COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Text Block]

10. COMMITMENTS AND CONTINGENCIES

Nuclear Insurance

Under Price-Anderson, SCE&G (for itself and on behalf of Santee-Cooper, a one-third owner of Unit 1) maintains agreements of indemnity with the NRC that, together with private insurance, cover third-party liability arising from any nuclear incident occurring at SCE&G’s nuclear power plant. Price-Anderson provides funds up to $13.4 billion for public liability claims that could arise from a single nuclear incident. Each nuclear plant is insured against this liability to a maximum of $375 million by ANI with the remaining coverage provided by a mandatory program of deferred premiums that could be assessed, after a nuclear incident, against all owners of commercial nuclear reactors. Each reactor licensee is currently liable for up to $127.3 million per reactor owned for each nuclear incident occurring at any reactor in the United States, provided that not more than $18.9 million of the liability per reactor would be assessed per year. SCE&G’s maximum assessment, based on its two-thirds ownership of Unit 1, would be $84.8 million per incident, but not more than $12.6 million per year. Both the maximum assessment per reactor and the maximum yearly assessment are adjusted for inflation at least every five years.

SCE&G currently maintains insurance policies (for itself and on behalf of Santee Cooper) with NEIL. The policies provide coverage to Unit 1 for property damage and outage costs up to $2.75 billion resulting from an event of nuclear origin and up to $2.33 billion resulting from an event of a non-nuclear origin. In addition, a builder’s risk insurance policy has been purchased from NEIL for the construction of the New Units. This policy provides the owners of the New Units up to $500 million of total coverage for accidental property damage occurring during construction. The NEIL policies, in the aggregate, are subject to a maximum loss of $2.75 billion for any single loss occurrence. All of the NEIL policies permit retrospective assessments under certain conditions to cover insurer’s losses. Based on the current annual premium, SCE&G’s portion of the retrospective premium assessment would not exceed $45.8 million. SCE&G currently maintains an excess property insurance policy (for itself and on behalf of Santee Cooper) with EMANI. The policy provides coverage to Unit 1 for property damage and outage costs up to $415 million resulting from an event of a non-nuclear origin. The EMANI policy permits retrospective assessments under certain conditions to cover insurer's losses. Based on the current annual premium, SCE&G's portion of the retrospective premium assessment would not exceed $1.8 million.

To the extent that insurable claims for property damage, decontamination, repair and replacement and other costs and expenses arising from an incident at Unit 1 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 or other incident. However, if such an incident were to occur, it likely would have a material impact on the Company’s and Consolidated SCE&G's results of operations, cash flows and financial position.

New Nuclear Construction

SCE&G, on behalf of itself and as agent for Santee Cooper, contracted with the Consortium in 2008 for the design and construction of the New Units. SCE&G's current ownership share in the New Units is 55%. As discussed below, SCE&G has agreed to acquire an additional 5% ownership in the New Units from Santee Cooper.

EPC Contract and BLRA Matters

The construction of the New Units and SCE&G’s related recovery of financing costs through rates is subject to review and approval by the SCPSC as provided for in the BLRA. Under the BLRA, the SCPSC has approved, among other things, a milestone schedule and a capital costs estimates schedule for the New Units. This approval constitutes a final and binding determination that the New Units are used and useful for utility purposes, and that the capital costs associated with the New Units are prudent utility costs and expenses and are properly included in rates, so long as the New Units are constructed or are being constructed within the parameters of the approved milestone schedule, including specified contingencies, and the approved capital costs estimates schedule. Subject to the same conditions, the BLRA provides that SCE&G may apply to the SCPSC annually for an order to recover through revised rates SCE&G’s weighted average cost of capital applied to all or part of the outstanding balance of construction work in progress concerning the New Units. Estimated operating costs, including the depreciation of the utility plant costs, are then to be recovered through rates beginning when the construction of each New Unit is completed and placed into service. The BLRA also provides that, in the event of abandonment prior to plant completion, construction work in progress costs incurred, including AFC, and a return on those costs may be recoverable through rates, so long as SCE&G demonstrates by a preponderance of the evidence that its decision to abandon the New Unit(s) was prudent. As of December 31, 2016, SCE&G’s investment in the New Units, including related transmission, totaled $4.5 billion, for which the financing costs on $3.8 billion have been reflected in rates under the BLRA. See Note 2 for a description of rate changes which have occurred under the BLRA.

