART I. FINANCIAL INFORMATION SCANA Corporation Financial Section..........................................3 Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000.............................................4 Condensed Consolidated Statements of Income and Retained Earnings for the Periods Ended September 30, 2001 and 2000........6 Condensed Consolidated Statements of Cash Flows for the Periods Ended September 30, 2001 and 2000.........................7 Condensed Consolidated Statements of Comprehensive Income...........8 Notes to Condensed Consolidated Financial Statements................9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................19 Item 3. Quantitative and Qualitative Disclosures About Market Risk.........27 South Carolina Electric & Gas Company Financial Section.....................28 Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000............................................29 Condensed Consolidated Statements of Income and Retained Earnings for the Periods Ended September 30, 2001 and 2000.......31 Condensed Consolidated Statements of Cash Flows for the Periods Ended September 30, 2001 and 2000................................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.........43 Public Service Company of North Carolina, Incorporated Financial Section....44 Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000............................................45 Condensed Consolidated Statements of Income (Loss) and Retained Earnings (Deficit) the Periods Ended September 30, 2001 and 2000................................................46 Condensed Consolidated Statements of Cash Flows for the Periods Ended September 30, 2001 and 2000................................47 Notes to Condensed Consolidated Financial Statements...............48 Item 2. Management's Narrative Analysis of Results of Operations...........52 PART II. OTHER INFORMATION Item 1. Legal Proceedings..................................................54 Item 6. Exhibits and Reports on Form 8-K...................................54 Signatures..................................................................55 Exhibit Index...............................................................58 SCANA CORPORATION FINANCIAL SECTION PART I. FINANCIAL INFORMATION Item 1. Financial Statements
SCANA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - ---------------------------------------------------------------------------------- ------------------ September 30, December 31, Millions of dollars 2001 2000 - ---------------------------------------------------------------------------------- ------------------ Assets Utility Plant: Electric $4,842 $4,747 Gas 1,481 1,435 Other 187 187 - --------------------------------------------------------------------------------- ------------------ Total 6,510 6,369 Less accumulated depreciation and amortization 2,338 2,212 - ---------------------------------------------------------------------------------- ------------------ Total 4,172 4,157 Construction work in progress 396 261 Nuclear fuel, net of accumulated amortization 49 57 Acquisition adjustments, net of accumulated amortization 463 474 - ---------------------------------------------------------------------------------- ------------------ Utility Plant, Net 5,080 4,949 - ---------------------------------------------------------------------------------- ------------------ Nonutility Property, net of accumulated depreciation 108 79 Investments 204 203 - ---------------------------------------------------------------------------------- ------------------ - ---------------------------------------------------------------------------------- ------------------ Nonutility Property and Investments, Net 312 282 - ---------------------------------------------------------------------------------- ------------------ - ---------------------------------------------------------------------------------- ------------------ Current Assets: Cash and temporary investments 142 159 Receivables (net of allowance for uncollectible accounts of $33 in 2001 and $31 in 2000) 394 699 Inventories (at average cost): Fuel 162 107 Materials and supplies 59 56 Emission allowances 15 20 Prepayments 19 16 Investments 609 479 - ---------------------------------------------------------------------------------- ------------------ Total Current Assets 1,400 1,536 - ---------------------------------------------------------------------------------- ------------------ Deferred Debits: Environmental 36 30 Nuclear plant decommissioning fund 77 72 Pension asset, net 228 196 Other regulatory assets 205 213 Other 202 142 - ---------------------------------------------------------------------------------- ------------------ Total Deferred Debits 748 653 - ---------------------------------------------------------------------------------- ------------------ Total $7,540 $7,420 ================================================================================== ==================
SCANA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - --------------------------------------------------------------------------------- ----------------- September 30, December 31, Millions of dollars 2001 2000 - --------------------------------------------------------------------------------- ----------------- Capitalization and Liabilities Stockholders' Investment: Common Equity $2,131 $2,032 Preferred stock (Not subject to purchase or sinking funds) 106 106 - --------------------------------------------------------------------------------- ----------------- Total Stockholders' Investment 2,237 2,138 Preferred Stock, net (Subject to purchase or sinking funds) 10 10 SCE&G-Obligated Mandatorily Redeemable Preferred Securities of SCE&G's Subsidiary Trust, SCE&G Trust I, holding solely $50 million principal amount of the 7.55% Junior Subordinated Debentures of SCE&G, due 2027 50 50 Long-Term Debt, net 2,671 2,850 - --------------------------------------------------------------------------------- ----------------- Total Capitalization 4,968 5,048 - --------------------------------------------------------------------------------- ----------------- Current Liabilities: Short-term borrowings 75 398 Current portion of long-term debt 738 41 Accounts payable 159 394 Customer deposits 27 27 Taxes accrued 76 54 Interest accrued 60 42 Dividends declared 34 32 Deferred income taxes, net 148 98 Other 23 30 - --------------------------------------------------------------------------------- ----------------- Total Current Liabilities 1,340 1,116 - --------------------------------------------------------------------------------- ----------------- Deferred Credits: Deferred income taxes, net 702 721 Deferred investment tax credits 115 119 Reserve for nuclear plant decommissioning 77 72 Postretirement benefits 119 113 Other regulatory liabilities 91 70 Other 128 161 - --------------------------------------------------------------------------------- ----------------- Total Deferred Credits 1,232 1,256 - --------------------------------------------------------------------------------- ----------------- Total $7,540 $7,420 ================================================================================= ================= See Notes to Condensed Consolidated Financial Statements.
SCANA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited) - ----------------------------------------------------------------------- ----------------------------- ------------------------------ Three Months Ended Nine Months Ended September 30, September 30, Millions of dollars, except per share amounts 2001 2000 2001 2000 - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Operating Revenues: Electric $416 $397 $1,097 $1,011 Gas - Regulated 133 159 775 635 Gas - Nonregulated 161 260 897 654 - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Total Operating Revenues 710 816 2,769 2,300 - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Operating Expenses: Fuel used in electric generation 87 84 222 228 Purchased power 43 19 131 36 Gas purchased for resale 235 366 1,383 1,023 Other operation and maintenance 117 118 367 346 Depreciation and amortization 56 54 168 162 Other taxes 29 29 88 88 - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Total Operating Expenses 567 670 2,359 1,883 - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Operating Income 143 146 410 417 - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Other Income: Other income, including allowance for equity funds used during construction 12 9 43 27 Gain on sale of assets 1 1 11 2 Gain on sale of investment - - 545 - - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Total Other Income 13 10 599 29 - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Income Before Interest Charges, Income Taxes, Preferred Stock Dividends and Cumulative Effect of Accounting Change 156 156 1,009 446 Interest Charges, Net of Allowance for Borrowed Funds Used During Construction 52 58 173 167 - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Income Before Income Taxes, Preferred Stock Dividends and Cumulative Effect of Accounting Change 104 98 836 279 Income Taxes 38 36 300 108 - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Income Before Preferred Stock Dividends and Cumulative Effect of Accounting Change 66 62 536 171 Preferred Dividend Requirement of SCE&G - Obligated Mandatorily Redeemable Preferred Securities (1) (3) (3) (1) - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Income Before Cash Dividends on Preferred Stock of Subsidiary and Cumulative Effect of Accounting Change 65 61 533 168 Cash Dividends on Preferred Stock of Subsidiary (At stated rates) (2) (2) (6) (6) - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Income Before Cumulative Effect of Accounting Change 63 59 527 162 Cumulative Effect of Accounting Change, net of taxes (Note 2) - - - 29 - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Net Income 63 59 527 191 Retained Earnings at Beginning of Period 1,251 792 850 720 Common Stock Cash Dividends Declared (31) (30) (94) (90) - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Retained Earnings at End of Period $1,283 $821 $1,283 $821 ======================================================================= ============== ============== =============== ============== Basic and Diluted Earnings Per Share of Common Stock: Before Cumulative Effect of Accounting Change $.61 $.56 $5.03 $1.55 Cumulative Effect of Accounting Change, net of taxes - - - .28 - ----------------------------------------------------------------------- -------------- -------------- --------------- -------------- Basic and diluted earnings per share $.61 $.56 $5.03 $1.83 ======================================================================= ============== ============== =============== ============== Weighted average shares outstanding (millions) 104.7 104.7 104.7 104.5 See Notes to Condensed Consolidated Financial Statements.
SCANA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - --------------------------------------------------------------------------------------- ---------------------------------- Nine Months Ended September 30, - --------------------------------------------------------------------------------------- ---------------------------------- Millions of dollars 2001 2000 - --------------------------------------------------------------------------------------- ------------------ --------------- Cash Flows From Operating Activities: Net income $527 $191 Adjustments to reconcile net income to net cash provided from operating activities: Cumulative effect of accounting change, net of taxes - (29) Depreciation and amortization 174 180 Amortization of nuclear fuel 11 15 Gain on sale of assets and investments (556) (2) Hedging activities (95) - Excess distributions (undistributed earnings) of affiliates, net 3 (3) Preferred stock dividends of subsidiary 6 6 Allowance for funds used during construction (16) (6) Over (under) collection, fuel adjustment clauses 17 4 Changes in certain assets and liabilities: (Increase) decrease in receivables 299 31 (Increase) decrease in inventories (53) (24) (Increase) decrease in pension asset (32) (33) (Increase) decrease in other regulatory assets (2) 11 Increase (decrease) in deferred income taxes, net 210 17 Increase (decrease) in regulatory liabilities 18 6 Increase (decrease) in postretirement benefits 6 14 Increase (decrease) in accounts payable (235) (27) Increase (decrease) in taxes accrued 22 (35) Other, net (34) 13 - --------------------------------------------------------------------------------------- ------------------ --------------- Net Cash Provided From Operating Activities 270 329 - --------------------------------------------------------------------------------------- ------------------ --------------- Cash Flows From Investing Activities: Utility property additions and construction expenditures, net of AFC (311) (204) Purchase of subsidiary, net of cash acquired - (212) Proceeds from sale of assets 28 1 Increase in nonutility property (35) (16) Increase in investments (43) (16) - --------------------------------------------------------------------------------------- ------------------ --------------- - --------------------------------------------------------------------------------------- ------------------ --------------- Net Cash Used For Investing Activities (361) (447) - --------------------------------------------------------------------------------------- ------------------ --------------- Cash Flows From Financing Activities: Proceeds: Issuance of First Mortgage Bonds 149 148 Issuance of notes and loans 654 998 Repayments and repurchases: First Mortgage Bonds - (100) Notes and loans (308) (174) Common stock - (488) Dividend payments: Common stock (92) (94) Preferred stock of subsidiary (6) (6) Short-term borrowings, net (323) (140) - --------------------------------------------------------------------------------------- ------------------ --------------- Net Cash Provided From Financing Activities 74 144 - --------------------------------------------------------------------------------------- ------------------ --------------- Net Increase (Decrease) In Cash and Temporary Investments (17) 26 Cash and Temporary Investments, January 1 159 116 - --------------------------------------------------------------------------------------- ------------------ --------------- Cash and Temporary Investments, September 30 $142 $142 ======================================================================================= ================== =============== Supplemental Cash Flow Information: Cash paid for - Interest (net of capitalized interest of $8 for 2001 and $4 for $162 $134 2000) - Income taxes 41 109 Noncash Investing and Financing Activities: Unrealized loss on securities available for sale, net of tax (294) (132) In conjunction with the February 2000 acquisition of Public Service Company of North Carolina, Incorporated, liabilities were assumed as follows: Fair value of assets acquired $1,177 Cash paid for capital stock (212) Stock issued for consideration (488) --------- Liabilities assumed $477 ========= See Notes to Condensed Consolidated Financial Statements.
SCANA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - ----------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, Millions of dollars 2001 2000 2001 2000 - ------------------------------------------------------------------- ---------- ------------- Net Income $63 $59 $527 $191 Other Comprehensive Income (Loss), net of tax: Unrealized gains (losses) on securities available for sale (195) (20) (294) (132) Unrealized gains (losses) on hedging activities (10) - (40) - - --------------------------------------------------------------------------------- ------------- Total Comprehensive Income (1) $(142) $39 $193 $59 ================================================================================= =============
(1) Accumulated other comprehensive income (loss) of the Company totaled $(195) million and $139 million as of September 30, 2001 and December 31, 2000, respectively. See Notes to Condensed Consolidated Financial Statements. SCANA CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2001 (Unaudited) The following notes should be read in conjunction with the Notes to Consolidated Financial Statements appearing in SCANA Corporation's (the Company) Annual Report on Form 10-K for the year ended December 31, 2000. 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 year. In the opinion of management, the information furnished herein reflects all adjustments, all of a normal recurring nature except as described in Notes 2, 3 and 4, 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. This accounting standard requires cost-based rate-regulated utilities to recognize in their financial statements revenues and expenses in different time periods than do enterprises that are not rate-regulated. As a result the Company has recorded, as of September 30, 2001, approximately $241 million and $91 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax assets and liabilities of approximately $140 million and $70 million, respectively. The electric and gas regulatory assets of approximately $61 million and $40 million, respectively, (excluding deferred income tax assets) are recoverable through rates. In the future, as a result of deregulation or other changes in the regulatory environment, the Company may no longer meet the criteria for continued application of SFAS 71 and could be required to write off its regulatory assets and liabilities. Such an event could have a material adverse effect on the Company's results of operations in the period the write-off would be recorded, but it is not expected that cash flows or financial position would be materially affected. B. New Accounting Standards On January 1, 2001 the Company adopted SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. See Note 7 for a discussion of the impact of the Company's adoption of SFAS 133. In June 2001 the Financial Accounting Standards Board approved the issuance of three new accounting standards. SFAS 141, "Business Combinations," requires that all business combinations be accounted for using the purchase method of accounting. SFAS 141 applies to all business combinations initiated after June 30, 2001, and is not expected to have any impact on the Company's results of operations, cash flows or financial position. SFAS 142, "Goodwill and Other Intangible Assets," requires that goodwill not be amortized but instead be tested for impairment at least annually at the reporting unit level. A reporting unit is the same level as, or one level below, an operating segment. The Company will adopt SFAS 142 effective January 1, 2002. The impact SFAS 142 may have on the Company's results of operations, cash flows or financial position has not been determined but could be material. SFAS 143, "Accounting for Asset Retirement Obligations," provides guidance for recording and disclosing a liability related to the future obligation to retire an asset (such as a nuclear plant). The Company will adopt SFAS 143 effective January 1, 2003. The impact SFAS 143 may have on the Company's results of operations, cash flows or financial position has not been determined but could be material. C. Stock Option Plan On April 27, 2000 the Company adopted the SCANA Corporation Long-Term Equity Compensation Plan (the Plan). Under the Plan, certain employees and non-employee directors may receive nonqualified stock options and other forms of equity compensation. The Company accounts for this equity-based compensation under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and related interpretations. In addition, the Company has adopted the disclosure provisions of SFAS 123, "Accounting for Stock-Based Compensation." As of September 30, 2001 options to acquire approximately 877,000 shares of SCANA common stock have been granted under the Plan at strike prices equal to or greater than market prices on the dates of grant. Therefore, no compensation expense has been recorded. 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 as net income divided 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. E. Reclassifications Certain amounts from prior periods have been reclassified to conform with the presentation adopted for 2001. 2. Cumulative Effect of Accounting Change Effective January 1, 2000 the Company changed its method of accounting for operating revenues associated with its regulated utility operations from cycle billing to full accrual. The cumulative effect of this change was $29 million, net of tax. Accruing unbilled revenues more closely matches revenues and expenses. Unbilled revenues represent the estimated amount customers will be charged for service rendered but not yet billed as of the end of the accounting period. 3. ACQUISITION On February 10, 2000 the Company completed its acquisition of Public Service Company of North Carolina, Incorporated (PSNC) in a business combination accounted for as a purchase. PSNC became a wholly owned subsidiary of the Company. PSNC is a public utility engaged primarily in transporting, distributing and selling natural gas to approximately 363,000 residential, commercial and industrial customers in 26 of its 28 franchised counties in North Carolina. Pursuant to the Agreement and Plan of Merger, PSNC shareholders were paid approximately $212 million in cash and 17.4 million shares of SCANA common stock valued at approximately $488 million. In connection with the acquisition, 16.3 million shares of SCANA common stock were repurchased for approximately $488 million. The results of operations of PSNC are included in the accompanying financial statements as of January 1, 2000, the effective date of acquisition. The total cost of the acquisition was approximately $700 million, which exceeded the fair value of the net assets acquired by approximately $466 million. The excess is being amortized over 35 years on a straight-line basis. 4. RATE AND OTHER REGULATORY MATTERS South Carolina Electric & Gas Company A. On April 24, 2001 the Public Service Commission of South Carolina (PSC) approved South Carolina Electric & Gas Company's (SCE&G) request to increase the fuel component of rates charged to electric customers from 1.330 cents per kilowatt-hour to 1.579 cents per kilowatt-hour. The increase reflects higher fuel costs projected for the period May 2001 through April 2002. The increase also provides recovery over a two-year period of under-collected actual fuel costs through April 2001, including short-term purchased power costs necessitated by outages at two of SCE&G's base load generating plants in winter 2000-2001. The new rates were effective as of the first billing cycle in May 2001. B. On July 20, 2000 the PSC approved SCE&G's request for an out-of-period adjustment to increase the cost of gas component of its rates for natural gas service from 54.334 cents per therm to 68.835 cents per therm, effective with the first billing cycle in August 2000. As part of its regularly scheduled annual review of gas costs, the PSC issued an order on November 9, 2000 which further increased the cost of gas component to 78.151 cents per therm, effective with the first billing cycle in November 2000. On December 21, 2000 the PSC issued an order approving SCE&G's request for another out-of-period adjustment to increase the cost of gas component to 99.340 cents per therm, effective with the first billing cycle in January 2001. On March 9, 2001 the PSC issued an order granting SCE&G's request to reduce the cost of gas component to 79.340 cents per therm, effective with the first billing cycle in March 2001. On October 23, 2001, as part of the annual review of gas costs, the PSC approved SCE&G's request to further reduce the cost of gas component to 59.646 cents per therm effective with the first billing cycle in November 2001. C. On July 5, 2000 the PSC approved SCE&G's request to implement lower depreciation rates for its gas operations. The new rates were effective retroactively to January 1, 2000 and resulted in a reduction in annual depreciation expense of approximately $2.9 million. The retroactive effect was recorded in the second quarter of 2000. D. On September 14, 1999 the PSC approved an accelerated capital recovery plan for SCE&G's Cope Generating Station. The plan was implemented beginning January 1, 2000 for a three-year period. The PSC approved an accelerated capital recovery methodology wherein SCE&G may increase depreciation of its Cope Generating Station in excess of amounts that would be recorded based upon currently approved depreciation rates. The amount of the accelerated depreciation will be determined by SCE&G based on the level of revenues and operating expenses, not to exceed $36 million annually without the approval of the PSC. Any unused portion of the $36 million in any given year may be carried forward for possible use in the following year. As of September 30, 2001 no accelerated depreciation has been recorded. The accelerated capital recovery plan will be accomplished through existing customer rates. E. On January 9, 1996 the PSC issued an order granting SCE&G an increase in retail electric rates which was fully implemented by January 1997. The PSC authorized a return on common equity of 12.0 percent. The PSC also approved establishment of a Storm Damage Reserve Account capped at $50 million to be collected through rates over a ten-year period. Additionally, the PSC approved accelerated amortization of a significant portion of SCE&G's electric regulatory assets (excluding deferred income tax assets) and the remaining transition obligation for postretirement benefits other than pensions, which enabled SCE&G to recover the balances as of the end of the year 2000. F. In 1994 the PSC issued an order approving SCE&G's request to recover through a billing surcharge to its gas customers the costs of environmental cleanup at the sites of former manufactured gas plants (MGPs). The billing surcharge is subject to annual review and provides for the recovery of substantially all actual and projected site assessment and cleanup costs and environmental claims settlements for SCE&G's gas operations that had previously been deferred. In October 2001, as a result of the annual review, the PSC approved SCE&G's request to increase the billing surcharge from $1.1cents per therm to $3.0 cents per therm, which is intended to provide for the recovery of the balance remaining at September 30, 2001 of $25.9 million prior to the end of the year 2005. Public Service Company of North Carolina, Incorporated G. PSNC's rates are established using a benchmark cost of gas approved by the North Carolina Utilities Commission (NCUC) which may be modified periodically to reflect changes in the commodity price of natural gas purchased by PSNC. PSNC may file revised tariffs with the NCUC coincident with these changes or it may track the changes in its deferred accounts for subsequent rate consideration. The rules of the NCUC allow recovery of all prudently incurred gas costs. The NCUC reviews PSNC's gas purchasing practices annually. PSNC's benchmark cost of gas in effect during the nine months ended September 2001 and 2000 was as follows: Rate Per Therm Effective Date Rate Per Therm Effective Date -------------- -------------- -------------- -------------- $.690 January 2001 $.300 January 2000 $.750 February-March 2001 $.265 February-May 2000 $.650 April-August 2001 $.350 June 2000 $.500 September 2001 $.450 July-September 2000 H. On April 6, 2000 the NCUC issued an order permanently approving PSNC's request to establish its commodity cost of gas for large commercial and industrial customers on the basis of market prices for natural gas. This mechanism allows PSNC to collect from its customers amounts approximating the amounts paid for natural gas. I. A state expansion fund, established by the North Carolina General Assembly in 1991 and funded by refunds from PSNC's interstate pipeline transporters, provides financing for expansion into areas that otherwise would not be economically feasible to serve. On December 30, 1999 PSNC filed an application with the NCUC to extend natural gas service to Madison, Jackson and Swain Counties, North Carolina. Pursuant to state statutes, the NCUC required PSNC to forfeit its exclusive franchises to serve six counties in western North Carolina effective January 31, 2000 because these counties were not receiving any natural gas service. Madison, Jackson and Swain Counties were included in the forfeiture order. On June 29, 2000 the NCUC approved PSNC's requests for reinstatement of its exclusive franchises for Madison, Jackson and Swain Counties and disbursement of up to $28.4 million from PSNC's expansion fund for this project. PSNC estimates that the cost of this project will be approximately $31.4 million. The Madison County portion of the project was completed at a cost of approximately $5.7 million, and customers began receiving service in July 2001. J. On December 7, 1999 the NCUC issued an order approving SCANA's acquisition of PSNC. As specified in the NCUC order, PSNC reduced its rates by approximately $1 million in each of August 2000 and August 2001, and has agreed to a moratorium on general rate cases until August 2005. General rate relief can be obtained during this period to recover costs associated with materially adverse governmental actions and force majeure events. 5. LONG-TERM DEBT On January 24, 2001 SCANA issued $202 million two-year floating rate notes maturing on January 24, 2003. The interest rate is reset quarterly based on three-month LIBOR plus 110 basis points. Also, on January 24, 2001 SCE&G issued $150 million First Mortgage Bonds having an annual interest rate of 6.70 percent and maturing on February 1, 2011. On February 16, 2001 PSNC issued $150 million of medium-term notes having an annual interest rate of 6.625 percent and maturing on February 15, 2011. The proceeds from these borrowings were used to reduce short-term debt and for general corporate purposes. On May 9, 2001 SCANA issued $300 million medium-term notes maturing May 15, 2011 and bearing a fixed interest rate of 6.875 percent (see Note 7). The proceeds were used to refinance $300 million bank notes originally issued to consummate SCANA's acquisition of PSNC. 6. RETAINED EARNINGS The Company's Restated Articles of Incorporation do not limit the dividends that may be payable on its common stock. However, the Restated Articles of Incorporation of SCE&G and the Indenture underlying its First and Refunding Mortgage Bonds contain provisions that, under certain circumstances, could limit the payment of cash dividends on its common stock. In addition, with respect to hydroelectric projects, the Federal Power Act requires the appropriation of a portion of certain earnings therefrom. At September 30, 2001 approximately $36 million of retained earnings were restricted by this requirement as to payment of cash dividends on SCE&G's common stock. 7. FINANCIAL INSTRUMENTS Effective January 1, 2001 the Company adopted SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. SFAS 133 requires the Company to recognize all derivative instruments as either assets or liabilities in the statement of financial position and to measure those instruments at fair value. SFAS 133 further provides that changes in the fair value of derivative instruments are either recognized in earnings or reported as a component of other comprehensive income, depending upon the intended use of the derivative and the resulting designation. The Company uses derivative instruments to hedge forward purchases and sales of natural gas, which create market risks of different types. Instruments designated as cash flow hedges are used to hedge risks associated with fixed price obligations in a volatile price market and risks associated with price differentials at different delivery locations. The basic types of financial instruments utilized are exchange-traded instruments, such as New York Mercantile Exchange futures contracts or options and over-the-counter instruments such as swaps, which are typically offered by energy and financial institutions. These instruments do not constitute investments independent of the hedged exposures. Risk limits are established to control the level of market, credit, liquidity and operational/administrative risks assumed by the Company. The Company's Board of Directors has delegated the authority for setting market risk limits to the Risk Management Committee, which is comprised of members of senior management, the Company's Controller, the Senior Vice President of South Carolina Pipeline Corporation and the President of SCANA Energy Marketing, Inc. The Risk Management Committee provides assurance to the Board of Directors with regard to compliance with risk management policies and brings to the Board's attention any areas of concern. Written policies define the physical and financial transactions that are prohibited as well as the authorization requirements for transactions that are allowed. As a result of adopting SFAS 133, the Company recorded a credit of approximately $23.0 million, net of tax, as the effect of a change in accounting principle (transition adjustment) to other comprehensive income on January 1, 2001. This amount represents the reclassification of unrealized gains that were deferred and reported as liabilities at December 31, 2000. All gains/losses related to qualifying cash flow hedges so reflected in other comprehensive income will be reclassified to earnings at the time the hedged transaction affects earnings. The Company recognized losses of approximately $7.4 million and $2.8 million, net of tax, as a result of qualifying cash flow hedges whose hedged transactions occurred during the three and nine months ended September 30, 2001, respectively. In May 2001 the Company entered into an interest rate swap agreement to pay variable rate and receive fixed rate interest payments on a notional amount of $300 million. This swap was designated as a fair value hedge of the $300 million medium-term notes also issued in May. The swap agreement was terminated and replaced with another swap agreement, also designated as a fair value hedge, in August 2001. At September 30, 2001 the estimated fair value of this swap was $16.5 million. In August 2001 the Company received a net premium of $6.5 million to terminate the original swap. This amount is being amortized over the ten year term of the $300 million medium-term notes. 8. INVESTMENTS IN EQUITY SECURITIES At September 30, 2001 SCANA and SCANA Communications Holdings, Inc. (SCH), a wholly owned, indirect subsidiary of SCANA, held the following investments: o SCH owns approximately 39.3 million ordinary shares of Deutsche Telekom AG (DT), a European telecommunications carrier. These shares were received in exchange for the approximately 14.9 million shares of Powertel, Inc. (Powertel) SCH owned prior to DT's acquisition of Powertel in May 2001. SCH recorded a non-cash, after-tax gain of $354.4 million as a result of the exchange. Based on the value of DT ordinary shares on the date of the exchange, SCH's investment in DT is approximately $798.0 million. DT ordinary shares closed at $15.50 per share on September 30, 2001, resulting in a pre-tax unrealized holding loss of $188.7 million. Accumulated other comprehensive income includes the after-tax amount of unrealized holding gains and losses on ordinary shares. o ITC Holding Company, Inc. (ITC) holds ownership interests in several Southeastern communications companies. SCH owns approximately 3.1 million common shares, 645,153 series A convertible preferred shares, and 133,664 series B convertible preferred shares of ITC. These investments cost approximately $5.8 million, $7.2 million, and $4.0 million, respectively. The market values of these investments are not readily determinable. o SCH owns approximately 5.1 million common shares of ITCD at a cost of approximately $43.0 million. ITCD common stock closed at $1.20 per share on September 30, 2001, resulting in a pre-tax unrealized holding loss of $36.9 million. In addition, SCH owns approximately 1.5 million shares of Series A preferred stock of ITCD, and SCANA owns 5,000 shares of Series B-1 and 6,667 shares of Series B-2 preferred stock of ITCD. These investments cost approximately $11.2 million, $4.3 million and $5.7 million, respectively. Series A preferred shares become convertible in March 2002 into approximately 3.0 million shares of ITCD common stock. Series B-1 and B-2 preferred shares are convertible at any time into a total of approximately 3.5 million shares of ITCD common stock. The market value of these series of preferred stock is not readily determinable. However, as converted, the market value of the underlying common stock was approximately $7.8 million at September 30, 2001, reflecting an unrealized pre-tax holding loss of approximately $13.4 million. In addition, the Company has warrants to purchase approximately 1.0 million shares of ITCD common stock, which cost approximately $1.7 million. At September 30, 2001 the value of these warrants was approximately $1.2 million, reflecting an unrealized pre-tax holding loss of approximately $0.6 million. Accumulated other comprehensive income includes the after-tax amount of these unrealized holding losses. o Knology, Inc. (Knology), an affiliate of ITC, is a broad-band service provider of cable television, telephone and internet services. SCH owns $71,050,000 face amount of 11.875 percent Senior Discount Notes due 2007 of Knology Broadband, Inc., a wholly-owned subsidiary of Knology. The Senior Discount Notes have a book basis at September 30, 2001 of approximately $63.1 million. In addition, SCH owns approximately 7.2 million shares of Knology series A convertible preferred stock with a cost basis of approximately $5.0 million and warrants to purchase approximately 159,000 shares of series A convertible preferred stock. On January 12, 2001 SCH invested $25.0 million for approximately 8.3 million shares of Knology series C convertible preferred stock. The market value of these investments is not readily determinable. 9. CONTINGENCIES With respect to commitments at September 30, 2001, reference is made to Note 13 of Notes to Consolidated Financial Statements appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. Contingencies at September 30, 2001 include the following: A. Lake Murray Dam Reinforcement On October 15, 1999 the Federal Energy Regulatory Commission (FERC) notified SCE&G of its agreement with SCE&G's plan to reinforce Lake Murray Dam in order to maintain the lake in case of an extreme earthquake. Construction for the project, which began in the third quarter of 2001 could cost up to $300 million with completion dates ranging from 2004 to 2006. Although any costs incurred by SCE&G are expected to be recoverable through electric rates, SCE&G also is exploring alternative sources of funding. B. Nuclear Insurance The Price-Anderson Indemnification Act, which deals with public liability for a nuclear incident, currently establishes the liability limit for third-party claims associated with any nuclear incident at $9.5 billion. Each reactor licensee is currently liable for up to $88.1 million per reactor owned for each nuclear incident occurring at any reactor in the United States, provided that not more than $10 million of the liability per reactor would be assessed per year. SCE&G's maximum assessment, based on its two-thirds ownership of V. C. Summer Nuclear Station (Summer Station), would be approximately $58.7 million per incident, but not more than $6.7 million per year. SCE&G currently maintains policies (for itself and on behalf of the South Carolina Public Service Authority) with Nuclear Electric Insurance Limited. The policies, covering the nuclear facility for property damage, excess property damage and outage costs, permit 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 $8.1 million. To the extent that insurable claims for property damage, decontamination, repair and replacement and other costs and expenses arising from a nuclear incident at Summer Station exceed the policy limits of insurance, or to the extent such insurance becomes unavailable in the future, and to the extent that SCE&G's rates would not recover the cost of any purchased replacement power, SCE&G will retain the risk of loss as a self-insurer. SCE&G has no reason to anticipate a serious nuclear incident at Summer Station. If such an incident were to occur, it could have a material adverse impact on the Company's results of operations, cash flows and financial position. C. Environmental The Company maintains an environmental assessment program to identify and evaluate current and former operations sites that could require environmental cleanup. As site assessments are initiated, estimates are made of the amount of expenditures, if any, deemed necessary to investigate and clean up each site. These estimates are refined as additional information becomes available; therefore, actual expenditures could differ significantly from the original estimates. Amounts estimated and accrued to date for site assessments and cleanup relate primarily to regulated operations. For SCE&G, such amounts are deferred and amortized with recovery provided through rates. Deferred amounts, net of amounts previously recovered through rates and insurance settlements, totaled $25.9 million at September 30, 2001. The deferral includes the estimated costs associated with the following matters. o In September 1992 the Environmental Protection Agency (EPA) notified SCE&G, the City of Charleston and the Charleston Housing Authority of their potential liability for the investigation and cleanup of the Calhoun Park area site in Charleston, South Carolina. This site encompasses approximately 30 acres and includes properties which were locations for industrial operations, including a wood preserving (creosote) plant, one of SCE&G's decommissioned MGPs, properties owned by the National Park Service and the City of Charleston and private properties. The site has not been placed on the National Priorities List, but may be added in the future. The Potentially Responsible Parties (PRPs) negotiated an administrative order by consent for the conduct of a Remedial Investigation/Feasibility Study and a corresponding Scope of Work. Field work began in November 1993, and the EPA approved a Remedial Investigation Report in February 1997 and a Feasibility Study Report in June 1998. In July 1998 the EPA approved SCE&G's Removal Action Work Plan for soil excavation. In September 1998 a Record of Decision was issued which sets forth the EPA's view of the extent of each PRP's responsibility for site contamination and the level to which the site must be remediated. In January 1999 the EPA issued a Unilateral Administrative Order for Remedial Design and Remedial Action directing SCE&G to design and carry out a plan of remediation for the Calhoun Park site. SCE&G submitted a Comprehensive Remedial Design Work Plan (RDWP) in December 1999 and proceeded with implementation pending agency approval. The RDWP was approved by the EPA in July 2000, and its implementation continues. In September 2000, SCE&G was notified by the South Carolina Department of Health and Environmental Control (DHEC) that benzene contamination was detected in the intermediate aquifer on surrounding properties to the Calhoun Park Area site. The EPA required that SCE&G conduct a focused Remedial Investigation/Feasibility Study on the intermediate aquifer, which was completed in June 2001. The EPA expects to issue a second Record of Decision dealing with the intermediate aquifer in the fourth quarter of 2001. As of September 30, 2001, SCE&G has spent approximately $14.8 million to remediate the Calhoun Park area site. Total remediation costs are estimated to be $21.9 million. o SCE&G owns three other decommissioned MGP sites in South Carolina which contain residues of by-product chemicals. For the site located in Sumter, effective September 15, 1998, SCE&G entered into a Remedial Action Plan Contract with DHEC pursuant to which it agreed to undertake a full site investigation and remediation under the oversight of DHEC. Site investigation, characterization and remediation are proceeding according to schedule. Excavation at the Sumter MGP site was completed in May 2001 as part of an Interim Removal Action. Further work may be required at the discretion of DHEC. Upon successful implementation of a site remedy, DHEC will give SCE&G a Certificate of Completion and a covenant not to sue. For the site located in Florence SCE&G entered into a similar Remedial Action Plan Contract with DHEC in September 2000. SCE&G is continuing to investigate the remaining site in Columbia, and is monitoring the nature and extent of residual contamination. In addition, PSNC owns, or has owned, all or portions of seven sites in North Carolina on which MGPs were formerly operated. Intrusive investigation (including drilling, sampling and analysis) has begun at two sites and the remaining sites have been evaluated using historical records and observations of current site conditions. These evaluations have revealed that MGP residuals are present or suspected at several of the sites. The North Carolina Department of Environment and Natural Resources (DENR) has recommended that no further action be taken with respect to one site. Excavation at the Raleigh MGP site was completed in March 2001 as part of an Interim Removal Action. Further work at this site may be required at the discretion of DENR. Work at the Durham MGP site began in May 2001 under a DENR-approved Phase II Workplan. An environmental due diligence review of PSNC conducted in February 1999 estimated that the cost to remediate the sites would range between $11.3 million and $21.9 million. During the second quarter of 2000, the review was finalized and the estimated liability was recorded. PSNC is unable to determine the rate at which costs may be incurred over this time period. The estimated cost range has not been discounted to present value. PSNC's associated actual costs for these sites will depend on a number of factors, such as actual site conditions, third-party claims and recoveries from other PRPs. A May 1993 order by the NCUC authorized deferral accounting for all costs associated with the investigation and remediation of MGP sites. As of September 30, 2001 PSNC has recorded a liability and associated regulatory asset of $9.1 million, which reflects the minimum amount of the range, net of shared cost recovery expected from other PRPs and expenditures for work completed. Amounts incurred to date are approximately $1.1 million. Management intends to request recovery of additional MGP clean-up costs not recovered from other PRPs in future rate case filings, and believes that all costs incurred will be recoverable in gas rates. 10. 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. Affiliate revenue is derived from transactions between reportable segments as well as transactions between separate legal entities that are combined into the same reportable segment. Accumulated depreciation is not assignable to Electric Operations and Gas Distribution segments.
