RATE AND OTHER REGULATORY MATTERS

3 Months Ended

Mar. 31, 2018

Schedule of Regulatory Assets and Liabilities [Text Block]

RATE AND OTHER REGULATORY MATTERS

Rate Matters

Tax Act Regulatory Proceedings

The Tax Act contained provisions that lowered the federal corporate tax rate from 35% to 21% effective January 1, 2018. In response, the SCPSC and the NCUC have sought information from utilities under their respective jurisdictions that would disclose the impact of the Tax Act on their individual company's operations and would propose procedures for changing customer rates to reflect those impacts. SCE&G and PSNC Energy provided to their respective commissions the requested information. The ORS filed a petition with the SCPSC that, among other things, requested that the SCPSC order that rates in effect as of January 1, 2018, be subject to refund so that ratepayers receive the benefit of the tax law changes as of January 1, 2018. The ORS has made subsequent filings with the SCPSC making specific recommendations for how it should direct SCE&G to account for the effects of the Tax Act and for the accrual of interest on deferred amounts until new customer rates are made effective. On April 25, 2018, the SCPSC issued an order that requires utilities to track and defer as a regulatory liability the effects resulting from the Tax Act.

SCE&G and PSNC Energy cannot determine when their respective commissions will take final action on this matter or what form that action will take. In the first quarter of 2018, estimates of income tax amounts charged through customer rates that relate to the effects of the Tax Act are being deferred as amounts subject to refund. Such deferrals include the accrual of estimated carrying costs. Such estimates totaled $40.0 million for the Company, of which $33.2 million was attributable to Consolidated SCE&G, and are included within Customer Deposits and Customer Prepayments on their respective condensed consolidated balance sheets. In addition, as further discussed under Regulatory Assets and Regulatory Liabilities below, certain accumulated deferred income taxes contained within regulatory liabilities represent excess deferred income taxes arising from the remeasurement of deferred income taxes upon the enactment of the Tax Act. Certain of these amounts are protected under normalization regulations and will be amortized over the remaining lives of related property, and certain of these amounts will be amortized to the benefit of customers over a prescribed period as instructed by regulators.

Electric - Cost of Fuel

On April 25, 2018, the SCPSC approved SCE&G’s proposal to increase the total fuel cost component of retail electric rates. Specifically, the SCPSC approved SCE&G’s increase to certain environmental, avoided capacity and DER cost components and SCE&G’s agreement to maintain its base fuel component to produce a projected under-recovered balance of approximately $1.3 million at the end of the 12-month period beginning with the first billing cycle of May 2018. This projected under-recovered balance includes the effect of offsetting fuel costs recovery with the gains realized from the settlement of certain interest rate derivatives. SCE&G also agreed to recover, over a 12-month period beginning with the first billing cycle of May 2018, projected DER program costs of approximately $29.3 million.

Electric - Base Rates

In January 2018, SCE&G requested in its annual DSM Programs filing to recover approximately $33.0 million of costs and net lost revenues associated with DSM programs, along with an incentive to invest in such programs. On April 25, 2018, the SCPSC approved SCE&G’s request effective beginning with the first billing cycle of May 2018.

Electric - BLRA and Joint Petition

On January 12, 2018, SCE&G and Dominion Energy filed with the SCPSC the Joint Petition for review and approval of a proposed business combination whereby SCANA would become a wholly-owned subsidiary of Dominion Energy. In the Joint Petition, approval of a customer benefits plan and a cost recovery plan for the Nuclear Project is also sought. Key provisions of this Joint Petition are summarized at Note 10. A hearing on this matter has not yet been scheduled.

On January 19, 2018, the ORS filed a report with the SCPSC in response to the SCPSC's order for a thorough inspection and audit of SCE&G's statements regarding potential adverse effects that could result from the removal of annual BLRA revenues. SCE&G subsequently filed responses to the ORS report. On January 31, 2018, the SCPSC ordered the ORS to complete the previously ordered thorough audit, inspection and examination of SCE&G's accounting records by March 30, 2018, encouraged them to employ the assistance of a utility financial professional if needed, and indicated that a request by the ORS for an extension of time would not be considered unreasonable. On February 7, 2018, the ORS requested clarification of the SCPSC's January 31, 2018 order. On February 15, 2018, the SCPSC instructed the ORS to evaluate a total of eight different scenarios to be included in its report and instructed the ORS to inform them by March 2, 2018 whether the ORS needed additional time to complete its work, By letter dated March 2, 2018, the ORS informed the SCPSC that it anticipates completing its scope of work in June 2018.