The SCPSC granted initial approval of the construction schedule and related forecasted capital costs in 2009. The NRC issued COLs in March 2012. The Consortium has experienced delays throughout much of the project to date, and forecasted work crew efficiency and productivity metrics have not been met. In response, in November 2012, and again in September 2015 and November 2016 (see discussion below), the SCPSC approved SCE&G's requested updates to the milestone schedule, revised contractual substantial completion dates, and increases in capital and other costs. Some of these increased costs were the result of the schedule delays and were the subject of dispute.

October 2015 Amendment and WEC's Engagement of Fluor

On October 27, 2015, SCE&G, Santee Cooper and the Consortium amended the EPC Contract. The October 2015 Amendment became effective in December 2015, upon the consummation of the acquisition by WEC of the stock of Stone & Webster from CB&I. Following that acquisition, Stone & Webster continues to be a member of the Consortium as a subsidiary of WEC rather than CB&I, and WEC has engaged Fluor as a subcontracted construction manager.

Among other things, the October 2015 Amendment provided SCE&G and Santee Cooper an irrevocable option to fix the total amount to be paid to the Consortium for its entire scope of work on the project (excluding a limited amount of work within the time and materials component of the contract price) after June 30, 2015 at $6.082 billion (SCE&G’s 55% portion being approximately $3.345 billion). This total amount to be paid would be reduced by amounts paid since June 30, 2015. SCE&G, on behalf of itself and as agent for Santee Cooper, executed the fixed price option, subject to SCPSC approval, on July 1, 2016.

The October 2015 Amendment:

(i) resolved by settlement and release most outstanding disputes between SCE&G and the Consortium,

(ii) revised the contractual guaranteed substantial completion dates of Units 2 and 3 to August 31, 2019 and 2020, respectively,

(iii) revised the delay-related liquidated damages computation requirements, including those related to the eligibility of the New Units to earn Internal Revenue Code Section 45J production tax credits (see also below), resulting in escalating liquidated damages that are capped at an aggregate of $338 million per New Unit (SCE&G’s 55% portion being approximately $186 million per New Unit),

(iv) provided for payment to the Consortium of a completion bonus of $150 million per New Unit (SCE&G’s 55% portion being approximately $83 million per New Unit) for each New Unit placed in service by the deadline to qualify for production tax credits,

(v) provided for development of a revised construction milestone payment schedule,

(vi) provided that SCE&G and Santee Cooper waive and cancel the CB&I parent company guaranty with respect to the project,

(vii) provided for an explicit definition of Change in Law designed to reduce the likelihood of certain future commercial disputes, with the Consortium also acknowledging and agreeing that the project scope includes providing New Units that meet the standards of the NRC approved Design Control Document Revision 19, and

(viii) eliminated the requirement or ability of any party to bring suit regarding disputes before substantial completion of the project.

As part of its responsibility as a subcontracted construction manager, Fluor has reviewed and assisted in the development of an updated integrated project schedule which reflects WEC’s revised estimated completion dates of April 2020 and December 2020 for Units 2 and 3, respectively. These later dates remain within the SCPSC-approved 18-month contingency periods provided for under the BLRA, and achievement of such dates would also allow the output of both units to qualify, under current law, for federal production tax credits (see below). However, there is substantial uncertainty as to WEC’s ability to meet these dates given its historical inability to achieve forecasted productivity and work force efficiency levels.

November 2016 SCPSC Order

In May 2016, SCE&G petitioned the SCPSC for approval of updated construction and capital cost schedules for the New Units which were developed in connection with the October 2015 Amendment. On November 9, 2016, the SCPSC approved a settlement agreement among SCE&G, ORS and certain other parties concerning this petition. The SCPSC also approved SCE&G's election of the fixed price option. See also Note 2.