Disclosure of Reportable Segments (Millions of dollars) - --------------------------- ----------- ------------- ------------- ----------- -------------- -------------- -------------- Three months ended Electric Gas Gas Retail Gas Energy Adjustments/ Consolidated September 30, 2001 Operations Distribution Transmission Marketing Marketing Eliminations Total - --------------------------- ----------- ------------- ------------- ----------- -------------- -------------- -------------- External Revenue 416 90 43 116 45 - 710 Intersegment Revenue 163 1 33 - - (197) - Operating Income (Loss) 154 (14) 5 n/a n/a (2) 143 Net Income (Loss) n/a n/a n/a (2) - 65 63 Segment Assets 4,878 1,579 313 96 94 580 7,540 - --------------------------- ----------- ------------ -------------- ----------- -------------- -------------- -------------- Nine months ended Electric Gas Gas Retail Gas Energy Adjustments/ Consolidated September 30, 2001 Operations Distribution Transmission Marketing Marketing Eliminations Total - --------------------------- ----------- ------------ -------------- ----------- -------------- -------------- -------------- External Revenue 1,097 600 176 500 396 - 2,769 Intersegment Revenue 435 1 199 - - (635) - Operating Income 345 39 9 n/a n/a 17 410 Net Income n/a n/a n/a 5 5 517 527 Segment Assets 4,878 1,579 313 96 94 580 7,540 - --------------------------- ----------- ------------ -------------- ----------- -------------- -------------- -------------- Three months ended Electric Gas Gas Retail Gas Energy Adjustments/ Consolidated September 30, 2000 Operations Distribution Transmission Marketing Marketing Eliminations Total - --------------------------- ----------- ------------ -------------- ----------- -------------- -------------- -------------- External Revenue 397 97 62 112 148 - 816 Intersegment Revenue 152 1 41 - - (194) - Operating Income (Loss) 164 (11) 6 n/a n/a (13) 146 Net Income (Loss) n/a n/a n/a (5) (3) 67 59 Segment Assets 4,873 1,544 258 33 130 290 7,128 - --------------------------- ----------- ------------ -------------- ----------- -------------- -------------- -------------- Nine months ended Electric Gas Gas Retail Gas Energy Adjustments/ Consolidated September 30, 2000 Operations Distribution Transmission Marketing Marketing Eliminations Total - --------------------------- ----------- ------------ -------------- ----------- -------------- -------------- -------------- External Revenue 1,011 459 176 339 315 - 2,300 Intersegment Revenue 368 2 142 - - (512) - Operating Income 357 42 22 n/a n/a (4) 417 Net Income (Loss) n/a n/a n/a 1 (4) 1941 191 Segment Assets 4,873 1,544 258 33 130 290 7,128 1 Includes cumulative effect of accounting change (See Note 2).
11. SUBSEQUENT EVENT In November 2001 a non-public company in which the Company has invested approximately $7.8 million declared that it was insolvent. This company was in the microturbine generator business. The Company's investment, which consisted of convertible loans and convertible preferred stock, was written off in November 2001. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - -------------------------------------------------------------------------------- SCANA CORPORATION 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 SCANA Corporation's (the Company) Annual Report on Form 10-K for the year ended December 31, 2000. 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 the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following: (1) that the information is of a preliminary nature and may be subject to further and/or continuing review and adjustment, (2) changes in the utility regulatory environment, including potential changes in the restructured, non-regulated Georgia natural gas markets, (3) changes in the economy, especially in areas served by the Company's subsidiaries, (4) the impact of competition from other energy suppliers, (5) growth opportunities for the Company's regulated and diversified subsidiaries, (6) the results of financing efforts, (7) changes in the Company's accounting policies, (8) weather conditions, especially in areas served by the Company's subsidiaries, (9) performance of and marketability of the Company's investments in telecommunications companies, (10) inflation, (11) changes in environmental regulations, (12) volatility in commodity natural gas markets and (13) the other risks and uncertainties described from time to time in the Company's periodic reports filed with the Securities and Exchange Commission. The Company disclaims any obligation to update any forward-looking statements. LIQUIDITY AND CAPITAL RESOURCES SCANA Energy, the Company's non-regulated retail gas division in Georgia, has maintained its position as the second largest marketer in Georgia, with an approximate 27 percent market share. SCANA Energy lost approximately $ .02 per share in the quarter ended September 30, 2001, approximately $ .03 per share less than the loss reported for the corresponding period in 2000. See additional discussion at Results of Operations. Due to record high natural gas prices and cold winter temperatures, the Georgia Public Service Commission (GPSC) adopted emergency rules which prohibited gas marketers from disconnecting service to residential customers for non-payment from mid-January through March 2001. Customers were also permitted to switch marketers without first paying outstanding balances owed to their previous provider. As a result of this action, SCANA Energy increased its allowance for uncollectible accounts in the first quarter of 2001 and, to the extent permitted by other GPSC rules, has implemented more stringent credit policies. Since that time, the GPSC has remained extremely active in its review and oversight of the natural gas marketplace. In the summer of 2001, the GPSC placed restrictions on the length of time that customer deposits may be held by marketers and also called for other changes in the ways that marketers interact with their customers. Further, in September, Georgia's Governor called for the formation of a task force to study the impact of natural gas deregulation. These actions raise concern as to the level of additional restrictions which may be placed on marketers, including SCANA Energy, in the coming winter months and heighten the risks of SCANA Energy's business efforts in that market. SCANA Energy and SCANA's other natural gas distribution, transmission and marketing segments maintain gas inventory and also utilize forward contracts and financial instruments, including futures contracts, to manage their exposure to fluctuating commodity natural gas prices. (See also Note 7 of Notes to Condensed Consolidated Financial Statements and discussion at Item 3.) As a part of this risk management process, a portion of SCANA's projected natural gas needs for this winter has been purchased or otherwise placed under contract. This factor and others (e.g., the level of bad debts experienced) are, in the aggregate, used to establish retail pricing levels at SCANA Energy. As a result of the potential regulatory actions discussed above and other downward pricing pressures inherent in the competitive market, SCANA Energy may be unable to sustain its current levels of customers and/or pricing, thereby reducing expected margins and profitability. On October 15, 1999 the Federal Energy Regulatory Commission (FERC) notified South Carolina Electric & Gas Company (SCE&G) of its agreement with SCE&G's plan to reinforce Lake Murray Dam in order to maintain the lake in case of an extreme earthquake. Construction for the project, which began in the third quarter of 2001, could cost up to $300 million with completion dates ranging from 2004 to 2006. Although any costs incurred by SCE&G are expected to be recoverable through electric rates, SCE&G also is exploring alternative sources of funding. On February 9, 2000 FERC issued FERC Order 2000. The Order required utilities which operate electric transmission systems to submit plans for the formation of regional transmission organizations (RTOs). In March 2001 FERC gave provisional approval to SCE&G and two other southeastern electric utilities to establish GridSouth Transco, LLC (GridSouth) as an independent regional transmission company, responsible for operating and planning the utilities' combined transmission systems. In July 2001 FERC expressed its desire that utilities throughout the U. S. combine their transmission systems to create four large independent regional operators, one each in the Northeast, Southeast, Midwest and West. Accordingly, FERC ordered mediation talks to take place between the utilities forming GridSouth and certain groups that had proposed other RTOs. These talks were mediated by an administrative law judge, who issued her nonbinding mediation report to FERC in September 2001. The report made recommendations related to the formation of a Southeast regional RTO. FERC has not acted on the mediation report, and the timing or impact of future FERC orders related to RTOs cannot be predicted. In March 2001 V. C. Summer Nuclear Station returned to service. It had been taken out of service on October 7, 2000 for a planned maintenance and refueling outage. During initial inspection activities, plant personnel discovered a small leak coming from a hole in a weld in a primary coolant system pipe. Repairs were completed and the integrity of the new welds was verified through extensive testing. The Public Service Commission of South Carolina (PSC) has approved recovery of the cost of replacement power through SCE&G's electric fuel adjustment clause (see Note 4A of Notes to Condensed Consolidated Financial Statements). The Nuclear Regulatory Commission was closely involved throughout this process and approved SCE&G's actions to repair the crack, as well as the restart schedule. SCE&G will continue to monitor primary coolant system pipes during the next outage, scheduled for the spring of 2002. In March 2001 the Company completed the sale of its home security and alarm monitoring division (SCANA Security). The sale, valued at approximately $24.5 million, resulted in a one-time gain of approximately $.04 per share in the first quarter 2001 (see Results of Operations). In April 2001 SCE&G's 385 megawatt coal-fired Cope Generating Station returned to service. It had been taken out of service in January 2001 due to an electrical ground in the generator. The PSC has approved recovery of the cost of replacement power through SCE&G's electric fuel adjustment clause (see Note 4A of Notes to Condensed Consolidated Financial Statements). In June 2001 SCANA Communications, Inc. (SCI) agreed to subcontract the operation and maintenance of its 800 megahertz radio service network to Motorola for the period July 1, 2001 through March 31, 2002. After March 31, 2002 SCI has the option to sell the network to Motorola. In June 2001 South Carolina Pipeline Corporation (SCPC) announced that it will petition the PSC to allow SCPC to convert from a closed system to an open-access transportation-only system. Under an open access system customers would be required to secure their own gas supplies and interstate transportation services. SCPC plans to file the petition in the fall of 2001 and seek implementation in 2003. In July 2001 the Company announced the formation of SCG Pipeline, Inc., a wholly owned subsidiary that will engage in the transportation of natural gas in Georgia and South Carolina. SCG Pipeline will transport natural gas from interconnections with Southern Natural Gas and Southern LNG's Elba Island liquefied natural gas import terminal near Savannah, Georgia to an endpoint in Jasper County, South Carolina. SCG Pipeline plans to file for FERC certification in the first quarter of 2002. The proposed service date for the pipeline is November 2003. In addition SCPC announced plans to extend its existing facilities to interconnect with the proposed pipeline to gain access to additional supplies of natural gas. In October 2001 SCE&G filed with the PSC its siting plans to construct an 875 megawatt generation facility in Jasper County, South Carolina, to supply electricity to its South Carolina customers. The facility will include three natural gas combustion-turbine generators and one steam-turbine generator. Construction of the $450 million facility is expected to begin in April 2002, with commercial operation in the summer of 2004. In connection with the facility, SCE&G has signed a 250 megawatt electric supply contract with North Carolina Electric Membership Corporation for a term of at least five years beginning January 1, 2004. SCANA and Westvaco each own a 50 percent interest in Cogen South LLC (Cogen). Cogen built and operates a cogeneration facility in North Charleston, South Carolina. On September 10, 1998 the contractor in charge of construction filed suit in Circuit Court alleging that it incurred construction cost overruns relating to the facility and that the construction contract provides for recovery of these costs. In addition to Cogen, Westvaco, SCE&G and SCANA were also named as defendants in the suit. Cogen filed a separate suit against the contractor for delay and performance issues. The suits were combined and the contractor brought the manufacturer of the generator into the performance suit. In November 2001 a settlement was reached between all parties. Terms of the settlement are confidential, but the settlement's impact on SCANA and SCE&G's results of operations, cash flow and financial position is not material. The following table summarizes how the Company generated and used funds for property additions and construction expenditures during the nine months ended September 30, 2001 and 2000: - -------------------------------------------------------------------------------- Nine Months Ended September 30, Millions of dollars 2001 2000 - -------------------------------------------------------------------------------- Net cash provided from operating activities $270 $329 Net cash provided from financing activities 74 144 Cash provided from sale of assets 28 1 Cash and temporary investments available at the beginning of the period 159 116 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Net cash available for property additions and construction expenditures $531 $590 ================================================================================ Funds used for purchase of subsidiary $- $212 Funds used for utility property additions and construction expenditures, net of noncash allowance for funds used during construction $311 $204 Funds used for nonutility property additions $35 $16 ================================================================================ The Company's electric and natural gas businesses are seasonal in nature, with the primary demand for electricity being experienced during summer and winter and the primary demand for natural gas being experienced during winter. As a result of the significant increase during early 2001 and the latter half of 2000 in the cost to the Company of natural gas and the colder than normal weather experienced during winter 2000-2001, the Company experienced significant increases in its working capital requirements, contributing to the need for the financings by SCANA and PSNC in early 2001 as described below. On January 24, 2001 SCANA issued $202 million two-year floating rate notes maturing on January 24, 2003. The interest rate is reset quarterly based on three-month LIBOR plus 110 basis points. Also on January 24, 2001 SCE&G issued $150 million First Mortgage Bonds having an annual interest rate of 6.70 percent and maturing on February 1, 2011. On February 16, 2001 PSNC issued $150 million of medium-term notes having an annual interest rate of 6.625 percent and maturing on February 15, 2011. The proceeds from these borrowings were used to reduce short-term debt and for general corporate purposes. On May 9, 2001 SCANA issued $300 million medium-term notes maturing May 15, 2011 and bearing a fixed interest rate of 6.875 percent. SCANA also entered into an interest rate swap agreement, designated as a fair value hedge, to pay variable rate and receive fixed rate interest payments. The proceeds from the issuance of the medium-term notes were used to refinance $300 million of bank notes originally issued to consummate SCANA's acquisition of PSNC. The swap agreement was terminated and replaced with another swap agreement, also designated as a fair value hedge, in August 2001. The net premium of approximately $6.5 million received upon the original swap's termination is being amortized over the term of the associated debt. In October 2001 SCANA's shelf registration of an additional $302 million medium-term notes became effective. SCANA currently has a total of $800 million medium-term notes available for issuance. The Company anticipates that the remainder of its 2001 cash requirements will be met through internally generated funds and the incurrence of additional short-term and long-term indebtedness. Sales of additional equity securities may also occur. The Company expects that it has or can obtain adequate sources of financing to meet its projected cash requirements for the next 12 months and for the foreseeable future. The Company's ratio of earnings to fixed charges for the 12 months ended September 30, 2001 was 4.57. Environmental Matters For information on environmental matters see Note 9C of Notes To Condensed Consolidated Financial Statements. Investments SCANA and SCANA Communications Holdings, Inc. (SCH), a wholly owned, indirect subsidiary of SCANA, hold investments in several telecommunications companies (described in Note 8 "Investments in Equity Securities" of Notes to Condensed Consolidated Financial Statements appearing in this Quarterly Report on Form 10-Q). As a result of Deutsche Telekom AG's (DT) acquisition of Powertel, Inc. (Powertel) on May 31, 2001, SCH's investment in Powertel was exchanged for approximately 39.3 million ordinary shares of DT. SCH may sell or transfer only up to 40% of these ordinary shares until November 30, 2001, after which time SCH may sell or transfer all of its DT shares. The Company intends to monetize SCH's investment in DT in an appropriate and timely manner and to use the proceeds to reduce outstanding debt and for potential future investments. In determining the book value of certain investments, the Company follows SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities" and related interpretive guidance in the SEC's Staff Accounting Bulletin No. 59. This guidance requires periodic assessment to determine if an other than temporary decline in value has occurred. If such a decline is identified, a write-down is required. The Company has determined that no write-down was required at September 30, 2001. The Company will continue to monitor and evaluate its investments for potential impairments. See Note 8 of Notes To Condensed Consolidated Financial Statements for a discussion of the Company's investments. In November 2001 a non-public company in which the Company has invested approximately $7.8 million declared that it was insolvent. This company was in the microturbine generator business. The Company's investment, which consisted of convertible loans and convertible preferred stock, was written off in November 2001. RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO THE CORRESPONDING PERIODS IN 2000 Earnings and Dividends Earnings per share of common stock for the three and nine months ended September 30, 2001 and 2000 were as follows: - -------------------------------------------------------------------------------- Three Months Ended Nine Months Ended 2001 2000 2001 2000 - -------------------------------------------------------------------------------- Earnings derived from: Operations $.61 $.56 $1.61 $1.55 Non-recurring items: Realized gain from stock investment - - 3.38 - Sale of subsidiary assets - - .04 - Cumulative effect of change in accounting - - - .28 - -------------------------------------------------------------------------------- Earnings per weighted average share $.61 $.56 $5.03 $1.83 ================================================================================ Earnings per share from operations for the three months ended September 30, 2001 increased $.05 as compared to 2000. The Company experienced an increase in gas margin of $.03, decreases in operation and maintenance expense of $.01 and interest expense of $.03, and other improvements of $.02. These improvements were partially offset by a decline in electric margin ($.04). Earnings per share from operations for the nine months ended September 30, 2001 increased $.06 as compared to 2000. The Company experienced increases in gas margin of $.14 and allowance for funds used during construction (AFC) of $.06, improved operating results due to the sale of SCANA Security of $.02, increased interest income of $.01 and other improvements of $.07. These improvements were partially offset by a decrease in electric margin ($.02) and increases in operation and maintenance expense ($.12), interest expense ($.06) and depreciation expense ($.04). For the last several years, the market value of the Company's retirement plan assets has exceeded the total actuarial present value of accumulated plan benefits. Pension income for the three and nine months ended September 30, 2001 was $11.7 million and $31.0 million, compared to $13.2 million and $31.9 million for the corresponding periods in 2000. As a result of pension income, employee benefit expenses were reduced approximately $6.3 million and $16.7 million for the three and nine months ended September 30, 2001, compared to $7.4 million and $17.5 million for the corresponding periods in 2000. In addition, other income increased $3.6 million and $9.6 million for the three and nine months ended September 30, 2001 compared to $3.9 million and $9.9 million for the corresponding periods in 2000. The Company recognized a non-recurring gain of $3.38 per share in connection with the sale of its investment in Powertel, Inc., which was acquired by Deutsche Telekom AG in May 2001 (see Note 8 of Notes to Condensed Consolidated Financial Statements). The Company also recognized a gain of $.04 per share in connection with the sale of the assets of SCANA Security in March 2001. In 2000, earnings from the cumulative effect of change in accounting resulted from the recording of unbilled revenues by SCANA's regulated retail utility subsidiaries (see Note 2 of Notes to Condensed Consolidated Financial Statements). 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. Both the equity and the debt portions of AFC are noncash items of nonoperating income which have the effect of increasing reported net income. AFC represented approximately seven percent and approximately two percent of income before taxes for the three months ended September 30, 2001 and 2000, respectively. AFC represented approximately two percent of income before income taxes for the nine months ended September 30, 2001 and 2000. The Company's Board of Directors declared the following quarterly dividends on common stock during 2001: - ------------------------ -------------- --------------------- ------------------ Declaration Dividend Record Payment Date Per Share Date Date - ------------------------ -------------- --------------------- ------------------ February 22, 2001 $.30 March 9, 2001 April 1, 2001 - ------------------------ May 3, 2001 $.30 June 8, 2001 July 1, 2001 - ------------------------ August 2, 2001 $.30 September 10, 2001 October 1, 2001 - ------------------------ November 1, 2001 $.30 December 10, 2001 January 1, 2002 - ------------------------ -------------- --------------------- ------------------ Electric Operations Electric Operations is comprised of the electric portion of SCE&G, South Carolina Generating Company (GENCO) and South Carolina Fuel Company (Fuel Company). Changes in the electric operations sales margins, including transactions with affiliates and excluding the cumulative effect of accounting change, for the three and nine months ended September 30, 2001, when compared to the corresponding periods in 2000, were as follows:
------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended Millions of dollars 2001 2000 Change 2001 2000 Change ------------------------------------------------------------------------------------------------------------------- Electric operating revenue $416.3 $396.7 $19.6 4.9% $1,097.0 $1,010.8 $86.2 8.5% Less: Fuel used in generation 86.5 84.6 1.9 2.2% 221.7 227.5 (5.8) (2.5)% Purchased power 43.3 19.0 24.3 * 130.8 36.4 94.4 * -------------------------------------------------------------------------------- Margin $286.5 $293.1 $(6.6) (2.3)% $744.5 $746.9 $(2.4) (0.3)% =================================================================================================================== *Greater than 100%
Changes in electric operations sales margins for the three months ended September 30, 2001 reflect milder weather and an economic slowdown. Purchased power increased primarily due to power purchased for resale to other utilities. As a result, operating revenue also increased, but was more than offset by the effects of milder weather and the economic slowdown. Changes in electric operations sales margins for the nine months ended September 30, 2001 reflect steady customer growth partially offset by the effects of milder weather and the economic slowdown. Increases in purchased power costs for the nine months, as compared to the corresponding period in 2000, were primarily attributable to plant outages discussed at Liquidity and Capital Resources, which delayed scheduled maintenance outages at other plants until April and May 2001, and to the power purchased for resale in the third quarter. Gas Distribution Gas Distribution is comprised of the local distribution operations of SCE&G and PSNC. Changes in the gas distribution sales margins, including transactions with affiliates and excluding the cumulative effect of accounting change, for the three and nine months ended September 30, 2001, when compared to the corresponding periods in 2000, were as follows:
- ------------------------------------------- --------- ---------- --------- --------- --------- ---------- ----------- Three Months Ended Nine Months Ended Millions of dollars 2001 2000 Change 2001 2000 Change - -------------------------------------------- --------- ------------------- --------- --------- ---------------------- Gas distribution operating revenue $90.3 $97.1 $(6.8) (7.0)% $600.8 $459.0 $141.8 30.9% Less: Gas purchased for resale 58.1 64.6 (6.5) (10.1)% 425.8 283.6 142.2 50.1% - -------------------------------------------- -------- ---------- ---------- --------- ---------- Margin $32.2 $32.5 $(0.3) (0.9)% $175.0 $175.4 $(0.4) (0.2)% ============================================ ======== ========== ========= ========== ========= ========== ==========
Changes in gas distribution sales margin for the three and nine months ended September 30, 2001 reflect milder weather and an economic slowdown. For the nine months ended September 30, 2001, these factors were largely offset by customer growth. Revenues and purchases were impacted by large increases in natural gas prices in late 2000 and early 2001. Gas Transmission Gas Transmission is comprised of the operations of South Carolina Pipeline Corporation. Changes in the gas transmission sales margins, including transactions with affiliates, for the three and nine months ended September 30, 2001, when compared to the corresponding periods in 2000, were as follows:
- ------------------------------------------ --------- -------- ------------- ------- ---------- --------- ----------- Three Months Ended Nine Months Ended Millions of dollars 2001 2000 Change 2001 2000 Change - ------------------------------------------ ---------- --------------------- ------- --------- ---------------------- Gas transmission operating revenue $76.2 $102.9 $(26.7) (25.9)% $374.6 $318.6 $56.0 17.6% Less: Gas purchased for resale 63.6 89.5 (25.9) (28.9)% 342.3 276.1 66.2 24.0% - ------------------------------------------ --------- ---------- -------- --------- --------- Margin $12.6 $13.4 $(0.8) (6.0)% $32.3 $42.5 $(10.2) (24.0)% ========================================== ========= ========== =========== ======== ========= ========= ===========
Gas transmission sales margins for the three and nine months ended September 30, 2001 decreased primarily as a result of an economic slowdown, reduced industrial margins due to the unfavorable competitive position of natural gas relative to alternate fuels, and the insolvency of an industrial customer in the first quarter of 2001. Revenues and purchases were impacted by large increases in natural gas prices in late 2000 and early 2001. Retail Gas Marketing Retail Gas Marketing is comprised of SCANA Energy, a division of SCANA Energy Marketing, Inc., which operates in Georgia's deregulated natural gas market. Retail gas marketing revenues and net income for the three and nine months ended September 30, 2001, when compared to the corresponding periods in 2000, were as follows:
- ---------------------------------- ----------- --------- --------- ----------- -------- --------- ---------- ----------- Three Months Ended Nine Months Ended Millions of dollars 2001 2000 Change 2001 2000 Change - ---------------------------------- ---------- ---------- --------------------- -------- --------- ---------------------- Operating revenues $116.0 $112.3 $3.7 3.3% $500.0 $339.2 $160.8 47.4% Net income (loss) $(8.5) $6.6 77.6% $4.8 $1.1 $3.7 * $(1.9) ================================== ========== =========== ========= ========== ========= ========= ========== ========== *Greater than 100%.
Operating revenues for the nine months ended September 30, 2001 increased primarily as a result of record high natural gas prices. Net income (loss) for the three and nine months improved primarily due to lower operating expenses. Energy Marketing Energy Marketing is comprised of the Company's non-regulated marketing operations, excluding SCANA Energy. Changes in energy marketing operating revenues, including transactions with affiliates, and net income (loss) for the three and nine months ended September 30, 2001, when compared to the corresponding periods in 2000, were as follows:
- ---------------------------------- --------- --------- ------- ----------- --------- ---------- ---- Three Months Ended Nine Months Ended Millions of dollars 2001 2000 Change 2001 2000 Change - --------------------------------------- --------------- ---------- --------- -------------------- Operating revenues $45.1 $147.6 $(102.5) (69.4)% $396.7 $314.7 $82.0 26.1% Net income (loss) $(0.3) $0.3 $(0.6) * $4.8 $(4.1) $8.9 * ======================================= =================== =========== ========== ========= ========= *Greater than 100%
Operating revenues for the three months ended September 30, 2001 decreased as a result of phasing out marketing operations in the Midwest and California during the third quarter. Operating revenues for the nine months ended September 30, 2001 increased primarily as a result of record high natural gas prices and more favorable weather in early 2001, which was partially offset by phasing out marketing operations previously noted. Net income for the nine months ended September 30, 2001 increased primarily as a result of increased value in certain transportation contracts. Other Operating Expenses Changes in other operating expenses for the three and nine months ended September 30, 2001, when compared to the corresponding periods in 2000, were as follows:
- ----------------------------------------- ---------- --------- ---------- ---------- --------- ---------- --------- Three Months Ended Nine Months Ended Millions of dollars 2001 2000 Change 2001 2000 Change - ------------------------------------------ --------- -------------------- --------- --------- --------------------- Other operation and maintenance $116.6 $118.2 $(1.6) (1.4)% $367.7 $346.8 $20.9 6.0% Depreciation and amortization 56.4 53.8 2.6 4.8% 168.3 161.5 6.8 4.2% Other taxes 29.4 29.5 (0.1) (0.3)% 88.1 87.7 0.4 0.5% --------------------------------------- ---------- --------- ---------- --------- ---------- Total $202.4 $201.5 $0.9 0.4% $624.1 $596.0 $28.1 4.7% ========================================= ========== ========= ========== ========== ========= ========== =========
Other operation and maintenance expense for the nine months increased primarily as a result of increased revenue-related expenses (e.g., provision for bad debts) for energy sales and increased employee benefit costs. Depreciation and amortization for the three and nine months increased due to normal property additions. Other Income Other income for the nine months ended September 30, 2001 increased when compared to the corresponding period in 2000, primarily due to the non-recurring gain recognized in May 2001 in connection with the Company's investment in Powertel, Inc., which was acquired by Deutsche Telekom AG, and the March 2001 gain on the sale of the assets of SCANA Security (see Note 8 of Notes to Condensed Consolidated Financial Statements). Interest Expense Interest expense for the three months ended September 30, 2001 decreased when compared to the corresponding period in 2000 primarily due to declining variable interest rates. Interest expense for the nine months ended September 30, 2001 increased when compared to the corresponding period in 2000 primarily due to the issuance of debt in mid-2000 and early 2001. The proceeds of such debt offerings were used to refinance debt related to the acquisition of PSNC in February 2000 and for general corporate purposes, including providing working capital for natural gas purchases. Income Taxes Income taxes for the nine months ended September 30, 2001 increased approximately $191.8 million when compared to the corresponding period in 2000. This change is primarily due to the recording of deferred income taxes in connection with the non-recurring gain recorded in May 2001 arising from the sale of the Company's investment in Powertel, Inc., to Deutsche Telekom AG (see Note 8 of Notes to Condensed Consolidated Financial Statements). Item 3. Quantitative and Qualitative Disclosures About Market Risk All financial instruments held by the Company described below are held for purposes other than trading. Interest rate risk - The table below provides information about the Company's financial instruments that are sensitive to changes in interest rates. For debt obligations the table presents principal cash flows and related weighted average interest rates by expected maturity dates.
September 30, 2001 Expected Maturity Date Millions of dollars There- Fair Liabilities 2001 2002 2003 2004 2005 after Total Value - -------------------------------- -------- --------- ---------- ---------- ---------- ---------- ------------ --------- - -------------------------------- -------- --------- ---------- ---------- ---------- ---------- ------------ --------- Long-Term Debt: Fixed Rate ($) 9.6 38.1 298.2 186.8 182.0 1,867.4 2,582.1 2,526.7 Average Fixed Interest Rate 8.67 7.21 6.38 7.58 7.43 7.16 7.13 - Variable Rate ($) - 700.0 202.0 - - - 902.0 901.2 Average Variable Interest Rate - 4.27 4.81 - - - 4.39 - Interest Rate Swap: Pay Variable/Receive Fixed ($) - - - - - 300.0 300.0 16.5 Average Pay Interest Rate - - - - - 3.28 3.28 - Average Receive Interest Rate - - - - - 6.88 6.88 -
While a decrease in interest rates would increase the fair value of debt, it is unlikely that events which would result in a realized loss will occur. In addition, the Company has an investment in the 11.875 percent senior discount notes (due 2007) of a telecommunications company, the cost basis of which is approximately $63.1 million . As these notes are not publicly traded, determination of their fair value is not practicable. An increase in market interest rates would result in a decrease in fair value of these notes and a corresponding adjustment, net of tax effect, to other comprehensive income. Commodity price risk - The table below provides information about the Company's financial instruments that are sensitive to changes in natural gas prices. Weighted average settlement prices are per 10,000 mmbtu.
