RATE AND OTHER REGULATORY MATTERS

6 Months Ended

Jun. 30, 2016

Public Utilities Disclosure [Text Block]

RATE AND OTHER REGULATORY MATTERS

Rate Matters

Electric - Cost of Fuel

By order dated July 15, 2015, the SCPSC approved a settlement agreement among SCE&G, ORS and certain other parties concerning SCE&G's petition for approval to participate in a DER program and to recover DER program costs as a separate component of SCE&G's overall fuel factor. Under this order, SCE&G will, among other things, implement programs to encourage the development of renewable energy facilities with a total nameplate capacity of at least approximately 84.5 MW by the end of 2020, of which half is to be customer-scale solar capacity and half is to be utility-scale solar capacity. SCE&G is to make a good faith effort to have at least 30 MW of utility-scale solar capacity in service by the end of 2016.

By order dated April 29, 2016, the SCPSC approved a settlement agreement among SCE&G, ORS and certain other parties to decrease the total fuel cost component of retail electric rates. SCE&G reduced the total fuel cost component of retail electric rates to reflect lower projected fuel costs and to eliminate over-collected balances of approximately $61 million for base fuel and environmental costs over a 12-month period beginning with the first billing cycle of May 2016. SCE&G also began to recover projected DER program costs of approximately $6.9 million beginning with the first billing cycle of May 2016.

Electric - Base Rates

Pursuant to an SCPSC order, SCE&G removes from rate base certain deferred income tax assets arising from capital expenditures related to the New Units and accrues carrying costs on those amounts during periods in which they are not included in rate base. Such carrying costs are determined at SCE&G’s weighted average long-term debt borrowing rate and are recorded as a regulatory asset and other income. Carrying costs during the three and six months ended June 30, 2016 totaled $3.5 million and $6.6 million, respectively. During the three and six months ended June 30, 2015, carrying costs totaled $2.2 million and $4.1 million, respectively. SCE&G anticipates that when the New Units are placed in service and accelerated tax depreciation is recognized on them, these deferred income tax assets will decline. When these deferred income tax assets are fully offset by related deferred income tax liabilities, the carrying cost accruals will cease, and the regulatory asset will begin to be amortized.

By Order dated April 29, 2016, the SCPSC approved SCE&G’s request to increase its pension costs component rider. This pension rider is subject to an annual true-up, depending on conditions in financial markets and other factors. The pension rider is designed to allow SCE&G to recover projected pension costs, including under-collections, over a 12-month period, beginning with the first billing cycle in May 2016.

In April 2016, ORS filed a report arising from its review of SCE&G’s annual DSM Programs rate rider filing. ORS concluded the updated DSM Programs rider proposal was developed in accordance with terms and conditions approved by the SCPSC in prior orders and recommended that SCE&G's request be approved. In addition, ORS recommended SCE&G update the three-year planning models used to calculate the overall effectiveness of the DSM Programs for future program years. By Order dated April 29, 2016, the SCPSC accepted ORS's recommendations and approved SCE&G's request to recover $37.6 million of costs and net lost revenues associated with the DSM Programs.

Electric - BLRA

On May 26, 2016, SCE&G petitioned the SCPSC seeking approval to update the capital cost schedule and construction milestone schedule for the New Units consistent with the October 2015 Amendment. Within this petition, SCE&G also informed the SCPSC that it had notified WEC of its intent to elect the fixed price option, subject to concurrence by Santee Cooper and approval by the SCPSC. The petition reflects an increase in total project costs of approximately $852 million over the cost approved by the SCPSC in September 2015, of which approximately $505 million is directly attributable to the fixed price option. The project's estimated gross construction cost is now estimated to be approximately $7.7 billion, including owner’s costs, transmission, escalation and AFC. On June 30, 2016, Santee Cooper's board of directors approved a resolution authorizing the execution of a limited agency agreement pursuant to which SCE&G, for itself and on behalf of Santee Cooper, would elect the fixed price option on its behalf. SCE&G then executed the fixed price option on July 1, 2016, subject to SCPSC approval. A public hearing on this matter is scheduled to begin on October 4, 2016, and the SCPSC is expected to issue its order in November 2016. See also Note 9.

On June 27, 2016, SCE&G filed its annual request for approval of revised rates under the provisions of the BLRA. Under this request, SCE&G has proposed an overall increase of approximately $74.2 million or 3.1% in retail electric rates. The ORS is expected to issue an audit report by August 29, 2016, and the SCPSC is expected to issue its order by October 27, 2016. If approved, the rate increase is anticipated to be effective on November 26, 2016.

Gas - SCE&G

On June 15, 2016, SCE&G filed with the SCPSC its quarterly monitoring report for the 12-month period ended March 31, 2016, and proposed an approximately $4.4 million, or 1.23%, overall increase to its natural gas rates under the terms of the RSA. The ORS is expected to issue an audit report by September 1, 2016 and the SCPSC is expected to issue its order by October 15, 2016. If approved, the rate adjustment will be effective for the first billing cycle in November 2016.