The approved construction schedule designates contractual guaranteed substantial completion dates of August 31, 2019 and August 31, 2020 for Units 2 and 3, respectively. The approved capital cost schedule includes incremental capital costs that total $831 million. SCE&G’s total project capital cost is now estimated at approximately $6.8 billion including owner’s costs and transmission, or $7.7 billion with escalation and AFC. In addition, the SCPSC approved revising SCE&G’s allowed ROE for new nuclear construction from 10.5% to 10.25%. This revised ROE will be applied prospectively for the purpose of calculating revised rates sought by SCE&G under the BLRA on and after January 1, 2017. In addition, SCE&G may not file future requests to amend capital cost schedules prior to January 28, 2019, unless its annual revised rate request is denied because SCE&G is out of compliance with its approved capital cost schedule or BLRA construction milestone schedule. In most circumstances, if the projected commercial operation date for Unit 2 is extended, the expiration of the January 28, 2019 moratorium will be extended by an equal amount of time.

On December 14, 2016, the SCPSC denied Petitions for Rehearing filed by certain parties that were not included in the settlement. These parties may appeal this decision to the South Carolina Supreme Court once the SCPSC’s order has been issued. SCE&G cannot determine when the SCPSC will issue its order in this matter or if that order will be appealed.

Construction Milestone Payment Schedule and Related DRB Activity

The October 2015 Amendment established a DRB process for resolving certain commercial claims and disputes. The DRB is comprised of three members chosen by the parties, and amounts in dispute of less than $5 million will be resolved by the DRB without recourse. Amounts in dispute greater than $5 million will be resolved by the DRB for the remainder of the construction of the New Units, with a reserved right to further arbitrate or to litigate such issues at the conclusion of construction.

On December 2, 2016 the DRB issued an order establishing a construction milestone payment schedule (see (v) in October 2015 Amendment above) on which SCE&G and WEC had been unable to agree subsequent to the October 2015 Amendment. The dispute related only to the timing of payments; the total amount to be paid was not in dispute. The DRB order provides that certain subcontractor and other supplier-related costs incurred by the Consortium will be reimbursed by the owners regardless of payment-milestone completion, but that other payments will be made only upon documented achievement of the agreed-upon payment-milestones. Such subcontractor and other supplier-related costs comprised approximately $873 million of the $3.345 billion of fixed option payments that were the subject of the DRB order.

Payment and Performance Obligations and Certain Related Uncertainties

Payment and performance obligations under the EPC Contract are joint and several obligations of WEC and Stone & Webster, and in connection with the October 2015 Amendment, Toshiba, WEC’s parent company, reaffirmed its guaranty of WEC’s payment obligations. Additionally, the EPC Contract provides the owners the right, exercisable upon certain conditions, to obtain payment and performance bonds from WEC equal to 15% of the highest projected three months billings during the applicable year, and their aggregate nominal coverage will not exceed $100 million (or $55 million for SCE&G's 55% share). SCE&G and Santee Cooper are responsible for the cost of the bonds.

In late 2015, Toshiba's credit ratings declined to below investment grade following disclosures regarding its operating and financial performance and near-term liquidity. As a result, pursuant to the above-described terms of the EPC Contract, SCE&G has obtained standby letters of credit in lieu of payment and performance bonds from WEC totaling $45 million (or approximately $25 million for SCE&G's 55% share). These standby letters of credit expire annually in February, and they automatically renew for successive one-year periods until their final expiration date of August 31, 2020, unless the issuer provides a minimum 60-day notice that it will not renew. If the issuer provides notice that it will not renew, SCE&G may draw upon the standby letter of credit prior to its expiration. In the event that WEC would be unable to meet its payment and performance obligations under the EPC Contract, it is anticipated this funding would provide a source of liquidity to assist in an orderly transition. In addition, the EPC Contract provides that upon the request of SCE&G, and at owners' cost, the Consortium must escrow certain intellectual property and software for the owners' benefit to assist in completion of the New Units. An escrow arrangement has been established, and certain intellectual property and software have been deposited. Additional deposits are anticipated.