As of September 30, 2001 Expected Maturity in 2001 Expected Maturity in 2002 Expected Maturity in 2003 ------------------------- ------------------------- ------------------------- Weighted Weighted Weighted Average Average Average Settlement Contract Fair Settlement Contract Fair Settlement Contract Fair Natural Gas Derivatives: Price Amount Value Price Amount Value Price Amount Value - --------------------------- ----------- ---------- --------- ----------- ---------- ---------- ----------- ---------- --------- (Millions of (Millions of (Millions of dollars) dollars) dollars) Futures Contracts: Long($) 2.50 58.8 32.5 2.80 156.2 103.3 3.30 2.2 1.8 Short($) 2.30 1.1 0.7 2.80 1.9 1.4 - - - - --------------------------- ----------- ---------- --------- ----------- ---------- ---------- ----------- -------- ----------- Expected Maturity in 2001 Natural Gas Derivatives: Weighted Average Strike Price Contract Amount ------------------------------- ---------------------------------------- ---------------------------------------- ------------------------------- ---------------------------------------- ---------------------------------------- (Millions of dollars) Options: Purchased call (long)($) 5.827 4.2 ------------------------------- ---------------------------------------- ----------------------------------------
See Note 7 of Notes to Condensed Consolidated Financial Statements for additional information. Equity price risk - Certain investments in telecommunications companies' marketable equity securities are carried at their market value of approximately $671.4 million. A ten percent decline in market value would result in a $67.1 million reduction in fair value and a corresponding adjustment, net of tax effect, to the related equity account for unrealized gains/losses, a component of other comprehensive income. SOUTH CAROLINA ELECTRIC & GAS COMPANY FINANCIAL SECTION PART I. FINANCIAL INFORMATION Item 1. Financial Statements SOUTH CAROLINA ELECTRIC & GAS COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - -------------------------------------------------------------------------------- September 30, December 31, Millions of dollars 2001 2000 - -------------------------------------------------------------------------------- Assets Utility Plant: Electric $4,550 $4,453 Gas 423 409 Other 187 186 - -------------------------------------------------------------------------------- Total 5,160 5,048 Less accumulated depreciation and amortization 1,821 1,720 - -------------------------------------------------------------------------------- Total 3,339 3,328 Construction work in progress 355 230 Nuclear fuel, net of accumulated amortization 49 57 - -------------------------------------------------------------------------------- Utility Plant, Net 3,743 3,615 - -------------------------------------------------------------------------------- Nonutility Property and Investments, Net 23 21 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Current Assets: Cash and temporary investments 37 60 Receivables 239 287 Inventories (at average cost): Fuel 25 21 Materials and supplies 48 46 Emission allowances 15 20 Prepayments 9 5 - -------------------------------------------------------------------------------- Total Current Assets 373 439 - -------------------------------------------------------------------------------- Deferred Debits: Environmental 26 20 Nuclear plant decommissioning fund 77 72 Pension asset, net 228 196 Other regulatory assets 194 191 Other 131 110 - -------------------------------------------------------------------------------- Total Deferred Debits 656 589 - -------------------------------------------------------------------------------- Total $4,795 $4,664 ================================================================================ SOUTH CAROLINA ELECTRIC & GAS COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - -------------------------------------------------------------------------------- September 30, December 31, Millions of dollars 2001 2000 - -------------------------------------------------------------------------------- Capitalization and Liabilities Stockholders' Investment: Common equity $1,737 $1,657 Preferred stock (Not subject to purchase or sinking funds) 106 106 - -------------------------------------------------------------------------------- Total Stockholders' Investment 1,843 1,763 Preferred Stock, net (Subject to purchase or sinking funds) 10 10 Company-Obligated Mandatorily Redeemable Preferred Securities of the Company's Subsidiary Trust, SCE&G Trust I, Holding solely $50 million principal amount of the 7.55% Junior Subordinated Debentures of SCE&G, due 2027 50 50 Long-Term Debt, net 1,414 1,267 - -------------------------------------------------------------------------------- Total Capitalization 3,317 3,090 - -------------------------------------------------------------------------------- Current Liabilities: Short-term borrowings 75 188 Current portion of long-term debt 28 28 Accounts payable 59 103 Accounts payable - affiliated companies 20 58 Customer deposits 19 17 Taxes accrued 102 51 Interest accrued 29 22 Dividends declared 40 44 Deferred income taxes, net 25 20 Other 6 10 - -------------------------------------------------------------------------------- Total Current Liabilities 403 541 - -------------------------------------------------------------------------------- Deferred Credits: Deferred income taxes, net 596 584 Deferred investment tax credits 105 109 Reserve for nuclear plant decommissioning 77 72 Postretirement benefits 119 113 Regulatory liabilities 82 65 Other 96 90 - -------------------------------------------------------------------------------- Total Deferred Credits 1,075 1,033 - -------------------------------------------------------------------------------- Total $4,795 $4,664 ================================================================================ See Notes to Condensed Consolidated Financial Statements.
SOUTH CAROLINA ELECTRIC & GAS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited) - ---------------------------------------------------------------------------- ------------------------ ----------------------------- Three Months Ended Nine Months Ended September 30, September 30, Millions of dollars 2001 2000 2001 2000 - ---------------------------------------------------------------------------- ---------- ------------- --------------- ------------- Operating Revenues: Electric $418 $397 $1,101 $1,011 Gas 43 51 258 203 - ---------------------------------------------------------------------------- ---------- -------------- ------------- -------------- Total Operating Revenues 461 448 1,359 1,214 - ---------------------------------------------------------------------------- ---------- -------------- ------------- -------------- Operating Expenses: Fuel used in electric generation 69 68 174 180 Purchased power (including affiliated purchases) 70 45 206 112 Gas purchased for resale 33 40 198 140 Other operation and maintenance 78 75 241 229 Depreciation and amortization 41 40 122 119 Other taxes 25 25 75 75 - ---------------------------------------------------------------------------- ---------- -------------- ------------- -------------- Total Operating Expenses 316 293 1,016 855 - ---------------------------------------------------------------------------- ---------- -------------- ------------- -------------- Operating Income 145 155 343 359 - ---------------------------------------------------------------------------- ---------- -------------- ------------- -------------- Other Income: Other Income, including allowance for equity funds used during construction 6 2 20 9 Gain on sale of assets 1 1 2 2 - ---------------------------------------------------------------------------- ---------- -------------- ------------- -------------- Total Other Income 7 3 22 11 - ---------------------------------------------------------------------------- ---------- -------------- ------------- -------------- Income Before Interest Charges, Income Taxes, Preferred Stock Dividends and Cumulative Effect of Accounting Change 152 158 365 370 Interest Charges, Net of Allowance for Borrowed Funds Used During Construction 26 82 79 26 - ---------------------------------------------------------------------------- ---------- -------------- ------------- -------------- Income Before Income Taxes, Preferred Stock Dividends and Cumulative Effect of Accounting Change 126 132 283 291 Income Taxes 45 49 103 107 - ---------------------------------------------------------------------------- ---------- -------------- ------------- -------------- Income Before Preferred Stock Dividends and Cumulative Effect of Accounting Change 81 83 180 184 Preferred Dividend Requirement of the Company - Obligated Mandatorily Redeemable Preferred Securities (1) (3) (3) (1) - ---------------------------------------------------------------------------- ---------- -------------- ------------- -------------- Income Before Cumulative Effect of Accounting Change 80 82 177 181 Cumulative Effect of Accounting Change, net of taxes (Note 2) - - - 22 - ---------------------------------------------------------------------------- ---------- -------------- ------------- -------------- Net Income 80 82 177 203 Preferred Stock Cash Dividends Declared (At stated rates) (2) (6) (6) (2) - ---------------------------------------------------------------------------- ---------- -------------- ------------- -------------- Earnings Available for Common Stockholder 78 80 171 197 Retained Earnings at Beginning of Period 665 603 649 550 Common Stock Cash Dividends Declared (38) (41) (115) (105) - ---------------------------------------------------------------------------- ---------- -------------- ------------- -------------- Retained Earnings at End of Period $705 $642 $705 $642 ============================================================================ ========== ============== ============= ============== See Notes to Condensed Consolidated Financial Statements.
SOUTH CAROLINA ELECTRIC & GAS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - --------------------------------------------------------------------------------------------- Nine Months Ended September 30, Millions of dollars 2001 2000 - ------------------------------------------------------------------------------- ------------- Cash Flows From Operating Activities: Net income $177 $203 Adjustments to reconcile net income to net cash provided from operating activities: Cumulative effect of accounting change, net of taxes - (22) Depreciation and amortization 122 119 Amortization of nuclear fuel 11 15 Gain on sale of assets (2) (2) Allowance for funds used during construction (14) (2) Over (under) collections, fuel adjustment clauses 3 2 Changes in certain assets and liabilities: (Increase) decrease in receivables 48 (6) (Increase) decrease in inventories (1) 4 (Increase) decrease pension asset (32) (42) (Increase) decrease other regulatory assets (4) 12 Increase (decrease) deferred income taxes, net 12 15 Increase (decrease) other regulatory liabilities 19 6 Increase (decrease) postretirement benefits 6 14 Increase (decrease) in accounts payable (82) (11) Increase (decrease) in taxes accrued 51 12 Other, net (3) (3) - ------------------------------------------------------------------------------- ------------- Net Cash Provided From Operating Activities 311 314 - ------------------------------------------------------------------------------- ------------- Cash Flows From Investing Activities: Utility property additions and construction expenditures, net of AFC (263) (176) Nonutility property additions (2) - Proceeds from sale of assets 3 1 Investments (5) (7) - ------------------------------------------------------------------------------- ------------- Net Cash Used For Investing Activities (267) (182) - ------------------------------------------------------------------------------- ------------- Cash Flows From Financing Activities: Proceeds: Issuance of First Mortgage Bonds 149 148 Capital contribution from Parent 25 - Repayments: First Mortgage Bonds - (100) Other long-term debt (3) (3) Dividend payments: Common stock (119) (87) Preferred stock (6) (6) Short-term borrowings, net (113) (108) - ------------------------------------------------------------------------------- ------------- Net Cash Provided From (Used For) Financing Activities (67) (156) - ------------------------------------------------------------------------------- ------------- Net Decrease In Cash and Temporary Investments (23) (24) Cash and Temporary Investments, January 1 60 78 - ------------------------------------------------------------------------------- ------------- Cash and Temporary Investments, September 30 $37 $54 =============================================================================== ============= Supplemental Cash Flow Information: Cash paid for - Interest (net of capitalized interest of $7 for 2001 and $3 for 2000) $103 $72 - Income taxes 11 65
See Notes to Condensed Consolidated Financial Statements. SOUTH CAROLINA ELECTRIC & GAS COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2001 (Unaudited) The following notes should be read in conjunction with the Notes to Consolidated Financial Statements appearing in South Carolina Electric & Gas Company's (the Company) Annual Report on Form 10-K for the year ended December 31, 2000. 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 year. In the opinion of management, the information furnished herein reflects all adjustments, all of a normal recurring nature except as described in Notes 2 and 3, 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. This accounting standard requires cost-based rate-regulated utilities to recognize in their financial statements revenues and expenses in different time periods than do enterprises that are not rate-regulated. As a result, the Company has recorded, as of September 30, 2001, approximately $220 million and $82 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax assets and liabilities of approximately $129 million and $65 million, respectively. The electric and gas regulatory assets of approximately $61 million and $30 million, respectively, (excluding deferred income tax assets) are recoverable through rates. In the future, as a result of deregulation or other changes in the regulatory environment, the Company may no longer meet the criteria for continued application of SFAS 71 and could be required to write off its regulatory assets and liabilities. Such an event could have a material adverse effect on the Company's results of operations in the period the write-off would be recorded, but it is not expected that cash flows or financial position would be materially affected. B. New Accounting Standards Effective January 1, 2001 the Company adopted SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. The Company's adoption of SFAS 133, as amended, did not have a material impact on the Company's results of operations, cash flows or financial position. In June 2001 the Financial Accounting Standards Board approved the issuance of three new accounting standards. SFAS 141, "Business Combinations," requires that all business combinations be accounted for using the purchase method of accounting. SFAS 141 applies to all business combinations initiated after June 30, 2001, and is not expected to have any impact on the Company's results of operations, cash flows or financial position. SFAS 142, "Goodwill and Other Intangible Assets," requires that goodwill not be amortized but instead be tested for impairment at least annually at the reporting unit level. A reporting unit is the same level as, or one level below, an operating segment. The Company will adopt SFAS 142 effective January 1, 2002. The impact SFAS 142 may have on the Company's results of operations, cash flows or financial position has not been determined. SFAS 143, "Accounting for Asset Retirement Obligations," provides guidance for recording and disclosing a liability related to the future obligation to retire an asset (such as a nuclear plant). The Company will adopt SFAS 143 effective January 1, 2003. The impact SFAS 143 may have on the Company's results of operations, cash flows or financial position has not been determined. C. Reclassifications Certain amounts from prior periods have been reclassified to conform with the presentation adopted for 2001. 2. Cumulative Effect of Accounting Change Effective January 1, 2000 the Company changed its method of accounting for operating revenues from cycle billing to full accrual. The cumulative effect of this change was $22 million, net of tax. Accruing unbilled revenues more closely matches revenues and expenses. Unbilled revenues represent the estimated amount customers will be charged for service rendered but not yet billed as of the end of the accounting period. 3. RATE AND OTHER REGULATORY MATTERS A. On April 24, 2001 the Public Service Commission of South Carolina (PSC) approved the Company's request to increase the fuel component of rates charged to electric customers from 1.330 cents per kilowatt-hour to 1.579 cents per kilowatt-hour. The increase reflects higher fuel costs projected for the period May 2001 through April 2002. The increase also provides recovery over a two-year period of under-collected actual fuel costs through April 2001, including short-term purchased power costs necessitated by outages at two of the Company's base load generating plants in winter 2000-2001. The new rates were effective as of the first billing cycle in May 2001. B. On July 20, 2000 the PSC approved the Company's request for an out-of-period adjustment to increase the cost of gas component of its rates for natural gas service from 54.334 cents per therm to 68.835 cents per therm, effective with the first billing cycle in August 2000. As part of its regularly scheduled annual review of gas costs, the PSC issued an order on November 9, 2000 which further increased the cost of gas component to 78.151 cents per therm, effective with the first billing cycle in November 2000. On December 21, 2000 the PSC issued an order approving the Company's request for another out-of-period adjustment to increase the cost of gas component to 99.340 cents per therm, effective with the first billing cycle in January 2001. On March 9, 2001 the PSC issued an order granting the Company's request to reduce the cost of gas component to 79.340 cents per therm, effective with the first billing cycle in March 2001. On October 23, 2001, as part of the annual review of gas costs, the PSC approved the Company's request to further reduce the cost of gas component to 59.646 cents per therm effective with the first billing cycle in November 2001. C. On July 5, 2000 the PSC approved the Company's request to implement lower depreciation rates for its gas operations. The new rates were effective retroactively to January 1, 2000 and resulted in a reduction in annual depreciation expense of approximately $2.9 million. The retroactive effect was recorded in the second quarter of 2000. D. On September 14, 1999 the PSC approved an accelerated capital recovery plan for the Company's Cope Generating Station. The plan was implemented beginning January 1, 2000 for a three-year period. The PSC approved an accelerated capital recovery methodology wherein the Company may increase depreciation of its Cope Generating Station in excess of amounts that would be recorded based upon currently approved depreciation rates. The amount of the accelerated depreciation will be determined by the Company based on the level of revenues and operating expenses, not to exceed $36 million annually without the approval of the PSC. Any unused portion of the $36 million in any given year may be carried forward for possible use in the following year. As of September 30, 2001 no accelerated depreciation has been recorded. The accelerated capital recovery plan will be accomplished through existing customer rates. E. On January 9, 1996 the PSC issued an order granting the Company an increase in retail electric rates which was fully implemented by January 1997. The PSC authorized a return on common equity of 12.0 percent. The PSC also approved establishment of a Storm Damage Reserve Account capped at $50 million to be collected through rates over a ten-year period. Additionally the PSC approved accelerated amortization of a significant portion of the Company's electric regulatory assets (excluding deferred income tax assets) and the remaining transition obligation for postretirement benefits other than pensions, which enabled the Company to recover the balances as of the end of the year 2000. F. In 1994 the PSC issued an order approving the Company's request to recover through a billing surcharge to its gas customers the costs of environmental cleanup at the sites of former manufactured gas plants (MGPs). The billing surcharge is subject to annual review and provides for the recovery of substantially all actual and projected site assessment and cleanup costs and environmental claims settlements for the Company's gas operations that had previously been deferred. In October 2001, as a result of the annual review, the PSC approved the Company's request to increase the billing surcharge from $1.1 cents per therm to $3.0 cents per therm, which is intended to provide for the recovery of the balance remaining at September 30, 2001 of $25.9 million prior to the end of the year 2005. 4. LONG-TERM DEBT On January 24, 2001 the Company issued $150 million First Mortgage Bonds having an annual interest rate of 6.70 percent and maturing on February 1, 2011. The proceeds from the sale of these bonds were used to reduce short-term debt and for general corporate purposes. 5. RETAINED EARNINGS The Company's Restated Articles of Incorporation and the Indenture underlying its First and Refunding Mortgage Bonds contain provisions that, under certain circumstances, could limit the payment of cash dividends on its common stock. In addition, with respect to hydroelectric projects, the Federal Power Act requires the appropriation of a portion of certain earnings therefrom. At September 30, 2001 approximately $36 million of retained earnings were restricted by this requirement as to payment of cash dividends on common stock. 6. CONTINGENCIES With respect to commitments at September 30, 2001, reference is made to Note 12 of Notes to Consolidated Financial Statements appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. Contingencies at September 30, 2001 include the following: A. Lake Murray Dam Reinforcement On October 15, 1999 the Federal Energy Regulatory Commission (FERC) notified the Company of its agreement with the Company's plan to reinforce Lake Murray Dam in order to maintain the lake in case of an extreme earthquake. Construction for the project, which began in the third quarter of 2001, could cost up to $300 million with completion dates ranging from 2004 to 2006. Although any costs incurred by the Company are expected to be recoverable through electric rates, the Company also is exploring alternative sources of funding. B. Nuclear Insurance The Price-Anderson Indemnification Act, which deals with public liability for a nuclear incident, currently establishes the liability limit for third-party claims associated with any nuclear incident at $9.5 billion. Each reactor licensee is currently liable for up to $88.1 million per reactor owned for each nuclear incident occurring at any reactor in the United States, provided that not more than $10 million of the liability per reactor would be assessed per year. The Company's maximum assessment, based on its two-thirds ownership of the V. C. Summer Nuclear Station (Summer Station), would be approximately $58.7 million per incident, but not more than $6.7 million per year. The Company currently maintains policies (for itself and on behalf of the South Carolina Public Service Authority) with Nuclear Electric Insurance Limited. The policies, covering the nuclear facility for property damage, excess property damage and outage costs, permit assessments under certain conditions to cover insurer's losses. Based on the current annual premium, the Company's portion of the retrospective premium assessment would not exceed $8.1 million. To the extent that insurable claims for property damage, decontamination, repair and replacement and other costs and expenses arising from a nuclear incident at Summer Station exceed the policy limits of insurance, or to the extent such insurance becomes unavailable in the future, and to the extent that the Company's rates would not recover the cost of any purchased replacement power, the Company will retain the risk of loss as a self-insurer. The Company has no reason to anticipate a serious nuclear incident at Summer Station. If such an incident were to occur, it could have a material adverse impact on the Company's results of operations, cash flows and financial position. C. Environmental The Company maintains an environmental assessment program to identify and evaluate current and former operations sites that could require environmental cleanup. As site assessments are initiated, estimates are made of the amount of expenditures, if any, deemed necessary to investigate and clean up each site. These estimates are refined as additional information becomes available; therefore, actual expenditures could differ significantly from the original estimates. Amounts estimated and accrued to date for site assessments and cleanup relate primarily to regulated operations. Such amounts are deferred and amortized with recovery provided through rates. Deferred amounts, net of amounts previously recovered through rates and insurance settlements, totaled $25.9 million at September 30, 2001. The deferral includes the estimated costs associated with the following matters. o In September 1992 the Environmental Protection Agency (EPA) notified the Company, the City of Charleston and the Charleston Housing Authority of their potential liability for the investigation and cleanup of the Calhoun Park area site in Charleston, South Carolina. This site encompasses approximately 30 acres and includes properties which were locations for industrial operations, including a wood preserving (creosote) plant, one of the Company's decommissioned MGPs, properties owned by the National Park Service and the City of Charleston and private properties. The site has not been placed on the National Priorities List, but may be added in the future. The Potentially Responsible Parties (PRPs) negotiated an administrative order by consent for the conduct of a Remedial Investigation/Feasibility Study and a corresponding Scope of Work. Field work began in November 1993, and the EPA approved a Remedial Investigation Report in February 1997 and a Feasibility Study Report in June 1998. In July 1998 the EPA approved the Company's Removal Action Work Plan for soil excavation. In September 1998 a Record of Decision was issued which sets forth the EPA's view of the extent of each PRP's responsibility for site contamination and the level to which the site must be remediated. In January 1999 the EPA issued a Unilateral Administrative Order for Remedial Design and Remedial Action directing the Company to design and carry out a plan of remediation for the Calhoun Park site. The Company submitted a Comprehensive Remedial Design Work Plan (RDWP) in December 1999 and proceeded with implementation pending agency approval. The RDWP was approved by the EPA in July 2000, and its implementation continues. In September 2000, the Company was notified by the South Carolina Department of Health and Environmental Control (DHEC) that benzene contamination was detected in the intermediate aquifer on surrounding properties to the Calhoun Park Area site. The EPA required that the Company conduct a focused Remedial Investigation/Feasibility Study on the intermediate aquifer, which was completed in June 2001. The EPA expects to issue a second Record of Decision dealing with the intermediate aquifer in the fourth quarter of 2001.. As of September 30, 2001, the Company has spent approximately $14.8 million to remediate the Calhoun Park area site. Total remediation costs are estimated to be $21.9 million. o The Company owns three other decommissioned MGP sites in South Carolina which contain residues of by-product chemicals. For the site located in Sumter, effective September 15, 1998, the Company entered into a Remedial Action Plan Contract with DHEC pursuant to which it agreed to undertake a full site investigation and remediation under the oversight of DHEC. Site investigation, characterization and remediation are proceeding according to schedule. Excavation at the Sumter MGP site was completed in May 2001 as part of an Interim Removal Action. Further work may be required at the discretion of DHEC. Upon successful implementation of a site remedy, DHEC will give the Company a Certificate of Completion and a covenant not to sue. For the site located in Florence the Company entered into a similar Remedial Action Plan Contract with DHEC in September 2000. The Company is continuing to investigate the remaining site in Columbia, and is monitoring the nature and extent of residual contamination. 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 reportable segments. Therefore, net income is not allocated to these segments. Affiliate revenue is derived from transactions between reportable segments as well as transactions between separate legal entities that are combined into the same reportable segment. Accumulated depreciation is not assignable to the Company's segments. Disclosure of Reportable Segments (Millions of Dollars) - ------------------------------------ ------------------------------------------- Three months ended Electric Gas Adjustments/ Consolidated September 30, 2001 Operations Distribution Eliminations Total - ------------------------------------ ------------------------------------------- External Revenue 418 43 - 461 Intersegment Revenue 66 - (66) - Operating Income (Loss) 151 (5) (1) 145 Segment Assets 4,878 427 (510) 4,795 - ------------------------------------ ------------ ------------------------------ Nine months ended Electric Gas Adjustments/ Consolidated September 30, 2001 Operations Distribution Eliminations Total - ------------------------------------ ------------ ------------------------------ External Revenue 1,101 258 - 1,359 Intersegment Revenue 165 - (165) - Operating Income (Loss) 334 12 (3) 343 Segment Assets 4,878 427 (510) 4,795 - ------------------------ ------------ ----------------------------------------- Three months ended Electric Gas Adjustments/ Consolidated September 30, 2000 Operations Distribution Eliminations Total - ------------------------------------ ------------ ------------------------------ External Revenue 397 51 - 448 Intersegment Revenue 63 - (63) - Operating Income (Loss) 160 (4) (1) 155 Segment Assets 4,576 411 (471) 4,516 - ------------------------ ------------ ------------ ----------------------------- Nine months ended Electric Gas Adjustments/ Consolidated September 30, 2000 Operations Distribution Eliminations Total - ------------------------ ------------ ------------ ----------------------------- External Revenue 1,011 203 - 1,214 Intersegment Revenue 169 - (169) - Operating Income (Loss) 345 17 (3) 359 Segment Assets 4,576 411 (471) 4,516 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) Annual Report on Form 10-K for the year ended December 31, 2000. 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 the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following: (1) that the information is of a preliminary nature and may be subject to further and/or continuing review and adjustment, (2) changes in the utility regulatory environment, (3) changes in the economy especially in SCE&G's service territory, (4) the impact of competition from other energy suppliers, (5) growth opportunities, (6) the results of financing efforts, (7) changes in SCE&G's accounting policies, (8) weather conditions, especially in areas served by SCE&G, (9) inflation, (10) changes in environmental regulations and (11) the other risks and uncertainties described from time to time in SCE&G's periodic reports filed with the Securities and Exchange Commission. SCE&G disclaims any obligation to update any forward-looking statements. LIQUIDITY AND CAPITAL RESOURCES On October 15, 1999 the Federal Energy Regulatory Commission (FERC) notified SCE&G of its agreement with SCE&G's plan to reinforce Lake Murray Dam in order to maintain the lake in case of an extreme earthquake. Construction for the project, which began in the third quarter of 2001, could cost up to $300 million with completion dates ranging from 2004 to 2006. Although any costs incurred by SCE&G are expected to be recoverable through electric rates, SCE&G also is exploring alternative sources of funding. On February 9, 2000 FERC issued FERC Order 2000. The Order required utilities which operate electric transmission systems to submit plans for the formation of regional transmission organizations (RTOs). In March 2001 FERC gave provisional approval to SCE&G and two other southeastern electric utilities to establish GridSouth Transco, LLC (GridSouth) as an independent regional transmission company, responsible for operating and planning the utilities' combined transmission systems. In July 2001 FERC expressed its desire that utilities throughout the U. S. combine their transmission systems to create four large independent regional operators, one each in the Northeast, Southeast, Midwest and West. Accordingly, FERC ordered mediation talks to take place between the utilities forming GridSouth and certain groups that had proposed other RTOs. These talks were mediated by an administrative law judge, who issued her nonbinding mediation report in September 2001. The report made recommendations related to the formation of a Southeast regional RTO. FERC has not acted on the mediation report, and the timing or impact of future FERC orders related to RTOs cannot be predicted. In March 2001 V. C. Summer Nuclear Station returned to service. It had been taken out of service on October 7, 2000 for a planned maintenance and refueling outage. During initial inspection activities, plant personnel discovered a small leak coming from a hole in a weld in a primary coolant system pipe. Repairs were completed and the integrity of the new welds was verified through extensive testing. The PSC has approved recovery of the cost of replacement power through SCE&G's electric fuel adjustment clause (see Note 3A of Notes to Condensed Consolidated Financial Statements). The Nuclear Regulatory Commission was closely involved throughout this process and approved SCE&G's actions to repair the crack, as well as the restart schedule. SCE&G will continue to monitor primary coolant system pipes during the next outage, scheduled for the spring of 2002. In April 2001 SCE&G's 385 megawatt coal-fired Cope Generating Station returned to service. It had been taken out of service in January 2001 due to an electrical ground in the generator. The PSC has approved recovery of the cost of replacement power through SCE&G's electric fuel adjustment clause (see Note 3A of Notes to Condensed Consolidated Financial Statements). In October 2001 SCE&G filed with the PSC its siting plans to construct an 875 megawatt generation facility in Jasper County, South Carolina, to supply electricity to its South Carolina customers. The facility will include three natural gas combustion-turbine generators and one steam-turbine generator. Construction of the $450 million facility is expected to begin in April 2002, with commercial operation in the summer of 2004. In connection with the facility, SCE&G has signed a 250 megawatt electric supply contract with North Carolina Electric Membership Corporation for a term of at least five years beginning January 1, 2004. The following table summarizes how SCE&G generated and used funds for property additions and construction expenditures during the nine months ended September 30, 2001 and 2000: - ---------------------------------------------------------------------------- Nine Months Ended September 30, Millions of dollars 2001 2000 - -------------------------------------------------------------- ------------- Net cash provided from operating activities $311 $314 Net cash used for financing activities (67) (156) at the beginning of the period 60 78 - -------------------------------------------------------------------------------- Net cash available for utility property additions and construction expenditures $304 $236 ================================================================================ Funds used for utility property additions and construction expenditures, net of noncash allowance for funds used during construction $263 $176 Funds used for nonutility property additions $2 $- ================================================================= ============= On January 24, 2001 SCE&G issued $150 million First Mortgage Bonds having an annual interest rate of 6.70 percent and maturing on February 1, 2011. The proceeds were used to reduce short-term debt and for general corporate purposes. SCE&G anticipates that the remainder of its 2001 cash requirements will be met through internally generated funds and the incurrence of additional short-term and long-term indebtedness. SCE&G expects that it has or can obtain adequate sources of financing to meet its projected cash requirements for the next 12 months and for the foreseeable future. SCE&G's ratio of earnings to fixed charges for the 12 months ended September 30, 2001 was 3.91. Environmental Matters For information on environmental matters see Note 6C of Notes To Condensed Consolidated Financial Statements. RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AS COMPARED TO THE CORRESPONDING PERIODS IN 2000 Earnings and Dividends Net income components for the three and nine months ended September 30, 2001 and 2000 were as follows: ---------------------------- ------------------------------------------------- Three Months Ended Nine Months Ended Millions of dollars 2001 2000 2001 2000 ---------------------------- ----------- ------------------------ ------------ Net income derived from: Operations $79.7 $82.0 $176.2 $180.5 Cumulative effect of change in accounting - - - 22.3 --------------------------------------- ------------- ---------- ------------- Total net income $79.7 $82.0 $176.2 $202.8 ======================================= ============= ========== ============= Net income from operations for the three months ended September 30, 2001 decreased primarily due to milder weather, an increase in other operation and maintenance expense and an economic slowdown, which were partially offset by customer growth. Net income from operations for the nine months ended September 30, 2001 decreased primarily due to milder weather, increases in interest expense and other operation and maintenance expense and an economic slowdown, which were partially offset by customer growth. For the last several years, the market value of the Company's retirement plan assets has exceeded the total actuarial present value of accumulated plan benefits. Pension income for the three and nine months ended September 30, 2001 was $11.1 million and $29.5 million, compared to $12.6 million and $30.7 million, respectively, for the corresponding periods in 2000. As a result of pension income, employee benefit expenses were reduced approximately $5.8 million and $15.4 million for the three and nine months ended September 30, 2001. For the corresponding periods in 2000, employee benefit expenses were reduced approximately $6.9 million and $16.4 million. Additionally, other income increased $3.7 million and $9.7 million for the three and nine months ended September 30, 2001. For the corresponding periods in 2000, other income increased $3.9 million and $9.9 million, respectively. Earnings from the cumulative effect of change in accounting resulted from recording of unbilled revenue (See Note 2 of Notes to Condensed Consolidated Financial Statements). Allowance for funds used during construction (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. Both the equity and the debt portions of AFC are noncash items of nonoperating income which have the effect of increasing reported net income. AFC represented approximately five percent of income before income taxes for the three and nine months ended September 30, 2001, respectively. For the three and nine months ended September 30, 2000, AFC represented approximately one percent of income before income taxes. SCE&G's Board of Directors declared the following quarterly dividends on common stock held by SCANA, during 2001: - ---------------------- ------------------ --------------------- ---------------- Declaration Dividend Quarter Payment Date Amount Ended Date - ---------------------- ------------------ --------------------- ---------------- February 22, 2001 $35.0 million March 31, 2001 April 1, 2001 - ---------------------- May 3, 2001 $41.75 million June 30, 2001 July 1, 2001 - ---------------------- August 2, 2001 $38.5 million September 30, 2001 October 1, 2001 - ---------------------- November 1, 2001 $40.0 million December 31, 2001 January 1, 2002 - ---------------------- ------------------ --------------------- ---------------- Electric Operations Electric Operations is comprised of the electric portion of SCE&G and South Carolina Fuel Company. Changes in the electric operations sales margins, excluding the cumulative effect of accounting change, for the three and nine months ended September 30, 2001, when compared to the corresponding periods in 2000, were as follows:
- --------------------------------- ------------------------------------------ ---------------------------------------------- Three Months Ended Nine Months Ended Millions of dollars 2001 2000 Change 2001 2000 Change - --------------------------------- --------- --------- ---------------------- ----------- ----------- ---------------------- Electric operating revenue $417.6 $396.7 $20.9 5.3% $1,101.0 $1,010.8 $90.2 8.9% Less: Fuel used in generation 69.1 67.6 1.5 2.2% 173.8 179.8 (6.0) (3.3)% Purchased power 69.6 45.2 24.4 54.0% 205.5 111.9 93.6 83.6% - --------------------------------- ---------- ----------- ----------- ----------- --------- --------- Margin $278.9 $283.9 $(5.0) (1.8)% $721.7 $719.1 $2.6 0.4% ================================= ========= ========= ========== =========== =========== =========== =========== ========== *Greater than 100% -
Changes in electric operations sales margins for the three months ended September 30, 2001 reflect milder weather and an economic slowdown. Purchased power increased primarily due to power purchased for resale. As a result, operating revenue also increased, but was partially offset by the effects of milder weather and the economic slowdown. Changes in electric operations sales margin for the nine months ended September 30, 2001 reflect steady customer growth partially offset by the effects of milder weather and the economic slowdown. Increases in purchased power costs for the nine months, as compared to the corresponding period in 2000, were primarily attributable to plant outages discussed at Liquidity and Capital Resources, which delayed scheduled maintenance outages at other plants until April and May 2001, and to power purchased for resale in the third quarter. Gas Distribution Gas Distribution is comprised of the local distribution operations of SCE&G. Changes in the gas distribution sales margins, excluding the cumulative effect of accounting change, for the three and nine months ended September 30, 2001, when compared to the corresponding periods in 2000, were as follows:
- ------------------------------------ ----------------------------------------- --------------------------------------------- Three Months Ended Nine Months Ended Millions of dollars 2001 2000 Change 2001 2000 Change - ------------------------------------ --------- --------- --------------------- ----------- ---------- ---------------------- Gas operating revenue $43.0 $51.4 $(8.4) (16.3)% $257.9 $202.9 $55.0 27.1% Less: Gas purchased for resale 32.6 40.2 (7.6) (18.9)% 198.0 140.4 57.6 41.0% - ------------------------------------ ---------- ----------- ---------- ----------- --------- --------- Margin $10.4 $11.2 $(0.8) (7.1)% $59.9 $62.5 $(2.6) (4.2)% ==================================== ========= ========= ========== ========== =========== ========== =========== ==========
Gas distribution sales margins for the three and nine months ended September 30, 2001 reflect milder weather and an economic slowdown. Revenues and purchases for the nine months ended September 30, 2001 were impacted by large increases in natural gas prices in late 2000 and early 2001. The increased cost of gas was passed on to customers as discussed in Note 3B in Notes To Condensed Consolidated Financial Statements. Other Operating Expenses Changes in other operating expenses for the three and nine months ended September 30, 2001 when compared to the corresponding periods in 2000, were as follows:
- -------------------------------------- ---------------------------------------- -------------------------------------------- Three Months Ended Nine Months Ended Millions of dollars 2001 2000 Change 2001 2000 Change - -------------------------------------- --------- -------- --------------------- ---------- ---------- ---------------------- Other operation and maintenance $78.4 $75.2 $3.2 4.3% $240.9 $229.3 $11.6 5.1% Depreciation and amortization 40.9 39.6 1.3 3.3% 122.5 118.8 3.7 3.1% Other taxes 24.8 25.5 (0.7) (2.7)% 75.2 75.1 0.1 0.1% - -------------------------------------- --------- ---------- ---------- ------------- --------- -------- Total $144.1 $140.3 $3.8 2.7% $438.6 $423.2 $15.4 3.6% ====================================== ========= ======== ========= =========== ========== ========== ============= ========
Other operation expenses for the three and nine months ended September 30, 2001 increased primarily as a result of increases in employee benefit costs. The increase in depreciation and amortization expenses for the three and nine months ended September 30, 2001 resulted from normal property additions. Item 3. Quantitative and Qualitative Disclosures About Market Risk All financial instruments held by SCE&G and described below are held for purposes other than trading. Interest rate risk - The table below provides information about SCE&G's financial instruments that are sensitive to changes in interest rates. For debt obligations the table presents principal cash flows and related weighted average interest rates by expected maturity dates.