Gas - PSNC Energy

The NCUC has authorized PSNC Energy to use a tracker mechanism to recover the incurred capital investment and associated costs of complying with federal standards for pipeline integrity and safety requirements that are not in current base rates. PSNC Energy has filed biannual applications to adjust its rates for this purpose, and the NCUC has approved those applications for the incremental annual revenue requirements, as follows:



Rates Effective		Incremental Increase
March 1, 2017		$1.9 million
September 1, 2017		$0.7 million
March 1, 2018		$14.7 million

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. Except for certain unrecovered nuclear project costs and other 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	March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017
Regulatory Assets:
Unrecovered Nuclear Project costs	$	3,966	$	3,976	$	3,966	$	3,976
AROs and related funding	447		434		423		410
Deferred employee benefit plan costs	300		305		269		273
Deferred losses on interest rate derivatives	451		456		451		456
Other unrecovered plant	102		105		102		105
DSM Programs	59		59		59		59
Pipeline integrity management costs	55		51		8		8
Environmental remediation costs	29		30		24		25
Deferred storm damage costs	24		24		24		24
Other	145		140		145		140
Total Regulatory Assets	$	5,578	$	5,580	$	5,471	$	5,476



Regulatory Liabilities:
Monetization of guaranty settlement	$	1,094	$	1,095	$	1,094	$	1,095
Accumulated deferred income taxes	1,072		1,076		914		914
Asset removal costs	763		757		530		527
Deferred gains on interest rate derivatives	79		131		79		131
Total Regulatory Liabilities	$	3,008	$	3,059	$	2,617	$	2,667

Regulatory assets for unrecovered Nuclear Project costs have been recorded based on such amounts not being probable of loss in accordance with the accounting guidance on abandonments, whereas the other regulatory assets have been recorded based on the probability of their recovery. All regulatory assets represent incurred costs that may be deferred under applicable GAAP for regulated operations. The SCPSC, the NCUC or the FERC has reviewed and approved through specific orders certain of the items shown as regulatory assets. In addition, regulatory assets include, but are not limited to, certain costs which have not been specifically approved for recovery by one of these regulatory agencies, including unrecovered nuclear project costs that are the subject of regulatory proceedings as further discussed in Note 10. In recording such costs as regulatory assets, management believes the costs would be allowable under existing rate-making concepts that are embodied in rate orders or current state law. 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, changes in state law, other changes in the regulatory environment or changes in accounting requirements or other adverse legislative or regulatory developments, the Company or Consolidated SCE&G could be required to write off all or a portion of 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.

Unrecovered Nuclear Project costs represents expenditures by SCE&G that have been reclassified from construction work in progress as a result of the decision to stop construction of Unit 2 and Unit 3 and to pursue recovery of costs under the abandonment provisions of the BLRA or through other regulatory means, net of an estimated impairment loss and of certain assets that have been or will be placed in service.

AROs and related funding represents the regulatory asset associated with the legal obligation to decommission and dismantle Unit 1 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 107 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. SCE&G recovers deferred pension costs through utility rates of approximately $2 million annually for electric operations, which will end in 2044, and approximately $1 million annually for gas operations, which will end in 2027. The remainder of the deferred benefit costs are expected to be recovered through utility rates, primarily over average service periods of participating employees up to approximately 11 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.

Other 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 is amortizing 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 electric demand reduction programs, and such deferred costs are currently being recovered over approximately five years through an approved rate rider.

Pipeline integrity management costs represent operating costs incurred to comply with federal regulatory requirements related to natural gas pipelines. PSNC Energy is recovering costs totaling $4.1 million annually through 2021. PSNC Energy is continuing to defer pipeline integrity costs, and as of March 31, 2018 costs of $30.6 million have been deferred pending future approval of rate recovery. SCE&G amortizes $1.9 million of such costs annually.

Environmental remediation costs represent costs associated with the assessment and clean-up of sites currently or formerly owned by SCE&G or PSNC Energy. SCE&G's remediation costs are expected to be recovered over periods of up to approximately 17 years, and PSNC Energy's remediation costs totaling $6.9 million are being recovered over a five year period that will end in 2021.

Deferred storm damage costs represent costs incurred in excess of amounts previously collected through SCE&G’s SCPSC-approved storm damage reserve, and for which SCE&G expects to receive future recovery through customer rates.

Various other regulatory assets are expected to be recovered through rates over varying periods through 2047.

Monetization of guaranty settlement represents proceeds received under or arising from the monetization of the Toshiba Settlement, net of certain expenses. The SCPSC is expected to determine how SCE&G's customers will realize the value of these net proceeds in connection with its consideration of the Request by the ORS and the Joint Petition (see Note 10).

Accumulated deferred income taxes contained within regulatory liabilities represent (i) excess deferred income taxes arising from the remeasurement of deferred income taxes upon the enactment of the Tax Act (certain of which are protected under normalization regulations and will be amortized over the remaining lives of related property, and certain of which will be amortized to the benefit of customers over a prescribed period as instructed by regulators) and (ii) deferred income taxes arising from investment tax credits, offset by (iii) deferred income taxes that arise from utility operations that have not been included in customer rates (a portion of which 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). See also Note 6.

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

SCEG

Rate Matters [Line Items]