In December 2016 through February 2017, Toshiba and WEC announced further deterioration in their financial position and liquidity related to write-downs arising from WEC’s acquisition of Stone and Webster from CB&I (discussed above). The announcements noted that WEC and Toshiba have determined that significant losses will be incurred under the EPC Contract for the New Units and under a similar engineering, procurement and construction agreement for other units currently being constructed in the United States. This determination has impacted their allocation of the CB&I purchase price, resulting in recognition of a large amount of goodwill which has in turn been determined to be impaired. Preliminary recognition of this impairment loss (in excess of $6 billion) has left Toshiba with negative shareholders' equity and threatened its liquidity. In January 2017, Toshiba’s credit ratings were further reduced. In response, Toshiba has indicated its interest in monetizing portions of its business as it attempts to restructure and restore its financial position. Toshiba has also indicated that it will withdraw from the nuclear construction business prospectively and that it will significantly alter its risk management oversight of its nuclear power business. WEC has told the Company that it and Toshiba are committed to completing the New Units. Toshiba has acknowledged its parental guaranty to the project, but it has informed the Company that no specific commitment regarding completion of the New Units has been agreed to by it so far.

Toshiba also announced that it had requested (and successfully received) a one-month extension of the deadline for submitting its securities report to Japanese securities regulators for the quarter ended December 31, 2016 to allow an internal investigation into the adequacy of internal controls relating to the purchase price allocation process for WEC’s acquisition of Stone & Webster and concerns that senior management at WEC may have exerted inappropriate pressure in order to advance the purchase price allocation process. As part of the announcement, it was stated that Toshiba’s audit committee was concerned that an invalidation of internal controls (or even the possibility thereof) might affect Toshiba’s quarterly financial statements, and that two law firms had been separately retained by the audit committee and WEC to assist with this investigation.

Although progress on the project was seen in December 2016 and January 2017, including the placement of the first of Unit 2’s two steam generators, significant risks and uncertainties remain concerning WEC’s ability to improve work force efficiency and productivity performance and to continue to fulfill its performance and financial commitments and Toshiba's ability to perform under its payment guaranty with respect to the project. In particular, there can be no assurance that their creditors will continue to provide support or that other sources of liquidity will emerge or continue to be available. In the event that WEC were to fail to complete the project in breach of its obligations under the EPC Contract, its payment obligations for damages would increase substantially above the amount of the liquidated damages described above, but would still be subject to limitations.

SCE&G and Santee Cooper, the co-owner of the New Units, continue to evaluate various actions which might be taken in the event that Toshiba and WEC are unable or unwilling to complete the project. These include completing the work under possible arrangements with other contractors or, were it determined to be prudent, halting the project and leaving SCE&G to pursue cost recovery under the abandonment provisions of the BLRA.

Also, in response to these developments and in light of the DRB-established construction milestone payment schedule, in February 2017, SCE&G initiated its solicitation for increased levels of standby letters of credit in lieu of payment and performance bonds referred to above. However, it is uncertain whether such additional levels of standby letters of credit will be available at reasonable cost or whether any letters of credit will continue to be renewed by their issuers.

Finally, additional claims by the Consortium or SCE&G involving the project schedule, budget and performance may arise as the project continues. The parties to the EPC Contract have established both informal and formal dispute resolution procedures in order to resolve such issues, and SCE&G expects to resolve disputes through those means. SCE&G expects to seek recovery through rates of any project costs that arise through such dispute resolution processes, as well as other project costs identified from time to time; however, any such request would be subject to the provisions of the November 2016 SCPSC order discussed above. There can be no assurance that recovery would be granted.

Santee Cooper Matters

As noted above, SCE&G has agreed to acquire an additional 5% ownership in the New Units from Santee Cooper. Under the terms of this agreement, SCE&G will acquire a 1% ownership interest in the New Units at the commercial operation date of Unit 2, an additional 2% ownership interest no later than the first anniversary of such commercial operation date, and the final 2% no later than the second anniversary of such commercial operation date. SCE&G has agreed to pay an amount equal to Santee Cooper's actual cost, including its cost of financing, of the percentage conveyed as of the date of each conveyance. In addition, the agreement provides that Santee Cooper will not transfer any of its remaining interest in the New Units to third parties until the New Units are complete. This transaction is subject to customary closing conditions, including receipt of necessary regulatory approvals. This transaction will not affect the payment obligations between the parties during construction of the New Units, nor is it anticipated that the payments for the additional ownership interest would be reflected in a revised rates filing under the BLRA. SCE&G’s current projected cost for the additional 5% interest being acquired from Santee Cooper is approximately $850 million.