September 30, 2001 Millions of dollars Expected Maturity Date There- Fair Liabilities 2001 2002 2003 2004 2005 after Total Value - --------------------------------- -------- ------- --------- ---------- ----------- ----------- ---------- - --------------------------------- -------- ------- --------- ---------- ----------- ----------- ---------- Long-Term Debt: Fixed Rate ($) 1.3 27.6 129.5 123.9 173.9 1,082.3 1,538.5 1,478.7 Average Interest Rate 6.50 6.72 6.37 7.52 7.40 7.43 7.33 -
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. PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED FINANCIAL SECTION PART I. FINANCIAL INFORMATION Item 1. Financial Statements. -------------------- PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - -------------------------------------------------------------------------------- September 30, December 31, Millions of dollars 2001 2000 - -------------------------------------------------------------------------------- Assets Gas Utility Plant $822 $787 Less accumulated depreciation 282 263 Acquisition adjustment, net of accumulated amortization 443 452 - -------------------------------------------------------------------------------- Gas Utility Plant, Net 983 976 - -------------------------------------------------------------------------------- Nonutility Property and Investments, Net 28 34 - -------------------------------------------------------------------------------- Current Assets: Cash and temporary investments 21 8 Restricted cash and temporary investments 1 5 Receivables (net of allowance for uncollectible accounts of $1 for 2001 and $2 for 2000) 41 148 Inventories (at average cost): Stored gas 47 32 Materials and supplies 8 7 Other 4 2 - -------------------------------------------------------------------------------- Total Current Assets 122 202 - -------------------------------------------------------------------------------- Deferred Charges and Other Assets: Due from affiliate-pension asset 10 10 Regulatory assets 11 21 Other 8 10 - -------------------------------------------------------------------------------- Total Deferred Charges and Other Assets 29 41 - -------------------------------------------------------------------------------- Total 1,162 $1,253 ================================================================================ ================================================================================ Capitalization and Liabilities Capitalization: Common equity $706 $712 Long-term debt, net 295 145 - -------------------------------------------------------------------------------- Total Capitalization 1,001 857 - -------------------------------------------------------------------------------- Current Liabilities: Short-term borrowings - 125 Current portion of long-term debt 4 4 Accounts payable 17 84 Taxes accrued - 3 Customer prepayments and deposits 11 8 Advances from parent - 44 Dividends declared and interest accrued 7 5 Other 3 6 - -------------------------------------------------------------------------------- Total Current Liabilities 42 279 - -------------------------------------------------------------------------------- Deferred Credits and Other Liabilities: Deferred income taxes, net 84 82 Deferred investment tax credits 2 3 Due to affiliate-postretirement benefits 11 10 Regulatory liabilities 5 - Other 17 22 - ----------------------------------------------------------- ------- Total Deferred Credits and Other Liabilities 119 117 - -------------------------------------------------------------------------------- Total $1,162 $1,253 ================================================================================ See Notes to Condensed Consolidated Financial Statements.
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS (DEFICIT) (Unaudited) ---------------------------------------------------------------------- --------------------------- ------------------------------ Three Months Ended Nine Months Ended September 30, September 30, Millions of dollars 2001 2000 2001 2000 ---------------------------------------------------------------------- ------------ -------------- --------------- -------------- Operating Revenues $47 $76 $343 $326 Cost of Gas 25 54 228 210 ---------------------------------------------------------------------- ------------ -------------- --------------- -------------- Gross Margin 22 22 115 116 ---------------------------------------------------------------------- ------------ -------------- --------------- -------------- Operating Expenses: Operation and maintenance 19 17 51 52 Depreciation and amortization 10 10 32 31 Other taxes 2 2 5 5 ---------------------------------------------------------------------- ------------ -------------- --------------- -------------- Total Operating Expenses 31 29 88 88 ---------------------------------------------------------------------- ------------ -------------- --------------- -------------- Operating Income (Loss) (9) (7) 27 28 Other Income, net 1 2 5 5 Interest Charges 6 5 16 15 ---------------------------------------------------------------------- ------------ -------------- --------------- -------------- Income (Loss) Before Income Taxes and Cumulative Effect of Accounting Change (14) (10) 16 18 Income Taxes (Benefit) (4) (2) 10 12 ---------------------------------------------------------------------- ------------ -------------- --------------- -------------- Income (Loss) Before Cumulative Effect of Accounting Change (10) (8) 6 6 Cumulative Effect of Accounting Change, net of taxes (Note 2) - - - 7 ---------------------------------------------------------------------- ------------ -------------- --------------- -------------- ---------------------------------------------------------------------- ------------ -------------- --------------- -------------- Net Income (Loss) (10) (8) 6 13 Retained Earnings at Beginning of Period 13 10 9 73 Acquisition of Company - - - (73) Common Stock Cash Dividends Declared (3) (5) (15) (16) ---------------------------------------------------------------------- ------------ -------------- --------------- -------------- ---------------------------------------------------------------------- ------------ -------------- --------------- -------------- Retained Earnings (Deficit) at End of Period $- $(3) $- $(3) ====================================================================== ============ ============== =============== ============== See Notes to Condensed Consolidated Financial Statements.
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - ---------------------------------------------------------------------------------------------- ---------------------------- Nine Months Ended September 30, Millions of dollars 2001 2000 - ---------------------------------------------------------------------------------------------- --------------- ------------ Cash Flows From Operating Activities: Net income $6 $13 Adjustments to reconcile net income to net cash provided from operating activities: Cumulative effect of accounting change, net of taxes - (7) Depreciation and amortization 37 35 Excess distributions (undistributed earnings) of investee 3 (2) Over (under) collection, fuel adjustment clause 14 2 Changes in certain assets and liabilities: (Increase) decrease in receivables, net 96 38 (Increase) decrease in inventories (17) (11) (Increase) decrease in regulatory assets 1 (5) Increase (decrease) in accounts payable and advances (101) (6) Increase (decrease) in deferred income taxes, net 2 2 Increase (decrease) in accrued taxes (2) (2) Other, net 2 2 - ---------------------------------------------------------------------------------------------- --------------- ------------ Net Cash Provided From Operating Activities 41 59 - ---------------------------------------------------------------------------------------------- --------------- ------------ Cash Flows From Investing Activities: Construction expenditures (41) (25) Investments - (1) Nonutility and other 1 - - ---------------------------------------------------------------------------------------------- --------------- ------------ Net Cash Used For Investing Activities (40) (26) - ---------------------------------------------------------------------------------------------- --------------- ------------ Cash Flows From Financing Activities: Issuance of medium-term notes 148 - Repayment of short-term borrowings, net (125) (13) Retirement of long-term debt and common stock - (1) Capital contribution from parent 4 - Cash dividends (15) (16) - ---------------------------------------------------------------------------------------------- --------------- ------------ Net Cash Provided From (Used For) Financing Activities 12 (30) - ---------------------------------------------------------------------------------------------- --------------- ------------ Net Increase In Cash and Temporary Investments 13 3 Cash and Temporary Investments, January 1 8 9 - ---------------------------------------------------------------------------------------------- --------------- ------------ Cash and Temporary Investments, September 30 $21 $12 ============================================================================================== =============== ============ Supplemental Cash Flow Information: Cash paid for - Interest (net of capitalized interest of $0.8 for 2001 and $0.7 for 2000) $12 $15 - Income taxes 15 14
In connection with the acquisition of Public Service Company of North Carolina, Inc. by SCANA Corporation, $21 million in common stock was cancelled. The application of push-down accounting for the acquisition resulted in a $466 million acquisition adjustment. Effective January 1, 2001 PSNC Production Corporation and SCANA Public Service Company LLC were sold to SCANA Energy Marketing, Inc., an affiliate, for $4.4 million, which approximated net book value. Assets transferred included approximately $4.0 million in cash. See Notes to Condensed Consolidated Financial Statements. PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2001 (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 (the Company) Annual Report on Form 10-K for the year ended December 31, 2000. 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 (Loss) are not necessarily indicative of amounts expected for the year. In the opinion of management, the information furnished herein reflects all adjustments, all of a normal recurring nature except as described in Notes 2, 3, 4 and 5, 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. This accounting standard requires cost-based rate-regulated utilities to recognize in their financial statements revenues and expenses in different time periods than do enterprises that are not rate-regulated. As a result the Company has recorded, as of September 30, 2001, approximately $11 million and $5 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax liabilities of approximately $0.2 million. The regulatory assets are recoverable through rates. In the future, as a result of deregulation or other changes in the regulatory environment, the Company may no longer meet the criteria for continued application of SFAS 71 and could be required to write off its regulatory assets and liabilities. Such an event could have a material adverse effect on the Company's results of operations in the period the write-off would be recorded, but it is not expected that cash flows or financial position would be materially affected. B. New Accounting Standards Effective January 1, 2001 the Company adopted SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. The Company's adoption of SFAS 133, as amended, did not have a material impact on the Company's results of operations, cash flows or financial position. In June 2001 the Financial Accounting Standards Board approved the issuance of three new accounting standards. SFAS 141, "Business Combinations," requires that all business combinations be accounted for using the purchase method of accounting. SFAS 141 applies to all business combinations initiated after June 30, 2001, and is not expected to have any impact on the Company's results of operations, cash flows or financial position. SFAS 142, "Goodwill and Other Intangible Assets," requires that goodwill not be amortized but instead be tested for impairment at least annually at the reporting unit level. A reporting unit is the same level as, or one level below, an operating segment. The Company will adopt SFAS 142 effective January 1, 2002. The impact SFAS 142 may have on the Company's results of operations, cash flows or financial position has not been determined but could be material. SFAS 143, "Accounting for Asset Retirement Obligations," provides guidance for recording and disclosing a liability related to the future obligation to retire an asset. The Company will adopt SFAS 143 effective January 1, 2003. The impact SFAS 143 may have on the Company's results of operations, cash flows or financial position has not been determined. C. Reclassifications Certain amounts from prior periods have been reclassified to conform with the presentation adopted for 2001. 2. CUMULATIVE EFFECT OF ACCOUNTING CHANGE Effective January 1, 2000 the Company changed its method of accounting for operating revenues from cycle billing to full accrual. The cumulative effect of this change was $6.6 million, net of tax. Accruing unbilled revenues more closely matches revenues and expenses. Unbilled revenues represent the estimated amount customers will be charged for service rendered but not yet billed as of the end of the accounting period. Also, effective January 1, 2000 the gas costs associated with unbilled revenues are no longer deferred. 3. ACQUISITION BY SCANA CORPORATION On February 10, 2000 the acquisition of the Company by SCANA Corporation (SCANA) was consummated in a business combination accounted for as a purchase. As a result the Company became a wholly owned subsidiary of SCANA. Pursuant to the Agreement and Plan of Merger, the Company shareholders were paid approximately $212 million in cash and 17.4 million shares of SCANA common stock valued at approximately $488 million. The Company has recorded a utility plant acquisition adjustment of approximately $466 million, which reflects the excess of SCANA's purchase price of approximately $700 million over the fair value of the Company's net assets at January 1, 2000. The adjustment is being amortized over 35 years on a straight-line basis. Common equity at September 30, 2001 and December 31, 2000 reflects the effect of this acquisition adjustment. Severance benefits of approximately $4.4 million have been paid to eight key executives. In addition, approximately $3.1 million was paid to former directors of the Company in connection with deferred compensation and retirement plans, and approximately $8.1 million was paid to participants in the Company's nonqualified stock option plans. 4. SALE OF PSNC PRODUCTION CORPORATION AND SCANA PUBLIC SERVICE LLC PSNC Production Corporation and SCANA Public Service Company LLC were sold to SCANA Energy Marketing, Inc., a subsidiary of SCANA, for $4.4 million, which approximated net book value, effective January 1, 2001. 5. RATE AND OTHER REGULATORY MATTERS PSNC's rates are established using a benchmark cost of gas approved by the North Carolina Utilities Commission (NCUC) which may be modified periodically to reflect changes in the commodity price of natural gas purchased by PSNC. PSNC may file revised tariffs with the NCUC coincident with these changes or it may track the changes in its deferred accounts for subsequent rate consideration. The rules of the NCUC allow recovery of all prudently incurred gas costs. The NCUC reviews PSNC's gas purchasing practices annually. PSNC's benchmark cost of gas in effect during the nine months ended September 2001 and 2000 was as follows: Rate Per Therm Effective Date Rate Per Therm Effective Date -------------- -------------- -------------- -------------- $.690 January 2001 $.300 January 2000 $.750 February-March 2001 $.265 February-May 2000 $.650 April-August 2001 $.350 June 2000 $.500 September 2001 $.450 July-September 2000 On April 6, 2000 the NCUC issued an order permanently approving the Company's request to establish its commodity cost of gas for large commercial and industrial customers on the basis of market prices for natural gas. The NCUC previously allowed the Company use of this mechanism on a trial basis. This mechanism allows the Company to collect from its customers amounts approximating the amounts paid for natural gas. 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 areas that otherwise would not be economically feasible to serve. On December 30, 1999 the Company filed an application with the NCUC to extend natural gas service to Madison, Jackson and Swain Counties, North Carolina. Pursuant to state statutes, the NCUC required the Company to forfeit its exclusive franchises to serve six counties in western North Carolina effective January 31, 2000 because these counties were not receiving any natural gas service. Madison, Jackson and Swain Counties were included in the forfeiture order. On June 29, 2000 the NCUC approved the Company's requests for reinstatement of its exclusive franchises for Madison, Jackson and Swain Counties and disbursement of up to $28.4 million from the Company's expansion fund for this project. The Company estimates that the cost of this project will be approximately $31.4 million. The Madison County portion of the project was completed at a cost of approximately $5.7 million, and customers began receiving service in July 2001. On December 7, 1999 the NCUC issued an order approving the acquisition of the Company by SCANA. As specified in the NCUC order, the Company reduced its rates by approximately $1 million in each of August 2000 and August 2001, and has agreed to a moratorium on general rate cases until August 2005. General rate relief can be obtained during this period to recover costs associated with materially adverse governmental actions and force majeure events. 6. LONG-TERM DEBT On February 16, 2001 the Company issued $150 million of medium-term notes having an annual interest rate of 6.625 percent and maturing on February 15, 2011. The proceeds were used to reduce short-term debt and for general corporate purposes. 7. CONTINGENCIES The Company owns, or has owned, all or portions of seven sites in North Carolina on which manufactured gas plants (MGPs) were formerly operated. Intrusive investigation (including drilling, sampling and analysis) has begun at two sites and the remaining sites have been evaluated using historical records and observations of current site conditions. These evaluations have revealed that MGP residuals are present or suspected at several of the sites. The North Carolina Department of Environment and Natural Resources (DENR) has recommended that no further action be taken with respect to one site. Excavation at the Raleigh MGP site was completed in March 2001 as part of an Interim Removal Action. Further work at this site may be required at the discretion of DENR. Work at the Durham MGP site began in May 2001 under a DENR-approved Phase II Workplan. An environmental due diligence review of the Company conducted in February 1999 estimated that the cost to remediate the sites would range between $11.3 million and $21.9 million. During the second quarter of 2000, the review was finalized and the estimated liability was recorded. The Company is unable to determine the rate at which costs may be incurred over this time period. The estimated cost range has not been discounted to present value. The Company's associated actual costs for these sites will depend on a number of factors, such as actual site conditions, third-party claims and recoveries from other Potentially Responsible Parties (PRPs). A May 1993 order by the NCUC authorized deferral accounting for all costs associated with the investigation and remediation of MGP sites. As of September 30, 2001 the Company has recorded a liability and associated regulatory asset of $9.1 million, which reflects the minimum amount of the range, net of shared cost recovery expected from other PRPs and expenditures for work completed. Amounts incurred to date are approximately $1.1 million. Management intends to request recovery of additional MGP clean-up costs not recovered from other PRPs in future rate case filings, and believes that all costs incurred will be recoverable in gas rates. 8. SEGMENT OF BUSINESS INFORMATION For the three and nine months ended September 30, 2001 Gas Distribution is the Company's only reportable segment. Gas Distribution uses operating income to measure profitability. Effective January 1, 2001 PSNC Production Corporation and SCANA Public Service Company LLC (SCANA Public Service) were sold to SCANA Energy Marketing, Inc., a subsidiary of SCANA (see Note 4). In 2000 SCANA Public Service was an Energy Marketing segment of the Company and used net income to measure profitability.
Disclosure of Reportable Segments (Millions of Dollars) -------------------------------- ----------------- ----------------- ------------------ ------------------ Three months ended Gas Energy Adjustments/ Consolidated September 30, 2001 Distribution Marketing Eliminations Total -------------------------------- ----------------- ----------------- ------------------ ------------------ External Revenue 47 n/a - 47 Intersegment Revenue - n/a - - Operating Income (Loss) (9) n/a - (9) Segment Assets 1,148 n/a 14 1,162 ----------------------------- --------------------- ----------------- ------------------- ---------------- Three months ended Gas Energy Adjustments/ Consolidated September 30, 2000 Distribution Marketing Eliminations Total ----------------------------- --------------------- ----------------- ------------------- ---------------- External Revenue 46 30 - 76 Intersegment Revenue - - - - Operating Income (Loss) (7) n/a - (7) Net Income n/a - (8) (8) Segment Assets 1,138 17 1 1,156 ------------------------------ --------------------- ----------------- ------------------- ---------------- Nine months ended Gas Energy Adjustments/ Consolidated September 30, 2001 Distribution Marketing Eliminations Total ------------------------------ --------------------- ----------------- ------------------- ---------------- External Revenue 343 n/a - 343 Intersegment Revenue - n/a - - Operating Income 27 n/a - 27 Segment Assets 1,148 n/a 14 1,162 ------------------------------ --------------------- ----------------- -------------------- --------------- Nine months ended Gas Energy Adjustments/ Consolidated September 30, 2000 Distribution Marketing Eliminations Total ------------------------------ --------------------- ----------------- -------------------- --------------- External Revenue 267 85 (26) 326 Intersegment Revenue - 2 (2) - Operating Income 26 n/a 2 28 Net Income n/a 1 121 13 Segment Assets 1,138 17 1 1,156 1 Includes cumulative effect of accounting change (See Note 2).
Item 2. Management's Narrative Analysis of Results of Operations. --------------------------------------------------------- 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 (PSNC) Annual Report on Form 10-K for the year ended December 31, 2000. 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 such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following: (1) that the information is of a preliminary nature and may be subject to further and/or continuing review and adjustment, (2) changes in the utility regulatory environment, (3) changes in the economy, especially in PSNC's service territory, (4) the impact of competition from other energy suppliers, (5) growth opportunities, (6) the results of financing efforts, (7) changes in PSNC's accounting policies, (8) weather conditions, especially in areas served by PSNC, (9) inflation, (10) changes in environmental regulations and (11) the other risks and uncertainties described from time to time in PSNC's periodic reports filed with the Securities and Exchange Commission. PSNC disclaims any obligation to update any forward-looking statements. Capital Expansion Program PSNC's capital expansion program, through the construction of lines, services, systems and facilities, and the purchase of equipment, is designed to help PSNC meet the growing demand for natural gas in its franchised service areas. PSNC's 2001 construction budget is approximately $58.0 million, compared to actual construction expenditures for 2000 of $39.1 million. The construction program is reviewed regularly by management and is dependent upon PSNC's continuing ability to generate adequate funds internally and to sell new issues of debt on acceptable terms. Construction expenditures during the nine months ended September 30, 2001 were $41.1 million compared to $24.6 million for the same period in 2000. PSNC's ratio of earnings to fixed charges for the 12 months ended September 30, 2001 was 3.0. Earnings and Dividends Net income components for the nine months ended September 30, 2001 and 2000 were as follows: - -------------------------------------------------------------------------------- Nine Months Ended September 30, Millions of dollars 2001 2000 - ------------------------------------------------------------------- ------------ Net income derived from: Operations $5.7 $6.3 Cumulative effect of change in accounting - 6.6 - ------------------------------------------------------------------- ------------ Total net income $5.7 $12.9 =================================================================== ============ Net income from operations for the nine months ended September 30, 2001 decreased primarily due to the sale of PSNC Production Corporation (see Note 4 of Notes to Condensed Consolidated Financial Statements), which was partially offset by customer growth. In 2000 net income reflects a change in accounting to record unbilled revenue (see Note 2). PSNC's Board of Directors declared the following dividends on common stock held by SCANA during 2001: - -------------------- ------------------- -------------------- ------------------ Declaration Date Dividend Amount Quarter Ended Payment Date - -------------------- ------------------- -------------------- ------------------ February 22, 2001 $6.0 million March 31, 2001 April 1, 2001 May 3, 2001 $5.8 million June 30, 2001 July 1, 2001 August 2, 2001 $3.0 million September 30, 2001 October 1, 2001 - -------------------- ------------------- -------------------- ------------------ Gas Distribution Changes in gas distribution sales margins for the nine months ended September 30, 2001, when compared to the corresponding period in 2000, were as follows: - ------------------------------------------------------------------------------- Nine Months Ended September 30, Millions of dollars 2001 2000 Change - -------------------------------------- ------------- -------------------------- Gas operating revenue $342.9 $326.3 $16.6 5.1% Less: Cost of gas 227.8 210.5 17.3 8.2% - -------------------------------------- ------------- ------------- Gross margin $115.1 $115.8 $(0.7) (0.6)% ====================================== ============= ============= ============ Gas distribution sales margin for the nine months ended September 30, 2001 decreased as a result of lower gas usage by residential customers and the sale of PSNC Production Corporation (see Note 4 of Notes to the Condensed Consolidated Financial Statements), which more than offset increased customer growth. Revenues and cost of gas were impacted by large increases in natural gas prices in late 2000 and early 2001. The increased cost of gas was passed on to customers. Operating Expenses Operating and maintenance expenses for the nine months ended September 30, 2001 decreased $0.8 million when compared to the corresponding period in 2000 primarily due to reduced costs related to employee benefits and advertising and the sale of PSNC Production. The increase was partially offset by an increased provision for bad debt. PART II. OTHER INFORMATION Item 1. Legal Proceedings SCANA Corporation: For information regarding legal proceedings see Note 4 of Notes To Consolidated Financial Statements appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2000, and Note 4 and Note 9 of Notes To Condensed Consolidated Financial Statements appearing in this Quarterly Report on Form 10-Q. South Carolina Electric & Gas Company: For information regarding legal proceedings see Note 3," of Notes To Consolidated Financial Statements appearing in South Carolina Electric & Gas Company's Annual Report on Form 10-K for the year ended December 31, 2000, and Note 3 and Note 6 " of Notes To Condensed Consolidated Financial Statements appearing in this Quarterly Report on Form 10-Q. Public Service Company of North Carolina, Incorporated: For information regarding legal proceedings see Note 5 of Notes To Consolidated Financial Statements appearing in Public Service Company of North Carolina, Incorporated's Annual Report on Form 10-K for the year ended December 31, 2000, and Note 5 and Note 7 of Notes To Condensed Consolidated Financial Statements appearing in this Quarterly Report on Form 10-Q. Item 2, 3, 4 and 5 are not applicable. Item 6. Exhibits and Reports on Form 8-K A. Exhibits SCANA Corporation, South Carolina Electric & Gas Company and Public Service Company of North Carolina, Incorporated: Exhibits filed with this Quarterly Report on Form 10-Q are listed in the following Exhibit Index. Certain of such exhibits which have heretofore been filed with the Securities and Exchange Commission and which are designated by reference to their exhibit numbers in prior filings are hereby incorporated herein by reference and made a part hereof. B. Reports on Form 8-K during the third quarter 2001 were as follows: SCANA Corporation: None South Carolina Electric & Gas Company: None Public Service Company of North Carolina, Incorporated: None SCANA CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SCANA CORPORATION (Registrant) November 14, 2001 By: s/Mark R. Cannon ---------------------- Mark R. Cannon Controller (Principal accounting officer) SOUTH CAROLINA ELECTRIC & GAS COMPANY SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SOUTH CAROLINA ELECTRIC & GAS COMPANY ------------------------------------- (Registrant) November 14, 2001 By: s/Mark R. Cannon --------------------------------- Mark R. Cannon Controller (Principal accounting officer) PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED (Registrant) November 14, 2001 By: s/Mark R. Cannon --------------------------------- Mark R. Cannon Controller (Principal accounting officer) EXHIBIT INDEX Exhibit Applicable to Form 10-Q of No. SCANA SCE&G PSNC Description 2.01 X X Agreement and Plan of Merger, dated as of February 16, 1999 as amended and restated as of May 10, 1999, by and among Public Service Company of North Carolina, Incorporated, SCANA Corporation, New Sub I, Inc. and New Sub II, Inc. (Filed as Exhibit 2.1 to Registration Statement No. 333-78227 on Form S-4) 3.01 X Restated Articles of Incorporation of SCANA as adopted on April 26, 1989 (Filed as Exhibit 3-A to Registration Statement No. 33-49145) 3.02 X Articles of Amendment of SCANA, dated April 27, 1995 (Filed as Exhibit 4-B to Registration Statement No. 33-62421) 3.03 X Restated Articles of Incorporation of SCE&G, as adopted on May 3, 2001 (Filed as Exhibit 3.01 to Registration Statement No. 333-65460) 3.04 X Articles of Amendment of SCE&G dated May 22, 2001 (Filed as Exhibit 3.02 to Registration Statement No. 333-65460) 3.05 X Articles of Correction of SCE&G dated June 1, 2001 (Filed as Exhibit 3.03 to Registration Statement No. 333-65460) 3.06 X Articles of Amendment of SCE&G dated June 14, 2001 (Filed as Exhibit 3.04 to Registration Statement No. 333-65460) 3.07 X Articles of Amendment of SCE&G dated August 30, 2001 (Filed herewith) 3.08 X Articles of Incorporation of PSNC (formerly New Sub II, Inc.) dated February 12, 1999 (Filed as Exhibit 3.01 to Registration Statement No. 333-45206) 3.09 X Articles of Amendment of PSNC (formerly New Sub II, Inc.) as adopted on February 10, 2000 (Filed as Exhibit 3.02 to Registration Statement No. 333-45206) 3.10 X Articles of Correction of PSNC dated February 11, 2000 (Filed as Exhibit 3.03 to Registration Statement No. 333-45206) 3.11 X By-Laws of SCANA as revised and amended on December 13, 2000 (Filed as Exhibit 3.01 to Registration Statement No. 333-68266) 3.12 X By-Laws of SCE&G as amended and adopted on February 22, 2001 (Filed as Exhibit 3.05 to Registration Statement No. 333-65460) 3.13 X By-Laws of PSNC (formerly New Sub II, Inc.) as revised and amended on February 22, 2001 (Filed as Exhibit 3.01 to Registration Statement No. 333-68516) 4.01 X Articles of Exchange of South Carolina Electric and Gas Company and SCANA Corporation (Filed as Exhibit 4-A to Post-Effective Amendment No. 1 to Registration Statement No. 2-90438) EXHIBIT INDEX Exhibit Applicable to Form 10-Q of No. SCANA SCE&G PSNC Description 4.02 X Indenture dated as of November 1, 1989 between SCANA Corporation and The Bank of New York, as Trustee (Filed as Exhibit 4-A to Registration Statement No. 33-32107) 4.03 X X Indenture dated as of January 1, 1945, between the South Carolina Power Company and Central Hanover Bank and Trust Company, as Trustee, as supplemented by three Supplemental Indentures dated respectively as of May 1, 1946, May 1, 1947 and July 1, 1949 (Filed as Exhibit 2-B to Registration Statement No. 2-26459) 4.04 X X Fourth Supplemental Indenture dated as of April 1, 1950, to Indenture referred to in Exhibit 4.03, pursuant to which SCE&G assumed said Indenture (Filed as Exhibit 2-C to Registration Statement No. 2-26459) 4.05 X X Fifth through Fifty-third Supplemental Indentures to Indenture referred to in Exhibit 4.03 dated as of the dates indicated below and filed as exhibits to the Registration Statements whose file numbers are set forth below December 1, 1950 Exhibit 2-D to Registration No. 2-26459 July 1, 1951 Exhibit 2-E to Registration No. 2-26459 June 1, 1953 Exhibit 2-F to Registration No. 2-26459 June 1, 1955 Exhibit 2-G to Registration No. 2-26459 November 1, 1957 Exhibit 2-H to Registration No. 2-26459 September 1, 1958 Exhibit 2-I to Registration No. 2-26459 September 1, 1960 Exhibit 2-J to Registration No. 2-26459 June 1, 1961 Exhibit 2-K to Registration No. 2-26459 December 1, 1965 Exhibit 2-L to Registration No. 2-26459 June 1, 1966 Exhibit 2-M to Registration No. 2-26459 June 1, 1967 Exhibit 2-N to Registration No. 2-29693 September 1, 1968 Exhibit 4-O to Registration No. 2-31569 June 1, 1969 Exhibit 4-C to Registration No. 33-38580 December 1, 1969 Exhibit 4-O to Registration No. 2-35388 June 1, 1970 Exhibit 4-R to Registration No. 2-37363 March 1, 1971 Exhibit 2-B-17 to Registration No. 2-40324 January 1, 1972 Exhibit 2-B to Registration No. 33-38580 July 1, 1974 Exhibit 2-A-19 to Registration No. 2-51291 May 1, 1975 Exhibit 4-C to Registration No. 33-38580 July 1, 1975 Exhibit 2-B-21 to Registration No. 2-53908 February 1, 1976 Exhibit 2-B-22 to Registration No. 2-55304 December 1, 1976 Exhibit 2-B-23 to Registration No. 2-57936 March 1, 1977 Exhibit 2-B-24 to Registration No. 2-58662 May 1, 1977 Exhibit 4-C to Registration No. 33-38580 February 1, 1978 Exhibit 4-C to Registration No. 33-38580 June 1, 1978 Exhibit 2-A-3 to Registration No. 2-61653 April 1, 1979 Exhibit 4-C to Registration No. 33-38580 June 1, 1979 Exhibit 2-A-3 to Registration No. 33-38580 April 1, 1980 Exhibit 4-C to Registration No. 33-38580 June 1, 1980 Exhibit 4-C to Registration No. 33-38580 December 1, 1980 Exhibit 4-C to Registration No. 33-38580 April 1, 1981 Exhibit 4-D to Registration No. 33-49421 June 1, 1981 Exhibit 4-D to Registration No. 2-73321 March 1, 1982 Exhibit 4-D to Registration No. 33-49421 April 15, 1982 Exhibit 4-D to Registration No. 33-49421 EXHIBIT INDEX Exhibit Applicable to Form 10-Q of No. SCANA SCE&G PSNC Description May 1, 1982 Exhibit 4-D to Registration No. 33-49421 December 1, 1984 Exhibit 4-D to Registration No. 33-49421 December 1, 1985 Exhibit 4-D to Registration No. 33-49421 June 1, 1986 Exhibit 4-D to Registration No. 33-49421 September 1, 1987 Exhibit 4-D to Registration No. 33-49421 January 1, 1989 Exhibit 4-D to Registration No. 33-49421 January 1, 1991 Exhibit 4-D to Registration No. 33-49421 July 15, 1991 Exhibit 4-D to Registration No. 33-49421 August 15, 1991 Exhibit 4-D to Registration No. 33-49421 April 1, 1993 Exhibit 4-E to Registration No. 33-49421 July 1, 1993 Exhibit 4-D to Registration No. 33-57955 May 1, 1999 Exhibit 4.04 to Registration No. 333-86387 4.06 X X Indenture dated as of April 1, 1993 from South Carolin Electric & Gas Company to NationsBank of Georgia, National Association (Filed as Exhibit 4-F to Registration Statement No. 33-49421) 4.07 X X First Supplemental Indenture to Indenture referred to in Exhibit 4.06 dated as of June 1, 1993 (Filed as Exhibit 4-G to Registration Statement No. 33-49421) 4.08 X X Second Supplemental Indenture to Indenture referred to in Exhibit 4.06 dated as of June 15, 1993 (Filed as Exhibit 4-G to Registration Statement No. 33-57955) 4.09 X X Trust Agreement for SCE&G Trust I (Filed as Exhibit 4.03 to Registration Statement No. 333-49960) 4.10 X X Certificate of Trust of SCE&G Trust I (Filed as Exhibit 4.04 to Registration Statement No. 333-49960) 4.11 X X Junior Subordinated Indenture for SCE&G Trust I (Filed as Exhibit 4.05 to Registration Statement No.333-49960) 4.12 X X Guarantee Agreement for SCE&G Trust I (Filed as Exhibit 4.06 to Registration Statement No. 333-49960) 4.13 X X Amended and Restated Trust Agreement for SCE&G Trust I (Filed as Exhibit 4.07 to Registration Statement No. 333-49960) 4.14 X X Indenture dated as of January 1, 1996 between PSNC and First Union National Bank of North Carolina, as Trustee (Filed as Exhibit 4.08 to Registration Statement No. 333-45206) 4.15 X X First Supplemental Indenture dated as of January 1, 1996, between PSNC and First Union National Bank of North Carolina, as Trustee (Filed as Exhibit 4.09 to Registration Statement No. 333-45206) 4.16 X X Second Supplemental Indenture dated as of December 15, 1996 between PSNC and First Union National Bank of North Carolina, as Trustee (Filed as Exhibit 4.10 to Registration Statement No. 333-45206) EXHIBIT INDEX Exhibit Applicable to Form 10-Q of No. SCANA SCE&G PSNC Description 4.17 X X Third Supplemental Indenture dated as of February 10, 2000 between PSNC and First Union National Bank of North Carolina, as Trustee (Filed as Exhibit 4.11 to Registration Statement No. 333-45206) 4.18 X X Fourth Supplemental Indenture dated as of February 12, 2001 between PSNC and First Union National Bank of North Carolina, as Trustee (Filed as Exhibit 4.05 to Registration Statement No. 333-68516) 4.19 X PSNC $150 million medium-term note issued February 16, 2001 (Filed as Exhibit 4.06 to Registration Statement No. 333-68516) 10.01 X SCANA Executive Deferred Compensation Plan as amended July 1, 2001 (Filed herewith) 10.01a X SCANA Voluntary Deferral Plan as amended through October 21, 1997 (Filed as Exhibit 10.01 to Registration Statement No. 333-49960) 10.01b X SCANA Key Employee Retention Plan as amended and restated effective as of October 21, 1997 (Filed as Exhibit 10.02 to Registration Statement No. 333-49960) 10.01c X Resolution by SCANA Corporation Board of Directors amending the SCANA Key Employee Retention Plan, adopted August 2, 2001 (Filed herewith) 10.02 X SCANA Supplemental Executive Retirement Plan as amended July 1, 2000 (Filed herewith) 10.03 X SCANA Key Executive Severance Benefits Plan as amended July 1, 2001 (Filed herewith) 10.03a X SCANA Supplementary Key Executive Severance Benefits Plan as amended July 1, 2001 (Filed herewith) 10.04 X SCANA Performance Share Plan as amended and restated effective January 1, 1998 (Filed as Exhibit 10 (e) to Registration Statement No. 333-86803) 10.05 X SCANA Long-Term Equity Compensation Plan dated January 2000 filed as Exhibit 4.04 to Registration Statement No. 333-37398) 10.06 X Description of SCANA Whole Life Option (Filed as Exhibit 10-F to Form 10-K for the year ended December 31, 1991, under cover of Form SE, File No. 1-8809) 10.07 X Description of SCANA Corporation Executive Annual Incentive Plan (Filed as Exhibit 10-G to Form 10-K for the year ended December 31, 1991, under cover of Form SE, File No. 1-8809) 10.08 X SCANA Corporation Director Compensation and Deferral Plan effective January 1, 2001 (Filed as Exhibit 10.05 to Registration Statement No. 333-49960) EXHIBIT INDEX Exhibit Applicable to Form 10-Q of No. SCANA SCE&G PSNC Description 10.09 X Operating Agreement of Pine Needle LNG Company, LLC dated August 8, 1995 (Filed as Exhibit 10.01 to Registration Statement No. 333-45206) 10.10 X Amendment to Operating Agreement of Pine Needle LNG Company, LLC dated October 1, 1995 (Filed as Exhibit 10.02 to Registration Statement No. 333-45206) 10.11 X Amended Operating Agreement of Cardinal Extension Company, LLC dated December 19, 1996 (Filed as Exhibit 10.03 to Registration Statement No. 333-45206) 10.12 X Amended Construction, Operation and Maintenance Agreement by and between Cardinal Operating Company and Cardinal Extension Company, LLC dated December 19, 1996 (Filed as Exhibit 10.04 to Registration Statement No. 333-45206) 10.13 X Form of Severance Agreement between PSNC and its Executive Officers (Filed as Exhibit 10.05 to Registration Statement No. 333-45206) 10.14 X Service Agreement between PSNC and SCANA Services, Inc., effective April 1, 2000 (Filed as Exhibit 10.06 to Registration Statement No. 333-45206) 10.15 X Service Agreement between SCE&G and SCANA Services, Inc., effective April 1, 2001 (Filed herewith) EX-3 3 aoa.txt ARTICLES OF AMENDMENT Exhibit 3.06 STATE OF SOUTH CAROLINA SECRETARY OF STATE ARTICLES OF AMENDMENT Pursuant to Section 33-10-106 of the 1976 South Carolina Code, as amended, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: 1. The name of the corporation is SOUTH CAROLINA ELECTRIC & GAS COMPANY. 