Gas - PSNC Energy

On March 31, 2016, PSNC Energy filed a general rate case application with the NCUC requesting a general rate increase of approximately $41.6 million, or approximately 9.7%, in annual revenue. The rate increase is largely associated with recovering costs related to expanding and operating PSNC Energy's pipeline system. In its application, PSNC Energy requested approval of a rider to its rates to track and provide for ongoing recovery of capital expenditures related to PSNC Energy’s transmission and distribution pipeline integrity management programs. A hearing on the application is scheduled for the week of August 29, 2016.

Regulatory Assets and Regulatory Liabilities

Rate-regulated utilities recognize in their financial statements certain revenues and expenses in different periods than do other enterprises. As a result, the Company and Consolidated SCE&G have recorded regulatory assets and regulatory liabilities which are summarized in the following tables. Other than unrecovered plant, substantially all regulatory assets are either explicitly excluded from rate base or are effectively excluded from rate base due to their being offset by related liabilities.



	The Company				Consolidated SCE&G
Millions of dollars	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Regulatory Assets:
Accumulated deferred income taxes	$	295	$	298	$	288	$	291
Environmental remediation costs	41		42		34		35
AROs and related funding	401		405		380		384
Deferred employee benefit plan costs	317		325		287		295
Deferred losses on interest rate derivatives	767		535		767		535
Unrecovered plant	122		127		122		127
DSM Programs	60		61		60		61
Other	165		144		145		129
Total Regulatory Assets	$	2,168	$	1,937	$	2,083	$	1,857



Regulatory Liabilities:
Asset removal costs	$	747	$	732	$	528	$	519
Deferred gains on interest rate derivatives	81		96		81		96
Other	27		27		19		20
Total Regulatory Liabilities	$	855	$	855	$	628	$	635

Accumulated deferred income tax liabilities that arise from utility operations that have not been included in customer rates are recorded as a regulatory asset. Substantially all of these regulatory assets relate to depreciation and are expected to be recovered over the remaining lives of the related property which may range up to approximately 85 years. Similarly, accumulated deferred income tax assets arising from deferred investment tax credits are recorded as a regulatory liability.

Environmental remediation costs represent costs associated with the assessment and clean-up of sites currently or formerly owned by the Company or Consolidated SCE&G, and are expected to be recovered over periods of up to approximately 24 years.

ARO and related funding represents the regulatory asset associated with the legal obligation to decommission and dismantle Summer Station and conditional AROs related to generation, transmission and distribution properties, including gas pipelines. These regulatory assets are expected to be recovered over the related property lives and periods of decommissioning which may range up to approximately 110 years.

Employee benefit plan costs of the regulated utilities have historically been recovered as they have been recorded under GAAP. Deferred employee benefit plan costs represent amounts of pension and other postretirement benefit costs which were accrued as liabilities and treated as regulatory assets pursuant to FERC guidance, and costs deferred pursuant to specific SCPSC regulatory orders. In 2013 SCE&G began recovering through utility rates approximately $63 million of deferred pension costs for electric operations over approximately 30 years and approximately $14 million of deferred pension costs for gas operations over approximately 14 years. The remainder of the deferred benefit costs are expected to be recovered through utility rates, primarily over average service periods of participating employees, or up to approximately 12 years.

Deferred losses or gains on interest rate derivatives represent (i) the effective portions of changes in fair value and payments made or received upon settlement of certain interest rate derivatives designated as cash flow hedges and (ii) the changes in fair value and payments made or received upon settlement of certain other interest rate derivatives not so designated. The amounts recorded with respect to (i) are expected to be amortized to interest expense over the lives of the underlying debt through 2043. The amounts recorded with respect to (ii) are expected to be similarly amortized to interest expense through 2065 except when, in the case of deferred gains, such amounts are applied otherwise at the direction of the SCPSC.

Unrecovered plant represents the carrying value of coal-fired generating units, including related materials and supplies inventory, retired from service prior to being fully depreciated. Pursuant to SCPSC approval, SCE&G will amortize these amounts through cost of service rates over the units' previous estimated remaining useful lives through approximately 2025. Unamortized amounts are included in rate base and are earning a current return.

DSM Programs represent SCE&G's deferred costs associated with such programs, and such deferred costs are currently being recovered over approximately five years through an approved rate rider.

Various other regulatory assets are expected to be recovered in rates over periods of up to approximately 30 years.

Asset removal costs represent estimated net collections through depreciation rates of amounts to be incurred for the removal of assets in the future.

The SCPSC, the NCUC or the FERC has reviewed and approved through specific orders most of the items shown as regulatory assets. Other regulatory assets include, but are not limited to, certain costs which have not been specifically approved for recovery by the SCPSC, the NCUC or by the FERC. In recording such costs as regulatory assets, management believes the costs will be allowable under existing rate-making concepts that are embodied in rate orders. The costs are currently not being recovered, but are expected to be recovered through rates in future periods. In the future, as a result of deregulation or other changes in the regulatory environment or changes in accounting requirements, the Company or Consolidated SCE&G could be required to write off its regulatory assets and liabilities. Such an event could have a material effect on the Company's and Consolidated SCE&G's financial statements in the period the write-off would be recorded.

SCEG

Rate Matters [Line Items]