Nuclear Production Tax Credits

The IRS has notified SCE&G that, subject to a national megawatt capacity limitation, the electricity to be produced by each of the New Units (advanced nuclear units, as defined) would qualify for nuclear production tax credits under Section 45J of the IRC to the extent that such New Unit is operational before January 1, 2021 and other eligibility requirements are met. These nuclear production tax credits (related to SCE&G's 55% share of both New Units) could total as much as approximately $1.4 billion. Such credits would be earned over the first eight years of each New Unit's operations and would be realized by SCE&G over those years or during allowable carry-forward periods. Based on current tax law and the contractual guaranteed substantial completion dates (and the recently revised forecasted dates of completion) provided above, both New Units would be operational and would qualify for the nuclear production tax credits; however, any further delays in the schedule or changes in tax law could adversely impact these conclusions. See also the Payment and Performance Obligations and Certain Related Uncertainties discussion above. When and to the extent that production tax credits are realized, their benefits are expected to be provided directly to SCE&G's electric customers.

Other Project Matters

When the NRC issued the COLs for the New Units, two of the conditions that it imposed were requiring inspection and testing of certain components of the New Units' passive cooling system, and requiring the development of strategies to respond to extreme natural events resulting in the loss of power at the New Units. In addition, the NRC directed the Office of New Reactors to issue to SCE&G an order requiring enhanced, reliable spent fuel pool instrumentation. SCE&G prepared and submitted an overall integration plan for the New Units to the NRC in August 2013. That plan remains under review by the NRC and SCE&G does not anticipate any additional regulatory actions as a result of that review, but it cannot predict future regulatory activities or how such initiatives would impact construction or operation of the New Units.

Environmental

The Company's operations are subject to extensive regulation by various federal and state authorities in the areas of air quality, water quality, control of toxic substances and hazardous and solid wastes. Applicable statutes and rules include the CAA, CWA, Nuclear Waste Act and CERCLA, among others. In many cases, regulations proposed by such authorities could have a significant impact on the Company's and Consolidated SCE&G's financial condition, results of operations and cash flows. In addition, the Company and Consolidated SCE&G often cannot predict what conditions or requirements will be imposed by regulatory or legislative proposals. To the extent that compliance with environmental regulations or legislation results in capital expenditures or operating costs, the Company and Consolidated SCE&G expect to recover such expenditures and costs through existing ratemaking provisions.

From a regulatory perspective, SCANA, SCE&G and GENCO continually monitor and evaluate their current and projected emission levels and strive to comply with all state and federal regulations regarding those emissions. SCE&G and GENCO participate in the SO₂and NO_X emission allowance programs with respect to coal plant emissions and also have constructed additional pollution control equipment at several larger coal-fired electric generating plants. Further, SCE&G is engaged in construction activities of the New Units which are expected to reduce GHG emission levels significantly once they are completed and dispatched by potentially displacing some of the current coal-fired generation sources. These actions are expected to address many of the rules and regulations discussed herein.

On August 3, 2015, the EPA issued a revised standard for new power plants by re-proposing NSPS under the CAA for emissions of CO₂from newly constructed fossil fuel-fired units. The final rule requires all new coal-fired power plants to meet a carbon emission rate of 1,400 pounds CO₂per MWh and new natural gas units to meet 1,000 pounds CO₂per MWh. While most new natural gas plants will not be required to include any new technologies, no new coal-fired plants could be constructed without partial carbon capture and sequestration capabilities. The Company and Consolidated SCE&G are monitoring the final rule, but do not plan to construct new coal-fired units in the foreseeable future.

In addition, on August 3, 2015, the EPA issued its final rule on emission guidelines for states to follow in developing plans to address GHG emissions from existing units. The rule includes state-specific goals for reducing national CO₂emissions by 32% from 2005 levels by 2030. The rule also provides for nuclear reactors under construction, such as the New Units, to count towards compliance and establishes a phased-in compliance approach beginning in 2022. The rule gives each state from one to three years to issue SIPs, which will ultimately define the specific compliance methodology that will be applied to existing units in that state. On February 9, 2016, the Supreme Court stayed the rule pending disposition of a petition of review of the rule in the Court of Appeals. The order of the Supreme Court has no immediate impact on SCE&G and GENCO or their generation operations. The Company and Consolidated SCE&G expect any costs incurred to comply with such rule to be recoverable through rates.