2. On , the corporation adopted the following Amendment(s) of its Articles of Incorporation: NOT APPLICABLE 3. The manner, if not set forth in the amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the Amendment shall be effected, is as follows: (a) The number of redeemable shares of the corporation reacquired by redemption or purchase is 3,203 itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 4.50% 1,203 Cumulative Preferred Stock ($50 par value) 4.60% Series A 2,000 (b) The aggregate number of issued shares of the corporation after giving effect to such cancellation is 41,630,840, itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 5% 125,209 " " " " 4.60% 0 " " " " 4.50% 8,397 " " " " 4.60% (Series A) 14,052 " " " " 5.125% 66,000 " " " " 4.60% (Series B) 54,400 " " " " 6% 66,635 " " " " 9.40% 0 " " " ($100 par value) 8.12% 0 " " " " 7.70% 0 " " " " 8.40% 0 " " " ($50 par value) 8.72% 0 " " ($100 par value) 6.52% 1,000,000 Common Stock ($4.50 par value) ------ 40,296,147 ---------- 41,630,840 (c) The amount of the stated capital of the corporation after giving effect to such cancellation is $298,067,311.50. Page 2 (d) The number of shares which the corporation has authority to issue after giving effect to such cancellation is 56,424,693, itemized as follows: Class Series No. of Shares Cumulative Preferred Stock ($50 par value) 5% 125,209 " " " " 4.60% 0 " " " " 4.50% 8,397 " " " " 4.60% (Series A) 14,052 " " " " 5.125% 66,000 " " " " 4.60% (Series B) 54,400 " " " " 6% 66,635 " " " " 9.40% 0 " " " ($100 par value) 8.12% 0 " " " " 7.70% 0 " " " " 8.40% 0 " " " ($50 par value) 8.72% 0 " " " ($100 par value) 6.52% 1,000,000 Serial Preferred Stock ($50 par value) (1 vote) ---- 640,000 Serial Preferred Stock ($100 par value) (1 vote) ---- 1,750,000 Serial Preferred Stock ($25 par value) (1/4 vote) ---- 2,000,000 Serial Preferred Stock ($50 par value) (1/2 vote) ---- 700,000 Common Stock ($4.50 par value) ---- 50,000,000 ---------- 56,424,693 -- 4. (a) |__| Amendment(s) adopted by shareholder action. At the date of adoption of the amendment, the number of outstanding shares of each voting group entitled to vote separately on the Amendment, and the vote of such shares was: Number of Number of Number of Votes Number of Undisputed Voting Outstanding Votes Entitled Represented at Shares Voted Group Shares to be Cast the meeting For Against - ----- ------------- -------------------------------------------------------- --- (b) |XX| The Amendment(s) was duly adopted by the incorporators or board of directors without shareholder approval pursuant to Sections 33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina Code, as amended, and shareholder action was not required. 5. Unless a delayed date is specified, the effective date of these Articles of Amendment shall be the date of the acceptance for filing by the Secretary of State (See Section 33-1-230(b)): SOUTH CAROLINA ELECTRIC & GAS COMPANY Date: August 30, 2001 By:__________________________________________ Secretary EX-10 4 edcp.txt EXECUTIVE DEFERRAL PLAN Exhibit 10.02 SCANA CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN as amended and restated effective as of July 1, 2001 SCANA CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN TABLE OF CONTENTS Page SECTION 1. ESTABLISHMENT AND PURPOSE 1 1.1 ESTABLISHMENT AND HISTORY OF THE PLAN 1 1.2 DESCRIPTION OF THE PLAN 1 1.3 PURPOSE OF THE PLAN 1 1.4 EFFECTIVE DATE 2 SECTION 2. DEFINITIONS 3 2.1 DEFINITIONS 3 2.2 GENDER AND NUMBER 6 SECTION 3. ELIGIBILITY AND PARTICIPATION 7 3.1 ELIGIBILITY 7 3.2 PARTICIPATION 7 3.3 CONTINUED PARTICIPATION 7 SECTION 4. DEFERRALS 8 4.1 DEFERRAL ELECTION 8 4.2 CREDITING OF EMPLOYER MATCHING DEFERRALS 8 4.3 DEFERRAL PERIOD 9 4.4 FORM OF PAYMENT OF DEFERRED AMOUNTS 9 4.5 MODIFICATION OF DEFERRAL DATE 10 SECTION 5. KEDCP LEDGERS - DEFERRED COMPENSATION ACCOUNTS 11 5.1 PARTICIPANT ACCOUNTS 11 5.2 HYPOTHETICAL EARNINGS 11 5.3 CHARGES AGAINST ACCOUNTS 11 SECTION 6. PAYMENT OF DEFERRED AMOUNTS 12 6.1 PAYMENT OF DEFERRED AMOUNTS 12 6.2 ACCELERATION OF PAYMENTS 12 6.3 FINANCIAL EMERGENCY 12 6.4 ACCELERATION SUBJECT TO SUBSTANTIAL LIMITATIONS 13 6.5 COMMITTEE MODIFICATION OF INSTALLMENT DISTRIBUTION OPTIONS 14 SECTION 7. BENEFICIARY DESIGNATION 15 7.1 DESIGNATION OF BENEFICIARY 15 7.2 DEATH OF BENEFICIARY 15 7.3 INEFFECTIVE DESIGNATION 15 SECTION 8. CHANGE IN CONTROL PROVISIONS 17 8.1 ACCELERATED DISTRIBUTIONS UPON CHANGE IN CONTROL 17 8.2 TAX COMPUTATION 17 8.3 NO SUBSEQUENT RECALCULATION OF TAX LIABILITY 17 8.4 SUCCESSORS 18 8.5 AMENDMENT AND TERMINATION AFTER CHANGE IN CONTROL 18 SECTION 9. GENERAL PROVISIONS 19 9.1 CONTRACTUAL OBLIGATION 19 9.2 UNSECURED INTEREST 19 9.3 "RABBI" TRUST 19 9.4 EMPLOYMENT/PARTICIPATION RIGHTS 19 9.5 NONALIENATION OF BENEFITS 20 9.6 SEVERABILITY 20 9.7 NO INDIVIDUAL LIABILITY 20 9.8 APPLICABLE LAW 20 SECTION 10. PLAN ADMINISTRATION, AMENDMENT AND TERMINATION 21 10.1 IN GENERAL 21 10.2 CLAIMS PROCEDURE 21 10.3 FINALITY OF DETERMINATION 21 10.4 DELEGATION OF AUTHORITY 21 10.5 EXPENSES 21 10.6 TAX WITHHOLDING 21 10.7 INCOMPETENCY 21 10.8 NOTICE OF ADDRESS 22 10.9 AMENDMENT AND TERMINATION 22 SECTION 11. EXECUTION 23 SCANA CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN (As Amended and Restated, formerly the SCANA Corporation Supplementary Voluntary Deferral Plan) SECTION 1. ESTABLISHMENT AND PURPOSE 1.1 Establishment and History of the Plan. SCANA Corporation established, effective as of January 1, 1987, this supplementary voluntary deferred compensation plan for executives known as the "SCANA Corporation Supplementary Voluntary Deferral Plan" (the "SVDP"). SCANA Corporation also established: (1) effective as of October 15, 1986, a deferred compensation plan for executives known as the "SCANA Corporation Voluntary Deferral Plan" (the "VDP"); and (2) effective as of December 18, 1996, a consolidated deferred compensation plan for selected executives known as the "SCANA Corporation Key Employee Retention Program" ("KERP"), which was a consolidation of various individual agreements with executives, previously established. The VDP, KERP, and SVDP have been amended from time to time after their initial adoption for various design and administrative changes. Further, the VDP, KERP, and SVDP were amended and restated effective as of December 18, 1996 to include provisions applicable upon a Change in Control. The VDP, KERP, and SVDP were further amended and restated effective as of October 21, 1997 to include various administrative provisions and to clarify certain provisions regarding a Change in Control. Effective as of July 1, 2000, the KERP was amended to provide a cash balance-type benefit for all participants. Effective as of July 1, 2001, the KERP and VDP were amended and merged with and into this Plan, which was re-named as the "SCANA Corporation Executive Deferred Compensation Plan" (hereinafter called the "Plan"). Effective as of January 1, 2002, the KERP cash balance-type benefit was frozen and this Plan was amended and restated to include new deferral opportunities as set forth herein. 1.2 Description of the Plan. This Plan is intended to constitute a non-qualified deferred compensation plan which, in accordance with ERISA Sections 201(2), 301(a)(3) and 401(a)(1), is unfunded and established primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. 1.3 Purpose of the Plan. The purpose of this Plan is to enable the Company to attract and retain persons of outstanding competence, to provide incentive benefits to a very select group of key management employees who contribute materially to the continued growth, development, and future business success of the Company, and to provide a means whereby certain amounts payable by the Company to selected executives may be deferred to some future period. 1.4 Effective Date. This amended and restated Plan is generally effective as of July 1, 2001, except as otherwise specifically provided herein (including in the appendices to the Plan) or in resolutions adopted by the Board or the Committee. SECTION 2. DEFINITIONS 2.1 Definitions. Whenever used herein, the following terms shall have the meanings set forth below, unless otherwise expressly provided herein or unless a different meaning is plainly required by the context, and when the defined meaning is intended, the term is capitalized: (a) "Agreement" means a contract between an Eligible Employee and the Company permitting the Eligible Employee to participate in the Plan and delineating the benefits (if any) that are to be provided to the Eligible Employee in lieu of or in addition to the benefits described under the terms of this Plan. (b) "Additional Deferral" means the pre-tax deferrals of Excess Compensation made by a Participant under this Plan of up to nineteen percent (19%) of his Excess Compensation in accordance with Section 4.1(b). (c) "Basic Deferral" means the pre-tax deferrals of Excess Compensation made by a Participant under this Plan of up to six percent (6%) of his Excess Compensation in accordance with Section 4.1(a). (d) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (e) "Beneficiary" means any person or entity who, upon the Participant's death, is entitled to receive the Participant's benefits under the Plan in accordance with Section 7 hereof. (f) "Board" means the Board of Directors of the Corporation. ----- (g) "Bonus Deferral" means the pre-tax deferrals of Performance Share Awards made by a Participant under this Plan of up to one hundred percent (100%) of his Performance Share Award in accordance with Section 4.1(c). (h) "Change in Control" means a change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Corporation is then subject to such reporting requirements; provided that, without limitation, such a Change in Control shall be deemed to have occurred if: (i) Any Person (as defined in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d)) is or becomes the Beneficial Owner, directly or indirectly, of twenty five percent (25%) or more of the combined voting power of the outstanding shares of capital stock of the Corporation; (ii) During any period of two (2) consecutive years (not including any period prior to December 18, 1996) there shall cease to be a majority of the Board comprised as follows: individuals who at the beginning of such period constitute the Board and any new director(s) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved; (iii) The issuance of an Order by the Securities and Exchange Commission (SEC), under Section 9(a)(2) of the Public Utility Holding Company Act of 1935 (the "1935 Act"), authorizing a third party to acquire five percent (5%) or more of the Corporation's voting shares of capital stock; (iv) The shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting shares of capital stock of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting shares of capital stock of the surviving entity) at least eighty percent (80%) of the combined voting power of the voting shares of capital stock of the Corporation or such surviving entity outstanding immediately after such merger or consolidation; or the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets; or (v) The shareholders of the Corporation approve a plan of complete liquidation, or the sale or disposition of South Carolina Electric & Gas Company (hereinafter SCE&G), South Carolina Pipeline Corporation, or any subsidiary of SCANA designated by the Board of Directors of SCANA as a "Material Subsidiary," but such event shall represent a Change in Control only with respect to a Participant who has been exclusively assigned to SCE&G, South Carolina Pipeline Corporation, or the affected Material Subsidiary. (i) "Code" means the Internal Revenue Code of 1986, as amended. ---- (j) "Code Limitations" means the limitations imposed on deferrals under and contributions to the Qualified Plan under Code Sections 401(a)(17), 401(k)(3), 401(m)(2), 402(g)(1), 415, and such other Code sections as the Committee, in its sole discretion, may designate. (k) "Committee" means the Management Development and Corporate Performance Committee of the Board. Any references in this Plan to the "Committee" shall be deemed to include references to the designee appointed by the Committee under Section 10.4. (l) "Company" means the Corporation and any subsidiaries of the Corporation and their successor(s) or assign(s) that adopt this Plan through execution of Agreements with any of their Employees or otherwise. When the term "Company" is used with respect to an individual Participant, it shall refer to the specific company at which the Participant is employed, unless otherwise required by the context. (m) "Compensation" means the Participant's Eligible Earnings (as defined in the Qualified Plan), determined without regard to the limitation on compensation otherwise required under Code Section 401(a)(17), and without regard to any deferrals or the foregoing of compensation under this or any other plan of deferred compensation maintained by the Company. (n) "Corporation" means SCANA Corporation, a South Carolina corporation, or any successor thereto. (o) "Eligible Employee" means an Employee who is employed by the Company in a high-level management or administrative position, including employees who also serve as officers of the Company, and who is eligible for awards under the SCANA Corporation Long-Term Equity Compensation Plan. (p) "Employee" means a person who is actively employed by the Company and who falls under the usual common law rules applicable in determining the employer-employee relationship. (q) "Employer Matching Deferral" means the deferrals credited to Participants' EDCP Ledgers in accordance with Section 4.2. (r) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (s) "Excess Compensation" means the Compensation otherwise payable to an Eligible Employee in excess of the dollar limitation imposed under Code Section 401(a)(17) (or such other dollar limitation as may be set by the Committee in its sole discretion for any Year). (t) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (u) "Investment Options" means those hypothetical targeted investment options designated by the Committee as measurements of the rate of return to be credited to (or charged against) Participants' EDCP Ledgers. (v) "EDCP Ledger" means the bookkeeping ledger account used to track deferred amounts under the Plan together with credited earnings (or losses) that reflect the Investment Options applicable with respect to each Participant's deferred amounts. (w) "Participant" means any Eligible Employee who is participating in the Plan in accordance with the provisions herein set forth. If a Participant had previously deferred amounts credited to a EDCP Ledger and such Participant is no longer eligible to participate hereunder (due to a Committee designation of his ineligibility), he shall be covered under this Plan as an inactive Participant. Except for those provisions related to deferral opportunities, references herein to a Participant shall be deemed to include references to such inactive Participants, unless otherwise required by the context. (x) "Performance Share Award" means the amount payable from the Performance Share Award portion of the SCANA Corporation Long-Term Equity Compensation Plan to a Participant in a Year. (y) "Retirement" means termination of employment after attainment of "Retirement Age," which shall be the later of attainment of age 55 and completion of 20 years of vesting service (as determined under the SCANA Corporation Retirement Plan) or attainment of age 65. (z) "Qualified Plan" means the SCANA Corporation Stock Purchase- Savings Plan, as amended from time to time. (aa) "Year" means the calendar year. ---- 2.2 Gender and Number. Except when otherwise indicated by the context, any masculine terminology used herein also shall include the feminine and the feminine shall include the masculine, and the use of any term herein in the singular may also include the plural and the plural shall include the singular. SECTION 3. ELIGIBILITY AND PARTICIPATION 3.1 Eligibility. An Eligible Employee shall become eligible to participate in this Plan as follows: (a) To be eligible to participate in this Plan for purposes of making Basic Deferrals or Additional Deferrals (and to benefit from Employer Matching Deferrals) for any Year, the Eligible Employee must earn Compensation during that Year in excess of the applicable dollar limitation on compensation under Code Section 401(a)(17) (or such other dollar limitation as may be set by the Committee in its sole discretion for any Year) and the Eligible Employee must have elected to defer the maximum allowable pre-tax deferrals under the Qualified Plan for the Year. (b) Eligible Employees are automatically eligible to participate in this Plan for purposes of making Bonus Deferrals. (c) Eligible Employees are automatically eligible to participate in this Plan if they are so eligible for purposes of making SVDP deferrals in accordance with the SVDP provisions described in Appendix A or for purposes of deferrals attributable to their transferred KERP cash balance accounts, if any, as described in Appendix B. (d) All Eligible Employees will be required, as a condition of participation, to execute such written participation agreements as required by the Committee from time to time. 3.2 Participation. An Employee who meets the eligibility requirements of Section 3.1 may become a Participant in this Plan by electing to defer a portion of his Excess Compensation or Performance Share Award on such form and in such manner as determined by the Committee pursuant to Section 4. 3.3 Continued Participation. Once an Eligible Employee becomes a Participant, he shall continue to be eligible to participate for all future years until his termination of employment or death or unless and until the Committee shall designate that individual as ineligible to participate. If a Participant becomes ineligible to participate for future deferrals under this Plan, he shall retain all the rights described under this Plan with respect to deferrals previously made while an active Participant. SECTION 4. DEFERRALS 4.1 Deferral Election. Subject to the conditions set forth in this Plan, a Participant may elect to defer amounts hereunder as follows: (a) Basic Deferrals. An Eligible Employee may elect to defer Basic Deferrals under this Plan in whole percentages up to six percent (6%) of his Excess Compensation. (b) Additional Deferrals. Effective as of January 1, 2002, an Eligible Employee may elect to defer Additional Deferrals under this Plan in whole percentages up to nineteen percent (19%) of his Excess Compensation. (c) Bonus Deferrals. Effective as of January 1, 2002, an Eligible Employee may elect to defer under this Plan, in whole percentages, up to one hundred percent (100%) of his Performance Share Award otherwise payable for a Year, as a Bonus Deferral. (d) Deferral Procedures for Basic and Additional Deferrals. All elections under Section 4.1(a) and Section 4.1(b) must be made at such time and in such manner as specified by the Committee prior to the payroll period in which such Excess Compensation is otherwise earned. Once a Basic Deferral or Additional Deferral election is made, it shall remain in effect for all future Excess Compensation otherwise payable in all future periods until affirmatively changed by the Participant. Participants may amend their Basic Deferral or Additional Deferral elections at any time, with respect to Excess Compensation to be earned after the date of such modified election. The Committee is permitted but not required to establish deferral procedures pursuant to which Participants are eligible to make separate deferral elections with respect to base salary and short-term incentive awards. Eligible Employee Basic Deferrals and Additional Deferrals shall be credited to the Participant's EDCP Ledger(s) at such times and in such manner as determined by the Committee, in its sole discretion, but no less frequently than monthly. (e) Deferral Procedures for Bonus Deferrals. Elections made under Section 4.1(c) must be made no later than the end of the second Year of any three-year award cycle established under the Performance Share Award portion of the SCANA Corporation Long-Term Equity Compensation Plan, and shall apply to the Participant's award that is otherwise payable, if at all, in the Year following the Year beginning immediately after the date the deferral election is made. Any Bonus Deferral election made for any Year shall apply solely with respect to the award otherwise payable in that Year and not any future Year. Eligible Employee Bonus Deferrals shall be credited to the Participant's EDCP Ledger(s) in such manner as determined by the Committee, in its sole discretion, but no later than as of the last business day of the month following the month in which the Participant's Performance Share Award is otherwise payable. 4.2 Crediting of Employer Matching Deferrals. Effective as of January 1, 2002, a Participant who has elected to have a Basic Deferral under Section 4.1(a) will automatically be credited with an amount equal to the Employer Matching Contribution to which the Participant would have been entitled under the Qualified Plan had his Basic Deferrals under this Plan been made under the Qualified Plan, disregarding any Code Limitations. Such Employer Matching Deferrals shall be credited to each the Participant's "termination of employment" EDCP Ledger at such times and in such manner as the Committee, in its sole discretion determines, but no less frequently than monthly. For periods prior to January 1, 2002, a Participant shall be entitled to an Employer Matching Deferral in accordance with the terms of Appendix A. 4.3 Deferral Period. With respect to deferrals made in accordance with Section 4.1, each Participant may elect the deferral period for each separate deferral. Effective as of January 1, 2002, and subject to the modification of deferral date provisions of Section 4.5 and the acceleration provisions of Section 6, a Participant may elect to defer his Basic Deferrals, Additional Deferrals, and Bonus Deferrals until his termination of employment or for a specified number of years (or until a specified date). All such deferrals are subject to the establishment of EDCP Ledgers in accordance with Section 5.1 and any additional limitations that the Committee in its sole discretion may choose to apply. Notwithstanding any deferral period election otherwise made by a Participant, payments of deferred amounts here under shall be paid or begin to be paid as soon as practicable following the earliest to occur of: (a) Death, (b) Disability as defined by the Long-Term Disability provisions of the SCANA Corporation Health and Disability Plan, (c) Retirement, or (d) Any other termination of employment. 4.4 Form of Payment of Deferred Amounts. At the same time as the election made pursuant to Section 4.1 and Section 4.3, and subject to the acceleration provisions of Section 6, each Participant must also elect the manner in which his deferred amounts will be paid. (a) Mandatory Single Sum Cash Payments. All amounts that are to be paid at a date certain prior to a Participant's termination of employment, death, or disability must be paid in the form of a single sum cash payment. Also, except as provided in Section 4.4(b), all deferred amounts otherwise payable upon a Participant's termination of employment, death, or Disability shall be paid in the form of a single sum cash payment. (b) Optional Forms of Distribution. Effective as of January 1, 2002, in lieu of a single sum cash payment, a Participant may elect to have all amounts payable hereunder after his Retirement, death after attainment of Retirement Age, or termination of employment due to Disability paid in the form of annual installment payments over a period not to exceed fifteen (15) years commencing as soon as practicable after Retirement, death or Disability. A Participant may elect to change his election as to the form of payment of deferred amounts at any time before his termination of employment; provided, however, that an election as to a form of payment shall not be valid unless it has been in effect for at least twelve (12) months before the Participant's Retirement, death after attainment of Retirement Age, or Disability. If an election otherwise made is not effective because it was not in effect for at least twelve (12) months before the Participant's Retirement, death after attainment of Retirement Age, or Disability, the last valid distribution election shall be effective or, in the absence of a valid election, all amounts shall be paid in the form of a single sum cash payment. Unless specifically elected otherwise, payments of all deferred amounts will be made in a single lump sum cash payment paid as soon as practicable after the conclusion of the applicable deferral period pursuant to Section 4.3. 4.5 Modification of Deferral Date. Effective as of January 1, 2002, a Participant may request that the Committee approve a modification to his "date certain" deferral, as follows: (a) A Participant may request that the Committee approve an additional deferral period of at least twelve (12) months with respect to any amount that was initially deferred to a "date certain" EDCP Ledger. Any such request must be made, in accordance with such procedures established by the Committee, in its discretion, at least twelve (12) months before the expiration of the date certain deferral period for any previously deferred amount with respect to which an additional deferral election is requested. Notwithstanding the foregoing, if a Participant had previously deferred amounts to a "termination of employment" EDCP Ledger and subsequently elected to accelerate the distribution of all or part of such amounts to a date certain, pursuant to Section 6.4(b), that election is irrevocable and the Participant may not make any further deferral elections with respect to such amounts. (b) A Participant may request, in accordance with such procedures established by the Committee, in its discretion, that the Committee approve a modified deferral date for the Participant's "date certain" EDCP Ledger as long as the modified deferral date is no earlier than twelve (12) months from the date of such election and the original date certain to which amounts were deferred is not within twelve (12) months from the date of such modification election. SECTION 5. EDCP LEDGERS - DEFERRED COMPENSATION ACCOUNTS 5.1 Participant Accounts. The Committee shall establish and maintain for each Participant a bookkeeping account or accounts to track deferrals made by such Participant. Such accounts shall be referred to herein as "EDCP Ledgers." Deferred amounts shall be credited to each Participant's EDCP Ledger(s) at such times as required under Section 4. Effective as of January 1, 2002, no more than two EDCP Ledgers may be established at any time for any Participant reflecting amounts deferred to a date certain (the Participant's "date certain" EDCP Ledger) separately from amounts initially deferred to termination of employment (the Participant's "termination of employment" EDCP Ledger). Once amounts are completely paid from the Participant's "date certain" EDCP Ledger, the Participant may establish a new "date certain" EDCP Ledger for future deferrals. In addition to deferrals otherwise provided for under Section 4, any Participant's cash balance account amounts transferred to this Plan from the KERP (as described in Appendix B) shall be credited to the Participant's "termination of employment" EDCP Ledger. 5.2 Hypothetical Earnings. Additional amounts shall be credited to (or deducted from) a Participant's EDCP Ledgers to reflect the hypothetical earnings (or losses) that would have been experienced had the deferred amounts been invested in the Investment Options selected by the Participant pursuant to his investment election. The Committee shall establish such procedures as it deems necessary, in its sole discretion, to allow Participants the ability to designate that all or a portion of amounts deferred to their EDCP Ledgers be hypothetically invested among the Investment Options. The Committee is authorized to select an Investment Option to serve as a default Investment Option in the absence of an actual election by any Participant. All amounts credited to Participants' EDCP Ledgers shall continue to be hypothetically invested among the Investment Options until such amounts are paid in full to the Participant (or his Beneficiary). Notwithstanding the foregoing, and subject to Section 9.2, no Participant shall have a right to designate the specific actual investment of deferred amounts. 5.3 Charges Against Accounts. There shall be charged against each Participant's account any payments made to the Participant or to his Beneficiary in accordance with Section 6 hereof. SECTION 6. PAYMENT OF DEFERRED AMOUNTS 6.1 Payment of Deferred Amounts. Payment of a Participant's EDCP Ledger(s), including accumulated hypothetical earnings (or losses), shall be paid in cash commencing with the conclusion of the deferral period otherwise provided in Section 4. The payments shall be made in the manner selected by the Participant under Section 4.4. The amount of any annual installment payment shall equal the Participant's distributable EDCP Ledger(s), determined as of the last day of the month preceding the payment date multiplied by a fraction, the numerator of which is one and the denominator of which is the number of installment payments remaining to be paid. 6.2 Acceleration of Payments. Notwithstanding the deferral period otherwise applicable to deferred amounts hereunder, effective as of January 1, 2002: (a) if a Participant dies after commencement of installment payments and prior to the payment of all amounts credited to his EDCP Ledger(s), the balance of any amount payable shall continue to be paid in installment distributions, unless: (i) the Participant's Beneficiary is not a natural person (or a trust, the beneficiary of which is a natural person), or (ii) the Participant's Beneficiary elects to accelerate the amounts remaining to be paid, pursuant to Section 6.3 or Section 6.4; (b) if the total amount payable from a Participant's EDCP Ledger(s) is less than $5,000 at the time for payment specified, such amount shall be paid in a lump sum; and (c) if applicable, the provisions of Section 8 shall apply. 6.3 Financial Emergency. At any time before the time an amount is otherwise payable hereunder, a Participant (or the Participant's Beneficiary) may request, pursuant to such procedures prescribed by the Committee in its sole discretion, a single sum cash distribution of all or a portion of the amounts credited to his EDCP Ledger(s) due to the Participant's (or the Beneficiary's) severe financial hardship, subject to the following requirements: (a) Such distribution shall be made, in the sole discretion of the Committee, if the individual has incurred a severe financial hardship resulting from a sudden or unexpected illness or accident of the individual or the individual's dependent (as defined in Code Section 152(a)), loss of the individual's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the individual's control. (b) The circumstances that will constitute an unforeseeable emergency will depend upon the facts of each case, but, in any case, payment may not be made to the extent that such hardship is or may be relieved: (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the individual's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or (iii) by cessation of deferrals under the Plan. Examples of circumstances that are not considered to be unforeseeable emergencies include the need to send an individual's child to college or the desire to purchase a home. (c) In all events, distributions made pursuant to this Section 6.3 shall only be permitted to the extent reasonably needed to satisfy the emergency need. The Committee may require such evidence of the individual's severe financial hardship as it deems appropriate. (d) All distributions under this Section 6.3 shall be made from the Participant's EDCP Ledger(s) as soon as practicable after the Committee has approved the distribution and the amounts credited to the Participant's EDCP Ledger(s) shall be reduced on a pro rata basis among his elected Investment Options to reflect the accelerated distribution. 6.4 Acceleration Subject to Substantial Limitations. Effective as of January 1, 2002, at any time before an amount is otherwise payable hereunder, a Participant (or the Participant's Beneficiary) may request, pursuant to such procedures prescribed by the Committee in its sole discretion, that an accelerated distribution of all or a portion of the amounts credited to his EDCP Ledger(s) be made pursuant to the following provisions: (a) An individual may accelerate all or any portion of his EDCP Ledger(s) and have such amount paid in the form of a single sum cash payment as soon as practicable after receipt of such request by the Committee, provided, however, that an amount equal to ten percent (10%) of the amount requested by the Participant will be forfeited from the Participant's EDCP Ledger(s) immediately prior to such payment. (b) In lieu of (or in addition to) any acceleration payment under Section 6.4(a) above, an individual may elect to accelerate the payment of all or any portion of the amounts otherwise payable from his EDCP Ledger(s), provided that: (i) the accelerated amounts are not otherwise payable within twelve (12) months of the date of such election; (ii) the accelerated amounts must be paid in the form of a single sum cash payment at the date specified by the individual; and (ii) the accelerated payment may not be paid any earlier than twelve (12) months after the date such acceleration election is received by the Committee. (c) No individual may make more than two acceleration elections with respect to the individual's EDCP Ledger(s) in any Year. (d) All distributions under this Section 6.4 shall be made from the Participant's EDCP Ledger(s) in a single sum cash payment as soon as practicable after the date approved by the Committee and the amounts credited to the Participant's EDCP Ledger(s) shall be reduced on a pro rata basis among his elected Investment Options to reflect the accelerated distribution. 6.5 Committee Modification of Installment Distribution Options. Notwithstanding anything to the contrary in this Plan, the Committee, in its sole discretion, may choose to accelerate any installment distribution amounts otherwise payable hereunder to a Participant (or Beneficiary), with or without the consent of the Participant (or Beneficiary). SECTION 7. BENEFICIARY DESIGNATION 7.1 Designation of Beneficiary. -------------------------- (a) A Participant shall designate a Beneficiary or Beneficiaries who, upon the Participant's death, are to receive the amounts that otherwise would have been paid to the Participant. All designations shall be in writing and signed by the Participant. The designation shall be effective only if and when delivered to the Corporation during the lifetime of the Participant. The Participant also may change his Beneficiary or Beneficiaries by a signed, written instrument delivered to the Corporation. The payment of amounts shall be in accordance with the last unrevoked written designation of Beneficiary that has been signed and delivered to the Corporation. All Beneficiary designations shall be addressed to the Secretary of SCANA Corporation and delivered to his office, and shall be processed as indicated in subsection (b) below by the Secretary or by his authorized designee. (b) The Secretary of SCANA Corporation (or his authorized designee) shall, upon receipt of the Beneficiary designation: (i) ascertain that the designation has been signed, and if it has not been, return it to the Participant for his signature; (ii) if signed, stamp the designation "Received," indicate the date of receipt, and initial the designation in the proximity of the stamp. 7.2 Death of Beneficiary. -------------------- (a) In the event that all of the Beneficiaries named in Section 7.1 predecease the Participant, the amounts that otherwise would have been paid to said Beneficiaries shall, where the designation fails to redirect to alternate Beneficiaries in such circumstance, be paid to the Participant's estate as the alternate Beneficiary. (b) In the event that two or more Beneficiaries are named, and one or more but less than all of such Beneficiaries predecease the Participant, each surviving Beneficiary shall receive any dollar amount or proportion of funds designated or indicated for him per the designation of Section 7.1, and the dollar amount or designated or indicated share of each predeceased Beneficiary which the designation fails to redirect to an alternate Beneficiary in such circumstance shall be paid to the Participant's estate as an alternate Beneficiary. 7.3 Ineffective Designation. ----------------------- (a) In the event the Participant does not designate a Beneficiary, or if for any reason such designation is entirely ineffective, the amounts that otherwise would have been paid to the Beneficiary shall be paid to the Participant's estate as the alternate Beneficiary. (b) In the circumstance that designations are effective in part and ineffective in part, to the extent that a designation is effective, distribution shall be made so as to carry out as closely as discernable the intent of the Participant, with result that only to the extent that a designation is ineffective shall distribution instead be made to the Participant's estate as an alternate Beneficiary. SECTION 8. CHANGE IN CONTROL PROVISIONS 8.1 Accelerated Distributions Upon Change in Control. Notwithstanding anything in this Plan to the contrary and subject to the terms of an individual Participant Agreement, if any, upon the occurrence of a Change in Control where there has not been a termination of the SCANA Corporation Key Executive Severance Benefits Plan prior thereto, the amounts (or remaining amounts) held in each Participant's EDCP Ledger(s) under this Plan as of the date of such Change in Control (referred to as each Participant's "EDCP Benefit") shall become immediately due and payable. All EDCP Benefits payable under this Section 8.1 shall be paid to each Participant (and his or her Beneficiary) in the form of a single lump sum cash payment, together with an amount (the "Gross-Up Payment") such that the net amount retained by each Participant after deduction of any excise tax imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed) on such benefits (the "Excise Tax") and any federal, state, and local income tax and Excise Tax upon the EDCP Benefit and the Gross-Up Payment provided for by this Section 8 shall be equal to the value of the Participant's EDCP Benefit. Such payment shall be made by the Corporation (or to the extent assets are transferred to the SCANA Corporation Executive Benefit Plan Trust by the trustee of such trust in accordance with the trust's terms) to the Participant (or his Beneficiary) as soon as practicable following the Change in Control, but in no event later than the date specified by the terms of the SCANA Corporation Executive Benefit Plan Trust. In all events, if the SCANA Corporation Key Executive Severance Benefits Plan was terminated prior to such Change in Control, then the provisions of this Section shall not apply and Participants' benefits shall be determined and paid under the otherwise applicable provisions of the Plan and/or any individual Participant Agreement. 8.2 Tax Computation. For purposes of determining the amount of the Gross-Up Payment referred to in Section 8.1, whether any of a Participant's EDCP Benefit will be subject to the Excise Tax, and the amounts of such Excise Tax: (i) there shall be taken into account all other payments or benefits received or to be received by a Participant in connection with a Change in Control of the Corporation (whether pursuant to the terms of this Plan or any other plan, arrangement, or agreement with the Corporation, any person whose actions result in a Change in Control of the Corporation or any person affiliated with the Corporation or such person); and (ii) the amount of any Gross-Up Payment payable with respect to any Participant (or his Beneficiary) by reason of such payment shall be determined in accordance with a customary "gross-up formula," as determined by the Committee it its sole discretion. 8.3 No Subsequent Recalculation of Tax Liability. The Gross-Up Payments described in the foregoing provisions of this Section 8 are intended and hereby deemed to be a reasonably accurate calculation of each Participant's actual income tax and Excise Tax liability under the circumstances (or such tax liability of his Beneficiary), the payment of which is to be made by the Corporation or the SCANA Corporation Executive Benefit Plan Trust. All such calculations of tax liability shall not be subject to subsequent recalculation or adjustment in either an underpayment or overpayment context with respect to the actual tax liability of the Participant (or his Beneficiary) ultimately determined as owed. 8.4 Successors. Notwithstanding anything in this Plan to the contrary, and subject to the terms of an individual Agreement, if any, upon the occurrence of a Change in Control, and only if the SCANA Corporation Key Executive Severance Benefits Plan ("KESBP") was terminated prior to such Change in Control, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company or of any division or subsidiary thereof to expressly assume and agree to perform this Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place, subject to the remaining provisions of this Section 8.4. In the event of such a Change in Control where the KESBP is terminated, Participants shall become entitled to benefits hereunder in accordance with the terms of this Plan, and any individual Agreement, based on amounts credited to each Participant's EDCP Ledger(s) as of the date of such Change in Control plus accumulated hypothetical earnings (or losses) attributable thereto (adjusted to reflect any change from the most recent EDCP Ledger calculation to the end of the month prior to the month such amounts are distributed to each Participant, based on the Investment Options in effect at such time). In the case of any Change in Control, any successor to the Company shall not be required to provide for additional deferral of benefits beyond the date of such Change in Control. In addition, and notwithstanding Section 8.5 to the contrary, if there is a Change in Control and the KESBP is terminated prior to such Change in Control, a successor to the Company may amend this Plan to provide for an automatic lump sum distribution of the then current value of Participants' EDCP Ledger(s), including accumulated hypothetical earnings (or losses) attributable thereto (adjusted to reflect any change since the most recent EDCP Ledger calculation) hereunder without such amendment being treated as an amendment reducing any benefits earned. 8.5 Amendment and Termination After Change in Control. Notwithstanding the foregoing, and subject to this Section 8, no amendment, modification or termination of the Plan may be made, and no Participants may be added to the Plan, upon or following a Change in Control if it would have the effect of reducing any benefits earned (including optional forms of distribution) by any Participant prior to such Change in Control without the written consent of all of the Plan's Participants covered by the Plan at such time. In all events, however, the Corporation reserves the right to amend, modify or delete the provisions of Section 8 at any time prior to a Change in Control, pursuant to a Board resolution adopted by a vote of two-thirds (2/3) of the Board members then serving on the Board. SECTION 9. GENERAL PROVISIONS 9.1 Contractual Obligation. It is intended that the Corporation is under a contractual obligation to make payments from a Participant's account when due. Payment of account balances shall be made out of the general funds of the Corporation as determined by the Board without any restriction of the assets of the Corporation relative to the payment of such contractual obligations; the Plan is, and shall operate as, an unfunded plan. 9.2 Unsecured Interest. No Participant or Beneficiary shall have any interest whatsoever in any specific asset of the Corporation. To the extent that any person acquires a right to receive payment under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Corporation. 9.3 "Rabbi" Trust. In connection with this Plan, the Board has established a grantor trust (known as the "SCANA Corporation Executive Benefit Plan Trust") for the purpose of accumulating funds to satisfy the obligations incurred by the Corporation under this Plan (and such other plans and arrangements as determined from time to time by the Corporation). At any time prior to a Change in Control, as that term is defined in such Trust, the Corporation may transfer assets to the Trust to satisfy all or part of the obligations incurred by the Corporation under this Plan, as determined in the sole discretion of the Committee, subject to the return of such assets to the Corporation at such time as determined in accordance with the terms of such Trust. Notwithstanding the establishment of the Trust, the right of any Participant to receive future payments under the Plan shall remain an unsecured claim against the general assets of the Corporation. 9.4 Employment/Participation Rights. ------------------------------- (a) Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. (b) Nothing in the Plan shall be construed to be evidence of any agreement or understanding, express or implied, that the Company will continue to employ a Participant in any particular position or at any particular rate of remuneration. (c) No employee shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. (d) Nothing in this Plan shall affect the right of a recipient to participate in and receive benefits under and in accordance with any pension, profit-sharing, deferred compensation or other benefit plan or program of the Company. 9.5 Nonalienation of Benefits. ------------------------- (a) No right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or change, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or change the same shall be void; nor shall any such disposition be compelled by operation of law. (b) No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to benefits under the Plan. (c) If any Participant or Beneficiary hereunder should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber, or change any right or benefit hereunder, then such right or benefit shall, in the sole discretion of the Committee, cease, and the Committee shall direct in such event that the Corporation hold or apply the same or any part thereof for the benefit of the Participant or Beneficiary in such manner and in such proportion as the Committee may deem proper. 9.6 Severability. If any particular provision of the Plan shall be found to be illegal or unenforceable for any reason, the illegality or lack of enforceability of such provision shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if the illegal or unenforceable provision had not been included. 9.7 No Individual Liability. It is declared to be the express purpose and intention of the Plan that no liability whatsoever shall attach to or be incurred by the shareholders, officers, or directors of the Corporation or any representative appointed hereunder by the Corporation, under or by reason of any of the terms or conditions of the Plan. 9.8 Applicable Law. This Plan shall be governed by and construed in accordance with the laws of the State of South Carolina except to the extent governed by applicable federal law. SECTION 10. PLAN ADMINISTRATION, AMENDMENT AND TERMINATION 10.1 In General. This Plan shall be administered by the Committee, which shall have the sole authority, in its sole discretion, to construe and interpret the terms and provisions of the Plan and determine the amount, manner and time of payment of any benefits hereunder. The Committee shall maintain records, make the requisite calculations and disburse payments hereunder, and its interpretations, determinations, regulations and calculations shall be final and binding on all persons and parties concerned. The Committee may adopt such rules as it deems necessary, desirable or appropriate in administering this Plan and the Committee may act at a meeting, in a writing without a meeting, or by having actions otherwise taken by a member of the Committee pursuant to a delegation of duties from the Committee. 10.2 Claims Procedure. Any person dissatisfied with the Committee's determination of a claim for benefits hereunder must file a written request for reconsideration with the Committee. This request must include a written explanation setting forth the specific reasons for such reconsideration. The Committee shall review its determination promptly and render a written decision with respect to the claim, setting forth the specific reasons for such denial written in a manner calculated to be understood by the claimant. Such claimant shall be given a reasonable time within which to comment, in writing, to the Committee with respect to such explanation. The Committee shall review its determination promptly and render a written decision with respect to the claim. Such decision upon matters within the scope of the authority of the Committee shall be conclusive, binding, and final upon all claimants under this Plan. 10.3 Finality of Determination. The determination of the Committee as to any disputed questions arising under this Plan, including questions of construction and interpretation, shall be final, binding, and conclusive upon all persons. 10.4 Delegation of Authority. The Committee may, in its discretion, delegate its duties to an officer or other Employee of the Company, or to a committee composed of officers or Employees of the Company. 10.5 Expenses. The cost of payment from this Plan and the expenses of administering the Plan shall be borne by the Corporation. 10.6 Tax Withholding. The Corporation shall have the right to deduct from all payments made from the Plan any federal, state, or local taxes required by law to be withheld with respect to such payments. 10.7 Incompetency. Any person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally competent and of age until the Committee receives written notice, in a form and manner acceptable to it, that such person is incompetent or a minor, and that a guardian, conservator, statutory committee under the South Carolina Code of Laws, or other person legally vested with the care of his estate has been appointed. In the event that the Committee finds that any person to whom a benefit is payable under the Plan is unable to properly care for his affairs, or is a minor, then any payment due (unless a prior claim therefor shall have been made by a duly appointed legal representative) may be paid to the spouse, a child, a parent, or a brother or sister, or to any person deemed by the Committee to have incurred expense for the care of such person otherwise entitled to payment. In the event a guardian or conservator or statutory committee of the estate of any person receiving or claiming benefits under the Plan shall be appointed by a court of competent jurisdiction, payments shall be made to such guardian or conservator or statutory committee provided that proper proof of appointment is furnished in a form and manner suitable to the Committee. Any payment made under the provisions of this Section 10.7 shall be a complete discharge of liability therefor under the Plan. 10.8 Notice of Address. Any payment made to a Participant or to his designated Beneficiary at the last known post office address of the distributee on file with the Corporation, shall constitute a complete acquittance and discharge to the Corporation and any director or officer with respect thereto, unless the Corporation shall have received prior written notice of any change in the condition or status of the distributee. Neither the Corporation nor any director or officer shall have any duty or obligation to search for or ascertain the whereabouts of the Participant or his designated Beneficiary. 10.9 Amendment and Termination. The Corporation expects the Plan to be permanent but, because future conditions affecting the Corporation cannot be anticipated or foreseen, the Corporation reserves the right to amend, modify, or terminate the Plan at any time by action of its Board, subject to Section 8.5; provided, however, that any such action shall not diminish retroactively any amounts, both deferred amounts and any hypothetical earnings (or losses) thereon, which have been credited to any Participant's EDCP Ledger(s). If the Board amends the Plan to cease future deferrals hereunder or terminates the Plan, the Board may, in its sole discretion, direct that the value of each Participant's EDCP Ledger(s) be paid to each Participant (or Beneficiary, if applicable) in an immediate lump sum payment. In the absence of any such direction from the Board, the Plan shall continue as a "frozen" plan under which no future deferrals will be recognized (however, hypothetical earnings (or losses) shall continue to be recognized in accordance with the Investment Options that continue to be made available under the Plan) and each Participant's benefits shall be paid in accordance with the otherwise applicable terms of the Plan. SECTION 11. EXECUTION IN WITNESS WHEREOF, the Corporation has caused this SCANA Corporation Executive Deferred Compensation Plan to be executed by its duly authorized officer this _2nd_ day of _August, 2001, to be effective as of the dates specified herein. SCANA CORPORATION By: s/W. B. Timmerman ----------------- Title: Chairman, President and Chief Executive Officer ATTEST: s/Lynn M. Williams -------------------- Secretary APPENDIX A - SPECIAL SVDP PROVISIONS A.1 Amendment of SVDP. Effective as of July 1, 2001, this Plan was amended and re-named as set forth herein. Notwithstanding anything herein to the contrary, the provisions of this Plan as in effect on June 30, 2001 shall remain in effect until January 1, 2002 and the terms of such provisions are incorporated by reference herein. Participants' balances, if any, attributable to periods prior to January 1, 2002 are referred to in this Appendix A as "SVDP Balances." A.2 SVDP Deferral Eligibility and Amounts. For periods prior to January 1, 2002, Eligible Employees who are otherwise eligible to participate in this Plan in accordance with the terms of the Plan in effect as of June 30, 2001 shall remain so eligible. The deferred amounts (including Employer Matching Deferrals) to which they are entitled (and the Investment Options available with respect to such deferred amounts) shall be determined by reference to the terms of the Plan in effect as of June 30, 2001. A.3 SVDP Deferral Periods; Form of Distribution. All SVDP Balances accumulated prior to January 1, 2002, shall be included in the Participant's "termination of employment" EDCP Ledger (as defined in Section 5) and shall be payable in a single sum cash distribution as soon as practicable after the earlier of the Participant's termination of employment or death. Prior to January 1, 2002, such amounts are eligible for an accelerated withdrawal under the financial hardship provisions under Section 6.3 and no other accelerated withdrawal provisions apply. A.4 Termination of Appendix A. Except as provided in Section 8.5, the provisions of this Appendix A shall automatically terminate as of January 1, 2002, without any further action by the Company, the Board or the Committee, previously deferred amounts under the SVDP shall continue to be administered pursuant to the otherwise applicable provisions of the Plan, and the remaining provisions of this Plan shall apply for all periods on and after January 1, 2002. APPENDIX B - TRANSFERRED KERP BENEFITS B.1 Amendment of KERP. Effective as of July 1, 2000, the SCANA Corporation Key Employee Retention Plan ("KERP") was amended to provide for a cash balance-type benefit for all covered participants, as described in Section B.2 below. Effective as of July 1, 2001, KERP Participants' benefits were merged with and into this Plan. B.2 Calculation of KERP Cash Balance Account Benefit. In accordance with the amendment described in Section B.1, each KERP Participant, as of June 30, 2000 was credited with a KERP opening cash balance account equal to the portion of the present value of the projected KERP benefit earned by the Participant, as of such date, based on the Participant's service with the Company as of June 30, 2000. Prior to such amendment, the KERP benefit formula generally provided for a benefit of 25% of the Participant's final average 36 months of base pay, payable over 15 years commencing upon the Participants retirement at age 65 or after 35 years of service. A KERP Participant's projected KERP benefit was determined under the KERP benefit formula described in the preceding sentence, assuming a four percent (4%) annual salary increase to the earlier of age 65 or 35 years of service. The present value of this projected KERP benefit payable over 15 years was determined using an interest rate of 6.35% and was not adjusted for the Participant's age as of June 30, 2000. Interest Adjustments. Each Participant's KERP cash balance account shall be increased monthly from July 1, 2000 through December 31, 2001 at the same applicable annual interest rate used in augmenting the Participant's cash balance account under the SCANA Corporation Retirement Plan. Additional Benefit Credit. Each Participant's KERP cash balance account shall also be credited for periods from July 1, 2000 through December 31, 2001 with the portion of the present value of the projected KERP benefit the Participant otherwise earns during that period. This benefit credit as of the last day of any month would equal the difference between (A) the portion of the present value of the projected KERP benefit earned by the Participant as of the end of that month, and (B) the Participant's KERP cash balance account at the end of the prior month. The present value of the projected KERP benefit would be determined in the same manner as explained above in this Section B.2, but recognizing current base pay, additional benefit service and the applicable interest rate for the relevant period. Notwithstanding the foregoing, additional benefit credits are intended to be determined as of December 31, 2000 and December 31, 2001 on an annual basis; provided, however, that if a Participant terminates employment for any reason (including due to death) prior to December 31, 2001 or if a Change in Control occurs prior to December 31, 2001, the additional KERP benefit credits shall be recalculated as of the last day of the month in which such termination of employment or Change in Control occurs. B.3 Transfer of KERP Cash Balance Account Benefits to this Plan. Effective as of July 1, 2001, the KERP was merged with and into this Plan and each KERP Participant's KERP cash balance account was credited to the Participant's "termination of employment" EDCP Ledger (as defined in Section 5). All KERP deferred amounts accumulated prior to January 1, 2002, shall be payable in a single sum cash distribution as soon as practicable after the earlier of the Participant's termination of employment or death. B.4 "Freeze" of KERP Cash Balance Account Benefits. Effective as of December 31, 2001, all amounts attributable to transferred KERP account balances are not eligible for increases due to annual interest or benefit credit adjustments as set forth under Section B.2 above. Instead, all such amounts shall be transferred to EDCP Ledgers for affected Participants and automatically deferred to "termination of employment" EDCP Ledgers, subject to further adjustments to reflect earnings (or losses) attributable to Investment Options available under the Plan and elected by Participants (or Beneficiaries). B.5 Status of KERP Cash Balance Account Benefits. Notwithstanding anything herein to the contrary, all amounts attributable to KERP cash balance account benefits reflect unsecured unfunded promises to pay amounts owed by the Corporation. B.6 Termination of Appendix B. Except as provided in Section 8.5, the provisions of this Appendix B shall automatically terminate as of January 1, 2002, without any further action by the Company, the Board or the Committee, previously deferred amounts under this Appendix B shall continue to be administered pursuant to the otherwise applicable provisions of the Plan, and the remaining provisions of this Plan shall apply for all periods on and after January 1, 2002. EX-10 5 serp.txt SUPPLEMENTAL EXECUTIVE BENEFITS PLAN Exhibit 10.03 SCANA CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN as amended and restated effective as of July 1, 2000 SCANA CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE OF CONTENTS Page SECTION 1. ESTABLISHMENT OF THE PLAN........................................1 1.1 Establishment and History of the Plan.............................1 1.2 Description of the Plan...........................................1 1.3 Purpose of the Plan...............................................1 1.4 Effective Date....................................................1 SECTION 2. DEFINITIONS....................................................2 2.1 Definitions.......................................................2 2.2 Gender and Number.................................................4 SECTION 3. ELIGIBILITY AND PARTICIPATION...................................5 3.1 Eligibility.......................................................5 3.2 Termination of Participation......................................5 3.3 Reemployment of Former Participant................................5 SECTION 4. BENEFITS........................................................6 4.1 Eligibility for Benefits..........................................6 4.2 Amount of Supplemental Benefit....................................6 4.3 Timing and Form of Payment........................................6 4.4 Death of Participant..............................................7 4.5 Designation of Beneficiary........................................7 4.6 Documentation.....................................................8 SECTION 5. FINANCING.......................................................9 5.1 Financing of Benefits.............................................9 5.2 Contractual Obligation............................................9 5.3 Unsecured Interest................................................9 5.4 "Rabbi" Trust.....................................................9 SECTION 6. GENERAL PROVISIONS.............................................10 6.1 Employment/Participation Rights..................................10 6.2 Nonalienation of Benefits........................................10 6.3 Severability.....................................................10 6.4 No Individual Liability..........................................10 6.5 Applicable Law...................................................11 SECTION 7. PLAN ADMINISTRATION, AMENDMENT AND TERMINATION.................12 7.1 In General.......................................................12 7.2 Claims Procedure.................................................12 7.3 Finality of Determination........................................12 7.4 Delegation of Authority..........................................12 7.5 Expenses.........................................................12 7.6 Tax Withholding..................................................12 7.7 Incompetency.....................................................12 7.8 Notice of Address................................................13 7.9 Amendment and Termination........................................13 SECTION 8. CHANGE IN CONTROL PROVISIONS...................................14 8.1 Accelerated Distributions Upon Change in Control.................14 8.2 Tax Computation..................................................14 8.3 No Subsequent Recalculation of Tax Liability.....................14 8.4 Successors.......................................................15 8.5 Amendment and Termination After Change in Control................15 SECTION 9. EXECUTION.......................................................16 SCANA CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (As Amended and Restated) SECTION 1. ESTABLISHMENT OF THE PLAN 1.1 Establishment and History of the Plan. SCANA Corporation established, effective as of January 1, 1994, a supplemental retirement plan for executives known as the "SCANA Corporation Supplemental Executive Retirement Plan" (the "Supplemental Plan"). The Supplemental Plan has been amended from time to time after its initial adoption for various design and administrative changes. The Supplemental Plan was amended and restated effective as of December 18, 1996 to include provisions applicable upon a Change in Control. The Supplemental Plan was further amended and restated effective as of October 21, 1997 to include various administrative provisions and to clarify certain provisions regarding a Change in Control. Effective as of July 1, 2000, the Supplemental Plan is being amended and restated as set forth herein to reflect the conversion of the Qualified Plan to a cash balance-type of retirement plan. 1.2 Description of the Plan. This Supplemental Plan is intended to constitute a nonqualified deferred compensation plan which, in accordance with ERISA Sections 201(2), 301(a)(3) and 401(a)(1), is unfunded and established primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. 1.3 Purpose of the Plan. The purpose of this Supplemental Plan is to provide supplemental retirement income to certain employees of the Company whose benefits under the Qualified Plan are limited in accordance with the limitations imposed by (i) Code Section 415 on the amount of annual retirement benefits payable to employees from qualified pension plans, (ii) Code Section 401(a)(17) on the amount of annual compensation that may be taken into account for all qualified plan purposes, or (iii) certain other design limitations on determining compensation under the Qualified Plan. 1.4 Effective Date. This amended and restated Supplemental Plan is effective as of July 1, 2000. The rights and benefits, if any, of a Participant who terminated or retired before July 1, 2000 shall be determined in accordance with the provisions of the Supplemental Plan in effect on the date his employment with the Company terminated. SECTION 2. DEFINITIONS 2.1 Definitions. Whenever used herein, the following terms shall have the meanings set forth below, unless otherwise expressly provided herein or unless a different meaning is plainly required by the context, and when the defined meaning is intended, the term is capitalized. Capitalized terms not defined herein shall have the respective meanings set forth in the Qualified Plan. (a) "Actuarial Equivalent" shall mean equality in value of the benefit provided under the Supplemental Plan based on actuarial assumptions, methods, factors and tables that would apply under the Qualified Plan under similar circumstances. (b) "Agreement" means a contract between an Eligible Employee and the Company permitting the Eligible Employee to participate in the Supplemental Plan and delineating the benefits (if any) that are to be provided to the Eligible Employee in lieu of or in addition to the benefits described under the terms of this Supplemental Plan. (c) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (d) "Beneficiary" means any person or entity who, upon the Participant's death before the payment or commencement of payment of the Participant's benefit under the Supplemental Plan, is entitled to receive the Participant's benefit, in accordance with Sections 4.3 and 4.4 hereof. (e) "Board" means the Board of Directors of the Corporation. (f) "Change in Control" means a change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Corporation is then subject to such reporting requirements; provided that, without limitation, such a Change in Control shall be deemed to have occurred if: (i) Any Person (as defined in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d)) is or becomes the Beneficial Owner, directly or indirectly, of twenty five percent (25%) or more of the combined voting power of the outstanding shares of capital stock of the Corporation; (ii) During any period of two (2) consecutive years (not including any period prior to December 18, 1996) there shall cease to be a majority of the Board comprised as follows: individuals who at the beginning of such period constitute the Board and any new director(s) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved; (iii) The issuance of an Order by the Securities and Exchange Commission (SEC), under Section 9(a)(2) of the Public Utility Holding Company Act of 1935 as amended (the "1935 Act"), authorizing a third party to acquire five percent (5%) or more of the Corporation's voting shares of capital stock; (iv) The shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting shares of capital stock of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting shares of capital stock of the surviving entity) at least eighty percent (80%) of the combined voting power of the voting shares of capital stock of the Corporation or such surviving entity outstanding immediately after such merger or consolidation; or the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets; or (v) The shareholders of the Corporation approve a plan of complete liquidation, or the sale or disposition of South Carolina Electric & Gas Company (hereinafter SCE&G), South Carolina Pipeline Corporation, or any subsidiary of SCANA designated by the Board as a "Material Subsidiary," but such event shall represent a Change in Control only with respect to a Participant who has been exclusively assigned to SCE&G, South Carolina Pipeline Corporation, or the affected Material Subsidiary. (g) "Code" means the Internal Revenue Code of 1986, as amended. ---- (h) "Code Limitations" means the limitations imposed by Code Section 415 on the amount of annual retirement benefits payable to employees from qualified pension plans and Code Section 401(a)(17) on the amount of annual compensation that may be taken into account for all qualified plan purposes. (i) "Committee" means the Management Development and Corporate Performance Committee of the Board. Any references in this Supplemental Plan to the "Committee" shall be deemed to include references to the designee appointed by the Committee under Section 7.4. (j) "Company" means the Corporation and any subsidiaries of the Corporation and their successor(s) or assign(s) that adopt this Supplemental Plan through execution of Agreements with any of their Employees or otherwise. When the term "Company" is used with respect to an individual Participant, it shall refer to the specific company at which the Participant is employed, unless otherwise required by the context. (k) "Compensation" means "Compensation" as determined under the Qualified Plan, without regard to the limitation under Section 401(a)(17) of the Code and including any amounts of Compensation otherwise deferred under any non-qualified deferred compensation plan of the Corporation (excluding the Supplemental Plan). (l) "Corporation" means SCANA Corporation, a South Carolina corporation, or any successor thereto. (m) "Eligible Employee" means an Employee who is employed by the Company in a high-level management or administrative position, including employees who also serve as officers and/or directors of the Company. (n) "Employee" means a person who is actively employed by the Company and who falls under the usual common law rules applicable in determining the employer-employee relationship. (o) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (p) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (q) "Participant" means any Eligible Employee who is participating in the Supplemental Plan in accordance with the provisions herein set forth. (r) "Qualified Plan" means the SCANA Corporation Retirement Plan, as in effect on July 1, 2000, and as may be further amended and in effect from time to time. 2.2 Gender and Number. Except when otherwise indicated by the context, any masculine terminology used herein also shall include the feminine and the feminine shall include the masculine, and the use of any term herein in the singular may also include the plural and the plural shall include the singular. SECTION 3. ELIGIBILITY AND PARTICIPATION 3.1 Eligibility. An Eligible Employee shall become a Participant in this Supplemental Plan on the first day on which: (a) his Accrued Benefit as calculated under the Qualified Plan is limited in accordance with either of the Code Limitations or due to his participation in a non-qualified deferred compensation plan of the Corporation (other than this Supplemental Plan); and (b) he enters into an Agreement with the Company regarding his participation in the Supplemental Plan. 3.2 Termination of Participation. Once an Eligible Employee becomes a Participant under Section 3.1, the Participant shall remain covered hereunder until the date upon which the Participant's employment terminates for any reason, provided, however, the Participant shall remain covered under the Supplemental Plan after termination of employment so long as any benefits are payable with respect to the Participant from this Supplemental Plan. Unless the terms of the Participant's Agreement provide to the contrary, if the Participant is not eligible for benefits in accordance with the provisions of Section 4.1 at the time his employment terminates, the Participant shall terminate his participation in the Supplemental Plan when his employment with the Company terminates. 3.3 Reemployment of Former Participant. Notwithstanding any provision of the Supplemental Plan or an Agreement to the contrary, any person reemployed as an Employee who previously participated in and received benefits under the Supplemental Plan shall not be eligible to participate again in the Supplemental Plan, and any payments or future rights to payments under the Supplemental Plan made or to be made with respect to such Participant shall not be discontinued on account of such reemployment. SECTION 4. BENEFITS 4.1 Eligibility for Benefits. A Participant shall be eligible to receive a benefit under this Supplemental Plan in accordance with and subject to the provisions of this Supplemental Plan, upon the Participant's termination of employment with the Company and its affiliates or if later, the date provided in the Participant's Agreement; provided, however, that, except as provided in the following sentence or as may otherwise be provided by an Agreement, no benefit shall be payable under this Supplemental Plan with respect to a Participant who terminates employment with the Company prior to becoming vested in his Accrued Benefit under the Qualified Plan. Notwithstanding the foregoing, if a Participant is involuntarily terminated following or incident to a Change in Control and prior to becoming fully vested in his Accrued Benefit under the Qualified Plan, the Participant shall automatically become fully vested in his benefit hereunder and a benefit will be payable under this Supplemental Plan with respect to the Participant. 