In July 2011, the EPA issued the CSAPR to reduce emissions of SO₂and NO_Xfrom power plants in the eastern half of the United States. The CSAPR replaces the CAIR and requires a total of 28 states to reduce annual SO₂emissions and annual and ozone season NO_Xemissions to assist in attaining the ozone and fine particle NAAQS. The rule establishes an emissions cap for SO₂and NO_Xand limits the trading for emission allowances by separating affected states into two groups with no trading between the groups. The State of South Carolina has chosen to remain in the CSAPR program, even though recent court rulings exempted the state. This allows the state to remain compliant with regional haze standards. Air quality control installations that SCE&G and GENCO have already completed have positioned them to comply with the existing allowances set by the CSAPR. Any costs incurred to comply with CSAPR are expected to be recoverable through rates.

In April 2012, the EPA's MATS rule containing new standards for mercury and other specified air pollutants became effective. The MATS rule has been the subject of ongoing litigation even while it remains in effect. Rulings on this litigation are not expected to have an impact on SCE&G or GENCO due to plant retirements, conversions, and enhancements. SCE&G and GENCO are in compliance with the MATS rule and expect to remain in compliance.

The CWA provides for the imposition of effluent limitations that require treatment for wastewater discharges. Under the CWA, compliance with applicable limitations is achieved under state-issued NPDES permits. As a facility’s NPDES permit is renewed (every five years), any new effluent limitations would be incorporated. The ELG Rule became effective on January 4, 2016. After this date, state regulators will modify facility NPDES permits to match more restrictive standards, thus requiring facilities to retrofit with new wastewater treatment technologies. Compliance dates will vary by type of wastewater, and some will be based on a facility's five year permit cycle and thus may range from 2018 to 2023. The Company and Consolidated SCE&G expect that wastewater treatment technology retrofits will be required at Williams and Wateree Stations. Any costs incurred to comply with the ELG Rule are expected to be recoverable through rates.

The CWA Section 316(b) Existing Facilities Rule became effective in October 2014. This rule establishes national requirements for the location, design, construction and capacity of cooling water intake structures at existing facilities that reflect the best technology available for minimizing the adverse environmental impacts of impingement and entrainment. SCE&G and GENCO are conducting studies and implementing plans as required by the rule to determine appropriate intake structure modifications to ensure compliance with this rule. Any costs incurred to comply with this rule are expected to be recoverable through rates.

The EPA's final rule for CCR became effective in the fourth quarter of 2015. This rule regulates CCR as a non-hazardous waste under Subtitle D of the Resource Conservation and Recovery Act and imposes certain requirements on ash storage ponds and other CCR management facilities at SCE&G's and GENCO's coal-fired generating facilities. SCE&G and GENCO have already closed or have begun the process of closure of all of their ash storage ponds and have previously recognized AROs for such ash storage ponds under existing requirements. The Company and Consolidated SCE&G do not expect the incremental compliance costs associated with this rule to be significant and expect to recover such costs in future rates.

The Nuclear Waste Act required that the United States government accept and permanently dispose of high-level radioactive waste and spent nuclear fuel by January 31, 1998, and it imposed on utilities the primary responsibility for storage of their spent nuclear fuel until the repository is available. SCE&G entered into a Standard Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste with the DOE in 1983. As of December 31, 2016, the federal government has not accepted any spent fuel from Unit 1, and it remains unclear when the repository may become available. SCE&G has constructed an independent spent fuel storage installation to accommodate the spent nuclear fuel output for the life of Unit 1. SCE&G may evaluate other technology as it becomes available.

The provisions of CERCLA authorize the EPA to require the clean-up of hazardous waste sites. The states of South Carolina and North Carolina have similar laws. The Company maintains an environmental assessment program to identify and evaluate current and former operations sites that could require clean-up. In addition, regulators from the EPA and other federal or state agencies periodically notify the Company that it may be required to perform or participate in the investigation and remediation of a hazardous waste site. As site assessments are initiated, estimates are made of the amount of expenditures, if any, deemed necessary to investigate and remediate each site. These estimates are refined as additional information becomes available; therefore, actual expenditures may differ significantly from the original estimates. Amounts estimated and accrued to date for site assessments and clean-up relate solely to regulated operations. Such amounts are recorded in regulatory assets and amortized, with recovery provided through rates.

SCE&G is responsible for four decommissioned MGP sites in South Carolina which contain residues of by-product chemicals. These sites are in various stages of investigation, remediation and monitoring under work plans approved by DHEC and the EPA. SCE&G anticipates that major remediation activities at all these sites will continue at least through 2018 and will cost an additional $10.2 million, which is accrued in Other within Deferred Credits and Other Liabilities on the consolidated balance sheet. SCE&G expects to recover any cost arising from the remediation of MGP sites through rates. At December 31, 2016, deferred amounts, net of amounts previously recovered through rates and insurance settlements, totaled $25.7 million and are included in regulatory assets.

Claims and Litigation

The Company and Consolidated SCE&G are subject to various claims and litigation incidental to their business operations which management anticipates will be resolved without a material impact on the Company’s and Consolidated SCE&G's results of operations, cash flows or financial condition.

Operating Lease Commitments

The Company and Consolidated SCE&G are obligated under various operating leases for land, office space, furniture, vehicles, equipment, rail cars, a purchase power agreement, and for the Company, airplanes. Leases expire at various dates through 2057.



	Rent Expense
Millions of dollars	2016		2015		2014
The Company	$	10.2	$	11.1	$	12.3
Consolidated SCE&G	12.2		12.3		12.1



	Future Minimum Rental Payments
Millions of dollars	2017		2018		2019		2020		2021		Thereafter
The Company	$	31	$	29	$	28	$	3	$	3	$	23
Consolidated SCE&G	25		23		22		1		—		17

Guarantees

SCANA issues guarantees on behalf of its consolidated subsidiaries to facilitate commercial transactions with third parties. These guarantees are in the form of performance guarantees, primarily for the purchase and transportation of natural gas, standby letters of credit issued by financial institutions and credit support for certain tax-exempt bond issues. SCANA is not required to recognize a liability for such guarantees unless it becomes probable that performance under the guarantees will be required. SCANA believes the likelihood that it would be required to perform or otherwise incur any losses associated with these guarantees is remote; therefore, no liability for these guarantees has been recognized. To the extent that a liability subject to a guarantee has been incurred, the liability is included in the consolidated financial statements. At December 31, 2016, the maximum future payments (undiscounted) that SCANA could be required to make under guarantees totaled approximately $1.7 billion.

Asset Retirement Obligations

A liability for the present value of an ARO is recognized when incurred if the liability can be reasonably estimated. Uncertainty about the timing or method of settlement of a conditional ARO is factored into the measurement of the liability when sufficient information exists, but such uncertainty is not a basis upon which to avoid liability recognition.

The legal obligations associated with the retirement of long-lived tangible assets that result from their acquisition, construction, development and normal operation relate primarily to the Company’s regulated utility operations. As of December 31, 2016, SCE&G has recorded AROs of approximately $199 million for nuclear plant decommissioning (see Note 1). In addition, the Company has recorded AROs of approximately $359 million, including $323 million for Consolidated SCE&G, for other conditional obligations primarily related to other generation, transmission and distribution properties, including gas pipelines. All of the amounts recorded are based upon estimates which are subject to varying degrees of precision, particularly since such payments will be made many years in the future.

A reconciliation of the beginning and ending aggregate carrying amount of AROs is as follows:



	The Company						Consolidated SCE&G
Millions of dollars	2016			2015			2016			2015
Beginning balance	$	520		$	563		$	488		$	536
Liabilities incurred	—			—			—			—
Liabilities settled	(11		)	(16		)	(11		)	(16		)
Accretion expense	23			25			22			23
Revisions in estimated cash flows	26			(52		)	23			(55		)
Ending balance	$	558		$	520		$	522		$	488

Revisions in estimated cash flows in 2016 primarily related to changes in projected costs, based on a nuclear decommissioning cost study. Such revisions in 2015 related to changes in the expected timing of ARO settlements due to changes in the estimated useful lives of certain electric utility properties identified as part of a customary depreciation study.

SCE&G

Commitment [Line Items]