4.2 Amount of Supplemental Benefit. Unless otherwise provided in an Agreement, the amount of any benefit payable to a Participant pursuant to this Supplemental Plan shall be determined as of the date the Participant first becomes eligible to receive benefits under the Supplemental Plan under Section 4.1 (the "determination date") and shall be equal to (i) the cash balance account that otherwise would have been payable under the Qualified Plan as of such determination date, based on Compensation as defined under this Supplemental Plan and disregarding the Code Limitations, minus (ii) the Participant's Cash Balance Account determined under the Qualified Plan as of such determination date. 4.3 Timing and Form of Payment. The benefit payable to a Participant under this Supplemental Plan shall be paid or commence to be paid as of the first day of the calendar month next following the date the Participant first becomes eligible to receive a benefit under this Supplemental Plan in accordance with Section 4.1 (the "payment date"). The Participant may elect, in accordance with such procedures established by the Committee from time to time in its sole discretion, to receive a distribution of such benefit in either of the following forms of payment: (a) Single Sum Distribution. A single sum distribution of the value of the Participant's benefit under the Supplemental Plan determined as of the last day of the month preceding the payment date. Upon such payment, no additional amounts are owed to the Participant or his Beneficiary under this Plan. (b) Life Annuity with 15-Year 60% Survivor Benefit. A lifetime annuity benefit with an additional death benefit payment as follows: A lifetime annuity that is the Actuarial Equivalent of the Participant's single sum amount under Section 4.3(a) which provides for a monthly benefit payable beginning on the payment date for the Participant's life. In addition to this life annuity, commencing on the first day of the month following the Participant's death, the Participant's designated Beneficiary shall receive a benefit of sixty percent (60%) of the amount of the Participant's monthly payment continuing for a fifteen (15) year period; provided, however, if the Participant's Beneficiary dies before the end of the fifteen (15) year period, the lump sum value of the remaining monthly payments of such survivor benefit shall be paid to the designated Beneficiary's estate. The Participant's life annuity shall not be reduced to reflect the "cost" of providing the sixty-percent (60%) survivor benefit feature. Notwithstanding anything herein to the contrary, in no event may a trust be named as a Beneficiary for purposes of the survivor benefit otherwise provided under this Section 4.3(b). In the absence of an effective election, amounts owed to a Participant hereunder shall be paid in the form specified in Section 4.3(b). 4.4 Death of Participant. Unless otherwise provided in an Agreement, if a Participant dies on or after July 1, 2000 and before the payment date (as defined in Section 4.3), a single sum distribution equal to the value of the Participant's benefit that otherwise would have been payable under the Supplemental Plan determined in accordance with Section 4.2 shall be paid to the Participant's designated Beneficiary as soon as administratively practicable following the Participant's death. 4.5 Designation of Beneficiary. -------------------------- (a)......A Participant shall designate a single person or trust (except as provided in Section 4.3(b)) as the Beneficiary who is to receive any benefits payable hereunder upon the Participant's death. The designation shall be in writing and signed by the Participant. The designation shall be effective only if and when delivered to the Corporation during the lifetime of the Participant. The Participant also may change his Beneficiary by a signed, written instrument delivered to the Corporation. The payment of amounts shall be in accordance with the last unrevoked written designation of Beneficiary that has been signed and delivered to the Corporation. All Beneficiary designations shall be addressed to the Secretary of SCANA Corporation and delivered to his office, and shall be processed as indicated in subsection (b) below by the Secretary or by his authorized designee. (b) The Secretary of SCANA Corporation (or his authorized designee) shall, upon receipt of a Participant's Beneficiary designation: .........(i) ascertain that the designation has been signed, and if it has not been, return it to the Participant for his signature; and .........(ii) if signed, stamp the designation "Received," indicate the date of receipt, and initial the designation in the proximity of the stamp. (c) In the event that the Beneficiary named in paragraph (a) above predeceases the Participant, the amounts that otherwise would have been paid to said Beneficiary shall, where the designation fails to redirect to an alternate Beneficiary in such circumstance, be paid to the Participant's estate as the alternate Beneficiary. (d) In the event the Participant does not designate a Beneficiary, or if for any reason such designation is entirely ineffective, the amounts that otherwise would have been paid to the Beneficiary shall first be paid to the Participant's spouse (as determined under the Qualified Plan), or if the Participant has no spouse upon his date of death, any amounts owed shall be paid to the Participant's estate as the alternate Beneficiary. (e) In the circumstance that a Participant's designation is effective in part and ineffective in part, to the extent that a designation is effective, distribution shall be made so as to carry out as closely as discernable the intent of the Participant, with result that only to the extent that a designation is ineffective shall distribution instead be made to the Participant's estate as an alternate Beneficiary. 4.6 Documentation. Each person eligible for a benefit under this Supplemental Plan shall furnish the Corporation with such documents, evidence, data or information in support of such application as the Corporation considers necessary or desirable. SECTION 5. FINANCING 5.1 Financing of Benefits. Participants shall not be required or permitted to make any contribution under the Supplemental Plan. Benefits shall be payable, when due, by the Corporation, out of its current operating revenue to the extent not paid from a trust created pursuant to Section 5.4. 5.2 Contractual Obligation. The Corporation's obligation to make payments to the recipient when due shall be contractual in nature only, and participation in the Supplemental Plan will not create in favor of any Participant any right or lien against the assets of the Corporation. No benefits under the Supplemental Plan shall be required to be funded by a trust fund or insurance contracts or otherwise. Prior to benefits becoming due, the Corporation shall expense the calculated liabilities in accordance with policies determined appropriate by the Corporation and its auditors. 5.3 Unsecured Interest. No Participant or Beneficiary shall have any interest whatsoever in any specific asset of the Corporation. To the extent that any person acquires a right to receive payment under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Corporation. 5.4 "Rabbi" Trust SCANA CORPORATION ------------- By: s/W. B. Timmerman ----------------- Title: Chairman, President and Chief Executive Officer ATTEST: s/Lynn M. Williams ------------------- Secretary EX-10 6 kesbp.txt KEY EXECUTIVE SEVERANCE BENEFITS PLAN Exhibit 10.04 SCANA CORPORATION KEY EXECUTIVE SEVERANCE BENEFITS PLAN as amended and restated effective as of July 1, 2001 SCANA CORPORATION KEY EXECUTIVE SEVERANCE BENEFITS PLAN TABLE OF CONTENTS Page SECTION 1. ESTABLISHMENT AND PURPOSE..............................1 1.1 ESTABLISHMENT AND HISTORY OF THE PLAN......................1 1.2 DESCRIPTION OF THE PLAN....................................1 1.3 PURPOSE OF THE PLAN........................................1 SECTION 2. DEFINITIONS.............................................2 2.1 DEFINITIONS................................................2 2.2 GENDER AND NUMBER..........................................4 SECTION 3. ELIGIBILITY AND PARTICIPATION..........................5 3.1 ELIGIBILITY................................................5 3.2 TERMINATION OF PARTICIPATION...............................5 SECTION 4. BENEFITS...............................................6 4.1 RIGHT TO KESBP BENEFITS....................................6 4.2 DESCRIPTION OF KESBP BENEFITS..............................6 4.3 GROSS-UP PAYMENTS..........................................7 4.4 TAX COMPUTATION............................................7 4.5 FORM AND TIMING OF KESBP BENEFITS..........................7 4.6 NO SUBSEQUENT RECALCULATION OF PLAN LIABILITY..............7 4.7 BENEFITS UNDER OTHER PLANS.................................8 SECTION 5. BENEFICIARY DESIGNATION.................................9 5.1 DESIGNATION OF BENEFICIARY.................................9 5.2 DEATH OF BENEFICIARY.......................................9 5.3 INEFFECTIVE DESIGNATION....................................9 SECTION 6. GENERAL PROVISIONS.....................................11 6.1 CONTRACTUAL OBLIGATION....................................11 6.2 UNSECURED INTEREST........................................11 6.3 "RABBI" TRUST.............................................11 6.4 EMPLOYMENT/PARTICIPATION RIGHTS...........................11 6.5 NONALIENATION OF BENEFITS.................................12 6.6 SEVERABILITY..............................................12 6.7 NO INDIVIDUAL LIABILITY...................................12 6.8 APPLICABLE LAW............................................12 SECTION 7. PLAN ADMINISTRATION, AMENDMENT AND TERMINATION.........13 7.1 IN GENERAL................................................13 7.2 CLAIMS PROCEDURE..........................................13 7.3 FINALITY OF DETERMINATION.................................13 7.4 DELEGATION OF AUTHORITY...................................13 7.5 EXPENSES..................................................13 7.6 TAX WITHHOLDING...........................................13 7.7 INCOMPETENCY..............................................13 7.8 NOTICE OF ADDRESS.........................................14 7.9 AMENDMENT AND TERMINATION.................................14 SECTION 8. EXECUTION..............................................15 SCANA CORPORATION KEY EXECUTIVE SEVERANCE BENEFITS PLAN (As Amended and Restated) SECTION 1. ESTABLISHMENT AND PURPOSE 1.1 Establishment and History of the Plan. SCANA Corporation established, effective February 28, 1990, a plan for certain senior executives known as the "SCANA Corporation Key Executive Severance Benefits Plan" (the "Plan"). The Plan has been amended from time to time after its initial adoption for various design and administrative changes. The Plan was amended and restated effective as of October 21, 1997 to include various administrative provisions and to clarify certain provisions regarding a Change in Control. Effective as of July 1, 2001, the Plan is being amended and restated as set forth herein to reflect various changes in the manner in which the benefits under the Plan are calculated and other administrative changes. 1.2 Description of the Plan. This Plan is intended to constitute an unfunded plan that is established primarily for the purpose of providing certain benefits for a select group of management or highly compensated employees in the event of a Change in Control. 1.3 Purpose of the Plan. The purpose of this Plan is to advance the interests of the Company by providing highly qualified Company executives and other key personnel with an assurance of equitable treatment in terms of compensation and economic security and to induce continued employment with the Company in the event of certain spin-offs, divestitures, or an acquisition or other Change in Control. The Corporation believes that an assurance of equitable treatment will enable valued executives and key personnel to maintain productivity and focus during a period of significant uncertainty inherent in such situations and that a compensation plan of this kind will aid the Company in attracting and retaining the highly qualified professionals who are essential to its success. SECTION 2. DEFINITIONS 2.1 Definitions. Whenever used herein, the following terms shall have the meanings set forth below, unless otherwise expressly provided herein or unless a different meaning is plainly required by the context, and when the defined meaning is intended, the term is capitalized: (a) "Agreement" means a contract between an Eligible Employee and the Company permitting the Eligible Employee to participate in the Plan and delineating the benefits (if any) that are to be provided to the Eligible Employee in lieu of or in addition to the benefits described under the terms of this Plan. (b) "Base Salary" means the base rate of compensation payable to a Participant as annual salary, not reduced by any pre-tax deferrals under any tax-qualified plan, non-qualified deferred compensation plan, qualified transportation fringe benefit plan under Code Section 132(f), or cafeteria plan under Code Section 125 maintained by the Company, but excluding amounts received or receivable under all incentive or other bonus plans. (c) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (d) "Beneficiary" means any person or entity who, upon the Participant's death, is entitled to receive the Participant's benefits under the Plan in accordance with Section 5 hereof. (e) "Board" means the Board of Directors of the Corporation. ----- (f) "Change in Control" means a change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Corporation is then subject to such reporting requirements; provided that, without limitation, such a Change in Control shall be deemed to have occurred if: (i) Any Person (as defined in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d)) is or becomes the Beneficial Owner, directly or indirectly, of twenty five percent (25%) or more of the combined voting power of the outstanding shares of capital stock of the Corporation; (ii) During any period of two (2) consecutive years (not including any period prior to December 18, 1996) there shall cease to be a majority of the Board comprised as follows: individuals who at the beginning of such period constitute the Board and any new director(s) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved; (iii) The issuance of an Order by the Securities and Exchange Commission (SEC), under Section 9(a)(2) of the Public Utility Holding Company Act of 1935, as amended (the "1935 Act"), authorizing a third party to acquire five percent (5%) or more of the Corporation's voting shares of capital stock; (iv) The shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting shares of capital stock of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting shares of capital stock of the surviving entity) at least eighty percent (80%) of the combined voting power of the voting shares of capital stock of the Corporation or such surviving entity outstanding immediately after such merger or consolidation; or the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets; or (v) The shareholders of the Corporation approve a plan of complete liquidation, or the sale or disposition of South Carolina Electric & Gas Company (hereinafter SCE&G), South Carolina Pipeline Corporation, or any subsidiary of the Corporation designated by the Board as a "Material Subsidiary," but such event shall represent a Change in Control only with respect to a Participant who has been exclusively assigned to SCE&G, South Carolina Pipeline Corporation, or the affected Material Subsidiary. (g) "Code" means the Internal Revenue Code of 1986, as amended. ---- (h) "Committee" means the Management Development and Corporate Performance Committee of the Board. Any references in this Plan to the "Committee" shall be deemed to include references to the designee appointed by the Committee under Section 7.4. (i) "Company" means the Corporation and any subsidiaries of the Corporation and their successor(s) or assign(s) that adopt this Plan through execution of Agreements with any of their Employees or otherwise. When the term "Company" is used with respect to an individual Participant, it shall refer to the specific company at which the Participant is employed, unless otherwise required by the context. (j) "Corporation" means SCANA Corporation, a South Carolina corporation, or any successor thereto. (k) "Eligible Employee" means an Employee who is employed by the Company in a high-level management or administrative position, including employees who also serve as officers of the Company. (l) "Employee" means a person who is actively employed by the Company and who falls under the usual common law rules applicable in determining the employer-employee relationship. (m) Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ (n) KESBP Benefit" means the benefits as provided in Section 4 herein. ------------- (o) Participant" means any Eligible Employee who is participating in the Plan in accordance with the provisions herein set forth. 2.2 Gender and Number. Except when otherwise indicated by the context, any masculine terminology used herein also shall include the feminine and the feminine shall include the masculine, and the use of any term herein in the singular may also include the plural and the plural shall include the singular. SECTION 3. ELIGIBILITY AND PARTICIPATION 3.1 Eligibility. An Eligible Employee shall become a Participant in the Plan when selected for such participation by the Corporation's Chief Executive Officer, in a writing signed by him. Once a Participant is selected for participation, the Participant shall remain covered under the Plan, subject to the termination of participation provisions under Section 3.2. 3.2 Termination of Participation. Once a Participant is selected for participation in the Plan under Section 3.1, the Participant shall remain covered hereunder until the earliest of (i) the date the Participant is notified, in a writing signed by the Corporation's Chief Executive Officer, that the Participant is no longer covered by the provisions of this Plan; (ii) the date upon which the Participant's employment terminates for any reason; or (iii) the date of termination of the Plan. SECTION 4. BENEFITS 4.1 Right to KESBP Benefits. A Participant shall be entitled to receive from the Corporation KESBP Benefits as described in Sections 4.2 and 4.3 upon the occurrence of a Change in Control. The amount of all KESBP Benefits described in Sections 4.2 and 4.3 shall be calculated by the Committee in its sole discretion. 4.2 Description of KESBP Benefits. Upon a Change in Control, the Corporation shall pay to, and provide, each Participant with the following: (a) An amount intended to approximate three (3) times the sum of: (i) the Participant's annual Base Salary in effect as of the Change in Control, and (ii) the Participant's full targeted annual incentive opportunity in effect as of the Change in Control; (b) An amount equal to the present value of the Participant's accrued benefit, if any, under the SCANA Corporation Supplemental Executive Retirement Plan (the Participant's SERP cash balance account), determined prior to any offset for amounts payable under the SCANA Corporation Retirement Plan, and calculated as of the date of the Change in Control, increased by the amount under (i) and reduced by the amount under (ii): (i) an amount equal to the present value of the additional projected pay credits and periodic interest credits to which the Participant would otherwise become entitled under the terms of the SCANA Corporation Retirement Plan (disregarding any Code limitations affecting the amount of benefits that may be provided under such plan) assuming that (A) the Participant remained employed through the date the Participant would have attained age 65, (B) the rate of interest used in determining the periodic interest credits shall remain unchanged from the rate in effect immediately prior to the Change in Control to the date the Participant would have attained age 65, and (C) the relevant salary increase and Social Security wage base assumptions set forth in the SCANA Corporation Retirement Plan shall apply from the date of the Change in Control to the date the Participant would have attained age 65. (ii) an amount equal to the Participant's cash balance account under the SCANA Corporation Retirement Plan as of the date of the Change in Control. For purposes of calculating the foregoing amounts, "present value" shall be determined using the same methods and assumptions in effect under the SCANA Corporation Retirement Plan, immediately prior to the Change in Control. (c) An amount equal to the total cost of coverage for medical coverage, long-term disability coverage, and LifePlus or other life insurance coverage, so as to provide substantially the same level of coverage and benefits enjoyed as if the Participant continued to be an employee of the Company for three (3) full years after the effective date of the Change in Control. 4.3 Gross-Up Payments. In addition to the benefits described in Section 4.2 payable to each Participant or his Beneficiary (referred to as each Participant's "KESBP Benefit"), upon a Change in Control, the Corporation shall pay to the Participant an amount (the "Gross-Up Payment") such that the net amount retained by each Participant after deduction of any excise tax imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed) on the KESBP Benefit, the Participant's benefit under the Performance Share Award portion of the SCANA Corporation Long-Term Equity Compensation Plan (or any predecessor plan thereto) payable in connection with the Change in Control (the "Performance Share Benefit"), and the Gross-Up Payment (the "Excise Tax") and any federal, state, and local income tax and Excise Tax upon the Participant's KESBP Benefit, the Performance Share Benefit, and the Gross-Up Payment provided for by this Section 4.3 shall be equal to the sum of (i) the value of the KESBP Benefit otherwise payable hereunder and (ii) the value of the Performance Share Benefits paid to the Participant under the Long-Term Equity Compensation Plan (or any predecessor plan thereto) on account of the change in control provisions of that plan (or its predecessor). 4.4 Tax Computation. For purposes of determining the amount of the Gross-Up Payment referred to in Section 4.3, whether any of a Participant's KESBP Benefit or Performance Share Benefit (as defined in Section 4.3) will be subject to the Excise Tax, and the amounts of such Excise Tax: (i) there shall be taken into account all other payments or benefits received or to be received by a Participant in connection with a Change in Control of the Corporation (whether pursuant to the terms of this Plan or any other plan, arrangement, or agreement with the Corporation, any person whose actions result in a Change in Control of the Corporation or any person affiliated with the Corporation or such person); and (ii) the amount of any Gross-Up Payment payable with respect to any Participant (or his Beneficiary) by reason of such payment shall be determined in accordance with a customary "gross-up formula," as determined by the Committee in its sole discretion. 4.5 Form and Timing of KESBP Benefits. All payments under this Plan shall be made by the Corporation (or to the extent assets are transferred to the SCANA Corporation Executive Benefit Plan Trust by the trustee of such trust in accordance with the trust's terms) to the Participant (or his Beneficiary) in the form of a single lump sum cash payment as soon as practicable following the Change in Control, but in no event later than the date specified by the terms of the SCANA Corporation Executive Benefit Plan Trust. 4.6 No Subsequent Recalculation of Plan Liability. The Gross-Up Payments described in Sections 4.3 and 4.4 are intended and hereby deemed to be a reasonably accurate calculation of each Participant's actual income tax and Excise Tax liability under the circumstances (or such tax liability of his Beneficiary), the payment of which is to be made by the Corporation or any "rabbi trust" established by the Corporation for such purposes. All such calculations of tax liability shall not be subject to subsequent recalculation or adjustment in either an underpayment or overpayment context with respect to the actual tax liability of the Participant (or his Beneficiary) ultimately determined as owed. 4.7 Benefits Under Other Plans. Subject to the terms of a Participant's Agreement, any other amounts due the Participant or his Beneficiary under the terms of any other Company plans or programs are in addition to the payments under this Plan. SECTION 5. BENEFICIARY DESIGNATION 5.1 Designation of Beneficiary. -------------------------- (a) A Participant shall designate a Beneficiary or Beneficiaries who, upon the Participant's death, are to receive the amounts that otherwise would have been paid to the Participant. All designations shall be in writing and signed by the Participant. The designation shall be effective only if and when delivered to the Corporation during the lifetime of the Participant. The Participant also may change his Beneficiary or Beneficiaries by a signed, written instrument delivered to the Corporation. The payment of amounts shall be in accordance with the last unrevoked written designation of Beneficiary that has been signed and delivered to the Corporation. All Beneficiary designations shall be addressed to the Secretary of SCANA Corporation and delivered to his office, and shall be processed as indicated in subsection (b) below by the Secretary or by his authorized designee. (b) The Secretary of SCANA Corporation (or his authorized designee) shall, upon receipt of a Participant's Beneficiary designation: (i) ascertain that the designation has been signed, and if it has not been, return it to the Participant for his signature; and (ii) if signed, stamp the designation "Received," indicate the date of receipt, and initial the designation in the proximity of the stamp. 5.2 Death of Beneficiary. -------------------- (a) In the event that all of the Beneficiaries named in Section 5.1 predecease the Participant, the amounts that otherwise would have been paid to said Beneficiaries shall, where the designation fails to redirect to alternate Beneficiaries in such circumstance, be paid to the Participant's estate as the alternate Beneficiary. (b) In the event that two or more Beneficiaries are named, and one or more but less than all of such Beneficiaries predecease the Participant, each surviving Beneficiary shall receive any dollar amount or proportion of funds designated or indicated for him per the designation under Section 5.1, and the dollar amount or designated or indicated share of each predeceased Beneficiary which the designation fails to redirect to an alternate Beneficiary in such circumstance shall be paid to the Participant's estate as an alternate Beneficiary. 5.3 Ineffective Designation. ----------------------- (a) In the event the Participant does not designate a Beneficiary, or if for any reason such designation is entirely ineffective, the amounts that otherwise would have been paid to the Beneficiary shall be paid to the Participant's estate as the alternate Beneficiary. (b) In the circumstance that designations are effective in part and ineffective in part, to the extent that a designation is effective, distribution shall be made so as to carry out as closely as discernable the intent of the Participant, with result that only to the extent that a designation is ineffective shall distribution instead be made to the Participant's estate as an alternate Beneficiary. SECTION 6. GENERAL PROVISIONS 6.1 Contractual Obligation. It is intended that the Corporation is under a contractual obligation to make payments of a Participant's KESBP Benefits when due. Payment of KESBP Benefits shall be made out of the general funds of the Corporation as determined by the Board without any restriction of the assets of the Corporation relative to the payment of such contractual obligations; the Plan is, and shall operate as, an unfunded plan. 6.2 Unsecured Interest. No Participant or Beneficiary shall have any interest whatsoever in any specific asset of the Corporation. To the extent that any person acquires a right to receive payment under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Corporation. 6.3 "Rabbi" Trust EX-10 7 skesbp.txt SUPPLEMENTARY KEY EXECUTIVE SEVERANCE BENEFITS PLAN Exhibit 10.05 SCANA CORPORATION SUPPLEMENTARY KEY EXECUTIVE SEVERANCE BENEFITS PLAN as amended and restated effective as of July 1, 2001 SCANA CORPORATION SUPPLEMENTARY KEY EXECUTIVE SEVERANCE BENEFITS PLAN TABLE OF CONTENTS Page SECTION 1. ESTABLISHMENT AND PURPOSE.........................................1 1.1 ESTABLISHMENT AND HISTORY OF THE PLAN................................1 1.2 DESCRIPTION OF THE PLAN..............................................1 1.3 PURPOSE OF THE PLAN..................................................1 SECTION 2. DEFINITIONS.......................................................2 2.1 DEFINITIONS..........................................................2 2.2 GENDER AND NUMBER....................................................6 SECTION 3. ELIGIBILITY AND PARTICIPATION....................................7 3.1 ELIGIBILITY..........................................................7 3.2 TERMINATION OF PARTICIPATION.........................................7 SECTION 4. BENEFITS.........................................................8 4.1 RIGHT TO SKESBP BENEFITS.............................................8 4.2 QUALIFYING TERMINATION...............................................8 4.3 DESCRIPTION OF SKESBP BENEFITS.......................................8 4.4 TERMINATION FOR TOTAL AND PERMANENT DISABILITY......................10 4.5 TERMINATION FOR RETIREMENT OR DEATH.................................10 4.6 TERMINATION FOR CAUSE OR BY PARTICIPANT OTHER THAN FOR GOOD REASON...............................................10 4.7 NOTICE OF TERMINATION...............................................10 4.8 PARTICIPANT'S OBLIGATIONS...........................................10 4.9 TERMINATION FOR JUST CAUSE..........................................10 4.10 GROSS-UP PAYMENT....................................................10 4.11 TAX COMPUTATION.....................................................11 4.12 FORM AND TIMING OF SKESBP BENEFITS..................................11 4.13 NO SUBSEQUENT RECALCULATION OF PLAN LIABILITY.......................11 4.14 BENEFITS UNDER OTHER PLANS..........................................11 SECTION 5. BENEFICIARY DESIGNATION..........................................12 5.1 DESIGNATION OF BENEFICIARY..........................................12 5.2 DEATH OF BENEFICIARY................................................12 5.3 INEFFECTIVE DESIGNATION.............................................12 SECTION 6. GENERAL PROVISIONS...............................................13 6.1 CONTRACTUAL OBLIGATION..............................................13 6.2 UNSECURED INTEREST..................................................13 6.3 "RABBI" TRUST.......................................................13 6.4 SUCCESSORS..........................................................13 6.5 EMPLOYMENT/PARTICIPATION RIGHTS.....................................13 6.6 NONALIENATION OF BENEFITS...........................................14 6.7 SEVERABILITY........................................................14 6.8 NO INDIVIDUAL LIABILITY.............................................14 6.9 APPLICABLE LAW......................................................14 6.10 LEGAL FEES AND EXPENSES.............................................15 6.11 ARBITRATION.........................................................15 SECTION 7. PLAN ADMINISTRATION, AMENDMENT AND TERMINATION...................16 7.1 IN GENERAL..........................................................16 7.2 CLAIMS PROCEDURE....................................................16 7.3 FINALITY OF DETERMINATION...........................................16 7.4 DELEGATION OF AUTHORITY.............................................16 7.5 EXPENSES............................................................16 7.6 TAX WITHHOLDING.....................................................16 7.7 INCOMPETENCY........................................................16 7.8 NOTICE OF ADDRESS...................................................17 7.9 AMENDMENT AND TERMINATION...........................................17 SECTION 8. EXECUTION........................................................18 SCANA CORPORATION SUPPLEMENTARY KEY EXECUTIVE SEVERANCE BENEFITS PLAN (As Amended and Restated) SECTION 1. ESTABLISHMENT AND PURPOSE 1.1 Establishment and History of the Plan. SCANA Corporation established, effective as of October 21, 1997, a severance plan for certain senior executives known as the "SCANA Corporation Supplementary Key Executive Severance Benefits Plan" (the "Plan"). Effective as of July 1, 2001, the Plan is being amended and restated as set forth herein to reflect various changes in the manner in which the benefits under the Plan are calculated and other administrative changes. 1.2 Description of the Plan. This Plan is intended to constitute a severance benefits plan which is unfunded and established primarily for the purpose of providing severance benefits for a select group of management or highly compensated employees. 1.3 Purpose of the Plan. The purpose of this Plan is to advance the interests of the Company by providing highly qualified Company executives and other key personnel with an assurance of equitable treatment in terms of compensation and economic security and to induce continued employment with the Company in the event of certain spin-offs, divestitures, or an acquisition or other Change in Control. The Corporation believes that an assurance of equitable treatment will enable valued executives and key personnel to maintain productivity and focus during a period of significant uncertainty inherent in such situations and that a severance compensation plan of this kind will aid the Company in attracting and retaining the highly qualified professionals who are essential to its success. SECTION 2. DEFINITIONS 2.1 Definitions. Whenever used herein, the following terms shall have the meanings set forth below, unless otherwise expressly provided herein or unless a different meaning is plainly required by the context, and when the defined meaning is intended, the term is capitalized: (a) "Agreement" means a contract between an Eligible Employee and the Company permitting the Eligible Employee to participate in the Plan and delineating the benefits (if any) that are to be provided to the Eligible Employee in lieu of or in addition to the benefits described under the terms of this Plan. (b) "Base Salary" means the base rate of compensation payable to a Participant as annual salary, not reduced by any pre-tax deferrals under any tax-qualified plan, non-qualified deferred compensation plan, qualified transportation fringe benefit plan under Code Section 132(f), or cafeteria plan under Section 125 maintained by the Company, but excluding amounts received or receivable under all incentive or other bonus plans. (c) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (d) "Beneficiary" means any person or entity who, upon the Participant's death, is entitled to receive the Participant's benefits under the Plan in accordance with Section 5 hereof. (e) "Board" means the Board of Directors of the Corporation. ----- (f) "Change in Control" means a change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Corporation is then subject to such reporting requirements; provided that, without limitation, such a Change in Control shall be deemed to have occurred if: (i) Any Person (as defined in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d)) is or becomes the Beneficial Owner, directly or indirectly, of twenty five percent (25%) or more of the combined voting power of the outstanding shares of capital stock of the Corporation; (ii) During any period of two (2) consecutive years (not including any period prior to December 18, 1996) there shall cease to be a majority of the Board comprised as follows: individuals who at the beginning of such period constitute the Board and any new director(s) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved; (iii) The issuance of an Order by the Securities and Exchange Commission (SEC), under Section 9(a)(2) of the Public Utility Holding Company Act of 1935, as amended (the "1935 Act"), authorizing a third party to acquire five percent (5%) or more of the Corporation's voting shares of capital stock; (iv) The shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting shares of capital stock of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting shares of capital stock of the surviving entity) at least eighty percent (80%) of the combined voting power of the voting shares of capital stock of the Corporation or such surviving entity outstanding immediately after such merger or consolidation; or the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets; or (v) The shareholders of the Corporation approve a plan of complete liquidation, or the sale or disposition of South Carolina Electric & Gas Company (hereinafter SCE&G), South Carolina Pipeline Corporation, or any subsidiary of the Corporation designated by the Board as a "Material Subsidiary," but such event shall represent a Change in Control only with respect to a Participant who has been exclusively assigned to SCE&G, South Carolina Pipeline Corporation, or the affected Material Subsidiary. (g) "Code" means the Internal Revenue Code of 1986, as amended. ---- (h) "Committee" means the Management Development and Corporate Performance Committee of the Board. Any references in this Plan to the "Committee" shall be deemed to include references to the designee appointed by the Committee under Section 7.4. (i) "Company" means the Corporation and any subsidiaries of the Corporation and their successor(s) or assign(s) that adopt this Plan through execution of Agreements with any of their Employees or otherwise. When the term "Company" is used with respect to an individual Participant, it shall refer to the specific company at which the Participant is employed, unless otherwise required by the context. (j) "Corporation" means SCANA Corporation, a South Carolina corporation, or any successor thereto. (k) "Effective Date of Termination" means the date on which a Qualifying Termination occurs which triggers SKESBP Benefits hereunder. (l) "Eligible Employee" means an Employee who is employed by the Company in a high-level management or administrative position, including employees who also serve as officers of the Company, as determined under the SCANA Corporation Key Executive Severance Benefits Plan. (m) "Employee" means a person who is actively employed by the Company and who falls under the usual common law rules applicable in determining the employer-employee relationship. (n) "Exchange Act" means the Securities Exchange Act of 1934, as amended. - (o) "Good Reason" means, without the Participant's written consent, the occurrence after a Change in Control of the Company of any one or more of the following: (i) The assignment of a Participant to duties inconsistent with his/her duties, responsibilities, and status as an officer of the Company or reduction or alteration in the nature or status of his/her responsibilities from those in effect as of ninety (90) days prior to the effective date of the Change in Control. A record, called "Exhibit A (of the KESB)," of each Plan Participant's responsibilities, duties, and status as an officer shall be maintained as a point of reference for the purpose of identifying changes in these responsibilities, duties and status as an officer that would constitute "Good Reason;" (ii) A reduction by the Company in a Participant's Base Salary as in effect thirty (30) days prior to the identification of a Potential Change in Control; (iii) The Company's requiring a Participant to be based at a location in excess of twenty-five (25) miles from the location where a Participant is based as of the Effective Date of this Plan; (iv) The failure of the Company to continue in effect any annual or long-term incentive program for officers which is in effect as of the effective date of the Change in Control, or any of the Company's employee benefit plans, policies, practices, or arrangements in which the Participant participates, unless similar plans of equal value are established in their place, or the failure by the Company to continue the Participant's participation therein on substantially the same basis, both in terms of the amount of benefits provided and the level of the Participant's participation relative to other participants, as existed as of the date of the Change in Control; (v) The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Plan, as contemplated in Section 6.4 herein; and (vi) Any purported termination by the Company of the Participant's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 4.7 herein, and for purposes of this Plan, no such purported termination shall be effective. A Participant's right to terminate his or her employment for Good Reason shall not be affected by his or her incapacity due to physical or mental illness. A Participant's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason herein. (p) "Just Cause" means any one or more of the following: ---------- (i) Willful and continued failure by a Participant to substantially perform his or her duties with the Company (other than any such failure resulting from a Qualifying Termination), after a demand for substantial performance is delivered to the Participant that specifically identifies the manner in which the Company believes that the Participant has not substantially performed his/her duties, and the Participant has failed to resume substantial performance of his/her duties on a continuous basis within fourteen (14) days of receiving such demand; (ii) The willful engaging by a Participant in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; or (iii) A Participant's conviction of a felony or conviction of a misdemeanor which impairs his/her ability substantially to perform his/her duties with the Company. For purposes of this Section 2.1(p), no act, or failure to act, on a Participant's part shall be deemed "willful" unless done, or omitted to be done, by a Participant not in good faith and without reasonable belief that the Participant's action or omission was in the best interest of the Company. (q) "Participant" means any Eligible Employee who is participating in the Plan in accordance with the provisions herein set forth. (r) "Potential Change in Control" means and includes the event of any one or more of the following occurrences: (i) The Corporation enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Corporation; (ii) Any person including the Corporation publicly announces an intention to take or to consider taking actions which if consummated, would constitute a Change of Control of the Corporation; (iii) Any person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation (or corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation representing eight and one-half percent (8.5%) or more of the combined voting power of the Corporation's then outstanding securities; (iv) The filing of an application by a third party with the SEC under Section 9(a)(2) of the Public Utility Holding Company Act of 1935, as amended, for authorization to acquire shares so as to hold, own or control, directly or indirectly, five percent (5%) or more of the voting stock of the Corporation; or (v) The Board adopts a resolution to the effect that for purposes of the SCANA Corporation Executive Benefit Plan Trust and affected plans, a Potential Change in Control has occurred. (s) "Qualifying Termination" means any of the events described in Section 4.2 herein, the occurrence of which triggers the payment of SKESBP Benefits hereunder. (t) "Retirement" means the retirement of a Participant at the "normal retirement age," as defined in the SCANA Corporation Retirement Plan, as in effect on July 1, 2000, and as may be further amended and in effect from time to time, or in accordance with any retirement arrangement established with the Participant's consent with respect to the Participant. (u) "SKESBP Benefit" means the benefits as provided in Section 4.3 herein. -------------- (v) "Total and Permanent Disability" means a physical or mental condition which: ------------------------------ (i) Renders a Participant unable to discharge his/her normal work responsibility with the Company and which, in the opinion of a licensed physician selected by the Participant, based upon significant medical evidence, can be reasonably expected to continue for a period of at least one (1) year; or (ii) Causes a Participant to be absent from the full-time performance of his/her duties with the Company for six (6) consecutive months and, within thirty (30) days after the Company delivers to the Participant written notice of termination, the Participant does not return to the full-time performance of his/her duties. 2.2 Gender and Number. Except when otherwise indicated by the context, any masculine terminology used herein also shall include the feminine and the feminine shall include the masculine, and the use of any term herein in the singular may also include the plural and the plural shall include the singular. SECTION 3. ELIGIBILITY AND PARTICIPATION 3.1 Eligibility. An Eligible Employee who is a Participant for purposes of the SCANA Corporation Key Executive Severance Benefits Plan shall be a Participant automatically for purposes of this Plan. 3.2 Termination of Participation. A Participant in this Plan under Section 3.1 shall remain covered hereunder until the earliest of (i) the date the Participant is notified, in a writing signed by the Corporation's Chief Executive Officer, that the Participant is no longer covered by the provisions of this Plan or the SCANA Corporation Key Executive Severance Benefits Plan; (ii) the date upon which the Participant's employment terminates for any reason, provided, however, the Participant shall be remain covered under the Plan after termination of employment so long as any benefits are payable from this Plan; or (iii) the date of termination of the Plan, provided, however, the Plan shall remain in effect with respect to the Participant so long as any benefits are payable to the Participant from this Plan. SECTION 4. BENEFITS 4.1 Right to SKESBP Benefits. A Participant shall be entitled to receive from the Corporation SKESBP Benefits as described in Section 4 herein, if there has been a Change in Control and if, within twenty-four (24) calendar months thereafter, the Participant's employment with the Company shall end for any reason specified in Section 4.2 herein as being a Qualifying Termination. The amount of all SKESBP Benefits described in Section 4 herein shall be calculated by the Committee in its sole discretion. 4.2 Qualifying Termination. Subject to the terms of this Plan, the occurrence of any one (1) of the following events within twenty-four (24) calendar months after a Change in Control shall trigger the payment of SKESBP Benefits under this Plan: (a) An involuntary termination of a Participant's employment with the Company without Just Cause; or (b) A voluntary termination of a Participant's employment with the Company for Good Reason. A termination of a Participant's employment with the Company by reason of death, Total and Permanent Disability, Retirement, a voluntary termination by the Participant without Good Reason, or an involuntary termination by the Company for Just Cause shall not entitle a Participant to receive SKESBP Benefits hereunder. In the event a successor company fails or refuses to assume the Company's obligations under this Plan on or before the effective date of a Change in Control, as required by Section 6.4 herein, or in the event the Company or a successor company breaches any provision of this Plan, each Participant shall be paid the SKESBP Benefits described herein, as if a qualifying employment termination had occurred on the effective date of the Change in Control. Notwithstanding the above, a Participant shall not be considered to have terminated his/her employment solely by reason of his/her transfer to a corporation whose stock was acquired from the Company in a transaction intended to qualify for tax-free treatment under Section 355 of the Code. 4.3 Description of SKESBP Benefits. If a Participant becomes entitled to receive SKESBP Benefits, the Corporation shall pay to, and provide, such Participant with the following benefits, subject to the tax "gross-up" payment described in Section 4.11 and Section 4.12 and the reduction for benefits described in Section 4.3(f): (a) An amount intended to approximate three (3) times the sum of: (i) the Participant's annual Base Salary in effect as of the Change in Control, and (ii) the Participant's full targeted annual incentive opportunity in effect as of the Change in Control; (b) An amount equal to the Participant's full targeted annual incentive opportunity in effect under each existing annual incentive plan or program for the year in which the Change in Control occurs; (c) An amount equal to the present value of the Participant's accrued benefit, if any, under the SCANA Corporation Supplemental Executive Retirement Plan (the Participant's SERP cash balance account), determined prior to any offset for amounts payable under the SCANA Corporation Retirement Plan, and calculated as of the date of the Change in Control, increased by the amount under (i) and reduced by the amount under (ii): (i) an amount equal to the present value of the additional projected pay credits and periodic interest credits to which the Participant would otherwise become entitled under the terms of the SCANA Corporation Retirement Plan (disregarding any Code limitations affecting the amount of benefits that may be provided under such plan) assuming that (A) the Participant remained employed through the date the Participant would have attained age 65, (B) the rate of interest used in determining the periodic interest credits shall remain unchanged from the rate in effect immediately prior to the Change in Control to the date the Participant would have attained age 65, and (C) the relevant salary increase and Social Security wage base assumptions set forth in the SCANA Corporation Retirement Plan shall apply from the date of the Change in Control to the date the Participant would have attained age 65. (ii) an amount equal to the Participant's cash balance account under the SCANA Corporation Retirement Plan as of the date of the Change in Control. For purposes of calculating the foregoing amounts, "present value" shall be determined using the same methods and assumptions in effect under the SCANA Corporation Retirement Plan, immediately prior to the Change in Control. (d) An amount equal to the value of the amounts credited on the Participant's behalf under the SCANA Corporation Executive Deferred Compensation Plan as of the date of the Change in Control, plus interest on such amounts at a rate equal to the sum of the prime interest rate as published in the Wall Street Journal on the most recent publication date that precedes the date of the Change in Control plus three percent (3%), with the total benefit amount calculated through the end of the month prior to the month such amounts are distributed to the Participant. (e) An amount equal to the total cost of coverage for medical coverage, long-term disability coverage, and LifePlus or other life insurance coverage, so as to provide substantially the same level of coverage and benefits enjoyed as if the Participant continued to be an employee of the Company for three (3) full years after the effective date of the Change in Control; and (f) Notwithstanding the above, the amount payable to each Participant under this Plan shall be reduced (but not below zero) by all amounts received by such Participant, if any, under the SCANA Corporation Key Executive Severance Benefits Plan. 4.4 Termination for Total and Permanent Disability. Following a Change in Control of the Corporation, if a Participant's employment is terminated due to Total and Permanent Disability, the Participant shall receive his Base Salary, through the Effective Date of Termination, at which point in time the Participant's benefits shall be determined in accordance with the Company's retirement, insurance, and other applicable plans and programs of the Company then in effect. 4.5 Termination for Retirement or Death. Following a Change in Control of the Corporation, if a Participant's employment is terminated by reason of his Retirement or death, the Participant's benefits shall be determined in accordance with the Company's retirement, survivor's benefits, insurance, and other applicable plans and programs of the Company then in effect. 4.6 Termination for Cause or by Participant Other Than for Good Reason. Following a Change in Control of the Company, if a Participant's employment is terminated either (i) by the Company for Just Cause; or (ii) by the Participant other than for Good Reason, the Company shall pay the Participant his/her full Base Salary and accrued vacation through the Effective Date of Termination, at the rate then in effect, plus all other amounts to which the Participant is entitled under any compensation plan of the Company, at the time such payments are due, and the Company shall have no further obligations to the Participant under this Plan. 4.7 Notice of Termination. Any Qualifying Termination shall be communicated by Notice of Termination from the party initiating the termination to the other party. For purposes of this Plan, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Plan relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Participant's employment under the provision so indicated, so as to entitle the Participant to benefits. 4.8 Participant's Obligations. Subject to the terms and conditions of this Plan, in the event of a Potential Change in Control of the Company, each Participant is required to remain with the Company until the earliest of (i) a date which is six (6) months after the occurrence of such Potential Change in Control of the Company; or (ii) a termination by a Participant of the Participant's employment by reason of Total and Permanent Disability or Retirement; or (iii) the occurrence of a Change in Control of the Company. 4.9 Termination for Just Cause. Nothing in this Plan shall be construed to prevent the Company from terminating a Participant's employment for Just Cause. In such case, no SKESBP Benefits shall be payable to the Participant under this Plan. 4.10 Gross-Up Payment. In addition to the benefits described in Section 4.3 payable to each Participant or his Beneficiary (referred to as each Participant's "SKESBP Benefit"), the Corporation shall pay to the Participant an amount (the "Gross-Up Payment") such that the net amount retained by each Participant after deduction of any excise tax imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed) on the SKESBP Benefit, the Participant's benefit under the Performance Share Award portion of the SCANA Corporation Long-Term Equity Compensation Plan (or any predecessor plan thereto) payable in connection with the Change in Control (the "Performance Share Benefit"), and the Gross-Up Payment (the "Excise Tax") and any federal, state, and local income tax and Excise Tax upon the Participant's SKESBP Benefit, the Performance Share Benefit, and the Gross-Up Payment provided for by this Section 4.10 shall be equal to the sum of (i) the value of the SKESBP Benefit otherwise payable hereunder and (ii) the value of the Performance Share Benefits paid to the Participant under the Long-Term Equity Compensation Plan (or any predecessor plan thereto) on account of the change in control provisions of that plan (or its predecessor). 4.11 Tax Computation. For purposes of determining the amount of the Gross-Up Payment referred to in Section 4.10, whether any of a Participant's SKESBP Benefit or Performance Share Benefit (as defined in Section 4.10) will be subject to the Excise Tax, and the amounts of such Excise Tax: (i) there shall be taken into account all other payments or benefits received or to be received by a Participant in connection with a Change in Control of the Corporation (whether pursuant to the terms of this Plan or any other plan, arrangement, or agreement with the Corporation, any person whose actions result in a Change in Control of the Corporation or any person affiliated with the Corporation or such person); and (ii) the amount of any Gross-Up Payment payable with respect to any Participant (or his Beneficiary) by reason of such payment shall be determined in accordance with a customary "gross-up formula," as determined by the Committee in its sole discretion. 4.12 Form and Timing of SKESBP Benefits. A Participant's SKESBP Benefits described in Section 4.3, together with the Gross-Up Payment described in Section 4.10 and Section 4.11 shall be paid in the form of a single lump sum cash payment as soon as practicable following the Effective Date of Termination, but in no event beyond thirty (30) days from such date. 4.13 No Subsequent Recalculation of Plan Liability. The Gross-Up Payments described in Sections 4.10 and 4.11 are intended and hereby deemed to be a reasonably accurate calculation of each Participant's actual income tax and Excise Tax liability under the circumstances (or such tax liability of his Beneficiary), the payment of which is to be made by the Corporation or any "rabbi trust" established by the Corporation for such purposes. All such calculations of tax liability shall not be subject to subsequent recalculation or adjustment in either an underpayment or overpayment context with respect to the actual tax liability of the Participant (or his Beneficiary) ultimately determined as owed. 4.14 Benefits Under Other Plans. Subject to the terms of a Participant's Agreement, any other amounts due the Participant or his Beneficiary under the terms of any other Company plans or programs are in addition to the payments under this Plan. SECTION 5. BENEFICIARY DESIGNATION 5.1 Designation of Beneficiary. -------------------------- (a) A beneficiary who is a Beneficiary for purposes of the SCANA Corporation Key Executive Severance Benefits Plan shall be a Beneficiary automatically for purposes of this Plan. (b) The Secretary of SCANA Corporation (or his authorized designee) shall, upon receipt of a Participant's Beneficiary designation: (i) ascertain that the designation has been signed, and if it has not been, return it to the Participant for his signature; and (ii) if signed, stamp the designation "Received," indicate the date of receipt, and initial the designation in the proximity of the stamp. 5.2 Death of Beneficiary. -------------------- (a) In the event that of the Beneficiaries named in Section 5.1 predecease the Participant, the amounts that otherwise would have been paid to said Beneficiaries shall, where the designation fails to redirect to alternate Beneficiaries in such circumstance, be paid to the Participant's estate as the alternate Beneficiary. (b) In the event that two or more Beneficiaries are named, and one or more but less than all of such Beneficiaries predecease the Participant, each surviving Beneficiary shall receive any dollar amount or proportion of funds designated or indicated for him per the designation under Section 5.1, and the dollar amount or designated or indicated share of each predeceased Beneficiary which the designation fails to redirect to an alternate Beneficiary in such circumstance shall be paid to the Participant's estate as an alternate Beneficiary. 5.3 Ineffective Designation. ----------------------- (a) In the event the Participant does not designate a Beneficiary, or if for any reason such designation is entirely ineffective, the amounts that otherwise would have been paid to the Beneficiary shall be paid to the Participant's estate as the alternate Beneficiary. (b) In the circumstance that designations are effective in part and ineffective in part, to the extent that a designation is effective, distribution shall be made so as to carry out as closely as discernable the intent of the Participant, with result that only to the extent that a designation is ineffective shall distribution instead be made to the Participant's estate as an alternate Beneficiary. SECTION 6. GENERAL PROVISIONS 6.1 Contractual Obligation. It is intended that the Corporation is under a contractual obligation to make payments of a Participant's SKESBP Benefits when due. Payment of SKESBP Benefits shall be made out of the general funds of the Corporation as determined by the Board without any restriction of the assets of the Corporation relative to the payment of such contractual obligations; the Plan is, and shall operate as, an unfunded plan. 6.2 Unsecured Interest. No Participant or Beneficiary shall have any interest whatsoever in any specific asset of the Corporation. To the extent that any person acquires a right to receive payment under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Corporation. 6.3 "Rabbi" Trust SCANA CORPORATION ------------- By:_s/W. B. Timmerman_________ ------------------ Title: Chairman, President and ------------------------------ Chief Executive Officer -------------------------------- ATTEST: s/Lynn M. Williams - --------------------- Secretary EX-10 8 exh10c.txt RESOLUTION Exhibit 10.01c FURTHER RESOLVED, THAT THE Supplementary Voluntary Deferral Plan be amended and restated as of July 1, 2001 (or such other earlier or later date that the appropriate officers and other employees of SCANA Services, Inc. determine to be appropriate for administrative purposes) by merging into it the Voluntary Deferral Plan and the Key Employee Retention Plan and renaming the combined plan to be the "SCANA Corporation Executive Deferral Compensation Plan". EX-10 9 serviceagr.txt SERVICE AGREEMENT Service Agreement This Service Agreement (this "Agreement") is entered into as of the 1st day of April, 2001, by and between South Carolina Electric & Gas Company, a South Carolina corporation (the "Company") and SCANA Services, Inc., a South Carolina corporation ("SCANA Services"). WHEREAS, SCANA Services is a direct or indirect wholly owned subsidiary of SCANA Corporation; WHEREAS, SCANA Services has been formed for the purpose of providing administrative, management and other services to subsidiaries of SCANA Corporation; and WHEREAS, the Company believes that it is in the interest of the Company to provide for an arrangement whereby the Company may, from time to time and at the option of the Company, agree to purchase such administrative, management and other services from SCANA Services; NOW, THEREFORE, in consideration of the mutual covenants contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: I. SERVICES. SCANA Services supplies, or will supply, certain administrative, management or other Company similar to those supplied to other subsidiaries of SCANA Corporation. Such services are and will be provided to the Company only at the request of the Company. Exhibit I hereto lists and describes all of the services that are available from SCANA Services. II. PERSONNEL. SCANA Services provides and will provide such services by utilizing the services of their executives, accountants, financial advisers, technical advisers, attorneys and other persons with the necessary qualifications. If necessary, SCANA Services, after consultation with the Company, may also arrange for the services of nonaffiliated experts, consultants and attorneys in connection with the performance of any of the services supplied under this Agreement. III. COMPENSATION AND ALLOCATION. As and to the extent required by law, SCANA Services provides and will provide such services at cost. Exhibit I hereof contains rules for determining and allocating such costs. Page 1 of 8 IV. TERMINATION AND MODIFICATION. The Company may terminate this Agreement by providing 60 days written notice of such termination to SCANA Services. SCANA Services may terminate this Agreement by providing 60 days written notice of such termination to the Company. V. SERVICE REQUESTS. The Company and SCANA Services will prepare a Service Request on or before April 1 of each year listing services to be provided to the Company by SCANA Services and any special arrangements related to the provision of such services for the coming year, based on services provided during the past year. The Company and SCANA Services may supplement the Service Request during the year to reflect any additional or special services that the Company wishes to obtain from SCANA Services, and the arrangements relating thereto. VI. BILLING AND PAYMENT. Unless otherwise set forth in a Service Request, payment for services provided by SCANA Services shall be by making remittance of the amount billed or by making appropriate accounting entries on the books of the Company and SCANA Services. Billing will be made on a monthly basis, with the bill to be rendered by the 25th of the month, and remittance or accounting entries completed within 30 days of billing. VII. NOTICE. Where written notice is required by this Agreement, all notices, consents, certificates, or other communications hereunder shall be in writing and shall be deemed given when mailed by United States registered or certified mail, postage prepaid, return receipt requested, addressed as follows: 1. To the Company: H. Thomas Arthur General Counsel SCANA Corporation 1426 Main Street Columbia, SC 29201 2. To SCANA Services: H. Thomas Arthur General Counsel SCANA Corporation 1426 Main Street Columbia, SC 29201 VIII. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of South Carolina, without regard to their conflict of laws provisions. IX. MODIFICATION. No amendment, change or modification of this Agreement shall be valid, unless made in writing and signed by all parties hereto. Page 2 of 8 X. ENTIRE AGREEMENT. This Agreement, together with its exhibits, constitutes the entire understanding and agreement of the parties with respect to its subject matter, and effective upon the execution of this Agreement by the respective parties hereof and thereto, any and all prior agreements, understandings or representations with respect to this subject matter are hereby terminated and canceled in their entirety and are of no further force or effect. XI. WAIVER. No waiver by any party hereto of a breach of any provision of this Agreement shall constitute a waiver of any preceding or succeeding breach of the same or any other provision hereof. XII. ASSIGNMENT. This Agreement shall inure to the benefit and shall be binding upon the parties and their respective successors and assigns. No assignment of this Agreement or any party's rights, interests or obligations hereunder may be made without the other party's consent, which shall not be unreasonably withheld, delayed or conditioned. XIII. SEVERABILITY. If any provision or provisions of this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall in no way be affected or impaired thereby. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of this 18th day of September. SCANA SERVICES, INC. By: s/Sarena D. Burch______________ ----------------- Name: Sarena D. Burch Title: Deputy General Counsel SOUTH CAROLINA ELECTRIC & GAS COMPANY By: s/Neville O. Lorick ---------------------------------------- Name: Neville O. Lorick Title: President Page 3 of 8 EXHIBIT I Description of Services, Cost Accumulation, Assignment and Allocation Methodologies for SCANA Services, Inc. This document sets forth the methodologies used to accumulate the costs of services performed by SCANA Services, Inc. ("SCANA Services") and to assign or allocate such costs to other subsidiaries and business units within SCANA Corporation ("Client Entities"). Cost of Services Performed SCANA Services maintains an accounting system that enables costs to be identified by Cost Center, Account Number or Project, Activity, Resource, and Event ("Account Codes"). The primary inputs to the accounting system are time records of hours worked by SCANA Services employees, accounts payable transactions and journal entries. Charges for labor are made at the employees' effective hourly rate, including the cost of pensions, other employee benefits and payroll taxes. To the extent practicable, costs of services are directly assigned to the applicable Account Codes. The full cost of providing services also includes certain indirect costs, e.g., departmental overheads, administrative and general costs, and taxes. Indirect costs are associated with the services performed in proportion to the directly assigned costs of the services or other relevant cost allocators. Cost Assignment and Allocation SCANA Services costs will be directly assigned, distributed or allocated to Client Entities in the manner prescribed below. 1. Costs accumulated in Account Codes for services specifically performed for a single Client Entity will be directly assigned or charged to such Client Entity. 2. Costs accumulated in Account Codes for services specifically performed for two or more Client Entities will be distributed among and charged to such Client Entities using methods determined on a case-by-case basis consistent with the nature of the work performed and based on one of the allocation methods described below. 3. Costs accumulated in Account Codes for services of a general nature which are applicable to all Client Entities or to a class or classes of Client Entities will be allocated among and charged to such Client Entities by application of one or more of the allocation methods described below. Page 4 of 8 Allocation Methods The following methods will be applied, as indicated in the Description of Services section that follows, to allocate costs for services of a general nature. 1. Information Systems Chargeback Rates - Rates for services, including but not limited to Software, Consulting, Mainframe, Midtier and Network Connectivity Services, are based on the costs of labor, materials and Information Services overheads related to the provision of each service. Such rates are applied based on the specific equipment employed and the measured usage of services by Client Entities. These rates will be determined annually based on actual experience and may be adjusted for any known and reasonably quantifiable events, or at such time as may be required due to significant changes. 2. Margin Revenue Ratio - "Margin" is equal to the excess of sales revenues over the applicable cost of sales, i.e., cost of fuel for generation and gas for resale. The numerator is equal to margin revenues for a specific Client Entity and the denominator is equal to the combined margin revenues of all the applicable Client Entities. This ratio will be evaluated annually based on actual results of operations for the previous calendar year and may be adjusted for any known and reasonably quantifiable events, or at such time, based on results of operations for a subsequent twelve-month period, as may be required due to significant changes. 3. Number of Customers Ratio - A ratio based on the number of retail electric and/or gas customers. This ratio will be determined annually based on the actual number of customers at the end of the previous calendar year and may be adjusted for any known and reasonably quantifiable events, or at such time as may be required due to significant changes. 4. Number of Employees Ratio - A ratio based on the number of employees benefitting from the performance of a service. This ratio will be determined annually based on actual counts of applicable employees at the end of the previous calendar year and may be adjusted for any known and reasonably quantifiable events, or at such time as may be required due to significant changes. 5. Three-Factor Formula - This formula will be determined annually based on the average of gross property (original cost of plant in service, excluding depreciation), payroll charges (salaries and wages, including overtime, shift premium and holiday pay, but not including pension, benefit and company-paid payroll taxes) and gross revenues during the previous calendar year and may be adjusted for any known and reasonably quantifiable events, or at such time as may be required due to significant changes. 6. Telecommunications Chargeback Rates - Rates for use of telecommunications services other than those encompassed by Information Systems Chargeback Rates are based on the costs of labor, materials, outside services and Telecommunications overheads. Such rates Page 5 of 8 are applied based on the specific equipment employment and the measured usage of services by Client Entities. These rates will be determined annually based on actual experience and may be adjusted for any known and reasonably quantifiable events, or at such time as may be required due to significant changes. 7. Gas Sales Ratio - A ratio based on the actual number of dekatherms of natural gas sold by the applicable gas distribution or marketing operations. This ratio will be determined annually based on actual results of operations for the previous calendar year and may be adjusted for any known and reasonably quantifiable events, or at such time, based on results of operations for a subsequent twelve-month period, as may be required due to significant changes. Description of Services A description of each of the services performed by SCANA Services, which may be modified from time to time, is presented below. As discussed above, where identifiable, costs will be directly assigned or distributed to Client Entities. For costs accumulated in Account Codes which are for services of a general nature that cannot be directly assigned or distributed, the method or methods of allocation are also set forth. Substitution or changes may be made in the methods of allocation hereinafter specified, as may be appropriate, and will be provided to state regulatory agencies and to each affected Client Entity. 1. Information Systems Services - Provides electronic data processing services. Costs of a general nature are allocated using the Information Systems Chargeback Rates. 2. Customer Services - Provides billing, mailing, remittance processing, call center and customer communication services for electric and gas customers. Costs of a general nature are allocated using the Margin Revenue Ratio. 3. Marketing and Sales - Establishing strategies, provides oversight for marketing, sales and branding of utility and related services and conducts marketing and sales programs. Costs of a general nature are allocated using the Number of Customers Ratio. 4. Employee Services - Includes Human Resources which establishes and administers policies and oversees compliance with regulations in the areas of employment, compensation and benefits, processes payroll and administers corporate training. Also includes employee communications, facilities management and mail services. Costs of a general nature are allocated using the Number of Employees Ratio. 5. Corporate Compliance - Oversees compliance with all laws, regulations and policies applicable to all of SCANA Corporation's businesses and directs compliance training. Costs of general nature are allocated using the Number of Employees Ratio. Page 6 of 8 6. Purchasing - Provides procurement services. Costs of a general nature are allocated using the Three-Factor Formula. 7. Financial Services - Provides treasury, accounting, tax, financial planning, rate and auditing services. Costs of a general nature are allocated using the Three-Factor Formula. 8. Risk Management - Provides insurance, claims, security, environmental and safety services. Costs of a general nature are allocated using the Three-Factor Formula. 9. Public Affairs - Maintains relationships with government policy makers, conducts lobbying activities and provides community relations functions. Costs of a general nature are allocated using the Three-Factor Formula. 10. Legal Services - Provides various legal services and general legal oversight; handles claims. Costs of a general nature are allocated using the Three-Factor Formula. 11. Investor Relations - Maintains relationships with the financial community and provides shareholder services. Costs of a general nature are allocated using the Three-Factor Formula. 12. Telecommunications - Provides telecommunications services, primarily the use of telephone equipment. Costs are allocated using the Telecommunications Chargeback Rates. 13. Gas Supply and Capacity Management - Provides gas supply and capacity management services. Costs of a general nature are allocated using the Gas Sales Ratio. 14. Strategic Planning - Develops corporate strategies and business plans. Costs of a general nature are allocated using the Three-Factor Formula. 15. Executive - Provides executive and general administrative services. Costs of a general nature are allocated using the Three-Factor Formula. Page 7 of 8 EXHIBIT II FORM OF INITIAL SERVICE REQUEST The undersigned requests all of the services listed in Exhibit I from SCANA Services Company, except for 13. The services requested hereunder shall commence on April 1, 2001 and be provided through March 31, 2002. SOUTH CAROLINA ELECTRIC & GAS COMPANY By: _s/Neville O. Lorick__________ ------------------- Name: Neville O. Lorick Title: President Page 8 of 8 -----END PRIVACY-ENHANCED MESSAGE-----